Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export, 78680-78705 [E8-29965]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 73, Number 247 (Tuesday, December 23, 2008)]
[Proposed Rules]
[Pages 78680-78705]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29965]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[EPA-HQ-OAR-2008-0496; FRL-8752-7]
RIN 2060-A076


Protection of Stratospheric Ozone: Adjustments to the Allowance 
System for Controlling HCFC Production, Import, and Export

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to adjust the allowance system for control of 
U.S. consumption and production of

[[Page 78681]]

hydrochlorofluorocarbons (HCFCs) by apportioning baselines and 
allocating production and consumption allowances for several HCFCs for 
which the Agency previously allocated allowances and other HCFCs that 
were not allocated allowances previously, for the control periods 2010-
2014. The HCFC allowance system is part of EPA's Clean Air Act program 
to phase out ozone-depleting substances (ODSs) to protect the 
stratospheric ozone layer. Protection of the stratospheric ozone layer 
helps reduce rates of skin cancer and cataracts, as well as other 
health and ecological effects. The U.S. is obligated under the Montreal 
Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) 
to limit HCFC consumption and production to a specific level and, using 
stepwise reductions, to decrease the specific level culminating in a 
complete HCFC phaseout in 2030. The next major milestone, to occur on 
January 1, 2010, is a 75 percent reduction from the aggregate U.S. HCFC 
baseline for production and consumption. In this action EPA proposes to 
allocate the allowances for 2010-2014 that will ensure compliance with 
the international stepwise reduction, consistent with the 1990 Clean 
Air Act Amendments. In addition, EPA proposes to amend the regulatory 
provisions concerning allowances for HCFC production for developing 
countries' basic domestic needs to be consistent with the September 
2007 adjustments to the Montreal Protocol. Also, the Agency is 
providing its interpretation of a self-effectuating ban on introduction 
into interstate commerce and use of HCFCs contained in section 605(a) 
of the Clean Air Act and proposes to amend existing regulatory 
provisions to facilitate implementation of the statutory requirements.

DATES: Comments must be received on or before February 23, 2009, unless 
a public hearing is requested. If a public hearing is requested, 
comments must then be received on or before March 9, 2009. Any party 
requesting a public hearing must notify the contact listed below under 
FOR FURTHER INFORMATION CONTACT by 5 p.m. Eastern Daylight Time on 
January 2, 2009. If a hearing is held, it will take place on January 7, 
2009 and the comment period will then close on March 9, 2009.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2008-0496, by one of the following methods:
     https://www.regulations.gov: Follow the on-line 
instructions for submitting comments.
     E-mail: a-and-r-Docket@epa.gov.
     Fax: 202-566-1741.
     Mail: Docket , Air and Radiation Docket and 
Information Center, U.S. Environmental Protection Agency, Mail Code: 
6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
     Hand Delivery: Docket  EPA-HQ-OAR-2008-0496 Air 
and Radiation Docket at EPA West, 1301 Constitution Avenue, NW., Room 
B108, Mail Code 6102T, Washington, DC 20460. Such deliveries are only 
accepted during the Docket's normal hours of operation, and special 
arrangements should be made for deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2008-0496. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
https://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI or otherwise protected through www.regulations.gov 
or e-mail. The https://www.regulations.gov Web site is an ``anonymous 
access'' system, which means EPA will not know your identity or contact 
information unless you provide it in the body of your comment. If you 
send an e-mail comment directly to EPA without going through https://
www.regulations.gov your e-mail address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, EPA recommends that you include your name and other contact 
information in the body of your comment and with any disk or CD-ROM you 
submit. If EPA cannot read your comment due to technical difficulties 
and cannot contact you for clarification, EPA may not be able to 
consider your comment. Electronic files should avoid the use of special 
characters, any form of encryption, and be free of any defects or 
viruses. For additional information about EPA's public docket visit the 
EPA Docket Center homepage at https://www.epa.gov/epahome/dockets.htm.

FOR FURTHER INFORMATION CONTACT: Cindy Axinn Newberg, EPA, 
Stratospheric Protection Division, Office of Atmospheric Programs, 
Office of Air and Radiation (6205J), 1200 Pennsylvania Avenue, NW., 
Washington, DC 20460, (202) 343-9729, newberg.cindy@epa.gov.

SUPPLEMENTARY INFORMATION: Under the Montreal Protocol on Substances 
that Deplete the Ozone Layer (Montreal Protocol), as amended, the U.S. 
and other industrialized countries that are Parties to the Protocol 
have agreed to limit production and consumption of 
hydrochlorofluorocarbons (HCFCs), and to phase out production and 
consumption in a step-wise fashion over time, culminating in a general 
phaseout by 2020 while permitting a small amount of HCFC production to 
continue solely for servicing existing appliances until 2030. Title VI 
of the Clean Air Act Amendments of 1990 (CAAA of 1990) also mandates 
restrictions on HCFCs, culminating in a complete production and 
consumption phaseout in 2030. For purposes of both the Montreal 
Protocol and the Clean Air Act, ``consumption'' is defined as 
production plus imports minus exports. Sections 605 and 606 of the 
Clean Air Act authorize EPA to promulgate regulations to manage the 
consumption and production of HCFCs until the terminal phaseout. In 
1993 EPA established a chemical-by-chemical, ``worst-first,'' approach 
to implement the Montreal Protocol's graduated phaseout in overall HCFC 
levels (58 FR 65018). Key concepts in the ``worst-first'' approach 
included ``distinguishing among HCFCs based on their [ozone depletion 
potential (ODP)] and phasing out use in new equipment prior to use for 
servicing existing equipment'' (58 FR 65026). The consumption cap 
became effective in 1996, and HCFC consumption in the U.S. remained 
about 15 percent below the cap for the first two years. In 1998 and 
1999, consumption rose to levels that approached the cap. On January 
21, 2003, EPA established an allowance tracking system for HCFCs (68 FR 
2820), noting at that time that EPA would again pursue a notice-and-
comment rulemaking to implement a 2010 stepwise reduction. EPA 
promulgated minor amendments to these regulations on June 17, 2004 (69 
FR 34024), and July 20, 2006 (71 FR 41163).
    In this action, EPA proposes the next step in the chemical-by-
chemical phaseout the United States uses to meet its international 
obligations. Specifically, EPA proposes for HCFC-141b, HCFC-22, and 
HCFC-142b, to grant specified percentages of the consumption and 
production baselines for the control periods 2010-2014; and for other 
HCFCs to apportion company-by-company consumption and production 
baselines as well as grant

[[Page 78682]]

specified percentages of the consumption and production baselines for 
the control periods 2010-2014. EPA is also proposing to amend the 
provisions for HCFC production allowances to meet the basic domestic 
needs of developing countries. In addition, EPA is proposing regulatory 
changes to complete the implementation of the section 605(a) ban on 
introduction into interstate commerce or use of HCFCs and clarifies its 
interpretation of this Clean Air Act provision.

Abbreviations and Acronyms Used in this Document

CAA--Clean Air Act
CAAA--Clean Air Act Amendments of 1990
CFC--chlorofluorocarbon
EPA--Environmental Protection Agency
HCFC--hydrochlorofluorocarbon
Montreal Protocol--Montreal Protocol on Substances that Deplete the 
Ozone Layer
NPRM--Notice of Proposed Rulemaking
ODP--ozone depletion potential
ODS--ozone-depleting substance
Party--States and regional economic integration organizations that have 
consented to be bound by the Montreal Protocol on Substances that 
Deplete the Ozone Layer
SNAP--Significant New Alternatives Policy
UNEP--United Nations Environment Programme

Tips for Preparing Your Comments

    When submitting comments, remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions--The Agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.

Table of Contents

I. Regulated Entities
II. Background
    A. How Do the Montreal Protocol and Clean Air Act Phase Out 
HCFCs?
    B. What Sections of the Clean Air Act Apply to This Rulemaking?
III. This Proposal
    A. How Does EPA Propose to Issue Production and Consumption 
Allowances for 2010-2014?
    1. What Actions Did EPA Take in the 2003 Allocation Rule?
    2. How Will EPA Allocate 2010-2014 Allowances for HCFC-22 and 
HCFC-142b?
    3. How Should EPA Consider Servicing Needs for Existing 
Equipment?
    4. How Will the Allocated Allowances Appear in the Regulations?
    5. What Other Methods Could Be Used to Determine the Allocation 
for HCFC-22 and HCFC-142b Allowances?
    6. How Important Is HCFC-22 in Determining the Allocation of 
Allowances?
    7. HCFC-22 Allowances for 2010-2014
    8. HCFC-142b Allowances for 2010-2014
    9. How Does the Aggregate for HCFC-22 and HCFC-142b Translate to 
Entity-by-Entity?
    10. Baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    11. What Percentage of the Baseline Will EPA Allocate for HCFC-
123, HCFC-124, HCFC-225ca, and HCFC-225cb for the Control Periods 
2010-2014?
    12. What About Other HCFCs?
    B. Does the Article 5 Allowance Provision Change Given the 
Adjustments to the Montreal Protocol?
    C. How Does EPA Interpret ``Introduce into Interstate Commerce 
or Use?''
IV. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations

I. Regulated Entities

    These proposed amendments will affect the following categories:

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                  Category                     NAICS code       SIC code        Examples of regulated entities
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Chlorofluorocarbon gas manufacturing.......          325120            2869  Chlorodifluoromethane
                                                                              manufacturers;
                                                                              Dichlorofluoroethane
                                                                              manufacturers;
                                                                              Chlorodifluoroethane
                                                                              manufacturers.
Chlorofluorocarbon gas importers...........          325120            2869  Chlorodifluoromethane importers;
                                                                              Dichlorofluoroethane importers;
                                                                              Chlorodifluoroethane importers.
Chlorofluorocarbon gas exporters...........          325120            2869  Chlorodifluoromethane exporters;
                                                                              Dichlorofluoroethane exporters;
                                                                              Chlorodifluoroethane exporters.
Manufacturers of air conditioners and                333415  ..............  Air-Conditioning Equipment and
 refrigerators.                                                               Commercial and Industrial
                                                                              Refrigeration Equipment
                                                                              manufacturers.
Importers of air conditioners and                    333415            3585  Air-Conditioning Equipment and
 refrigerators.                                                               Commercial and Industrial
                                                                              Refrigeration Equipment importers.
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
potentially could be regulated by this action. Other types of entities 
not listed in this table could also be affected. To determine whether 
your facility, company, business organization, or other entity is 
regulated by this action, you should carefully examine these 
regulations. If you have questions regarding the applicability of this 
action to a particular entity, consult the person listed in the FOR 
FURTHER INFORMATION CONTACT section.

II. Background

A. How Do the Montreal Protocol and Clean Air Act Phase Out HCFCs?

    The Montreal Protocol on Substances that Deplete the Ozone Layer is 
the international agreement aimed at reducing and eventually 
eliminating the production and consumption of

[[Page 78683]]

stratospheric ozone-depleting substances. The U.S. was one of the 
original signatories to the 1987 Montreal Protocol and the U.S. 
ratified the Protocol on April 12, 1988. Congress then enacted, and 
President George H.W. Bush signed into law, the Clean Air Act 
Amendments of 1990 (CAAA of 1990), which included Title VI on 
Stratospheric Ozone Protection, codified as 42 U.S.C. Chapter 85, 
Subchapter VI, to ensure that the United States could satisfy its 
obligations under the Montreal Protocol. Title VI includes restrictions 
on production, consumption, and use of ozone-depleting substances that 
are subject to acceleration if ``the Montreal Protocol is modified to 
include a schedule to control or reduce production, consumption, or use 
* * * more rapidly than the applicable schedule'' prescribed by the 
statute. Both the Montreal Protocol and the Clean Air Act define 
consumption as production plus imports minus exports.
    In 1990, as part of the London Amendment to the Montreal Protocol, 
the Parties identified HCFCs as ``transitional substances'' to serve as 
temporary, lower-ODP substitutes for CFCs and other ODSs. EPA similarly 
viewed HCFCs as ``important interim substitutes that will allow for the 
earliest possible phaseout of CFCs and other Class I substances'' \1\ 
(58 FR 65026). In 1992, through the Copenhagen Amendment to the 
Montreal Protocol, the Parties created a detailed phaseout schedule for 
HCFCs beginning with a cap on consumption for industrialized (Article 
2) Parties, a schedule to which the United States adheres. The 
consumption cap for each Article 2 Party was set at 3.1 percent (later 
tightened to 2.8 percent) of a Party's CFC consumption in 1989, plus a 
Party's consumption of HCFCs in 1989 (weighted on an ODP basis). Based 
on this formula, the HCFC consumption cap for the U.S. was 15,240 ODP-
weighted metric tons, effective January 1, 1996. This became the U.S. 
consumption baseline for HCFCs.
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    \1\ Class I refers to the controlled substances listed in 
appendix A to 40 CFR part 82 subpart A. Class II refers to the 
controlled substances listed in appendix B to 40 CFR part 82 subpart 
A.
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    The 1992 Copenhagen Amendment created a schedule with graduated 
reductions and the eventual phaseout of HCFC consumption (Copenhagen, 
23-25 November, 1992, Decision IV/4). Prior to the 2007 adjustment, the 
schedule called for a 35 percent reduction of the consumption cap in 
2004, followed by a 65 percent reduction in 2010, a 90 percent 
reduction in 2015, a 99.5 percent reduction in 2020 (restricting the 
remaining 0.5 percent of baseline to the servicing of existing 
refrigeration and air-conditioning equipment), with a total phaseout in 
2030.
    The Copenhagen Amendment did not cap HCFC production. In 1999, 
however, the Parties created a cap on production for Article 2 Parties 
through an amendment to the Montreal Protocol agreed by the Eleventh 
Meeting of the Parties (Beijing, 29 November--3 December 1999, Decision 
XI/5). The cap on production was set at the average of: (a) 1989 HCFC 
production plus 2.8 percent of 1989 CFC production, and (b) 1989 HCFC 
consumption plus 2.8 percent of 1989 CFC consumption. Based on this 
formula, the HCFC production cap for the U.S. was 15,537 ODP-weighted 
metric tons, effective January 1, 2004. This became the U.S. production 
baseline for HCFCs.
    The U.S. has chosen to implement the Montreal Protocol phaseout 
schedule on a chemical-by-chemical basis. In 1992, environmental and 
industry groups petitioned EPA to implement the required phaseout by 
eliminating the most ozone-depleting HCFCs first. Based on the 
available data at that time, EPA believed that the U.S. could meet, and 
possibly exceed, the required Montreal Protocol reductions through a 
chemical-by-chemical phaseout that employed a ``worst-first'' approach 
focusing on certain chemicals earlier than others. In 1993, as 
authorized by section 606 of the CAA, the U.S. established a phaseout 
schedule that eliminated HCFC-141b first and would greatly restrict 
HCFC-142b and HCFC-22 next, followed by restrictions on all other HCFCs 
and ultimately a complete phaseout. (58 FR 15014, March 18, 1993; 58 FR 
65018, December 10, 1993). EPA explained that its action modified the 
schedule contained in paragraphs (a) and (b) of section 605 (58 FR 
65025). Paragraph (a) addresses use and introduction into interstate 
commerce, while paragraph (b) addresses production.
    On January 21, 2003 (68 FR 2820), EPA promulgated regulations to 
ensure compliance with the first milestone in the HCFC phaseout: the 
requirement that, by January 1, 2004, the U.S. reduce HCFC consumption 
by 35 percent and freeze HCFC production. In that rule EPA established 
chemical-specific consumption and production baselines for HCFC-141b, 
HCFC-22, and HCFC-142b. To further carry out the 1993 phaseout 
schedule, EPA issued calendar-year allowances equal to 100 percent of 
baseline for HCFC-22 and HCFC-142b for each control period \2\ from 
2003 through 2009. For those same control periods EPA issued calendar-
year allowances equal to zero for HCFC-141b; under the 1993 rule HCFC-
141b was subject to a complete phaseout on January 1, 2003, which 
allowed the United States to meet and exceed the 2004 stepwise 
reduction of 35 percent below the baseline for all HCFCs. EPA did, 
however, create a petition process to allow applicants to request very 
small amounts of HCFC-141b beyond the phaseout. EPA considered 
establishing baselines for all HCFCs in that rule but deferred such 
action for all but HCFC-141b, HCFC-142b, and HCFC-22. These regulations 
were amended with a technical correction on July 16, 2003 (68 FR 
41925), and with direct final rules adopting minor amendments on June 
17, 2004 (69 FR 34024) and July 20, 2006 (71 FR 41163).
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    \2\ A control period, as defined at 40 CFR 82.3, is a twelve-
month period from January 1 through December 31.
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    To further protect human health and the environment, the Parties to 
the Montreal Protocol adjusted the Montreal Protocol's phaseout 
schedule for HCFCs at the 19th Meeting of the Parties in September 
2007. In accordance with Article 2(9)(d) of the Montreal Protocol, the 
adjustment to the phaseout schedule was effective on May 14, 2008.\3\
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    \3\ Under Article 2(9)(d) of the Montreal Protocol, an 
adjustment enters into force six months from the date the depositary 
(the Ozone Secretariat) circulates it to the Parties. The depositary 
accepts all notifications and documents related to the Protocol and 
examines whether all formal requirements are met. In accordance with 
the procedure in Article 2(9)(d), the depositary communicated the 
adjustment to all Parties on November 14, 2007. The adjustment 
entered into force and become binding for all Parties on May 14, 
2008.
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    As a result of the 2007 Montreal Adjustment (reflected in Decision 
XIX/6), the United States and other industrialized countries are 
obligated to reduce HCFC production and consumption 75 percent below 
the established baseline by 2010, rather than 65 percent as was the 
previous requirement. The other milestones remain the same: 90 percent 
below the baseline by 2015, and 99.5 percent below the baseline by 
2020--allowing, during 2020 to 2030, production and consumption at only 
0.5 percent of baseline solely for servicing existing air-conditioning 
and refrigeration equipment. The adjustment also resulted in a phaseout 
schedule for HCFC production that parallels the consumption phaseout 
schedule. All production and consumption for Article 2 Parties is 
phased out by 2030.
    Decision XIX/6 also adjusted the provisions for Parties operating 
under

[[Page 78684]]

paragraph 1 of Article 5 (developing countries): (1) To set production 
and consumption baselines based on the average 2009-2010 production and 
consumption, respectively; (2) to freeze production and consumption at 
those baselines in 2013; and (3) to add stepwise reductions of 10 
percent below baselines by 2015, 35 percent by 2020, 67.5 percent by 
2025, and 97.5 percent by 2030--allowing, between 2030 and 2040, an 
annual average of no more than 2.5 percent to be produced or imported 
solely for servicing existing air-conditioning and refrigeration 
equipment. All production and consumption for Article 5 Parties is 
phased out by 2040.
    In addition, Decision XIX/6 adjusted Article 2F to allow 
industrialized countries to produce ``up to 10 percent of baseline 
levels'' for export to Article 5 countries ``in order to satisfy basic 
domestic needs'' until 2020.\4\ Paragraph 14 of Decision XIX/6 notes 
that no later than 2015 the Parties would consider ``further reduction 
of production for basic domestic needs'' in 2020 and beyond. Under 
paragraph 13 of Decision XIX/6, the Parties will review in 2015 and 
2025, respectively, the need for the ``servicing tails'' for 
industrialized and developing countries. The term ``servicing tail'' 
refers to an amount of HCFCs used to service existing equipment, such 
as certain types of air-conditioning and refrigeration appliances.
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    \4\ Paragraphs 4-6 of adjusted Article 2F read as follows:
    ``4. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2010, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, twenty-
five per cent of the sum referred to in paragraph 1 of this Article. 
Each Party producing one or more of these substances shall, for the 
same periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, twenty-five per cent of the calculated level referred to 
in paragraph 2 of this Article. However, in order to satisfy the 
basic domestic needs of the Parties operating under paragraph 1 of 
Article 5, its calculated level of production may exceed that limit 
by up to ten per cent of its calculated level of production of the 
controlled substances in Group I of Annex C as referred to in 
paragraph 2.
    5. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2015, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, ten per 
cent of the sum referred to in paragraph 1 of this Article. Each 
Party producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, ten per cent of the calculated level referred to in 
paragraph 2 of this Article. However, in order to satisfy the basic 
domestic needs of the Parties operating under paragraph 1 of Article 
5, its calculated level of production may exceed that limit by up to 
ten per cent of its calculated level of production of the controlled 
substances in Group I of Annex C as referred to in paragraph 2.
    6. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2020, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed zero. Each Party 
producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed zero. 
However:
    i. Each Party may exceed that limit on consumption by up to zero 
point five per cent of the sum referred to in paragraph 1 of this 
Article in any such twelve-month period ending before 1 January 
2030, provided that such consumption shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020;
    ii. Each Party may exceed that limit on production by up to zero 
point five per cent of the average referred to in paragraph 2 of 
this Article in any such twelve-month period ending before 1 January 
2030, provided that such production shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020.''
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B. What Sections of the Clean Air Act Apply to This Rulemaking?

    Several sections of the Clean Air Act apply to this proposed 
rulemaking. Section 605 of the Clean Air Act phases out production and 
consumption and restricts the use of HCFCs in accordance with the 
schedule set forth in that section. Section 606 provides for 
acceleration of the schedule in section 605 based on a determination by 
EPA regarding current scientific information or the availability of 
substitutes, or to conform to any acceleration under the Montreal 
Protocol. EPA has previously accelerated the section 605 schedule 
through a rulemaking published December 10, 1993 (58 FR 65018). Though 
this action, EPA is further accelerating the section 605 HCFC 
production and consumption phaseouts.
    Section 606 provides authority for EPA to promulgate regulations 
that establish a schedule for production and consumption that is more 
stringent than what is set forth in section 605 if: ``(1) Based on an 
assessment of credible current scientific information (including any 
assessment under the Montreal Protocol) regarding harmful effects on 
the stratospheric ozone layer associated with a Class I or Class II 
substance, the Administrator determines that such more stringent 
schedule may be necessary to protect human health and the environment 
against such effects, (2) based on the availability of substitutes for 
listed substances, the Administrator determines that such more 
stringent schedule is practicable, taking into account technological 
achievability, safety, and other relevant factors, or (3) the Montreal 
Protocol is modified to include a schedule to control or reduce 
production, consumption, or use of any substance more rapidly than the 
applicable schedule under this title.'' It is only necessary to meet 
one of the three criteria. EPA believes that in this instance, all 
three criteria have been met.
    The first criterion allows the Administrator, based on an 
assessment of credible current scientific information, to determine 
that a more stringent schedule may be necessary to protect human 
health. The recent scientific findings by the Montreal Protocol's 
Science Assessment Panel, Science Assessment of Ozone Depletion: 2006, 
available in the docket for this rulemaking, were initially presented 
to the Parties to the Montreal Protocol in October 2006 at the 18th 
Meeting of the Parties in New Delhi, India. The Assessment was 
published in March 2007, and hard copies were available to the Parties 
in advance of the 26th Open-Ended Working Group Meeting held in June 
2007 in Nairobi, Kenya. The assessment report shows that 
notwithstanding the evidence of a healing of the ozone layer, there 
continue to be human health and environmental effects associated with 
ozone depletion and that recovery continues to rely on a successful 
total global phaseout of ODSs. The report includes scenarios where 
additional actions taken by the Parties would result in a faster 
recovery. While these specific scenarios (including complete phaseout 
by the end of that calendar year) were not all necessarily deemed to be 
practical, they demonstrated to the Parties what could be achieved with 
additional actions and contributed in part to the willingness of many 
Parties, including the United States, to consider the adjustments to 
the Montreal Protocol's HCFC phaseout schedule that were successfully 
negotiated in September 2007. EPA published a notice of data 
availability (72 FR 35230) concerning the potential changes in HCFC 
consumption from proposed adjustments to the Montreal Protocol 
submitted by the United States for consideration at the 19th Meeting of 
the Parties held in Montreal September 2007. The data made available 
through that notice were specific to the United States' proposal but 
had general applicability to the other five proposals submitted by 
various Parties to the Protocol and to what was ultimately agreed to by 
the Parties at the 19th Meeting.
    Reductions in stratospheric ozone levels lead to higher levels of 
ultraviolet radiation reaching the Earth's surface, and a higher risk 
of negative health

[[Page 78685]]

effects. According to the American Cancer Society, one in five 
Americans will develop skin cancer in their lifetime, and one American 
dies every hour from this disease. While medical research continues to 
improve the understanding of the causes and effects of skin cancer, 
many health and education groups are working to reduce the incidence of 
this disease. EPA believes the recent scientific findings on 
stratospheric ozone depletion, together with the well-established 
relationship between ozone depletion and increased risk of human health 
effects, support a determination that a more stringent HCFC phaseout 
schedule may be necessary to protect against such effects.
    The second criterion allows the Administrator to determine a more 
stringent schedule is practicable based on the availability of 
substitutes for ODS, taking into account technological achievability, 
safety, and other relevant factors. Since the establishment of the 
domestic chemical-by-chemical phaseout in the United States, advances 
by industry have resulted in the availability of substitutes for a 
large variety of end-use applications. Under section 612 of the CAA, 
EPA's Significant New Alternatives Policy (SNAP) program evaluates and 
lists alternatives for ODSs that reduce overall risk to human health 
and the environment and are currently or potentially available. 
Alternatives include chemical replacements, product substitutes, and 
alternative technologies. The SNAP program has reviewed approximately 
450 combinations of alternatives and end uses to date. EPA makes 
information available concerning potential alternatives for various 
end-use applications. Suitable alternatives--in many cases, multiple 
suitable alternatives--are available for all end-use applications for 
the HCFCs considered in this action. The SNAP program has reviewed 
substitutes for the following industrial sectors:
     Refrigeration & Air Conditioning.
     Foam Blowing Agents.
     Cleaning Solvents.
     Fire Suppression and Explosion Protection.
     Aerosols.
     Sterilants.
     Tobacco Expansion.
     Adhesives, Coatings & Inks.
    HCFCs have been used in almost all of these industrial sectors. For 
example, within the air conditioning and refrigeration industrial 
sector, end uses where HCFCs have been used include chillers, 
industrial process refrigeration systems, ice skating rinks, cold 
storage warehouses, refrigerated transport, retail food refrigeration, 
household appliances, and residential and light commercial air 
conditioning and heat pumps. The SNAP program lists substitutes for 
each of the end uses. (For a complete list of substitutes the reader is 
directed to: https://www.epa.gov/ozone/snap/lists/.) EPA 
believes that given the availability of substitutes, a more stringent 
HCFC phaseout schedule now is practicable.
    The last criterion is that the Montreal Protocol be modified to 
include a schedule to control or reduce production, consumption, or use 
of any substance more rapidly than section 605 would dictate. The 
United States submitted a proposal to adjust the Montreal Protocol in 
March 2007 to accelerate the phaseout of HCFCs. This was one of six 
proposals considered by the Parties at their 19th Meeting. Due to the 
efforts of the United States and others, the Parties agreed to 
adjustments that result in a more aggressive phaseout schedule for both 
developed and developing countries. Therefore, this third criterion has 
been met. Through this action, EPA is proposing to incorporate a 
schedule that reflects the 2007 Montreal Adjustment in its regulations. 
In order to meet the 2010 stepdown, EPA is proposing to allocate HCFC 
allowances for the years 2010 through 2014 at a level that will ensure 
the aggregate HCFC production and consumption will not exceed 25 
percent of the U.S. baselines.
    While section 606 is sufficient authority for this acceleration of 
the section 605 phaseout schedule, EPA also notes that section 614(b) 
of the Clean Air Act provides that in the case of a conflict between 
the Act and the Protocol, the more stringent provision shall govern. 
Thus, section 614(b) requires the Agency to establish phaseout 
schedules at least as stringent as the schedules contained in the 
Protocol.
    In addition to implementing the 2007 Montreal Adjustment, today's 
proposed rule would also address provisions in section 605 of the Clean 
Air Act that relate to use and introduction intro interstate commerce 
of class II substances. In today's action, EPA is proposing to complete 
its implementation (begun in 1993) of the section 605 provisions on use 
of class II substances. EPA is also proposing regulatory language to 
reflect the section 605 provisions on introduction into interstate 
commerce of class II substances. EPA previously addressed the 
provisions concerning use of class II substances in a 1993 rulemaking 
that accelerated the phaseout schedule for HCFC-22 and HCFC-142b (58 FR 
15014, 58 FR 65018). The intent of the 1993 rulemaking was to 
accelerate not only the production and consumption schedule, but also 
the use restrictions for those two substances. In the March 18, 1993 
notice of proposed rulemaking, EPA stated that the effect of this 
acceleration was ``to prohibit the use of the chemicals (virgin 
material only) for any use except as a feedstock or as a refrigerant in 
existing equipment as of January 1, 2010'' (58 FR 15028). EPA noted in 
the December 10, 1993 notice of final rulemaking that ``HCFC 
restrictions and the approach included in today's final rule have not 
changed from those proposed by the Agency in March'' (58 FR 65028). The 
regulatory prohibitions included with that notice, however, did not 
control use directly, but instead banned production and import for most 
uses. In today's action, EPA is proposing to add the direct use 
prohibitions contemplated in the 1993 rule as well as the corresponding 
prohibitions on introduction into interstate commerce. EPA is also 
clarifying its interpretation of section 605(a).

III. This Proposal

    EPA is proposing to adjust existing regulations to address the next 
major milestone in the HCFC phaseout. As a Party to the Montreal 
Protocol, and having ratified the Montreal Protocol and all of its 
amendments, the United States is required to decrease its amount of 
HCFC consumption and production to 25 percent of the U.S. baseline by 
2010. Our domestic chemical-by-chemical approach results in differing 
schedules for the phaseout of individual HCFC compounds. EPA believes 
that the chemical-by-chemical HCFC allocation of allowances proposed in 
this notice of proposed rulemaking (NPRM) will ensure that the United 
States continues to maintain an overall HCFC production and consumption 
level that is below the 2010 cap specified by the September 2007 
Montreal Adjustment, while at the same time ensuring that servicing 
needs consistent with Section 605(a) of the Clean Air Act and EPA's 
implementing regulations continue to be met. Thus the aggregate 
allowances for all U.S. HCFC consumption in the years 2010-2014 will 
not exceed 3,810 ODP-weighted metric tons (25 percent of the aggregate 
U.S. consumption baseline) annually and the aggregate allowances for 
all U.S. HCFC production in the years 2010-2014 will not exceed 
3,884.25 ODP-weighted metric tons (25 percent of the aggregate U.S. 
production baseline) annually.

[[Page 78686]]

    To meet the 2010 cap for the 2010-2014 control periods, EPA is 
proposing to continue its past practice of apportioning company-
specific production and consumption baselines for individual HCFCs, and 
granting a certain percent of that baseline as necessary to achieve 
compliance with the cap. For HCFC-141b, HCFC-22, and HCFC-142b, EPA is 
proposing to apportion company-specific baselines in amounts that are 
equivalent to those currently published at Sec.  82.17 (for production) 
and Sec.  82.19 (for consumption), adjusted as necessary to reflect 
permanent transfers of baseline allowances and changes to the names of 
entities identified in the tables at Sec.  82.17 and Sec.  82.19. 
Companies are currently granted, in Sec.  82.16, 0 percent of baseline 
for HCFC-141b and 100 percent of baseline for HCFC-22 and HCFC-142b. 
For 2010-2014, given the previous phaseout of HCFC-141b, EPA will 
continue to allocate zero percent for HCFC-141b, continuing to allow 
only limited amounts of production via an EPA petition process.\5\ EPA 
is proposing to allocate less than 100 percent of baseline for HCFC-22 
and HCFC-142b to meet our obligations under the Montreal Protocol and 
reflecting the use restrictions under section 605(a) that are discussed 
later in this proposal while providing for servicing needs consistent 
with those restrictions.
---------------------------------------------------------------------------

    \5\ EPA is not proposing any changes and thus is not seeking 
comment with regard to the HCFC-141b petition process for the 2010-
2014 control periods.
---------------------------------------------------------------------------

    EPA is proposing a similar approach for HCFC-123, HCFC-124, HCFC-
225ca, and HCFC-225cb, which currently do not have baselines. EPA is 
proposing to apportion company-specific baselines for these HCFCs based 
on production and import data available to the Agency. For control 
periods 2010-2014, EPA is proposing to grant 125 percent of baseline 
for these HCFCs.
    The allocations described above for HCFC-22, HCFC-142b, HCFC-123, 
HCFC-124, HCFC-225ca, and HCFC-225cb reflect EPA's analysis of market 
data for these chemicals. The proposed allocations were developed to 
allow the need for virgin material to be met and to avoid shortages 
during the affected control periods, as well as to accommodate some 
market growth for HCFCs-123, -124, -225ca, and -225cb, for which 
baselines were not developed in the 2003 allocation rule. The total 
proposed allocation of HCFC allowances to meet the U.S. need for virgin 
material is less than the 3,810 ODP-ton cap. The differential between 
the cap and the total proposed allocation will have the effect of 
accommodating minor adjustments in the market, particularly to allow 
potential market growth for HCFCs that have not been produced or 
imported since 2003 (and which are therefore not reflected here). In 
summary, of the 3,810 ODP tons of consumption and 3,884.25 ODP tons of 
production allowable for the 2010-2014 control periods as established 
by the Montreal Protocol, EPA is proposing to allocate allowances, in 
aggregate, for 2,920 ODP tons of consumption and 2,646 ODP tons of 
production.
    These proposed allocations represent 77 percent of the consumption 
cap and 68 percent of the production cap established by the Montreal 
Protocol for 2010. EPA seeks comment on whether the proposed 
allocations, together with the amounts assumed to be available from 
reclaimed refrigerant, will suffice to meet HCFC needs for the existing 
uses (primarily refrigerant servicing) that will still be permitted in 
2010, as well as potential adjustments in the HCFC market. Please 
provide information and documentation on newly emerging uses of HCFCs 
and other uses of HCFCs, if any, that are not accounted for by EPA 
currently. EPA is especially interested in information pertaining to 
the years 2010 through 2014.
    EPA is proposing two other changes in this proposed rule. First, to 
reflect the September 2007 Montreal Adjustments, EPA is proposing to 
adjust the amount of Article 5 allowances for control periods 2010-
2019. Second, EPA is completing its implementation of the provisions in 
section 605 of the Clean Air Act that relate to use and introduction 
into interstate commerce of class II substances.
    EPA is not proposing changes to other provisions of 40 CFR part 82 
subpart A, such as the recordkeeping and reporting obligations, the 
essential use and critical use provisions, and the HCFC-141b petition 
process. EPA is only seeking comments on the portions of 40 CFR part 82 
subpart A that are specifically addressed by this proposal.

A. How Does EPA Propose to Issue Production and Consumption Allowances 
for 2010-2014?

    In the United States, an allowance is the unit of measure that 
controls production and consumption of ozone-depleting substances. An 
allowance represents the privilege granted to a company to produce or 
import one kilogram (not ODP-weighted) of the specific substance. EPA 
establishes company-by-company baselines (also known as ``baseline 
allowances'') and allocates calendar-year allowances equal to a 
percentage of the baseline for specified control periods. EPA has 
allocated two types of calendar-year allowances--production allowances 
and consumption allowances--for HCFC-22 and HCFC-142b. ``Production 
allowance'' and ``consumption allowance'' are defined at 40 CFR 82.3. 
To produce an HCFC for which allowances have been allocated, an 
allowance holder must expend both production and consumption 
allowances. To import an HCFC for which allowances have been allocated, 
an allowance holder must expend consumption allowances. An allowance 
holder exporting HCFCs for which it has expended consumption allowances 
may obtain a refund of those consumption allowances upon submittal of 
proper documentation to EPA.
    Since EPA is implementing the phaseout on a chemical-by-chemical 
basis, it allocates and tracks production and consumption allowances on 
an absolute kilogram basis for each chemical. Upon EPA approval, an 
allowance holder may trade allowances for one type of HCFC for 
allowances of another type of HCFC, with transactions weighted 
according to the ozone depletion potential of the chemicals involved. 
Pursuant to section 607 of the Clean Air Act, EPA applies an offset to 
each HCFC trade by deducting 0.1 percent from the transferor's 
allowance balance. The offset is viewed as a benefit to the ozone layer 
since it ``results in greater total reductions in the production in 
each year of * * * class II substances than would occur in that year in 
the absence of such transactions'' (42 U.S.C. 7671f).
    Under current regulations at 40 CFR 82.15(a) and (b), HCFC-22 and 
HCFC-142b may not be produced or imported in excess of the calendar-
year allowances held by the producer or importer. EPA has not yet 
allocated any calendar-year allowances for HCFC-142b or HCFC-22 to 
cover the 2010 control period and beyond. Absent a grant of calendar-
year allowances for these HCFCs, Sec.  82.15 would prohibit their 
production and import after December 31, 2009. EPA intends to avoid 
that result by issuing a final rule in advance of that date that will 
allocate calendar-year allowances for 2010-2014.
1. What Actions Did EPA Take in the 2003 Allocation Rule?
    In the January 21, 2003, allocation rule, EPA established baselines 
for HCFC-141b, HCFC-22, and HCFC-142b. Section 601(2) states that EPA 
may select ``a representative calendar year'' to serve as the baseline 
for HCFCs. In the 2003 allocation rule, however,

[[Page 78687]]

EPA concluded that because the entities eligible for allowances had 
differing production and import histories, no one year was 
representative for all companies. Therefore, in the 2003 allocation 
rule EPA assigned an individual consumption baseline year to each 
company by selecting its highest ODP-weighted consumption year from 
among the years 1994 through 1997. EPA assigned individual production 
baseline years in the same manner. EPA did not consider years after 
1997 to avoid creating an uneven playing field that would skew 
allocations to those companies with ample resources and good access to 
information regarding the impending phaseout. EPA is not proposing to 
revisit decisions made in the 2003 allocation rule, such as the 
Agency's discretion to consider data from multiple years in 
establishing a baseline.
    The 2003 allocation rule apportioned production and consumption 
baselines to each company in amounts equal to the amounts in the 
company's highest ``production year'' or ``consumption year,'' as 
described above. It completely phased out the production and import of 
HCFC-141b, with the limited exception described above, by granting 0 
percent of that chemical's baseline for production and consumption in 
the table at Sec.  82.16. The rule granted 100 percent of baseline for 
production and consumption of HCFC-22 and HCFC-142b. EPA was able to 
allocate allowances for HCFC-22 and HCFC-142b at 100 percent of 
baseline because, in light of the concurrent complete phaseout of HCFC-
141b, the allocations for HCFC-22 and HCFC-142b, combined with 
projections for consumption of all other HCFCs, remained below the 2004 
cap of 65 percent of the baseline.
    Because EPA has allocated the same amount of allowances every year 
from 2004 to 2009--with minor changes reflecting permanent trades of 
baseline allowances--and because EPA tracks the production and 
consumption of all HCFCs (including those for which baselines are not 
allocated), the Agency can ascertain that the U.S. will remain 
comfortably below the cap through 2009. The January 2003 allocation 
rule announced that EPA would allocate allowances for 2010-2014 in a 
subsequent action and that those allowances would be lower in aggregate 
than for 2003-2009, consistent with the next stepwise reduction for 
HCFCs under the Montreal Protocol. EPA stated its intention to 
determine the exact amount of allowances that would be needed for HCFC-
22 and HCFC-142b, bearing in mind that other HCFCs would also 
contribute to total HCFC consumption. EPA stated that it would likely 
achieve the 2010 reduction step by applying a percentage reduction to 
the HCFC-22 and HCFC-142b baseline allowances. EPA has monitored the 
market to ascertain servicing needs and market adjustments in the use 
of HCFCs, including HCFCs for which EPA did not establish baselines in 
the 2003 allocation rule.
2. How Will EPA Allocate 2010-2014 Allowances for HCFC-22 and HCFC-
142b?
    This proposal identifies five primary options for allocating HCFC-
22 and HCFC-142b allowances for the control periods 2010-2014: (1) 
Allocating a percentage of the baseline allowances (Sec. Sec.  82.17 
and 82.19) for each HCFC respectively with or without considering any 
permanent baseline transfers and/or inter-pollutant transfers that 
resulted in a different amount of production or consumption for a 
specific HCFC; (2) allocating allowances based on evaluation of the 
most recent three years of production, import, and/or export data as 
reported to EPA; (3) allocating allowances based on evaluation of past 
sales of HCFCs by allowance holders by considering how the HCFCs were 
ultimately used (e.g., servicing refrigeration or air-conditioning, 
original manufacture of refrigeration or air-conditioning equipment, 
foam blowing); (4) allocating allowances based on aggregated ODP tons; 
or (5) allocating a total amount of allowances and allowing for 
purchase by establishing an auction system. These options are described 
in more detail in section III.A.9 of this preamble. Each of these five 
methods offers advantages and disadvantages for potential allowance 
holders which vary according to whether a particular entity is 
predominantly a producer or importer; whether it currently sells HCFC-
22 and HCFC-142b to original equipment manufacturers, wholesalers, 
retailers, or companies that service appliances; whether the portion of 
its business that is ODS-based is expanding or contracting as the next 
major milestone in the phaseout approaches; its liquidity; whether it 
holds both HCFC-142b and HCFC-22 allowances and/or engages in inter-
pollutant transfers; and whether it sold HCFCs for applications that do 
not lend themselves to servicing. Without regard to the practices of 
individual entities, each of the potential allocation schemes also 
offers advantages and disadvantages associated with the ease of 
implementation and other administrative burdens. EPA has placed in the 
docket to this NPRM a memorandum titled ``Draft Regulatory Options for 
Allocating HCFC Allowances after 2009'' that explores the advantages 
and disadvantages of the various options. In addition to the 
memorandum, EPA has also placed in the docket written correspondence by 
entities that also discusses various options for allocating HCFC 
allowances.
    EPA provided notice of the leading option for implementing the 2010 
milestone in the preamble to the 2003 allocation rule by indicating 
that EPA ``intends to achieve this reduction step through notice and 
comment prior to 2010 and will likely implement the reduction by simply 
listing a percent of baseline allowances to be granted in Sec.  82.16 
for the years after 2009'' (68 FR 2823). The Agency said that it would 
allocate allowances for HCFC-22 and HCFC-142b at less than 100 percent 
of the respective baselines during the control periods 2010-2014. EPA 
continues to believe that this option is the most appropriate, but 
seeks comment on other options. This approach offers a transparent 
design and provides stability in that it uses a well-vetted baseline. 
EPA believes this option also is the least burdensome because it would 
not require additional one-time or periodic reporting obligations that 
may be necessary if EPA were to adopt a different option. Producers and 
importers have adapted to the current HCFC allocation method and 
aligned their business activities around the baselines set forth in the 
2003 allocation rule. Currently, EPA manages a tracking system and 
issues calendar-year allowances per control period to specific entities 
listed in Sec.  82.17 and Sec.  82.19. An option that utilizes this 
system would limit administrative burdens for the Agency and allowance 
holders.
    In the 2003 allocation rule, EPA did not forecast the amount of 
reduction for HCFC-22 and HCFC-142b that would be needed to ensure that 
the United States stayed sufficiently below the 2010 stepwise 
reduction, which at the time was a reduction of 65 percent from the 
Montreal Protocol baseline. EPA did not determine whether it would 
reduce the allocations for the two substances by the same percentage or 
by different percentages. Several factors affect determination of the 
appropriate percentage of the HCFC-22 and HCFC-142b production and 
consumption baselines to allocate for 2010-2014. Factors include the 
percentage of the aggregate U.S. production and consumption caps that 
other HCFCs comprise as well as provisions in the Clean Air Act and 
implementing

[[Page 78688]]

regulations that include use restrictions (discussed in section III.C 
of this NPRM).
    EPA uses information from quarterly, annual, and other periodic 
reporting requirements to monitor consumption, production, imports, and 
exports of all HCFCs. EPA uses this information to ensure companies' 
compliance with regulatory requirements and to develop reports that are 
requested by the Parties to the Montreal Protocol, including reports 
ascertaining U.S. compliance with the phaseout caps. The information 
enables EPA to monitor production and consumption for all HCFCs, 
including HCFCs for which baselines have not yet been established and 
for which allowances have not yet been allocated.
    Although EPA's July 20, 2001, proposed HCFC allocation rulemaking 
would have allocated production and consumption allowances for all 
HCFCs, the January 2003 final rule apportioned company-specific 
baselines, and allocated a specific percentage of baseline allowances 
for the 2003-2009 control periods, only for HCFC-141b, HCFC-22, and 
HCFC-142b. EPA applied a ``worst-first'' approach to these HCFCs since 
they are the most damaging to the stratospheric ozone layer. The 2003 
final rule noted that the HCFC market was continuing to evolve. At that 
time, the market for HCFCs with lower ODPs did not reflect rapid 
expansion and thus it was not necessary to establish specific baselines 
by chemical and issue allowances to ensure that the United States 
remained below its cap. Later in this proposal, EPA further discusses 
establishing and apportioning baselines as well as allocating calendar-
year allowances for these lower-ODP HCFCs for the control periods 2010-
2014.
3. How Should EPA Consider Servicing Needs for Existing Equipment?
    EPA is proposing to use projected servicing needs in its 
determination of the amounts of HCFC-22 and HCFC-142b allowances to be 
allocated for the 2010-2014 control periods. EPA is focusing on 
servicing needs because under section 605(a) of the Clean Air Act and 
EPA's implementing regulations, nearly all other uses of these two 
HCFCs will be banned effective January 1, 2010. EPA has previously 
issued a draft analysis of servicing demand for the HCFC appliances in 
the U.S. refrigeration and air-conditioning sector projected to be in 
service from 2010-2019. The report is titled The U.S. Phaseout of 
HCFCs: Projected Servicing Needs in the U.S. Air-Conditioning and 
Refrigeration Sector (the ``Servicing Tail'' report). On November 4, 
2005, EPA published a notice of data availability (70 FR 67172) making 
a draft of the report available for public review and comment. On 
September 29, 2006, EPA held a stakeholder meeting presenting the 
findings of a revision to the Servicing Tail report along with other 
important information regarding the next major milestones in the HCFC 
phaseout. EPA solicited comments on the findings presented at the 
meeting. Some stakeholders, including representatives of manufacturers, 
chemical producers, importers, reclaimers, industry associations, and 
environmental organizations, commented on the projected amount of HCFCs 
needed to service this installed base of equipment and on the amounts 
expected to be available from reclamation.
    EPA focused the analysis on air-conditioning and refrigeration 
appliances because such equipment will represent the bulk of the 
servicing need. In addition, the servicing exception to the use ban for 
HCFC-22 and HCFC-142b pertains only to use as a refrigerant in such 
equipment. EPA also focused the analysis on HCFC-22 because HCFC-22 is 
the predominant HCFC in the installed base of air-conditioning and 
refrigerant equipment for which servicing in the U.S. will likely 
continue. The findings in the Servicing Tail report have helped to 
shape EPA's views regarding the allocation for the control periods 
2010-2014.
    The majority of HCFC-22 equipment that is projected to be in use 
from 2010 onward will be air-conditioning applications, including 
window units, packaged terminal units, residential and commercial 
unitary air-conditioning, chillers, dehumidifiers, water and ground 
source heat pumps, and non-light duty mobile air-conditioning in buses 
and trains. Approximately 147.5 million units of all such types of 
HCFC-22 air-conditioning equipment will be in use in 2010, decreasing 
from 2010 levels by about 41 percent by 2015 and 76 percent by 2020. In 
2010, approximately 2.2 million units of HCFC-22 refrigeration 
equipment will be in use, including retail food, industrial process 
refrigeration, and transport refrigeration equipment (but not including 
cold storage warehouses). The installed base of HCFC-22 refrigeration 
equipment is projected to decrease from 2010 levels by about 29 percent 
by 2015 and 51 percent by 2020. EPA developed these estimates using its 
Vintaging Model, a tool for estimating the annual chemical emissions 
from industrial sectors that have historically used ozone-depleting 
substances in their products. Additional information on the Vintaging 
Model is available in the docket for this rulemaking.
    As a result of the September 2007 Montreal Adjustment, in which the 
Parties agreed to adjust the stepwise reduction in 2010 from 65 percent 
of baseline to 75 percent of baseline for non-Article 5 Parties, and 
recognizing the overall advances by industry in transitioning to non-
ODS substitutes, EPA has prepared a draft revised Servicing Tail report 
to: (1) Reflect the 75 percent reduction in 2010; (2) consider more 
recent production and consumption data in the United States; and (3) 
consider more recent trends in the air-conditioning and refrigeration 
sectors. This revised draft report is available in the docket for this 
rulemaking. EPA is accepting comments on the analysis and the draft 
findings until February 23, 2009 or March 9, 2009 if a hearing 
regarding this rulemaking is held.
    The Servicing Tail report utilizes production, import, and export 
data reported to the Agency on a quarterly, annual, and transactional 
basis, as required by Sec.  82.24. EPA's analysis of the reported data 
confirms that the United States is satisfying its obligations as it 
phases out ODSs and enables EPA to consider trends in the HCFC markets 
on a chemical-by-chemical basis. EPA also uses this information to 
submit an annual report to the Ozone Secretariat as requested by the 
Parties to the Montreal Protocol.
    Using the reported data, the draft revised Servicing Tail report, 
and the comments provided at the September 2006 stakeholder meeting and 
submitted in subsequent correspondence (available in the docket), EPA 
believes it has sufficient information to propose through this action 
to allocate a percentage of baseline allowances for HCFC-22 and for 
HCFC-142b for production and consumption for the control periods 2010-
2014 that will address servicing needs. The specific percentage of 
baseline for each of the affected compounds is discussed below. EPA 
requests comments regarding whether it should consider other sources of 
information in addition to the required reports, the Servicing Tail 
report, and stakeholder comments. In particular, EPA is interested in 
whether these sources provide sufficient information to allow EPA to 
reasonably estimate servicing needs for 2010-2014, especially for HCFC-
22, which accounts for the majority of the market.
4. How Will the Allocated Allowances Appear in the Regulations?
    EPA is proposing to revise two types of tables in 40 CFR part 82 
that together

[[Page 78689]]

specify the production and consumption allowances available to 
allowance holders during specified control periods. Tables at Sec.  
82.17 and Sec.  82.19 apportion baseline production and consumption 
amounts (also referred to as baseline production allowances and 
baseline consumption allowances), respectively, to individual companies 
for individual HCFCs. Complementing these tables, the table at Sec.  
82.16 lists the percentage of baseline allocated to allowance holders 
for specific control periods. EPA is proposing to retain this framework 
of complementary tables, revising them to reflect adjustments to 
baselines, and to grant percentages of baselines in a manner that 
achieves the 2010 phasedown goal.
    Currently the table at Sec.  82.16 allocates zero percent of 
baseline to HCFC-141b and 100 percent of baseline to HCFC-22 and HCFC-
142b (combined in a single column) for each control period spanning 
2003-2009. EPA is proposing to amend the table by including control 
periods 2010-2014, by continuing to allocate zero percent to HCFC-141b, 
and by allocating specified percentages (in separate columns) to HCFC-
22, HCFC-142b, and--as will be discussed later--other HCFCs.
    The proposed percentages for HCFC-22 and HCFC-142b differ because 
EPA projects that the needs will differ for servicing air-conditioning 
and refrigeration appliances during the 2010-2014 control periods. 
EPA's analysis shows that there will be a significantly greater need 
for HCFC-22 than for HCFC-142b during the control periods 2010-2014. 
Based on the Serv