Response to Comments

                    For the Notice of Proposed Rulemaking:

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

                         Docket: EPA-HQ-OAR-2011-0354

                                  April 2013

                     U.S. Environmental Protection Agency
                          Office of Air and Radiation
                       Stratospheric Protection Division
                         1200 Pennsylvania Avenue, NW
                             Washington, DC 20460

Table of Contents
GENERAL SUMMARY OF COMMENTS	1
1. Baselines for HCFC-22 AND HCFC-142B ALLOWANCES	7
1.1.	Establishing baselines for 2012 - 2014 that reflect past inter-pollutant baseline transfers	7
1.2.	Using more recent production and import data to establish baselines for 2015 - 2019, and whether there would be an environmental benefit to doing so	9
1.3.	Whether EPA should approve future inter-pollutant baseline transfers	11
2. FACTORS CONSIDERED IN ALLOCATING AMOUNTS FOR HCFC-22 ANd HCFC-142B	11
2.1	Surplus inventory of HCFC-22	13
2.2	Adjustments for recovery, reclamation, and reuse	14
2.2.1	Projections of reclaim capabilities in the Adjustment Memo	14
2.2.2	Comments from or about large end users of refrigerant, including supermarkets	18
2.3	Estimated servicing need for HCFC-22 as presented in the Adjustment Memo	19
2.4 	Effects of dry-shipped HCFC-22 equipment on the HCFC phaseout	21
3. Issues related to the arkema v. epa decision	27
3.1	Whether EPA should provide recoupment	28
3.1.1 	Whether the Arkema v. EPA decision should be interpreted as applying to the 2010 allocation (i.e., recoupment)	28
3.1.2	Whether EPA should provide recoupment for HCFC - 22 and HCFC - 142b, or just HCFC - 22 allowances	33
3.1.3	 Whether EPA should provide recoupment for production and consumption, or just consumption allowances	33
3.2	Whether EPA should finalize option 1, 2, 3 or 4 to adjust allowances in future control periods to reflect the Arkema v. EPA decision (i.e., recoupment)	33
3.2.1	Providing recoupment allowances in 2013 in addition to the aggregate level of production and consumption specified in the Final Rule (i.e., option 1)	34
3.2.2.	Allocating recoupment allowances over two years (2013 - 2014) in addition to the aggregate level of production and consumption specified in the Final Rule (i.e., option 2)	35
3.2.3	Allocating recoupment allowances from the aggregate level of production and consumption specified in the Final Rule over two years (2013 - 2014) (i.e., option 3)	36
3.2.4	Treating missed allowances from 2010 as impossible to recoup (i.e., option 4)	37
4. HCFC-22 AND HCFC-142B allocations IN 2012-2014	38
4.1	Decreasing HCFC-22 consumption allowances relative to the 2009 Final Rule	40
4.2 	Amount of HCFC-22 production allowances relative to the 2009 Final Rule	50
4.2.1	Whether EPA can decouple the percentage of baseline allocated for production and consumption	50
4.2.2	Whether EPA should increase the percentage of baseline allocated for production 	51
4.2.3	Whether an increase in the number of HCFC - 22 production allowances would result in an increase in HCFC consumption and production	53
4.3	HCFC-142b consumption and production allowance allocations	54
5. Other Issues	55
5.1	HCFC supply, price, and economic conditions	57
5.2	Providing allowances to reclaimers	63
5.3	Providing allowances to manufacturers of HCFC blends	66
5.4	Potential impacts of the proposed rule on small entities and consumers	67
5.5	Timely completion of the rule	71
5.6	Compliance and enforcement issues	73

 GENERAL SUMMARY OF COMMENTS
This document summarizes comments on the proposed rule, Protection of the Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export, which are found in EPA's docket, EPA-HQ-OAR-2011-0354. A total of 124 comments were submitted and are listed in Table 1 by document ID and organization. Thirteen of these comments were submitted after the close of the comment period on February 3, 2012. Another 14 are comments that EPA received following publication of the August 5, 2011 Interim Final Rule, which has the same name as the proposed rule and covers related issues.

The docket also contains comments with multiple signatories. These signatories are listed individually in the table below. In the comments sections, two comments are listed by their group name, "Group of EPA Certified ODS Reclaimers," and "Rapid Recovery Franchise Partners," and contain 20 and 21 signatories, respectively. In addition, the docket contains multiple comments that were submitted by individuals associated with Johnstone Supply.

Table 1. Public Comments Received by EPA on the Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export
Count
Document ID
Organization
                                       1
A & M Heating, Air Conditioning & Refrigeration, Inc.
EPA-HQ-OAR-2011-0354-0077
                                       2
Able Distributors
EPA-HQ-OAR-2011-0354-0147
                                       3
Air Conditioning Contractors of America (ACCA)
EPA-HQ-OAR-2011-0354-0081
                                       4
Air-Conditioning, Heating, and Refrigeration Institute (AHRI)
EPA-HQ-OAR-2011-0354-0072
                                       5
Airgas, Inc.
EPA-HQ-OAR-2010-1040-0022[a]
                                       6

EPA-HQ-OAR-2011-0354-0079
                                       7
APR Supply Co.
EPA-HQ-OAR-2011-0354-0148
                                       8
Arkema Inc.
EPA-HQ-OAR-2010-1040-0028[a]
                                       9

EPA-HQ-OAR-2011-0354-0073
                                      10
AZ Refrigerant Abatement, Inc
EPA-HQ-OAR-2011-0354-0053
                                      11
Bay Area Refrigerant Recovery, Inc
EPA-HQ-OAR-2011-0354-0080
                                      12
Bettcher Enterprises, Inc
EPA-HQ-OAR-2011-0354-0056
                                      13
BRYANS UNITED AIR CONDITIONING
EPA-HQ-OAR-2011-0354-0118
                                      14
Bryson Insurance
EPA-HQ-OAR-2011-0354-0135
                                      15
Carroll Area Development Corporation
EPA-HQ-OAR-2011-0354-0159[b]
                                      16
Center for Energy Efficiency and Sustainability, Ingersoll Rand
EPA-HQ-OAR-2011-0354-0063
                                      17
Certified Refrigerant Services Inc.
EPA-HQ-OAR-2011-0354-0057
                                      18
Coburn Supply Company, Inc.
EPA-HQ-OAR-2011-0354-0149
                                      19
Consolidated Refrigerant Reclaim
EPA-HQ-OAR-2011-0354-0083
                                      20
Coolgas, Inc.
EPA-HQ-OAR-2011-0354-0088[b]
                                      21
Cottongim Heating & Cooling
EPA-HQ-OAR-2011-0354-0154
                                      22
DALHOUSIE UNIVERSITY
EPA-HQ-OAR-2011-0354-0091
                                      23
Delta Ice Air & Heat, Inc.
EPA-HQ-OAR-2011-0354-0138
                                      24
Dermid Enterprises, LLC
EPA-HQ-OAR-2011-0354-0113
                                      25
Doug's Refrigeration
EPA-HQ-OAR-2011-0354-0116
                                      26
DuPont
EPA-HQ-OAR-2010-1040-0020[a]
                                      27

EPA-HQ-OAR-2011-0354-0070
                                      28
E.A.S.E. LLC
EPA-HQ-OAR-2011-0354-0107
                                      29
Energy Specialists Air Conditioning Co.
EPA-HQ-OAR-2011-0354-0109
                                      30
Express Heating and Air Conditioning Services LLC
EPA-HQ-OAR-2011-0354-0137
                                      31
Express Recovery, Inc
EPA-HQ-OAR-2011-0354-0050[c]
                                      32

EPA-HQ-OAR-2011-0354-0075
                                      33
Food Marketing Institute (FMI)
EPA-HQ-OAR-2011-0354-0157[b]
                                      34

EPA-HQ-OAR-2011-0354-0158[b]
                                      35
Fountainbleau Management Services, LLC
EPA-HQ-OAR-2011-0354-0139
                                      36
Golden Refrigerant
EPA-HQ-OAR-2011-0354-0054
                                      37

EPA-HQ-OAR-2010-1040-0025[a]
                                      38
Goodman Global, Inc.
EPA-HQ-OAR-2011-0354-0084
                                      39
Greens Services Inc.
EPA-HQ-OAR-2011-0354-0090
                                      40
Greer Holdings, LLC
EPA-HQ-OAR-2011-0354-0052
                                      41
Group of EPA Certified ODS Reclaimers
 EPA-HQ-OAR-2011-0354-0085[d]

      Aerosys Inc.

      Airgas Refrigerants, Inc.

      AllCool Refrigerant Reclaim

      American Refrigerants, Inc.

      Certified Refrigerant Services, Inc.

      Consolidated Refrigerant Reclaim

      Coolgas, Inc.

      ICOR International

      J.R.'s Appliance Disposal

      Novent Refrigerant Services

      Refrigerant Exchange Corp.

      Refrigerants Inc.

      REMTEC International

      Perfect Cycle CFC Group

      Pure Chem Separation LP

      RMS of Georgia

      Safe Disposal Systems, Inc.

      SpecGas Inc.

      Summit Refrigerants

      Total Reclaim, Inc.

                                      42
Harrell's A/C & Heating Services
EPA-HQ-OAR-2011-0354-0104
                                      43
Heating, Air-Conditioning and Refrigeration Distributors International
EPA-HQ-OAR-2011-0354-0069
                                      44
Highland Electric Heat & Air LLC
EPA-HQ-OAR-2011-0354-0096
                                      45
Hinton A/C Services
EPA-HQ-OAR-2011-0354-0106
                                      46
Honeywell
EPA-HQ-OAR-2011-0354-0082
                                      47

EPA-HQ-OAR-2010-1040-0029[a]
                                      48
Houston Refrigerant Recovery, LLC
EPA-HQ-OAR-2011-0354-0060
                                      49
Hudson Technologies Company
EPA-HQ-OAR-2010-1040-0027[a]
                                      50

EPA-HQ-OAR-2011-0354-0071
                                      51
HVAC Service Solutions
EPA-HQ-OAR-2011-0354-0115
                                      52
ICOR International Inc.
EPA-HQ-OAR-2010-1040-0031[a]
                                      53
Johnstone Supply
EPA-HQ-OAR-2011-0354-0095
                                      54

EPA-HQ-OAR-2011-0354-0097
                                      55

EPA-HQ-OAR-2011-0354-0098
                                      56

EPA-HQ-OAR-2011-0354-0099
                                      57

EPA-HQ-OAR-2011-0354-0101
                                      58

EPA-HQ-OAR-2011-0354-0120[b]
                                      59

EPA-HQ-OAR-2011-0354-0124
                                      60

EPA-HQ-OAR-2011-0354-0132
                                      61

EPA-HQ-OAR-2011-0354-0133
                                      62

EPA-HQ-OAR-2011-0354-0136
                                      63

EPA-HQ-OAR-2011-0354-0140
                                      64

EPA-HQ-OAR-2011-0354-0145
                                      65

EPA-HQ-OAR-2011-0354-0153
                                      66
LA Refrigerant Recovery, Inc
EPA-HQ-OAR-2011-0354-0051
                                      67
Lemoine Marine Refrigeration, Inc
EPA-HQ-OAR-2011-0354-0127
                                      68
Lennox International Inc.
EPA-HQ-OAR-2011-0354-0061
                                      69
Mayeux's A/C & Heating, Inc.
EPA-HQ-OAR-2011-0354-0093
                                      70

EPA-HQ-OAR-2011-0354-0094
                                      71
MDA Manufacturing, Inc.
EPA-HQ-OAR-2010-1040-0030[a]
                                      72
Mexichem Fluor Inc.
EPA-HQ-OAR-2011-0354-0066
                                      73
Mondy Global, Inc.
EPA-HQ-OAR-2011-0354-0055
                                      74
National Multi Housing Council (NMHC)
EPA-HQ-OAR-2011-0354-0156[b][,][e]

National Apartment Association (NAA)

                                      75
National Refrigerants, Inc. (NRI)
EPA-HQ-OAR-2011-0354-0068
                                      76
Natural Resources Defense Council (NRDC)
EPA-HQ-OAR-2011-0354-0067[f]

Institute for Governance & Sustainable Development (IGSD)

Environmental Investigation Agency (EIA)

                                      77
Natural Resources Defense Council (NRDC)
EPA-HQ-OAR-2010-1040-0033[a]
                                      78
NORDYNE
EPA-HQ-OAR-2011-0354-0089
                                      79
Perfect Score Technologies, LLC
EPA-HQ-OAR-2011-0354-0150[b]
                                      80
Perry's Electric, Inc.
EPA-HQ-OAR-2011-0354-0131
                                      81
Polar Technology
EPA-HQ-OAR-2011-0354-0076
                                      82
Private Citizen Comment
EPA-HQ-OAR-2011-0354-0100
                                      83

EPA-HQ-OAR-2011-0354-0102
                                      84

EPA-HQ-OAR-2011-0354-0103
                                      85

EPA-HQ-OAR-2011-0354-0110
                                      86

EPA-HQ-OAR-2011-0354-0111
                                      87

EPA-HQ-OAR-2011-0354-0112
                                      88

EPA-HQ-OAR-2011-0354-0119[b]
                                      89

EPA-HQ-OAR-2011-0354-0121[b]
                                      90

EPA-HQ-OAR-2011-0354-0123[b]
                                      91

EPA-HQ-OAR-2011-0354-0125
                                      92

EPA-HQ-OAR-2011-0354-0126
                                      93

EPA-HQ-OAR-2011-0354-0128
                                      94

EPA-HQ-OAR-2011-0354-0129
                                      95

EPA-HQ-OAR-2011-0354-0130
                                      96

EPA-HQ-OAR-2011-0354-0134
                                      97

EPA-HQ-OAR-2011-0354-0142
                                      98

EPA-HQ-OAR-2011-0354-0143[b]
                                      99

EPA-HQ-OAR-2011-0354-0144[b]
                                      100

EPA-HQ-OAR-2011-0354-0146
                                      101

EPA-HQ-OAR-2011-0354-0151
                                      102

EPA-HQ-OAR-2011-0354-0152
                                      103

EPA-HQ-OAR-2011-0354-0155
                                      104
Rapid Recovery Franchise Partners
EPA-HQ-OAR-2011-0354-0086[g]

      Georgia Carolina Refrigerant Recovery, Inc.

      AZ Refrigerant Abatement, Inc.

      SLC Abatement, Inc.

      Abatement and Recovery Services of WA, Inc.

      Southeast Refrigerant Recovery, Inc.

      Bay Area Refrigerant Recovery, Inc.

      Mid-South Refrigerant Abatement, LLC

      Sacramento Refrigerant Recovery, Inc

      Houston Refrigerant Recovery, LLC

      Greer Holdings, LLC

      Express Recovery, Inc.

      Bettcher Enterprises, Inc.

      KC Refrigerant Recovery Services, Inc

      SAMCOM, Inc.

      Rocky Mountain Refrigerant Abatement, LLC

      Refrigerant Recovery, Inc.

      Landco Industrial Services, LLC

      Rhynard and White Enterprises, Inc.

      LA Refrigerant Recovery, Inc.

      RR Operations, LLC

      John Thompson

                                      105
Regional Mechanical
EPA-HQ-OAR-2011-0354-0117
                                      106
RemTec International
EPA-HQ-OAR-2010-1040-0024[a]
                                      107
Rheem Manufacturing Company
EPA-HQ-OAR-2011-0354-0087
                                      108
Rhynard and White Enterprises, Inc.
EPA-HQ-OAR-2011-0354-0058
                                      109
RMS of Georgia, LLC
EPA-HQ-OAR-2011-0354-0078
                                      110
Rocky Mountain Refrigerant Abatement, LLC
EPA-HQ-OAR-2011-0354-0059
                                      111
RSS Realtors
EPA-HQ-OAR-2011-0354-0105
                                      112
Solvay Fluorides, LLC
EPA-HQ-OAR-2010-1040-0026[a,h]
                                      113

EPA-HQ-OAR-2011-0354-0064[a,h]
                                      114
Southeast Refrigerant Recovery, Inc.
EPA-HQ-OAR-2011-0354-0074
                                      115
Summit Refrigerants
EPA-HQ-OAR-2011-0354-0062
                                      116
Surgi's Heating and Air Conditioning
EPA-HQ-OAR-2011-0354-0114
                                      117
Sustainable Energy Solutions LLC
EPA-HQ-OAR-2011-0354-0141
                                      118
T.L. Maintenance HVAC
EPA-HQ-OAR-2011-0354-0092
                                      119
Thermal Solutions LLC
EPA-HQ-OAR-2011-0354-0108
                                      120
Tri-Parish A/C & Refrigeration, L.L.C.
EPA-HQ-OAR-2011-0354-0122[b]
                                      121
USA Refrigerants
EPA-HQ-OAR-2010-1040-0021[a]
                                      122

EPA-HQ-OAR-2010-1040-0023[a]
                                      123
UTC Climate
EPA-HQ-OAR-2011-0354-0065
                                      124
Williams & Associates
EPA-HQ-OAR-2010-1040-0032[a]
a.       Comment on 2011 Interim Final Rule.
b.       Comment was submitted after the close of the comment period on February 3, 2012.
c.       Duplicate copy of EPA-HQ-OAR-2011-0354-0075. All Express Recovery, Inc. comments are listed under EPA-HQ-OAR-2011-0354-0075 in the following sections.
d.       For the remainder of the document, the collective group of 20 reclaimer signatories will be referred to as "Group of EPA Certified ODS Reclaimers."
e.       EPA-HQ-OAR-2011-0354-0156 was collectively submitted by the National Multi Housing Council (NMHC) and National Apartment Association (NAA).
f.       EPA-HQ-OAR-2011-0354-0067 was collectively submitted by the Natural Resources Defense Council (NRDC), the Institute for Governance & Sustainable Development (IGSD), and the Environmental Investigation Agency (EIA).
g.       For the remainder of the document, the collective group of 21 reclaimer signatories will be referred to as "Rapid Recovery Franchise Partners."
h.       This comment was submitted on behalf of Solvay Fluorides, LLC and Solvay Solexis.

All comments have been reviewed, summarized, and organized by main topics within the remainder of this document to highlight major issues and clarify requests pertinent to the rule. Summaries are organized by the following main topics of stakeholder concern:

   * Section 1  -  Baselines for HCFC-22 and HCFC-142b Allowances
   * Section 2  -  Factors Considered in Allocating Amounts for HCFC-22 and HCFC-142b
   * Section 3  -  Issues Related to the Arkema v. EPA Decision
   * Section 4  -  HCFC-22 and HCFC-142b Allocations in 2012-2014
   * Section 5  -  Other Issues

For the purpose of this comment summary, section organization does not exactly follow the outline established in the proposed rule, but follows a logical order of discussion; the selection and organization of these section topics are based on topic frequency and whether EPA sought specific comments on the issue.

At the beginning of each section, an outline of topics is provided followed by a table detailing commenters that contributed comments, which is organized by document ID. Below each individual topic heading of a section, a bulleted list of comments is provided. Special attention was paid to ensure that comments were properly addressed with sufficient and relevant detail extracted from their submittal. Commenters are listed at the beginning and Docket ID numbers are provided in parentheses at the end of each comment.

The majority of comments submitted to EPA express support for EPA in its commitment to the Montreal Protocol and reduction of ozone-depleting substances for public and environmental health interests. Comments deal primarily with EPA's request for comments regarding HCFC allocations in 2012-2014. Commenters were split between supporting a reduction and opposing a reduction. However, a slight majority of the organizations commenting supported the reduction of HCFC-22 consumption allowances relative to the 2009 Final Rule, with many of those commenters supporting at least a 20 percent or greater reduction. Commenters also generally supported the decoupling of production and consumption allowances. In addition, of the nine entities commenting on recoupment, seven were in opposition. Comments regarding the Adjustment Memo generally supported the concept that the reclamation industry is able to increase its current capacity, and many commenters also noted concerns about an oversupply and low price for HCFC-22. Several commenters expressed concern regarding the timing of the proposed and final rules' release and effect on the HVACR industry and consumers. Commenters requested swift and clear direction from EPA. Commenters further expressed the need for enforcement to ensure a smooth phaseout.
 1. Baselines for HCFC-22 AND HCFC-142B ALLOWANCES

      1.1	Establishing baselines for 2012 - 2014 that reflect past inter-pollutant baseline transfers
      1.2	Using more recent production and import data to establish baselines for 2015 - 2019, and whether there would be an environmental benefit to doing so
      1.3	Whether EPA should approve future inter-pollutant baseline transfers

Count
Commenter
Organization
Document ID No
                                       1
Diran Yegparian
Mondy Global, Inc.
EPA-HQ-OAR-2011-0354-0055
                                       2
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2011-0354-0064
                                       3
Steven H. Bernhardt
Honeywell
EPA-HQ-OAR-2011-0354-0082
                                       4
Mack McFarland
DuPont
EPA-HQ-OAR-2011-0354-0070
                                       5
William J. Hamel
Arkema Inc.
EPA-HQ-OAR-2011-0354-0073
                                       6
Mack McFarland
DuPont
EPA-HQ-OAR-2010-1040-0020
                                       7
Steven H. Bernhardt
Honeywell
EPA-HQ-OAR-2010-1040-0029
                                       8
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2010-1040-0026

Establishing baselines for 2012 - 2014 that reflect past inter-pollutant baseline transfers
EPA received comments from two companies that support the baselines used in the proposal for 2012-2014. Two other companies do not support the proposed baselines.

Arkema and Solvay support EPA's inclusion of past inter-pollutant transfers of baseline allowances.
>  Arkema and Solvay support EPA's interpretation of the D.C. Circuit's decision in Arkema v. EPA with regard to baseline allowances. Arkema states that the question of baseline allowances was a straightforward problem and was correctly settled in the Interim Final Rule providing 2011 HCFC-22 and HCFC-142b baseline allowances, published on August 5, 2011.[0073, 0064]
EPA Response: EPA agrees with the commenters that the baselines used in the proposed rule are consistent with the U.S. Court of Appeals for the D.C. Circuit's decision in Arkema v. EPA. A more complete discussion of the baselines used in the final rule is available in section IV.A.1. of the preamble and in the 2011 Interim Final Rule (76 FR 47451).
DuPont and Honeywell expressed concern and opposition regarding EPA's proposed method for establishing baselines.
> DuPont is concerned with the proposed readjustments in baselines and the economic harm it will cause DuPont. DuPont asserts that the U.S. Court of Appeals for the District of Columbia Circuit decision in Arkema v. EPA did not address the validity of Arkema's and Solvay's 2008 transfers, but rather simply assumed they were valid for purposes of the challenge to the 2009 Final Rule. Thus, DuPont comments that the Arkema decision does not mandate that EPA simply assume the validity of those transfers. The commenter believes that amending Arkema's and Solvay's baselines to account for their 2008 inter-pollutant transfers violates the CAA and DuPont's due process rights. DuPont believes a more prudent course would be for EPA to grant the pending joint petition for reconsideration of the approval of those 2008 transfers filed by DuPont and Honeywell. DuPont comments that granting this petition would not prevent the agency from adopting its proposed decoupling and reductions in consumption allowances, and would result only in the proper readjustment of individual company baselines. [0070, 0020]
   Honeywell objects to the Proposed Rule's method for establishing baselines. According to the commenter, EPA's underlying assumption in the Proposed Rule is that the D.C. Circuit's decision in Arkema mandates the establishment of baselines that recognize the 2008 transfers by Arkema and Solvay of HCFC-142b into HCFC-22 on a permanent basis. Honeywell believes both the Clean Air Act and EPA policy prohibit such permanent transfers. Furthermore, Honeywell believes that the method and allocation EPA now proposes violates the Arkema decision and fundamental concepts of due process. Honeywell also incorporated its previous comments on this issue (a petition to EPA submitted Oct. 6, 2010, and the petitioners' briefs in Honeywell International Inc. v. EPA) by reference. [0082]
   Honeywell believes the D.C. Circuit decision in Arkema did not address the validity of the 2008 inter-pollutant transfers by Arkema and Solvay, but rather assumed they were valid for purposes of the challenge to the 2009 Final Rule. Thus, Honeywell does not believe that EPA is mandated by that decision simply to recognize the validity of those transfers. Instead, Honeywell believes EPA should grant the pending petition for reconsideration of these transfers filed jointly by Honeywell and DuPont. Honeywell states that if EPA determines that the transfers are void ab initio, EPA's justification for the Interim Rule's allocation of baseline would be moot. The commenter states that very issue is the subject of pending litigation involving Honeywell and EPA before the D.C. Circuit. Honeywell notes that were the Court to vacate the four 2008 transfers, EPA would have no choice but to begin another rulemaking, as the Proposed Rule is erroneously premised on the legitimacy of those transfers. [0082, 0029]
   Honeywell comments that EPA's decision to approve inter-pollutant transfers in 2008 was not consistent with the CAA or EPA's own regulations. Honeywell notes that inter-pollutant transfers and inter-company transfers are treated quite differently under the terms of the CAA statute. Under §607(b) of the CAA, inter-pollutant transfers of allowances may occur only on a current year basis. The provision governing inter-company transfers  -  § 607(c)  -  contains no such temporal restriction. Honeywell states that EPA's regulations are consistent with this view of § 607(b). Honeywell notes the subsection dealing with inter-pollutant transfers refers repeatedly to the "control period," which is defined in EPA regulations as a calendar year.
      Honeywell further comments that in the Proposed Rule, EPA has departed from the clear language of the statute and the provisions of its own regulations that distinguish inter-pollutant transfers from inter-company intra-pollutant transfers on the grounds that inter-pollutant transfers are available only for the current "control period" (i.e., year). Honeywell urges EPA to change its approach and act consistently with the statute and EPA's regulations. [0082]
   Honeywell comments that EPA's approach fails to follow the agency's original interpretation of its transfer regulations that the "phase-down follows the allowance"  -  in other words, that any inter-pollutant transfer is subject to the phase-down of the transferred chemical. Honeywell states that EPA may not change this interpretation without notice-and-comment rulemaking. Honeywell believes that to the extent that EPA intends to grant Arkema and Solvay additional allowances in 2012-2014 to reflect the 2008 transfers, it must reduce those allowances by the same percent that the agency is phasing out HCFC-142b. Honeywell comments that only in that way will the transferred allowances fairly reflect EPA's ongoing effort to meet the Clean Air Act's mandate to accelerate the phaseout of HCFCs. [0082]
   Honeywell further notes that EPA's authority to promulgate regulations is limited to those which are reasonable and not arbitrary and capricious, citing Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-844 (1984). Under the Court decision, HCFC-22 baseline transferred from HCFC-142b is considered "vested." The Proposed Rule responds to the Arkema ruling by increasing the share of the baseline awarded to Arkema and Solvay. The share of the baseline awarded to Honeywell and other holders of baseline is accordingly reduced. Honeywell believes this result is arbitrary and capricious: Honeywell and others' share of the baseline is vested and therefore Honeywell does not think it may be invaded by EPA to award to other participants. Honeywell comments that they are injured by the Proposed Rule, which increases the annual allocation of HCFC-22 allowances to Arkema and Solvay. As a consequence of these transfers, Honeywell notes that they suffer a decrease in the total number of HCFC-22 annual production and/or consumption allowances allocated to them, a dilution in the value of those HCFC-22 production and consumption allowances, a decrease in their share of the demand market, and other potential injuries. Honeywell urges EPA to adopt an allocation scheme that does not take from the vested rights of Honeywell and other baseline holders to give to Arkema and Solvay to protect their vested rights. [0082]
EPA Response: 	As discussed in this final rule and the 2011 Interim Final Rule (76 FR 47451), the decision in Arkema v. EPA required EPA to consider the 2008 inter-pollutant transfers in setting the baselines for future allocations, at least to the extent EPA continues to use the historical production and consumption baselines. The D.C. Circuit recently held that Arkema v. EPA forecloses challenges to the 2008 transfers. Honeywell International, Inc. v. EPA, D.C. Cir. No. 10-1347 (January 22[nd], 2013). A more complete discussion of the baselines used in the final rule is available in section IV.A.1. of the preamble and in the 2011 Interim Final Rule (76 FR 47451). The full response to this comment is in section IV.A.1. of the preamble.
Using more recent production and import data to establish baselines for 2015 - 2019, and whether there would be an environmental benefit to doing so
EPA received two comments supporting the use of 2005-2007 production and import data to establish baselines for 2015-2019 and two other comments stating that EPA should not revise company baselines.

Honeywell and DuPont believe that 2005-2007 data should be used to establish baselines.
> Honeywell and DuPont support the idea that the 2015-2019 allocation period should use the highest production and import levels for HCFC-22 between 2005-2007 rather than the 1994-1997 baseline. Honeywell believes baselines should be updated to more accurately reflect current market conditions. Honeywell suggests that EPA should revise each producer's and importer's production and consumption baselines by allowing each entity to select its highest year of actual production and consumption from among the calendar years 2005, 2006, and 2007. Honeywell states that EPA has set a precedent for using the period 2005-2007 since it chose to use that same period as the baseline for newly-controlled HCFCs. (74 Fed. Reg. 66412 (Dec. 15, 2009)). Honeywell believes those three years are best suited to be the baseline here, too, because they are the three years nearest in time to the present that both represent relatively stable market conditions and were not influenced by the 2009 Final Rule. Honeywell believes using more recent years would be inappropriate: 2008 and 2009 production and consumption were negatively impacted by the economic downturn and are not fairly representative years; 2010 and 2011 are inappropriate as they fell under the 2009 Final Rule and thus already reflect the initial 2010-2014 step-down period reductions. Honeywell notes that allowing each baseline allowance holder to select the highest year of the three years allows for the smoothing of year-to-year variability. [0070, 0082]
   DuPont notes that to assign company baselines for the HCFCs for which no baselines had been established in the 2003 Final Rule, EPA utilized 2005-2007 data to "ensure that the baseline reflects the current market as closely as possible..." in the 2009 Final Rule. This methodology followed past practice with respect to establishing baselines for HCFC-141b, HCFC-22 and HCFC-142b. DuPont notes that EPA has also chosen to implement a "worst first" policy for HCFCs, integral to which is a limited lifespan for HCFC allowances and allowances derived from an HCFC subject to 100 percent phase-out. HCFC allowances, even if transferred from one HCFC to another every calendar year do not live on in perpetuity; instead, when the underlying HCFC source of an allowance is completely phased out, so too are all allowances derived from the HCFC. DuPont believes the agency should continue to follow these past practices and take further action to revise all HCFC baselines through consideration of a company's highest reported consumption and production of such HCFCs during the years 2005-2007. DuPont notes that this action would reset baselines to reflect the current market as closely as possible and avoid rewarding companies for attempting to manipulate their baselines by converting allowances from HCFCs that they knew would have no future value to HCFC allowances they knew would retain value in the current step down period and beyond. [0070]
   DuPont notes that in discussion of Arkema, the Court stated that "the Agency is certainly entitled to ... institute a program that forbids baseline inter-pollutant transfers in the future." The Court in Arkema also agreed that EPA "may interpret what constraints, if any, Congress placed on the establishment of baselines for each step-down period." DuPont notes that EPA thus has ample discretion under the CAA to update HCFC-22 baselines and encourages the agency to undertake this action utilizing the 2005-2007 production and consumption period. Given that EPA has considered different baseline allocation methodologies since 2001 and reconsidered updating baselines in 2008-2009 as part of the 2009 Final Rule, DuPont sees no reason why EPA cannot act in a more expeditious manner. DuPont urges EPA to take action on this matter at the earliest possible time and not to consider reallocation of HCFC allowances as inextricably tied to the next regulatory step down period of 2015-2019. [0070]
EPA Response: EPA is not updating the baselines for 2012-14. In the notice of proposed rulemaking, the agency did not take comment on changing baselines in 2012-2014. This was because the agency did not believe there would be adequate time to make a significant change to baselines or to adopt other allocation options in the current regulatory period. In addition, evaluating and implementing such a change could have injected additional uncertainty into the market in the short term. For these reasons, EPA did not propose, and is not finalizing, changed baselines for 2012-14.
EPA remains open to revising the allowance system and baselines in the future. Several options EPA could use were discussed in the 2009 Final Rule (74 FR 66412) and could be explored in more detail. However, EPA would want to weigh whether updating baselines or changing the allocation system five years before the complete phaseout of HCFC-22 would provide sufficient benefit (particularly environmental benefit) to justify the time and potential burden. In addition, if EPA were to consider updating baselines, EPA would want to assess whether and how the 2008 inter-pollutant transfers should be taken into account. EPA agrees that it has made past statements indicating that once an HCFC is phased out (not phased down), all baseline allowances associated with that HCFC are also phased out (as discussed further in section V.A. of the preamble to the final rule). EPA will continue to review these issues as it develops the proposed 2015-2019 HCFC allocation.
Solvay and Mondy Global Inc. state that EPA should continue to use existing baselines.
> Mondy Global Inc. comments that EPA should not revise company baselines for the 2015-2019 allocation period. They believe that EPA's current allocation method is the fairest way to allocate allowances because it is transparent and clear. Market participants know what their baselines are and thus can anticipate their share of the allocation in relation to other companies, which is critical for business planning. Therefore, continuing to use existing baselines would be the least disruptive to the market. [0055]
   Solvay believes there is no benefit to using more recent data to establish baselines for 2015-2019, and no benefit to a lengthy process to potentially distribute the same number of allowances. However, Solvay believes that further reductions in the number of allowances that EPA issues in future calendar years will benefit the environment by promoting reclamation. [0064]
EPA Response: See previous response. Additionally, no comments were received indicating there is an environmental benefit to revising baselines in the future. However, the agency will continue to evaluate all options before establishing allowances for the 2015-2019 regulatory period.

Whether EPA should approve future inter-pollutant baseline transfers
EPA received two comments on EPA's proposed changes to the regulatory text covering future allowance transfers. Mondy Global Inc. supports EPA's proposed changes, while Solvay does not.
> Mondy Global Inc. supports EPA's proposed changes to the regulatory text prohibiting permanent transfers of baseline allowances because it will prevent future manipulation of the allowance program. According to the commenter, the CAA plainly prohibits permanent inter-pollutant transfers. [0055]
EPA Response: As discussed in the proposed rule and in the 2011 Interim Final Rule, EPA is concerned that allowing inter-pollutant baseline transfers could undermine the HCFC phaseout program and is therefore finalizing the changes to the regulatory text. EPA believes the CAA language is ambiguous but is best read as prohibiting permanent inter-pollutant transfers. A more complete response is available in section V. of the preamble to the final rule.
> Solvay comments that EPA should revisit its thinking on future inter-pollutant baseline transfers. Solvay disagrees with EPA's statement in the preamble that EPA will not recognize inter-pollutant transfers when it updates the baseline in preparation for the 2015-2019 step-down period. Solvay disagrees with EPA's concern that by recognizing permanent inter-pollutant transfers in future baseline calculations, companies could `game' the system by making transfers from substances that are being phased out into allowances for substances that may still be used. Solvay notes that in 2008 and 2009 it converted the vast majority of its HCFC-142b allowances into HCFC-22 allowances for sale to US customers, continuing a practice it began in 2006 and which EPA acknowledged in 2009. Solvay comments that they made these inter-pollutant transfers because it was in Solvay and its customers' interest to engage in those transactions. Solvay notes these were market-driven transactions, which EPA seeks to promote. [0064]
   Solvay suggests that for 2015-2019, EPA could permit permanent inter-pollutant transfers to be converted from one control period to another only if substantial allowance conversions and market activity has taken place before the last year of a control period. Solvay believes that mere paper transactions should be disallowed, but transactions that have actually taken place in the market should be recognized. Solvay notes that it has considered the precedent such a blanket rule [i.e. not recognizing inter-pollutant transfers] might have on any future cap-and-trade policy administered by EPA. Solvay envisions a scenario where an allowance holder could change the focus of its business to produce and sell a substance that is relatively less harmful to the environment. However, Solvay believes that if a company cannot be guaranteed allowances in future years, the company may decide that the cost is too great to justify production of that substance for just a limited time. The result would be greater production and sale of a substance that is more harmful to the environment and a lack of competition and innovation. [0064]
EPA Response: EPA is not considering in this action whether permanent inter-pollutant transfers should be allowed in other current or future cap-and-trade programs. EPA's policy and legal interpretation regarding inter-pollutant transfers in the stratospheric ozone program are specific to the structure of the program and the language of section 607 of the CAA. A response to the remainder of this comment is available in section V. of the preamble to the final rule.

 2. FACTORS CONSIDERED IN ALLOCATING AMOUNTS FOR HCFC-22 ANd HCFC-142B
EPA received 43 comments (signed by multiple commenters) on factors considered in allocating HCFC allowances. Comments were in reference to four main topics:

      2.1	Surplus inventory of HCFC-22
      2.2	Adjustments for recovery, reclamation, and reuse
      2.2.1	Projections of reclaim capabilities in the Adjustment Memo
      2.2.2	Comments from or about large end users of refrigerant, including supermarkets
      2.3	Estimated servicing need for HCFC-22 as presented in the Adjustment Memo
      2.4	Effects of dry-shipped HCFC-22 equipment on the HCFC phaseout

Count
Commenter
Organization
Document ID No
                                       1
David Doniger
Natural Resources Defense Council (NRDC)
EPA-HQ-OAR-2011-0354-0067
                                       2
William J. Hamel
Arkema Inc.
EPA-HQ-OAR-2011-0354-0073
                                       3
Rick Roland
Certified Refrigerant Services Inc.
EPA-HQ-OAR-2011-0354-0057
                                       4
Karim Amrane
AHRI
EPA-HQ-OAR-2011-0354-0072
                                       5
Rich Dykstra
Consolidated Refrigerant Reclaim
EPA-HQ-OAR-2011-0354-0083
                                       6
Gary L. Clark
Goodman Global, Inc.
EPA-HQ-OAR-2011-0354-0084
                                       7
RemTec International
Group of EPA Certified ODS Reclaimers
EPA-HQ-OAR-2011-0354-0085
                                       8
Steven H. Bernhardt
Honeywell
EPA-HQ-OAR-2011-0354-0082
                                       9
Stephen P. Mandracchia
Hudson Technologies Company
EPA-HQ-OAR-2011-0354-0071
                                      10
Jerry Dykstra
Rapid Recovery Franchise Partners
EPA-HQ-OAR-2011-0354-0086
                                      11
A. Stephen Trevino
Summit Refrigerants
EPA-HQ-OAR-2011-0354-0062
                                      12
Mack McFarland
DuPont
EPA-HQ-OAR-2011-0354-0070
                                      13
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2011-0354-0064
                                      14
Walt Baker
Polar Technology
EPA-HQ-OAR-2011-0354-0076
                                      15
Michael Bleier
Able Distributors
EPA-HQ-OAR-2011-0354-0147
                                      16
Charles McCrudden
ACCA
EPA-HQ-OAR-2011-0354-0081
                                      17
John Tice
APR Supply Co.
EPA-HQ-OAR-2011-0354-0148
                                      18
Jeff Moe
Center for Energy Efficiency and Sustainability, Ingersoll Rand
EPA-HQ-OAR-2011-0354-0063
                                      19
Don Maloney
Coburn Supply Company, Inc.
EPA-HQ-OAR-2011-0354-0149
                                      20
Colt Anderson
Cottongim Heating & Cooling
EPA-HQ-OAR-2011-0354-0154
                                      21
Jonathan Melchi
Heating, Air-Conditioning and Refrigeration Distributors International
EPA-HQ-OAR-2011-0354-0069
                                      22
Kyle E. Gilley
Lennox International Inc.
EPA-HQ-OAR-2011-0354-0061
                                      23
David Lambert
NA
EPA-HQ-OAR-2011-0354-0126
                                      24
Maureen Beatty
National Refrigerants, Inc. (NRI)
EPA-HQ-OAR-2011-0354-0068
                                      25
Michael Seabaugh
NORDYNE
EPA-HQ-OAR-2011-0354-0089
                                      26
Karen B. Meyers
Rheem Manufacturing Company
EPA-HQ-OAR-2011-0354-0087
                                      27
John Mandyck
UTC Climate
EPA-HQ-OAR-2011-0354-0065
                                      28
M. J. Dermid
Dermid Enterprises, LLC
EPA-HQ-OAR-2011-0354-0113
                                      29
John M. Batt
Airgas, Inc.
EPA-HQ-OAR-2011-0354-0079
                                      30
Joel K. French
Coolgas, Inc.
EPA-HQ-OAR-2011-0354-0088
                                      31
Erik R. Lieberman
Food Marketing Institute (FMI)
EPA-HQ-OAR-2011-0354-0157
                                      32
Mack McFarland
DuPont
EPA-HQ-OAR-2010-1040-0020
                                      33
Theodore Broudy; James Burke
USA Refrigerants
EPA-HQ-OAR-2010-1040-0023
                                      34
Richard Marcus
RemTec International
EPA-HQ-OAR-2010-1040-0024
                                      35
Carl Grolle
Golden Refrigerant
EPA-HQ-OAR-2010-1040-0025
                                      36
Stephen Mandracchia
Hudson Technologies
EPA-HQ-OAR-2010-1040-0027
                                      37
Pete Williams
Williams & Associates
EPA-HQ-OAR-2010-1040-0032
                                      38
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2010-1040-0026
                                      39
Erik R. Lieberman
Food Market Institute
EPA-HQ-OAR-2010-1040-0158
                                      40
Kenneth M. Ponder
RMS of Georgia, LLC
EPA-HQ-OAR-2011-0354-0078
                                      41
David P. Huet
Johnstone Supply
EPA-HQ-OAR-2011-0354-0101
                                      42
Terry Deppe
Johnstone Supply
EPA-HQ-OAR-2011-0354-0140
                                      43
Peter M. Geosits
Mexichem Fluor Inc.
EPA-HQ-OAR-2011-0354-0066

 2.1	Surplus inventory of HCFC-22
EPA received ten comments on its estimate of surplus HCFC-22 production from past years that is in existing inventory.

> NRDC, IGSD, and EIA comment that the 45,400 MT stockpile and the 6,000 MT annual drawdown should reasonably be regarded as minimum, not maximum, estimates. They state that the Adjustment Memo indicates that the stockpile may be an underestimate due to greater stockpiling during an unexpectedly cool summer in 2009 and "in anticipation of higher prices" during the 2010-2014 period. [0067]
> Hudson believes that there are significant volumes of HCFC-22 stockpiled and available to meet demand. Hudson comments that EPA's assessment of stockpiled inventory in the Adjustment Memo, and its effect on the aftermarket, is essential for supporting recovery and reclamation. [0071, 0027]
> Coolgas strongly supports EPA's consideration of HCFC-22 stockpiles. However, based on the amount of stockpiled HCFC-22 Coolgas holds and based upon its own independent estimates of industry stockpiles, the company believes that the quantity of inventory surplus used in the Vintaging Model may be underestimated. [0088]
> Solvay urges EPA to reduce allowances in 2013 and 2014. Solvay notes that the amount of HCFC-22 in inventory is likely greater than one year's supply of virgin material based on the "Adjustment Memo" included in the Docket, which estimates current inventory of HCFC-22 as high as 45,400 MT. Reducing future allowances should reduce this inventory overhang, supporting the sustainable reclamation industry while ensuring that sufficient supply is available for all consumers. Solvay also notes that they have no first-hand knowledge of any company having a problem sourcing virgin material. [0064, 0026]
> Williams & Associates comments that all indicators suggest that there is too much HCFC-22 available in the U.S. market. Williams & Associates commends EPA's aggressive approach to phase-down HCFCS and believes that EPA must consider and adjust for the effects that oversupply is having throughout the industry. [0032]
EPA Response: All comments on the amount of existing inventory, as well as confidential comments, indicate EPA's estimate of surplus inventory is reasonable. While some comments suggested a larger annual adjustment, EPA did not receive enough data to support a larger change. EPA is finalizing the rule with the 6,000 MT adjustment for surplus inventory. More information and further response is provided in section IV.B.2. of the preamble to the final rule.
> USA Refrigerants comments that it is well known that HCFC-22 is being stockpiled and relates the stockpiles back to an over-supply of HCFC-22 and low prices. It offers the following three suggestions to fix the problem:
      * EPA has an auction option in which HCFC allocation would be purchased, thus increasing the virgin gas price.
      * Give the allocation to whomever EPA chooses, charging a per pound fee ($3-$7 per pound). USA Refrigerants is aware that EPA has a dilemma with receiving monies. They also respectfully disagree with EPA that it is difficult to collect fees. They believe that the allocation holders are well known and could be put on the honor system. USA Refrigerants believes that this will ensure that if there is a glut, they will not produce, and if there is a shortage, they will produce.
      * Do nothing (i.e. do not allocate allowances) until the market price of R-22 is stable above $8 per pound. [0023]
EPA Response: As discussed in the response to NRDC, Hudson, Coolgas and Solvay, comments indicate EPA's estimate of surplus inventory is reasonable. However, the three options presented are not within the scope of the proposed rule for 2012-2014. EPA will consider whether to propose these options as it develops the 2015-2019 rule.
> Golden Refrigerants asks that EPA review the current state of the HCFC market before issuing allocations for 2012 and future years. The amount of HCFC's available in the marketplace is in excess of what is required for servicing existing units. The oversupply is causing the price of HCFC-22 to fall and leading to a lack of concern for recovery and reclamation. [0025]
EPA Response: EPA agrees with the commenter that the 2009 Final Rule, which originally governed 2012-2014, provided more allowances than were needed to meet servicing need. The proposed rule considered issuing fewer allowances for this very reason. However, EPA does not believe it is in the best interest of the industry to issue annual rulemakings, nor would it promote a smooth transition out of HCFC-22. As evidenced by the timing of the 2011 Interim Final Rule and this rule, providing allowances for the reminder of the regulatory period provides more certainty to industry than an annual approach. Additionally, EPA has previously addressed this issue in past rulemakings and reiterates its support for providing the annual allocations as far in advance as possible.
> Ingersoll Rand notes that from discussions with their dealers, parts centers, contractors, and other industry stakeholders, there is currently an oversupply of HCFC-22 in the marketplace relative to demand. [0063]
EPA Response: See previous response to NRDC and others.
> AHRI comments that there is an excess supply of virgin HCFC-22. [0072]
EPA Response: See previous response in this section to NRDC others.

 2.2	Adjustments for recovery, reclamation, and reuse

        2.2.1	Projections of reclaim capabilities in the Adjustment Memo
Out of the 15 comments EPA received on reclaim capabilities, 14 comments (some signed by multiple organizations) stated that the reclamation industry is able to increase its current capacity, although some commenters noted that sufficient supply of recovered HCFC-22 would be the limiting factor. One comment (from Goodman) stated that the infrastructure to effectively and efficiently recover, recycle, redistribute, and reuse HCFC-22 likely will take several years to develop into a viable source for the market. In addition, Polar Technology agreed that the industry has the capacity to meet reclaim needs, but disagreed with the base assumption that this activity will automatically take place.
> NRDC, IGSD, and EIA state that the 19,700 MT figure should be a minimum, rather than a maximum because established companies that reclaim refrigerants have the technical capacity to recover between 12,500 and 19,700 MT per year in 2012 and could easily expand capacity to meet demand. NRDC, IGSD, and EIA note their support of EPA's analysis of the impact on reclamation of the HCFC-22 over-supply and support the agency's proposal to reduce the over-supply and restore the conditions needed to build the necessary reclamation and reuse capacity.
      NRDC and IGSD support the reclamation and reuse of HCFC-22 for two reasons: 1) every ton of reclaimed and reused HCFC-22 avoids the need to produce a ton of new HCFC-22, thus reducing the total amount of HCFC-22 that will ultimately be leaked into the atmosphere; and 2) a robust reclamation industry will be needed post-2015 to meet the demand for HCFC-22 to service existing equipment. [0067]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. EPA agrees with NRDC's reasons for supporting the adjustment. In addition, comments from the reclamation industry confirm that many reclaimers could quickly increase capacity, and that the 19,700 MT adjustment is a reasonable change. While the reclamation industry may be able to increase capacity to even more than 19,700 MT, EPA did not receive sufficient data to warrant making an adjustment higher than the maximum 19,700 MT that was proposed. EPA's estimates of recovered refrigerant also support finalizing this adjustment for recovery and reclamation (see the Recovery Memo included in the docket). Additionally, the commenter did not provide data supporting an upward adjustment. A complete response is available in section IV.B.2. of the preamble to the final rule.
> Based on discussions with its members, AHRI believes that the industry is capable of reclaiming HCFC-22 in excess of 12,500 MT. [0072]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A complete response is available in section IV.B.2. of the preamble to the final rule.
> Certified Refrigerant Services, Inc. comments that as the demand for capacity grows, reclaim companies will be able to expand to cover the need that will ultimately be driven by higher prices and a decrease in supply. The commenter notes that they reclaimed 135,000 lbs of HCFC-22 in 2011 with only a 35% utilization of their current equipment. Full utilization could yield 400,000 lbs of reclaim in one year, and could easily double production volumes if recovery becomes aggressive. However, companies will not expand until there is a need. Further, the commenter states that of all refrigerant reclaiming businesses, none are operating at greater than 60% of their capacity. The solution would be to reduce availability, forcing the price to go up, and therefore forcing contractors to participate in recycle and reuse programs. [0057]
EPA Response: EPA agrees with the commenter that as the allowances for virgin HCFC-22 decrease, there will be an increased incentive to recover and reclaim the gas. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Hudson believes that the reclamation industry will easily support the maximum proposed reduction levels, as calculated in the Adjustment Memo. Hudson agrees that 25% to 80% of servicing need could be met, noting that Hudson can easily triple its current capacity and believes that this is typical amongst most reclaimers. Hudson believes that the issue is not whether the industry can supply but whether the market will recover and return sufficient product for reclamation. According to the commenter, with emphasis on responsible use and handling and a limitation on virgin supply, reclamation and recycling could serve 80% or more of the aftermarket. The commenter believes that a vibrant reclamation industry is a key component for the HCFC phaseout. Hudson states that unless the supply of new refrigerant is reduced and the value of the refrigerant increases, the volume of reclamation simply will not increase. The commenter believes this can be achieved by limiting the production of HCFC-22. [0071, 0027]
   Airgas believes that U.S. reclaimers have sufficient capacity to achieve and exceed the target of 12,500 MT. The commenter notes that having reclamation capacity, however, does not equate to having reclaimed product to supply the market. Current market pricing and economics do not support profitable reclamation. Airgas notes that instead of increasing, nationally reclaimed volumes of HCFC-22 have remained relatively flat for the last two years. [0079]
   Summit Refrigerants notes that capacity exists in the reclamation industry to handle increased reclamation volume. The commenter has made a significant investment in equipment, facilities, personnel, and training to handle a much greater volume of reclamation, including the packaging and sale of reclaimed refrigerant to the HVAC service industry. The commenter notes that they are willing to make additional capital investments. Summit Refrigerants has been informed that other refrigerant reclaimers throughout the country also have capacity to handle a greater volume of reclamation activity. [0062]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> A group of 20 EPA Certified ODS Reclaimers comment that they believe reclaimers can meet the projected demands of the industry if allocations are reduced to the maximum extent in 2012-2014. They agree that the amount of HCFC-22 that they reclaimed was well below their capacity mainly due to the price and ample supply of virgin manufactured and imported HCFC-22. [0085]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Honeywell believes it is important to make clear to EPA that there is sufficient recovery and reclamation capability today. The supply chain from equipment-in-use to reclamation facilities is highly fragmented and complex, however, so it will continue to take time to get this supply chain up-to-speed. [0082]
EPA Response: While EPA agrees that reclamation will not increase overnight, the agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Rapid Recovery Franchise Partners comment that it will be necessary to increase the quantity of high quality reclaimed R-22. The commenter believes that existing reclaimers have the capacity to process more than enough R-22 to meet the industry needs, but are not convinced that given the present situation, there will be enough used R-22 recovered to meet the raw material needs of the reclaimers. The commenter states that HVAC contractors are currently not recovering enough R-22 to meet the level necessary to sustain the industry for the long term. [0086]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Consolidated comments that it has been well documented that the reclaim industry has both the capacity and the willingness to significantly increase the amount of R-22 it processes. Consolidated notes they could easily double their capacity immediately and if necessary add to their equipment and staffing to triple or quadruple the amount of refrigerants they reclaim each year. Consolidated believes the ability to increase processing capacity is not the real issue. If the industry expects to significantly increase the amount of R-22 and other refrigerants available for reclamation, the concern will need to shift away from those who reclaim refrigerants to those involved in the recovery process. Consolidated notes that additional reclaimed R-22 is, and will continue to be, directly proportional to the quantity of refrigerant that is captured and made available to the reclaimers. [0083]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Polar Technology agrees that the industry has the capacity to meet whatever increases in reclamation activity that may occur. However, they disagree with the base assumption that this activity will automatically take place. They believe history indicates that system owners/technicians/contractors do not become actively engaged in reclaiming R-22 as a result of reduced allocations. The commenter believes the industry does not have concern for the environment, doing the right thing, or over the diminishing supply and rising prices. Polar Technology states that allocation reductions actually may not significantly impact existing reclamation activities and economics is one of the strongest factors. They believe the anticipated increase in reclamation volume of R-22 will not occur for the following four reasons:
      * Enforcement or lack thereof. Technicians, contractors, and system owners do not fear that the failure to properly recover will be met with punishment. There are too many systems and technicians to monitor and hold accountable. Polar Technology cites California's AB32 that according to them was created based on the failure of the CAA. AB32 holds the system owner accountable for refrigerants in their control. Without enforcement, there is no motivating reason for anyone to adhere to regulations.
      * New revenue opportunities. Small R-22 system owners are forced to buy new and costly systems before their current system has naturally worn out because they are at the mercy of technicians and contractors. In this case, the manufacturers and contractors profit and the consumers (system owners) lose.
      * Reclamation rates. The commenter states that according to EPA, reclaimed refrigerant activity has remained the same since the CAA was implemented. The commenter states that reclamation capacity has increased, just not the amount of used refrigerants to reclaim. They believe it is easier to manufacture and buy new gas than it is to reclaim. Because they are at the mercy of the market, system owners will pay for poor recovery practices.
      * History. The commenter points to the phaseout of CFC-12 and states that price and volume do not correlate. The applications are different and more widespread than was the case with CFC-12. Polar Technology believes that as the price increases, technicians will hoard more refrigerant, which will lead to dirty refrigerants going into existing systems, creating inefficient cooling and other compromises. [0076]
EPA Response: The agency recognizes that assuming 19,700 MT of annual servicing need can be met by recovered and reclaimed material -- instead of 12,500 MT -- does not mean that amount will actually be reclaimed each year. EPA's adjustment to encourage recovery and reclamation could also encourage transition to HCFC-22 alternatives and more recovery and reuse of HCFC-22 in systems that require a large refrigerant charge. EPA believes adjusting allowances to encourage reclamation will still send the desired market signal to incentivize recovery and reclamation. As the supply of virgin HCFC-22 decreases, the value of the gas and the incentive to recover and reclaim it will likely increase.
In response to the commenter's statement about enforcement, EPA encourages anyone to report potential Clean Air Act violations and to send EPA concrete evidence when possible to help in enforcement. EPA reminds the industry that intentional venting is illegal under EPA regulations. In addition to the current venting prohibition, EPA is incentivizing the proper handling and recovery of all existing HCFC-22 by reducing allowances. Fewer allowances results in each allowance, and therefore each pound of HCFC-22, having higher value. Reclaimers can use this increase in value to provide a financial incentive for contractors and system owners to recover more used HCFC-22.
In response to the comment on decisions system owners are making with their contractors, EPA does not have data or evidence to verify or rebut the commenters' assertion. EPA encourages system owners to find a contractor that they trust using ENERGY STAR tips on How to Find a Good Heating and Cooling Contractor and to work with their contractor to determine the best path forward when deciding to repair or replace systems.
In response to the commenter's assertion that reclamation has remained the same since the CAA was implemented, EPA disagrees. The average reclamation amount for HCFC-22 in 2000-2003 was about 5.2 million lbs per year compared to about 8.5 million lbs per year in 2008-2011 (source: Summary of Refrigerant Reclamation 2000-2011, available at http://www.epa.gov/ozone/title6/608/reclamation/recsum.pdf). Additionally, EPA does not have data on the price of CFC-12 to verify the statements made about the CFC-12 phaseout's effect on reclamation. EPA is aware that CFC-12 equipment is still in use even though the production and import of CFC-12 stopped in 1996.
> RMS Georgia commented that it had the capacity and resources to increase the quantity of reclamation if the demand for reclaimed material increases. RMS Georgia has invested resources into increasing the infrastructure to prepare for the need for higher reclamation. [0078]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
> Goodman believes that EPA relies far too much on the potential for recovery and reuse as a means of servicing existing HCFC-22 during the time period 2012-2014. Due to the comparatively small amount of HCFC-22 typically used in a residential air conditioning system (approximately 6 to 8 pounds), Goodman believes the infrastructure to effectively and efficiently recover, recycle, redistribute, and reuse HCFC-22 likely will take several years to develop into a viable source for the market. [0084]
EPA Response: EPA disagrees with the comment. Even with lower recovery in the residential AC market, there is enough recoverable HCFC-22 in existing HCFC-22 equipment to increase the adjustment for recovery and reuse from 12,500 MT to 19,700 MT, especially in light of the 2015 Montreal Protocol cap and the 2020 phaseout of HCFC-22 production and import. EPA believes it needs to encourage recovery and reuse now to ensure a smooth transition. While recovery and reclamation may not increase immediately, other sources (e.g., transition to alternatives, use of existing inventory, and in-house recovery and reuse) can help meet current needs. A more complete response is available in section IV.B.2. of the preamble to this final rule.
> RemTec International comments that the capacity is available by reclaimers to meet or exceed the 20 percent target. Further, they believe that in the past, reclaimers have not been able to fully utilize their capacity due to the economics or pricing issues to incentivize the recovery efforts and then compete with low cost imported products. [0024]
EPA Response: The agency is finalizing the proposed 19,700 MT adjustment to foster increased HCFC-22 recovery and reclamation. A more complete response is available in section IV.B.2. of the preamble to the final rule.
       2.2.2	Comments from or about large end users of refrigerant, including supermarkets
> Honeywell notes that there is another high volume source that EPA should continue to recognize and quantify. Large users that are retiring equipment can efficiently and effectively capture the majority of refrigerant from commercial refrigeration and air conditioning units by recovery for future reuse for service needs in other equipment owned by these users. These users do not require reclamation technology or equipment. Such recovery and reuse should continue to be considered as a source of HCFC-22 service refrigerant. [0082]
EPA Response: EPA agrees there are other large end users, in addition to supermarkets, that can be a source for recovered HCFC-22. The extent to which large end-users meet their needs with refrigerant recovered in-house is unclear. The agency accounts for the recovery practices of large end-users in its Vintaging Model and is using its estimates of recoverable refrigerant to support the maximum proposed reduction for recycling and reclamation.
> The Food Marketing Institute (FMI) states that the proposed rule will impose substantial burdens on food retailers and wholesalers. The commenter believes a lack of true equal capacity HCFC replacement `drop-in' refrigerants for packaged HVAC units will result in higher energy usage and increased carbon emissions while lowering the ability of the system to meet store condition requirements. They believe that the inability to meet store requirements will additionally increase refrigeration system energy usage. [0157]
EPA Response: EPA agrees with the commenter that refrigeration and AC systems are typically most efficient when using the refrigerant they were designed to run on. EPA encourages HCFC-22 system owners to transition to equipment designed for alternatives when it makes sense for them, keeping in mind that virgin HCFC-22 can no longer be imported or produced beginning in 2020. Recovered and recycled refrigerant can be used as long as it is available.
> FMI also submitted a late comment, asking EPA to immediately increase HCFC-22 production and consumption allowances in order to provide relief to grocery retailers. FMI proposes a phaseout schedule of 65,000 MT of both consumption and production allowances in 2012, followed by 50,000 MT in 2013 and 40,000 MT in 2014. The commenter suggests that its proposed phaseout schedule would meet the requirements for the heads of executive departments and agencies to consider the cumulative effects of regulations, pursuant to Executive Order 13563. The comment also included information from individual FMI members:
      * HCFC-22 prices have increased, but it is available.
      * Supermarkets have begun to retrofit some stores, but still rely on HCFC-22 in many systems.
      * Supermarkets vary in the extent to which they recover HCFC-22 and bank it, with some chains utilizing all of their recovered refrigerant, and others selling HCFC-22 to a recovery or reclamation company [0158].
EPA Response: See previous responses to FMI and Honeywell. EPA appreciates the concerns raised by FMI. However, FMI's request for EPA to increase the allowed amount of HCFC-22 consumption beyond the level allowed under the 2009 Final Rule, rather than reduce consumption allowances or keep them the same, is counter to EPA's understanding of the broader HCFC-22 market as presented in the Adjustment Memo. As such, the agency is finalizing what it believes to be an appropriate amount of allowances based on its analysis of the market and the comments supporting that analysis. The rationale and support for the finalized allocations is provided in the preamble to the rule.
   Additionally, Supervalu, Food Lion and Weis Market contributed to EPA's research and analysis presented in the Adjustment Memo. Based on conversations with these stores, EPA found that some supermarkets have converted a substantial proportion of their HCFC-22 equipment and that many have sufficient recovered HCFC-22 in stock for servicing such that they do not anticipate a need to purchase any more virgin material in the future. Other supermarkets that have not converted from HCFC-22 equipment as aggressively indicated that as low as 10% to 20% of their servicing needs are met by material recovered from retrofitted stores they own.
   The agency recognizes that some stores are able to meet much of their HCFC-22 needs with refrigerant that is recovered and reused in-house; however, EPA also recognizes that some supermarket stores are not able to meet a significant portion of their servicing needs with in-house recovery, especially smaller chains or independent store owners. Since the agency does not have sufficient data on in-house reuse, EPA is not accounting for supermarket reuse as its own category. However, the agency's Vintaging Model has reasonable estimates for actual recoverable material for various sectors, and EPA is using those modeled recovery rates for supermarkets to help support overall recovery and reuse estimates in this rule (see the Recovery Memo for specifics on modeled recovery rates).
> NRCD, IGSC, and EIA suggest downward adjustments for supermarkets by reducing leakage and by sourcing through recovery and reuse, in line with the Adjustment Memo. [0067]
EPA Response: See previous responses in this section.
 2.3	Estimated servicing need for HCFC-22 as presented in the Adjustment Memo
EPA received four additional comments on the Adjustment Memo, all related to the estimated servicing need for HCFC-22.
> Airgas commented that servicing need for HCFC-22 was overstated in the 2009 Final Rule and that the new estimates for 2012-2014 are even higher in the Adjustment Memo, meaning that the reduction in allowances will have to be even greater to arrive at where the market must be in 2015. [0079]
EPA Response: Vintaging Model estimates of servicing need are higher in the Adjustment Memo than in the Servicing Tail Report published with the 2009 Final Rule. The Adjustment Memo discusses the reasons for the change. The adjustments in this proposed rule (77 FR 237) were made to the updated servicing need estimate. EPA will revisit this estimate again as it develops the allocations for 2015-2019.
> Certified Refrigerant Services, Inc. noted that EPA did a reasonable job of forecasting service demand, but is concerned that the economic recession (2009) has impacted the service demand forecasts from 2007. The recession resulted in a drop in demand, while the importation and production became excessive, negatively impacting refrigerant reclaimers. [0057]
EPA Response: EPA discusses several reasons why the allocation in the 2009 Final Rule likely resulted in an oversupply of virgin HCFC-22 in the Adjustment Memo. The adjustments proposed in this rulemaking are an attempt to remedy that over-allocation, and to incentivize proper handling of HCFC-22 and transition to alternatives.
> DuPont comments that as a result of the proposed reductions in total HCFC-22 allowances and the supporting Adjustment Memo, it initiated a review of its market assessment and what it believes will be needed to move the market to where it must be in 2015 and 2020 to comply with Montreal Protocol requirements. DuPont's assessment supports the agency's HCFC-22 "smaller allocation scenario," even though its assessment of the market differs in detail from that in the Adjustment Memo. DuPont comments that the primary difference between its assessment and the Adjustment Memo is that market demand for HCFC-22 is significantly lower than the agency has estimated. DuPont believes that as supply shrinks, service practices will improve, emissions will decrease, and overall demand for newly produced, inventoried and reclaimed HCFC-22 will decrease. In addition, DuPont comments that it is informed that service technicians and end users are increasingly using HFC retrofit options that will further reduce demand for HCFC-22. DuPont's analysis concludes that the maximum proposed reductions in allocations can be achieved without causing a significant disruption in the market place. [0070]
EPA Response: EPA is continually updating the Vintaging Model based on new market information. Before issuing the 2009 Final Rule and the 2009 Servicing Tail Report (using Vintaging Model results), EPA issued and sought comment on three versions of a draft report. The report analyzes servicing need for HCFC appliances in the U.S. refrigeration and air-conditioning sector projected to be in service from 2010-2019. All versions are available at Docket EPA-HQ-OAR-2008-0496: published November 4, 2005 at 70 FR 67172; released at a stakeholder meeting on September 29, 2006; published December 23, 2008, with 2008 Proposed Rule. The Servicing Tail Report focuses on air-conditioning and refrigeration appliances because such equipment represents the bulk of the servicing need. EPA generally agrees with the commenter that the amount provided in the 2009 Final Rule was too high to foster an orderly transition away from HCFC-22. Several possible contributing factors and supporting indicators of this over-allocation are discussed in the Adjustment Memo. EPA will revisit this estimate again as it develops allowances for 2015-2019.
> Arkema comments that that the estimates from EPA's Vintaging Model of 56,200 MT of HCFC-22 in 2012, 51,200 MT in 2013 and 45,900 MT in 2014 are reasonable projections. Arkema also believes providing the lowest number of HCFC-22 allowances would foster reclamation without disrupting equipment servicing. [0073]
EPA Response: See previous responses in this section.

 2.4 	Effects of dry-shipped HCFC-22 equipment on the HCFC phaseout
EPA received 20 comments on whether repairing an existing system with dry-shipped HCFC-22 equipment affects the HCFC phaseout. Eight commenters believe repairs with dry-shipped HCFC-22 condensing units is affecting the phaseout and/or should be stopped.
> Lennox comments that EPA should prohibit the sale and distribution of dry-shipped HCFC-22 air conditioning condensing units. The commenter states that the continued installation of dry-shipped HCFC-22 condensing units for air-conditioning systems is impacting the HCFC-22 phase-out in significant, negative ways. The continued installation of dry-shipped condensing units effectively allows the manufacture of otherwise banned HCFC-22 air-conditioning systems, which undercuts the market for new, more environmentally-friendly air-conditioning equipment. It maintains demand for HCFC-22 refrigerant that otherwise would not exist. [0061]
      Lennox further comments that EPA should grant the Carrier petition and that whatever action EPA may take in tightening the HCFC-22 allocations is likely insufficient to address the issue. The commenter states that HCFC-22 air conditioning condensing systems create a source of demand for HCFC-22 that is known to be significant but difficult to predict, which could create undue volatility in the HCFC-22 market. Despite what appears to be a current sufficient supply of HCFC-22 refrigerant, future shortages may nonetheless result if HCFC-22 air conditioning equipment remains in use that EPA had expected to be replaced. Lennox notes that the exact scale of the problem is difficult to determine because there is no public reporting on HCFC-22 condensing unit shipments, but millions of units are believed to be at issue. [0061]
      The commenter further states that if EPA does not change its policy, it is encouraging manufacturers to avoid promoting environmentally-friendly equipment. The commenter expressed concern that, in the future, manufacturers may refrain from developing more environmentally-friendly equipment, driving up the costs of more advanced equipment and impeding the transition away from ozone-depleting substances. Accepting the Carrier petition should help EPA to more accurately predict how significantly it may reduce HCFC-22 allocations pursuant to the Proposed Rule. [0061]
> EPA Response: EPA agrees with the commenter that servicing of appliances that have been repaired through the installation of dry-shipped HCFC-22 condensing units does make up part of HCFC-22 servicing need and that there is no consensus on how much of total servicing need is due to repairing existing systems with new condensing units. Given the paucity of concrete quantifiable information on this subject currently available to the agency, EPA is not ready to determine whether the installation of dry-shipped HCFC-22 condensing units will affect EPA's ability to phase out HCFC-22 by 2020. The limited data received to date suggest that it will not. Two documents, which serve as an example of the data received to date, are available in the docket: a September 24, 2010 letter with supporting analysis from AHRI and a market update from analysts at Credit Suisse. More information about how EPA is approaching this issue is available in the preamble. However, since banning the manufacture of HCFC-22 condensing units is beyond the scope of this rulemaking (i.e., EPA didn't propose to ban condensing units in this rule), EPA will continue to evaluate the issue as it develops future regulations. The agency continues to seek quantifiable information on the number of dry-shipped condensing units being shipped, whether they are being used as a repair in lieu of a compressor or motor replacement, and whether they will hinder EPA's ability to phase out HCFC-22 by 2020.
> United Technologies, the parent company of Carrier, supports banning the manufacture of uncharged HCFC-22 condensing units. They believe the installation of newly-manufactured, uncharged HCFC-22 condensing units does affect the phaseout of virgin HCFC-22 production and import. United Technologies states "there is no doubt" that EPA's policy on dry-shipped HCFC-22 condensing units perpetuates the demand for HCFC-22 and hampers the transition to alternatives. United Technologies states that the proposed reduction in allocations will not address their concerns.
      The commenter estimates that approximately 74 million AC systems are operating today with HCFC-22, with enough refrigerant to perpetuate newly installed HCFC-22 condensing units for the next decade or more. United Technology comments that new condensing units can extend the lifetime of HCFC-22 equipment by over 100%. The company states that 25-30% of equipment replacements are dry-shipped condensing units and that these replacements are being sold in lieu of alternatives; the company suggests that if this is left unchecked, HCFC-22 projections would increase rather than decrease.
      United Technologies requests that EPA invite comments on all aspects of Carrier's petition and expresses concern about the continued delay in acting on Carrier's position. The commenter states that if the Carrier petition is not accepted before the end of the upcoming peak sales season, the potential exists for more than one million additional replacement units to be sold this year and manufacturers will continue to ramp up production capacity and inventories. Further, the commenter believes that EPA has sufficient information to grant the petition now. United Technologies believes that the information readily available to EPA shows that 1) dry-shipped HCFC-22 units newly produced to take advantage of existing regulations is a substantial and growing segment of the market; 2) the installations of dry-shipped units greatly extend the useful lives of existing HCFC-22 systems and therefore will perpetuate the demand for HCFC-22 well into the next regulatory step-down period; 3) additional emissions of HCFC-22 into the atmosphere will occur due to the resulting increase in the installed base of HCFC-22 units and additional servicing of the equipment; and 4) the next result of the exemption undermines the smooth phase-out of HCFCs and the use of newer, more energy efficient technologies.
      United Technologies further asserts that if AHRI's projections are accurate, which contrast sharply with the Servicing Tail report, at the end of the current regulatory step-down period, between 5 and 10 million more HCFC-22 units than originally forecasted will be in service as a result of EPA's current policy.
      According to United Technologies, EPA should invite comments on all aspects of Carrier petition. EPA has only solicited comments on whether the dry-shipped HCFC-22 condensing unit policy affects the phase-out of virgin HCFC-22. While the commenter believes this issue is important, they state that there are many other important issues relevant to whether EPA should eliminate the dry-shipped condensing unit loophole. Further, the commenter states that the agency's view of the use of HCFC-22 is contrary to how EPA viewed the issue in the Pre-charged Appliance Rule. United Technologies believes that EPA now has evidence that dry units are being marketed and sold not as repair parts, but as cheaper alternatives to installing new, more energy efficient equipment. The commenter states that EPA has a responsibility to examine whether the expressed intention of its 2009 Pre-charged Appliance Rule is being met. Carrier's petition explains that by focusing solely on production and import versus actual emissions of HCFC-22, EPA's rules ignores the important issue of maintaining the production of dry-filled units throughout the phase-out of HCFC-22 production and consumption. According to the commenter, more HCFC-22 units being manufactured equate to more emissions over time regardless of whether a refrigerant is newly produced or recaptured and reused. They believe that this is contrary to the goals of the CAA and Montreal Protocol.
      United Technologies comments that if Carrier's petition is granted it will not affect the ability of consumers to service existing HCFC-22 equipment. Their petition seeks to prohibit only the sale, marketing, and distribution of entirely new HCFC-22 condensing units. United Technologies supports EPA's recent decision to update home air-conditioning resources for consumers. They strongly believe that EPA should not in any way delay the transition to newer, more efficient and environmentally beneficial air conditioning systems. [0065]
EPA Response: See the above response to Lennox International.
United Technologies asserts that there is an adequate amount of refrigerant in existing systems "to perpetuate newly installed HCFC-22 condensing units for the next decade or more." EPA understands this comment to mean that repairing current systems with dry components, including condensing units, may not affect EPA's ability to phaseout HCFC-22 by 2020 due to the large amount of HCFC-22 in existing systems. EPA agrees that there is a significant amount of HCFC-22 in existing systems that can be recovered and reused to repair systems both now and in the future. As discussed in section IV.B.2. of the preamble, EPA anticipates that reclaimed and reused material can meet a significant portion of estimated servicing need over the coming years.
United Technologies also comments that dry condensing units can extend the lifetime of an existing system by 100% or more. EPA welcomes data to verify this claim.
EPA disagrees with United Technologies' statement that repairing systems by replacing condensing units increases the installed base of HCFC-22 equipment. EPA's prohibition on the manufacture of new HCFC-22 systems with virgin refrigerant began January 1, 2010 -- capping the installed HCFC-22 equipment base, with limited exceptions. As a result, the installed base of residential HCFC-22 systems should not be growing, unless reclaimed HCFC-22 is being used to install large numbers of new systems or illegal activity is occurring. If United Technologies or any other entity has knowledge of new systems being installed with virgin HCFC-22, they should report the violation to EPA.
EPA seeks more information from the commenter on how allowing repairs of existing systems with dry-shipped condensing units results in increased emissions, especially in light of EPA's venting prohibition and EPA's control of potential emissions through the allocation of annual production and consumption allowances.
United Technologies questions whether the intent of the Pre-Charged Appliance rule (74 FR 66450) is being met, considering the marketing and sales of dry-shipped units. EPA's intent in the Pre-Charged Appliance rule was clear: the Pre-Charged Appliance rule focuses on pre-charged appliances and components. To the best of the agency's knowledge, the intent of the rule is being realized. However, as stated previously, EPA seeks quantifiable data and will continue to review this issue as it develops future regulations.
> Ingersoll Rand does not believe the issue of dry charged condensing unit production can be properly addressed through a reduction in HCFC-22 allocation levels. Ingersoll Rand believes a direct regulatory approach is needed to properly address the growing penetration of dry charge HCFC-22 unit volume in the residential and commercial markets. According to the commenter, end-users who are making service or replacement decisions today on their existing HCFC-22 systems are not aware of the specifics associated with the supply/demand of HCFC-22, especially when trying to predict what the future supply/demand market dynamics might be and how this may impact the cost of continued service of their systems. Consumers tend to make the decision based on the direct cost of the change-out. The portion of this direct cost associated with the HCFC-22 refrigerant needed for the re-charging of the HCFC-22 system is quite small (<5%) of the total cost so even a significant inflation on the cost of HCFC-22 will still have a minimal impact on the end-user decision. [0063]
EPA Response: EPA agrees with the commenter that the price and availability of HCFC-22 is not the only factor affecting the practice of repairing existing systems with dry-shipped HCFC-22 condensing units. However, the reduction in allowances does send a strong market signal about the future availability of HCFC-22. Absent any change to current EPA policy on repairing pre-2010 systems, as the allocation for HCFC-22 production and importation decreases, consumers, in consultation with their AC and refrigeration contractor, will have to decide when to transition to a non-HCFC alternative. See the response to Lennox and United Technologies for more detail on several of the points raised in the comment.
> NRDC, IGSD, and EIA comment that the market for dry-shipped HCFC-22 condensing units is expanding rapidly. The commenters express concern that because newly-produced HCFC-22 is so cheap, service technicians are venting HCFC-22 from broken units, installing dry-ship condensing units in their place, and then charging the unit with virgin HCFC-22. [0067]
EPA Response: EPA has received conflicting reports on where the market for dry-shipped HCFC-22 repair units is moving. However, through this rule EPA is reducing HCFC-22 allowances to adjust for recent market changes and to encourage proper handling and recycling of HCFC-22. EPA encourages everyone to report potential Clean Air Act violations and when possible, to send EPA concrete evidence to help with enforcement. EPA reminds the industry that intentional venting is illegal under existing EPA regulations.
> One commenter urges EPA to consider ending the manufacture of HCFC-22 dry shipped condensers instead of reducing the HCFC-22 production beyond what has already been planned. [0126]
EPA Response: EPA did not propose to ban repairs with condensing units in this rule, but will continue to evaluate the issue as it develops future regulations. The agency continues to seek quantifiable information on the number of dry-shipped condensing units being shipped, whether they are being used as a repair in lieu of a compressor or motor replacement, and whether they will hinder EPA's ability to phaseout the production and import of virgin HCFC-22 by 2020.
> Cottongim Heating & Cooling is concerned that dry ship condensing units are creating more harm than good with regard to overall equipment efficiency. They state that too many companies are using dry ship units to replace older systems and leaving the inside unit with a lower SEER rating. According to the commenter, a dry ship system is not going to last long in a mismatched configuration. Instead, energy consumption can be decreased with a newly matched R-410a system. [0154]
EPA Response: EPA encourages all system owners to install matched systems using non-ozone-depleting refrigerants when their existing system needs to be replaced. ENERGY STAR offers information on when to consider replacing a system and encourages the installation of systems with higher energy efficiency (see www.energystar.gov/index.cfm?c=heat_cool.pr_checklist_consumers).
> One commenter from Johnstone Supply urges EPA to stop allowing the manufacture of dry charged R-22 condensing units. The commenter believes this concern was initially brought to EPA's attention, but was ignored. [0101]
EPA Response: Since banning the manufacture of HCFC-22 condensing units is beyond the scope of this rulemaking, EPA will continue to evaluate the issue as it develops future regulations.
Additionally, EPA disagrees with the assertion that the agency has ignored this concern. The agency has been reviewing the Carrier petition since its arrival, has discussed the issue with numerous stakeholders within the industry, and sent a preliminary response on January 24, 2012. The agency continues to seek quantifiable information on the number of dry-shipped condensing units being shipped, whether they are being used as a repair in lieu of a compressor replacement, and whether they will hinder EPA's ability to phase out the production and import of virgin HCFC-22 by 2020.
> One commenter from Johnstone supply comments that the cost to fill and continuously operate the dry units currently in the market will be disastrous. [0140]
EPA Response: EPA will continue to evaluate the issue as it develops future regulations. The agency continues to seek quantifiable information on the number of dry-shipped condensing units being shipped, whether they are being used as a repair in lieu of a compressor replacement, and whether they will hinder EPA's ability to phaseout the production and import of virgin HCFC-22 by 2020.
Also, the amount of refrigerant that a new condensing unit will need over its lifetime depends significantly on installation and servicing practices. EPA notes that a well-installed, properly serviced system should not need additional refrigerant added on a regular basis unless it develops a leak.

Seven commenters do not believe repairs with dry-shipped condensing units significantly affect the phaseout and/or do not believe repairs using dry-shipped HCFC-22 condensing units should be banned.
> Goodman disagrees with the view that the sale of dry condensing units must be prohibited, or else use of HCFC-22 will continue practically in perpetuity. Goodman estimates that the HVAC industry ships between 5 million and 6 million units annually, only a small percentage of which are dry, uncharged HCFC-22 components. Goodman estimates that the amount of HCFC-22 used to install these dry components into systems is well below 10 percent of the total HCFC-22 that is used by the industry in a given year. In contrast, the vast amount of HCFC-22 is used each year to service and/or repair existing systems that may have a small leak or simply are in need of normal servicing. Thus, Goodman believes the agency's proposed reduction in allowances for 2012-2014 would have an acute, negative impact on those homeowners who need to have their existing systems serviced. Goodman believes it is abundantly clear that the availability of dry, uncharged HCFC-22 components is not materially affecting the amount of HCFC-22 used each year. [0084]
      Goodman also believes that Carrier's estimate that dry-shipped units constitute 25-30 percent of the total replacement market is significantly overstated. Goodman believes that Carrier's projections and claims regarding a purported "growth industry" in uncharged HCFC-22 components, and resulting energy efficiency losses and greater HCFC-22 emissions are wildly speculative at best. [0084]
      Goodman further notes that if an installer or contractor determines that a homeowner's existing HCFC-22 system can be repaired through installation of a new, uncharged HCFC-22 condensing unit (a repair that is permissible under EPA regulations), the repair and replacement would cost about $1,000 to $2,000. In contrast, a homeowner who is forced to replace an existing HCFC-22 system with a new system would have to spend about $4,000 to $5,000. [0084]
EPA Response: See previous responses to Lennox and United Technologies, in particular EPA's request for additional data. Additionally, EPA believes the number of HCFC-22 allowances needed in 2012-2014 is significantly lower than the amount provided in the partially-vacated 2009 Final Rule. As discussed in sections 2.1 and 2.2 of this Response to Comments and sections IV.B.1-3. of the preamble to the final rule, there is adequate reclamation capacity and a large amount of HCFC-22 available in inventory to help meet servicing need in 2012-2014.
> NORDYNE disagrees with Carrier's position in the Carrier petition, disagrees with EPA's response to the Carrier petition requesting a rulemaking to ban the sale of residential split system air conditioners that use HCFC-22, and supports maintaining the availability of uncharged HCFC-22 replacement condensing units for the marketplace. NORDYNE disagrees with an assumption within some of the HVAC industry that uncharged HCFC-22 replacement condensing units are displacing charged HFC-410A units. NORDYNE contends that the primary application of the uncharged HCFC-22 replacement condensing units is to provide consumers an affordable, more reliable and environmentally friendly service option to major failures of compressors and coils. NORDYNE states that historical AHRI shipment data clearly demonstrates the volume of repairs that have been occurring and continue in today's economic climate. NORDYNE notes there is no negative environmental impact caused by consumers choosing to service their unit with an uncharged HCFC-22 replacement condensing unit instead of replacing a compressor; the defined cap on HCFC-22 is unaffected. NORDYNE believes that the market demand for uncharged HCFC-22 replacement condensing units will heavily contract in conjunction with the prescribed phase down. [0089]
   Able Distributors, APR Supply Co. and Coburn Supply Company all contend that the primary application of the uncharged HCFC-22 replacement condensing units is to provide consumers with an affordable, reliable and environmentally friendly service option to major failures of compressors and coils. All three companies state their position is contrary to that of the Carrier petition. All three companies believe that the market demand for uncharged HCFC-22 replacement condensing units will heavily contract in conjunction with the prescribed phase down. [0147, 0148, 0149]
EPA Response: See previous response to Goodman, United Technologies and Lennox, in particular EPA's request for additional data. Banning repairs of existing HCFC-22 systems using dry condensing units is beyond the scope of this rulemaking; EPA did not propose to ban condensing units in this rule. However, EPA will continue to evaluate the issue as it develops future regulations.
> Rheem does not agree that the installation of dry-shipped HCFC-22 condensing units will have a negative effect on the phase-out of virgin HCFC-22 production and import. Rheem believes that addressing the availability of the refrigerant is the appropriate driver; it is the declining availability of the refrigerant itself that matters. [0087]
EPA Response: See previous responses in this section.
> NRI does not believe that dry shipped condensing units will affect the phaseout of virgin HCFC-22 production and import. They also do not believe that all appliance problems result in loss of the refrigerant. If EPA has verifiable evidence that the servicing or repair of HCFC-22 appliances is resulting in increased emissions of the refrigerant, then EPA should consider extending the leak repair requirements to all appliances, not just appliances with a refrigerant charge greater than 50 lbs. NRI believes that there will be a direct and immediate impact on consumer behavior by refining the allocation system. [0068]
EPA Response: See previous responses in this section. Additionally, revising the leak repair regulations for systems with a refrigerant charge below 50 pounds is beyond the scope of this rulemaking.
Five additional comments discuss HCFC-22 condensing units in more general terms:
> HARDI suggests that EPA consider that most dry-shipped condensing units are being sold and installed with multi-year warranties which may require a revision to EPA servicing tail analyses if HCFC-22 replacement refrigerants are not approved by the compressor and equipment manufacturers for warranty servicing beyond 2015. HARDI states its non-support of the Carrier petition. [0069]
EPA Response: EPA will review service practices in the HCFC-22 market as it revises its servicing need estimates for future regulatory periods.
> Mexichem Fluor states that in determining the reduction of consumption allowances, the increased installation of dry-shipped HCFC-22 condensing units should be considered. [0066]

   ACCA commented that dry-charged units are affecting the demand for R-22. This is based on AHRI shipment data which suggests that dry charged units are in high demand yet prices of R-22 remained low up until the proposed ruling. [0081]
EPA Response: See previous responses in this section. The effect of repairs using dry-shipped HCFC-22 condensing units was not directly estimated for this rulemaking, largely because EPA has not received enough quantifiable data to determine how large an effect, if any, this practice has on current and future servicing need.
> One contractor notes that if the economy had been healthy, manufacturers would not have been coerced by a repair-minded public into producing a dry-ship condensing unit designed to operate on R-407 that just happens to operate with HCFC-22. The contractor states that contractors want to sell R-410a systems in lieu of repairing older systems, since it is much more profitable, but that American consumers have other bills to pay. [0113]
EPA Response: EPA understands that consumers face a number of choices when deciding to repair or replace their existing AC system and will continue to provide information on the pros and cons of different repair options.
> DuPont comments that further reductions in consumption allowances might discourage installation and field charging of new condensing units with HCFC-22. They believe that continued installation of such units will only increase the challenge of meeting the 2015 stepdown and increase emissions of HCFC-22 to the atmosphere. [0020]
EPA Response: See responses to earlier comments in this section. EPA is not attempting to stop repairs using dry-shipped HCFC-22 condensing units in this rulemaking. EPA will review service practices in the HCFC-22 market as it revises its servicing need estimates for future regulatory periods.
 3. Issues related to the ARKEMA V. epa decision
EPA received 13 comments in response to the request for comments on issues related to the Arkema v. EPA decision.

      3.1	Whether EPA should provide recoupment
            3.1.1	Whether the Arkema v. EPA decision should be interpreted as applying to the 2010 allocation (i.e., recoupment)
            3.1.2	Whether EPA should provide recoupment for HCFC-22 and HCFC-142b, or just HCFC-22 allowances
            3.1.3	Whether EPA should provide recoupment for production and consumption, or just consumption allowances
      3.2	Whether EPA should finalize option 1, 2, 3 or 4 to adjust allowances in future control periods to reflect the Arkema v. EPA decision (i.e., recoupment)
            3.2.1	Providing recoupment allowances in 2013 in addition to the aggregate level of production and consumption specified in the Final Rule (option 1)
            3.2.2	Allocating recoupment allowances over two years (2013-14) in addition to the aggregate level of production and consumption specified in the Final Rule (option 2)
            3.2.3	Allocating recoupment allowances from the aggregate level of production and consumption specified in the Final Rule over two years (2013-14) (option 3)
      3.2.4	Treating allowances from 2010 as impossible to recoup (option 4)

Count
Commenter
Organization
Document ID No
                                       1
William J. Hamel
Arkema Inc.
EPA-HQ-OAR-2011-0354-0073
                                       2
Joel K. French
Coolgas, Inc.
EPA-HQ-OAR-2011-0354-0088
                                       3
Mack McFarland
DuPont
EPA-HQ-OAR-2011-0354-0070
                                       4
Steven H. Bernhardt
Honeywell
EPA-HQ-OAR-2011-0354-0082
                                       5
Peter M. Geosits
Mexichem Fluor Inc.
EPA-HQ-OAR-2011-0354-0066
                                       6
Diran Yegparian
Mondy Global, Inc.
EPA-HQ-OAR-2011-0354-0055
                                       7
Maureen Beatty
National Refrigerants, Inc. (NRI)
EPA-HQ-OAR-2011-0354-0068
                                       8
David Doniger
Natural Resources Defense Council (NRDC)
EPA-HQ-OAR-2011-0354-0067
                                       9
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2011-0354-0064
                                      10
Mack McFarland
DuPont
EPA-HQ-OAR-2010-1040-0020
                                      11
William J. Hamel
Arkema Inc.
EPA-HQ-OAR-2010-1040-0028
                                      12
Stephen Bernhardt
Honeywell
EPA-HQ-OAR-2010-1040-0029
                                      13
Don Magid
Solvay Fluorides, LLC
EPA-HQ-OAR-2010-1040-0026

 3.1	Whether EPA should provide recoupment
           3.1.1 Whether the Arkema v. EPA decision should be interpreted as applying to the 2010 allocation (i.e., recoupment)
EPA received 13 comments in opposition to recoupment, stating that EPA should not interpret the court decision as applying to the 2010 allocation. Two commenters, Solvay and Arkema, believe that the decision should be interpreted as applying to the 2010 allocation and that EPA should issue recoupment.
> Mexichem Fluor expects that a reduction of consumption allowances combined with recoupment allowances would lead to a distorted market and unfair treatment of allowance holders. Companies receiving recoupment would have an additional economic advantage compared to 2010. The commenter notes that market conditions and price expectations were different in 2010 due to the absence of the 2012-2014 proposed rule.
      Mexichem Fluor further comments that EPA should also consider whether companies actually used all of their consumption allowances in 2010; only 86% (approximately) of allowances were used in 2010. According to the commenter, not taking into account unused allowances might also lead to an overcompensation for loss and be unfair to other companies without recoupment allowances, given that the market conditions and price expectations were different in 2010 due to the absence of this proposed rule. [0066]
EPA Response: See section IV.B.6. of the preamble to the final rule for a full response. EPA is issuing recoupment allowances in this final action in response to the Court's finding that the agency had committed legal error. The grant of additional allowances is limited to this particular circumstance. EPA is not changing its standard policies regarding the issuance of allowances and the period of time during which allowances may be used. For example, EPA's policy that allowances may not be banked for future years is not affected by this final action.
> NRDC, IGSD, and EIA oppose all of the recoupment proposals and strongly support the no recoupment option. They oppose any option for implementing Arkema that increases the total number of allowances, which would only increase harm to the ozone layer and to public health and welfare. The commenters note that the mandate from the Court of Appeals did not issue until late 2010, which is too late to affect allocations in that year and that further annual allocations cannot be "banked" from year to year. The commenters state that it is too late for an allocation in 2012-2014 to recoup for supposed shortfalls in 2010. According to the commenters, there is no market need to justify this additional increment of allocations, and EPA has documented an extensive stockpile of unused HCFC-22 carried over from 2010. The commenters stated that recoupment options would only give a few companies a financial advantage at the expense of public health. [0067]
EPA Response: EPA is reducing the total number of HCFC-22 consumption allowances by more than 31,000 MT over the three years. As a result, providing recoupment does not increase the allowed amount of HCFC-22 produced and imported for U.S. use relative to the 2009 Final Rule. See section IV.B.6. of the preamble to the final rule for a full response on this portion of the comment.
EPA does not believe that the mere fact that the Court's mandate issued in 2011 is sufficient reason to decline to issue recoupment allowances. As a general matter, "the decision of a federal court must be given retroactive effect regardless whether it is being applied by a court or an agency." Nat'l Fuel Gas Supply Corp. v. FERC, 59 F.3d 1281, 1289 (D.C. Cir. 1995). EPA noted in the proposal for this action that all 2010 allowances had expired at the time the vacatur occurred and raised the question of whether an expired portion of a rule can be vacated. EPA did not receive any analysis of that specific issue. However, it is not necessary to resolve that specific issue here, because although the 2010 allowances had expired, the baselines had not. EPA concluded in the preamble to the Interim Final Rule that the Court's vacatur applied at a minimum to the baselines and the 2011-2014 allowances. The Court's finding of legal error with respect to the baselines means that the agency has an obligation to allocate additional allowances representing the difference between what the affected parties would have received in 2010 under the 2008 proposed rule, which reflected the 2008 transfers, and what they actually received under the 2009 final rule, which did not.

> Mondy Global Inc. agrees with EPA that the agency should not and cannot compensate companies for allowances they believe they were owed during 2010. Since allowances are allocated for a calendar year only, 2010 allowances would be of no value beyond that year. The Court's mandate issued on February 4, 2011; 2010 allowances had already expired. Therefore, EPA only needs to adhere to allocations for calendar years 2011 and after. [0055]
EPA Response: See section IV.B.6. of the preamble to the final rule and the response to the NRDC comment above for a full response.
> Honeywell strongly supports EPA's proposal to not provide additional allowances to Arkema and Solvay in 2013-2014 as some form of "recoupment" for allowances that were allegedly due to Arkema and Solvay in 2010. Honeywell believes such recoupment would be both contrary to law and the public policy objectives of the stratospheric ozone program. [0082]
      Honeywell agrees with EPA that recoupment would effectively be a transfer from 2010 to later years, and that EPA's own regulations preclude such a transfer. Honeywell notes that regulations require allocation of allowances only for a specific control period and that there is no provision for banking or borrowing of allowances in later years according to 40 C.F.R. § 82.3, 82.16(a). Honeywell believes that there is an even more fundamental objection to such a transfer: the Clean Air Act requires that any transfer of allowances "result in greater total reductions in the production in each year of ... class II substances than would occur in that year in the absence of such transactions," 42 U.S.C. § 7671f (a), yet issuing additional recoupment allowances in 2013-2014 would have the opposite effect. Honeywell notes that by definition, the provision of recoupment allowances in any given year will cause the sum of all allowances allocated in that year to be higher than it would have been had no recoupment allowances been allocated. Honeywell believes that both Title VI of the Clean Air Act and its implementing regulations prohibit the allocation of recoupment allowances. [0082]
      Honeywell also agrees with the policy reasons that EPA listed for not providing recoupment allowances to Arkema and Solvay. For instance, EPA stated that not providing recoupment allowances will benefit the environment and public health as well as promoting the reclamation industry that is likely needed for the 2015 stepdown period. 77 Fed. Reg. at 249. EPA also stated that providing recoupment allowances would decrease the actual number of allowances or the market share of all other allowance holders. 77 Fed. Reg. at 249. [0082]
      Honeywell believes that avoiding losses of allowances or market share is more than just good public policy. Under Arkema v. EPA, the Court announced that companies have vested rights in their allowances. Honeywell believes EPA cannot simply reduce the number of shares held by companies, or degrade the value of those shares, without violating the principle underpinning the Arkema decision or without due process of law. See, e.g., Halbach v. Great-West Life & Annuity Ins. Co., 561 F.3d 872, 877 (8th Cir. 2009); Bell v. Burson, 402 U.S. 535 (1971) (licenses cannot be suspended or revoked without due process). Therefore, Honeywell strongly believes that any action by EPA to provide additional allowances to Arkema and Solvay at the expense of other allowance-holding companies (whether via a reduction in the number of allowances or a dilution of their value) is unlawful. [0082]
      In addition to the legal and policy reasons mentioned above, Honeywell believes that there is no reason to provide recoupment allowances to either Arkema or Solvay as a matter of fact. EPA acknowledged that a "large number of HCFC allowances ... were not used in 2010...." 77 Fed. Reg. at 245. Honeywell agrees that 2010 was marked by significant oversupply of HCFC-22 allowances with a significant portion not being used. There were more than ample allowances available for use and/or sale. Providing recoupment allowances would constitute an inequitable windfall to companies that were never harmed. Arkema and Solvay already attempted, unsuccessfully, to show that they would be harmed by the 2009 Final Rule in 2010, citing estimates of money they thought they would lose in 2010. [See Arkema v. EPA, Motion of Petitioner Arkema Inc. for Partial Stay and for Expedited Consideration of Petition for Review, No. 09-1318, Doc. No. 1222488 (D.C. Cir.) (filed Dec. 28, 2009); Motion for Partial Stay and Expedited Consideration of Petition for Review, No. 09-1318, Doc. No. 1224774 (D.C. Cir.) (Filed Jan. 8, 2010). The Court denied the motions. Order, No. 09-1318, Doc. No. 1226756 (Filed Jan. 21, 2010).] Honeywell sees no justification for providing recoupment allowances under these facts. [0082]
      Honeywell comments that Arkema and Solvay have no legal right to what is essentially the recovery of damages by way of rulemaking. If the companies believe they were deprived of their property and are entitled to compensation, they could file a claim for compensation under the Tucker Act. [See 28 U.S.C. § 1491(a)(1).] This is the exclusive avenue for the recovery of damages against the government, absent an alternative statutory mechanism for compensation. [See United States v. Fausto, 484 U.S. 439 (1988).] According to the commenter, any attempt to provide additional allowances to Arkema and Solvay as means of compensation for whatever monetary losses they allegedly suffered in 2010 raises serious legal questions. Honeywell believes EPA should decline to provide recoupment allowances to Arkema and Solvay on these grounds alone. [0082, 0029]
EPA Response: See section IV.B.6. of the preamble to the final rule for a full response to many of the points the commenter raises. See section IV.A.1. of the preamble for additional discussion of "vested rights" and market share as it relates to the Arkema decision.
Regarding the Tucker Act, the commenter appears to be saying that if Arkema and Solvay believe they are entitled to compensation for deprivation of property, their only potential recourse would be to file a claim under the Tucker Act for the recovery of damages. The Tucker Act states that the U.S. Court of Federal Claims has jurisdiction over claims against the United States for "liquidated or unliquidated damages," including takings claims. 28 U.S.C. 1491(a). This jurisdictional provision concerns monetary claims. See Bywaters v. U.S., 670 F.3d 1221, 1224 (Fed. Cir. 2012) ("The United States Court of Federal Claims has exclusive jurisdiction over such claims where the amount in controversy is greater than $10,000 . . . ."). EPA is not providing monetary compensation. Instead, EPA is working within the constraints of its stratospheric protection program to compensate for lost opportunities in 2010 by allocating additional allowances in 2013-2014.
Issuance of recoupment allowances in this final action is well within EPA's statutory authority. Section 605 of the CAA authorizes EPA to promulgate regulations phasing out the production and consumption of class II substances in accordance with the phaseout schedule as accelerated pursuant to section 606. Section 607 authorizes EPA to issue production and consumption allowances. As long as EPA does not issue allowances in excess of the accelerated phaseout schedule, the precise quantity of allowances issued in any given control period is subject to the Agency's discretion. In the circumstance of the Court's remand and vacatur, EPA can correct the legal error found by the Court by issuing additional allowances while at the same time ensuring that the total quantity remains consistent with the accelerated phaseout schedule.
> DuPont believes that it is unnecessary to consider any option with regard to "recoupment" of 2010 allowances since this action is not required by the CAA or the D.C. Circuit decision in Arkema. DuPont comments that while EPA discusses several related matters in the Proposed Rule, including advantages for the environment, public health and the reclamation industry in not providing any additional "recoupment" allowances, DuPont believes that the agency is under no legal duty to provide additional allowances to certain companies on a policy basis.
      DuPont comments that reducing their company's allowances in future allocation periods to provide "recoupment" would cause significant financial harm to DuPont. DuPont believes EPA has a duty to avoid such harm and no authority to impose it on the basis that has been articulated by companies seeking additional allowances. DuPont further believes that EPA should not finalize any of the recoupment options outlined in the Proposed Rule or the regulatory language in 40 C.F.R. § 82.16(a)(2) providing such allowances for the 2013 calendar year. [0070, 0020]
EPA Response: See section IV.B.6. of the preamble to the final rule for a full response. See section IV.A.1. of the preamble for additional discussion of "vested rights" and market share as it relates to the Arkema decision.
> Coolgas agrees with EPA and does not support recoupment of 2010 allowances for those companies that benefited by the court's decision in Arkema v. EPA. The court's mandate issued on February 4, 2011, by which time all of the 2010 HCFC allowances had expired. Therefore, EPA is obligated to adhere to the court's mandate only with respect to HCFC allowances for 2011-2014. According to the commenter, to provide additional allowances would be contrary to the Proposed Rule's efforts to reduce allocations for 2012-2014. In addition, EPA has a long-standing policy against re-allocation of market share; the proposed recoupment options would violate such policy. The proposed recoupment would, in effect, re-allocate market share to the recoupment recipients at the expense of companies not receiving recoupment. [0088]
EPA Response: See section IV.B.6. of the preamble to the final rule and previous responses in this section for a full response.
> NRI does not support recoupment, noting that EPA has already stated that the 2010 control period has expired and 2010 allowances have no current or future value. [0068]
EPA Response: See section IV.B.6. of the preamble to the final rule and previous responses in this section for a full response.
Two commenters, Solvay and Arkema, believe that the decision in Arkema v. EPA should be interpreted as applying to the 2010 allocation and support recoupment.
> Solvay states that recoupment allowances must be issued, and further states that there can be no doubt that the 2010 allowances were covered under the litigation. The deprivation of rightful allowances beginning in 2010 was the reason for the litigation, and the Court ordered EPA to "promptly" make these changes for the entire 2010-2014 control period. Solvay comments that to comply with the Court order, recoupment is essential to remedy the error made by the EPA in issuing the 2010 HCFC allowances.
      Solvay disagrees with EPA's concern that as the number of allowances is lowered, providing the recoupment allowances could upset the market by depriving other holders of the allowances they anticipate they will receive. Solvay also disagrees with EPA's statement that if EPA were to literally follow the Court's order and provide the 2010 consumption allowances, they could not be used to consume or produce product since these allowances have expired. Solvay quotes AT&T Corp. v. FCC, 448 F.3d 426, 433(D.C Cir. 2006) for the proposition that when an agency "...commits legal error, the proper remedy is one that puts the parties in the position they would have been in had the error not been made" (citing Exxon Co. v. FERC, 182 F.3d 30, 47 (D.C. Cir. 1999). Solvay notes that the Court has further held that the proper remedy to an error is "to put the victim of the agency error `in the economic position it would have occupied but for the error'." [The correct citation for this quotation is Ethyl Corp. v. Browner, 67 F.3d 941, 945 (D.C. Cir. 1995) (quoting Delta Data Sys. Corp. v. Webster, 744 F.2d 197, 206-07 (D.C. Cir. 1984).]
      Solvay notes that the faulty production and consumption baselines determined individual company allowances not for the single year of 2010, but as EPA itself notes, for five years, 2010 through 2014. Further, the Court ruled that absent a new act of Congress, these 2010 allowances cannot be withheld. Solvay comments that there is still ample time to implement this remedy and Solvay has repeatedly suggested scenarios for recoupment, as well as reminding the agency that it has an obligation to promptly issue these recoupment allowances. [0064, 0026]
EPA Response: After reviewing comments and relevant case law, and considering the Agency's ability to provide a remedy for the legal error identified by the Court, EPA has decided to provide recoupment for both HCFC-22 and HCFC-142b allowances. The agency believes this addresses any remaining issues arising from the Arkema v. EPA decision. See section IV.B.6. of the preamble to the final rule and earlier responses in this section for a full response.