HCFC-22 is also referred to as R-22. It is a popular refrigerant that is commonly used in a variety of refrigeration and air-conditioning equipment, including:
On January 21, 2003, EPA promulgated regulations (68 FR 2820, January 21, 2003, “2003-2009 Rule”) to ensure compliance with the first reduction milestone in the HCFC phaseout: The requirement that by January 1, 2004, the United States reduce HCFC consumption to 65 percent of baseline and freeze HCFC production. In the 2003-2009 Rule, EPA established chemical-specific consumption and production baselines for HCFC-141b, HCFC-22, and HCFC-142b for the initial regulatory period ending December 31, 2009. Section 601(2) states that EPA may select “a representative calendar year” to serve as the company baseline for HCFCs. In the 2003-2009 Rule, EPA concluded that because the entities eligible for allowances had differing production and import histories, no single year was representative for all companies. Therefore, EPA assigned an individual consumption baseline year to each company by selecting its highest ODP-weighted consumption year from 1994 through 1997. EPA assigned individual production baseline years in the same manner. EPA also provided for new entrants that began importing after 1997 but before April 5, 1999, the date the advanced notice of proposed rulemaking (ANPRM) was published. EPA took this action to ensure that small businesses that might not have been aware of the impending rulemaking would be able to continue in the HCFC market.
In the United States, an allowance is the unit of measure that controls production and consumption of ODS. EPA allocates calendar-year allowances equal to a percentage of the baseline—they are valid from January 1 to December 31 of that control period. A calendar-year allowance represents the privilege granted to a company to produce or import one kilogram (not ODP-weighted) of the specific substance. “Production allowance” and “consumption allowance” are defined at 40 CFR 82.3. To produce an HCFC for which EPA has issued allowances, an allowance holder must expend both production and consumption allowances. To import an HCFC for which EPA has issued allowances, an allowance holder must expend only consumption allowances. An allowance holder exporting HCFCs for which it has expended consumption allowances may request a refund of those consumption allowances by submitting proper documentation and receiving approval from EPA.
The 2003-2009 Rule set production and consumption baselines for the 2003-2009 regulatory period, using each company's highest “production year” or “consumption year.” The 2003-2009 Rule prohibited production and import of those HCFCs that were subject to the allowance system without the appropriate allowances (40 CFR 82.15(a),(b)). EPA set the maximum production and consumption of each HCFC by issuing allowances that are valid for a single calendar year, equal to a certain percentage of each company's baseline.  It completely phased out the production and import of HCFC-141b by granting zero percent of baseline for production and consumption in the table at 40 CFR 82.16. EPA created a petition process to allow applicants to request small amounts of HCFC-141b beyond the phaseout. For production and consumption of HCFC-22 and HCFC-142b in 2003 through 2009, EPA allocated allowances at 100 percent of baseline. The complete phaseout of HCFC-141b, the allocations for HCFC-22 and HCFC-142b, combined with projections for consumption of all other HCFCs, remained below the 2004 cap of 65 percent of the United States baseline.
Since EPA is implementing the phaseout on a chemical-by-chemical basis, it allocates and tracks production and consumption allowances on a kilogram basis for each chemical. Upon EPA approval, an allowance holder may transfer calendar-year allowances of one type of HCFC for calendar-year allowances of another type of HCFC, with transactions weighted according to the ODP of the chemicals involved. Pursuant to section 607 of the CAA, EPA applies an offset to each HCFC transfer by deducting 0.1 percent from the transferor's allowance balance. The offset benefits the ozone layer since it “results in greater total reductions in the production in each year of * * * class II substances than would occur in that year in the absence of such transactions” (see CAA section 607(a)).
The 2003-2009 Rule announced that EPA would allocate allowances for the 2010-2014 regulatory period in a subsequent action and that those allowances would be lower than for 2003-2009, consistent with the next stepwise reduction for HCFCs under the Montreal Protocol. EPA subsequently monitored the market to estimate servicing needs and market adjustments in the use of HCFCs, including HCFCs for which EPA had not established baselines in the 2003-2009 Rule. In the 2010-2014 Rule (74 FR 66412, December 15, 2009), EPA issued production and import allowances for HCFC-22, HCFC-142b, and other HCFCs not previously included in the allowance system, for the 2010-2014 control periods.
In the 2010-2014 Rule, EPA estimated the need for HCFC-22 during the 2010-2014 regulatory period and the percentage of that need for which it was appropriate to allocate allowances. EPA decided that the percentage of the estimated need allocated in the form of allowances should not remain constant from year to year, but rather should decline on an annual basis. For 2010, EPA allocated HCFC-22 allowances equal to 80 percent of the estimated need, concluding that reused, recycled, and reclaimed material could meet the remaining 20 percent. The percentage of estimated need for which there was no allocation, and that would therefore need to be met through recycling and reclamation, rose from 20 percent in 2010 to 29 percent in 2014. The intent of this approach was to foster reclamation and to ensure that the United States could meet the 2015 stepdown under the Montreal Protocol.
However, part of the 2010-2014 Rule was vacated in an August 27, 2010, decision issued by the United States Court of Appeals for the District of Columbia Circuit (Court) in Arkema v. EPA (618 F.3d 1, D.C. Cir. 2010). Certain allowance holders affected by the 2010-2014 Rule contended that the rule was impermissibly retroactive because in setting the baselines for the new regulatory period, EPA did not take into account certain inter-pollutant baseline transfers that petitioners had performed during the prior regulatory period. Accounting for these transfers in the 2010-2014 Rule and applying the same methodology would have resulted in different baselines and calendar-year allowances for HCFC-22 and HCFC-142b.
The Court agreed with petitioners that “the [2010-2014] Final Rule unacceptably alters transactions the EPA approved under the 2003 Rule,” (Arkema v. EPA, 618 F.3d at 3). The Court vacated the rule in part, “insofar as it operates retroactively,” and remanded to EPA “for prompt resolution,” (618 F.3d at 10). EPA's petition for rehearing was denied on January 21, 2011. EPA addressed the Court's partial vacatur as it related to 2011 in an August 5, 2011, interim final rule, “Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export,” (76 FR 47451, August 5, 2011, “2011 Interim Final Rule”). In that rule, EPA established new baselines that (1) credited the 2008 inter-pollutant trades at issue in Arkema v. EPA based on the Court's decision; (2) reflected inter-company, single-pollutant baseline transfers that occurred since the 2010-2014 Rule was signed; (3) allocated HCFC-22 and HCFC-142b allowances for 2011; (4) clarified EPA's policy on all future inter-pollutant transfers; and (5) updated company names. The HCFC-22 and HCFC-142b use restrictions and the allocation for other controlled HCFCs were not affected by the partial vacatur.
To complete its response to the Court's decision, EPA published a final rule with the same name on April 3, 2013, allocating HCFC-142b and HCFC-22 allowances for 2012-2014 (78 FR 20004, “2012-2014 Rule”). That rule reduced HCFC-22 allowances in 2012-2014 by almost 30 percent relative to the 2010-2014 Rule in order to incentivize proper handling and recovery of HCFC-22 and encourage transition to non-ODS alternatives.
On December 24, 2013, EPA published a proposed rule that would issue allowances for HCFC-22, HCFC-142b, HCFC-123, and HCFC-124 for the 2015-2019 regulatory period (78 FR 78071, “2015-2019 Proposed Rule”). Today's action finalizes the HCFC allowance allocations for those years based on the options presented in the 2015-2019 Proposed Rule and comments submitted to EPA. For more information on the history of the HCFC phaseout and applicable rulemakings, see: http://www.epa.gov/ozone/title6/phaseout/classtwo.html.
By starting the phase down at 10,000MT in 2015, EPA is trying to address the concerns about over-supply in existing inventories, while encouraging transition, reclamation, and proper refrigerant management, and sending a signal to industry that allocations will be dropping. The 2015 allocation amount is about 13,000MT less than the 2014 allocation.
The Final Rule also addresses the issue of “Dry-shipped” condensing units that are manufactured for sale as a system replacement part. In the request for comments to this rule, EPA sough quantifiable information on the number of dry-shipped condensing units were being shipped, whether they are being used as a repair instead of a compressor or motor replacement, and whether and to what extent condensing unit replacements extend the life of an existing system. EPA did not receive substantive comments to these questions, but intends to survey a limited number of industry stakeholders to collect additional data.
In the Final Rule, the EPA mentions a pending petition submitted by an industry trade group to extend the Section 608 program rules to HFC refrigerants. In their response to comments filed on this topic (which is outside the scope of this rule), the Final Rule noted, “EPA is actively considering the merits and environmental benefits of this petition under a separate process.”