[Federal Register Volume 79, Number 208 (Tuesday, October 28, 2014)]
[Rules and Regulations]
[Pages 64253-64290]
[FR Doc No: 2014-25374]

Vol. 79

Tuesday,

No. 208

October 28, 2014

Part II

Environmental Protection Agency

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40 CFR Part 82

Protection of Stratospheric Ozone: Adjustments to the Allowance System
for Controlling HCFC Production, Import and Export, 2015-2019; Rule

Federal Register / Vol. 79 , No. 208 / Tuesday, October 28, 2014 /
Rules and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[EPA-HQ-OAR-2013-0263; FRL-9917-98-OAR]
RIN 2060-AR04

Protection of Stratospheric Ozone: Adjustments to the Allowance
System for Controlling HCFC Production, Import and Export, 2015-2019

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is adjusting the
allowance system for the consumption and production of
hydrochlorofluorocarbons (HCFCs). Under the Clean Air Act, EPA is
required to phase out production and import of these chemicals in
accordance with the Montreal Protocol on Substances that Deplete the
Ozone Layer (Protocol). Under the Protocol, total United States HCFC
production and consumption is capped, and will be completely phased out
by 2030. Today's action announces the availability of annual production
and consumption allowances for HCFC-22, HCFC-142b, HCFC-123, and HCFC-
124 for 2015-2019. This rule also makes minor changes to the
reclamation regulations, updates the use restrictions to account for a
recent amendment to the Clean Air Act, and finalizes a de minimis
exemption to the use restrictions for certain uses of HCFC-225ca/cb and
HCFC-124.

DATES: This final rule is effective on January 1, 2015.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2013-0263. All documents in the docket are listed on the
www.regulations.gov Web site. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy at: EPA Docket Center, WJC West
Building, Room 3334, 1301 Constitution Avenue NW., Washington, DC
20004. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m.,
Monday through Friday, excluding legal holidays. The telephone number
for the Public Reading Room is<PHONE_NUMBER>, and the telephone number
for the Air and Radiation Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: Elizabeth Whiteley by telephone at
(202) 343-9310 or by email at<EMAIL_ADDRESS>or by mail at
United States Environmental Protection Agency, Stratospheric Protection
Division, Stratospheric Program Implementation Branch (6205J), 1200
Pennsylvania Ave. NW., Washington, DC 20460. You may also visit the Web
site of EPA's Stratospheric Protection Division at www.epa.gov/ozone/strathome.html for further information about EPA's stratospheric ozone
protection regulations, the science of ozone layer depletion, and
related topics.

SUPPLEMENTARY INFORMATION:
    Acronyms and Abbreviations. The following acronyms and
abbreviations are used in this document.

ANPRM--Advance Notice of Proposed Rulemaking
CAA--Clean Air Act
CAAA--Clean Air Act Amendments of 1990
CFC--Chlorofluorocarbon
CFR--Code of Federal Regulations
EPA--Environmental Protection Agency
FR--Federal Register
GWP--Global Warming Potential
HCFC--Hydrochlorofluorocarbon
HVACR--Heating, Ventilating, Air Conditioning and Refrigeration
Montreal Protocol or Protocol--Montreal Protocol on Substances that
Deplete the Ozone Layer
MOP--Meeting of the Parties
MT--Metric Ton
ODP--Ozone Depletion Potential
ODS--Ozone-Depleting Substance(s)
Party--States and regional economic integration organizations that
have consented to be bound by the Montreal Protocol on Substances
that Deplete the Ozone Layer
RACA--Request for Additional Consumption Allowances

    Organization of This Document. The following outline is provided to
aid in locating information in this preamble.

I. General Information
    A. Does this action apply to me?
II. Background
    A. How does the Montreal Protocol phase out HCFCs?
    B. How do the Clean Air Act and EPA regulations phase out HCFCs?
    C. What sections of the Clean Air Act apply to this rulemaking?
III. Summary of This Final Action
IV. Clean Air Act Requirements That Begin in 2015
    A. What are the existing HCFC product labeling requirements at
40 CFR Part 82 subpart E?
    1. Minor Modifications to Existing Regulatory Text
    2. Comments on the Existing Labeling Requirements and EPA's
Response
    B. What actions is EPA taking regarding the use and sales
restriction in Clean Air Act section 605(a)?
    1. Treatment of Existing Inventory of HCFC-225ca and HCFC-225cb
for Solvent Uses
    2. Treatment of Existing Inventory of HCFC-124 for Sterilant
Uses
    3. Update to Regulations to Account for Recent Changes to
Section 605(a)
    C. Which Montreal Protocol requirements take effect in 2015 and
2020?
V. HCFC Baselines for 2015-2019
VI. HCFC Allowance Allocation Amounts for 2015-2019
    A. What is the 2015-2019 HCFC-22 consumption allocation?
    1. Summary of Final HCFC-22 Consumption Allocation
    2. EPA's Collection, Consideration and Use of Aggregate HCFC-22
Inventory Data
    3. Explanation of the Agency's Final Decision and Response to
Comments
    4. Timing of the Final Rule
    B. What is the 2015-2019 HCFC-22 production allocation?
    C. What is the 2015-2019 HCFC-142b consumption and production
allocation?
    D. What is the 2015-2019 HCFC-123 consumption allocation?
    E. What is the 2015-2019 HCFC-124 consumption and production
allocation?
    F. How is EPA addressing the end of the HCFC-141b Exemption
Program?
    G. Other HCFCs that Are Class II Controlled Substances
VII. Other Adjustments to the HCFC Allowance System
    A. What is EPA's response to comments on dry-shipped HCFC-22
condensing units?
    B. How is EPA treating requests for additional consumption
allowances in 2020 and beyond?
    C. What is EPA's response to comments on maximizing compliance
with HCFC regulations?
VIII. Modifications to Section 608 Regulations
    A. Overview of Current Reclamation Standards
    B. Benefits of Reclamation
    C. What regulatory changes is EPA finalizing under CAA section
608?
    1. Consideration of AHRI 700-2012 Standards
    2. Notification to EPA of Changes to Business Management,
Location, or Contact Information
    3. Reporting and Recordkeeping Requirements
    4. Other Section 608 Reclamation Program Options
    5. Other Issues Related to Section 608's National Recycling and
Emissions Reduction Program
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks

    H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Congressional Review Act

I. General Information

A. Does this action apply to me?

    This rule may affect the following categories:

--Industrial Gas Manufacturing entities (NAICS code 325120), including
fluorinated hydrocarbon gas manufacturers and reclaimers;
--Other Chemical and Allied Products Merchant Wholesalers (NAICS code
424690), including chemical gases and compressed gases merchant
wholesalers;
--Air-Conditioning and Warm Air Heating Equipment and Commercial and
Industrial Refrigeration Equipment Manufacturing entities (NAICS code
333415), including air-conditioning equipment and commercial and
industrial refrigeration equipment manufacturers;
--Air-Conditioning Equipment and Supplies Merchant Wholesalers (NAICS
code 423730), including air-conditioning (condensing unit, compressors)
merchant wholesalers;
--Electrical and Electronic Appliance, Television, and Radio Set
Merchant Wholesalers (NAICS code 423620), including air-conditioning
(room units) merchant wholesalers;
--Plumbing, Heating, and Air-Conditioning Contractors (NAICS code
238220), including Central air-conditioning system and commercial
refrigeration installation, HVACR contractors;
--Refrigerant reclaimers, manufacturers of recovery/recycling
equipment, and refrigerant recovery/recycling equipment testing
organizations;
--Fire Extinguisher Chemical Preparations Manufacturing (325998);
Portable Fire Extinguishers Manufacturing (339999); Other Aircraft
Parts and Auxiliary Equipment Manufacturing (336413);
--Surgical Appliance and Supplies Manufacturing (339113); Ophthalmic
goods manufacturing (339115); General Medical and Surgical Hospitals
(622110); Specialty (Except Psychiatric and Substance Abuse) Hospitals
(622310);
--Entities Performing Solvent Cleaning, (including but not necessarily
limited to NAICS subsector codes 332 and 335).

    This list is not intended to be exhaustive, but rather provides a
guide for readers regarding the types of entities that could
potentially be regulated by this action. Other types of entities not
listed in this table could also be affected. To determine whether your
facility, company, business organization, or other entity is regulated
by this action, you should carefully examine these regulations. If you
have questions regarding the applicability of this action to a
particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.

II. Background

A. How does the Montreal Protocol phase out HCFCs?

    The Montreal Protocol on Substances that Deplete the Ozone Layer is
the international agreement aimed at reducing and eventually
eliminating the production and consumption of ozone-depleting
substances (ODS). The United States was one of the original signatories
to the 1987 Montreal Protocol and ratified the Protocol in 1988.
Congress then enacted, and President George H.W. Bush signed into law,
the Clean Air Act Amendments of 1990 (CAAA) to ensure that the United
States could satisfy its obligations under the Montreal Protocol. Title
VI of the Act (codified as 42 U.S.C. Chapter 85, Subchapter VI), titled
Stratospheric Ozone Protection, includes restrictions on production,
consumption, and use of ODS that are subject to acceleration if ``the
Montreal Protocol is modified to include a schedule to control or
reduce production, consumption, or use * * * more rapidly than the
applicable schedule'' prescribed by the statute (see Clean Air Act
section 606(a)(3)). Both the Montreal Protocol and the Clean Air Act
(CAA) define consumption as production plus imports minus exports (see
CAA section 601(6)).
    In 1990, as part of the London Amendment to the Montreal Protocol,
the Parties identified HCFCs as ``transitional substances'' to serve as
temporary, lower ozone depletion potential (ODP) substitutes for
chlorofluorocarbons (CFCs) and other ODS. EPA similarly viewed HCFCs as
``important interim substitutes that will allow for the earliest
possible phaseout of CFCs and other class I substances.\1\'' (58 FR
65026, December 10, 1993). In 1992, through the Copenhagen Amendment to
the Montreal Protocol, the Parties created a detailed phaseout schedule
for HCFCs, beginning with a cap on consumption for developed countries
not operating under Article 5 of the Montreal Protocol (non-Article 5
Parties), a schedule to which the United States adheres. The
consumption cap for each non-Article 5 Party was set at 3.1 percent
(later tightened to 2.8 percent) of a Party's CFC consumption in 1989,
plus a Party's consumption of HCFCs in 1989 (weighted on an ODP basis).
Based on this formula, the HCFC consumption cap for the United States
was set at 15,240 ODP-weighted metric tons, effective January 1, 1996.
This cap is the United States HCFC consumption baseline.
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    \1\ Class I refers to the controlled substances listed in
appendix A to 40 CFR part 82 subpart A. Class II refers to the
controlled substances listed in appendix B to 40 CFR part 82 subpart
A; HCFCs are class II substances.
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    The 1992 Copenhagen Amendment created a schedule with graduated
reductions and eventual phaseout of HCFC consumption (Copenhagen, 23-25
November, 1992, Decision IV/4). The schedule for non-Article 5 Parties
initially called for tighter consumption caps based on a Party's
baseline, as follows: An annual consumption cap equal to 65 percent of
baseline in 2004, 35 percent of baseline in 2010, 10 percent of
baseline in 2015, and 0.5 percent of baseline in 2020, with a complete
HCFC phaseout by 2030.
    The Copenhagen Amendment did not cap HCFC production. In 1999, the
Parties created a cap on production for non-Article 5 Parties through
an amendment to the Montreal Protocol agreed to at the Eleventh Meeting
of the Parties (Beijing, 29 November-3 December 1999, Decision XI/5).
The cap on production was set at the average of: (a) 1989 HCFC
production plus 2.8 percent of 1989 CFC production, and (b) 1989 HCFC
consumption plus 2.8 percent of 1989 CFC consumption. Based on this
formula, the HCFC production cap for the United States was set at
15,537 ODP-weighted metric tons (MT), effective January 1, 2004. This
cap is the United States HCFC production baseline.
    To further protect human health and the environment, the Parties to
the Montreal Protocol adjusted the phaseout schedule for HCFCs at the
19th Meeting of the Parties in September 2007. As a result of the
Montreal Adjustment (reflected in Decision XIX/6),\2\ the United States
and other non-Article 5 parties were obligated to reduce HCFC
production and consumption to 25 percent of baseline by 2010, rather
than 35 percent as previously required. The other milestones remain the
same. The

adjustment also resulted in a phaseout schedule for HCFC production
that parallels the consumption phaseout schedule. All production and
consumption for non-Article 5 Parties must be phased out by 2030.
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    \2\ The adjustment entered into force and became binding for all
Parties on May 14, 2008.
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    Decision XIX/6 also adjusted the provisions for Parties operating
under paragraph 1 of Article 5, considered as developing countries
under the Protocol: (1) To set HCFC production and consumption
baselines based on the average 2009-2010 production and consumption,
respectively; (2) to freeze HCFC production and consumption at those
baselines in 2013; and (3) to add stepwise reductions to 90 percent of
baseline by 2015, 65 percent by 2020, 32.5 percent by 2025, and an
average of 2.5 percent for 2030-2039. All production and consumption
for Article 5 Parties must be phased out by 2040.
    In addition, Decision XIX/6 adjusted Article 2F to allow non-
Article 5 Parties to produce ``up to 10 percent of baseline levels''
for export to Article 5 countries ``in order to satisfy basic domestic
needs'' until 2020. Paragraph 14 of Decision XIX/6 notes that no later
than 2015, the Parties would consider ``further reduction of production
for basic domestic needs'' in 2020 and beyond. Paragraph 3 of Decision
XIX/6 contains the accelerated phaseout schedule, allowing consumption
and production up to 0.5 percent of baseline from 2020-2030 for
servicing needs only. Pursuant to paragraph 13 of Decision XIX/6, the
Parties will review in 2015 and 2025, respectively, the need for the
``servicing tails'' for Article 5 and non-Article 5 countries. EPA uses
the term ``servicing tail'' to refer to an amount of HCFCs used to
service existing equipment, such as certain types of air-conditioning
and refrigeration appliances.

B. How do the Clean Air Act and EPA regulations phase out HCFCs?

    The Clean Air Act schedules for the phaseout of HCFC production and
consumption, and for the restriction of HCFC use, appear in section
605. EPA has used its authority under section 606 to accelerate those
schedules. EPA regulations that apply to production and consumption of
HCFCs are designed to enable the United States to meet the phaseout
schedule under the Montreal Protocol.
    The United States has chosen to implement the Montreal Protocol
phaseout schedule on a chemical-by-chemical basis. In 1992,
environmental and industry groups petitioned EPA to implement the
required phaseout by eliminating the HCFCs with the highest ozone
depletion potential first. Based on data available at that time, EPA
believed the United States could meet, and possibly exceed, the
required Montreal Protocol reductions through a chemical-by-chemical
phaseout that employed a ``worst-first'' approach. In 1993, as
authorized by section 606 of the CAA, EPA established a phaseout
schedule that eliminated HCFC-141b first and would greatly restrict
HCFC-142b and HCFC-22 next, followed by restrictions on all other HCFCs
and ultimately a complete phaseout (58 FR 15014, March 18, 1993, and 58
FR 65018, December 10, 1993).
    On January 21, 2003, EPA promulgated regulations (68 FR 2820,
January 21, 2003, ``2003-2009 Rule'') to ensure compliance with the
first reduction milestone in the HCFC phaseout: The requirement that by
January 1, 2004, the United States reduce HCFC consumption to 65
percent of baseline and freeze HCFC production. In the 2003-2009 Rule,
EPA established chemical-specific consumption and production baselines
for HCFC-141b, HCFC-22, and HCFC-142b for the initial regulatory period
ending December 31, 2009. Section 601(2) states that EPA may select ``a
representative calendar year'' to serve as the company baseline for
HCFCs. In the 2003-2009 Rule, EPA concluded that because the entities
eligible for allowances had differing production and import histories,
no single year was representative for all companies. Therefore, EPA
assigned an individual consumption baseline year to each company by
selecting its highest ODP-weighted consumption year from 1994 through
1997. EPA assigned individual production baseline years in the same
manner. EPA also provided for new entrants that began importing after
1997 but before April 5, 1999, the date the advanced notice of proposed
rulemaking (ANPRM) was published. EPA took this action to ensure that
small businesses that might not have been aware of the impending
rulemaking would be able to continue in the HCFC market.
    In the United States, an allowance is the unit of measure that
controls production and consumption of ODS. EPA allocates calendar-year
allowances equal to a percentage of the baseline--they are valid from
January 1 to December 31 of that control period. A calendar-year
allowance represents the privilege granted to a company to produce or
import one kilogram (not ODP-weighted) of the specific substance.
``Production allowance'' and ``consumption allowance'' are defined at
40 CFR 82.3. To produce an HCFC for which EPA has issued allowances, an
allowance holder must expend both production and consumption
allowances. To import an HCFC for which EPA has issued allowances, an
allowance holder must expend only consumption allowances. An allowance
holder exporting HCFCs for which it has expended consumption allowances
may request a refund of those consumption allowances by submitting
proper documentation and receiving approval from EPA.
    The 2003-2009 Rule set production and consumption baselines for the
2003-2009 regulatory period, using each company's highest ``production
year'' or ``consumption year.'' The 2003-2009 Rule prohibited
production and import of those HCFCs that were subject to the allowance
system without the appropriate allowances (40 CFR 82.15(a),(b)). EPA
set the maximum production and consumption of each HCFC by issuing
allowances that are valid for a single calendar year, equal to a
certain percentage of each company's baseline.\3\ It completely phased
out the production and import of HCFC-141b by granting zero percent of
baseline for production and consumption in the table at 40 CFR 82.16.
EPA created a petition process to allow applicants to request small
amounts of HCFC-141b beyond the phaseout. For production and
consumption of HCFC-22 and HCFC-142b in 2003 through 2009, EPA
allocated allowances at 100 percent of baseline. The complete phaseout
of HCFC-141b, the allocations for HCFC-22 and HCFC-142b, combined with
projections for consumption of all other HCFCs, remained below the 2004
cap of 65 percent of the United States baseline.
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    \3\ The process for assigning consumption baseline percentages
works as follows: First, all the company-specific baselines listed
in the tables at 40 CFR 82.19 are added to determine the aggregate
consumption baseline. Second, EPA determines how many consumption
allowances to allocate for a given year and divides that amount by
the aggregate baseline. The resulting percentage listed in the table
at section 82.16 becomes what each company is allowed to consume in
a given control period. For example, a company with 100,000 kg of
HCFC-22 consumption baseline allowances would multiply that number
by the percentage allowed in a given year (for example, 25 percent)
to determine its calendar-year consumption allowance is 25,000 kg.
EPA uses the same process to determine production baseline
percentages.
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    Since EPA is implementing the phaseout on a chemical-by-chemical
basis, it allocates and tracks production and consumption allowances on
a kilogram basis for each chemical. Upon EPA approval, an allowance
holder may transfer calendar-year allowances of one type of HCFC for
calendar-year allowances of another type of HCFC, with transactions
weighted according to the ODP of the chemicals involved.

Pursuant to section 607 of the CAA, EPA applies an offset to each HCFC
transfer by deducting 0.1 percent from the transferor's allowance
balance. The offset benefits the ozone layer since it ``results in
greater total reductions in the production in each year of * * * class
II substances than would occur in that year in the absence of such
transactions'' (see CAA section 607(a)).
    The 2003-2009 Rule announced that EPA would allocate allowances for
the 2010-2014 regulatory period in a subsequent action and that those
allowances would be lower than for 2003-2009, consistent with the next
stepwise reduction for HCFCs under the Montreal Protocol. EPA
subsequently monitored the market to estimate servicing needs and
market adjustments in the use of HCFCs, including HCFCs for which EPA
had not established baselines in the 2003-2009 Rule. In the 2010-2014
Rule (74 FR 66412, December 15, 2009), EPA issued production and import
allowances for HCFC-22, HCFC-142b, and other HCFCs not previously
included in the allowance system, for the 2010-2014 control periods.
    In the 2010-2014 Rule, EPA estimated the need for HCFC-22 during
the 2010-2014 regulatory period and the percentage of that need for
which it was appropriate to allocate allowances. EPA decided that the
percentage of the estimated need allocated in the form of allowances
should not remain constant from year to year, but rather should decline
on an annual basis. For 2010, EPA allocated HCFC-22 allowances equal to
80 percent of the estimated need, concluding that reused, recycled, and
reclaimed material could meet the remaining 20 percent. The percentage
of estimated need for which there was no allocation, and that would
therefore need to be met through recycling and reclamation, rose from
20 percent in 2010 to 29 percent in 2014. The intent of this approach
was to foster reclamation and to ensure that the United States could
meet the 2015 stepdown under the Montreal Protocol.
    However, part of the 2010-2014 Rule was vacated in an August 27,
2010, decision issued by the United States Court of Appeals for the
District of Columbia Circuit (Court) in Arkema v. EPA (618 F.3d 1, D.C.
Cir. 2010). Certain allowance holders affected by the 2010-2014 Rule
contended that the rule was impermissibly retroactive because in
setting the baselines for the new regulatory period, EPA did not take
into account certain inter-pollutant baseline transfers that
petitioners had performed during the prior regulatory period.
Accounting for these transfers in the 2010-2014 Rule and applying the
same methodology would have resulted in different baselines and
calendar-year allowances for HCFC-22 and HCFC-142b.
    The Court agreed with petitioners that ``the [2010-2014] Final Rule
unacceptably alters transactions the EPA approved under the 2003
Rule,'' (Arkema v. EPA, 618 F.3d at 3). The Court vacated the rule in
part, ``insofar as it operates retroactively,'' and remanded to EPA
``for prompt resolution,'' (618 F.3d at 10). EPA's petition for
rehearing was denied on January 21, 2011. EPA addressed the Court's
partial vacatur as it related to 2011 in an August 5, 2011, interim
final rule, ``Protection of Stratospheric Ozone: Adjustments to the
Allowance System for Controlling HCFC Production, Import, and Export,''
(76 FR 47451, August 5, 2011, ``2011 Interim Final Rule''). In that
rule, EPA established new baselines that (1) credited the 2008 inter-
pollutant trades at issue in Arkema v. EPA based on the Court's
decision; (2) reflected inter-company, single-pollutant baseline
transfers that occurred since the 2010-2014 Rule was signed; (3)
allocated HCFC-22 and HCFC-142b allowances for 2011; (4) clarified
EPA's policy on all future inter-pollutant transfers; and (5) updated
company names. The HCFC-22 and HCFC-142b use restrictions and the
allocation for other controlled HCFCs were not affected by the partial
vacatur.
    To complete its response to the Court's decision, EPA published a
final rule with the same name on April 3, 2013, allocating HCFC-142b
and HCFC-22 allowances for 2012-2014 (78 FR 20004, ``2012-2014 Rule'').
That rule reduced HCFC-22 allowances in 2012-2014 by almost 30 percent
relative to the 2010-2014 Rule in order to incentivize proper handling
and recovery of HCFC-22 and encourage transition to non-ODS
alternatives.
    On December 24, 2013, EPA published a proposed rule that would
issue allowances for HCFC-22, HCFC-142b, HCFC-123, and HCFC-124 for the
2015-2019 regulatory period (78 FR 78071, ``2015-2019 Proposed Rule'').
Today's action finalizes the HCFC allowance allocations for those years
based on the options presented in the 2015-2019 Proposed Rule and
comments submitted to EPA. For more information on the history of the
HCFC phaseout and applicable rulemakings, see: http://www.epa.gov/ozone/title6/phaseout/classtwo.html.

C. What sections of the Clean Air Act apply to this rulemaking?

    Several sections of the CAA \4\ apply to this rulemaking. Section
602 states that EPA shall publish an initial list of class II
substances, which is to include the HCFCs specified in the statute as
well as their isomers. EPA's listing of class II substances appears at
appendix B to 40 CFR part 82, subpart A.
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    \4\ The Clean Air Act provisions that address stratospheric
ozone protection are codified at 42 U.S.C. 7671-7671q.
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    Section 605 of the CAA phases out production and consumption and
restricts the use of HCFCs in accordance with the schedule set forth in
that section. As discussed in the 2010-2014 Rule (74 FR 66416), section
606 provides EPA authority to set a more stringent phaseout schedule
based on (1) current scientific information that a more stringent
schedule may be necessary to protect human health and the environment,
(2) the availability of substitutes, or (3) to conform to any
acceleration under the Montreal Protocol. EPA previously set a more
stringent schedule than the section 605 schedule through a rule
published December 10, 1993 (58 FR 65018). The 2010-2014 Rule made a
further adjustment from the section 605 schedule based on the
acceleration under the Montreal Protocol as agreed to at the Meeting of
the Parties in September 2007. The more stringent schedule established
in that rule was unaffected by the decision in Arkema v. EPA and is
still in effect.
    Section 608 of the CAA, titled National Recycling and Emission
Reduction Program, requires EPA to establish standards and requirements
for the use and disposal of class I and class II substances. Those
requirements must reduce the use and emissions of controlled substances
to the lowest achievable level, as well as maximize their recapture and
recycling. Additionally, section 608(c) prohibits any person
maintaining, servicing, repairing, or disposing of an appliance that
contains refrigerant from knowingly venting, releasing, or disposing of
that substance to the environment, regardless of whether the
refrigerant is an ODS or a substitute. Substitutes are exempted from
this prohibition only if EPA has determined that venting, releasing, or
disposing of the substitute does not pose a threat to the environment.
The full list of substitutes that are exempt from this prohibition can
be found at 40 CFR section 82.154(a).
    Section 611 of the CAA requires EPA to establish and implement
labeling

requirements for containers of, and products containing or manufactured
with, class I or class II ODS. While containers of class II substances
(HCFCs) already are subject to labeling requirements, products
containing or manufactured with class II substances must be labeled
beginning January 1, 2015. The specific requirements and existing
regulation implementing those requirements are discussed in Section
IV.A. of this preamble.
    Finally, section 614 of the CAA describes the relationship of Title
VI to the Montreal Protocol. Section 614(b) states: ``In the case of
conflict between any provision of this title and any provision of the
Montreal Protocol, the more stringent provision shall govern.'' Section
614 ensures that EPA regulations are in accordance with United States
obligations under the Montreal Protocol.

III. Summary of This Final Action

    This action amends the existing regulations to implement the next
major milestone in the HCFC phaseout. As a party to the Montreal
Protocol, the United States has agreed to decrease HCFC consumption and
production levels to 10 percent of the U.S. baseline by 2015. In this
rule, EPA is allocating HCFC allowances starting at approximately five
percent of the U.S. consumption baseline in 2015, or half of the
Montreal Protocol cap.
    EPA is issuing allowances for four HCFCs, implementing a narrow de
minimis exemption for use of existing inventory of HCFC-225ca/cb \5\
and HCFC-124, and is updating regulations to account for a recent
change to the Clean Air Act. In addition, EPA is making minor changes
to the regulations promulgated under section 608 of the Act. These
final agency actions are summarized below:
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    \5\ Throughout this preamble, the term `HCFC-225ca/cb' refers to
either the HCFC-225ca or HCFC-225cb isomers, as well as blends
containing both isomers.
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    --HCFC-22: EPA is finalizing the lowest proposed 5-year linear
approach of HCFC-22 consumption allowances. The consumption allocation
in 2015 is approximately 10,000 MT, decreasing by approximately 2,000
MT per year until it is phased out in 2020. EPA is also providing
approximately 28,000 MT of HCFC-22 production allowances each year.
Under existing regulations, HCFC-22 production and consumption are zero
in 2020. The agency considered market information, comments, regulatory
and statutory requirements and its long-standing policy objectives as
it weighed the merits of the proposed approaches. The final consumption
allocation meets the 2020 phaseout deadline, and should help achieve a
smooth transition to more environmentally-friendly alternatives, while
also providing regulatory certainty to consumers and industry.
    --HCFC-123: EPA is finalizing its preferred consumption allocation
of approximately 2,000 MT per year through 2019. EPA is also finalizing
its proposal to align its regulations with the recent amendment to CAA
section 605(a) and allow for continued use of HCFC-123 in
nonresidential streaming fire suppression applications.
    --HCFC-124: EPA is finalizing its preferred production and
consumption allocation of 200 MT per year through 2019.
    --HCFC-142b: EPA is finalizing its preferred production and
consumption allocation of 35 MT in 2015, decreasing by 5 MT per year
through 2019. Under existing regulations HCFC-142b allowances for
production and consumption are zero in 2020.
    --HCFC-225ca/cb: EPA is allocating zero percent of the baseline for
production and consumption of HCFC-225ca or HCFC-225cb effective
January 1, 2015.
    --De minimis use exemption: EPA is finalizing its proposed de
minimis exemption allowing any person with HCFC-225ca/cb in inventory
prior to January 1, 2015, to use that material as a solvent. EPA is
also finalizing a de minimis exemption allowing any person with HCFC-
124 in inventory prior to January 1, 2015, to use that material as a
sterilant for biological indicators.
    --CAA Section 608 Reclamation Requirements: EPA is finalizing its
proposal (1) to require a reclaimer to notify EPA when there is a
change in business management, location, or contact information and (2)
to require disaggregated information for all reclaimed refrigerants as
part of annual reporting to EPA. The agency is not finalizing its
proposed incorporation by reference of AHRI 700-2012 at this time due
to the ongoing review of the standard by ASHRAE and AHRI.

IV. Clean Air Act Requirements That Begin in 2015

A. What are the existing HCFC product labeling requirements at 40 CFR
part 82 subpart E?

    Section 611 of the CAA requires EPA to establish and implement
labeling requirements for containers of, and products containing or
manufactured with, class I or class II ODS. In 1993, EPA published
regulations on these labeling requirements (58 FR 8136, February 11,
1993, Labeling Rule), codified at 40 CFR part 82 subpart E. Currently,
these requirements only apply to containers containing class I or II
ODS and products containing or manufactured with class I ODS. Products
containing or manufactured with class II substances will be subject to
these requirements beginning on January 1, 2015.
    In 2015, containers containing, products containing, and products
manufactured with a class I or class II substance must bear a product
label stating: ``Warning: Contains [or Manufactured with, if
applicable] [insert name of class I or II substance], a substance which
harms public health and environment by destroying ozone in the upper
atmosphere'' (40 CFR 82.106). The wording of the label is specified
verbatim in CAA section 611.
    EPA defines a ``product containing'' a class II substance as a
product including, but not limited to, containers, vessels, or pieces
of equipment, that physically holds a controlled substance at the point
of sale to the ultimate consumer which remains within the product, (40
CFR 82.104). Two examples of a ``product containing'' a class II
substance that would require a label are (1) portable fire
extinguishers containing an HCFC and (2) appliances that incorporate
closed-cell foam blown with an HCFC. Foams are plastics (such as
polyurethane or polystyrene) that are manufactured using blowing agents
to create bubbles or cells in the material's structure. Closed-cell
foam physically holds blowing agent within the cells. While HCFCs are
no longer used as blowing agents in the United States, they are used in
other countries from which the United States may import products. In
the case of portable fire extinguishers, the fire suppression agent is
contained in a reservoir within the extinguisher and released by the
user when needed.
    The definition of a product ``manufactured with'' a class II
substance is a product for which the manufacturer used a class II
substance directly in that product's manufacturing, but where the
product itself does not contain more than trace quantities of the ODS
at the point of introduction into interstate commerce. A product
``manufactured with'' a class II substance would include electronics
cleaned with an HCFC solvent or open cell foam blown with an HCFC. Open
cell foam is different from closed cell foam in that it was
manufactured with a blowing agent, but no longer contains the blowing
agent because the cells or bubbles in open cell foam are open to the
surrounding environment. Since

HCFCs are no longer used as foam blowing agents in the United States,
and the Nonessential Products Ban prohibits the sale or distribution of
open cell plastic foam products made with HCFCs (40 CFR 82.70(c)), EPA
expects the requirement for a ``manufactured with'' label should not be
relevant to most open cell foam products.
    Final products that incorporate another product that was
``manufactured with'' a class I or class II ODS do not have to bear a
label so long as the manufacturer of the final product is distinct from
the manufacturer of the product ``manufactured with'' the ODS (40 CFR
82.116). By contrast, final products that incorporate ``products
containing'' a class I or II ODS will require a warning label, even if
the final product manufacturer purchases the ``product containing'' the
ODS from another manufacturer or supplier (40 CFR 82.114).
1. Minor Modifications to Existing Regulatory Text
    The agency proposed and is now finalizing three minor edits to 40
CFR subpart E to clarify the intent of the regulatory language with
respect to class II substances. EPA received no adverse comments
regarding these minor clarifying revisions.
    The first two clarifications are to replace ``class I substance''
with ``controlled substance.'' While the emphasis in 1993 was on class
I substances, EPA is now removing any ambiguity with respect to class
II substances by reconciling inconsistent terminology, specifically at
82.110(c) and 82.112(d). The text of 40 CFR 82.110(c) clearly applies
to both class I and class II products, so EPA is revising the title of
this paragraph to make it consistent with the existing operative text.
    Similarly, 82.112(d) includes the more general term ``controlled
substances'' in the title, but not the existing operative text. Through
today's action, EPA is replacing ``class I substance'' with
``controlled substance'' to clarify that this narrow exemption to the
labeling requirements also applies to class II products in the same way
it applied to class I products.
    Third, EPA proposed to correct a citation in 82.122(a)(1). The
first sentence incorrectly refers to 82.106(b)(2) as the exemption for
certain methyl chloroform uses; this exemption is actually provided for
in 82.106(b)(4). EPA is revising the text to reference the correct
paragraph. EPA also notes that this exemption ended May 15, 1994.
2. Comments on the Existing Labeling Requirements and EPA's Response
    EPA created a preliminary list of products that might be affected
by these requirements in 2015. This list, along with guidance for
manufacturers and importers of potentially affected products, is titled
Summary of HCFC Product Labeling Requirements & Potentially Affected
Products (Labeling Memo) and can be found in the docket for this
rulemaking. EPA sought comment on whether this list is accurate and
complete, and where products made with or containing HCFCs are
manufactured. The agency sought comment on which products have mainly
switched to non-ODS alternatives so it can continue to assist companies
in determining whether the labeling requirements are likely to apply to
their products. The agency also sought comment on whether any
clarification to the regulations at 40 CFR subpart E (82.100-82.124) is
needed to implement the existing labeling requirement for products
containing or manufactured with class II substances. EPA received five
comments regarding the existing labeling requirements implementing CAA
section 611(c), specifically on the effectiveness and applicability of
such requirements.
    RMS of Georgia commented that the labeling requirements will not be
an effective way to increase awareness and ensure compliance because
EPA does not have an enforcement arm to handle complaints. The Alliance
does not think the labeling requirements are beneficial, and encourages
EPA to focus its enforcement efforts towards compliance with
regulations promulgated under CAA section 608 (40 CFR subpart F). The
Alliance also commented that it believes the list of products included
in the docket is complete, and it does not support additional labeling
of products. In contrast, Carrier commented that EPA should revise the
labeling requirements to apply to dry-shipped HCFC-123 chillers and
residential air conditioning condensing units, not just products
containing or manufactured with HCFCs. American Pacific (AMPAC)
believes fire extinguishers containing HCFC-123 should not be subject
to labeling because the ODP of HCFC-123 is very low and it is used as a
replacement to Halon 1211, which has a very high ODP. The commenter
also noted that the list of products potentially subject to this
requirement does include the HCFC Blend B nonresidential fire
suppressant that it has manufactured since 1994.
    The agency appreciates comments on the effectiveness of the
labeling requirements. EPA takes enforcement of its regulations
seriously, and notes that the comment that the agency ``does not have
an enforcement arm to handle complaints'' is inaccurate. EPA has also
made an effort to focus its outreach toward the industries most likely
to be affected by the HCFC product labeling requirement. Applicability
of this CAA requirement is to all class II products, which includes all
products that contain or are manufactured with HCFC-123. The labeling
requirements for ``products containing'' or ``products manufactured
with'' class II substances in CAA section 611(c) apply January 1, 2015,
without any action by the Administrator. The commenter asking for an
exemption for HCFC-containing fire extinguishers did not explain how
EPA could create an exemption, given that such products are clearly
``products containing'' class II substances. Similarly, the commenter
requesting an extension of the labeling requirements did not explain
how or under what authority EPA could extend those requirements to
equipment that does not contain an HCFC when introduced into interstate
commerce. In addition, EPA did not propose to take any such actions.
    Finally, Honeywell commented on labeling requirements for closed
cell polyurethane insulated refrigerated trailers and containers where
the foam was blown with HCFC-141b. Honeywell suggests that EPA require,
or at least offer guidance stating, that the warning label be applied
to transactional paperwork as well as the actual trailer, container, or
panels containing the HCFC-blown foam.
    To the extent that these HCFC-141b trailers or containers are
imported into the U.S. (and therefore introduced into interstate
commerce), they would require a label. The existing labeling
requirements allow flexibility in where the label may be placed,
including on the bill of lading, supplemental printed material, or
promotional printed material (see 40 CFR 82.108). However, the label
must be placed where the person purchasing the HCFC-containing product
(or product manufactured with HCFCs) is likely to read and understand
the warning statement before purchasing the product. In the preamble to
the rule that implemented the statutory labeling requirements (58 FR
8136, February 11, 1993), EPA explained that ``the warning statement
may appear on a display panel other than the [principal display panel]
as long as that label can be readily seen and understood by the
consumer at the time of purchase,'' (58 FR 8152). EPA continues to
communicate with and offer guidance to companies that must

determine whether the HCFC labeling requirements apply to their
products. More background on the labeling requirements, including a
discussion of the labeling pass-through requirements, can be found in
the 1993 Labeling Rule.

B. What actions is EPA taking regarding the use and sales restriction
in Clean Air Act section 605(a)?

    Starting January 1, 2015, section 605(a) of the Clean Air Act
prohibits the use or introduction into interstate commerce of any class
II substance that does not meet one of four exceptions. Specifically,
use or introduction into interstate commerce is allowed only if (1) the
substance has been used, recovered and recycled; (2) it is entirely
transformed, except for trace quantities, in the production of other
chemicals; (3) it is used as a refrigerant in appliances manufactured
prior to 2020; or (4) it is listed as acceptable for use as a
nonresidential fire suppression agent in accordance with CAA section
612(c).\6\ Section 612 is the statutory authority for EPA's Significant
New Alternatives Policy (SNAP) program, under which the agency reviews
information on the human health and environmental impacts of
substitutes for class I and class II substances in certain end-uses and
lists those substitutes as acceptable, acceptable subject to use
conditions, acceptable subject to narrowed use limits, or unacceptable
(see 40 CFR subpart G).
---------------------------------------------------------------------------

    \6\ The fourth exception in this list is a recent change to the
Clean Air Act, which was included in the National Defense
Authorization Act for Fiscal Year 2012 [112th Congress, H.R. 1540,
Title III, Section 320, Fire Suppression Agents].
---------------------------------------------------------------------------

    In the 2010-2014 Rule (74 FR 66412), EPA used its authority under
section 606 to accelerate the section 605(a) restrictions on use and
introduction into interstate commerce for HCFC-22 and HCFC-142b \7\ to
January 1, 2010, five years earlier than the date specified in section
605(a). Effective January 1, 2010, EPA prohibited the use of virgin
HCFC-22 and HCFC-142b to manufacture or service new air-conditioning
and refrigeration appliances. In a separate rule, under the authority
provided in section 615 of the CAA, EPA also prohibited the sale and
distribution of appliances and appliance components pre-charged with
either virgin or used, recovered, and recycled HCFC-22 and HCFC-142b
(74 FR 66450). For all other HCFCs, including those for which EPA has
not historically issued allowances, the CAA section 605(a) prohibitions
and exceptions apply as of January 1, 2015. All HCFCs other than HCFC-
22 and HCFC-142b may continue to be used and sold as refrigerants, but
only for use in appliances manufactured before 2020.
---------------------------------------------------------------------------

    \7\ EPA also accelerated the restrictions for HCFC-141b in the
same rulemaking; however, HCFC-141b is not discussed further in this
section because it is not used for refrigeration purposes.
---------------------------------------------------------------------------

    EPA believes the term ``use'' is ambiguous in the context of
section 605(a) with respect to potential categories of use that
Congress did not directly address. Historically, in the context of
section 605, EPA has focused on use of refrigerants to manufacture and
service appliances and the section 605(a)(3) exception for servicing
existing equipment. In 1993, EPA took the section 605(a) use
restrictions into account in establishing the HCFC chemical-by-chemical
phaseout. The 1993 Proposed Rule (58 FR 15014, March 18, 1993)
discusses the acceleration of the use restriction for HCFC-22 and HCFC-
142b from the standpoint of when it would be technologically feasible
to end the use of these two chemicals in new refrigeration and air-
conditioning equipment. In that rulemaking, EPA did not explore how to
interpret or apply the term ``use'' in other circumstances. EPA
considered various interpretations of that term in developing the 2010-
2014 Rule but again focused on refrigerants. In the 2008 Proposed Rule
(73 FR 78680, December 23, 2008), EPA noted that the three statutory
exceptions that existed at that time ``inform EPA's understanding of
the term `use' '' (73 FR 78698). The preamble to the 2010-2014 Rule
states: ``With regard to HCFCs used as refrigerants, EPA interprets the
term `use' to mean initially charging as well as maintaining and
servicing refrigeration equipment'' (74 FR 66437). In regard to non-
refrigerant uses, EPA addressed two manufacturing uses of HCFC-22
(manufacture of sterilant blends for medical equipment and manufacture
of thermostatic expansion valves); EPA also concluded that section
605(a) would ban the primary pre-2010 use of HCFC-142b (foam-blowing).
At that time, however, EPA was not yet implementing section 605(a) with
respect to other HCFCs and did not fully explore what ``use'' might
mean in the context of non-refrigerants.
    In the development of the 2010-2014 Rule, EPA did consider whether
section 605(a) applies to the operation of products containing HCFCs.
With regard to refrigeration equipment, EPA concluded: ``the section
605(a) `use' ban does not apply to a consumer's operation of equipment
containing HCFCs'' (74 FR 66438). The agency's conclusion was partially
based on the third exemption to 605(a), for class II substances that
are used as refrigerants in appliances manufactured before a specified
date. This exemption indicated ``that Congress intended to permit the
continued use of previously manufactured appliances.'' EPA also stated
that for ``products containing HCFCs for non-refrigerant uses. . . .
EPA interprets the term `use' as relating to the manufacture (and where
applicable, the service) of those products, not the utilization of
those products in the hands of the end user'' (74 FR 66437).
    EPA is not revisiting its interpretation of section 605(a) with
respect to how it interprets ``use'' for products containing HCFCs. For
purposes of implementing the 2015 use restriction in section 605(a),
``use'' of a controlled substance includes the manufacture of products
that contain or are made with HCFCs; however, it would not include use
of existing products containing HCFCs. (Products that contain class II
controlled substances other than HCFC-22, HCFC-142b and HCFC-141b may
still be manufactured before January 1, 2015). As EPA explains in the
preamble to the 2010-2014 Rule, EPA interprets section 605(a) as
prohibiting the use of substances, not the use of products. The
statutory language does not directly address whether use of a product
containing controlled substances might constitute a prohibited use of
the substance. However, consistent with its earlier statements, EPA
does not treat the use of a product containing HCFCs as use of the
HCFC.
    The agency has a long history of distinguishing between products
and substances in its ODS phaseout regulations. The definition of
controlled substances in 40 CFR part 82 subpart A excludes any such
substance or mixture that is in a manufactured product other than a
container used for the transportation or storage of the substance or
mixture. EPA distinguishes between bulk containers of HCFCs and
products containing HCFCs. The subpart A definition of controlled
substance clarifies that if a substance needs to be transferred from a
bulk container to a piece of equipment or another container to realize
its intended use, it will be treated as a ``substance.'' Examples of
bulk containers include jugs, drums, and cylinders.
    EPA refers readers to the preamble of the 2010-2014 Rule for two
other clarifications on how EPA interprets the term ``use'' in the
context of section 605(a). First, the agency clarified how the
Nonessential Products Ban (CAA section 610) and the HCFC use
restriction (CAA section 605(a)) should be interpreted together: ``By
prohibiting use and introduction into interstate

commerce of HCFCs as bulk substances, section 605(a) effectively
prohibits the continued manufacture of any products containing HCFCs
(which qualifies as a type of `use') unless specifically exempted in
that section.'' EPA explained that while the section 610(a)
Nonessential Products Ban exempts certain products, these exempted
products may not be manufactured after 2014 due to the HCFC use
restrictions in section 605(a). EPA clarified that ``such products are
prohibited from continued manufacture, unless manufactured with
recovered HCFCs'' (74 FR 66439). Second, in the preamble to the 2010-
2014 Rule the agency clarified that ``EPA does not interpret `use' [in
the context of section 605] to include destruction, recovery for
disposal, discharge consistent with all other regulatory requirements,
or other similar actions where the substance is part of a disposal
chain'' (74 FR 66439).
    Because the use prohibition will apply to a variety of sectors and
circumstances beginning in 2015, EPA believes it may be helpful to
define ``use'' in the phaseout regulations (40 CFR part 82 subpart A).
There is currently a definition of ``use'' in the regulations for the
SNAP program (40 CFR part 82 subpart G), under which ``use'' means any
use of a substitute for a class I or class II substance, including but
not limited to, use in a manufacturing process or product, in
consumption by the end-user, or in intermediate uses, such as
formulation or packaging for other subsequent uses (40 CFR 82.172). EPA
proposed a related definition for purposes of the section 605(a) use
prohibition. Under this proposed definition, use of a class II
controlled substance, for the purposes of section 82.15, would include
use in a manufacturing process, use in manufacturing a product,
intermediate uses such as formulation or packaging for other subsequent
uses, and use in maintaining, servicing, or repairing an appliance or
other piece of equipment. It would also include use of that controlled
substance when it is removed from a storage or transportation vessel.
However, the definition of ``use'' would not include use of a
manufactured product containing a controlled substance. The primary
difference between the proposed definition under section 605(a) and the
SNAP regulations' definition is that the SNAP definition includes use
by the consumer of a product containing ODS. This difference reflects
EPA's interpretation of the section 605(a) use restriction as set forth
in the preamble to the 2010-2014 Rule.
    EPA received three comments on its proposed definition of ``use.''
Two commenters support adopting a formal definition as proposed. One
commenter opposes EPA's interpretation, particularly as it relates to
the proposed HCFC-225ca/cb exemption for existing inventory. The
commenter in opposition provides no justification for their opposition
to EPA's definition of use, so EPA believes this comment is in fact a
comment in opposition to the de minimis exemption for existing
inventory of HCFC-225ca/cb, which is discussed in the following section
(IV.B.1). In light of the comments received, EPA is finalizing its
proposed definition of ``use'' at 40 CFR 82.3.
1. Treatment of Existing Inventory of HCFC-225ca and HCFC-225cb for
Solvent Uses
    Numerous stakeholders have asked what they will be able to do with
inventory of HCFC-225ca, HCFC-225cb, and mixtures thereof (abbreviated
as ``HCFC-225ca/cb'' for the remainder of the preamble) that exists as
of January 1, 2015. To EPA's knowledge, HCFC-225ca/cb is used only as a
solvent, primarily for precision cleaning in the aerospace and
electronics industries. As explained above, the section 605(a) use ban
does not apply to the use of products that contain class II controlled
substances. However, some substances, including HCFC-225ca/cb, may be
used directly to clean equipment or to manufacture a product without
first being put into a manufactured product themselves. For example, a
person may take HCFC-225ca/cb from a bulk container, in a mixture or
neat, and either add it to a vapor degreaser or pour it on a hand wipe
to clean a piece of equipment. In those circumstances, the substance
itself--not a product containing the substance--is being used. This
differs from the use of products that contain HCFC-225ca/cb, such as
aerosol cans or pre-soaked wipes. In general, EPA proposed to interpret
the section 605(a) use ban to apply to use when the substance is
removed from a container used for transportation or storage. The agency
did not receive any adverse comment on EPA's proposed interpretation
and is therefore finalizing this interpretation.
    However, EPA believes the use of HCFC-225ca/cb entered into
inventory prior to January 1, 2015, by persons that use these
substances as solvents may fairly be considered de minimis. Thus, for
reasons discussed below, the agency is finalizing its proposed de
minimis exemption to the use prohibition in section 605(a), which
allows any person with HCFC-225ca/cb in inventory prior to January 1,
2015, to use that material as a solvent.\8\ ``Person'' is defined in 40
CFR 82.3 to include corporations and Federal agencies, as well as their
employees and agents. Agents include contractors and subcontractors, as
well as other entities performing a service or task on behalf of the
corporation or Federal agency. One of those tasks could be storing and/
or using HCFC-225ca/cb that was in existing inventory prior to January
1, 2015.
---------------------------------------------------------------------------

    \8\ Since the section 605(a) prohibition only limits the use of
virgin or unused HCFC-225ca/cb solvent, used, recovered, and
recycled solvent can still be used for precision cleaning and
manufacturing products after January 1, 2015.
---------------------------------------------------------------------------

    EPA did not propose an exemption to the prohibition on introduction
into interstate commerce, nor did it propose to change the existing
regulatory phaseout date for production and import of HCFC-225ca/cb.
Effective January 1, 2015, a person holding HCFC-225ca/cb in inventory
may not transfer or sell it to another person (unless for destruction),
nor is EPA issuing any allowances to produce or import new HCFC-225ca/
cb.
    Additionally, neither companies that manufacture products for their
own use, nor companies that manufacture products for sale to others are
allowed to manufacture products containing virgin HCFC-225ca/cb, as
that is a prohibited use of the substance. A person may sell any
products containing HCFC-225ca/cb that had been manufactured and
entered into initial inventory prior to January 1, 2015, since at that
point they would be ``products'' and not ``class II controlled
substances.'' A product is considered to be a part of ``initial
inventory'' at the point where the original product has completed its
manufacturing process and is ready for sale by the product
manufacturer. For more discussion of EPA's interpretation of the term
``initial inventory,'' see the 1993 Nonessential Products Ban. Also,
for purposes of section 605(a), manufacturers may continue to use HCFC-
225ca/cb to make both products ``manufactured with'' and products
``containing'' HCFC-225ca/cb as of January 1, 2015, so long as the
HCFC-225ca/cb has been used, recovered and recycled. Labeling
requirements for these products manufactured with either virgin or
used, recovered, and recycled HCFC-225ca/cb will apply beginning
January 1, 2015 (see Section IV.A. of this preamble). Manufacturers
should also ensure that they are in compliance with the Nonessential
Products Ban and with SNAP regulations.
    EPA received seven comments on its proposed de minimis exemption to
the

use restriction in section 605(a) for entities that use HCFC-225ca/cb
as solvents and have HCFC-225ca/cb in their inventory prior to January
1, 2015. Six commenters supported the exemption because it would
provide valuable flexibility while they evaluate and qualify
alternatives that can satisfy specialized applications. Charles Stark
Draper Laboratory (CSDL) and AGC Chemicals both note that EPA has
adequate authority in the CAA to issue this exemption. Three commenters
also noted that the exemption would help industry avoid costs
associated with disposing of HCFC-225ca/cb already held in inventory.
    One commenter, AGC Chemicals, stated that EPA should clarify that
``owners'' of HCFC-225ca/cb can use their inventory in any of their
affiliated organizations, allowing transfer among facilities in
different locations. In the preceding text describing the exemption,
EPA has attempted to clarify that the term ``person'' applies to
subcontractors and other agents working on the person's behalf.
Transferring a chemical between different facilities of the same person
within the United States would be allowed by this exemption.
    Another commenter supports EPA's proposed de minimis exemption for
HCFC-225ca/cb inventory prior to January 1, 2015, because at that point
the inventory would be a product and not a class II controlled
substances. EPA would like to clarify that bulk HCFC-225ca/cb produced
or imported before 2015 is not a product. As explained in this section,
bulk HCFC-225ca/cb in existing inventory is still a controlled class II
substance. As such, EPA is providing an exemption to the use
prohibition for class II controlled substances and is not reclassifying
HCFC-225ca/cb as a product merely because time has passed.
    One commenter, NRDC, opposes the exemption and believes that
section 605(a) is intended to be interpreted strictly. According to
NRDC, justifying the de minimis argument based on the limited
quantities of this chemical in use is inappropriate and unjustified.
NRDC further asserts that EPA's statutory interpretation has the
potential to cause harm in future years of the phaseout if small
amounts of a chemical were made available for ``as long as needed'' and
that such an exemption would be contrary to the goals of Title VI of
the Clean Air Act and the Montreal Protocol.
    As explained in the proposal and in this rule, EPA is not allowing
for new production or new import of virgin HCFC-225ca/cb, but only for
the continued use of a small amount of material that was previously
produced and/or imported using the appropriate allowances prior to
2015. The production and consumption allocation for HCFC-225ca/cb is
zero starting in 2015. EPA sees the de minimis exemption as consistent
with how EPA has treated other ODS, and with the goals of Title VI. For
example, production and consumption of CFCs were phased out in 1996,
yet amounts in inventory continued to be used. Additionally, there will
still be continued use of HCFC-22 after EPA phases out production and
import of HCFC-22 in 2020. In general, the term ``phaseout'' applies to
the decrease and eventual elimination of production and import of a
virgin substance, not to the use of a particular substance. While
section 605(a) limits the use of virgin HCFCs starting in 2015, use of
class I substances and certain uses of particular class II substances
will continue without undermining the overarching goals of CAA Title
VI.
    As stated in the proposed rule, EPA believes it has implied
authority to create a de minimis exemption from the section 605(a) use
restriction. The United States Court of Appeals for the District of
Columbia Circuit has recognized that ``[u]nless Congress has been
extraordinarily rigid, there is likely a basis for an implication of de
minimis authority to provide exemption when the burdens of regulation
yield a gain of trivial or no value.'' Alabama Power Co. v. Costle, 636
F.2d 323, 360-61 (D.C. Cir. 1980). In Alabama Power, the Court held
that ``[c]ategorical exemptions from statutory commands may . . . be
permissible as an exercise of agency power, inherent in most statutory
schemes, to overlook circumstances that in context may fairly be
considered de minimis. It is commonplace, of course, that the law does
not concern itself with trifling matters, and this principle has often
found application in the administrative context. Courts should be
reluctant to apply the literal terms of a statute to mandate pointless
expenditures of effort.'' Id. (internal citations omitted).
    In an earlier case cited by the court in Alabama Power, the court
described the doctrine as follows: ``The `de minimis' doctrine that was
developed to prevent trivial items from draining the time of the courts
has room for sound application to administration by the Government of
its regulatory programs . . . The ability, which we describe here, to
exempt de minimis situations from a statutory command is not an ability
to depart from the statute, but rather a tool to be used in
implementing the legislative design.'' District of Columbia v. Orleans,
406 F.2d 957, 959 (1968).
    In this respect, the Alabama Power opinion observed in a footnote
that the de minimis principle ``is a cousin of the doctrine that,
notwithstanding the `plain meaning' of a statute, a court must look
beyond the words to the purpose of the act where its literal terms lead
to `absurd or futile results.' '' Id. at 360 n. 89 (citations omitted).
To apply an exclusion based on the de minimis doctrine, ``the agency
will bear the burden of making the required showing'' that a matter is
truly de minimis which naturally will turn on the assessment of
particular circumstances. Id. The Alabama Power opinion concluded that
``most regulatory statutes, including the CAA, permit such agency
showings in appropriate cases.'' Id.
    A notable limitation on the use of the de minimis doctrine is that
it does not authorize the agency to exclude something on the basis of a
cost-benefit analysis. As the court explained, this ``implied authority
is not available for a situation where the regulatory function does
provide benefits, in the sense of furthering the regulatory objectives,
but the agency concludes that the acknowledged benefits are exceeded by
the costs.'' Id. The court held that any ``implied authority to make
cost-benefit decisions must be based not on a general doctrine but on a
fair reading of the specific statute, its aims and legislative
history.'' Id.
    Several courts have recognized de minimis exceptions (1) so long as
they are not contrary to the express terms of the statute \9\ and (2)
the agency's interpretation of the exception is a permissible reading
of the statute. See e.g., Ober v. Whitman, 243 F.3d 1190 (9th Cir.
2001); see also Ohio v. EPA, 997 F.2d 1520 (D.C. Cir. 1993).
---------------------------------------------------------------------------

    \9\ In Sierra Club v. EPA, 705 F.3d 458 (D.C. Cir. 2013), the DC
Circuit held that EPA had no de minimis authority to create an
exemption from the preconstruction monitoring requirement in Sec.
165(e)(2) of the CAA. ``Whether we call preconstruction monitoring a
`plain requirement' or a requirement mandated by an `extraordinarily
rigid' statute, the result is the same: The EPA has no de minimis
authority to exempt the requirement.'' Id. at 468.
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    A de minimis exemption is permissible in this situation for several
reasons. First, section 605(a) is not extraordinarily rigid. Second,
the use prohibition in section 605(a) is ambiguous with respect to
potential categories of use that Congress did not directly address.
Third, banning the use of HCFC solvent inventory held by the end-user
would not advance the statutory purpose of Title VI of the

Clean Air Act. These arguments are discussed in more detail in the
following paragraphs.
    The purpose of Title VI of the Clean Air Act, as its title
suggests, is stratospheric ozone protection. Title VI can be
categorized into three principal areas: The phaseout of production and
import of ozone depleting substances (sections 602-607); reduction in
emissions of these substances via various means such as required
servicing practices, restrictions on sale and distribution of products,
and consumer education (sections 608-611); and the transition to
alternatives that reduce overall risk to human health and the
environment compared to other alternatives (section 612).
    Section 605 specifically addresses the phaseout of production and
consumption of class II controlled substances. Section 604 applies to
the phaseout of production and consumption of class I substances. There
are notable differences between the two phaseouts. The phaseout under
section 604 works much more quickly than the phaseout under section
605. In addition, the section 604 phaseout applies much earlier than
the section 605 phaseout. Section 604 required the first reductions in
class I substances in 1992, followed by a series of stepdowns
culminating in the complete phaseout of nearly all class I substances
by 2000. For class II substances, section 605 freezes production and
consumption in 2015, with the complete phaseout not occurring until
2030.\10\ Two principal factors drive the distinction in phaseout
schedules. First, class I substances have much higher ODPs relative to
class II substances.\11\ Second, class II substances were recognized as
and often developed expressly to be important transitional chemicals,
beneficial in phasing out class I substances as quickly as possible.
During the development of the 1990 Clean Air Act Amendments, Congress
heard testimony on the need to phase out HCFCs as well as class I
substances. Senator Chaffee acknowledged that ``one difficulty,
however, is the fact that achieving the goal of eliminating the potent
long-lived CFCs as rapidly as possible is, to some extent, dependent on
the continued availability of HCFCs as intermediate substitutes pending
development of other, safe, non-ozone depleting substances or
processes.'' (A Legislative History of the Clean Air Act Amendments of
1990, volume 1, p. 5210 (Senate debate)).
---------------------------------------------------------------------------

    \10\ Through rulemakings, EPA accelerated the statutory
deadlines in sections 604 and 605, in accordance with the
requirements in section 606. See 57 FR 3354 and 58 FR 65013.
    \11\ For example, all CFCs have an ODP of 0.6 or greater, with
most having an ODP of 1.0, whereas the HCFC with the highest ODP is
HCFC-141b, which has an ODP of 0.11.
---------------------------------------------------------------------------

    It is clear that Congress' intent was to phase out production and
import of class I substances ``as rapidly as possible,'' and certainly
more rapidly than class II substances given the difference in the start
and duration of the two phaseout schedules; however, nowhere in section
604 does Congress restrict the use of class I substances. Instead,
Congress phases out the production and import for domestic use, and
allows for certain exemptions to the phaseout for specific uses (see,
e.g., section 604 (f) and (g).) Given the comparable titles of sections
604 and 605 and the overarching goal of phasing out both class I and
class II ODS,\12\ Congress likely intended that the ``use''
restriction, which is unique to section 605, should be interpreted in a
manner that furthers the phaseout of production and import of HCFCs
while recognizing the role of HCFCs as transitional substances.
---------------------------------------------------------------------------

    \12\ ``The centerpiece of the stratospheric ozone protection
program established by this title is the phaseout of production and
consumption of all ozone depleting substances.'' Clean Air Act
Amendments--Conference Report (Senate--October 27, 1990) (136 Cong.
Rec. S16946).
---------------------------------------------------------------------------

    Congress' overall approach to the class II phaseout is generally
less rigid than its approach to the class I phaseout, considering the
longer timeframes and the presence of only one intermediate reduction
step (see section 605(b)). Given this context, EPA does not view
section 605(a) as ``extraordinarily rigid.'' In addition, section
605(a) provides an explicit exception for class II substances that have
been ``used, recovered, and recycled.'' Thus, Congress clearly did not
envision that all HCFC use in applications not specifically exempted
would come to a halt by 2015. Indeed, end-users of HCFC-225ca/cb could
avail themselves of this exception by putting their entire existing
inventory of HCFC-225ca/cb into their equipment before January 1, 2015.
For example, an end-user could use its entire inventory of virgin HCFC-
225ca/cb in its vapor degreaser, recover the HCFC-225ca/cb from the
degreaser, and then recycle it for reuse in 2015 and beyond. In other
instances, an end-user could take virgin HCFC-225ca/cb, apply it to a
surface via the typical application method such that the surface is
cleaned as intended, at which point any recovered HCFC-225ca/cb would
be rendered ``used.'' EPA does not wish to encourage this approach to
meeting section 605(a) requirements, which would do nothing to advance
the statutory purpose of stratospheric ozone protection. Rather than
insist on an inflexible reading of the statute that may create ``absurd
or futile results,'' EPA believes the better option is to allow end-
users to continue to use virgin HCFC-225ca/cb inventory that was
manufactured and is in their possession prior to 2015.
    EPA views section 605(a) as ambiguous with respect to potential
categories of use that Congress did not explicitly address. Section
605(a) explicitly addresses refrigerant uses of HCFCs but is silent
with respect to solvents. At the time the 1990 Clean Air Act Amendments
were written, HCFCs were used predominantly as refrigerants and much
consideration was given to this use in the legislative history. HCFC
solvent uses, on the other hand, were not considered by Congress in the
context of the class II phaseout, because they did not exist. At that
time, two class I substances, CFC-113 and methyl chloroform, were used
as solvents. Far from expecting an early transition, Congress allowed
production and import of methyl chloroform until 2002, two years after
the phaseout date for most class I substances. In addition, in section
604(d)(1), Congress specifically allowed for limited exemptions to the
production and import phaseout for methyl chloroform for ``use in
essential applications.'' It was not until 1995 that the SNAP program
listed HCFC-225ca/cb as acceptable subject to use conditions in
electronics cleaning and precision cleaning (see 60 FR 31092, June 13,
1995). HCFC-225ca/cb was listed as acceptable in metals cleaning as
recently as 2002 (see 67 FR 77927, December 20, 2002). In all three of
these end-uses, HCFC-225ca/cb, which has an ODP of 0.025/0.033, is a
substitute for CFC-113 and methyl chloroform, which have ODPs of 0.8
and 0.1, respectively. While HCFC-225ca/cb solvents have acted since
1995 as transitional substances between class I ODS and non-ODS
substitutes for certain niche needs, there is no evidence that Congress
anticipated in 1990 that any HCFCs would be used as solvents. Thus,
Congress did not have the opportunity to consider whether to apply the
section 605(a) use restriction to HCFC-225ca/cb solvents.
    EPA does not believe that it would advance the goals of Title VI to
prohibit persons that use HCFC-225ca/cb as a solvent to clean their
equipment or to clean components of products they manufacture--
resulting in products ``manufactured with'' these HCFCs--from using
their existing inventory of HCFC-225ca/cb. As discussed above, any
person could avoid such a

prohibition by rendering all their inventory ``used'' in advance of the
effective date. From the perspective of potential ozone destruction,
there is little or no difference in this instance whether the person
uses de minimis quantities already on site at the end of 2014 or after
January 1, 2015.
    EPA believes a de minimis exemption is appropriate for the reasons
provided, and also because the quantities involved are extremely
limited. This is a small niche use and EPA is only proposing to exempt
HCFC-225ca/cb held in inventory by persons that use these substances as
a solvent. Allowances act as a ceiling on the quantities that can be
produced or imported and thus comprise pre-2015 inventory. The annual
allocation of allowances for HCFC-225ca/cb from 2010-2014 has been only
20.7 ODP-weighted MT per year. Recent data showing HCFC-225ca/cb
consumption has been substantially less than the allocation, further
decreasing the absolute maximum amount that could remain in inventories
as of 2015, when production and import are prohibited.
    EPA also considered its past use of de minimis authority under
Title VI of the Clean Air Act. The agency is modeling this exemption to
section 605(a) on the de minimis exemption to the Nonessential Products
Ban for class II substances (CAA section 610(c) and (d)). In the 1993
Nonessential Products Rule, EPA exempted products manufactured with or
containing HCFCs from the ban if they were placed in initial inventory
by December 27, 1993, which was 90 days after the proposed rule
published and four days prior to the statutory ban on sale and
distribution in interstate commerce (58 FR 50464, September 27, 1993
and 58 FR 69638, December 30, 1993). EPA adopted this narrow
``grandfather'' exception for existing inventories based on a de
minimis rationale: ``The crux of EPA's reasoning for providing any
exemption for existing inventories was that emissions from products
already in existence were de minimis'' (58 FR 69660). EPA believes that
emissions from pre-2015 existing inventories of HCFC-225ca/cb would
also be de minimis.
    As discussed, EPA believes it has sufficient authority to adopt a
de minimis exemption to the section 605(a) use prohibition for use of
HCFC-225ca/cb held in inventory by persons using these substances as
solvents. EPA has also considered policy aspects of an exemption. In
the 1993 Nonessential Products Rule, EPA identified various reasons for
exempting existing inventory. One policy goal was to relieve a
potentially onerous burden on small businesses because, absent a sell
through provision, existing inventories would otherwise have to be
liquidated (or in the case of the section 605(a) use restriction,
intentionally used, recovered, and recycled prior to the effective date
of the prohibition).
    Another important consideration is that the nature of precision
cleaning is such that the group of affected entities is small, but
their needs are very specific. Those needs often include minimal to
zero flammability as well as excellent solvency properties. If those
needs are not met, human safety can be jeopardized. Prior to the
proposal, EPA had heard from several entities that use HCFC-225ca/cb as
solvents for cleaning existing equipment or for cleaning surfaces that
are part of a newly-produced product that still have not found a
suitable alternative to HCFC-225ca/cb. In some instances, they need
more time to test alternatives to ensure that the chosen replacement
has acceptable solvency, flammability, and usability characteristics.
Also, in some areas of the United States, a number of Federal, state,
and local regulations affect the choice of solvents. In particular,
areas that do not meet the national ambient air quality standard for
ground-level ozone may regulate solvents that are volatile organic
compounds (VOCs) to reduce emissions that contribute to the formation
of smog. HCFC-225ca and HCFC-225cb are exempt from the definition of
VOC under CAA regulations (see 40 CFR 51.100(s)) addressing the
development of State Implementation Plans (SIPs) to attain and maintain
the national ambient air quality standards. Only a few SNAP-listed
alternatives to HCFC-225ca/cb are exempt from the definition of VOC
(e.g., trans-1-chloro-3,3,3-trifluoroprop-1-ene).
    After taking into account public comments, as well as the legal and
policy considerations above, EPA is finalizing its proposed de minimis
exemption to the use restriction in CAA section 605(a) for entities
that use HCFC-225ca/cb as solvents and that have HCFC-225ca/cb in their
inventory prior to January 1, 2015. The exemption will appear at 40 CFR
82.15(g). The exemption does not pertain to manufacturers of products
containing HCFC-225ca/cb, such as technical aerosol solvents, or to
producers and importers of HCFC-225ca/cb. Any aerosol solvent product
manufactured prior to January 1, 2015, could be sold and used after
that date, since an aerosol spray can is a product, not a controlled
substance. However, manufacture of the product or HCFC blends used in
those products would be considered use of a controlled substance, and
would be prohibited after January 1, 2015, unless the HCFC were used,
recovered, and recycled.
2. Treatment of Existing Inventory of HCFC-124 for Sterilant Uses
    In the proposed rule, EPA also sought comment on whether there are
other small, niche uses of HCFCs that Congress may not have
contemplated in the 1990 CAA Amendments and for which a prohibition on
continued use of existing inventory would yield trivial or no benefits
in light of the statutory purpose. In the proposal, the agency stated
that it might consider extending the proposed exemption to other such
niche uses in the final rule.
    EPA received one comment from Mesa Labs, requesting continued use
of HCFC-124 already held in inventory as a sterilant for the
manufacture and testing of biological indicators (BIs). BIs contain
biological spores and are used in the pharmaceutical, medical device
and healthcare markets to monitor sterilization cycles. In this case,
the commenter manufactures BIs for use in monitoring ethylene oxide
(EtO) sterilization cycles. Two sources of EtO currently available for
use are 100 percent EtO and a blend called Oxyfume 2000 (which consists
of 8.6 percent EtO and 91.4 percent HCFC-124). The commenter requests
an exemption to the section 605(a) HCFC use restriction for their HCFC-
124 inventory for the specific reasons listed below:
    (1) BIs in the commenter's stability program may need to be tested
for up to two years after the production date of the BI (i.e. up until
the expiration date). This is a regulatory compliance issue connected
to the FDA and ISO 9001:2008 standards.\13\ Since initial resistance
assessment of these BIs was conducted using the Oxyfume 2000 blend gas,
the commenter cannot obtain relevant comparison data if subsequent
testing is performed using 100 percent EtO as the source gas.
Transitioning to a non-HCFC sterilant would affect the commenter's
ability to comply with the ISO standards as well as FDA expectations.
---------------------------------------------------------------------------

    \13\ According to www.iso.org, ISO 9001:2008 ``specifies
requirements for a quality management system where an organization
needs to demonstrate its ability to consistently provide product
that meets customer and applicable statutory and regulatory
requirements, and aims to enhance customer satisfaction through the
effective application of the system, including processes for
continual improvement of the system and the assurance of conformity
to customer and applicable statutory and regulatory requirements.''

---------------------------------------------------------------------------

    (2) According to the ISO 11138-2 standard,\14\ the minimum
acceptable resistance for a BI used for EtO monitoring is 2.5 minutes.
This is achievable using the Oxyfume blend but not achievable using the
100 percent EtO source. The ISO 11138-2 standard has not yet been
changed to reflect this difference. Therefore, the commenter would not
be able to comply with the ISO resistance requirements using 100
percent EtO, which would affect the medical industry's ability to
source suitable BIs.
---------------------------------------------------------------------------

    \14\ According to www.iso.org, ISO 11138-2:2006 ``provides
specific requirements for test organisms, suspensions, inoculated
carriers, biological indicators and test methods intended for use in
assessing the performance of sterilizers and sterilization processes
employing ethylene oxide gas as the sterilizing agent, either as
pure ethylene oxide gas or mixtures of this gas with diluent gases,
at sterilizing temperatures within the range of 29 [deg]C to 65
[deg]C.''
---------------------------------------------------------------------------

    (3) The manufacturer of Oxyfume 2000 has stopped producing the
material and will no longer accept unused material for destruction.
    (4) The company's existing supplies of Oxyfume 2000 are small (300-
400 pounds) and will last for up to 2 years.
    The commenter also stated that they are active on the Association
for the Advancement of Medical Instrumentation (AAMI) BI Working Group.
Efforts are underway to change the ISO 11138-2 standard to reflect
appropriate resistance values associated with the use of 100 percent
EtO as the sterilants source gas. However, changes to the ISO standard
will likely take 18-24 months.
    Prior to the December 2013 proposal, EPA spoke with the domestic
manufacturer of Oxyfume 2000 and also with representatives from the
Ethylene Oxide Sterilization Association (EOSA). Through these
conversations, the agency confirmed that the medical sterilant industry
was aware of the upcoming use prohibition and that sterilant users were
in the process of, or had already transitioned to, non-ODS sterilants.
However, EPA appreciates that the standards for the minimum acceptable
resistance for a BI used for EtO monitoring are currently being revised
and that revision may take up to two years to complete. Due to strict
requirements for BI testing, it may not be feasible for BI
manufacturers to transition to a non-ODS sterilant before January 1,
2015. Therefore, in developing this final rule, EPA considered whether
to create a de minimis exemption for this use similar to the exemption
being finalized for use of HCFC 225ca/cb. EPA believes a de minimis
exemption for use of HCFC-124/EtO sterilant blends in existing
inventory is permissible for several reasons. First, as described
above, section 605(a) is not extraordinarily rigid. Second, as
discussed, the use prohibition in section 605(a) is ambiguous with
respect to potential categories of use that Congress did not directly
address. There is no mention of sterilant uses of HCFCs in section
605(a). It is unlikely that Congress considered sterilant uses of HCFCs
in developing the 1990 CAA Amendments. Estimates indicate that in 1989,
CFC-12/EtO was used for over 95 percent of all sterilization in
hospitals (59 FR 13044). HCFC-124 containing sterilants were listed as
acceptable by SNAP in the March 1994 rule establishing the SNAP program
(59 FR 13044), several years after the 1990 CAA Amendments. Following
that action, use of an HCFC-124/EtO blend largely replaced
sterilization with a CFC-12/EtO blend. Third, banning the use of HCFC
sterilant inventory held by the end-user would not advance the
statutory purpose as companies could render the material ``used'' prior
to the 2015 use prohibition, and then be able to utilize the ``used''
material in 2015 and beyond.
    Additionally, the quantities of HCFC-124 that are being exempted
are extremely limited. This is a small niche use and EPA is only
exempting HCFC-124 held in inventory prior to January 1, 2015.
Allowances act as a ceiling on the quantities that can be produced or
imported and thus comprise pre-2015 inventory. The annual allocation of
allowances for HCFC-124 from 2010-2014 has been 66 ODP-weighted MT per
year. Recent data showing HCFC-124 consumption has been less than the
full allocation, further decreasing the absolute maximum amount that
could remain in inventories as of 2015, when production and import are
prohibited. Honeywell, the manufacture of the Oxyfume 2000 HCFC-124
sterilant blend, stopped producing this product as of November 1, 2013.
The company also encouraged their customers to ship back unused
material and has a Web site dedicated to informing customers about the
use restriction that takes effect on January 1, 2015 (see http://www.honeywell-sterilants.com/questions-and-answers/ or the PDF in the
docket). It is likely that the remaining HCFC-124 inventory is very
small, and is held by end-users with niche sterilization needs (e.g.
testing the efficacy of BIs).
    For the reasons discussed above, EPA is including in this final
rule a limited use exemption for sterilants containing HCFC-124. EPA is
not creating an exemption to the prohibition on introduction into
interstate commerce. Similarly, EPA is not changing the existing
regulatory phaseout date for production and import of HCFC-124 for use
as a sterilant, nor is EPA issuing any allowances to produce or import
new HCFC-124 for use as a sterilant. Effective January 1, 2015, a
person holding HCFC-124 in inventory may not transfer or sell HCFC-124
to another person (unless for destruction or for use as a refrigerant).
EPA is creating a de minimis exemption to the use restriction in CAA
section 605(a) for entities that use HCFC-124 as a sterilant for
manufacture and testing of biological indicators and that have HCFC-124
in their inventory prior to January 1, 2015. The exemption will appear
at 40 CFR 82.15(g). The exemption does not pertain to manufacturers of
products containing HCFC-124 (e.g., aerosol spray cans); however, a
product manufactured prior to January 1, 2015, could be sold and used
after that date, since an aerosol spray can is a product, not a
controlled substance.
3. Update to Regulations To Account for Recent Changes to Section
605(a)
    In the National Defense Authorization Act (NDAA) for fiscal year
2012, Congress amended section 605(a) of the Clean Air Act to allow for
continued use and introduction into interstate commerce of a class II
substance that ``is listed as acceptable for use as a fire suppression
agent for nonresidential applications in accordance with section
612(c).''
    Section 612 of the Clean Air Act requires EPA to develop a program
for evaluating alternatives to ozone-depleting substances. EPA refers
to this program as the Significant New Alternatives Policy (SNAP)
program. Section 612(c) requires EPA to publish a list of the
substitutes unacceptable for specific uses and to publish a
corresponding list of substitutes acceptable for specific uses. The
list of acceptable substitutes is found at www.epa.gov/ozone/snap/lists, and the lists of ``unacceptable,'' ``acceptable subject to use
conditions,'' and ``acceptable subject to narrowed use limits''
substitutes are found in the appendices to subpart G of 40 CFR part 82.
    HCFC-123, HCFC-124, and several blends containing an HCFC are
currently listed as acceptable and acceptable subject to narrowed use
limits as fire suppression agents, where the use limit restricts use to
only nonresidential fire suppression. EPA assumes that Congress
intended the statutory phrase ``listed as acceptable for use'' to
include HCFCs listed as

acceptable and acceptable subject to narrowed use limits. In light of
the 2012 statutory revision, EPA proposed to update its regulations for
use and introduction into interstate commerce of HCFCs (82.15(g)), as
well as the regulations governing production and import (82.16).
Specifically, the agency proposed amending 82.15(g)(4) to allow for use
and introduction into interstate commerce of any class II controlled
substance not governed by the acceleration of the use prohibition to
2010, when used as a fire suppression streaming agent listed as
acceptable for use or acceptable subject to narrowed use limits for
nonresidential applications. EPA believes this addition is necessary
and appropriate, given Congress' addition to section 605(a).
    Though section 605(a) pertains only to use and introduction into
interstate commerce, EPA believes that allowing for continued HCFC
production and import for nonresidential fire suppression uses is in
accordance with Congressional intent. Section 605 does not establish a
production phaseout date for any specific HCFC. EPA previously used its
discretion to establish a regulatory phaseout date, which the agency is
modifying in this action. This change has minimal effect on the overall
allocation since the primary HCFC used for fire suppression, HCFC-123,
has a low ODP, and the quantities used for fire suppression are small
relative to the other uses of HCFCs.
    In large part, the regulatory phaseout date for HCFCs used in fire
suppression was driven by the section 605(a) limitations on use and
introduction into interstate commerce of class II controlled
substances, to which Congress has now created an exception. Therefore,
EPA also proposed to amend 82.16(d), by allowing for HCFC production
and import in the 2015-2019 regulatory period for use in nonresidential
streaming fire suppression applications. To give practical effect to
this proposed change, EPA proposed allocating consumption allowances
for HCFC-123 for use as both a refrigerant and as a fire suppression
agent. As discussed in section VI.D. of this preamble, EPA is
finalizing its proposal to allocate the maximum allowed amount of HCFC-
123 consumption allowances under section 605(b). This is 100 percent of
the HCFC-123 baseline, which is still less than three percent of the
Montreal Protocol cap for 2015-2019.
    EPA is allowing production and import for fire suppression purposes
for the 2015-2019 regulatory period only. Beginning January 1, 2020,
Article 2F of the Montreal Protocol limits United States production and
import of HCFCs to use only in servicing and repair of existing
refrigeration and air conditioning equipment. Under section 614(b),
where either the Montreal Protocol or Title VI is more stringent, the
more stringent provision governs. To reflect this Montreal Protocol
time limitation, EPA proposed adding language to 82.16(e) indicating
the purposes for which production and import may continue in 2020 and
beyond. Fire suppression was not included on the list.
    The agency received three comments regarding its plans to update
regulations to account for recent changes to section 605(a), all of
which agreed with EPA's rationale and language regarding continued use
of HCFCs as a fire suppression agent. One fire suppressant
manufacturer, AMPAC, commented that the word ``streaming'' should be
deleted from the proposed changes to section 82.15(g)(4) and 82.16(d),
on the ground that limiting the exemption to streaming agents only is
inconsistent with legislative intent and what is stated in section 320
of the 2012 NDAA.
    EPA recognizes that the language included in section 320 of the
2012 NDAA is broader than the regulatory language proposed. In
particular, the 2012 NDAA does not provide any guidance on whether
Congress intended to exempt only those applications in which HCFCs are
currently used. EPA proposed language that was limited to streaming
applications to reflect its understanding that current use of HCFCs in
fire suppression is limited to streaming applications. The agency
sought comment on whether HCFCs were used for other nonresidential fire
suppression applications, such as total flooding. EPA did not receive
any comments that would counter its understanding that current use of
HCFCs in fire suppression is limited to streaming applications.
Therefore, the agency is not including total flooding applications and
is finalizing its changes to 40 CFR 82.15(g)(4), 82.16(d),\15\ and 82.
16(e)(2) as proposed.
---------------------------------------------------------------------------

    \15\ EPA intended to use parallel language for production and
import of HCFCs for fire suppression in Sec.  82.16(d) but
inadvertently omitted the phrase ``listed as acceptable for use or
acceptable subject to narrowed use limits'' from the clause
regarding imports. EPA is correcting this omission in the final
rule.
---------------------------------------------------------------------------

C. Which Montreal protocol requirements take effect in 2015 and 2020?

    As discussed in section II.A. of this preamble, the United States
has agreed under the Montreal Protocol to limit consumption and
production of HCFCs by January 1, 2015, to no more than 10 percent of
its Montreal Protocol baseline. Starting in 2015, the United States cap
on consumption will be 1,524 ODP-weighted MT and the cap on production
will be 1,553.7 ODP-weighted MT. By January 1, 2020, the United States
is required to limit consumption and production of HCFCs to 0.5 percent
of baseline. As required under sections 606(a) and 614(b) of the Clean
Air Act, EPA phaseout regulations reflect the Montreal Protocol
schedule for phasing out HCFCs, including the 2015 and 2020 stepdowns.
In developing and finalizing the HCFC allocation schedule for 2015-
2019, the agency bore in mind that as of January 1, 2020, the
consumption and production caps will be approximately 76 and 77.5 ODP-
weighted MT, respectively. Also, as of January 1, 2020, Article 2F of
the Protocol limits United States production and consumption of HCFCs
to servicing needs for refrigeration and air conditioning equipment. In
addition, CAA section 605(a) limits the use of virgin HCFCs as of
January 1, 2015, to use as a refrigerant in equipment manufactured
prior to 2020, and use as a nonresidential fire suppressant. EPA
regulations also prohibit the production and import of virgin HCFC-22
or HCFC-142b for refrigeration uses as of January 1, 2020 (see 40 CFR
82.16(e)). The 2015 and 2020 milestones in the Montreal Protocol and
the Clean Air Act provide a framework within which EPA proposed, and is
now finalizing, the HCFC allocations for 2015-2019.

V. HCFC Baselines for 2015-2019

    EPA proposed to keep the post-Arkema historical baselines in the
December 2013 proposal (as adjusted to reflect subsequent name changes
and inter-company baseline allowance transfers), for the 2015-2019
regulatory period. The baselines for production and consumption of the
seven HCFCs for which EPA has allocated allowances can be found at 40
CFR 82.17 and 82.19, respectively. Through today's final rule, EPA is
finalizing those same baselines for 2015-2019 for all HCFCs subject to
the allocation system. More information on the HCFC baseline system and
the Arkema lawsuit is found in section II.B. of this preamble.
    EPA received six comments on how it would determine baselines for
2015-2019 regulatory period, all in support of maintaining the existing
baseline system. National, the Alliance, Combs Investment Properties,
Arkema, Honeywell, and AMPAC all support (or in the case of AMPAC, do
not object to) EPA's proposal to maintain existing

baselines. Several commenters reference the certainty and stability
that maintaining the current system would provide, or the confusion
that new baselines would cause, and agree with EPA that altering
baselines would not provide environmental benefit. One commenter
explicitly referenced EPA's statements that revised baselines would not
affect the overall, aggregate allocation since it is the percentage of
baseline issued--not the aggregate baseline itself--that determines the
allowed amount of production and import in a given year. AMPAC states
that it supports establishment of baselines such that only actively
consuming companies receive baseline allowances and it supports
reallocating any allowances proportionately from non-active companies
to those that are still using allowances.
    Since EPA proposed to maintain the current baseline system, and
commenters were supportive of the proposal, the agency is finalizing
the same baselines it used in the 2012-2014 Rule. In response to
AMPAC's comments, the agency believes that reallocating baselines,
especially this far into the phaseout of HCFCs, would cause uncertainty
and confusion. As discussed above, altering baselines would not provide
environmental benefit. In addition, changing baselines for 2015-2019
could interfere with the agency's longstanding goal of an orderly
transition out of HCFCs. Since baseline allowances are tradable, there
is flexibility within the current system to allow companies to grow or
shrink their activity in the market. The agency's consideration of
updated baselines and its reasons for not proposing to revise baselines
are discussed in more detail in the proposed rule (78 FR 78083).

VI. HCFC Allowance Allocation Amounts for 2015-2019

    Section 605(a) of the Clean Air Act limits the use of newly-
produced (i.e. virgin) HCFCs beginning January 1, 2015. Under the
statute, the uses of virgin HCFCs are limited to use as a refrigerant
in appliances \16\ manufactured prior to 2020 (EPA accelerated this
manufacturing date to 2010 for HCFC-22 and HCFC-142b) \17\ and as a
nonresidential fire suppressant, if listed as acceptable under SNAP for
this end-use. HCFC-22 and HCFC-123 are both used as refrigerants, and
thus EPA is issuing allowances for these chemicals. EPA is also issuing
consumption and production allowances for HCFC-142b and HCFC-124, since
both are listed as acceptable for certain refrigerant end-uses and
limited, albeit decreasing, demand for refrigerant blends containing
these HCFCs continues.
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    \16\ The Clean Air Act defines appliance as ``any device which
contains and uses a class I or class II substance as a refrigerant
and which is used for household or commercial purposes, including
any air conditioner, refrigerator, chiller or freezer.''
    \17\ EPA accelerated the 605(a) use restrictions for HCFC-22 and
HCFC-142b in the 2010-2014 Rule. Consequently, HCFC-22, HCFC-142b,
and blends containing either can only be used as a refrigerant in
appliances manufactured before January 1, 2010, not 2020.
Additionally, the Clean Air Act allows use and introduction into
interstate commerce of virgin HCFCs for use in transformation, but
since this use does not require consumption or production
allowances, it is not discussed in this section.
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    EPA is not issuing allowances for HCFC-225ca or HCFC-225cb because
neither is used as a refrigerant nor as a fire suppressant, though the
agency is finalizing a narrow de minimis exemption for the use of
existing inventory of HCFC-225ca, HCFC-225cb, or a mixture of the two
isomers (HCFC-225ca/cb) in specialty precision cleaning needs. EPA is
also adopting a narrow de minimis exemption for the use of inventory of
sterilants containing HCFC-124. Both of these exemptions are discussed
at section IV.B. of this preamble.
    Use of HCFC-141b was banned effective January 1, 2010 (see
82.15(g)(1),(3)), with limited exceptions. In addition, the exemption
from the class II phaseout that allows for HCFC-141b exemption
allowances does not continue beyond 2014 (see 40 CFR 82.16(b),(d)). The
agency is finalizing its proposal to remove 40 CFR 82.16(h), which
described the petition requirements for receiving HCFC-141b exemption
allowances. EPA did not receive any adverse comments on removing this
regulatory language.
    As stated in the proposal and in accordance with 40 CFR 82.18(a)(2)
and (3), EPA is issuing Article 5 allowances \18\ for 2015-2019 to each
company with a production baseline for any HCFC. The allocation is
equal to 10 percent of the company's production baseline for that HCFC,
regardless of whether production or consumption allowances are issued
for that HCFC in 2015-2019.
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    \18\ Article 5 allowances allow a company with an HCFC baseline
to produce that HCFC only for export to Article 5 Parties under the
Montreal Protocol. See 40 CFR 82.18(a).
---------------------------------------------------------------------------

    The final HCFC allowance allocations discussed in the following
sections were developed with consideration of many factors, including:
Production, import, and use restrictions in the CAA and Montreal
Protocol; current HCFC uses and trends, including inventory trends for
HCFC-22; historic allowance use; the expected availability of recovered
and reused material; servicing need projections in EPA's 2013 Servicing
Tail Report; comments received on the proposed rule; the availability
of alternatives for each HCFC in each end-use; and proposed EPA action
through the SNAP program regarding higher-global warming potential \19\
(GWP) alternatives. In the case of HCFC-22 and HCFC-142b, EPA also
considered the fact that under long-standing regulations, production
and import of these two HCFCs must be phased out by January 1, 2020.
---------------------------------------------------------------------------

    \19\ Global warming potential is a measure of the total energy
that a gas absorbs over a particular period of time (usually 100
years), compared to carbon dioxide.
---------------------------------------------------------------------------

    The agency released its HCFC servicing need projections (i.e.,
estimates of HCFC use) and other data supporting its proposed
allocations for 2015-2019 in the 2013 Servicing Tail Report on HCFC
market needs with the proposed rule in December 2013. The agency made
several revisions to the HCFC-123 fire suppression sections of the
report and released the revised report with the Notice of Data
Availability published April 7, 2014 (79 FR 19077). With this final
action, the agency is releasing the updated 2014 Servicing Tail Report,
which reflects data and certain comments received during the public
comment period. Both the 2013 and 2014 versions of the Servicing Tail
Report are found in the docket for this rulemaking.

A. What is the 2015-2019 HCFC-22 consumption allocation?

1. Summary of Final HCFC-22 Consumption Allocation
    In developing the proposed rule, EPA considered three options for
determining the quantity of HCFC-22 consumption allowances to allocate.
Each involved a declining allocation from year to year. The overarching
goal of all of the proposed approaches was to meet servicing needs and
encourage a smooth transition away from HCFC-22, while meeting the
Clean Air Act and Montreal Protocol phaseout requirements. Under the
linear approach (Option 1), which was EPA's preferred approach, the
agency proposed to decrease the allocation by the same amount each
year, such that there is a linear decrease in allowances from 2015
through 2019, ending at zero in 2020.
    Within Option 1, EPA's preferred starting point in the proposal was
approximately 13,700 MT, but the agency also proposed to start at
16,700 MT or 10,000 MT--each with consistent

annual decreases in allocation, ending at zero in 2020. EPA based the
preferred starting point of 13,700 MT on a linear decrease from the
lowest allocation previously proposed for 2014 (see 78 FR 78072). The
higher starting point of 16,700 MT was based on the 2014 allocation,
prior to the addition of approximately 3,000 MT of recoupment
allowances (20,100 MT), and the lower proposed starting point of 10,000
MT was approximately half of the 2014 pre-recoupment allocation.
    For each starting point within this linear five-year approach, EPA
considered information concerning the HCFC-22 market in 2012 and 2013,
particularly (1) changes in inventory, (2) the availability of recycled
and reclaimed HCFC-22, (3) recent sales of HCFC-22 alternatives, and
(4) allowance expenditure in recent years.
    Under Option 2, EPA proposed a three-year linear approach, where
consumption would be zero in 2018 instead of 2020. The proposed
starting points in 2015 were 12,300 MT or 15,000 MT.
    Under Option 3, EPA proposed to estimate servicing need as
published in the 2013 Servicing Tail Report, and then make adjustments
to account for estimated recovery and reuse and for inventory, much
like it did in the 2010-2014 and 2012-2014 Rules. Under the estimation
approach, the maximum starting allocation in 2015 would be 23,100 MT,
but with a wide range of possible allocations in each year, including
2015. Under the estimation approach EPA proposed to ``account for up to
10,000 MT of inventory each year.'' Since the estimation approach is
predicated on modeled servicing need, it has a significantly higher
starting allocation than either of the linear approaches (Options 1 and
2). This is why EPA specifically proposed to account for existing
inventory, whereas the linear approaches inherently account for
inventory, given their lower starting points relative to past
allocations and projected need.
    For the reasons discussed in the remainder of this section of the
preamble, EPA is finalizing an HCFC-22 consumption allocation that
starts at approximately 10,000 MT in 2015 (7.0% of baseline), and
decreases by approximately 2,000 MT each year, such that the allocation
in 2020 is zero. This is the lowest proposed variant of EPA's preferred
five-year linear approach (Option 1). EPA is revising the table at
82.16(a) to reflect the percentage of consumption allowance baseline
issued in each year from 2015-2019.
2. EPA's Collection, Consideration and Use of Aggregate HCFC-22
Inventory Data
    On August 8, 2013, EPA sent requests to nine companies asking for
each company's year-end inventory of HCFC-22 from 2008-2012. Under
section 114(a) of the Clean Air Act, EPA has the authority to ask any
person who is subject to any requirement of the Act to establish and
maintain such records, make such reports, and provide such other
information as the Administrator may reasonably require. These nine
companies included HCFC-22 producers, importers, distributors, and
reclaimers; some are large allowance holders and others are not. The
group has a significant role in the HCFC-22 market, and because they
are different types of entities, data from these companies provide
information on how much HCFC-22 might be in the supply chain. In
collecting inventory data, EPA did not intend to determine exactly how
much inventory or ``stockpiled gas'' exists, but to understand the
general scale of inventory and trends in the growth or decrease in
inventory as HCFC-22 allowance allocations changed.
    2008 through 2012 aggregate inventory data from these nine entities
was fully available to EPA before the proposed rule was signed and EPA
considered these data in development of the proposed rule. Aggregate
data was subsequently placed in the docket as explained below.
Aggregate inventory as of December 31, 2011, was approximately 62,000
MT. At the end of 2012, inventory had decreased by 17.5 percent
(approximately 10,000 MT) to just over 51,000 MT.
    Prior to signature of the proposal, on November 23, 2013, NRDC
filed a FOIA request for the aggregate inventory data; however, the
agency did not immediately release the data with the proposed rule or
in response to the FOIA request because two responding companies had
claimed the aggregate data as confidential business information (CBI).
Per EPA's regulations at 40 CFR Part 2 Subpart B, when the agency
desires to determine whether business information in its possession is
entitled to confidential treatment, or when the agency learns that it
is responsible for responding to a FOIA request for the information, it
must first determine which businesses, if any, have asserted claims of
business confidentiality and generally must provide the affected
businesses an opportunity to comment. The agency subsequently issues a
final administrative determination of whether the business information
is entitled to confidential treatment. If the agency determines that
the information is not entitled to confidential treatment, it provides
notice to the affected businesses, stating that the agency will make
the information available to the public on the tenth business day after
the business' receipt of the written notice unless the business
commences an action in federal court for judicial review of the
determination and to obtain a preliminary injunction against
disclosure.
    The agency followed these procedures with respect to the inventory
data and on February 18, 2014, EPA issued a final determination that
the aggregate inventory data are not entitled to confidential
treatment. After notifying the two companies of its intent to release
the aggregate data and waiting the required 10 business days before
releasing the data, EPA made the 2008-2012 inventory data public on its
Web site and responded to the FOIA submitted by NRDC. EPA sent a second
letter under the authority of section 114 of the Clean Air Act to the
same nine entities on February 27, 2014, requesting each company's
HCFC-22 inventory as of December 31, 2013. No company claimed the
aggregate inventory data for 2013 as CBI. Aggregate inventory at the
end of 2013 was approximately 54,000 MT, an increase of 5.4 percent
over 2012 inventory.
    EPA posted the 2008-2012 aggregate inventory data on the agency's
Web site at http://www.epa.gov/ozone/title6/phaseout/classtwo.html and
notified stakeholders via email on March 10, 2014. EPA posted the 2013
aggregate inventory data on the agency's Web site and notified
stakeholders via email on March 27, 2014. In addition, the agency
formally announced the availability of these data on April 7, 2014, in
a Notice of Data Availability (NODA). The aggregate HCFC-22 inventory
data (2008-2013 HCFC-22 Aggregate Inventory Data) and the April 7 NODA
can be found in the docket at www.regulations.gov/#!docketDetail;D=EPA-
HQ-OAR-2013-0263.
    In addition to the section 114 requests, the agency also held more
than 60 meetings with stakeholders and in almost every meeting
inventory was discussed in a general sense to gauge how large industry-
wide inventory might be. While not definitive, most of these
stakeholder conversations confirmed our view that inventory identified
through the 114 process represents a significant share of total
inventory in the United States.

3. Explanation of the Agency's Final Decision and Response to Comments
    In this section, EPA explains the rationale and process for
reaching a final decision on the HCFC-22 consumption allocation. The
agency's overarching goal is to meet the 2020 phaseout deadline for
HCFC-22 production and import in a manner that achieves a smooth
transition to more environmentally-friendly alternatives. Further, EPA
has sought to accomplish this transition in a way that provides
regulatory certainty to consumers and industry without prematurely
stranding equipment (i.e., equipment owners should not feel forced out
of HCFC-22 if their equipment is still within its expected lifetime).
EPA's focus in this rule is stratospheric ozone protection, and the
focus on this section is the HCFC production and consumption phaseout
under section 605(b)-(c) of the CAA, taking into account the HCFC use
restrictions in section 605(a). EPA has also been mindful, however, of
actions the agency is proposing under section 612, and has noted, where
applicable, the climate implications of various options for
implementing the HCFC-22 phaseout.
    The reasoning for determining the final HCFC-22 allocation, as
discussed more in this section, can be summarized as follows:
    (i) The first question the agency considered was whether to issue
allowances, as proposed, or to move forward with some commenters'
suggestion of issuing zero allowances starting in 2015. As discussed in
this section, EPA did not propose to issue zero allowances for several
reasons, and those reasons were reaffirmed by several other commenters.
    (ii) After determining that consumption allowances would be issued,
EPA considered the question of methodology: A linear approach, with
consistent annual decreases (Options 1 and 2 from the proposal) or the
estimation approach (Option 3), which is an approach used in past HCFC
allocation rulemakings. The agency concluded that a five-year linear
approach is most appropriate for the last five years of the HCFC-22
phaseout. A five-year approach conforms to long-standing market
expectations and provides much needed market certainty.
    (iii) The final consideration was what level to use as the starting
point in 2015. A starting point of 10,000 MT in 2015 addresses the
concerns about over-supply of HCFC-22 and the large existing
inventories, while encouraging transition, reclamation and proper
refrigerant management.
    The agency carefully considered market information, comments,
regulatory and statutory requirements, and its long-standing policy
objectives as it weighed the merits of the proposed approaches and came
to a final decision on the amount to allocate for 2015-2019. In the
remainder of this section, EPA summarizes and responds to a majority of
the comments. The full Response to Comments, which summarizes and
responds to each comment received on the proposed rule, is available in
the public docket at www.regulations.gov/#!docketDetail;D=EPA-HQ-OAR-
2013-0263.
i. EPA's Decision To Issue Allowances for 2015-2019
    Sixteen commenters support a lower allocation than any of the
proposed options, with most of them advocating for an allocation of
zero in 2015. EPA did not propose a zero allocation option for 2015-
2019, but commenters assert that dramatically reducing or eliminating
the allocation would: (1) Provide decisive action needed to correct the
oversupply of HCFC-22; (2) encourage development of new low-GWP
alternatives and use of non-ODS alternatives; (3) encourage responsible
reclamation practices and revive the reclamation industry; and (4)
encourage improved leak reduction and product stewardship. Commenters
also state that between the large amount of HCFC-22 currently in
inventory, decreased demand, better leak control, use of reclaimed
HCFC-22, and availability of alternative refrigerants, consumers can be
assured of sufficient capacity to service their existing systems
without EPA granting a significant amount of new HCFC-22 allowances.
Among others, these commenters include NRDC, EIA, Hudson Technologies,
and other reclamation companies that commented individually and also as
part of the New Era Group, Inc. coalition.
    Two commenters, NRDC and EIA, state that the lower allocations they
advocate for (zero allowances of HCFC-22, or if not zero, then Option 2
with a modified three-year phasedown) are logical outgrowths of the
proposal and as such, satisfy the legal requirements to offer
opportunity for comment.
    EPA is not finalizing commenters' suggestion of issuing zero
allowances in this rule for several reasons. First, recent market data
support the issuance of allowances. Data from 2012 and 2013 show that
there is still considerable servicing need for HCFC-22. Data collected
through EPA's section 114 process show that inventory drawdown in 2012
was over 10,000 MT. Given that consumption was 25,600 MT, and
reclamation was over 4,000 MT, it is clear that in 2012 there was still
significant servicing demand for HCFC-22. In 2013, consumption was
29,146 MT, and inventory build from the nine companies was only 2,800
MT, or about a 5 percent increase in their aggregate inventory levels.
(The increase in inventory from these nine companies is about equal to
the number of recoupment allowances that were issued in addition to the
final consumption allocation.) Reclamation was also more than 3,500 MT.
Based on these data, the agency concludes that there is still
significant servicing need for HCFC-22. Continued servicing need for
existing equipment is not unexpected, problematic or otherwise contrary
to the goals of the phaseout. Allowing consumers to continue operating
equipment using the refrigerant for which it was designed is
instrumental to the agency's goal of a smooth transition while
safeguarding the viability of the reclamation industry.
    Second, while there would be a benefit to the stratospheric ozone
layer from not allocating allowances for 2015-2019, the total level of
HCFC consumption allowances allocated over the five year period covered
by this rule is already 75 percent below the maximum level of
consumption permitted by the Montreal Protocol and EPA's regulations
implementing sections 605 and 606 of the Clean Air Act. In addition, by
finalizing the option starting at 10,000 MT rather than the option
starting at 13,700 MT, EPA is taking an additional step towards
stratospheric ozone protection by preventing the consumption of more
than 11,000 MT of HCFC-22 over the five year period. EPA disagrees with
commenters about the climate benefits of a zero allocation approach.
Some of these commenters state that the future emissions resulting from
a large allocation of HCFC-22 would have significant climate impacts
and be contrary to the President's Climate Action Plan. Hudson states
that eliminating or further reducing HCFC-22 allowances beyond EPA's
preferred approach in the proposal would be ``one of the most
significant actions the Administration could take in the short-term to
address global climate change.'' Two commenters believe EPA's preferred
approach may benefit the consumer, but is at odds with the agency's
greenhouse gas reduction goals. In total, twelve commenters state that
EPA's preferred approach will result in significant and unnecessary

emissions of HCFC-22 to the atmosphere, and recommend adopting a faster
phaseout schedule to minimize environmental impact.
    On the other hand, Arkema and the Department of Defense (DoD) do
not believe that eliminating HCFC-22 allowances before 2020 would have
environmental benefits, especially since the agency is reducing
consumption at a faster rate than the Montreal Protocol requires. They
believe that an overly quick phaseout schedule may accelerate equipment
replacement, and DoD points out that the commercial availability of
equipment using low-GWP alternatives is limited for some uses. DoD
states that accelerating transition to equipment using high-GWP
alternative refrigerants may not benefit the environment. One commenter
is concerned about emissions from the venting of HCFC-22, but also
states that the movement to switch out of HCFC-22 is creating a problem
related to the high GWPs of the HCFC-22 substitutes. FMI is concerned
about accelerated or poorly planned retrofits in the retail food sector
from a shrinking HCFC-22 supply, which could lead to an increase in
energy use.
    EPA notes that commenters claiming that a zero allocation would
reduce HCFC-22 emissions and accordingly have climate benefits, do not
account for the emissions of the refrigerant that would replace HCFC-
22. Calculating potential HCFC emissions avoided, without considering
emissions from replacement refrigerants, does not give a true picture
of climate impacts. In addition, while new systems like R-410A
residential unitary air-conditioners often have smaller charge sizes
and lower leak rates than the HCFC-22 equipment they replace, this is
not the case for retrofits of existing unitary equipment.
    A zero allocation would likely accelerate retrofits, particularly
in residential unitary air-conditioning. The agency heard from numerous
stakeholders that retrofits and system replacements increased when the
price of HCFC-22 went up in 2012 and early 2013. Data collected from
alternatives producers show a dramatic increase in sales of HCFC-22
retrofit refrigerants \20\ since 2011. EPA has also heard that during
the last several years, service technicians have become more aware of
and comfortable using non-ODS retrofit refrigerants. As the phaseout
progresses, the percentage of HCFC-22 demand met by retrofit
refrigerants is expected to continue to rise.
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    \20\ e.g., R-407C, R-421A, R-422D, R-438A, and numerous other
non-ODS alternatives.
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    EPA believes retrofits are an important option for many consumers
as HCFC-22 is phased out; however, the agency does not want to
prematurely drive consumers away from the refrigerant their system was
designed to run with. EPA is concerned that a zero allocation could
unnecessarily push equipment owners to retrofits, potentially
discouraging continued operation of HCFC-22 equipment with reclaimed
refrigerant. In addition, HCFC-22 systems generally run most
efficiently on HCFC-22, and to the extent stakeholders wish to evaluate
the climate impacts of various options, energy efficiency is also an
important climate consideration. Retrofitting an existing system can
also decrease capacity, meaning a system must run longer and use more
electricity in order to generate the same cooling output. A decreased
capacity may also result in the inability of equipment to meet the
sensible (temperature) and latent (humidity) cooling needs required
throughout the season.
    Additionally, stakeholders should be aware that most retrofit
refrigerants (often inaccurately called ``drop-ins'' \21\) have higher