Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for Application-Specific Allowances, 75898-75943 [2024-20602]

Download as PDF 75898 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 84 [EPA–HQ–OAR–2024–0196; FRL–10782–01– OAR] RIN 2060–AV98 Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for Application-Specific Allowances Environmental Protection Agency (EPA). ACTION: Notice of proposed rulemaking. AGENCY: The U.S. Environmental Protection Agency is undertaking this rulemaking to assess the eligibility of six applications to receive priority access to allowances allocated pursuant to the American Innovation and Manufacturing Act of 2020. This rulemaking proposes the framework for how EPA will assess whether to renew the eligibility of applications to receive application-specific allowances; decisions to renew or not renew each of the six applications that currently receive application-specific allowances; revisions to the Technology Transitions regulations as 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; narrow revisions to the methodology used to allocate allowances to applicationspecific allowance holders for calendar years 2026 and beyond; and limited revisions to existing regulations. EPA is also proposing to authorize an entity to produce regulated substances for export. Lastly, EPA is proposing certain confidentiality determinations for newly reported information if this rulemaking is finalized as proposed. DATES: Comments must be received on or before October 31, 2024. 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 September 23, 2024. If a virtual public hearing is held, it will take place on or before October 1, 2024 and further information will be provided at https://www.epa.gov/ climate-hfcs-reduction. ADDRESSES: The U.S. Environmental Protection Agency (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 lotter on DSK11XQN23PROD with PROPOSALS2 SUMMARY: VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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: graff.michelle@epa.gov. 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 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 CF3I—Trifluoroiodomethane CFR—Code of Federal Regulations CGMP—Current Good Manufacturing Practice CHIPS Act—Creating Helpful Incentives to Produce Semiconductors Act of 2022 ClF3—Chlorine Trifluoride CO2—Carbon Dioxide COVID—Coronavirus Disease CVD—Chemical Vapor Deposition DFARS—Defense Federal Acquisition Regulation Supplement DOD—U.S. Department of Defense DOJ—U.S. Department of Justice EEI—Electronic Export Information EV—Exchange Value EVe—Exchange Value Equivalent EPA—U.S. Environmental Protection Agency FAA—Federal Aviation Administration FAR—Federal Acquisition Regulation FDA—U.S. Food and Drug Administration FIFRA—Federal Insecticide, Fungicide, and Rodenticide Act PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 FSTOC—Fire Suppression Technical Options Committee FTOC—Flexible and Rigid Foams Technical Options Committee FR—Federal Register GHG—Greenhouse Gas GWP—Global Warming Potential HCFO—Hydrochlorofluoroolefin HFC—Hydrofluorocarbon HFIB—Hexafluoroisobutylene HFO—Hydrofluoroolefin ICAO—International Civil Aviation Organization 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 NF3—Nitrogen Trifluoride ODP—Ozone Depletion Potential ODS—Ozone-Depleting Substances OMB—U.S. Office of Management and Budget PFC—Perfluorocarbon PII—Personally Identifiable Information PRA—Paperwork Reduction Act PU—Polyurethane RACA—Requests for Additional Consumption Allowance RFA—Regulatory Flexibility Act RIA—Regulatory Impact Analysis RSV—Respiratory Syncytial Virus SCPPU—Structural Composite Preformed Polyurethane SF6—Sulfur Hexafluoride SiN—Silicon Nitride SiO2—Silicon Dioxide SNAP—Significant New Alternatives Policy SISNOSE—Significant Economic Impact on a Substantial Number of Small Entities 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 the Proposed Regulatory Action B. Summary of Proposed 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 proposed framework for renewing applications? E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules V. Review of the Six Applications Listed in the AIM Act A. Overview of Total U.S. HFC Consumption B. Propellants in Metered Dose Inhalers 1. Availability of Safe and Technically Achievable Substitutes 2. Supply 3. What is EPA proposing regarding eligibility for application-specific allowances? C. Defense Sprays 1. Availability of Safe and Technically Achievable Substitutes 2. Supply 3. What is EPA proposing regarding eligibility for application-specific allowances? 4. Proposed Restriction Under EPA’s Technology Transitions Program D. Structural Composite Preformed Polyurethane Foam for Marine Use and Trailer Use 1. Availability of Safe and Technically Achievable Substitutes 2. Supply 3. What is EPA proposing regarding eligibility for application-specific allowances? 4. Proposed Restriction Under EPA’s Technology Transitions Program E. 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. What is EPA proposing regarding eligibility for application-specific allowances? F. Mission-Critical Military End Uses 1. Availability of Safe and Technically Achievable Substitutes 2. Supply 3. What is EPA proposing regarding eligibility for application-specific allowances? G. Onboard Aerospace Fire Suppression 1. Availability of Safe and Technically Achievable Substitutes 2. Supply 3. What is EPA proposing regarding eligibility for application-specific allowances? VI. What are the proposed requirements associated with a petition to be listed as an application that will receive application-specific allowances? VII. Proposed Revisions to Existing Regulations A. Expected Total HFC Purchases B. Unique Circumstances C. Methodology for Entities With Irregular Purchasing History and Very Small Users D. Average Annual Growth Rate Calculations E. Inventory F. Department of Defense Conferrals G. Limited Set-Aside for Unique Circumstances Related to MDIs H. Return of Unneeded Allowances I. Enabling Auctions of Illegally Imported HFCs J. Quarterly Exporter Reporting of Internal Transaction Numbers VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 K. Date of Purchase for Requests for Additional Consumption Allowances (RACAs) VIII. Authorization To Produce for Export A. To what entities is EPA proposing to allocate production for export allowances? B. How many production for export allowances is EPA proposing to issue to Iofina on an annual basis, and for how many years is EPA proposing to issue these allowances? C. Would 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 proposed 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. Background on Determinations of Whether Information Is Entitled to Treatment as Confidential Information B. Data Elements Associated With a Petition To Be Listed as an Application That Will Receive Application-Specific Allowances C. Data Elements Related to Proposed Revisions to Existing Regulations D. Data Elements Reported to EPA Related to Production for Export X. What are the costs and benefits of this action? XI. Statutory and Executive Order Review A. Executive Order 12866: Regulatory Planning and Review and Executive Order 14094: Modernizing Regulatory Review B. Paperwork Reduction Act (PRA) C. Regulatory Flexibility Act (RFA) D. Unfunded Mandates Reform Act (UMRA) E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations and Executive Order 14096: Revitalizing Our Nation’s Commitment to Environmental Justice for All I. Executive Summary A. Purpose of the Proposed Regulatory Action The U.S. Environmental Protection Agency (EPA) is undertaking this action to implement certain provisions of the PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 75899 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 transferrable production and consumption allowances, which entities must expend to produce or import HFCs. In addition, subsection (e)(4)(B) of the Act authorizes EPA to allocate allowances exclusively for the use in specific applications for which there is: (1) no safe or technically achievable substitute and (2) an insufficient supply of the HFCs used in the application that can be secured from chemical manufacturers. The Act listed six applications that would receive priority access to 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. EPA intends to finalize this proposed rule ahead of the allocation of calendar year 2026 allowances. Without finalization of this proposed rule, all applications would be ineligible for allowances for calendar year 2026.1 EPA has created a category of allowances to provide this priority access, which EPA refers to as application-specific allowances (ASAs). ASAs 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 (86 FR 55116, October 5, 2021) for more information). After the total ASA quantity is determined, the remaining allowances are distributed to general pool allowance recipients using a different methodology. 1 EPA first codified the allocation methodology for general pool and ASA holders 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). 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. E:\FR\FM\16SEP2.SGM 16SEP2 75900 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 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, if the application meets the criteria above, authorize the eligibility of the application to receive priority access to allowances for a period of not more than five years. EPA is proposing how the Agency will interpret these two criteria to review applications receiving ASAs. EPA is also proposing 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. Under the authority of this provision, EPA finalized the rule ‘‘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 39 subsectors. The rule exempted applications with a current qualification for ASAs. 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. EPA is therefore proposing how the Technology Transitions regulations would apply to applications if EPA were to determine that those applications are not eligible for renewal for the full fiveyear period. The Act also includes a provision for the public to petition EPA to designate an application as eligible for priority access to allowances. EPA is proposing a procedural process for submitting a petition under this provision and to define minimum required elements of such a petition. In addition, this rulemaking proposes narrow revisions 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 regulations. EPA is also proposing to authorize an entity to produce regulated substances for export for application-specific uses pursuant to subsection (e)(5). Lastly, EPA is proposing certain confidentiality determinations for newly reported information if this rulemaking is finalized as proposed. B. Summary of Proposed Actions Application-specific allowance holder review: EPA is describing how it proposes to interpret the criteria under subsection (e)(4)(B) of the AIM Act and evaluate the six categories of ASA holders listed in subsection (e)(4)(B)(v) of the Act. EPA is proposing to renew the following applications for the full five-year period from 2026–2030: propellants in MDIs, 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 co-proposing two options for defense sprays: do not renew or renew for a two-year period through 2027. EPA is co-proposing three options for SCPPU foams for marine and trailer uses: do not renew, renew for a two-year period through 2027, or renew for the full five-year period from 2026– 2030 with allowance amounts determined based on the exchange value (EV) of a substitute HFC. In cases where EPA is proposing to change the status of ASA holders, this proposal also details how the Technology Transitions regulations would apply to those applications. Application-specific allowance holder petitions: EPA is proposing 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 an essential use. Application-specific allowance methodology: EPA is proposing targeted revisions to the existing ASA methodology: 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 purchasing history, how to account for inventory in allocation decisions, to establish a setaside of 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 is also proposing new requirements for conferrals of MCMEU allowances and an opportunity to return unneeded ASAs. Other regulatory revisions: EPA is proposing other specific regulatory changes 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: EPA is proposing to authorize an entity to produce for export for application-specific uses abroad. Handling of confidentiality for newly reported information: EPA is proposing certain confidentiality determinations for newly reported information if this rulemaking is finalized as proposed. II. General Information A. Does this action apply to me? You may be potentially affected by this proposal 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 lotter on DSK11XQN23PROD with PROPOSALS2 NAICS code 325120 325199 325211 325412 325414 325998 326220 326150 326299 ................................. ................................. ................................. ................................. ................................. ................................. ................................. ................................. ................................. VerDate Sep<11>2014 19:38 Sep 13, 2024 NAICS industry description Industrial Gas Manufacturing. All Other Basic Organic Chemical Manufacturing. Plastics Material and Resin Manufacturing. Pharmaceutical Preparation Manufacturing. Biological Product (except Diagnostic) Manufacturing. All Other Miscellaneous Chemical Product and Preparation Manufacturing. Rubber and Plastics Hoses and Belting Manufacturing. Urethane and Other Foam Product. All Other Rubber Product Manufacturing. Jkt 262001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 75901 TABLE 1—NAICS CLASSIFICATION OF POTENTIALLY AFFECTED ENTITIES—Continued NAICS code NAICS industry description 333415 ................................. Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing. Industrial Mold Manufacturing. Semiconductor and Related Device Manufacturing. Other Electronic Component Manufacturing. Electromedical and Electrotherapeutic Apparatus Manufacturing. Truck Trailer Manufacturing. Travel Trailer and Camper Manufacturing. Aircraft Manufacturing. Ship Building and Repairing. Boat Building. Military Armored Vehicle, Tank, and Tank Component Manufacturing. Military Ships, Building, and Repairing. Surgical and Medical Instrument Manufacturing. Plumbing and Heating Equipment and Supplies (Hydronics) Merchant Wholesalers. Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers. Refrigeration Equipment and Supplies Merchant Wholesalers. Industrial Machinery and Equipment Merchant Wholesalers. Industrial Supplies Merchant Wholesalers. Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers. Other Chemical and Allied Products Merchant Wholesalers. Freight Transportation Arrangement. Testing Laboratories. Research and Technology in Biotechnology (except Nanobiotechnology). Solid Waste Collection. Hazardous Waste Treatment and Disposal. Materials Recovery Facilities. Fire Protection. 333511 ................................. 334413 ................................. 334419 ................................. 334510 ................................. 336212 ................................. 336214 ................................. 336411 ................................. 336611 ................................. 336612 ................................. 336992 ................................. SIC 373102 .......................... 339112 ................................. 423720 ................................. 423730 ................................. 423740 ................................. 423830 ................................. 423840 ................................. 423860 ................................. 424690 ................................. 488510 ................................. 541380 ................................. 541714 ................................. 562111 ................................. 562211 ................................. 562920 ................................. 922160 ................................. 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. lotter on DSK11XQN23PROD with PROPOSALS2 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) (see 42 U.S.C. 7607(d)(1)(I)) (CAA section 307(d) applies to ‘‘promulgation or revision of regulations under subchapter VI of this VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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, facilitating the transition to next-generation technologies by restricting use of these HFCs in the sector or subsectors in which they are used, and promulgating certain regulations for purposes of maximizing reclaiming and minimizing releases of HFCs from equipment and ensuring the safety of technicians and consumers. This proposal relates to the first area and addresses restrictions in the second area for impacted subsectors. The Act required EPA, for the fiveyear 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. EPA intends to finalize this rulemaking ahead of the allocation of calendar year 2026 PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 allowances. Without finalization of this rulemaking, all applications would be ineligible for application-specific allowances for calendar year 2026. 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 the exclusive use of regulated substances 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 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 E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75902 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 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 review requirements 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 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 restrictions promulgated under the Technology Transitions Program are not currently applicable to any application receiving an ASA (40 CFR 84.56(a)(2)). To the extent that this proposal would result in an application no longer receiving an ASA, this action also proposes the Technology Transitions Program restrictions that would apply to that application, if any, based on EPA’s consideration of the factors listed in subsection (i)(4) of the AIM Act, should EPA finalize a determination that an application can no longer receive an ASA. Prior to proposing a rule, subsection (i)(2)(A) of the Act directs EPA to consider negotiating with stakeholders in the sector or subsector subject to the potential rule in accordance with negotiated rulemaking procedures established under subchapter III of chapter 5 of title 5, United States Code (commonly known as the ‘‘Negotiated Rulemaking Act of 1990’’). If EPA makes a determination to use the negotiated rulemaking procedures, subsection (i)(2)(B) requires that EPA, to the extent practicable, give priority to completing that rulemaking over completing rulemakings under subsection (i) that are not using that procedure. If EPA does not use the negotiated rulemaking process, subsection (i)(2)(C) requires the Agency to publish an explanation of the decision not to use that procedure before commencement of the rulemaking process. The Negotiated Rulemaking Act of 1990 (5 U.S.C. 563) provides seven criteria that the head of an agency should consider when determining whether a negotiated rulemaking is in the public interest, namely, whether: (1) there is a need for a rule; (2) there are a limited number of identifiable interests that will be VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 significantly affected by the rule; (3) there is a reasonable likelihood that a committee can be convened with a balanced representation of persons who can adequately represent the identified interests and are willing to negotiate in good faith to reach a consensus on the proposed rule; (4) there is a reasonable likelihood that a committee will reach a consensus on the proposed rule within a fixed period of time; (5) the negotiated rulemaking procedure will not unreasonably delay the notice of proposed rulemaking and the issuance of the final rule; (6) the agency has adequate resources and is willing to commit such resources, including technical assistance, to the committee; and (7) the agency, to the maximum extent possible consistent with the legal obligations of the agency, will use the consensus of the committee with respect to the proposed rule as the basis for the action proposed by the agency for notice and comment. If a head of agency determines that the use of the negotiated rulemaking procedure is in the public interest, an agency may convene a federally chartered advisory committee, and may rely on an appointed convener under 5 U.S.C. 563(b) to assist with ascertaining the names of persons who are willing and qualified to represent interests that will be significantly affected by the proposed rule. If the agency decides to establish a negotiated rulemaking committee, the agency must publish in the Federal Register and in relevant publications a notice announcing the agency’s intention to establish a negotiated rulemaking committee, a description of the subject and scope of the rule, a list of the interests which are likely to be significantly affected by the rule, a list of the persons proposed to represent such interests and the proposed agency representatives, a proposed agenda and schedule for completing the committee’s work, a description of the administrative and technical support to be provided to the committee by the agency, a solicitation for comments on the proposal to establish the committee and on the proposed membership of the committee, and an explanation of how a person may apply or nominate another person for membership on the committee. The agency must provide at least 30 calendar days for the submission of comments and applications related to the membership of the committee. In establishing and administering such a committee, the agency shall comply with the Federal Advisory Committee Act, unless an exception applies. If the committee reaches consensus on a PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 proposed rule, the committee shall transmit a report containing the proposed rule to the Federal agency. If the committee does not reach a consensus on a proposed rule, the committee may transmit a report specifying any areas upon which consensus was reached. The proposed rule is still subject to public comment, and for purposes of a rulemaking developed under the AIM Act, the requirements of CAA section 307(d). Before proposing the 2023 Technology Transitions Rule, consistent with AIM Act subsection (i)(2)(A) and (C), EPA considered whether to negotiate with stakeholders using the negotiated rulemaking procedure provided for in the Negotiated Rulemaking Act of 1990, decided not to use such procedures, and published its explanation of that decision in the Federal Register (86 FR 74080, December 29, 2021). EPA noted in the final 2023 Technology Transitions Rule that, where appropriate, EPA will consider recent Agency actions and decisions related to restrictions on the use of HFCs in sectors and subsectors for its consideration on using negotiated rulemaking procedures. EPA did not, for example, separately consider using negotiated rulemaking for four petitions that were received after a rulemaking process had already been commenced regarding the same sectors and subsectors, nor did EPA consider anew whether or not to use negotiated rulemaking in an interim final rule (88 FR 88825, December 26, 2023) that amended one provision of the 2023 Technology Transitions Rule for one subsector. Similarly, the proposed changes to the Technology Transitions regulations contemplated in this action would be targeted at a subset of applications within a subsector subject to those restrictions. EPA is not addressing a new subsector in this proposal, nor even proposing a different level of stringency from already promulgated restrictions; rather, this action proposes only to establish deadlines by which applications would need to comply with Technology Transitions regulations in the event that those applications no longer receive ASAs. EPA does not believe that the public interest would be served by using the negotiated rulemaking procedure for this limited adjustment to the Technology Transitions regulations, especially because timeliness is a concern. E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules III. Background fluorinated HFCs are chemicals that have no known natural sources. HFCs are used in a variety of applications such as refrigeration and air conditioning, foam blowing agents, solvents, aerosols, and fire suppression. HFCs are potent greenhouse gases (GHGs) with 100-year global warming potentials (GWPs) (a measure of the relative climatic impact of a GHG) that can be hundreds to thousands of times that of carbon dioxide (CO2). HFC use and emissions have been growing worldwide due to the global phaseout of ozone-depleting substances (ODS) under the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol), and the increasing use of refrigeration and airconditioning equipment globally. HFC emissions had previously been projected to increase substantially over the next several decades. In 2016, in Kigali, Rwanda, countries agreed to adopt an amendment to the Montreal Protocol, known as the Kigali Amendment, which provides for a global phasedown of the production and consumption of HFCs. The United States ratified the Kigali Amendment on October 31, 2022. Global adherence to the Kigali Amendment would substantially reduce future emissions, leading to a peaking of HFC emissions before 2040. 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) and have high impacts as measured by the quantity of each substance emitted multiplied by their respective GWPs. These 18 HFCs are all saturated, meaning they have only single bonds between their atoms, and therefore have longer atmospheric lifetimes than fluorinated compounds that are unsaturated. More detailed information on HFCs, their uses, and their impacts is available in the Allocation Framework Rule (86 FR 55116, October 5, 2021). anthropogenic 2 lotter on DSK11XQN23PROD with PROPOSALS2 IV. How is EPA assessing whether to extend eligibility for applicationspecific 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 2 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. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 five years. The statute says 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)(1)). In this section, we outline how EPA interprets these criteria, what information the Agency will consider in assessing these criteria, and a proposed framework for evaluating if an application is eligible for renewal for up to five years. EPA notes that under the statute, these criteria also apply to new applications that may be listed, but, aside from Section VI addressing the petition process, this proposed rulemaking is primarily focused on the renewal of existing applications. However, 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 rulemaking. 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 is proposing that the best interpretation of this criterion is that if there is an available substitute that is both safe and technically achievable, an application would not meet this criterion for renewal. EPA acknowledges that the statutory language could be ambiguous as to whether a substitute must be both safe and technically achievable. However, reading the statutory language differently than proposed would seem to create a perverse outcome. In such a scenario, an application would become ineligible for ASAs if EPA identified a substitute that was technically achievable, but not safe. EPA reads the context of subsection (e)(4) as indicating that Congress intended that listed applications continue to receive priority access to allowances as long as the PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 75903 application needed to use regulated substances. In a situation where an identified substitute is not safe, EPA believes that it would be Congress’s intent to continue to provide priority access to allowances such that the application was not prematurely forced to transition to an unsafe substitute. Similarly, it does not seem reasonable to take away access to ASAs when an identified substitute is safe, but not technically achievable. If the application cannot technically implement the transition to a substitute, it seems unrealistic to think that there could be a transition away from regulated substances. Accordingly, EPA proposes to interpret the statutory text and surrounding framework such that if EPA determines there is no safe substitute that is technically achievable for an application, or a technically achievable substitute is not safe, the application would meet the first criterion for renewal. In looking at potential substitutes for an application under subsection (e)(4)(B)(i)(I), EPA is proposing 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 general function as the current HFC in use. EPA is proposing that such an interpretation of the term ‘‘substitute’’ is most consistent with the statutory language of subsection (e)(4)(B) as a whole. Specifically, in its direction to EPA to review applications receiving ASAs every five years, Congress directed EPA to ‘‘review the availability of substitutes, including any quantities of the regulated substance available.’’ This sentence structure, indicating that examination of quantities of regulated substances available would be included as part of analyzing what substitutes are available, suggests that regulated substances are part of the universe of substitutes that Congress intended EPA to include in its review. In addition to EPA’s determination that such an approach is more consistent with the statutory language than an approach of only looking at non-regulated substances as substitutes, EPA has also identified other benefits of this interpretation. For example, it would seem to be a perverse outcome if EPA renewed an application’s eligibility for ASAs at historic quantities where there was an available substitute that did not require any or required fewer allowances to procure. Non-HFCs may be able to fill the same role as the HFC, often functioning as a chemical-for-chemical E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75904 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules replacement or requiring limited design changes. EPA is proposing, as part of its assessment of what chemicals may be determined to be safe as a substitute for applications under review, to only include substances, including blends of substances, with a lower GWP than the regulated substance currently in use. As explained in the Allocation Framework Rule (86 FR 55116, October 5, 2021), the HFC phasedown’s significant benefits are derived from the reduction of production and consumption of certain chemicals on a GWP-weighted basis.3 Considering higher-GWP substances or blends of substances would run against this overall objective and could reduce the benefits of the HFC phasedown, especially if this rulemaking led to the uptake of higher-GWP non-HFC technologies (e.g., semiconductor manufacturers transitioning back to using higher-GWP perfluorocarbons (PFCs)). In addition, this proposed interpretation aligns with the approach under the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023), which established GWP limits for subsectors and considered substitutes as only those with lower GWPs. Further discussion regarding the sources EPA is relying on to determine if a substitute is safe (e.g., listed by EPA’s Significant New Alternatives Policy (SNAP) Program) can be found below. In addition to looking at chemicals that could serve as substitutes, EPA is also including 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). Such an approach is consistent with the common understanding of the plain language definition of ‘‘substitute.’’ For example, Merriam Webster defines substitute as a thing that ‘‘takes the place of function of another’’ and the Oxford dictionary similarly notes a substitute is a ‘‘thing acting or serving in place of another.’’ In general, not-inkind technologies can serve the need of some applications, so it is appropriate to include them within the scope of assessing safe and technically achievable substitutes. It would be unnecessarily limiting to exclude from the scope of the analysis a technology that performs the same general function for the application as the current HFC in use does. EPA also acknowledges that 3 While the AIM Act calls for reduction of HFC production and consumption on an EV-weighted basis, EV and GWP are numerically equal. Lower GWP is an important consideration for whether a substitute is safe, so EPA is using GWP instead of EV in the discussion in this section of the rule. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 market pressure from the HFC phasedown may encourage a transition into not-in-kind technologies (and nonHFCs) by limiting the supply of HFCs on a GWP-weighted basis, while the Technology Transitions Program prohibits the use of certain HFCs in certain sectors and subsectors. There is also precedent for considering not-inkind technologies under CAA Title VI, such as the SNAP Program and Nonessential Product Bans, and the AIM Act Technology Transitions Program, all of which also evaluate not-in-kind substitutes as possible alternatives to ODS and HFCs, respectively. EPA is aware that a transition to certain substitutes will require changes to how the HFCs are used in the application (e.g., accommodating a flammable HFC in the manufacturing process). Shifts to not-in-kind technologies will inherently require a change in manufacturing and/or the product, so it would be a consistent approach to also not outright exclude substitute chemicals that would similarly require a change in manufacturing process or the product. EPA does not want to unnecessarily limit the scope of the substitute analysis at this point in time, and therefore is considering a wide range of possible safe and technically achievable substitutes. The phasedown of HFCs is still nascent, and, at this point, we cannot know the full breadth of technologies that will be developed as replacements for the current HFCs in use. The Agency is proposing to assess this criterion, specifically that a substitute is safe, technically achievable, and available, on an application-wide basis. For applications that use multiple HFCs, a 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 viable substitute for known subapplications. EPA’s interpretation is that it would be unreasonable to consider an application as having met this criterion and thereby ineligible for renewal unless all known sub-applications can successfully transition away from their currently used HFC(s). EPA’s evaluation of each application is not intended to be a company-specific review; the commercialization 4 of a substitute by 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, there are additional barriers to commercialization, which are considered when assessing if the identified substitute is available for an entire application. In addition, EPA’s interpretation of the statutory language is that applications are intended to be viewed as a whole and not necessarily renewed by sub-application. Specifically, the listing of the applications in subsection (e)(4)(B)(iv)(I) does not break down the application into sub-applications (e.g., ‘‘defense sprays’’ is not listed as multiple separate applications, e.g., ‘‘personal defense sprays,’’ ‘‘law enforcement defense sprays,’’ and ‘‘bear defense sprays’’). Similarly, for applications that use multiple HFCs and have specific uses for the individual HFCs, it would not be reasonable to assess this criterion as being met if an application does not have an available safe and technically achievable substitute for each HFC. It is EPA’s opinion that Congress did not intend for an application to lose its eligibility for ASAs if it could only transition some, but not all, of the HFCs currently used in the application. EPA reviewed a range of sources in developing its assessment of the availability of safe, technically achievable substitutes for each application at issue here. Sources include, but are not limited to: manufacturer announcements; information provided by stakeholders under part 84 reporting requirements and other communications; relevant Federal and State regulations; evaluations carried out under the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) 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) standards for MDIs); and peer-reviewed technical reports. The Technical Support Document (TSD) ‘‘Draft Review of Applications in the American Innovation and Manufacturing (AIM) Act Section (e)(4)(B)(4)’’ contains a comprehensive array of sources we looked at for each application, and EPA is taking comment on other relevant sources that should be considered. 4 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. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules As noted, EPA is considering the listings under the SNAP Program as part of its assessment. The SNAP Program has an established history evaluating substitutes for ODS, many of which are also possible substitutes for HFCs. Where relevant, in its assessment of the availability of safe substitutes, EPA considered information from the SNAP Program, including the listings themselves and the information underlying SNAP Program decisions. The SNAP Program does not evaluate substitutes for semiconductor etching and cleaning of CVD chambers. Some military applications are covered under the SNAP Program. In other cases, such as MDIs and SCPPU foams, while these applications are within the scope of the SNAP Program, there may be other sources of information (e.g., the FDA, company information) that may be more appropriate. In its 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 human health risks analyzed include safety, and in particular, flammability, toxicity, and exposure (of workers, consumers, and the general population) to chemicals with direct toxicity; environmental risks include ozone depletion potential (ODP) and GWP. 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. EPA evaluates substitutes under the SNAP Program on an ongoing basis and over time has listed numerous substances as ‘‘acceptable,’’ ‘‘acceptable, subject to use conditions,’’ or ‘‘acceptable, subject to narrowed use limits.’’ ‘‘Acceptable subject to use conditions’’ indicates that a substitute is acceptable only if used in a certain way. Use conditions can include, but are not limited to, warning labels, compliance with relevant safety standards, and restrictions on where a substitute is used (e.g., HFC–134a is acceptable for FDA-approved MDIs for medical purposes but is not acceptable for a majority of aerosol uses, and some fire suppression substitutes may only be used in typically unoccupied spaces). EPA can also list substitutes as ‘‘acceptable subject to narrowed use VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 limits’’ under SNAP, indicating that a substitute may be used only within certain specialized applications within an end use and may not be used for other applications within that end use (e.g., SNAP has previously listed some substitutes as acceptable for only narrowed use limits for military or space- and aeronautics-related applications). In listing of a chemical as acceptable or acceptable subject to use conditions directly relevant to the application, the SNAP Program makes an assessment that the benefits outweigh the risks relative to other alternatives; these listings are relevant data to support EPA’s determination under AIM Act subsection (e)(4)(B) on whether a substitute is ‘‘safe’’ under the interpretation proposed in this rulemaking. EPA lists substitutes as ‘‘unacceptable’’ under SNAP if the Agency determines that they may increase overall risk to human health and the environment, compared to other alternatives that are available or potentially available for the same use. EPA has listed substitutes as unacceptable considering the human health criteria described above, as well as the environmental factors considered under SNAP. For example, SNAP has listed certain substitutes as unacceptable due to unusually high ODP, GWP, toxicity and exposure, and flammability (where it is not clear how to mitigate risks sufficiently). Substitutes listed as unacceptable in an end use are prohibited for that use and therefore would not be an available safe or technically achievable substitute for an application under our proposed interpretation of this criterion. The Agency is also reviewing the evaluations carried out for the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) and relying on information and assessments done in that rulemaking, as appropriate. In establishing restrictions, the Technology Transitions Program factored in the availability of substitutes, considering both safety and technological achievability, among other factors. The Technology Transitions Program relied on information from a wide range of sources when assessing availability, including but not limited to, SNAP, the Montreal Protocol’s Technology and Economic Assessment Panel (TEAP), standards bodies, and information provided by industry, States, and environmental non-governmental organizations. Though the Technology Transitions Program looked subsectorwide, not at specific end uses, and did not specifically analyze the applications currently receiving ASAs under PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 75905 subsection (e)(4)(B)(iv), some of these applications (e.g., defense sprays and SCPPU foams for marine and trailer uses) have similarities with the subsectors currently subject to restrictions. As a result, in carrying out the assessments undertaken in this rulemaking, EPA is considering relevant information from the Technology Transition Program’s evaluations. In the assessment undertaken in this rulemaking, EPA is also taking into account other Federal standards and regulations, both within EPA and from other U.S. Government agencies. For many applications under review in this rulemaking, there are applicable regulations and standards that outline requirements related to the chemicals or technologies used within an application. In these situations, such standards and regulations may in some instances limit use of possible substitutes. In some instances, it may not be possible for a substitute to ever be used. In other instances, applicable regulations may require entities to go through a regulatory approval process that would affect when an application can transition to a substitute. Some examples of regulations and standards we are considering as part of our proposed evaluations include EPA’s regulations covering pesticides such as bear spays and dog sprays (subapplications of defense sprays) under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. 136– 136y), the FDA’s requirements for MDIs, and the U.S. Federal Aviation Administration’s (FAA) requirements for onboard aerospace fire suppression. Additional standards and regulations for each application are discussed further in the relevant chapter of the TSD. EPA invites comment on any other standards or regulations that entities think EPA should consider in determining an application’s ability to transition to a substitute. EPA also considered the work undertaken by the Montreal Protocol’s TEAP in the proposed application assessment given the TEAP’s analytical work on substitutes and alternative technologies to substances controlled under the Montreal Protocol, including HFCs. TEAP assesses technical and economic information that serves as the basis for parties’ assessment of control measures of substances under the purview of the Montreal Protocol. Such information is related to substitutes that may replace the substances controlled under the Montreal Protocol and alternative technologies that may be used without adverse impact on the ozone layer and climate, production and consumption of controlled substances, E:\FR\FM\16SEP2.SGM 16SEP2 75906 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 emissions of controlled substances, potential alternatives for exempted uses and others, as mandated by the parties. This assessment includes applications listed in AIM subsection (e)(4)(B)(iv). In addition, TEAP develops assessments in response to decisions taken by the parties to the Montreal Protocol, including but not limited to Decision XXVIII/2, which call for an assessment of alternatives to HFCs every five years. EPA particularly looked at the 2022 Assessment Reports by the Medical and Chemical Technical Options Committee, concerning semiconductors, aerosols, and MDIs; the Flexible and Rigid Foams Technical Options Committee (FTOC); and the Fire Suppression Technical Options Committee (FSTOC). TEAP reports have included information on technical achievability and safety. TEAP reports are developed by experts around the world and provide insight into the HFC substitutes currently in use and under development in the United States and globally. As such, EPA is considering relevant information from these reports when carrying out the assessment of available safe or technically achievable substitutes undertaken in this rulemaking. As described throughout this section, EPA is considering information from a wide range of sources in its assessment of the availability of safe or technically achievable substitutes for the applications receiving ASAs under subsection (e)(4)(B)(iv)(I), and no one source will be determinative for this criterion. Further information about sources consulted for each application can be found in Section V of this preamble and the TSD. EPA invites comment on its interpretation of ‘‘no safe or technically achievable substitute will be available’’ and the sources it is considering in its assessment of this criterion. 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. 7675(e)(4)(B)(i)(II)). As described here and in the sections of the proposed rule discussing each of the six applications, a determination that there is insufficient supply could be based on a number of VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 different factors, 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., federally required purity specifications). Priority access to allowances through ASAs has the potential to address insufficient supply of HFCs by allowing entities that use HFCs in an eligible application to more easily procure HFCs from a domestic supplier by conferring allowances to authorize production or import or to import the HFCs themselves. In this proposed rulemaking, EPA is interpreting this criterion as requiring an assessment related to the supply of the HFC(s) currently used in an application’s equipment or to manufacture the application’s products for use. Under this proposed interpretation, EPA would not evaluate HFC(s) currently used exclusively for research and development in assessing whether there is insufficient supply. EPA recognizes that the research and development process may find various alternatives to be unsuitable for an application. Therefore, it would be premature to consider supply of potentially unsuitable HFC alternatives until such time as they have been commercialized or are close to commercialization. Further, it could also have the perverse effect of limiting research into alternatives if an application’s initial research could prematurely contribute to removal from eligibility for ASAs. EPA is proposing to consider regulated substances supplied by chemical manufacturers in its assessment of supply. EPA interprets the reference to regulated substances ‘‘from chemical manufacturers’’ in 42 U.S.C. 7675(e)(4)(B)(i)(II) as direction from Congress to assess supply from chemical manufacturers only, and that this direction could cover both virgin and recovered and reprocessed HFCs. EPA is proposing to include HFCs produced domestically and those that are produced abroad and imported in its assessment of supply under this criterion. Congress directed EPA to consider regulated substances ‘‘from chemical manufacturers . . . , including any quantities of a regulated substance available from production or import’’ in its assessment under 42 U.S.C. 7675(e)(4)(B)(i)(II). Because of Congress’s reference to production and import of regulated substances, and the lack of any language suggesting that chemical manufacturers should be read as limited to only U.S. producers, EPA intends to consider imported material from foreign HFC producers in addition to regulated substances from domestic PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 producers. As a result, EPA is proposing not to consider HFC supply held by and available to entities that do not produce or import HFCs in its assessment of this criterion. This would exclude quantities of HFCs held by entities that do not produce or import HFCs with allowances, potentially including reclaimers, distributors, HFC blenders,5 and HFC repackagers. EPA considers this proposed interpretation to be most consistent with the statutory language in 42 U.S.C. 7675(e)(4)(B)(i)(II). The Agency is proposing to consider multiple sources of data in its evaluation of whether supply of a regulated substance is insufficient to accommodate an application. Specifically, in developing the analysis for each application, EPA has drawn 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 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. EPA is intending to 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. EPA is taking comment on these and any other sources the agency should consider when assessing insufficient supply. EPA is proposing to assess insufficient supply on an applicationwide basis. If an application uses multiple HFCs, and the supply of at least one of those HFCs is insufficient to accommodate the application, EPA would consider the criterion met for the application. EPA interprets 42 U.S.C. 7675(e)(4)(B)(i)(II) to require the Agency to review the supply of the regulated substance for each regulated substance an application uses. If there is an insufficient supply for one HFC, EPA would determine that this criterion is met, and the application would continue to be eligible for ASAs, assuming the first criterion regarding substitutes is also met. EPA is proposing 5 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 (86 FR 55116) and the discussion in the 2024 Allocation Rule (88 FR 46863). E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules that such an approach is the best interpretation of the AIM Act direction in 42 U.S.C. 7675(e)(4)(B)(i)(II) that if both criteria are met, ‘‘the Administrator shall authorize the production or consumption, as applicable, of any regulated substance used in the application.’’ A converse approach would result in EPA not renewing the ASA eligibility of an application that has no available substitutes and there is an insufficient supply available of a regulated substance used by that application. EPA is interpreting the AIM Act to provide ASAs to an application where at least one regulated substance that manufacturers are capable of securing is insufficient to accommodate the application, even if the supply of a different regulated substance is not insufficient. In addition to looking generally at the supply of HFCs, EPA is also considering 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. EPA is considering any applicable relevant Federal regulations and standards (examples listed above in Section IV.A.), including required regulatory approvals and purity levels, that could limit the supply of the HFC(s) used within an application. lotter on DSK11XQN23PROD with PROPOSALS2 C. What is EPA’s proposed 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 the 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 interprets the statutory language to mean 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. If either or both criteria are not met as of January 1, 2026, EPA proposes to not renew an application’s eligibility to receive ASAs. Put another way, if EPA determines, for example, that supply is not insufficient to accommodate an application as of January 1, 2026, EPA would propose to not renew that application’s eligibility VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 for ASAs, regardless of whether a substitute is available. If both statutory criteria are met as of January 1, 2026, EPA intends to 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 will deem an application eligible to receive ASAs. For example, if EPA determines that there is no substitute available as of January 1, 2026, but a substitute will be available by January 1, 2028, 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 deemed 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, EPA would renew the application’s eligibility to receive ASAs for only two years (i.e., calendar years 2026 and 2027). If EPA determines that an application has a safe or technically achievable substitute available that is a regulated substance, EPA proposes to evaluate the supply of the substitute HFC and assess if supply of the substitute HFC is insufficient to accommodate the application. If the Agency did not do this, the application would not be eligible for renewal because it had met the substitute criterion, regardless of the supply of this substitute HFC; EPA sees this as counter to Congress’s intent when it established priority access to allowances for these applications. Further, it is EPA’s assessment that it would be counterproductive to an application’s efforts to transition away from the currently used HFC(s) if EPA did not consider the supply of the HFC substitute when assessing eligibility for renewal for ASAs (i.e., if an application had insufficient supply of the substitute HFC, an entity may be forced to return to using its original HFC). Under the framework proposed in this rulemaking, 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 would allow an entity transitioning to a lowerGWP HFC to remain eligible to receive allowances until supply of that lowerGWP HFC is no longer insufficient (or a non-HFC substitute is identified). EPA is also proposing that if an application is eligible to be renewed 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. The direction PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 75907 in the statute under AIM subsection (e)(4)(B)(v) is to review each ‘‘application receiving an allocation of allowances under clause (i) or (iv) . . . not less frequently than once every 5 years,’’ and, if the criteria are met, EPA shall renew the application ‘‘for renewable periods of not more than 5 years.’’ EPA interprets this language, coupled with the lack of language in the statute directing EPA to do another review of an application that is no longer eligible for allowances at the end of its renewal period, as direction that EPA is not required to re-review this application for eligibility for ASAs ahead of the next five-year period. Congress’s direction to undertake a renewal is specific to applications receiving ASAs under 42 U.S.C. 7675(e)(4)(B)(i) and (iv). If an application is renewed for only two of five years at this stage, when the next renewal period arises, it would not be receiving ASAs under 42 U.S.C. 7675(e)(4)(B)(i) or (iv). Therefore, EPA is proposing that the best interpretation of the AIM Act language is that once EPA determines that an application is no longer eligible for ASAs, EPA would not re-review that application at any future time. If an application is determined to no longer be eligible for ASAs and an entity is interested in being considered for eligibility for ASAs again, the entity would need to petition the Agency to be evaluated for eligibility, and the Agency would then undertake the relevant petition review process; see Section VI of this preamble for further discussion of the petition process requirements. 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 42 U.S.C. (e)(4)(B)(v)(I). Pursuant to that review, in this rulemaking EPA is proposing and seeking comment on 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 begins with an overview of total projected U.S. HFC consumption and then proceeds into EPA’s assessment of the criteria for each application and proposed decision regarding whether to renew each application’s eligibility to receive ASAs. EPA provides additional E:\FR\FM\16SEP2.SGM 16SEP2 75908 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 information in the TSD available in the docket for this rulemaking. A. Overview of Total U.S. HFC Consumption This section contains a summary of total projected U.S. HFC consumption. We assess specific HFC supply considerations on an application-byapplication basis below. EPA provides additional information regarding this analysis in the TSD. The global and domestic HFC markets have been rapidly changing since agreement to the Kigali Amendment to the Montreal Protocol in 2016.6 The domestic HFC market has been further changing since the passage of the AIM Act in 2020 and the subsequent promulgation of domestic regulations. In 2021, EPA promulgated regulations to implement the required phasedown of HFC production and consumption in the United States. Additional regulations coming into effect, as early as January 1, 2025, will also further alter this overall market and impact demand for certain HFCs. EPA anticipates the market will be dynamic as it responds to these additional regulations and continues adapting to the global phasedown of HFCs. In the addendum to the HFC Phasedown Regulatory Impact Analysis (RIA) updated for the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023), EPA modeled 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. The 2023 Technology Transitions Rule established subsector-level GWP limits and restrictions on the use of certain regulated substances. These requirements take effect as early as January 1, 2025, and as late as January 1, 2028. While some subsectors already use either HFCs that are below the GWP limit or non-HFC substitutes, other subsectors will need to transition away from their currently used HFC to comply with these regulations. In addition, 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 ‘‘Emissions Reduction and Reclamation Rule’’) has proposed requirements that reclaimed and recycled HFCs be used for certain equipment in the refrigeration, air6 The United States ratified the Kigali Amendment in October 2022. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 conditioning, and heat pump sector and fire suppression sector (onboard aerospace fire suppression, as an application eligible for ASAs, is currently exempt) as early as early as January 1, 2028. If finalized as proposed, these requirements are also expected to limit use of virgin HFCs for specific activities (e.g., servicing for certain refrigeration and air conditioning subsectors).7 In general, there is uncertainty associated with these estimates, as they are based on expected industry transitions in response to AIM Act rulemakings and predicted market dynamics. If HFC consumption is lower than the amount allowed under the AIM Act in a given year, the result may be that there are more allowances than are needed to meet market demand in that year.8 If demand for HFCs is lower than the cap, it is possible that 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. While current ASA holders can access material produced using general pool allowances or purchase HFCs on the open market, if demand by non-ASA entities is lower than the cap, it is possible that the ‘‘leftover’’ allowances could be used to supply ASA holders and therefore decrease the need for ASAs. It is also possible that all allowances are used, and the HFCs that are not sold in that year are stockpiled in anticipation of future needs. The Agency cannot fully predict shifts in chemical production, domestically and internationally, that may occur. As the HFC phasedown progresses, EPA anticipates suppliers may focus their business on supplying lower-GWP HFCs, since production and consumption of these lower-GWP HFCs requires the expenditure of fewer allowances for the same volume of 7 See Emissions Reduction and Reclamation Rule (88 FR 72216, 72292, October 19, 2023). 8 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). PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 substance.9 At the same time, sectors that are not yet ready to transition and are not covered by the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) may continue to use higherGWP HFCs and could grow in size. EPA also does not yet have data on how the market is reacting to the 2024 stepdown in HFC allowances (from 90 percent of the HFC consumption baseline to 60 percent of baseline); at the time of this proposal the market is only a few months into adjusting to the 2024 HFC stepdown, and EPA has received only one set of quarterly reports. Among other things, data on market reactions could inform how the market will react to the next large stepdown in 2029 (from 60 percent of baseline to 30 percent of baseline). For example, the decrease in available consumption allowances could encourage users of HFCs to transition faster than projected. However, given the significant amount of HFCs in inventory at the end of 2022, the transition away from HFCs could also be slower than projected. Though it seems likely that demand could be below the cap for the 2025–2028 period based on existing regulations, it is uncertain if 2029 (the fourth year of the five-year renewal period) will see similar space between consumption and allowed consumption under the cap. EPA also notes the 2024 stepdown in permissible production and consumption is unique given its scale and that it is occurring early in the overall AIM Act implementation. There will be significantly more information regarding the state of the HFC market after the January 1, 2024, stepdown at the time EPA is finalizing this proposal, and EPA intends to analyze available data to inform its decisions regarding whether supply of individual HFCs is insufficient to accommodate the individual applications. In addition, there are also other constraints on supply of specific HFCs used in the six applications that EPA is taking into consideration (e.g., purity specifications required by Federal standards and regulations and limited number of producers), as explained in more detail in Sections V.B through V.G. of this preamble. Supply chain dynamics for each of the six 9 In the Allocation Framework Rule, EPA established a system whereby allowances are measured on an EV equivalent basis. 86 FR at 55142. To determine the total number of allowances needed, producers and importers multiply the quantity of the HFC they seek to produce or import by its EV. For example, an importer would need to expend 143 consumption allowances to import 100 kilograms (kg) of HFC–134a. Given the variation in EVs, one would need to expend 5.3 allowances to import 100 kg of HFC–152a. E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules applications could affect whether general pool allowances would be able to be used to provide HFCs for each application. lotter on DSK11XQN23PROD with PROPOSALS2 B. 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)(ff) 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, purified from technical grade HFC–227ea and HFC–134a, respectively, are both used in MDIs as a propellant. EPA is proposing to determine 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 this application through calendar year 2030. Therefore, EPA proposes 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. 1. Availability of Safe and Technically Achievable Substitutes EPA has not identified substitutes that it would propose to deem safe and technically achievable that are available for propellants in the metered-dose inhalers application at this time. In assessing the availability of substitutes for MDIs, EPA reviewed information from sources such as the FDA, the EPA SNAP Program, the TEAP’s Medical and Chemicals Technical Options Committee (MCTOC), industry, scientific journal articles, and more, which is described in greater detail in the TSD included in the docket for this proposed action. After reviewing relevant information and analyses, EPA is aware of two potential replacements for HFC–134a and HFC–227ea as propellants in MDIs, specifically HFO– 1234ze(E) and HFC–152a. MDIs, including those containing an alternative propellant other than HFC– VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 134a or HFC–227ea, are subject to the approval requirements under section 505 of the Federal Food, Drug and Cosmetic Act. The process to develop an MDI with a new propellant is complex and will take time. A sponsor (i.e., MDI manufacturer) will need to reformulate the MDI product to use the new alternative propellant and conduct a development program to obtain data, including clinical data, with the new MDI product. If the development program is successful, a sponsor will then need to submit an application to the FDA for approval; the review timeline for a new drug application is 10 to 12 months. The overall process to develop an MDI product containing a new alternative propellant is expected to take years. EPA regularly consulted with the FDA throughout development of this proposed rule, and the reformulation of the majority of MDIs with an alternative propellant may extend beyond the end of the renewal period of 2030. EPA is aware that a few MDI manufacturers have begun the development process, some of whom are expecting to soon begin Phase 3 trials and FDA has stated that it is possible that they may receive new drug applications for a small number of MDI products with alternative propellants by 2030. However, these new drug applications will need to undergo FDA review. For new drug applications that receive FDA approval, the commercialization plans for new MDIs are unknown but is anticipated to take additional time. Unlike for some of the other uses receiving ASAs where commercialization of substitutes across the entire application after those products are first available on the market may take a few years, for MDIs, EPA anticipates that it will take many years before alternatives are available across the application. That is, it will take time for reformulation, approval, and commercialization to occur for each of the individual MDI products used to treat pulmonary disease. For example, manufacturers of generic MDIs may face delay in transitioning to alternative propellants, as generic drug products must be shown to be a duplicate of, and bioequivalent to, a previously approved drug product and rely on FDA’s finding that the previously approved product is safe and effective. Applicants request approval for generic drug products, including MDIs, in Abbreviated New Drug Applications (ANDAs). FDA provides its recommendations for establishing bioequivalence in its product-specific guidances, which for orally inhaled products like MDIs, have PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 75909 generally included some combination of in vitro and in vivo studies, along with recommendations related to the formulation and device. FDA committed to review 90% of standard original ANDAs within 10 months from the date of submission, but often multiple review cycles are necessitated by application quality. This review time can be extended if a site/facility is not ready for inspection. The timing of ANDA approval also depends on, among other things, the patent and exclusivity protections for the previously approved product. According to the MCTOC 2022 Assessment Report, the transition from HFC–134a and HFC–227ea to HFC–152a and HFO–1234ze(E) in MDIs is expected to begin in non-Article 5 countries 10 in 2025 and continue through at least 2032, and no other feasible, lower-GWP MDI propellants have been identified in the United States and abroad.11 HFO– 1234ze(E) and HFC–152a, along with other aerosol propellants, are listed as acceptable by EPA’s SNAP Program and are commercially available and currently used in commercial and/or technical aerosol products. Furthermore, they also have most of the requisite physical properties to function as a propellant in MDIs with significantly lower GWPs than the current HFCs in use; however, neither propellant has significant use in pharmaceuticals today and will require extensive clinical research and FDA approval before they could replace the current HFCs. In light of the above analysis, it is EPA’s assessment that there is no information before the Agency at the time of this proposal to suggest that there would be a safe and technically achievable substitute available prior to the next five-year review. 2. Supply As previously mentioned, pharmaceutical-grade HFC–134a and HFC–227ea (also known as HFA–134a and HFA–227ea) are currently used as propellants in MDIs. 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. Documents the FDA requires as part of the drug approval process must specify the facility manufacturing the HFC propellant. The supply of pharmaceutical-grade HFC– 10 Non-Article 5 countries are defined as developed countries under the Montreal Protocol. For a list of Article 5 and non-Article 5 countries see https://ozone.unep.org/classification-parties. 11 See https://ozone.unep.org/system/files/ documents/MCTOC-Assessment-Report-2022.pdf. E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75910 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 134a comes from technical grade HFC– 134a that is produced at a limited number of production facilities in other countries, including a single plant in the United States, and then purified at a single facility in the United Kingdom and reimported to the United States for consumption in MDIs. In its analysis 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 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. As components of drug products, the use of HFCs in MDIs are subject to certain FDA requirements. FDA’s Current Good Manufacturing Practice (CGMP) requirements under the statute (21 U.S.C. 351(a)) apply to drugs, including their components (21 U.S.C. 321(g)(1)), and include requirements related to methods, facilities, controls, manufacturing, processing, packing, and holding to assure that drugs meet requirements for safety, identity, strength, and quality and purity. FDA has also promulgated CGMP regulations for finished pharmaceuticals in 21 CFR 210 and 211. These CGMP regulations also contain requirements for manufacturers in their handling, control, storage, and testing of components used in manufacture of drug products. HFC purification occurs in dedicated facilities that are subject to FDA CGMP requirements for drugs and devices, as well as other international quality standards, as MDI manufacturers may serve markets in addition to that of the United States. If an MDI manufacturer wanted to change their supplier of pharmaceutical grade HFC, this would trigger FDA review. MDI manufacturers who change suppliers of pharmaceutical grade HFCs would need to provide data to ensure the safety and quality of the new propellant and submit the data to the FDA for review and approval. This data may include pharmacology/toxicology data, product quality data of the new propellant source, and a comparison of the current and proposed new propellant sources, and quality data that demonstrates the drug made with the new propellant meets all applicable quality requirements. Depending upon the comparability of the HFA sources, additional data may be requested by the FDA (21 CFR 314.70). There are three suppliers of pharmaceutical-grade HFC–227ea for VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 use in the United States. One of the suppliers is a producer that purifies the technical grade HFC–227ea at one of their facilities in the United States. The second produces and purifies the pharmaceutical-grade HFC–227ea at their facility in Germany, which is then imported by that producer for distribution to domestic MDI manufacturers. The third supplies pharmaceutical-grade HFC–227ea to the United States from their facility in the United Kingdom. At least two of these facilities also supply pharmaceuticalgrade HFC–227ea globally for MDI manufacture. Producers of pharmaceutical-grade HFC–227ea must also comply with FDA requirements as described above, which limits their ability to switch to other suppliers of HFC–227ea. 3. What is EPA proposing regarding eligibility for application-specific allowances? EPA is proposing 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. EPA is proposing 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, for the reasons outlined earlier in this section, EPA is proposing to determine 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. EPA is proposing to determine that the supply of both HFC– 134a and HFC–227ea is insufficient to accommodate the propellants in MDIs application. C. Defense Sprays Per subsection (e)(4)(B)(iv)(I)(bb) of the AIM Act, EPA has been allocating ASAs for defense sprays since 2021. EPA defined a ‘‘defense spray’’ as ‘‘an aerosol-based spray used for selfdefense, 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. The defense sprays chapter in the TSD contains more details on these product categories. HFC–134a is the PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 primary propellant currently used for the majority of defense sprays and is the only HFC for which EPA has allocated allowances since 2022. After analyzing information relevant to the statutory criteria, as outlined in this section and the TSD, EPA is proposing two options—to not renew the eligibility for entities in this application to receive ASAs or to renew for two years. EPA is also taking comment on the possibility of renewing for a full five-year period. 1. Availability of Safe and Technically Achievable Substitutes There has already been commercialization of alternatives to HFC–134a as a propellant in some defense spray uses, and transition is underway for other parts of the application. Thus, while many defense sprays currently use HFC–134a as a propellant, EPA is aware of entities that have already successfully commercialized alternative propellants, including non-HFCs, in some of their products. The availability of safe and technically achievable substitutes for this application will continue to expand, and EPA will take any additional information into account in the final rulemaking. All dog defense sprays commercialized in the United States and registered with EPA under FIFRA use a non-HFC propellant and have never used an HFC propellant; from company communications, EPA is aware that at least three dog sprays utilize compressed nitrogen gas. In addition, EPA is aware from company communications that two bear sprays using propellants other than HFC–134a are available domestically, one using a non-HFC, HFO–1234ze(E), and one utilizing a lower-GWP HFC, HFC–152a. Both products have been available for multiple years. In addition, there is one bear spray that is manufactured domestically, but sold into the Canadian market, that also utilizes HFO– 1234ze(E). EPA is also aware of at least one defense spray used on humans available in other countries, but manufactured in the United States, that uses HFO–1234ze(E). The commercialization of defense sprays with alternative propellants suggests that there are safe and technically achievable substitutes to HFC–134a available within this application, but it is not clear that they are immediately available for the entire application. In other words, there are multiple different uses within this application, and many of the uses have similar technical requirements (e.g., large spray volume and distance) and safety considerations (e.g., E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 flammability). Thus, EPA’s assessment is that while there are certain differences amongst the uses, generally a propellant commercialized for one use should be safe and technically achievable for another use as explained in more detail below. It is EPA’s understanding that defense sprays have industry-set technical requirements that differentiate them from other aerosols, but that outside of FIFRA requirements for bear sprays,12 defense sprays do not need to be certified or comply with Federal regulatory standards to be sold in the United States. EPA is aware of some voluntary standards for law enforcement sprays, explained in more detail in the defense sprays chapter of the TSD, that specify performance requirements and test methods for the evaluation of these sprays. EPA’s understanding is that defense sprays do not need to be certified under this standard to be sold into the law enforcement market. While some entities have successfully commercialized alternative propellants, there are steps other entities will need to undertake in order to use these alternatives, such as their own research and development process, approval under FIFRA for bear sprays, and potentially changes to manufacturing facilities. For example, EPA is aware of at least two defense spray manufacturers that had made significant investments to potentially transition to a non-HFC as a propellant that did not pursue the transition due to performance concerns.13 The multiple defense spray products commercialized using alternative propellants suggests that past challenges can be overcome, though EPA acknowledges that commercialization of alternative 12 Defense sprays used to deter bears, dogs, and other animals are considered pesticides under FIFRA, so must comply with related requirements, including approval for the inert ingredients (e.g., the propellant) used in the product. In addition to HFC–134a, both HFC–152a and HFO–1234ze(E) are approved for use as inert ingredients for non-food pesticidal use (e.g., animal sprays). Transitioning a product to another approved propellant is a relatively simple process that only requires submission of product performance data (i.e., no tests related to safety, impacts on human health, etc.), and approval can occur in five to seven months. This action would be a Pesticide Registration Improvement Act B680 or B681. See https://www.epa.gov/pria-fees/pria-fee-categorytable-biopesticides-and-pollution-preventiondivision-bppd-amendments for more information. 13 Written testimony submitted for the record from Safariland and Security Equipment Corporation for the U.S. Senate Committee on Environment and Public Works hearing on the AIM Act. https://www.epw.senate.gov/public/index.cfm/ 2020/3/s-2754-american-innovation-andmanufacturing-act-of-2019-written-testimony-andquestions-for-the-record. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 propellants across this entire application may take a few years. Outside of what has already been commercialized by some defense spray companies, EPA is not aware of any other substances under consideration as safe and technically achievable substitutes for this application. 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 TEAP’s MCTOC. However, there are additional technical demands in the defense spray application that provide unique challenges as compared to other types of aerosol applications. For example, given their use for personal protection and crowd control, defense sprays need to have a larger spray cloud and longer spray distance, and stakeholders have noted that law enforcement’s use of defense sprays alongside stun guns (e.g., Tasers) poses specific concerns around flammability. Therefore, alternatives identified as acceptable for aerosols, such as hydrocarbons, may not be available for all defense spray uses. SNAP lists substitutes for aerosols at the end use level, not the application level (e.g., the Agency has listed substitutes for aerosol propellants, which would allow for those substitutes in defense sprays), and TEAP’s MCTOC has not specifically discussed or evaluated defense sprays as an individual use. More information about the specialized nature of defense sprays can be found in the defense sprays chapter of the TSD. To inform determinations in this rulemaking, EPA invites comment on whether the alternatives commercialized for some defense spray uses are not available for the entire application, including any supporting data and information; EPA is particularly interested in data regarding flammability of alternative propellants at the concentrations found in defense sprays and testing results demonstrating safety risks in the situations where defense sprays are typically utilized. 2. Supply The majority of defense sprays currently use HFC–134a as their propellant. HFC–134a is the most widely produced HFC globally and is produced in substantial quantities in multiple countries, including the United States. In 2022, domestic production of HFC–134a was 61,377 metric tons (MT), making up 46 percent of U.S. HFC production on a mass basis; this production amount is also nearly double the domestic production amount of the HFC produced in the second highest PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 75911 quantity. EPA is aware that one domestic producer of HFC–134a is transitioning its facility to produce a different chemical.14 In addition, there are multiple entities that import HFC– 134a. In 2022, 7,363.1 MT of HFC–134a were imported into the United States. Overall, HFC–134a made up approximately 32 percent of total U.S. HFC consumption 15 in 2022 on a mass basis. This application has very limited demand for HFC–134a in comparison to U.S. consumption of HFC–134a; allocated ASAs for this application in 2024 are equivalent to 0.1 percent of calculated domestic consumption of HFC–134a in 2022, on a metric tons of exchange value equivalent (MTEVe) basis. In addition, at the end of 2022, suppliers held 51,902.9 MT of HFC– 134a in domestic inventory, which is equivalent to about 101 percent of calculated consumption of HFC–134a in 2022, and 1,036.8 MT of HFC–134a was reclaimed; the entities both holding this material in inventory and reclaiming these HFCs 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. However, as described in more detail in Section V.A of this preamble, the overall market for HFCs and for HFC– 134a in particular is likely to continue changing in light of the AIM Act and other restrictions. There is uncertainty regarding how the market is reacting to the stepdown of the level of permissible production and consumption of HFCs that took effect on January 1, 2024, and EPA anticipates further market changes as a result of the stepdown taking effect on January 1, 2029. However, 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 will analyze any available information on market adjustment to the January 1, 2024, stepdown and regulations effective January 1, 2025, in finalizing this rulemaking. 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 14 See https://www.arkema.com/usa/en/media/ news/global/corporate/2022/20221006-two-majorsteps-develop-supply-forane-1233zd/. 15 Consumption = (Total Production + Production for Feedstock + Imports [Virgin and Used])¥(Exports [Virgin and Used] + Destruction). E:\FR\FM\16SEP2.SGM 16SEP2 75912 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 requirements for HFCs used in this application. As a result, the supply of recovered and reprocessed HFCs that can be secured from chemical manufacturers is 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.16 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 supply of HFC–134a available to this application. However, as is true in many other parts of EPA’s supply analysis, there is uncertainty regarding the overall supply and demand for reclaimed HFCs. There is additional uncertainty around the supply and demand for HFC–134a as a result of the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023). GWP restrictions under the 2023 Technology Transitions Rule begin taking effect January 1, 2025, with the latest restriction taking effect on January 1, 2028. Overall demand for HFC–134a could fall since all 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 GWP limit (i.e., 700). However, many subsectors subject to Technology Transition restrictions already use chemicals that fall below the GWP restriction levels, and where this is the case EPA does not anticipate any change in demand of HFC–134a. Additionally, some sectors may use blends with HFC– 134a as a component where the GWP is below the applicable limit. Moreover, HFC–134a will likely continue to be 16 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 one recovering the 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. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 used in other applications not subject to these restrictions (e.g., heavy-duty trucks), as well as for servicing existing equipment (e.g., light-duty motor vehicle air conditioning). HFC suppliers may also shift their production and import practices, such that supply of HFC–134a changes. EPA intends to review available information on market shifts that occur when the first set of Technology Transition restrictions take effect on January 1, 2025, and where possible will incorporate any relevant information into the analysis underpinning finalization of this rulemaking. Based on this additional information, at finalization of this proposed rule, EPA may be in a position to determine that the supply of HFC– 134a is not insufficient to accommodate this application once all of the Technology Transition restrictions take effect as of January 1, 2028, if not earlier (i.e., as early as January 1, 2026). EPA also intends to finalize a rulemaking under subsection (h) of the AIM Act, the Emissions Reduction and Reclamation Rule (88 FR 72216, October 19, 2023), in the summer of 2024. EPA proposed a number of requirements including those concerning use of reclaimed HFCs for certain activities. In addition, EPA intends to finalize a rulemaking, ‘‘Trichloroethylene (TCE); Regulation Under the Toxic Substances Control Act (TSCA)’’ (88 FR 74712, October 31, 2023), later this year; this rulemaking has proposed to ban the use of TCE due to unreasonable risk of injury to human health. If finalized as proposed, this would prohibit TCE from being used as a feedstock to manufacture HFC–134a within eight and a half years from when that rule is finalized. While this could end the production of HFC–134a in the United States,17 it is unclear how this change would affect overall supply of HFC– 134a, as there is currently still global supply of HFC–134a that could be imported into the United States. EPA anticipates being able to consider the projected effects of these other rules prior to finalizing this rulemaking. Entities do not need to seek or receive ASAs in order to use HFC–134a in defense sprays. Further, entities do not have to expend an allowance to purchase HFC–134a from another entity that has imported or produced the regulated substance. EPA notes that of the six defense spray entities that have received ASAs at some point for calendar years 2022, 2023, and 2024, 17 Though there are other pathways to produce HFC–134a, the pathway using TCE is the primary production pathway in the United States, and it is EPA’s understanding that it is complex to change production pathways. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 three did not receive ASAs in at least one of those years. EPA is also aware of at least two entities selling bear sprays that use HFC–134a that have never applied for, and therefore never received, ASAs. This suggests that at least those two entities were able to acquire HFC–134a on the open market without having ASAs. These facts could suggest that ASAs may not be imperative for entities in this application to access HFC–134a. In sum, HFC–134a is currently more widely available than other HFCs, and defense sprays’ need for HFC–134a is small compared to the overall demand for HFC–134a across a range of sectors. At the same time, there is inherent uncertainty in the HFC market due to future stepdowns and new regulations coming into effect. 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. EPA is also considering the supply of HFC–152a, as it is used in at least one defense spray product, as noted above. HFC–152a is produced in substantial quantities, though the current domestic production of HFC–152a is about half that of HFC–134a, on a mass basis.18 In 2022, domestic production of HFC–152a was 29,654.9 MT, about 22 percent of U.S. HFC production by mass. There is currently only one U.S. HFC–152a production facility, and that producer has announced plans to increase production by approximately 20 percent by mid-2024.19 At the time of this proposal, the facility expansion is not yet complete, so EPA cannot say with certainty when it will be available. However, there is also substantial global production of HFC–152a, which also supplies the U.S. market. Multiple entities imported HFC–152a in 2022, importing a total of 5,810.1 MT. Overall, HFC–152a made up approximately 20 percent of total U.S. HFC consumption in 2022 on a mass basis. In addition, at the end of 2022, suppliers held 5,076.3 MT of HFC–152a in domestic inventory, which is equivalent to about 16 percent of calculated consumption of HFC–152a in 2022. The company that has commercialized the bear spray using HFC–152a has never received allowances for HFC–152a, which suggests that at least this entity is able 18 See https://www.epa.gov/climate-hfcsreduction/hfc-data-hub/expanded-hfc-data. 19 See https://www.chemours.com/en/newsmedia-center/all-news/press-releases/2023/ chemours-announces-capacity-increase-of-hfc152a-providing-reliable-domestic-supply-of-lowglobal-wa. E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 to acquire HFC–152a on the open market without having ASAs. In addition, HFC–152a has one of the lowest EVs relative to other regulated HFCs, so fewer allowances are needed to import or produce HFC–152a in comparison to the same volume of higher-EV HFCs. For example, an importer would need to expend 143 consumption allowances to import 100 kg of HFC–134a compared to 12.4 allowances to import 100 kg of HFC– 152a—a greater than 90% reduction. This means that, from a strictly allowance-focused view, HFC–152a will be easier to acquire than most other HFCs as the phasedown progresses and the number of HFC allowances is reduced. Allowances allocated to an end user may therefore not be necessary to secure production or import of HFC– 152a. Future projections suggest that there could be increased demand for HFC– 152a, although there is inherent uncertainty with how industry will respond to the phasedown of HFCs at this early stage. HFC–152a has a GWP that is below all the GWP limits for sectors and subsectors subject to the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023). The 2023 Technology Transitions Rule identified HFC–152a as an available or potentially available substitute for all 13 foam subsectors, aerosol propellants, motor vehicle air conditioning, and household refrigerators and freezers.20 However, there are also multiple other acceptable alternatives, including non-HFCs, and, for subsectors where a transition to another substitute has already occurred (e.g., motor vehicle air conditioning, household refrigerators and freezers), it is highly unlikely that a new transition to HFC–152a would be considered. For subsectors where HFC–152a neat or in blends is likely under consideration, it is not yet known if there will be any significant shift toward use of HFC– 152a, particularly as many relevant subsectors have begun to move out of HFCs entirely. For example, the MCTOC 2022 Assessment report notes that a significant proportion of aerosols already use non-HFCs as propellants. 20 See 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) 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. In addition, EPA did not identify information for products or equipment containing certain substitutes, which may indicate a lack of current commercial demands for the substitutes in those products or equipment. However, this did not automatically remove those substitutes from the list of available substitutes, as commercial demands is only one subfactor that needed to be considered under subsection (i)(4)(B). VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 Similarly, the FTOC 2022 Assessment Report highlights that fluorocarbon use in foams has been falling for decades, and foams are largely expected to continue transitioning to non-HFCs, including hydrocarbons, HFOs, and hydrochlorofluoroolefins (HCFOs). Demand for HFC–152a may therefore change in future years as subsectors transition to alternatives from their currently used HFC. In sum, while there is a reasonably large supply of HFC–152a that is expected to increase over the coming years relative to other HFCs, there is uncertainty around future demand for the reasons described above. 3. What is EPA proposing regarding eligibility for application-specific allowances? Given the rapidly changing landscape for HFC supply and EPA’s assessment of substitute availability application-wide, EPA is proposing two options based on our current analysis and in anticipation of additional available information before this proposed rule is finalized. Specifically, EPA is proposing to finalize one of the following outcomes: (1) No renewal, such that the application will not receive ASAs or (2) Renew eligibility for ASAs for two years, such that ASAs are available for calendar years 2026 and 2027.21 EPA is also seeking comment on renewing eligibility for the full five-year period. As explained earlier in this proposal, an application must meet both criteria to be eligible to receive ASAs. For the reasons described earlier in this section, EPA is proposing to determine that there is not a safe and technically achievable substitute that is immediately available for the entire application, but a safe or technically achievable substitute will be available for the entirety of the defense spray application by January 1, 2028. In other words, EPA proposes to determine that the criterion in subsection (e)(4)(B)(i)(I) is not met for defense sprays starting January 1, 2028. Under this proposed determination, even if EPA received information to determine that supply of the currently used regulated substance was insufficient, defense sprays would not be eligible for renewal as of January 1, 2028, unless they have insufficient supply of a substitute HFC, as discussed in more detail below. EPA is also proposing to determine that either (1) the supply of HFC–134a is not insufficient to accommodate this 21 The proposed amendatory text included in this Federal Register notice shows only one of the coproposed options. This is for illustrative purposes and should not be read as EPA favoring one coproposal over another. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 75913 application; or (2) the supply of HFC– 134a will not be insufficient to accommodate this application as of January 1, 2028. In other words, EPA proposes to determine that the criterion in subsection (e)(4)(B)(i)(I) is either: (1) not met at all for this application for HFC–134a, and therefore the application would not be eligible to receive ASAs starting January 1, 2026; or (2) not met as of January 1, 2028, and therefore the application would not be eligible to receive ASAs starting January 1, 2028. Under the first option, this means that even if the application does not have a safe or technically achievable substitute available, ASAs would not be available for defense spray manufacturers as of January 1, 2026. For the second option, defense sprays would not be an eligible application for ASAs as of January 1, 2028, regardless of the availability of substitutes. EPA does not have sufficient information to make a definitive determination on whether supply of HFC–152a is insufficient to accommodate this application at the time of this proposal. We are monitoring this issue and will be seeking information on the alternatives that subsectors subject to Technology Transitions restrictions transition into and how much additional domestic production capacity of HFC–152a comes online in the coming year. EPA is also taking comment on whether defense sprays should be eligible to receive ASAs for the full fiveyear period from 2026–2030. A full fiveyear renewal could be without restriction or could be based on and tailored only to the application’s need to purchase HFC–152a. As explained earlier, HFC–152a is used commercially in one bear spray product, so this latter scenario could be relevant if HFC–152a is an available safe and technologically achievable substitute for the entire defense spray application by 2028. Under this scenario, EPA would follow an approach similar to the option proposed for SCPPU foams for marine and trailer uses in Section V.D.3. EPA intends to review comments and other relevant information received on this proposal to further understand how the market surrounding this application evolves and the availability of substitutes application-wide before EPA finalizes this proposed rule. Specifically, we intend to review additional information on how the HFC market adjusts to the 2024 stepdown, defense sprays’ research into alternative propellants and related trials (including relevant data on flammability), what alternatives consumer aerosols transition to (as they are subject to the E:\FR\FM\16SEP2.SGM 16SEP2 75914 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 Technology Transitions restrictions starting in 2025), and research into alternative propellants intended to be used in technical aerosols (which are subject to the Technology Transitions restrictions starting in 2028). EPA invites submission of comment and additional data related to these data gaps. EPA will consider this new information, in addition to public comments, in making a final determination for this application. 4. Proposed Restriction Under EPA’s Technology Transitions Program The 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) restricts the manufacture and import of all aerosol products that use HFCs or HFC blends that have a GWP greater than 150. This restriction begins January 1, 2025, for all aerosols except for those specifically listed in the final rule as technical aerosols, which have manufacture and import restrictions starting January 1, 2028. 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 exempts applications that receive ASAs (40 CFR 84.56(a)(2)). However, as finalized in the October 24, 2023, rule, if an application no longer qualifies for ASAs, the Technology Transitions restrictions then apply. While most aerosols are required under the Technology Transitions Program to meet a 150 GWP limit starting on January 1, 2025, the EPA provided additional time to comply with this limit for some technical aerosol uses. Most of the U.S. aerosol industry subject to the January 1, 2025, compliance date has already transitioned to using propellants that meet the 150 GWP limit,22 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 uses that received an extension for compliance with the 150 GWP limit until January 1, 2028, 40 CFR 84.54(a)(16)(i)(A)–(O), currently use 22 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 at EPA–HQ–OAR–2021–0289–0037. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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 is proposing that defense sprays would be considered under the Technology Transitions Program consistent with technical aerosols, with the corresponding compliance deadlines on the manufacture and import of defense sprays using HFCs and blends containing HFCs with a GWP of 150 or greater beginning January 1, 2028, with a three-year sell-through of those products. Thus, defense sprays manufactured or imported prior to January 1, 2028, could continue to be sold until January 1, 2031. As discussed in Section V.C.1 of this preamble, while some defense spray uses may have substitutes available in the near term that are technically achievable and safe, EPA’s proposed assessment under subsection (e)(4)(B) is that such substitutes are not immediately available across all defense spray uses. In particular, the flammability or specific vapor pressure of potential substitute propellants present availability concerns for some uses in the near term. Consideration of technological achievability and safety, as well as other subsection (i)(4)(B) factors, indicates that a compliance date of January 1, 2025, for transition of all defense spray uses is not appropriate, but the approval of substitute propellants as safe under SNAP and TEAP analyses (see Section V.C.1), as well as EPA’s assessment that many propellant uses in this subsector have been able to successfully transition to substitutes, provides support for EPA’s proposed finding that all defense sprays will have available substitutes by January 1, 2028. We invite comment on whether availability of substitutes for use in defense sprays, particularly considering those factors enumerated under subsection (i)(4)(B), indicates that defense sprays could in fact meet the existing 150 GWP limit restriction if the application ceased being eligible for ASAs on January 1, 2026. We note that given the January 1, 2028, compliance date for the transition of the remaining aerosol sector, comments urging the Agency to provide additional time for compliance beyond that date will need to provide very specific and detailed information in support of that request, speaking to the statute’s factors under subsection (i)(4) and in particular the subsection (i)(4)(B) factors. Under the 2023 Technology Transitions Rule, the labeling requirements are effective at the same PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 time as the manufacture and import restrictions, which, if EPA finalizes this action as proposed, would be January 1, 2028. Recordkeeping and reporting provisions are effective for all sectors and subsectors under the 2023 Technology Transitions Rule starting January 1, 2025. EPA proposes that the recordkeeping requirements would apply to defense spray manufacturers and importers beginning January 1 of the year that use no longer qualifies for ASAs, and the first report would be due March 31 of the following year. For example, if defense sprays are no longer eligible for ASAs in 2026, manufacturers and importers would need to keep records as required by the 2023 Technology Transitions Rule starting January 1, 2026, and submit their first Technology Transitions report to EPA by March 31, 2027, even if EPA finalizes its proposal that the 150 GWP limit for the manufacture and import of defense sprays using HFCs would not apply until January 1, 2028. EPA requests comment on the proposal to consider defense sprays consistent with technical aerosols for purposes of the Technology Transitions Program and the restrictions that result from such a classification, such as the GWP limit that would take effect on January 1, 2028, use restrictions, a threeyear sell-through window for inventory ending January 1, 2031, and labeling and reporting requirements. EPA has previously determined that available substitutes for use as aerosol propellants include HFC–152a (GWP 124) and HFO–1234ze(E) (GWP <1) (88 FR 73098, October 24, 2023). EPA is also interested in any supporting data and information related to the availability of substitutes and whether a different timeline is more appropriate for transitioning in this application or for a subset of products in this application. D. Structural Composite Preformed Polyurethane Foam for Marine Use and Trailer Use The third application to which EPA has been allocating ASAs to since 2022 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 (86 FR 55116, October 5, 2021), 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 E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 polyurethane (PU) foams due to its specialized structural properties, and it is preformed into required shapes (e.g., specific boat or trailer design). HFC– 134a is the current HFC used in the blowing process for SCPPU foam. After analyzing information relevant to the statutory criteria, as outlined in this section and the TSD, EPA is proposing a range of options—to not renew the eligibility for entities in this application to receive ASAs, to renew for two years, or to renew access to ASAs for five years with allowances determined based on the use of a lower-GWP HFC substitute for HFC–134a. EPA is also taking comment on the possibility of renewing for a full five-year period consistent with the current allowance allocation approach. 1. Availability of Safe and Technically Achievable Substitutes EPA anticipates that SCPPU foam for marine and trailer uses’ commercialization of formulations using alternatives to HFC–134a as blowing agents is well underway and will evolve significantly between issuance of this proposed rulemaking and its finalization. The Agency will consider information collected from regulated entities and other relevant sources through the public comment period and the current reporting requirements to inform a final determination. EPA is aware, from manufacturer communications and reporting, of two substitutes currently under development for this application—an HFC–152a/cyclopentane blend and an HFO. EPA notes that SNAP has listed both HFC–152a and cyclopentane as acceptable for all PU foams, including rigid PU uses in both marine flotation and commercial refrigeration (the two respective end uses for this application). Based on information from the manufacturers of SCPPU foam for marine and trailer uses, EPA understands that the research and development phase for both potential substitutes is nearing completion and that companies are nearing a phase where they will be able to commercialize use of substitutes. If commercialization occurs as companies anticipate and as shared with EPA, the entire application would be able to use a substitute different from HFC–134a before January 1, 2026. According to the information shared with EPA, one substitute seems close to being commercialized for SCPPU foam for marine use, and the other substitute seems close to being commercialized for SCPPU foam for trailer use. The company that is close to commercializing use of the HFC–152a/ VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 cyclopentane blend performed multiple early trial runs with HFOs, all of which failed to meet their needs, so the company decided to pursue the HFC– 152a blend. On this basis, we are proposing to determine that the HFO is not an available substitute applicationwide for the five-year period from 2026– 2030, given additional research and development trials are needed, as well as the subsequent ramp up to commercialization. EPA understands that often different companies use different blowing agents to produce the same foam. At this time, it is unclear why an HFC–152a/cyclopentane blend cannot be used across the entirety of the application and similarly whether at some future date another blowing agent (e.g., an HFO) might be used application-wide. To inform determinations in this rulemaking, EPA invites comment on any potential reasons why an HFC–152a/cyclopentane blend might not be safe and technically achievable for the entire application, including any supporting data and information, such as trial data. While there are two different end uses in this application, the foam used in both subapplications is the same (i.e., it is an SCPPU foam). Other than an HFO and an HFC–152a/ cyclopentane blend, EPA is not aware of other safe and available alternatives at this time. There are currently a range of alternatives identified as acceptable by SNAP and as technically proven by the TEAP’s FTOC for other PU foams, including rigid PU uses in both marine flotation and commercial refrigeration. Alternatives include a lower-GWP HFC (i.e., HFC–152a), hydrocarbons, and HFOs. However, alternatives identified as acceptable for PU foams are not necessarily available for SCPPU foam, given the unique technical requirements for this foam (e.g., specialized structural properties). SNAP generally lists substitutes at the sector and end use level, not the application level (e.g., the Agency has listed substitutes for rigid PU foam, which would allow for those substitutes in SCPPU foam, but it has not evaluated the use of these substitutes for SCPPU foam in particular), and TEAP’s FTOC did not specifically discuss or evaluate SCPPU foam as an individual use in its 2022 assessment report. More information about the specialized nature of SCPPU foam can be found in the SCPPU foam chapter of the TSD. Aside from the limitations noted above, EPA is not aware of significant Federal regulatory restrictions on the type of substitutes that could be considered for this application. EPA is also not aware of any required standards PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 75915 that SCPPU foam needs to meet to be manufactured and sold in the United States. The SCPPU foam chapter of the TSD contains further information on sources consulted, and EPA invites comment on any additional information the Agency should consider in analyzing substitutes for this application. After reviewing the available information, including reports on progress made by manufacturers of SCPPU foam for marine and trailer use, EPA has not identified a safe and technically achievable substitute that is available at the time of this proposal, but anticipates that substitutes will likely be available soon. We are monitoring this issue and are seeking information from the entities that use HFCs in this application on whether progress continues as anticipated to inform our final determination. 2. Supply Entities manufacturing SCPPU for marine and trailer uses currently use an HFC–134a formulation. As described in more detail in Section V.C.2 of this preamble, 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 2024 are equivalent to 0.1 percent of calculated domestic consumption of HFC–134a in 2022, on an MTEVe basis. However, as noted earlier, the global and domestic HFC markets are continuing to adapt to regulations promulgated pursuant to the AIM Act, including the implementation of the phasedown of production and consumption of HFCs, and other authorities. EPA anticipates this market will continue to change, and EPA will analyze additional information as it becomes available ahead of finalizing this rulemaking. Such additional information will include whether there were immediate market shifts as a result of both the stepdown of the level of permissible production and consumption of HFCs that took effect on January 1, 2024, and regulations effective January 1, 2025. In addition to changes in the HFC market due to the overall phasedown of production and consumption, other AIM Act regulatory programs are expected to take effect both between proposal and finalization of this rulemaking and during the applicable period under review in this rulemaking, as described in more detail in Section V.C.2. These requirements may reduce demand for HFC–134a domestically for E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75916 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules certain other uses, though EPA expects continuing demand for HFC–134a in applications not subject to restrictions will continue. There may also be new or expanded use of blends with HFC–134a as a component designed to meet new restrictions. In addition, other EPA regulations may impact domestic supply of HFC–134a, but global supply should remain substantial in comparison to this application’s demand for HFC–134a. EPA is currently not aware of any applicable restrictions on where this application could purchase HFCs, including any purity requirements or regulatory restrictions on supply. As such, it is EPA’s assessment that this application may be able to use recovered and reprocessed HFCs supplied by chemical manufacturers. This is relevant in assessing what supply of regulated substance may be available to an application, since in such a case EPA does not need to limit its analysis to only virgin chemicals. The likeliest source of reprocessed HFCs for this application would be reclaimed refrigerants, which are held to AHRI 700 standards (see footnote 17 in Section V.C.2). Since there are no Federal purity requirements for HFCs used in foams or any industry requirements, the purity of reclaimed HFCs is likely the same or higher than the virgin HFCs used in this application. While EPA is not aware of specific purity requirements for this application, EPA notes that efficacy of blowing agents can be influenced by their composition and purity. As described in more detail in Section V.C.2, the supply of reclaimed HFC– 134a in the United States is significant, though there is uncertainty regarding the future demand for this material. As part of this proposed analysis, EPA is also considering the supply of HFC– 152a. As further explained in Section IV.C, as part of the framework for its analysis EPA is proposing to evaluate the supply of a substitute HFC if that HFC is a safe or technically achievable substitute for an application. As outlined in the prior section (Section V.D.1), EPA’s analysis suggests that HFC–152a blended with cyclopentane appears to be a safe and technically achievable substitute for this application. EPA is therefore evaluating the supply of HFC–152a to determine whether it would be insufficient to accommodate this application. As described in more detail in Section V.C.2, other AIM Act regulations may increase demand for HFC–152a domestically for certain uses, though EPA notes that many sectors where HFC–152a is a technically achievable substitute have already transitioned to other alternatives. Domestic production VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 capacity is also expected to increase, but EPA cannot say with certainty when it will be available. Global supply should also remain substantial in comparison to this application’s demand for HFC– 152a. 3. What is EPA proposing regarding eligibility for application-specific allowances? In light of the rapid evolution of information regarding both the availability of substitutes for this sector (including all companies in this application’s stated plans to transition away from HFC–134a before 2026) and HFC supply, EPA is proposing a range of options based on the current Agency analysis and in anticipation of increased available information before this proposed rule is finalized. Specifically, EPA is proposing to finalize any of the following outcomes: (1) no renewal, such that the application will not receive ASAs, (2) renew eligibility for ASAs for two years, such that ASAs are available for calendar years 2026 and 2027, or (3) renew eligibility to continue receiving ASAs for the full five-year period with allowance amounts determined based on the EV of HFC– 152a.23 Before finalization of this rule, we anticipate new information to become available on the supply of HFCs and availability of substitutes for the application, as outlined in detail in this section. EPA will consider this new information, in addition to public comments, in making a final determination for this application. As explained earlier in this section, the development of safe or technically achievable substitutes for this application is a rapidly evolving space, such that multiple possible outcomes can reasonably be expected to occur through 2030. All entities that have received ASAs for SCPPU foam for marine and trailer uses to date have told EPA that they plan to transition to substitutes before January 1, 2026. One potential outcome at rule finalization is that EPA depends on these statements to determine that a ‘‘safe or technically achievable substitute is available for the applicable period’’ for this application. Statements from all of the companies that use regulated substances to manufacture SCPPU foam that they will transition to substitutes before the next ASA period could serve as a reasonable basis to determine that safe and technically achievable substitutes are 23 The proposed amendatory text included in this Federal Register document shows only one of the co-proposed options. This is for illustrative purposes and should not be read as EPA favoring one co-proposal over another. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 available. There are also specific milestones that these entities have reached, such as one company receiving a final air permit for an expansion of the manufacturing facility that will use the HFC–152a/cyclopentane blend, indicating the company is able to move forward with full-scale testing and commercialization. If the entities’ plans shared with EPA remain the same at the time when EPA is finalizing this proposed rule, particularly if they have already commercialized use of the substitutes, it is likely that EPA would determine that a safe or technically achievable substitute is available for this application. If EPA makes this determination, SCPPU foam for marine and trailer uses will not be eligible for ASAs as of January 1, 2026, even if EPA receives information to determine that supply of the currently used regulated substance is insufficient, unless the application has insufficient supply of a substitute HFC, as discussed in more detail below in this section. However, EPA recognizes there is uncertainty as to whether plans to commercialize will remain the same, be delayed, or be subject to unanticipated hurdles that could require additional evaluation of this alternative. EPA also has less information regarding the deployment of the HFO alternative outside of statements from the entity working toward its development and commercialization. Before finalization of this proposed rule, EPA intends to review and consider, as appropriate, all available information, specifically regarding expected timelines and testing data. EPA invites comment regarding the availability of safe or technically achievable substitutes for this application. The Agency will continue to collect information from regulated entities and other relevant sources through the public comment period and the current reporting requirements to inform a final determination of whether the criterion in subsection (e)(4)(B)(i)(I) is met. EPA is also proposing 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. In other words, EPA proposes to determine that the criterion in subsection (e)(4)(B)(i)(I) is either: (1) not met at all for this application for HFC–134a, and therefore the application would not be eligible to receive ASAs with allowances calculated based on HFC– 134a use starting January 1, 2026; or (2) not met as of January 1, 2028, and therefore the application would not be E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules eligible to receive ASAs with allowances calculated based on HFC– 134a use starting January 1, 2028. Under the first option, this means that even if the application did not have a safe or technically achievable substitute available, ASAs would not be available for manufacturers of SCPPU foam for marine and trailer uses as of January 1, 2026. For the second option, SCPPU foam for marine and trailer uses would not be an eligible application for ASAs as of January 1, 2028, regardless of the availability of substitutes. However, if the available substitute is an HFC with insufficient supply, EPA may determine SCPPU foam for marine and trailer uses are eligible for renewal for that substitute HFC. Given the current uncertainty over which EPA anticipates having more clarity ahead of finalization of this proposed rule, at this time EPA contends that it could determine that the criterion in subsection (e)(4)(B)(i)(I) is met now, met as of January 1, 2028, or is not met at all through the entire renewal period with respect to HFC– 152a. Under the first possible determination (supply of HFC–152a is not insufficient now), even if the application did not have a safe or technically achievable non-HFC substitute available as of January 1, 2026, the application would not be eligible for renewal as of that date. Under the second possible determination (supply of HFC–152a is not insufficient as of January 1, 2028), the application would not be eligible for ASAs as of January 1, 2028, even if the application did not have a safe or technically achievable non-HFC substitute. Under the third possible determination (supply of HFC–152a is insufficient), the application would be eligible for ASAs if there was no safe or technically achievable non-HFC substitute for the entire application. EPA will monitor reported data over the next year on the noted areas of uncertainty and invites comment on this issue. In light of the range of outcomes EPA has proposed regarding its determinations on whether the criteria in subsection (e)(4)(B)(i)(I) and (II) are met, EPA is proposing 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 fiveyear period of calendar years 2026–2030 with allowance amounts determined based on the EV of HFC–152a. EPA is also taking comment on SCPPU foam for marine and trailer uses eligibility to VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 receive ASAs consistent with the current approach through calendar year 2030 ASAs. EPA also could finalize different outcomes based on how the transition to substitutes progresses between this proposal and rule finalization. Under outcome (3), EPA is proposing to allocate allowances based on an expectation that the application can use HFC–152a. To achieve this, EPA is proposing to base the calculation of allowance allocations on the estimated total mass of HFCs needed by the application and allocate at the level necessary to purchase HFC–152a on an EV-weighted basis. For example, if a company used 1,000 kg of HFC–134a and 500 kg of HFC–152a in Year 3 (as defined by the regulatory formula; see Section VII for further discussion of regulatory formula and proposed revisions), and HFC–152a substituted for HFC–134a one-for-one on a gram basis for this application, EPA would multiply 1,500 kg by the applicable average annual growth rate (AAGR) and then by the EV of HFC–152a to calculate the company’s allowance allocation for the following year. EPA would not limit which HFCs could be purchased for use in the application once the allowances are issued. EPA is taking comment on whether the Agency should apply any relevant mass conversions in this calculation (i.e., if an application needed more or less HFC–152a on a gram-by-gram basis when substituting for HFC–134a) where the total mass of HFCs used would be multiplied by a mass ratio, as appropriate, then multiplied by the AAGR. As outlined in detail elsewhere in this section, before EPA finalizes this proposed rule, the Agency intends to review available information and comments received on this proposal to get further clarity on progress toward commercialization of substitutes, how the overall HFC market has adjusted to the 2024 stepdown, what alternatives are adopted by subsectors subject to 2025 Technology Transitions Program restrictions, and how much additional domestic HFC–152a production capacity comes online. 4. Proposed Restriction Under EPA’s Technology Transitions Program The 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) restricts the manufacture and import of foam products that use as a blowing agent HFCs or HFC blends that have a GWP of 150 or greater (hereafter, ‘‘foam products’’). This restriction begins January 1, 2025. Examples of items subject to this restriction include products that are foams, such as PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 75917 extruded polystyrene boardstock; products for blowing foam, such as twopart foam systems for blowing PU foam; and products that are manufactured using foam, such as boats or refrigerated trailers. The 2023 Technology Transitions Rule exempts applications which receive ASAs (40 CFR 84.56(a)(2)). However, as finalized in the October 24, 2023, rule, if an application no longer qualifies for ASAs, the Technology Transitions restrictions would apply. As discussed in the preamble to the 2023 Technology Transitions Rule, the transition to non-HFC and lower-GWP substitutes is already well underway or completed for much of the foams sector (see 88 FR 73184). EPA therefore established a uniform GWP limit of 150 for the entire foams sector starting January 1, 2025. The sole exception to this restriction for the foams sector was SCPPU foam for marine and trailer uses, per their receipt of ASAs. As discussed above in Section V.D.1, EPA proposes that while there are no safe and technically achievable alternatives available at this time under subsection (e)(4)(B) specifically for use in SCPPU foams for marine and trailer uses, we anticipate, based on currently available information, that the development of substitutes for these uses is progressing rapidly, such that by the time EPA finalizes this action, substitutes meeting the (e)(4)(B)(i)(I) criterion may be available. While the list of considerations under subsection (i)(4)(B) that EPA is to factor in, to the extent practicable, when considering availability of substitutes for issuing restrictions under subsection (i) includes factors beyond those characteristics listed in subsection (e)(4)(B)(i)(I), in this instance EPA’s view is that technological achievability of lower-GWP substitutes in marine and trailer uses is the primary barrier to transitioning away from the use of HFC– 134a in these two uses. Many of the factors listed in subsection (i)(4)(B) are not relevant to EPA’s assessment of availability of substitutes for these two uses, such as building codes, appliance efficiency standards, and contractor training costs. As noted in Section V.D.1 of this preamble, EPA’s SNAP Program has already listed as acceptable the potential substitutes under consideration and the entities actively developing the substitutes and working to bring those substitutes to market are almost certainly considering costs to consumers and affordability for small business consumers as part of their efforts. We propose that the applicability of the restriction on HFC foam blowing E:\FR\FM\16SEP2.SGM 16SEP2 75918 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules agents in the 2023 Technology Transitions Rule to SCPPU foam for marine and trailer uses will depend entirely on which of the three coproposals EPA ultimately finalizes. That is, under co-proposal (1), where EPA would not renew ASAs for SCPPU for marine and trailer uses as of the effective date of a final rule based on this proposal, requirements of the Technology Transitions Program, which include labeling, reporting, recordkeeping, and restrictions on HFCs, would apply beginning January 1, 2026. Under co-proposal (2), where EPA would renew ASAs for SCPPU for marine and trailer uses for 2026 and 2027, requirements of the Technology Transitions Program would apply beginning January 1, 2028. For both coproposals (1) and (2), EPA proposes that the recordkeeping requirements would apply to manufacturers of SCPPU foams for marine and trailer uses beginning January 1 of the year those uses no longer qualify for ASAs, and the first report would be due March 31 of the following year, as discussed above in Section V.C.4. For example, under coproposal (1), manufacturers would need to keep records as required by the 2023 Technology Transitions Rule starting January 1, 2026, and submit their first Technology Transitions report to EPA by March 31, 2027; under co-proposal (2), manufacturers would need to keep such records starting January 1, 2028, and would submit their first Technology Transitions report by March 31, 2029. Under co-proposal (3), where EPA would renew ASAs for SCPPU for marine and trailer uses based upon the use of HFC–152a instead of HFC–134a, SCPPU for marine and trailer uses would continue to be exempt from the 2023 Technology Transitions Rule. The requirements under each co-proposal for SCPPU for marine and trailer uses are summarized in Table 2 below. EPA is interested in data and information related to the availability of substitutes and the proposed timeline for transitioning in this application. TABLE 2—APPLICABILITY OF TECHNOLOGY TRANSITIONS REQUIREMENTS UNDER CO-PROPOSALS FOR SCPPU FOR MARINE AND TRAILER USES Co-proposal Technology transitions GWP limit and compliance date Date technology transitions labeling requirements begin Date technology transitions reporting requirements begin (1) No renewal of ASAs ................. GWP limit of 150 beginning January 1, 2026. January 1, 2026 ............................ First report due March 31, 2027, including data from January 1, 2026, through December 31, 2026. (2) Renew eligibility for ASAs for 2026 and 2027. GWP limit of 150 beginning January 1, 2028. First report due March 31, 2029, including data from January 1, 2028, through December 31, 2028. (3) Renew eligibility for 2026–2030 with allowance amounts determined based on the EV of HFC– 152a. Because application continues to be eligible for ASAs, it is exempt from Technology Transitions requirements. lotter on DSK11XQN23PROD with PROPOSALS2 E. 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 plasmagenerated 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 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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 proposal, EPA is aware of three 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 is proposing to determine 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 proposes 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. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 1. Availability of Safe and Technically Achievable Substitutes EPA has not identified any substitutes that it would propose to deem safe and technically achievable that are available for the entirety of the defined semiconductor application. In developing this assessment, EPA reviewed information from industry trade groups, the TEAP’s MCTOC, the Intergovernmental Panel on Climate Change (IPCC), scientific journal articles, and more. The sources examined by EPA are outlined in greater detail in the TSD included in the docket for this proposed action. The MCTOC 2022 Assessment report reviewed HFC gases commonly used in semiconductor manufacturing, along with their alternatives, using the following criteria: commercially available, technically proven, environmentally sound, economically viable and cost effective, safe to use in industrial applications considering flammability and toxicity issues, and easy to use and maintain.24 Based on this report and other sources, EPA is 24 See https://ozone.unep.org/system/files/ documents/MCTOC-Assessment-Report-2022.pdf. E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules aware that semiconductor manufacturers currently utilize other fluorinated gases, such as sulfur hexafluoride (SF6), nitrogen trifluoride (NF3), some saturated PFCs (i.e., CF4, C2F6, c-C4F8), and some unsaturated PFCs (i.e., C4F6, C5F8) for the processes of etching and chamber cleaning. The MCTOC 2022 Assessment report lists these chemicals as both commercially available and technically proven and can be used as substitutes for etching and chamber cleaning. In developing its proposed determination regarding substitutes, however, EPA did not consider many of these chemicals in its proposed consideration of the availability of safe and technically achievable substitutes because of their higher GWPs, lower utilization rates (i.e., higher emission rates), or higher toxicity than HFCs. Sulfur hexafluoride (SF6), which is used in the etching of silicon, silicon dioxide (SiO2), and silicon nitride (SiN), as well as chamber cleaning, has a 100-year GWP of 22,800. Nitrogen trifluoride (NF3), which is used in the etching of silicon and silicon nitride (SiN), as well as for chamber cleaning, has a 100-year GWP of 17,200. Saturated PFCs, used in the etching of silicon, silicon dioxide (SiO2), and other materials, have a 100-year GWP ranging between 7,390 to 12,200. Saturated PFCs are also difficult to abate and have relatively low utilization rates. Unsaturated PFCs are used in highaspect-hole-ratio etching. They have GWPs of less than two; however, these compounds have not been widely adopted at least in part since these chemicals can only be used in certain processes and are not necessarily viable for all types of etching, etching all materials, or chamber cleaning. For example, unsaturated PFCs are not known to be used in chamber cleaning, so the Agency does not consider unsaturated PFCs as available for the entire application. The MCTOC 2022 Assessment report also lists other compounds that are currently being studied for use but are not yet technically proven, are not considered safe or easy to use, and may have additional toxicity concerns. These chemicals include carbonyl sulfide, HFO–1336mzz(E), PFC–1216, chlorine trifluoride (ClF3), hexafluoroisobutylene (HFIB), and trifluoroiodomethane (CF3I). Carbonyl sulfide, used in certain etching applications, is also highly flammable and toxic. HFO–133mzz(E) is being considered as a replacement for certain etching chemicals. PFC–1216 is being studied for use in etching silicon dioxide (SiO2). Chlorine trifluoride (ClF3) may be used for chamber cleaning for Low Pressure CVD chambers but is VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 extremely flammable and is not considered safe or easy to use. Although not known to currently be used, hexafluoroisobutylene (HFIB) could be used in certain etching applications for silicon containing material. Trifluoroiodomethane (CF3I) is used for etching of silicon dioxide (SiO2) and silicon nitride (SiN), but the MCTOC 2022 Assessment report does not list it as safe or easy to use. EPA is aware of certain HFCs that may be in the early stages of research for high-aspect-ratio hole etching, such as HFC–134a and HFC–125. ASA holders have stated that research on lower-GWP alternatives is ongoing and there are currently no known alternatives to HFCs, PFCs, and nitrogen trifluoride (NF3), and any alternatives would not be commercially available until at least 2030. In light of the above analysis, EPA has not identified a safe and technically achievable substitute that is available at the time of this proposal. When a substitute or substitutes are identified for the entirety of the application, it would still take significant time to replace the current HFC(s) with the substitute(s). One industry trade group has stated that semiconductor technologies require at least 10 years from fundamental research to high volume manufacturing to innovate and implement new technologies and their associated raw materials. Given that no promising substitutes have been identified, there is no information before the Agency at the time of this proposal to suggest that there would be a safe and technically achievable substitute available prior to the next five-year review. 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 proposing to determine that an application meets this 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. As described above in Section E of this preamble, HFC–23 is used in the etching of silicon dioxide (SiO2) and silicon nitride (SiN) and is also used minimally in chamber cleaning. In 2022, domestic producers produced approximately 1,049.3 MT of HFC–23. 876.2 MT were subsequently destroyed, and one producer sold 5.2 MT of this HFC–23 for consumptive uses, which PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 75919 could be used for semiconductors as well as other uses. In addition, there were about a half dozen entities that imported HFC–23 with total amount of imports equaling 125.6 MT. Overall, HFC–23 made up only 0.07 percent of total U.S. HFC consumption in 2022 on a mass basis. Moreover, as HFC–23 has the highest EV, it may be possible that this supply is further constricted in the future as the phasedown progresses and the number of available allowances is reduced. As stated elsewhere in this proposed rule, EPA recognizes that there is inherent uncertainty regarding HFC production, and in particular for HFCs with a more limited number of production facilities and/or higher GWPs than other regulated HFCs, this uncertainty may be greater. Therefore, EPA understands there will be changes to the market conditions resulting from the domestic and global phasedown of HFC production and consumption. In addition, the use of HFC–23 in the semiconductor manufacturing application is large compared to the annual consumption of HFC–23. In 2022, semiconductor ASA holder purchases 25 of HFC–23 accounted for about 81 percent of calculated consumption of HFC–23. Furthermore, at the end of 2022, suppliers held 304.0 MT of HFC–23 in domestic inventory, which is equivalent to about 293 percent of calculated consumption of HFC–23 in 2022; not all of this HFC–23 may be considered available supply, as the entities both holding this material in inventory and reclaiming these HFCs are broader than EPA’s interpretation of chemical manufacturers (see Section IV.B for more information). EPA also analyzed the supply of HFC–32. In 2022, the one domestic producer of HFC–32 produced 17,744.3 MT of HFC–32. There were also over a dozen entities that imported HFC–32, with total import quantities equaling 9,885.3 MT. Overall, HFC–32 made up approximately 17 percent of total U.S. HFC consumption in 2022 on a mass basis. 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 21,435 MT of HFC– 32 in domestic inventory, which is equivalent to about 80 percent of calculated consumption of HFC–32 in 2022; similar to considerations for 25 For this calculation, EPA is using purchases in 2022 instead of allowances allocated so that percent of consumption can be calculated for each HFC. E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75920 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules supply of HFC–23 and for other applications, not all of this inventory may be considered available. Another factor EPA is considering is the impact that other regulatory actions may have for the available supply of HFC–32. As described in more detail above in Section V.A, the overall market for HFCs is likely to continue changing in light of AIM Act and potentially other restrictions. There is particular uncertainty regarding demand for HFC– 32. The 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) set a GWP threshold of 700 for certain sectors and subsectors where previously higher-GWP HFCs or HFC blends have been used. HFC–32 has a GWP of 675 and may be a suitable alternative in those sectors and subsectors. In other cases, the 2023 Technology Transitions Rule set a GWP threshold of 150 and thus HFC–32 could not be used unless as a component of blends. The first set of restrictions under the 2023 Technology Transitions Rule have compliance dates of January 1, 2025, with the latest compliance dates taking effect on January 1, 2028. Additionally, the proposed Emissions Reduction and Reclamation Rule (88 FR 72216, October 19, 2023) proposes requirements for the use of recycled or reclaimed HFCs for certain uses, as discussed elsewhere in this preamble. When finalized, that rule may affect the use of reclaimed HFC–32. EPA also analyzed the supply of HFC–41. There is one domestic supplier of HFC–41 that produced 22.2 MT of HFC–41 in 2022. In addition, there were multiple entities that imported HFC–41, with total import quantities equaling 38.3 MT. Overall, HFC–41 made up only 0.03 percent of total U.S. HFC consumption in 2022 on a mass basis. 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 21.5 percent of calculated consumption of HFC–41. At the end of 2022, suppliers held 26.7 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. One factor that plays into the sufficiency of supply of these HFCs is the purity specifications used by individual companies in the semiconductor manufacturing sector. While there is no Federal standard or regulation governing the purity of HFCs used in semiconductor manufacturing, VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 EPA is aware that individual companies in this sector set their own requirements. HFCs purchased for use in semiconductor manufacturing is produced at around 95–97 percent purity and then typically is purified to 99.999–99.9999 percent purity before it is used by semiconductor manufacturers. Supplying refined HFCs to end users can take up to one year, as purifiers require long lead times. These purity requirements are also relevant when considering if reclaimed HFCs can be used in this application. EPA notes that virgin HFCs produced for semiconductor use are typically only at 95–97 percent purity, so EPA is not aware of why reclaimed HFCs cannot also be purified to industry specifications; EPA invites comments on this. 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, 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. There are other factors that may further impact the supply of HFCs for this application. The Creating Helpful Incentives to Produce Semiconductors Act of 2022 (CHIPS Act) has allocated over 50 billion dollars to semiconductor research, development, manufacturing, and workforce development in the United States, which has led to additional investment by semiconductor manufacturers. The U.S. market share of memory chip production is projected to grow from less than 2 percent to up to 10 percent over the next decade.26 27 3. What is EPA proposing regarding eligibility for application-specific allowances? EPA is proposing to renew the eligibility of entities using regulated substances for the etching of semiconductor material or wafers and the cleaning of CVD chambers within the semiconductor manufacturing sector to receive ASAs for the five-year period of calendar years 2026 through 2030. EPA is proposing to determine ‘‘that the requirements described in subclauses (I) 26 See https://www.whitehouse.gov/briefing-room/ statements-releases/2022/01/21/fact-sheet-bidenharris-administration-bringing-semiconductormanufacturing-back-to-america-2/. 27 See https://www.mckinsey.com/industries/ industrials-and-electronics/our-insights/ semiconductor-fabs-construction-challenges-in-theunited-states. PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 and (II) of clause (i) are met’’ in accordance with the requirements of 42 U.S.C. 7675(e)(4)(B)(v)(II). Specifically, for the reasons outlined earlier in this section, EPA is proposing to determine 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 the entire fiveyear period. EPA is also proposing 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. As explained earlier, EPA is proposing to determine the supply criterion is met if supply of one HFC used by the application is insufficient to accommodate the application. EPA proposes to determine that the supply of HFC–23 and HFC–41 are insufficient to accommodate the application for the reasons outlined in the prior section. F. 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). In the Allocation Framework Rule, EPA finalized an approach that treats the allocation of MCMEU allowances differently than the other applications given the ‘‘complex nature of the way DOD sources and uses HFCs for mission-critical applications,’’ (e.g., significantly larger networks of sites and users, including contractors, of HFCs than others covered by ASAs) (86 FR 55116, 55153, October 5, 2021). EPA set up a system whereby DOD must provide the amount of HFCs needed for missioncritical military use and that the two agencies would ‘‘work together to ensure the amount necessary is available for mission-critical military applications’’ (86 FR 55116, 55153, October 5, 2021). E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 As the definition states, DOD has discretion to identify which uses of HFCs have a direct impact on mission capability. DOD is required to report to EPA ‘‘the broad sectors of use covered by current mission-critical military end uses in the next calendar year,’’ per 40 CFR 84.31(h)(3)(iv). Given the complex nature of the way DOD sources and uses HFCs for mission-critical applications, EPA has always maintained that DOD should have discretion to request the amount of allowances necessary to meet its mission-critical end uses and the Agency is not altering that approach through this rulemaking. Recognizing the sensitive nature of the application, as well as the expert judgement that DOD has in identifying which uses of HFCs have a direct impact on mission capability, EPA consulted with DOD throughout development of this proposed rule, including in advance of interagency review, and received input to support EPA’s evaluation of the statutory criteria described in Section IV of this preamble. After analyzing information relevant to the statutory criteria, as outlined in this section, and based on input from DOD, EPA is proposing to determine that no safe or technically achievable substitute will be available for the MCMEU application and that the supply of the regulated substances that the application is capable of securing from chemical manufacturers is insufficient to accommodate the MCMEU application through calendar year 2030. Therefore, EPA proposes to renew the eligibility of the MCMEU application to receive ASAs for the five-year period of calendar years 2026 through 2030. 1. Availability of Safe and Technically Achievable Substitutes As discussed earlier in the preamble, in situations where there are not safe and technically achievable substitutes available for the entirety of the application, EPA would consider the statutory criterion regarding substitutes as being met. In public technical reports DOD (included in the rulemaking docket), DOD identified mission-critical end uses that do not have safe and technically achievable substitutes available. For example, DOD uses a mixture of HFC–227ea and sodium bicarbonate dry chemical in automatic fire extinguishing systems that protect the crew compartments of ground vehicles. DOD has tested potential replacements but has not identified a viable alternative to date. There are distinct technical specifications for some mission-critical end uses that are distinct from civil standards for the VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 same category of use (e.g., refrigerants and fire suppression agents). For example, automatic fire suppression systems in ground vehicles must meet unique military requirements for inhalation toxicity that allow personnel to stay within the protected space for at least five minutes after fire suppression. Furthermore, because Congress defined this application as what is ‘‘mission-critical,’’ EPA has always acknowledged that this application is more fluid in terms of what particular HFC uses fall within the application. DOD may change which end uses it determines to be mission-critical over time. This further feeds into EPA’s proposed assessment that the Agency cannot determine at this time that there will be safe and technically achievable substitutes available for the entirety of the application. 2. Supply In 2021, DOD sent a letter to EPA with information regarding mission-critical end uses at the time, including a list of six HFCs used in the application (HFC– 125, –134a, –143a, –227ea, –236fa, and –32). EPA has determined through communications with DOD that at least some of these HFCs continue to be utilized in mission-critical end uses. As described in section IV.B of the preamble, EPA is proposing to determine that an application meets this criterion if EPA determines that any of the HFCs currently used to manufacture products or systems for use in the application have insufficient supply. In the analysis of other applications in this proposal, EPA has evaluated the supply of five out of six HFCs that DOD identified as using in 2021 (i.e., all but HFC–143a). EPA is proposing to determine that 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 proposing to determine that the supply of HFC–227ea and HFC–236fa is insufficient to accommodate the application. This is 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 MCMEUs. For example, there are Buy America requirements in Federal Acquisition Regulation (FAR) 25.1 and Defense Federal Acquisition Regulation Supplement (DFARS) 225.1 which may restrict how DOD can procure goods, which may include HFCs. Furthermore, as noted in the substitutes discussion for the MCMEU application, EPA has always acknowledged that this application is more fluid in terms of PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 75921 what HFC uses fall within the application. DOD may change which end uses it determines to be missioncritical over time. The fact that DOD may determine that different HFCs and different annual quantities of those HFCs are necessary for mission-critical end uses further feeds into EPA’s proposed assessment that the supply of HFCs will be insufficient to accommodate the application. 3. What is EPA proposing regarding eligibility for application-specific allowances? EPA proposes to renew eligibility for DOD to receive MCMEU ASAs for the five-year period of calendar years 2026 through 2030. EPA is proposing 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, for the reasons outlined earlier in this section, EPA is proposing 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. G. 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 commercialderivative 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 this proposal, EPA is aware of only one area, lavatory trash receptacles, in which HFCs (specifically HFC–227ea and HFC–236fa) are used in commercial aviation. For military uses, HFC–125 has been used in engine nacelles and APUs, and HFC–236fa has been used in a streaming application (i.e., a portable E:\FR\FM\16SEP2.SGM 16SEP2 75922 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules extinguisher).28 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. The Agency seeks additional information on how HFCs are used for general aviation and how widespread the use is. After analyzing information relevant to the statutory criteria, as outlined in this section and the TSD, EPA is proposing to determine that no safe or technically achievable substitute will be available for the entirety of onboard aerospace fire suppression and that supply of the regulated substance that manufacturers and users are capable of securing from chemical manufacturers is insufficient to accommodate the onboard aerospace fire suppression application through calendar year 2030. Therefore, EPA proposes 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. lotter on DSK11XQN23PROD with PROPOSALS2 1. Availability of Safe and Technically Achievable Substitutes Identification of available safe and technically achievable substitutes in this application requires considering a range of factors, including fire suppression effectiveness, toxicity, and space and weight considerations. EPA has not identified available substitutes that it would propose to deem safe and technically achievable for the entirety of the onboard aerospace fire suppression application. As discussed earlier in the preamble, in situations where there are not safe and technically achievable substitutes available for the entirety of the application, EPA would not consider this statutory criterion met. HFCs are used in onboard aerospace fire suppression in fixed systems for total flooding applications and in portable equipment for streaming uses (e.g., handheld fire extinguishers). Fire suppression agents must satisfy environmental and safety criteria, including but not limited to acceptable ODPs and GWPs, be effective extinguishants, and, for spaces where people would be present, have sufficiently low toxicity such that under normal use the discharge of agent in occupied spaces would not harm people. Other important features that are sometimes relevant for onboard aerospace fire suppression include 28 See https://www.epw.senate.gov/public/_ cache/files/d/1/d152a591-878f-4a4d-b9c1dc7121c06eca/9D366FF1E61F7 EFFD6A71C37C92924A5.04.03.2020-boeing.pdf. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 being electrically non-conductive, and ‘‘clean’’ in certain applications such as for high-value electronics, controls, or other critical systems in the protected spaces where it is important to leave no non-volatile residue that could damage the equipment. As noted at the start of this section, HFCs are used in limited areas within the application. Because there are potentially overlapping ASAs available for a military use of HFCs, EPA has focused its analysis of substitute availability primarily on commercial aviation. EPA is aware of only one application where HFCs are used in commercial aviation: lavatory trash receptacle fire extinguishing systems. Lavatory trash receptacle systems are total flooding systems; total flooding systems are designed to automatically discharge a fire extinguishing agent throughout a confined space. EPA has not identified any safe and technically achievable substitutes for lavatory trash receptacle systems. In coming to this proposed determination, EPA reviewed information from multiple sources including FAA, the EPA SNAP Program, FSTOC, and the International Civil Aviation Organization (ICAO) which is outlined in greater detail in the TSD included in the docket for this proposed action. The FSTOC 2022 Assessment Report noted that it is not aware of any research to develop an HFC substitute in lavatory trash receptacle fire extinguishing systems. Furthermore, FSTOC noted that identifying substitutes for lavatory trash receptacles is a low priority for industry given that it makes up less than one percent of the installed fire suppression base on board aircraft. In developing its proposed determination, given the global effort to find viable halon alternatives, EPA did not consider halons in its proposed consideration of the availability of safe and technically achievable substitutes. However, both Halon 1301 and Halon 1211 are technically achievable and continue to be used in onboard aerospace fire suppression. Although the onboard aerospace fire suppression industry has relied on halons for fire suppression for decades, the United States phased out the production and import of virgin halons in 1994 due to their high ODP. Recycled halons have been the only supply of halons in the United States for nearly 30 years and still comprise the majority of installed fire suppression capacity on most aircraft. Industry has made extensive efforts to identify alternatives to halons particularly with recent estimates from the TEAP’s FSTOC that the dwindling PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 supply of recycled halons could lead to shortages in the next decade. In assessing whether there was a safe and technically achievable substitute available, EPA also considered what alternatives are listed for use under SNAP for fire suppression that would be relevant for these applications. EPA notes that 2-bromo-3,3,3trifluoropropene (2–BTP) is listed as an acceptable substitute subject to use conditions for use as a streaming agent in handheld extinguishers and for certain total flooding applications (e.g., engine nacelles and APUs). FAA has approved the use of 2–BTP in handheld extinguishers, and commercial aircraft manufacturers have begun replacing Halon 1211 with 2–BTP extinguishers on newly designed aircraft. As noted above, the SNAP Program listed 2–BTP as acceptable as a total flooding agent in engine nacelles and APUs; however, 2– BTP has not been listed as acceptable in lavatory trash receptacles and the factors for consideration are different from other acceptable SNAP-listed uses. For examples, use in lavatory trash receptacles would be in a space occupied by people, whereas use in engine nacelles and APUs are in unoccupied spaces. Furthermore, FAA has not approved 2–BTP for any total flooding systems to date. As noted in the introduction to this section, in addition to the use of HFCs for lavatory trash receptacles in commercial aviation, HFC–125 has been used in engine nacelles and APUs on commercial-derivative aircraft for military use. Industry has explored several other fire suppression agents in engine nacelles and APUs, but none have proven to be a viable solution. For example, the industry previously explored FK–5–1–12 for use as a fire suppression agent in engine nacelles, but it failed an FAA-required live fire test. As a result, for the purposes of its evaluation under the AIM Act subsection (e), EPA has not identified safe and technically achievable substitutes that are available for use in engine nacelles or APUs. In addition to the areas in which HFCs are used in total flooding systems, HFC–236fa is used as a streaming agent in commercial-derivative aircraft for military use. As previously noted in this section, 2–BTP has been listed as acceptable by SNAP, is FAA-approved, and commercial aircraft manufacturers have begun transitioning to 2–BTP extinguishers on newly produced aircraft. While EPA analysis suggests that 2–BTP is available as a safe and technically achievable substitute, as explained elsewhere in this proposal, EPA would only determine the statutory E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 criterion in subsection (e)(4)(B)(i)(I) is not met if the Agency determines substitutes are available for the entirety of the application. If a substitute were identified for the entirety of the application, it would still take significant time for transition to the substitute to occur for this application. FAA has testing requirements and minimum performance standards that a new fire suppression agent must meet before it can be used commercially. While there is no prescribed amount of time it takes to meet these requirements, a stakeholder indicated to EPA in a November 2023 public stakeholder meeting that the certification process can take three to five years. Another stakeholder described the FAA process as arduous and noted that it could take many years to receive certification for a new fire suppression agent. There is no information before the Agency at the time of this proposal to suggest that there would be a safe and technically achievable substitute available prior to the next five-year review. 2. Supply As previously discussed, HFC–227ea, HFC–236fa, and HFC–125 are all currently used in onboard aerospace fire suppression. As described in Section IV.B of the preamble, EPA is proposing to determine that the requirements of 42 U.S.C. 7675(e)(4)(B)(i)(II) are met for this application if EPA determines that any of the HFCs currently used in a commercial product or to manufacture products for use in the application have insufficient supply. HFC–227ea is the only regulated substance for which onboard aerospace fire suppression allowances have been expended to date. As previously stated, HFC–227ea is used in commercial aviation whereas HFC–236fa and HFC– 125 are used in commercial-derivative aircraft for military use. As intended in the Allocation Framework Rule, there is overlap between the onboard aerospace fire suppression application and the MCMEU application. EPA is not reopening this approach through this rulemaking, so as long as DOD continues to classify the operation of Armed Forces aircraft as missioncritical, then DOD may use MCMEU allowances for fire suppression equipment installed on commercialderivative aircraft. Therefore, in addition to HFC–227ea being the only regulated substance for which onboard aerospace fire suppression allowances have been expended, the uses of HFC– 227ea are the only uses for which the onboard aerospace fire suppression application is the sole pathway to receive allowances. In 2022, the sole VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 domestic producer of HFC–227ea produced 1,324.7 MT of HFC–227ea, comprising one percent of U.S. HFC production on a mass basis. In addition, there were nine entities that imported HFC–227ea with the total amount of imports equaling 454.2 MT. Overall, HFC–227ea made up only 0.2 percent of all U.S. HFC consumption in 2022 on a mass basis. At the end of 2022, suppliers held 1,008.3 MT of HFC– 227ea in domestic inventory, which is equivalent to about 323 percent of calculated consumption of HFC–227ea in 2022; as noted in the supply discussions for the other applications above (Sections B–E), not all of this HFC–227ea may be considered available supply, as the entities holding this material are broader than EPA’s interpretation of chemical manufacturers. As stated elsewhere in this proposed rule, EPA recognizes that there is inherent uncertainty regarding HFC production, and in particular for HFCs with a more limited number of production facilities and/or higher GWPs than other regulated HFCs, this uncertainty may be greater; HFC–227ea has one of the highest GWPs of the regulated HFCs. Additionally, EPA understands there will be changes to market conditions resulting from the domestic and global phasedown of HFC production and consumption that could affect future supply of HFC–227ea. Given the relative size of the market for HFC–227ea and the limited number of producers in the United States and abroad, the supply chain for HFC–227ea is potentially more fragile than other supply chains (e.g., HFC–134a). This makes it more likely that the supply of HFC–227ea available from chemical manufacturers will be insufficient during 2026–2030 for this application. The use of HFC–227ea in onboard aerospace fire suppression is small compared to the annual consumption of HFC–227ea. Allocated ASAs for this application in 2024 are equivalent to 0.8 percent of calculated consumption of HFC–227ea in 2022. While this small usage could make it easier for suppliers to divert a fraction of their available supply to this application, the supply chain for HFC–227ea remains fragile for reasons mentioned earlier in this section, including low production and a limited number of suppliers. Another factor EPA is considering is the impact that other regulatory actions may have for the available supply of HFC–227ea. Specifically, the proposed Emissions Reduction and Reclamation Rule proposes requirements for the use of recycled HFCs for the initial charge (i.e., installation) and/or servicing in fire suppression systems generally, but not PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 75923 onboard aerospace fire suppression systems as long as the application continues to be eligible for ASAs. If this requirement is finalized as proposed, this could decrease the demand for virgin HFC–227ea. EPA also analyzed the supply of the other HFCs currently used in this application to determine whether supply of those HFCs was also insufficient to accommodate the application. HFC–236fa is used in portable extinguishers in commercialderivative aircraft. There is currently one producer in the United States of HFC–236fa, however, there was no domestic production reported in 2022. Globally, HFC–236fa is produced in even smaller quantities than HFC– 227ea. In 2022, there were seven entities that imported HFC–236fa with the total amount of imports equaling 301.4 MT. Overall, HFC–236fa made up less than 0.2 percent of all U.S. HFC consumption in 2022 on a mass basis. At the end of 2022, suppliers held 127.5 MT of HFC– 236fa in domestic inventory, which is equivalent to about 47 percent of calculated consumption of HFC–236fa in 2022; as noted for HFC–227ea and other HFCs discussed in this preamble, not all of this inventory may be considered available supply (see Section IV.B for more information). While onboard aerospace fire suppression allowance holders have not used allowances for HFC–236fa to date, allocated ASAs for this application in 2024 are equivalent to 0.3 percent of calculated consumption of HFC–236fa in 2022. However, similar to the analysis for HFC–227ea, given the relative size of the market for HFC– 236fa and the limited number of producers in the United States and abroad, the supply chain for HFC–236fa is potentially more fragile than other supply chains (e.g., HFC–134a). This makes it more likely that the supply of HFC–236fa available from chemical manufacturers will be insufficient during 2026–2030 for this application. Also, if finalized as proposed, the Emissions Reduction and Reclamation Rule (88 FR 72216, October 19, 2023) could result in similar changes for HFC– 236fa as previously discussed with HFC–227ea. HFC–125 is used in engine nacelles and APUs in military use. HFC–125 is one of the most widely produced HFCs in the world with multiple producers in the United States and globally. In 2022, U.S. production of HFC–125 totaled 19,175.7 MT, comprising 14 percent of U.S. HFC production on a mass basis. In addition, there were 19 entities that imported HFC–125 with the total amount of imports equaling 23,849 MT. E:\FR\FM\16SEP2.SGM 16SEP2 75924 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules Overall, HFC–125 made up approximately 25 percent of total U.S. HFC consumption in 2022 on a mass basis. At the end of 2022, suppliers held 56,208.2 MT of HFC–125 in domestic inventory, which is equivalent to about 141 percent of calculated consumption of HFC–125 in 2022; for reasons explained elsewhere in this preamble, not all of this inventory may be considered available supply. Allocated ASAs for this application in 2024 are equivalent to 0.0059 percent of calculated consumption of HFC–125 in 2022. The 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) is restricting the use of HFCs and HFC blends above certain GWP limits in a number of sectors and subsectors as early as 2025. In all likelihood, demand for certain blends containing HFC–125 will decrease. However, given HFC–125 could be used in lower-GWP blends, including blends with GWPs that are less than the relevant GWP limits, there is uncertainty regarding how HFC–125 demand will be impacted. A reduction in demand for HFC–125 in the refrigeration and air conditioning sectors could result in an increase in available supply for use in fire suppression equipment. lotter on DSK11XQN23PROD with PROPOSALS2 3. What is EPA proposing regarding eligibility for application-specific allowances? EPA is proposing 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 is proposing 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, for the reasons outlined earlier in this section, EPA is proposing to determine that no safe or technically achievable substitute will be available for onboard aerospace fire suppression and that the supply of the regulated substance that manufacturers and users are capable of securing from chemical manufacturers is insufficient to accommodate onboard aerospace fire suppression through calendar year 2030. As explained earlier, EPA is proposing to determine the supply criterion is met if supply of one HFC used by the application is insufficient to accommodate the application. EPA proposes to determine that the supply of HFC–227ea and the supply of HFC–236fa are insufficient to accommodate the application for the reasons outlined in the prior section. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 VI. What are the proposed requirements associated with a petition to be listed as an application that will receive application-specific allowances? The Agency is proposing 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 42 U.S.C. 7675(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. In order to have sufficient information to evaluate a petition based on the criteria in subsection (e)(4)(B)(i), EPA is proposing to require that certain information must be included in order for a petition to be considered complete. The Agency envisions that petitions could be submitted by a single entity, such as a company or trade association, or a group of entities. The information listed as required is not meant to be a comprehensive list of what a petition may include, but rather a minimum threshold after which the Agency would consider a petition complete. EPA would only consider the statutory timeline triggered upon the filing of a complete petition. If the Agency were to receive a petition that did not include all required elements listed in this section, EPA proposes that it would consider that petition incomplete. 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. After a petition is submitted, if the petitioner supplements the petition, EPA would consider the petition to be re-submitted, and the statutory timelines for action would restart. New information may fundamentally alter the merits of a petition and therefore EPA would have to restart its review in order to account for new information holistically. Comments on EPA’s proposed determination would not restart the statutory timelines unless the PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 petitioner formally requested to supplement or revise their petition. EPA proposes that 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 substances and description of their use 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-inkind 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 communication from responsible corporate officers at multiple representative suppliers and 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; • 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 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 E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 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 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 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. Requiring minimum information be included in order for the Agency to deem a petition complete and process that petition would help provide clarity for the Agency and ensure timeliness and transparency for the petitioner. If EPA does not take this approach, it could prevent EPA from having sufficient data to determine whether the application warrants receiving ASAs and would unnecessarily delay a response from the Agency. This would mean that a petitioner would have to wait longer to re-submit a petition if a necessary element were omitted from the original submission. EPA seeks comment on the proposed petition process, including all of these proposed elements and the associated burden VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 with providing such information to the Agency. In addition to proposing to establish required elements of a complete petition, EPA is providing a nonexhaustive list of other elements that are optional, but 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; • Other information that may be relevant as the Agency evaluates the petition, based on the factors listed in subsection (e)(4)(B)(i). 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 2027, the entity should submit a complete petition no later than January 31, 2025. 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 proposed timeline would 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 proposes 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). EPA contends that allocating allowances based on the established regulatory approach would be the fairest and most transparent method of determining allowance allocations for entities in a new application. While EPA is proposing that a petition be required to include PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 75925 some of the information that would be necessary to determine an allowance allocation, it is possible that not all entities within an application would be involved in the submission of the petition. In other words, having entities within a new application request ASAs by July 31 like all other applications (per 40 CFR 84.13(b)) would ensure that all entities in a new application have equal opportunity to request allowances. 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 proposes 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 proposes 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 proposed 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. Consistent with the reporting requirements under 40 CFR 84.31(a), EPA is proposing that all reports, petitions, and any related supporting documents must be submitted electronically in a format specified by EPA; 29 and quantities of regulated substances must be stated in terms of kilograms unless otherwise specified. EPA is proposing that these records and copies of reports required by this section must be retained for three years. VII. Proposed 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. EPA set up a framework to determine ASA 29 Currently, most HFC reports under the AIM Act are submitted through the HAWK module in the electronic Greenhouse Gas Reporting Tool (eGGRT). E:\FR\FM\16SEP2.SGM 16SEP2 75926 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules allocations for calendar years 2022 through 2025 for five of the six applications identified in the AIM Act: propellants in MDIs; defense sprays; SCPPU foam for marine use and trailer use; etching of semiconductor material or wafers and the cleaning of CVD chambers within the semiconductor manufacturing sector; and onboard aerospace fire suppression. 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 (86 FR 55116, 55153, October 5, 2021). The 2024 HFC Allocation Rule did not reopen the methodology for issuing ASAs but noted that the Agency had begun development of this proposed 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 (88 FR 46836, 46840, July 20, 2023). As EPA foreshadowed in the 2024 HFC Allocation Rule, the Agency is proposing 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 is also proposing 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, proposing to require exporting companies to report ITNs quarterly, and proposing 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: Æ The AAGR of use for the company over the past three years; or Æ 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: (( Application or Entity HFC Purchases in Year 2 _ 1) + (Application or Entity HFC Purchases in Year 3 _ 1)) Application or Entity HFC Purchases in Year 1 Application or Entity HFC Purchases in Year 2 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 is proposing 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. 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 also factually documented when determining allowance allocations. EPA finalized 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 or expanded manufacturing line, (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 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 patients diagnosed with medical conditions treated by MDIs. These scenarios could provide reasons to increase allowance allocations to affected companies in the affected years. Furthermore, 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. Specific 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; or Securities and Exchange Commission filings documenting facility acquisitions or expansions. Ultimately, accommodating unique circumstances that are fully documented and proven help the Agency fulfill Congress’s mandate that EPA ‘‘allocate the full quantity of allowances necessary’’ (86 FR 55116, 55151, October 5, 2021). As a result of the multiple allocations between 2021 and 2023 and the lessons learned through this process, EPA is now proposing limited changes to these existing regulations. Specifically, EPA is proposing: 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 PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 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 is proposing 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. A. Expected Total HFC Purchases Under EPA’s current program, entities may voluntarily state the total amount of HFCs they expect to purchase for the next year. EPA has encouraged entities to provide this data on a voluntary basis to provide an additional data element for the Agency to consider in making allocation decisions. EPA proposes 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. Under this proposed requirement, entities would be required to provide an estimate of the total quantity of HFCs they expect to purchase next year based on their expected eligibility for allowances. EPA will allocate at that level if it is lower E:\FR\FM\16SEP2.SGM 16SEP2 EP16SE24.005</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 than what that entity is eligible for based on the regulatory formula. EPA is proposing this approach to better understand each entity’s HFC needs in the next year. The regulatory allocation methodology established in the Allocation Framework Rule, and outlined at the start of this section, is designed to determine an allocation based on ‘‘projected, current, and historical trends.’’ However, this formula may not fully take into account other considerations that could impact an entity’s HFC needs in the next year. This proposed approach may also avoid overallocation at the expense of general pool allowance holders. 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. Entities ‘‘must provide additional information if requesting that EPA consider unique circumstances’’ under 40 CFR 84.13(b)(1). EPA is proposing to codify into the regulations the Agency’s existing practice of requiring entities to provide supporting documentation to verify any claimed need. EPA previously codified three situations that would be considered as unique circumstances (40 CFR 84.13(b)(1)). After multiple allocations and many conversations with stakeholders, EPA is proposing to add to the list of unique circumstances under which EPA may allocate additional allowances beyond what is calculated from the regulatory allocation formula. EPA is also proposing to broaden the third unique circumstance related to MDIs. First, EPA is proposing to create a unique circumstance for economic disruption outside the immediate control of the entity applying for ASAs, such as an economy-wide recession or other documented short- to mediumterm market events that negatively impact a company’s operations, such as a strike that affects product demand or supply chain disruption. EPA proposes to consider this situation as a unique circumstance as such an event could lead to an increased need to purchase HFCs beyond what is reflected in the regulatory formula, but likely would not be captured under an existing scenario that EPA would consider as an acceptable unique circumstance. If finalized, entities would still have to submit documentation that verifies that this situation has taken place, the current status of the market event (e.g., whether it has concluded and demand for the HFCs has returned), and that this situation has materially impacted an VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 entity’s HFC needs. The entity would also have to provide supporting documentation to justify the projected amount of HFCs needed, including explaining how projections compare to pre-market event use. EPA is also proposing to add building a stockpile of a specific HFC as a scenario which EPA would consider a unique circumstance 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 the cease in production. For an entity to be eligible for additional allowances under this unique circumstance, EPA proposes that the entity must provide EPA with a letter from their supplier signed by a responsible corporate officer 30 stating that the supplier is ceasing all production of the HFC at issue within three years. Further, EPA proposes 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 no other chemical manufacturers that can supply the needed HFC). EPA proposes 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 proposes 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 is also proposing to expand 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.’’ EPA notes that the reference in the regulations to an ‘‘other 30 EPA is also proposing to define this term, which is used elsewhere under the HFC Allocation Program. For purposes of 40 CFR part 84, subpart A, EPA is proposing that responsible corporate officer and responsible official mean 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. PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 75927 public health emergency’’ is not limited to situations where the Department of Health and Human Services (HHS) has officially declared a public health emergency. The proposed expansion of the unique circumstance is a direct outgrowth of experience over the past three years of implementing the phasedown and is designed to ensure a sufficient volume of HFCs is available to manufacture MDIs to treat asthma, chronic obstructive pulmonary disease, and other respiratory diseases when unexpected market events occur. EPA proposes 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. If finalized, EPA intends to consult closely with the FDA and potentially HHS more broadly before allocating allowances for ‘‘healthcare system needs.’’ Examples of the types of events that could fall into a healthcare system need include, but are not limited to: • 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 that; • Significant increase in respiratory infections in 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. C. Methodology for Entities With Irregular Purchasing History and Very Small Users EPA has observed that there are certain entities with purchase patterns 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. For these entities, EPA is proposing an alternative approach for calculating the quantity of allowances each entity is eligible to receive. Specifically, EPA is proposing to create an alternative E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75928 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules method of allocating to entities that are either of the following: (1) Entity has small purchases of HFCs (<100 kg) at least one of the last three years where their purchase history would result in 200 percent or higher AAGR of use for the company over the past three years, or (2) entity’s growth rate cannot be calculated because it had zero purchases in one of the last three years for reasons other than newly using HFCs. For entities that fall into either category, the Agency is proposing to allocate the highest, as measured in exchange value equivalent (EVe), verified purchase amount in the last three years. With respect to the first category, EPA is proposing these cutoff numbers to allow for some narrow flexibility in an entity’s purchasing patterns and to recognize the variability for entities that purchase relatively small quantities of HFCs. EPA is proposing to move away from applying the existing regulatory formula for entities where a relatively small fluctuation in purchasing measured on a mass basis would result in an extraordinarily large and nonsensical growth rate. EPA reviewed data from the past three October 1 allocation cycles and found that the top three highest entity-specific AAGRs from each of the allocation cycles ranged from about 125 percent or higher, with the lowest ‘‘small use’’ of HFCs in a particular year of less than 5 kg. Thus, the Agency is proposing 200 percent as the AAGR cutoff and less than 100 kg as the ‘‘small use’’ cutoff. For the second category, it is mathematically impossible to calculate a growth rate based on zero purchases in a year under EPA’s existing regulatory formula. Entities that had zero purchases in one of the three years under consideration would also have to be determined to be an active purchaser prior to a year with zero purchases. It is not EPA’s intent to capture entities that are new in an application under this alternative pathway. EPA is separately proposing a different allocation approach for all very small purchasers of HFCs. EPA is proposing to define entities in this category as anyone whose HFC purchases add up to less than 100 kg in each of the previous three years. The Agency recognizes there are certain entities that purchase the same small quantities of regulated substances every year who may not follow a growthoriented use similar to that of entities that use HFCs in wide-scale, commercial operations. Examples of these uses could include those meant for small batch use in one of the eligible applications for research and development and/or entities that may VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 not yet be manufacturing commercially if, for example in the case of MDIs, the entity is still in the product development phase, is only manufacturing small numbers of MDIs (e.g., for clinical trials), and is waiting for final FDA approval. For these entities, EPA proposes to allocate the highest, determined on an EVe basis, of an entity’s past three years’ worth of purchases, since their use stays relatively consistent over time. EPA is taking comment on whether the Agency should look back further at up to five years’ worth of purchase history. EPA based this number on the past three October 1 allocation cycles, and reviewed purchasing patterns for the smallest purchasers who are not new to the HFC market and would not be considered entities with irregular purchase histories. EPA is taking comment on the cutoff threshold on what size purchases would allow for an entity to be considered a ‘‘small user.’’ EPA is also soliciting comment on whether, combined with this approach or as an alternative to this approach, EPA should round allowance allocations for very small purchasers to account for purchase of a specific cylinder volume. In order to take this approach, EPA requests comment on the typical cylinder volume sizes used in these small purchases. EPA would also require eligible applicants to provide information on the cylinders being purchased in their biannual reporting. D. Average Annual Growth Rate Calculations EPA currently calculates AAGR on an MTEVe basis. This process involves converting the mass (e.g., kilogram) of each HFC into MTEVe and summing those MTEVe quantities across each year, before applying the AAGR formula described earlier in this section. The Agency is providing courtesy notice of a change going forward to calculate AAGR on a mass basis. This new process would be based on summing all HFCs together for each year to get a total quantity based on mass and using this mass quantity in the AAGR formula. AAGR calculations are not codified in the regulations, so this is not a regulatory revision, but EPA is providing this notice given broader methodology changes proposed in this rulemaking. EPA is modifying this calculation because we are concerned that as entities transition to lower-GWP HFCs, an AAGR calculated on an MTEVe basis will not appropriately reflect their projected demand for HFCs in the upcoming calendar year. For example, under an MTEVe-based AAGR PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 calculation, an entity transitioning to a lower-GWP HFC, which has an associated lower EV, could have a negative AAGR while simultaneously experiencing a growth in actual HFC usage. In this situation, the entity would be allocated an amount of allowances lower than its current year’s HFC use. While entities will require fewer allowances to purchase these lowerGWP HFCs, until a company has a full three years of purchase data with this lower-GWP HFC, the calculated allowances may be substantially less than projected demand, either increasing by too small an amount or in some cases declining despite an actual increase in demand. It would be a perverse outcome for entities to receive an insufficient HFC allocation because they are transitioning to a lower-GWP alternative. In addition, growth calculated on a mass basis is more reflective of demand than MTEVe and is not impacted by any potential swings resulting from purchasing differing levels of HFCs with different EV values each year. For example, a company purchasing 20 kg of HFC–41 in one year and 40 kg of HFC–23, which has an EV approximately 160 times that of HFC– 41, the following year would have the same growth rate as a company purchasing 20 kg of HFC–41 in one year and 40 kg of HFC–41 the next year (i.e., the growth rate for that year is 100 percent for both companies versus 32,000 percent for the first company and 100 percent for the second company). E. 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 (86 FR 55116, 55152, October 5, 2021). EPA is proposing to include verified changes in inventory into the calculation of the quantity of HFCs an entity used over the 12-month period for all allocations except MCMEU. Changes in inventory are documented information as to how an entity used HFCs in a particular year. For example, if an entity purchased 100 kg of HFCs, E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 and their inventory grew by 50 kg, this would suggest that the entity used 50 kg in the manufacturing process under the applicable application. In this instance, consideration of purchases minus inventory buildup is a more accurate reflection of HFC use by the entity than HFC purchases would be alone. EPA proposes to factor in both drawdown and growth in inventory; a drawdown of inventory would be added to HFC purchases and a buildup of inventory would be subtracted from HFC purchases. EPA is proposing that this approach would not apply to calculation of MCMEU allowance allocations because DOD has a history of building up inventory and may need to do so for mission-critical or national security purposes. The Agency acknowledges that building inventories can be an important strategy for other entities to navigate changing market conditions, especially in advance of the 2029 reduction step. Therefore, as part of this proposal, EPA is also including 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. An example of what the Agency would consider to be acceptable rationale would be if a producer announced that they would be ceasing production of an HFC that is used in a particular application, and the entity wanted to build up inventory of that HFC to continue manufacturing of their product while they figured out their transition timeline. Another example could include a situation where an entity had to purchase a minimum volume (e.g., a full ISO tank) and that last purchase resulted in an increase in inventory. In the alternative, EPA is proposing to not incorporate small amounts of growth in inventory in allocation decisions. EPA would propose to define a small amount of growth as below 20 percent or, alternatively, growth in inventory for only a single year. EPA invites comment on this alternative pathway and also what the Agency should consider to be a small amount of inventory growth. F. 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 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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 certain imports are not delayed or denied, EPA is proposing to modify the 40 CFR part 84, subpart A regulations to require that DOD report information consistent with the required reporting of conferral data from all other ASA holders. This would include the identity of each conferrer and conferee and the quantity in MTEVe of ASAs being conferred. This proposed regulatory change would not be a significant burden for DOD because DOD is already required to track this data internally (40 CFR 84.31(h)(7)). If finalized, this regulatory revision would bring the process for conferring MCMEU allowances in line with other entities receiving ASAs. The Allocation Framework Rule noted that one of the goals of this requirement was ‘‘to ensure EPA has the requisite information to track application-specific allowances’’ (86 FR 55116, 55189, October 5, 2021). When an HFC supplier reports to EPA that they have expended ASAs other than MCMEU allowances, conferral reports have allowed EPA to confirm whether that supplier was in possession of ASAs. With MCMEU allowances, given that DOD is not required to share information about the conferral of MCMEU allowances with EPA, the Agency has encountered difficulty verifying whether suppliers are in possession of MCMEU allowances. EPA is particularly concerned that without conferral information for MCMEU allowances, the Agency would recommend that U.S. Customs and Border Protection (CBP) deny entry of an import of HFCs bound for MCMEU. This could cause unnecessary delays for DOD and extra costs for importers. Different reporting requirements for MCMEU allowances has resulted in unexpected confusion and delays in the approval of some producer and/or importer quarterly reports, increasing administrative burden for DOD, entities who are producing and importing on behalf of DOD, and EPA. If finalized, this regulatory change would help address these issues. In addition to bringing the process for conferring MCMEU allowances in line with other entities receiving ASAs, EPA is proposing one additional requirement for the conferral of MCMEU allowances, per a request from DOD. To enable clearer tracking of MCMEU allowances from initial conferral to expenditure, EPA is proposing 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 PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 75929 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. Finally, 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. This additional layer of tracking conferrals could further relieve any unexpected confusion. G. Limited Set-Aside for Unique Circumstances Related to MDIs Some stakeholders have expressed concern that an annual allocation decision is not always sufficient to meet the needs of the entities eligible for ASAs. Entities have noted that unanticipated events may arise after July 31, when requests for ASAs are due, that legitimately necessitate an increased need to purchase more HFCs than expected. EPA received a comment to the Allocation Framework Rule (86 FR 55116, October 5, 2021) requesting that EPA create a separate additional pool of allowances to accommodate growth, new mid-year entrants, and ‘‘under-allocation.’’ At the time of that rulemaking, EPA determined that establishing such a pool of allowances was unnecessary because the Agency had set up an allocation formula to allocate the full quantity of allowances necessary, and setting allowances aside just in case they were needed would reduce the allowances available to general pool allowance holders thereby reducing how many HFCs can be imported or produced if the set-aside allowances went unexpended. EPA also noted that a company can access HFCs from the open market; if a company used more HFCs in a given year, that increased use would be reflected in the next year’s allocation. However, EPA also noted that the Agency would learn from implementation of the program and consider adjusting the methodology (86 FR 55116, 55151, October 5, 2021). Based on the Agency’s observations in implementing the ASA allocations over the past three years, EPA is proposing to create a set-aside of allowances specifically for situations that meet the criteria for the unique circumstance established in 40 CFR 84.13(b)(1)(iii), including the proposed changes described in Section VII.B of this preamble. 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 E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75930 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules diagnosed with medical conditions treated by MDIs. EPA still sees significant downsides to creating a setaside of allowances for unforeseen demands in the eligible applications as outlined in the Allocation Framework Rule, but does see benefit in creating a set-aside for the singular narrow possibility of a public health emergency or other unforeseen event that would specifically affect availability of MDIs. As a result, EPA is proposing to set aside allowances that would be available for the use of HFCs as a propellant in MDIs if the requester meets the criteria for the unique circumstance as defined in in 40 CFR 84.13(b)(1)(iii). 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. For example, during the beginnings of the COVID–19 pandemic in 2020, MDI manufacturers purchased nearly 40% more HFC–134a than they did in 2019, which is substantially more than they would have been allocated based on Year 3 purchases and the application’s AAGR; this extra demand also could not have been predicted in July 2019, when manufacturers would have applied for calendar year 2020 allowances. EPA would consult with the FDA in determining whether the presented situation meets the criteria as defined, but scenarios could include a global pandemic. Other examples of situations that could qualify are described in Section VII.B. EPA is also taking 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. If a commenter identifies such a situation, EPA requests that the commenter also provide information on how EPA would appropriately cabin requests to demand that was truly unexpected and unforeseeable and also information on what entities should have to provide as evidence when applying for set-aside ASAs. At a minimum, it seems 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. EPA seeks comment VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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 would likely require at least some of the records described in Section VI of this preamble. EPA is presenting a series of options for comment on how such a set-aside pool would be created. Under Option 1, which is EPA’s preferred option, EPA would form this pool by setting aside 10 percent of the allocation of certain entities—those that produced or imported HFCs during 2011–2019 to serve the applications eligible for ASAs, except MCMEU. An entity that produced or imported HFCs in the time range of 2011–2019 for a separate entity now receiving ASAs is getting a current HFC allowance allocation based on those past purchases. At the same time, ASAs are being issued to entities for conferral to a producer or importer. This can be viewed as a double allocation. For example, if Entity A imported for an MDI manufacturer in 2011–2019, those historic imports are included in calculating Entity A’s allowance allocation. In other words, Entity A is getting a higher allowance allocation because of their imports for an MDI manufacturer. At the same time, the MDI manufacturer is being allocated ASAs, which can be conferred to Entity A to import HFCs for the MDI manufacturer. Therefore, Entity A has two sets of allowances available to them as a result of being an importer for MDI manufacturers. Because of this aspect of the design of EPA’s allocation system, if EPA were to create a set-aside of allowances for application-specific entities, EPA proposes to hold back 10 percent of the allocation of entities that produced and imported for applicationspecific uses during 2011–2019. This appears more equitable than holding back a set amount of allowances from all general pool allowance holders, since only those that historically imported and produced for application-specific uses may have two sets of allowances now available to them. Of course, because a company that historically produced or imported for applicationspecific uses has two sets of allowances available to them, it seems that they should have sufficient production and/ or consumption allowances available to purchase additional HFCs for an application-specific entity if an unexpected need arises. EPA is soliciting comment on whether, because of this fact, a set-aside is not truly needed, or if a set-aside is necessary because historic importers and PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 producers are requiring conferral of ASAs to meet the needs of applicationspecific entities. Under this proposed Option 1 approach, EPA would withhold 10 percent of the identified entities’ allowances 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 seeks comment on whether April 30 is late enough in the year to provide the appropriate safety value for unforeseen public health emergencies and other healthcare system needs. Alternatively, Option 2 would be that EPA would create a set-aside pool for application-specific entities in the event of a public health emergency or other healthcare system need from any revoked allowances, including from administrative consequences already finalized. In the Allocation Framework Rule, EPA created administrative consequences whereby EPA can adjust allowance allocations if EPA determines that a person failed to comply with certain requirements relating to the HFC allowance allocation and trading program. Under the administrative consequence tool, a revoked allowance is one that EPA takes back from an allowance holder and redistributes to all other allowance holders (86 FR 55116, 55169, October 5, 2021). 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. One potential flaw with this proposed approach is that to date, entities could expend ASAs to either produce or import HFCs. EPA created ASAs to function this way because end users in the identified applications may not know in advance how they will procure HFCs, and this method provides flexibility to ensure that end users receive the ‘‘full quantity of allowances necessary,’’ (86 FR 55148). To ensure that these ASAs are provided within the overall annual production and consumption caps, EPA subtracts the amount of ASAs allocated from both the production and consumption general allowance pools (40 CFR 84.9(a)(3); 84.11(a)(3)). However, to date, EPA has only revoked consumption E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules allowances.31 EPA would likely need to hold back some amount of production allowances under this option, up to 1,000,000 MTEVe, to ensure sufficient allowances were available. A third, less preferred option, would be to hold back a set amount of allowances. This set-aside would be created from all general pool allowance holders. EPA proposes that the Agency could hold back allowances in the range of 500,000 to 1,000,000 MTEVe production and consumption allowances. 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. As explained previously, this approach seems less equitable than Option 1. This approach also does not allay the concerns identified by EPA in the Allocation Framework Rule for establishing a set-aside for ASAs. However, EPA is interested in stakeholder input regarding this option. Finally, as an alternative to creating a set-aside at all, EPA is taking comment on the possibility of allowing conferral of ASAs from other applications in the event an unforeseen event that meets the unique circumstance outlined in 40 CFR 84.13(b)(1)(iii). Under EPA’s current regulations, conferred ASAs may only be used to produce or import HFCs for the application-specific use associated with the allowance(s) (40 CFR 84.13(h)). Under this alternative, EPA would amend the regulations such that if an unforeseen event meeting 40 CFR 84.13(b)(1)(iii), ASAs could be conferred and expended to produce or import HFCs for application-specific use different from the application associated with the allowance. For example, if EPA agreed that there was a public health emergency that created an unexpected need to purchase more HFCs for MDI manufacturing, under this approach ASAs allocated for aerospace fire suppression could be conferred to import or produce HFCs for use in MDI manufacturing. EPA seeks comment on these proposals, in particular on the scope of the need, the number of allowances that are expected to need to be set aside, the date by which requests must be received to be considered, and all other aspects of the proposal. 31 See https://www.epa.gov/climate-hfcsreduction/administrative-consequences-under-hfcallocation-rule. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 H. Return of Unneeded Allowances EPA is aware that some applicationspecific entities are allocated more allowances than are necessary to accommodate their needs for a given calendar year. This may be because for that specific year, the regulatory formula overestimated that individual entity’s need. It is also possible that the entity’s expectations for the year did not match reality because of unexpected intervening events, such as a drop in demand for the entity’s products or supply chain difficulties. In light of these considerations, EPA is proposing to allow ASA holders to return their allowances voluntarily if they do not intend to use them. ASA holders could return allowances up to and including June 30 of the year for which the allowances can be expended (e.g., calendar year 2025 allowances would have to be returned by June 30, 2025). This would be completely optional and intended to be used at the discretion of the ASA holder. EPA proposes to use any returned allowances to either: (1) fulfill unexpected higher demand of another ASA holder (see proposal in Section VII.G of this preamble); or (2) return the allowances to the general pool of allowance holders proportionate to respective market shares. EPA sees benefit of redeploying allowances that would go unused into the overall HFC market for smoother transition and to ease the overall HFC phasedown. EPA is soliciting comment on this proposal, including whether it is needed if EPA finalizes other proposals outlined in this notice. EPA is particularly interested in whether this proposed approach is needed if EPA finalizes the requirement for entities to include in their application for allowances their anticipated need for the following calendar year. EPA is also interested in stakeholder input on whether codifying an ability for entities to return unneeded allowances would have unintended negative effects, including limiting the availability of allowances for transfer to another application-specific entity that has an unanticipated need for more allowances during the calendar year. I. Enabling Auctions of Illegally Imported HFCs In addition to the proposed changes to EPA’s application-specific regulations outlined in this section, EPA is also proposing a targeted change to the regulations related to the enforcement and compliance provisions EPA finalized in the Allocation Framework Rule. As explained in the Allocation Framework Rule, EPA established a comprehensive system of mechanisms PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 75931 that together and by themselves discourage and prevent illegal production, import, and subsequent sales of illegally produced or imported HFCs. Since the requirement came into effect that entities must expend allowances to produce or import HFCs, EPA has been working with partner agencies across the Federal government to implement a comprehensive enforcement and compliance program. One issue that EPA has been grappling with is what to do with HFCs that an entity imports or attempts to import without expending the requisite number of allowances. Among other things, the Federal government has been considering reexport, destruction, and auctions as potential available pathways for such HFCs. EPA is in the process of working with partner Federal agencies, particularly CBP, to consider the feasibility of an auction of HFCs that have been stopped or seized by CBP as was done in the past with illegally imported ODS. As part of this process, EPA has identified a provision in the existing 40 CFR part 84 regulations that could be read to inhibit some auctions of HFCs, although there is nothing in 40 CFR part 84 that prohibits auctions. In order to ensure auctions are an option, if the Federal government otherwise chooses to pursue them, EPA in this rulemaking is proposing to amend the prohibition relating to the sale and prohibition 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 CBP if the buyer expended consumption allowances or ASAs in a quantity equal to the EV-weighted equivalent of the illegally imported regulated substances. This proposed change would provide explicit clarity to an entity that purchases HFCs at such an auction that the HFCs they purchase can be sold as if they were initially imported with allowances.32 EPA is also proposing targeted changes to the reporting requirements to provide clarity in the regulations for how such purchases would be reported. EPA proposes that 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). EPA proposes that entities would use the date that entry 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. E:\FR\FM\16SEP2.SGM 16SEP2 75932 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 was filed 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). This would provide a date that can be easily verified and would align with when the entity formally expressed intent to CBP to enter the HFCs into U.S. commerce. Additionally, EPA is proposing 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 proposes 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 is proposing that the entity would need to do any required sampling and testing prior to sale in U.S. commerce. J. Quarterly Exporter Reporting of Internal Transaction Numbers ITNs uniquely identify shipments being exported from the U.S. to another country. EPA currently requires companies to report ITNs when they request additional consumption allowances after exporting bulk HFCs. EPA is proposing to require companies to additionally report ITNs quarterly for all HFC exports. It is EPA’s understanding that reporters can obtain ITNs from either CBP or their broker with relative ease, once they have a process to do so in place. Many reporters already gather ITNs on a regular basis for the purpose of submitting RACA reports. Under CBP regulations, there are some instances in which exporters may acquire ITNs but are not required to do so. These instances may include exports to Canada and lower-value exports, for example. EPA proposes that exporters would not be required to report ITNs for shipments that are exempt from needing ITNs under CBP regulations. EPA is not proposing any changes to the existing regulations related to RACAs, so reporters would still need to obtain ITNs for any exports listed in RACA submissions (e.g., exports to Canada). EPA is proposing to require exporters to report ITNs quarterly to better enable EPA to perform quality assurance and VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 integrity checks between exports reported to the Agency under the reporting requirements in 40 CFR 84.31 with Customs records. This, in turn, will enable EPA to better ensure the accuracy of the overall volume of HFCs that are exported, which is a critical component of the overall calculation of the HFC phasedown, in addition to being communicated for transparency to stakeholders and being a key part of the Agency’s international reporting obligations under the Montreal Protocol. K. Date of Purchase for Requests for Additional Consumption Allowances (RACAs) EPA is proposing to change the existing requirement in 40 CFR 84.17(a)(5) to report the date HFCs were purchased as part of a RACA. Instead, EPA would require an entity to only report whether the HFCs exported were purchased before January 1, 2022, or after that date. EPA has received feedback from entities requesting RACAs that it is difficult to report the date HFCs were purchased because the information can be difficult to obtain. For example, a company may purchase several batches of HFCs over the course of several months and combine these batches into a homogenous mixture in an on-site holding tank. These batches of HFCs could come from multiple suppliers. The contents of the holding tank are then siphoned off into smaller containers and exported to a foreign country, at which point the company seeks a RACA for those exported HFCs. In this scenario, it is difficult to determine what the ‘‘date of purchase’’ was for any given container of HFCs that was exported. When EPA initially codified the requirement to provide the date purchased as part of a RACA, the primary purpose of this data element was to track how much material is being exported out of pre-2022 inventory, before the phasedown program was in effect. This, in turn, helps the Agency understand certain market trends (e.g., how many containers are being sold out of older inventory as opposed to more recently purchased inventory). However, EPA can track this trend with a simpler data element. Accordingly, EPA proposes to change the existing requirement to provide the date HFCs were purchased to whether the HFCs were purchased before or after January 1, 2022. VIII. Authorization To Produce for Export In previous rulemakings, i.e., the Allocation Framework Rule and the 2024 Allocation Rule, some commenters PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 expressed concern that under EPA’s methodology for issuing production and consumption allowances, certain producers were not allocated sufficient allowances to meet the demands of their international customers working in applications for which ASAs were allocated to the domestic manufacturers. Commenters said that foreign semiconductor manufacturing remains important even while domestic semiconductor manufacturing increases under the CHIPS Act. This issue was generally beyond the scope of prior rulemakings, but EPA recognizes that under the methodology for issuing general pool production and consumption HFC allowances 33 in tandem with how ASAs have historically been issued, domestic HFC producers that manufacture low EV HFCs with proportionally smaller market shares may face challenges due to a combination of the phasedown itself, EPA’s allocation methodology, and that EPA does not allocate ASAs for entities’ operations outside the United States. 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; • Authorization must be established via notice and opportunity for public comment; and • 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 • The production so authorized would not violate the production or consumption limits. EPA has 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. Iofina has informed EPA that it has experienced challenges acquiring HFC allowances via a transfer from another allowance holder so it can produce low-EV, HFC– 41, to sell to semiconductors manufacturers abroad. Iofina has flagged 33 EPA is not reopening nor proposing to revisit the methodology for issuing general pool production and consumption HFC allowances in this rulemaking. 34 Given that the prohibition of (j)(1) does not take effect until 2033, and EPA is proposing to make allowances available to Iofina through 2030, EPA does not consider this restriction related to subsection (j)(1) as relevant to this rulemaking. E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 this challenge for EPA for several years. The company has also noted that even if it were able to secure a transfer for a single year, Iofina could not plan over multiple years. EPA has considered 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, and is proposing to authorize Iofina to undertake additional production for export as contemplated by AIM Act subsection (e)(5). To operationalize this subsection of the AIM Act, EPA is proposing to establish a production for export category of allowances and associated recordkeeping and reporting requirements. EPA is proposing that this new category of allowances would be nontransferable. Consistent with language in subsection (e)(5) of the AIM Act that EPA may ‘‘authorize an entity’’ (emphasis added), the Agency is proposing that these production for export allowances would be available only to Iofina to supply regulated HFCs to application-specific end users located abroad, specifically and only for the etching of semiconductor material or wafers and cleaning of CVD chambers within the semiconductor manufacturing sector. EPA is proposing to issue 3,000.0 MTEVe of allowances annually to Iofina for the stated purpose for each of the calendar years 2026 through 2030. EPA proposes to determine that authorization of production for export to Iofina in this instance is appropriate and consistent with subsection (e)(5) of the AIM Act. EPA proposes that this is particularly true where the ASA requirements of subsection (e)(4)(B)(iv) provide priority access to HFCs for defined applications. This proposal is intended to address a need that has been voiced consistently and exclusively by Iofina, for which Iofina has provided supporting information to substantiate the request. EPA is proposing 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 follows. A. To what entities is EPA proposing to allocate production for export allowances? As described above, EPA is proposing to only allocate production for export allowances to Iofina. The Agency has determined that the company has demonstrated their need for production VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 75933 for export allowances. Iofina has made good faith efforts to acquire allowances via an inter-company transfer and has had difficulty finding another allowance holder willing to transfer production and consumption allowances to them in order to produce regulated HFCs for export. Iofina has documented foreign customer demand in an applicationspecific end use for the HFC they produce. Iofina has committed to conduct 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 the etching of semiconductor material or wafers and cleaning of CVD chambers within the semiconductor manufacturing sector 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). EPA has also considered how this authorization supports the HFC phasedown overall. Iofina produces only one HFC, HFC–41, one of the lowest EV HFCs controlled by the AIM Act with an EV of 92, at its facility in Covington, Kentucky. Iofina produced HFCs during the 2011–2019 timeline and in subsequent years, and accordingly have been allocated allowances for calendar years 2022, 2023, and 2024. Because Iofina has always produced a low EV HFC, their allocation is smaller than companies that have historically produced higher EV HFCs, which now have flexibility to transition into a lower EV HFC at higher volumes. HFC–41 comprises a small portion of overall U.S. HFC calculated production 35 (0.02 percent in 2022 on a mass basis and approximately 0.001 percent on an EVe basis), and Iofina is the only U.S. producer of HFC–41 for consumptive use. Further, HFC–41 has a lower EV than all other regulated substances used in the etching of semiconductor material or wafers and the cleaning of CVD chambers within the semiconductor manufacturing sector. Coupled with the extremely small volume of allowances that this production would require, EPA sees authorizing this additional flexibility as appropriate to support continued U.S. production of HFC–41. EPA recognizes that upon reviewing this proposed rulemaking, there may be other HFC producers who would be interested in receiving production for export allowances for applicationspecific uses abroad. At this time, EPA has only assessed the appropriateness of proposing an allocation for Iofina in B. How many production for export allowances is EPA proposing to issue to Iofina on an annual basis, and for how many years is EPA proposing to issue these allowances? EPA is proposing to issue Iofina nontransferrable production for export allowances in the amount of 3,000.0 MTEVe on an annual basis. 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 production cap for calendar year 2024 through 2028 (the current phasedown step) is 229,521,263 MTEVe and the production cap for calendar year 2029 through 2033 (the next phasedown step) is 114,760,632 MTEVe. The proposed number of production for export allowances the Agency would issue Iofina would be approximately 0.001 percent of the overall production cap for 2026 through 2028 and 0.003 percent for 2029 and 2030.36 Accordingly, the Agency does not envision any shortage of production allowances for these years as a result of the proposal to issue Iofina 3,000.0 MTEVe of production for export allowances. In essence, the proposed 3,000.0 MTEVe of production for export allowances issued to Iofina would not materially affect any other domestic producer even in light of the next phasedown step. Consistent with the provisions in subsection (e)(5)(A)(i), EPA is proposing that if finalized, Iofina would be issued 35 See EPA HFC Data Hub at https:// www.epa.gov/climate-hfcs-reduction/hfc-data-hub. 36 Percent = (Number of Production of Allowances Issued)/(Production Cap)*100. PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 light of the specific circumstances presented by that entity. The Agency is not proposing, nor creating 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 would consider whether to act in a separate rulemaking under subsection (e)(5), but we emphasize 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. E:\FR\FM\16SEP2.SGM 16SEP2 lotter on DSK11XQN23PROD with PROPOSALS2 75934 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules production for export allowances on an annual basis for a five-year period between 2026 through 2030. are issued on an annual basis and is neither revising nor reopening the methodology codified in 40 CFR 84.11. C. Would 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 proposes 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 is proposing that when Iofina produces for export using this specific category of allowances, it is not required to expend consumption allowances in an equivalent amount. Relatedly, EPA is also proposing that Iofina’s materials produced with production for export allowances are not eligible for additional consumption allowances through the RACA provisions in 40 CFR 84.17. E. What are the proposed recordkeeping and reporting requirements for production for export allowances? In order to maintain overall stringency while allowing for the flexibilities in the AIM Act described in this general information section of the preamble, EPA is proposing 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). D. How will this process affect the issuance of other types of allowances? Under 40 CFR part 84, subpart A, EPA first issues ASAs. Because the Agency is proposing an annual finite number of production for export allowances for Iofina, EPA proposes to issue these nontransferrable allowances immediately after ASAs are issued. As a result, EPA is proposing 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. 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 if the production for export allowance provisions are finalized. EPA is not proposing any changes to how general pool consumption allowances VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 1. Annual Certifications EPA is proposing 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 is proposing 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. If the regulated HFCs produced by Iofina using product 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 is proposing that the name and address of the foreign entity, and the contact person’s name, email address, and phone number are included. Further, EPA is proposing 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 is proposing 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 PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 that EPA can quickly locate exports of regulated HFCs produced by Iofina, the Agency is proposing that an ITN be provided 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. Additionally, EPA is proposing 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. All reports described in this section would be subject to EPA’s auditing provisions under 40 CFR 84.33 if finalized as proposed. 3. Recordkeeping EPA is proposing 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 is also proposing 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 applicationspecific 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 is proposing several ways it intends to release data that would be collected if this proposed rule is finalized as proposed. EPA has reviewed the data elements that are proposed to be reported under this rulemaking. Based on that review, EPA is proposing certain confidentiality E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules determinations in advance through this notice and comment rulemaking for individual reported data elements that EPA would be collecting through this rulemaking. This proposal identifies certain information that must be submitted to EPA that may be subject to disclosure to the public without further notice because the Agency proposes to find that the information does not meet the standard for confidential treatment under Exemption 4 of the Freedom of Information Act (FOIA). EPA is also proposing to identify certain other categories of information that would be entitled to confidential treatment. 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 caseby-case confidentiality determinations. The confidentiality determinations in this proposed action are intended to increase the efficiency with which the Agency responds to FOIA requests and to provide consistency in the treatment of the same or similar information. Establishing these determinations through this rulemaking will provide predictability for both information requesters and entities submitting information to EPA. The confidentiality determinations are also proposed to increase transparency around this program’s implementation. A. Background on Determinations of Whether Information Is Entitled to Treatment as Confidential Information lotter on DSK11XQN23PROD with PROPOSALS2 Exemption 4 of the FOIA exempts from disclosure ‘‘trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential’’ (5 U.S.C. 552(b)(4)). In order for information to meet the requirements of Exemption 4, EPA must find that the information is either: (1) a trade secret, or (2) commercial or financial information that is: (a) obtained from a person, and (b) privileged or confidential. Generally, when we have information that we intend to disclose publicly that is covered by a claim of confidentiality under FOIA Exemption 4, EPA has a process to make case-by-case or class determinations under 40 CFR part 2 to evaluate whether such information qualifies for confidential treatment under the exemption. 40 CFR 2.205.37 In 37 This approach of making categorical determinations for a class of information is a wellestablished Agency practice. Prior examples of rules where EPA has made such categorical determinations include Confidentiality Determinations for Data Required Under the Mandatory Greenhouse Gas Reporting Rule and Amendments to Special Rules Governing Certain Information Obtained Under the Clean Air Act (76 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 this action, EPA is proposing to make categorical confidentiality determinations in advance through this notice and comment rulemaking for some information that must be submitted to EPA under the proposed requirements. If EPA finalizes these determinations, that information could be disclosed to the public without further notice. The U.S. Supreme Court decision in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019) (Argus Leader) addresses the meaning of ‘‘confidential’’ within the context of FOIA Exemption 4. The Court held that ‘‘[a]t least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4.’’ Argus Leader, 139 S. Ct. at 2366. The Court identified two conditions ‘‘that might be required for information communicated to another to be considered confidential.’’ Id. at 2363. Under the first condition, ‘‘information communicated to another remains confidential whenever it is customarily kept private, or at least closely held, by the person imparting it.’’ Id. (internal citations omitted). The second condition provides that ‘‘information might be considered confidential only if the party receiving it provides some assurance that it will remain secret.’’ Id. (internal citations omitted). The Court found that the first condition necessary for information to be considered confidential within the meaning of Exemption 4, but did not address whether the second condition must also be met. Following the issuance of the Court’s opinion in Argus Leader, the U.S. Department of Justice (DOJ) issued guidance concerning the confidentiality prong of Exemption 4, articulating ‘‘the newly defined contours of Exemption 4’’ post-Argus Leader.38 Where the Government provides an express or implied indication to the submitter prior to or at the time the information is submitted to the Government that the Government would publicly disclose the information, then the submitter FR 30817) (May 26, 2011); Control of Air Pollution From New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards (88 FR 4296) (January 24, 2023); and Renewable Fuel Standard (RFS) Program: RFS Annual Rules (87 FR 39600) (July 1, 2002). 38 ‘‘Exemption 4 After the Supreme Court’s Ruling in Food Marketing Institute v. Argus Leader Media and Accompanying Step-by-Step Guide,’’ Office of Information Policy, U.S. DOJ, (October 4, 2019), available at https://www.justice.gov/oip/exemption4-after-supreme-courts-ruling-food-marketinginstitute-v-argus-leader-media. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 75935 generally cannot reasonably expect confidentiality of the information upon submission, and the information is not entitled to confidential treatment under Exemption 4.39 In this proposed rule, EPA intends to clearly assert that certain information would not be kept confidential and may be disclosed publicly, if it is determined to not be entitled to confidential treatment in the final version of this rulemaking. This assertion aligns with the Supreme Court’s decision, and the subsequent DOJ guidance that the government’s assurances that a submission will be treated as not confidential should dictate the expectations of submitters. If EPA were to finalize these determinations, submitters would be on notice before they submit any information that EPA has determined that the identified information outlined in the memorandum provided in the docket for this action titled Proposed Confidentiality Determinations for Data Elements in the Proposed Rule, will not be entitled to confidential treatment upon submission and may be released by the Agency without further notice. As a result, submitters will not have a reasonable expectation that the information will be treated as confidential; rather, they should have the expectation that the information will be disclosed. As described further below, EPA is proposing to make categorical confidentiality determinations as some of the proposed data elements that would be submitted to EPA contain information that is not entitled to confidential treatment. For data elements not explicitly listed in the document in the docket, EPA will apply the 40 CFR part 2 process for establishing case-by-case confidentiality determinations. There may be additional reasons not to release information determined to not be entitled to confidential treatment, for example 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. EPA requests comment on the proposed confidentiality determinations. 39 See id.; see also ‘‘Step-by-Step Guide for Determining if Commercial or Financial Information Obtained from a Person is Confidential under Exemption 4 of the FOIA,’’ Office of Information Policy, U.S. DOJ, (updated October 7, 2019), available at https://www.justice.gov/oip/stepstep-guide-determining-if-commercial-or-financialinformation-obtained-person-confidential. E:\FR\FM\16SEP2.SGM 16SEP2 75936 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules B. 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 has reviewed the data elements EPA has proposed would be required for a petition to be listed as an application that will receive ASAs. Specifically, EPA proposes to not provide confidential treatment to, and may release without further process, all required elements of the petition, except for a subset of the elements for which EPA has proposed that multiple entities could submit information individually to EPA; 40 and all information submitted to EPA that does not correspond to a required element. The memorandum to the docket lists each individual element of a complete petition, as proposed by EPA, with an accompanying proposed determination on whether that element would be entitled or not to confidential treatment. EPA is proposing that through this rulemaking, entities are put on notice of data release in line with the Argus Leader decision. 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. EPA invites comment on this proposed determination. lotter on DSK11XQN23PROD with PROPOSALS2 C. Data Elements Related to Proposed Revisions to Existing Regulations To maximize program transparency, EPA is proposing to release several data elements associated with the proposed limited changes to existing regulations, including specific data elements associated with the following proposed regulatory revisions: (1) a pool of setaside allowances for situations that meet the criteria for unique circumstances related to the propellants in MDIs application; (2) allowing ASA holders to return their allowances voluntarily if they do not intend to use them; and (3) 40 For example, EPA is proposing that (1) data on the proportion of the overall cost of the product or system that reflects the cost of regulated substance(s) and (2) historic and projected sales for the product or system would not be treated as confidential business information, as these are important elements for the public to consider when EPA is taking action on a petition for applicationspecific allowances. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 the ‘‘date of purchase’’ requirement for a RACA. The memorandum to the docket lists each individual element EPA has proposed related to these regulatory revisions with an accompanying proposed determination on whether that element would be entitled or not to confidential treatment. EPA is proposing that through this rulemaking notice, entities are put on notice of data release in line with the Argus Leader decision. EPA is providing an express indication to all entities 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. EPA invites comment on this proposed determination. EPA is proposing to regulatorily determine that certain other information would be entitled to confidential treatment. EPA is proposing that supporting documentation verifying a need to purchase regulated substances in the present calendar year for purposes of the proposed set aside because it is likely to include the type of information that submitters customarily keep private or closely held. EPA is also proposing that data elements associated with the following proposed regulatory revisions would be entitled to confidential treatment: (1) requiring companies provide the total expected amount of HFCs they intend to purchase in the calendar year; (2) new requirements for the conferral of MCMEU allowances; and (3) requiring exporters to report ITNs quarterly. These data elements constitute the type of information that submitters customarily keep private or closely held. 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 the Department of Commerce. Additional information on the proposed determinations for specific data elements associated with the proposed regulatory revisions is provided in the memorandum in the docket for this action. EPA invites comments on these proposed confidentiality determinations, including information on whether the listed elements are the type of information customarily kept private or closely held. PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 D. Data Elements Reported to EPA Related to Production for Export EPA is proposing to establish a production for export category of allowances as described in Section VIII. If EPA were to finalize the proposal for production for export allowances, EPA is proposing to 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 lists each individual element EPA has 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 is proposing that through this rulemaking, entities are put on notice of data release in line with the Argus Leader decision. EPA is providing an express indication to all entities 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. EPA invites comment on this proposed determination. EPA is proposing that the ITNs submitted for all exports of regulated substances produced using production for export allowances would be entitled to confidential treatment for the same rationale described earlier in this section for the proposed requirement that exporters report ITNs on a quarterly basis. EPA requests comment on this proposed determination, including comments on why this information may not be entitled to confidential treatment. EPA is proposing 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 customer, and any intermediaries). EPA requests comment on this proposed determination, including comments on why this information may not be E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules entitled to confidential treatment. Specifically, EPA requests comment on whether the existence of a business relationship between an HFC producer and customer is information that is customarily closely held. X. What are the costs and benefits of this action? The changes proposed in this proposed rule would not result in any significant changes to the phasedown program as a whole, and thus do not fundamentally change the assumptions made in the Allocation Framework Rule RIA and subsequent RIA addenda. The Allocation Framework Rule RIA estimated benefits and costs for the HFC phasedown between 2022 and 2050, including assuming for analytical purposes that the allocation system would continue unchanged for years past the initial period (i.e., for 2024 and beyond). This action would not change the total number of allowances issued each year or the associated environmental impacts. Further, the 2023 Technology Transitions Rule RIA Addendum quantified the costs and benefits associated with the transitions necessary for compliance based on the sector- and subsector-specific restrictions finalized in that rule. Given that the 2023 Technology Transitions Rule promulgated restrictions for sectors that encompass both defense sprays and SCPPU foams (aerosols and foam blowing sectors, respectively), the compliance costs associated with the proposals described in Section V of this proposed rule to restrict the use of certain HFCs in defense sprays and SCPPU foams have already been accounted for in the 2023 Technology Transitions Rule RIA Addendum. Therefore, EPA is not developing an update to the RIA for this proposed rule; however, given that some elements proposed in this rulemaking could result in incremental impacts for a subset of entities, the Agency did analyze potentially salient costs and benefits considerations associated with this proposed rulemaking. A summary of this analysis is included below, and additional details are presented in Discussion of Costs and Benefits 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). This analysis is intended to provide the public with information on the relevant costs and benefits of this action and to comply with Executive Orders. The analysis does not form a basis or rationale for any of the actions EPA is proposing in this rulemaking. For entities in applications for which EPA is co-proposing an option to not renew eligibility for ASAs, the biggest drivers for any costs would be no longer being exempted from the restrictions promulgated under the Technology Transitions Program. However, entities within those applications that currently receive ASAs would also avoid recordkeeping and reporting costs associated with being an ASA holder because they would no longer receive ASAs and thereby no longer need to comply with related recordkeeping and reporting provisions, resulting in burden relief. General pool allowance holders may receive benefits in the form of additional allowances if EPA finalized one or more applications no longer being eligible for ASAs. However, EPA anticipates that the number of additional allowances would be insignificant, totaling well under one percent of consumption allowances in a given year. For example, the number of allowances allocated in calendar year 2024 to the two applications for which EPA is co-proposing an option to not renew is equivalent to 0.1 percent of calendar year 2024 consumption allowances. In addition, as these marginal benefits constitute a transfer from one group to another and do not 75937 change the total number of allowances issued, there is no net societal impact. EPA estimates that there may be costs related to the proposed requirements for ASA petitions and revisions to existing regulations. For example, in a scenario in which EPA does not renew the defense sprays and SCPPU foam for marine and trailer uses applications, the estimated costs of this proposed rule would be $19,052 in one-time costs and $54,310 in annual costs. More discussion of this scenario is included in the costs and benefits memo available in the docket that is referenced above. Other than these costs, EPA has not identified additional costs or benefits beyond those estimated in the Allocation Framework Rule RIA and subsequent RIA addenda. XI. Statutory and Executive Order Review A. Executive Order 12866: Regulatory Planning and Review and Executive Order 14094: Modernizing Regulatory Review This action is a ‘‘significant regulatory action’’ as defined in Executive Order 12866, as amended by Executive Order 14094. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for Executive Order 12866 review. Documentation of any changes made in response to the Executive Order 12866 review is available in the docket. EPA prepared an economic analysis of the potential impacts associated with this action. This analysis, ‘‘Discussion of Costs and Benefits for Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for Applicationspecific Allowances,’’ is available in the docket for this action (EPA–HQ–OAR– 2024–0196) and is briefly summarized in Section X of this preamble, titled, ‘‘What are the costs and benefits of this action?’’. The high end costs of this proposed rule are estimated in the table below: lotter on DSK11XQN23PROD with PROPOSALS2 TABLE 3—SUMMARY OF COSTS IN SCENARIO IN WHICH DEFENSE SPRAYS AND SCPPU FOAM FOR MARINE AND TRAILER USES APPLICATIONS ARE NOT RENEWED Activity One-time costs Application-specific allowance recordkeeping and reporting burden relief for entities no longer eligible for ASAs Technology Transitions recordkeeping and reporting burden for entities no longer eligible for ASAs .................. Petitions requesting eligibility for ASAs ................................................................................................................... Other regulatory revisions ....................................................................................................................................... ........................ 19,052 ........................ ........................ $(189,728) 221,462 12,758 9,818 Total .................................................................................................................................................................. 19,052 54,310 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 E:\FR\FM\16SEP2.SGM 16SEP2 Annual costs lotter on DSK11XQN23PROD with PROPOSALS2 75938 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules B. Paperwork Reduction Act (PRA) The information collection activities in this proposed rule have been submitted for approval to OMB under the PRA. The Information Collection Request (ICR) document that the EPA prepared has been assigned EPA ICR number 2685.05. You can find a copy of the ICR in the docket for this proposed rule, and it is briefly summarized here. Subsection (d)(1)(A) of the AIM Act specifies that on a periodic basis, but not less than annually, each 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 proposing 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 for the proposal to authorize 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 proposed confidentiality determinations described in Section IX of this VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 preamble, if finalized as proposed. 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: $5,486,236 (per year), includes $1,038,450 annualized capital or operation & maintenance costs. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA’s regulations in 40 CFR are listed in 40 CFR part 9. Submit your comments on the Agency’s need for this information, the accuracy of the provided burden estimates and any suggested methods for minimizing respondent burden to the EPA using the docket identified at the beginning of this proposed rule. The EPA will respond to any ICR-related comments in the final rule. You may also send your ICR-related comments to OMB’s Office of Information and Regulatory Affairs using the interface at www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ‘‘Currently under Review—Open for Public Comments’’ or by using the search function. OMB must receive comments no later than October 16, 2024. C. Regulatory Flexibility Act (RFA) I certify that this action will not have a significant economic impact on a substantial number of small entities (SISNOSE) under the RFA. The small entities subject to the requirements of this action are entities that hold HFC allowance allocations (including production, consumption, and application-specific allowances), PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 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. Given there are co-proposals for two applications, EPA conducted this preliminary screening analysis based on the pathway that could lead to the highest cost burden on small entities; therefore, this analysis assumes for analytical purposes that the defense sprays and SCPPU foam for marine and trailer uses applications will not be renewed. The Agency has determined that four of the 276 affected small businesses—or 1.4 percent of all affected small businesses—could incur costs in excess of one percent of annual sales, and three of those four small businesses—or 1.1 percent of all affected small businesses—could incur costs in excess of 3 percent of annual sales. The four entities that could incur costs in excess of one percent of annual sales are all entities that currently receive ASAs in the defense sprays and SCPPU foam for marine and trailer uses applications. These costs are primarily driven by these entities no longer being exempted from Technology Transition Program restrictions. Further 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). D. 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 GDP implicit price deflator) or more in any one year. E. Executive Order 13132: Federalism This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules F. 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. G. 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. lotter on DSK11XQN23PROD with PROPOSALS2 H. 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. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations and Executive Order 14096: Revitalizing Our Nation’s Commitment to Environmental Justice for All The EPA believes that this type of action does not concern human health or environmental conditions and therefore cannot be evaluated with respect to potentially disproportionate and adverse effects on communities with environmental justice concerns. This proposed rule does not change the HFC phasedown schedule. Although this action does not concern human health or environmental conditions, the EPA identified and addressed environmental justice concerns associated with the HFC phasedown within the Allocation Framework Rule (86 FR 55116, October 5, 2021) and the 2024 Allocation Rule (88 FR 46836, July 20, 2023). In these rulemakings, EPA identified and addressed environmental justice concerns by assessing available information to analyze baseline human health or environmental conditions, conducting updated analyses based on more recently available data, and providing meaningful participation opportunities for communities with environmental justice concerns. EPA carefully evaluated available information on HFC production facilities and the characteristics of nearby communities. Based on EPA’s analysis, EPA found evidence of environmental justice concerns near HFC production facilities from cumulative exposure to existing environmental hazards in these communities. List of Subjects in 40 CFR Part 84 Environmental protection, Administrative practice and procedure, Air pollution control, Chemicals, Climate Change, Emissions, Imports, Reporting and recordkeeping requirements. Michael S. Regan, Administrator. For the reasons set out in the preamble, the EPA proposes to amend 40 CFR part 84 as follows: PART 84 PHASEDOWN OF HYDROFLUOROCARBONS I. National Technology Transfer and Advancement Act ■ This rulemaking does not involve technical standards. Authority: Pub. L. 116–260, Division S, Sec. 103. VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 1. The authority citation for part 84 continues to read as follows: PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 75939 2. Amend § 84.3 by adding the definitions ‘‘Healthcare system need’’, ‘‘Responsible corporate officer’’, and ‘‘Responsible official’’ in alphabetical order to read as follows: ■ § 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. * * * * * ■ 3. Amend § 84.5 by: ■ a. In paragraph (a)(1), adding ‘‘, unexpended production for export allowances,’’ after the phrase ‘‘unexpended production allowances and consumption allowances’’. ■ b. Revising paragraph (c)(2). ■ c. In paragraph (d), adding ‘‘production for export,’’ after ‘‘All production, consumption,’’ and adding ‘‘production for export,’’ after the phrase ‘‘confer a production, consumption,’’. ■ d. Revising paragraph (f). ■ e. Adding paragraph (k). The revisions and additions read as follows: § 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). Applicationspecific allowances are apportioned to a person under §§ 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 E:\FR\FM\16SEP2.SGM 16SEP2 75940 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules that was produced or imported in violation of paragraphs (a) through (d) of this section, except: (1) for such actions needed to reexport the regulated substance; or (2) 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 § 84.13(a). ■ 4. Amend § 84.9 by: ■ a. In paragraph (b)(3) adding ‘‘and 3,000.0 MTEVe allowances to be allocated pursuant to § 84.18,’’ after ‘‘§ 84.13’’. ■ b. Redesignating paragraph (c) as paragraph (d). ■ c. Adding new paragraph (c). The addition reads as follows: § 84.9 Allocation of calendar-year production allowances. lotter on DSK11XQN23PROD with PROPOSALS2 * * * * * (c) Starting with the allocation of 2026 calendar year allowances, the relevant Agency official will withhold ten percent of production allowances otherwise calculated under paragraph (b) of this section from any entity that produced regulated substances in any calendar year 2011 through 2019 for a separate entity that is being issued application-specific allowances in accordance with § 84.13, except for mission-critical military end uses. If there are remaining production allowances after distribution from the set-aside under § 84.15, the relevant agency official will distribute such allowances to the entity from which they were withheld. * * * * * ■ 5. Amend § 84.11 by: ■ a. Redesignating the second paragraph (c) as paragraph (e). ■ b. Redesignating paragraph (c) as paragraph (d). ■ c. Adding new paragraph (c). VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 The addition reads as follows: § 84.11 Allocation of calendar-year consumption allowances. * * * * * (c) Starting with the allocation of 2026 calendar year allowances, the relevant Agency official will withhold ten percent of consumption allowances otherwise calculated under paragraph (b) of this section from any entity that imported regulated substances in any calendar year 2011 through 2019 for a separate entity that is being issued application-specific allowances in accordance with § 84.13, except for mission-critical military end uses. If there are remaining consumption allowances after distribution from the set-aside under § 84.15, the relevant agency official will distribute such allowances to the entity from which they were withheld. * * * * * ■ 6. Amend § 84.13 by: ■ a. In paragraph (a), removing ‘‘2022, 2023, 2024, and 2025’’ and adding in their place ‘‘as designated’’. ■ b. In paragraph (a)(1), adding ‘‘for calendar years 2022–2030’’ after the phrase ‘‘metered dose inhalers’’. ■ c. In paragraph (a)(2), adding ‘‘for calendar years 2022–2025’’ after the phrase ‘‘defense sprays’’. ■ d. In paragraph (a)(3), adding ‘‘for calendar years 2022–2030’’ after the phrase ‘‘trailer use’’. ■ e. In paragraph (a)(4), adding ‘‘for calendar years 2022–2030’’ after the phrase ‘‘semiconductor manufacturing sector’’. ■ f. In paragraph (a)(5), adding ‘‘for calendar years 2022–2030’’ after the phrase ‘‘end uses’’. ■ g. In paragraph (a)(6), adding ‘‘for calendar years 2022–2030’’ after the phrase ‘‘fire suppression’’. ■ h. In paragraph (b)(1), adding ‘‘, including supporting documentation that verifies this need’’ after the phrase ‘‘this section’’. ■ i. In paragraph (b)(1)(ii) remove ‘‘or’’ after the phrase ‘‘facility or facilities;’’. ■ j. In paragraph (b)(1)(iii), removing ‘‘A global pandemic or other public health emergency that increases’’ and adding in their place ‘‘A global pandemic, other public health emergency, or other healthcare system needs related to increased’’ and removing ‘‘inhalers.’’ and adding in its place ‘‘inhalers;’’. ■ k. Adding paragraphs (b)(1)(iv) and (v). ■ l. Adding paragraph (b)(2). ■ m. Redesignating paragraph (c)(1) as paragraph (c)(7). ■ n. Adding new paragraph (c)(1). ■ o. Adding paragraphs (c)(4) through (6). PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 p. Revising newly redesignated paragraph (c)(7) introductory text. ■ q. Removing paragraph (e). ■ r. Redesignating paragraphs (f) through (h) as paragraphs (e) through (g), respectively. ■ s. Adding new paragraph (h). The revisions and additions read as follows: ■ § 84.13 Allocation of application-specific allowances. * * * * * (b) * * * (1) * * * (iv) Economic disruption outside the immediate control of the applicant; or (v) 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 that the applicant has regulatory requirements beyond this part that limit ability to switch suppliers or there are no other suppliers that could meet their needs; and evidence that the applicant has a restricted HFC supply chain. (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 in calculating growth rates and purchase amounts, except: (i) for applications for mission-critical military end uses; and (ii) if the applying entity provides a rationale deemed acceptable by the relevant agency official as to why inventory buildup should not be accounted for; * * * * * (4) Subtracting out quantities reported under § 84.31(h)(1)(x) in calculating growth rates and purchase amounts; (5) Allocating allowances equivalent to the highest verified purchase amount measured in exchange value equivalent from the prior three years for entities that meet any of the following criteria: (i) entity purchased 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 paragraph (7)(i) is equal to or greater than 200 percent; (ii) entity had zero purchases in one of the last three years for reasons other than newly using regulated substances; or (iii) entity purchased equal to or less than 100 kilograms of regulated E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules substances in each of the past three years; (6) For the application of structural composite preformed polyurethane foam for marine use and trailer use, utilizing the exchange value for HFC– 152a in calculating the allowance allocation, regardless of what regulated substance was used by an entity; (7) For all other entities, multiplying the use of regulated substances by the company in the specific application in the prior year by the higher of: * * * * * (h) Any entity receiving an allocation of allowances pursuant to this section may voluntarily choose to return any quantity of allowances to EPA up to, and including, June 30 of the calendar year in which the allowances can be expended. If any allowances are so returned, those allowances will be distributed to the persons who meet the criteria listed in §§ 84.9 and 84.11 proportionate to entities’ market share as calculated in §§ 84.9(b)(2) and 84.11(b)(5). ■ 7. Add § 84.14 to read as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 84.14 Petition for designation of an application as eligible for applicationspecific allowances. (a) Petitions filed pursuant to 42 U.S.C. 7675(e)(4)(B)(ii) 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 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 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 and notarized 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; VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 (6) Total quantity (in kilograms) of all regulated substances acquired by each entity submitting the petition for 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 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 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 HFC(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. (c) In the event that an application becomes eligible to receive applicationspecific allowances: (1) EPA will allocate allowances to entities in a new application in accordance with § 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 § 84.13(a). ■ 8. Amend § 84.15 by adding paragraph (h) to read as follows: § 84.15 Set-aside of application-specific allowances, production allowances, and consumption allowances. * * * * * (h) Consumption and production allowances from § 84.9(c) and § 84.11(c) are available in the form of applicationspecific allowances to entities that PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 75941 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 § 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 § 84.13(c)(1); (3) are facing a situation that qualifies as a unique circumstance as defined in § 84.13(b)(iii); and (4) demonstrate to the satisfaction of the relevant agency official that the situation described in paragraph (3) was unknowable at the time the entity made its request for application-specific allowances pursuant to § 84.13(b). ■ 9. Amend § 84.17 by: ■ a. In the introductory text, adding the language ‘‘, except for the export of regulated substances produced with a production for export allowance’’ to the end of the first sentence. ■ b. Revising paragraph (a)(5). The revision reads as follows: § 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; * * * * * ■ 10. Add § 84.18 to read as follows: § 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. ■ 11. Amend § 84.31 by: ■ 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’’. ■ b. Redesignating paragraphs (d)(1)(vii) and (d)(1)(viii) as paragraphs (d)(1)(viii) and (d)(1)(ix), respectively. ■ c. Adding new paragraph (d)(1)(vii). ■ d. In paragraph (h)(1)(i), adding ‘‘, including a copy of the sales records, invoices, or other records documenting that quantity’’ after the word ‘‘months’’. ■ e. In paragraph (h)(1)(ii), adding ‘‘, including a copy of the sales records, invoices, or other records documenting that quantity’’ after the word ‘‘months’’. E:\FR\FM\16SEP2.SGM 16SEP2 75942 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules f. 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)’’. ■ g. In paragraph (h)(1)(iv), adding ‘‘, including a copy of inventory records documenting that quantity;’’ after the word ‘‘use’’. ■ h. In paragraph (h)(1)(viii), removing the last ‘‘and’’ after the phrase ‘‘additional need’’. ■ i. In paragraph (h)(1)(ix), removing ‘‘allowances.’’ and adding in its place ‘‘allowances; and’’. ■ j. Adding paragraph (h)(1)(x). ■ k. In paragraph (h)(2)(iv), adding ‘‘, including a copy of inventory records documenting that quantity;’’ after the phrase ‘‘current year’’. ■ l. In the introductory text of paragraph (h)(4), removing ‘‘, except for the conferral of allowances for missioncritical military end uses,’’. ■ m. In paragraph (h)(7)(i), removing ‘‘annual’’ and adding in its place ‘‘biannual’’. ■ n. Redesignating paragraphs (h)(7)(iii) through (h)(7)(vi) as paragraphs (h)(7)(iv) through (h)(7)(vii), respectively. ■ o. Adding new paragraph (h)(7)(iii). ■ p. Redesignating paragraph (l) as paragraph (n). ■ q. Adding new paragraphs (l) and (m). The revision and additions read as follows: ■ § 84.31 Recordkeeping and reporting. lotter on DSK11XQN23PROD with PROPOSALS2 * * * * * (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 § 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. * * * * * (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 VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 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: (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) Signed certifications by a responsible corporate officer from all foreign customers and supply intermediaries attesting that any regulated substances produced using production for export allowances will only be used in an application as listed in § 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) A description of how the use identified in the signed certifications provided pursuant to paragraph (i) aligns with the applications as listed in § 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 § 84.13(a). (m) Purchasers of HFCs at a government auction. Any entity purchasing regulated substances at a PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 government auction authorized by the United States Customs and Border Protection must report such purchase as if they were an import consistent with the applicable provisions under this section, except for the following adjustments. (1) Quarterly reporting. The date that filing for that entry was accepted by a United States Customs and Border Protection-authorized electronic data interchange system, such as the Automated Broker Interface, 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. 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. (2) 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. (3) Advance notification. The auction purchaser must report the information specified in paragraph (c)(7) 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. * * * * * ■ 12. Amend § 84.54 by revising paragraph (a)(16)(i)(O) and adding paragraph (a)(16)(i)(P) to read as follows: § 84.54 Restrictions on the use of hydrofluorocarbons. (a) * * * (16) * * * (i) * * * (O) Products for removing bandage adhesives from skin; and (P) Defense sprays as defined at § 84.3. * * * * * E:\FR\FM\16SEP2.SGM 16SEP2 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Proposed Rules 13. Amend § 84.60 by adding paragraphs (a)(7) and (b)(3) to read as follows: ■ § 84.60 Recordkeeping and reporting. (a) * * * (7) Effective [DATE], this paragraph shall apply to defense sprays as defined at § 84.3 and structural composite preformed polyurethane foam as defined at § 84.3. (b) * * * (3) Effective [DATE], this paragraph shall apply to defense sprays as defined at § 84.3 and structural composite preformed polyurethane foam as defined at § 84.3. [FR Doc. 2024–20602 Filed 9–13–24; 8:45 am] lotter on DSK11XQN23PROD with PROPOSALS2 BILLING CODE 6560–50–P VerDate Sep<11>2014 19:38 Sep 13, 2024 Jkt 262001 PO 00000 Frm 00047 Fmt 4701 Sfmt 9990 75943 E:\FR\FM\16SEP2.SGM 16SEP2

Agencies

ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 89, Number 179 (Monday, September 16, 2024)]
[Proposed Rules]
[Pages 75898-75943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-20602]



[[Page 75897]]

Vol. 89

Monday,

No. 179

September 16, 2024

Part VII





Environmental Protection Agency





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40 CFR Part 84





Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for 
Application-Specific Allowances; Proposed Rule

Federal Register / Vol. 89 , No. 179 / Monday, September 16, 2024 / 
Proposed Rules

[[Page 75898]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 84

[EPA-HQ-OAR-2024-0196; FRL-10782-01-OAR]
RIN 2060-AV98


Phasedown of Hydrofluorocarbons: Review and Renewal of 
Eligibility for Application-Specific Allowances

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Environmental Protection Agency is undertaking this 
rulemaking to assess the eligibility of six applications to receive 
priority access to allowances allocated pursuant to the American 
Innovation and Manufacturing Act of 2020. This rulemaking proposes the 
framework for how EPA will assess whether to renew the eligibility of 
applications to receive application-specific allowances; decisions to 
renew or not renew each of the six applications that currently receive 
application-specific allowances; revisions to the Technology 
Transitions regulations as 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; narrow 
revisions to the methodology used to allocate allowances to 
application-specific allowance holders for calendar years 2026 and 
beyond; and limited revisions to existing regulations. EPA is also 
proposing to authorize an entity to produce regulated substances for 
export. Lastly, EPA is proposing certain confidentiality determinations 
for newly reported information if this rulemaking is finalized as 
proposed.

DATES: Comments must be received on or before October 31, 2024. 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 September 23, 2024. If a virtual public hearing is held, it will 
take place on or before October 1, 2024 and further information will be 
provided at https://www.epa.gov/climate-hfcs-reduction.

ADDRESSES: The U.S. Environmental Protection Agency (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
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
CF3I--Trifluoroiodomethane
CFR--Code of Federal Regulations
CGMP--Current Good Manufacturing Practice
CHIPS Act--Creating Helpful Incentives to Produce Semiconductors Act 
of 2022
ClF3--Chlorine Trifluoride
CO2--Carbon Dioxide
COVID--Coronavirus Disease
CVD--Chemical Vapor Deposition
DFARS--Defense Federal Acquisition Regulation Supplement
DOD--U.S. Department of Defense
DOJ--U.S. Department of Justice
EEI--Electronic Export Information
EV--Exchange Value
EVe--Exchange Value Equivalent
EPA--U.S. Environmental Protection Agency
FAA--Federal Aviation Administration
FAR--Federal Acquisition Regulation
FDA--U.S. Food and Drug Administration
FIFRA--Federal Insecticide, Fungicide, and Rodenticide Act
FSTOC--Fire Suppression Technical Options Committee
FTOC--Flexible and Rigid Foams Technical Options Committee
FR--Federal Register
GHG--Greenhouse Gas
GWP--Global Warming Potential
HCFO--Hydrochlorofluoroolefin
HFC--Hydrofluorocarbon
HFIB--Hexafluoroisobutylene
HFO--Hydrofluoroolefin
ICAO--International Civil Aviation Organization
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
NF3--Nitrogen Trifluoride
ODP--Ozone Depletion Potential
ODS--Ozone-Depleting Substances
OMB--U.S. Office of Management and Budget
PFC--Perfluorocarbon
PII--Personally Identifiable Information
PRA--Paperwork Reduction Act
PU--Polyurethane
RACA--Requests for Additional Consumption Allowance
RFA--Regulatory Flexibility Act
RIA--Regulatory Impact Analysis
RSV--Respiratory Syncytial Virus
SCPPU--Structural Composite Preformed Polyurethane
SF6--Sulfur Hexafluoride
SiN--Silicon Nitride
SiO2--Silicon Dioxide
SNAP--Significant New Alternatives Policy
SISNOSE--Significant Economic Impact on a Substantial Number of 
Small Entities
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 the Proposed Regulatory Action
    B. Summary of Proposed 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 proposed framework for renewing applications?

[[Page 75899]]

V. Review of the Six Applications Listed in the AIM Act
    A. Overview of Total U.S. HFC Consumption
    B. Propellants in Metered Dose Inhalers
    1. Availability of Safe and Technically Achievable Substitutes
    2. Supply
    3. What is EPA proposing regarding eligibility for application-
specific allowances?
    C. Defense Sprays
    1. Availability of Safe and Technically Achievable Substitutes
    2. Supply
    3. What is EPA proposing regarding eligibility for application-
specific allowances?
    4. Proposed Restriction Under EPA's Technology Transitions 
Program
    D. Structural Composite Preformed Polyurethane Foam for Marine 
Use and Trailer Use
    1. Availability of Safe and Technically Achievable Substitutes
    2. Supply
    3. What is EPA proposing regarding eligibility for application-
specific allowances?
    4. Proposed Restriction Under EPA's Technology Transitions 
Program
    E. 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. What is EPA proposing regarding eligibility for application-
specific allowances?
    F. Mission-Critical Military End Uses
    1. Availability of Safe and Technically Achievable Substitutes
    2. Supply
    3. What is EPA proposing regarding eligibility for application-
specific allowances?
    G. Onboard Aerospace Fire Suppression
    1. Availability of Safe and Technically Achievable Substitutes
    2. Supply
    3. What is EPA proposing regarding eligibility for application-
specific allowances?
VI. What are the proposed requirements associated with a petition to 
be listed as an application that will receive application-specific 
allowances?
VII. Proposed Revisions to Existing Regulations
    A. Expected Total HFC Purchases
    B. Unique Circumstances
    C. Methodology for Entities With Irregular Purchasing History 
and Very Small Users
    D. Average Annual Growth Rate Calculations
    E. Inventory
    F. Department of Defense Conferrals
    G. Limited Set-Aside for Unique Circumstances Related to MDIs
    H. Return of Unneeded Allowances
    I. Enabling Auctions of Illegally Imported HFCs
    J. Quarterly Exporter Reporting of Internal Transaction Numbers
    K. Date of Purchase for Requests for Additional Consumption 
Allowances (RACAs)
VIII. Authorization To Produce for Export
    A. To what entities is EPA proposing to allocate production for 
export allowances?
    B. How many production for export allowances is EPA proposing to 
issue to Iofina on an annual basis, and for how many years is EPA 
proposing to issue these allowances?
    C. Would 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 proposed 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. Background on Determinations of Whether Information Is 
Entitled to Treatment as Confidential Information
    B. Data Elements Associated With a Petition To Be Listed as an 
Application That Will Receive Application-Specific Allowances
    C. Data Elements Related to Proposed Revisions to Existing 
Regulations
    D. Data Elements Reported to EPA Related to Production for 
Export
X. What are the costs and benefits of this action?
XI. Statutory and Executive Order Review
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 14094: Modernizing Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations and Executive Order 14096: Revitalizing Our Nation's 
Commitment to Environmental Justice for All

I. Executive Summary

A. Purpose of the Proposed 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 
transferrable production and consumption allowances, which entities 
must expend to produce or import HFCs. In addition, subsection 
(e)(4)(B) of the Act authorizes EPA to allocate allowances exclusively 
for the use in specific applications for which there is: (1) no safe or 
technically achievable substitute and (2) an insufficient supply of the 
HFCs used in the application that can be secured from chemical 
manufacturers. The Act listed six applications that would receive 
priority access to 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. EPA 
intends to finalize this proposed rule ahead of the allocation of 
calendar year 2026 allowances. Without finalization of this proposed 
rule, all applications would be ineligible for allowances for calendar 
year 2026.\1\ EPA has created a category of allowances to provide this 
priority access, which EPA refers to as application-specific allowances 
(ASAs). ASAs 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 (86 FR 55116, October 5, 2021) for more 
information). After the total ASA quantity is determined, the remaining 
allowances are distributed to general pool allowance recipients using a 
different methodology.
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    \1\ EPA first codified the allocation methodology for general 
pool and ASA holders 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). 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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[[Page 75900]]

    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, if the application meets 
the criteria above, authorize the eligibility of the application to 
receive priority access to allowances for a period of not more than 
five years. EPA is proposing how the Agency will interpret these two 
criteria to review applications receiving ASAs. EPA is also proposing 
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. Under the authority of this 
provision, EPA finalized the rule ``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 39 
subsectors. The rule exempted applications with a current qualification 
for ASAs. 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. EPA is therefore proposing how the 
Technology Transitions regulations would apply to applications if EPA 
were to determine that those applications are not eligible for renewal 
for the full five-year period.
    The Act also includes a provision for the public to petition EPA to 
designate an application as eligible for priority access to allowances. 
EPA is proposing a procedural process for submitting a petition under 
this provision and to define minimum required elements of such a 
petition. In addition, this rulemaking proposes narrow revisions 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 regulations. EPA is also proposing to authorize 
an entity to produce regulated substances for export for application-
specific uses pursuant to subsection (e)(5). Lastly, EPA is proposing 
certain confidentiality determinations for newly reported information 
if this rulemaking is finalized as proposed.

B. Summary of Proposed Actions

    Application-specific allowance holder review: EPA is describing how 
it proposes to interpret the criteria under subsection (e)(4)(B) of the 
AIM Act and evaluate the six categories of ASA holders listed in 
subsection (e)(4)(B)(v) of the Act. EPA is proposing to renew the 
following applications for the full five-year period from 2026-2030: 
propellants in MDIs, 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 co-
proposing two options for defense sprays: do not renew or renew for a 
two-year period through 2027. EPA is co-proposing three options for 
SCPPU foams for marine and trailer uses: do not renew, renew for a two-
year period through 2027, or renew for the full five-year period from 
2026-2030 with allowance amounts determined based on the exchange value 
(EV) of a substitute HFC. In cases where EPA is proposing to change the 
status of ASA holders, this proposal also details how the Technology 
Transitions regulations would apply to those applications.
    Application-specific allowance holder petitions: EPA is proposing 
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 an essential use.
    Application-specific allowance methodology: EPA is proposing 
targeted revisions to the existing ASA methodology: 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 purchasing 
history, how to account for inventory in allocation decisions, to 
establish a set-aside of 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 is also 
proposing new requirements for conferrals of MCMEU allowances and an 
opportunity to return unneeded ASAs.
    Other regulatory revisions: EPA is proposing other specific 
regulatory changes 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: EPA is proposing to 
authorize an entity to produce for export for application-specific uses 
abroad.
    Handling of confidentiality for newly reported information: EPA is 
proposing certain confidentiality determinations for newly reported 
information if this rulemaking is finalized as proposed.

II. General Information

A. Does this action apply to me?

    You may be potentially affected by this proposal 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
------------------------------------------------------------------------
          NAICS code                   NAICS industry description
------------------------------------------------------------------------
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.

[[Page 75901]]

 
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.
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.
------------------------------------------------------------------------

    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) (see 42 
U.S.C. 7607(d)(1)(I)) (CAA section 307(d) applies to ``promulgation or 
revision of regulations under subchapter VI of this chapter (relating 
to stratosphere and ozone protection)'').
    The AIM Act authorizes EPA to address HFCs in three main ways: 
phasing down HFC production and consumption through an allowance 
allocation program, facilitating the transition to next-generation 
technologies by restricting use of these HFCs in the sector or 
subsectors in which they are used, and promulgating certain regulations 
for purposes of maximizing reclaiming and minimizing releases of HFCs 
from equipment and ensuring the safety of technicians and consumers. 
This proposal relates to the first area and addresses restrictions in 
the second area 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. 
EPA intends to finalize this rulemaking ahead of the allocation of 
calendar year 2026 allowances. Without finalization of this rulemaking, 
all applications would be ineligible for application-specific 
allowances for calendar year 2026.
    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 the exclusive 
use of regulated substances 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 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

[[Page 75902]]

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 review requirements 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 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 restrictions promulgated under the 
Technology Transitions Program are not currently applicable to any 
application receiving an ASA (40 CFR 84.56(a)(2)). To the extent that 
this proposal would result in an application no longer receiving an 
ASA, this action also proposes the Technology Transitions Program 
restrictions that would apply to that application, if any, based on 
EPA's consideration of the factors listed in subsection (i)(4) of the 
AIM Act, should EPA finalize a determination that an application can no 
longer receive an ASA.
    Prior to proposing a rule, subsection (i)(2)(A) of the Act directs 
EPA to consider negotiating with stakeholders in the sector or 
subsector subject to the potential rule in accordance with negotiated 
rulemaking procedures established under subchapter III of chapter 5 of 
title 5, United States Code (commonly known as the ``Negotiated 
Rulemaking Act of 1990''). If EPA makes a determination to use the 
negotiated rulemaking procedures, subsection (i)(2)(B) requires that 
EPA, to the extent practicable, give priority to completing that 
rulemaking over completing rulemakings under subsection (i) that are 
not using that procedure. If EPA does not use the negotiated rulemaking 
process, subsection (i)(2)(C) requires the Agency to publish an 
explanation of the decision not to use that procedure before 
commencement of the rulemaking process. The Negotiated Rulemaking Act 
of 1990 (5 U.S.C. 563) provides seven criteria that the head of an 
agency should consider when determining whether a negotiated rulemaking 
is in the public interest, namely, whether: (1) there is a need for a 
rule; (2) there are a limited number of identifiable interests that 
will be significantly affected by the rule; (3) there is a reasonable 
likelihood that a committee can be convened with a balanced 
representation of persons who can adequately represent the identified 
interests and are willing to negotiate in good faith to reach a 
consensus on the proposed rule; (4) there is a reasonable likelihood 
that a committee will reach a consensus on the proposed rule within a 
fixed period of time; (5) the negotiated rulemaking procedure will not 
unreasonably delay the notice of proposed rulemaking and the issuance 
of the final rule; (6) the agency has adequate resources and is willing 
to commit such resources, including technical assistance, to the 
committee; and (7) the agency, to the maximum extent possible 
consistent with the legal obligations of the agency, will use the 
consensus of the committee with respect to the proposed rule as the 
basis for the action proposed by the agency for notice and comment.
    If a head of agency determines that the use of the negotiated 
rulemaking procedure is in the public interest, an agency may convene a 
federally chartered advisory committee, and may rely on an appointed 
convener under 5 U.S.C. 563(b) to assist with ascertaining the names of 
persons who are willing and qualified to represent interests that will 
be significantly affected by the proposed rule. If the agency decides 
to establish a negotiated rulemaking committee, the agency must publish 
in the Federal Register and in relevant publications a notice 
announcing the agency's intention to establish a negotiated rulemaking 
committee, a description of the subject and scope of the rule, a list 
of the interests which are likely to be significantly affected by the 
rule, a list of the persons proposed to represent such interests and 
the proposed agency representatives, a proposed agenda and schedule for 
completing the committee's work, a description of the administrative 
and technical support to be provided to the committee by the agency, a 
solicitation for comments on the proposal to establish the committee 
and on the proposed membership of the committee, and an explanation of 
how a person may apply or nominate another person for membership on the 
committee. The agency must provide at least 30 calendar days for the 
submission of comments and applications related to the membership of 
the committee. In establishing and administering such a committee, the 
agency shall comply with the Federal Advisory Committee Act, unless an 
exception applies. If the committee reaches consensus on a proposed 
rule, the committee shall transmit a report containing the proposed 
rule to the Federal agency. If the committee does not reach a consensus 
on a proposed rule, the committee may transmit a report specifying any 
areas upon which consensus was reached. The proposed rule is still 
subject to public comment, and for purposes of a rulemaking developed 
under the AIM Act, the requirements of CAA section 307(d).
    Before proposing the 2023 Technology Transitions Rule, consistent 
with AIM Act subsection (i)(2)(A) and (C), EPA considered whether to 
negotiate with stakeholders using the negotiated rulemaking procedure 
provided for in the Negotiated Rulemaking Act of 1990, decided not to 
use such procedures, and published its explanation of that decision in 
the Federal Register (86 FR 74080, December 29, 2021).
    EPA noted in the final 2023 Technology Transitions Rule that, where 
appropriate, EPA will consider recent Agency actions and decisions 
related to restrictions on the use of HFCs in sectors and subsectors 
for its consideration on using negotiated rulemaking procedures. EPA 
did not, for example, separately consider using negotiated rulemaking 
for four petitions that were received after a rulemaking process had 
already been commenced regarding the same sectors and subsectors, nor 
did EPA consider anew whether or not to use negotiated rulemaking in an 
interim final rule (88 FR 88825, December 26, 2023) that amended one 
provision of the 2023 Technology Transitions Rule for one subsector.
    Similarly, the proposed changes to the Technology Transitions 
regulations contemplated in this action would be targeted at a subset 
of applications within a subsector subject to those restrictions. EPA 
is not addressing a new subsector in this proposal, nor even proposing 
a different level of stringency from already promulgated restrictions; 
rather, this action proposes only to establish deadlines by which 
applications would need to comply with Technology Transitions 
regulations in the event that those applications no longer receive 
ASAs. EPA does not believe that the public interest would be served by 
using the negotiated rulemaking procedure for this limited adjustment 
to the Technology Transitions regulations, especially because 
timeliness is a concern.

[[Page 75903]]

III. Background

    HFCs are anthropogenic \2\ fluorinated chemicals that have no known 
natural sources. HFCs are used in a variety of applications such as 
refrigeration and air conditioning, foam blowing agents, solvents, 
aerosols, and fire suppression. HFCs are potent greenhouse gases (GHGs) 
with 100-year global warming potentials (GWPs) (a measure of the 
relative climatic impact of a GHG) that can be hundreds to thousands of 
times that of carbon dioxide (CO2).
---------------------------------------------------------------------------

    \2\ 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.
---------------------------------------------------------------------------

    HFC use and emissions have been growing worldwide due to the global 
phaseout of ozone-depleting substances (ODS) under the Montreal 
Protocol on Substances that Deplete the Ozone Layer (Montreal 
Protocol), and the increasing use of refrigeration and air-conditioning 
equipment globally. HFC emissions had previously been projected to 
increase substantially over the next several decades. In 2016, in 
Kigali, Rwanda, countries agreed to adopt an amendment to the Montreal 
Protocol, known as the Kigali Amendment, which provides for a global 
phasedown of the production and consumption of HFCs. The United States 
ratified the Kigali Amendment on October 31, 2022. Global adherence to 
the Kigali Amendment would substantially reduce future emissions, 
leading to a peaking of HFC emissions before 2040.
    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) and have high impacts as measured by the 
quantity of each substance emitted multiplied by their respective GWPs. 
These 18 HFCs are all saturated, meaning they have only single bonds 
between their atoms, and therefore have longer atmospheric lifetimes 
than fluorinated compounds that are unsaturated. More detailed 
information on HFCs, their uses, and their impacts is available in the 
Allocation Framework Rule (86 FR 55116, October 5, 2021).

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 says 
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)(1)). In this section, we outline how EPA 
interprets these criteria, what information the Agency will consider in 
assessing these criteria, and a proposed framework for evaluating if an 
application is eligible for renewal for up to five years. EPA notes 
that under the statute, these criteria also apply to new applications 
that may be listed, but, aside from Section VI addressing the petition 
process, this proposed rulemaking is primarily focused on the renewal 
of existing applications. However, 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 rulemaking.

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 is proposing that the best 
interpretation of this criterion is that if there is an available 
substitute that is both safe and technically achievable, an application 
would not meet this criterion for renewal. EPA acknowledges that the 
statutory language could be ambiguous as to whether a substitute must 
be both safe and technically achievable. However, reading the statutory 
language differently than proposed would seem to create a perverse 
outcome. In such a scenario, an application would become ineligible for 
ASAs if EPA identified a substitute that was technically achievable, 
but not safe. EPA reads the context of subsection (e)(4) as indicating 
that Congress intended that listed applications continue to receive 
priority access to allowances as long as the application needed to use 
regulated substances. In a situation where an identified substitute is 
not safe, EPA believes that it would be Congress's intent to continue 
to provide priority access to allowances such that the application was 
not prematurely forced to transition to an unsafe substitute. 
Similarly, it does not seem reasonable to take away access to ASAs when 
an identified substitute is safe, but not technically achievable. If 
the application cannot technically implement the transition to a 
substitute, it seems unrealistic to think that there could be a 
transition away from regulated substances. Accordingly, EPA proposes to 
interpret the statutory text and surrounding framework such that if EPA 
determines there is no safe substitute that is technically achievable 
for an application, or a technically achievable substitute is not safe, 
the application would meet the first criterion for renewal.
    In looking at potential substitutes for an application under 
subsection (e)(4)(B)(i)(I), EPA is proposing 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 general function as the current 
HFC in use. EPA is proposing that such an interpretation of the term 
``substitute'' is most consistent with the statutory language of 
subsection (e)(4)(B) as a whole. Specifically, in its direction to EPA 
to review applications receiving ASAs every five years, Congress 
directed EPA to ``review the availability of substitutes, including any 
quantities of the regulated substance available.'' This sentence 
structure, indicating that examination of quantities of regulated 
substances available would be included as part of analyzing what 
substitutes are available, suggests that regulated substances are part 
of the universe of substitutes that Congress intended EPA to include in 
its review. In addition to EPA's determination that such an approach is 
more consistent with the statutory language than an approach of only 
looking at non-regulated substances as substitutes, EPA has also 
identified other benefits of this interpretation. For example, it would 
seem to be a perverse outcome if EPA renewed an application's 
eligibility for ASAs at historic quantities where there was an 
available substitute that did not require any or required fewer 
allowances to procure. Non-HFCs may be able to fill the same role as 
the HFC, often functioning as a chemical-for-chemical

[[Page 75904]]

replacement or requiring limited design changes.
    EPA is proposing, as part of its assessment of what chemicals may 
be determined to be safe as a substitute for applications under review, 
to only include substances, including blends of substances, with a 
lower GWP than the regulated substance currently in use. As explained 
in the Allocation Framework Rule (86 FR 55116, October 5, 2021), the 
HFC phasedown's significant benefits are derived from the reduction of 
production and consumption of certain chemicals on a GWP-weighted 
basis.\3\ Considering higher-GWP substances or blends of substances 
would run against this overall objective and could reduce the benefits 
of the HFC phasedown, especially if this rulemaking led to the uptake 
of higher-GWP non-HFC technologies (e.g., semiconductor manufacturers 
transitioning back to using higher-GWP perfluorocarbons (PFCs)). In 
addition, this proposed interpretation aligns with the approach under 
the 2023 Technology Transitions Rule (88 FR 73098, October 24, 2023), 
which established GWP limits for subsectors and considered substitutes 
as only those with lower GWPs. Further discussion regarding the sources 
EPA is relying on to determine if a substitute is safe (e.g., listed by 
EPA's Significant New Alternatives Policy (SNAP) Program) can be found 
below.
---------------------------------------------------------------------------

    \3\ While the AIM Act calls for reduction of HFC production and 
consumption on an EV-weighted basis, EV and GWP are numerically 
equal. Lower GWP is an important consideration for whether a 
substitute is safe, so EPA is using GWP instead of EV in the 
discussion in this section of the rule.
---------------------------------------------------------------------------

    In addition to looking at chemicals that could serve as 
substitutes, EPA is also including 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). Such an approach is consistent 
with the common understanding of the plain language definition of 
``substitute.'' For example, Merriam Webster defines substitute as a 
thing that ``takes the place of function of another'' and the Oxford 
dictionary similarly notes a substitute is a ``thing acting or serving 
in place of another.'' In general, not-in-kind technologies can serve 
the need of some applications, so it is appropriate to include them 
within the scope of assessing safe and technically achievable 
substitutes. It would be unnecessarily limiting to exclude from the 
scope of the analysis a technology that performs the same general 
function for the application as the current HFC in use does. EPA also 
acknowledges that market pressure from the HFC phasedown may encourage 
a transition into not-in-kind technologies (and non-HFCs) by limiting 
the supply of HFCs on a GWP-weighted basis, while the Technology 
Transitions Program prohibits the use of certain HFCs in certain 
sectors and subsectors. There is also precedent for considering not-in-
kind technologies under CAA Title VI, such as the SNAP Program and 
Nonessential Product Bans, and the AIM Act Technology Transitions 
Program, all of which also evaluate not-in-kind substitutes as possible 
alternatives to ODS and HFCs, respectively.
    EPA is aware that a transition to certain substitutes will require 
changes to how the HFCs are used in the application (e.g., 
accommodating a flammable HFC in the manufacturing process). Shifts to 
not-in-kind technologies will inherently require a change in 
manufacturing and/or the product, so it would be a consistent approach 
to also not outright exclude substitute chemicals that would similarly 
require a change in manufacturing process or the product.
    EPA does not want to unnecessarily limit the scope of the 
substitute analysis at this point in time, and therefore is considering 
a wide range of possible safe and technically achievable substitutes. 
The phasedown of HFCs is still nascent, and, at this point, we cannot 
know the full breadth of technologies that will be developed as 
replacements for the current HFCs in use.
    The Agency is proposing to assess this criterion, specifically that 
a substitute is safe, technically achievable, and available, on an 
application-wide basis. For applications that use multiple HFCs, a 
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 viable substitute for known sub-
applications. EPA's interpretation is that it would be unreasonable to 
consider an application as having met this criterion and thereby 
ineligible for renewal unless all known sub-applications can 
successfully transition away from their currently used HFC(s).
    EPA's evaluation of each application is not intended to be a 
company-specific review; the commercialization \4\ of a substitute by 
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, there are additional barriers to 
commercialization, which are considered when assessing if the 
identified substitute is available for an entire application. In 
addition, EPA's interpretation of the statutory language is that 
applications are intended to be viewed as a whole and not necessarily 
renewed by sub-application. Specifically, the listing of the 
applications in subsection (e)(4)(B)(iv)(I) does not break down the 
application into sub-applications (e.g., ``defense sprays'' is not 
listed as multiple separate applications, e.g., ``personal defense 
sprays,'' ``law enforcement defense sprays,'' and ``bear defense 
sprays''). Similarly, for applications that use multiple HFCs and have 
specific uses for the individual HFCs, it would not be reasonable to 
assess this criterion as being met if an application does not have an 
available safe and technically achievable substitute for each HFC. It 
is EPA's opinion that Congress did not intend for an application to 
lose its eligibility for ASAs if it could only transition some, but not 
all, of the HFCs currently used in the application.
---------------------------------------------------------------------------

    \4\ 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.
---------------------------------------------------------------------------

    EPA reviewed a range of sources in developing its assessment of the 
availability of safe, technically achievable substitutes for each 
application at issue here. Sources include, but are not limited to: 
manufacturer announcements; information provided by stakeholders under 
part 84 reporting requirements and other communications; relevant 
Federal and State regulations; evaluations carried out under the 2023 
Technology Transitions Rule (88 FR 73098, October 24, 2023) 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) standards for MDIs); and peer-reviewed 
technical reports. The Technical Support Document (TSD) ``Draft Review 
of Applications in the American Innovation and Manufacturing (AIM) Act 
Section (e)(4)(B)(4)'' contains a comprehensive array of sources we 
looked at for each application, and EPA is taking comment on other 
relevant sources that should be considered.

[[Page 75905]]

    As noted, EPA is considering the listings under the SNAP Program as 
part of its assessment. The SNAP Program has an established history 
evaluating substitutes for ODS, many of which are also possible 
substitutes for HFCs. Where relevant, in its assessment of the 
availability of safe substitutes, EPA considered information from the 
SNAP Program, including the listings themselves and the information 
underlying SNAP Program decisions. The SNAP Program does not evaluate 
substitutes for semiconductor etching and cleaning of CVD chambers. 
Some military applications are covered under the SNAP Program. In other 
cases, such as MDIs and SCPPU foams, while these applications are 
within the scope of the SNAP Program, there may be other sources of 
information (e.g., the FDA, company information) that may be more 
appropriate.
    In its 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 
human health risks analyzed include safety, and in particular, 
flammability, toxicity, and exposure (of workers, consumers, and the 
general population) to chemicals with direct toxicity; environmental 
risks include ozone depletion potential (ODP) and GWP. 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.
    EPA evaluates substitutes under the SNAP Program on an ongoing 
basis and over time has listed numerous substances as ``acceptable,'' 
``acceptable, subject to use conditions,'' or ``acceptable, subject to 
narrowed use limits.'' ``Acceptable subject to use conditions'' 
indicates that a substitute is acceptable only if used in a certain 
way. Use conditions can include, but are not limited to, warning 
labels, compliance with relevant safety standards, and restrictions on 
where a substitute is used (e.g., HFC-134a is acceptable for FDA-
approved MDIs for medical purposes but is not acceptable for a majority 
of aerosol uses, and some fire suppression substitutes may only be used 
in typically unoccupied spaces). EPA can also list substitutes as 
``acceptable subject to narrowed use limits'' under SNAP, indicating 
that a substitute may be used only within certain specialized 
applications within an end use and may not be used for other 
applications within that end use (e.g., SNAP has previously listed some 
substitutes as acceptable for only narrowed use limits for military or 
space- and aeronautics-related applications). In listing of a chemical 
as acceptable or acceptable subject to use conditions directly relevant 
to the application, the SNAP Program makes an assessment that the 
benefits outweigh the risks relative to other alternatives; these 
listings are relevant data to support EPA's determination under AIM Act 
subsection (e)(4)(B) on whether a substitute is ``safe'' under the 
interpretation proposed in this rulemaking.
    EPA lists substitutes as ``unacceptable'' under SNAP if the Agency 
determines that they may increase overall risk to human health and the 
environment, compared to other alternatives that are available or 
potentially available for the same use. EPA has listed substitutes as 
unacceptable considering the human health criteria described above, as 
well as the environmental factors considered under SNAP. For example, 
SNAP has listed certain substitutes as unacceptable due to unusually 
high ODP, GWP, toxicity and exposure, and flammability (where it is not 
clear how to mitigate risks sufficiently). Substitutes listed as 
unacceptable in an end use are prohibited for that use and therefore 
would not be an available safe or technically achievable substitute for 
an application under our proposed interpretation of this criterion.
    The Agency is also reviewing the evaluations carried out for the 
2023 Technology Transitions Rule (88 FR 73098, October 24, 2023) and 
relying on information and assessments done in that rulemaking, as 
appropriate. In establishing restrictions, the Technology Transitions 
Program factored in the availability of substitutes, considering both 
safety and technological achievability, among other factors. The 
Technology Transitions Program relied on information from a wide range 
of sources when assessing availability, including but not limited to, 
SNAP, the Montreal Protocol's Technology and Economic Assessment Panel 
(TEAP), standards bodies, and information provided by industry, States, 
and environmental non-governmental organizations. Though the Technology 
Transitions Program looked subsector-wide, not at specific end uses, 
and did not specifically analyze the applications currently receiving 
ASAs under subsection (e)(4)(B)(iv), some of these applications (e.g., 
defense sprays and SCPPU foams for marine and trailer uses) have 
similarities with the subsectors currently subject to restrictions. As 
a result, in carrying out the assessments undertaken in this 
rulemaking, EPA is considering relevant information from the Technology 
Transition Program's evaluations.
    In the assessment undertaken in this rulemaking, EPA is also taking 
into account other Federal standards and regulations, both within EPA 
and from other U.S. Government agencies. For many applications under 
review in this rulemaking, there are applicable regulations and 
standards that outline requirements related to the chemicals or 
technologies used within an application. In these situations, such 
standards and regulations may in some instances limit use of possible 
substitutes. In some instances, it may not be possible for a substitute 
to ever be used. In other instances, applicable regulations may require 
entities to go through a regulatory approval process that would affect 
when an application can transition to a substitute. Some examples of 
regulations and standards we are considering as part of our proposed 
evaluations include EPA's regulations covering pesticides such as bear 
spays and dog sprays (sub-applications of defense sprays) under the 
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. 
136-136y), the FDA's requirements for MDIs, and the U.S. Federal 
Aviation Administration's (FAA) requirements for onboard aerospace fire 
suppression. Additional standards and regulations for each application 
are discussed further in the relevant chapter of the TSD. EPA invites 
comment on any other standards or regulations that entities think EPA 
should consider in determining an application's ability to transition 
to a substitute.
    EPA also considered the work undertaken by the Montreal Protocol's 
TEAP in the proposed application assessment given the TEAP's analytical 
work on substitutes and alternative technologies to substances 
controlled under the Montreal Protocol, including HFCs. TEAP assesses 
technical and economic information that serves as the basis for 
parties' assessment of control measures of substances under the purview 
of the Montreal Protocol. Such information is related to substitutes 
that may replace the substances controlled under the Montreal Protocol 
and alternative technologies that may be used without adverse impact on 
the ozone layer and climate, production and consumption of controlled 
substances,

[[Page 75906]]

emissions of controlled substances, potential alternatives for exempted 
uses and others, as mandated by the parties. This assessment includes 
applications listed in AIM subsection (e)(4)(B)(iv). In addition, TEAP 
develops assessments in response to decisions taken by the parties to 
the Montreal Protocol, including but not limited to Decision XXVIII/2, 
which call for an assessment of alternatives to HFCs every five years. 
EPA particularly looked at the 2022 Assessment Reports by the Medical 
and Chemical Technical Options Committee, concerning semiconductors, 
aerosols, and MDIs; the Flexible and Rigid Foams Technical Options 
Committee (FTOC); and the Fire Suppression Technical Options Committee 
(FSTOC). TEAP reports have included information on technical 
achievability and safety. TEAP reports are developed by experts around 
the world and provide insight into the HFC substitutes currently in use 
and under development in the United States and globally. As such, EPA 
is considering relevant information from these reports when carrying 
out the assessment of available safe or technically achievable 
substitutes undertaken in this rulemaking.
    As described throughout this section, EPA is considering 
information from a wide range of sources in its assessment of the 
availability of safe or technically achievable substitutes for the 
applications receiving ASAs under subsection (e)(4)(B)(iv)(I), and no 
one source will be determinative for this criterion. Further 
information about sources consulted for each application can be found 
in Section V of this preamble and the TSD. EPA invites comment on its 
interpretation of ``no safe or technically achievable substitute will 
be available'' and the sources it is considering in its assessment of 
this criterion.

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. 7675(e)(4)(B)(i)(II)). As described here and 
in the sections of the proposed rule discussing each of the six 
applications, a determination that there is insufficient supply could 
be based on a number of different factors, 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., 
federally required purity specifications). Priority access to 
allowances through ASAs has the potential to address insufficient 
supply of HFCs by allowing entities that use HFCs in an eligible 
application to more easily procure HFCs from a domestic supplier by 
conferring allowances to authorize production or import or to import 
the HFCs themselves.
    In this proposed rulemaking, EPA is interpreting this criterion as 
requiring an assessment related to the supply of the HFC(s) currently 
used in an application's equipment or to manufacture the application's 
products for use. Under this proposed interpretation, EPA would not 
evaluate HFC(s) currently used exclusively for research and development 
in assessing whether there is insufficient supply. EPA recognizes that 
the research and development process may find various alternatives to 
be unsuitable for an application. Therefore, it would be premature to 
consider supply of potentially unsuitable HFC alternatives until such 
time as they have been commercialized or are close to 
commercialization. Further, it could also have the perverse effect of 
limiting research into alternatives if an application's initial 
research could prematurely contribute to removal from eligibility for 
ASAs.
    EPA is proposing to consider regulated substances supplied by 
chemical manufacturers in its assessment of supply. EPA interprets the 
reference to regulated substances ``from chemical manufacturers'' in 42 
U.S.C. 7675(e)(4)(B)(i)(II) as direction from Congress to assess supply 
from chemical manufacturers only, and that this direction could cover 
both virgin and recovered and reprocessed HFCs. EPA is proposing to 
include HFCs produced domestically and those that are produced abroad 
and imported in its assessment of supply under this criterion. Congress 
directed EPA to consider regulated substances ``from chemical 
manufacturers . . . , including any quantities of a regulated substance 
available from production or import'' in its assessment under 42 U.S.C. 
7675(e)(4)(B)(i)(II). Because of Congress's reference to production and 
import of regulated substances, and the lack of any language suggesting 
that chemical manufacturers should be read as limited to only U.S. 
producers, EPA intends to consider imported material from foreign HFC 
producers in addition to regulated substances from domestic producers. 
As a result, EPA is proposing not to consider HFC supply held by and 
available to entities that do not produce or import HFCs in its 
assessment of this criterion. This would exclude quantities of HFCs 
held by entities that do not produce or import HFCs with allowances, 
potentially including reclaimers, distributors, HFC blenders,\5\ and 
HFC repackagers. EPA considers this proposed interpretation to be most 
consistent with the statutory language in 42 U.S.C. 
7675(e)(4)(B)(i)(II).
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    \5\ 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 (86 FR 55116) and the discussion in the 2024 Allocation Rule 
(88 FR 46863).
---------------------------------------------------------------------------

    The Agency is proposing to consider multiple sources of data in its 
evaluation of whether supply of a regulated substance is insufficient 
to accommodate an application. Specifically, in developing the analysis 
for each application, EPA has drawn 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 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. EPA 
is intending to 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. EPA 
is taking comment on these and any other sources the agency should 
consider when assessing insufficient supply.
    EPA is proposing to assess insufficient supply on an application-
wide basis. If an application uses multiple HFCs, and the supply of at 
least one of those HFCs is insufficient to accommodate the application, 
EPA would consider the criterion met for the application. EPA 
interprets 42 U.S.C. 7675(e)(4)(B)(i)(II) to require the Agency to 
review the supply of the regulated substance for each regulated 
substance an application uses. If there is an insufficient supply for 
one HFC, EPA would determine that this criterion is met, and the 
application would continue to be eligible for ASAs, assuming the first 
criterion regarding substitutes is also met. EPA is proposing

[[Page 75907]]

that such an approach is the best interpretation of the AIM Act 
direction in 42 U.S.C. 7675(e)(4)(B)(i)(II) that if both criteria are 
met, ``the Administrator shall authorize the production or consumption, 
as applicable, of any regulated substance used in the application.'' A 
converse approach would result in EPA not renewing the ASA eligibility 
of an application that has no available substitutes and there is an 
insufficient supply available of a regulated substance used by that 
application. EPA is interpreting the AIM Act to provide ASAs to an 
application where at least one regulated substance that manufacturers 
are capable of securing is insufficient to accommodate the application, 
even if the supply of a different regulated substance is not 
insufficient.
    In addition to looking generally at the supply of HFCs, EPA is also 
considering 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. EPA is considering any applicable relevant Federal 
regulations and standards (examples listed above in Section IV.A.), 
including required regulatory approvals and purity levels, that could 
limit the supply of the HFC(s) used within an application.

C. What is EPA's proposed 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 the 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 interprets the 
statutory language to mean 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. If either or both criteria are not met as of January 1, 2026, 
EPA proposes to not renew an application's eligibility to receive ASAs. 
Put another way, if EPA determines, for example, that supply is not 
insufficient to accommodate an application as of January 1, 2026, EPA 
would propose to not renew that application's eligibility for ASAs, 
regardless of whether a substitute is available.
    If both statutory criteria are met as of January 1, 2026, EPA 
intends to 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 will deem an 
application eligible to receive ASAs. For example, if EPA determines 
that there is no substitute available as of January 1, 2026, but a 
substitute will be available by January 1, 2028, 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 deemed 
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, EPA would renew the 
application's eligibility to receive ASAs for only two years (i.e., 
calendar years 2026 and 2027).
    If EPA determines that an application has a safe or technically 
achievable substitute available that is a regulated substance, EPA 
proposes to evaluate the supply of the substitute HFC and assess if 
supply of the substitute HFC is insufficient to accommodate the 
application. If the Agency did not do this, the application would not 
be eligible for renewal because it had met the substitute criterion, 
regardless of the supply of this substitute HFC; EPA sees this as 
counter to Congress's intent when it established priority access to 
allowances for these applications. Further, it is EPA's assessment that 
it would be counterproductive to an application's efforts to transition 
away from the currently used HFC(s) if EPA did not consider the supply 
of the HFC substitute when assessing eligibility for renewal for ASAs 
(i.e., if an application had insufficient supply of the substitute HFC, 
an entity may be forced to return to using its original HFC). Under the 
framework proposed in this rulemaking, 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 would allow 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 
identified).
    EPA is also proposing that if an application is eligible to be 
renewed 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. The direction in the statute under AIM subsection (e)(4)(B)(v) 
is to review each ``application receiving an allocation of allowances 
under clause (i) or (iv) . . . not less frequently than once every 5 
years,'' and, if the criteria are met, EPA shall renew the application 
``for renewable periods of not more than 5 years.'' EPA interprets this 
language, coupled with the lack of language in the statute directing 
EPA to do another review of an application that is no longer eligible 
for allowances at the end of its renewal period, as direction that EPA 
is not required to re-review this application for eligibility for ASAs 
ahead of the next five-year period. Congress's direction to undertake a 
renewal is specific to applications receiving ASAs under 42 U.S.C. 
7675(e)(4)(B)(i) and (iv). If an application is renewed for only two of 
five years at this stage, when the next renewal period arises, it would 
not be receiving ASAs under 42 U.S.C. 7675(e)(4)(B)(i) or (iv). 
Therefore, EPA is proposing that the best interpretation of the AIM Act 
language is that once EPA determines that an application is no longer 
eligible for ASAs, EPA would not re-review that application at any 
future time. If an application is determined to no longer be eligible 
for ASAs and an entity is interested in being considered for 
eligibility for ASAs again, the entity would need to petition the 
Agency to be evaluated for eligibility, and the Agency would then 
undertake the relevant petition review process; see Section VI of this 
preamble for further discussion of the petition process requirements.

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 42 U.S.C. (e)(4)(B)(v)(I). Pursuant to that review, in 
this rulemaking EPA is proposing and seeking comment on 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 begins with an overview of total projected U.S. HFC consumption 
and then proceeds into EPA's assessment of the criteria for each 
application and proposed decision regarding whether to renew each 
application's eligibility to receive ASAs. EPA provides additional

[[Page 75908]]

information in the TSD available in the docket for this rulemaking.

A. Overview of Total U.S. HFC Consumption

    This section contains a summary of total projected U.S. HFC 
consumption. We assess specific HFC supply considerations on an 
application-by-application basis below. EPA provides additional 
information regarding this analysis in the TSD.
    The global and domestic HFC markets have been rapidly changing 
since agreement to the Kigali Amendment to the Montreal Protocol in 
2016.\6\ The domestic HFC market has been further changing since the 
passage of the AIM Act in 2020 and the subsequent promulgation of 
domestic regulations. In 2021, EPA promulgated regulations to implement 
the required phasedown of HFC production and consumption in the United 
States. Additional regulations coming into effect, as early as January 
1, 2025, will also further alter this overall market and impact demand 
for certain HFCs. EPA anticipates the market will be dynamic as it 
responds to these additional regulations and continues adapting to the 
global phasedown of HFCs.
---------------------------------------------------------------------------

    \6\ The United States ratified the Kigali Amendment in October 
2022.
---------------------------------------------------------------------------

    In the addendum to the HFC Phasedown Regulatory Impact Analysis 
(RIA) updated for the 2023 Technology Transitions Rule (88 FR 73098, 
October 24, 2023), EPA modeled 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. The 2023 Technology Transitions Rule established 
subsector-level GWP limits and restrictions on the use of certain 
regulated substances. These requirements take effect as early as 
January 1, 2025, and as late as January 1, 2028. While some subsectors 
already use either HFCs that are below the GWP limit or non-HFC 
substitutes, other subsectors will need to transition away from their 
currently used HFC to comply with these regulations. In addition, 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 ``Emissions Reduction and Reclamation 
Rule'') has proposed requirements that reclaimed and recycled HFCs be 
used for certain equipment in the refrigeration, air-conditioning, and 
heat pump sector and fire suppression sector (onboard aerospace fire 
suppression, as an application eligible for ASAs, is currently exempt) 
as early as early as January 1, 2028. If finalized as proposed, these 
requirements are also expected to limit use of virgin HFCs for specific 
activities (e.g., servicing for certain refrigeration and air 
conditioning subsectors).\7\ In general, there is uncertainty 
associated with these estimates, as they are based on expected industry 
transitions in response to AIM Act rulemakings and predicted market 
dynamics. If HFC consumption is lower than the amount allowed under the 
AIM Act in a given year, the result may be that there are more 
allowances than are needed to meet market demand in that year.\8\ If 
demand for HFCs is lower than the cap, it is possible that 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. While current ASA 
holders can access material produced using general pool allowances or 
purchase HFCs on the open market, if demand by non-ASA entities is 
lower than the cap, it is possible that the ``leftover'' allowances 
could be used to supply ASA holders and therefore decrease the need for 
ASAs. It is also possible that all allowances are used, and the HFCs 
that are not sold in that year are stockpiled in anticipation of future 
needs.
---------------------------------------------------------------------------

    \7\ See Emissions Reduction and Reclamation Rule (88 FR 72216, 
72292, October 19, 2023).
    \8\ 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).
---------------------------------------------------------------------------

    The Agency cannot fully predict shifts in chemical production, 
domestically and internationally, that may occur. As the HFC phasedown 
progresses, EPA anticipates suppliers may focus their business on 
supplying lower-GWP HFCs, since production and consumption of these 
lower-GWP HFCs requires the expenditure of fewer allowances for the 
same volume of substance.\9\ At the same time, sectors that are not yet 
ready to transition and are not covered by the 2023 Technology 
Transitions Rule (88 FR 73098, October 24, 2023) may continue to use 
higher-GWP HFCs and could grow in size.
---------------------------------------------------------------------------

    \9\ In the Allocation Framework Rule, EPA established a system 
whereby allowances are measured on an EV equivalent basis. 86 FR at 
55142. To determine the total number of allowances needed, producers 
and importers multiply the quantity of the HFC they seek to produce 
or import by its EV. For example, an importer would need to expend 
143 consumption allowances to import 100 kilograms (kg) of HFC-134a. 
Given the variation in EVs, one would need to expend 5.3 allowances 
to import 100 kg of HFC-152a.
---------------------------------------------------------------------------

    EPA also does not yet have data on how the market is reacting to 
the 2024 stepdown in HFC allowances (from 90 percent of the HFC 
consumption baseline to 60 percent of baseline); at the time of this 
proposal the market is only a few months into adjusting to the 2024 HFC 
stepdown, and EPA has received only one set of quarterly reports. Among 
other things, data on market reactions could inform how the market will 
react to the next large stepdown in 2029 (from 60 percent of baseline 
to 30 percent of baseline). For example, the decrease in available 
consumption allowances could encourage users of HFCs to transition 
faster than projected. However, given the significant amount of HFCs in 
inventory at the end of 2022, the transition away from HFCs could also 
be slower than projected. Though it seems likely that demand could be 
below the cap for the 2025-2028 period based on existing regulations, 
it is uncertain if 2029 (the fourth year of the five-year renewal 
period) will see similar space between consumption and allowed 
consumption under the cap. EPA also notes the 2024 stepdown in 
permissible production and consumption is unique given its scale and 
that it is occurring early in the overall AIM Act implementation. There 
will be significantly more information regarding the state of the HFC 
market after the January 1, 2024, stepdown at the time EPA is 
finalizing this proposal, and EPA intends to analyze available data to 
inform its decisions regarding whether supply of individual HFCs is 
insufficient to accommodate the individual applications.
    In addition, there are also other constraints on supply of specific 
HFCs used in the six applications that EPA is taking into consideration 
(e.g., purity specifications required by Federal standards and 
regulations and limited number of producers), as explained in more 
detail in Sections V.B through V.G. of this preamble. Supply chain 
dynamics for each of the six

[[Page 75909]]

applications could affect whether general pool allowances would be able 
to be used to provide HFCs for each application.

B. 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)(ff) 
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, purified 
from technical grade HFC-227ea and HFC-134a, respectively, are both 
used in MDIs as a propellant.
    EPA is proposing to determine 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 this application through calendar year 2030. Therefore, EPA 
proposes 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.
1. Availability of Safe and Technically Achievable Substitutes
    EPA has not identified substitutes that it would propose to deem 
safe and technically achievable that are available for propellants in 
the metered-dose inhalers application at this time. In assessing the 
availability of substitutes for MDIs, EPA reviewed information from 
sources such as the FDA, the EPA SNAP Program, the TEAP's Medical and 
Chemicals Technical Options Committee (MCTOC), industry, scientific 
journal articles, and more, which is described in greater detail in the 
TSD included in the docket for this proposed action. After reviewing 
relevant information and analyses, EPA is aware of two potential 
replacements for HFC-134a and HFC-227ea as propellants in MDIs, 
specifically HFO-1234ze(E) and HFC-152a.
    MDIs, including those containing an alternative propellant other 
than HFC-134a or HFC-227ea, are subject to the approval requirements 
under section 505 of the Federal Food, Drug and Cosmetic Act. The 
process to develop an MDI with a new propellant is complex and will 
take time. A sponsor (i.e., MDI manufacturer) will need to reformulate 
the MDI product to use the new alternative propellant and conduct a 
development program to obtain data, including clinical data, with the 
new MDI product. If the development program is successful, a sponsor 
will then need to submit an application to the FDA for approval; the 
review timeline for a new drug application is 10 to 12 months. The 
overall process to develop an MDI product containing a new alternative 
propellant is expected to take years.
    EPA regularly consulted with the FDA throughout development of this 
proposed rule, and the reformulation of the majority of MDIs with an 
alternative propellant may extend beyond the end of the renewal period 
of 2030. EPA is aware that a few MDI manufacturers have begun the 
development process, some of whom are expecting to soon begin Phase 3 
trials and FDA has stated that it is possible that they may receive new 
drug applications for a small number of MDI products with alternative 
propellants by 2030. However, these new drug applications will need to 
undergo FDA review. For new drug applications that receive FDA 
approval, the commercialization plans for new MDIs are unknown but is 
anticipated to take additional time. Unlike for some of the other uses 
receiving ASAs where commercialization of substitutes across the entire 
application after those products are first available on the market may 
take a few years, for MDIs, EPA anticipates that it will take many 
years before alternatives are available across the application. That 
is, it will take time for reformulation, approval, and 
commercialization to occur for each of the individual MDI products used 
to treat pulmonary disease. For example, manufacturers of generic MDIs 
may face delay in transitioning to alternative propellants, as generic 
drug products must be shown to be a duplicate of, and bioequivalent to, 
a previously approved drug product and rely on FDA's finding that the 
previously approved product is safe and effective. Applicants request 
approval for generic drug products, including MDIs, in Abbreviated New 
Drug Applications (ANDAs). FDA provides its recommendations for 
establishing bioequivalence in its product-specific guidances, which 
for orally inhaled products like MDIs, have generally included some 
combination of in vitro and in vivo studies, along with recommendations 
related to the formulation and device. FDA committed to review 90% of 
standard original ANDAs within 10 months from the date of submission, 
but often multiple review cycles are necessitated by application 
quality. This review time can be extended if a site/facility is not 
ready for inspection. The timing of ANDA approval also depends on, 
among other things, the patent and exclusivity protections for the 
previously approved product.
    According to the MCTOC 2022 Assessment Report, the transition from 
HFC-134a and HFC-227ea to HFC-152a and HFO-1234ze(E) in MDIs is 
expected to begin in non-Article 5 countries \10\ in 2025 and continue 
through at least 2032, and no other feasible, lower-GWP MDI propellants 
have been identified in the United States and abroad.\11\ HFO-1234ze(E) 
and HFC-152a, along with other aerosol propellants, are listed as 
acceptable by EPA's SNAP Program and are commercially available and 
currently used in commercial and/or technical aerosol products. 
Furthermore, they also have most of the requisite physical properties 
to function as a propellant in MDIs with significantly lower GWPs than 
the current HFCs in use; however, neither propellant has significant 
use in pharmaceuticals today and will require extensive clinical 
research and FDA approval before they could replace the current HFCs.
---------------------------------------------------------------------------

    \10\ Non-Article 5 countries are defined as developed countries 
under the Montreal Protocol. For a list of Article 5 and non-Article 
5 countries see https://ozone.unep.org/classification-parties.
    \11\ See https://ozone.unep.org/system/files/documents/MCTOC-Assessment-Report-2022.pdf.
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    In light of the above analysis, it is EPA's assessment that there 
is no information before the Agency at the time of this proposal to 
suggest that there would be a safe and technically achievable 
substitute available prior to the next five-year review.
2. Supply
    As previously mentioned, pharmaceutical-grade HFC-134a and HFC-
227ea (also known as HFA-134a and HFA-227ea) are currently used as 
propellants in MDIs.
    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. Documents the FDA requires as part of the drug approval 
process must specify the facility manufacturing the HFC propellant. The 
supply of pharmaceutical-grade HFC-

[[Page 75910]]

134a comes from technical grade HFC-134a that is produced at a limited 
number of production facilities in other countries, including a single 
plant in the United States, and then purified at a single facility in 
the United Kingdom and reimported to the United States for consumption 
in MDIs. In its analysis 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 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.
    As components of drug products, the use of HFCs in MDIs are subject 
to certain FDA requirements. FDA's Current Good Manufacturing Practice 
(CGMP) requirements under the statute (21 U.S.C. 351(a)) apply to 
drugs, including their components (21 U.S.C. 321(g)(1)), and include 
requirements related to methods, facilities, controls, manufacturing, 
processing, packing, and holding to assure that drugs meet requirements 
for safety, identity, strength, and quality and purity. FDA has also 
promulgated CGMP regulations for finished pharmaceuticals in 21 CFR 210 
and 211. These CGMP regulations also contain requirements for 
manufacturers in their handling, control, storage, and testing of 
components used in manufacture of drug products. HFC purification 
occurs in dedicated facilities that are subject to FDA CGMP 
requirements for drugs and devices, as well as other international 
quality standards, as MDI manufacturers may serve markets in addition 
to that of the United States. If an MDI manufacturer wanted to change 
their supplier of pharmaceutical grade HFC, this would trigger FDA 
review. MDI manufacturers who change suppliers of pharmaceutical grade 
HFCs would need to provide data to ensure the safety and quality of the 
new propellant and submit the data to the FDA for review and approval. 
This data may include pharmacology/toxicology data, product quality 
data of the new propellant source, and a comparison of the current and 
proposed new propellant sources, and quality data that demonstrates the 
drug made with the new propellant meets all applicable quality 
requirements. Depending upon the comparability of the HFA sources, 
additional data may be requested by the FDA (21 CFR 314.70).
    There are three suppliers of pharmaceutical-grade HFC-227ea for use 
in the United States. One of the suppliers is a producer that purifies 
the technical grade HFC-227ea at one of their facilities in the United 
States. The second produces and purifies the pharmaceutical-grade HFC-
227ea at their facility in Germany, which is then imported by that 
producer for distribution to domestic MDI manufacturers. The third 
supplies pharmaceutical-grade HFC-227ea to the United States from their 
facility in the United Kingdom. At least two of these facilities also 
supply pharmaceutical-grade HFC-227ea globally for MDI manufacture. 
Producers of pharmaceutical-grade HFC-227ea must also comply with FDA 
requirements as described above, which limits their ability to switch 
to other suppliers of HFC-227ea.
3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    EPA is proposing 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. EPA is proposing 
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, for the reasons outlined 
earlier in this section, EPA is proposing to determine 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. EPA is proposing to determine that the supply of both HFC-134a 
and HFC-227ea is insufficient to accommodate the propellants in MDIs 
application.

C. Defense Sprays

    Per subsection (e)(4)(B)(iv)(I)(bb) of the AIM Act, EPA has been 
allocating ASAs for defense sprays since 2021. 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. The defense sprays 
chapter in the TSD contains more details on these product categories. 
HFC-134a is the primary propellant currently used for the majority of 
defense sprays and is the only HFC for which EPA has allocated 
allowances since 2022. After analyzing information relevant to the 
statutory criteria, as outlined in this section and the TSD, EPA is 
proposing two options--to not renew the eligibility for entities in 
this application to receive ASAs or to renew for two years. EPA is also 
taking comment on the possibility of renewing for a full five-year 
period.
1. Availability of Safe and Technically Achievable Substitutes
    There has already been commercialization of alternatives to HFC-
134a as a propellant in some defense spray uses, and transition is 
underway for other parts of the application. Thus, while many defense 
sprays currently use HFC-134a as a propellant, EPA is aware of entities 
that have already successfully commercialized alternative propellants, 
including non-HFCs, in some of their products. The availability of safe 
and technically achievable substitutes for this application will 
continue to expand, and EPA will take any additional information into 
account in the final rulemaking.
    All dog defense sprays commercialized in the United States and 
registered with EPA under FIFRA use a non-HFC propellant and have never 
used an HFC propellant; from company communications, EPA is aware that 
at least three dog sprays utilize compressed nitrogen gas. In addition, 
EPA is aware from company communications that two bear sprays using 
propellants other than HFC-134a are available domestically, one using a 
non-HFC, HFO-1234ze(E), and one utilizing a lower-GWP HFC, HFC-152a. 
Both products have been available for multiple years. In addition, 
there is one bear spray that is manufactured domestically, but sold 
into the Canadian market, that also utilizes HFO-1234ze(E). EPA is also 
aware of at least one defense spray used on humans available in other 
countries, but manufactured in the United States, that uses HFO-
1234ze(E).
    The commercialization of defense sprays with alternative 
propellants suggests that there are safe and technically achievable 
substitutes to HFC-134a available within this application, but it is 
not clear that they are immediately available for the entire 
application. In other words, there are multiple different uses within 
this application, and many of the uses have similar technical 
requirements (e.g., large spray volume and distance) and safety 
considerations (e.g.,

[[Page 75911]]

flammability). Thus, EPA's assessment is that while there are certain 
differences amongst the uses, generally a propellant commercialized for 
one use should be safe and technically achievable for another use as 
explained in more detail below. It is EPA's understanding that defense 
sprays have industry-set technical requirements that differentiate them 
from other aerosols, but that outside of FIFRA requirements for bear 
sprays,\12\ defense sprays do not need to be certified or comply with 
Federal regulatory standards to be sold in the United States. EPA is 
aware of some voluntary standards for law enforcement sprays, explained 
in more detail in the defense sprays chapter of the TSD, that specify 
performance requirements and test methods for the evaluation of these 
sprays. EPA's understanding is that defense sprays do not need to be 
certified under this standard to be sold into the law enforcement 
market.
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    \12\ Defense sprays used to deter bears, dogs, and other animals 
are considered pesticides under FIFRA, so must comply with related 
requirements, including approval for the inert ingredients (e.g., 
the propellant) used in the product. In addition to HFC-134a, both 
HFC-152a and HFO-1234ze(E) are approved for use as inert ingredients 
for non-food pesticidal use (e.g., animal sprays). Transitioning a 
product to another approved propellant is a relatively simple 
process that only requires submission of product performance data 
(i.e., no tests related to safety, impacts on human health, etc.), 
and approval can occur in five to seven months. This action would be 
a Pesticide Registration Improvement Act B680 or B681. See https://www.epa.gov/pria-fees/pria-fee-category-table-biopesticides-and-pollution-prevention-division-bppd-amendments for more information.
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    While some entities have successfully commercialized alternative 
propellants, there are steps other entities will need to undertake in 
order to use these alternatives, such as their own research and 
development process, approval under FIFRA for bear sprays, and 
potentially changes to manufacturing facilities. For example, EPA is 
aware of at least two defense spray manufacturers that had made 
significant investments to potentially transition to a non-HFC as a 
propellant that did not pursue the transition due to performance 
concerns.\13\ The multiple defense spray products commercialized using 
alternative propellants suggests that past challenges can be overcome, 
though EPA acknowledges that commercialization of alternative 
propellants across this entire application may take a few years.
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    \13\ Written testimony submitted for the record from Safariland 
and Security Equipment Corporation for the U.S. Senate Committee on 
Environment and Public Works hearing on the AIM Act. https://www.epw.senate.gov/public/index.cfm/2020/3/s-2754-american-innovation-and-manufacturing-act-of-2019-written-testimony-and-questions-for-the-record.
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    Outside of what has already been commercialized by some defense 
spray companies, EPA is not aware of any other substances under 
consideration as safe and technically achievable substitutes for this 
application. 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 TEAP's MCTOC. However, there are 
additional technical demands in the defense spray application that 
provide unique challenges as compared to other types of aerosol 
applications. For example, given their use for personal protection and 
crowd control, defense sprays need to have a larger spray cloud and 
longer spray distance, and stakeholders have noted that law 
enforcement's use of defense sprays alongside stun guns (e.g., Tasers) 
poses specific concerns around flammability. Therefore, alternatives 
identified as acceptable for aerosols, such as hydrocarbons, may not be 
available for all defense spray uses. SNAP lists substitutes for 
aerosols at the end use level, not the application level (e.g., the 
Agency has listed substitutes for aerosol propellants, which would 
allow for those substitutes in defense sprays), and TEAP's MCTOC has 
not specifically discussed or evaluated defense sprays as an individual 
use. More information about the specialized nature of defense sprays 
can be found in the defense sprays chapter of the TSD.
    To inform determinations in this rulemaking, EPA invites comment on 
whether the alternatives commercialized for some defense spray uses are 
not available for the entire application, including any supporting data 
and information; EPA is particularly interested in data regarding 
flammability of alternative propellants at the concentrations found in 
defense sprays and testing results demonstrating safety risks in the 
situations where defense sprays are typically utilized.
2. Supply
    The majority of defense sprays currently use HFC-134a as their 
propellant. HFC-134a is the most widely produced HFC globally and is 
produced in substantial quantities in multiple countries, including the 
United States. In 2022, domestic production of HFC-134a was 61,377 
metric tons (MT), making up 46 percent of U.S. HFC production on a mass 
basis; this production amount is also nearly double the domestic 
production amount of the HFC produced in the second highest quantity. 
EPA is aware that one domestic producer of HFC-134a is transitioning 
its facility to produce a different chemical.\14\ In addition, there 
are multiple entities that import HFC-134a. In 2022, 7,363.1 MT of HFC-
134a were imported into the United States. Overall, HFC-134a made up 
approximately 32 percent of total U.S. HFC consumption \15\ in 2022 on 
a mass basis. This application has very limited demand for HFC-134a in 
comparison to U.S. consumption of HFC-134a; allocated ASAs for this 
application in 2024 are equivalent to 0.1 percent of calculated 
domestic consumption of HFC-134a in 2022, on a metric tons of exchange 
value equivalent (MTEVe) basis. In addition, at the end of 2022, 
suppliers held 51,902.9 MT of HFC-134a in domestic inventory, which is 
equivalent to about 101 percent of calculated consumption of HFC-134a 
in 2022, and 1,036.8 MT of HFC-134a was reclaimed; the entities both 
holding this material in inventory and reclaiming these HFCs 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.
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    \14\ See https://www.arkema.com/usa/en/media/news/global/corporate/2022/20221006-two-major-steps-develop-supply-forane-1233zd/.
    \15\ Consumption = (Total Production + Production for Feedstock 
+ Imports [Virgin and Used])-(Exports [Virgin and Used] + 
Destruction).
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    However, as described in more detail in Section V.A of this 
preamble, the overall market for HFCs and for HFC-134a in particular is 
likely to continue changing in light of the AIM Act and other 
restrictions. There is uncertainty regarding how the market is reacting 
to the stepdown of the level of permissible production and consumption 
of HFCs that took effect on January 1, 2024, and EPA anticipates 
further market changes as a result of the stepdown taking effect on 
January 1, 2029. However, 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 will analyze any 
available information on market adjustment to the January 1, 2024, 
stepdown and regulations effective January 1, 2025, in finalizing this 
rulemaking.
    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

[[Page 75912]]

requirements for HFCs used in this application. As a result, the supply 
of recovered and reprocessed HFCs that can be secured from chemical 
manufacturers is 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.\16\ 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 supply of HFC-134a available to this application. 
However, as is true in many other parts of EPA's supply analysis, there 
is uncertainty regarding the overall supply and demand for reclaimed 
HFCs.
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    \16\ 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 one recovering the 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.
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    There is additional uncertainty around the supply and demand for 
HFC-134a as a result of the 2023 Technology Transitions Rule (88 FR 
73098, October 24, 2023). GWP restrictions under the 2023 Technology 
Transitions Rule begin taking effect January 1, 2025, with the latest 
restriction taking effect on January 1, 2028. Overall demand for HFC-
134a could fall since all 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 GWP limit (i.e., 700). However, many 
subsectors subject to Technology Transition restrictions already use 
chemicals that fall below the GWP restriction levels, and where this is 
the case EPA does not anticipate any change in demand of HFC-134a. 
Additionally, some sectors may use blends with HFC-134a as a component 
where the GWP is below the applicable limit. Moreover, HFC-134a will 
likely continue to be used in other applications not subject to these 
restrictions (e.g., heavy-duty trucks), as well as for servicing 
existing equipment (e.g., light-duty motor vehicle air conditioning). 
HFC suppliers may also shift their production and import practices, 
such that supply of HFC-134a changes. EPA intends to review available 
information on market shifts that occur when the first set of 
Technology Transition restrictions take effect on January 1, 2025, and 
where possible will incorporate any relevant information into the 
analysis underpinning finalization of this rulemaking. Based on this 
additional information, at finalization of this proposed rule, EPA may 
be in a position to determine that the supply of HFC-134a is not 
insufficient to accommodate this application once all of the Technology 
Transition restrictions take effect as of January 1, 2028, if not 
earlier (i.e., as early as January 1, 2026).
    EPA also intends to finalize a rulemaking under subsection (h) of 
the AIM Act, the Emissions Reduction and Reclamation Rule (88 FR 72216, 
October 19, 2023), in the summer of 2024. EPA proposed a number of 
requirements including those concerning use of reclaimed HFCs for 
certain activities. In addition, EPA intends to finalize a rulemaking, 
``Trichloroethylene (TCE); Regulation Under the Toxic Substances 
Control Act (TSCA)'' (88 FR 74712, October 31, 2023), later this year; 
this rulemaking has proposed to ban the use of TCE due to unreasonable 
risk of injury to human health. If finalized as proposed, this would 
prohibit TCE from being used as a feedstock to manufacture HFC-134a 
within eight and a half years from when that rule is finalized. While 
this could end the production of HFC-134a in the United States,\17\ it 
is unclear how this change would affect overall supply of HFC-134a, as 
there is currently still global supply of HFC-134a that could be 
imported into the United States. EPA anticipates being able to consider 
the projected effects of these other rules prior to finalizing this 
rulemaking.
---------------------------------------------------------------------------

    \17\ Though there are other pathways to produce HFC-134a, the 
pathway using TCE is the primary production pathway in the United 
States, and it is EPA's understanding that it is complex to change 
production pathways.
---------------------------------------------------------------------------

    Entities do not need to seek or receive ASAs in order to use HFC-
134a in defense sprays. Further, entities do not have to expend an 
allowance to purchase HFC-134a from another entity that has imported or 
produced the regulated substance. EPA notes that of the six defense 
spray entities that have received ASAs at some point for calendar years 
2022, 2023, and 2024, three did not receive ASAs in at least one of 
those years. EPA is also aware of at least two entities selling bear 
sprays that use HFC-134a that have never applied for, and therefore 
never received, ASAs. This suggests that at least those two entities 
were able to acquire HFC-134a on the open market without having ASAs. 
These facts could suggest that ASAs may not be imperative for entities 
in this application to access HFC-134a.
    In sum, HFC-134a is currently more widely available than other 
HFCs, and defense sprays' need for HFC-134a is small compared to the 
overall demand for HFC-134a across a range of sectors. At the same 
time, there is inherent uncertainty in the HFC market due to future 
stepdowns and new regulations coming into effect. 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.
    EPA is also considering the supply of HFC-152a, as it is used in at 
least one defense spray product, as noted above. HFC-152a is produced 
in substantial quantities, though the current domestic production of 
HFC-152a is about half that of HFC-134a, on a mass basis.\18\ In 2022, 
domestic production of HFC-152a was 29,654.9 MT, about 22 percent of 
U.S. HFC production by mass. There is currently only one U.S. HFC-152a 
production facility, and that producer has announced plans to increase 
production by approximately 20 percent by mid-2024.\19\ At the time of 
this proposal, the facility expansion is not yet complete, so EPA 
cannot say with certainty when it will be available. However, there is 
also substantial global production of HFC-152a, which also supplies the 
U.S. market. Multiple entities imported HFC-152a in 2022, importing a 
total of 5,810.1 MT. Overall, HFC-152a made up approximately 20 percent 
of total U.S. HFC consumption in 2022 on a mass basis. In addition, at 
the end of 2022, suppliers held 5,076.3 MT of HFC-152a in domestic 
inventory, which is equivalent to about 16 percent of calculated 
consumption of HFC-152a in 2022. The company that has commercialized 
the bear spray using HFC-152a has never received allowances for HFC-
152a, which suggests that at least this entity is able

[[Page 75913]]

to acquire HFC-152a on the open market without having ASAs.
---------------------------------------------------------------------------

    \18\ See https://www.epa.gov/climate-hfcs-reduction/hfc-data-hub/expanded-hfc-data.
    \19\ 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.
---------------------------------------------------------------------------

    In addition, HFC-152a has one of the lowest EVs relative to other 
regulated HFCs, so fewer allowances are needed to import or produce 
HFC-152a in comparison to the same volume of higher-EV HFCs. For 
example, an importer would need to expend 143 consumption allowances to 
import 100 kg of HFC-134a compared to 12.4 allowances to import 100 kg 
of HFC-152a--a greater than 90% reduction. This means that, from a 
strictly allowance-focused view, HFC-152a will be easier to acquire 
than most other HFCs as the phasedown progresses and the number of HFC 
allowances is reduced. Allowances allocated to an end user may 
therefore not be necessary to secure production or import of HFC-152a.
    Future projections suggest that there could be increased demand for 
HFC-152a, although there is inherent uncertainty with how industry will 
respond to the phasedown of HFCs at this early stage. HFC-152a has a 
GWP that is below all the GWP limits for sectors and subsectors subject 
to the 2023 Technology Transitions Rule (88 FR 73098, October 24, 
2023). The 2023 Technology Transitions Rule identified HFC-152a as an 
available or potentially available substitute for all 13 foam 
subsectors, aerosol propellants, motor vehicle air conditioning, and 
household refrigerators and freezers.\20\ However, there are also 
multiple other acceptable alternatives, including non-HFCs, and, for 
subsectors where a transition to another substitute has already 
occurred (e.g., motor vehicle air conditioning, household refrigerators 
and freezers), it is highly unlikely that a new transition to HFC-152a 
would be considered. For subsectors where HFC-152a neat or in blends is 
likely under consideration, it is not yet known if there will be any 
significant shift toward use of HFC-152a, particularly as many relevant 
subsectors have begun to move out of HFCs entirely. For example, the 
MCTOC 2022 Assessment report notes that a significant proportion of 
aerosols already use non-HFCs as propellants. Similarly, the FTOC 2022 
Assessment Report highlights that fluorocarbon use in foams has been 
falling for decades, and foams are largely expected to continue 
transitioning to non-HFCs, including hydrocarbons, HFOs, and 
hydrochlorofluoroolefins (HCFOs). Demand for HFC-152a may therefore 
change in future years as subsectors transition to alternatives from 
their currently used HFC.
---------------------------------------------------------------------------

    \20\ See 2023 Technology Transitions Rule (88 FR 73098, October 
24, 2023) 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. In addition, EPA did not 
identify information for products or equipment containing certain 
substitutes, which may indicate a lack of current commercial demands 
for the substitutes in those products or equipment. However, this 
did not automatically remove those substitutes from the list of 
available substitutes, as commercial demands is only one subfactor 
that needed to be considered under subsection (i)(4)(B).
---------------------------------------------------------------------------

    In sum, while there is a reasonably large supply of HFC-152a that 
is expected to increase over the coming years relative to other HFCs, 
there is uncertainty around future demand for the reasons described 
above.
3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    Given the rapidly changing landscape for HFC supply and EPA's 
assessment of substitute availability application-wide, EPA is 
proposing two options based on our current analysis and in anticipation 
of additional available information before this proposed rule is 
finalized. Specifically, EPA is proposing to finalize one of the 
following outcomes: (1) No renewal, such that the application will not 
receive ASAs or (2) Renew eligibility for ASAs for two years, such that 
ASAs are available for calendar years 2026 and 2027.\21\ EPA is also 
seeking comment on renewing eligibility for the full five-year period.
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    \21\ The proposed amendatory text included in this Federal 
Register notice shows only one of the co-proposed options. This is 
for illustrative purposes and should not be read as EPA favoring one 
co-proposal over another.
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    As explained earlier in this proposal, an application must meet 
both criteria to be eligible to receive ASAs. For the reasons described 
earlier in this section, EPA is proposing to determine that there is 
not a safe and technically achievable substitute that is immediately 
available for the entire application, but a safe or technically 
achievable substitute will be available for the entirety of the defense 
spray application by January 1, 2028. In other words, EPA proposes to 
determine that the criterion in subsection (e)(4)(B)(i)(I) is not met 
for defense sprays starting January 1, 2028. Under this proposed 
determination, even if EPA received information to determine that 
supply of the currently used regulated substance was insufficient, 
defense sprays would not be eligible for renewal as of January 1, 2028, 
unless they have insufficient supply of a substitute HFC, as discussed 
in more detail below.
    EPA is also proposing to determine that either (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 other words, EPA proposes to 
determine that the criterion in subsection (e)(4)(B)(i)(I) is either: 
(1) not met at all for this application for HFC-134a, and therefore the 
application would not be eligible to receive ASAs starting January 1, 
2026; or (2) not met as of January 1, 2028, and therefore the 
application would not be eligible to receive ASAs starting January 1, 
2028. Under the first option, this means that even if the application 
does not have a safe or technically achievable substitute available, 
ASAs would not be available for defense spray manufacturers as of 
January 1, 2026. For the second option, defense sprays would not be an 
eligible application for ASAs as of January 1, 2028, regardless of the 
availability of substitutes.
    EPA does not have sufficient information to make a definitive 
determination on whether supply of HFC-152a is insufficient to 
accommodate this application at the time of this proposal. We are 
monitoring this issue and will be seeking information on the 
alternatives that subsectors subject to Technology Transitions 
restrictions transition into and how much additional domestic 
production capacity of HFC-152a comes online in the coming year.
    EPA is also taking comment on whether defense sprays should be 
eligible to receive ASAs for the full five-year period from 2026-2030. 
A full five-year renewal could be without restriction or could be based 
on and tailored only to the application's need to purchase HFC-152a. As 
explained earlier, HFC-152a is used commercially in one bear spray 
product, so this latter scenario could be relevant if HFC-152a is an 
available safe and technologically achievable substitute for the entire 
defense spray application by 2028. Under this scenario, EPA would 
follow an approach similar to the option proposed for SCPPU foams for 
marine and trailer uses in Section V.D.3.
    EPA intends to review comments and other relevant information 
received on this proposal to further understand how the market 
surrounding this application evolves and the availability of 
substitutes application-wide before EPA finalizes this proposed rule. 
Specifically, we intend to review additional information on how the HFC 
market adjusts to the 2024 stepdown, defense sprays' research into 
alternative propellants and related trials (including relevant data on 
flammability), what alternatives consumer aerosols transition to (as 
they are subject to the

[[Page 75914]]

Technology Transitions restrictions starting in 2025), and research 
into alternative propellants intended to be used in technical aerosols 
(which are subject to the Technology Transitions restrictions starting 
in 2028). EPA invites submission of comment and additional data related 
to these data gaps. EPA will consider this new information, in addition 
to public comments, in making a final determination for this 
application.
4. Proposed Restriction Under EPA's Technology Transitions Program
    The 2023 Technology Transitions Rule (88 FR 73098, October 24, 
2023) restricts the manufacture and import of all aerosol products that 
use HFCs or HFC blends that have a GWP greater than 150. This 
restriction begins January 1, 2025, for all aerosols except for those 
specifically listed in the final rule as technical aerosols, which have 
manufacture and import restrictions starting January 1, 2028. 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 exempts applications that 
receive ASAs (40 CFR 84.56(a)(2)). However, as finalized in the October 
24, 2023, rule, if an application no longer qualifies for ASAs, the 
Technology Transitions restrictions then apply.
    While most aerosols are required under the Technology Transitions 
Program to meet a 150 GWP limit starting on January 1, 2025, the EPA 
provided additional time to comply with this limit for some technical 
aerosol uses. Most of the U.S. aerosol industry subject to the January 
1, 2025, compliance date has already transitioned to using propellants 
that meet the 150 GWP limit,\22\ 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 uses that 
received an extension for compliance with the 150 GWP limit until 
January 1, 2028, 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.
---------------------------------------------------------------------------

    \22\ 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 
at EPA-HQ-OAR-2021-0289-0037.
---------------------------------------------------------------------------

    EPA is proposing that defense sprays would be considered under the 
Technology Transitions Program consistent with technical aerosols, with 
the corresponding compliance deadlines on the manufacture and import of 
defense sprays using HFCs and blends containing HFCs with a GWP of 150 
or greater beginning January 1, 2028, with a three-year sell-through of 
those products. Thus, defense sprays manufactured or imported prior to 
January 1, 2028, could continue to be sold until January 1, 2031. As 
discussed in Section V.C.1 of this preamble, while some defense spray 
uses may have substitutes available in the near term that are 
technically achievable and safe, EPA's proposed assessment under 
subsection (e)(4)(B) is that such substitutes are not immediately 
available across all defense spray uses. In particular, the 
flammability or specific vapor pressure of potential substitute 
propellants present availability concerns for some uses in the near 
term. Consideration of technological achievability and safety, as well 
as other subsection (i)(4)(B) factors, indicates that a compliance date 
of January 1, 2025, for transition of all defense spray uses is not 
appropriate, but the approval of substitute propellants as safe under 
SNAP and TEAP analyses (see Section V.C.1), as well as EPA's assessment 
that many propellant uses in this subsector have been able to 
successfully transition to substitutes, provides support for EPA's 
proposed finding that all defense sprays will have available 
substitutes by January 1, 2028. We invite comment on whether 
availability of substitutes for use in defense sprays, particularly 
considering those factors enumerated under subsection (i)(4)(B), 
indicates that defense sprays could in fact meet the existing 150 GWP 
limit restriction if the application ceased being eligible for ASAs on 
January 1, 2026. We note that given the January 1, 2028, compliance 
date for the transition of the remaining aerosol sector, comments 
urging the Agency to provide additional time for compliance beyond that 
date will need to provide very specific and detailed information in 
support of that request, speaking to the statute's factors under 
subsection (i)(4) and in particular the subsection (i)(4)(B) factors.
    Under the 2023 Technology Transitions Rule, the labeling 
requirements are effective at the same time as the manufacture and 
import restrictions, which, if EPA finalizes this action as proposed, 
would be January 1, 2028. Recordkeeping and reporting provisions are 
effective for all sectors and subsectors under the 2023 Technology 
Transitions Rule starting January 1, 2025. EPA proposes that the 
recordkeeping requirements would apply to defense spray manufacturers 
and importers beginning January 1 of the year that use no longer 
qualifies for ASAs, and the first report would be due March 31 of the 
following year. For example, if defense sprays are no longer eligible 
for ASAs in 2026, manufacturers and importers would need to keep 
records as required by the 2023 Technology Transitions Rule starting 
January 1, 2026, and submit their first Technology Transitions report 
to EPA by March 31, 2027, even if EPA finalizes its proposal that the 
150 GWP limit for the manufacture and import of defense sprays using 
HFCs would not apply until January 1, 2028.
    EPA requests comment on the proposal to consider defense sprays 
consistent with technical aerosols for purposes of the Technology 
Transitions Program and the restrictions that result from such a 
classification, such as the GWP limit that would take effect on January 
1, 2028, use restrictions, a three-year sell-through window for 
inventory ending January 1, 2031, and labeling and reporting 
requirements.
    EPA has previously determined that available substitutes for use as 
aerosol propellants include HFC-152a (GWP 124) and HFO-1234ze(E) (GWP 
<1) (88 FR 73098, October 24, 2023). EPA is also interested in any 
supporting data and information related to the availability of 
substitutes and whether a different timeline is more appropriate for 
transitioning in this application or for a subset of products in this 
application.

D. Structural Composite Preformed Polyurethane Foam for Marine Use and 
Trailer Use

    The third application to which EPA has been allocating ASAs to 
since 2022 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 (86 FR 55116, October 5, 2021), 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

[[Page 75915]]

polyurethane (PU) foams due to its specialized structural properties, 
and it is preformed into required shapes (e.g., specific boat or 
trailer design). HFC-134a is the current HFC used in the blowing 
process for SCPPU foam. After analyzing information relevant to the 
statutory criteria, as outlined in this section and the TSD, EPA is 
proposing a range of options--to not renew the eligibility for entities 
in this application to receive ASAs, to renew for two years, or to 
renew access to ASAs for five years with allowances determined based on 
the use of a lower-GWP HFC substitute for HFC-134a. EPA is also taking 
comment on the possibility of renewing for a full five-year period 
consistent with the current allowance allocation approach.
1. Availability of Safe and Technically Achievable Substitutes
    EPA anticipates that SCPPU foam for marine and trailer uses' 
commercialization of formulations using alternatives to HFC-134a as 
blowing agents is well underway and will evolve significantly between 
issuance of this proposed rulemaking and its finalization. The Agency 
will consider information collected from regulated entities and other 
relevant sources through the public comment period and the current 
reporting requirements to inform a final determination.
    EPA is aware, from manufacturer communications and reporting, of 
two substitutes currently under development for this application--an 
HFC-152a/cyclopentane blend and an HFO. EPA notes that SNAP has listed 
both HFC-152a and cyclopentane as acceptable for all PU foams, 
including rigid PU uses in both marine flotation and commercial 
refrigeration (the two respective end uses for this application). Based 
on information from the manufacturers of SCPPU foam for marine and 
trailer uses, EPA understands that the research and development phase 
for both potential substitutes is nearing completion and that companies 
are nearing a phase where they will be able to commercialize use of 
substitutes. If commercialization occurs as companies anticipate and as 
shared with EPA, the entire application would be able to use a 
substitute different from HFC-134a before January 1, 2026. According to 
the information shared with EPA, one substitute seems close to being 
commercialized for SCPPU foam for marine use, and the other substitute 
seems close to being commercialized for SCPPU foam for trailer use. The 
company that is close to commercializing use of the HFC-152a/
cyclopentane blend performed multiple early trial runs with HFOs, all 
of which failed to meet their needs, so the company decided to pursue 
the HFC-152a blend. On this basis, we are proposing to determine that 
the HFO is not an available substitute application-wide for the five-
year period from 2026-2030, given additional research and development 
trials are needed, as well as the subsequent ramp up to 
commercialization. EPA understands that often different companies use 
different blowing agents to produce the same foam. At this time, it is 
unclear why an HFC-152a/cyclopentane blend cannot be used across the 
entirety of the application and similarly whether at some future date 
another blowing agent (e.g., an HFO) might be used application-wide. To 
inform determinations in this rulemaking, EPA invites comment on any 
potential reasons why an HFC-152a/cyclopentane blend might not be safe 
and technically achievable for the entire application, including any 
supporting data and information, such as trial data. While there are 
two different end uses in this application, the foam used in both sub-
applications is the same (i.e., it is an SCPPU foam).
    Other than an HFO and an HFC-152a/cyclopentane blend, EPA is not 
aware of other safe and available alternatives at this time. There are 
currently a range of alternatives identified as acceptable by SNAP and 
as technically proven by the TEAP's FTOC for other PU foams, including 
rigid PU uses in both marine flotation and commercial refrigeration. 
Alternatives include a lower-GWP HFC (i.e., HFC-152a), hydrocarbons, 
and HFOs. However, alternatives identified as acceptable for PU foams 
are not necessarily available for SCPPU foam, given the unique 
technical requirements for this foam (e.g., specialized structural 
properties). SNAP generally lists substitutes at the sector and end use 
level, not the application level (e.g., the Agency has listed 
substitutes for rigid PU foam, which would allow for those substitutes 
in SCPPU foam, but it has not evaluated the use of these substitutes 
for SCPPU foam in particular), and TEAP's FTOC did not specifically 
discuss or evaluate SCPPU foam as an individual use in its 2022 
assessment report. More information about the specialized nature of 
SCPPU foam can be found in the SCPPU foam chapter of the TSD.
    Aside from the limitations noted above, EPA is not aware of 
significant Federal regulatory restrictions on the type of substitutes 
that could be considered for this application. EPA is also not aware of 
any required standards that SCPPU foam needs to meet to be manufactured 
and sold in the United States. The SCPPU foam chapter of the TSD 
contains further information on sources consulted, and EPA invites 
comment on any additional information the Agency should consider in 
analyzing substitutes for this application.
    After reviewing the available information, including reports on 
progress made by manufacturers of SCPPU foam for marine and trailer 
use, EPA has not identified a safe and technically achievable 
substitute that is available at the time of this proposal, but 
anticipates that substitutes will likely be available soon. We are 
monitoring this issue and are seeking information from the entities 
that use HFCs in this application on whether progress continues as 
anticipated to inform our final determination.
2. Supply
    Entities manufacturing SCPPU for marine and trailer uses currently 
use an HFC-134a formulation. As described in more detail in Section 
V.C.2 of this preamble, 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 2024 are 
equivalent to 0.1 percent of calculated domestic consumption of HFC-
134a in 2022, on an MTEVe basis. However, as noted earlier, the global 
and domestic HFC markets are continuing to adapt to regulations 
promulgated pursuant to the AIM Act, including the implementation of 
the phasedown of production and consumption of HFCs, and other 
authorities. EPA anticipates this market will continue to change, and 
EPA will analyze additional information as it becomes available ahead 
of finalizing this rulemaking. Such additional information will include 
whether there were immediate market shifts as a result of both the 
stepdown of the level of permissible production and consumption of HFCs 
that took effect on January 1, 2024, and regulations effective January 
1, 2025.
    In addition to changes in the HFC market due to the overall 
phasedown of production and consumption, other AIM Act regulatory 
programs are expected to take effect both between proposal and 
finalization of this rulemaking and during the applicable period under 
review in this rulemaking, as described in more detail in Section 
V.C.2. These requirements may reduce demand for HFC-134a domestically 
for

[[Page 75916]]

certain other uses, though EPA expects continuing demand for HFC-134a 
in applications not subject to restrictions will continue. There may 
also be new or expanded use of blends with HFC-134a as a component 
designed to meet new restrictions. In addition, other EPA regulations 
may impact domestic supply of HFC-134a, but global supply should remain 
substantial in comparison to this application's demand for HFC-134a.
    EPA is currently not aware of any applicable restrictions on where 
this application could purchase HFCs, including any purity requirements 
or regulatory restrictions on supply. As such, it is EPA's assessment 
that this application may be able to use recovered and reprocessed HFCs 
supplied by chemical manufacturers. This is relevant in assessing what 
supply of regulated substance may be available to an application, since 
in such a case EPA does not need to limit its analysis to only virgin 
chemicals. The likeliest source of reprocessed HFCs for this 
application would be reclaimed refrigerants, which are held to AHRI 700 
standards (see footnote 17 in Section V.C.2). Since there are no 
Federal purity requirements for HFCs used in foams or any industry 
requirements, the purity of reclaimed HFCs is likely the same or higher 
than the virgin HFCs used in this application. While EPA is not aware 
of specific purity requirements for this application, EPA notes that 
efficacy of blowing agents can be influenced by their composition and 
purity. As described in more detail in Section V.C.2, the supply of 
reclaimed HFC-134a in the United States is significant, though there is 
uncertainty regarding the future demand for this material.
    As part of this proposed analysis, EPA is also considering the 
supply of HFC-152a. As further explained in Section IV.C, as part of 
the framework for its analysis EPA is proposing to evaluate the supply 
of a substitute HFC if that HFC is a safe or technically achievable 
substitute for an application. As outlined in the prior section 
(Section V.D.1), EPA's analysis suggests that HFC-152a blended with 
cyclopentane appears to be a safe and technically achievable substitute 
for this application. EPA is therefore evaluating the supply of HFC-
152a to determine whether it would be insufficient to accommodate this 
application. As described in more detail in Section V.C.2, other AIM 
Act regulations may increase demand for HFC-152a domestically for 
certain uses, though EPA notes that many sectors where HFC-152a is a 
technically achievable substitute have already transitioned to other 
alternatives. Domestic production capacity is also expected to 
increase, but EPA cannot say with certainty when it will be available. 
Global supply should also remain substantial in comparison to this 
application's demand for HFC-152a.
3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    In light of the rapid evolution of information regarding both the 
availability of substitutes for this sector (including all companies in 
this application's stated plans to transition away from HFC-134a before 
2026) and HFC supply, EPA is proposing a range of options based on the 
current Agency analysis and in anticipation of increased available 
information before this proposed rule is finalized. Specifically, EPA 
is proposing to finalize any of the following outcomes: (1) no renewal, 
such that the application will not receive ASAs, (2) renew eligibility 
for ASAs for two years, such that ASAs are available for calendar years 
2026 and 2027, or (3) renew eligibility to continue receiving ASAs for 
the full five-year period with allowance amounts determined based on 
the EV of HFC-152a.\23\
---------------------------------------------------------------------------

    \23\ The proposed amendatory text included in this Federal 
Register document shows only one of the co-proposed options. This is 
for illustrative purposes and should not be read as EPA favoring one 
co-proposal over another.
---------------------------------------------------------------------------

    Before finalization of this rule, we anticipate new information to 
become available on the supply of HFCs and availability of substitutes 
for the application, as outlined in detail in this section. EPA will 
consider this new information, in addition to public comments, in 
making a final determination for this application.
    As explained earlier in this section, the development of safe or 
technically achievable substitutes for this application is a rapidly 
evolving space, such that multiple possible outcomes can reasonably be 
expected to occur through 2030. All entities that have received ASAs 
for SCPPU foam for marine and trailer uses to date have told EPA that 
they plan to transition to substitutes before January 1, 2026. One 
potential outcome at rule finalization is that EPA depends on these 
statements to determine that a ``safe or technically achievable 
substitute is available for the applicable period'' for this 
application. Statements from all of the companies that use regulated 
substances to manufacture SCPPU foam that they will transition to 
substitutes before the next ASA period could serve as a reasonable 
basis to determine that safe and technically achievable substitutes are 
available. There are also specific milestones that these entities have 
reached, such as one company receiving a final air permit for an 
expansion of the manufacturing facility that will use the HFC-152a/
cyclopentane blend, indicating the company is able to move forward with 
full-scale testing and commercialization. If the entities' plans shared 
with EPA remain the same at the time when EPA is finalizing this 
proposed rule, particularly if they have already commercialized use of 
the substitutes, it is likely that EPA would determine that a safe or 
technically achievable substitute is available for this application. If 
EPA makes this determination, SCPPU foam for marine and trailer uses 
will not be eligible for ASAs as of January 1, 2026, even if EPA 
receives information to determine that supply of the currently used 
regulated substance is insufficient, unless the application has 
insufficient supply of a substitute HFC, as discussed in more detail 
below in this section. However, EPA recognizes there is uncertainty as 
to whether plans to commercialize will remain the same, be delayed, or 
be subject to unanticipated hurdles that could require additional 
evaluation of this alternative. EPA also has less information regarding 
the deployment of the HFO alternative outside of statements from the 
entity working toward its development and commercialization. Before 
finalization of this proposed rule, EPA intends to review and consider, 
as appropriate, all available information, specifically regarding 
expected timelines and testing data. EPA invites comment regarding the 
availability of safe or technically achievable substitutes for this 
application. The Agency will continue to collect information from 
regulated entities and other relevant sources through the public 
comment period and the current reporting requirements to inform a final 
determination of whether the criterion in subsection (e)(4)(B)(i)(I) is 
met.
    EPA is also proposing 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. In other words, EPA proposes to determine that 
the criterion in subsection (e)(4)(B)(i)(I) is either: (1) not met at 
all for this application for HFC-134a, and therefore the application 
would not be eligible to receive ASAs with allowances calculated based 
on HFC-134a use starting January 1, 2026; or (2) not met as of January 
1, 2028, and therefore the application would not be

[[Page 75917]]

eligible to receive ASAs with allowances calculated based on HFC-134a 
use starting January 1, 2028. Under the first option, this means that 
even if the application did not have a safe or technically achievable 
substitute available, ASAs would not be available for manufacturers of 
SCPPU foam for marine and trailer uses as of January 1, 2026. For the 
second option, SCPPU foam for marine and trailer uses would not be an 
eligible application for ASAs as of January 1, 2028, regardless of the 
availability of substitutes. However, if the available substitute is an 
HFC with insufficient supply, EPA may determine SCPPU foam for marine 
and trailer uses are eligible for renewal for that substitute HFC.
    Given the current uncertainty over which EPA anticipates having 
more clarity ahead of finalization of this proposed rule, at this time 
EPA contends that it could determine that the criterion in subsection 
(e)(4)(B)(i)(I) is met now, met as of January 1, 2028, or is not met at 
all through the entire renewal period with respect to HFC-152a. Under 
the first possible determination (supply of HFC-152a is not 
insufficient now), even if the application did not have a safe or 
technically achievable non-HFC substitute available as of January 1, 
2026, the application would not be eligible for renewal as of that 
date. Under the second possible determination (supply of HFC-152a is 
not insufficient as of January 1, 2028), the application would not be 
eligible for ASAs as of January 1, 2028, even if the application did 
not have a safe or technically achievable non-HFC substitute. Under the 
third possible determination (supply of HFC-152a is insufficient), the 
application would be eligible for ASAs if there was no safe or 
technically achievable non-HFC substitute for the entire application. 
EPA will monitor reported data over the next year on the noted areas of 
uncertainty and invites comment on this issue.
    In light of the range of outcomes EPA has proposed regarding its 
determinations on whether the criteria in subsection (e)(4)(B)(i)(I) 
and (II) are met, EPA is proposing 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 is also taking comment on 
SCPPU foam for marine and trailer uses eligibility to receive ASAs 
consistent with the current approach through calendar year 2030 ASAs. 
EPA also could finalize different outcomes based on how the transition 
to substitutes progresses between this proposal and rule finalization.
    Under outcome (3), EPA is proposing to allocate allowances based on 
an expectation that the application can use HFC-152a. To achieve this, 
EPA is proposing to base the calculation of allowance allocations on 
the estimated total mass of HFCs needed by the application and allocate 
at the level necessary to purchase HFC-152a on an EV-weighted basis. 
For example, if a company used 1,000 kg of HFC-134a and 500 kg of HFC-
152a in Year 3 (as defined by the regulatory formula; see Section VII 
for further discussion of regulatory formula and proposed revisions), 
and HFC-152a substituted for HFC-134a one-for-one on a gram basis for 
this application, EPA would multiply 1,500 kg by the applicable average 
annual growth rate (AAGR) and then by the EV of HFC-152a to calculate 
the company's allowance allocation for the following year. EPA would 
not limit which HFCs could be purchased for use in the application once 
the allowances are issued. EPA is taking comment on whether the Agency 
should apply any relevant mass conversions in this calculation (i.e., 
if an application needed more or less HFC-152a on a gram-by-gram basis 
when substituting for HFC-134a) where the total mass of HFCs used would 
be multiplied by a mass ratio, as appropriate, then multiplied by the 
AAGR.
    As outlined in detail elsewhere in this section, before EPA 
finalizes this proposed rule, the Agency intends to review available 
information and comments received on this proposal to get further 
clarity on progress toward commercialization of substitutes, how the 
overall HFC market has adjusted to the 2024 stepdown, what alternatives 
are adopted by subsectors subject to 2025 Technology Transitions 
Program restrictions, and how much additional domestic HFC-152a 
production capacity comes online.
4. Proposed Restriction Under EPA's Technology Transitions Program
    The 2023 Technology Transitions Rule (88 FR 73098, October 24, 
2023) restricts the manufacture and import of foam products that use as 
a blowing agent HFCs or HFC blends that have a GWP of 150 or greater 
(hereafter, ``foam products''). This restriction begins January 1, 
2025. Examples of items subject to this restriction include products 
that are foams, such as extruded polystyrene boardstock; products for 
blowing foam, such as two-part foam systems for blowing PU foam; and 
products that are manufactured using foam, such as boats or 
refrigerated trailers.
    The 2023 Technology Transitions Rule exempts applications which 
receive ASAs (40 CFR 84.56(a)(2)). However, as finalized in the October 
24, 2023, rule, if an application no longer qualifies for ASAs, the 
Technology Transitions restrictions would apply.
    As discussed in the preamble to the 2023 Technology Transitions 
Rule, the transition to non-HFC and lower-GWP substitutes is already 
well underway or completed for much of the foams sector (see 88 FR 
73184). EPA therefore established a uniform GWP limit of 150 for the 
entire foams sector starting January 1, 2025. The sole exception to 
this restriction for the foams sector was SCPPU foam for marine and 
trailer uses, per their receipt of ASAs. As discussed above in Section 
V.D.1, EPA proposes that while there are no safe and technically 
achievable alternatives available at this time under subsection 
(e)(4)(B) specifically for use in SCPPU foams for marine and trailer 
uses, we anticipate, based on currently available information, that the 
development of substitutes for these uses is progressing rapidly, such 
that by the time EPA finalizes this action, substitutes meeting the 
(e)(4)(B)(i)(I) criterion may be available. While the list of 
considerations under subsection (i)(4)(B) that EPA is to factor in, to 
the extent practicable, when considering availability of substitutes 
for issuing restrictions under subsection (i) includes factors beyond 
those characteristics listed in subsection (e)(4)(B)(i)(I), in this 
instance EPA's view is that technological achievability of lower-GWP 
substitutes in marine and trailer uses is the primary barrier to 
transitioning away from the use of HFC-134a in these two uses. Many of 
the factors listed in subsection (i)(4)(B) are not relevant to EPA's 
assessment of availability of substitutes for these two uses, such as 
building codes, appliance efficiency standards, and contractor training 
costs. As noted in Section V.D.1 of this preamble, EPA's SNAP Program 
has already listed as acceptable the potential substitutes under 
consideration and the entities actively developing the substitutes and 
working to bring those substitutes to market are almost certainly 
considering costs to consumers and affordability for small business 
consumers as part of their efforts.
    We propose that the applicability of the restriction on HFC foam 
blowing

[[Page 75918]]

agents in the 2023 Technology Transitions Rule to SCPPU foam for marine 
and trailer uses will depend entirely on which of the three co-
proposals EPA ultimately finalizes. That is, under co-proposal (1), 
where EPA would not renew ASAs for SCPPU for marine and trailer uses as 
of the effective date of a final rule based on this proposal, 
requirements of the Technology Transitions Program, which include 
labeling, reporting, recordkeeping, and restrictions on HFCs, would 
apply beginning January 1, 2026. Under co-proposal (2), where EPA would 
renew ASAs for SCPPU for marine and trailer uses for 2026 and 2027, 
requirements of the Technology Transitions Program would apply 
beginning January 1, 2028. For both co-proposals (1) and (2), EPA 
proposes that the recordkeeping requirements would apply to 
manufacturers of SCPPU foams for marine and trailer uses beginning 
January 1 of the year those uses no longer qualify for ASAs, and the 
first report would be due March 31 of the following year, as discussed 
above in Section V.C.4. For example, under co-proposal (1), 
manufacturers would need to keep records as required by the 2023 
Technology Transitions Rule starting January 1, 2026, and submit their 
first Technology Transitions report to EPA by March 31, 2027; under co-
proposal (2), manufacturers would need to keep such records starting 
January 1, 2028, and would submit their first Technology Transitions 
report by March 31, 2029. Under co-proposal (3), where EPA would renew 
ASAs for SCPPU for marine and trailer uses based upon the use of HFC-
152a instead of HFC-134a, SCPPU for marine and trailer uses would 
continue to be exempt from the 2023 Technology Transitions Rule. The 
requirements under each co-proposal for SCPPU for marine and trailer 
uses are summarized in Table 2 below. EPA is interested in data and 
information related to the availability of substitutes and the proposed 
timeline for transitioning in this application.

    Table 2--Applicability of Technology Transitions Requirements Under Co-Proposals for SCPPU for Marine and
                                                  Trailer Uses
----------------------------------------------------------------------------------------------------------------
                                        Technology transitions      Date technology          Date technology
             Co-proposal                    GWP limit and        transitions  labeling    transitions  reporting
                                           compliance date         requirements begin       requirements begin
----------------------------------------------------------------------------------------------------------------
(1) No renewal of ASAs...............  GWP limit of 150         January 1, 2026........  First report due March
                                        beginning January 1,                              31, 2027, including
                                        2026.                                             data from January 1,
                                                                                          2026, through December
                                                                                          31, 2026.
                                                               -------------------------------------------------
(2) Renew eligibility for ASAs for     GWP limit of 150         First report due March 31, 2029, including data
 2026 and 2027.                         beginning January 1,     from January 1, 2028, through December 31,
                                        2028.                    2028.
                                      --------------------------------------------------------------------------
(3) Renew eligibility for 2026-2030    Because application continues to be eligible for ASAs, it is exempt from
 with allowance amounts determined      Technology Transitions requirements.
 based on the EV of HFC-152a.
----------------------------------------------------------------------------------------------------------------

E. 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 proposal, EPA is aware of three 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 is proposing to determine 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 proposes 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
    EPA has not identified any substitutes that it would propose to 
deem safe and technically achievable that are available for the 
entirety of the defined semiconductor application.
    In developing this assessment, EPA reviewed information from 
industry trade groups, the TEAP's MCTOC, the Intergovernmental Panel on 
Climate Change (IPCC), scientific journal articles, and more. The 
sources examined by EPA are outlined in greater detail in the TSD 
included in the docket for this proposed action.
    The MCTOC 2022 Assessment report reviewed HFC gases commonly used 
in semiconductor manufacturing, along with their alternatives, using 
the following criteria: commercially available, technically proven, 
environmentally sound, economically viable and cost effective, safe to 
use in industrial applications considering flammability and toxicity 
issues, and easy to use and maintain.\24\ Based on this report and 
other sources, EPA is

[[Page 75919]]

aware that semiconductor manufacturers currently utilize other 
fluorinated gases, such as sulfur hexafluoride (SF6), 
nitrogen trifluoride (NF3), some saturated PFCs (i.e., 
CF4, C2F6, c-
C4F8), and some unsaturated PFCs (i.e., 
C4F6, C5F8) for the 
processes of etching and chamber cleaning. The MCTOC 2022 Assessment 
report lists these chemicals as both commercially available and 
technically proven and can be used as substitutes for etching and 
chamber cleaning. In developing its proposed determination regarding 
substitutes, however, EPA did not consider many of these chemicals in 
its proposed consideration of the availability of safe and technically 
achievable substitutes because of their higher GWPs, lower utilization 
rates (i.e., higher emission rates), or higher toxicity than HFCs. 
Sulfur hexafluoride (SF6), which is used in the etching of 
silicon, silicon dioxide (SiO2), and silicon nitride (SiN), 
as well as chamber cleaning, has a 100-year GWP of 22,800. Nitrogen 
trifluoride (NF3), which is used in the etching of silicon 
and silicon nitride (SiN), as well as for chamber cleaning, has a 100-
year GWP of 17,200. Saturated PFCs, used in the etching of silicon, 
silicon dioxide (SiO2), and other materials, have a 100-year 
GWP ranging between 7,390 to 12,200. Saturated PFCs are also difficult 
to abate and have relatively low utilization rates.
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    \24\ See https://ozone.unep.org/system/files/documents/MCTOC-Assessment-Report-2022.pdf.
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    Unsaturated PFCs are used in high-aspect-hole-ratio etching. They 
have GWPs of less than two; however, these compounds have not been 
widely adopted at least in part since these chemicals can only be used 
in certain processes and are not necessarily viable for all types of 
etching, etching all materials, or chamber cleaning. For example, 
unsaturated PFCs are not known to be used in chamber cleaning, so the 
Agency does not consider unsaturated PFCs as available for the entire 
application.
    The MCTOC 2022 Assessment report also lists other compounds that 
are currently being studied for use but are not yet technically proven, 
are not considered safe or easy to use, and may have additional 
toxicity concerns. These chemicals include carbonyl sulfide, HFO-
1336mzz(E), PFC-1216, chlorine trifluoride (ClF3), 
hexafluoroisobutylene (HFIB), and trifluoroiodomethane 
(CF3I). Carbonyl sulfide, used in certain etching 
applications, is also highly flammable and toxic. HFO-133mzz(E) is 
being considered as a replacement for certain etching chemicals. PFC-
1216 is being studied for use in etching silicon dioxide 
(SiO2). Chlorine trifluoride (ClF3) may be used 
for chamber cleaning for Low Pressure CVD chambers but is extremely 
flammable and is not considered safe or easy to use. Although not known 
to currently be used, hexafluoroisobutylene (HFIB) could be used in 
certain etching applications for silicon containing material. 
Trifluoroiodomethane (CF3I) is used for etching of silicon 
dioxide (SiO2) and silicon nitride (SiN), but the MCTOC 2022 
Assessment report does not list it as safe or easy to use.
    EPA is aware of certain HFCs that may be in the early stages of 
research for high-aspect-ratio hole etching, such as HFC-134a and HFC-
125. ASA holders have stated that research on lower-GWP alternatives is 
ongoing and there are currently no known alternatives to HFCs, PFCs, 
and nitrogen trifluoride (NF3), and any alternatives would 
not be commercially available until at least 2030.
    In light of the above analysis, EPA has not identified a safe and 
technically achievable substitute that is available at the time of this 
proposal. When a substitute or substitutes are identified for the 
entirety of the application, it would still take significant time to 
replace the current HFC(s) with the substitute(s). One industry trade 
group has stated that semiconductor technologies require at least 10 
years from fundamental research to high volume manufacturing to 
innovate and implement new technologies and their associated raw 
materials. Given that no promising substitutes have been identified, 
there is no information before the Agency at the time of this proposal 
to suggest that there would be a safe and technically achievable 
substitute available prior to the next five-year review.
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 proposing to determine that an 
application meets this 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.
    As described above in Section E of this preamble, HFC-23 is used in 
the etching of silicon dioxide (SiO2) and silicon nitride 
(SiN) and is also used minimally in chamber cleaning. In 2022, domestic 
producers produced approximately 1,049.3 MT of HFC-23. 876.2 MT were 
subsequently destroyed, and one producer sold 5.2 MT of this HFC-23 for 
consumptive uses, which could be used for semiconductors as well as 
other uses. In addition, there were about a half dozen entities that 
imported HFC-23 with total amount of imports equaling 125.6 MT. 
Overall, HFC-23 made up only 0.07 percent of total U.S. HFC consumption 
in 2022 on a mass basis. Moreover, as HFC-23 has the highest EV, it may 
be possible that this supply is further constricted in the future as 
the phasedown progresses and the number of available allowances is 
reduced. As stated elsewhere in this proposed rule, EPA recognizes that 
there is inherent uncertainty regarding HFC production, and in 
particular for HFCs with a more limited number of production facilities 
and/or higher GWPs than other regulated HFCs, this uncertainty may be 
greater. Therefore, EPA understands there will be changes to the market 
conditions resulting from the domestic and global phasedown of HFC 
production and consumption.
    In addition, the use of HFC-23 in the semiconductor manufacturing 
application is large compared to the annual consumption of HFC-23. In 
2022, semiconductor ASA holder purchases \25\ of HFC-23 accounted for 
about 81 percent of calculated consumption of HFC-23. Furthermore, at 
the end of 2022, suppliers held 304.0 MT of HFC-23 in domestic 
inventory, which is equivalent to about 293 percent of calculated 
consumption of HFC-23 in 2022; not all of this HFC-23 may be considered 
available supply, as the entities both holding this material in 
inventory and reclaiming these HFCs are broader than EPA's 
interpretation of chemical manufacturers (see Section IV.B for more 
information).
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    \25\ For this calculation, EPA is using purchases in 2022 
instead of allowances allocated so that percent of consumption can 
be calculated for each HFC.
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    EPA also analyzed the supply of HFC-32. In 2022, the one domestic 
producer of HFC-32 produced 17,744.3 MT of HFC-32. There were also over 
a dozen entities that imported HFC-32, with total import quantities 
equaling 9,885.3 MT. Overall, HFC-32 made up approximately 17 percent 
of total U.S. HFC consumption in 2022 on a mass basis. 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 21,435 MT of 
HFC-32 in domestic inventory, which is equivalent to about 80 percent 
of calculated consumption of HFC-32 in 2022; similar to considerations 
for

[[Page 75920]]

supply of HFC-23 and for other applications, not all of this inventory 
may be considered available.
    Another factor EPA is considering is the impact that other 
regulatory actions may have for the available supply of HFC-32. As 
described in more detail above in Section V.A, the overall market for 
HFCs is likely to continue changing in light of AIM Act and potentially 
other restrictions. There is particular uncertainty regarding demand 
for HFC-32. The 2023 Technology Transitions Rule (88 FR 73098, October 
24, 2023) set a GWP threshold of 700 for certain sectors and subsectors 
where previously higher-GWP HFCs or HFC blends have been used. HFC-32 
has a GWP of 675 and may be a suitable alternative in those sectors and 
subsectors. In other cases, the 2023 Technology Transitions Rule set a 
GWP threshold of 150 and thus HFC-32 could not be used unless as a 
component of blends. The first set of restrictions under the 2023 
Technology Transitions Rule have compliance dates of January 1, 2025, 
with the latest compliance dates taking effect on January 1, 2028. 
Additionally, the proposed Emissions Reduction and Reclamation Rule (88 
FR 72216, October 19, 2023) proposes requirements for the use of 
recycled or reclaimed HFCs for certain uses, as discussed elsewhere in 
this preamble. When finalized, that rule may affect the use of 
reclaimed HFC-32.
    EPA also analyzed the supply of HFC-41. There is one domestic 
supplier of HFC-41 that produced 22.2 MT of HFC-41 in 2022. In 
addition, there were multiple entities that imported HFC-41, with total 
import quantities equaling 38.3 MT. Overall, HFC-41 made up only 0.03 
percent of total U.S. HFC consumption in 2022 on a mass basis. 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 21.5 percent 
of calculated consumption of HFC-41. At the end of 2022, suppliers held 
26.7 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.
    One factor that plays into the sufficiency of supply of these HFCs 
is the purity specifications used by individual companies in the 
semiconductor manufacturing sector. While there is no Federal standard 
or regulation governing the purity of HFCs used in semiconductor 
manufacturing, EPA is aware that individual companies in this sector 
set their own requirements. HFCs purchased for use in semiconductor 
manufacturing is produced at around 95-97 percent purity and then 
typically is purified to 99.999-99.9999 percent purity before it is 
used by semiconductor manufacturers. Supplying refined HFCs to end 
users can take up to one year, as purifiers require long lead times.
    These purity requirements are also relevant when considering if 
reclaimed HFCs can be used in this application. EPA notes that virgin 
HFCs produced for semiconductor use are typically only at 95-97 percent 
purity, so EPA is not aware of why reclaimed HFCs cannot also be 
purified to industry specifications; EPA invites comments on this. 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, 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.
    There are other factors that may further impact the supply of HFCs 
for this application. The Creating Helpful Incentives to Produce 
Semiconductors Act of 2022 (CHIPS Act) has allocated over 50 billion 
dollars to semiconductor research, development, manufacturing, and 
workforce development in the United States, which has led to additional 
investment by semiconductor manufacturers. The U.S. market share of 
memory chip production is projected to grow from less than 2 percent to 
up to 10 percent over the next decade.^{26 27}
---------------------------------------------------------------------------

    \26\ See https://www.whitehouse.gov/briefing-room/statements-releases/2022/01/21/fact-sheet-biden-harris-administration-bringing-semiconductor-manufacturing-back-to-america-2/.
    \27\ See https://www.mckinsey.com/industries/industrials-and-electronics/our-insights/semiconductor-fabs-construction-challenges-in-the-united-states.
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3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    EPA is proposing to renew the eligibility of entities using 
regulated substances for the etching of semiconductor material or 
wafers and the cleaning of CVD chambers within the semiconductor 
manufacturing sector to receive ASAs for the five-year period of 
calendar years 2026 through 2030. EPA is proposing 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, for the reasons outlined earlier in 
this section, EPA is proposing to determine 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 the entire five-year 
period. EPA is also proposing 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. As explained earlier, EPA is proposing to 
determine the supply criterion is met if supply of one HFC used by the 
application is insufficient to accommodate the application. EPA 
proposes to determine that the supply of HFC-23 and HFC-41 are 
insufficient to accommodate the application for the reasons outlined in 
the prior section.

F. 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). 
In the Allocation Framework Rule, EPA finalized an approach that treats 
the allocation of MCMEU allowances differently than the other 
applications given the ``complex nature of the way DOD sources and uses 
HFCs for mission-critical applications,'' (e.g., significantly larger 
networks of sites and users, including contractors, of HFCs than others 
covered by ASAs) (86 FR 55116, 55153, October 5, 2021). EPA set up a 
system whereby DOD must provide the amount of HFCs needed for mission-
critical military use and that the two agencies would ``work together 
to ensure the amount necessary is available for mission-critical 
military applications'' (86 FR 55116, 55153, October 5, 2021).

[[Page 75921]]

    As the definition states, DOD has discretion to identify which uses 
of HFCs have a direct impact on mission capability. DOD is required to 
report to EPA ``the broad sectors of use covered by current mission-
critical military end uses in the next calendar year,'' per 40 CFR 
84.31(h)(3)(iv). Given the complex nature of the way DOD sources and 
uses HFCs for mission-critical applications, EPA has always maintained 
that DOD should have discretion to request the amount of allowances 
necessary to meet its mission-critical end uses and the Agency is not 
altering that approach through this rulemaking.
    Recognizing the sensitive nature of the application, as well as the 
expert judgement that DOD has in identifying which uses of HFCs have a 
direct impact on mission capability, EPA consulted with DOD throughout 
development of this proposed rule, including in advance of interagency 
review, and received input to support EPA's evaluation of the statutory 
criteria described in Section IV of this preamble.
    After analyzing information relevant to the statutory criteria, as 
outlined in this section, and based on input from DOD, EPA is proposing 
to determine that no safe or technically achievable substitute will be 
available for the MCMEU application and that the supply of the 
regulated substances that the application is capable of securing from 
chemical manufacturers is insufficient to accommodate the MCMEU 
application through calendar year 2030. Therefore, EPA proposes to 
renew the eligibility of the MCMEU application to receive ASAs for the 
five-year period of calendar years 2026 through 2030.
1. Availability of Safe and Technically Achievable Substitutes
    As discussed earlier in the preamble, in situations where there are 
not safe and technically achievable substitutes available for the 
entirety of the application, EPA would consider the statutory criterion 
regarding substitutes as being met. In public technical reports DOD 
(included in the rulemaking docket), DOD identified mission-critical 
end uses that do not have safe and technically achievable substitutes 
available. For example, DOD uses a mixture of HFC-227ea and sodium 
bicarbonate dry chemical in automatic fire extinguishing systems that 
protect the crew compartments of ground vehicles. DOD has tested 
potential replacements but has not identified a viable alternative to 
date. There are distinct technical specifications for some mission-
critical end uses that are distinct from civil standards for the same 
category of use (e.g., refrigerants and fire suppression agents). For 
example, automatic fire suppression systems in ground vehicles must 
meet unique military requirements for inhalation toxicity that allow 
personnel to stay within the protected space for at least five minutes 
after fire suppression.
    Furthermore, because Congress defined this application as what is 
``mission-critical,'' EPA has always acknowledged that this application 
is more fluid in terms of what particular HFC uses fall within the 
application. DOD may change which end uses it determines to be mission-
critical over time. This further feeds into EPA's proposed assessment 
that the Agency cannot determine at this time that there will be safe 
and technically achievable substitutes available for the entirety of 
the application.
2. Supply
    In 2021, DOD sent a letter to EPA with information regarding 
mission-critical end uses at the time, including a list of six HFCs 
used in the application (HFC-125, -134a, -143a, -227ea, -236fa, and -
32). EPA has determined through communications with DOD that at least 
some of these HFCs continue to be utilized in mission-critical end 
uses. As described in section IV.B of the preamble, EPA is proposing to 
determine that an application meets this criterion if EPA determines 
that any of the HFCs currently used to manufacture products or systems 
for use in the application have insufficient supply.
    In the analysis of other applications in this proposal, EPA has 
evaluated the supply of five out of six HFCs that DOD identified as 
using in 2021 (i.e., all but HFC-143a). EPA is proposing to determine 
that 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 proposing to determine 
that the supply of HFC-227ea and HFC-236fa is insufficient to 
accommodate the application. This is 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 MCMEUs. For example, there are Buy America requirements in Federal 
Acquisition Regulation (FAR) 25.1 and Defense Federal Acquisition 
Regulation Supplement (DFARS) 225.1 which may restrict how DOD can 
procure goods, which may include HFCs. Furthermore, as noted in the 
substitutes discussion for the MCMEU application, EPA has always 
acknowledged that this application is more fluid in terms of what HFC 
uses fall within the application. DOD may change which end uses it 
determines to be mission-critical over time. The fact that DOD may 
determine that different HFCs and different annual quantities of those 
HFCs are necessary for mission-critical end uses further feeds into 
EPA's proposed assessment that the supply of HFCs will be insufficient 
to accommodate the application.
3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    EPA proposes to renew eligibility for DOD to receive MCMEU ASAs for 
the five-year period of calendar years 2026 through 2030. EPA is 
proposing 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, for the 
reasons outlined earlier in this section, EPA is proposing 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.

G. 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 this proposal, EPA is aware of only one 
area, lavatory trash receptacles, in which HFCs (specifically HFC-227ea 
and HFC-236fa) are used in commercial aviation. For military uses, HFC-
125 has been used in engine nacelles and APUs, and HFC-236fa has been 
used in a streaming application (i.e., a portable

[[Page 75922]]

extinguisher).\28\ 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. The 
Agency seeks additional information on how HFCs are used for general 
aviation and how widespread the use is.
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    \28\ See https://www.epw.senate.gov/public/_cache/files/d/1/d152a591-878f-4a4d-b9c1-dc7121c06eca/9D366FF1E61F7EFFD6A71C37C92924A5.04.03.2020-boeing.pdf.
---------------------------------------------------------------------------

    After analyzing information relevant to the statutory criteria, as 
outlined in this section and the TSD, EPA is proposing to determine 
that no safe or technically achievable substitute will be available for 
the entirety of onboard aerospace fire suppression and that supply of 
the regulated substance that manufacturers and users are capable of 
securing from chemical manufacturers is insufficient to accommodate the 
onboard aerospace fire suppression application through calendar year 
2030. Therefore, EPA proposes 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.
1. Availability of Safe and Technically Achievable Substitutes
    Identification of available safe and technically achievable 
substitutes in this application requires considering a range of 
factors, including fire suppression effectiveness, toxicity, and space 
and weight considerations. EPA has not identified available substitutes 
that it would propose to deem safe and technically achievable for the 
entirety of the onboard aerospace fire suppression application. As 
discussed earlier in the preamble, in situations where there are not 
safe and technically achievable substitutes available for the entirety 
of the application, EPA would not consider this statutory criterion 
met.
    HFCs are used in onboard aerospace fire suppression in fixed 
systems for total flooding applications and in portable equipment for 
streaming uses (e.g., handheld fire extinguishers). Fire suppression 
agents must satisfy environmental and safety criteria, including but 
not limited to acceptable ODPs and GWPs, be effective extinguishants, 
and, for spaces where people would be present, have sufficiently low 
toxicity such that under normal use the discharge of agent in occupied 
spaces would not harm people. Other important features that are 
sometimes relevant for onboard aerospace fire suppression include being 
electrically non-conductive, and ``clean'' in certain applications such 
as for high-value electronics, controls, or other critical systems in 
the protected spaces where it is important to leave no non-volatile 
residue that could damage the equipment.
    As noted at the start of this section, HFCs are used in limited 
areas within the application. Because there are potentially overlapping 
ASAs available for a military use of HFCs, EPA has focused its analysis 
of substitute availability primarily on commercial aviation. EPA is 
aware of only one application where HFCs are used in commercial 
aviation: lavatory trash receptacle fire extinguishing systems. 
Lavatory trash receptacle systems are total flooding systems; total 
flooding systems are designed to automatically discharge a fire 
extinguishing agent throughout a confined space. EPA has not identified 
any safe and technically achievable substitutes for lavatory trash 
receptacle systems. In coming to this proposed determination, EPA 
reviewed information from multiple sources including FAA, the EPA SNAP 
Program, FSTOC, and the International Civil Aviation Organization 
(ICAO) which is outlined in greater detail in the TSD included in the 
docket for this proposed action. The FSTOC 2022 Assessment Report noted 
that it is not aware of any research to develop an HFC substitute in 
lavatory trash receptacle fire extinguishing systems. Furthermore, 
FSTOC noted that identifying substitutes for lavatory trash receptacles 
is a low priority for industry given that it makes up less than one 
percent of the installed fire suppression base on board aircraft.
    In developing its proposed determination, given the global effort 
to find viable halon alternatives, EPA did not consider halons in its 
proposed consideration of the availability of safe and technically 
achievable substitutes. However, both Halon 1301 and Halon 1211 are 
technically achievable and continue to be used in onboard aerospace 
fire suppression. Although the onboard aerospace fire suppression 
industry has relied on halons for fire suppression for decades, the 
United States phased out the production and import of virgin halons in 
1994 due to their high ODP. Recycled halons have been the only supply 
of halons in the United States for nearly 30 years and still comprise 
the majority of installed fire suppression capacity on most aircraft. 
Industry has made extensive efforts to identify alternatives to halons 
particularly with recent estimates from the TEAP's FSTOC that the 
dwindling supply of recycled halons could lead to shortages in the next 
decade.
    In assessing whether there was a safe and technically achievable 
substitute available, EPA also considered what alternatives are listed 
for use under SNAP for fire suppression that would be relevant for 
these applications. EPA notes that 2-bromo-3,3,3-trifluoropropene (2-
BTP) is listed as an acceptable substitute subject to use conditions 
for use as a streaming agent in handheld extinguishers and for certain 
total flooding applications (e.g., engine nacelles and APUs). FAA has 
approved the use of 2-BTP in handheld extinguishers, and commercial 
aircraft manufacturers have begun replacing Halon 1211 with 2-BTP 
extinguishers on newly designed aircraft. As noted above, the SNAP 
Program listed 2-BTP as acceptable as a total flooding agent in engine 
nacelles and APUs; however, 2-BTP has not been listed as acceptable in 
lavatory trash receptacles and the factors for consideration are 
different from other acceptable SNAP-listed uses. For examples, use in 
lavatory trash receptacles would be in a space occupied by people, 
whereas use in engine nacelles and APUs are in unoccupied spaces. 
Furthermore, FAA has not approved 2-BTP for any total flooding systems 
to date.
    As noted in the introduction to this section, in addition to the 
use of HFCs for lavatory trash receptacles in commercial aviation, HFC-
125 has been used in engine nacelles and APUs on commercial-derivative 
aircraft for military use. Industry has explored several other fire 
suppression agents in engine nacelles and APUs, but none have proven to 
be a viable solution. For example, the industry previously explored FK-
5-1-12 for use as a fire suppression agent in engine nacelles, but it 
failed an FAA-required live fire test. As a result, for the purposes of 
its evaluation under the AIM Act subsection (e), EPA has not identified 
safe and technically achievable substitutes that are available for use 
in engine nacelles or APUs.
    In addition to the areas in which HFCs are used in total flooding 
systems, HFC-236fa is used as a streaming agent in commercial-
derivative aircraft for military use. As previously noted in this 
section, 2-BTP has been listed as acceptable by SNAP, is FAA-approved, 
and commercial aircraft manufacturers have begun transitioning to 2-BTP 
extinguishers on newly produced aircraft. While EPA analysis suggests 
that 2-BTP is available as a safe and technically achievable 
substitute, as explained elsewhere in this proposal, EPA would only 
determine the statutory

[[Page 75923]]

criterion in subsection (e)(4)(B)(i)(I) is not met if the Agency 
determines substitutes are available for the entirety of the 
application.
    If a substitute were identified for the entirety of the 
application, it would still take significant time for transition to the 
substitute to occur for this application. FAA has testing requirements 
and minimum performance standards that a new fire suppression agent 
must meet before it can be used commercially. While there is no 
prescribed amount of time it takes to meet these requirements, a 
stakeholder indicated to EPA in a November 2023 public stakeholder 
meeting that the certification process can take three to five years. 
Another stakeholder described the FAA process as arduous and noted that 
it could take many years to receive certification for a new fire 
suppression agent. There is no information before the Agency at the 
time of this proposal to suggest that there would be a safe and 
technically achievable substitute available prior to the next five-year 
review.
2. Supply
    As previously discussed, HFC-227ea, HFC-236fa, and HFC-125 are all 
currently used in onboard aerospace fire suppression. As described in 
Section IV.B of the preamble, EPA is proposing to determine that the 
requirements of 42 U.S.C. 7675(e)(4)(B)(i)(II) are met for this 
application if EPA determines that any of the HFCs currently used in a 
commercial product or to manufacture products for use in the 
application have insufficient supply.
    HFC-227ea is the only regulated substance for which onboard 
aerospace fire suppression allowances have been expended to date. As 
previously stated, HFC-227ea is used in commercial aviation whereas 
HFC-236fa and HFC-125 are used in commercial-derivative aircraft for 
military use. As intended in the Allocation Framework Rule, there is 
overlap between the onboard aerospace fire suppression application and 
the MCMEU application. EPA is not reopening this approach through this 
rulemaking, so as long as DOD continues to classify the operation of 
Armed Forces aircraft as mission-critical, then DOD may use MCMEU 
allowances for fire suppression equipment installed on commercial-
derivative aircraft. Therefore, in addition to HFC-227ea being the only 
regulated substance for which onboard aerospace fire suppression 
allowances have been expended, the uses of HFC-227ea are the only uses 
for which the onboard aerospace fire suppression application is the 
sole pathway to receive allowances. In 2022, the sole domestic producer 
of HFC-227ea produced 1,324.7 MT of HFC-227ea, comprising one percent 
of U.S. HFC production on a mass basis. In addition, there were nine 
entities that imported HFC-227ea with the total amount of imports 
equaling 454.2 MT. Overall, HFC-227ea made up only 0.2 percent of all 
U.S. HFC consumption in 2022 on a mass basis. At the end of 2022, 
suppliers held 1,008.3 MT of HFC-227ea in domestic inventory, which is 
equivalent to about 323 percent of calculated consumption of HFC-227ea 
in 2022; as noted in the supply discussions for the other applications 
above (Sections B-E), not all of this HFC-227ea may be considered 
available supply, as the entities holding this material are broader 
than EPA's interpretation of chemical manufacturers. As stated 
elsewhere in this proposed rule, EPA recognizes that there is inherent 
uncertainty regarding HFC production, and in particular for HFCs with a 
more limited number of production facilities and/or higher GWPs than 
other regulated HFCs, this uncertainty may be greater; HFC-227ea has 
one of the highest GWPs of the regulated HFCs. Additionally, EPA 
understands there will be changes to market conditions resulting from 
the domestic and global phasedown of HFC production and consumption 
that could affect future supply of HFC-227ea. Given the relative size 
of the market for HFC-227ea and the limited number of producers in the 
United States and abroad, the supply chain for HFC-227ea is potentially 
more fragile than other supply chains (e.g., HFC-134a). This makes it 
more likely that the supply of HFC-227ea available from chemical 
manufacturers will be insufficient during 2026-2030 for this 
application.
    The use of HFC-227ea in onboard aerospace fire suppression is small 
compared to the annual consumption of HFC-227ea. Allocated ASAs for 
this application in 2024 are equivalent to 0.8 percent of calculated 
consumption of HFC-227ea in 2022. While this small usage could make it 
easier for suppliers to divert a fraction of their available supply to 
this application, the supply chain for HFC-227ea remains fragile for 
reasons mentioned earlier in this section, including low production and 
a limited number of suppliers.
    Another factor EPA is considering is the impact that other 
regulatory actions may have for the available supply of HFC-227ea. 
Specifically, the proposed Emissions Reduction and Reclamation Rule 
proposes requirements for the use of recycled HFCs for the initial 
charge (i.e., installation) and/or servicing in fire suppression 
systems generally, but not onboard aerospace fire suppression systems 
as long as the application continues to be eligible for ASAs. If this 
requirement is finalized as proposed, this could decrease the demand 
for virgin HFC-227ea.
    EPA also analyzed the supply of the other HFCs currently used in 
this application to determine whether supply of those HFCs was also 
insufficient to accommodate the application. HFC-236fa is used in 
portable extinguishers in commercial-derivative aircraft. There is 
currently one producer in the United States of HFC-236fa, however, 
there was no domestic production reported in 2022. Globally, HFC-236fa 
is produced in even smaller quantities than HFC-227ea. In 2022, there 
were seven entities that imported HFC-236fa with the total amount of 
imports equaling 301.4 MT. Overall, HFC-236fa made up less than 0.2 
percent of all U.S. HFC consumption in 2022 on a mass basis. At the end 
of 2022, suppliers held 127.5 MT of HFC-236fa in domestic inventory, 
which is equivalent to about 47 percent of calculated consumption of 
HFC-236fa in 2022; as noted for HFC-227ea and other HFCs discussed in 
this preamble, not all of this inventory may be considered available 
supply (see Section IV.B for more information). While onboard aerospace 
fire suppression allowance holders have not used allowances for HFC-
236fa to date, allocated ASAs for this application in 2024 are 
equivalent to 0.3 percent of calculated consumption of HFC-236fa in 
2022. However, similar to the analysis for HFC-227ea, given the 
relative size of the market for HFC-236fa and the limited number of 
producers in the United States and abroad, the supply chain for HFC-
236fa is potentially more fragile than other supply chains (e.g., HFC-
134a). This makes it more likely that the supply of HFC-236fa available 
from chemical manufacturers will be insufficient during 2026-2030 for 
this application. Also, if finalized as proposed, the Emissions 
Reduction and Reclamation Rule (88 FR 72216, October 19, 2023) could 
result in similar changes for HFC-236fa as previously discussed with 
HFC-227ea.
    HFC-125 is used in engine nacelles and APUs in military use. HFC-
125 is one of the most widely produced HFCs in the world with multiple 
producers in the United States and globally. In 2022, U.S. production 
of HFC-125 totaled 19,175.7 MT, comprising 14 percent of U.S. HFC 
production on a mass basis. In addition, there were 19 entities that 
imported HFC-125 with the total amount of imports equaling 23,849 MT.

[[Page 75924]]

Overall, HFC-125 made up approximately 25 percent of total U.S. HFC 
consumption in 2022 on a mass basis. At the end of 2022, suppliers held 
56,208.2 MT of HFC-125 in domestic inventory, which is equivalent to 
about 141 percent of calculated consumption of HFC-125 in 2022; for 
reasons explained elsewhere in this preamble, not all of this inventory 
may be considered available supply. Allocated ASAs for this application 
in 2024 are equivalent to 0.0059 percent of calculated consumption of 
HFC-125 in 2022. The 2023 Technology Transitions Rule (88 FR 73098, 
October 24, 2023) is restricting the use of HFCs and HFC blends above 
certain GWP limits in a number of sectors and subsectors as early as 
2025. In all likelihood, demand for certain blends containing HFC-125 
will decrease. However, given HFC-125 could be used in lower-GWP 
blends, including blends with GWPs that are less than the relevant GWP 
limits, there is uncertainty regarding how HFC-125 demand will be 
impacted. A reduction in demand for HFC-125 in the refrigeration and 
air conditioning sectors could result in an increase in available 
supply for use in fire suppression equipment.
3. What is EPA proposing regarding eligibility for application-specific 
allowances?
    EPA is proposing 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 
is proposing 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, for the 
reasons outlined earlier in this section, EPA is proposing to determine 
that no safe or technically achievable substitute will be available for 
onboard aerospace fire suppression and that the supply of the regulated 
substance that manufacturers and users are capable of securing from 
chemical manufacturers is insufficient to accommodate onboard aerospace 
fire suppression through calendar year 2030. As explained earlier, EPA 
is proposing to determine the supply criterion is met if supply of one 
HFC used by the application is insufficient to accommodate the 
application. EPA proposes to determine that the supply of HFC-227ea and 
the supply of HFC-236fa are insufficient to accommodate the application 
for the reasons outlined in the prior section.

VI. What are the proposed requirements associated with a petition to be 
listed as an application that will receive application-specific 
allowances?

    The Agency is proposing 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 42 U.S.C. 7675(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.
    In order to have sufficient information to evaluate a petition 
based on the criteria in subsection (e)(4)(B)(i), EPA is proposing to 
require that certain information must be included in order for a 
petition to be considered complete. The Agency envisions that petitions 
could be submitted by a single entity, such as a company or trade 
association, or a group of entities. The information listed as required 
is not meant to be a comprehensive list of what a petition may include, 
but rather a minimum threshold after which the Agency would consider a 
petition complete. EPA would only consider the statutory timeline 
triggered upon the filing of a complete petition. If the Agency were to 
receive a petition that did not include all required elements listed in 
this section, EPA proposes that it would consider that petition 
incomplete. 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. After a petition is submitted, if 
the petitioner supplements the petition, EPA would consider the 
petition to be re-submitted, and the statutory timelines for action 
would restart. New information may fundamentally alter the merits of a 
petition and therefore EPA would have to restart its review in order to 
account for new information holistically. Comments on EPA's proposed 
determination would not restart the statutory timelines unless the 
petitioner formally requested to supplement or revise their petition.
    EPA proposes that 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 substances and description of their 
use 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 communication from responsible corporate 
officers at multiple representative suppliers and 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;
     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 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

[[Page 75925]]

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 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 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.
    Requiring minimum information be included in order for the Agency 
to deem a petition complete and process that petition would help 
provide clarity for the Agency and ensure timeliness and transparency 
for the petitioner. If EPA does not take this approach, it could 
prevent EPA from having sufficient data to determine whether the 
application warrants receiving ASAs and would unnecessarily delay a 
response from the Agency. This would mean that a petitioner would have 
to wait longer to re-submit a petition if a necessary element were 
omitted from the original submission. EPA seeks comment on the proposed 
petition process, including all of these proposed elements and the 
associated burden with providing such information to the Agency.
    In addition to proposing to establish required elements of a 
complete petition, EPA is providing a non-exhaustive list of other 
elements that are optional, but 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;
     Other information that may be relevant as the Agency 
evaluates the petition, based on the factors listed in subsection 
(e)(4)(B)(i).
    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 2027, 
the entity should submit a complete petition no later than January 31, 
2025. 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 proposed timeline would 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 proposes 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). EPA contends that allocating 
allowances based on the established regulatory approach would be the 
fairest and most transparent method of determining allowance 
allocations for entities in a new application. While EPA is proposing 
that a petition be required to include some of the information that 
would be necessary to determine an allowance allocation, it is possible 
that not all entities within an application would be involved in the 
submission of the petition. In other words, having entities within a 
new application request ASAs by July 31 like all other applications 
(per 40 CFR 84.13(b)) would ensure that all entities in a new 
application have equal opportunity to request allowances. 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 proposes 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 proposes 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 
proposed 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.
    Consistent with the reporting requirements under 40 CFR 84.31(a), 
EPA is proposing that all reports, petitions, and any related 
supporting documents must be submitted electronically in a format 
specified by EPA; \29\ and quantities of regulated substances must be 
stated in terms of kilograms unless otherwise specified. EPA is 
proposing that these records and copies of reports required by this 
section must be retained for three years.
---------------------------------------------------------------------------

    \29\ Currently, most HFC reports under the AIM Act are submitted 
through the HAWK module in the electronic Greenhouse Gas Reporting 
Tool (eGGRT).
---------------------------------------------------------------------------

VII. Proposed 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. EPA 
set up a framework to determine ASA

[[Page 75926]]

allocations for calendar years 2022 through 2025 for five of the six 
applications identified in the AIM Act: propellants in MDIs; defense 
sprays; SCPPU foam for marine use and trailer use; etching of 
semiconductor material or wafers and the cleaning of CVD chambers 
within the semiconductor manufacturing sector; and onboard aerospace 
fire suppression. 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 (86 FR 55116, 55153, October 5, 2021).
    The 2024 HFC Allocation Rule did not reopen the methodology for 
issuing ASAs but noted that the Agency had begun development of this 
proposed 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 (88 FR 46836, 46840, July 
20, 2023). As EPA foreshadowed in the 2024 HFC Allocation Rule, the 
Agency is proposing 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 is also proposing 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, proposing 
to require exporting companies to report ITNs quarterly, and proposing 
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 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:
[GRAPHIC] [TIFF OMITTED] TP16SE24.005

    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 is proposing 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.
    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 also factually documented 
when determining allowance allocations. EPA finalized 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 or expanded manufacturing line, (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. Furthermore, 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. Specific 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; or Securities and Exchange Commission 
filings documenting facility acquisitions or expansions. Ultimately, 
accommodating unique circumstances that are fully documented and proven 
help the Agency fulfill Congress's mandate that EPA ``allocate the full 
quantity of allowances necessary'' (86 FR 55116, 55151, October 5, 
2021). As a result of the multiple allocations between 2021 and 2023 
and the lessons learned through this process, EPA is now proposing 
limited changes to these existing regulations.
    Specifically, EPA is proposing: 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 is proposing 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.

A. Expected Total HFC Purchases

    Under EPA's current program, entities may voluntarily state the 
total amount of HFCs they expect to purchase for the next year. EPA has 
encouraged entities to provide this data on a voluntary basis to 
provide an additional data element for the Agency to consider in making 
allocation decisions.
    EPA proposes 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. Under this proposed requirement, entities 
would be required to provide an estimate of the total quantity of HFCs 
they expect to purchase next year based on their expected eligibility 
for allowances. EPA will allocate at that level if it is lower

[[Page 75927]]

than what that entity is eligible for based on the regulatory formula.
    EPA is proposing this approach to better understand each entity's 
HFC needs in the next year. The regulatory allocation methodology 
established in the Allocation Framework Rule, and outlined at the start 
of this section, is designed to determine an allocation based on 
``projected, current, and historical trends.'' However, this formula 
may not fully take into account other considerations that could impact 
an entity's HFC needs in the next year. This proposed approach may also 
avoid overallocation at the expense of general pool allowance holders.

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. Entities ``must provide additional information if 
requesting that EPA consider unique circumstances'' under 40 CFR 
84.13(b)(1). EPA is proposing to codify into the regulations the 
Agency's existing practice of requiring entities to provide supporting 
documentation to verify any claimed need. EPA previously codified three 
situations that would be considered as unique circumstances (40 CFR 
84.13(b)(1)). After multiple allocations and many conversations with 
stakeholders, EPA is proposing to add to the list of unique 
circumstances under which EPA may allocate additional allowances beyond 
what is calculated from the regulatory allocation formula. EPA is also 
proposing to broaden the third unique circumstance related to MDIs.
    First, EPA is proposing to create a unique circumstance for 
economic disruption outside the immediate control of the entity 
applying for ASAs, such as an economy-wide recession or other 
documented short- to medium-term market events that negatively impact a 
company's operations, such as a strike that affects product demand or 
supply chain disruption. EPA proposes to consider this situation as a 
unique circumstance as such an event could lead to an increased need to 
purchase HFCs beyond what is reflected in the regulatory formula, but 
likely would not be captured under an existing scenario that EPA would 
consider as an acceptable unique circumstance. If finalized, entities 
would still have to submit documentation that verifies that this 
situation has taken place, the current status of the market event 
(e.g., whether it has concluded and demand for the HFCs has returned), 
and that this situation has materially impacted an entity's HFC needs. 
The entity would also have to provide supporting documentation to 
justify the projected amount of HFCs needed, including explaining how 
projections compare to pre-market event use.
    EPA is also proposing to add building a stockpile of a specific HFC 
as a scenario which EPA would consider a unique circumstance 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 the cease in production. For 
an entity to be eligible for additional allowances under this unique 
circumstance, EPA proposes that the entity must provide EPA with a 
letter from their supplier signed by a responsible corporate officer 
\30\ stating that the supplier is ceasing all production of the HFC at 
issue within three years. Further, EPA proposes 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 no other chemical manufacturers that can supply the needed HFC). 
EPA proposes 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 proposes 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.
---------------------------------------------------------------------------

    \30\ EPA is also proposing to define this term, which is used 
elsewhere under the HFC Allocation Program. For purposes of 40 CFR 
part 84, subpart A, EPA is proposing that responsible corporate 
officer and responsible official mean 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.
---------------------------------------------------------------------------

    EPA is also proposing to expand 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.'' EPA notes 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. The 
proposed expansion of the unique circumstance is a direct outgrowth of 
experience over the past three years of implementing the phasedown and 
is designed to ensure a sufficient volume of HFCs is available to 
manufacture MDIs to treat asthma, chronic obstructive pulmonary 
disease, and other respiratory diseases when unexpected market events 
occur.
    EPA proposes 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. If finalized, EPA intends to 
consult closely with the FDA and potentially HHS more broadly before 
allocating allowances for ``healthcare system needs.''
    Examples of the types of events that could fall into a healthcare 
system need include, but are not limited to:
     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 that;
     Significant increase in respiratory infections in 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.

C. Methodology for Entities With Irregular Purchasing History and Very 
Small Users

    EPA has observed that there are certain entities with purchase 
patterns 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. For these entities, EPA is proposing an 
alternative approach for calculating the quantity of allowances each 
entity is eligible to receive. Specifically, EPA is proposing to create 
an alternative

[[Page 75928]]

method of allocating to entities that are either of the following: (1) 
Entity has small purchases of HFCs (<100 kg) at least one of the last 
three years where their purchase history would result in 200 percent or 
higher AAGR of use for the company over the past three years, or (2) 
entity's growth rate cannot be calculated because it had zero purchases 
in one of the last three years for reasons other than newly using HFCs. 
For entities that fall into either category, the Agency is proposing to 
allocate the highest, as measured in exchange value equivalent (EVe), 
verified purchase amount in the last three years.
    With respect to the first category, EPA is proposing these cutoff 
numbers to allow for some narrow flexibility in an entity's purchasing 
patterns and to recognize the variability for entities that purchase 
relatively small quantities of HFCs. EPA is proposing to move away from 
applying the existing regulatory formula for entities where a 
relatively small fluctuation in purchasing measured on a mass basis 
would result in an extraordinarily large and nonsensical growth rate. 
EPA reviewed data from the past three October 1 allocation cycles and 
found that the top three highest entity-specific AAGRs from each of the 
allocation cycles ranged from about 125 percent or higher, with the 
lowest ``small use'' of HFCs in a particular year of less than 5 kg. 
Thus, the Agency is proposing 200 percent as the AAGR cutoff and less 
than 100 kg as the ``small use'' cutoff.
    For the second category, it is mathematically impossible to 
calculate a growth rate based on zero purchases in a year under EPA's 
existing regulatory formula. Entities that had zero purchases in one of 
the three years under consideration would also have to be determined to 
be an active purchaser prior to a year with zero purchases. It is not 
EPA's intent to capture entities that are new in an application under 
this alternative pathway.
    EPA is separately proposing a different allocation approach for all 
very small purchasers of HFCs. EPA is proposing to define entities in 
this category as anyone whose HFC purchases add up to less than 100 kg 
in each of the previous three years. The Agency recognizes there are 
certain entities that purchase the same small quantities of regulated 
substances every year who may not follow a growth-oriented use similar 
to that of entities that use HFCs in wide-scale, commercial operations. 
Examples of these uses could include those meant for small batch use in 
one of the eligible applications for research and development and/or 
entities that may not yet be manufacturing commercially if, for example 
in the case of MDIs, the entity is still in the product development 
phase, is only manufacturing small numbers of MDIs (e.g., for clinical 
trials), and is waiting for final FDA approval. For these entities, EPA 
proposes to allocate the highest, determined on an EVe basis, of an 
entity's past three years' worth of purchases, since their use stays 
relatively consistent over time. EPA is taking comment on whether the 
Agency should look back further at up to five years' worth of purchase 
history. EPA based this number on the past three October 1 allocation 
cycles, and reviewed purchasing patterns for the smallest purchasers 
who are not new to the HFC market and would not be considered entities 
with irregular purchase histories. EPA is taking comment on the cutoff 
threshold on what size purchases would allow for an entity to be 
considered a ``small user.'' EPA is also soliciting comment on whether, 
combined with this approach or as an alternative to this approach, EPA 
should round allowance allocations for very small purchasers to account 
for purchase of a specific cylinder volume. In order to take this 
approach, EPA requests comment on the typical cylinder volume sizes 
used in these small purchases. EPA would also require eligible 
applicants to provide information on the cylinders being purchased in 
their biannual reporting.

D. Average Annual Growth Rate Calculations

    EPA currently calculates AAGR on an MTEVe basis. This process 
involves converting the mass (e.g., kilogram) of each HFC into MTEVe 
and summing those MTEVe quantities across each year, before applying 
the AAGR formula described earlier in this section. The Agency is 
providing courtesy notice of a change going forward to calculate AAGR 
on a mass basis. This new process would be based on summing all HFCs 
together for each year to get a total quantity based on mass and using 
this mass quantity in the AAGR formula. AAGR calculations are not 
codified in the regulations, so this is not a regulatory revision, but 
EPA is providing this notice given broader methodology changes proposed 
in this rulemaking.
    EPA is modifying this calculation because we are concerned that as 
entities transition to lower-GWP HFCs, an AAGR calculated on an MTEVe 
basis will not appropriately reflect their projected demand for HFCs in 
the upcoming calendar year. For example, under an MTEVe-based AAGR 
calculation, an entity transitioning to a lower-GWP HFC, which has an 
associated lower EV, could have a negative AAGR while simultaneously 
experiencing a growth in actual HFC usage. In this situation, the 
entity would be allocated an amount of allowances lower than its 
current year's HFC use. While entities will require fewer allowances to 
purchase these lower-GWP HFCs, until a company has a full three years 
of purchase data with this lower-GWP HFC, the calculated allowances may 
be substantially less than projected demand, either increasing by too 
small an amount or in some cases declining despite an actual increase 
in demand. It would be a perverse outcome for entities to receive an 
insufficient HFC allocation because they are transitioning to a lower-
GWP alternative.
    In addition, growth calculated on a mass basis is more reflective 
of demand than MTEVe and is not impacted by any potential swings 
resulting from purchasing differing levels of HFCs with different EV 
values each year. For example, a company purchasing 20 kg of HFC-41 in 
one year and 40 kg of HFC-23, which has an EV approximately 160 times 
that of HFC-41, the following year would have the same growth rate as a 
company purchasing 20 kg of HFC-41 in one year and 40 kg of HFC-41 the 
next year (i.e., the growth rate for that year is 100 percent for both 
companies versus 32,000 percent for the first company and 100 percent 
for the second company).

E. 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 (86 FR 55116, 55152, 
October 5, 2021).
    EPA is proposing to include verified changes in inventory into the 
calculation of the quantity of HFCs an entity used over the 12-month 
period for all allocations except MCMEU. Changes in inventory are 
documented information as to how an entity used HFCs in a particular 
year. For example, if an entity purchased 100 kg of HFCs,

[[Page 75929]]

and their inventory grew by 50 kg, this would suggest that the entity 
used 50 kg in the manufacturing process under the applicable 
application. In this instance, consideration of purchases minus 
inventory buildup is a more accurate reflection of HFC use by the 
entity than HFC purchases would be alone. EPA proposes to factor in 
both drawdown and growth in inventory; a drawdown of inventory would be 
added to HFC purchases and a buildup of inventory would be subtracted 
from HFC purchases.
    EPA is proposing that this approach would not apply to calculation 
of MCMEU allowance allocations because DOD has a history of building up 
inventory and may need to do so for mission-critical or national 
security purposes. The Agency acknowledges that building inventories 
can be an important strategy for other entities to navigate changing 
market conditions, especially in advance of the 2029 reduction step. 
Therefore, as part of this proposal, EPA is also including 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. An example of what the Agency would consider to be acceptable 
rationale would be if a producer announced that they would be ceasing 
production of an HFC that is used in a particular application, and the 
entity wanted to build up inventory of that HFC to continue 
manufacturing of their product while they figured out their transition 
timeline. Another example could include a situation where an entity had 
to purchase a minimum volume (e.g., a full ISO tank) and that last 
purchase resulted in an increase in inventory.
    In the alternative, EPA is proposing to not incorporate small 
amounts of growth in inventory in allocation decisions. EPA would 
propose to define a small amount of growth as below 20 percent or, 
alternatively, growth in inventory for only a single year. EPA invites 
comment on this alternative pathway and also what the Agency should 
consider to be a small amount of inventory growth.

F. 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 certain imports are not delayed or denied, 
EPA is proposing to modify the 40 CFR part 84, subpart A regulations to 
require that DOD report information consistent with the required 
reporting of conferral data from all other ASA holders. This would 
include the identity of each conferrer and conferee and the quantity in 
MTEVe of ASAs being conferred. This proposed regulatory change would 
not be a significant burden for DOD because DOD is already required to 
track this data internally (40 CFR 84.31(h)(7)).
    If finalized, this regulatory revision would bring the process for 
conferring MCMEU allowances in line with other entities receiving ASAs. 
The Allocation Framework Rule noted that one of the goals of this 
requirement was ``to ensure EPA has the requisite information to track 
application-specific allowances'' (86 FR 55116, 55189, October 5, 
2021). When an HFC supplier reports to EPA that they have expended ASAs 
other than MCMEU allowances, conferral reports have allowed EPA to 
confirm whether that supplier was in possession of ASAs. With MCMEU 
allowances, given that DOD is not required to share information about 
the conferral of MCMEU allowances with EPA, the Agency has encountered 
difficulty verifying whether suppliers are in possession of MCMEU 
allowances. EPA is particularly concerned that without conferral 
information for MCMEU allowances, the Agency would recommend that U.S. 
Customs and Border Protection (CBP) deny entry of an import of HFCs 
bound for MCMEU. This could cause unnecessary delays for DOD and extra 
costs for importers. Different reporting requirements for MCMEU 
allowances has resulted in unexpected confusion and delays in the 
approval of some producer and/or importer quarterly reports, increasing 
administrative burden for DOD, entities who are producing and importing 
on behalf of DOD, and EPA. If finalized, this regulatory change would 
help address these issues.
    In addition to bringing the process for conferring MCMEU allowances 
in line with other entities receiving ASAs, EPA is proposing one 
additional requirement for the conferral of MCMEU allowances, per a 
request from DOD. To enable clearer tracking of MCMEU allowances from 
initial conferral to expenditure, EPA is proposing 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. Finally, 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. This additional layer of tracking 
conferrals could further relieve any unexpected confusion.

G. Limited Set-Aside for Unique Circumstances Related to MDIs

    Some stakeholders have expressed concern that an annual allocation 
decision is not always sufficient to meet the needs of the entities 
eligible for ASAs. Entities have noted that unanticipated events may 
arise after July 31, when requests for ASAs are due, that legitimately 
necessitate an increased need to purchase more HFCs than expected. EPA 
received a comment to the Allocation Framework Rule (86 FR 55116, 
October 5, 2021) requesting that EPA create a separate additional pool 
of allowances to accommodate growth, new mid-year entrants, and 
``under-allocation.'' At the time of that rulemaking, EPA determined 
that establishing such a pool of allowances was unnecessary because the 
Agency had set up an allocation formula to allocate the full quantity 
of allowances necessary, and setting allowances aside just in case they 
were needed would reduce the allowances available to general pool 
allowance holders thereby reducing how many HFCs can be imported or 
produced if the set-aside allowances went unexpended. EPA also noted 
that a company can access HFCs from the open market; if a company used 
more HFCs in a given year, that increased use would be reflected in the 
next year's allocation. However, EPA also noted that the Agency would 
learn from implementation of the program and consider adjusting the 
methodology (86 FR 55116, 55151, October 5, 2021).
    Based on the Agency's observations in implementing the ASA 
allocations over the past three years, EPA is proposing to create a 
set-aside of allowances specifically for situations that meet the 
criteria for the unique circumstance established in 40 CFR 
84.13(b)(1)(iii), including the proposed changes described in Section 
VII.B of this preamble. 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

[[Page 75930]]

diagnosed with medical conditions treated by MDIs. EPA still sees 
significant downsides to creating a set-aside of allowances for 
unforeseen demands in the eligible applications as outlined in the 
Allocation Framework Rule, but does see benefit in creating a set-aside 
for the singular narrow possibility of a public health emergency or 
other unforeseen event that would specifically affect availability of 
MDIs. As a result, EPA is proposing to set aside allowances that would 
be available for the use of HFCs as a propellant in MDIs if the 
requester meets the criteria for the unique circumstance as defined in 
in 40 CFR 84.13(b)(1)(iii). 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. For example, during the beginnings of the 
COVID-19 pandemic in 2020, MDI manufacturers purchased nearly 40% more 
HFC-134a than they did in 2019, which is substantially more than they 
would have been allocated based on Year 3 purchases and the 
application's AAGR; this extra demand also could not have been 
predicted in July 2019, when manufacturers would have applied for 
calendar year 2020 allowances. EPA would consult with the FDA in 
determining whether the presented situation meets the criteria as 
defined, but scenarios could include a global pandemic. Other examples 
of situations that could qualify are described in Section VII.B. EPA is 
also taking 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. If a commenter identifies such a situation, EPA requests that 
the commenter also provide information on how EPA would appropriately 
cabin requests to demand that was truly unexpected and unforeseeable 
and also information on what entities should have to provide as 
evidence when applying for set-aside ASAs. At a minimum, it seems 
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. EPA seeks comment 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 would likely require at least some of the records described in 
Section VI of this preamble.
    EPA is presenting a series of options for comment on how such a 
set-aside pool would be created. Under Option 1, which is EPA's 
preferred option, EPA would form this pool by setting aside 10 percent 
of the allocation of certain entities--those that produced or imported 
HFCs during 2011-2019 to serve the applications eligible for ASAs, 
except MCMEU. An entity that produced or imported HFCs in the time 
range of 2011-2019 for a separate entity now receiving ASAs is getting 
a current HFC allowance allocation based on those past purchases. At 
the same time, ASAs are being issued to entities for conferral to a 
producer or importer. This can be viewed as a double allocation. For 
example, if Entity A imported for an MDI manufacturer in 2011-2019, 
those historic imports are included in calculating Entity A's allowance 
allocation. In other words, Entity A is getting a higher allowance 
allocation because of their imports for an MDI manufacturer. At the 
same time, the MDI manufacturer is being allocated ASAs, which can be 
conferred to Entity A to import HFCs for the MDI manufacturer. 
Therefore, Entity A has two sets of allowances available to them as a 
result of being an importer for MDI manufacturers. Because of this 
aspect of the design of EPA's allocation system, if EPA were to create 
a set-aside of allowances for application-specific entities, EPA 
proposes to hold back 10 percent of the allocation of entities that 
produced and imported for application-specific uses during 2011-2019. 
This appears more equitable than holding back a set amount of 
allowances from all general pool allowance holders, since only those 
that historically imported and produced for application-specific uses 
may have two sets of allowances now available to them. Of course, 
because a company that historically produced or imported for 
application-specific uses has two sets of allowances available to them, 
it seems that they should have sufficient production and/or consumption 
allowances available to purchase additional HFCs for an application-
specific entity if an unexpected need arises. EPA is soliciting comment 
on whether, because of this fact, 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.
    Under this proposed Option 1 approach, EPA would withhold 10 
percent of the identified entities' allowances 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 seeks comment on whether April 30 is late enough in the 
year to provide the appropriate safety value for unforeseen public 
health emergencies and other healthcare system needs.
    Alternatively, Option 2 would be that EPA would create a set-aside 
pool for application-specific entities in the event of a public health 
emergency or other healthcare system need from any revoked allowances, 
including from administrative consequences already finalized. In the 
Allocation Framework Rule, EPA created administrative consequences 
whereby EPA can adjust allowance allocations if EPA determines that a 
person failed to comply with certain requirements relating to the HFC 
allowance allocation and trading program. Under the administrative 
consequence tool, a revoked allowance is one that EPA takes back from 
an allowance holder and redistributes to all other allowance holders 
(86 FR 55116, 55169, October 5, 2021). 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. One potential flaw with this proposed approach is that to 
date, entities could expend ASAs to either produce or import HFCs. EPA 
created ASAs to function this way because end users in the identified 
applications may not know in advance how they will procure HFCs, and 
this method provides flexibility to ensure that end users receive the 
``full quantity of allowances necessary,'' (86 FR 55148). To ensure 
that these ASAs are provided within the overall annual production and 
consumption caps, EPA subtracts the amount of ASAs allocated from both 
the production and consumption general allowance pools (40 CFR 
84.9(a)(3); 84.11(a)(3)). However, to date, EPA has only revoked 
consumption

[[Page 75931]]

allowances.\31\ EPA would likely need to hold back some amount of 
production allowances under this option, up to 1,000,000 MTEVe, to 
ensure sufficient allowances were available.
---------------------------------------------------------------------------

    \31\ See https://www.epa.gov/climate-hfcs-reduction/administrative-consequences-under-hfc-allocation-rule.
---------------------------------------------------------------------------

    A third, less preferred option, would be to hold back a set amount 
of allowances. This set-aside would be created from all general pool 
allowance holders. EPA proposes that the Agency could hold back 
allowances in the range of 500,000 to 1,000,000 MTEVe production and 
consumption allowances. 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. As explained previously, this approach 
seems less equitable than Option 1. This approach also does not allay 
the concerns identified by EPA in the Allocation Framework Rule for 
establishing a set-aside for ASAs. However, EPA is interested in 
stakeholder input regarding this option.
    Finally, as an alternative to creating a set-aside at all, EPA is 
taking comment on the possibility of allowing conferral of ASAs from 
other applications in the event an unforeseen event that meets the 
unique circumstance outlined in 40 CFR 84.13(b)(1)(iii). Under EPA's 
current regulations, conferred ASAs may only be used to produce or 
import HFCs for the application-specific use associated with the 
allowance(s) (40 CFR 84.13(h)). Under this alternative, EPA would amend 
the regulations such that if an unforeseen event meeting 40 CFR 
84.13(b)(1)(iii), ASAs could be conferred and expended to produce or 
import HFCs for application-specific use different from the application 
associated with the allowance. For example, if EPA agreed that there 
was a public health emergency that created an unexpected need to 
purchase more HFCs for MDI manufacturing, under this approach ASAs 
allocated for aerospace fire suppression could be conferred to import 
or produce HFCs for use in MDI manufacturing.
    EPA seeks comment on these proposals, in particular on the scope of 
the need, the number of allowances that are expected to need to be set 
aside, the date by which requests must be received to be considered, 
and all other aspects of the proposal.

H. Return of Unneeded Allowances

    EPA is aware that some application-specific entities are allocated 
more allowances than are necessary to accommodate their needs for a 
given calendar year. This may be because for that specific year, the 
regulatory formula overestimated that individual entity's need. It is 
also possible that the entity's expectations for the year did not match 
reality because of unexpected intervening events, such as a drop in 
demand for the entity's products or supply chain difficulties. In light 
of these considerations, EPA is proposing to allow ASA holders to 
return their allowances voluntarily if they do not intend to use them. 
ASA holders could return allowances up to and including June 30 of the 
year for which the allowances can be expended (e.g., calendar year 2025 
allowances would have to be returned by June 30, 2025). This would be 
completely optional and intended to be used at the discretion of the 
ASA holder. EPA proposes to use any returned allowances to either: (1) 
fulfill unexpected higher demand of another ASA holder (see proposal in 
Section VII.G of this preamble); or (2) return the allowances to the 
general pool of allowance holders proportionate to respective market 
shares. EPA sees benefit of redeploying allowances that would go unused 
into the overall HFC market for smoother transition and to ease the 
overall HFC phasedown.
    EPA is soliciting comment on this proposal, including whether it is 
needed if EPA finalizes other proposals outlined in this notice. EPA is 
particularly interested in whether this proposed approach is needed if 
EPA finalizes the requirement for entities to include in their 
application for allowances their anticipated need for the following 
calendar year. EPA is also interested in stakeholder input on whether 
codifying an ability for entities to return unneeded allowances would 
have unintended negative effects, including limiting the availability 
of allowances for transfer to another application-specific entity that 
has an unanticipated need for more allowances during the calendar year.

I. Enabling Auctions of Illegally Imported HFCs

    In addition to the proposed changes to EPA's application-specific 
regulations outlined in this section, EPA is also proposing a targeted 
change to the regulations related to the enforcement and compliance 
provisions EPA finalized in the Allocation Framework Rule. As explained 
in the Allocation Framework Rule, EPA established a comprehensive 
system of mechanisms that together and by themselves discourage and 
prevent illegal production, import, and subsequent sales of illegally 
produced or imported HFCs. Since the requirement came into effect that 
entities must expend allowances to produce or import HFCs, EPA has been 
working with partner agencies across the Federal government to 
implement a comprehensive enforcement and compliance program.
    One issue that EPA has been grappling with is what to do with HFCs 
that an entity imports or attempts to import without expending the 
requisite number of allowances. Among other things, the Federal 
government has been considering reexport, destruction, and auctions as 
potential available pathways for such HFCs. EPA is in the process of 
working with partner Federal agencies, particularly CBP, to consider 
the feasibility of an auction of HFCs that have been stopped or seized 
by CBP as was done in the past with illegally imported ODS. As part of 
this process, EPA has identified a provision in the existing 40 CFR 
part 84 regulations that could be read to inhibit some auctions of 
HFCs, although there is nothing in 40 CFR part 84 that prohibits 
auctions. In order to ensure auctions are an option, if the Federal 
government otherwise chooses to pursue them, EPA in this rulemaking is 
proposing to amend the prohibition relating to the sale and prohibition 
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 CBP if the buyer 
expended consumption allowances or ASAs in a quantity equal to the EV-
weighted equivalent of the illegally imported regulated substances. 
This proposed change would provide explicit clarity to an entity that 
purchases HFCs at such an auction that the HFCs they purchase can be 
sold as if they were initially imported with allowances.\32\
---------------------------------------------------------------------------

    \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 is also proposing targeted changes to the reporting 
requirements to provide clarity in the regulations for how such 
purchases would be reported. EPA proposes that 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). 
EPA proposes that entities would use the date that entry

[[Page 75932]]

was filed 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). This would provide a date that can be easily verified 
and would align with when the entity formally expressed intent to CBP 
to enter the HFCs into U.S. commerce.
    Additionally, EPA is proposing 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 proposes 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 is proposing that the entity would need to do any 
required sampling and testing prior to sale in U.S. commerce.

J. Quarterly Exporter Reporting of Internal Transaction Numbers

    ITNs uniquely identify shipments being exported from the U.S. to 
another country. EPA currently requires companies to report ITNs when 
they request additional consumption allowances after exporting bulk 
HFCs. EPA is proposing to require companies to additionally report ITNs 
quarterly for all HFC exports. It is EPA's understanding that reporters 
can obtain ITNs from either CBP or their broker with relative ease, 
once they have a process to do so in place. Many reporters already 
gather ITNs on a regular basis for the purpose of submitting RACA 
reports.
    Under CBP regulations, there are some instances in which exporters 
may acquire ITNs but are not required to do so. These instances may 
include exports to Canada and lower-value exports, for example. EPA 
proposes that exporters would not be required to report ITNs for 
shipments that are exempt from needing ITNs under CBP regulations. EPA 
is not proposing any changes to the existing regulations related to 
RACAs, so reporters would still need to obtain ITNs for any exports 
listed in RACA submissions (e.g., exports to Canada).
    EPA is proposing to require exporters to report ITNs quarterly to 
better enable EPA to perform quality assurance and integrity checks 
between exports reported to the Agency under the reporting requirements 
in 40 CFR 84.31 with Customs records. This, in turn, will enable EPA to 
better ensure the accuracy of the overall volume of HFCs that are 
exported, which is a critical component of the overall calculation of 
the HFC phasedown, in addition to being communicated for transparency 
to stakeholders and being a key part of the Agency's international 
reporting obligations under the Montreal Protocol.

K. Date of Purchase for Requests for Additional Consumption Allowances 
(RACAs)

    EPA is proposing to change the existing requirement in 40 CFR 
84.17(a)(5) to report the date HFCs were purchased as part of a RACA. 
Instead, EPA would require an entity to only report whether the HFCs 
exported were purchased before January 1, 2022, or after that date. EPA 
has received feedback from entities requesting RACAs that it is 
difficult to report the date HFCs were purchased because the 
information can be difficult to obtain. For example, a company may 
purchase several batches of HFCs over the course of several months and 
combine these batches into a homogenous mixture in an on-site holding 
tank. These batches of HFCs could come from multiple suppliers. The 
contents of the holding tank are then siphoned off into smaller 
containers and exported to a foreign country, at which point the 
company seeks a RACA for those exported HFCs. In this scenario, it is 
difficult to determine what the ``date of purchase'' was for any given 
container of HFCs that was exported.
    When EPA initially codified the requirement to provide the date 
purchased as part of a RACA, the primary purpose of this data element 
was to track how much material is being exported out of pre-2022 
inventory, before the phasedown program was in effect. This, in turn, 
helps the Agency understand certain market trends (e.g., how many 
containers are being sold out of older inventory as opposed to more 
recently purchased inventory). However, EPA can track this trend with a 
simpler data element. Accordingly, EPA proposes to change the existing 
requirement to provide the date HFCs were purchased to whether the HFCs 
were purchased before or after January 1, 2022.

VIII. Authorization To Produce for Export

    In previous rulemakings, i.e., the Allocation Framework Rule and 
the 2024 Allocation Rule, some commenters expressed concern that under 
EPA's methodology for issuing production and consumption allowances, 
certain producers were not allocated sufficient allowances to meet the 
demands of their international customers working in applications for 
which ASAs were allocated to the domestic manufacturers. Commenters 
said that foreign semiconductor manufacturing remains important even 
while domestic semiconductor manufacturing increases under the CHIPS 
Act.
    This issue was generally beyond the scope of prior rulemakings, but 
EPA recognizes that under the methodology for issuing general pool 
production and consumption HFC allowances \33\ in tandem with how ASAs 
have historically been issued, domestic HFC producers that manufacture 
low EV HFCs with proportionally smaller market shares may face 
challenges due to a combination of the phasedown itself, EPA's 
allocation methodology, and that EPA does not allocate ASAs for 
entities' operations outside the United States.
---------------------------------------------------------------------------

    \33\ EPA is not reopening nor proposing to revisit the 
methodology for issuing general pool production and consumption HFC 
allowances in this rulemaking.
---------------------------------------------------------------------------

    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;
     Authorization must be established via notice and 
opportunity for public comment; and
     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 proposing to make 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.
    EPA has 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. Iofina has informed EPA that it has experienced 
challenges acquiring HFC allowances via a transfer from another 
allowance holder so it can produce low-EV, HFC-41, to sell to 
semiconductors manufacturers abroad. Iofina has flagged

[[Page 75933]]

this challenge for EPA for several years. The company has also noted 
that even if it were able to secure a transfer for a single year, 
Iofina could not plan over multiple years.
    EPA has considered 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, and is proposing to 
authorize Iofina to undertake additional production for export as 
contemplated by AIM Act subsection (e)(5). To operationalize this 
subsection of the AIM Act, EPA is proposing to establish a production 
for export category of allowances and associated recordkeeping and 
reporting requirements. EPA is proposing that this new category of 
allowances would be nontransferable. Consistent with language in 
subsection (e)(5) of the AIM Act that EPA may ``authorize an entity'' 
(emphasis added), the Agency is proposing that these production for 
export allowances would be available only to Iofina to supply regulated 
HFCs to application-specific end users located abroad, specifically and 
only for the etching of semiconductor material or wafers and cleaning 
of CVD chambers within the semiconductor manufacturing sector. EPA is 
proposing to issue 3,000.0 MTEVe of allowances annually to Iofina for 
the stated purpose for each of the calendar years 2026 through 2030.
    EPA proposes to determine that authorization of production for 
export to Iofina in this instance is appropriate and consistent with 
subsection (e)(5) of the AIM Act. EPA proposes that this is 
particularly true where the ASA requirements of subsection 
(e)(4)(B)(iv) provide priority access to HFCs for defined applications. 
This proposal is intended to address a need that has been voiced 
consistently and exclusively by Iofina, for which Iofina has provided 
supporting information to substantiate the request.
    EPA is proposing 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 follows.

A. To what entities is EPA proposing to allocate production for export 
allowances?

    As described above, EPA is proposing to only allocate production 
for export allowances to Iofina. The Agency has determined that the 
company has demonstrated their need for production for export 
allowances. Iofina has made good faith efforts to acquire allowances 
via an inter-company transfer and has had difficulty finding another 
allowance holder willing to transfer production and consumption 
allowances to them in order to produce regulated HFCs for export. 
Iofina has documented foreign customer demand in an application-
specific end use for the HFC they produce. Iofina has committed to 
conduct 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 the 
etching of semiconductor material or wafers and cleaning of CVD 
chambers within the semiconductor manufacturing sector 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).
    EPA has also considered how this authorization supports the HFC 
phasedown overall. Iofina produces only one HFC, HFC-41, one of the 
lowest EV HFCs controlled by the AIM Act with an EV of 92, at its 
facility in Covington, Kentucky. Iofina produced HFCs during the 2011-
2019 timeline and in subsequent years, and accordingly have been 
allocated allowances for calendar years 2022, 2023, and 2024. Because 
Iofina has always produced a low EV HFC, their allocation is smaller 
than companies that have historically produced higher EV HFCs, which 
now have flexibility to transition into a lower EV HFC at higher 
volumes. HFC-41 comprises a small portion of overall U.S. HFC 
calculated production \35\ (0.02 percent in 2022 on a mass basis and 
approximately 0.001 percent on an EVe basis), and Iofina is the only 
U.S. producer of HFC-41 for consumptive use. Further, HFC-41 has a 
lower EV than all other regulated substances used in the etching of 
semiconductor material or wafers and the cleaning of CVD chambers 
within the semiconductor manufacturing sector. Coupled with the 
extremely small volume of allowances that this production would 
require, EPA sees authorizing this additional flexibility as 
appropriate to support continued U.S. production of HFC-41.
---------------------------------------------------------------------------

    \35\ See EPA HFC Data Hub at https://www.epa.gov/climate-hfcs-reduction/hfc-data-hub.
---------------------------------------------------------------------------

    EPA recognizes that upon reviewing this proposed rulemaking, there 
may be other HFC producers who would be interested in receiving 
production for export allowances for application-specific uses abroad. 
At this time, EPA has only assessed the appropriateness of proposing an 
allocation for Iofina in light of the specific circumstances presented 
by that entity. The Agency is not proposing, nor creating 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 would consider whether to act in a separate rulemaking 
under subsection (e)(5), but we emphasize 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.

B. How many production for export allowances is EPA proposing to issue 
to Iofina on an annual basis, and for how many years is EPA proposing 
to issue these allowances?

    EPA is proposing to issue Iofina non-transferrable production for 
export allowances in the amount of 3,000.0 MTEVe on an annual basis. 
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 production cap for calendar year 2024 through 2028 (the current 
phasedown step) is 229,521,263 MTEVe and the production cap for 
calendar year 2029 through 2033 (the next phasedown step) is 
114,760,632 MTEVe. The proposed number of production for export 
allowances the Agency would issue Iofina would be approximately 0.001 
percent of the overall production cap for 2026 through 2028 and 0.003 
percent for 2029 and 2030.\36\ Accordingly, the Agency does not 
envision any shortage of production allowances for these years as a 
result of the proposal to issue Iofina 3,000.0 MTEVe of production for 
export allowances. In essence, the proposed 3,000.0 MTEVe of production 
for export allowances issued to Iofina would not materially affect any 
other domestic producer even in light of the next phasedown step.
---------------------------------------------------------------------------

    \36\ Percent = (Number of Production of Allowances Issued)/
(Production Cap)*100.
---------------------------------------------------------------------------

    Consistent with the provisions in subsection (e)(5)(A)(i), EPA is 
proposing that if finalized, Iofina would be issued

[[Page 75934]]

production for export allowances on an annual basis for a five-year 
period between 2026 through 2030.

C. Would 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 proposes 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 is 
proposing that when Iofina produces for export using this specific 
category of allowances, it is not required to expend consumption 
allowances in an equivalent amount. Relatedly, EPA is also proposing 
that Iofina's materials produced with production for export allowances 
are not eligible for additional consumption allowances through the RACA 
provisions in 40 CFR 84.17.

D. How will this process affect the issuance of other types of 
allowances?

    Under 40 CFR part 84, subpart A, EPA first issues ASAs. Because the 
Agency is proposing an annual finite number of production for export 
allowances for Iofina, EPA proposes to issue these non-transferrable 
allowances immediately after ASAs are issued. As a result, EPA is 
proposing 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. 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 if the 
production for export allowance provisions are finalized. EPA is not 
proposing any changes to how general pool consumption allowances are 
issued on an annual basis and is neither revising nor reopening the 
methodology codified in 40 CFR 84.11.

E. What are the proposed recordkeeping and reporting requirements for 
production for export allowances?

    In order to maintain overall stringency while allowing for the 
flexibilities in the AIM Act described in this general information 
section of the preamble, EPA is proposing 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 is proposing 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 is proposing 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. If the regulated HFCs produced by 
Iofina using product 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 is proposing that the name and 
address of the foreign entity, and the contact person's name, email 
address, and phone number are included. Further, EPA is proposing 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 is proposing 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 is proposing that an ITN be provided 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. Additionally, EPA is proposing 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. All reports described in this section would be 
subject to EPA's auditing provisions under 40 CFR 84.33 if finalized as 
proposed.
3. Recordkeeping
    EPA is proposing 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 is also proposing 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).

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 is proposing several ways 
it intends to release data that would be collected if this proposed 
rule is finalized as proposed.
    EPA has reviewed the data elements that are proposed to be reported 
under this rulemaking. Based on that review, EPA is proposing certain 
confidentiality

[[Page 75935]]

determinations in advance through this notice and comment rulemaking 
for individual reported data elements that EPA would be collecting 
through this rulemaking. This proposal identifies certain information 
that must be submitted to EPA that may be subject to disclosure to the 
public without further notice because the Agency proposes to find that 
the information does not meet the standard for confidential treatment 
under Exemption 4 of the Freedom of Information Act (FOIA). EPA is also 
proposing to identify certain other categories of information that 
would be entitled to confidential treatment. 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. The confidentiality determinations in 
this proposed action are intended to increase the efficiency with which 
the Agency responds to FOIA requests and to provide consistency in the 
treatment of the same or similar information. Establishing these 
determinations through this rulemaking will provide predictability for 
both information requesters and entities submitting information to EPA. 
The confidentiality determinations are also proposed to increase 
transparency around this program's implementation.

A. Background on Determinations of Whether Information Is Entitled to 
Treatment as Confidential Information

    Exemption 4 of the FOIA exempts from disclosure ``trade secrets and 
commercial or financial information obtained from a person [that is] 
privileged or confidential'' (5 U.S.C. 552(b)(4)). In order for 
information to meet the requirements of Exemption 4, EPA must find that 
the information is either: (1) a trade secret, or (2) commercial or 
financial information that is: (a) obtained from a person, and (b) 
privileged or confidential.
    Generally, when we have information that we intend to disclose 
publicly that is covered by a claim of confidentiality under FOIA 
Exemption 4, EPA has a process to make case-by-case or class 
determinations under 40 CFR part 2 to evaluate whether such information 
qualifies for confidential treatment under the exemption. 40 CFR 
2.205.\37\ In this action, EPA is proposing to make categorical 
confidentiality determinations in advance through this notice and 
comment rulemaking for some information that must be submitted to EPA 
under the proposed requirements. If EPA finalizes these determinations, 
that information could be disclosed to the public without further 
notice.
---------------------------------------------------------------------------

    \37\ This approach of making categorical determinations for a 
class of information is a well-established Agency practice. Prior 
examples of rules where EPA has made such categorical determinations 
include Confidentiality Determinations for Data Required Under the 
Mandatory Greenhouse Gas Reporting Rule and Amendments to Special 
Rules Governing Certain Information Obtained Under the Clean Air Act 
(76 FR 30817) (May 26, 2011); Control of Air Pollution From New 
Motor Vehicles: Heavy-Duty Engine and Vehicle Standards (88 FR 4296) 
(January 24, 2023); and Renewable Fuel Standard (RFS) Program: RFS 
Annual Rules (87 FR 39600) (July 1, 2002).
---------------------------------------------------------------------------

    The U.S. Supreme Court decision in Food Marketing Institute v. 
Argus Leader Media, 139 S. Ct. 2356 (2019) (Argus Leader) addresses the 
meaning of ``confidential'' within the context of FOIA Exemption 4. The 
Court held that ``[a]t least where commercial or financial information 
is both customarily and actually treated as private by its owner and 
provided to the government under an assurance of privacy, the 
information is `confidential' within the meaning of Exemption 4.'' 
Argus Leader, 139 S. Ct. at 2366. The Court identified two conditions 
``that might be required for information communicated to another to be 
considered confidential.'' Id. at 2363. Under the first condition, 
``information communicated to another remains confidential whenever it 
is customarily kept private, or at least closely held, by the person 
imparting it.'' Id. (internal citations omitted). The second condition 
provides that ``information might be considered confidential only if 
the party receiving it provides some assurance that it will remain 
secret.'' Id. (internal citations omitted). The Court found that the 
first condition necessary for information to be considered confidential 
within the meaning of Exemption 4, but did not address whether the 
second condition must also be met.
    Following the issuance of the Court's opinion in Argus Leader, the 
U.S. Department of Justice (DOJ) issued guidance concerning the 
confidentiality prong of Exemption 4, articulating ``the newly defined 
contours of Exemption 4'' post-Argus Leader.\38\ Where the Government 
provides an express or implied indication to the submitter prior to or 
at the time the information is submitted to the Government that the 
Government would publicly disclose the information, then the submitter 
generally cannot reasonably expect confidentiality of the information 
upon submission, and the information is not entitled to confidential 
treatment under Exemption 4.\39\ In this proposed rule, EPA intends to 
clearly assert that certain information would not be kept confidential 
and may be disclosed publicly, if it is determined to not be entitled 
to confidential treatment in the final version of this rulemaking. This 
assertion aligns with the Supreme Court's decision, and the subsequent 
DOJ guidance that the government's assurances that a submission will be 
treated as not confidential should dictate the expectations of 
submitters. If EPA were to finalize these determinations, submitters 
would be on notice before they submit any information that EPA has 
determined that the identified information outlined in the memorandum 
provided in the docket for this action titled Proposed Confidentiality 
Determinations for Data Elements in the Proposed Rule, will not be 
entitled to confidential treatment upon submission and may be released 
by the Agency without further notice. As a result, submitters will not 
have a reasonable expectation that the information will be treated as 
confidential; rather, they should have the expectation that the 
information will be disclosed.
---------------------------------------------------------------------------

    \38\ ``Exemption 4 After the Supreme Court's Ruling in Food 
Marketing Institute v. Argus Leader Media and Accompanying Step-by-
Step Guide,'' Office of Information Policy, U.S. DOJ, (October 4, 
2019), available at https://www.justice.gov/oip/exemption-4-after-supreme-courts-ruling-food-marketing-institute-v-argus-leader-media.
    \39\ See id.; see also ``Step-by-Step Guide for Determining if 
Commercial or Financial Information Obtained from a Person is 
Confidential under Exemption 4 of the FOIA,'' Office of Information 
Policy, U.S. DOJ, (updated October 7, 2019), available at https://www.justice.gov/oip/step-step-guide-determining-if-commercial-or-financial-information-obtained-person-confidential.
---------------------------------------------------------------------------

    As described further below, EPA is proposing to make categorical 
confidentiality determinations as some of the proposed data elements 
that would be submitted to EPA contain information that is not entitled 
to confidential treatment. For data elements not explicitly listed in 
the document in the docket, EPA will apply the 40 CFR part 2 process 
for establishing case-by-case confidentiality determinations.
    There may be additional reasons not to release information 
determined to not be entitled to confidential treatment, for example 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. EPA requests comment on the proposed confidentiality 
determinations.

[[Page 75936]]

B. 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 
has reviewed the data elements EPA has proposed would be required for a 
petition to be listed as an application that will receive ASAs. 
Specifically, EPA proposes to not provide confidential treatment to, 
and may release without further process, all required elements of the 
petition, except for a subset of the elements for which EPA has 
proposed that multiple entities could submit information individually 
to EPA; \40\ and all information submitted to EPA that does not 
correspond to a required element. The memorandum to the docket lists 
each individual element of a complete petition, as proposed by EPA, 
with an accompanying proposed determination on whether that element 
would be entitled or not to confidential treatment. EPA is proposing 
that through this rulemaking, entities are put on notice of data 
release in line with the Argus Leader decision. 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. EPA invites comment on this proposed 
determination.
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    \40\ For example, EPA is proposing that (1) data on the 
proportion of the overall cost of the product or system that 
reflects the cost of regulated substance(s) and (2) historic and 
projected sales for the product or system would not be treated as 
confidential business information, as these are important elements 
for the public to consider when EPA is taking action on a petition 
for application-specific allowances.
---------------------------------------------------------------------------

C. Data Elements Related to Proposed Revisions to Existing Regulations

    To maximize program transparency, EPA is proposing to release 
several data elements associated with the proposed limited changes to 
existing regulations, including specific data elements associated with 
the following proposed 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; (2) 
allowing ASA holders to return their allowances voluntarily if they do 
not intend to use them; and (3) the ``date of purchase'' requirement 
for a RACA. The memorandum to the docket lists each individual element 
EPA has proposed related to these regulatory revisions with an 
accompanying proposed determination on whether that element would be 
entitled or not to confidential treatment. EPA is proposing that 
through this rulemaking notice, entities are put on notice of data 
release in line with the Argus Leader decision. EPA is providing an 
express indication to all entities 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. EPA invites comment on this proposed determination.
    EPA is proposing to regulatorily determine that certain other 
information would be entitled to confidential treatment. EPA is 
proposing that supporting documentation verifying a need to purchase 
regulated substances in the present calendar year for purposes of the 
proposed set aside because it is likely to include the type of 
information that submitters customarily keep private or closely held. 
EPA is also proposing that data elements associated with the following 
proposed regulatory revisions would be entitled to confidential 
treatment: (1) requiring companies provide the total expected amount of 
HFCs they intend to purchase in the calendar year; (2) new requirements 
for the conferral of MCMEU allowances; and (3) requiring exporters to 
report ITNs quarterly. These data elements constitute the type of 
information that submitters customarily keep private or closely held. 
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 the Department of Commerce. Additional 
information on the proposed determinations for specific data elements 
associated with the proposed regulatory revisions is provided in the 
memorandum in the docket for this action. EPA invites comments on these 
proposed confidentiality determinations, including information on 
whether the listed elements are the type of information customarily 
kept private or closely held.

D. Data Elements Reported to EPA Related to Production for Export

    EPA is proposing to establish a production for export category of 
allowances as described in Section VIII. If EPA were to finalize the 
proposal for production for export allowances, EPA is proposing to 
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 lists each individual element 
EPA has 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 is proposing that 
through this rulemaking, entities are put on notice of data release in 
line with the Argus Leader decision. EPA is providing an express 
indication to all entities 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. EPA invites comment on this proposed determination.
    EPA is proposing that the ITNs submitted for all exports of 
regulated substances produced using production for export allowances 
would be entitled to confidential treatment for the same rationale 
described earlier in this section for the proposed requirement that 
exporters report ITNs on a quarterly basis. EPA requests comment on 
this proposed determination, including comments on why this information 
may not be entitled to confidential treatment.
    EPA is proposing 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 customer, and any intermediaries). EPA requests comment on 
this proposed determination, including comments on why this information 
may not be

[[Page 75937]]

entitled to confidential treatment. Specifically, EPA requests comment 
on whether the existence of a business relationship between an HFC 
producer and customer is information that is customarily closely held.

X. What are the costs and benefits of this action?

    The changes proposed in this proposed rule would not result in any 
significant changes to the phasedown program as a whole, and thus do 
not fundamentally change the assumptions made in the Allocation 
Framework Rule RIA and subsequent RIA addenda. The Allocation Framework 
Rule RIA estimated benefits and costs for the HFC phasedown between 
2022 and 2050, including assuming for analytical purposes that the 
allocation system would continue unchanged for years past the initial 
period (i.e., for 2024 and beyond). This action would not change the 
total number of allowances issued each year or the associated 
environmental impacts. Further, the 2023 Technology Transitions Rule 
RIA Addendum quantified the costs and benefits associated with the 
transitions necessary for compliance based on the sector- and 
subsector-specific restrictions finalized in that rule. Given that the 
2023 Technology Transitions Rule promulgated restrictions for sectors 
that encompass both defense sprays and SCPPU foams (aerosols and foam 
blowing sectors, respectively), the compliance costs associated with 
the proposals described in Section V of this proposed rule to restrict 
the use of certain HFCs in defense sprays and SCPPU foams have already 
been accounted for in the 2023 Technology Transitions Rule RIA 
Addendum. Therefore, EPA is not developing an update to the RIA for 
this proposed rule; however, given that some elements proposed in this 
rulemaking could result in incremental impacts for a subset of 
entities, the Agency did analyze potentially salient costs and benefits 
considerations associated with this proposed rulemaking. A summary of 
this analysis is included below, and additional details are presented 
in Discussion of Costs and Benefits 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).
    This analysis is intended to provide the public with information on 
the relevant costs and benefits of this action and to comply with 
Executive Orders. The analysis does not form a basis or rationale for 
any of the actions EPA is proposing in this rulemaking.
    For entities in applications for which EPA is co-proposing an 
option to not renew eligibility for ASAs, the biggest drivers for any 
costs would be no longer being exempted from the restrictions 
promulgated under the Technology Transitions Program. However, entities 
within those applications that currently receive ASAs would also avoid 
recordkeeping and reporting costs associated with being an ASA holder 
because they would no longer receive ASAs and thereby no longer need to 
comply with related recordkeeping and reporting provisions, resulting 
in burden relief.
    General pool allowance holders may receive benefits in the form of 
additional allowances if EPA finalized one or more applications no 
longer being eligible for ASAs. However, EPA anticipates that the 
number of additional allowances would be insignificant, totaling well 
under one percent of consumption allowances in a given year. For 
example, the number of allowances allocated in calendar year 2024 to 
the two applications for which EPA is co-proposing an option to not 
renew is equivalent to 0.1 percent of calendar year 2024 consumption 
allowances. In addition, as these marginal benefits constitute a 
transfer from one group to another and do not change the total number 
of allowances issued, there is no net societal impact.
    EPA estimates that there may be costs related to the proposed 
requirements for ASA petitions and revisions to existing regulations. 
For example, in a scenario in which EPA does not renew the defense 
sprays and SCPPU foam for marine and trailer uses applications, the 
estimated costs of this proposed rule would be $19,052 in one-time 
costs and $54,310 in annual costs. More discussion of this scenario is 
included in the costs and benefits memo available in the docket that is 
referenced above. Other than these costs, EPA has not identified 
additional costs or benefits beyond those estimated in the Allocation 
Framework Rule RIA and subsequent RIA addenda.

XI. Statutory and Executive Order Review

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 14094: Modernizing Regulatory Review

    This action is a ``significant regulatory action'' as defined in 
Executive Order 12866, as amended by Executive Order 14094. 
Accordingly, EPA submitted this action to the Office of Management and 
Budget (OMB) for Executive Order 12866 review. Documentation of any 
changes made in response to the Executive Order 12866 review is 
available in the docket. EPA prepared an economic analysis of the 
potential impacts associated with this action. This analysis, 
``Discussion of Costs and Benefits for Phasedown of Hydrofluorocarbons: 
Review and Renewal of Eligibility for Application-specific 
Allowances,'' is available in the docket for this action (EPA-HQ-OAR-
2024-0196) and is briefly summarized in Section X of this preamble, 
titled, ``What are the costs and benefits of this action?''. The high 
end costs of this proposed rule are estimated in the table below:

 Table 3--Summary of Costs in Scenario in Which Defense Sprays and SCPPU
      Foam for Marine and Trailer Uses Applications Are Not Renewed
------------------------------------------------------------------------
                Activity                  One-time costs   Annual costs
------------------------------------------------------------------------
Application-specific allowance            ..............      $(189,728)
 recordkeeping and reporting burden
 relief for entities no longer eligible
 for ASAs...............................
Technology Transitions recordkeeping and          19,052         221,462
 reporting burden for entities no longer
 eligible for ASAs......................
Petitions requesting eligibility for      ..............          12,758
 ASAs...................................
Other regulatory revisions..............  ..............           9,818
                                         -------------------------------
    Total...............................          19,052          54,310
------------------------------------------------------------------------


[[Page 75938]]

B. Paperwork Reduction Act (PRA)

    The information collection activities in this proposed rule have 
been submitted for approval to OMB under the PRA. The Information 
Collection Request (ICR) document that the EPA prepared has been 
assigned EPA ICR number 2685.05. You can find a copy of the ICR in the 
docket for this proposed rule, and it is briefly summarized here.
    Subsection (d)(1)(A) of the AIM Act specifies that on a periodic 
basis, but not less than annually, each 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 
proposing 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 for the proposal to authorize 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 proposed confidentiality 
determinations described in Section IX of this preamble, if finalized 
as proposed. 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: $5,486,236 (per year), includes $1,038,450 
annualized capital or operation & maintenance costs.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for the 
EPA's regulations in 40 CFR are listed in 40 CFR part 9.
    Submit your comments on the Agency's need for this information, the 
accuracy of the provided burden estimates and any suggested methods for 
minimizing respondent burden to the EPA using the docket identified at 
the beginning of this proposed rule. The EPA will respond to any ICR-
related comments in the final rule. You may also send your ICR-related 
comments to OMB's Office of Information and Regulatory Affairs using 
the interface at www.reginfo.gov/public/do/PRAMain. Find this 
particular information collection by selecting ``Currently under 
Review--Open for Public Comments'' or by using the search function. OMB 
must receive comments no later than October 16, 2024.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities (SISNOSE) under the 
RFA. The small entities subject to the requirements of this action 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. Given there are co-proposals for two applications, EPA conducted 
this preliminary screening analysis based on the pathway that could 
lead to the highest cost burden on small entities; therefore, this 
analysis assumes for analytical purposes that the defense sprays and 
SCPPU foam for marine and trailer uses applications will not be 
renewed. The Agency has determined that four of the 276 affected small 
businesses--or 1.4 percent of all affected small businesses--could 
incur costs in excess of one percent of annual sales, and three of 
those four small businesses--or 1.1 percent of all affected small 
businesses--could incur costs in excess of 3 percent of annual sales. 
The four entities that could incur costs in excess of one percent of 
annual sales are all entities that currently receive ASAs in the 
defense sprays and SCPPU foam for marine and trailer uses applications. 
These costs are primarily driven by these entities no longer being 
exempted from Technology Transition Program restrictions. Further 
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).

D. 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 GDP implicit price 
deflator) or more in any one year.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

[[Page 75939]]

F. 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.

G. 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.

H. 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.

I. National Technology Transfer and Advancement Act

    This rulemaking does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations and 
Executive Order 14096: Revitalizing Our Nation's Commitment to 
Environmental Justice for All

    The EPA believes that this type of action does not concern human 
health or environmental conditions and therefore cannot be evaluated 
with respect to potentially disproportionate and adverse effects on 
communities with environmental justice concerns. This proposed rule 
does not change the HFC phasedown schedule.
    Although this action does not concern human health or environmental 
conditions, the EPA identified and addressed environmental justice 
concerns associated with the HFC phasedown within the Allocation 
Framework Rule (86 FR 55116, October 5, 2021) and the 2024 Allocation 
Rule (88 FR 46836, July 20, 2023). In these rulemakings, EPA identified 
and addressed environmental justice concerns by assessing available 
information to analyze baseline human health or environmental 
conditions, conducting updated analyses based on more recently 
available data, and providing meaningful participation opportunities 
for communities with environmental justice concerns. EPA carefully 
evaluated available information on HFC production facilities and the 
characteristics of nearby communities. Based on EPA's analysis, EPA 
found evidence of environmental justice concerns near HFC production 
facilities from cumulative exposure to existing environmental hazards 
in these communities.

List of Subjects in 40 CFR Part 84

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Climate Change, Emissions, Imports, 
Reporting and recordkeeping requirements.

Michael S. Regan,
Administrator.

    For the reasons set out in the preamble, the EPA proposes to amend 
40 CFR part 84 as follows:

PART 84 PHASEDOWN OF HYDROFLUOROCARBONS

0
1. The authority citation for part 84 continues to read as follows:

    Authority:  Pub. L. 116-260, Division S, Sec. 103.

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:


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 the phrase ``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 
the phrase ``confer a production, consumption,''.
0
d. Revising paragraph (f).
0
e. Adding paragraph (k).
    The revisions and additions 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

[[Page 75940]]

that was produced or imported in violation of paragraphs (a) through 
(d) of this section, except:
    (1) for such actions needed to re-export the regulated substance; 
or
    (2) 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 new 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 ten percent of production 
allowances otherwise calculated under paragraph (b) of this section 
from any entity that produced regulated substances in any calendar year 
2011 through 2019 for a separate entity that is being issued 
application-specific allowances in accordance with Sec.  84.13, except 
for mission-critical military end uses. If there are remaining 
production allowances after distribution from the set-aside under Sec.  
84.15, the relevant agency official will distribute such allowances to 
the entity from which they were withheld.
* * * * *
0
5. Amend Sec.  84.11 by:
0
a. Redesignating the second paragraph (c) as paragraph (e).
0
b. Redesignating paragraph (c) as paragraph (d).
0
c. Adding new 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 ten percent of consumption 
allowances otherwise calculated under paragraph (b) of this section 
from any entity that imported regulated substances in any calendar year 
2011 through 2019 for a separate entity that is being issued 
application-specific allowances in accordance with Sec.  84.13, except 
for mission-critical military end uses. 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 the entity from which they were withheld.
* * * * *
0
6. Amend Sec.  84.13 by:
0
a. In paragraph (a), removing ``2022, 2023, 2024, and 2025'' and adding 
in their place ``as designated''.
0
b. In paragraph (a)(1), adding ``for calendar years 2022-2030'' after 
the phrase ``metered dose inhalers''.
0
c. In paragraph (a)(2), adding ``for calendar years 2022-2025'' after 
the phrase ``defense sprays''.
0
d. In paragraph (a)(3), adding ``for calendar years 2022-2030'' after 
the phrase ``trailer use''.
0
e. In paragraph (a)(4), adding ``for calendar years 2022-2030'' after 
the phrase ``semiconductor manufacturing sector''.
0
f. In paragraph (a)(5), adding ``for calendar years 2022-2030'' after 
the phrase ``end uses''.
0
g. In paragraph (a)(6), adding ``for calendar years 2022-2030'' after 
the phrase ``fire suppression''.
0
h. In paragraph (b)(1), adding ``, including supporting documentation 
that verifies this need'' after the phrase ``this section''.
0
i. In paragraph (b)(1)(ii) remove ``or'' after the phrase ``facility or 
facilities;''.
0
j. In paragraph (b)(1)(iii), removing ``A global pandemic or other 
public health emergency that increases'' and adding in their place ``A 
global pandemic, other public health emergency, or other healthcare 
system needs related to increased'' and removing ``inhalers.'' and 
adding in its place ``inhalers;''.
0
k. Adding paragraphs (b)(1)(iv) and (v).
0
l. Adding paragraph (b)(2).
0
m. Redesignating paragraph (c)(1) as paragraph (c)(7).
0
n. Adding new paragraph (c)(1).
0
o. Adding paragraphs (c)(4) through (6).
0
p. Revising newly redesignated paragraph (c)(7) introductory text.
0
q. Removing paragraph (e).
0
r. Redesignating paragraphs (f) through (h) as paragraphs (e) through 
(g), respectively.
0
s. Adding new paragraph (h).
    The revisions and additions read as follows:


Sec.  84.13  Allocation of application-specific allowances.

* * * * *
    (b) * * *
    (1) * * *
    (iv) Economic disruption outside the immediate control of the 
applicant; or
    (v) 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 that the applicant has regulatory requirements beyond 
this part that limit ability to switch suppliers or there are no other 
suppliers that could meet their needs; and evidence that the applicant 
has a restricted HFC supply chain.
    (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 in calculating 
growth rates and purchase amounts, except:
    (i) for applications for mission-critical military end uses; and
    (ii) if the applying entity provides a rationale deemed acceptable 
by the relevant agency official as to why inventory buildup should not 
be accounted for;
* * * * *
    (4) Subtracting out quantities reported under Sec.  84.31(h)(1)(x) 
in calculating growth rates and purchase amounts;
    (5) Allocating allowances equivalent to the highest verified 
purchase amount measured in exchange value equivalent from the prior 
three years for entities that meet any of the following criteria:
    (i) entity purchased 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 paragraph (7)(i) is equal to or greater than 200 percent;
    (ii) entity had zero purchases in one of the last three years for 
reasons other than newly using regulated substances; or
    (iii) entity purchased equal to or less than 100 kilograms of 
regulated

[[Page 75941]]

substances in each of the past three years;
    (6) For the application of structural composite preformed 
polyurethane foam for marine use and trailer use, utilizing the 
exchange value for HFC-152a in calculating the allowance allocation, 
regardless of what regulated substance was used by an entity;
    (7) For all other entities, multiplying the use of regulated 
substances by the company in the specific application in the prior year 
by the higher of:
* * * * *
    (h) Any entity receiving an allocation of allowances pursuant to 
this section may voluntarily choose to return any quantity of 
allowances to EPA up to, and including, June 30 of the calendar year in 
which the allowances can be expended. If any allowances are so 
returned, those allowances will be distributed to the persons who meet 
the criteria listed in Sec. Sec.  84.9 and 84.11 proportionate to 
entities' market share as calculated in Sec. Sec.  84.9(b)(2) and 
84.11(b)(5).
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) 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 
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 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 and notarized 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 by each entity submitting the petition for 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 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 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 HFC(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.
    (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) 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) are facing a situation that qualifies as a unique circumstance 
as defined in Sec.  84.13(b)(iii); and
    (4) demonstrate to the satisfaction of the relevant agency official 
that the situation described in paragraph (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 text, adding the language ``, except for the 
export of regulated substances produced with a production for export 
allowance'' to the end of the first sentence.
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. Redesignating paragraphs (d)(1)(vii) and (d)(1)(viii) as paragraphs 
(d)(1)(viii) and (d)(1)(ix), respectively.
0
c. Adding new paragraph (d)(1)(vii).
0
d. 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
e. In paragraph (h)(1)(ii), adding ``, including a copy of the sales 
records, invoices, or other records documenting that quantity'' after 
the word ``months''.

[[Page 75942]]

0
f. 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
g. In paragraph (h)(1)(iv), adding ``, including a copy of inventory 
records documenting that quantity;'' after the word ``use''.
0
h. In paragraph (h)(1)(viii), removing the last ``and'' after the 
phrase ``additional need''.
0
i. In paragraph (h)(1)(ix), removing ``allowances.'' and adding in its 
place ``allowances; and''.
0
j. Adding paragraph (h)(1)(x).
0
k. In paragraph (h)(2)(iv), adding ``, including a copy of inventory 
records documenting that quantity;'' after the phrase ``current year''.
0
l. In the introductory text of paragraph (h)(4), removing ``, except 
for the conferral of allowances for mission-critical military end 
uses,''.
0
m. In paragraph (h)(7)(i), removing ``annual'' and adding in its place 
``biannual''.
0
n. Redesignating paragraphs (h)(7)(iii) through (h)(7)(vi) as 
paragraphs (h)(7)(iv) through (h)(7)(vii), respectively.
0
o. Adding new paragraph (h)(7)(iii).
0
p. Redesignating paragraph (l) as paragraph (n).
0
q. Adding new paragraphs (l) and (m).
    The revision and additions read as follows:


Sec.  84.31  Recordkeeping and reporting.

* * * * *
    (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.
* * * * *
    (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:
    (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) Signed certifications by a responsible corporate officer from 
all foreign customers and supply intermediaries 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) A description of how the use identified in the signed 
certifications 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 
the United States Customs and Border Protection must report such 
purchase as if they were an import consistent with the applicable 
provisions under this section, except for the following adjustments.
    (1) Quarterly reporting. The date that filing for that entry was 
accepted by a United States Customs and Border Protection-authorized 
electronic data interchange system, such as the Automated Broker 
Interface, 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. 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.
    (2) 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.
    (3) Advance notification. The auction purchaser must report the 
information specified in paragraph (c)(7) 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.
* * * * *
0
12. Amend Sec.  84.54 by revising paragraph (a)(16)(i)(O) and adding 
paragraph (a)(16)(i)(P) to read as follows:


Sec.  84.54  Restrictions on the use of hydrofluorocarbons.

    (a) * * *
    (16) * * *
    (i) * * *
    (O) Products for removing bandage adhesives from skin; and
    (P) Defense sprays as defined at Sec.  84.3.
* * * * *

[[Page 75943]]

0
13. Amend Sec.  84.60 by adding paragraphs (a)(7) and (b)(3) to read as 
follows:


Sec.  84.60  Recordkeeping and reporting.

    (a) * * *
    (7) Effective [DATE], this paragraph shall apply to defense sprays 
as defined at Sec.  84.3 and structural composite preformed 
polyurethane foam as defined at Sec.  84.3.
    (b) * * *
    (3) Effective [DATE], this paragraph shall apply to defense sprays 
as defined at Sec.  84.3 and structural composite preformed 
polyurethane foam as defined at Sec.  84.3.

[FR Doc. 2024-20602 Filed 9-13-24; 8:45 am]
BILLING CODE 6560-50-P

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