[Federal Register Volume 90, Number 163 (Tuesday, August 26, 2025)]
[Rules and Regulations]
[Pages 41676-41724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-16357]
[[Page 41675]]
Vol. 90
Tuesday,
No. 163
August 26, 2025
Part III
Environmental Protection Agency
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40 CFR Part 84
Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for
Application-Specific Allowances; Final Rule
Federal Register / Vol. 90, No. 163 / Tuesday, August 26, 2025 /
Rules and Regulations
[[Page 41676]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 84
[EPA-HQ-OAR-2024-0196; FRL-10782-02-OAR]
RIN 2060-AV98
Phasedown of Hydrofluorocarbons: Review and Renewal of
Eligibility for Application-Specific Allowances
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The U.S. Environmental Protection Agency (EPA) is finalizing,
pursuant to the statutory framework established in the American
Innovation and Manufacturing Act of 2020 (AIM Act), the eligibility of
six applications to continue to receive priority access to allowances
to produce or import hydrofluorocarbons. In this final rule, EPA
establishes the framework for how EPA interprets the statutory criteria
for assessing whether to renew the eligibility of applications to
receive application-specific allowances and sets out determinations to
renew or not renew each of the six applications that currently receive
application-specific allowances. EPA is also finalizing revisions to
the Technology Transitions regulations relevant to the specific
applications under review, a procedural process for submitting a
petition to designate a new application as eligible for priority access
to allowances, the methodology used to allocate allowances to
application-specific allowance holders for calendar years 2026 and
beyond, and limited revisions to existing regulations. In addition, EPA
is authorizing an entity to produce regulated substances for export.
Lastly, EPA is finalizing certain regulatory confidentiality
determinations for newly reported information.
DATES: This rule is effective on September 25, 2025.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2024-0196. All documents in the docket are listed on the
https://www.regulations.gov website. Although listed in the index, some
information is not publicly available, e.g., Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is
not placed on the internet and will be publicly available only in hard-
copy form. Publicly available docket materials are available
electronically through https://www.regulations.gov or in hard copy at
the EPA Docket Center, Room 3334, WJC West Building, 1301 Constitution
Avenue NW, Washington, DC. The Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is (202) 566-1744, and the
telephone number for the EPA Docket Center is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: Michelle Graff, U.S. Environmental
Protection Agency, Stratospheric Protection Division, telephone number:
(202) 564-5387; 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 and
abbreviations that are used in this rulemaking that may be helpful
include:
2-BTP--2-bromo-3,3,3-trifluoropropene
AAGR--Average Annual Growth Rate
ACE--Automated Commercial Environment
AD/CVD--Anti-dumping and Countervailing Duties
AES--Automated Export System
AIM Act--American Innovation and Manufacturing Act of 2020
AHRI--Air-Conditioning, Heating, and Refrigeration Institute
APU--Auxiliary Power Unit
ASHRAE--American Society for Heating, Refrigerating, and Air-
Conditioning Engineers
ASA--Application-specific Allowance
CAA--Clean Air Act
CBI--Confidential Business Information
CBP--U.S. Customs and Border Protection
CFR--Code of Federal Regulations
CGMP--Current Good Manufacturing Practice
CO2--Carbon Dioxide
COVID--Coronavirus Disease
CRA--Congressional Review Act
CVD--Chemical Vapor Deposition
DOC--U.S. Department of Commerce
DOD--U.S. Department of Defense
EEI--Electronic Export Information
EV--Exchange Value
EVe--Exchange Value Equivalent
EPA--U.S. Environmental Protection Agency
FDA--U.S. Food and Drug Administration
FIFRA--Federal Insecticide, Fungicide, and Rodenticide Act
FR--Federal Register
GDP--Gross Domestic Product
GHG--Greenhouse Gas
GWP--Global Warming Potential
HCFC--Hydrochlorofluorocarbon
HFA--Hydrofluoroalkane
HFC--Hydrofluorocarbon
HFO--Hydrofluoroolefin
HHS--U.S. Department of Health and Human Services
HVM--High Volume Manufacturing
ICR--Information Collection Request
IPCC--Intergovernmental Panel on Climate Change
ITN--Internal Transaction Number
Kg--Kilogram
MCMEU--Mission-Critical Military End Uses
MCTOC--Medical and Chemicals Technical Options Committee
MDI--Metered Dose Inhaler
MT--Metric Ton
MTEVe--Metric Tons of Exchange Value Equivalent
NAICS--North American Industry Classification System
OMB--U.S. Office of Management and Budget
PFAS--Per- and Polyfluoroalkyl Substances
PFC--Perfluorocarbon
PII--Personally Identifiable Information
PRA--Paperwork Reduction Act
PU--Polyurethane
RACA--Request for Additional Consumption Allowance
RFA--Regulatory Flexibility Act
RIA--Regulatory Impact Analysis
RSV--Respiratory Syncytial Virus
SCPPU--Structural Composite Preformed Polyurethane
SNAP--Significant New Alternatives Policy
TCE--Trichloroethylene
TEAP--Technology and Economic Assessment Panel
TSCA--Toxic Substances Control Act
TSD--Technical Support Document
UMRA--Unfunded Mandates Reform Act
Table of Contents
I. Executive Summary
A. Purpose of Regulatory Action
B. Summary of Final Actions
II. General Information
A. Does this action apply to me?
B. What is EPA's authority for taking this action?
III. Background
IV. How is EPA assessing whether to extend eligibility for
application-specific allowances?
A. How is EPA interpreting the ``no safe or technically
achievable substitute will be available'' criterion?
B. How is EPA interpreting the insufficient supply of regulated
substances criterion?
C. What is EPA's framework for renewing applications?
V. Review of the Six Applications Listed in the AIM Act
A. Propellants in Metered Dose Inhalers
1. Availability of Safe and Technically Achievable Substitutes
2. Supply
3. Final Determination on Application-Specific Allowance
Eligibility
B. Defense Sprays
1. Availability of Safe and Technically Achievable Substitutes
2. Supply
3. Final Determination on Application-Specific Allowance
Eligibility
4. Restriction Under 40 CFR Part 84, Subpart B
C. Structural Composite Preformed Polyurethane Foam for Marine
Use and Trailer Use
1. Availability of Safe and Technically Achievable Substitutes
2. Supply
[[Page 41677]]
3. Final Determination on Application-Specific Allowance
Eligibility
D. Etching of Semiconductor Material or Wafers and the Cleaning
of Chemical Vapor Deposition Chambers Within the Semiconductor
Manufacturing Sector
1. Availability of Safe and Technically Achievable Substitutes
2. Supply
3. Final Determination on Application-Specific Allowance
Eligibility
E. Mission-Critical Military End Uses
F. Onboard Aerospace Fire Suppression
VI. What are the requirements associated with a petition to be
listed as an application that will receive application-specific
allowances?
VII. Revisions to Existing Regulations
A. Expected Total HFC Purchases
B. Unique Circumstances
1. Healthcare System Needs
2. Economic Disruptions
3. Stockpiling
C. Inventory
D. Methodology for Small Purchasers of HFCs, Entities That Do
Not Purchase HFCs Every Year, and Entities With Irregular HFC Usage
E. Department of Defense Conferrals
F. Limited Set-Aside for Unique Circumstances Related to Metered
Dose Inhalers
G. Return of Unneeded Allowances
H. Enabling Auctions of Illegally Imported HFCs
I. Quarterly Exporter Reporting of Internal Transaction Numbers
J. Date of Purchase for Requests for Additional Consumption
Allowances (RACAs)
VIII. Authorization To Produce for Export
A. To what entities is EPA finalizing provisions to allocate
production for export allowances?
B. How many production for export allowances will EPA issue to
Iofina on an annual basis, and for how many years will EPA issue
these allowances?
C. Will Iofina need to expend consumption allowances for
materials produced with production for export allowances and
subsequently exported?
D. How will this process affect the issuance of other types of
allowances?
E. What are the final recordkeeping and reporting requirements
for production for export allowances?
1. Annual Certifications
2. Quarterly Export and Inventory Reporting
3. Recordkeeping
IX. How will EPA handle confidentiality for newly reported
information?
A. Data Elements Associated With a Petition To Be Listed as an
Application That Will Receive Application-specific Allowances
B. Data Elements Related to Proposed Revisions to Existing
Regulations
C. Data Elements Reported to EPA Related to Production for
Export
X. What are the costs and benefits of this action?
XI. Judicial Review
XII. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Executive Order 14192: Unleashing Prosperity Through
Deregulation
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution or Use
J. National Technology Transfer and Advancement Act
K. Congressional Review Act (CRA)
I. Executive Summary
A. Purpose of Regulatory Action
The U.S. Environmental Protection Agency (EPA) is undertaking this
action to implement certain provisions of the American Innovation and
Manufacturing Act of 2020, codified at 42 U.S.C. 7675 (AIM Act or the
Act). The Act directs EPA to implement the phasedown of
hydrofluorocarbons (HFCs) by issuing a limited quantity of production
and consumption allowances, which entities must expend to produce or
import HFCs. Subsection (e)(4)(B) of the Act authorizes EPA to allocate
allowances exclusively for the use of HFCs in specific applications for
which there is (1) no safe or technically achievable substitute during
the applicable period and (2) an insufficient supply of the HFCs used
in the application that can be secured from chemical manufacturers to
accommodate the application. The Act listed six applications to receive
these allowances for a five-year period beginning on December 27, 2020:
propellants in metered dose inhalers (MDIs), defense sprays, structural
composite preformed polyurethane (SCPPU) foam for marine use and
trailer use (hereafter referred to as SCPPU foam for marine and trailer
uses), the etching of semiconductor material or wafers and the cleaning
of chemical vapor deposition (CVD) chambers within the semiconductor
manufacturing sector, mission-critical military end uses (MCMEU), and
onboard aerospace fire suppression.\1\ EPA has created a category for
these allowances, which EPA refers to as application-specific
allowances (ASAs). ASAs provide priority access for eligible
applications and are allocated ahead of general pool allowances based
on a methodology intended to determine eligible entities' needs for
regulated substances (see section VII. of this preamble and the
Allocation Framework Rule for more information).\2\ After the total ASA
quantity is determined, the remaining allowances are distributed to
general pool allowance recipients using the methodology codified in
regulation.
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\1\ EPA codified that application-specific allowances are
available to entities using regulated substances in the statutorily
listed applications for calendar years 2022, 2023, 2024, and 2025 in
``Phasedown of Hydrofluorocarbons: Establishing the Allowance
Allocation and Trading Program Under the American Innovation and
Manufacturing Act'' (hereafter referred to as the ``Allocation
Framework Rule'') (86 FR 55116, October 5, 2021). 40 CFR 84.13(a).
Accordingly, EPA made the final allocation under the preexisting
regulations when it allocated calendar year 2025 allowances on
October 1, 2024. See ``Phasedown of Hydrofluorocarbons: Notice of
2025 Allowance Allocations for Production and Consumption of
Regulated Substances Under the American Innovation and Manufacturing
Act of 2020, and Notice of Final Actions Establishing Administrative
Consequences'' (89 FR 84583, October 23, 2024).
\2\ EPA first codified the allocation methodology for general
pool and ASA holders in the Allocation Framework Rule. The
methodology for general pool allowance holders was subsequently
updated in ``Phasedown of Hydrofluorocarbons: Allowance Allocation
Methodology for 2024 and Later Years'' (hereafter referred to as the
``2024 Allocation Rule''; 88 FR 46836, July 20, 2023); the ASA
methodology was not updated in the 2024 Allocation Rule.
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Subsection (e)(4)(B)(v) of the AIM Act directs EPA to review
applications receiving priority access to allowances not less
frequently than once every five years and establishes statutory
criteria under which EPA is to review the applications. If an
application is deemed to meet the statutory criteria, EPA is to renew
the eligibility of the application to receive priority access to
allowances for a period of not more than five years. As explained in
the proposed rule, 89 FR 75898 (September 16, 2024), EPA is undertaking
this review in this rulemaking, and therefore this final rule
establishes how the Agency is interpreting the statutory criteria for
reviewing applications receiving ASAs. EPA is also making decisions to
renew or not renew each of the six applications that currently receive
ASAs.
Separately, subsection (i) of the Act authorizes EPA, by
rulemaking, to restrict the use of HFCs in sectors or subsectors where
the regulated substances are used. Based on this provision, EPA
promulgated a final rule entitled ``Phasedown of Hydrofluorocarbons:
Restrictions on the Use of Certain Hydrofluorocarbons Under the
American Innovation and Manufacturing Act of 2020'' (hereafter referred
to as the ``2023 Technology Transitions Rule''; 88 FR 73098, October
24, 2023), which established restrictions for three sectors and
numerous
[[Page 41678]]
subsectors. The rule exempted applications currently eligible to
receive ASAs for the year or years in which that application receives
an ASA. As such, if an application is no longer eligible to receive
ASAs, it would become subject to the restrictions established in the
2023 Technology Transitions Rule. Therefore, as part of this
rulemaking, EPA considered whether there are any appropriate changes to
make specific to applications under review in this rule, and if so,
whether to finalize those modifications to the Technology Transitions
regulations, codified at 40 CFR part 84, subpart B.\3\
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\3\ Through a separate rulemaking, EPA announced reconsideration
of the Technology Transitions requirements for certain refrigeration
applications, including in supermarket systems and at semiconductor
fabrication plants. See https://www.epa.gov/newsreleases/trump-epa-takes-action-lower-costs-american-families-grocery-store-reconsidering.
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The Act also allows members of the public to petition EPA to
designate an application as eligible for priority access to allowances.
EPA is finalizing a procedure for submitting a petition under this
provision and defining minimum required elements of such a petition. In
addition, EPA is making narrow revisions in this final rule to the
methodology used to allocate allowances to ASA holders for calendar
years 2026 and beyond as well as other limited revisions to the
existing 40 CFR part 84, subpart A regulations.
EPA is also authorizing an entity to produce regulated substances
for export for application-specific uses pursuant to subsection (e)(5)
of the Act, which authorizes EPA to permit the production in excess of
allowances held by an entity so long as the excess production is solely
for export purposes and meets additional requirements in the Act.
Lastly, EPA is finalizing certain regulatory confidentiality
determinations for newly reported information.
B. Summary of Final Actions
Application-specific allowance eligibility review: EPA is
finalizing its interpretation of the criteria under subsection
(e)(4)(B) of the AIM Act and applying that interpretation to evaluate
the six categories of ASA holders listed in subsection (e)(4)(B)(v) of
the Act. EPA is renewing the following applications for the full five-
year period from 2026-2030: propellants in MDIs, SCPPU foams for marine
and trailer uses, the etching of semiconductor material or wafers and
the cleaning of CVD chambers within the semiconductor manufacturing
sector, MCMEU, and onboard aerospace fire suppression. EPA is also
finalizing the option set out in the proposed rule of not renewing the
eligibility of defense sprays for ASAs beginning with calendar year
2026 allowances,\4\ and is excluding defense sprays from Technology
Transitions restrictions that would otherwise apply under the current
regulation.
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\4\ Entities without ASAs can continue to purchase and use HFCs
in accordance with the overall requirements established in 40 CFR
part 84.
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Application-specific allowance eligibility petitions: EPA is
finalizing the process and information requirements for submitting
petitions under subsection (e)(4)(B) of the AIM Act which seek the
designation of an application as eligible for priority allowance access
consistent with EPA's proposal.
Application-specific allowance methodology: EPA is making targeted
revisions to the existing ASA methodology as proposed: to require
companies to provide a total request for allowances for the calendar
year, to expand permissible scenarios that could qualify as unique
circumstances, to use a different allocation methodology for certain
very small users of HFCs and entities with irregular HFC usage history,
to account for inventory in allocation decisions, and to establish a
set-aside of allowances for situations that meet the criteria for
unique circumstances related to medical conditions treated by MDIs. EPA
is also finalizing new requirements for conferrals of MCMEU allowances
in line with the proposed rule.
Other regulatory revisions: EPA is finalizing amendments to
existing regulations as proposed to: clarify the ability of the federal
government to pursue, if appropriate, auctioning illegally imported
HFCs that are seized by enforcement officials, require exporting
companies to report ``Internal Transaction Numbers'' (ITNs) quarterly,
and simplify the reporting on ``date of purchase'' for a Request for
Additional Consumption Allowances (RACA).
Authorization of production for export: As proposed, EPA is
authorizing an entity to produce regulated substances for export for
application-specific uses abroad.
Handling of confidentiality for newly reported information: EPA is
finalizing certain regulatory confidentiality determinations for newly
reported information.
II. General Information
A. Does this action apply to me?
You may be potentially affected by this action if you use HFCs in
one of the six applications eligible for an allocation under section
(e)(4)(B)(iv) of the AIM Act. You may also potentially be affected if
you produce, import, export, purify, destroy, reclaim, package, or
otherwise distribute HFCs for end users in one of these six
applications or are a current HFC allowance holder. 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-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.
[[Page 41679]]
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.
336992....................... Military Armored Vehicle, Tank, and Tank
Component Manufacturing.
SIC 373102................... Military Ships, Building, and Repairing..
339112....................... Surgical and Medical Instrument
Manufacturing.
423720....................... Plumbing and Heating Equipment and
Supplies (Hydronics) Merchant
Wholesalers.
423730....................... Warm Air Heating and Air-Conditioning
Equipment and Supplies Merchant
Wholesalers.
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).
562111....................... Solid Waste Collection.
562211....................... Hazardous Waste Treatment and Disposal.
562920....................... Materials Recovery Facilities.
922160....................... Fire Protection.
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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 EPA's authority for taking this 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 (codified at 42 U.S.C. 7675). In subsection
(k)(1)(A), the AIM Act provides EPA with the authority to promulgate
necessary regulations to carry out EPA's functions under the Act,
including its obligations to ensure that the Act's requirements are
satisfied (42 U.S.C. 7675(k)(1)(A)). Subsection (k)(1)(C) of the Act
also provides that Clean Air Act (CAA) sections 113, 114, 304, and 307
apply to the AIM Act and any regulations EPA promulgates under the AIM
Act as though the AIM Act were part of title VI of the CAA.
Accordingly, this rulemaking is subject to CAA section 307(d) (42
U.S.C. 7607(d)(1)(I)), which applies to ``promulgation or revision of
regulations under subchapter VI of this chapter (relating to
stratosphere and ozone protection).''
The AIM Act authorizes EPA to address HFCs in three main ways:
phasing down HFC production and consumption through an allowance
allocation program, promulgating certain regulations for purposes of
maximizing reclaiming and minimizing releases of HFCs from equipment
and ensuring the safety of technicians and consumers, and facilitating
the transition to next-generation technologies by restricting use of
these HFCs in the sector or subsectors in which they are used. This
rulemaking relates to the first area and also addresses restrictions in
the third area solely for impacted subsectors.
The Act required EPA, for the five-year period beginning on
December 27, 2020, to allocate the full quantity of allowances
necessary, based on projected, current, and historical trends, for the
production or consumption of regulated substances for the exclusive use
in six applications: propellants in MDIs, defense sprays, SCPPU foam
for marine and trailer uses, the etching of semiconductor material or
wafers and the cleaning of CVD chambers within the semiconductor
manufacturing sector, MCMEU, and onboard aerospace fire suppression (42
U.S.C. 7675(e)(4)(B)(iv)(I)). EPA has defined these allowances as ASAs.
Subsection (e)(4)(B)(v) of the AIM Act requires EPA to review
applications receiving allocations pursuant to subsection (e)(4)(B)(iv)
at least every five years. If pursuant to this review EPA determines
that the requirements of two statutory criteria are met, EPA shall
authorize production or consumption, as applicable, of regulated
substances for exclusive use in the application for renewable periods
of not more than five years. Specifically, EPA must determine whether:
(1) no safe or technically achievable substitute will be available
during the applicable period for the application; and (2) the supply of
the regulated substance that manufacturers or users of the regulated
substance for that application are capable of securing from chemical
manufacturers is insufficient to accommodate the application.
Separately, an entity may file a petition for an application to
receive ASAs. The AIM Act outlines timeframes and deadlines for EPA to
act on such a petition and describes how the Agency should assess such
a petition (42 U.S.C. 7675(e)(4)(B)(ii)). Specifically, not later than
180 days after receiving a petition, EPA must propose and seek public
comment on whether to provide ASAs for the application. Not later than
270 days after EPA receives a petition, the Agency must take final
action on the petition. Any application determined to be eligible for
ASAs would also be subject to the periodic eligibility review
established in subsection (e)(4)(B)(v).
Subsection (i) of the AIM Act, ``Technology Transitions,'' provides
that ``the Administrator may by rule restrict, fully, partially, or on
a graduated schedule, the use of a regulated substance in the sector or
subsector in which the regulated substance is used'' (42 U.S.C.
7675(i)(1)). However, rules promulgated under subsection (i) ``shall
not apply to . . . an essential use under clause (i) or (iv) of
subsection (e)(4)(B), including any use for which the production or
consumption of the
[[Page 41680]]
regulated substance is extended under clause (v)(II) of that
subsection'' (42 U.S.C. 7675(i)(7)(B)(i)). Therefore, per subsection
(i)(7)(B)(i), the Technology Transitions regulations are not currently
applicable to any application receiving an ASA (40 CFR 84.56(a)(2)). In
this final rule, EPA is clarifying how the 40 CFR part 84, subpart B
restrictions will apply to an application no longer receiving an ASA,
based on EPA's consideration of the factors listed in subsection (i)(4)
of the AIM Act.
III. Background
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 have 100-year global warming
potentials (GWPs) \6\ (a measure of the relative climatic impact of a
greenhouse gas (GHG)) that can be hundreds to thousands of times that
of carbon dioxide (CO2). 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 (neat and in blends). These 18
HFCs are all saturated, meaning they have only single bonds between
their atoms, and therefore have longer atmospheric lifetimes than
fluorinated compounds that are unsaturated. More detailed information
on HFCs, their uses, and their impacts is available in the Allocation
Framework Rule.
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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 and other fluorinated gases.
\6\ EPA notes that the exchange values (EVs) listed in the AIM
Act for each regulated HFC are numerically identical to the 100-year
GWPs of each substance, as given in the Errata to Table 2.14 of the
Intergovernmental Panel on Climate Change's (IPCC) Fourth Assessment
Report (AR4). See IPCC, 2007: Summary for Policymakers. In: Climate
Change 2007: The Physical Science Basis. Contribution of Working
Group I to the Fourth Assessment Report of the Intergovernmental
Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen,
M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)].
Cambridge University Press, Cambridge, United Kingdom and New York,
NY, USA. Available at https://www.ipcc.ch/report/ar4/wg1.
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IV. How is EPA assessing whether to extend eligibility for application-
specific allowances?
As noted in section II.B. of this preamble, the AIM Act directs EPA
to undertake a review of applications receiving allowances pursuant to
subsection (e)(4)(B)(iv) at least every five years. The statute
provides that access to ASAs shall be authorized for a renewed period
if two statutory criteria are met. Specifically: (1) ``no safe or
technically achievable substitute will be available during the
applicable period for that application; and'' (2) ``the supply of the
regulated substance that manufacturers or users of the regulated
substance for that application are capable of securing from chemical
manufacturers . . . including any quantities of a regulated substance
available from production or import, is insufficient to accommodate the
application'' (42 U.S.C. 7675(e)(4)(B)(i), (e)(4)(B)(v)). In this
section, we outline how EPA interprets these criteria, what information
the Agency considers in assessing these criteria, and establish a
framework for evaluating if an application is eligible for renewal and
for what time period. EPA notes that under the statute, these criteria
also apply to new applications that may be listed; however, aside from
the discussion of the petition process in section VI., this final rule
only considers the renewal of existing applications. EPA's
interpretations of the criteria discussed in this section would apply
to future actions to add new applications. The AIM Act includes
additional evaluation considerations for new applications in subsection
(e)(4)(B)(i), but the Agency is not addressing their interpretation in
this final rule.
A. How is EPA interpreting the ``no safe or technically achievable
substitute will be available'' criterion?
In order for an application to continue to be eligible to receive
ASAs, EPA must determine ``no safe or technically achievable substitute
will be available'' for the application during the time period under
review (42 U.S.C. 7675(e)(4)(B)(i)(I)). EPA proposed to interpret this
criterion to mean that if there is an available substitute that is both
safe and technically achievable, an application would not meet this
criterion for renewal. In other words, if EPA determines there is a
safe substitute, but it is not technically achievable, or the only
technically achievable substitutes are not safe, the application would
meet the first criterion for renewal. EPA included further explanation
regarding this proposed interpretation in the notice of proposed
rulemaking (89 FR 75898, September 16, 2024).
In the proposal, EPA explained its intent to consider a wide range
of possibilities in assessing whether there was a safe and technically
achievable substitute for an application under subsection
(e)(4)(B)(i)(I). Specifically, EPA proposed to consider regulated
substances (i.e., other HFCs), alternative substances (e.g.,
hydrofluoroolefins (HFOs), hydrocarbons), and blends of HFCs and/or HFC
alternatives that can perform the same function as the current HFC in
use; of these substances, EPA proposed to assess only those with a
lower GWP than the regulated substance currently in use. EPA proposed
to include substitute chemicals that are both a chemical-for-chemical
replacement and those that would require a change in manufacturing
process or the product.
In addition to looking at chemicals that could serve as
substitutes, EPA also proposed to include in its analysis any
potentially available not-in-kind technologies (e.g., finger-pump
bottles that would not use any chemical propellant in lieu of aerosol
cans) for purposes of subsection (e)(4)(B)(i)(I).
The Agency proposed to assess this criterion, specifically whether
a safe and technically achievable substitute(s) is available, on an
application-wide basis. For applications that use multiple HFCs, a safe
and technically achievable substitute would need to be able to replace
all HFCs used (or multiple substitutes that replace all individual HFCs
would need to be available). For applications that have sub-
applications (e.g., defense sprays include those intended for humans
and those intended for animals), there would need to be a safe and
technically achievable substitute for known sub-applications that have
been relying on ASAs to date.
EPA proposed that its evaluation of each application is not
intended to be a company-specific review; the commercialization \7\ of
a substitute in one sub-application suggests the substitute is safe or
technically achievable for the entire application barring evidence,
such as testing data, to the contrary. However, EPA noted at proposal
that if there are additional barriers to commercialization, those would
be considered when assessing if the identified substitute is available
for an entire application and the renewal period, as applicable. In
addition, EPA's interpretation of the statutory language is that
applications are intended to be viewed as a whole and not renewed by
sub-application.
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\7\ EPA is using the term ``commercialization'' to mean that the
substitute is commercially available and actively being used in an
application's equipment or sold on the market (domestically or
internationally) for use in the application. ``Commercialization''
is not intended to be equated with ``available,'' as explained in
more detail in the main text.
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One commenter requested further clarification regarding EPA's
interpretation of ``technically achievable
[[Page 41681]]
substitute.'' \8\ The commenter noted its support of the sources of
information that EPA outlined in the proposed rule in determining the
availability of substitutes, specifically noting Significant New
Alternatives Policy (SNAP) Program listings (pursuant to section 612 of
the CAA) and 2023 Technology Transitions Rule evaluations. However, the
commenter stated a need for more clarity on how EPA plans to interpret
the phrase ``technically achievable substitute.''
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\8\ All comments referenced in this preamble can be found in the
``Response to Comments'' document in the docket for this rulemaking.
EPA has responded to the most significant comments in the final rule
preamble. All other comments are only addressed in the Response to
Comments document.
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EPA disagrees with the commenter that the proposed action lacked
sufficient clarity and notes that the commenter does not specify what
was unclear in the proposal. As the commenter acknowledges, EPA listed
numerous sources of information the Agency intended to draw from in
developing its assessment of the availability of a technically
achievable substitute for individual applications. How EPA incorporates
information from these sources is necessarily source-specific and will
vary depending on the information received from the source. For
example, EPA listed manufacturer announcements as an information
source. If a company within an application has announced that it is
commercializing a product using a substitute chemical, that would be
meaningful for EPA's assessment. Conversely, if a company announces it
is starting the first stage of testing for use of a substitute
chemical, that will also be information EPA will take into account, but
the analysis will be different. Similarly, many peer-reviewed technical
reports discuss whether substitutes are currently and/or expected to be
technically achievable, and how EPA will account for that information
will depend on the content of the report.
Moreover, the Technical Support Document (TSD), ``Review of
Applications in the American Innovation and Manufacturing (AIM) Act
Subsection (e)(4)(B)(4),'' accompanying the proposed rule demonstrated
exactly how this variation would play out. EPA took information from
cited sources and then developed an assessment of the availability of
substitutes for each individual application. EPA received no adverse
comment on its more general approach to analyzing substitute
availability in the TSD for the applications as a whole. To the extent
any commenter raised concerns about this application-specific
assessment, EPA has accounted for that in the individual application
decisions contained in section V. of this preamble to the final rule.
Finally, as the commenter acknowledges, EPA explained in the
proposal its intent to consider the listings under the SNAP Program and
evaluations carried out for the 2023 Technology Transitions Rule as
part of its assessment. This includes listings themselves and the
information underlying those decisions. In evaluation of substitutes
and related decisions (e.g., to list as acceptable or unacceptable),
the SNAP Program carries out a comparative risk evaluation and
considers whether a substitute to an ozone-depleting substance presents
human health and environmental risks that are lower than or comparable
to such risks from other substitutes that are currently or potentially
available for the same uses. The analysis undertaken when evaluating a
proposed substitute includes ozone depletion potential, GWP, local air
quality, toxicity, flammability, and occupational and consumer health/
safety. Information and data relied upon in the SNAP Program are
directly relevant to EPA's assessment of substitutes in this
rulemaking, and therefore EPA has pulled from and relied upon SNAP
Program assessments as appropriate. The 2023 Technology Transitions
Rule applied a list of criteria that are similar, but not identical, to
the ASA review process (e.g., the availability of substitutes,
considering both safety and technological achievability), and EPA has
also considered the information prepared for that rule, which is
available in the relevant docket.
Another commenter stated that the criteria ``no available
substitute that is both safe and technically achievable'' is ambiguous
and restrictive and does not provide an incentive for applications to
explore substitutes. EPA acknowledges this comment, but notes that the
language cited by the commenter comes directly from the AIM Act. The
Agency has no authority to alter the statutory language enacted by
Congress. EPA's role, as an executive branch agency, is to implement
the language in such a way to give effect to the text provided by the
legislature.
EPA did not receive any further adverse comments on this part of
its proposal, including what can be considered a substitute (i.e., the
various chemicals that will be considered along with not-in-kind
substitutes), the proposal to assess the availability of substitutes on
an application-wide basis, and the proposal to not determine
availability of substitutes on a company-specific basis. EPA is
therefore finalizing its interpretation of the ``no safe or technically
achievable substitute will be available'' criterion as proposed, which
EPA views as the best reading of the statutory text.
In the proposed rule, EPA outlined a range of sources of
information it intended to, and did, review in developing the
assessment of the availability of safe, technically achievable
substitutes for applications under review. EPA's TSD that accompanied
the proposed rule also included detailed information of the substitute
assessment for each individual application, including citations to all
sources of information considered. Sources include, but are not limited
to: manufacturer announcements; information provided by stakeholders
under reporting requirements of part 84 of the CFR and other
communications; relevant federal and state regulations; evaluations
carried out under the 2023 Technology Transitions Rule and the SNAP
Program; standards from industry, standard-setting bodies (e.g.,
American Society for Heating, Refrigerating, and Air-Conditioning
Engineers (ASHRAE)), and the U.S. Government (e.g., the U.S. Food and
Drug Administration's (FDA) regulations and guidance for MDIs); and
peer-reviewed technical reports. EPA did not receive general comment on
additional sources to consider, but we note that the Agency may
consider additional information as relevant when assessing this
criterion in future actions. The TSD accompanying this final rule has
detailed information on the sources used in analyzing substitutes for
each individual application in this final rulemaking. To the extent any
commenter suggested additional sources of information for particular
applications, EPA has considered these additional sources and
incorporated that information as warranted into the analyses of the
individual applications, as outlined in detail in the TSD.
B. How is EPA interpreting the insufficient supply of regulated
substances criterion?
Under the second criterion for renewal of an application's
eligibility to receive ASAs, EPA must determine that ``the supply of
the regulated substance that manufacturers or users of the regulated
substance for that application are capable of securing from chemical
manufacturers. . . , including any quantities of a regulated substance
available from production or import, is insufficient to accommodate the
application'' (42 U.S.C.
[[Page 41682]]
7675(e)(4)(B)(i)(II)). In the proposal, EPA described its intention to
look at a number of different factors to assess whether an application
met this second criterion, including the available domestic supply of
the HFC(s) at issue, demand for said HFC(s), and supply chain
constraints particular to a given application (e.g., federal
requirements related to purity specifications).
EPA proposed to evaluate only the supply of the HFC(s) currently
used in an application's equipment or to manufacture the application's
products for use; this excludes any HFC(s) currently used exclusively
for research and development. For applications that use multiple HFCs,
EPA proposed to individually evaluate each HFC for which ASAs are being
expended to assess if supply of that HFC is insufficient. EPA proposed
to assess insufficient supply on an application-wide basis. In other
words, if the supply of at least one of the HFCs evaluated is
insufficient to accommodate the application, EPA proposed to consider
the criterion met for the application.
EPA discussed in the proposed rule that in assessing supply, the
Agency would also consider relevant restrictions, if any, on the type
of HFC or supplier of HFCs that would further limit supply to a
particular application. For example, FDA regulations govern use of
pharmaceutical-grade HFCs by MDI manufacturers. Facilities
manufacturing the regulated substances must comply with FDA
regulations, and there are a limited number of purifiers.
In addition, per the Agency's best interpretation of the statutory
language to consider regulated substances ``from chemical manufacturers
. . . , including any quantities of a regulated substance available
from production or import'' in 42 U.S.C. 7675(e)(4)(B)(i)(II), EPA
proposed to consider only regulated substances that are supplied by
chemical manufacturers in its assessment of supply. EPA proposed this
assessment covers both virgin and recovered and reprocessed HFCs, and
includes both imported material from foreign HFC producers and
regulated substances from domestic producers. Relatedly, EPA proposed
that ``chemical manufacturers'' excludes entities that do not produce
or import HFCs and therefore that EPA would not consider HFC supply
held by and available to entities that do not produce or import HFCs in
its assessment of this criterion. This excludes quantities of HFCs held
by entities that do not produce or import HFCs with allowances,
potentially including reclaimers, distributors, HFC blenders,\9\ and
HFC repackagers. Further explanation about EPA's interpretation of this
statutory language can be found in the proposed rule.
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\9\ For a discussion on the difference between producing HFCs
consistent with the AIM Act and blending HFCs to make various
refrigerant blends, see ``Response to Comments,'' pg 193, Docket ID
No. EPA-HQ-OAR-2021-0044, associated with the Allocation Framework
Rule and the discussion in the 2024 Allocation Rule.
---------------------------------------------------------------------------
EPA did not receive comments related to the Agency's proposed
interpretation of the statutory language in subsection
(e)(4)(B)(i)(II). EPA is therefore finalizing its interpretation of the
supply criterion as proposed, which EPA views as the best reading of
the statutory text.
EPA also discussed in the proposed rule the sources of data it
would consider in its evaluation of whether supply of a regulated
substance is insufficient to accommodate an application. These include
information regarding the total expected HFC consumption in the United
States, global production of individual HFCs used in the applications,
manufacturer announcements regarding production of specific HFCs, past
and projected market trends for an application that can inform
projected demand for the HFC(s) it uses, and allowance usage by an
application to date, including conferrals, imports, and open market
purchases by ASA holders, as well as expenditures of conferred
allowances by suppliers to ASA holders. To the extent available, EPA
will consider data from all of these sources collectively in order to
gain a more complete picture of projected supply for the relevant
individual HFC(s), rather than relying on one data point. While EPA did
not receive general comment on additional sources to consider, we note
this list is not exhaustive and that the Agency may consider additional
information as relevant when assessing this criterion. The TSD
accompanying this final rule has detailed information on the sources
used in analyzing supply related to each individual application. To the
extent any commenter suggested supply data to be considered in an
individual application's renewal decision, EPA has considered the data
sources and incorporated that information as warranted into the
analysis of the individual application, as outlined in detail in the
TSD.
C. What is EPA's framework for renewing applications?
In outlining the requirement that EPA review the applications
eligible for ASAs at least every five years, the AIM Act states that if
EPA determines ``that the requirements described in subclauses (I) and
(II) of clause (i) are met'' then EPA will renew the application's
eligibility to continue to receive ASAs (42 U.S.C.
7675(e)(4)(B)(v)(II)) (emphasis added). Accordingly, EPA explained in
the proposed rule that the Agency considered the best interpretation of
the statutory language to be that both criterion (I) of clause (i)
(that a substitute is not available) and criterion (II) (that supply is
insufficient) must be met for an application to be renewed as eligible
for ASAs. EPA further proposed that an application will no longer be
eligible for ASAs at the time at which EPA has determined it does not
fulfill one of these criteria.
In practice, this means that if either or both criteria are not met
at the beginning of the renewal period, EPA will not renew an
application's eligibility to receive ASAs. For example, if, for this
review cycle, the Agency determines that supply is not insufficient to
accommodate an application as of January 1, 2026 (the beginning of this
renewal period), EPA will not renew that application's eligibility for
ASAs, regardless of whether a substitute is available.
If both statutory criteria are met as of the beginning of the
renewal period, EPA proposed it would assess whether an application's
fulfillment of a criterion may change over the following five-year
period. The outcome of this assessment would be determinative of how
long EPA would determine an application eligible to receive ASAs. For
example, if, for this renewal cycle, EPA determines that there is no
substitute available as of January 1, 2026, but a substitute will be
available by January 1, 2028, then EPA would renew the application's
eligibility to receive ASAs for only two years (i.e., calendar years
2026 and 2027). Similarly, if supply is determined to be insufficient
to accommodate the application as of January 1, 2026, but the market
will change such that supply will not be insufficient to accommodate
the application as of January 1, 2028, then EPA would renew the
application's eligibility to receive ASAs for only two years (i.e.,
calendar years 2026 and 2027).
The Agency also proposed that if EPA determines that an application
has a safe or technically achievable substitute available that is a
regulated substance, EPA would also evaluate the supply of the
substitute HFC and assess if supply of the substitute HFC is
insufficient to accommodate the application. Further information
regarding the Agency's
[[Page 41683]]
reasoning can be found in the notice of proposed rulemaking for this
action. Under this proposed framework, if EPA determines there is an
HFC substitute, but there is insufficient supply of that HFC
substitute, EPA would continue to list the application as eligible for
ASAs. This approach allows an entity transitioning to a lower-GWP HFC
to remain eligible to receive allowances until supply of that lower-GWP
HFC is no longer insufficient (or a non-HFC substitute is available).
EPA also proposed that if an application is renewed for ASAs for
less than five years, the application would not be reviewed for
eligibility for ASAs again as part of the statutorily mandated schedule
(i.e., once EPA determines that an application is no longer eligible
for ASAs, EPA would not re-review that application), given the
direction in the statute. In such a situation, an entity may petition
the Agency to be evaluated for ASA eligibility, and the Agency would
then undertake the relevant petition review process; see section VI.
for further discussion of the petition process requirements.
One commenter suggested that EPA should review applications more
frequently than every five years. The commenter points to the statutory
text in the AIM Act in subsection (e)(4)(B)(v) that directs EPA to
review applications receiving ASAs ``not less frequently than once
every 5 years'' and to authorize renewals of not more than five years.
The commenter states that this text allows EPA to review applications
more frequently than every five years. The commenter alleges that EPA's
proposal to not do so is inconsistent with EPA's expectation the HFC
market will be dynamic given EPA's statement at proposal that the
Agency ``cannot know the full breadth of technologies that will be
developed as replacements for the current HFCs in use,'' (89 FR 75898,
75904).
EPA notes that the commenter itself acknowledges that the language
in the AIM Act is merely permissive of EPA reviewing applications more
frequently than every five years and that the commenter does not
provide any argument that the best interpretation of the statutory
language is that EPA is required to review applications more frequently
than every five years. Congress set a clear directive that the Agency
review applications receiving ASAs ``not less frequently than once
every 5 years,'' and EPA's approach clearly aligns with this language.
The statute provides EPA discretion to determine the appropriate review
period, as long as the Agency reviews at least once every five years.
To the extent the commenter intended to raise a policy or
programmatic rather than a legal argument, EPA disagrees with the
commenter's contention that adopting a five-year review period in this
final rule is inconsistent with statements EPA made at proposal. The
quotation of the proposal language provided by the commenter is from
the portion of EPA's proposal that discusses how EPA will analyze the
substitute availability criterion, and specifically what types of
chemicals and technologies should be considered as potential
substitutes. In that passage of the proposed rule, EPA explained why it
would be appropriate to consider various types of chemicals as well as
not-in-kind technologies in assessing whether an application had an
available substitute. This is distinct from the question of whether EPA
has sufficient information to prognosticate whether and how an
individual application may meet the two statutory criteria for ASA
renewal over the next five-year review period adopted in this final
rule. As explained in detail in the proposed rule and the TSD
accompanying the proposal, EPA examined the availability of substitutes
for each individual application and, if not currently available, when a
substitute would be expected to become available for the entire
application. While EPA expects the market to be dynamic, based on
analysis done for this rulemaking and as detailed in the TSD, EPA has
explained why a substitute currently unknown is not reasonably expected
to be available within the five-year renewal period, thus making an
earlier assessment earlier than the five-year period unnecessary. EPA
has demonstrated how this assessment plays out for individual
applications in the TSD accompanying the proposal and final rule. In
determining a final approach, EPA has taken this in balance with the
desire to provide certainty to applications for which Congress provided
priority access to HFC allowances.
One commenter suggested that ``because the proposed extension
period for some applications overlaps the next phasedown year (2029),
it may be appropriate to reevaluate the transition to lower GWP
alternatives in these applications and adjust allocations
accordingly.'' Although the intended meaning of this comment is not
entirely clear, EPA interprets this comment to suggest that if an
application has a safe and technically achievable substitute available
that is a lower-GWP HFC, either at the present time or at some point
within the five-year renewal period, EPA should base the application's
allocation levels on that lower GWP-HFC. EPA had proposed this as a
possibility for applications that may have had a lower-GWP HFC
substitute become available (see, e.g., 89 FR 75898, 75917). However,
as described in section V., EPA is not determining this factual
situation to be occurring for any application within this renewal
period. Therefore, the commenter's suggestion is not relevant for this
particular action at this time. If this situation arises within the
next renewal period, EPA may consider whether to adjust allocation
levels to meet a lower-GWP HFC substitute.
EPA did not receive comments on the following aspects of its
proposal: that applications must meet both criteria to be renewed as
eligible for ASAs, that EPA will review the supply of substitute HFCs
if they are determined to be available for an application, that EPA
will base the renewal timeline on less than five years if an
application will fulfill a criterion within the five-year period, and
that if an application is renewed as eligible for ASAs for less than
five years, the application will not be reviewed for eligibility for
ASAs ahead of the next five-year renewal period.
After considering all comments, EPA is finalizing all aspects of
this portion of the rule as proposed.
V. Review of the Six Applications Listed in the AIM Act
EPA reviewed the six applications listed in AIM Act subsection
(e)(4)(B)(iv)(I)--propellant in MDIs, defense sprays, SCPPU foam for
marine use and trailer use, the etching of semiconductor material or
wafers and the cleaning of CVD chambers within the semiconductor
manufacturing sector, MCMEU, and onboard aerospace fire suppression--as
required under subsection (e)(4)(B)(v)(I). Pursuant to that review, EPA
evaluated whether the criteria for renewal described in section IV. of
this preamble are met for any part, or the entirety, of the 2026-2030
time period. This section contains EPA's assessment of the criteria for
each application and EPA's decision regarding whether to renew each
application's eligibility to receive ASAs. EPA provides additional
information in the TSD available in the docket for this rulemaking. EPA
views the decision made for each individual application to be severable
from the decisions made for the other applications, as each application
determination is based on facts and assessment specific to that
application. In the event that a reviewing court overturns EPA's
[[Page 41684]]
determination for an individual application, EPA intends that the
determinations for the remaining applications should be considered as
severable and stand.
A. Propellants in Metered Dose Inhalers
EPA has been allocating ASAs for regulated substances used for
propellants in MDIs in accordance with subsection (e)(4)(B)(iv)(I)(aa)
of the AIM Act. In the Allocation Framework Rule, EPA defined a
``metered dose inhaler'' as ``a handheld pressurized inhalation system
that delivers small, precisely measured therapeutic doses of medication
directly to the airways of a patient. MDIs treat health conditions such
as asthma and chronic obstructive pulmonary disease and are approved
for such use by the U.S. Food and Drug Administration (FDA),'' (40 CFR
84.3). Patients using MDIs to treat pulmonary conditions work closely
with their healthcare provider to identify the right treatment for
their condition. Pharmaceutical grade HFC-227ea and HFC-134a, more
commonly referred to as hydrofluoroalkane (HFA)-227ea and HFA-134a in
the pharmaceutical industry, are purified from technical grade HFC-
227ea and HFC-134a, respectively, and are both used in MDIs as
propellants.
1. Availability of Safe and Technically Achievable Substitutes
In the proposed rulemaking, EPA proposed to determine that through
calendar year 2030, no safe or technically achievable substitute will
be available for propellants in MDIs and that supply of the regulated
substances that manufacturers and users are capable of securing from
chemical manufacturers is insufficient to accommodate this application.
Therefore, EPA proposed to renew the eligibility of entities using
regulated substances for propellants in MDIs to receive ASAs for the
five-year period of calendar years 2026 through 2030.
Many commenters were supportive of EPA's proposed determination
that no safe or technically achievable substitute will be available for
the MDI application. EPA acknowledges the commenters' support.
One commenter was a chemical producer who shared that they are
actively developing HFO-1234ze(E) as a low-GWP propellant for use in
MDIs and the alternative is currently undergoing clinical trials to
prepare for regulatory approvals and marketing authorizations by FDA
and other authorities. The commenter also stated that the chemical is
an available substitute and described their planned largescale
production capabilities of medical-grade HFO-1234ze(E). The commenter
also said that based on the SNAP evaluation of HFO-1234ze(E), this
chemical should be considered a safe alternative to high-GWP HFCs in
MDIs.
EPA responds that while the chemical producer stated that ``HFO-
1234ze is an available substitute,'' their comment focused on
largescale production of the chemical, which speaks to its available
supply as opposed to how EPA is evaluating substitutes for the MDI
application. EPA notes that while it has listed HFO-1234ze(E) as an
acceptable substitute under the SNAP program for many applications, EPA
has not evaluated this substance for applications that concern
inhalation, including use as a propellant in MDIs, under the SNAP
program. Other than the reference to SNAP's listings for non-MDI
applications, the commenter does not discuss how EPA has said it would
assess whether a substitute is available. As outlined in the proposed
rule in section IV.A., in the Agency's assessment of safe or
technically achievable substitutes, EPA takes into account Federal
regulations, including from other U.S. Government agencies. For the MDI
application, EPA specifically references FDA's requirements for MDIs,
and thus considers an alternative to be available for a particular MDI
drug product once an MDI containing the alternative propellant has been
approved by FDA. Consistent with the proposal, for an assessment of a
``safe'' alternative for use as a propellant in MDIs, EPA relies on
FDA, as FDA takes these considerations into account in their review, as
described in more detail in the TSD. Since FDA has not yet approved
MDIs containing any propellant substitutes to HFC-134a and HFC-227ea,
EPA does not consider HFO-1234ze(E) to be available within the
applicable renewal period. Further, based on experience with the ozone-
depleting substance MDI transition, we expect that companies will seek,
and FDA will evaluate, applications for MDIs that use alternative
propellants, on an individual MDI product-by-product basis, and thus it
is unlikely there will be approvals for all MDIs within the application
within the five year timeframe. In other words, EPA does not intend to
consider that FDA's approval of a single MDI product containing an
alternative propellant to mean that the alternative propellant is
therefore available for the entire application.
For the reasons outlined here and in the proposed rule, and based
on information available in the TSD, EPA is finalizing the
determination that no safe or technically achievable substitute will be
available for propellants in MDIs.
2. Supply
EPA proposed to determine that the supply of the regulated
substance that manufacturers and users are capable of securing from
chemical manufacturers is insufficient to accommodate propellants in
MDIs through calendar year 2030. As part of the manufacturing process
for MDIs, technical grade HFC-134a and HFC-227ea are purified into
pharmaceutical-grade HFC-134a and HFC-227ea. These pharmaceutical-grade
HFC propellants are produced at a limited number of production
facilities domestically and abroad. In its analyses of other
applications, EPA has noted that HFC-134a is the most widely available
HFC. However, this fact does not equate to a sizeable supply for the
MDI application because there are a limited number of HFC-134a
production and purification facilities that meet FDA's Current Good
Manufacturing Practice (CGMP) regulations and MDI manufacturers are not
easily able to switch suppliers of pharmaceutical-grade HFCs. Unlike
other applications, where EPA has discussed the diverse number of
chemical suppliers for HFC-134a globally, in this instance the options
are constrained. Producers of pharmaceutical-grade HFC-227ea must also
comply with FDA requirements as described in the proposed rule, which
limits their ability to switch to other suppliers of HFC-227ea. The two
additional years of reported consumption and production data for the
United States since the publication of the proposed rulemaking do not
change EPA's proposed assessment due to the limitations summarized here
and described in more detail in the proposed rule.
Commenters were supportive of the determination that supply of the
regulated substance that manufacturers and users are capable of
securing from chemical manufacturers is insufficient to accommodate the
MDI application through calendar year 2030, and there has been no
further information EPA has been made aware of that would change the
Agency's proposed determination. Therefore, EPA is finalizing as
proposed the determinations that the supply of both HFC-134a and HFC-
227ea is insufficient to accommodate the propellants in MDIs
application.
[[Page 41685]]
3. Final Determination on Application-Specific Allowance Eligibility
All but one commenter were supportive of EPA's determination to
renew the eligibility of entities in this application to continue
receiving ASAs for the full five-year period of calendar years 2026
through 2030. One commenter stated their opposition to the federal
government's ``green inhaler mandate'' due to their concerns about lack
of medical benefits and cost of generics and that the Agency should
commit that it is the policy of the federal government that neither EPA
nor FDA should ever ban, phase out, or refuse to approve HFC inhalers
based on their GHG emissions. The commenter also stated that any
rulemaking should permanently exempt inhalers from the phasedown of
HFCs and the administration should seek a change in law so that the
permanent exemption need not be reviewed by EPA every five years.
EPA responds that the AIM Act in subsection (b)(4)(B)(v) instructs
EPA to extend the eligibility of any application that meets the
statutory criteria ``for renewable periods of not more than 5 years.''
In this action, EPA is extending the eligibility of the MDI application
for the maximum length of time permitted by the statute. Further,
nothing in this rulemaking nor in the AIM Act mandates or requires that
MDI manufacturers transition to alternative propellants. In fact, EPA
is continuing to provide flexibility for manufacturers of MDIs to use
the propellant that they choose. Under the AIM Act, EPA is required to
implement an 85 percent phasedown of HFCs on an EV-weighted basis from
historic levels by 2036. This is not a complete phaseout as was
required under the CAA for ozone-depleting substances, meaning
production and import of HFCs is permitted indefinitely at a reduced
level. EPA anticipates the continued production and import of HFCs will
include applications where alternatives are not available and/or where
the transition is more challenging. In other words, there is nothing in
this rulemaking, in the AIM Act, or in any current EPA regulation that
would prevent MDI manufacturers from continuing to use the current HFCs
they are using after 2036.
In addition, the AIM Act authorizes EPA under subsection
(e)(4)(B)(iv) to provide priority access to allowances for certain
applications, including propellants in MDIs. EPA must provide the
``full quantity of allowances necessary, based on projected, current,
and historical trends, for the production or consumption of a regulated
substance for the exclusive use of the regulated substance in an
application.'' This rulemaking maintains eligibility for MDI
manufacturers to receive ASAs for another five years (i.e., through
2030) at which time, the Agency will conduct another review, consistent
with the Congressional mandate.
Regarding the request for EPA to permanently exempt MDIs from the
phasedown of HFCs, that is outside the scope of this rulemaking and
likely is not consistent with the AIM Act. However, as stated above,
the AIM Act calls for a phasedown and not a phaseout. Given the nature
of the phasedown, EPA does not foresee restricting access to all HFCs
for MDI manufacturers. EPA can and is finalizing to continue providing
priority access to HFCs through eligibility for ASAs for use as a
propellant in MDIs.
MDIs provide important, life-saving medications, and the
flexibilities described in this rule allow for continued production and
import of HFCs for use in MDIs. As discussed elsewhere in this rule,
EPA is finalizing additional flexibility to allow for continued
priority access to HFCs for the manufacture of MDIs at a level that
meets their need (see sections VII.B. and VII.F.).
One commenter stated that even after FDA grants approvals of MDIs
containing alternative propellants, eligibility for receiving ASAs may
still be needed as one of the potential alternatives, HFC-152a, is a
regulated substance under the AIM Act. The commenter requested that
when FDA grants approvals to MDIs containing HFC-152a and HFO-
1234ze(E), that the Agency does not encourage the use of one propellant
over the other, and that such determinations should be left with FDA.
Regarding the first part of the comment regarding eligibility for
receiving ASAs for HFC-152a, EPA responds that since FDA has not yet
approved any MDIs containing HFC-152a as a propellant, EPA has not yet
assessed providing ASAs based on the potential approval of MDIs
containing HFC-152a in this application. Regarding the second part of
the comment, EPA responds that since FDA has not approved any MDIs
containing either alternative propellant, treatment of the two
potential alternatives is beyond the scope of this rulemaking.
EPA is finalizing as proposed the determination that no safe or
technically achievable substitute will be available for propellants in
MDIs and that supply of the regulated substance that manufacturers and
users are capable of securing from chemical manufacturers is
insufficient to accommodate propellants in MDIs through calendar year
2030. Therefore, EPA is finalizing the proposal to renew the
eligibility of entities using regulated substances for propellants in
MDIs to receive ASAs for the five-year period of calendar years 2026
through 2030.
B. Defense Sprays
Per subsection (e)(4)(B)(iv)(I)(bb) of the AIM Act, EPA has been
allocating ASAs for use of regulated substances in defense sprays. EPA
defined a ``defense spray'' as ``an aerosol-based spray used for self-
defense, including pepper spray and animal sprays, and containing the
irritant capsaicin and related capsaicinoids (derived from oleoresin
capsicum), an emulsifier, and an aerosol propellant,'' (40 CFR 84.3).
Within this application, there are four primary uses: bear sprays, dog
sprays, personal defense sprays, and law enforcement sprays (which
includes military sprays). The defense sprays chapter in the TSD
contains more details on these product categories. HFC-134a is the
propellant predominantly used for defense sprays and is the only HFC
for which defense spray ASAs have ever been expended.
1. Availability of Safe and Technically Achievable Substitutes
EPA proposed that there would not be a safe and technically
achievable substitute available for the entire application at the time
of rule finalization, but a safe or technically achievable substitute
would be available for the entirety of the defense spray application by
January 1, 2028. EPA's proposed substitutes determination was based on
knowledge at the time of proposal that some entities in the defense
sprays application had already successfully commercialized alternative
propellants, including non-HFCs, in some of their products. In
addition, multiple propellants, including HFC-152a, HFO-1234ze(E), and
hydrocarbons, have been listed as acceptable under SNAP and identified
as technically and economically feasible alternatives for propellants
in aerosols by the Montreal Protocol's Technology and Economic
Assessment Panel (TEAP) Medical and Chemicals Technical Options
Committee (MCTOC). EPA's Technology Transitions restrictions will also
require that all aerosols, including technical aerosols, transition out
of HFC-134a by January 1, 2028. EPA's assessment at the time of
proposal was that the commercialization of substitutes in some defense
spray sub-applications suggests these substitutes are viable
application-wide.
[[Page 41686]]
Comments on the proposed renewal options were all focused on
availability of substitutes. Some commenters requested that defense
sprays continue to be eligible for ASAs for the full five-year period
because there is no safe or technically achievable substitute for
specific sub-applications of defense sprays and explained their
concerns. One commenter suggested a two-year renewal also based on the
availability of substitutes. Another commenter supported a two-year
renewal but provided no explanation or additional information that can
inform EPA's assessment. Finally, one commenter supported no renewal of
ASAs given the availability of alternatives, though did not provide
additional information beyond EPA's initial assessment.
As discussed in section IV.C., which outlines the application
review framework, an application must meet both criteria to be eligible
for renewal of ASAs. EPA discusses in the next subsection that EPA is
finalizing a determination that the criterion in subsection
(e)(4)(B)(i)(II) is not met for this application beginning January 1,
2026. This outcome is determinative, standing alone, for EPA to
finalize that defense sprays will not be eligible for ASAs beginning
January 1, 2026. As a result, EPA is not making a final determination
regarding the availability of substitutes in the context of ASAs.
Because EPA is not making a final determination in this rule with
respect to the availability of substitutes for this application, the
comments filed are not significantly adverse to the outcome in this
rule. Therefore, EPA is not responding to comments specific to the
substitute criterion of the review of the defense spray application.
However, the proposed rulemaking also requested comment on the
treatment of defense sprays under the 40 CFR part 84, subpart B
Technology Transitions restrictions. Responses to comments regarding
availability of substitutes as relevant to the Technology Transitions
restrictions are addressed in section V.B.4. of this final rule.
2. Supply
As explained, HFC-134a is the propellant predominantly used for
defense sprays and is the only HFC for which defense spray ASAs have
ever been expended. Therefore, EPA is analyzing the supply of HFC-134a
in assessing whether this application meets the second criterion to be
renewed as eligible for ASAs. EPA co-proposed two supply
determinations: (1) the supply of HFC-134a is not insufficient to
accommodate this application; or (2) the supply of HFC-134a will not be
insufficient to accommodate this application as of January 1, 2028.
In this final rulemaking EPA did not consider the supply of HFC-
152a in assessing whether the defense spray application meets the
statutory criteria for renewed eligibility for ASAs. EPA noted in the
proposal that assessment of HFC-152a supply could be relevant if HFC-
152a is an available safe and technologically achievable substitute for
the entire defense spray application. EPA did not receive any comments
regarding if HFC-152a is an available safe and technically achievable
substitute for the entire defense sprays application. Comments from
defense spray manufacturers instead highlighted the concerns around the
use of flammable propellants in law enforcement and military settings,
where defense sprays are often used in conjunction with ``Conducted
Energy Weapons'' (e.g., Tasers). As described in more detail below in
section V.B.3., EPA agrees with commenters regarding the human safety
concerns of using stun guns alongside flammable propellants, such that
HFC-152a, given its flammability, is not an available safe and
technically achievable substitute application-wide. Thus, in this final
rulemaking EPA did not consider the supply of HFC-152a as it pertains
to the defense sprays application.
In the proposal, EPA explained that there is a large available
supply of HFC-134a, and demand for HFC-134a from the defense sprays
application is very small relative to overall supply. Given its broad
use in other applications (e.g., refrigeration and air conditioning),
HFC-134a is the most widely produced HFC globally and is produced in
substantial quantities in multiple countries, including the United
States. At the time of proposal, domestic production of HFC-134a was
nearly 50 percent of total U.S. HFC production, but EPA also noted at
the time of proposal that one domestic producer indicated it was
transitioning its facility to produce a different chemical; \10\ as of
the time of this final rulemaking, this retrofit was completed.
Significant amounts of HFC-134a were also imported in 2022, such that
HFC-134a made up approximately 32 percent of total U.S. HFC consumption
in 2022. In addition, suppliers held quantities of HFC-134a in
inventory that were approximately 100 percent of calculated consumption
of HFC-134a in 2022. EPA had also noted in the proposed rulemaking that
it was not aware of any reason this application could not use recovered
and reprocessed HFCs, and the supply of reclaimed HFC-134a (the
likeliest source of recovered and reprocessed HFCs) was significant and
further increased the available supply of HFC-134a.\11\ At the time of
proposal, EPA had not yet finalized the proposed rulemaking ``Phasedown
of Hydrofluorocarbons: Management of Certain Hydrofluorocarbons and
Substitutes Under Subsection (h) of the American Innovation and
Manufacturing Act of 2020'' (88 FR 72216, October 19, 2023) (hereafter
referred to as the ``2024 Emissions Reduction and Reclamation Rule''),
which had proposed requirements that reclaimed HFCs be used for certain
equipment to support maximizing reclamation. Despite the large supply
of HFC-134a, EPA recognized the uncertainty regarding future supply
given the stepdown in permissible production and consumption of HFCs
taking place in 2024 and that the Agency did not have complete
production, consumption, or inventory data available for 2024 when the
proposed rulemaking was issued. In addition, at the time of this
proposed rulemaking, EPA had not yet finalized another rulemaking
related to the use of trichloroethylene (TCE) in the production of HFC-
134a; the TCE pathway is the primary production pathway used to produce
HFC-134a in the United States.
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\10\ See https://www.arkema.com/usa/en/media/news/global/corporate/2022/20221006-two-major-steps-develop-supply-forane-1233zd/.
\11\ EPA publishes annual data submitted under CAA section 608
showing trends in the reclamation market for ozone-depleting
substances and HFC refrigerants. Over 2.5 million pounds of HFC-134a
were reclaimed in 2023 and HFC-134a was one of the primary drivers
for the 20% year-over-year increase in the reclamation market
between the 2022 and 2023. See https://www.epa.gov/section608/summary-refrigerant-reclamation-trends.
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Regarding demand of HFC-134a, EPA's models project total HFC
consumption to be significantly lower than the limit established by the
statutory phasedown cap for all years of the phasedown, assuming
compliance with the restrictions.\12\ This is due in part, as explained
in the proposal, to an expected decrease in demand for HFC-134a over
time as a result of the 2023 Technology Transitions Rule, which
established sector and subsector-level GWP limits and restrictions on
the use of certain regulated substances. GWP restrictions under the
2023 Technology
[[Page 41687]]
Transitions Rule began taking effect on January 1, 2025, with the
latest restriction taking effect on January 1, 2028. The majority of
sectors or subsectors subject to Technology Transitions restrictions
will not be permitted to use neat HFC-134a, as its GWP of 1,430 is
greater than the highest relevant GWP limit for those sectors or
subsectors (i.e., 700), so demand for this chemical should relatedly
fall over time. Many, perhaps most, of these sectors or subsectors were
transitioning away from using HFC-134a before the enactment of the AIM
Act (e.g., light-duty motor vehicle air conditioning and consumer
aerosols). However, EPA also noted that some sectors may transition to
blends with HFC-134a as a component where the GWP is below the
applicable limit, and that HFC-134a will likely continue to be used in
other applications not subject to these restrictions (e.g., air
conditioning for heavy-duty vehicles), as well as for servicing
existing equipment (e.g., older light-duty motor vehicle air
conditioning). In addition, EPA noted in the proposal that of the six
defense spray entities that had received ASAs at some point for
calendar years 2022, 2023, and 2024, three did not receive ASAs in at
least one of those years and only three requested allowances for 2025.
EPA was also aware of at least one entity selling bear sprays that use
HFC-134a that has never applied for, and therefore never received,
ASAs.
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\12\ See HFC Phasedown Regulatory Impact Analysis (RIA) updated
for the 2023 Technology Transitions Rule at https://www.epa.gov/system/files/documents/2024-11/epa-hq-oar-2021-0643-0227_attachment_1.pdf.
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There were no comments on EPA's proposed assessment for the
insufficient supply criterion related to defense sprays.
In preparing this final rulemaking, EPA analyzed data that has
become newly available since the time of proposal related to supply of
regulated substances for this application. In 2024, domestic production
of HFC-134a was 34,119.4 metric tons (MT), making up 33 percent of U.S.
HFC production on a mass basis; this production amount is nearly
equivalent to the HFC produced in the highest quantity in that year.
While domestic production of HFC-134a has decreased since 2022, global
production of this chemical remains high,\13\ and there are multiple
entities that import HFC-134a. In 2024,\14\ 7,791.1 MT of HFC-134a were
imported into the United States. Overall, HFC-134a made up
approximately 22 percent of total U.S. HFC consumption in 2024 on a
mass basis. The defense sprays application has very limited demand for
HFC-134a in comparison to U.S. consumption of HFC-134a; allocated ASAs
for this application in 2025 are equivalent to 0.5 percent of
calculated domestic consumption of HFC-134a in 2024, on a metric tons
of exchange value equivalent (MTEVe) basis. In addition, at the end of
2024, suppliers held 24,598.1 MT of HFC-134a in domestic inventory,
which is equivalent to 92 percent of calculated consumption of HFC-134a
in 2024; however, EPA notes that the entities holding this material in
inventory are broader than EPA's interpretation of chemical
manufacturers (see section IV.B. for more information), so not all of
this HFC-134a may be considered available supply under the statutory
review criteria in AIM Act subsection (e)(4)(B)(i)(II).
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\13\ Global production of HFC-134a is estimated to have risen by
approximately 20 percent since 2020. See https://ozone.unep.org/system/files/documents/TEAP-May2024-Progress-Report.pdf.
\14\ All data for 2024 in this preamble is preliminary and
includes all data from reports verified as of July 25, 2025.
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EPA recognizes that the overall market for HFCs is likely to
continue changing in light of the AIM Act and other restrictions.
However, the market behavior to date suggests that over the first three
years of the AIM Act-directed HFC phasedown, there have not been
dramatic shifts in the supply of HFC-134a. On January 1, 2024, the
second stepdown of the level of permissible production and consumption
of HFCs took effect. This stepdown was unique in scale, with a cap of
60% of historic baseline levels and a decrease of 30% compared to 2022
and 2023 permissible production and consumption. Imports and production
of HFC-134a remained high, albeit with a decrease in total consumption
relative to levels in 2023. While consumption of HFC-134a has decreased
relative to 2022 and 2023, this aligns with projected decreases in
demand for HFC-134a as products transition to new HFC and non-HFC
substitutes. In addition, global production capacity is expected to
remain substantial over the coming years, given production will
continue in countries on later HFC phasedown schedules, and EPA expects
continued domestic and global demand for HFC-134a.
EPA notes it is unclear whether there may be impacts on domestic
production of HFC-134a from the recently finalized rulemaking,
``Trichloroethylene (TCE); Regulation Under the Toxic Substances
Control Act (TSCA)'' (89 FR 102568, December 17, 2024). This rulemaking
bans, through a phasedown, the use of TCE due to unreasonable risk of
injury to human health, including prohibiting TCE from being used as a
feedstock to manufacture HFC-134a within eight and a half years from
when that rule was finalized (i.e., by mid-June 2033). The HFC-134a
production pathway using TCE is the primary production pathway in the
United States, and while there are other pathways to produce HFC-134a,
it is EPA's understanding that it is complex to change already existing
domestic manufacturing infrastructure built for the TCE production
pathways such that transitions may not occur immediately but rather
over the course of the eight-and-a-half year TCE phaseout. However, at
the end of this ASA five-year renewal period in 2030, production of TCE
for use as a feedstock in the manufacture of HFC-134a will still be
allowed at 50% of baseline TCE levels. In addition, given entities
using TCE to produce HFC-134a can use any 12 consecutive months in the
three years preceding the December 2024 publication of the final TCE
rule to calculate their TCE feedstock baselines for compliance with the
TCE requirements under TSCA, the baseline TCE level could be based on
TCE use early in the HFC phasedown when greater levels of HFC-134a
production were allowed. Specifically, the AIM Act limit on HFC
consumption and production in 2022 and 2023 was 90% of historic HFC
baseline levels; in 2030, HFC consumption and production will be
limited to 30% of the HFC baseline. The TCE rule under TSCA is not
expected to be a limiting factor during the period covered by this rule
and will likely allow for substantial U.S. HFC-134a production levels
relative to demand, as discussed in more detail below in this section.
Further, while the complete phaseout of TCE for the production of HFC-
134a may impact production of HFC-134a in the United States, it is
unlikely to limit available supply of HFC-134a, as there is still
global supply of HFC-134a from foreign producers that could be imported
into the United States. The complete prohibition on TCE being used in
the domestic production of HFC-134a will occur after the five-year
renewal period assessed in this rulemaking. Therefore, when combined
with consideration of global supply, the TCE phasedown does not change
EPA's determination in this rulemaking that supply of HFC-134a is not
insufficient to accommodate the defense spray application.
In considering supply of the regulated substance currently used by
this application, EPA also notes that the Agency is unaware of any
reason why this application cannot use recovered and reprocessed HFCs.
For example, EPA is not aware of any specific purity requirements for
HFCs used in this application. EPA did not receive any comments
suggesting that recovered and
[[Page 41688]]
reprocessed HFCs cannot be used in this application. One commenter
suggested that EPA not rely on the use of reclaimed HFCs for defense
sprays because reclaimed HFCs should be utilized in applications where
the material is able to be recaptured multiple times, thereby extending
the usefulness of the substance. In response, EPA notes that this
rulemaking does not require the use of reclaimed HFCs in defense sprays
but rather notes that reclaimed HFCs may provide a potential source of
supply for this application. Requirements for the use of reclaimed HFCs
in equipment, and further information on the related authority to do so
under the AIM Act and EPA's relevant analyses, can be found in the
recently finalized 2024 Emissions Reduction & Reclamation Rule (89 FR
82682, October 11, 2024).
In light of the lack of relevant comments and following on the
explanation provided in the proposed rule, EPA is considering the
supply of recovered and reprocessed HFCs that can be secured from
chemical manufacturers as relevant when assessing whether the supply of
HFC-134a is insufficient to accommodate this application. The likeliest
source of these reprocessed HFCs for defense sprays would be reclaimed
refrigerants, which must meet specific purity requirements.\15\ Since
there are no federal purity requirements or industry purity standards
for HFCs used in aerosols, the purity of reclaimed HFCs is likely the
same or higher than the virgin HFCs used in this application. The
supply of reclaimed HFC-134a in the United States is substantial and
increases the overall supply of HFC-134a available to this application.
HFC-134a is the most reclaimed single-component HFC refrigerant since
HFC reclamation reporting under CAA section 608 began in 2017 and
continues to see growth within the reclamation market due to its
prevalence as a refrigerant in various appliances. Annual reported
volumes of reclaimed HFC-134a have continued to grow since the
beginning of the HFC phasedown under the AIM Act; preliminary HFC
reclamation data for reporting year 2024 indicate a quantity of 1,175.6
MT, an increase of approximately 40 percent since 2021. Discussion on
reclaim market trends and future growth potential for reclaimed HFCs
can be found in EPA's Analysis of the U.S. Hydrofluorocarbon
Reclamation Market: Stakeholders, Drivers, and Practices \16\ report in
the docket for the 2024 Emissions Reduction and Reclamation Rule. EPA
expects growth in HFC reclamation, and specifically HFC-134a, to
continue due to several factors, such as (1) the increase in
refrigeration and air-conditioning appliances using HFC refrigerants
reaching their end-of-life--making more HFCs potentially available for
recovery and reclamation, (2) provisions established in the 2024
Emissions Reduction and Reclamation Rule intended to maximize reclaim,
(3) the overall HFC phasedown's limits on how much virgin HFC can be
imported and produced, and (4) increased capacity from EPA-certified
reclaimers to reprocess recovered refrigerant. EPA notes that while
reclaimed HFC-134a serves as an additional source of available supply,
the Agency's assessment that supply of HFC-134a is not insufficient
would be the same with or without including the available supply of
reclaimed HFC-134a given the significant amounts of HFC-134a available
globally and in the United States and other data described in this
section.
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\15\ In alignment with the definition in 42 U.S.C. 7675 (b)(9),
EPA defined reclaim as ``the reprocessing of regulated substances to
all of the specifications in appendix A to 40 CFR part 82, subpart F
(based on Air-Conditioning, Heating, and Refrigeration Institute
(AHRI) Standard 700-2016) that are applicable to that regulated
substance and to verify that the regulated substance meets these
specifications using the analytical methodology prescribed in
section 5 of appendix A to 40 CFR part 82, subpart F'' (40 CFR
84.3). Thus, HFC-134a refrigerant that is reclaimed and used by a
different user than the original owner of the recovered refrigerant
must meet the purity requirements of AHRI 700, Standard for
Specifications for Refrigerants. That standard, among other things,
requires that reclaimed HFC-134a must be visibly clean (that is, no
visible solids or particulate), no more than 1.5 percent by volume
of air in the vapor phase, no more than 10 parts per million of
water by weight, and no more than 0.5 percent by weight of other
volatile impurities.
\16\ See 2024 Emissions Reduction & Reclamation Rule's Analysis
of the U.S. Hydrofluorocarbon Reclamation Market: Stakeholders,
Drivers, and Practices report at https://www.regulations.gov/document/EPA-HQ-OAR-2022-0606-0169.
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Restrictions established in the 2023 Technology Transitions Rule
began taking effect at the beginning of this year. There has been no
further information EPA has been made aware of that would change the
Agency's assessment that demand for HFC-134a will continue to fall in
part because of these restrictions.
Entities do not need to seek or receive ASAs in order to use HFC-
134a in defense sprays, barring requirements under other related
regulations. Further, entities do not have to expend an allowance to
purchase HFC-134a from another entity that has imported or produced the
regulated substance. The number of entities requesting allowances for
this application has decreased over the years; only three entities
requested calendar year 2025 allowances for this application as
compared to four for 2024 and five for 2022. As explained earlier in
this section, EPA is also aware of at least one entity selling bear
spray that uses HFC-134a that has never applied for, and therefore
never received, ASAs. This suggests that at least this one entity, as
well as the others who have stopped applying for allowances, were able
to acquire HFC-134a on the open market without having ASAs. In
addition, updated EPA modeling conducted for the 2024 Emissions
Reduction & Reclamation Rule continues to support that total projected
HFC consumption will be significantly lower than the limit established
by the statutory phasedown cap for all years of the phasedown, assuming
compliance with the restrictions.\17\ If HFC consumption is lower than
the amount allowed under the AIM Act in a given year, there should be
more allowances than are needed to meet market demand in that year.\18\
If demand for HFCs is lower than the cap, general pool consumption and
production allowances, which are currently used to produce or import
HFCs for entities that do not hold allowances and entities that use
HFCs in an application-specific use, would be available to allow for
the production or import of HFCs for use by entities that historically
have relied upon ASAs. Together, these facts support the conclusion
that the supply of HFC-134a is not insufficient to accommodate entities
in this application.
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\17\ See HFC Phasedown RIA Addendum at https://www.regulations.gov/document/EPA-HQ-OAR-2022-0606-0175.
\18\ The actions taken pursuant to subsection (h) and (i) of the
AIM Act did not propose to and did not accelerate the HFC phasedown.
The RIAs associated with those actions did not analyze an
acceleration of the HFC phasedown. Rather, HFCs will continue to be
available consistent with the phasedown codified at 40 CFR part 84,
subpart A, and this action does not propose to change that phasedown
schedule. Even if the requirements finalized pursuant to subsections
(h) and (i) in effect reduce the production or consumption of HFCs
used in particular sectors or subsectors faster than the scheduled
reductions under the AIM Act, that does not make those rules an
acceleration under subsection (f).
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In sum, HFC-134a is currently more widely available than other
HFCs, demand for HFC-134a is decreasing, and defense sprays' need for
HFC-134a is small compared to the overall demand for HFC-134a across a
range of sectors. Further information regarding EPA's assessment of the
supply of HFC-134a related to the needs of the defense sprays
application can be found in the defense sprays chapter of the TSD. As a
result of this review, EPA is finalizing the proposed determination
that the
[[Page 41689]]
criterion in subsection (e)(4)(B)(i)(II) is not met for this
application beginning January 1, 2026, i.e., the supply of HFC-134a is
not insufficient to accommodate this application for the full five-year
period from 2026-2030.
3. Final Determination on Application-Specific Allowance Eligibility
EPA co-proposed two renewal options for the defense sprays
application--to not renew the eligibility for entities in this
application to receive ASAs, such that the application is ineligible
for ASAs beginning January 1, 2026, or to renew for two years, such
that the application is ineligible to receive ASAs beginning January 1,
2028--and took comment on a full five-year renewal. EPA explained that
these renewal options flowed out of how the Agency would land on a
range of proposed determinations for the statutory criteria.
Specifically, as described earlier in this section, EPA proposed that
there would not be a safe and technically achievable substitute
available for the entire application at the time of rule finalization,
but a safe or technically achievable substitute would be available for
the entirety of the defense spray application by January 1, 2028. EPA
co-proposed two supply determinations: (1) the supply of HFC-134a is
not insufficient to accommodate this application; or (2) the supply of
HFC-134a will not be insufficient to accommodate this application as of
January 1, 2028. EPA's co-proposals were based on uncertainty at the
time of the proposed rulemaking, for which EPA expected to have
additional information at the time of this final rulemaking that would
inform a final determination. These co-proposals and the related
information that supported each co-proposal are discussed in more
detail earlier in this section and in the proposal.
EPA also took comment on a full five-year renewal based on and
tailored only to the application's need to purchase HFC-152a. No
defense spray ASAs have been expended for HFC-152a to date, but EPA
asked for comment in the proposal on whether HFC-152a could be an
available safe and technologically achievable substitute for the entire
defense spray application within the renewal period. EPA explained that
this proposed option, to renew allowances tailored to the application's
need to purchase HFC-152a, could be relevant if HFC-152a was determined
by EPA in the final rule to be an available safe and technologically
achievable substitute for the entire defense spray application within
the renewal period.
Comments on the proposed renewal options were all focused on
availability of substitutes. EPA responds to these comments in section
V.B.1. and section V.B.4. EPA is finalizing a determination that the
criterion in subsection (e)(4)(B)(i)(II) is not met for this
application beginning January 1, 2026. EPA is not making a final
determination regarding the availability of substitutes in the context
of ASAs, as described in more detail in section IV.B.3. Because the
defense sprays application does not meet both criteria as of January 1,
2026 (i.e., it fails to meet the insufficient supply criterion), EPA is
finalizing that defense sprays are not eligible for ASAs beginning
January 1, 2026.
4. Restriction Under 40 CFR Part 84, Subpart B
In this final rule, EPA is excluding defense sprays from the
provisions of 40 CFR part 84, subpart B. Thus, under this final rule
they can continue to be manufactured in the United States and imported
into the United States using current propellants indefinitely.
The 2023 Technology Transitions Rule restricts the manufacture and
import of aerosol products that use HFCs or HFC blends that have a GWP
greater than 150. This restriction began January 1, 2025, for all
aerosols except for those specifically listed in the rule as technical
aerosols, which have manufacture and import restrictions starting
January 1, 2028. Sectors and subsectors subject to the GWP limit are
also subject to labeling, reporting and recordkeeping requirements. The
listed technical aerosols are applications for which EPA received
sufficient information through the comment period or through EPA's own
analysis indicating that additional time is needed to transition to
substitutes due to various technical requirements, such as non-
flammability and/or a specific vapor pressure. The list of technical
aerosols does not include defense sprays. The 2023 Technology
Transitions Rule also exempted applications while they are receiving
ASAs (40 CFR 84.56(a)(2)). If an application no longer qualifies for
ASAs, the restrictions would then apply.
Most of the U.S. aerosol industry subject to the January 1, 2025,
compliance date had already transitioned to using propellants that meet
the 150 GWP limit as indicated in the information provided by industry
and trade associations in the development of the 2023 Technology
Transitions Rule,\19\ and therefore has available substitutes for use
based on EPA's consideration of the factors listed in subsection
(i)(4)(B) (e.g., technological achievability, commercial demands,
safety, consumer costs, etc.). By contrast, the aerosol uses that have
a January 1, 2028, compliance date (see 40 CFR 84.54(a)(16)(i)(A)-(O))
currently use HFC-134a (most often as a propellant) and have
limitations that require additional time ``to reformulate, test, and
transition'' to ensure availability of substitutes under subsection
(i)(4)(B) for these technical uses. EPA determined in the 2023
Technology Transitions Rule that available substitutes for use as
aerosol propellants include HFC-152a and HFO-1234ze(E).
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\19\ See Household and Commercial Products Association (HCPA)
and National Aerosols Association (NAA) Technology Transitions
Petition to EPA dated July 6, 2021. Available in the public docket
to the 2023 Technology Transitions Rule at EPA-HQ-OAR-2021-0289-
0037.
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In the proposed rule, EPA requested comment on treating defense
sprays consistent with how technical aerosols are treated under 40 CFR
part 84, subpart B and the codified restrictions that would therefore
apply, such as the GWP limit starting January 1, 2028, a three-year
sell-through window for inventory ending January 1, 2031, and labeling,
recordkeeping, and reporting requirements. EPA also requested data and
information related to the availability of substitutes for use in
defense sprays and whether a different timeline would be more
appropriate for the transition of defense sprays or for a subset of
products in this application.
EPA received comments on the use of HFC-134a in defense sprays.
First, commenters raised concerns about using a flammable propellant in
law enforcement and military applications. These defense sprays could
be used by law enforcement or military personnel in combination with a
taser, which commenters stated poses a safety risk, as well as a cost
to users to retrain personnel to mitigate these risks. The commenters
requested an exemption for these uses until a non-flammable alternative
propellant is available.
EPA received a comment requesting that the Agency provide
additional time for compliance with the provisions of 40 CFR part 84,
subpart B for bear sprays to transition to new alternatives. The
commenter stated that new formulations of bear sprays must gain
approval by EPA under the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA) as well as every state where those products are
sold. EPA also received comments from a defense spray
[[Page 41690]]
manufacturer and a propellant supplier stating that alternative
propellants have been commercialized already and are effective in
defense spray applications where flammability is not a concern, e.g.,
bear repellents.
EPA acknowledges these comments regarding the safety, efficacy, and
availability of substitute propellants used in defense sprays. The
Agency agrees that the circumstances in which law enforcement and
military defense sprays may be used warrants proceeding with caution.
Almost all currently identified substitutes to HFC-134a as a propellant
are either flammable or mildly flammable. While dog sprays use
compressed nitrogen gas, which is a non-flammable propellant, technical
limitations limit its suitability for use in other types of defense
sprays. For example, products using compressed nitrogen gas will
steadily reduce in pressure as the contents of the aerosol are used,
whereas liquified gas propellants maintain a more constant pressure.
Apart from nitrogen gas, we are not aware of available non-flammable
substitutes, nor active, in-process development of such substitutes. Of
particular concern is that law enforcement or military use of defense
sprays in combination with tasers would be applied directly at or on
humans, heightening safety risks. We therefore agree with commenters
that, at this time, there is no available substitute for the HFCs
employed in defense sprays that can safely be used across all uses.
Therefore, the Agency is finalizing that defense sprays as defined
in 40 CFR 84.3, are excluded from the provisions under 40 CFR part 84,
subpart B because there are not available substitutes, per AIM Act
section (i)(4)(B), across all defense spray applications. As such,
defense sprays are not subject to the restrictions on the manufacture
or import at 40 CFR 84.54(a)(16), and subsequent sale and distribution
at 40 CFR 84.54(b). The labeling, reporting, and recordkeeping
requirements are also not applicable. In other words, defense spray
manufacturers will not have to comply with any of the 2023 Technology
Transitions Rule aerosol requirements that would otherwise apply to
them once they are no longer eligible for ASAs and can purchase HFC-
134a to manufacture defense sprays the same way nearly all other
entities purchase HFCs, i.e., on the open market.
C. Structural Composite Preformed Polyurethane Foam for Marine Use and
Trailer Use
The third application to which EPA has been allocating ASAs is
SCPPU foam for marine and trailer uses, in accordance with subsection
(e)(4)(B)(iv)(I)(cc) of the AIM Act. In the Allocation Framework Rule,
EPA defined this application as ``a foam blown from polyurethane that
is reinforced with fibers and with polymer resin during the blowing
process, and is preformed into the required shape (e.g., specific boat
or trailer design) to increase structural strength while reducing the
weight of such structures,'' (40 CFR 84.3). SCPPU foam is different
from other types of polyurethane (PU) foams due to its specialized
structural properties, and it is preformed into required shapes (e.g.,
specific boat or trailer design). At the time of proposal, HFC-134a was
the HFC used commercially in the blowing process for SCPPU foam.
Transitions have developed such that at the time of this final
rulemaking, HFC-152a, in addition to HFC-134a, is a regulated substance
used in this application.
1. Availability of Safe and Technically Achievable Substitutes
With respect to the statutory criterion regarding availability of
substitutes, EPA explained in the proposed rule that commercialization
of substitutes is well underway in this application, and the Agency
anticipated that the availability of substitutes would evolve
significantly between the proposed and final rule. EPA noted that it
would consider information collected from regulated entities and other
relevant sources through public comment and regulatory reporting to
inform a final decision on this criterion. At the time of proposal, EPA
was aware, from manufacturer communications and reporting, of two
substitutes under development for this application--an HFC-152a/
cyclopentane blend and an HFO. Information from the manufacturers of
SCPPU foam for marine and trailer uses suggested that the research and
development phase for both potential substitutes could be nearing a
phase where they would be able to commercialize use of substitutes.
According to the information shared with EPA prior to the proposed
rule, one substitute seemed close to being available for SCPPU foam for
marine use, and the other substitute seemed close to being
commercialized for SCPPU foam for trailer use. EPA noted that if
commercialization occurred as the companies anticipated and as shared
with EPA, the entire application would be able to use a chemical or
blend of chemicals different from HFC-134a before January 1, 2026. EPA
proposed to determine that the HFO is not an available substitute
application-wide for the five-year period of 2026-2030, given
additional research and development trials would be needed along with a
ramp up to commercialization, before the sub-application could possibly
use the HFO as a substitute. With respect to the other substitute under
development, EPA noted in its proposal that the Agency was unclear on
why the HFC-152a/cyclopentane blend cannot be used across the whole
application, and EPA invited comment on reasons why, including
supporting data and information. EPA noted that often different
companies use different blowing agents to produce the same foam, and
that there are two different end uses in this application, but the foam
used in both sub-applications is the same (i.e., it is an SCPPU foam).
EPA noted that it was not aware of any other safe and available
alternatives other than an HFO and the HFC-152a/cyclopentane blend.
As noted earlier in this section, at the time of proposal, EPA
explained that transitions were well underway in this application, and
the Agency anticipated that the commercial processes used in this
application could evolve significantly between the proposed and final
rule. To that end, one commenter in the trailer sub-application stated
that as of October 2024, the company had nearly completed a full
transition to using the HFC-152a/cyclopentane blend and anticipated the
transition to be finalized by early 2025 at the latest. On the basis of
this statement, as well as regulatory reporting to EPA, the factual
framework for the assessment of this application has shifted from the
proposal in this final rulemaking. Specifically, EPA is now considering
HFC-152a to be commercially used in the SCPPU foam application.
Therefore, EPA will be assessing the SCPPU foam application in
accordance with the review framework outlined in section IV., and
specifically considering this application as one that uses two HFCs,
instead of just one.
As described at the proposal, beside the HFC-152a/cyclopentane
blend that EPA is now considering as an HFC used within this
application for purposes of the analysis in this final rule, EPA only
identified one other potential substitute to analyze with specificity
in considering whether this application met the first statutory
criterion for renewal. Specifically, EPA noted testing that had
occurred within the application
[[Page 41691]]
for a potential transition to an HFO. EPA received comments from
entities operating within the SCPPU foam application, both in the
marine sub-application and trailer sub-application, that all agreed
with EPA's proposal that HFOs are not a safe and technically achievable
substitute available within the renewal period for this application.
The entity operating within the trailer sub-application noted that they
had completed nearly 190 trials over close to seven years, which were
unsuccessful, regarding transition to an HFO. This is consistent with
information EPA had on hand in developing the proposal. With respect to
the sub-application for marine uses, multiple commenters raised
skepticism about the availability of safe and technically achievable
substitutes for the marine uses sub-application. One commenter in the
SCPPU foams for marine uses sub-application noted that while it has
been working with its key supplier on substitutes for several years,
that work has been unsuccessful, and no viable substitute has been
identified. The commenter stated that it has not invested heavily into
pursuing HFOs as an alternative due to perceived risk of those
chemicals being under state-level regulatory scrutiny. Another
commenter, the supplier for the marine foams sub-application, provided
detailed technical information on the challenges of HFOs as compared to
HFC-134a. For example, they note ``HFO-containing PU [foam] is much
more challenging to formulate and process to reach the same level of
processability even with adjustments to processing equipment due to the
fact that all the components and chemistries such as polyols,
surfactants, catalysts etc. are optimized for HFC blown formulations
and processes.'' They noted the transition to HFOs will require ``more
time to optimize and scale for commercial use.'' Another commenter, a
recreational marine trade associate, stated that while manufacturers
are actively pursuing alternatives to HFC-134a, none of those
alternatives are currently viable as they have not yet met the
stringent technical and safety requirements for marine applications. No
stakeholder operating within the application commented that a safe and
technically achievable substitute is available in the application nor
would be available within the renewal time period.
EPA acknowledges the support from the commenters of EPA's proposed
determination that there is no HFO alternative that is or will be a
safe and technically achievable substitute for this application within
the renewal period. To the extent commenters provided data to support
this conclusion beyond what was included in the TSD for the proposed
action, EPA has incorporated that information into the TSD accompanying
this final action. Regarding commenters' allegation that considering
transition to HFOs is inadvisable due to regulatory action related to
per- and polyfluoroalkyl substances (PFAS), EPA notes that the federal
government has not adopted a specific definition of PFAS and has not
included HFCs or HFOs in any PFAS-related restrictions. Although EPA
does not have a consensus definition of PFAS, the Agency has applied
certain criteria or definitions to advance program-specific efforts in
specific rules (see section 3.4 of the accompanying TSD). As was
detailed in the proposed action and accompanying TSD, HFOs may
eventually be considered a safe alternative that is otherwise
technically achievable and available. However, for this particular
application, as detailed in response to an earlier comment, the Agency
is determining that HFOs are not available substitutes at this time.
Entities working within the marine sub-application also provided
comments regarding a transition from HFC-134a to HFC-152a. However,
given that EPA has updated its assessment in this final rule to
consider HFC-152a a regulated substance used within the application, as
opposed to a potential substitute subject to evaluation, these comments
are not significant nor adverse to the action being taken here.
However, EPA acknowledges the information provided by the commenter and
will incorporate it into future Agency deliberations, as relevant and
appropriate.
EPA is finalizing a determination that no safe or technically
achievable substitute will be available for the SCPPU foams for marine
and trailer uses application for the full five-year period from 2026-
2030. Further information about EPA's determination regarding available
substitutes for this application can be found in the proposed rule and
the SCPPU foam chapter of the TSD.
2. Supply
As explained, entities manufacturing within the SCPPU foam
application have historically used an HFC-134a formulation. Between EPA
proposing this rule and its finalization, the application has changed
such that the trailer sub-application is now using an HFC-152a
formulation. Therefore, EPA is analyzing the supply of both HFCs in
assessing whether this application meets the second criterion to be
renewed as eligible for ASAs.
In the proposed rulemaking, EPA stated its assessment that this
application may be able to use recovered and reprocessed HFCs supplied
by chemical manufacturers. As a result, EPA did not limit its analysis
to only virgin chemicals in assessing what supply of regulated
substance may be available to this application at the proposal stage.
EPA noted in the proposed rulemaking that it was not aware of any
purity requirements or other regulatory restrictions that would
prohibit the use of recovered and reprocessed HFCs in this application.
However, EPA also noted in the proposed rulemaking that efficacy of
blowing agents can be influenced by their composition and purity.
Comments on the use of recovered and reprocessed HFCs primarily
focused on the challenges of using this material, but one commenter
noted it is exploring using reclaimed HFCs. Commenters asserted that
impurities can impact the efficacy of blowing agents. Specifically,
commenters highlighted how oils can act as defoamers and that
impurities can lead to ``inconsistent foam formation and cell
structure, which will result in products with inconsistent insulation
performance, mechanical strength and integrity.'' One commenter stated
how these inconsistencies might require changing formulation and
process conditions with each batch of HFCs. Another commenter asserted
their HFC supply must be free of impurities because otherwise the
product would ``likely be compromised, rendering the product
ineffective and unusable,'' but did not provide any testing data or
purity standards.
Reclaimed HFCs, the likeliest source of recovered and reprocessed
HFC-134a, are required to be at a very high, but not 100 percent,
purity (see footnote 15 in section V.B.). While no commenter suggested
that these contaminants cannot be fully removed, EPA recognizes that it
may be impractical or infeasible, as EPA is not aware of any purifiers
for the SCPPU foams (or other) application that currently purify
reclaimed HFC-134a, and commenters did not note any. As described in
further detail below, EPA has determined to not incorporate any supply
of used HFCs in its assessment of supply for this application at this
time, given that inclusion of such used HFCs is not determinative of
the supply outcome. However, EPA may take a different approach in
future rulemakings and welcomes ongoing stakeholder input regarding the
ability to use recovered and reprocessed HFCs for this application.
[[Page 41692]]
EPA proposed to determine either: (1) the supply of HFC-134a is not
insufficient to accommodate this application; or (2) the supply of HFC-
134a is not insufficient to accommodate this application as of January
1, 2028. As outlined in further detail in EPA's proposed rule and the
accompanying TSD, HFC-134a is the most widely produced of all HFCs.
There is substantial domestic and global production of HFC-134a. This
application's demand for HFC-134a is very small compared to domestic
consumption; allocated ASAs for this application in 2025 are equivalent
to 0.2 percent of calculated domestic consumption of HFC-134a in 2024,
on an MTEVe basis. In addition, global supply should remain substantial
in comparison to this application's demand for HFC-134a. EPA had also
noted in the proposed rulemaking that it was not aware of any purity
requirements or other regulatory restrictions that would prohibit the
use of recovered and reprocessed HFCs. However, EPA also noted in the
proposed rulemaking that efficacy of blowing agents can be influenced
by their composition and purity.
With respect to the supply of HFC-134a, one commenter stated
uncertainty about the future availability of HFC-134a to meet the
application's needs given the reduction in production and consumption
allowances under the AIM Act. In response, EPA notes that the commenter
did not provide any specific comments on the data EPA presented nor
counter data to support a determination that the supply of HFC-134a
will be insufficient to accommodate this application. As noted in
section V.B., global production of HFC-134a is expected to continue for
the foreseeable future. EPA also notes this application uses a very
small amount of HFC-134a (the commenter characterized it as
``infinitesimal'') as compared to total domestic consumption. EPA notes
this is further evidence that the large supply of HFC-134a is not
insufficient to accommodate this application. Further, EPA responds
that the commenter's concern does not align with Congress's direction
to EPA to review all applications receiving ASAs at least every five
years and instruction to consider the supply of regulated substances as
part of a determination on whether to renew the eligibility of an
application to continue to receive ASAs. In crafting this system,
Congress knew that this review would occur against the backdrop of the
overall phasedown in production and consumption of HFCs. While EPA
acknowledges the commenter's concern that the phasedown creates some
uncertainty for an evolving HFC market, the best interpretation of the
HFC supply criterion cannot be that it is always met simply because of
the HFC phasedown occurring.
After considering comments received and reviewing additional data
available regarding the supply of HFC-134a, EPA is finalizing a
determination that supply of HFC-134a is not insufficient to
accommodate the SCPPU foams application as of January 1, 2026. To take
a conservative approach, EPA is not including recovered and reprocessed
HFC-134a in its assessment of the available supply of HFC-134a to
accommodate this application, given the potential concerns raised by
commenters about the impacts of even small levels of impurities in the
HFCs used as blowing agents. Due to the significant global production
of virgin HFC-134a, the exclusion of recovered and reprocessed HFC-134a
does not change EPA's conclusion regarding available supply of HFC-
134a.
With respect to HFC-152a, EPA stated in the proposed rule that in
light of uncertainty, EPA did not make a proposed determination about
the supply of HFC-152a. EPA stated that the Agency could determine in
the final rulemaking that supply of HFC-152a is not insufficient to
accommodate the SCPPU foams for marine and trailer uses application for
the full five-year period, is not insufficient as of January 1, 2028,
or is insufficient for the entire renewal period. This was based on
multiple facts regarding supply and demand of this chemical that are
outlined in significant detail in the proposed rule and the TSD
accompanying the proposal. Specifically, domestic production and
imports of HFC-152a were substantial, with HFC-152a being produced in
the second highest quantities domestically of any HFC and production
equal to about 22 percent of U.S. HFC production by mass.\20\ Domestic
production capacity was also expected to increase by approximately 20
percent by mid-2024 due to one manufacturer's facility expansion, but
EPA could not say with certainty at the time of proposal when that
expansion would be complete.\21\ Overall, HFC-152a made up
approximately 20 percent of total U.S. HFC consumption in 2022 on a
mass basis. Domestic inventory of HFC-152a equaled 3,228.4 MT of HFC-
152a at the end of 2022, equivalent to about 10 percent of calculated
consumption of HFC-152a that year. Demand, however, was less certain.
For example, certain HFC restrictions that would take effect as of
January 1, 2025, could increase demand for HFC-152a domestically for
certain uses. HFC-152a has a GWP that is below all the GWP limits for
sectors and subsectors subject to restrictions under 40 CFR part 84,
subpart B. The 2023 Technology Transitions Rule identified HFC-152a as
an available or potentially available substitute for foams, aerosols,
motor vehicle air conditioning, and household refrigerators and
freezers.\22\ While some of the affected sectors and subsectors
transitioned to other substitutes (e.g., motor vehicle air
conditioning, household refrigerators and freezers), there are
subsectors where HFC-152a neat or in blends is a substitute, and it was
unknown at the time of proposal if there would be any significant shift
toward use of HFC-152a in 2025. EPA also noted that this application's
demand for HFC-152a was minimal compared to global supply.
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\20\ See https://www.epa.gov/climate-hfcs-reduction/hfc-data-hub/expanded-hfc-data.
\21\ See https://www.chemours.com/en/news-media-center/all-news/press-releases/2023/chemours-announces-capacity-increase-of-hfc-152a-providing-reliable-domestic-supply-of-low-global-wa.
\22\ See 2023 Technology Transitions Rule TSD ``American
Innovation and Manufacturing Act of 2020--Subsection (i)(4) Factors
for Determination: List of Substitutes.'' This list is not
exhaustive, so it is possible HFC-152a is an available alternative
for other subsectors.
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One commenter stated general uncertainty regarding the supply of
HFC-152a related to the HFC phasedown. The commenter asserted with the
40% phasedown step in 2025 and the 70% stepdown in 2029, it is ``very
reasonable to assume that the supply of HFC-152a will be reduced by a
similar degree.'' This commenter also highlighted their sub-
application's growing demand for HFC-152a as compared to previous
years.
EPA responds in a similar fashion as to the concerns raised
regarding the supply of HFC-134a relative to the HFC phasedown,
specifically that Congress could not have intended for the supply
criterion to be meaningless in the face of the overall AIM Act
phasedown of regulated substances. Additionally, EPA has analyzed data
that has become newly available since the time of proposal related to
supply of HFC-152a for this application. In 2023, domestic production
of HFC-152a increased to 33,905.9 MT, about 26 percent of U.S. HFC
production by mass. Preliminary data for 2024 shows that production
remained similar in 2024, increasing slightly to 34,154.9 MT. The
facility expansion that EPA described in the proposed rule has been
completed. There is continued substantial global
[[Page 41693]]
production of HFC-152a, which also supplies the U.S. market. Multiple
entities imported HFC-152a in 2024, and imports have remained at
significant levels. In 2024, entities imported a total of 5,886.5 MT,
an approximately 8 percent decrease compared to 2023 imports and 1
percent increase compared to 2022 imports. Overall, HFC-152a made up
approximately 22 percent of total U.S. HFC consumption in 2023 on a
mass basis and 30 percent in 2024, approximately a 50 percent increase
relative to 2022. These data trends taken together suggest that what
the commenter termed as a reasonable assumption that HFC-152a supply
will be reduced in amounts proportional to reductions in the HFC
production and consumption caps appears to be incorrect.
In addition to considering the comment filed on this issue, EPA
analyzed two additional years of reported data since the publication of
the proposed rulemaking to determine how the new information impacts
EPA's proposed determinations regarding the supply of HFC-152a. Despite
the increase in domestic production and imports, there are factors that
limit supply of HFC-152a. Inventory of this chemical is substantially
lower than that of other HFCs, such as HFC-134a. At the end of 2024,
suppliers held just 5,650.4 MT of HFC-152a in domestic inventory, which
is equivalent to approximately 15 percent of calculated consumption of
HFC-152a in 2024. A lack of available inventory could indicate
increased use in this market as the phasedown progresses as compared to
HFCs where there is more inventory available, such as for HFC-134a.
In addition, there is continued uncertainty regarding the demand
for HFC-152a as other manufacturers transition. As noted earlier in the
section, HFC-152a has a GWP that is below all the GWP limits for
sectors and subsectors subject to restrictions under 40 CFR part 84,
subpart B. At the time of this final rulemaking, it is still not known
if there will be a significant shift toward use of HFC-152a neat or in
blends. The continued global HFC phasedown could encourage a shift to
lower GWP HFCs, like HFC-152a, and Technology Transitions restrictions
may also result in some sectors transitioning to HFC-152a. EPA's
Vintaging Model shows a projected decreased demand for HFC-152a in the
coming years, but, as described above, consumption of HFC-152a has been
increasing, suggesting an increased demand for HFC-152a, potentially in
new blends. This differing information and projections further
highlight the uncertainty regarding the near-term market demand for
HFC-152a as a substitute. In addition, EPA is also aware that HFC-152a
is used as a feedstock to produce other chemicals, which could
contribute to variations in demand for HFC-152a for use as a feedstock.
In sum, while there is currently a reasonably large supply of HFC-152a
that is expected to increase over the coming years relative to other
HFCs, there is significant uncertainty around supply and demand for
HFC-152a. As a result of this uncertainty, EPA is finalizing a
determination that the supply of HFC-152a is insufficient to
accommodate the SCPPU foams for marine and trailer uses application for
the full five-year period from 2026-2030, i.e., the criterion in
section (e)(4)(B)(i)(II) is met for HFC-152a.
3. Final Determination on Application-Specific Allowance Eligibility
In light of the range of outcomes EPA proposed regarding its
determinations on whether the criteria in subsection (e)(4)(B)(i)(I)
and (II) are met, EPA proposed three potential outcomes on whether and
how SCPPU foam for marine and trailer uses may be eligible for future
ASAs: (1) not eligible to receive ASAs; (2) eligible to receive
calendar year 2026 and 2027 ASAs; and (3) eligible to receive ASAs for
the five-year period of calendar years 2026-2030 with allowance amounts
determined based on the EV of HFC-152a. EPA also took comment on SCPPU
foam for marine and trailer uses eligibility to receive ASAs consistent
with the current approach through calendar year 2030. EPA also noted
that it could finalize different outcomes based on how the transition
to substitutes progressed between the proposal and rule finalization.
Comments regarding the proposed renewal determinations were mixed.
Two commenters supported a full five-year renewal without restriction
on how allowances are calculated; one of these commenters, a
manufacturer of SCPPU foam for marine uses, requested renewal for the
full five-year period for HFC-134a because it would be unable to comply
with the relevant Technology Transitions restrictions if it was not
eligible for ASAs. Another commenter supported a five-year renewal with
allowance amounts determined based on the EV of HFC-152a but also
supported no restriction on allowance calculations. One commenter
supported a two-year renewal ending January 1, 2027.\23\ Finally, one
commenter supported a hybrid approach--a two-year renewal with no
restriction on allowance calculations and renewal for the remaining
three years with allowance amounts determined based on the EV of HFC-
152a--based on availability of alternatives.
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\23\ EPA notes a two-year renewal period, as EPA co-proposed,
would end January 1, 2028, so EPA is interpreting this comment as
being consistent with EPA's co-proposal.
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Based on the analysis provided in the prior subsections, as further
detailed in the TSD accompanying this final action, EPA is finalizing
determinations that the SCPPU foams for marine and trailer uses
application meets both criteria in subsection (e)(4)(B)(i) for the full
five-year renewal period. As such, EPA is finalizing to renew the
eligibility of entities using regulated substances for SCPPU foams for
marine and trailer uses application for the five-year period of
calendar years 2026 through 2030. Regarding the commenter's request for
a full five-year renewal for HFC-134a so as to not be held to relevant
Technology Transitions restrictions, EPA's decision to finalize a
renewal addresses this comment; because this application is eligible
for ASAs through 2030, it will continue to be exempt from relevant
Technology Transitions restrictions through at least 2030.
D. Etching of Semiconductor Material or Wafers and the Cleaning of
Chemical Vapor Deposition Chambers Within the Semiconductor
Manufacturing Sector
EPA has been allocating ASAs for regulated substances used for the
etching of semiconductor material or wafers and the cleaning of CVD
chambers within the semiconductor manufacturing sector in accordance
with subsection (e)(4)(B)(iv)(I)(dd) of the AIM Act. In the Allocation
Framework Rule, EPA defined ``etching'' in the context of semiconductor
manufacturing as ``a process type that uses plasma-generated fluorine
atoms and other reactive fluorine-containing fragments that chemically
react with exposed thin films (e.g., dielectric, metals) or substrate
(e.g., silicon) to selectively remove portions of material. This
includes semiconductor production processes using fluorinated GHG
reagents to clean wafers,'' (40 CFR 84.3). EPA defined ``chemical vapor
deposition chamber cleaning'' (hereafter referred to as ``chamber
cleaning'') in the context of semiconductor manufacturing as ``a
process type in which chambers used for depositing thin films are
cleaned periodically using plasma-generated fluorine atoms and other
reactive fluorine-containing fragments,'' (40 CFR 84.3). At the time of
this final rule, EPA is aware of three
[[Page 41694]]
HFCs that are used for this application in manufacturing. HFC-23 is
commonly used for selective dry etching of silicon dioxide
(SiO2) and silicon nitride (SiN), while HFC-32 and HFC-41
are used in high-aspect-ratio hole etching. HFC-23, HFC-32, and HFC-41
may also be minimally used in chamber cleaning processes.
EPA proposed to determine that this application met both statutory
criteria for the full five-year renewal period. Specifically, EPA
proposed to find that, through calendar year 2030, (1) no safe or
technically achievable substitute will be available for the etching of
semiconductor material or wafers and the cleaning of CVD chambers
within the semiconductor manufacturing sector; and (2) that the supply
of regulated substances that manufacturers and users are capable of
securing from chemical manufacturers is insufficient to accommodate
this application. Therefore, EPA proposed to renew the eligibility of
entities using regulated substances for the defined semiconductor
application to receive ASAs for the five-year period of calendar years
2026 through 2030.
1. Availability of Safe and Technically Achievable Substitutes
With respect to whether safe and technically achievable
substitute(s) are or will be available for this application, EPA
explained in the proposed rule that while there are a number of
alternative chemicals currently used for etching and chamber cleaning
in semiconductor manufacturing, EPA proposed to not consider any of
these chemicals to be safe and technically achievable substitutes based
on consideration of these chemicals having some or a combination of
higher GWPs, higher emission rates (also referred to as lower
utilization rates in this application), or higher toxicity than the
HFCs for which ASAs are currently used. EPA also identified other
compounds that are being studied for use in etching and chamber
cleaning, and are either not yet technically achievable or are not
considered safe. All the details of EPA's assessment regarding
substitutes can be found in the proposed rule and accompanying TSD.
Some commenters were supportive of EPA's proposed determination
that there will be no available safe and technically achievable
substitutes for the semiconductor application by the end of the renewal
period. One commenter encouraged EPA to consider gas use, gas
utilization, and byproduct generation rates within its evaluation of
alternatives' technical feasibility. The commenter noted that within
the semiconductor application, gases have different utilization and
byproduct emission factors, citing 40 CFR part 98, subpart I: Mandatory
Greenhouse Gas Reporting: Electronics Manufacturing tables I-3 through
I-7.
EPA acknowledges these comments in support of the Agency's proposed
determination regarding availability of safe and technically achievable
substitutes. When the commenter references ``gas use,'' they do not
specify what they mean by this phrase. EPA understands that this term
could mean gas consumption (i.e., the quantity of each gas used for a
particular process), how the gas is used (i.e., for which processes or
technologies), or some other meaning. The Agency reviewed a variety of
sources in developing its assessment of substitutes, some of which
included consideration of the factors listed by the commenter. For
example, the TEAP's MCTOC 2022 Assessment report considers utilization
rates and byproduct generation in its review. The Agency did not
consider many of the potential alternatives listed in the MCTOC 2022
Assessment report as available substitutes. As one example, EPA did not
consider saturated perfluorocarbons (PFCs) as a technically available
and safe substitute for this application for a variety of reasons,
including that they have relatively low gas utilization rates. Based on
the data at hand and the information available to the Agency at the
time, EPA has not identified any substitute or substitutes that could
be considered an available alternative under EPA's definition of a
``safe and technically achievable substitute.'' EPA may consider
additional factors in the review of their potential substitute
chemicals in future reviews, including the ones cited by the commenter,
as additional data becomes available.
One commenter stated that there has been ``promising work''
demonstrating low-GWP, affordable alternative recipes that do not
include HFC-23, HFC-32, and HFC-41 and these alternative recipes would
not introduce use of substances that may be considered PFAS. The
commenter added that in-house testing at semiconductor manufacturers
has lagged as limited incentives exist, and that providing a five-year
renewal will further disincentivize the semiconductor industry from
developing lower-GWP etch processes using alternative etch molecules.
The commenter said an incentive for the semiconductor industry to
proactively demonstrate the ``HVM performance'' (EPA understands the
commenter to mean high volume manufacturing in their use of the acronym
HVM) of alternative, lower-GWP etch recipes replacing HFC-23, HFC-32,
and HFC-41 should be provided, which they suggest could be done by
limiting the renewal to one year.
While the commenter has stated that there is promising work in the
development of alternative etch chemistries, the commenter has not
provided specific data to inform EPA's determination regarding whether
there are substitutes available for this application now. As explained
elsewhere in this section and detailed in the TSD accompanying this
final rule, EPA has analyzed all available information in coming to a
determination that substitutes are not available for this application.
The commenter suggests that EPA could renew this application for only a
single year to incentivize the HVM performance of alternative, lower-
GWP etch recipes to replace HFC-23, HFC-32, and HFC-41, but does not
provide any data to support such an outcome, i.e., that substitutes
will become available within a year and therefore both statutory
criteria for renewal are no longer met. EPA invites the commenter to
review section IV. of this rule for more information about how EPA is
making decisions regarding application eligibility, including the
determination of how long an application will be eligible to receive
ASAs.
Another commenter stated that EPA's proposed determination that
there is no substitute available for HFC-23 deserves close attention.
The commenter stated that the Agency should not wait five years to re-
visit the determinations for the availability of substitutes for HFC-
23. The commenter asserted that lower-GWP, affordable alternatives to
HFC-23 have been demonstrated in various semiconductor applications.
The commenter, a chemical manufacturer, described efforts to
collaborate with a partner on an unspecified near-zero GWP alternative
for use in this application. According to the commenter, this chemical
has been demonstrated for etching and is ready for use in the field.
The commenter expressed that with its high GWP and incomplete
destruction resulting in potent emissions, the stakes are particularly
high for the continued use of HFC-23, and the Agency should not be
incentivizing its continued use. The commenter quotes AIM Act
subsection (e)(4)(B)(v), which directs EPA to review applications ``not
less frequently than once every 5 years'' and suggests that EPA is free
to review the applications more frequently than every five years.
[[Page 41695]]
In response to the commenter regarding the availability of
potential substitutes for HFC-23, while the commenter has stated that a
near-zero GWP alternative has been demonstrated for etching and chamber
cleaning use and is ready for use in the field, their comment indicates
this alternative has not been commercialized or otherwise adopted by
the semiconductor industry. EPA met with the commenter to further
discuss the status of the alternative and determined that the
alternative would not replace all uses of HFC-23 for etching. Even if
this alternative were to become available as an HFC-23 substitute
within the next five years, EPA still has not identified substitutes
that would meet the substitute criteria on an application-wide basis.
As described earlier in this section and finalized in section IV.A.,
determinations on whether a substitute is available and whether the
statutory criterion is met are made on an application-wide basis.
Therefore, if EPA agreed with the commenter's statements and could
determine that an alternative would be available for HFC-23 within the
five-year renewal period, there still is no evidence that there would
be an available substitute for the entire application. EPA responds to
the comment regarding the frequency of review of these applications in
section IV.C.
In addition to the information provided by the commenters, EPA also
reviewed existing sources of information for potential updates on the
Agency's assessment of whether substitutes are available for this
sector. EPA found no significant updates, which is outlined in more
detail in the TSD accompanying this final rule. Therefore, for the
reasons outlined, EPA is finalizing the determination that no safe or
technically achievable substitute will be available for the etching of
semiconductor material or wafers and the cleaning of CVD chambers
within the semiconductor manufacturing sector for at least the next
five years.
2. Supply
HFC-23, HFC-32, and HFC-41 are all currently used in the etching of
semiconductor material or wafers and the cleaning of CVD chambers
within the semiconductor manufacturing sector. As described earlier in
section IV.B. of the preamble, EPA is finalizing the approach described
in the proposed rule to determine that an application meets the supply
criterion if EPA determines that any of the HFCs currently used in an
application's equipment or to manufacture the application's products
for use have insufficient supply. EPA proposed to determine that the
supply of HFC-23 and HFC-41 are insufficient to accommodate the
application. Therefore, EPA proposed to determine that supply of the
regulated substance that manufacturers and users are capable of
securing from chemical manufacturers is insufficient to accommodate
this application through calendar year 2030.
In the proposed rulemaking, EPA noted that it is not aware of why
reclaimed HFCs cannot be purified to industry specifications and
invited comment on the topic. EPA noted that of the three HFCs utilized
by the semiconductor industry, only HFC-23 and HFC-32 were reclaimed in
2022 and thereby could be a source of supply for this application,
though the amount of reclaimed material is small. In addition, EPA
noted that it is possible to capture the unreacted process gases used
in semiconductor manufacturing, but the reclamation of fluorinated
gases from the semiconductor manufacturing process is not currently
economically viable.
One commenter stated that reclaimed refrigerants cannot be used to
supply the semiconductor industry, stating that both purity and
chemical consistency of each batch of HFCs are critical, and
accordingly each HFC source must be approved by purifiers and/or
semiconductor customers and a consistent chemical fingerprint must be
demonstrated. The commenter added that this assures purifiers that they
will be able to effectively and economically produce material for the
semiconductor industry, and it assures fabrication plants they will not
be introducing unexpected contaminants to their processes. The
commenter further asserted that reclamation cannot offer the same
consistency between each batch. The commenter added that many different
sources, with many different impurities, may contribute to reclaimed
HFCs, and this complicates the purification process, making it more
expensive, and puts semiconductor fabrication plants at risk. They
concluded that it would thus be inappropriate for EPA to include
reclaimed material in assessing availability of HFCs for the
semiconductor sector pursuant to the ASA program. Another commenter
described similar challenges associated with purifying HFC-23 from
semiconductor fabrication facility recapture. The commenter stated that
virgin HFC material contains known purities, and that purification and
distillation processes are therefore calibrated to handle these
predefined impurity levels. These purification methods are able to
purify HFC-23 to a quality of 99.999% with stable metrology solutions
for monitoring. Conversely, the commenter cited challenges with
purifying HFC-23 from semiconductor fab recapture, including the
variation in the concentration of HFC-23 and other molecules between
tools, the variability in the chamber effluent output across tools, the
low concentrations of HFC-23 in effluent gas due to dilution from other
substances introduced downstream to sweep impurities, and cost-
effectiveness issues associated with removal of toxic substances and
movement of the gases.
EPA notes that these two commenters are describing concerns related
to recovered HFCs from two different pathways--the purification of
generally reclaimed gas and the recapture of HFC-23 from a
semiconductor fab facility. However, commenters raised similar concerns
with both types of material, and therefore EPA is responding to the
comments in a single response. EPA notes that the commenters state that
purification and subsequent use of reclaimed HFC material at this time
may not be feasible for the purposes of semiconductor manufacturing due
to quality control concerns in addition to the other technical and cost
limitations outlined in these comments. EPA has added this information
to the TSD. In addition, EPA notes that the quantities of reclaim
available for these specific HFCs are currently very small and may be
limited. In 2024, only HFC-23 and HFC-32 were reclaimed in small
quantities, and there were no quantities of reclaimed HFC-41 reported.
EPA also acknowledges that the reuse of such material in etching and
chamber cleaning may not be feasible at this time due to concerns
regarding variability in recaptured HFC-23 material and cost concerns
associated with purification of this material to a level of purity high
enough for the semiconductor industry. As described in further detail
below, EPA has determined to not incorporate any supply of used HFCs in
its assessment of supply for this application at this time, given that
inclusion of such used HFCs is not determinative of the supply outcome.
However, EPA may take a different approach in future rulemakings and
welcomes ongoing stakeholder input regarding the ability to use
recovered and reprocessed HFCs in this application.
With respect to HFC-23, in the proposed rule, EPA evaluated 2022
data. Domestic producers produced approximately 1,049.3 MT of HFC-23.
876.2 MT were subsequently destroyed,
[[Page 41696]]
and one producer sold 5.2 MT of HFC-23 for consumptive uses. In
addition, there were about a half dozen entities that imported HFC-23
with total amount of imports equaling 125 MT. In the proposed rule, EPA
explained that there is particular uncertainty for HFCs with a more
limited number of production facilities and/or higher GWPs than other
regulated HFCs. In addition, EPA noted in the proposed rule that the
demand for HFC-23 from the semiconductor manufacturing application is
large relative to the annual consumption of HFC-23. In 2022,
semiconductor ASA holder purchases of HFC-23 accounted for about 76
percent of calculated consumption of HFC-23. At the end of 2022,
suppliers held 301 MT of HFC-23 in domestic inventory; not all of this
HFC-23 may be considered available supply for purposes of this
analysis, as the entities holding this material in inventory may be
broader than EPA's interpretation of chemical manufacturers (see
section IV.B. for more information).
One commenter requested that the Agency revisit the determination
for HFC-23 on insufficient supply. Citing numbers from the TSD, the
commenter stated that ASA allowance holders acquired only approximately
59 MT of HFC-23 in both 2022 and 2023 compared to the approximate
calendar year 2022 values from domestic producers of 1,000 MT produced
and 880 MT destroyed. The commenter concluded that with the potential
available supply far exceeding the semiconductor demand, it was
difficult for it to see how the amount of HFC-23 available from
manufacturers is insufficient.
EPA responds that domestic producers generate HFC-23 in the United
States exclusively as an unintended byproduct of other chemical
production. Quantities of byproduct HFC-23 are not necessarily
equivalent to supply of HFC-23 that could be available for use in
semiconductor manufacturing due to technical and economic constraints.
EPA's understanding is that most facilities that produced HFC-23 in the
United States generated HFC-23 in low concentrations in operations that
are not designed to, and in some cases cannot, isolate and process the
HFC-23 into a viable product. These quantities are destroyed or
emitted. Therefore, without alterations to the equipment and processes
run at these facilities, HFC-23 produced cannot always be made
available for consumptive uses. Additional information regarding the
unique aspects of by-production of HFC-23 can be found in the TSD
accompanying this final rule. Therefore, EPA considered the quantities
of HFC-23 produced for consumptive uses (5.2 MT in 2022) when
considering domestic production figures for the supply analysis at
proposal. EPA also considered factors like the limited number of
importers.
In addition to considering information provided by the commenters,
EPA analyzed two additional years of reported data that became
available since the publication of the proposed rulemaking to determine
how the new information impacts EPA's proposed determinations. The 2023
and 2024 data confirm many of the supply constraints described in the
proposed rulemaking. The number of producers and importers remained
similar in 2024 compared to 2022 and 2023. Production for consumptive
uses increased to 9.3 MT in 2024 from 6.2 MT in 2023. Virgin imports of
HFC-23 decreased, from 127.0 MT in 2023 to 91.6 MT in 2024. In 2024,
reported semiconductor ASA holder purchases of HFC-23 were 1.3 times
higher than calculated U.S. consumption overall of HFC-23, compared to
2023, where purchases represented about 73 percent of calculated
consumption. There was about a 2 percent increase in the quantity of
HFC-23 held in inventory at the end of the year in 2024 compared to
2023, while exports of virgin HFC-23 increased by about 11 percent.
EPA also analyzed the supply of HFC-32 in the proposed rule. In
2022, there was one domestic producer of HFC-32 and over a dozen
entities that imported HFC-32. The use of HFC-32 in the semiconductor
manufacturing application is small compared to the annual consumption
of HFC-32. In 2022, semiconductor ASA holder purchases of HFC-32
accounted for less than 0.035 percent of calculated consumption of HFC-
32. At the end of 2022, suppliers held 20,908 MT of HFC-32 in domestic
inventory, which is equivalent to about 78 percent of calculated
consumption of HFC-32 in 2022; similar to considerations for supply of
HFC-23 and for other applications, not all of this inventory may be
considered available. EPA also considered the impact other regulatory
actions may have for the available supply of HFC-32. As described in
more detail in the proposed rule, EPA stated that the overall market
for HFCs is likely to continue changing in light of AIM Act and
potentially shifts to HFC-32 neat or in blends, and thus there is
particular uncertainty regarding demand for HFC-32.
One commenter stated that EPA's assessment of the available supply
of HFC-32 for semiconductors must account for continued demand in the
refrigerant sector. The commenter added that unlike the proposed rule,
which found ``particular uncertainty'' regarding the HFC-32 market, the
commenter projected robust demand in the refrigerant sector for the
foreseeable future, as several original equipment manufacturers have
selected HFC-32 as a standalone refrigerant to replace R-410A.
Additionally, they said that HFO/HFC blends needed to replace higher-
GWP materials will utilize HFC-32 in significant quantities, which
would thus indicate a growing need for HFC-32 into the 2030s.
EPA notes the commenter projection of robust demand for HFC-32 and
identification of certain drivers of this demand, and the Agency has
incorporated the information into the TSD accompanying this final rule,
as appropriate.
Additionally, EPA has analyzed data that has become newly available
since the publication of the proposed rule related to the supply of
HFC-32 for this application. The 2023 and 2024 data confirm many of the
supply considerations described in the proposed rulemaking of HFC-32.
The number of producers and importers decreased in 2024 compared to
2023, and the production of HFC-32 decreased by about 22 percent to
17,558.8 MT from 2023 to 2024. By 2024, HFC-32 accounted for 17 percent
of all U.S. production. U.S. consumption of HFC-32 decreased nearly 30
percent from 37,870.3 MT in 2023 to 27,782.1 MT in 2024. Exports of
virgin HFC-32 increased by nearly 67 percent from 2023 (1,660 MT) to
2024 (2,773 MT). Suppliers held 21,174 MT of HFC-32 in domestic
inventory at the end of 2024, which is equivalent to 76 percent of 2024
calculated consumption of HFC-32. In 2024, semiconductor ASA holder
purchases of HFC-32 accounted for about 0.03 percent of calculated
consumption of HFC-32, an increase from about 0.02 percent from the
previous year. There is continued substantial global production of HFC-
32, which also supplies the U.S. market. Multiple entities continued to
import HFC-32 in 2024, and imports have remained relatively high. In
2024, entities imported a total of 13,000.4 MT, an approximately 24
percent decrease from 2023 imports but 31 percent increase over 2022
imports.
As noted in the proposed rule, there is continued uncertainty
regarding the demand for HFC-32 as the overall market for HFCs is
likely to continue
[[Page 41697]]
changing in light of AIM Act and market shifts to HFC-32 and HFC
blends. The 2023 Technology Transitions Rule set a GWP threshold of 700
for certain sectors and subsectors. HFC-32 has a GWP of 675 and may be
a suitable alternative in those sectors and subsectors which could
result in increased demand. For other sectors and subsectors where
other HFCs, HFC blends, or non-HFCs (e.g., HFC-152a, HFO-1234yf) are
used, the GWP threshold is lower (e.g., 300, 150). The first set of
restrictions under the 2023 Technology Transitions Rule have compliance
dates of January 1, 2025, with additional later compliance dates.
Additionally, the final 2024 Emissions Reduction and Reclamation Rule
could also affect the use and availability of new and reclaimed HFC-32.
EPA's Vintaging Model shows consistent levels of demand for HFC-32
through 2030, but, as described above, consumption of HFC-32 has been
increasing, suggesting an increased demand for HFC-32. This differing
information further highlights the uncertainty regarding the overall
market for HFC-32. In sum, while there is currently a reasonably large
supply of HFC-32 that is expected to increase over the coming years
relative to other HFCs, there is significant uncertainty around supply
and demand for HFC-32.
EPA analyzed the supply of HFC-41 in 2022 in the proposed rule.
There was one domestic producer of HFC-41 and multiple entities that
imported HFC-41. The use of HFC-41 in the semiconductor manufacturing
application is moderately large compared to the annual consumption of
HFC-41. In 2022, semiconductor ASA holder purchases of HFC-41 accounted
for 21 percent of calculated consumption of HFC-41. At the end of 2022,
suppliers held 27 MT of HFC-41 in domestic inventory, which is
equivalent to about 60 percent of calculated consumption of HFC-41 in
2022; as noted for the supply of HFC-23 and HFC-32 and for other
applications, not all of this inventory may be considered available.
EPA did not receive any comments regarding the supply of HFC-41.
The 2023 and 2024 data regarding the supply of HFC-41 confirm many
of the supply constraints described in the proposed rulemaking. The
number of producers and importers remained the same in 2024 compared to
2023. Production of HFC-41 decreased about 24 percent from 2023 to 2024
while virgin imports decreased by about 1 percent in the same time
period. In 2024, semiconductor ASA holder purchases of HFC-41 accounted
for about 95 percent of calculated consumption of HFC-41, nearly
equivalent to the previous year. Exports of virgin HFC-41 decreased by
about 14 percent, and there was a 17 percent increase in the quantity
of HFC-41 held in inventory at the end of the year from 2023 to 2024.
Due to the reasons outlined here, EPA is finalizing the
determination that at least the supply of HFC-23 and HFC-41 is
insufficient to accommodate the application.
3. Final Determination on Application-Specific Allowance Eligibility
EPA proposed to renew the eligibility of entities using regulated
substances for the defined semiconductor application to receive ASAs
for the five-year period of calendar years 2026 through 2030. Several
commenters were generally supportive of the proposed determination to
renew the eligibility of entities in the semiconductor application to
continue receiving ASAs for the full five-year period of calendar years
2026 through 2030.
EPA is finalizing as proposed the determination that no safe or
technically achievable substitute will be available for the
semiconductor application and that supply of the regulated substance
that manufacturers and users are capable of securing from chemical
manufacturers is insufficient to accommodate the semiconductor
application through calendar year 2030. Therefore, EPA finalizing the
proposal to renew the eligibility of entities using regulated
substances for the defined semiconductor application to receive ASAs
for the five-year period of calendar years 2026 through 2030.
E. Mission-Critical Military End Uses
EPA has been allocating ASAs for regulated substances used for
MCMEU in accordance with subsection (e)(4)(B)(iv)(I)(ee) of the AIM
Act. In the Allocation Framework Rule, EPA defined ``mission-critical
military end uses'' as ``those uses of regulated substances by an
agency of the Federal Government responsible for national defense which
have a direct impact on mission capability, as determined by the U.S.
Department of Defense (DOD), including, but not limited to uses
necessary for development, testing, production, training, operation,
and maintenance of Armed Forces vessels, aircraft, space systems,
ground vehicles, amphibious vehicles, deployable/expeditionary support
equipment, munitions, and command and control systems,'' (40 CFR 84.3).
EPA proposed to renew eligibility for DOD to receive MCMEU ASAs for
the five-year period of calendar years 2026 through 2030. EPA proposed
to determine ``that the requirements described in subclauses (I) and
(II) of clause (i) are met'' in accordance with the requirements of 42
U.S.C. 7675(e)(4)(B)(v)(II). Specifically, EPA proposed to determine
that no safe or technically achievable substitute will be available for
the entirety of the application and that the supply of the regulated
substance that manufacturers and users are capable of securing from
chemical manufacturers is insufficient to accommodate the application
through calendar year 2030. EPA is aware that there are various end
uses that DOD considers mission-critical, and DOD uses different HFCs
across these end uses. The docket for this rulemaking includes
technical reports in which DOD identifies indicative uses of regulated
substances which DOD has deemed to be mission-critical. In the proposed
rule, EPA outlined its analysis relative to these uses underpinning the
proposed determination that technically achievable and safe substitutes
do not exist across the entirety of this application. EPA also outlined
its assessment of HFCs that have been used by DOD for mission-critical
purposes where EPA proposed to determine that there was insufficient
supply to accommodate the application. EPA also described in the
proposal how this application is more fluid in terms of which
particular HFC uses fall within the application, and DOD may change
which end uses it determines to be mission-critical over time. DOD has
informed EPA that it will continue to need HFCs for mission-critical
end uses through at least 2030.
One commenter supported EPA's proposal to renew eligibility for the
MCMEU application for the five-year period from 2026 through 2030. EPA
did not receive any adverse comments on its proposal to renew the
eligibility of this application for ASAs or on the assessments outlined
at the time of proposal to underpin that proposed outcome. EPA is not
aware of any developments in the identification of safe and technically
achievable substitutes to the currently used HFCs for mission-critical
end uses. For the supply criterion, EPA evaluated HFCs used by DOD in
its assessment of other applications and has determined that the supply
of some of these HFCs is insufficient to accommodate the application.
For example, in the evaluation of supply for the onboard aerospace fire
suppression application, EPA is finalizing the determination that the
supply of HFC-227ea is insufficient to accommodate the application.
This is
[[Page 41698]]
in addition to the unique restrictions that apply to the Defense
Logistics Agency and DOD purchasing requirements that impact the
available supply of HFCs to DOD for MCMEU. Therefore, EPA is finalizing
renewal through the entire period for the MCMEU application as
proposed.
F. Onboard Aerospace Fire Suppression
EPA has been allocating ASAs for regulated substances used for
onboard aerospace fire suppression in accordance with subsection
(e)(4)(B)(iv)(I)(ff) of the AIM Act. In the Allocation Framework Rule,
EPA defined ``onboard aerospace fire suppression'' as the ``use of a
regulated substance in fire suppression equipment used on board
commercial and general aviation aircraft, including commercial-
derivative aircraft for military use; rotorcraft; and space vehicles.
Onboard commercial aviation fire suppression systems are installed
throughout mainline and regional passenger and freighter aircraft,
including engine nacelles, auxiliary power units (APUs), lavatory trash
receptacles, baggage/crew compartments, and handheld extinguishers,''
(40 CFR 84.3). At the time of proposal, EPA was aware of only one area,
lavatory trash receptacles, in which HFCs are used in commercial
aviation. For military uses, HFCs have been used in engine nacelles,
APUs, and a streaming application (i.e., a portable extinguisher).\24\
In addition to HFC uses in commercial and military aviation, EPA is
aware that HFCs have limited usage in general aviation, which consists
of private and/or business aircraft. HFC-227ea is the only HFC for
which onboard aerospace fire suppression ASAs have ever been expended.
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\24\ See https://www.epw.senate.gov/public/_cache/files/d/1/d152a591-878f-4a4d-b9c1-dc7121c06eca/9D366FF1E61F7EFFD6A71C37C92924A5.04.03.2020-boeing.pdf.
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In the proposed rulemaking, EPA proposed to determine that no safe
or technically achievable substitute will be available for the entirety
of onboard aerospace fire suppression. While EPA suggested in the
proposed rulemaking that 2-bromo-3,3,3-trifluoropropene (2-BTP) is a
safe and technically achievable substitute for portable extinguishers,
EPA did not identify a safe and technically achievable substitute
available for other HFC uses including for lavatory trash receptacle
systems, engine nacelles, or APUs. EPA also proposed that supply of the
regulated substance that manufacturers and users are capable of
securing from chemical manufacturers is insufficient to accommodate the
application through calendar year 2030. Therefore, EPA proposed to
renew the eligibility of entities using regulated substances for
onboard aerospace fire suppression to receive ASAs for the five-year
period of calendar years 2026 through 2030.
EPA only received one comment regarding EPA's proposal. The
commenter supported EPA's proposal to renew the application for the
full five years but did not provide any additional data that could be
used to inform EPA's analysis on the two statutory criteria.
EPA is not aware of any additional information since the
publication of the proposed rule that would alter the Agency's analysis
of the substitutes criterion that was presented in the proposed rule
and accompanying TSD. For the Agency's assessment of the supply
criterion, as explained in section IV.B., EPA is individually
evaluating each HFC for which ASAs are being expended. HFC-227ea is the
only regulated substance for which onboard aerospace fire suppression
ASAs have been expended to date. Therefore, in this final rule EPA only
considered the supply of HFC-227ea in assessing whether the onboard
aerospace fire suppression application meets the statutory criteria for
renewed eligibility for ASAs. EPA analyzed two additional years of
reported data since the publication of the proposed rulemaking to
determine whether the new data supports EPA's proposed determination
that the supply of HFC-227ea is insufficient to accommodate the
application. The 2023 and 2024 data confirm many of the supply
constraints on HFC-227ea described in the proposed rulemaking.
Production of HFC-227ea has remained fairly even since 2022, while the
quantity imported has declined year over year from 494.3 MT in 2022 to
50.7 MT in 2024. Suppliers also held less HFC-227ea in inventory at the
end of 2024 than either of the previous two years, dropping from a high
of 1,173.3 MT in 2023 to 744.0 MT in 2024. The supply chain for HFC-
227ea remains more fragile than supply chains for other HFCs given it
has one of the highest EVs of the regulated HFCs and there are a
limited number of producers in the United States and abroad.
Consistent with the analysis completed for the proposed rule and
described in more detail in the TSD, EPA is finalizing renewed
eligibility for the full five-year period from 2026 to 2030 as
proposed.
VI. What are the requirements associated with a petition to be listed
as an application that will receive application-specific allowances?
The Agency proposed a procedural framework for a petition filed
pursuant to 42 U.S.C. 7675(e)(4)(B)(ii) requesting the designation of
an application as eligible for ASAs. Subsection (e)(4)(B)(ii) outlines
requirements that apply if the Administrator receives a petition
requesting consideration of eligibility for ASAs. In the event a
complete petition is received, the Agency would make a determination on
whether to designate the application as eligible for ASAs after
considering the criteria listed in subsection (e)(4)(B)(i). The AIM Act
specifies a timeline by which the Agency must consider these petitions.
Within 180 days, the Agency must make the complete petition available
to the public and propose and seek comment on whether to designate the
application as eligible for ASAs and if so, the requisite number of
allowances. Within 270 days of receiving the petition, the Agency must
take final action on the petition. The Agency envisions that petitions
could be submitted by a single entity, such as a company or trade
association, or a group of entities.
In order to have sufficient information to evaluate a petition
based on the criteria in subsection (e)(4)(B)(i), EPA proposed to
require that certain information must be included in order for a
petition to be considered complete. This proposed required list was not
meant to be comprehensive, but rather a minimum threshold after which
the Agency would consider a petition complete.
EPA received two comments regarding the elements which EPA proposed
to require as part of a complete petition. One commenter suggested that
the Agency should be flexible in what information is required so that a
new application (i.e., an end use newly using HFCs) would be able to
satisfy the requirements and submit a complete petition. The commenter
stated as an example that it may be difficult for a new application to
include the total quantity of regulated substances acquired for the
application in the past three years.
[[Page 41699]]
EPA responds that the elements which EPA proposed to require are
achievable regardless of the length of time a petitioner has been using
HFCs. EPA clarifies that, for elements for which EPA is requesting
three years of data, an entity would still be able to submit three
years of data even if that entity has been using HFCs for less time; an
entity can indicate zero for any years for which regulated substances
were not used in the application and, as with all provided data,
assuming the information is accurate, the petitioner would satisfy the
requirement. Similarly, EPA proposed that entities submitting the
petition must include certain information on their HFC suppliers for
the past three years. If an entity has been using HFCs for one year,
then the entity should indicate that in the submission and provide the
required supplier information for that one year.
Another commenter, while expressing general support for outlining
petition requirements, suggested that these requirements should focus
on the essentiality of the use and that requirements for completeness
of a petition should be limited to what is relevant and necessary. The
commenter provided, as an example, that requiring the cost of the
product or system that reflects the cost of regulated substances,
should not be required.
In developing this final rule, EPA revisited the proposed
requirements to determine whether any elements would be extraneous in
the development of a well-informed position on a petition. The Agency
was deliberate in proposing to require information that would be
critical for reviewing a petition consistent with the criteria in
subsection (e)(4)(B)(i) of the AIM Act. EPA considered proposing to
require certain other elements that in the Agency's view did not rise
to the level of critical for evaluating a petition; some of these were
included in the proposed rulemaking as optional elements which the
Agency may find helpful in evaluating a petition. Upon review, EPA
reaffirms that all the proposed requirements would meaningfully inform
whether a petition meets the statutory criteria. For example, the
commenter indicated that EPA should not need data on the proportion of
the overall cost of the product or system that reflects the cost of
regulated substances. EPA responds that this element would meaningfully
inform the Agency's assessment of the criteria listed in subsection
(e)(4)(B)(i) of the AIM Act, in particular affordability for
residential and small business consumers. If a high proportion of a
product's cost is due to the cost of the currently used regulated
substance, and a potential alternative is vastly more expensive, then
the Agency may consider whether that poses affordability concerns for
residential and small business consumers. EPA responds that this is a
key data point which may not be easily retrievable based on public data
alone, and therefore it is appropriate to require as one element of a
complete petition.
After considering the comments received, EPA is finalizing the list
of petition requirements as proposed with minor modifications for
clarity. Therefore, a complete petition must include, at a minimum:
A description of the application, including an explanation
of what the application is, what purpose or function it achieves, and
what populations or commercial products benefit from the application;
A list of regulated substance(s) and description of their
use(s) in the application and an explanation as to why HFCs are
required in the application;
Evidence that no safe or technically achievable
substitute, including not-in-kind technologies, is or is expected to be
available, and that the petitioner has conducted research to evaluate
substitutes for the HFC(s). Examples of evidence that may be accepted
include, but are not limited to, third-party analyses and technical
reports by recognized experts in the field, test results evaluating
potential substitutes on safety and technical achievability, decisions
by EPA to list alternatives under the SNAP Program, or federal
regulatory standards that inhibit the ability of the application to
transition to a substitute;
Evidence that supply of the regulated substance(s) used in
the application is insufficient to accommodate the application.
Examples of evidence that may be accepted include, but are not limited
to, signed and notarized \25\ communication from responsible corporate
officers at multiple representative suppliers or potential suppliers
for the sector or related sectors that the application falls in stating
that the currently used HFCs cannot be sourced; signed and notarized
communication from responsible corporate officers at 10 or more
allowance holders, including at least three of the 10 largest
consumption allowances holders, stating that the currently used HFCs
cannot be sourced;
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\25\ Notarization ensures authenticity of the signature and
deters fraud.
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A signed certification from a responsible corporate
officer at the requesting entity that the application cannot use
recovered and reprocessed HFCs in conjunction with or in place of
virgin HFCs, either due to demonstrated lack of technical achievability
or insufficient supply, and an explanation and evidence documenting why
recovered and reprocessed HFCs cannot be used for the application;
Total quantity (in kilograms (kg)) of all regulated
substances acquired for the application specified in the petition in
each of the previous three years, including a copy of the sales
records, invoices, or other records documenting that quantity; if
multiple entities are submitting a joint petition, they must each
provide EPA with unaggregated entity-specific information, which may be
transmitted jointly or individually;
The name of the entity or entities supplying regulated
substances for and contact information for those suppliers over the
past three years; if multiple entities are submitting the petition,
they must each provide this information individually to EPA;
Total quantities (in kg) of regulated substances held in
inventory for use in the application specified in the petition as of
the date the petition is submitted; if multiple entities are submitting
the petition, they must each provide this information individually to
EPA;
An estimate of the total quantity of HFCs the petitioner
expects to purchase for use in the application specified in the
petition in the first year it would be eligible for ASAs;
Data on the proportion of the overall cost of the product
or system that reflects the cost of regulated substances; if multiple
entities are submitting the petition, they must each provide this
information individually to EPA;
Historic and projected sales of the product or system; if
multiple entities are submitting the petition, they must each provide
this information individually to EPA;
Evidence of research into design changes to decrease the
amount of HFCs used in the product or system;
An explanation regarding whether the use of the regulated
substance is necessary for the health, safety, or is critical for the
functioning of society (encompassing cultural, intellectual, and
economic aspects);
An explanation regarding steps taken to minimize the use
of the regulated substance and any associated emission of the HFC(s);
and
Information on regulatory restrictions related to possible
alternatives and substitutes.
Consistent with the proposal, EPA is also providing a non-
exhaustive list of
[[Page 41700]]
other elements that are optional, and the Agency may find compelling or
helpful in making a determination on a petition:
Market research on the application, which could include:
an estimate of the number of domestic entities within the application;
an estimate of the amount of bulk HFCs used domestically within the
application; an estimate of the projected annual growth rate for the
duration of the period for which the application is seeking eligibility
to receive ASAs, with supporting evidence by third-party sources;
Economic research on the elasticity of demand for products
or systems within the application, with supporting evidence by third-
party sources;
Research on whether products or systems in the application
outside of the United States have had success in transitioning to
substitutes or otherwise reducing use of HFCs; and
Other information that may be relevant as the Agency
evaluates the petition, based on the factors listed in subsection
(e)(4)(B)(i).
In addition to establishing minimum required elements of a complete
petition, EPA proposed some framework elements on how EPA would process
petitions received. EPA proposed to consider the statutory timeline
triggered upon the filing of a complete petition. In the event that an
entity filed an incomplete petition, EPA would notify that entity that
their petition was incomplete, but not process the petition any
further. EPA proposed to consider a petition re-submitted if the
petitioner supplements the petition, and the statutory timelines for
action would restart. Comments on EPA's proposed determination on a
petition would not restart the statutory timelines unless the
petitioner formally requested to supplement or revise their petition.
EPA did not receive any comments on the framework under which a
petition would be considered and is therefore finalizing as proposed.
EPA notes that for an entity to be eligible to receive ASAs in a
given calendar year, a complete petition should be submitted no later
than January 31 two calendar years prior to provide the Agency
sufficient time to review a petition and be able to issue allowances in
advance of the statutory deadline of October 1 each year. For example,
if an entity would like to receive allowances in calendar year 2028,
the entity should submit a complete petition no later than January 31,
2026. Earlier submission and/or discussion with the Agency is
encouraged to allow for timely reviews. EPA is setting this clear
expectation so entities can factor this into their planning when
deciding to petition EPA to be added to the list of eligible
applications. This timeline will allow the Agency the requisite time to
review and take final action on the petition, consistent with the
statutory timeline in subsection (e)(4)(B)(ii), and also issue a final
rule to effectuate that decision in 40 CFR 84.13.
EPA proposed to allocate allowances to entities in a new
application through the same manner as other entities receiving ASAs,
per 40 CFR 84.13 and 40 CFR 84.31(h). In other words, entities within a
new application would need to request ASAs by July 31 like all other
applications (per 40 CFR 84.13(b)). This may mean that in cases where
there is a final rule pending to add an application to the list of
entities eligible for ASAs at 40 CFR 84.13, any entity wishing to be
eligible for ASAs in the next calendar year would need to provide the
information required at 40 CFR 84.13(h)(2) by July 31. EPA did not
receive comment on this proposal and is finalizing as proposed.
EPA proposed that if a petition is granted and a new application is
listed as eligible to receive ASAs, that eligibility would apply until
the end of the five-year review cycle during which its petition was
granted. Per subsection (e)(4)(B)(v), EPA must review each ASA use
receiving an allocation of allowances not less frequently than once
every five years. EPA also proposed that, at the end of each five-year
review cycle, it will review any applications listed in 40 CFR 84.13(a)
at the time of review, regardless of how they were initially included
on the list. For example, the five-year review period covered in this
rule includes calendar years 2026 through 2030. If a petition were
granted to receive ASAs starting for calendar year 2028, that
application would be eligible for calendar year 2028, 2029, and 2030
allowances, and then EPA would review the eligibility for that
application to continue receiving ASAs starting with calendar year 2031
allowances. EPA did not receive comment on these proposals and is
finalizing as proposed.
Consistent with the reporting requirements under 40 CFR 84.31(a),
EPA proposed that for an entity that is eligible for ASAs as the result
of EPA granting a petition, all reports, petitions, and any related
supporting documents must be submitted electronically in a format
specified by EPA,\26\ and quantities of regulated substances must be
stated in terms of kilograms unless otherwise specified. EPA also
proposed that these records and copies of reports required by this
section must be retained for three years. EPA did not receive comment
on these proposals and is finalizing as proposed.
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\26\ Currently, most HFC reports under the AIM Act are submitted
through HAWK, the HFC reporting system.
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VII. Revisions to Existing Regulations
EPA finalized an approach under the Allocation Framework Rule for
issuing ASAs for the initial years after enactment of the AIM Act. As
explained in more detail in the Allocation Framework Rule, EPA
allocates ASAs differently for MCMEU, given the complex nature of the
way DOD sources and uses HFCs in the mission-critical context. The 2024
HFC Allocation Rule did not reopen the methodology for issuing ASAs but
noted that the Agency had begun development of this rule to review and
consider whether to renew eligibility for each of the six applications
for ASAs and would herein consider revisions to existing regulatory
requirements. As EPA foreshadowed in the 2024 HFC Allocation Rule, the
Agency proposed targeted regulatory changes after considering whether
any changes should be made to the existing regulatory requirements
governing ASAs based on implementation over the past several years. EPA
also proposed one specific regulatory change to clarify how EPA's
regulations would apply to any illegally imported HFCs that are seized
and auctioned by enforcement officials, proposed to require exporting
companies to report ITNs quarterly, and proposed to simplify the ``date
of purchase'' requirement for a RACA.
Under the current regulations established in the Allocation
Framework Rule, EPA issues ASAs based on multiplying the company's HFC
use in the prior year by the higher of:
[cir] The Average Annual Growth Rate (AAGR) of use for the company
over the past three years; or
[cir] The AAGR of use by all entities requesting that type of ASA
(e.g., for MDIs) over the past three years.
For the calculation of AAGR, EPA calculates the growth rate between
the first and second year plus the growth rate between the second and
third year, divided by two. The formula is as follows:
[[Page 41701]]
[GRAPHIC] [TIFF OMITTED] TR26AU25.000
EPA relies on activity from July 1 to June 30 for each of the three
preceding years prior to the annual allocation because of the biannual
reporting deadlines and to include the most recent year of data prior
to the October 1 allocation deadline in the allowance allocation
determinations. EPA established the information an entity requesting
ASAs must provide in 40 CFR 84.31(h)(2). EPA proposed to codify the
existing practice such that entities reporting on or applying for ASAs
provide supporting documentation to verify reported data on total
quantities of HFCs acquired through conferring allowances, expending
allowances for direct import, purchases without expending allowances,
and quantity held in inventory above zero. EPA did not receive any
comments on this proposal, and therefore is finalizing as proposed.
In the Allocation Framework Rule, EPA also established that the
Agency would consider unique circumstances that are not reflected by
the rates of growth calculated in the methodology outlined above that
are factually documented when determining allowance allocations. EPA
codified the following circumstances as potentially meriting an
increased allocation to an individual company beyond historical growth
rates: (1) additional capacity will come on line in the next year, such
as a new manufacturing plant, expanded manufacturing line, or launch of
a new product within the scope of the application, (2) a domestic
manufacturer or some of its manufacturing facilities has been acquired,
and (3) a global pandemic or other public health emergency increases
demand for use of HFCs in an application, such as an increase in
patients diagnosed with medical conditions treated by MDIs. These
scenarios could provide reasons to increase allowance allocations to
affected companies in the affected years. If a company wanted to make a
claim that it qualifies for individualized treatment due to one of
these unique circumstances, the company must sufficiently document in a
verifiable way why it qualifies. Acceptable documentation includes, but
is not limited to, recent invoices for new tools; permit documentation
for new facilities, facility expansion, or installation of equipment
related to retooling; agency or company press releases for the launch
of new products; documentation reflecting the hiring of additional
employees or adding additional shifts; or Securities and Exchange
Commission filings documenting facility acquisitions or expansions.
Ultimately, accommodating documented unique circumstances that are not
reflected by the recent rates of growth, in addition to an amount of
allowances based on verified use in the past three years, supports the
Agency in fulfilling Congress's mandate that EPA ``allocate the full
quantity of allowances necessary, based on projected, current, and
historical trends,'' (86 FR 55116, 55151, October 5, 2021).
As a result of the lessons learned from multiple years of issuing
HFC allocations, EPA proposed limited changes to these existing
regulations. Specifically, EPA proposed: to require companies provide
the total expected amount of HFCs they intend to purchase in the
calendar year, to expand permissible scenarios that could qualify as
unique circumstances, a different allocation methodology for certain
very small users of HFCs and entities with irregular purchasing
history, how to account for inventory in allocation decisions, new
requirements for conferrals of MCMEU allowances, to establish a pool of
set-aside allowances for situations that meet the criteria for unique
circumstances related to medical conditions treated by MDIs, and to
allow ASA holders to return a portion of their allowances voluntarily
if they do not intend to use them. EPA proposed other specific
regulatory changes to: clarify how EPA's regulations would apply to any
illegally imported HFCs that are seized and auctioned by enforcement
officials, require exporting companies to report ITNs quarterly, and
simplify the ``date of purchase'' requirement for a RACA. This section
discusses each of these elements in detail, specifically, what EPA
proposed; what, if any, comment the Agency received on the proposal;
and whether and how EPA is finalizing the proposed changes. In the
instance that a reviewing court determines any of these changes to be
unlawful, EPA intends each of these regulatory revisions to be
severable from the others, as each is based on individual reasoning and
bases that is distinct from the other revisions.
A. Expected Total HFC Purchases
EPA proposed to amend the regulations to require all entities to
provide their total expected HFC purchases for the next calendar year
as a component of overall applications due July 31 for ASAs for the
following calendar year. Entities would be required to provide the
total quantity of HFCs they expect to purchase next year based on their
expected eligibility for allowances. EPA proposed to allocate at that
level if it is lower than what that entity is eligible for based on the
regulatory formula. EPA's rationale for making this proposal were
detailed in the proposed rule.
EPA received only one comment on this proposal, which was
supportive of the requirement that entities provide a total request for
allowances for the next calendar year and for EPA to allocate ASAs to
that level if lower than what the entities are otherwise eligible for
based on the regulatory formula.
Therefore, EPA is finalizing this approach as proposed. Entities
must report this quantity, in MTEVe, by the July 31 deadline to request
ASAs. The total request should be the total expected HFC purchases for
the next calendar year, so would be inclusive of any HFCs an entity
anticipates purchasing as a result of a unique circumstance(s). The
amount should be equal to the full quantity of allowances an entity
believes EPA should allocate and that the entity wants to have on hand
to expend or confer. Accordingly, EPA will not apply a 10 percent
purification loss multiplier when allocating to the total request level
for an entity in the semiconductor application.\27\
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\27\ In the Allocation Framework Rule, EPA created a 10 percent
purification loss allowance for the semiconductor industry, which is
applied after EPA calculates a semiconductor manufacturer's
allocation under the regulatory formula, including any unique
circumstances or other applicable individual considerations (86 FR
55116, 55152, October 5, 2021). To provide clarity on how this loss
allowance works with the other changes finalized in this rule, EPA
has modified the regulatory text in 40 CFR 84.13.
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B. Unique Circumstances
Under EPA's current regulations, entities may request that EPA
consider unique circumstances that are not reflected by the rates of
growth calculated when making annual allowance allocations. Entities
``must
[[Page 41702]]
provide additional information if requesting that EPA consider unique
circumstances'' under 40 CFR 84.13(b)(1). EPA proposed to codify into
the regulations the Agency's existing practice of requiring entities to
provide supporting documentation to verify any claimed need. EPA did
not receive any comments on this proposal, and therefore is finalizing
as proposed.
EPA previously codified three situations that would be considered
as unique circumstances (40 CFR 84.13(b)(1)). EPA proposed to broaden
one of these unique circumstances that is related to MDIs and proposed
to add two new unique circumstances under which EPA may allocate
additional allowances beyond what is calculated from the regulatory
allocation formula.
1. Healthcare System Needs
EPA proposed to expand the scope of the existing unique
circumstance for a global pandemic or other public health emergency
that increases patients diagnosed with medical conditions treated by
MDIs to include ``healthcare system needs.'' In the proposed rule, EPA
noted that the reference in the regulations to an ``other public health
emergency'' is not limited to situations where the Department of Health
and Human Services (HHS) has officially declared a public health
emergency.
EPA proposed to define a healthcare system need as circumstances
where an increase in demand for MDIs used to treat asthma, chronic
obstructive pulmonary disease, and other respiratory diseases may occur
because of a change in market conditions that otherwise would not be
included in calculated rates of growth.
EPA provided the following examples of the types of events that
could fall into a healthcare system need:
A manufacturer that makes MDIs outside of the United
States stops selling approved MDI products in the United States;
Major recall or suspension of production of alternative
(non-MDI) emergency asthma treatments prompting increase in MDI demand;
Change in preferred products from pharmacy benefit
managers or state Medicare programs to patients;
FDA compliance or enforcement actions that impact MDI
market dynamics by reducing availability of generic drug products;
Significant increase in respiratory infections in the
general population (e.g., respiratory syncytial virus (RSV),
coronavirus disease (COVID)); and
Decrease in availability of active pharmaceutical
ingredient or device component for one or more MDI manufacturers
causing a supply shortage.
All comments received on this proposal were supportive. Therefore,
EPA is finalizing the expansion of the scope of the unique circumstance
for a global pandemic or other public health emergency that increases
patients diagnosed with medical conditions treated by MDIs to include
``healthcare system needs.''
If an entity is requesting consideration for this unique
circumstance, they must submit supporting documentation that allows EPA
to verify this request. Supporting documentation for a unique
circumstance has been a requirement under 40 CFR 84.31(h)(1)(viii), and
entities will be required to continue providing this documentation if
requesting consideration of additional allowances due to ``healthcare
system needs.'' Examples of such documentation could include, but are
not limited to, market share and/or sales data (e.g., IQVIA or internal
company data), press releases announcing a particular MDI product
leaving the market, or supplier announcement or other communications
regarding a supply shortage for a particular MDI device component. EPA
will determine if other forms of supporting documentation are
acceptable on a case-by-case basis. Additionally, as described in the
proposed rule, EPA intends to consult closely with FDA and potentially
HHS more broadly before allocating allowances for ``healthcare system
needs.''
2. Economic Disruptions
The first new unique circumstance EPA proposed to create was for
economic disruptions outside the immediate control of the entity
applying for ASAs, such as an economy-wide recession or other
documented short- or medium-term market events that negatively impact a
company's operations. In the proposed rulemaking, EPA described the
types of documentation that an entity would be required to submit in
its request including documentation verifying that the disruption has
taken place and that it has materially impacted the entity's HFC needs.
Several commenters generally supported EPA's proposal. One
commenter supported EPA's proposal that the requesting party would need
to provide documentation to verify the event occurred, the current
status of the event, and how the event impacted HFC needs. EPA
acknowledges the commenters' support.
One commenter stated that requests for allowances under this unique
circumstance would be likely due to the cyclical nature of the
application, as well as other events, including shifts in market share
based on competitiveness of the product mix, changes in product mix
which change use of HFCs, ramp of new technology nodes, and new
investment. This commenter also requested further clarity on the scope
and required documentation to qualify for the use of this unique
circumstance.
In the proposal, EPA described this proposed unique circumstance as
applying to ``documented short- to medium-term market events that
negatively impact a company's operations,'' (89 FR 75898, 75927,
September 16, 2024). In reviewing the commenter's input, and upon
further consideration of the proposal, EPA has determined that the
proposal did not include a definition or sufficiently discuss the types
of events that would qualify under this unique circumstance. Without
additional specificity beyond what was proposed, EPA has concerns that
this unique circumstance could not be appropriately evaluated and
decided within the context of individual allocation decisions.
While commenters supported the proposal in concept, some were
unsure what the scope of the proposed unique circumstance would include
and on the types of documentation needed to demonstrate eligibility for
the proposed unique circumstance. Others did not provide any additional
specificity or constructive feedback on how to further operationalize
the proposed unique circumstance. In the one instance where specificity
was provided on the types of additional situations that could be
eligible, the events appear to be outside the scope of what was
proposed. The examples mentioned in the comment, e.g., new
manufacturing processes, new products and technology improvements, and
investments in new facilities, are not short- to medium-term economic
disruptions and commenters did not explain how these events would
qualify as such. Further, these situations appear to be covered by the
existing unique circumstance for new manufacturing capacity coming
online, at least in part.
While EPA acknowledges the potential for unanticipated short- to
medium-term disruptions that could lead to a need to purchase HFCs
beyond what is reflected in the regulatory formula, the Agency has not
seen such a situation occur to date and has concerns that the term
``economic disruption'' as proposed was not specific enough for the
Agency to finalize a change at this time. The Agency plans to monitor
the issue and engage with stakeholders further on this
[[Page 41703]]
concept as requested by commenters and may repropose a new unique
circumstance to address such events in the future if warranted.
3. Stockpiling
The second unique circumstance EPA proposed to add was building a
stockpile of a specific HFC in the event a major producer for an
application announces they will be ceasing production of the HFC used
by the application-specific entity in the near future. An entity could
request additional allowances for the purpose of building inventory
ahead of a supplier ceasing production. For an entity to be eligible
for additional allowances under this unique circumstance, EPA proposed
that the entity must provide EPA with a letter from their supplier
signed by a responsible corporate officer stating that the supplier is
ceasing all production of the HFC at issue within three years. Further,
EPA proposed that an eligible entity must certify that they have
regulatory requirements beyond the 40 CFR part 84 requirements that
limit its ability to switch suppliers or there are no other suppliers
that could meet their needs (e.g., because there are no other chemical
manufacturers that can supply the needed HFC). EPA proposed to also
require evidence that the entity has a restricted HFC supply chain,
such as required purity requirements. If additional allowances were
granted because of this requested unique circumstance, EPA proposed to
require reporting specific to the building of inventory by the entity
that would be allocated ASAs in advance of their supplier's production
facility ceasing production. Such inventory buildup must be held by the
entity that is allocated allowances, and EPA would subtract those
quantities from the entity's purchase history such that it is not
included in the regulatory formula to determine the entity's allocation
the following year.
EPA received a number of supportive comments on the proposal. One
commenter stated that the potential need for building a stockpile at
some point is well supported by the historical experience with the
chlorofluorocarbon MDI transition, while another commenter representing
the semiconductor industry stated that with the cyclical nature of
semiconductor manufacturing, such a unique circumstance may be likely.
Another commenter also found it reasonable that EPA require an entity
requesting this unique circumstance to provide the Agency with a letter
from their supplier signed by a responsible corporate officer stating
that the supplier is ceasing all production of the HFC at issue within
three years; certify that the entity has regulatory requirements beyond
CFR part 84 requirements that limit the entity's ability to switch
suppliers or there are no other suppliers that could meet their needs;
and provide evidence that the entity has a restricted supply chain.
EPA acknowledges commenters' support of the proposal. EPA agrees
with the commenter that the Agency should not authorize a stockpiling
unique circumstance without strong evidence that alternative supply
sources are not available. As EPA stated in its proposal, an entity
would need to certify that there are no other suppliers that can supply
the regulated substances in the quantity that they need. EPA recognizes
that this unique circumstance should only apply in situations when an
entity has no other avenue in which to procure the HFCs to meet their
full needs in the near future in the event their supplier announces
that they are no longer producing the relevant HFC material.
Another commenter stated that EPA should not authorize a
stockpiling unique circumstance without finding that the supply from
alternative sources is and will be insufficient for the expected life
of the stockpile, and that the ASA holder should not transfer the HFCs
it stockpiled because of a supplier closure to any other entity.
EPA does not agree that it needs to determine that supply is
unavailable for the full lifetime of the stockpile. EPA is finalizing
this unique circumstance in a narrow manner such that the provision as
finalized will require that (1) the ASA holder have regulatory
requirements beyond the 40 CFR part 84 requirements that limit its
ability to switch suppliers or document that there are no other
suppliers that can supply the regulated substances in the quantity that
they need and (2) the requester provide evidence that it has a
restricted HFC supply chain. The commenter did not provide any
rationale for why these requirements were not sufficient or why the
Agency would need to review whether supply is unavailable for the full
lifetime of the stockpile. Additionally, building and managing a
stockpile is not a decision that most manufacturers would make lightly.
As discussed with stakeholders prior to the development of the proposed
rule, there are upfront costs associated with creating a multiyear
stockpile and then ongoing costs associated with managing a stockpile,
e.g., to avoid contamination and leakage. There may also be limitations
on how long the HFCs can be stored (e.g., EPA understands the shelf
life for HFCs for pharmaceutical grade HFCs can be five years before
they would potentially need to be reprocessed back to purity
specifications). These factors decrease the incentive to choose
stockpiling over switching suppliers.
EPA does not see the need to limit the ability of an ASA holder to
transfer or sell the HFCs it stockpiled under this unique circumstance.
Under current regulations in place before this rulemaking, HFCs
acquired by expending ASAs must be used solely for the application for
which they were produced or imported, and entities must report that
sale or conveyance to EPA (40 CFR 84.5(c) and 84.21(a)). As a result,
an entity could only sell or convey HFCs if they were for use within
the same application. The commenter did not provide a rationale for why
EPA should add additional restrictions for regulated substances
acquired under this unique circumstance. This additional limitation
would effectively require entities to destroy or permanently hold onto
any unused HFCs when they could meaningfully be deployed for use in the
same application. EPA considers using already produced HFCs to be a
better outcome than destroying those HFCs or forcing them to remain in
storage indefinitely, where there would be a higher risk of leakage.
Furthermore, EPA sees advantage in allowing entities within the same
application to transfer or sell regulated substances in this situation,
given that entities using the same regulated substance for the same
application may face similar supply challenges.
EPA is finalizing the proposed requirement to add the unique
circumstance of building a stockpile of a specific HFC in the event a
major producer for an application announces they will be ceasing
production of the HFC used by the application-specific entity in the
near future. Any entity requesting such unique circumstance must
provide sufficient evidence of the following to be eligible:
(1) Confirmation that its supplier is ceasing production of the
specific HFC needed within three years. This must be documented in a
letter from its supplier signed by a responsible corporate officer at
the company.
(2) Certification that the requester has regulatory requirements
beyond the 40 CFR part 84 requirements that limit its ability to switch
suppliers or that there are no other suppliers that can supply the
regulated substances in the quantity that they need. The requester
should submit the specific regulatory requirements or if the requester
is
[[Page 41704]]
certifying that there are no other suppliers that could meet their
needs, an entity must provide documentation of due diligence to
identify and secure supply from potential alternative suppliers. This
documentation is especially relevant for cases in which there is more
than one global producer of the regulated substance. This documentation
may include a signed certification from a responsible corporate officer
at other producers of the regulated substance certifying that they are
not able to supply the regulated substance in sufficient quantities to
the requester.
(3) The requester has a restricted supply chain. While required
purity requirements were cited as an example in the proposed
rulemaking, EPA envisions that an entity could provide different types
of evidence of a restricted supply chain, such as third-party reports
demonstrating the limited number of producers or purifiers of the HFC
being used and/or the specific purity requirements that make it
challenging to acquire HFCs that limit the available supply.
Entities submitting a request under this unique circumstance must
specify how much of each HFC they intend to purchase (in kg) and the
year(s) they intend to purchase the HFCs in. The request should also
include a description of the requester's plan. If the requester intends
to build its inventory over multiple years, they should continue
requesting a unique circumstance for stockpiling in each of the years
they hope to acquire HFCs for the stockpile.
Finally, in the proposed rule, EPA stated that it would subtract
quantities purchased to build a stockpile from the entity's purchase
history such that it is not included in the regulatory formula to
determine the entity's allocation the following year. EPA received no
adverse comments on this proposal. To implement the proposal EPA is
requiring that entities include information in their request on how
long they expect their stockpiled material to last or when they expect
to fully draw down the stockpiled material. This should be updated
annually if building an inventory over multiple years. After approval
of the unique circumstance, entities must track and manage their
inventory of the stockpiled HFC separately from their other inventory,
and report biannually on the buildup and drawdown (including sales or
conveyance to another entity) of the stockpile until the stockpile is
depleted.\28\ This reporting requirement applies even if the allowance
holder is no longer requesting additional allowances. This approach
will ensure that for as long as there is a stockpile, the entity
receiving the allocation will receive allowances commensurate with non-
stockpile use. The Agency expects this will be a relatively
straightforward task given the HFC that is being stockpiled would be
hard to otherwise acquire once a supplier stops providing it.
---------------------------------------------------------------------------
\28\ An entity allocated allowances under this unique
circumstance will receive an allocation based on the regulatory
formula, including all other eligible unique circumstances, and an
amount based on the stockpiling unique circumstance. Any HFCs
purchased for the stockpile should be tracked separately and
reported as inventory buildup. This amount would at minimum be the
difference between the total amount acquired in the year minus the
non-stockpile portion of the allocation and the maximum amount would
be the total amount of allowances allocated for stockpiling. For
example, if an entity was allocated 500 allowances based on historic
purchases and changes in inventory plus an additional 1,000
allowances under the stockpiling unique circumstance, any amount
acquired in the year above 500 allowances' worth would be the
minimum amount of HFCs that would be considered as entered into a
stockpile and 1,000 allowances worth would be the maximum.
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C. Inventory
EPA's current regulations require entities receiving ASAs to
provide, as part of their biannual reporting requirements, information
on the quantities of HFCs left in their inventory at the end of the
previous six-month reporting period (40 CFR 84.31(h)(1)(iv)). Upon
finalization of this rulemaking and heading into the allocation of
calendar year 2026 allowances, EPA will have several years of data on
inventory, including how inventory levels have changed over time. In
the Allocation Framework Rule, EPA noted its intent to account for
changes in inventory in the allocation of ASAs.
EPA proposed to include verified changes in inventory into the
calculation of the quantity of HFCs an entity used over the 12-month
period for all applications except MCMEU. EPA noted in the proposed
rulemaking that incorporating changes in inventory would yield a more
accurate reflection of HFC use than if the Agency were to look at HFC
purchases alone. EPA proposed to factor in both drawdown and growth in
inventory, meaning that a drawdown of inventory would be added to HFC
purchases and a buildup of inventory would be subtracted from HFC
purchases in determining an entity's HFC use for the year. EPA
alternatively proposed to not incorporate small amounts of growth
(i.e., below 20 percent) in inventory in allocation decisions or,
alternatively, growth in inventory for only a single year. EPA also
proposed as another option that entities may provide a rationale as to
why a buildup in inventory should not be incorporated.
EPA received one comment regarding EPA's proposal to account for
changes in inventory in allocation decisions. The commenter stated that
incorporating inventory may have a place in calculating allocations,
but the commenter expressed concern that its implementation could lead
to unintended consequences. For example, the commenter presented a
hypothetical scenario in which a company drew down inventory before the
finalization of this rule and subsequent to the finalization of this
rule rebuilds that inventory. In this scenario, the commenter posits
that the company would not have received the benefit of higher
allocations from drawing down inventory pre-finalization, and their
calculated usage would be reduced by growing inventory post-
finalization.
In response to the commenter, EPA acknowledges that any change in
the methodology by which the Agency allocates allowances could result
in changes in the amount that an entity is eligible to receive.
However, subsection (e)(4)(B)(iv)(I) of the AIM Act directs EPA to
``allocate the full quantity of allowances necessary, based on
projected, current, and historical trends.'' In order to meet that
directive, EPA has determined it is appropriate to evaluate and refine
the allocation methodology so that the Agency is able to best
approximate the number of allowances an ASA holder may need in the next
calendar year. After multiple years of implementing the phasedown, EPA
has noted challenges with relying heavily on purchase history to
calculate ASA allocations, and some stakeholders have raised concern as
well. Some ASA holders that tend to purchase HFCs at irregular
intervals have experienced considerable swings in the amount they have
been eligible for year-to-year, even in cases where their annual HFC
usage has remained relatively steady. While the circumstances and data
for each individual company are different, the Agency anticipates that
incorporating changes in inventory will generally result in more stable
allocation amounts year-to-year and better reflect company needs.
The same commenter expressed support for EPA's alternative pathway
to exclude small amounts of growth in inventory in allocation decisions
or to exclude a single year of inventory growth. The commenter's
rationale for excluding small amounts of growth in
[[Page 41705]]
inventory in allocation decisions was that including the full amount of
inventory growth could reduce an entity's allocation.
EPA has considered this comment, but in developing the final rule
has determined that such a methodology does not align with the best
interpretation of the statutory directive in subsection
(e)(4)(B)(iv)(I) of the AIM Act to ``allocate the full quantity of
allowances necessary, based on projected, current, and historical
trends.'' As previously noted, EPA considers that the inclusion of
inventory drawdown and buildup in allocation decisions will yield a
more accurate reflection of HFC use than HFC purchases alone. If the
Agency moved forward with excluding small amounts of inventory buildup,
it would be detrimental to the concept of accurately estimating an
entity's use and could result in over-allocating to ASA holders.
Allowing an entity to provide a rationale as to why a buildup in
inventory should not be subtracted from the quantities of HFCs they
annually acquire would similarly detract from the Agency's intent to
approximate the entity's use with the greatest accuracy possible and
could result in over-allocation. Given there is a finite pool of
allowances available in each calendar year, over-allocation to ASA
holders would come at the expense of general pool allowance holders.
Finally, the same commenter encouraged EPA to finalize a definition
of inventory to prevent inconsistent reporting. Specifically, the
commenter suggested that EPA finalize a definition for inventory that
reflects the quantity of inventory stored in containers, including
heels, but excludes containers in service. While EPA sees benefits to
defining how an entity should report what is to be included when
calculating the amount of HFCs in inventory and may revisit it in the
future, EPA did not propose and is not finalizing that entities report
inventory based on a specific definition at this time. For the first
few years of the allocation program, EPA has communicated to ASA
holders that each individual entity should report inventory in a
consistent manner year-over-year, and the Agency will continue to
encourage ASA holders to maintain rigorous inventory tracking systems
so that they are able to report the quantity of regulated substances
held in inventory with accuracy. However, EPA understands that entities
receiving ASAs are in differing applications (e.g., aerosol fillers
versus semiconductor etching) and that they may have different ways of
maintaining inventory. Therefore, EPA will continue to evaluate whether
an entity has reported inventory in an appropriate manner on a case-by-
case basis. For example, EPA would not accept an ASA biannual report if
an entity reported inventory buildup without documentation for how
those HFCs had been acquired.
EPA is finalizing as proposed that the Agency will include verified
changes in inventory into the calculation of the quantity of HFCs an
entity used over the 12-month period for all applications except MCMEU.
The Agency will factor in both drawdown and growth in inventory,
meaning that a drawdown of inventory would be added to HFC purchases
and a buildup of inventory would be subtracted from HFC purchases. EPA
is not finalizing its alternative pathway to exclude small amounts of
growth in inventory for allocation decisions or its proposal that
entities may provide a rationale as to why a buildup in inventory
should not be subtracted from the quantities of HFCs they annually
acquire. In developing this final rule, EPA has determined it is also
necessary to add an additional required reporting element on regulated
substances sold, returned, or otherwise conveyed to another entity. EPA
has determined this is necessary so that an entity's sale of HFCs does
not artificially appear to be a drawdown in available inventory
attributed to use in allocation determinations. For the purposes of
this additional reporting element, EPA is not requiring ASA holders to
report the return of heels in cylinders to an entity's supplier.
D. Methodology for Small Purchasers of HFCs, Entities That Do Not
Purchase HFCs Every Year, and Entities With Irregular HFC Use
Since beginning the allocation program, EPA has observed that there
are certain entities for which the regulatory formula either is not
able to calculate an allocation or applying the terms of the regulatory
formula would produce absurd results. EPA proposed to create an
alternative method of allocating to these entities. Specifically, EPA
proposed to create an alternative methodology for entities that fall in
any of the following categories: (1) entity has small purchases of HFCs
(<100 kg) at least one of the last three years and an AAGR of 200
percent or higher, (2) entity has zero purchases in one of the last
three years for reasons other than newly using HFCs, or (3) entity's
HFC purchases add up to less than 100 kg in each of the previous three
years. For entities that fall into these categories, the Agency
proposed to allocate the highest, as measured in exchange value
equivalent (EVe), verified purchase amount in the last three years. EPA
also solicited comment on whether the Agency should round allowance
allocations for very small purchasers (i.e., entities whose HFC
purchases add up to less than 100 kg in each of the previous three
years) to account for purchase of a specific cylinder volume. Further
information about the rationale behind this proposal can be found in
the proposed rule.
EPA did not receive adverse comments on how the Agency proposed to
define the categories of entities that would fall under the alternative
methodology proposed. Therefore, EPA is largely finalizing the three
categories as proposed. However, in light of more general concern
raised that the proposed methodology may not fully address industry
fluctuations, EPA is making a modification for entities who have a
significant decline in HFC usage in Year 3 as compared to Year 2. For
example, an entity that uses 15,000 MTEVe in Year 1, 20,000 MTEVe in
Year 2, and 500 MTEVe in Year 3 would have an AAGR of -32% and would
only be eligible for 339.6 MTEVe of allowances in the following
calendar year, which, assuming Year 3 was an aberration, would be an
unreasonable allocation. It is not EPA's intent for the methodology to
unintentionally penalize entities for a market fluctuation and/or need
to only use a minimal amount of HFCs in a given year. EPA is therefore
finalizing the converse of a tripling of growth represented by an AAGR
>200 percent--an entity will be considered an irregular user of HFCs if
its Year 3 usage is <=33 percent of its Year 2 usage, i.e., the entity
has a >=67 percent decrease in HFC usage from Year 2 to Year 3.
EPA had proposed that entities in this irregular HFC user category
would be allocated the highest verified purchase amount in the last
three years, as measured in EVe. EPA stated that it was taking comment
on whether the Agency should look back further at up to five years'
worth of purchase history and also solicited comment on whether EPA
should round allowance allocations for very small purchasers to account
for purchase of a specific cylinder volume. EPA did not receive comment
on either of these issues for which it solicited comment.
One commenter stated that while this alternate methodology may be
helpful, it may still not be sufficient for changes in use and typical
industry fluctuations and requested that EPA consider a minimum
allocation for entities in a specific application, suggesting 5,000
MTEVe.
[[Page 41706]]
EPA disagrees with the commenter's suggestion to allocate a minimum
number of allowances to entities in the semiconductor application.
Providing a set minimum allocation to any entity requesting allowances
in the semiconductor application does not align with the AIM Act's
direction that EPA ``allocate the full quantity of allowances
necessary, based on projected, current, and historical trends.'' A set
minimum allocation level would not be tailored to the allocation level
``necessary'' nor would it be ``based on projected, current, and
historical trends.''
The commenter did not provide an explanation of why providing a
minimum allocation would be the best reading of the relevant statutory
language. EPA considers its ASA allocation methodology to be the best
read of Congress's directive because it is specifically based on
historical HFC usage trends, while also allowing for an entity to
request additional allowances for verified unique circumstances (40 CFR
84.31(b)(1)) which document where the entity is trending currently and
will be in the future. EPA's best interpretation of the statutory
direction in the AIM Act is that all applications receiving ASAs should
be allocated allowances in the same manner. The AIM Act directs EPA to
``allocate the full quantity of allowances necessary . . . for the
production or consumption of a regulated substance for the exclusive
use of the regulated substance in an application solely for [the six
applications being discussed in this rulemaking],'' and nowhere
suggests that one application may be allocated allowances in a
different manner or otherwise treated independently from the other
applications receiving ASAs.
Further, the commenter did not provide any data or information that
would substantiate their statement that allocations have not been
sufficient to date or would be insufficient in the future. In fact,
data from previous years suggests allowances allocated to all ASA
holders are sufficient. For example, the semiconductor application,
which has the largest number of applicants, has left a substantial
number of allowances unexpended in previous years; in 2023, 39 percent
of semiconductor allowances (approximately 741,000 allowances) went
unexpended, and in 2024, 30 percent (just over 550,000 allowances) went
unexpended. These unexpended allowances can be transferred to meet the
needs of entities within the same application, should there be a need
for additional allowances by an entity in the semiconductor
application. Further, based on EPA's review of the data, there isn't
technical support for 5,000 MTEVe as an appropriate minimum allocation,
and the commenter did not provide a basis for the amount. Further, the
data does not support a decision to choose any other specific quantity
to serve as a minimum allocation. Entities applying for ASAs range in
size and HFC needs. In calendar years 2023, 2024, and 2025 allocations,
approximately 40 percent of ASA applicants were eligible for less than
5,000 MTEVe of allowances, and 15 to 20 percent were eligible for less
than 1,000 MTEVe. Of the 20 entities receiving less than 5,000 MTEVe
for calendar year 2025 allowances, 15 had also received less than 5,000
MTEVe in 2024, and 11 had received less in 2023 (three entities
received allowances for the first time in 2024). EPA is not aware of
widespread concerns with entities not receiving allowances commensurate
with their planned use, and many of the entities even requested a total
allocation substantially below 5,000 MTEVe.
In the near term, if entities require more allowances beyond their
allocation, ASA holders can either receive a transfer of allowances
from other entities within their application, as noted above, or from
general pool allowances holders, or they can acquire additional HFCs
from the open market. EPA further notes that, given the finite pool of
allowances available in each calendar year, any overallocation of ASAs
lessens the number of allowances available to general pool allowance
holders. Following finalization of this rule, the Agency will continue
to monitor ASAs and has the ability to undertake future rulemakings to
pursue additional methodology updates if appropriate.
Therefore, EPA is finalizing that the Agency will allocate to the
highest amount in the last three years beginning with the allocation of
calendar year 2026 allowances. Because EPA is finalizing the proposal
to incorporate inventory usage into calculation of entities' AAGRs (see
section VII.C. for more information), whether an entity qualifies for
the alternative allocation methodology will be based on AAGR where
relevant, and therefore inventory use will be taken into account in the
determination. Further, allocation decisions will be made based on use,
not purchases. EPA is thereby finalizing that entities that qualify for
the alternative methodology here will be allocated allowances in a
quantity equivalent to the highest verified use amount in the last
three years, as measured in EVe.\29\
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\29\ Entities newly using HFCs within the past three years are
not intended to be captured under the categories described in this
section unless they have zero purchases in one of the last three
years for reasons other than newly using HFCs (i.e., zero purchases
in a year after they began using HFCs). For an entity newly using
HFCs, EPA would calculate its base allocation (i.e., the eligible
amount based on historical activity) by multiplying that entity's
Year 3 HFC usage by the higher of the application-wide AAGR or one.
---------------------------------------------------------------------------
E. Department of Defense Conferrals
In the Allocation Framework Rule, EPA finalized that anyone
conferring an ASA, except for the conferral of allowances for MCMEU,
would be required to submit information about each conferral prior to
conferring allowances (40 CFR 84.31(h)(4)). While DOD was not required
to submit conferral information to EPA, DOD was required to maintain
records documenting the conferral(s) of ASAs to other entities up to
and including the producer or importer of the chemical (40 CFR
84.31(h)(7)(iv)).
In order to ensure that imports are not delayed or denied, EPA
proposed to modify the 40 CFR part 84, subpart A regulations to require
that conferrals of MCMEU allowances be reported to EPA consistent with
the process for all other ASA holders in 40 CFR 84.31(h)(4). This would
include the identity of each conferrer and conferee and the quantity in
MTEVe of ASAs being conferred. More detailed information on the reasons
why EPA proposed this change is available in this rulemaking's proposal
(89 FR 75898, September 16, 2024). EPA also proposed to require that a
certificate number, generated by DOD, be reported to EPA for each
conferral and expenditure of MCMEU allowances. For example, if an
intermediary receives a conferral of MCMEU allowances from DOD and then
confers the allowances further to a supplier, both DOD and the
intermediary must report the same certificate number as part of the
conferral. When the supplier expends the conferred MCMEU allowances for
production or import of HFCs, the supplier must report the certificate
number in the same report in which the expenditure of MCMEU allowances
is reported. EPA made this proposal in light of a suggestion from DOD
that requiring such information would be helpful for administrative
efficiency of this program.
EPA did not receive any comments on any aspect of these proposed
changes and is therefore finalizing these changes as proposed.
F. Limited Set-Aside for Unique Circumstances Related to Metered Dose
Inhalers
EPA proposed to create a set-aside of allowances that would be
available for
[[Page 41707]]
the use of HFCs as a propellant in MDIs if the requester meets the
criteria for the unique circumstance established in 40 CFR
84.13(b)(1)(iii), including the changes described in section VII.B.1.
In other words, this would be a set-aside to accommodate unforeseen
need for regulated substances related to a global pandemic, other
public health emergency, or other healthcare system needs related to
increased patients diagnosed with medical conditions treated by MDIs.
Application-specific entities could apply to EPA for these allowances
based on a demonstrated need to purchase more HFCs in the present
calendar year in light of events that were unforeseen at the time of
the entity's application for ASAs for the calendar year at issue and
that qualify under 40 CFR 84.13(b)(1)(iii), as modified in this rule.
EPA took comment on whether there are other analogous situations where
an unexpected increased need for HFCs resulting from the other
established and proposed unique circumstances could arise in which the
facts would justify the potential use of another set-aside for ASA
holders. EPA also solicited comment on whether, because historic
producers and importers of HFCs for application-specific uses may be
effectively receiving a ``double allocation,'' a set-aside is not truly
needed, or if a set-aside is necessary because historic importers and
producers are requiring conferral of ASAs to meet the needs of
application-specific entities.
Multiple commenters supported the creation of a set-aside pool for
unique circumstances that meet the criteria defined in in 40 CFR
84.13(b)(1)(iii), as updated. One commenter noted the proposal is
responsive to previously raised concerns that ``the annual allocation
decision may not adequately account for increased needs and is not
flexible enough to respond to changed circumstances,'' with the COVID-
19 pandemic being a good example, as EPA had raised in the proposal. No
commenters suggested this limited set-aside should be expanded to other
unique circumstances and applications, and one commenter specifically
stated that a set-aside for the semiconductor application is
unnecessary. The commenter noted there was no justification for an HFC-
32 set-aside because the analysis in this rulemaking is that HFC-32 is
not ``insufficient to supply the ASA sectors,'' and ``production or
import with general pool allowances will be able to satisfy any
increase in demand in the ASA sectors for HFC-32.''
EPA acknowledges commenters' support of EPA's proposal. EPA is
finalizing as proposed that this set-aside pool of allowances would
only be available for unique circumstances that meet the criteria
defined in 40 CFR 84.13(b)(1)(iii), as updated through this rulemaking.
EPA plans to consult with FDA in determining whether the presented
situation meets the criteria as defined. Examples of scenarios can be
found in section VII.B.1. of this preamble and the proposed rule.
In addition to a requester demonstrating that they meet the
criteria for the unique circumstance as defined in in 40 CFR
84.13(b)(1)(iii), EPA noted in the proposed rulemaking that, at a
minimum, it would be appropriate to require a requesting entity to
present EPA with information on how facts have changed that were
unknowable at the time the entity applied for that year's ASAs and also
evidence that the entity has been unable to acquire needed HFCs from
the open market or through allowance transfer, as well as that EPA
would likely require at least some of the records described in section
VI. EPA took comment on any other evidence requesters should provide
when applying for set-aside ASAs and on the appropriate records that
would need to be provided to EPA to document the entity's unsuccessful
efforts to acquire HFCs without additional allowances from EPA.
EPA did not receive comments on required records. EPA is thereby
finalizing, as described in the proposal, that entities applying for
this set-aside would need to provide EPA with the minimum information
it noted in the proposal, i.e., documentation that they meet the
criteria for the unique circumstance as defined in 40 CFR
84.13(b)(1)(iii), information on how facts have changed that were
unknowable at the time the entity applied for that year's ASAs, and
evidence that the entity has been unable to acquire needed HFCs from
the open market or through an allowance transfer. Examples of evidence
that may be accepted include, but are not limited to, signed and
notarized communication from responsible corporate officers from its
approved suppliers and potential suppliers for the sector or related
sectors that the application falls in stating that the currently used
HFC(s) cannot be sourced; entities must also include the name of the
entity or entities supplying regulated substances for and contact
information for those suppliers over the past three years. In addition,
EPA is finalizing that entities should provide the total quantities (in
kg) of regulated substances held in inventory as of the date the
application is submitted, including documentation to verify this
quantity (this includes zero quantities), and an explanation of why
that inventory, if available, will not be sufficient to accommodate
this increased demand.
EPA presented a series of options for comment on how such a set-
aside pool would be created. Under Option 1, EPA would form this pool
by setting aside 10 percent of the allocation of entities that produced
or imported HFCs during 2011-2019 to serve the applications eligible
for ASAs, except MCMEU. The second option EPA presented was to create
this set-aside pool from any revoked allowances, including from
administrative consequences already finalized. Under this second
option, instead of redistributing revoked allowances to all other
allowance holders, EPA would put the revoked allowances into a set-
aside pool in case additional ASAs were needed as a result of a public
health emergency. A third option was to hold back a set amount of
allowances from all general pool allowance holders. EPA proposed that
the Agency could hold back allowances in the range of 500,000 to
1,000,000 MTEVe production and consumption allowances. EPA also
proposed that this set-aside pool could be created from voluntarily
returned ASAs, if that proposal was finalized.
Finally, as an alternative to creating a set-aside at all, EPA took
comment on the possibility of allowing conferral of ASAs from other
applications should an unforeseen event that meets the unique
circumstance outlined in 40 CFR 84.13(b)(1)(iii) occur. In this
occurrence, EPA would amend the regulations in 40 CFR 84.13(h) to allow
ASAs to be conferred and expended to produce or import HFCs for
application-specific use different from the application associated with
the allowance.
Commenters were mixed on how this pool should be created. One
commenter supported creating this pool from revoked allowances, and one
preferred withholding 10 percent of allowances from historic producers
and importers for ASA uses (Option 1) based on the information
currently available and a desire to maximize certainty and flexibility;
neither commenter explained their preferences in more detail. Another
commenter raised multiple concerns about Option 1. Specifically, the
commenter argued that withholding 10 percent is excessive and not
justified, particularly given that ASA holders represent only 5 percent
of consumption allowances for calendar year 2025. The commenter also
flagged that EPA did not explain how it will gather data on
[[Page 41708]]
what entities sold HFCs to entities now being issued ASAs. The
commenter also asserted that EPA did not show that entities that
supplied for these applications are now benefitting from a ``double
allocation.'' The commenter similarly argued that only producers and
importers currently receiving conferrals, and conferrals larger than a
de minimis amount, should contribute to this pool; the commenter
further argued that only producers and importers of HFCs used by the
MDI application should contribute to this pool, as producers and
importers for other applications that do not use any of the same HFCs
would not be able to supply the necessary HFCs should such a need
arise. Comments on how voluntarily returned allowances should be
distributed were mixed, but one commenter supported using voluntarily
returned allowances for this set-aside pool; responses to these
comments are covered in full in section VII.G. EPA did not receive
comments on allowing transfers between applications or creating this
set-aside pool from all general pool allowance holders.
EPA is not finalizing the proposal to allow for the voluntary
return of allowances (see section VII.G.), so this option is not
discussed further in this section.
Option 1 was originally EPA's preferred option; however, after
considering comments received, EPA agrees with the commenter on the
challenges and some of the potential inequities with this approach and
thus is not finalizing this approach. EPA acknowledges that currently
it does not have the required data to pursue Option 1, and it will be
difficult to acquire such data going back to 2011 at this time.
Further, as discussed in more detail below, EPA is finalizing the
proposal to set aside a set number of allowances before allocating the
remainder to the general pool.
While EPA agrees with the commenter that creating this pool from
revoked allowances is a viable approach, EPA still has the same
concerns that were raised in the proposed rulemaking. Specifically, to
date, there have only been revoked consumption allowances.\30\ Because
entities can expend ASAs to either produce or import HFCs, if only
consumption allowances were revoked, a pool of production allowances
would still be needed to ensure entities can source ASAs from domestic
producers, in addition to being able to import the HFCs (as consumption
allowances allow). In addition, a pool created from revoked allowances
would vary in size (e.g., for calendar year 2025, EPA revoked 523,912.0
MTEVe of allowances, as compared to 272,329.6 MTEVe in calendar year
2024) and thus would lack stability and certainty around addressing the
intent of this provision to ensure access to additional allowances in
the case of an unforeseen public health emergency or other healthcare
system need.
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\30\ See https://www.epa.gov/climate-hfcs-reduction/administrative-consequences-under-hfc-allocation-rule.
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Commenters did not raise particular concerns with EPA's proposed
approach to hold back allowances from the entire general pool to create
this set aside. While EPA had noted some concerns in the proposal
regarding potential inequity of holding back allowances from all
general pool allowance holders to create this pool, upon further
consideration and review of comments EPA sees benefits in subtracting
allowances used for the set-aside from the full set of allowances
available for the general pool allowance holders. This approach is
consistent with how the Agency allocates for ASAs currently and also
creates certainty in the size of the set-aside pool each year, as
compared to creating a pool from revoked allowances.
EPA is thereby finalizing the option to withhold 1,000,000 MTEVe of
consumption and production allowances from all general pool allowance
holders to create this set-aside pool; this is significantly smaller
than the Agency's proposal under Option 1, as it would withhold
approximately 0.5 percent of all allowances allocated through 2029,
compared to 10 percent under proposed Option 1. This pool of allowances
is greater than 50 percent of the total number of allowances allocated
to the MDI application for calendar year 2025,\31\ which should be
sufficient to address any future unexpected spikes in demand that
qualify for this set-aside pool. During the peak of the COVID-19
pandemic, HFC usage increased by approximately 540,000 MTEVe (a 35
percent relative to pre-pandemic numbers), so 1,000,000 MTEVe (i.e., an
additional 50 percent over the total MDI allocation for 2025) provides
a meaningful buffer. Should the size of this pool be shown to be
insufficient, EPA could reevaluate the number of allowances withheld in
a future rulemaking.
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\31\ This includes consumption allowances allocated to
GlaxoSmithKline, who is an MDI manufacturer and a historic HFC
importer that is thereby eligible for both ASAs and consumption
allowances.
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Therefore, EPA is finalizing in this rule that when EPA issues
allowances annually it will issue allowances in the following order:
first, allocate ASAs based on requests submitted by July 31 of that
year (unchanged from the current approach), second, set aside 1,000,000
MTEVe allowances for potential additional ASA needs for the limited MDI
needs described in this rule, and, third, allocate the remainder of
allowances to the general pool based on each entity's market share
(unchanged from the current approach).
EPA had proposed that allowances held back from the general pool,
whether only historic producers and importers for ASA uses or all
general pool allowances, would be withheld until April 30. If no
application-specific entity applied for the allowances by April 30,
then the withheld allowances would be issued to the entities from which
they were withheld. If a request is pending, EPA would withhold
allowances until that request was evaluated and allowances were issued.
Such issuance would be done in a proportionate fashion if some, but not
all, of the set-aside allowances were allocated to application-specific
entities.
EPA did not receive comments on the dates by which set-aside
allowances should be requested and unclaimed allowances would be
released. Therefore, EPA is finalizing April 30 as the deadline by
which entities must request allowances from this set-aside pool. EPA
will not accept additional supporting documentation after this date but
may reach out to entities to ask clarifying questions as needed. EPA
will assess the validity of requests and will work to provide a notice
of its determination and issue the set-aside allowances, if
appropriate, within 60 days. If the total request for set-aside
allowances is greater than the set-aside pool, EPA will distribute the
allowances proportionally. For example, Entity A requests 600,000
allowances, Entity B requests 360,000 allowances, and Entity C requests
240,000 allowances, equaling a total of 1,200,000 allowances, which is
greater than the size of the set-aside pool. Assuming all requests are
verified, because Entity A's request is 50 percent of total set-aside
allowances requested, Entity B's is 30 percent, and Entity C's is 20
percent, Entity A would receive 50 percent of the total available pool
of allowances (i.e., 500,000 MTEVe allowances), Entity B would receive
30 percent (i.e., 300,000 MTEVe), and Entity C would receive 20 percent
(i.e., 200,000 MTEVe). If no set-aside allowances are requested,
requests are not granted, or there are any remaining allowances after
the set-aside pool is
[[Page 41709]]
distributed, EPA also intends to distribute any remaining set-aside
allowances pro rata amongst general pool allowance holders within 60
days of the April 30 request date.
G. Return of Unneeded Allowances
EPA proposed to allow ASA holders to return their allowances
voluntarily if they did not intend to use them. EPA proposed to use any
returned allowances to either: (1) fulfill unexpected higher demand of
another ASA holder (see section VII.F. on a limited set-aside for
unique circumstances related to MDIs) or (2) return the allowances to
the general pool of allowance holders proportionate to respective
market shares. EPA solicited comment on this proposal, including
whether it would be needed if EPA finalized other proposals outlined in
the proposed rulemaking. EPA was particularly interested in whether
this proposed approach would be needed if EPA finalized the requirement
for entities to include in their application for allowances their
anticipated need for the following calendar year (see section VII.A.).
In addition, EPA proposed other potential sources of allowances for the
limited set-aside for unique circumstances related to MDIs (see section
VII.F.).
EPA received mixed comments on the proposal to allow ASA holders to
return their allowances voluntarily. One commenter supported the
proposal and suggested that EPA retain the flexibility to redeploy
returned allowances based on the most urgent need. Another commenter, a
general pool allowance holder, conditionally supported the proposal if
returned allowances were redistributed to the general pool. A third
commenter, an ASA holder, opposed the proposal, indicating that they
would not be in a position to voluntarily return allowances and that
returning allowances could limit the availability of intra-application
allowance transfers.
EPA is not finalizing the proposal to allow ASA holders to return
their allowances voluntarily at this time for several reasons. First,
as mentioned earlier in this section, EPA proposed a variety of sources
of allowances that could support the limited set-aside for MDIs
described in section VII.F. Because of EPA's decision to finalize
setting aside 1,000,000 MTEVe of allowances before allocating to
production and consumption allowance holders, EPA anticipates that
there will be a sufficient number of allowances available to support
the set-aside already. Second, EPA is not aware of any ASA holders who
have suggested that they would voluntarily return allowances. No ASA
holders commented in support of this flexibility and as previously
noted, one ASA holder commented that they would not be in a position to
return allowances due to unpredictability in the HFC supply chain.
Therefore, it seems that at the present time this mechanism would not
be used. However, EPA sees benefit in continuing to consider whether a
mechanism for unused ASA allowances may be beneficial. Third, as
described in section VII.A., EPA is finalizing the requirement that all
entities provide their total expected HFC purchases for the next
calendar year as a component of overall applications due July 31 for
ASAs for the following calendar year. EPA noted in the proposed
rulemaking that this change may help avoid overallocation on ASAs at
the expense of general pool allowance holders, which in turn may reduce
the amount of unused allowances held by ASA holders. Fourth, EPA noted
in the proposed rulemaking, and a commenter agreed, that allowing for
the return of unneeded allowances could limit the availability of
allowances for transfer to another application-specific entity that has
an unanticipated need for more allowances during the calendar year.
Allowance transfers can be an important flexibility for ASA holders in
the event that they need more allowances than they have been allocated
in a given calendar year. Thus, while EPA is not finalizing returning
unneeded allowances to the Agency, EPA instead encourages ASA holders
with unneeded allowances to consider transferring those allowances to
other entities within their application if any of those entities are
seeking additional allowances.
H. Enabling Auctions of Illegally Imported HFCs
EPA proposed to amend the prohibition relating to the sale and
distribution of illegally imported HFCs in 40 CFR 84.5 to clarify that
a person may sell or distribute, or offer for sale or distribution, a
regulated substance purchased at an auction authorized by U.S. Customs
and Border Protection (CBP) if the buyer expended consumption
allowances or ASAs in a quantity equal to the EV-weighted equivalent of
the illegally imported regulated substances.\32\
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\32\ The sales provision in 40 CFR 84.5 does not apply to other
government personnel or contractors that need to move the HFCs for
eventual disposition consistent with the regulatory requirements,
such as through an auction with verification by EPA prior to sale.
---------------------------------------------------------------------------
EPA also proposed targeted changes to the reporting requirements to
provide clarity in the regulations for how such purchases would be
reported. Specifically, entities purchasing HFCs at auction would need
to report the import of those HFCs (that was done by another entity
prior to administration of the auction) under 40 CFR 84.31(c)(1) and
maintain records consistent with 40 CFR 84.31(c)(2). In addition, EPA
proposed that entities would use the entry date for the HFCs purchased
at auction for purposes of 40 CFR 84.31(c)(1) reporting and maintain
records of that purchase under 40 CFR 84.31(c)(2).
Additionally, EPA proposed that entities who purchase HFCs at
auction would not be subject to the advance notification requirement in
40 CFR 84.31(c)(7) for HFCs purchased via an auction authorized by CBP,
as the window for the notification would have already passed and EPA
would be verifying whether a prospective purchaser has sufficient
allowances as part of any auction. However, EPA proposed that entities
would still have to provide notification to EPA via a CBP-authorized
electronic data interchange system, such as the Automated Broker
Interface, prior to the HFCs entering U.S. commerce and provide the
same data elements as in 40 CFR 84.31(c)(7). If a certificate of
analysis (see 40 CFR 84.31(c)(7)(xvi)) is not available at the time of
filing entry, EPA proposed that the entity would need to do any
required sampling and testing prior to sale in U.S. commerce.
Several commenters expressed concern at the appropriateness of
auctions generally for the handling of illegally imported regulated
HFCs and instead urged the Agency to require that these materials be
destroyed at the expense of the illegal importer. Commenters argued
that auctions would generally be inappropriate because an auction would
force CBP into a particular outcome prior to them issuing a proposal
for handling illegally imported HFCs, and the high organizational,
creation, and facilitation costs for auctions would be better spent on
other mechanisms such as import screening, sustainable management
practices, and destruction orders. One commenter also expressed the
same conceptual concern with auctions of previously illegally imported
HFCs as they did with auctions for the statutorily-required yearly
issuance of allowances.
At the outset, EPA is restating that the proposed amendment to the
prohibition relating to the sale and prohibition of illegally imported
HFCs in 40 CFR 84.5 was to clarify that a person may sell or
distribute, or offer for sale or distribution, a regulated substance
[[Page 41710]]
purchased at an auction authorized by CBP if the buyer expended
consumption allowances or ASAs in a quantity equal to the EV-weighted
equivalent of the illegally imported regulated substances. The Agency's
proposal did not prejudge the outcome of the handling of illegally
imported materials, nor was it an endorsement of auctions as a lead
option over other outcomes such as re-export or destruction.
Accordingly, EPA disagrees that the regulatory changes contemplated
force EPA, CBP, or any other agency to pursue one specific action;
instead, an auction is one possible outcome, and the regulatory changes
simply provide flexibility for auctions to be operationalized if and
when deemed appropriate.
In response to comments that the high costs and burdens associated
with auctions would be better spent on monitoring legal HFC imports,
supporting programs that promote sustainable HFC management practices,
and carrying out what the commenter referred to as ``a more
straightforward'' approach to requiring destruction, EPA notes that
these regulatory changes do not require or necessitate the use of
auctions, but rather preserve flexibility for auctions to potentially
be pursued if and when deemed appropriate. Therefore, EPA does not view
these comments as significant adverse comments with respect to the
action proposed in this rulemaking. EPA also notes that other
disposition options (e.g., destruction of illegally imported HFCs) have
significant costs without any opportunity to offset those costs.
EPA acknowledges the importance of monitoring for HFC imports. EPA
notes that since 2021, the Agency has co-chaired an interagency task
force on illegal HFC trade. Detecting, disrupting, and deterring
illegal shipments of HFCs has been a priority for EPA and our
interagency partners. In addition to daily monitoring of HFC imports,
EPA and our federal partners have also made information technology
enhancements such as upgrades to a filing system within the Automated
Commercial Environment (ACE) specifically for HFCs that prohibit
unknown importers or importers without sufficient allowances to file
for entry. These enhancements allow EPA to more efficiently identify
potential instances of illegal trade that could undermine U.S.
businesses complying with the AIM Act.
For the reasons stated above, EPA is finalizing as proposed the
amendment to 40 CFR 84.5 to clarify that a person may sell or
distribute, or offer for sale or distribution, a regulated substance
purchased at an auction authorized by CBP if the buyer expended
consumption allowances or ASAs in a quantity equal to the EV-weighted
equivalent of the illegally imported regulated substances.\33\
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\33\ The sales provision in 40 CFR 84.5 does not apply to other
government personnel or contractors that need to move the HFCs for
eventual disposition consistent with the regulatory requirements,
such as through an auction with verification by EPA prior to sale.
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Closely joined to comments received in opposition of auctions as a
concept generally for previously illegally imported HFCs, several
commenters favored destruction of illegally imported HFCs at the
importer's responsibility and cost. These commenters asserted that this
approach ensures public safety by not introducing potentially harmful
low-quality or unknown-quality HFCs, upholds the integrity of U.S.
regulatory authorities by sending a clear message to illegal importers
and would-be illegal importers, and prevents unfair competition against
U.S. manufacturers who have made significant investments to meet
environmental and regulatory standards. As noted in response to the
prior comments, this rulemaking is not intended to choose one approach
over another, but rather preserve flexibility for future decision
making. Amendments being finalized in this rulemaking do not pre-judge
an outcome or favor any outcome for illegally imported HFCs. Rather,
these changes allow for the legal transfer of previously illegally
imported HFCs by way of a very specific mechanism. Therefore, these
comments are not significantly adverse to the regulatory changes EPA
proposed here and do not require a response in the context of this
rulemaking. However, in the interest of providing clarity to interested
stakeholders on these issues, EPA is providing its view on these points
below and will take commenters' concerns into account in making future
decisions on disposition of illegally imported HFCs in cooperation and
coordination with federal agency partners.
EPA has taken steps to address the concerns mentioned and disagrees
with the commenters on their arguments against auctioning illegally
imported HFCs. Note that under the provisions being finalized in this
rule, EPA would only allow for auctioned HFCs to be sold or distributed
in U.S. commerce if an equivalent amount of allowances are expended. To
address concerns about quality and to ensure that all HFCs sold have an
accurate label, sampling and testing and labeling requirements are in
place for HFCs purchased at auction just like the requirements
applicable to all other HFCs. Additionally, anyone buying HFCs through
an auction would be prohibited, consistent with the sales and
distribution restrictions at 40 CFR 84.5(i), from selling or
distributing or offering for sale and distribution HFCs that are off
specification (e.g., refrigerants that do not meet the AHRI 700 purity
standard) as included in EPA regulations.
Regarding the concern that auctioning illegally imported HFCs does
not uphold the integrity of U.S. regulatory authorities, EPA disagrees.
Any HFCs sold via an auction are HFCs that were attempted to be
imported without the appropriate permissions (e.g., allowances), were
stopped, and were seized. The goods themselves and any value associated
with them would be forfeited by the illegal importer. This upholds the
integrity of the regulatory requirements by preventing the importer
from bringing these into the United States without following applicable
law and results in a complete financial loss to the importer.
Additionally, the entity that attempted to import HFCs would still be
subject to applicable civil and criminal penalties, as applicable, for
violating the law.
EPA also disagrees with commenters' assertions that simply allowing
an auction to occur may have negative economic effects against U.S.
manufacturers. Any potential buyer would have to expend consumption
allowances equal to the quantity acquired at auction. Since there are a
finite number of allowances allocated each year and allowances will be
expended for the quantity purchased at auction, this approach ensures
there is no additional consumption beyond the limits in the AIM Act and
implementing regulations at 40 CFR part 84, subpart A. In other words,
the total pool of HFCs that can enter the U.S. market in a given year
will not change if illegally imported HFCs are auctioned to an entity
that will expend an equivalent number of allowances. Other than
domestic producers, allowance holders are almost exclusively expending
their allowances to import HFCs. By expending allowances for HFCs
purchased at auction, these allowance holders are in effect offsetting
quantities they would otherwise be importing, which is expected to
result in no change in the quantity of HFCs produced domestically.
Regarding concerns that there would be financial effects on U.S.
manufacturers due to auctioned HFCs being sold at a below market price,
EPA expects minimum pricing thresholds would reduce any effects. See
the discussion later in this section.
The Agency also received comments on specific aspects of the
physical goods
[[Page 41711]]
as well as the process and criteria for holding an auction. These
comments include: the quality and composition of auctioned materials
and potential downstream effects on end users; payment of duties and
tariffs; pricing that may undercut U.S. manufacturers; reclassifying
the goods; and limiting the scope of who may bid on the goods.
As stated in responses to regulatory changes that were considered
and being finalized in this rule, the changes contemplated in this rule
are not intended to favor auctions as a means to handle illegally
imported HFCs. Whether, and how, to pursue such an auction is subject
to future decision making. However, EPA notes that to mitigate quality
and component concerns for any downstream end user, EPA proposed that
if a certificate of analysis (see 40 CFR 84.31(c)(7)(xvi)) is not
available at the time of filing entry, the entity purchasing illegally
imported HFCs would need to do any required sampling and testing prior
to sale in U.S. commerce. The Agency is finalizing this provision with
a minor adjustment to better reflect when the certificate of analysis
is required, i.e., if a certificate of analysis is not available by the
time the auction concludes and the purchasing entity takes physical
possession of the goods, the entity must perform any required sampling
and testing prior to sale in U.S. commerce in accordance with 40 CFR
84.5(i)(3)(i), regardless of whether the entity meets one of the
criteria contained in that subsection. EPA is also clarifying that in
instances where a purchasing entity is repackaging regulated substances
whether as a single or multicomponent substance, that they must perform
lab sampling and testing in accordance with 40 CFR 84.5(i)(3)(i) even
if a certificate of analysis was available at the time the purchaser
took physical possession of the goods. As noted above and in
combination with existing labeling and purity requirements, this
ensures that the purchaser at auction knows the composition of the HFCs
and whether those HFCs meet the regulatory purity standard prior to
sale.
Several commenters urged EPA to require that any applicable tariffs
or import duties, including anti-dumping and countervailing duties (AD/
CVDs) be paid, either by the purchaser of the goods or prior to the
goods being auctioned. EPA acknowledges the comment and the importance
of preventing duty evasion. In addition to the authority and mandates
of the U.S. Department of Commerce (DOC), CBP enforces AD/CVD laws by
collecting the applicable cash deposits, administering AD/CVD entries,
assessing and collecting final AD/CVDs, and enforcing AD/CVD on imports
that evade AD/CVD orders. The comments on ensuring that tariffs and
duties have been paid is outside of the scope of this rulemaking, and
would require the Agency to determine details about factors including
but not limited to scope, timing, and rationale that EPA does not have
sufficient information at this time to develop. However, if the Agency
pursues an auction, in collaboration with federal government partners,
the Agency may consider whether to include a minimum pricing threshold
to negate the detrimental effects to U.S. manufacturers of any
potential dumping or countervailing. Upon verification that EPA
requirements have been satisfied, CBP can affect a sale of forfeited
property via national seized property contracts. These contracts are
awarded by the U.S. Department of Treasury's Treasury Executive Office
for Asset Forfeiture, and minimum pricing thresholds can be instituted.
Two commenters expressed concern that the auction of illegally
imported HFCs could introduce below-market priced HFCs into commerce
which would therefore unfairly compete against domestic companies that
have followed the legal framework, borne the costs of compliance, and
invested in new environmental and regulatory standards. Furthermore,
these commenters contended that auctioning illegally imported HFCs at
below-market prices may dilute efforts and incentives created by the
HFC phasedown, specifically the adoption of lower EV alternatives. EPA
responds that today's final rulemaking considers regulatory changes
that could provide future flexibility to pursue an auction of
previously illegally imported HFCs. This rulemaking does not consider
potential criteria for any future auctions and the comments described
in this paragraph are outside of the scope of this rulemaking. However,
and as noted above, EPA may consider whether it is appropriate to
include a minimum pricing threshold to remain competitive when compared
to products from U.S. manufacturers as part of any future auction
proceedings.
One commenter offered an alternative to EPA's proposal for
administering an auction for previously illegally imported HFCs: these
HFCs may be auctioned as ``recovered'' refrigerant which, once verified
to meet AHRI 700 specifications, could be sold as reclaim to support
compliance with reclamation requirements contained in the final 2024
Emissions Reduction and Reclamation Rule. This commenter also offered
that only EPA-certified reclaimers who are also allowance holders may
bid on the goods, that the illegal importer not be eligible to bid on
the goods, that tariffs and duties have been paid, and that EPA must
furnish information about the source of the material being offered at
auction. EPA responds that the premise of referring to HFCs being
auctioned as ``recovered'' is outside of the scope of today's
rulemaking. However, in future development of an auction, if pursued,
EPA would be unlikely to pursue commenter's suggestions given the
definition codified in 40 CFR 84.102, for ``recover,'' which means:
The process by which a regulated substance, or where applicable,
a substitute for a regulated substance, is
(1) removed, in any condition, from equipment and
(2) stored in an external container, with or without testing or
processing the regulated substance or substitute for a regulated
substance.
One commenter suggested that entities subject to administrative
consequences, or their affiliates, should be ineligible to participate
in an auction of previously illegally imported HFCs. EPA reiterates
that this rule is simply contemplating flexibilities that would allow
future consideration of an auction. As a result, in the proposal EPA
did not put forward limits or exclusionary criteria for entities who
may bid on the auction of previously illegally imported HFCs.
One commenter expressed concern that auctions may have other
unintended consequences, i.e., they may encourage or incentivize
continued illegal activities, and auctioned materials may be harder to
track and ensure responsible use. The commenter alleged that by
administering auctions, the illegal importers might see this process as
an opportunity to legitimize their wrongdoing and continue importing
HFCs in a manner that is inconsistent with EPA's regulations. The
commenter expressed a concern that this may also embolden would-be
illegal importers and lead to efforts to bypass EPA's regulations
thereby flooding the U.S. market with illegal HFCs. EPA responds that
as previously noted, the provision being finalized in this rulemaking
only allows flexibility for the federal government to potentially
pursue auctions, and therefore the Agency does not consider these
comments to be significantly adverse to the regulatory changes
proposed. EPA is not pre-judging the outcome of any illegal shipment
nor is the Agency favoring auction over other final outcomes. EPA also
notes that the commenter has only provided
[[Page 41712]]
conceptual arguments, but has not provided any data, information, or
other compelling evidence to support the argument that illegal activity
would be meaningfully higher if the goods were to be auctioned versus
other outcomes such as re-export or destruction. However, EPA reaffirms
our commitment to working with our federal partners to detect, disrupt,
and deter illegal shipments of HFCs. If an auction were to be pursued,
the entity that illegally imported would have their HFCs seized by CBP,
losing all value and investment made to bring those HFCs into the
United States illegally. Coupled with the need to purchase allowances,
it is not clear how auctions would facilitate illegal trade, especially
if the HFCs are auctioned with a minimum pricing threshold.
The commenter also expressed concern that there would be no
guarantee that auctioned goods would be used in an environmentally
responsible manner or according to regulatory standards. EPA does not
view this comment as significantly adverse to the regulatory changes
considered in this rulemaking. However, the Agency notes that entities
must expend the appropriate number of allowances to cover the auctioned
materials on an EV-weighted basis, thereby creating regulatory
obligations for them if they weren't already an allowance holder. Among
other things, the entity purchasing illegally imported HFCs at auction
would be subject to certain reporting and recordkeeping requirements
under 40 CFR 84.31(c), would be responsible for ensuring the quality
and composition of the goods either through an existing certificate of
analysis and/or additional lab sampling and testing, and would be
subject to annual audits of certain HFC activities under 40 CFR 84.33.
As applicable, purchasers of HFCs at auctions would also be subject to
EPA's regulations under 40 CFR part 82, subpart F, where applicable,
including but not limited to any recordkeeping provisions under the
sales restriction contained in 40 CFR 82.154(c). Failure to abide by
one or more of any of these traceable and tangible obligations created
as a result of taking possession of or selling previously illegally
imported HFCs could result in administrative consequences, traditional
enforcement action, or a combination of the two. End users of any HFCs
are also subject to EPA regulations implemented under the 2023
Technology Transitions Rule and the 2024 Emissions Reduction and
Reclamation Rule.
EPA also proposed targeted changes to the reporting requirements to
provide clarity in the regulations for how such purchases would be
reported. Specifically, entities purchasing HFCs at auction would need
to report the import of those HFCs (that was done by another entity
prior to the auction purchase) under 40 CFR 84.31(c)(1) and maintain
records consistent with 40 CFR 84.31(c)(2). The Agency did not receive
any comments during the public comment period with respect to this
proposed provision, and in the absence of any information that would
deem these provisions to be inappropriate, EPA is finalizing this
provision as proposed.
In addition, EPA proposed that entities would use the entry date
for the HFCs purchased at auction for purposes of 40 CFR 84.31(c)(1)
reporting and maintain records of that purchase under 40 CFR
84.31(c)(2). The Agency did not receive any comments during the public
comment period with respect to this proposed provision, but after
consultation with CBP specifically with respect using the date that
entry was filed for the purposes of 40 CFR 84.31(c)(1), EPA is amending
this provision to be the date that the goods were released to the
entity purchasing the HFCs at auction. The Agency understands that
there may be logistical issues that arise for CBP if the purchaser were
to file for entry; accordingly, EPA is adjusting the date to use for
the purposes of reporting to 40 CFR 84.31(c)(1) in a manner that should
not materially affect either domestic or international compliance or
reporting obligations while simultaneously not creating additional
burden for another Federal Agency.
Lastly, EPA proposed that entities who purchase HFCs at auction
would not be subject to the advance notification requirement in 40 CFR
84.31(c)(7) for HFCs purchased via an auction authorized by CBP, as the
window for the notification would have already passed and EPA would be
verifying whether a prospective purchaser has sufficient allowances as
part of any auction. However, EPA proposed that entities would still
have to provide notification to EPA via a CBP-authorized electronic
data interchange system, such as the Automated Broker Interface, prior
to the HFCs entering U.S. commerce and provide the same data elements
as in 40 CFR 84.31(c)(7). The Agency did not receive any comments
during the public comment period with respect to this proposed
provision, but after consultation with CBP specifically with respect to
the notion of the purchaser providing notification to EPA via a CBP-
authorized electronic interchange system as the Automated Broker
Interface, EPA is not finalizing this requirement. EPA understands that
having a broker or importer transmit notification via a CBP-authorized
electronic interchange system may create logistical issues for CBP, and
accordingly will work directly with an entity purchasing HFCs at
auction to ensure that the same information that is contained in 40 CFR
84.31(c)(7) is received prior to the HFCs entering commerce.
Specifically, in lieu of entities providing notification to EPA via a
CBP-authorized electronic data interchange system, entities who
purchase HFCs through an auction shall provide information contained in
40 CFR 84.31(c)(7) directly to EPA in an electronic format specified by
EPA. EPA had proposed that the required information be submitted within
three business days of the HFCs being purchased at auction. However,
after further reflection and recognizing that the general auction
process would be novel to both government agencies and purchasers, EPA
is finalizing that the required information must be submitted within 30
calendar days of the HFCs being purchased at auction and that the HFCs
may not enter commerce until the required information is submitted.
Additionally, transmittal shall also certify that the entity has
expended the necessary allowances as of the date of purchase and will
report the transaction(s) in the quarterly importer report required
under 40 CFR 84.31(c)(1) as if the HFCs had been imported on the date
the HFCs were released to the purchaser at auction.
I. Quarterly Exporter Reporting of Internal Transaction Numbers
ITNs uniquely identify shipments being exported from the United
States to another country. EPA currently requires companies to report
ITNs when they request additional consumption allowances after
exporting bulk HFCs. EPA proposed to require companies, as part of
reporting done pursuant to AIM Act subsection (d)(1), to additionally
report ITNs quarterly for all HFC exports, but that exporters would not
be required to report on their quarterly reports ITNs for shipments
that are exempt from needing ITNs under CBP regulations. EPA did not
receive comment on this proposal so is finalizing these changes as
proposed. EPA did not propose any changes to the existing regulations
related to RACAs, such that reporters would still need to obtain ITNs
for any exports listed in RACA submissions (e.g., exports to Canada).
[[Page 41713]]
J. Date of Purchase for Requests for Additional Consumption Allowances
(RACAs)
EPA proposed to amend the existing requirement in 40 CFR
84.17(a)(5) to require an entity to only report whether the HFCs
exported were purchased before or after January 1, 2022, rather than
the exact date purchased as is currently required. EPA did not receive
comments on this proposal and is accordingly finalizing this amendment
as proposed.
VIII. Authorization To Produce for Export
Subsection (e)(5) of the AIM Act provides that the Administrator
may authorize an entity to produce a regulated substance in excess of
the number of production allowances otherwise allocated to that entity,
subject to several conditions including:
The authorization is valid for a renewable period of not
more than five years;
The authorization must be established via notice and
opportunity for public comment;
The production is solely for export to, and use in, a
foreign country that is not subject to the prohibition in subsection
(j)(1); \34\ and
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\34\ Given that the prohibition of (j)(1) does not take effect
until 2033, and EPA is making allowances available to Iofina through
2030, EPA does not consider this restriction related to subsection
(j)(1) as relevant to this rulemaking.
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The production so authorized would not violate the
production or consumption limits.
On March 28, 2024, EPA received a request from Iofina Chemical
(Iofina) to authorize additional production of HFCs under subsection
(e)(5) that can be exported to supply semiconductor manufacturers
outside of the United States. Details of Iofina's request can be found
in the proposed rulemaking and in the docket associated with this
rulemaking.
After considering Iofina's specific situation, the limited number
of allowances that would be needed to accommodate its request, and its
stated intent to export HFCs for use in an application that Congress
specified in subsection (e)(4)(B) of the AIM Act, EPA proposed to
allocate 3,000.0 MTEVe non-transferrable production for export
allowances exclusively to Iofina on an annual basis for each of the
calendar years 2026 through 2030. A detailed discussion of the
rationale for the Agency's proposal and final action follow.
A. To what entities is EPA finalizing provisions to allocate production
for export allowances?
As described above, EPA proposed to only allocate production for
export allowances to Iofina. As outlined in the proposal, the Agency
had determined that the company has demonstrated its need for
production for export allowances. EPA also outlined in the proposed
rule how such an authorization supports the HFC phasedown overall,
given that Iofina only produces HFC-41, one of the lowest EV HFCs
controlled by the AIM Act with an EV of 92, at its facility in
Covington, Kentucky.
EPA notes that while there may be other HFC producers interested in
receiving production for export allowances, EPA has only assessed the
appropriateness of proposing an allocation for Iofina in light of the
specific circumstances presented by that entity. The Agency did not
propose, nor create a mechanism to finalize, production for export
allowances for any other entity through this rulemaking. If other
producers were to express a similar interest, EPA may consider whether
to act in a separate rulemaking under subsection (e)(5) on a case-by-
case basis. At this time, EPA emphasizes that this action is dependent
on facts specific to Iofina, including the relatively small size of
Iofina's production and the modest impacts on the overall market for
HFCs that will result.
The Agency received supportive comments from Iofina and did not
receive comments from any other entity either in support of, or
against, our proposal. EPA is finalizing as proposed that Iofina will
receive production for export allowances in the amount and duration
described in this final rule.
B. How many production for export allowances will EPA issue to Iofina
on an annual basis, and for how many years will EPA issue these
allowances?
EPA proposed to issue Iofina non-transferrable production for
export allowances in the amount of 3,000.0 MTEVe on an annual basis for
the five-year period between 2026 and 2030. The Agency arrived at this
proposed amount based on an evaluation of a combination of factors,
including: Iofina's request; supporting information from the company
explaining and demonstrating the need for production for export
allowances; Iofina's relative market share of production allowances and
recent yearly allocations from EPA; recent conferral activity where
Iofina is the recipient; and the general effect to other producers of
issuing Iofina production for export allowances in the proposed amount.
The Agency received supportive comments from Iofina during the
public comment period for this provision, and did not receive comments
from any other entity either in support of, or against, our proposal.
Consistent with the provisions in subsection (e)(5)(A)(i), EPA is
finalizing that Iofina will be allocated production for export
allowances in the amount of 3,000.0 MTEVe on an annual basis for a
five-year period between 2026 and 2030.
C. Will Iofina need to expend consumption allowances for materials
produced with production for export allowances and subsequently
exported?
Subsection (e)(5) of the AIM Act allows EPA to ``authorize a person
to produce'' for export if such production would not violate the yearly
cap described in subsection (e)(2)(B). To operationalize this statutory
requirement, EPA proposed to require that any material produced with
production for export allowances must be exported in the same year it
was produced. The AIM Act defines ``consumption'' as the amount of HFCs
produced and imported minus the quantity of HFCs exported. Therefore,
production of an HFC in a given year would be ``netted out'' when
calculating consumption if that HFC is exported in that same year.
Because HFCs produced with production for export allowances would be
exported in the same year and therefore would be ``netted out'' when
evaluating the United States' calculated yearly consumption, EPA
proposed that when Iofina produces for export using this specific
category of allowances, it would not be required to expend consumption
allowances in an equivalent amount. Relatedly, EPA also proposed that
Iofina's materials produced with production for export allowances would
not be eligible for additional consumption allowances through the RACA
provisions in 40 CFR 84.17.
No comments were received on this provision during the public
comment period. Accordingly, EPA is finalizing these provisions as
proposed, i.e., any material produced with production for export
allowances must be exported in the same year it was produced, Iofina
does not need to expend consumption allowances in equivalent amount
when it produces regulated HFCs using production for export allowances,
and Iofina's materials produced with production for export allowances
are not eligible for the RACA provisions in 40 CFR 84.17.
[[Page 41714]]
D. How will this process affect the issuance of other types of
allowances?
Under 40 CFR part 84, subpart A, EPA first determines ASAs prior to
determining any other allowances. Because the Agency proposed to issue
an annual finite number of production for export allowances for Iofina,
EPA proposed to determine these non-transferrable allowances
immediately after ASAs are determined. As a result, EPA proposed small
modifications to 40 CFR 84.9 to reflect that the number of available
general pool production allowances is the difference between the yearly
production cap and the sum of ASAs issued and the number of production
for export allowances. EPA did not propose any changes to how general
pool consumption allowances are issued on an annual basis and did not
propose to either revise or reopen the methodology codified in 40 CFR
84.11.
The Agency did not receive comments on the proposed process for
issuing production for export allowances or how this process may affect
other types of allowances. In the absence of any information that would
indicate that the proposed provisions would be inappropriate, EPA is
finalizing the provision to determine non-transferrable allowances to
Iofina immediately after ASAs are determined as well as related
modifications to 40 CFR 84.9 to reflect that the number of available
general pool production allowances is the difference between the yearly
production cap and the sum of ASAs issued and the number of production
for export allowances. It should be noted that because production for
export allowances is a separate category from general pool production
allowances, Iofina would be eligible for both of these types of
allowances beginning in 2026 through 2030. No changes to how general
pool consumption allowances are allocated are being finalized in this
rulemaking.
E. What are the final recordkeeping and reporting requirements for
production for export allowances?
EPA is finalizing that Iofina comply with recordkeeping and
reporting requirements in addition to what is already required of the
entity as a domestic producer under 40 CFR 84.31(a) and (b) and as an
exporter under 40 CFR 84.31(d).
1. Annual Certifications
EPA proposed that Iofina secure signed certifications by a
responsible corporate officer from their overseas application-specific
customers attesting that any regulated HFCs produced using production
for export allowances will only be used in application-specific uses
(i.e., only for the etching of semiconductor material or wafers and the
cleaning of CVD chambers within the semiconductor manufacturing
sector). EPA proposed that Iofina must provide such written and signed
certification for each of their overseas customers, accompanied by a
description of how the foreign use aligns with the definitions in 40
CFR 84.13(a) and 40 CFR 84.3. The Agency also proposed that if the
regulated HFCs produced by Iofina using production for export
allowances are to be held at an intermediary prior to receipt by the
semiconductor manufacturer, the intermediary must also submit the same
certification. As part of the yearly written certification, EPA
proposed that the name and address of the foreign entity, and the
contact person's name, email address, and phone number are included.
Further, EPA proposed that Iofina must provide copies of these signed
certifications with its end of year fourth quarter report due February
14 (i.e., certifications for calendar year 1 are due on February 14 of
year 2).
During the public comment period, Iofina explained that as one of
its common business practices, it sells regulated HFCs to intermediary
companies, who then repackage and sell the regulated HFCs to the final
end users. Iofina interpreted the Agency's proposed provisions as
requiring it to obtain and submit copies of the signed certifications
from all intermediaries and final end users. In an effort to protect
customer confidentiality, Iofina requested that it be responsible for
obtaining and submitting to EPA the signed certifications from the
intermediary, and that Iofina or the intermediary be responsible for
obtaining and submitting to EPA the signed certification from the final
end user.
EPA acknowledges Iofina's concerns regarding customer
confidentiality, and is clarifying the final provisions for annual
certifications. In instances where the regulated HFCs produced using
production for export allowances are sold by Iofina directly to a final
end user, EPA is finalizing that Iofina must secure signed
certifications by a responsible corporate officer from its overseas
application-specific customers attesting that any regulated HFCs
produced using production for export allowances will only be used in
application-specific uses (i.e., only for the etching of semiconductor
material or wafers and the cleaning of CVD chambers within the
semiconductor manufacturing sector). The certifications must be
accompanied by a description of how the use in another country aligns
with the definitions in 40 CFR 84.13(a) and 40 CFR 84.3. EPA is
finalizing that in instances when regulated HFCs produced using
production for export allowances are sold directly for use by foreign
end users, the name and address of the foreign entity, and the contact
person's name, email address, and phone number are included in the
certification. Further, EPA is finalizing that Iofina must provide
copies of these signed certifications with its end of year fourth
quarter report due February 14 (i.e., certifications for calendar year
1 are due on February 14 of year 2).
If the regulated HFCs produced by Iofina using production for
export allowances are to be held at an intermediary prior to receipt by
the semiconductor manufacturer, EPA is clarifying that Iofina must
secure signed certifications by a responsible corporate officer from
the intermediary attesting that any regulated HFCs produced using
production for export allowances will only be used in application-
specific uses (i.e., only for the etching of semiconductor material or
wafers and the cleaning of CVD chambers within the semiconductor
manufacturing sector). The certifications must be accompanied by a
description of how the foreign use aligns with the definitions in 40
CFR 84.13(a) and 40 CFR 84.3. As part of the yearly written
certification for the intermediary, EPA is finalizing that Iofina must
provide the name and address of the intermediary, as well as the
contact person's name, email address, and phone number. Further, EPA is
finalizing that Iofina must provide copies of these signed
certifications with its end of year fourth quarter report due February
14 (i.e., certifications for calendar year 1 are due on February 14 of
year 2).
2. Quarterly Export and Inventory Reporting
In addition to submitting the quarterly exporter reports currently
required under 40 CFR 84.31(a) and (b), the Agency proposed that Iofina
must, as part of these quarterly exporter reports, document the amounts
exported that were produced using production for export allowances.
Iofina would also be required to document the country to which HFCs
were exported. As part of this documentation and to help ensure that
EPA can quickly locate exports of regulated HFCs produced by Iofina,
the Agency proposed that an ITN be provided for each shipment
regardless of monetary value, destination country, or other
characteristics that could
[[Page 41715]]
otherwise exempt or preclude an exporting entity from obtaining an ITN.
Additionally, EPA proposed that Iofina report quarterly no later than
45 days after the applicable quarterly control period on inventory of
regulated HFCs produced with production for export allowances so EPA
can effectively track their use. Inventory of regulated HFCs produced
with production for export allowances must be zero as of December 31
for that calendar year; otherwise, EPA may pursue actions including but
not limited to allowance adjustments, i.e., administrative
consequences, or enforcement action.
The Agency did not receive any comments during the public comment
period on this set of provisions. Accordingly, EPA is finalizing that
as part of the existing quarterly exporter reports, Iofina must also:
document the amounts exported that were produced using production for
export allowances; document the country to which HFCs were exported
along with an ITN for each shipment regardless of monetary value,
destination country, or other characteristics that could otherwise
exempt or preclude an exporting entity from obtaining an ITN; and, that
Iofina report quarterly no later than 45 days after the applicable
quarterly control period on inventory of regulated HFCs produced with
production for export allowances. As stated in the proposal and
reiterated in this final rulemaking, inventory of regulated HFCs
produced with production for export allowances must be zero as of
December 31 for that calendar year; otherwise, EPA may pursue actions
including but not limited to allowance adjustments, i.e.,
administrative consequences, or enforcement action. All reports
described in this section are subject to EPA's auditing provisions
under 40 CFR 84.33.
3. Recordkeeping
EPA proposed that Iofina maintains for a period of five years the
certifications from all of its customers and any intermediaries
attesting that the regulated HFCs they are receiving are only to be
used for the etching of semiconductor material or wafers and cleaning
of CVD chambers within the semiconductor manufacturing sector. The
Agency also proposed that Iofina maintain for a period of five years
records demonstrating that Iofina has conducted extensive due diligence
to verify and ensure that the HFCs they sell abroad are only sold to an
entity that will use the HFC for an application-specific use and are
not going to be diverted for some other use (e.g., destroyed for carbon
credits, sold to another entity that will use the HFCs for another end
use).
The Agency did not receive any comments during the public comment
period on this set of provisions. Accordingly, EPA is finalizing that:
Iofina maintain for a period of five years the certifications from all
of its customers and intermediaries attesting that the regulated HFCs
they are receiving are only to be used for the etching of semiconductor
material or wafers and cleaning of CVD chambers within the
semiconductor manufacturing sector; and, Iofina maintain for a period
of five years records demonstrating that Iofina has conducted extensive
due diligence to verify and ensure that the HFCs they sell abroad are
only sold to an entity that will use the HFC for an application-
specific use and are not going to be diverted for some other use (e.g.,
destroyed for carbon credits, sold to another entity that will use the
HFCs for another end use).
IX. How will EPA handle confidentiality for newly reported information?
Consistent with EPA's commitment to transparency in program
implementation, as well as to proactively encourage compliance, support
enforcement of program requirements, and enable third-party engagement
to complement EPA's enforcement efforts, EPA proposed several ways it
would treat the release of data that would be collected if this rule
were finalized as proposed. Specifically, EPA proposed to make
categorical confidentiality determinations for some of the proposed
data elements that would be submitted to EPA. The proposal identified
certain information that would be subject to disclosure to the public
without further notice because the Agency proposed to find that the
information did not meet the standard for confidential treatment under
Exemption 4 of the Freedom of Information Act. EPA also proposed to
identify certain other categories of information that would be entitled
to confidential treatment.
EPA is finalizing confidentiality determinations for certain
individual reported data elements as proposed. Some aspects of the
proposal are not being finalized because they related to elements of
data that are not being required upon finalization of this rule. For
example, EPA proposed determinations related to the proposal to allow
ASA holders to voluntarily return unneeded allowances, but as explained
in section VII.G., EPA is not finalizing this proposal to allow ASA
holders to voluntarily return allowances. For data elements for which
EPA is not making a confidentiality determination in this action, EPA
will apply the 40 CFR part 2 process for establishing case-by-case
confidentiality determinations. EPA will also follow the aggregation
criteria as finalized in the Allocation Framework Rule.
Two comments discussed EPA's general approach to confidential
information. One commenter suggested that the Agency was proposing a
different standard for determining confidential business information
(CBI) than that used in other programs and encouraged the Agency to
handle confidentiality determinations consistently across the Agency
and its programs and not adjust treatment depending on ASA
applications. Another commenter similarly noted that it is important
for the Agency to protect CBI consistently to ensure that CBI is
afforded appropriate protection from disclosure.
EPA responds that by establishing confidentiality determinations
through this rulemaking, EPA will provide predictability for both
information requesters and entities submitting information to EPA. The
confidentiality determinations are also intended to increase
transparency around this program's implementation. EPA did not propose,
nor is the Agency finalizing, a different standard for the handling of
confidential information related to ASA applications than that used by
the Agency generally across programs. Unless directed otherwise by
statute, EPA uses the same legal review standard for confidentiality
determinations across all Agency programs, whether through rulemaking
or through the Agency's 40 CFR part 2 process. EPA explained at length
this legal standard and its rationale for proposing categorical
confidentiality determinations in the proposed rule. EPA's rationale
remains the same from the proposed rule, and EPA is not reproducing
that rationale in this final rule. In short, through this rulemaking,
submitters are on notice before they submit any information that EPA
has determined that the information identified as not CBI in the
memorandum provided in the docket for this action titled
Confidentiality Determinations for Data Elements in the Application-
specific Allowances Review and Renewal Rule, will not be entitled to
confidential treatment upon submission and may be released by the
Agency without further notice. As a result, for any data element
included in the memorandum and categorized as not CBI, submitters do
not have a reasonable
[[Page 41716]]
expectation that the information will be treated as confidential;
rather, they should have the expectation that the information will be
disclosed.
There may be additional reasons not to release information
determined to not be entitled to confidential treatment, e.g., if it is
personally identifiable information (PII). The Agency will separately
determine whether any data should be withheld from release for reasons
other than business confidentiality before data is released.
A. Data Elements Associated With a Petition To Be Listed as an
Application That Will Receive Application-Specific Allowances
In light of the statutory requirement in subsection (e)(4)(B)(ii)
to make a complete petition available to the public, and consistent
with EPA's commitment to transparency in program implementation, EPA is
finalizing the proposal without change. The Agency will not provide
confidential treatment to, and may release without further process,
petitions submitted under 40 CFR 84.14 in full with limited exception.
EPA will treat as confidential a subset of required elements for which
EPA is finalizing that multiple entities could submit information
individually to EPA, specifically information submitted under 40 CFR
84.14(a)(6), (7), and (8). All other information, including all
information submitted to EPA that does not correspond to a required
element, will be released without further process. EPA did not receive
comments in response to the proposed determinations for data submitted
in a petition. The memorandum to the docket lists each individual
element of a complete petition with an accompanying determination on
whether that element is entitled or not to confidential treatment. EPA
proposed and is finalizing that through this rulemaking, entities are
put on notice of data release in line with the legal standard
established by the Argus Leader decision and EPA regulations at 40 CFR
part 2, as more fully explained in the proposal. EPA is providing an
express indication to all potential petitioners prior to the time
information is submitted to EPA that EPA will publicly disclose the
information without further process. Therefore, potential future
submitters cannot reasonably expect confidentiality of the information
upon submission, and the information is not entitled to confidential
treatment under Exemption 4.
B. Data Elements Related to Proposed Revisions to Existing Regulations
To maximize program transparency, EPA is finalizing that the Agency
will release data elements corresponding to the following regulatory
revisions: (1) a pool of set-aside allowances for situations that meet
the criteria for unique circumstances related to the propellants in
MDIs application; and (2) the ``date of purchase'' requirement for a
RACA. EPA did not receive comments on these elements which the Agency
proposed that it would intend to release. The memorandum to the docket
lists each individual element related to these regulatory revisions
with an accompanying determination on whether that element would be
entitled or not to confidential treatment. EPA proposed and is
finalizing those individual determinations through this rulemaking.
Entities reporting this information are put on notice that this data
may be released without further notice in line with the legal standard
established in the Argus Leader decision and EPA regulations at 40 CFR
part 2. Therefore, potential future submitters cannot reasonably expect
confidentiality of the information upon submission, and the information
is not entitled to confidential treatment under Exemption 4.
EPA proposed and is finalizing determinations through rulemaking
that certain other reported information is entitled to confidential
treatment. EPA proposed and is finalizing that supporting documentation
verifying a need to purchase regulated substances in the present
calendar year for purposes of the set-aside is entitled to confidential
treatment because it is likely to include the type of information that
submitters customarily keep private or closely held. This is also
consistent with the Agency's current approach regarding requests for
ASAs. EPA also proposed and is finalizing determinations that the
following data elements are entitled to confidential treatment: (1)
companies reported total expected amount of HFCs they intend to
purchase in the calendar year; (2) elements reported on the conferral
of MCMEU allowances; and (3) exporters' quarterly reported ITNs. These
data elements constitute the type of information that submitters
customarily keep private or closely held and will be treated as
confidential information consistent with the approach taken in the
Allocation Framework Rule.
One commenter stated that ITN numbers are customarily kept private
or closely held. EPA agrees with the commenter. Furthermore, in the
case of ITNs reported by exporters, it is EPA's understanding that the
ITN, as part of the Electronic Export Information (EEI) contained in
the Automated Export System (AES), is considered confidential by DOC.
This further underpins EPA's final determination in this rulemaking
that ITN numbers reported in quarterly export reports are entitled to
confidential treatment. Additional information on the determinations
for specific data elements associated with the regulatory revisions is
provided in the memorandum in the docket for this action.
C. Data Elements Reported to EPA Related to Production for Export
EPA is finalizing a production for export category of allowances as
described in section VIII. EPA stated in the rule proposal that the
Agency would release several data elements that a ``production for
export'' allowance holder would be required to submit, including: (1)
quantity of allowances expended for each regulated substance; (2)
quantity of each regulated substance produced for export; (3) quantity
of each regulated substance, produced using production for export
allowances, that was exported; (4) quantity of each regulated substance
held in inventory at the end of the quarter; and (5) the country to
which regulated substances, produced using production for export
allowances, were exported. The memorandum to the docket for the
proposed rulemaking listed each individual element EPA proposed related
to the production for export allowances with an accompanying proposed
determination on whether that element would be entitled or not to
confidential treatment. EPA invited comment on this proposed
determination.
Additionally, EPA proposed that the ITNs submitted for all exports
of regulated substances produced using production for export allowances
would be entitled to confidential treatment, under the same rationale
described earlier in this section for the proposed requirement that
exporters report ITNs on a quarterly basis. EPA requested comment on
this proposed determination, including comments on why this information
may not be entitled to confidential treatment.
EPA also proposed that the signed certifications would be entitled
to confidential treatment because it is EPA's understanding that these
certifications could have the potential to reveal confidential business
relationships (i.e., the relationship between the allowance holder,
overseas
[[Page 41717]]
customer, and any intermediaries). EPA requested comment on this
proposed determination, including comments on why this information may
not be entitled to confidential treatment. Specifically, EPA requested
comment on whether the existence of a business relationship between an
HFC producer and customer is information that is customarily closely
held.
In response to these proposed determinations for data related to
production for export, one commenter requested that all elements
related to any reporting and recordkeeping requirements for production
for export allowances be treated as confidential. The commenter stated
that protecting the confidentiality of business relationships and
customers is critical with respect to the names of any intermediaries
and final end users. Additionally, the commenter asserted that CBI
protection is necessary to prevent unfair competitive advantages
resulting from the publication of intermediary and end user
information. The commenter also expressed concern that other HFC
manufacturers in countries where regulations may not yet be in place
would gain a competitive advantage over US manufacturers if CBI
protections are not provided.
EPA responds that at the time of proposal, the Agency had proposed
that certain data elements for which the commenter requested
confidential treatment, i.e., ITNs and the signed certifications,
should be treated as confidential. EPA did not receive comments from
any other entity and in the absence of information demonstrating why it
would be inappropriate to treat these specific elements as
confidential. Therefore, the Agency is finalizing its determination
that ITNs and signed certifications for the production for export
provisions are CBI.
EPA also proposed confidentiality determinations for several other
data elements related to production for export allowances, including:
(1) quantity of allowances expended for each regulated substance; (2)
quantity of each regulated substance produced for export; (3) quantity
of each regulated substance, produced using production for export
allowances, that was exported; (4) quantity of each regulated substance
held in inventory at the end of the quarter; and (5) the country to
which regulated substances, produced using production for export
allowances, were exported. Upon further analysis of the confidentiality
determinations previously finalized in the Allocation Framework Rule,
the Agency has determined that for four of these five elements
confidentiality determinations already exist, specifically
determinations for production and export data. The one exception is the
fourth data element listed at proposal--the quantity of each regulated
substance held in inventory at the end of the quarter. For every other
data element, while production for export allowances is a distinct and
novel category of allowances under the HFC allocation program, the
confidentiality determinations finalized in the Allocation Framework
Rule cover all production and export of HFCs. Therefore, under the
existing determinations for production data reported to EPA, the
quantity of allowances expended for each regulated substance and the
quantity of each regulated substance produced are not entitled to
confidential treatment. Similarly, consistent with the existing
determinations for export data reported to EPA, the quantity of each
regulated substance that was exported and the country to which
regulated substances were exported are not entitled to confidential
treatment. Because EPA is not finalizing new determinations for these
data elements, any data released on production or export activity would
be aggregated to include all production or export activity for a given
reporting period, without distinction based on type of allowance used.
With respect to the fourth element listed at proposal, which is the
quantity of each regulated substance held in inventory at the end of
the quarter, this is a data element that is not covered under existing
confidentiality determinations. While producers must report on the
quantity of each regulated substance held in inventory, and EPA
previously determined that this information is entitled to confidential
treatment, producers are only required to report inventory on an annual
basis, per 40 CFR 84.31(b)(2)(x). However, in light of the prior
determination that annual inventory reporting is entitled to
confidential treatment, the Agency finds that it is appropriate to
treat the quantity of each regulated substance held in inventory at the
end of each quarter as confidential.
For all other data elements for which the Agency is not finalizing
a confidentiality determination in this rulemaking, EPA will follow the
individualized determination process outlined in 40 CFR part 2 on a
case-by-case basis, as described earlier in section IX. and the
aggregation criteria established in the Allocation Framework Rule.
X. What are the costs and benefits of this action?
This action only results in minor additional costs and benefits
attributable to changes in recordkeeping and reporting requirements,
primarily marginal benefits associated with not renewing ASAs for
defense sprays and the resulting changes in recordkeeping and reporting
costs for the defense sprays application. This rule will not result in
any significant changes to the HFC phasedown program as a whole (i.e.,
the number of allowances that will be issued in total and overall
phasedown schedule remain the same) and will allow the defense sprays
application to remain exempt from the restrictions under the 2023
Technology Transitions Rule. Thus, while EPA considered both the
Allocation Framework Rule and the 2023 Technology Transitions Rule to
be the status quo from which potential incremental costs and benefits
should be evaluated, the rule does not fundamentally alter the analytic
results associated with these prior rulemakings. In the Allocation
Framework Rule, EPA estimated benefits and costs for the HFC phasedown
between 2022 and 2050. Given that some elements in this rule may result
in incremental impacts for a subset of entities, the Agency analyzed
potentially salient costs and benefits considerations associated with
this rulemaking.
The analysis described in this section is intended to provide the
public with information on the relevant costs and benefits of this
action and has been completed to comply with relevant Executive Orders.
The analysis does not form a basis or rationale for any of the actions
EPA is finalizing in this rulemaking. As explained in section II.B.,
the AIM Act requires EPA to review applications receiving allocations
pursuant to subsection (e)(4)(B)(iv) at least every five years and to
renew eligibility based on two statutory criteria. Specifically, EPA
must renew ASA eligibility for an application when the Agency
determines there is (1) no safe or technically achievable substitute
available during the applicable period and (2) an insufficient supply
of the HFC(s) used in the application that can be secured from chemical
manufacturers to accommodate the application. Without finalization of
this rule, none of the applications listed in the AIM Act and currently
receiving ASAs would continue to receive priority access to allowances
beyond calendar year 2025.
For entities in the five applications with renewed eligibility for
ASAs, there
[[Page 41718]]
are no costs or benefits in addition to those already accounted for in
the Allocation Framework Rule; when EPA originally established
eligibility for ASAs, the Agency did not presuppose that applications
would lose that eligibility for analytical purposes. Furthermore, per
subsection (i)(7)(B)(i) of the AIM Act, the Technology Transitions
provisions codified at 40 CFR part 84, subpart B are not currently
applicable to any application receiving an ASA (40 CFR 84.56(a)(2)). As
such, they are not subject to the restrictions on the manufacture or
import at 40 CFR 84.54(a), sale and distribution at 40 CFR 84.54(b), or
installation at 40 CFR 84.54(c). The labeling, reporting, and
recordkeeping requirements are also not applicable.
EPA does not anticipate that there are marginal costs associated
with entities in the defense spray application no longer being able to
procure HFCs using ASAs. The decision to not renew the defense sprays
application is based on analysis that the requirement described in
subclause (II) of clause (i) are not met in accordance with the
requirements of subsection (e)(4)(B) of the AIM Act (i.e., the supply
of the HFC used by the defense spray application is not insufficient to
accommodate the application beginning January 1, 2026). The Agency is
making the determination that the supply of the regulated substance
that manufacturers and users are capable of securing from chemical
manufacturers is not insufficient to accommodate the application.
Entities using HFCs in the defense spray application are able to source
HFCs from the open market, subject to general restrictions under 40 CFR
part 84. Therefore, EPA anticipates that there would be no cost
associated with losing eligibility to receive ASAs.
EPA acknowledges that the ability to receive ASAs and confer these
allowances to HFC importers/producers as opposed to buying HFCs on the
open market may theoretically be of value in cases where it insulates
an entity in part from market risk related to availability or price
increases. However, for those entities where EPA is making the
determination not to renew ASA eligibility, EPA does not anticipate the
price or availability of HFCs would differ on the open market.
Further, EPA's determination to not renew an application's
eligibility for ASAs does not alter the overall amount of allowed
production and consumption or the benefits associated with the
phasedown. EPA notes that there are marginal benefits due to avoided
recordkeeping and reporting costs required of an ASA holder (e.g.,
biannual report submissions, conferral requests). The annual
recordkeeping and reporting cost burden for an ASA holder is estimated
to be $25,781 per entity. While only six entities have ever requested
ASAs, EPA is aware of nine entities that manufacture defense sprays in
the United States. All nine companies, as well as any additional
companies that begin manufacturing defense sprays in the United States
in the future, would have been eligible for ASAs if EPA renewed the
application. For analytical purposes, the Agency is assuming six would
request ASAs in each year consistent with the total number of entities
that have requested ASAs to date. Assuming burden relief for six
defense spray manufacturers would collectively avoid $154,686 annually
and $773,430 over the five-year renewal period in recordkeeping and
reporting costs for ASA holders.
There may be marginal benefits for general pool allowance holders
(i.e., production and consumption allowance holders) due to the defense
sprays application no longer being eligible for ASAs. However, EPA
notes that that the number of additional allowances allocated to the
general pool, and not allocated to the defense spray application,
totals well under one percent of consumption allowances in a given
year. For example, for calendar year 2025 allowances, defense spray
companies were allocated 209,254.5 allowances collectively, which is
equivalent to approximately 0.1% of consumption allowances issued.
Because general pool allowances are allocated based on market share
according to the methodology at 40 CFR 84.9 and 84.11, this effectively
means each general pool allowance holder would be allocated
approximately 0.1% more in allowances. While this may represent a
marginal benefit to specific allowance holders, EPA notes that--as
these benefits constitute a transfer from one group to another and do
not change the total number of allowances issued--there is no net
benefit. EPA has not endeavored to quantify the value of this marginal
benefit for individual allowance holders and notes that it would likely
differ from company to company.
EPA analyzed whether there are marginal costs or benefits
associated with codifying a petition process for requesting the
designation of an application as eligible for ASAs. EPA assumes for
analytical purposes that the Agency will receive one petition over the
five-year period with five entities in the application. EPA estimates a
cost per entity of $13,139 and a total cost of $65,695.
As detailed in section VII. of the preamble, EPA is also finalizing
updates to the recordkeeping and reporting requirements originally
established in the Allocation Framework Rule and the 2024 Allocation
Rule. While some of these updates represent clarifications of the
existing requirements, others represent additional requirements that
would impact the total anticipated compliance costs of this rule.
Section VIII. of the preamble details EPA's determination to authorize
an entity (i.e., Iofina) to produce for export for application-specific
uses abroad. There are likely benefits that Iofina would experience
from receiving additional production for export allowances, such as the
ability to increase its production of HFC-41 for export to support
foreign semiconductor manufacturers. The Agency does not have
sufficient information--such as the additional quantity that might be
produced, the profits that might accrue from that production, and the
related effects on employment at the facility--to quantify the effect.
As a result of the regulatory changes listed above, EPA estimates that,
starting in 2026, recordkeeping and reporting costs across all entities
regulated under the HFC Allocation requirements will increase by
approximately $10,611 annually relative to the previous estimates
reflected in the 2024 Allocation Rule.
Overall, EPA estimates this final rule will result in an annual net
cost savings of $130,936. More details on recordkeeping and reporting
costs can be found in the Information Collection Request (ICR) in the
docket for this rulemaking.
XI. Judicial Review
The AIM Act provides that certain sections of the CAA ``shall apply
to'' the AIM Act and actions ``promulgated by the Administrator of
[EPA] pursuant to [the AIM Act] as though [the AIM Act] were expressly
included in title VI of [the CAA],'' (42 U.S.C. 7675(k)(1)(C)). Among
the applicable sections of the CAA is section 307, which includes
provisions on judicial review. Section 307(b)(1) provides, in part,
that petitions for review must only be filed in the United States Court
of Appeals for the District of Columbia Circuit: (i) when the agency
action consists of ``nationally applicable regulations promulgated, or
final actions taken, by the Administrator,'' or (ii) when such action
is locally or regionally applicable, but ``such action is based on a
determination of nationwide scope or effect and if in taking such
action the Administrator finds and publishes that
[[Page 41719]]
such action is based on such a determination.''
The final action herein noticed is ``nationally applicable'' within
the meaning of CAA section 307(b)(1). The AIM Act imposes a national
cap on the total number of allowances available for each year for all
entities nationwide (42 U.S.C. 7675(e)(2)(B)-(D)). In this rulemaking,
EPA is not adjusting the baseline from which that total number of
allowances is derived. The action noticed herein establishes a
methodology to distribute that finite set of allowances in a nationally
applicable rule. EPA is also establishing other nationally applicable
regulations for reporting, recordkeeping, and other implementation
measures.
For these reasons, this final action is nationally applicable.
Under CAA section 307(b)(1), petitions for judicial review of this
action must be filed in the United States Court of Appeals for the
District of Columbia Circuit by October 27, 2025.
XII. Statutory and Executive Order Reviews
Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This action is a 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. EPA prepared an economic analysis of the potential costs and
benefits associated with this action which can be found in section X.
of this preamble, titled, ``What are the costs and benefits of this
action?''. The costs and benefits of this rule are estimated in the
table below:
Table 2--Summary of Costs and Benefits
------------------------------------------------------------------------
Annual costs
Activity (cost savings)
------------------------------------------------------------------------
ASA recordkeeping and reporting burden relief for $(154,686)
entities no longer eligible for ASAs...................
Petitions requesting eligibility for ASAs............... 13,139
Other regulatory revisions.............................. 10,611
---------------
Total............................................... (130,936)
------------------------------------------------------------------------
B. Executive Order 14192: Unleashing Prosperity Through Deregulation
This action is considered an Executive Order 14192 deregulatory
action. Details on the estimated cost savings of this final rule can be
found in EPA's analysis of the potential costs and benefits associated
with this action.
C. Paperwork Reduction Act (PRA)
The information collection activities in this rule, along with the
full ICR titled ``Recordkeeping and Reporting of the Hydrofluorocarbon
Allowance Allocation and Trading Program,'' will be submitted for
approval to OMB under the PRA. The ICR document that EPA prepared
modifies and renews the existing ICR and has been assigned EPA ICR
number 2685.06. You can find a copy of the ICR in the docket for this
rule, and it is briefly summarized here. The new information collection
requirements finalized in this rule are not enforceable until OMB
approves them.
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 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 to
calculate allowances, to track the movement of HFCs through commerce,
and to require auditing. Collecting these data elements allows EPA to
confirm that the entity has not exceeded its allowed level of
production and consumption and that the aggregated annual quantity of
production and consumption in the United States does not exceed the cap
established in the AIM Act. As described above in this preamble, EPA is
establishing a procedural process for submitting a petition to
designate a new application as eligible for priority access to
allowances; reporting and recordkeeping requirements relevant for
narrow revisions to the methodology used to allocate allowances to ASA
holders for calendar years 2026 and beyond; and other limited reporting
and recordkeeping revisions, such as authorizing an entity to produce
regulated substances for export.
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
Allocation Framework Rule and the confidentiality determinations being
finalized in this rule as described in section IX. of this preamble.
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.
Respondents/affected entities: Respondents and affected entities
will be individuals or entities that produce, import, export, reclaim,
recycle for use as a fire suppressant, distribute, destroy, transform,
use HFCs as a process agent, or produce for export, certain HFCs that
are defined as a regulated substance under the AIM Act. Respondents and
affected entities will also be any entity issued or conferred ASAs.
Respondent's obligation to respond: Mandatory (AIM Act).
Estimated number of respondents: 342.
Frequency of response: Quarterly, biannual, annual, and as needed
depending on the nature of the report.
Total estimated burden: 36,248 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
Total estimated cost: $5,643,734 (per year), includes $1,063,204
annualized capital or operation & maintenance costs.
[[Page 41720]]
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. When OMB approves
this ICR renewal and modification, the Agency will announce that
approval in the Federal Register and publish a technical amendment to
40 CFR part 9 to display the OMB control number for the approved
information collection activities contained in the existing ICR and as
modified in this final rule.
D. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, EPA concludes that the impact of concern for
this rule is any significant adverse economic impact on small entities
and that the Agency is certifying that this rule will not have a
significant economic impact on a substantial number of small entities
because the rule has a minor burden on a subset of the small entities
subject to the rule. However, this rule relieves the overall burden for
small entities subject to the rule, and all entities expected to
experience cost savings as a result of this rule are small entities.
The small entities subject to the requirements of this action are
entities that hold HFC allowance allocations (including production,
consumption, and application-specific allowances), entities that
applied for but did not receive set-aside allowances in 2022, entities
that previously imported HFCs between 2017 and 2019 but did not receive
2022 allowance allocations, and entities that recover and reprocess
HFCs. Details of this analysis are presented in Economic Impact
Screening Analysis for Phasedown of Hydrofluorocarbons: Review and
Renewal of Eligibility for Application-specific Allowances, which is
available in the docket for this action (EPA-HQ-OAR-2024-0196). Certain
small entities will have reduced regulatory burden due to EPA excluding
defense sprays from Technology Transitions restrictions that would
otherwise apply under the current regulation (i.e., allowing for
continued use of HFC-134a in defense sprays) and by removing
recordkeeping and reporting requirements for those entities, while
other small entities may incur negligible reporting costs. The reduced
regulatory burden for entities in the defense spray application
contribute to EPA's finding that this rule will result in an annual net
cost savings. We have therefore concluded that this action will have
minor to no net regulatory burden for all directly regulated small
entities.
E. Unfunded Mandates Reform Act (UMRA)
This action does not contain any unfunded mandate of $100 million
(adjusted annually for inflation) or more (in 1995 dollars) 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 and the costs involved
in this action are estimated not to exceed $183 million in 2023$ ($100
million in 1995$ adjusted for inflation using the gross domestic
product (GDP) implicit price deflator) or more in any one year.
F. 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.
G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have Tribal implications as specified in
Executive Order 13175. EPA is not aware of Tribal businesses engaged in
activities that would be directly affected by this action. Based on the
Agency's assessments, EPA also does not believe that potential effects,
even if direct, would be substantial. Accordingly, this action 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.
H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive Order.
Therefore, this action is not subject to Executive Order 13045
because it does not concern an environmental health risk or safety
risk. Since this action does not concern human health, EPA's Policy on
Children's Health also does not apply.
I. Executive Order 13211: Actions Concerning Regulations 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.
J. National Technology Transfer and Advancement Act
This rulemaking does not involve technical standards.
K. Congressional Review Act (CRA)
This action is subject to the CRA, and EPA will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. This action is not a ``major rule'' as defined in 5
U.S.C. 804(2).
List of Subjects in 40 CFR Part 84
Environmental protection, Administrative practice and procedure,
Air pollution control, Chemicals, Imports, Reporting and recordkeeping
requirements.
Lee Zeldin,
Administrator.
For the reasons set out in the preamble, 40 CFR part 84 is amended
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--Production and Consumption Controls
0
2. Amend Sec. 84.3 by adding the definitions ``healthcare system
need'', ``responsible corporate officer'', and ``responsible official''
in alphabetical order to read as follows:
[[Page 41721]]
Sec. 84.3 Definitions.
* * * * *
Healthcare system need means circumstances where an increase in
demand for MDIs used to treat asthma, chronic obstructive pulmonary
disease, and other respiratory diseases may occur because of a change
in market conditions that otherwise would not be included in calculated
rates of growth.
* * * * *
Responsible corporate officer means a person who is authorized by
the regulated entity to make representations on behalf of, or obligate
the company as ultimately responsible for, any activity regulated under
40 CFR part 84, subpart A.
Responsible official means a person who is authorized by the
regulated entity to make representations on behalf of, or obligate the
company as ultimately responsible for, any activity regulated under 40
CFR part 84, subpart A.
* * * * *
0
3. Amend Sec. 84.5 by:
0
a. In paragraph (a)(1), adding ``, unexpended production for export
allowances,'' after ``unexpended production allowances and consumption
allowances''.
0
b. Revising paragraph (c)(2).
0
c. In paragraph (d), adding ``production for export,'' after ``All
production, consumption,'' and adding ``production for export,'' after
``confer a production, consumption,''.
0
d. Revising paragraph (f).
0
e. Adding paragraph (k).
The addition and revisions read as follows:
Sec. 84.5 Prohibitions relating to regulated substances.
* * * * *
(c) * * *
(2) No person may use a regulated substance produced or imported by
expending application-specific allowances for any purpose other than
those for which the application-specific allowance was allocated, and
as set forth in this paragraph (c). Application-specific allowances are
apportioned to a person under Sec. Sec. 84.13 and 84.15 for the
production or import of regulated substances solely for the individual
application listed on the allowance.
* * * * *
(f) Sale and distribution. No person may sell or distribute, or
offer for sale or distribution, any regulated substance that was
produced or imported in violation of paragraphs (a) through (d) of this
section, except for such actions needed to re-export the regulated
substance or if the regulated substance was purchased at a government
auction authorized by the United States Customs and Border Protection
and consumption allowances were expended in the requisite quantity to
cover the regulated substances at issue. Every kilogram of a regulated
substance sold or distributed, or offered for sale or distribution, in
contravention of this paragraph constitutes a separate violation of
this subpart. Sale or distribution, or offer for sale or distribution,
of less than one kilogram of regulated substance in contravention of
this paragraph constitutes a separate violation of this subpart.
* * * * *
(k) Production for export allowances. No person may use a regulated
substance produced by expending production for export allowances for
any purpose other than those for which the production for export
allowance was allocated, aligning with the applications as listed in
Sec. 84.13(a).
0
4. Amend Sec. 84.9 by:
0
a. In paragraph (b)(3), adding ``and 3,000.0 MTEVe allowances to be
allocated pursuant to Sec. 84.18,'' after ``Sec. 84.13''.
0
b. Redesignating paragraph (c) as paragraph (d).
0
c. Adding paragraph (c).
The addition reads as follows:
Sec. 84.9 Allocation of calendar-year production allowances.
* * * * *
(c) Starting with the allocation of 2026 calendar year allowances,
the relevant Agency official will withhold 1,000,000 MTEVe of
production allowances. If there are remaining production allowances
after distribution from the set-aside under Sec. 84.15, the relevant
agency official will distribute such allowances pro rata to all
entities receiving production allowances in that calendar year.
* * * * *
0
5. Amend Sec. 84.11 by:
0
a. Redesignating paragraph (c) as paragraph (d).
0
b. Adding paragraph (c).
The addition reads as follows:
Sec. 84.11 Allocation of calendar-year consumption allowances.
* * * * *
(c) Starting with the allocation of 2026 calendar year allowances,
the relevant Agency official will withhold 1,000,000 MTEVe of
consumption allowances. If there are remaining consumption allowances
after distribution from the set-aside under Sec. 84.15, the relevant
agency official will distribute such allowances to all entities
receiving consumption allowances in that calendar year.
* * * * *
0
6. Amend Sec. 84.13 by:
0
a. In paragraph (a), replacing ``2022, 2023, 2024, and 2025'' with ``as
designated''.
0
b. In paragraph (a)(1), adding ``for calendar years 2022-2030'' after
``metered dose inhalers''.
0
c. In paragraph (a)(2), adding ``for calendar years 2022-2025'' after
``defense sprays''.
0
d. In paragraph (a)(3), adding ``for calendar years 2022-2030'' after
``trailer use''.
0
e. In paragraph (a)(4), adding ``for calendar years 2022-2030'' after
``semiconductor manufacturing sector''.
0
f. In paragraph (a)(5), replacing ``; and'' with ``for calendar years
2022-2030;''.
0
g. In paragraph (a)(6), replacing ``.'' with ``for calendar years 2022-
2030; and''.
0
h. Adding paragraph (a)(7).
0
i. In paragraph (b)(1), adding ``, including supporting documentation
that verifies this need'' after the phrase ``this section'' in the
first sentence.
0
j. In paragraph (b)(1)(ii) delete ``or'' after ``facility or
facilities;''.
0
k. In paragraph (b)(1)(iii), replacing ``A global pandemic or other
public health emergency that increases'' with ``A global pandemic,
other public health emergency, or other healthcare system needs related
to increased'' and replacing ``.'' with ``; and''.
0
l. Adding paragraph (b)(1)(iv).
0
m. Adding paragraph (b)(2).
0
n. Redesignating paragraph (c)(1) as paragraph (c)(5).
0
o. Adding paragraph (c)(1).
0
p. In paragraph (c)(2), replacing ``; and'' with ``;''.
0
q. Redesignating paragraph (c)(3) as paragraph (c)(7).
0
r. Adding paragraphs (c)(3) through (4).
0
s. In the newly designated paragraph (c)(5), replacing ``Taking the
higher of the use of regulated substances by the company in the
specific application in the prior year multiplied by:'' with ``For
entities that do not meet any of the criteria in paragraph (4),
multiplying the use of regulated substances by the company in the
specific application in the prior year by the higher of:''.
0
t. Adding paragraph (c)(6).
0
u. In the newly designated paragraph (c)(7), replacing ``.'' with ``;
and''.
0
v. Adding paragraph (c)(8).
0
w. Removing paragraph (e).
0
x. Redesignating paragraphs (f) through (h) as paragraphs (e) through
(g), respectively.
[[Page 41722]]
The additions read as follows:
Sec. 84.13 Allocation of application-specific allowances.
(a) * * *
(7) For any application designated as eligible for application-
specific allowances pursuant to Sec. 84.14, but in all instances for
no longer than calendar year 2030.
(b) * * *
(1) * * *
(iv) Buildup of a stockpile of a specific regulated substance in
the event of a production cessation. Requests for this unique
circumstances must include: a letter from the applicant's supplier
signed by a responsible corporate officer stating that the supplier is
ceasing all production of the regulated substance at issue within three
years; certification and supporting documentation that the applicant
has regulatory requirements beyond this part that limit ability to
switch suppliers or there are no other suppliers that can supply the
regulated substance in the quantity needed; and evidence that the
applicant has a restricted supply chain for regulated substances.
Applicants must specify: quantity (in kilograms) they intend to
purchase of each HFC; the year(s) of intended purchase; and description
of stockpile plan.
(2) Entities must provide an estimate of the total quantity of
regulated substances they expect to purchase in the following calendar
year based on their expected eligibility for allowances.
(c) * * *
(1) Accounting for verified changes in inventory and quantities of
regulated substances acquired (excluding amounts conveyed or sold) in
calculating use, except for applications for mission-critical military
end uses;
* * * * *
(3) Excluding quantities reported under Sec. 84.31(h)(1)(x) and
(xi) in calculating growth rates and use amounts;
(4) Allocating allowances equivalent to the highest verified use
amount measured in exchange value equivalent from the prior three years
for entities that meet any of the following criteria:
(i) Entity purchased equal to or less than 100 kilograms of
regulated substances in at least one of the last three years, and the
average growth rate of use for the company over the past three years
calculated under subparagraph (7)(i) is equal to or greater than 200
percent;
(ii) Entity has a Year 3 use amount that is less than or equal to
33 percent of its Year 2 use;
(iii) Entity had zero purchases or use in one of the last three
years for reasons other than newly using regulated substances; or
(iv) Entity purchased equal to or less than 100 kilograms of
regulated substances in each of the past three years;
* * * * *
(6) For an entity operating in the etching of semiconductor
material or wafers and the cleaning of chemical vapor deposition
chambers within the semiconductor manufacturing application, add 10
percent of the quantity derived pursuant to paragraphs 1 through 5;
* * * * *
(8) In all instances, using the amount reported in paragraph (b)(2)
if it is less than the quantity otherwise determined under this
paragraph.
* * * * *
0
7. Add Sec. 84.14 to read as follows:
Sec. 84.14 Petition for designation of an application as eligible for
application-specific allowances.
(a) Petitions filed pursuant to 42 U.S.C. 7675(e)(4)(B)(ii)
requesting the designation of an application as eligible for
application-specific allowances must include:
(1) A description of the application, including an explanation of
what the application is, what purpose or function it achieves, and what
populations or commercial products benefit from the application;
(2) A list of regulated substance(s) and description of their
use(s) in the application and an explanation as to why regulated
substances are required in the application;
(3) Evidence that no safe or technically achievable substitute,
including not-in-kind technologies, is or is expected to be available,
and that the petitioner has conducted research to evaluate substitutes
for the regulated substance(s);
(4) Evidence that supply of the regulated substance(s) used in the
application is insufficient to accommodate the application;
(5) A signed certification from a responsible corporate officer at
the requesting entity that the application cannot use recovered and
reprocessed regulated substance in conjunction with or in place of
virgin regulated substance, either due to demonstrated lack of
technical achievability or insufficient supply, and an explanation and
evidence documenting why recovered and reprocessed regulated substance
cannot be used for the application;
(6) Total quantity (in kilograms) of all regulated substances
acquired and used by each individual entity submitting the petition for
use in the application specified in the petition in each of the
previous three years, including records documenting that quantity;
(7) The name of the entity or entities supplying regulated
substances and contact information for those suppliers over the past
three years;
(8) Total quantity (in kilograms) of each regulated substance held
in inventory for use in the application specified in the petition by
each entity submitting the petition as of the date the petition is
submitted;
(9) An estimate of the total quantity of regulated substances the
petitioner expects to purchase for use in the application specified in
the petition in the first year it would be eligible for ASAs;
(10) Data on the proportion of the overall cost of the product or
system that reflects the cost of regulated substances for each entity;
(11) Historic and projected sales for the product or system for
each entity;
(12) Evidence of research into design changes to decrease the
amount of regulated substance used in the product or system;
(13) An explanation regarding whether the use of the regulated
substance(s) is necessary for the health, safety, or is critical for
the functioning of society (encompassing cultural and intellectual
aspects);
(14) An explanation regarding steps taken to minimize the use of
the regulated substance and any associated emission of the regulated
substance(s); and
(15) Information on regulatory restrictions related to possible
alternatives and substitutes.
(b) If the petition does not include the required information
listed in paragraph (a), the petition will be deemed incomplete, and
EPA will notify the entity submitting the petition. The Agency will not
consider the petition until it is complete.
(c) In the event that an application becomes eligible to receive
application-specific allowances:
(1) EPA will allocate allowances to entities in a new application
in accordance with Sec. 84.13; and
(2) A new application would be eligible to receive application-
specific allowances for no longer than the latest calendar year
included in Sec. 84.13(a).
0
8. Amend Sec. 84.15 by adding paragraph (h) to read as follows:
Sec. 84.15 Set-aside of application-specific allowances, production
allowances, and consumption allowances.
* * * * *
(h) Consumption and production allowances from Sec. 84.9(c) and
Sec. 84.11(c)
[[Page 41723]]
are available in the form of application-specific allowances to
entities that request them no later than April 30 of the calendar year
in which the allowances may be expended that:
(1) Qualify for application-specific allowances under Sec. 84.13;
(2) Provide supporting documentation that verify a need to purchase
regulated substances in the present calendar year beyond what is
reflected by the rates of growth calculated in Sec. 84.13(c)(1);
(3) Provide the total quantities (in kg) of regulated substances
held in inventory as of the date the application is submitted,
including documentation to verify this quantity (this includes zero
quantities), and an explanation of why that inventory, if available,
will not be sufficient to accommodate this increased demand;
(4) Are facing a situation that qualifies as a unique circumstance
as defined in Sec. 84.13(b)(iii); and
(5) Demonstrate to the satisfaction of the relevant Agency official
that the situation described in subparagraph (3) was unknowable at the
time the entity made its request for application-specific allowances
pursuant to Sec. 84.13(b).
0
9. Amend Sec. 84.17 by:
0
a. In the introductory paragraph, adding ``, except for the export of
regulated substances produced with a production for export allowance''
after ``a foreign country in accordance with this section''.
0
b. Revising paragraph (a)(5).
The revision reads as follows:
Sec. 84.17 Availability of additional consumption allowances.
* * * * *
(a) * * *
(5) The source of the regulated substances and whether the date
purchased was before or after January 1, 2022;
* * * * *
0
10. Add Sec. 84.18 to read as follows:
Sec. 84.18 Authorization of production for export allowances.
(a) EPA will allocate 3,000.0 MTEVe of production for export
allowances to Iofina Chemical by October 1 of the calendar year prior
to the year in which the allowances may be used for calendar years
2026, 2027, 2028, 2029, and 2030.
(b) Production for export allowances cannot be transferred.
(c) Any regulated substances produced with production for export
allowances must be exported in the same calendar year it was produced.
0
11. Amend Sec. 84.31 by:
0
a. In the introductory text of paragraph (a), removing the phrase ``in
the six applications listed in subsection (e)(4)(B)(iv) of the AIM
Act'';
0
b. In paragraph (b)(2)(ix), removing ``and'' after ``those listed
applications;'';
0
c. Redesignating paragraph (b)(2)(x) as paragraph (b)(2)(xi);
0
d. Adding paragraph (b)(2)(x);
0
e. Redesignating paragraphs (c)(1)(v) through (c)(1)(ix) as paragraphs
(c)(1)(vi) through (c)(1)(x), respectively;
0
f. Adding paragraph (c)(1)(v);
0
g. Redesignating paragraphs (d)(1)(vii) and (d)(1)(viii) as paragraphs
(d)(1)(viii) and (d)(1)(ix), respectively;
0
h. Adding paragraph (d)(1)(vii);
0
i. In paragraph (h)(1)(i), adding ``, including a copy of the sales
records, invoices, or other records documenting that quantity'' after
the word ``months'';
0
j. In paragraph (h)(1)(ii), adding ``, including a copy of the sales
records, invoices, or other records documenting that quantity'' after
the word ``months'';
0
k. In paragraph (h)(1)(iii), adding ``, including a copy of the sales
records, invoices, or other records documenting that quantity'' after
the parenthetical ``(i.e., from the open market)'';
0
l. In paragraph (h)(1)(iv), adding ``, with separate reporting on any
inventory of stockpiled HFCs acquired pursuant to Sec.
84.13(b)(1)(iv), including a copy of inventory records documenting that
quantity if said quantity is greater than zero'' after the word
``use'';
0
m. In paragraph (h)(1)(viii), removing the last ``and'' after the
phrase ``additional need'';
0
n. In paragraph (h)(1)(ix), replacing ``.'' with ``;'';
0
o. Adding paragraphs (h)(1)(x);
0
p. Adding paragraph (h)(1)(xi);
0
q. In paragraph (h)(2)(iv), adding ``, including a copy of inventory
records documenting that quantity if said quantity is greater than
zero'' after the phrase ``current year'';
0
r. In the introductory text of paragraph (h)(4), striking out ``,
except for the conferral of allowances for mission-critical military
end uses,'';
0
s. In paragraph (h)(4)(v), removing ``and'' after ``submitted to
EPA;'';
0
t. In paragraph (h)(4)(vi), replacing ``.'' with ``; and'';
0
u. Adding paragraph (h)(4)(vii);
0
v. In paragraph (h)(7)(i), replacing ``annual'' with ``biannual'';
0
w. Redesignating paragraphs (h)(7)(iii) through (h)(7)(vi) as
paragraphs (h)(7)(iv) through (h)(7)(vii), respectively;
0
x. Adding paragraph (h)(7)(iii);
0
y. Redesignating paragraph (l) as paragraph (n); and
0
z. Adding paragraph (l) and (m).
The additions read as follows:
Sec. 84.31 Recordkeeping and reporting.
* * * * *
(b) * * *
(2) * * *
(x) The conferral certificate number, generated by the Department
of Defense, for any regulated substances produced using application-
specific allowances for mission-critical military end uses; and
* * * * *
(c) * * *
(1) * * *
(v) The conferral certificate number, generated by the Department
of Defense, for any regulated substances imported using application-
specific allowances for mission-critical military end uses;
* * * * *
(d) * * *
(1) * * *
(vii) Internal Transaction Numbers for all shipments, except
shipments where an exemption from the requirements for the filing of
Electronic Export Information (EEI) is provided in 15 CFR part 30,
subpart D;
* * * * *
(h) * * *
(1) * * *
(x) If allowances are allocated for a unique circumstance under
Sec. 84.13(b)(1)(v), the quantity (in kilograms) of each regulated
substance purchased with the intent to build inventory during the prior
six-month period, including a copy of records documenting that
quantity; and
(xi) The quantity (in kilograms) of each regulated substance that
was sold, returned, or otherwise conveyed to another entity during the
previous six months, excluding heels as defined in Sec. 84.3,
including a copy of records documenting that quantity.
* * * * *
(4) * * *
(vii) For the conferral of allowances for mission-critical military
end uses, a conferral certificate number generated by the Department of
Defense.
* * * * *
(7) * * *
(iii) A copy of confirmation notices when conferring allowances for
application-specific use;
* * * * *
(l) Holders of production for export allowances. Any person
allocated production for export allowances must comply with the
following recordkeeping and reporting requirements:
(1) Quarterly reporting. Within 45 days after the end of each
quarter, each holder of production for export allowances must submit to
the relevant Agency official a report containing the following
information:
[[Page 41724]]
(i) The quantity (in exchange value equivalent) of production for
export allowances expended for each regulated substance and the
quantity (in kilograms) of each regulated substance produced for
export;
(ii) The quantity (in kilograms) of each regulated substance
produced using production for export allowances that was exported;
(iii) The quantity (in kilograms) of each regulated substance
produced with production for export allowances held in inventory at the
end of the quarter;
(iv) Internal Transaction Numbers for all exports of regulated
substances produced with production for export allowances;
(v) The country or countries to which regulated substances produced
using production for export allowances were exported
(2) Annual reporting. Within 45 days after the end of the fourth
quarter, each holder of production for export allowances must submit to
the relevant Agency official a report containing the following
information:
(i) In instances where the regulated HFCs produced using production
for export allowances are sold directly to final foreign users, signed
certifications by a responsible corporate officer from all foreign
customers attesting that any regulated substances produced using
production for export allowances will only be used in an application as
listed in Sec. 84.13(a). Each certification must include the name and
address of the foreign entity, and a contact person's name, email
address, and phone number;
(ii) In instances where the regulated HFCs produced using
production for export allowances are held at an intermediary prior to
receipt by final foreign users, signed certifications by a responsible
corporate officer from the intermediary attesting that any regulated
substances produced using production for export allowances will only be
used in an application as listed in Sec. 84.13(a). Each certification
must include the name and address of the foreign entity, and a contact
person's name, email address, and phone number; and
(iii) A description of how the use identified in the signed
certifications from either the final foreign user or intermediary as
appropriate, provided pursuant to paragraph (i) aligns with the
applications as listed in Sec. 84.13(a).
(3) Recordkeeping. Entities who receive production for export
allowances must maintain the following records for three years:
(i) A copy of all certifications reported pursuant to paragraph
(2)(i); and
(ii) Records demonstrating due diligence undertaken to verify and
ensure that all regulated substances produced with production for
export allowances and exported are being used in an application as
listed in Sec. 84.13(a).
(m) Purchasers of HFCs at a government auction. Any entity
purchasing regulated substances at a government auction authorized by
U.S. Customs and Border Protection must report such purchase to EPA as
if they were an import consistent with the applicable provisions under
this section, except for the following adjustments.
(i) Quarterly reporting. The date that the regulated substances
were released to the purchaser by U.S. Customs and Border Protection or
an authorized agent acting consistent with direction from U.S. Customs
and Border Protection must be reported as the date on which the
regulated substances were imported for purposes of paragraph (c)(1)(v).
Unless otherwise unavailable, all requirements of paragraph (c)(1) must
be reported to EPA. If a data element is unavailable, the auction
purchaser must contact EPA and state that fact in writing by the time
they make their filed report.
(ii) Recordkeeping. In addition to the records specified in
paragraph (c)(2), the auction purchaser must maintain records of the
auction purchase, including the accepted bid, confirmation of payment,
certification by the entity that they expended allowances, container
composition testing to verify the regulated substances contained within
the cylinder, and all other final documentation of the auction
purchase. Unless otherwise unavailable, all requirements of paragraph
(c)(2) must be met. If a data element is unavailable, the auction
purchaser must contact EPA and state that fact in writing by the time
they make their filed report.
(iii) Advance notification. The auction purchaser must report the
information specified in paragraph (c)(7) electronically in a format
specified by EPA within 30 calendar days and prior to the HFCs entering
U.S. commerce. The requirement in paragraph (c)(7)(xvi) does not apply
if a certificate of analysis is not available at the time of submitting
the information in paragraph (c)(7). The entity must complete all
required sampling and testing required in this subpart prior to sale in
U.S. commerce and maintain such records consistent with 84.31.
* * * * *
Subpart B--Restrictions on the Use of Hydrofluorocarbons
0
12. Amend Sec. 84.54 by:
0
a. In paragraph (a)(16)(i), adding ``, defense sprays as defined in
Sec. 84.3,'' after ``an aerosol solvent.''
0
b. In paragraph (a)(16)(ii), adding ``, except defense sprays as
defined in Sec. 84.3'' after ``150 or greater''.
[FR Doc. 2025-16357 Filed 8-25-25; 8:45 am]
BILLING CODE 6560-50-P