M. What are the Record Keeping Requirements? EPA proposes that producers, importers, and distributors of critical use methyl bromide maintain self certification records from buyers ( typically wholesale buyers) for 3 years, along with other transactional records such as invoices and order forms. EPA proposes that distributors, third party applicators, and any other entities that directly sell critical use methyl bromide or fumigation services to approved critical users, keep self certification records signed by the buyer of the critical use methyl bromide ( whether from expended CUAs or from expended CSAs) on file for 3 years, along with other transactional records such as invoices and order forms. DRAFT EPA DOCUMENT  39 N. How Often will Critical Use Allowances ( CUAs) be Distributed and How are Allowances Expended? Through a notice and comment rulemaking, EPA proposes to allocate critical use allowances ( CUAs) on an annual basis consistent with authorizations by the Parties and Section 604( d)( 6) of the CAA. To the extent that the Parties continue to authorize controls on available stocks, the Agency will also allocate critical stock allowances ( CSAs) on an annual basis. EPA proposes to allow producers and importers to expend their critical use allowances ( CUAs) for production and import of methyl bromide at any time during the control period so as to avoid disruptions in the supply of methyl bromide. However, as with other allowances under EPA's phaseout program for ozone depleting substances, EPA is proposing that companies would only be able to expend CUAs during the specified control period ( calendar year)   for today's proposed action that would be during 2005. In other words, there would not be any banking of unused critical use allowances ( CUAs) from control period to control period. If the Parties' decision authorizing 2006 critical use exemptions is specific about controls of available stocks, then the Agency would discuss such a control in its notice and comment rulemaking for the 2006 allocations. In developing today's action, EPA also takes comment on the option of issuing half of the allowances at the beginning of the control period and then the remainder of the allowances six months into the control period. Under this option, EPA would publish an annual rulemaking before the start of the control period indicating how many allowances of each type could be expended in the first two quarters of the year and how many allowances of each type could be expended in the later two quarters of the year. EPA notes there are many steps in publishing rulemakings, many of which can be timeconsuming. Publishing two rulemakings to allocate critical use allowances for a given year, if it were an annual process, might result in a lapse in available allowances and therefore a disruption in supply. EPA requests comment on whether this option addresses concerns regarding the availability of sufficient critical use methyl bromide that were raised by entities in sectors who fumigate later in the calendar year. EPA proposes to allow producers and importers to expend ( use) their allowances for production and import of methyl bromide at any time during the control period so as to avoid disruptions in the supply of methyl bromide ( See Section VI B. above regarding " expending" allowances). However, EPA also requests comment on an option that would permit allowances to be expended only when an order for methyl bromide had been placed by a distributor or some other purchaser of methyl bromide, making a so called " redeemable" allowance system ( see Section VII. on a redeemable allowance system). EPA believes that there may be some environmental benefit of only allowing production and import to take occur once an order is placed. However, EPA believes that such an approach is unlikely to result in significantly less critical use methyl bromide production, importation and stockpile draw down, and would be more disruptive to the methyl bromide market. EPA is proposing to allow producers, importers, distributors, applicators, and other entities that hold critical stock allowances ( CSAs) to expend their stockpile allowances by selling a corresponding amount of methyl bromide stocks, at any point during the control period. Likewise, the Agency is proposing that producers and importers allocated critical use allowances DRAFT EPA DOCUMENT  40 ( CUAs) would be able to expend their allowances to produce or import methyl bromide for the agreed critical use categories at any time during the control period ( calendar year). This approach is preferred because producers and importers need a certain amount of time to actually manufacture, and bring to market, quantities of methyl bromide. Furthermore, producers and importers need to make business decisions regarding manufacturing and marketing well before an order is actually placed in order to efficiently batch their production and import operations. EPA will allocate CUAs and CSAs before the control period and the allowances, under today's proposal, may be expended at any point during the one year control period. EPA seeks comments on today's proposal and the other options described above regarding when allowances are allocated and when allowances can be expended.

O. Can Allowances be Traded? In accordance with CAA Section 607, EPA proposes to that producers and importers allocated critical use allowances ( CUAs) be permitted to trade or transfer those allowances. EPA is proposing that CUAs would be transferable as other allowances for controlled ozone depleting substances can be traded under existing regulatory provisions of the 40 CFR Part 82, Subpart A. Critical stock allowances ( CSAs) are not used in order to produce or import methyl bromide but rather are rights to allowance holders to sell pre existing supplies of methyl bromide to the critical use market. If the holder of a CSA does not wish to sell his inventoried methyl bromide to the critical use market, he may sell his critical stock allowances ( CSAs) to another CSA holder. The second CSA holder may then sell additional amounts of his methyl bromide inventory to the agreed critical use categories specified in the rulemaking. As noted earlier, a CSA is only expended when methyl bromide stocks are sold to an approved critical user. Thus, normal distribution of stocks of methyl bromide from a producer or importer to a distributor does not require a CSA.. For example, if a producer sends a distributor 10,000 kilograms of methyl bromide stocks for sale to approved critical users, the producer would not need to expend CSAs to sell methyl bromide to a distributor. However, if the distributor intended to sell the methyl bromide to an approved critical user, the distributor would need to have sufficient CSAs to sell to a self certifying approved critical user. If the distributor did not have sufficient CSAs, it might request that the producer transfer CSAs to the distributor as part of the transfer transaction of stocks manufactured prior to January 1, 2005. EPA is proposing that the transfers of methyl bromide stocks manufactured or imported with expended production and consumption allowances prior to January 1, 2005, would not constitute a transfer ( trade) under this proposed rulemaking, unless the transfer ( sale) is to an approved critical user. In accordance with the requirements of Section 607 of the CAA, EPA is proposing an offset of one percent of the amount of CUAs being traded that would be deducted from the transferor's allowance balance at the time of a trade. Section 607 of the CAA governs the allocation of allowances for the production and consumption of class I and class II ozone depleting substances and the transfers ( trades) of such allowances. Paragraph ( c) of Section 607 requires that such transfers of allowances result in a lower level of production than if the trade had not occurred. To provide less production after every trade, EPA is proposing a one percent offset of the amount of CUAs being transferred be deducted from the transferors balance. A one DRAFT EPA DOCUMENT  41 percent offset is consistent with the offset required for the transfer of production and consumption allowances under other parts of the phaseout program for class I controlled ozone depleting substances, including the transfer of methyl bromide production allowances and consumption allowances. EPA is seeking comment on the appropriateness of the proposed offset. Trades of production and consumption allowances for class I controlled ozone depleting substances, including methyl bromide, have had a one percent offset. For consistency with the requirements governing other types of allowance transfers under the phaseout regulations, EPA proposes that the entity that is selling or giving allowances to another entity must file an allowance transfer form with EPA, which the existing regulation requires that EPA process within 3 business days of receipt. The current regulation states that trades that are not processed by EPA in 3 working days are automatically approved. EPA established this short review period to encourage trading and ensure the Agency does not impede a fluid market. Today's action proposes that the information to be provided to EPA would include the total number of CUAs to be transferred and the name of the entity who is acquiring the allowances. See 40 CFR Sections 82.9, 82.10 and 82.12 under the current regulations and below in the proposed regulatory text. EPA is proposing an additional, special type of transfer for the methyl bromide critical use exemption program. EPA is proposing that a person holding critical use allowances ( CUAs) could exchange them for additional critical stock allowances ( CSAs) and this exchange would not require an offset. Under this option, the CUAs would be retired and EPA would issue additional CSAs in an amount equal to the amount of retired CUAs. This type of an exchange is consistent with Decision IX/ 6 and section 607 of the Clean Air Act because it results in use of more stocks and less production in a given control period. If the companies involved understand the market and believe additional quantities can be provided from stocks rather than new production or import in a given year, the Agency does not want to interfere in the market. Because the Parties specified the maximum amount of critical use methyl bromide that may be derived from new production or import in Decision Ex I/ 3, EPA is proposing that CUAs may be converted into CSAs in this manner, but not vice versa. The Protocol and CAA have no restriction on meeting more critical use needs from stocks. However, because Decision Ex I/ 3 limits the total amount of new production or import in 2005, there cannot be an exchange that would increase the number of CUAs. EPA seeks comments on the proposed exchange of CUAs for CSAs. EPA is seeking comments on the programs proposed for trading allowances and the options that are described above.

P. Are Allowances Bankable from One Year to the Next? EPA proposes to prohibit banking of allowances from one year to the next because the controls under the Montreal Protocol and the Clean Air Act are calendar year " control periods". The U. S. has obligations under the Montreal Protocol and the Clean Air Act to control the production and consumption of ozone depleting " controlled substances" on an annual, calendar year basis. To date, the authorization for exempted production and import of methyl bromide for agreed critical use categories ( Decision Ex I/ 3) is only for the 2005 calendar year. For the 2005 calendar year ( control period), methyl bromide production and import is prohibited, except where DRAFT EPA DOCUMENT  42 otherwise exempted. The Parties may allow for multiple year exemptions in the future which may possibly allow for banking of allowances from one year to the next so long as it is within the duration of the exemption authorized by the Parties. EPA will revisit the issue of banking allowances under a multi year scenario to reflect any framework changes agreed to by the Parties in future decisions.

Q. How is Unused Critical Use Methyl Bromide Treated at the End of the Compliance Period? The critical use exemption is currently an annual exemption program. Critical use methyl bromide authorized by the Parties for 2005 critical uses must be used during that calendar year. However, methyl bromide created under the exemption in one year may not be fully used before the end of the compliance control period. In the event that there are inventories of critical use methyl bromide at the end of the control period, EPA proposes to deduct the difference from the total number of CUAs made available in the next year. EPA is proposing that if critical use allowances ( CUAs) are allocated on a sector specific basis, and the methyl bromide is produced or imported but unused in the control period, the material could be used only for the approved critical uses in the subsequent control period. This proposal would mean quantities produced or imported with expended CUAs not used in the relevant control period would, as stated in today's proposal, be deducted from the amount of new production or import authorized by the Parties for the subsequent control period. EPA would include unused critical use methyl bromide in the calculation of available stocks for the subsequent year. EPA also seeks comment on restricting the use of sector specific critical use methyl bromide to only the sector for which it was allocated. For example, if methyl bromide was produced in year x with expended eggplant CUAs, EPA would limit the use of unused quantities to only approved critical use eggplant uses in the subsequent control period. EPA also requests comment on an option of allowing critical use methyl bromide that is unused in the relevant control period to be available for any use in the subsequent control period, but the Agency believes this option would run contrary tothe Protocol, as the material was explicitly produced or imported beyond the phaseout for a critical use exemption. EPA seeks comments on the proposed method for accounting for unused critical use methyl bromide and the other options discussed above.

R. What are the Enforcement Provisions Governing Critical Uses? Section 113 of the CAA controls enforcement activities for violations of requirements under Title VI. Under the Stratospheric Ozone Program regulations, EPA has historically defined each kilogram of unauthorized production or importation of controlled substances to be a separate violation of its regulations. See e. g. 40 C. F. R. § 82.4( a)( 1) (" Every kilogram of excess production constitutes a separate violation of this subpart."). Likewise, for the restricted distribution under exemption programs of controlled substances, the Stratospheric Ozone Program has also considered each kilogram of inappropriate sale for a use other than the designated specific exempted purpose to be a separate violation. To ensure U. S. compliance under the Montreal Protocol, EPA believes this approach remains justified for enforcement DRAFT EPA DOCUMENT  43 against producers, importers, and distributors of methyl bromide because these are large companies that have an ability to pay higher penalties and should face a substantial deterrent against producing, importing, and selling large quantities of controlled substances in excess of allowances or application limitations. In addition, these producers, importers and distributors are larger companies that typically have government affairs staff and retain legal counsel to advise them on their regulatory requirements. Thus, EPA will continue to define violations involving the unauthorized production, import, or sale of critical use methyl bromide on a per kilogram basis. In the case of methyl bromide end users, defining each violation on a per kilogram basis could mean a small farmer might face the potential of a very high penalty if she applied critical use methyl bromide in an unauthorized fashion. However, in assessing penalties under any enforcement action, the Agency takes into consideration the size of the violator and the ability of the violator to pay a penalty. Farmers in many of the agreed critical use categories typically use several hundred kilograms of methyl bromide to treat a single acre. If the Agency were to maintain that each kilogram that is wrongly used is a separate violation, then a farmer ordering and applying 3,000 kilogram in error to her 10 acre farm would face a potential maximum penalty of more than $ 97 million. EPA recognizes that there is a difference in scale of possible violations and impact on compliance with U. S. obligations under the Protocol and is therefore proposing to define each single violation for the mis use of critical use methyl bromide by an end user differently than a violation by a holder of a CUA or CSA so it reflects the typical farm size and application rate of a person in the approved critical use categories. EPA is proposing to define each violation associated with the improper use of critical use methyl bromide in increments of 50 kilograms. Taking the example of the farmer described above, who ordered and submitted a self certification to use 3,000 kilograms of critical use methyl bromide in accordance with today's proposed restrictions, but then wrongfully applied the material, she would face 60 separate violations for this mis use with a potential maximum penalty of $ 1.95 million. EPA wishes to note again that in assessing penalties, the Agency takes into account the circumstances of the violation, the size of the violator and their ability to pay. EPA believes it is important to retain a sizable potential maximum penalty so there is a deterrent against abuse of this exemption from the phaseout. EPA also notes that larger farms ( that might be operated by sizable agricultural corporations) will also be ordering and certifying the proper use of large quantities of critical use methyl bromide and if the material were to be mis used they should continue to face large potential maximum penalties to deter them from simply incorporating the penalty ( and the mis use of exempted methyl bromide) into their business plans. EPA requests comments on whether the proposed definition for an end user's violation is appropriate for enforcement, especially in light of the fact that the person is self certifying they will use the critical use methyl bromide in accordance with today's proposed restrictions for the exemption. Under today's action, EPA is not proposing to use the Federal Insecticide, Fungicide, and Rodenticide Act ( FIFRA) authorities or mechanisms to implement or enforce the critical use exemption. However, under today's action, nothing precludes parallel implementation and enforcement under FIFRA and other federal, state, and local pesticide regulations. DRAFT EPA DOCUMENT  44 VII. What are Other Options on which EPA Seeks Comment? EPA also requests comment on other options for allocating critical use exemption allowances. In addition to the proposed option described above which entails the distribution of critical use allowances to producers and importers, EPA is requesting comment on an additional regulatory framework that would give critical use exemption permits to the end users of methyl bromide. These permits, hereafter referred to as " critical user permits" would differ from the critical use allowances in the following manner. Critical user permits would be redeemed to buy 1kilogram of methyl bromide for an approved critical use whereas a critical use allowance would be an allowance for the production and import of 1 kilogram of methyl bromide by a manufacturer or importer of methyl bromide. EPA believes that the options described in Section VII of this proposed rulemaking would create a new burden on approved critical users of methyl bromide. A full analysis of the burden associated with providing permits to end users is described in the supporting analytical documents that accompany this rule. The supporting analysis primarily analyzed two options for who could hold critical use allowances, producers and importers or end users. Under a system that creates permits distributed to end users, EPA estimated that the annual burden on industry would be about $ 6.4 million per year. In contrast, a system designed to provide allowances only to producers and importers would cost industry about $ 2.2 million. For a more complete discussion of the supporting analysis, please see Section VIII. A of this proposal. In some instances, EPA made only a qualitative assessment due to uncertainty about the future price of methyl bromide and other unknown factors. In other instances, it was difficult to create a direct quantitative comparison on the de regulatory benefit of one option compared to the next. EPA believes that the options described in Section VII would be substantially more burdensome in terms of regulatory requirements on approved critical users of methyl bromide than the proposed option would be. EPA received public comment to this effect at the stakeholder meetings held over the previous year. To the degree that not all potentially interested parties were able to attend these stakeholder meetings, EPA specifically requests comment on the tradeoffs involved in these options that may not have been represented in previous public fora. EPA seeks comment on these options to better understand if the benefits of these options outweigh the additional regulatory burden.

A. What Other Allowance Systems is EPA Taking Comment On? EPA seeks comment on other types of allowance systems. In addition to the upstream allowance trading system described above that would regulate the supply and suppliers of methyl bromide, EPA seeks comment on a downstream system that involves issuing tradable permits to end users of methyl bromide. EPA requests comment on an allowance system that would distribute permits to approved critical users of methyl bromide who would have to demonstrate ownership of sufficient permits in order to then purchase methyl bromide from their supplier. Under this type of system, approved critical users would have a permit that could be traded to other approved critical users. This permit would presumably have a value and if a user decided not to redeem it for methyl bromide, the user could sell the permit and obtain revenue from this action. EPA is currently DRAFT EPA DOCUMENT  45 concerned that the regulatory burden involved in issuing permits to end users of methyl bromide may be very high, primarily because of the additional data submission requirements to establish a baseline against which pro rated permits would be distributed and due to the reporting and recordkeeping requirements which would be placed on approximately 2,000 additional entities.

B. Distribution of Critical User Permits to End Users of Methyl Bromide? EPA is taking comment on options regulating downstream distribution of methyl bromide through the use of critical user permits or CUPs. EPA seeks comment on two options for initially distributing the permits. One option, similar to the method used in Canada under their phaseout of methyl bromide, would involve the distribution of permits to end users. The second option would employ an auction system whereby the allowances would be sold to the user with the highest bid. A CUP system involving the distribution of permits to end users would require individual farms and companies to provide data to EPA ( see Section VIII. E for more detail on distribution of permits). EPA would then examine the data and would write an additional notice andcomment rulemaking to distribute permits to each entity. This process would take between one and two years to complete, so permits would not be available to end users until after the phaseout takes effect. In such a scenario, EPA would implement the CUPs beginning in 2007 and rely on an upstream system as described in Section VI as an interim control measure until 2007. EPA is accepting comments on employing an auction as one method to circumvent the burden and time involved with permit distribution. However, the auction of CUPs, similar to a method where EPA uses data to distribute CUPs, would impose more requirements on end users than the proposed option. End users under the auction would be required to familiarize themselves with auction procedures, participate in the auction, keep records of all auction and CUP activities for three years, and report to EPA annually on the use of CUPs acquired. Under the proposed option, end users would not have any reporting or recordkeeping obligations. Again, similar to using data to distribute CUPs, there are timing concerns regarding the auction. It would take time for EPA to create the infrastructure to implement an auction, likely causing an implementation delay past January 2005. In stakeholder meetings held by EPA over the summer of 2003, stakeholders universally commented that they wanted a simple regulation and one that would impose minimum burden on end users. This comment was regularly made in association with the two end user permit options, which stakeholders viewed as presenting significant burden on end users without sufficient accompanying benefits. Under either CUP scenario, EPA would abide by the parameters set by the Parties in the authorization of critical use exemptions. Decision Ex I/ 3 requests Parties to endeavor to allocate critical use permits according to the use categories recommended by the TEAP. Thus, EPA requests comment on whether it could create one auction where all critical users would vie for permits or should create sector level auctions instead. EPA may propose to be more restrictive than required under the Protocol, as interpreted by the Parties, but not less. DRAFT EPA DOCUMENT  46 C. What is a Critical User Permit and Can it Be Traded? A critical user permit ( CUP) is a permit which would entitle the holder to obtain one kilogram of methyl bromide for use for approved critical uses. A different type of CUP could be designated for each critical use category in Decision Ex I/ 3. Once a user acquires an initial allocation of permits, whether through rulemaking or auction, EPA would allow the user to either redeem the permit to buy methyl bromide, hold that permit unredeemed until the end of the control period when it would expire, or sell the permit to another entity. Although only approved critical users would be given permits initially, EPA requests comment on whether it should restrict the type of entity to whom approved critical users could sell permits. EPA believes that allowing trading in this fashion would create opportunity for brokers, trading firms, citizen groups and others to participate in the market and thereby increase the liquidity of the market. EPA is also considering not allowing users to trade their CUPs after the initial allocation ( i. e. a command and control approach), allowing CUP holders to trade permits with other CUP holders across sectors ( e. g. a user could trade a tomato CUP to a strawberry grower) or allowing trades only within a sector ( only allowing a tomato trade with a tomato grower).

D. Who is Eligible to Receive an Initial Allocation of CUPs and Who May Use CUPs? EPA requests comment on two options for who can receive an initial allocation of CUPs. The first option would only allow those entities included in an application to EPA to receive an initial allocation of CUPs. The second option would allow those users not explicitly covered by an application but who have the limiting critical condition to receive an initial allocation. Once an entity receives its CUP allocation, it can either use it to acquire critical use methyl bromide, or it can simply hold it ( holding a CUP is addressed in Section VII. D below). There are also two options for who can use a CUP to acquire critical use methyl bromide, namely only allowing those entities included in an application to EPA to participate, or allowing those users not explicitly covered by an application but who have the limiting critical condition to redeem a CUP for methyl bromide. EPA believes that it would be unfair to those groups that invested the resources in applying to EPA for an exemption if EPA adopted an option that would make an initial allocation of permits available to users who meet the limiting critical condition but are not covered by an application. However, EPA believes that a hybrid approach which allows any user who meets the limiting critical condition to buy permits after the initial allocation is fair in that the right of first refusal has already been given to those that applied for the exemption. EPA requests comment on this issue.

E. Who May Hold a CUP? Even though only approved critical users would be able to obtain methyl bromide under the critical use exemption, EPA would allow any entity to hold permits in order to enhance market liquidity. For example, EPA is considering allowing citizen groups and brokers to hold permits, but not giving such entities an initial allocation and not allowing them to use or redeem the CUPs. EPA seeks comment on who may receive an initial allocation of CUPs, who may hold DRAFT EPA DOCUMENT  47 CUPs, and who may redeem CUPs for critical use methyl bromide.

F. Methods for Distribution of Critical User Permits: Distribution Based on Data EPA requests comment on several methods for distributing CUPs to the end user community using entity level historic use and/ or operational information. One method would use entity level historic methyl bromide use data to create a baseline against which CUPs would be allocated. Under this option, individual end users would have to provide 3 years of historic use data and documentation to EPA which would include total quantity ( kilograms) of methyl bromide used in each year, the hectares or cubic meters treated annually, the formulation rates, and data on efforts to minimize use and emissions. Using these data, EPA would establish a straight average baseline and would pro rate amounts of methyl bromide available to the sector by the total treated area requested by entities that submitted the additional data. Because the exemption is contingent upon first demonstrating that the user is using methyl bromide in a manner of maximum efficiency, best practice information on the minimization of use and emissions would be applied to all users within the category and could reduce the amount of methyl bromide incorporated into the baseline of a specific operation. If a user has not been a historic grower or owner of the commodity for which he seeks an exemption but is now a member of a covered consortium, EPA is considering having that user submit documentation to support his plans to treat the specified acreage/ volume. Alternatively, a new entrant might not be given an initial allocation but be allowed to buy and use CUPs from a willing seller so long as the entity met the limiting critical condition. Another method for distributing CUPs would involve economic considerations for each entity. For example, EPA could distribute permits to those users with the highest marginal cost of substitution, in other words to those end users with the greatest economic need. Alternatively, EPA is considering distributing permits to end users with the lowest marginal cost of substitution who would then be inclined to sell their permits to users who have a higher substitution cost. In order for EPA to make a determination as to how to distribute permits under a scenario using economic criteria, individual entities would have to submit historic use data to EPA and individual entity economic data on operational costs and the costs of alternatives. EPA seeks comment on the options described for determining baselines and distributing CUPs.

G. Submitting Individual Entity Data to Obtain Critical User Permits ( CUPs) Under an option involving the distribution of CUPs, users would be required to submit the additional data for baseline determination either with the annual critical use application or under separate cover to EPA. Each year, beginning in 2002, users interested in a critical use exemption have been required to submit a detailed application to EPA between August and September. A small number of users applied only on behalf of their operations alone and therefore for these users, EPA has sufficient use data on a per entity basis in order to create an historic baseline of methyl bromide use for a few entities. Most users however applied for a critical use exemption as groups of similar users ( e. g. all of tomato growers in Michigan). In these instances, EPA does not have the bulk of the baseline DRAFT EPA DOCUMENT  48 data needed to create per entity historic baselines of methyl bromide use. Due to the amount of time it would take a) for users to submit additional data and documentation to EPA and b) for EPA to analyze the data and write a notice and comment regulation allocating baseline allocations, EPA would implement the CUPs beginning in 2007 and relying on an upstream system as described in Section VI of this proposal an interim control measure until 2007.

H. Methods for Distribution of Critical User Permits: Distribution Using Auctions EPA takes comment on using an auction as a method for distributing critical use permits ( CUPs) to operations ( users) that meet the critical use criteria. EPA understands that affected entities have expressed a strong preference for a simple regulatory mechanism for the critical use exemption. EPA believes that of all the options, an auction is by far the most complex to design, would be unlikely to be in place in time for the beginning of the critical use exemption, and would impose a steep learning curve on affected entities. EPA does not have statutory authority to set a price for methyl bromide under the Clean Air Act. Therefore, to implement an auction, EPA could only consider an option that did not have the government set a minimum or maximum price for material under the critical use exemption. EPA therefore is only considering auctions using a sealed bid method with no set minimum bid. Other bid options which EPA did not consider include the ascending bid or English auction and the declining bid or Dutch auction. In a sealed bid auction, each bidder discloses the maximum bid they would offer and the number of permits they are seeking. The auctioneer then opens all of the bids and awards the permits to the highest bidders until there are no more permits left. The price of the last permit awarded could be used to set the price of all of the bids awarded ( clearing price) or the price could be determined by the bid set by the bidder (" pay as you bid"). In an ascending auction bid, the auctioneer offers a losing bidder the chance to increase his/ her bid. When the bidding has ended, the permits are distributed to the highest bidders. In a declining bid auction, the auctioneer sets a price for the permit at the high end of the spectrum. Bidders can then accept the price and buy permits or can wait and see if the price comes down. EPA believes that it only has authority for a " pay as you bid" auction. To submit a bid, a user would first have to establish an account via a letter of credit or similar mechanism with the auctioneer or would have to submit a certified check for their maximum bid amount with their bid form. Information on the bid form would include name of bidder, contact information for bidder, name and contact information of the authorized representative if applicable, number of kilograms the bidder wishes to purchase at a given price, type of permits if applicable, location to be fumigated, a description of other crops or uses that would benefit from the fumigation ( e. g. a double crop of peppers), and a certification form that any methyl bromide obtained will be used only for critical use purposes. The bid price could be structured to include just the cost of the permit ( the bid premium) or the cost of the permit plus the price of the actual methyl bromide purchased. In the former, the bidder only obtains the right to buy methyl bromide at a price to be set by the supplier; in the latter option, the price paid by the successful bidder includes the right to buy methyl bromide and DRAFT EPA DOCUMENT  49 the cost of the methyl bromide. However, since EPA does not have the authority to redistribute revenues from the auction, EPA only considered a bid price that covers the cost of the CUP ( the right to buy methyl bromide) alone. All revenues from the auction would be sent to the U. S. Treasury since EPA does not have statutory authority to capture the revenue for other purposes. EPA is considering running the auction in house, having another federal entity run the auction, or allowing a third party to administer the auction. In the event that a third party were to run the auction, EPA examined the options of having the party run the auction either for a fee or as a gratuitous service to the government. If the auction would be run as the latter, the thirdparty would then be able to charge a reasonable administration fee from those in the user community that elected to participate in the auction. EPA seeks comment on the various elements of the auction method for distributing permits.

I. Frequency of Auctions and Set Asides In order to make the auction feasible, EPA believes that two auctions a year would be required, one shortly before the beginning of the control period and one three to four months after the new control period begins. The second, later auction would be required in order to ensure that quantities of methyl bromide authorized by the Parties to the Protocol in their meeting only two months before the control period and approved through rulemaking during the early part of the compliance period could be allocated to users EPA further seeks comment on creating a set aside program to hold back permits from the auction. Under such a program, between 10% and 50% of the total allowable amount, would be held in reserve for a second annual auction in order to accommodate those users who typically acquire methyl bromide later on in the season. EPA seeks comment on the use of set asides, the amount of methyl bromide to set aside for a second auction, and the number of times a year EPA should conduct an auction.

J. Other Methods for Distributing CUPs EPA also requests comments on other options for distributing critical use permits ( CUPs) that would not entail EPA giving permits directly to end users of methyl bromide. EPA is considering giving the CUPs to the consortium that applied for an exemption. The consortium could then determine how they would like to distribute allowances to individual users, either through use of data or through an auction. However, there are several consortia that do not have any infrastructure to receive and distribute the permits and some consortia are not even legally incorporated entities. Alternatively, EPA is considering giving allowances to State governments to re distribute using a method of their choosing. However, due to concerns about the possibility of creating an unfunded mandate, EPA has decided not to further consider such an option.

K. Tracking Permits EPA might create a web enabled database program to allow for the tracking and trading of CUPs. Since almost 10 million CUPs could be issued based on the number of kilograms requested by the U. S. government for critical uses in the 2003 nomination, EPA believes that a DRAFT EPA DOCUMENT  50 new tracking system would have to be developed to facilitate the trading and tracking of CUPs. Each entity that applies for an initial allocation of CUPs would be required to create an account in the web enabled database as well as entities that sell or distribute methyl bromide to end users and entities who acquire permits through trading. Once allocated, EPA would place CUPs in the account of the end user. All accounts would be frozen on an annual basis on December 31st for the annual true up period during which time no transactions could take place.

L. Redeeming CUPs for Methyl Bromide A CUP holder may redeem his permit with a methyl bromide supplier such as a custom applicator or distributor by transferring his permits to the supplier's account. To transfer the permits, EPA would require the permit holder to electronically transfer his permits to the supplier's account indicating the number of acres/ square feet to be treated, location of area to be treated ( address, coordinates, parcel ID number) and whether a second crop will benefit from the fumigation. The permit holder would then transfer the permits electronically to the supplier's account, at which point the permits would be deactivated automatically by the system. Automatically, an electronic mail notification would be sent to the supplier notifying him that the specified CUPs have been transferred to his account. The user would then print out a certification form that the material would only be used for the specific critical use, sign it and send it to the supplier before he or she could receive the methyl bromide. A supplier or end user would have ten business days to dispute the transaction with EPA in the event that an error was made by the permit holder in the transfer of permits.

M. Reporting Requirements for CUP Holders CUP holders would be required to annually reconcile their accounts by submitting a written form to EPA no later than 15 days after the end of the control period, i. e. December 31st or the date when all unredeemed permits would expire. The form would be created by EPA and available on the EPA's methyl bromide website. CUP holders would be required to indicate how much critical use methyl bromide bought during the year has not been used and/ or remains held in inventory for future use.

N. Interaction between CUPs and CUAs EPA could implement the CUP program as a stand alone program or in conjunction with a CUA program. If the CUP program were to be implemented as a stand alone program, CUP holders would sell their permits to producers and importers of methyl bromide at a time of their choosing. The producers and importers would not be able to produce or import methyl bromide until they held sufficient CUPs to match their production or import decisions. EPA believes that under such a system, CUP holders would have an incentive to sell their permits to producers and importers early in the year in order to obtain revenues as quickly as possible. Producers and importers might be likely to pay more for permits they obtain early in the year since they seek certainty on the amounts they will be able to produce and import during the year. Under the stand alone CUP program, EPA is considering two options for how permit holders would obtain methyl bromide. Under the first option, the permit holder would be entitled DRAFT EPA DOCUMENT  51 to receive 1 kilogram of methyl bromide for each permit sold. EPA believes that under this scenario, the price producers and importers would be willing to pay is likely to be lower than under the following option. Under the second option, a permit holder would sell his permit to a producer or importer and would then purchase methyl bromide at a later date through his normal supplier as a separate transaction following the procedures proposed in today's notice andcomment rulemaking. Under the stand alone CUP program, the reporting and recordkeeping requirements for producers, importers, distributors, custom applicators and fumigators would be required as described in Sections VI of this preamble. EPA understands that creating a stand alone system for the creation of exempted methyl bromide could place some strain on the methyl bromide production system unless producers and importers were able to buy CUPs from permit holders several months in advance of the control period. However, due to the time it would take to allocate CUPs through a notice and comment rulemaking, it would be unlikely that sufficient time would be available before the control period for producers and importers of methyl bromide to have sufficient certainty to make production decisions. Therefore, EPA might allocate CUAs in addition to CUPs. Under this combined option, the CUA program described in Section VI of today's notice would be implemented side by side with a CUP system described in this Section. Under a combined system, the tracking requirements on usage and restrictions on CUAs by sector could be eliminated since these requirements, in part, are designed to ensure that the U. S. does not exceed its allowable caps for each sector. EPA seeks comment on the stand alone CUP option and the combined CUP and CUA options.

VIII. What Conforming Amendments Is EPA Proposing With Respect to Essential Use Allowances? To make is easier for the public to read and EPA to update the allocation of critical use allowances and critical stock allowance each year, EPA proposes to create a new regulation at 40 C. F. R. § 82.8. This section number is currently reserved. EPA proposes to place the list of critical use allowance and critical stock allowance allocations in this section. In addition, to be consistent with this improved formatting for the critical use exemption regulations, EPA also proposes to include the essential use allowance allocations in section 82.8. Moving these allocations to section 82.8 requires certain conforming amendments to section 82.4( n) as reflected in the proposed regulatory text below. EPA seeks comment on whether these changes make both the critical use exemption and essential use exemption regulations more clear.

IX. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866, ( 58 FR 51735, October 4, 1993) the Agency must determine whether the regulatory action is " significant" and therefore subject to OMB review and DRAFT EPA DOCUMENT  52 the requirements of the Executive Order. The Order defines " significant regulatory action" as one that is likely to result in a rule that may: ( 1) have an annual effect on the economy of $ 100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; ( 2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; ( 3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or ( 4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. OMB has notified EPA that it considers this a " significant regulatory action" under Executive Order 12866 and EPA has submitted it to OMB for review. We will document changes made in response to OMB suggestions or recommendations in the public record. EPA conducted an economic impact analysis ( Economic Impact Analysis for Methyl Bromide Allocation in the United States, hereafter EIA) that looked at three basic options for implementing the critical use exemption: 1) an upstream cap and trade allowance system which would give critical use allowances to producers and importers of methyl bromide; 2) an upstream cap and trade system with a downstream permit trading system where the permits are distributed to end users and; 3) an upstream cap and trade system with a downstream permit trading system where the permits are initially obtained through an auction. The EIA describes the impact of today's proposed regulation with regards to the existing methyl bromide requirements which call for a complete phaseout of methyl bromide production and consumption by 2005 ( consumption is defined as production plus imports minus exports). Therefore, it is important to note that any change in the existing regulations that allows for continued production and import of methyl bromide is de regulatory in nature and will result in an overall cost savings to society. The estimated negative costs ( i. e. reduced costs resulting from the establishment of this exemption) to society are approximately $ 19 million to $ 31 million on an annual basis and $ 380 million to $ 600 million on a Net Present Value basis depending on the particular option and discount rate used ( EIA, p. 126).

Table I: Annualized and Net Present Value of Private Sector Compliance Costs Discount Rate Annualized Costs Net Present Value Costs Sector Specific Approach Illustrative Universal Approach Sector Specific Approach Illustrative Universal Approach 3% $ 19.5 million $ 21.9 million $ 616.6 million $ 695.6 million DRAFT EPA DOCUMENT  53 7% $ 26.8 million $ 31.3 million $ 382.7 million $ 446.8 million The societal cost savings vary depending on the discount rate used and the approach selected. There are two factors which affect the costs of compliance; they are the size of the cap ( i. e. the amount of critical use methyl bromide exempted) and how the cap is constrained ( i. e. if there is one " universal" amount of methyl bromide made available to all approved critical users or if there is a sub cap for each sector/ commodity group). The general methodological framework of the model used for the analysis of the 2000 Phaseout Rule was retained to calculate the costs for today's proposed rule. The phaseout model relies on an engineering approach and is not well suited to predict the distribution of methyl bromide under a universal approach. Therefore, while EPA had a significant amount of data on certain aspects associated with the analysis of today's proposal options, such as data on methyl bromide use and substitutes for key markets, EPA made a host of assumptions regarding the future amount and distribution of methyl bromide allowances. These assumptions included the total amount of critical use methyl bromide that would be made available, the distribution of methyl bromide allowances to various sectors under each option analyzed, and the schedule for the methyl bromide critical use exemption from 2005 to 2018. For example, EPA assumed that under a universal approach, 80 percent of the total available amount of methyl bromide would go to the two largest groups of end users, tomatoes and strawberries. Eighty percent was used to reflect the total amount of methyl bromide originally requested by these applicants. The incremental cost savings estimated for today's proposed rule includes two general components: cost savings from the continued use of methyl bromide as compared to use of a more expensive substitute ( under the baseline), and the economic benefit associated with the increased crop yield obtained through use of methyl bromide instead of a less effective substitute ( under the baseline). The analysis also estimates the administrative costs associated with each option ( e. g. reporting and record keeping). The EIA addresses the question of whether or not a framework option that would create either an upstream cap and trade system ( option 1) or a downstream tradable permit system ( option 2) is more economically efficient ( option 3, the auction approach for allocating allowances, was not quantitatively analyzed in this EIA). The EIA concluded that in fact who holds the allowances has relatively little impact on the efficiency of compliance costs per se and that such costs are impacted more by the size of the cap and constraints on the cap as identified in the preceding paragraphs. Under both options, methyl bromide is ultimately purchased by the user of methyl bromide with the highest willingness to pay. The main driver of efficiency is whether or not methyl bromide goes to the highest value use within a commodity sector or if it goes to the use with the highest value across sectors. According to chapter 5 of the EIA, however, there are some factors that could affect whether or not the options produce the same result in terms of consumption of methyl bromide by end users and in control costs, namely how smoothly the market functions under either option. For more information on the qualitative factors that would impact either option for who holds the allowances, as well as a discussion of DRAFT EPA DOCUMENT  54 the limitations associated with the analysis, please refer to the EIA available in docket OAR 2003 0230. While option two is better than option one in compensating end users who give up their " rights" to methyl bromide, the drawback to option two is the additional complexity in both administering the system and in complying with the system. The EIA estimates that the administrative burden for the regulated community and EPA under options one and two as follows: Table 2: Administrative Burden of Options 1 and 2 EPA Burden Industry Burden Option One $ 25 k ( annual) $ 15 k ( one time) $ 2,200 k( annual) $ 86 k ( one time)

Option Two $ 2,100 k ( annual) $ 53 k ( one time) $ 6,400 k ( annual) $ 2,000 k ( one time)

Source: EIA pages 102 and 117 Further details regarding the de regulatory benefits of the proposed critical use exemption and a discussion on the relative merits of the two main options are available in the EIA which is docketed with this proposed rulemaking.

B. Paperwork Reduction Act The information collection requirements in this rule have been submitted for approval to the Office of Management and Budget ( OMB) under the Paperwork Reduction Act, 44 U. S. C. 3501 et seq. The information collection requirements are not enforceable until OMB approves them. EPA submitted an ICR to OMB concurrent with today's proposed rule. In the ICR, EPA characterizes the paperwork burden that industry may face as a result of today's proposed action. The Information Collection Request ( ICR) document prepared by EPA has been assigned EPA ICR number 1432.23. The information collection under this rule is authorized under Sections 603( b), 603( d) and 614( b) of the Clean Air Act ( CAA). The mandatory reporting requirements included in this rule are intended to: 1) Satisfy U. S. obligations under the international treaty, The Montreal Protocol on Substances that Deplete the Ozone Layer ( Protocol), to report data under Article 7; 2) Fulfill statutory obligations under Section 603( b) of Title VI of the Clean Air Act Amendments of 1990 ( CAA) for reporting and monitoring; 3) Provide information to report to Congress on the production, use and consumption of class I controlled substances as statutorily required in Section 603( d) of Title VI of the CAA. Information will be collected through quarterly reporting by producers and importers and annual reporting by distributors and third party applicators of methyl bromide. In addition, distributors and third party applicators would be required to provide quarterly updates on the availability of critical use exempted methyl bromide. DRAFT EPA DOCUMENT  55 Collection Activity No. of respondents Total no. of responses Hours per response Total hours Rule Familiarization 54 54 4 216 Data Compilation ( quarterly basis) 4 16 4 64 Data Compilation ( annual basis) 50 50 8 400 Data Reporting ( quarterly basis) 4 16 .5 500 Data Reporting ( annual basis) 50 50 .5 25 Reporting on Allowance Trading Activities 4 16 .5 8 Self Certification Activities by Producers, Importers, and Distributors 54 100 .25 25 Self Certification Activities by End Users 2,000 2,500 .25 625 Total Burden Hours 18 1,371 EPA informs respondents that they may assert claims of business confidentiality for any of the information they submit. Information claimed confidential will be treated in accordance with the procedures for handling information claimed as confidential under 40 CFR Part 2, Subpart B, and will be disclosed only to the extent, and by means of the procedures, set forth in that subpart. If no claim of confidentiality is asserted when the information is received by EPA, it may be made available to the public without further notice to the respondents ( 40 CFR 2.203). Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information; process and maintain information; disclose and provide information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An Agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15. To comment on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, including the use of automated collection techniques, EPA has established a public docket for this rule, which includes this ICR, under Electronic Docket ID number OAR 2003 0230. Submit any comments related to the rule ICR for this proposed rule to EPA and OMB. See " Addresses" Section at the DRAFT EPA DOCUMENT  56 beginning of this notice for where to submit comments to EPA. Send comments to OMB at the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW, Washington D. C. 20503 attn: Desk Officer for EPA. Include the EPA ICR number ( 1432.23) in correspondence related to this ICR.

C. Regulatory Flexibility Act ( RFA) The RFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: ( 1) a small business that is identified by the North American Industry Classification System ( NAICS) Code in the Table below; ( 2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less that 50,000; and ( 3) a small organization that is any not for profit enterprise which is independently owned and operated and is not dominant in its field.

Category NAICS code SIC code NAICS Small business size standard ( in number of employees or millions of dollars) DRAFT EPA DOCUMENT  57 Agricultural production Storage Uses Distributors and Applicators Producers and Importers 1112 Vegetable and Melon farming 1113 Fruit and Nut Tree Farming 1114 Greenhouse, Nursery, and Floriculture Production 115114 Postharvest Crop activities ( except Cotton Ginning) 311211 Flour Milling 311212 Rice Milling 493110 General Warehousing and Storage 493130 Farm Product Warehousing and Storage 115112 Soil Preparation, Planting and Cultivating 325320 Pesticide and Other Agricultural Chemical Manufacturing 0171 Berry Crops 0172 Grapes 0173 Tree Nuts 0175 Deciduous Tree Fruits ( except apple orchards and farms) 0179 Fruit and Tree Nuts, NEC 0181 Ornamental Floriculture and Nursery Products 0831 Forest Nurseries and Gathering of Forest Products 2041 Flour and Other Grain Mill Products 2044 Rice Milling 4221 Farm Product Warehousing and Storage 4225 General Warehousing and Storage 0721 Crop Planting, Cultivation, and Protection 2879 Pesticides and Agricultural Chemicals, NEC $ 0.75 million $ 6 million $ 21.5 million $ 6 million 500 employees Agricultural producers of minor crops and entities that store agricultural commodities are categories of affected entities that contain small entities. This rule only affects entities that applied to EPA for a de regulatory exemption. In most cases, EPA received aggregated requests for exemptions from industry consortia. On the exemption application, EPA asked consortia to describe the number and size distribution of entities their application covered. Based on the data provided, EPA estimates that there are 3,218 entities that petitioned EPA for an exemption. Since many applicants did not provide information on the distribution of sizes of entities covered in their applications, EPA estimated that between 1/ 4 to 1/ 3 of the entities may be small DRAFT EPA DOCUMENT  58 businesses based on the definition given above. In addition, other categories of affected entities do not contain small businesses based on the above description. After considering the economic impacts of today's proposed rule on small entities, EPA certifies that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives " which minimize any significant economic impact of the proposed rule on small entities." ( 5 U. S. C. § § 603 604). Thus, an Agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves a regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. Since this rule will make methyl bromide available for approved critical uses after the phaseout date of January 1, 2005, this is a de regulatory action which will confer a benefit to users of methyl bromide. EPA believes the estimated de regulatory value for users of methyl bromide is between $ 20 million to $ 30 million annually. We have therefore concluded that today's proposed rule will relieve regulatory burden for all small entities. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.

D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 ( UMRA), P. L. 104 4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local and tribal governments and the private sector. Under Section 202 of the UMRA, EPA generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with " Federal mandates" that may result in expenditures by State, local and tribal governments, in the aggregate, or by the private sector, of $ 100 million or more in any one year. If a written statement is required under Section 202, Section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost effective or least burdensome alternative that achieves the objectives of the rule, unless the Agency explains why this alternative is not selected or the selection of this alternative is inconsistent with law. Section 203 of the UMRA requires the Agency to establish a plan for obtaining input from and informing, educating, and advising any small governments that may be significantly or uniquely affected by the rule. Section 204 of the UMRA requires the Agency to develop a process to allow elected state, local, and tribal government officials to provide input in the development of any proposal containing a significant Federal intergovernmental mandate. EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $ 100 million or more by State, local and tribal governments, in the aggregate, or by the private sector, in any one year. Today's proposed rule seeks to obtain comment on provisions authorized under the international treaty, The Montreal Protocol on Substances that Deplete the Ozone Layer, as well as authorizations set forth by Congress in Section 604 ( d)( 6) of the Clean Air Act. Viewed as a whole, all of today's amendments do not create a Federal mandate resulting in costs of $ 100 million or more in any one year for State, local and tribal governments, in the aggregate, or for the private sector. Thus, today's proposed rule is not subject to the requirements of Sections 202 and 205 of the UMRA. EPA has also determined that this proposed DRAFT EPA DOCUMENT  59 rule contains no regulatory requirements that might significantly or uniquely affect small governments; therefore, EPA is not required to develop a plan with regard to small governments under Section 203. Finally, because this proposal does not contain a significant intergovernmental mandate, the Agency is not required to develop a process to obtain input from elected State, local, and tribal officials under Section 204.

E. Executive Order 13132: Federalism Executive Order 13132, entitled " Federalism" ( 64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure " meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications." The phrase " policies that have federalism implications" is defined in the Executive Order to include regulations that have " substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government." Under Section 6 of Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct control costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct control costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law, unless the Agency consults with State and local officials early in the process of developing the regulation. This proposed rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. Today's proposed rule is expected to primarily affect producers, suppliers, importers and exporters and users of methyl bromide. Thus, the requirements of Section 6 of the Executive Order do not apply to this proposed rule.

F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments Executive Order 13175, entitled " Consultation and Coordination with Indian Tribal Governments" ( 65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure " meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications." This proposed rule does not have tribal implications, as specified in Executive Order 13175. Today's proposed rule does not significantly or uniquely affect the communities of Indian tribal governments. The proposed rule does not impose any enforceable duties on communities of Indian tribal governments. Thus, Executive Order 13175 does not apply to this proposed rule.

G. Executive Order 13045: Protection of Children from Environmental Health & Safety Risks Executive Order 13045: " Protection of Children from Environmental Health Risks and Safety Risks" ( 62 FR 19885, April 23, 1997) applies to any rule that: ( 1) is determined to be " economically significant" as defined under E. O. 12866, and ( 2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or DRAFT EPA DOCUMENT  60 safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. EPA interprets E. O. 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under Section 5 501 of the Order has the potential to influence the regulation. This proposed rule is not subject to E. O. 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use This rule is not a " significant energy action" as defined in Executive Order 13211, " Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use" ( 66 FR 28355 ( May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. This rule does not pertain to any segment of the energy production economy nor does it regulate any manner of energy use. Therefore, we have concluded that this rule is not likely to have any adverse energy effects.

I. The National Technology Transfer and Advancement Act Section 12( d) of the National Technology Transfer and Advancement Act of 1995 (" NTTAA"), Pub L. No. 104 113, § 12( d) ( 15 U. S. C. § 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e. g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards.

____________________ Date ______________________________________________ Michael O. Leavitt, Administrator PART 82 PROTECTION OF STRATOSPHERIC OZONE 1. The authority citation for subpart 82 continues to read as follows:

Authority: 42 U. S. C. 7414, 7601, 7671 7671q.

Subpart A Production and Consumption Controls 2. Section 82.3 is amended by adding new definitions in alphabetical order for the terms, " Approved critical use," " Approved critical user," " Consortium," " Contingent critical use," " Critical need," " Critical stock allowance," " Critical stock allowance holder," " Critical use DRAFT EPA DOCUMENT  61 allowance," " Critical use allowance holder," " Critical use methyl bromide," " End user," " Limiting critical condition," " Sector cap," " Self applicators," " Third party applicator," " Unexpended critical stock allowance," and " Unexpended critical use allowance."

§ 82.3 Definitions. Approved critical use( s) means those uses of methyl bromide listed in Section 82.4( p) that have a limiting critical condition. * * * * * Approved critical user( s) means a person who: ( 1) for the applicable control period, applied to EPA for a critical use exemption or is a member of a consortium that applied for a critical use exemption for a use that was included in the U. S. nomination, authorized by a Decision of the Parties to the Montreal Protocol, and then finally determined by EPA in a notice and comment rulemaking to be a critical use, and ( 2) has an area that requires methyl bromide fumigation because the area is subject to a limiting critical condition. * * * * * Consortium means an organization representing a group of methyl bromide users that has collectively submitted an application for a critical use exemption on behalf of all members of the group. The members of a consortium shall be determined on the basis of the rules established by the organization. Members may either be required to formally join the consortium ( i. e., by submitting an application or paying dues) or may automatically become members upon meeting particular criteria ( i. e. a grower of a specific crop in a particular region). * * * * * Critical need means a circumstance in which ( 1) there are no technically and economically feasible alternatives to using methyl bromide, and ( 2) a prohibition on use of methyl bromide would cause significant market disruption in the United States. * * * * * Critical stock allowances ( CSA) means the privilege granted by this subpart to sell one ( 1) kilogram of methyl bromide to an approved critical user during the specified control period. A person's critical stock allowances are the total of the allowances obtained under § 82.8( c) as may be modified under § 82.12 ( transfer of allowances). * * * * * Critical stock allowance ( CSA) holder means an entity to which EPA allocates a quantity of critical stock allowances as reflected under § 82.8( c). * * * * * Critical use allowances ( CUA) means the privilege granted by this subpart to produce or import one ( 1) kilogram of methyl bromide for an approved critical user during the specified control period. A person's critical use allowances are the total of the allowances obtained under § 82.8( c) as may be modified under § 82.12 ( transfer of allowances). * * * * * Critical use allowance ( CUA) holder means an entity to which EPA allocates a quantity of critical use allowances as reflected in § 82.8( c). * * * * * Critical use methyl bromide means the class I, Group VI controlled substance produced and imported through expending a critical use. * * * * * DRAFT EPA DOCUMENT  62 End user means a person that treats or fumigates commodities, crops, structures or land in his possession with methyl bromide or contracts with a third party applicator for such treatment or fumigation. * * * * * Limiting critical condition means the regulatory, technical, and economic circumstances listed in Appendix L to this subpart that establish a critical need for methyl bromide in a fumigation area. Such conditions may include, but are not limited, to ( 1) the absence of any alternative to methyl bromide for a specific use; ( 2) regulatory restrictions that prohibit the use of available alternatives in a specific fumigation area; ( 3) or terrain, soil, or climatological conditions that render use of available alternatives technically or economically infeasible in a specific fumigation area. * * * * * Sell to approved critical uses means to sell quantities of methyl bromide to an end user or to contract with an end user to provide treatment or fumigation services on commodities, structures, crops, or land in the possession of the end user. * * * * * Third party applicator means an applicator of critical use methyl bromide who fumigates or treats commodities, structures, crops, or land in the possession of an end user. * * * * * Unexpended critical stock allowances ( CSA) means critical stock allowances against which methyl bromide has not yet been sold or distributed to approved critical uses. At any time in any control period a person's unexpended critical stock allowances are the total of the level of critical stock allowances the person has authorization under this subpart to hold at that time for that control period, minus the level of class I, Group VI controlled substances that the person has sold or distributed to approved critical users in that control period until that time. * * * * * Unexpended critical use allowances ( CUA) means critical use allowances against which methyl bromide has not yet been produced or imported. At any time in any control period a person's unexpended critical use allowances are the total of the level of critical use allowances the person has authorization under this subpart to hold at that time for that control period, minus the level of class I, Group VI controlled substances that the person has produced or has imported solely for approved critical uses in that control period until that time. * * * * *

3. Section 82.4 is amended by revising paragraph ( b) and republishing the text, revising paragraph ( d) and republishing the text, by revising paragraph ( n), and by adding paragraph ( p) as follows: § 82.4 Prohibitions. * * * * * ( b)( 1) Effective January 1, 1996, for any class I, Group I, Group II, Group III, Group IV, Group V, or Group VII controlled substances, and effective January 1, 2005, for any class I, Group VI controlled substance, and effective August 18, 2003, for any class I, Group VIII controlled substance, no person may produce, at any time in any control period, ( except that are transformed or destroyed domestically or by a person of another Party) in excess of the amount of conferred unexpended essential use allowances or exemptions under this subpart, or the amount of unexpended critical use allowances allocated under this subpart, or the amount of unexpended DRAFT EPA DOCUMENT  63 Article 5 allowances as allocated under § § 82.9, for that substance held by that person under the authority of this subpart at that time for that control period. Every kilogram of excess production constitutes a separate violation of this subpart. ( 2) Production and import of class I, Group VI controlled substances is not subject to the prohibitions in paragraph ( c)( 1) of this section if it is solely for quarantine and preshipment applications as defined in this subpart. * * * * * ( d)( 1) Effective January 1, 1996, for any class I, Group I, Group II, Group III, Group IV, Group V, or Group VII controlled substances, and effective January 1, 2005, for any class I, Group VI controlled substance, and effective August 18, 2003, for any class I, Group VIII controlled substance, no person may import ( except for transhipments or heels), at any time in any control period, ( except for controlled substances that are transformed or destroyed) in excess of the amount of unexpended essential use allowances or exemptions, or unexpended critical use allowances, as allocated in this subpart for that substance held by that person under the authority of this subpart at that time for that control period. Every kilogram of excess importation ( other than transhipments or heels) constitutes a separate violation of this subpart. It is a violation of this subpart to obtain unused class I controlled substances under the general laboratory exemption in excess of actual need and to recycle that material for sale into other markets. ( 2) Production and import of class I, Group VI controlled substances is not subject to the prohibitions in paragraph ( c)( 1) of this section if it is solely for quarantine and preshipment applications as defined in this subpart. * * * * * ( n) No person may use class I controlled substances produced or imported under the essential use exemption for any purpose other than those set forth in this paragraph. Effective January 1, 1996, essential use allowances are apportioned to a person under Section 82.8( a) and ( b) for the exempted production or importation of specified class I controlled substances solely for the purposes listed in paragraphs ( n)( 1)( i) through ( iii) of this section. ( 1) Essential uses for the production or importation of controlled substances as agreed to by the Parties to the Protocol and subject to the periodic revision of the Parties are: ( i) Metered dose inhalers ( MDIs) for the treatment of asthma and chronic obstructive pulmonary disease that were approved by the Food and Drug Administration before December 31, 2000. ( ii) Space Shuttle  solvents. ( iii) Essential laboratory and analytical uses ( defined at Appendix G of this subpart). ( 2) Any person acquiring unused class I controlled substances produced or imported under the authority of essential use allowances or the essential use exemption granted in Section 82.8 to this subpart for use in anything other than an essential use ( i. e., for uses other than those specifically listed in paragraph ( n)( 1) of this section) is in violation of this subpart. Each kilogram of unused class I controlled substance produced or imported under the authority of essential use allowances or the essential use exemption and used for a non essential uses is a separate violation of this subpart. Any person selling unused class I controlled substances produced or imported under authority of essential use allowances or the essential use exemption for uses other than an essential use is in violation of this subpart. Each kilogram of unused class I controlled substances produced or imported under authority of essential use allowances or the essential use exemption and sold for a use other than an essential use is a separate violation of this subpart. It is a DRAFT EPA DOCUMENT  64 violation of this subpart to obtain unused class I controlled substances under the exemption for laboratory and analytical uses in excess of actual need and to recycle that material for sale into other markets. * * * * * ( p) For critical use methyl bromide, for the relevant control period: ( 1) No person shall sell critical use methyl bromide to an end user who is not an approved critical user. Every kilogram of critical use methyl bromide sold to an end user that is not an approved critical use constitutes a separate violation of this subpart. ( 2) No person shall sell methyl bromide produced or consumed before the phaseout date of January 1, 2005, to any approved critical use unless the person holds a critical stock allowance ( CSA). Every kilogram of methyl bromide sold to an approved critical user for critical use in excess of the number of critical stock allowances held by the seller constitutes a separate violation of this subpart. ( 3) No person who acquires critical use methyl bromide may use such quantities for a use other than the specified critical use listed in Appendix L to this subpart. No person who acquires critical use methyl bromide produced under an allowance for a specific use sector listed in Appendix L to this subpart, if applicable, may use such quantities in a different use sector. No person who acquires critical use methyl bromide may use such material unless he meets a limiting critical condition listed in Appendix L to this subpart. No approved critical user shall take possession of quantities of critical use methyl bromide or acquire fumigation services using quantities of critical use methyl bromide without first certifying that they are approved critical users in accordance with the requirements in Section 82.13. Every 50 kilograms certified by an end user to be for an approved critical use that is not then used for that approved critical use listed in Appendix L to this subpart constitutes a separate violation of this subpart. ( 4) No person shall sell critical use methyl bromide to an approved critical user without first obtaining a certification form from the approved critical user. Every kilogram of critical use methyl bromide sold to an approved critical user without first obtaining certification constitutes a separate violation of this subpart.

4. Revise the title of 82.8 to read as follows, and, since this section was reserved, add text to read as follows:

§ 82.8 Grant of essential use allowances and critical use allowances. ( a) Effective January 1, 1996, persons in the following list are allocated essential use allowances or exemptions for quantities of a specific class I controlled substance for a specific essential use ( the Administrator reserves the right to revise the allocations based on future decisions of the Parties).

TABLE I  Essential Use Allowances for Calendar Year 2003 Company Chemical Quantity ( metric tonnes)

( i) Metered dos inhalers ( for oral inhalation) for treatment of asthma and chronic pulmonary disease Armstrong Pharmaceuticals DRAFT EPA DOCUMENT  65 ( ii) Cleaning, bonding and surface activation application for the Shuttle Rockets and Titan Rockets ( b) A global exemption for class I controlled substances for essential laboratory and analytical uses shall be in effect through December 31, 2005 subject to the restrictions in Appendix G of this subpart, and subject to the recorkeeping and reporting requirements at § 82.13( u) through ( x). There is no amount specified for this exemption. ( c) Effective January 1, 2005, critical use allowances are apportioned as set forth in paragraph ( c)( 1) of this Section for the exempted production and import of class I, Group VI controlled substances specifically for those approved critical uses listed in Appendix L to this subpart for the applicable control period. Every kilogram of production and import in excess of the total number and type of unexpended critical use allowances held for a particular type of use constitutes a separate violation of this subpart. Effective January 1, 2005, critical stock allowances of a specific number are apportioned as set forth in paragraph ( c)( 2) of this Section, for those uses listed in Appendix L to this subpart for the applicable control period, for the sale to approved critical users of class I, Group VI controlled substances held in inventory that were produced or consumed before the January 1, 2005 phaseout date. Every kilogram of sale to approved critical users in excess of the total number of unexpended critical stock allowances held constitutes a separate violation of this subpart. ( 1) Allocated critical use allowances for annual control period. [ Reserved] ( 2) Allocated critical stock allowances for annual control period. [ Reserved]

5. Section 82.12 is amended by: revising paragraph ( a) and republishing the text, revising paragraph ( a)( i)( H) and republishing the text, revising paragraph ( a)( i)( I)( ii) and republishing the text and, revising paragraph ( a)( i)( I)( iii) and republishing the text as follows.

§ 82.12 Transfers of allowances for class I controlled substances. ( a) Inter company transfers. ( 1) Until January 1, 1996, for all class I controlled substances, except for Group VI, and until January 1, 2005, for Group VI, any person (   transferor'') may transfer to any other person (   transferee'') any amount of the transferor's consumption allowances or production allowances, and effective January 1, 1995, for all class I controlled substances any person (   transferor'') may transfer to any other person (   transferee'') any amount of the transferor's Article 5 allowances. DRAFT EPA DOCUMENT  66 After January 1, 2002, any essential use allowance holder ( including those persons that hold essential use allowances issued by a Party other than the United States) (   transferor'') may transfer essential use allowances for CFCs to a metered dose inhaler company solely for the manufacture of essential MDIs. After January 1, 2005, any critical use allowance holder (" transferor") may transfer critical use allowances to any other person (" transferee"). After January 1, 2005, any critical stock allowance holder (" transferor") may transfer critical stock allowances to any critical stock allowance holder (" transferee"). ( i) * * * ( H) The amount of the one percent offset applied to the unweighted amount traded will be deducted from the transferor's production or consumption allowance balance ( except for trades from transformers and destroyers to producers or importers for the purpose of allowance reimbursement). In the case of transferring essential use allowances, the amount of one tenth of one percent of the amount traded will be deducted from the transferor's allowance balance. In the case of transferring critical use allowances, the amount of one percent of the amount traded will be deducted from the transferor's critical use allowance balance. ( I) * * * ( ii) The Administrator will determine whether the records maintained by EPA, taking into account any previous transfers and any production, allowable imports and exports of controlled substances reported by the transferor, indicate that the transferor possesses, as of the date the transfer claim is processed, unexpended allowances sufficient to cover the transfer claim ( i. e., the amount to be transferred plus, in the case of transferors of essential use allowances, one tenth of one percent of the transferred amount, and in the case of transferors of critical use allowances, one percent of the transferred amount). Within three working days of receiving a complete transfer claim, the Administrator will take action to notify the transferor and transferee as follows: ( A) * * * ( B) * * * ( iii) In the event that the Administrator does not respond to a transfer claim within the three working days specified in paragraph ( a)( 1)( ii) of this Section, the transferor and transferee may proceed with the transfer. EPA will reduce the transferor's balance of unexpended allowances by the amount to be transferred plus, in the case of transfers of production, consumption or critical use allowances, one percent of that amount, and in the case of essential use allowances, one tenth of one percent of that amount. However if EPA ultimately finds that the transferor did not have sufficient unexpended allowances to cover the claim, the transferor and transferee will be held liable for any violations of the regulations of this subpart that occur as a result of, or in conjunction with, the improper transfer. ( e) Exchange of Critical Use Allowances for Critical Stock Allowances. ( 1) Critical use allowance holders may petition the Administrator to exchange a quantity of their unexpended critical use allowances for an equivalent amount of critical stock allowances provided they hold this equivalent amount of class I, Group VI controlled substance that was produced or imported in the prior control period either with production allowances and consumption allowances or critical use allowances. A person allocated critical stock allowances may not petition to exchange unexpended critical stock allowances for critical use allowances. ( 2) [ Reserved]

6. Section 82.13 is amended by: revising paragraph ( a), adding paragraphs ( f)( 2)( xx) DRAFT EPA DOCUMENT  67 through ( f)( 2)( xxi), revising paragraph ( f)( 3)( iv), adding paragraphs ( f)( 3)( xvi) through ( f)( 3)( xix), adding paragraph ( g)( 1)( xx) through ( g)( 1)( xxi), revising paragraph ( g)( 4)( vii), adding paragraphs ( g)( 4)( xviii) through ( g)( 4)( xxi), and adding paragraphs ( ab) through ( ad).

§ 82.13 Recordkeeping and reporting requirements. ( a) Unless otherwise specified, the recordkeeping and reporting requirements set forth in this Section take effect on January 1, 1995. For class I, Group VIII controlled substances, the recordkeeping and reporting requirements set forth in this Section take effect on August 18, 2003. For class I, Group VI critical use methyl bromide, the recordkeeping and reporting requirements set forth in this Section take effect January 1, 2005. ( f) * * * ( 2) * * * ( xx) For class I, Group VI controlled substances, dated records such as invoices and order forms, and a log of the quantity of controlled substances produced for critical use, by specified critical use if applicable as per Appendix L of this subpart, and the quantity sold for critical use, by specified critical use if applicable as per Appendix L of this subpart, and; ( xxi) Written certifications that quantities of class I, Group VI controlled substances produced for critical use were purchased by distributors, applicators, or end users to be used or sold only for critical use in accordance with the definitions and prohibitions in this subpart. ( 3) * * * ( iv) The producer's total of expended and unexpended production allowances, consumption allowances, Article 5 allowances, critical use allowances by specified critical use if applicable, critical stock allowances, and amount of essential use allowances and destruction and transformation credits conferred at the end of that quarter; ( v) * * * ( vi) * * * ( vii) * * * ( viii) * * * ( ix) * * * ( x) * * * ( xi) * * * ( xii) * * * ( xiii) * * * ( xiv) * * * ( xv) * * * ( xvi) For critical uses of class I, Group VI controlled substances, an annual list of the total amount of critical use methyl bromide by specified critical use, if applicable as per Appendix L of this subpart, that was produced, bought, and sold as well as the amounts of critical use methyl bromide held in inventory by the reporting entity or held in inventory by the reporting entity on behalf of another entity. ( g) * * * ( 1) * * * ( xx) For class I, Group VI controlled substances, dated records such as invoices and order forms, of the quantity of controlled substances imported for critical use, by specified critical use if applicable per Appendix L of this subpart, and the quantity sold for critical use, by specified DRAFT EPA DOCUMENT  68 critical use if applicable as per Appendix L of this subpart, and; ( xxi) Written certifications that quantities of class I, Group VI controlled substances imported for critical use were purchased by distributors, applicators, or end users to be used or sold only for critical use in accordance with the definitions and prohibitions in this subpart. ( 4) * * * ( vii) The importer's total sum of expended and unexpended consumption allowances by chemical as of the end of that quarter and the total sum of expended and unexpended critical use allowances by specified critical use, if applicable, as per Appendix L of this subpart; ( 2) * * * ( 3) * * * ( 4) * * * ( 5) * * * ( 6) * * * ( 7) * * * ( 8) * * * ( 9) * * * ( 10) * * * ( 11) * * * ( 12) * * * ( xviii) For critical uses of class I, Group VI controlled substances, an annual list of the total amount of critical use methyl bromide by specified critical use if applicable, as per Appendix L of this subpart, that was imported, bought, and sold as well as the amounts of critical use methyl bromide held in inventory by the reporting entity or held in inventory by the reporting entity on behalf of another entity. * * * * * ( ab) Every distributor of methyl bromide ( class I, Group VI controlled substances) who purchases or receives a quantity of critical use methyl bromide must comply with recordkeeping and reporting requirements specified in this paragraph. ( 1) Recordkeeping   Every distributor of critical use methyl bromide must certify to the producer or importer or other entity from which they are acquiring quantities of critical use methyl bromide that such quantities received will be sold or used only for approved critical use( s) in accordance with the definitions and prohibitions in this subpart. ( i) Every distributor of a quantity of critical use methyl bromide must receive from an applicator, or any other entity to whom they sell critical use methyl bromide, a certification of the quantity of critical use methyl bromide ordered, prior to delivery of the quantity, stating that the quantity will be sold or used only for approved critical uses in accordance with definitions and prohibitions in this subpart. ( ii) Every distributor of methyl bromide who receives a certification from an applicator or any other entity to which they sell critical use methyl bromide must maintain the certifications as records for 3 years. ( iii) Every distributor of a quantity of critical use methyl bromide must maintain invoice and order records related to the sale of such material for 3 years. ( 2) Reporting   Every distributor of critical use methyl bromide must report to the Administrator annually, the following items: ( i) For critical uses of class I, Group VI controlled substances, an annual list of the amount DRAFT EPA DOCUMENT  69 of critical use methyl bromide bought, organized by specified critical use if applicable as per Appendix L of this subpart, and; ( ii) For critical uses of class I, Group VI controlled substances, an annual list of the amount of critical use methyl bromide sold organized by specified critical use and; ( iii) For critical uses of class I, Group VI controlled substances, an annual list of the amount of critical use methyl bromide held by the reporting entity or held by the reporting entity on behalf of another entity, organized by specified critical use if applicable as per Appendix L of this subpart. ( ac) Every third party applicator of methyl bromide ( class I, Group VI controlled substances) that purchases or receives critical use methyl bromide must comply with recordkeeping and reporting requirements specified in this paragraph. ( 1) Recordkeeping   Every third party applicator of methyl bromide must certify to the producer or importer or other entity from whom they are acquiring quantities of critical use methyl bromide that such quantities received will be sold or used only for approved critical use in accordance with the definitions and prohibitions in this subpart. ( i) Every third party applicator of a quantity of critical use methyl bromide must receive from an end user or any other entity, to whom they sell critical use methyl bromide, or for whom they fumigate an area, a certification that the quantity of class I, Group VI controlled substances ordered, prior to delivery of the quantity or prior to providing fumigation services, will only be sold or used for critical uses in accordance with definitions and prohibitions in this subpart. ( ii) Every third party applicator of methyl bromide who receives a certification from an entity to which they sell critical use methyl bromide must maintain the certifications as records for 3 years. ( iii) Every third party applicator of a quantity of critical use methyl bromide must maintain invoice and order records related to the sale of such material for three years. ( 2) Reporting   Every third party applicator of critical use methyl bromide must report to the Administrator annually, the following items: ( i) For critical uses of class I, Group VI controlled substances, an annual list of the amount of critical use methyl bromide bought, and from whom, organized by specified end use if applicable as per Appendix L of this subpart and; ( ii) For critical uses of class I, Group VI controlled substances, an annual list of the amount of critical use methyl bromide sold organized by specified end use and; ( iii) For critical uses of class I, Group VI controlled substances, an annual list of the amount of critical use methyl bromide held for the reporting entity or held by the reporting entity on behalf of another entity, organized by specified end use if applicable as per Appendix L of this subpart. ( ad) Every approved critical user purchasing an amount of critical use methyl bromide or purchasing fumigation services with critical use methyl bromide must, for each request, must certify knowledge of the requirements associated with the exemption for critical use in this subpart and provide such information that identifies the use as a critical use and the user as an approved critical user. The certification will state, in part: " I certify, under penalty of law, knowledge of the requirements associated with the exempted critical use published in 40 CFR part 82, including the requirement that this letter cite basic information identifying the end use as an approved critical use and the end user as an approved critical user." * * * * * DRAFT EPA DOCUMENT  70 7. Add to this subpart Appendix L that reads as follows:

APPENDIX L TO PART 82 SUBPART A   APPROVED CRITICAL USES AND LIMITING CRITICAL CONDITIONS FOR THOSE USES FOR THE 2005 CONTROL PERIOD Approved Critical Uses Limiting Critical Conditions PRE PLANT USES Cucurbits a) Michigan growers with moderate to severe fungal pathogen infestation b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, and Virginia growers with moderate to severe yellow or purple nutsedge infestation Eggplant a) Georgia growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, moderate to severe nematode infestation and/ or moderate to severe fungal pathogen infestation b) Florida growers with limiting critical conditions: moderate to severe yellow or purple nutsedge infestation and/ or moderate to severe nematode infestation and/ or moderate to severe fungal pathogen infestation and/ or karst topography Forest Seedlings Approved critical users listed below for forest seedlings with one or more of the following limiting critical conditions: moderate to severe fungal pathogen infestation, moderate to severe yellow or purple nutsedge infestation, and/ or moderate to severe disease infestation.

a) Members of the Auburn University Southern Forest Nursery Management Cooperative limited to growing locations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia b) International Paper and its subsidiaries limited to growing locations in Arkansas, Alabama, Georgia, South Carolina and, Texas c) Weyerhaeuser Company and its subsidiaries limited to growing locations in Alabama, Arkansas, North Carolina, South Carolina, Oregon and, Washington d) Public ( government owned) seedling nurseries in the states of California, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland, Missouri, Nebraska, New Jersey, Ohio, Oregon, Pennsylvania, Utah, Washington, West Virginia and, Wisconsin e) Members of the Nursery Technology Cooperative limited to growing locations in Oregon and Washington f) Michigan seedling nurseries Ginger a) Hawaii growers with the limiting critical condition of moderate to severe nematode infestation and/ or moderate to severe bacterial wilt infestation Orchard Nursery Seedlings Approved critical users listed below for orchard nursery seedlings with one or more of the following limiting critical conditions: moderate to severe nematode infestation, medium to heavy clay soils, and/ or a prohibition of on the use of 1,3 dichloropropene products due to reaching local township limits on the use of this alternative DRAFT EPA DOCUMENT  71 a) Members of the Western Raspberry Nursery Consortium limited to growing locations in California and Oregon ( Driscoll's raspberries and their contract growers in California and Oregon)

b) Members of the California Association of Nurserymen Deciduous Fruit and Nut Tree Growers c) Members of theCalifornia Association of Nurserymen Citrus and Avocado Growers Orchard Replant Approved critical users listed below for orchard replant with one or more of the following limiting critical conditions: replanted ( non virgin) orchard soils to prevent orchard replant disease, and/ or medium to heavy soils, and/ or a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached.

a) California stone fruit growers b) California table and raisin grape growers c) California walnut growers d) California almond growers Ornamentals a) Yoder Brothers Inc. for use in chrysanthemum production b) California rose nurseries prohibited from using 1,3 dichloropropene products because local township limits for this alternative have been reached Peppers a) California growers with the limiting critical conditions of moderate to severe fungal pathogens, and/ or moderate to sever disease infestation, and/ or moderate to sever nematode infestation, and/ or moderate to severe yellow or purple nutsedge infestation, and/ or a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee and Virginia growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less c) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or karst topography Strawberry Nurseries a) California growers with one or more of the following limiting critical conditions: moderate to severe black root rot or crown rot, moderate to severe nematode infestation, and/ or moderate to severe yellow or purple nutsedge infestation b) North Carolina and Tennessee growers with the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less Strawberry Fruit a) California growers with one or more of the following limiting critical conditions: moderate to severe black root rot or crown rot, moderate to severe nematode infestation, moderate to severe yellow or purple nutsedge infestation, a prohibition of the use of 1,3 dichloropropene products because local township limits for this alternative have been reached b) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge, and/ or karst topography DRAFT EPA DOCUMENT  72 c) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, Virginia, Ohio and, New Jersey growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge, and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less Sweet Potatoes a) California growers with the contingent limiting critical condition of a prohibition on the use of 1,3 dichloropropene products because local township limits for this alternative have been reached Tomatoes a) Michigan growers with moderate to severe disease and/ or fungal pathogens b) Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee and Virginia growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or and/ or the presence of an occupied structure within 76 meters of a grower's field the size of 100 acres or less c) Florida growers with one or more of the following limiting critical conditions: moderate to severe yellow or purple nutsedge infestation, and/ or karst topography Turfgrass a) U. S. turfgrass sod nursery producers for the production of industry certified pure sod b) U. S. golf courses establishing sod in the construction of new golf courses or the renovation of putting greens, tees, and fairways POST HARVEST USES Food Processing Approved critical users listed below for food processing with one or more of the following limiting critical conditions: older structures that can not be properly sealed to use an alternative to methyl bromide, and/ or the presence of sensitive electronic equipment subject to corrosivity a) Rice millers in Arkansas, California Louisiana, Florida, Missouri, and Mississippi b) Pet food manufacturing facilities in the U. S.

c) Kraft Foods d) Members of the North American Millers' Association Commodity Storage a) Smokehouse ham curing in facilities owned by Gwaltney of Smithfield b) Entities storing walnuts, beans, dried plums, and pistachios in California with one or more of the following limiting critical conditions: rapid fumigation is required to meet a critical market window, such as during the holiday season, rapid fumigation is required when a buyer provides short ( 2 days or less) notification for a purchase, and/ or there is a short period after harvest in which to fumigate and there is limited silo availability for using alternatives DRAFT EPA DOCUMENT  73