DRAFT EPA DOCUMENT  2 regulations, the science of ozone layer depletion, and other related topics.

SUPPLEMENTARY INFORMATION: This proposed rule concerns Clean Air Act restrictions on the consumption, production and on the use of methyl bromide ( class I, Group VI controlled substance) for critical uses after the phaseout date of January 1, 2005. Under the Clean Air Act, methyl bromide consumption and production will be phased out on January 1, 2005 apart from allowable exemptions, namely the proposed critical use exemption and the existing quarantine and pre shipment exemption. With today's action, EPA is proposing a framework for how the critical use exemption will operate as well as specific amounts of methyl bromide to be made available for proposed critical uses.

Table of Contents I. General Information A. Regulated Entities B. How Can I Get Copies Of Related Information ? C. How and To Whom Do I Submit Comments? D. How Should I Submit CBI To the Agency? II. What is the Background of the Phaseout Regulations for Ozone Depleting Substances? III. What is Methyl Bromide? IV. What is the Legal Authority for Exempting the Production and Import of Methyl Bromide for Critical Uses Authorized by the Parties to the Montreal Protocol? V. What is the Critical Use Exemption Process? VI. What are Today's Proposed Changes to the Phaseout Schedule for Methyl Bromide? A. What is the Total Amount of Methyl Bromide that May be Supplied for U. S. Critical Uses? B. What is the Proposed Regulatory Framework for Implementing the Critical Use Exemption And What is a Critical Use Allowance ( CUA) and a Critical Stock Allowance ( CSA)? C. How Will Critical Use Allowances ( CUAs) be Distributed? D. How are Critical Stock Allowances ( CSAs) Distributed? E. Are Allowances to be Allocated on a Sector Specific Basis or as One Lump Sum for All Sectors? F. How Many Critical Use Allowances ( CUAs) and Critical Stockpile Allowances ( CSAs) Will Producers, Importers and Distributers be Allocated? G. What are the Tracking Requirements for a Sector or Applicant Specific Allocation? H. How Do " Approved Critical Users" Acquire Methyl Bromide Under Today's Proposal? I. Who is an Approved Critical User? J. Can New Market Entrants or New Consortia Members be Approved Critical Users? DRAFT EPA DOCUMENT  3 K. What Uses and " Limiting Critical Condition" are Permitted Access to the Methyl Bromide under the Critical Use Exemption? L. What are the Reporting Requirements? M. What are the Record Keeping Requirements? N. How Often will Critical Use Allowances ( CUAs) be Distributed and How are Allowances Expended? O. Can Allowances be Traded? P. Are Allowances Bankable from One Year to the Next? Q. How is Unused Critical Use Methyl Bromide Treated at the End of the Compliance Period? R. What are the Enforcement Provisions Governing Critical Uses? S. What is the Interaction between this Proposed Rulemaking and the Federal Insecticide, Fungicide and Rodenticide Act ( FIFRA)? VII. What are Other Options on which EPA Seeks Comment? C. Distribution of Critical User Permits ( CUP) to End Users of Methyl Bromide. D. What is a CUP and Can it Be Traded? E. Who is Eligible to Receive an Initial Allocation of CUPs and Who May Use CUPs? F. Who May Hold a CUP? G. Methods for Distribution of Critical User Permits: Distribution Based on Data. H. Submitting Individual Entity Data. I. Methods for Distribution of Critical User Permits: Distribution Using Auctions. J. Frequency of Auctions and Set Asides. K. Other Methods for Distributing CUPs. L. Tracking Permits M. Redeeming CUPs for Methyl Bromide N. Reporting Requirements for CUP Holders O. Interaction between CUPs and CUAs. VIII. What Conforming Amendments Is EPA Proposing With Respect to Essential Use Allowances? IX. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health & Safety Risks H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer Advancement Act DRAFT EPA DOCUMENT  4 I. General Information A. Regulated Entities Entities potentially regulated by this proposed action are those associated with the production, import, export, sale, application and use of methyl bromide. Potentially regulated categories and entities include:

Category Examples of Regulated Entities Industry Producers, Importers and Exporters of methyl bromide; Applicators, Distributors of methyl bromide; Users of methyl bromide, e. g. farmers of vegetable crops and seedlings; and owners of stored food commodities and structures such as grain mills and processors, Government and non government researchers.

The above table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this proposed action. This table lists the types of entities that EPA is aware could potentially be regulated by this proposed action. To determine whether your facility, company, business, or organization is regulated by this proposed action, you should carefully examine the regulations promulgated at 40 CFR 82, Subpart A. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding " FOR FURTHER INFORMATION CONTACT" Section.

B. How Can I Get Copies Of This Document and Other Related Information ? 1. Docket. EPA has established an official public docket for this action under the Office of Air and Radiation Docket & Information Center, Electronic Air Docket ID No. OAR 2003 0230. The official public docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information ( CBI) or other information whose disclosure is restricted by statute. The official public docket is the collection of materials that is available for public viewing at EPA West, 1301 Constitution Ave. NW, Room B108, Mail Code 6102T, Washington, D. C. 20460, Phone: ( 202) 566 1742, Fax: ( 202) 566 1741. The materials may be inspected from 8: 30am until 4: 30pm Monday through Friday, excluding legal holidays. A reasonable fee may be charged for copying docket materials. 2. Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the " Federal Register" listings at http:// www. epa. gov/ fedrgstr/. An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. EPA prefers that you use the electronic EPA Dockets at http:// www. epa. gov/ edocket/ to submit or view public comments and access the index listing of the contents of the official public docket. To locate the docket on EPA's docket website, select " search," then key in the appropriate docket identification number, in this case OAR 2003 0230. DRAFT EPA DOCUMENT  5 Additional supporting documents related to this proposed action may be found in EPA's electronic docket system, docket numbers OAR 2002 0018 and OAR 2003 0017 and in EPA's paper docket, Air Docket ID No. A 2000 24. Certain types of information will not be placed in the EPA Dockets. Information claimed as confidential business information ( CBI) and other information whose disclosure is restricted by statute, will not be included in the official public docket and will not be available for public viewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified in Unit B. For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or in paper, will be made available for public viewing in EPA's electronic public docket as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in EPA's electronic public docket. Public comments submitted on computer disks that are mailed or delivered to the docket will be transferred to EPA's electronic public docket. Public comments that are mailed or delivered to the Docket will be scanned and placed in EPA's electronic public docket. Where practical, physical objects will be photographed, and the photograph will be placed in EPA's electronic public docket along with a brief description written by the docket staff.

C. How and To Whom Do I Submit Comments? You may submit comments electronically, by mail or through hand delivery/ courier. The preferred method for submitting comments on this proposed rulemaking is to submit comments to the electronic docket OAR 2003 0230. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your comment, in this instance OAR 2003 0230 Please ensure that your comments are submitted within the specified comment period. Comments received after the close of comment period will be marked late. EPA is not required to consider late comments. If you plan to submit comments, please notify Hodayah Finman, U. S. Environmental Protection Agency, Global Programs Division ( 6205J), 1200 Pennsylvania Ave. NW, Washington, D. C. 20460, ( 202) 343 9246. Information designated as Confidential Business Information ( CBI) under 40 CFR, Part 2, Subpart 2, must be sent directly to the contact person for this notice. However, the Agency is requesting that all respondents submit a non confidential version of their comments to the docket as well. To submit an electronic comment as described below, EPA recommends that you include your name, mailing address, and an e mail address or other contact information in the body of your comment. Also include this contact information on the outside of any disk or CD ROM you submit, and in any cover letter accompanying the disk or CD ROM. This ensures that you can be identified as the submitter of the comment and allows EPA to contact you in case EPA cannot DRAFT EPA DOCUMENT  6 read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. i. EPA Dockets. Your use of EPA's electronic public docket to submit comments is the preferred method for submitting comments. Go directly to EPA dockets at http:// www. epa. gov/ edocket, and follow the online instructions for submitting comments to docket OAR 2003 0230. ii. By Mail. Send one copy of your comments to each of the following two offices: U. S. Environmental Protection Agency, Air and Radiation Docket ( 6102), Electronic Air Docket ID No. OAR 2003 0230 Washington, D. C. 20460 and to U. S. Environmental Protection Agency, ( 6205J) 1200 Pennsylvania Ave. N. W., Washington, D. C., 20460 attn: Hodayah Finman docket no. OAR 2003 0230. iii. By Hand Delivery or Courier. Deliver your comments to: Hodayah Finman 1310 L Street N. W., Washington, D. C., 20005, Attention Electronic Air Docket ID No. OAR 2003 0230. Such deliveries are only accepted during the normal hours of operation 9 a. m to 5 p. m. iv. By Facsimile. Fax your comments to both: ( 202) 566 1741, Attention Electronic Air Docket ID No. OAR 2003 0230 and to ( 202) 343 2337, Attention Hodayah Finman, Electronic Ar Docket No. OAR 2003 0230.

D. How Should I Submit Confidential Business Information ( CBI) To the Agency? Do not submit information that you consider to be CBI electronically through EPA's electronic public docket or by e mail. Send or deliver information identified as CBI only to the mail or courier addresses listed in the " FOR FURTHER INFORMATION CONTACT" Section, Electronic Air Docket ID No. OAR 2003 0230. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI ( if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2. In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI should be submitted for inclusion in the public docket and EPA's electronic public docket. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and EPA's electronic public docket without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the " FOR FURTHER INFORMATION CONTACT" Section.

II. What is the Background to the Phaseout Regulations for Ozone Depleting Substances? The current regulatory requirements of the Stratospheric Ozone Protection Program that DRAFT EPA DOCUMENT  7 limit production and consumption of ozone depleting substances can be found at 40 CFR Part 82 Subpart A. The regulatory program was originally published in the Federal Register on August 12, 1988 ( 53 FR 30566), in response to the 1987 signing of the Montreal Protocol on Substances that Deplete the Ozone Layer ( Protocol). The U. S. was one of the original signatories to the 1987 Montreal Protocol and the U. S. ratified the Protocol on April 21, 1988. Congress then enacted, and President Bush signed into law, the Clean Air Act Amendments of 1990 ( CAA or the Act) that included Title VI on Stratospheric Ozone Protection to ensure that the United States could satisfy its obligations under the Protocol. EPA has made several amendments to the regulations since that time.

III. What is Methyl Bromide? Methyl bromide is an odorless, colorless, toxic gas, which is used as a broad spectrum pesticide and is controlled under the CAA as a Class I ozone depleting substance ( ODS). Methyl bromide is used in the U. S. and throughout the world as a fumigant to control a wide variety of pests such as insects, weeds, rodents, pathogens, and nematodes. Additional characteristics and details about the uses of methyl bromide can be found in the proposed rule on the phaseout schedule for methyl bromide published in the Federal Register on March 18, 1993 ( 58 FR 15014) and the final rule published in the Federal Register on December 10, 1993 ( 58 FR 65018). The phaseout schedule for methyl bromide was revised in a concurrent proposal and direct final rulemaking on November 28, 2000 ( 65 FR 70795) which allowed for the phased reduction in methyl bromide consumption and extended the phaseout to 2005. The revised phaseout schedule was again amended to allow for an exemption for quarantine and preshipment purposes on July 19, 2001 ( 66 FR 37751) with an interim final rule and with a final rule ( 68 FR 238) on January 2, 2003. Information on methyl bromide can be found at the following sites of the World Wide Web: http:// www. epa. gov/ ozone/ mbr and http:// teap. org or by contacting the Stratospheric Ozone Hotline at 1 800 296 1996. Because it is a pesticide, methyl bromide is also regulated by EPA and the states under the Federal Insecticide, Fungicide, and Rodenticide Act ( FIFRA) and other statutes and regulatory authority. Under FIFRA, methyl bromide is a restricted use pesticide. Because of this status, a restricted use pesticide is subject to certain federal and state requirements governing its sale, distribution, and use. Nothing in this proposed rule implementing the Clear Air Act is intended to derogate from provisions in any other federal, state, or local laws or regulations governing actions including, but not limited to, the sale, distribution, transfer, and use of methyl bromide. All entities that would be affected by the proposed provisions must continue to comply with FIFRA and other pertinent statutory and regulatory requirements for pesticides ( including, but not limited to, requirements pertaining to restricted use pesticides) when acquiring, selling, distributing, transferring, or using methyl bromide for critical uses. The proposed regulations in today's rulemaking are intended only to implement Clean Air Act restrictions on the production, consumption and use of methyl bromide for critical uses exempted from the phaseout of methyl bromide.

IV. What is the Legal Authority for Exempting the Production and Import of Methyl DRAFT EPA DOCUMENT  8 Bromide for Critical Uses Authorized by the Parties to the Montreal Protocol? Methyl bromide was added to the Protocol as an ozone depleting substance in 1992 through the Copenhagen Amendment to the Protocol. The Parties to the Protocol established a freeze in the level of methyl bromide production and consumption for industrialized countries at the 1992 Meeting in Copenhagen. The Parties agreed that each industrialized country's level of methyl bromide production and consumption in 1991 should be the baseline for establishing the freeze. EPA published a final rule in the Federal Register on December 10, 1993 ( 58 FR 69235), listing methyl bromide as a class I, Group VI controlled substance, freezing U. S. production and consumption at this 1991 level, and, in Section 82.7 of the rule, setting forth the percentage of baseline allowances for methyl bromide granted to companies in each control period ( each calendar year) until the year 2001 ( 58 FR 65018). This phaseout date was consistent with requirements under 602( d) of the CAA for newly listed class I ozone depleting substances that " no extension under this subsection may extend the date for termination of production of any class I substance to a date more than 7 years after January 1 of the year after the year in which the substance is added to the list of class I substances." Therefore, the 1993 regulation established a United States phaseout for methyl bromide in 2001. At their 1995 meeting, the Parties made adjustments to the methyl bromide control measures and agreed to reduction steps and a 2010 phaseout date for industrialized countries with exemptions permitted for critical uses. At this time, the U. S. continued to have a 2001 phaseout date in accordance with the Clean Air Act language. At their 1997 meeting, the Parties agreed to further adjustments to the phaseout schedule for methyl bromide in industrialized countries, with reduction steps leading to a 2005 phaseout for industrialized countries. In October 1998, the U. S. Congress followed by amending the CAA to direct EPA to promulgate regulations reflecting the Protocol phaseout date of 2005, with interim phasedown steps in 1999, 2001, and 2003, and permitting exemptions for quarantine and preshipment uses, and for critical uses. In Section 764 of the 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act ( PL 105 277, October 21, 1998), Congress amended Title VI of the CAA to bring the U. S. phaseout of methyl bromide in line with the global requirements specified under the Protocol and to provide for the exemptions under the Protocol. These amendments were codified in Section 604 of the CAA. On November 28, 2000, EPA issued regulations to amend the phaseout schedule for methyl bromide and extend the phaseout to 2005 ( 65 Fed Reg. 70795). Today, EPA is proposing to further amend 40 CFR Part 82 to implement an exemption to the 2005 phaseout of methyl bromide that allows continued production and consumption of methyl bromide for critical uses. Section 604( d)( 6) of the Clean Air Act, as added in 1999, provides that "[ t] o the extent consistent with the Montreal Protocol, the Administrator, after notice and the opportunity for public comment, and after consultation with other departments or instrumentalities of the Federal Government having regulatory authority related to methyl bromide, including the Secretary of Agriculture, may exempt the production, importation, and consumption of methyl bromide for critical uses." 42 U. S. C. § 7271c( d)( 6). Article 2H ( 5) of the Montreal Protocol provides that the 2005 methyl bromide phaseout shall not apply " to the extent the Parties decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses." DRAFT EPA DOCUMENT  9 Both Section 604( d)( 6) and Section 614( b) of the CAA address the relationship between the Montreal Protocol and actions taken under Title VI of the Act. Section 604( d)( 6) addresses critical uses specifically, while Section 614( b) is more general in scope. Section 604( d)( 6) states that the critical use exemption must ensure consistency with U. S. obligations under the Protocol. Section 614( b) states that Title VI " shall be construed, interpreted, and applied as a supplement to the terms and conditions of the Montreal Protocol, as provided in Article 2, paragraph 11 thereof, and shall not be construed, interpreted, or applied to abrogate the responsibilities or obligations of the United States to implement fully the provisions of the Montreal Protocol. In case of a conflict between any provision of this subchapter [ Title VI] and any provision of the Montreal Protocol, the more stringent provision shall govern." Accordingly, EPA may not adopt a more expansive definition of " critical use" domestically than the definition agreed to by the Parties to the Protocol since a more expansive definition would not be consistent with U. S. implementation of its obligations under the Protocol. EPA must take into account not only the text ofArticle 2H but also the related Decisions of the Protocol Parties that interpret that text. Under customary international law, as codified in the 1969 Vienna Convention on the Law of Treaties ( 8 International Legal Materials 679 ( 1969)) both the treaty text and the practice of the parties in interpreting that text form the basis for its interpretation. Although the United States is not a party to the 1969 Convention, the United States has regarded it since 1971 as " the authoritative guide to current treaty law and practice." See Secretary of State William D. Rodgers to President Richard Nixon, October 18, 1971, 92d Cong., 1st Sess., Exec. L ( Nov. 22, 1971). Specifically, Article 31( 1) of the Vienna Convention provides that "[ a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose." Article 31( 3) goes on to provide that "[ t] here shall be taken into account, together with the context: ( a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions." In the current circumstances, the relevant Decisions of the Parties can be construed as subsequent consensus agreements among the Parties to the Montreal Protocol, including the United States, regarding the interpretation and application of the Protocol. In accordance with Article 2H( 5), the Parties have issued several Decisions pertaining to the critical use exemption. At their Ninth Meeting in 1997, the Parties issued Decision IX/ 6 which established criteria applicable to the critical use exemption. In Decision IX/ 6, the Parties agreed as follows: ( a) That a use of methyl bromide should qualify as " critical" only if the nominating Party determines that: ( i) The specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption; and ( ii) There are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination; ( b) That production and consumption, if any, of methyl bromide for critical uses should be permitted only if: ( i) All technically and economically feasible steps have been taken to minimize the DRAFT EPA DOCUMENT  10 critical use and any associated emission of methyl bromide; ( ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked or recycled methyl bromide, also bearing in mind the developing countries' need for methyl bromide; ( iii) It is demonstrated that an appropriate effort is being made to evaluate, commercialize and secure national regulatory approval of alternatives and substitutes, taking into account the circumstances of the nomination . . . Non Article V [ Developed country] parties must demonstrate that research programmes are in place to develop and deploy alternatives and substitutes. . . The Parties also agreed in Decision IX/ 6 that the Technology and Economic Assessment Panel, which, together with its Technical Options Committees, reviews nominations and makes recommendations regarding approval, would base its review and recommendations on the criteria in paragraphs ( a)( ii) and ( b). The criterion in paragraph ( a)( i) was not subject to review by the Protocol's Panels or Committees. At the First Extraordinary Meeting of the Parties in March of 2004, the Parties issued several decisions that address the agreed critical uses, the allowable levels of new production and consumption for critical uses, the conditions for granting critical use exemptions, and reporting obligations. Decision Ex. I/ 3 covers the agreed critical uses and allowable levels of new production and consumption for the year 2005. This Decision includes the following terms: 1. For the agreed critical uses set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol for each Party, to permit, subject to the conditions set forth in decision Ex. I/ 4, the levels of production and consumption set forth in annex II B to the present report which are necessary to satisfy critical uses, with the understanding that additional levels and categories of uses may be approved by the Sixteenth Meeting of the Parties in accordance with decision IX/ 6; 2. That a Party with a critical use exemption level in excess of permitted levels of production and consumption for critical uses is to make up any such difference between those levels by using quantities of methyl bromide from stocks that the Party has recognized to be available; 3. That a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol when amounts from stocks combined with allowable production and consumption for critical uses exceed the total level for that Party set forth in annex II A to the present report; 4. That Parties should endeavor to allocate the quantities of methyl bromide recommended by the Technology and Economic Assessment Panel as listed in annex II A to the report of the First Extraordinary Meeting of the Parties; 5. That each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/ 6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks. Each Party is requested to report on the implementation of the present paragraph to the Ozone Secretariat; DRAFT EPA DOCUMENT  11 The agreed critical uses and allowable levels of production and consumption are set forth in annexes to the Parties' report. Decision Ex I/ 4 addresses the conditions for granting and reporting critical use exemption for methyl bromide. Decisions IX/ 6, Ex. I/ 3, and Ex. I/ 4 are subsequent consensus agreements of the Parties that address the interpretation and application of the critical use provision in Article 2H( 5) of the Protocol. For example, Decision Ex. I/ 3 reflects a decision called for by the text of Article 2H( 5) where the parties are directed to " decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses." EPA intends to follow the terms of Decisions IX/ 6, Ex. I/ 3, and Ex. I/ 4. This would ensure consistency with the Montreal Protocol and would also satisfy the requirements of Section 614( b) of the CAA. Decision Ex. I/ 3 recognizes that article 2H( 5) of the Protocol contemplates that the Parties will make two separate determinations when establishing the critical use exemption. First, the Parties agree on the total amount and categories of uses that are deemed critical under the criteria established in Decision IX/ 6. Second, the Parties determine the maximum level of new production and consumption that should be permitted because it is necessary to satisfy those critical uses. Under paragraph 1 of Decision Ex. I/ 3, the first of the these determinations ( the " agreed critical uses") is reflected in annex II A to the report of the First Extraordinary Meeting of the Parties. For the United States, the Parties agreed to 16 critical uses for methyl bromide and authorized use of 8,942 metric tonnes of methyl bromide for these critical uses. The second of these determinations is set forth in annex II B which allows the United States 7,659 metric tons of production and consumption of methyl bromide to satisfy critical uses. Where the level of agreed critical uses exceeds the level of new production and consumption determined by the Parties to be necessary to satisfy those uses, a Party is to utilize available stocks of methyl bromide to fill the gap. Decision Ex. I/ 3, para. 2. Parties are to ensure that the total use of methyl bromide material supplied from existing stocks and new production and consumption does not exceed the overall level of use agreed to be critical. Decisions Ex. I/ 3, para. 3. Thus, Decision Ex. I/ 3 establishes two caps with respect to methyl bromide for 2005   one on the level of new production and consumption for critical uses and one on the total usage of methyl bromide in the agreed critical use categories. Under this Decision, the United States is allowed a total of 8,942 metric tons of methyl bromide in 2005 to satisfy critical uses. In accordance with Ex I/ 3, the quantity of new production and consumption in combination with the amount of stocks determined to be available for the specified critical uses cannot exceed for 2005 the amount of 8,942 metric tons. Because of the cap on the amount of methyl bromide available for the specified critical uses, EPA will not authorize new production and consumption that, when combined with use of available stocks, would exceed the agreed critical use level of 8,942 metric tons. The methyl bromide to satisfy those uses may be derived from available stocks of material or new production and consumption. The upper limit on the amount of new production and consumption for the specified critical uses is up to 7,659 metric tons. However, this level of new production and consumption was authorized by the Parties subject to compliance with the conditions set forth in Decisions Ex. I/ 3 and Ex. I/ 4. One of these conditions, in paragraph 5 of Decision Ex. I/ 3, provides that " each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision DRAFT EPA DOCUMENT  12 IX/ 6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks." In accordance with this paragraph, when the EPA authorizes new production and consumption for critical uses under Decision Ex. I/ 3, the Agency should ensure that it takes available stocks into account and applies the criteria in Decision IX/ 6. These criteria in Decision IX/ 6 include the direction in paragraph 1( b) " That production and consumption, if any, of methyl bromide for critical uses should be permitted only if: ... ( ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked or recycled methyl bromide." Thus, to remain consistent with Decision IX/ 6 and Decision Ex. I/ 3, paragraph 5, EPA's decision to license new production and consumption of methyl bromide for critical uses will musttake into account available stocks of methyl bromide material. Therefore, EPA is adjusting the level of new production and consumption allowed in the United States to reflect the amount of methyl bromide from stocks recognized by EPA to be " available" for critical uses. In addition, to prevent the total use levels of methyl bromide from exceeding the critical use cap, Paragraph 3 of Decision Ex. I/ 3 requires that Parties prohibit the use of stocks of methyl bromide under certain circumstances. This provision states that " a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol when amounts from stocks combined with allowable production and consumption exceed the total level for that Party set forth in annex II A to the present report." This restriction applies in countries where methyl bromide material necessary to meet the agreed critical uses is derived from a combination of available stocks and new production or imports. In this situation, a Party may not allow the total amount of material supplied from stocks and new production and consumption to exceed the level of use determined by the Parties to be critical. This restriction is necessary to ensure that a Party's total level of critical use does not exceed the level which formed the basis for the Parties' decision to authorize new production and consumption at particular levels. Thus, to accord with Decision Ex. I/ 3, if EPA authorizes new production and consumption to supplement available stocks, EPA will restrict the use of existing stocks of methyl bromide in cases where use of stocks combined with the authorized level of new production and consumption could exceed the critical use cap. In light of the Parties' agreement in Decision Ex. I/ 3 that such a restriction is needed to implement Article 2H( 5) of the Protocol, EPA is authorized under sections 604( b)( 6) and 614( b) of the Clean Air Act to regulate the use of existing stocks of methyl bromide. EPA's power under section 604( b)( 6) to exempt new production, importation, and consumption of methyl bromide for critical uses exists only " to the extent consistent with the Montreal Protocol." 42 U. S. C. § 7671c( b)( 6). Because the Parties have interpreted the Protocol to impose such a use restriction as a condition for the authorization of new production and consumption for critical uses, EPA will adhere to the same restriction in its domestic implementation of the critical use exemption. This adherence is consistent with Section 614( b) of the Clean Air Act. 42 U. S. C. § 7671m( b). Although many parts of the Montreal Protocol and subchapter VI of the Clean Air Act focus on controlling the production and consumption of ozone depleting substances, select provisions also require restrictions on the use of such substances. For example, section 605 of the DRAFT EPA DOCUMENT  13 Clean Air Act restricts the use of class II substances ( hydrochloroflourocarbon) to a limited number of applications starting in 2015. 42 U. S. C. § 7671d( a). Section 608 of the Act requires the Administrator to promulgate regulations to reduce the use and emission of class I substances during the service, repair, and disposal of appliances and refrigeration equipment. 42 U. S. C. § 7671g. The essential use exemption in sections 604( d)( 1)( 3) authorizes limited production of controlled substances subject to the limitation that such substances may only be used in specific applications. 42 U. S. C. § 7671c( d). Likewise, the critical use exemption under section 604( d)( 6) permits exempted production, importation, and consumption but only " for critical uses." 42 U. S. C. § 7671c( d)( 6). Thus, under the essential use and critical use exemptions, new production and consumption is necessarily restricted to particular use categories. In the case of the critical use exemption for methyl bromide, the Parties recognized in Decision Ex. I/ 3 that the use restrictions on newly produced material must also extend to the use of existing stocks of such material in those use categories for which new production and consumption has been permitted by the Parties under the exemption. As noted above, such a restriction is necessary to ensure that Parties abide by the critical use representations underlying the authorization of new production and consumption. Where new production and consumption is authorized because sufficient material is not available from existing stocks, then the predicate for this decision would be undermined if Article 2H( 5) of the Protocol was interpreted to permit unrestricted use of existing stocks in the categories of use that may utilize newly produced material. Furthermore, placing such a limitation on the use of existing stocks encourages the entities in possession of the methyl bromide material to make it available for critical uses. If quantities of methyl bromide greater than the available amount identified by EPA cannot be sold for critical uses, suppliers are prevented from subsequently introducing additional quantities into the market after the EPA has authorized new production for a given year. This limitation reduces the incentive for entities to withhold methyl bromide material from the market in order to induce EPA to authorize more new production. This kind of a restriction on the use of existing stocks is also authorized under the essential use exemption as a condition for allowing new production and consumption. However, for practical reasons the Parties and EPA have never needed to expressly impose such restrictions under the essential use exemption. The limited quantities of CFCs and methyl chloroform produced and consumed in the United States under the essential use exemption have historically been held by the users of such substances. In addition, the number of essential uses and size of the user community is very small. Essential uses have been limited to use of CFCs as propellants in asthma inhalers by not more than 10 companies and the servicing of space vehicles by the National Aeronautical and Space Administration. Thus, it has been much easier under the essential use exemption for the Parties and EPA to determine how much existing material is available to the essential users and to ensure that the exempted production and consumption in a given year was not grossly exceeding the level of essential need. In the case of the essential use exemption, the Parties never agreed to a Decision that limited the amount of material available from stocks for uses deemed essential. However, the Parties track the stocks of these essential use materials to ensure the exempted production and consumption does not result in a growing stockpile. DRAFT EPA DOCUMENT  14 In contrast, in the case of methyl bromide, the majority of existing stocks of methyl bromide are not owned and controlled by users but by producers, distributors, and importers of such material. There are also hundreds of potential users and many uses for methyl bromide. In addition, the Parties have authorized a greater number of critical uses for methyl bromide ( 16 categories in the U. S.), and each of these uses are subject to specific limiting conditions under which methyl bromide use in those categories becomes critical. In this situation, there is more risk that the use level in critical use categories could exceed the level of agreed critical use without express regulation. In the case of essential use allowances, there was no need for an express restriction on use of existing stocks because the marketplace and the user community selfregulated However, in a situations such as methyl bromide where the distribution patterns of the material are different and the user group and critical use profile is much larger, the EPA can no longer rely solely on self regulation to ensure the appropriate use level. Thus, in accordance with these authorities, EPA is proposing a limit on the sale of stocks of methyl bromide to the critical use categories permitted to obtain new production and consumption for their critical uses. This action proposes that holders of stocks will be authorized to sell methyl bromide for critical use by expending critical stock allowances ( CSAs) allocated by EPA through this rulemaking action. The proposed limitation on the sale of stocks is narrowly defined and applicable only to the categories of critical uses for which new production and consumption has been authorized because of a demonstrated critical need. EPA proposes that stocks of methyl bromide produced or imported prior to January 1, 2005, may continue to be used by other applications, not determined to have a critical need, without additional limitations other than those already existing under applicable pesticide laws.

V. What is the Critical Use Exemption Process? The procedural requirements for the critical use exemption are delineated in Decision IX/ 6 of the Parties to the Protocol. As applied in the United States, users of methyl bromide who believe they may meet the criteria to qualify for a critical use exemption may make an application to EPA for inclusion in the U. S. nomination of critical uses. Starting in 2002, EPA began notifying applications as to the availability of the application, and the deadline to apply, with a notice in the Federal Register ( 68 FR 24737) and an announcement on the methyl bromide website at www. epa. gov/ ozone/ mbr. Applicants for the critical use exemption must provide information demonstrating to the U. S. government that they have no technically and economically feasible alternatives to methyl bromide available to them. Applicants for the exemption must also submit information on their use of methyl bromide, on research into the use of alternatives to methyl bromide, on efforts to minimize use of methyl bromide and to reduce emissions and on the specific technical and economic results of testing alternatives to methyl bromide. Applicants may apply as individuals or as part of a group of users ( a " consortium") who face the same limiting critical conditions ( i. e. specific conditions which establish a critical need for methyl bromide). Users of methyl bromide who believe they may meet the criteria to qualify for a critical use exemption may make an application to EPA for inclusion in the U. S. nomination of critical uses. The U. S. government reviews applications and creates a package for submission to the Ozone Secretariat of the Protocol for uses nominated as having a critical need for methyl bromide DRAFT EPA DOCUMENT  15 beyond the phaseout. Each Party must justify such a request by determining that there are no technically and economically feasible alternatives to methyl bromide for the use in question and that significant market disruption would result without continued use of methyl bromide. The critical use nominations ( CUNs) of various countries are then reviewed by a technical committee that advises the countries that have ratified the Protocol ( the " Parties" to the Protocol). This technical committee is known as the Methyl Bromide Technical Options Committee (" MBTOC") of the Technical and Economic Assessment Panel (" TEAP"). Based on the recommendations of MBTOC and TEAP and their own review of the Critical Use Nominations ( CUNs) submitted by various countries seeking a critical use exemption, the Parties, at their annual meeting, take decisions to authorize critical use exemptions which " permit the level of production or consumption [ of methyl bromide] that is necessary to satisfy uses agreed to them to be critical uses" ( Article 2H, paragraph 5). After decisions by the Parties, for each control period, EPA will provide an opportunity such as this for comment on the amounts of methyl bromide that may be supplied under the critical use exemption and the end uses eligible to use critical use methyl bromide. EPA recognizes that users of methyl bromide who qualify for a critical use exemption and producers and importers of methyl bromide, need to have certainty regarding the amounts of methyl bromide that will be available under this proposed exemption and the additional regulatory procedures that govern the production and use of critical use methyl bromide before the phaseout date of January 1, 2005. Therefore, EPA is considering all available regulatory procedures that will allow affected entities to have operational certainty that an exemption of some form will be in place in advance of the phaseout date.

VI. What are the Details of Today's Proposed Action to Implement the Critical Use Exemption for Methyl Bromide? In today's proposed action, which is the first rule EPA has proposed to implement the critical use exemption, the Agency is proposing both ( 1) the regulatory framework for how the exemption will operate; ( 2) and the allocation of the allowances established under this framework to methyl bromide suppliers for the 2005 control period. [ It might be worth addressing why the EPA is not taking action with regard to the other criteria in Decision IX/ 6   e. g., those criteria are already taken into account through other U. S. procedures or through TEAP's consideration.]

A. What is the Total Amount of Methyl Bromide that May be Supplied for U. S. Critical Uses? EPA is proposing a determination that the United States has a critical need for methyl bromide of 8,942,214 kilograms to satisfy the agreed critical uses for 2005 ( including from available stocks and new production or imports). This is the amount that the U. S. government included in the U. S. Critical Use Nomination as adjusted by the Parties in Decision Ex I/ 3. This amount is adjusted from the 9,777,288 kilograms originally nominated by the U. S. government. The difference between the two amounts is accounted for by the following adjustments: ( a) the removal of methyl bromide for tobacco seedling float trays, totaling 1,323 kilograms, a use category that the Parties agreed did not meet the conditions for a critical use exemption, ( b) a reduction of 53,328 kilograms to account for the market uptake of sulfuryl flouride, a newly DRAFT EPA DOCUMENT  16 registered alternative for the fumigation of stored food items, ( c) a reduction of 635,027 kilograms from strawberry field uses of methyl bromide due to further adoption of alternatives, in particular emulsified 1,3 dichloropropene formulations, ( d) a reduction of 145,367 kilograms for turfgrass production to reflect lower application rates using mixtures with lower concentrations of methyl bromide, and ( e) a small number of kilograms based on rounding adjustments. EPA seeks comment on the amount of methyl bromide the Agency has determined to be necessary to satisfy the critical uses authorized by the Parties for 2005 EPA refers commenters to the E Docket where the U. S. nominations and additional responses to MBTOC are available. These are the technical documents which are the basis for the Parties and EPA's determination. Supplies of methyl bromide for critical uses can only be obtained by end users from available stocks of methyl bromide, or, new production or imports if the available stocks are insufficient to meet the needs of the agreed critical uses authorized by the Parties. Based on the review of the nominations discussed above, the Parties to the Montreal Protocol allowed the United States to permit up to 7,659 metric tons of newly produced and imported quantities of methyl bromide for the agreed critical uses set forth in Annex II. a of Decision Ex I/ 3 if this amount is determined by EPA to be necessary to satisfy the agreed critical uses. To accord with Decision Ex. I/ 3, however, the United States will consider during the domestic authorization process implemented by EPA, whether it should adjust the authorized level of new production and consumption for critical uses by the amount of " available" stocks ( consumption is defined as production plus imports minus exports). Specifically, paragraph 5 of Decision Ex 1/ 3 states that the Parties " should ensure that the criteria in paragraph 1of Decision IX/ 6 are applied when licensing, permitting, or authorizing the use of methyl bromide and that such procedures take into account available stocks." The relevant portion of Decision IX/ 6 1( b) states " That production and consumption, if any, of methyl bromide for critical uses should be permitted only if: ... ( ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked and recycled methyl bromide, also bearing in mind the developing countries' need for methyl bromide." As recognized by the Parties, the level of existing stocks may differ from the level of available stocks. In order to apply the Decision IX/ 6 criteria, EPA will assess how much methyl bromide is available from existing inventories and then determine how much is available to meet market demand for critical uses. The Decision clearly points to an adjustment to account for inventory intended to meet the needs of developing countries. Hence, EPA will need to determine not just if stocks exist in the United States but in fact what amount is available for approved critical users in this country. Decision Ex I/ 3 ( 2) further states, " That a Party with a critical use exemption level in excess of permitted levels of production and consumption for critical uses is to make up any such difference between those levels by using quantities of methyl bromide from stocks that the Party has recognized to be available." Thus, Decision IX/ 6 and Decision Ex I/ 3 recognize that not all existing stocks may be available to meet critical uses. Although enumerated in Decision IX/ 6, the needs of Article 5( 1) countries is not the only factor that may limit the availability of stocks for critical uses. The terms of Decision IX/ 6 do not preclude Parties from considering other factors that determine the amount of stocks, if any, that are available. [ This short paragraph is supporting a lot of weight. As it stands now, it highlights DRAFT EPA DOCUMENT  17 the issue for challenge because the existence of an explicit exception just as easily argues for the lack of implicit exceptions. We'd recommend removing, or replacing with language that relies more on EPA's authority and expertise to determine availability. Perhaps use language like: " To accord with Decision Ex I/ 3, the United States will make a determination as to which existing stocks it " recognize[ s] to be available." The EPA has the authority to make this determination, and has developed an analysis which it believes is consistent with the Clean Air Act and with Decision Ex I/ 3."] EPA has solicited information on existing and available stocks from approved critical users and from producers, importers, and major distributors of methyl bromide in the United States through a combination of the critical use exemption applications and information request letters sent to entities pursuant to Section 114 of the Clean Air Act. In developing today's action for the 2005 compliance period, EPA believes it has sufficient information to make a preliminary determination about the level of existing and available stocks. To update this information about existing and available stocks, EPA is publishing in today's Federal Register a Section 114 Information Request asking any person who has stocks of methyl bromide as of [ DATE OF PUBLICATION] that are unrestricted ( not for quarantine and preshipment and produced solely for export to Article 5 countries) and not under contract for delivery to a specific end user to submit information to EPA by [ INSERT 20 DAYS AFTER PUBLICATION]. For years beyond 2005, EPA describes later in this proposed rulemaking annual reporting requirements that will provide the Agency with sufficient information to determine the level of existing and available stocks. EPA proposes to use the following methodology, based on reasoning described below in this section, to determine how much of the existing stocks are available. EPA seeks comment on the proposed formula and reasoning described in the following paragraphs. EPA proposes to determine available stocks using the formula AS = ES  E1  E2  C  N  D where AS = available stocks; ES = existing stocks or unrestricted total stocks held in the United States by producers, importers, distributors, and applicants as of the end of calendar year 2003; E1 = stocks not produced with Article 5 allowances held for export to developing countries; E2 = amounts held for export to developed countries in 2004; C = amounts held in catastrophic reserve; N = amounts held for transition management in non critical use categories in 2005, and; D = the estimated drawdown of stocks by U. S. and international consumers in 2004. Existing stocks do not include restricted stocks of methyl bromide that were produced under the exemptions for quarantine and preshipment and with expended Article 5 allowances to meet the basic domestic needs of Article 5 countries. Export is an important global consideration in determining the level of available stocks for domestic critical uses. The U. S. faces different circumstances from many other Parties because it is a methyl bromide producer country as well as a user country. Unlike the majority of the Parties that have authorized critical uses for 2005, the U. S. has stocks of methyl bromide to meet global demands in 2004 for methyl bromide not just for developing countries but for developed countries as well. Therefore, particularly in the case of the U. S., stocks held by U. S. companies are not necessarily available for U. S. users. This is a different case from Parties that satisfy their demand for methyl bromide strictly through imports. Any stocks available in the distribution chain of an DRAFT EPA DOCUMENT  18 importing country are presumably imported for the express purpose of meeting the demands of domestic end users. EPA believes that an accurate accounting of available stocks must take into account the global demand for the product in both developed ( E2) and developing ( E1) countries as authorized under the Protocol. Furthermore, the U. S. is the world's largest supplier of methyl bromide. In the event of an unforseen catastrophe such as the destruction of a production plant, EPA believes that a strategic buffer should be held in reserve in order to meet real time global demand for methyl bromide. Since U. S. companies supply a significant portion of the world, a catastrophe in the U. S. would not only effect U. S. users but would effect those users who have authorized critical uses in developed countries as well as the users in developing countries who have not yet phased out of methyl bromide. EPA estimates that a catastrophic plant incident that resulted in unforseen shutdown could result in a three month supply disruption and that a catastrophic buffer ( C) equal to the amount of methyl bromide produced for both domestic and overseas markets for transformation, quarantine and preshipment, and critical uses for that period of time is necessary to prevent a significant impact on certain agricultural sectors. EPA seeks comment on the impact of a three month closure on global methyl bromide supplies. In addition, some entities in the U. S. did not apply for a critical use exemption because they intend to meet their small, limited needs through existing U. S. inventories of methyl bromide. EPA therefore has deducted from the available stockpile, amounts ( N) set aside to meet the needs of end users who did not apply for an exemption but who are still using methyl bromide during their transition to alternatives. [ Brevity would be best here; the current text highlights an awkward issue a bit too much.] Finally, stocks in the United States will continue to be sold and used by domestic and international consumers throughout the 2004 calendar year, in advance of the January 1, 2005 phaseout date. This drawdown ( D) should be considered in determining the amount of stocks available for critical uses in 2005. EPA is proposing to use the formula described above to determine how much of the existing stocks are available for critical uses. EPA will then deduct the amount of available stocks from the amount of methyl bromide determined by EPA to be necessary for critical uses. To satisfy the remainder of the critical need that cannot be satisfied with available stocks, EPA is proposing to issue critical use allowances ( CUAs) for new production and import for the agreed critical use categories at a level not to exceed any amounts of methyl bromide authorized by the Parties to be produced or consumed to satisfy critical uses. In Decision Ex. I/ 3, the Parties agreed that for 2005 the United States had demonstrated a critical need for 8,942,214 kilograms of methyl bromide. However, the Parties only authorized the United States to produce up to 7,659,000 kilograms of methyl bromide for critical uses in 2005 with the understanding that the United States would likely have stocks available. In the event that EPA determines that the available stocks are greater than this difference between critical need and authorized production, EPA intends to deduct this additional amount of available stocks from any authorization made by the Parties. EPA believes that this standard is most consistent with the language agreed to in Decision IX/ 6 ( b)( ii) and Decision Ex. I/ 3. Using the formula proposed above ( AS = ES  E1  E2  C  N  D), EPA has determined DRAFT EPA DOCUMENT  19 that 1,656,800 kilograms of methyl bromide are available from existing stocks. Therefore EPA proposes to allocate critical use allowances ( CUAs) authorizing 7,285,414 kilograms of new methyl bromide production or import for the agreed critical use categories in 2005. This proposed quantity of new production or import is the difference between the total amount of methyl bromide use authorized by the Parties for the agreed critical use categories in Decision Ex I/ 3, an amount of 8,942,214 kilograms, and the amount of available stocks of 1,656,800 kilograms. Since EPA is proposing that more than 1,283,214 kilograms, which is equal to five percent of the U. S. baseline is available from stocks, today's action is proposing not to allocate the full amount of new production and import that was authorized by the Parties in Ex I/ 3. In making this determination of available stocks, EPA derived the total amount of existing stocks ( ES) from information that EPA currently has on the amount of methyl bromide stocks held by a handful companies in the United States as of the end of 2003. As described above, EPA is seeking to update its information on existing stocks. The information EPA currently has on existing stocks was obtained through responses to Section 114 requests that EPA sent to this handful of companies. However, each of these companies claimed their responses to EPA's request to be Confidential Business Information. As a result, EPA is not authorized to release this information until it completes the process for evaluating these claims prescribed by the Agency's CBI regulations at 40 C. F. R. Part 2, Subpart B. EPA is currently evaluating the merits of these claims in accordance with these procedures and expects to make a final determination on the CBI claims prior to finalizing the proposed critical use exemption regulation. Pending the completion of the process required under 40 C. F. R. Part 2, Subpart B, EPA is treating the companies' methyl bromide stockpile information as CBI. In addition, EPA is treating the aggregate total of the stocks held by these companies as CBI because of concerns that publication of the aggregate amount could allow the small number of producers, imports, and distributors who know the size of their own holdings to calculate the amounts claimed as CBI by their competitors. Because EPA has not yet completed its review of these CBI claims regarding methyl bromide stocks, this notice does not include the total amount of existing stocks ( ES) and other quantitative values that EPA derived to determine available stocks using the formula set forth above. EPA is concerned that the amount of existing stocks ( ES) could be revealed by simple arithmetic if EPA were to publish its methodology for determining available stocks and quantify all the values used to derive the amount of available stocks except for the amount of existing stocks. However, to provide the public with a meaningful opportunity to comment on its determination of available stocks, EPA has published the total amount of available stocks in this notice and described the methodology used to derive this figure. EPA has also prepared a detailed Technical Support Document which elaborates on the reasoning and methodology that EPA used to calculate each of the values in the formula described above. Interested parties may find a copy of this document within EPA's electronic docket, Electronic Air Docket ID No. OAR 2003 0230, and EPA's paper docket, Air Docket ID No. A 2000 24. If, in accordance with the procedures set forth in 40 C. F. R. Part 2, Subpart B, EPA determines that all or part of the information on existing stocks of methyl bromide stocks may be released to the public, EPA DRAFT EPA DOCUMENT  20 will place this information in the docket and quantify the other values in the formula. As a condition for authorizing new production for the agreed critical use categories, Decision Ex I/ 3 stipulates that Parties will limit the use of stocks by those categories beyond the level that has been determined by a Party to be available for critical uses. In other words, Decision Ex I/ 3 aims to limit the total use of methyl bromide by the agreed critical use categories in a given year to that level agreed by the Parties to be critical. Where new production is permitted on the grounds that sufficient material is not available from stocks, a party will ensure that no more methyl bromide from stocks is used by the authorized critical uses categories than the total amount determined to be available from stocks plus the level of new production authorized by that party. Thus, in accordance with this Decision and other authorities discussed above, EPA is proposing a restriction on the sale of stocks of methyl bromide to the agreed critical use categories that are permitted to obtain new production and consumption. The proposed limitation on the sale of stocks is narrowly defined and applicable only to the categories of critical uses for which new production and consumption has been authorized because of a demonstrated critical need. EPA proposes that stocks of methyl bromide produced or imported prior to January 1,2005, may continue to be used for other applications not determined to have a critical need and authorized by the Parties, without additional limitations other than those already existing under applicable pesticide laws. To implement this rule on a national basis in 2005, EPA proposes to prohibit entities holding stocks of methyl bromide from selling or distributing such material to critical use categories for which new production and import is authorized under Decision Ex I/ 3, unless that entity holds a " critical stock allowance" allocated by EPA. EPA proposes to allocate " critical stock allowances" ( CSAs) in an amount ( 1,656,800 kilograms) equal to the amount of the methyl bromide determined by EPA to be available from stocks for the agreed critical use categories. In the event that market forces reveal that EPA has under predicted the amount of material available from stocks, EPA proposes to allow holders of critical use allowances ( CUAs) to retire such allowances in exchange for additional critical stock allowances ( CSAs) to be issued by EPA. EPA seeks comment on the amounts of critical use allowances ( CUAs) and critical stock allowances ( CSAs) proposed for allocation under the critical use exemption framework. EPA also seeks comment on its methodology for determining available stocks for 2005.

B. What is the Proposed Regulatory Framework for Implementing the Critical Use Exemption And What is a Critical Use Allowance ( CUA) and a Critical Stock Allowance ( CSA)? EPA proposes to implement the critical use exemption by using an allowance system. EPA believes an allowance system that regulates the production and import of critical use methyl bromide, as opposed to regulating the actual users of methyl bromide, is the simplest and most transparent method available for ensuring U. S. compliance with Protocol obligations. There are only a relatively few entities to regulate that produce and import methyl bromide and these entities are already providing high quality reporting data to EPA that is verifiable and easy to track. In accordance with Protocol obligations and CAA requirements the EPA primarily regulates production and consumption ( defined as production plus imports minus exports) of ozone DRAFT EPA DOCUMENT  21 depleting substances. Given that the universe of producers and importers is considerably smaller than the universe of end users, and that producers and importers generally have more infrastructure for regulatory compliance than end users, this method of regulation is proven to be cost effective for ensuring U. S. compliance with obligations under the Montreal Protocol and requirements under the CAA. Thus, EPA proposes to create critical use allowances ( CUA) which would entitle the allowance holder ( producer or importer) to produce or import 1 kilogram of methyl bromide for the exclusive purpose of satisfying the needs of the agreed critical use categories during the 2005 control period ( calendar year). A CUA holder would expend one allowance for producing or importing one kilogram of methyl bromide. In addition, in order to control the amount of methyl bromide obtained in 2005 by the agreed critical use categories, EPA is also proposing to create critical stock allowances ( CSAs). A CSA would entitle the allowance holder ( producer, importer, distributor or applicator) to sell 1 kilogram of methyl bromide of available stockpiled material to an approved critical user. For example, a distributor with 100 CSAs may sell 100 kilograms of stockpiled methyl bromide to an approved critical user for use in an agreed critical use category of fumigation. EPA is proposing to prohibit the sale of methyl bromide stocks to an approved critical user for critical uses without a critical stock allowance. Thus, EPA would control the total amount of stocks that can be sold or distributed to the critical use categories authorized by the Parties through the allocation of a limited number of critical stock allowances. The issuance of critical stock allowances ( CSAs) does not obligate holders of stocks to make these quantities available to critical uses if they choose for practical or business reasons not to sell or distribute stocks to critical uses. However, EPA believes that if the critical need is sufficient, market prices will encourage suppliers to shift material away from other priorities such as export to developing countries. The CSA would be expended upon the sale of methyl bromide to an approved critical user, which would include instances where an approved critical user contracts with a distributor to provide fumigation services. A CSA would not be expended upon the transfer of methyl bromide from producers or importers to a distributor. See the additional discussion below on transfers of CSAs. EPA seeks comments on the proposed allowance allocation framework for implementing the " double cap" agreed to in Decision Ex I/ 3 by the Parties to the Protocol C. How Will Critical Use Allowances ( CUAs) be Distributed? With today's action, EPA is proposing to allocate critical use allowances ( CUAs) to producers and importers of methyl bromide on a pro rata basis based on their 1991 consumption baseline levels. EPA proposes using historic 1991 baseline levels of consumption allowances to allocate CUAs because it is consistent with the method of allocation currently in place under the phaseout of methyl bromide and because EPA has easily verifiable baseline data for 1991. EPA is proposing to use consumption baselines and not production baselines because critical use methyl bromide can be legally sourced in the U. S. through either domestic production or import. A critical use allowance ( CUA), as described in Section B. of this proposed rule, DRAFT EPA DOCUMENT  22 entitles the allowance holder either to produce or to import one ( 1) kilogram of methyl bromide. Therefore, EPA believes that the production baseline would be inappropriate to use since it would exclude importers from meeting the needs of critical uses. Although EPA is proposing to distribute allowances to producers and importers based on the 1991 baseline, EPA also requests comment on the option of allocating allowances to producers and importers based on the volume of material marketed over a previous historic period, such as the immediate past four years. EPA does not have adequate data to create a new baseline of marketed material for methyl bromide producers and importers. EPA believes that acquiring sufficient, credible data of this nature, would require the Agency to review all transaction records for each sale made by a methyl bromide producer or importer to a distributor, other supplier, or directly to end users. It is not clear to EPA that such records are available in their entirety. The Agency is concerned that it would take a long time to compile, receive and analyze such detailed information. In addition, such a process of compiling and submitting the information to make a new baseline determination would impose additional burden on the regulated community. This burden would likely be annual since the volumes of marketed material would not remain static from year to year after 2005. EPA also requests comment on an allocation method that equally divides the number of allowances amongst those entities with historic production and consumption. EPA believes that this would be the simplest approach to allocating allowances. However, a simple division of the critical use allowances ( CUAs) based on the number of entities involved would grossly distort historic and current relative market shares of the regulated entities; some would receive far more than their historic production and consumption and others would receive far less. Allocating allowances based on volume of recently marketed material may more closely reflect current market shares for each company, but, for reasons involving the annual burden on industry and government discussed above, this is not a desirable distributional mechanism. Therefore, EPA is proposing to allocate allowances based on the 1991 historic baseline that has been used for more than a decade in the U. S. to determine relative market shares among producers and importers. Allocating CUAs based on each company's 1991 baseline allowances ( on a pro rata basis) is a better reflection of market share than simply dividing the number of allowances by the total number of entities, and would be less burdensome than conducting a detailed recent historical market share analysis on a an annual basis. Using the 1991 historic baseline method for distributing CUAs is consistent with how EPA has allocated methyl bromide production and consumption allowances for the past decade under the methyl bromide phaseout. EPA seeks comment on these options for baseline determination and critical use allowance ( CUA) distribution. During stakeholder meetings prior to development of this rule, one stakeholder suggested that EPA give the allowances to a third party not for profit entity who would in turn auction the allowances to the producers, importers, and distributors. After the producer, importer and distributor purchased the requisite number of allowances, these entities could then expend the allowances as described in Sections VI. B. and VI. M.. of this proposed rule. The revenue derived from the auction would be used by the not for profit entity to fund transitions to alternatives where the alternatives are technically available but not economically feasible and research into DRAFT EPA DOCUMENT  23 alternatives to methyl bromide where no technically feasible alternatives exist to date. Under the allowance auction approach, no additional activities would be required of the end users but they would receive a substantial benefit in the form of the transition fund described above in this paragraph. One of the economic benefits of the auction would be the redistribution of windfall profits that the producers and importers of methyl bromide currently receive under the phaseout of methyl bromide and that will be extended under the proposed critical use exemption. There are relatively few producers and importers of methyl bromide and the regulatory induced scarcity created by the Protocol and CAA means higher prices can be charged and the additional profits are then received and kept by the producer and importer companies. Under an auction however, producers and importers would pay for the right to produce or import methyl bromide, thereby decreasing their windfall profits. Apart from a small amount of money to maintain operations of the not for profit entity, in theory the revenues derived from the auction could be transferred to end users of methyl bromide to ease the economic burden of their phaseouts. A second stakeholder commented that an auction could be established as follows. EPA would distribute allowances to producers and importers as described in this NPRM which would entitle the companies to take two actions ( a) produce and import kilograms of methyl bromide up to the number of allowances held, or ( b) auction the allowances to critical end users. The end users would then turn in their allowances to the methyl bromide supplier at the time of purchase. EPA seeks comment on these alternative allowance distribution options suggested in stakeholder meetings.

D. How are Critical Stock Allowances ( CSAs) Distributed? EPA proposes to allocate CSAs on a pro rata basis between each of the identified entities that holds stocks. EPA will pro rate the total amount of stocks that the Agency has determined are available between each known entity relative to the percentage of the total existing stocks they hold. For example, if company A holds one percent of all existing stocks and EPA determines that 1,000 kilograms of stocks are available, EPA will issue that company 10 critical stock allowances ( CSAs). EPA believes this is the most equitable and least arbitrary method available for allocating CSAs. Based on information currently available, EPA proposes to issue CSA's to the handful of companies that had stocks of methyl bromide in 2003. The amount allocated to each of these companies ( and any other company that may come forward) will be determined in the final rule on the basis of comments and additional information collected by EPA. EPA seeks comment on the proposal to allocate Critical Stock Allowances on a pro rata basis to these companies ( and any other party holding stocks) based on the amount of stocks held by each entity and the Agency's determination of available stocks for meeting critical use needs. In today's Federal Register, EPA is requesting additional information on the amount of available stocks in the United States. Elsewhere in today's Federal Register EPA is publishing a notice under Section 114 of the CAA calling for every entity to submit to EPA by [ INSERT DATE 20 DAYS AFTER PUBLICATION] information on their stocks of methyl bromide that are unrestricted ( not for quarantine and preshipment and produced solely for export to Article 5 countries) and not under contract for delivery to a specific end user as of [ DATE OF DRAFT EPA DOCUMENT  24 PUBLICATION]. An entity that does not submit information to EPA regarding stocks of methyl bromide they hold for sale or transfer to another entity on [ DATE OF PUBLICATION] will not receive critical stock allowances ( CSAs) in the allocation made in the final rule. Such persons will not, therefore, be able to sell methyl bromide to any of the approved critical users in the 16 agreed critical use categories defined in Decision Ex I/ 3 by the Parties to the Protocol. As noted above, EPA is currently evaluating ( in accordance with the procedures in 40 C. F. R. Part 2, Subpart B) whether the inventory amounts held by individual entities are entitled to be withheld from the public as confidential business information. If EPA makes a final determination that the amount of stocks held by each entity is not confidential business information, then the final rule will contain the specific amounts of CSA's allocated to each entity on the basis of the information submitted to EPA. However, if EPA determines that individual company holdings of methyl bromide stocks are CBI, then the final rule will list the names of the parties issued CSAs without including the amounts. EPA would then confidentially inform each party of amount of CSAs allocated to them for 2005. Alternatively, EPA might be able to allocate CSAs on a pro rata basis without revealing the amount of existing stocks held by each party. This is because the CSA allocation would be a pro rata percentage of " available" stocks, which may be an lesser amount than the aggregate of existing stocks held by all the companies, and therefore not the actual amount held by each of the companies. EPA seeks comment on whether this approach would reconcile its competing obligations to provide notice to the public and to protect confidential business information.

E. Are Allowances to be Allocated on a Sector Specific Basis or as One Lump Sum for All Sectors? Decision Ex I/ 3 ( 4) states that, " Parties should endeavor to allocate quantities of methyl bromide" in accordance with the recommendations made by the Technology and Economic Assessment Panel ( TEAP) as listed in agreed critical use categories. EPA is therefore requesting comment on a sector based allocation of allowances, as well as several other more flexible methods for making allocations. Under a sector specific option, in 2005 EPA would create and allocate 16 different types of CUAs, one type for each end use category authorized by the Parties. End users of methyl bromide made applications to EPA for an exemption and the U. S. government created a nomination of uses with similar circumstances to be considered by the Parties. These nominations aggregated similar circumstances of methyl bromide use into sectors. In a sector specific allocation scheme, each producer and importer of methyl bromide would be allocated 16 different types of CUAs on a pro rata basis in relation to their overall 1991 consumption baseline. For example, assume producer A has a consumption baseline that equals 50% of total allowable U. S. consumption. If the Parties authorized new production of 100 kilograms of methyl bromide for tomatoes and 20 kilograms of methyl bromide for flower nurseries, EPA would allocate 50 tomato critical use allowances ( tomato CUAs) and 10 flower nursery critical use allowances ( flower nursery CUAs) to company A. See Section VI. N. below for the proposed sector specific allocation of CUAs to individual producers and importers. The methyl bromide produced or DRAFT EPA DOCUMENT  25 imported with a tomato CUA could only be sold and used for growing tomatoes by an approved critical user that has the limiting critical conditions cited as the basis for the critical methyl bromide need in the nomination that was subsequently authorized by the Parties. EPA recognizes that not all allowance holders may want or need allowances of all types. For example, some allowance holders may supply only certain geographic markets or certain sectors. If EPA were to implement an allocation scheme, such as a sector specific system, that is more restrictive than the current market, EPA would permit allowance trading amongst allowance holders. Section 607 of the CAA allows for trading in part to encourage rationalization in the industry. It would be difficult for EPA to know exactly which company services which particular group of end users. However, the market based mechanisms ( transfers of allowances) described later in this preamble may rectify such issues under a sector specific allocation scheme. In light of these issues, EPA requests comment on the option of creating one pool of CUAs and one pool of CSAs that can be used to supply critical use methyl bromide across sectors in what is known as a " lump sum" or " universal" approach. This means that critical use methyl bromide produced or imported with CUAs could be used for any of the agreed critical use categories. Likewise, with a lump sum allocation of critical stock allowances ( CSAs), the limited inventory that is available for sale into the critical use market would be for any of the agreed critical use categories. EPA also requests comment on making allowances specific to applicants. Under this option, in 2005 EPA would create and allocate 51 different types of CUAs and 51 different types of CSAs, one for each authorized applicant. Again, these allowances would be distributed to producers and importers in a pro rated fashion and would be tradable amongst them. EPA recognizes that the more types of allowances we create, the more administratively and logistically complex the regulation becomes for the regulated community. With added administrative complexity generally comes higher costs of implementation and greater inflexibility in the market. EPA also is requesting comment on a hybrid approach that would create sector or applicant specific CUAs and universal or " lump sum" CSAs. EPA realizes that stocks may be held by distributors and applicators. Unlike producers and importers whom EPA has historically regulated, some of these entities are smaller or more specialized. For example, EPA is aware of a distributor and custom applicator based on the East Coast that only services customers in the eastern part of the U. S. It is unlikely that this East Coast distributor and applicator will have any customers from the California fruit tree nursery sector that was authorized for critical use methyl bromide, since this is a region the distributor and applicator does not service. Thus, an allocation of fruit tree nursery CSAs would be of little practical use to this company. If the allocation were sector specific, the company could trade its fruit tree nursery CSAs with one of the distributor/ applicator companies that operates in California. However, if the company on the east coast was allocated only a small number of fruit tree nursery CSAs, it may not be worth the time and cost to find a suitable trading partner and engage in the trade. Therefore, EPA is also requesting comment on an allocation scheme that would have sector specific or even applicantspecific CUAs, but universal CSAs. The universal CSAs would alleviate problems associated with dividing small quantities of inventories scattered throughout the distribution system into many different types of end uses that may be of little use to a distributor in a specific geographic DRAFT EPA DOCUMENT  26 location. In addition, the universal CSAs would provide some flexibility to the end user community in the event that unanticipated market forces drive up demand in a particularly commodity area or pest outbreaks in a particular crop are unusually high in a particular growing season. EPA is also requesting comment on making CUAs and CSAs universal but requiring distributors and others who sell methyl bromide directly to end users to " endeavor" to make quantities of critical use methyl bromide available to their customers as prescribed in Decision Ex I/ 3 annex II a. This option would rely on entities at the point of sale to ration methyl bromide to their customers the same way they have been doing under the phaseout  based on each clients historical purchases  in essence giving each sector ( customer) the right of first refusal to a specific quantity of methyl bromide. However, under a scheme where distributors endeavor to make the critical use methyl bromide available in accordance with the quantities associated with specific sectors in annex II a of Decision Ex I/ 3, the methyl bromide, whether from CUAs or CSAs would still be " universal," and distributors would have the flexibility to move quantities of critical use methyl bromide from one sector that does not need their full amount, to another sector that may have higher than anticipated need. Finally, regarding the allocation of critical use allowances ( CUAs) for new production and import of methyl bromide after the January 1, 2005 phaseout, EPA is seeking comments on whether a percentage should be allocated on a sector specific basis and a percentage should be allocated in a universal, lump sum basis. This option of allocating a percentage of the CUAs as sector specific and a percentage of CUAs as universal would provide some measure of certainty for each applicant as well as providing flexibility if a few of the sectors faced greater need for methyl bromide in the 2005 control period. EPA is seeking comments on these hybrid approaches and in particular, comments on what portion of the authorized quantity should be made sector or applicant specific, if any, and what portion should be made universal through any allocation scheme. Under a universal allocation system, EPA anticipates that the actual critical use will closely follow the sector breakout listed by the TEAP and incorporated into Decision Ex I/ 3. [ We are skeptical of the previous statement. Is there a sufficient basis for this?] The TEAP recommendations are based on data submitted by the U. S. which in turn are based on recent historic use data under the current methyl bromide phaseout market which is a " universal" system. In other words, the TEAP recommendations agreed to by the Parties are based on current use and the current uses are taking place in a marketplace where all methyl bromide users compete for the lump sum. Thus, EPA expects that 2005 use under a universal approach will look similar to the TEAP recommendations and annex II a in Decision Ex I/ 3. To the extent that any discrepancies between expected and actual use in 2005 occurs, a later section of today's proposed rulemaking describes tracking and reporting requirements that will help verify actual use by sector and help refine future U. S. nominations for critical use exemptions by highlighting differences between amounts nominated for a sector, recommended by TEAP, and agreed by the Parties and the actual use by that sector during the 2005 control period. EPA believes that a more restrictive allocation based on sector or applicant specific categories would provide some certainty to each sector or group of applicants that a defined DRAFT EPA DOCUMENT  27 amount of methyl bromide would be available for that particular user group. However, under this system, if a user group did not use its entire allowable amount of methyl bromide, it would not be available for other approved critical users. So too, if a group needed more methyl bromide because they had a particularly bad pest infestation or demand for their product suddenly increased, the group would not be able to secure additional quantities without first seeking approval from the Parties during the annual nomination process and obtaining a higher allocation through EPA's subsequent notice and comment rulemaking. A more restrictive sector or applicant specific allocation provides more certainty to each group but at the cost of flexibility. EPA would like to note that currently the methyl bromide market under the phaseout reductions ( since 1994) operates as a " universal" system. All end users of methyl bromide compete in the same marketplace for methyl bromide under the phaseout regulations. [ This language would make things very difficult for us in international fora.] In addition to the logistic and administrative reasons for implementing a universal allocation scheme, there are significant economic reasons to implement such a lump sum approach. The more restrictive the methyl bromide caps are, the less efficient the distribution of methyl bromide one would expect in the market. According to economic theory, under a universal cap, methyl bromide would go to those users with the highest marginal cost of substitution who would set the price of methyl bromide. This price of methyl bromide would lead those users with marginal costs of substitution lower than the price of methyl bromide to move instead to an alternative that may not have been previously economically feasible, thus resulting in a comparatively more efficient distribution of material and an overall lower cost of compliance for the regulated community as a whole. EPA estimates that the benefits to industry ( the analysis discussed below refers to negative costs) of an illustrative sector specific approach may be between $ 20 to $ 27 million; while the benefits ( negative costs) to industry under an illustrative universal approach would be $ 22 to $ 31 million ( see section VII a for more information on this analysis). Thus, the universal approach results in a less expensive regulation to industry overall. However, to the extent that cost savings from the universal approach accrue to the industry as a whole, many stakeholders may prefer the security of knowing that a certain amount of methyl bromide is set aside for their specific end use compared to the theoretical cost savings that could be realized under a less restrictive approach. [ It would be better to communicate this idea more tersely, as suggested in the next paragraph.] In today's action, EPA is seeking comments on several different methods for allocating allowances from more specific than the agreed critical use categories to less specific. The circumstances that are the basis for the U. S. sector nominations and the TEAP recommendations for specific sectors may have changed since that data was submitted. However, since EPA will not make more critical use methyl bromide available than the amount authorized by the Parties, this proposed rulemaking provides stakeholders with the opportunity to request flexibility in how the material is made available to accommodate changes in the marketplace that have transpired since the TEAP review. This NPRM represents part of EPA's endeavor to allocate methyl bromide in accordance with TEAP's recommendations, but the possibility exists that a sectorspecific allocation scheme would be unworkable. Thus, EPA seeks comment on the universal, sector specific, application specific, and hybrid methods for allocating CUAs and CSAs. EPA DRAFT EPA DOCUMENT  28 will evaluate and reconcile these comments and then publish a final rule that describes how allowances will be distributed.

F. How Many Critical Use Allowances ( CUAs) and Critical Stockpile Allowances ( CSAs) Will Producers, Importers and Distributers be Allocated? Using the methodology described in the immediately preceding sections of this proposed rulemaking, EPA proposes the following allocation of critical use allowances and critical stock allowances. In today's proposal, EPA is taking comment on options that would allow for sectorspecific allocations of critical use allowances( CUAs), or for a universal allocation of critical use allowances ( CUAs). In addition, today's action, proposes a universal allocation of critical stock allowances ( CSAs). The distribution of CUAs to specific producers and importers of methyl bromide is as follows for a universal allocation ( Table I), and for a sector specific allocation ( Table II). The proposed distribution of CSAs would be as follows for a universal allocation ( Table III), unless EPA receives new information in response to the Section 114 request published elsewhere in today's Federal Register.

Table I Critical Use Allowance Allocation for the Calendar Year 2005 ( Universal)

Company / Universal Allocation Number of Critical Use Allowances ( kilograms)

Great Lakes Chemical Corporation 4,427,693 Albemarle Corportion 1,820,736 AmeriBrom, Inc. 1,005,814 Trical, Inc. 31,171 Total 7,285,414 Table II Critical Use Allowance Allocation for the Calendar Year 2005 ( Sector Specific)

Sector Specific Allocation Number of Critical Use Allowances ( kilograms) for each Company for Each Sector Approved Critical Use Sectors Great Lakes Chemical Corporation Albemarle Corporation Ameribrom, Inc Trical, Inc.

Chrysanthemum cuttings  rose plants 14,563 5,989 3,308 103 Curcurbits  field 588,133 241,850 133,603 4,141 Dried fruit, beans and nuts 42,955 17,664 9,758 302 DRAFT EPA DOCUMENT  29 Eggplant  field 36,423 14,978 8,274 256 Forest tree nurseries 95,323 39,198 21,654 671 Fruit tree nurseries 22,678 9,325 5,152 160 Ginger production  field 4,555 1,873 1,035 32 Mills and processors 239,155 98,344 54,327 1,684 Orchard replant 349,660 143,785 79,430 2,462 Peppers  field 537,381 220,979 122,074 3,783 Smokehouse ham 449 185 102 3 Strawberry fruit  field 908,020 373,392 206,269 6,393 Strawberry runners 27,227 11,196 6,185 192 Sweet potato  field 40,023 16,458 9,092 282 Tomato  field 1,418,739 583,408 322,287 9,988 Turfgrass 102,409 42,112 23,264 721 TOTAL 4,427,693 1,820,736 1,005,814 31,173 Table III Critical Stock Allowance Allocation Company Number of Critical Stock Allowances ( kilograms)

Company A... ... reserved Company B... ... reserved pending resolution of CBI claim and Section 114 request Total 1,656,800 G. What are the Tracking Requirements for a Sector or Applicant Specific Allocation? In the event that EPA puts in place a final rule that issues sector or applicant specific allowances, EPA must devise a system that would ensures compliance with the sector/ applicant level caps. EPA believes that tracking types of allowances expended ( e. g. pepper CUAs) in order to ensure compliance with a sector cap is essentially an accounting question and is therefore seeking comment on a system that controls sector or applicant level production and import through different types of CUAs. EPA seeks comment on a system where entities in the supply chain such as producers, importers, and distributors would create and keep an on going log of the DRAFT EPA DOCUMENT  30 amount and type of critical use methyl bromide ( i. e., eggplant CUAs), on a per kilogram basis, that they acquire and sell during the year. In addition, entities that acquire critical use methyl bromide from a supplier would sign a self certification form indicating that they understand they are taking possession of a certain number of kilograms of critical use methyl bromide of a specific type. EPA believes that it is the responsibility of the distributor or other supplier to place orders with producers or importers for critical use methyl bromide of the appropriate type to meet the needs of their customers which means that a distributor may have to call more than one company to find the correct type of material in sufficient quantity to meet demand ( see Sections VI. L. and VI. M. for more information on record keeping and reporting requirements). EPA received a suggestion during the public meetings on potential allocation framework options held during the summer of 2003 to require the use of a database system to track critical use methyl bromide. Currently, a real time database system is being used in the state of California to track the use of 1,3 dichloropropene and ensure that the township caps are not exceeded. Under this option, EPA would require registrants to populate the database with information on the allowable critical uses, the approved critical users, and the amount of critical use methyl bromide produced, imported or available from critical stockpiles. Distributors and applicators would consult the database and reserve a specific amount of critical use methyl bromide when an order is placed for the material or for fumigation with critical use methyl bromide. The reservation would freeze the amounts of critical use methyl bromide for 14 days  at which point the company that made the reservation would lose its reservation unless it indicated that the material had already been used in a fumigation. This database could be created by EPA through a contractor or EPA could require regulated entities to utilize existing commercial database programs. EPA believes that producers, importers, distributers, and applicators would likely have to make some capital expenditures to be able to use the database for tracking purposes. EPA believes that the database approach would provide high quality use data on critical use of methyl bromide and that it could be used under a sector specific or applicant specific approach to ensure that distributers and other points of sale do not exceed total allowable amounts of critical use methyl bromide for that particular use. EPA seeks comment on the use of a commercially available database system to track the sale of critical use methyl bromide.

H. How Do " Approved Critical Users" Acquire Methyl Bromide Under Today's Proposal? With today's action, EPA is proposing that approved critical users ( end users) within an agreed critical use sector, that also have the " limiting critical conditions" for their specific circumstances of use, acquire methyl bromide following a system nearly identical to the existing procedures under the quarantine and preshipment exemption ( QPS) to the phaseout of methyl bromide ( 68 FR 237 ( January 2, 2003)). The phrases " approved critical user" and " limiting critical condition" are further discussed below in Sections H. and J., respectively. EPA proposes that approved critical users of methyl bromide who wish to acquire critical use methyl bromide, or who contract for fumigation with critical use methyl bromide, will self certify that they are approved critical users at the time of purchase. EPA will create a form that an approved critical user will complete with basic information about the user ( name, location of fumigation, consortium, etc), the number of kilograms to be purchased and the area to be treated, the agreed DRAFT EPA DOCUMENT  31 critical use category ( i. e. tomatoes, bean storage, etc.), and a check list of the applicable limiting critical conditions approved by EPA and the Parties ( e. g. karst topography, heavy to moderate nutsedge infestation). The form would be signed by the approved critical user ( purchaser) of the methyl bromide and given to the supplier of methyl bromide to indicate that the purchaser is acquiring exempted critical use methyl bromide from the supplier to use in accordance with the exemption and bears the full penalty of law for providing false information or for use that is not in accordance with the critical use exemption regulations. Producers, importers, and distributors will be prohibited from selling methyl bromide in critical use categories without obtaining a self certification from an approved critical user. If an approved critical user seeks methyl bromide from stocks existing prior to 2005, then the user must find a supplier who holds a sufficient amount of critical stock allowances ( CSAs) to sell methyl bromide to an agreed critical use category. To obtain methyl bromide produced or imported in 2005 under the exemption, the approved critical user must go to a supplier who has methyl bromide newly produced or imported through expended 2005 critical use allowances ( CUAs). EPA requests comment on the proposed self certification system.

I. Who is an Approved Critical User? An " approved critical user" is an entity whose circumstance of methyl bromide use is covered by an application that is included in the U. S. nomination and subsequently authorized by a Decision of the Parties to the Montreal Protocol for a critical use exemption and then determined, through an EPA notice and comment rulemaking, to be eligible for exempted critical use methyl bromide ( see Section A. of this proposed rulemaking). Thus, EPA proposes to define an " approved critical user" as a person meeting the following two criteria: ( 1) The user, for the applicable control period, applied to EPA for a critical use exemption or is a member of a consortium that applied for a critical use exemption for a use that was included in the U. S. nomination, authorized by a Decision of the Parties to the Montreal Protocol, and then finally determined by EPA in a noticeand comment rulemaking to be a critical use, AND ( 2) The user has an area that requires methyl bromide fumigation because the area is subject to a limiting critical condition. To summarize, EPA proposes that in order to be an approved critical user, a user must have the circumstances of methyl bromide use included in an application for the specific control period that was nominated by the U. S. for a critical use exemption which was subsequently authorized by the Parties to the Protocol and determined by EPA through notice and comment rulemaking to be a critical use with the limiting critical condition in their circumstance of use of methyl bromide.

J. Can New Market Entrants or New Consortia Members be Approved Critical Users? EPA proposes that an approved critical user can include a member of a consortium during the control period even if the user was not a member at the time the application was submitted to EPA. In today's proposal, EPA is defining consortium as an organization representing a group of DRAFT EPA DOCUMENT  32 methyl bromide users that has collectively submitted an application for a critical use exemption on behalf of all members of the group. The members of a consortium would be determined by the rules established by the consortium. Members could either be required to formally join the consortium ( i. e., by submitting an application or paying dues) or may automatically become members upon meeting particular criteria ( i. e. a grower of a specific crop in a particular region). EPA does not believe that it is up to the Agency or to distributors and third party applicators of methyl bromide to discern between different types of consortium members. For example, the Auburn University Cooperative consists of a certain number of forest seedling nursery operators. The Cooperative made an application to EPA for a critical use exemption that only included its members. Therefore, only members of the Cooperative would qualify as approved critical users pursuant to the consortium's application. However, if a company that was not a member of the Cooperative at the time of the application in 2002 decided to join the cooperative in 2004, EPA is proposing that the company be eligible to access critical use methyl bromide available to members of the consortium once the exemption takes effect in 2005 since the company would be a member of the Cooperative during the control period. A second example is the California Strawberry Commission, which made an application to EPA to cover all strawberry growers in the state of California. Because the initial application was made on behalf of all growers in that state, any strawberry grower in California regardless of the date when he first entered the market is considered by EPA to be a member of the consortium. Thus, a new strawberry grower who enters the market in California in 2005 and who meets the limiting critical condition for the agreed critical use category would be able to access the critical use methyl bromide under the framework set forth in today's proposal. In summary, EPA proposes that an approved critical user may include an entity who newly enters the market of a crop/ use that has a limiting critical condition; an entity who switches to a crop/ use that has a limiting critical condition; an entity who increases production of a crop/ use that has a limiting critical condition; or an entity who switches production of a crop/ use with a limiting critical condition from one physical location to another. In each instance, such an entity would need to meet the limiting critical condition and qualify as a member of consortium that applied for and obtained a critical use exemption. Under the second example described above, any consortium that applied for an exemption for a broad geographic group of users may in fact be encouraging free riders. However, EPA believes that those consortia that applied on behalf of an entire state or region in their initial application believe that all users in that location need a critical use exemption based on technical and economic criteria. Therefore, if a new user enters the market place in that same location, EPA believes that the user would have automatically become a member of the consortium as if he had entered the market at the time the application was made. Therefore, the only remaining relevant question is whether or not the new market entrant in the geographic area meets the limiting critical condition and therefore may be an approved critical user. In public meetings, EPA received a suggestion from the affected community which called for allowing critical use exemptions to only be made available to those users who are " users of record." A user of record was suggested to be an approved critical user who was engaged in production of a crop or commodity in a critically exempted sector immediately prior to the DRAFT EPA DOCUMENT  33 control period. The effect of such a provision would be to require any entity that was not a user of record to use an alternative to methyl bromide for the first year it engages in crop or commodity production. After the first year, the new market entrant would become a user of record and would be able to avail himself of critical use methyl bromide. EPA believes that this system may provide an incentive for new entrants to try alternatives to methyl bromide. However, this system would be difficult to administer outside of the state of California where such information is already tracked by state regulators. In addition, critical use methyl bromide will only be available for those users who do not have any technically and economically feasible alternatives available to them; therefore, a requirement such as the one suggested would foreclose any new entrants altogether. EPA believes that in order to accommodate the ever shifting marketplace, growers and other users of methyl bromide should be allowed to increase or move production as needed so long as total U. S. production and import of methyl bromide for use in a given sector remains under the limits authorized by the Parties and determined to be a critical use in the U. S. through notice and comment rulemaking. Therefore EPA is proposing an option in today's notice that allows for shifts in the marketplace ( market entry and exit, and rotation into new production areas) while still ensuring fairness to those groups who applied for a CUE. It is important to note that the amount of methyl bromide that may be supplied for critical uses in a calendar year ( control period) will not increase even if the number of users or treated area increases. The only way the amount of methyl bromide available for critical uses will be increased is if the Parties authorize such an increase and EPA incorporates the increase into its phaseout regulation through notice and comment rulemaking, a lengthy process. Under the proposed framework outlined in this section, users who have the limiting critical condition but who are not users or members of a group of users that submitted an application to EPA, are not eligible critical users. For example, a consortium applied on behalf of certain raspberry nurseries in California and Oregon. This use was determined by EPA to qualify for an exemption because of the limiting critical condition that there are no technically feasible alternatives which provide adequate control of pests for raspberry nursery propagative stock. If a raspberry nursery operator in California met the limiting critical condition but was not a member of the consortium and needed to buy methyl bromide, under the proposed option, they would not be an approved critical user because the application that was made to EPA was not on behalf of all growers in California, only certain identified companies. EPA did consider allowing such a person to acquire critically exempted material. EPA decided not to propose this option in order to discourage free riders who did not invest the time and effort to apply for an exemption or even join a consortium that submitted an application. EPA understands that users who applied for an exemption sometimes spent hundreds of hours preparing an application for a critical use exemption. EPA recommends that users who did not submit an application or are not part of a consortia, consult with USDA or EPA immediately to determine if they could be included in the next U. S. nomination of critical uses. Such users should also consider contacting any consortium that applied for an exemption for their use category. EPA is seeking comment on this manner of treating new market entrants and users of methyl bromide that were not part of the consortia or companies that submitted applications for critical use exemptions. DRAFT EPA DOCUMENT  34 K. What Uses and " Limiting Critical Condition" are Permitted Access to the Methyl Bromide under the Critical Use Exemption? A " limiting critical condition" is the basis on which the critical need for methyl bromide is demonstrated and authorized. The limiting critical condition placed on a use category reflects certain regulatory, technical or economic factors that either prohibit the use of feasible alternatives or represent the lack of a technically or economically feasible alternative for that use or circumstance. For example, EPA may determine that a critical use exemption for tomatoes is only necessary for areas of tomato production in karst topography even if the EPA received applications for all of U. S. fresh market tomato production. In this example, not all tomato growers would be eligible to acquire exempted critical use methyl bromide. Only those growers with production in an area with the limiting critical condition of karst topography would have access to the methyl bromide under the critical use exemption. Another example is as follows: EPA received applications for exemptions for all U. S. grain milling companies that are members of the North American Milling Association ( NAMA). The Parties authorized the exemption because grain milling companies have a critical need for methyl bromide because the alternatives can not be used, in part, due to corrosivity to electronic equipment. Thus, one of the limiting critical conditions for this critical use category is the presence of sensitive electronic equipment subject to corrosivity from fumigation with the alternative. All grain mills that are members of NAMA that have sensitive electronic equipment would be able to acquire and use critical use methyl bromide. Some approved critical users have limiting critical conditions that are contingent. These " contingent critical uses" are those uses of methyl bromide which qualify as an approved critical use only if a specified condition has been met. For example, a number of potential critical use needs for methyl bromide in California currently use the alternative 1,3 Dichloropropene ( 1,3 D) in various formulations. This chemical is regulated by the state of California so that specific townships have limits on the amount of 1,3 D that can be used over a given time period. Certain of the agreed critical use categories in Decision Ex I/ 3 may have a contingent need for critical use methyl bromide in the event that the township cap for 1,3 D has been reached or exceeded. EPA proposes that producers and importers be allowed to produce and import critical use methyl bromide for contingent uses at any time during the control period. However, EPA is proposing that unused methyl bromide produced or imported for such contingent purposes will be deducted from the total number of CUAs that EPA makes available for the following control period ( it would become stocks available for the use in the subsequent control periods). Below EPA describes the " limiting critical conditions" for each of the agreed critical use categories in Decision Ex I/ 3. EPA seeks comment on these " limiting critical conditions" proposed for each agreed critical use category in Decision Ex I/ 3. EPA seeks comment on the uses of methyl bromide and the limiting critical conditions the Agency has determined meet the criteria for a critical use exemption and refers commenters to the E Docket where the U. S. nominations, additional responses to MBTOC, and a memo describing the determination process are available. EPA wishes to note that while we may, in response to comments, reduce the types and conditions of a critical use compared to what has been authorized by the Parties, EPA will not increase the quantities, and sectors, beyond those authorized by the Parties. Section 2H( 5) of the DRAFT EPA DOCUMENT  35 Protocol limits the critical use exemption to those uses agreed upon by the Parties. The agreed critical uses for 2005 are reflected in Decision Ex. I/ 3. EPA based the proposed " limiting critical conditions" on the data submitted by critical use exemption applicants, as well as public and propriety data sources. The U. S. government, in developing the nomination, defined the limiting critical conditions for which exempted methyl bromide was being sought. The U. S. government used this data to determine if ( a) the lack of availability of methyl bromide for a particular use would result in significant market disruption, and ( b) if there were any technically and economically feasible methyl bromide substitutes available to the user. The analysis was conducted and described in the U. S. nomination of critical uses. This nomination was then sent to the Parties to the Protocol, and the Parties used this information as the basis for the decision which authorized critical uses. Based on the data described above, EPA determined that the following uses with the limiting critical conditions specified below qualify to obtain and use critical use methyl bromide. EPA proposes, based on the determination described in the U. S. nomination and its supporting documents, that users who are in a specific geographic location, identified below, or who are members of a specific industry consortia, identified below, or companies specifically identified below, are approved critical users provided that such users are subject to the specified limiting critical condition.

PRE PLANT USES Cucurbits a) Michigan growers with moderate to severe fungal pathogen infestation; b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, and Virginia growers with moderate to severe yellow or purple nutsedge infestation; Eggplant a) Georgia growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, moderate to severe nematode infestation and/ or moderate to severe fungal pathogen infestation; b) Florida growers with limiting critical conditions: moderate to severe yellow or purple nutsedge infestation and/ or moderate to severe nematode infestation and/ or moderate to severe fungal pathogen infestation and/ or karst topography; Forest Seedlings Approved critical users listed below with one or more of the following limiting critical conditions: moderate to severe fungal pathogen infestation, moderate to severe yellow or purple nutsedge infestation, and/ or moderate to severe disease infestation. a) Members of the Auburn University Southern Forest Nursery Management Cooperative limited to growing locations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia; b) International Paper and its subsidiaries limited to growing locations in Arkansas, Alabama, Georgia, South Carolina and, Texas; c) Weyerhaeuser Company and its subsidiaries limited to growing locations in Alabama, DRAFT EPA DOCUMENT  36 Arkansas, North Carolina, South Carolina, Oregon and, Washington; d) Public ( government owned) seedling nurseries in the states of California, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland, Missouri, Nebraska, New Jersey, Ohio, Oregon, Pennsylvania, Utah, Washington, West Virginia and, Wisconsin; e) Members of the Nursery Technology Cooperative limited to growing locations in Oregon and Washington; and f) Michigan seedling nurseries Ginger a) Hawaii growers with the limiting critical condition of moderate to severe nematode infestation and/ or moderate to severe bacterial wilt infestation; Orchard Nursery Seedlings Approved critical users listed below with one or more of the following limiting critical conditions: moderate to severe nematode infestation, medium to heavy clay soils, and/ or a prohibition of on the use of 1,3 dichloropropene products due to reaching local township limits on the use of this alternative; a) Members of the Western Raspberry Nursery Consortium limited to growing locations in California and Oregon ( Driscoll's raspberries and their contract growers in California and Oregon) b) Members of the California Association of Nurserymen Deciduous Fruit and Nut Tree Growers c) Members of theCalifornia Association of Nurserymen Citrus and Avocado Growers Orchard Replant Approved critical users listed below with one or more of the following limiting critical conditions: replanted ( non virgin) orchard soils to prevent orchard replant disease, and/ or medium to heavy soils, and/ or a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached. a) California stone fruit growers b) California table and raisin grape growers c) California walnut growers d) California Almond growers Ornamentals a) Yoder Brothers Inc. for use in chrysanthemum production. b) California rose nurseries prohibited from using 1,3 dichloropropene products because local township limits for this alternative have been reached Peppers a) California growers with the limiting critical conditions of moderate to severe fungal pathogens, and/ or moderate to sever disease infestation, and/ or moderate to sever nematode infestation, and/ or moderate to severe yellow or purple nutsedge infestation, and/ or a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached; b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee and Virginia growers with one or more of the following limiting critical conditions: moderate to severe DRAFT EPA DOCUMENT  37 yellow or purple nutsedge infestation, and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less; c) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or karst topography; Strawberry Nurseries a) California growers with one or more of the following limiting critical conditions: moderate to severe black root rot or crown rot, moderate to severe nematode infestation, and/ or moderate to severe yellow or purple nutsedge infestation; b) North Carolina and Tennessee growers with the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less; Strawberry Fruit a) California growers with one or more of the following limiting critical conditions: moderate to severe black root rot or crown rot, moderate to severe nematode infestation, moderate to severe yellow or purple nutsedge infestation, a prohibition of the use of 1,3 dichloropropene products because local township limits for this alternative have been reached; b) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge, and/ or karst topography; c) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, Virginia, Ohio and, New Jersey growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge, and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less; Sweet Potatoes a) California growers with the contingent limiting critical condition of a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached; Tomatoes a) Michigan growers with moderate to severe disease and/ or fungal pathogens; b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee and Virginia growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less; c) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or karst topography; Turfgrass a) U. S. turfgrass sod nursery producers for the production of industry certified pure sod b) U. S. golf courses establishing sod in the construction of new golf courses or the renovation of putting greens, tees, and fairways.

POST HARVEST USES Food Processing Approved critical users listed below with one or more of the following limiting DRAFT EPA DOCUMENT  38 critical conditions: older structures that can not be properly sealed to use an alternative to methyl bromide, and/ or the presence of sensitive electronic equipment subject to corrosivity; a) Rice millers in Arkansas, California Louisiana, Florida, Missouri, and Mississippi b) Pet food manufacturing facilities in the U. S. c) Kraft Foods d) Members of the North American Millers' Association Commodity Storage a) Smokehouse ham curing in facilities owned by Gwaltney of Smithfield. b) Entities storing walnuts, beans, dried plums, and pistachios in California with one or more of the following limiting critical conditions: rapid fumigation is required to meet a critical market window, such as during the holiday season, rapid fumigation is required when a buyer provides short ( 2 days or less) notification for a purchase, and/ or there is a short period after harvest in which to fumigate and there is limited silo availability for using alternatives.

L. What are the Reporting Requirements? In today's action, EPA is proposing that producers and importers of critical use methyl bromide submit quarterly reports to EPA on the number of kilograms of critical use allowances ( CUAs) expended and unexpended. In addition, those entities that sell critical use methyl bromide to end users shall report to EPA on an annual basis, the total amount of methyl bromide produced or imported with CUAs during the control period for each sector. For example, a distributor would submit an annual report to EPA that he sold 1,000 kilograms of critical use methyl bromide for pre plant tomato fumigation and 500 kilograms of critical use methyl bromide for pre plant strawberry fumigation. EPA is further proposing that producers, importers, distributors and applicators allocated critical stock allowances ( CSAs) file quarterly reports to EPA on the number of expended and unexpended CSAs based on the amount of methyl bromide stocks sold during the quarter to an approved critical user ( from whom a self certification was received). Information collection as proposed above is authorized under Sections 603( b), 603( d) and 614( b) of the CAA. EPA believes the reporting requirements outlined above are necessary in order to meet U. S. reporting obligations under Article 7 of the Protocol and CAA reporting requirements to Congress under Section 603( d).