Phasedown of Hydrofluorocarbons: Review and Renewal of Eligibility for Application-Specific Allowances

SUPPLEMENTARY INFORMATION:

Throughout this document, whenever “we,” “us,” “the Agency,” or “our” is used, we mean EPA. Acronyms and abbreviations that are used in this rulemaking that may be helpful include:

2-BTP—2-bromo-3,3,3-trifluoropropene

AAGR—Average Annual Growth Rate

AES—Automated Export System

AIM Act—American Innovation and Manufacturing Act of 2020

AHRI—Air-Conditioning, Heating, and Refrigeration Institute

APU—Auxiliary Power Unit

ASHRAE—American Society for Heating, Refrigerating, and Air-Conditioning Engineers

ASA—Application-Specific Allowance

CAA—Clean Air Act

CBI—Confidential Business Information

CBP—U.S. Customs and Border Protection

CF₃ I—Trifluoroiodomethane

CFR—Code of Federal Regulations

CGMP—Current Good Manufacturing Practice

CHIPS Act—Creating Helpful Incentives to Produce Semiconductors Act of 2022

ClF₃ —Chlorine Trifluoride

CO₂ —Carbon Dioxide

COVID—Coronavirus Disease

CVD—Chemical Vapor Deposition

DFARS—Defense Federal Acquisition Regulation Supplement

DOD—U.S. Department of Defense

DOJ—U.S. Department of Justice

EEI—Electronic Export Information

EV—Exchange Value

EVe—Exchange Value Equivalent

EPA—U.S. Environmental Protection Agency

FAA—Federal Aviation Administration

FAR—Federal Acquisition Regulation

FDA—U.S. Food and Drug Administration

FIFRA—Federal Insecticide, Fungicide, and Rodenticide Act

FSTOC—Fire Suppression Technical Options Committee

FTOC—Flexible and Rigid Foams Technical Options Committee

FR—Federal Register

GHG—Greenhouse Gas

GWP—Global Warming Potential

HCFO—Hydrochlorofluoroolefin

HFC—Hydrofluorocarbon

HFIB—Hexafluoroisobutylene

HFO—Hydrofluoroolefin

ICAO—International Civil Aviation Organization

ICR—Information Collection Request

IPCC—Intergovernmental Panel on Climate Change

ITN—Internal Transaction Number

Kg—Kilogram

MCMEU—Mission-Critical Military End Uses

MCTOC—Medical and Chemicals Technical Options Committee

MDI—Metered Dose Inhaler

MT—Metric Ton

MTEVe—Metric Tons of Exchange Value Equivalent

NAICS—North American Industry Classification System

NF₃ —Nitrogen Trifluoride

ODP—Ozone Depletion Potential

ODS—Ozone-Depleting Substances

OMB—U.S. Office of Management and Budget

PFC—Perfluorocarbon

PII—Personally Identifiable Information

PRA—Paperwork Reduction Act

PU—Polyurethane

RACA—Requests for Additional Consumption Allowance

RFA—Regulatory Flexibility Act

RIA—Regulatory Impact Analysis

RSV—Respiratory Syncytial Virus

SCPPU—Structural Composite Preformed Polyurethane

SF₆ —Sulfur Hexafluoride

SiN—Silicon Nitride

SiO₂ —Silicon Dioxide

SNAP—Significant New Alternatives Policy

SISNOSE—Significant Economic Impact on a Substantial Number of Small Entities

TCE—Trichloroethylene

TEAP—Technology and Economic Assessment Panel

TSCA—Toxic Substances Control Act

TSD—Technical Support Document

UMRA—Unfunded Mandates Reform Act

Table of Contents

I. Executive Summary

A. Purpose of the Proposed Regulatory Action

B. Summary of Proposed Actions

II. General Information

A. Does this action apply to me?

B. What is EPA's authority for taking this action?

III. Background

IV. How is EPA assessing whether to extend eligibility for application-specific allowances?

A. How is EPA interpreting the “no safe or technically achievable substitute will be available” criterion?

B. How is EPA interpreting the insufficient supply of regulated substances criterion?

C. What is EPA's proposed framework for renewing applications?

V. Review of the Six Applications Listed in the AIM Act

A. Overview of Total U.S. HFC Consumption

B. Propellants in Metered Dose Inhalers

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

C. Defense Sprays

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

4. Proposed Restriction Under EPA's Technology Transitions Program

D. Structural Composite Preformed Polyurethane Foam for Marine Use and Trailer Use

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

4. Proposed Restriction Under EPA's Technology Transitions Program

E. Etching of Semiconductor Material or Wafers and the Cleaning of Chemical Vapor Deposition Chambers Within the Semiconductor Manufacturing Sector

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

F. Mission-Critical Military End Uses

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

G. Onboard Aerospace Fire Suppression

1. Availability of Safe and Technically Achievable Substitutes

2. Supply

3. What is EPA proposing regarding eligibility for application-specific allowances?

VI. What are the proposed requirements associated with a petition to be listed as an application that will receive application-specific allowances?

VII. Proposed Revisions to Existing Regulations

A. Expected Total HFC Purchases

B. Unique Circumstances

C. Methodology for Entities With Irregular Purchasing History and Very Small Users

D. Average Annual Growth Rate Calculations

E. Inventory

F. Department of Defense Conferrals

G. Limited Set-Aside for Unique Circumstances Related to MDIs

H. Return of Unneeded Allowances

I. Enabling Auctions of Illegally Imported HFCs

J. Quarterly Exporter Reporting of Internal Transaction Numbers

K. Date of Purchase for Requests for Additional Consumption Allowances (RACAs)

VIII. Authorization To Produce for Export

A. To what entities is EPA proposing to allocate production for export allowances?

B. How many production for export allowances is EPA proposing to issue to Iofina on an annual basis, and for how many years is EPA proposing to issue these allowances?

C. Would Iofina need to expend consumption allowances for materials produced with production for export allowances and subsequently exported?

D. How will this process affect the issuance of other types of allowances?

E. What are the proposed recordkeeping and reporting requirements for production for export allowances?

1. Annual Certifications

2. Quarterly Export and Inventory Reporting

3. Recordkeeping

IX. How will EPA handle confidentiality for newly reported information?

A. Background on Determinations of Whether Information Is Entitled to Treatment as Confidential Information

B. Data Elements Associated With a Petition To Be Listed as an Application That Will Receive Application-Specific Allowances

C. Data Elements Related to Proposed Revisions to Existing Regulations

D. Data Elements Reported to EPA Related to Production for Export

X. What are the costs and benefits of this action?

XI. Statutory and Executive Order Review

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 14094: Modernizing Regulatory Review

B. Paperwork Reduction Act (PRA)

C. Regulatory Flexibility Act (RFA)

D. Unfunded Mandates Reform Act (UMRA)

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments

G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use

I. National Technology Transfer and Advancement Act

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations and Executive Order 14096: Revitalizing Our Nation's Commitment to Environmental Justice for All

I. Executive Summary

A. Purpose of the Proposed Regulatory Action

The U.S. Environmental Protection Agency (EPA) is undertaking this action to implement certain provisions of the American Innovation and Manufacturing Act of 2020, codified at 42 U.S.C. 7675 (AIM Act or the Act). The Act directs EPA to implement the phasedown of hydrofluorocarbons (HFCs) by issuing a limited quantity of transferrable production and consumption allowances, which entities must expend to produce or import HFCs. In addition, subsection (e)(4)(B) of the Act authorizes EPA to allocate allowances exclusively for the use in specific applications for which there is: (1) no safe or technically achievable substitute and (2) an insufficient supply of the HFCs used in the application that can be secured from chemical manufacturers. The Act listed six applications that would receive priority access to allowances for a five-year period beginning on December 27, 2020: propellants in metered dose inhalers (MDIs), defense sprays, structural composite preformed polyurethane (SCPPU) foam for marine use and trailer use (hereafter referred to as SCPPU foam for marine and trailer uses), the etching of semiconductor material or wafers and the cleaning of chemical vapor deposition (CVD) chambers within the semiconductor manufacturing sector, mission-critical military end uses (MCMEU), and onboard aerospace fire suppression. EPA intends to finalize this proposed rule ahead of the allocation of calendar year 2026 allowances. Without finalization of this proposed rule, all applications would be ineligible for allowances for calendar year 2026. EPA has created a category of allowances to provide this priority access, which EPA refers to as application-specific allowances (ASAs). ASAs are allocated ahead of general pool allowances based on a methodology intended to determine eligible entities' needs for regulated substances (see Section VII of this preamble and the Allocation Framework Rule (86 FR 55116, October 5, 2021) for more information). After the total ASA quantity is determined, the remaining allowances are distributed to general pool allowance recipients using a different methodology.

Subsection (e)(4)(B)(v) of the AIM Act directs EPA to review applications receiving priority access to allowances not less frequently than once every five years, and, if the application meets the criteria above, authorize the eligibility of the application to receive priority access to allowances for a period of not more than five years. EPA is proposing how the Agency will interpret these two criteria to review applications receiving ASAs. EPA is also proposing decisions to renew or not renew each of the six applications that currently receive ASAs.

Separately, subsection (i) of the Act authorizes EPA, by rulemaking, to restrict the use of HFCs in sectors or subsectors where the regulated substances are used. Under the authority of this provision, EPA finalized the rule “ Phasedown of Hydrofluorocarbons: Restrictions on the Use of Certain Hydrofluorocarbons Under the American Innovation and Manufacturing Act of 2020” (hereafter referred to as the “2023 Technology Transitions Rule”; 88 FR 73098, October 24, 2023), which established restrictions for three sectors and 39 subsectors. The rule exempted applications with a current qualification for ASAs. As such, if an application is no longer eligible to receive ASAs, it would become subject to the restrictions established in the 2023 Technology Transitions Rule. EPA is therefore proposing how the Technology Transitions regulations would apply to applications if EPA were to determine that those applications are not eligible for renewal for the full five-year period.

The Act also includes a provision for the public to petition EPA to designate an application as eligible for priority access to allowances. EPA is proposing a procedural process for submitting a petition under this provision and to define minimum required elements of such a petition. In addition, this rulemaking proposes narrow revisions to the methodology used to allocate allowances to ASA holders for calendar years 2026 and beyond as well as other limited revisions to the existing 40 CFR part 84 regulations. EPA is also proposing to authorize an entity to produce regulated substances for export for application-specific uses pursuant to subsection (e)(5). Lastly, EPA is proposing certain confidentiality determinations for newly reported information if this rulemaking is finalized as proposed.

B. Summary of Proposed Actions

Application-specific allowance holder review: EPA is describing how it proposes to interpret the criteria under subsection (e)(4)(B) of the AIM Act and evaluate the six categories of ASA holders listed in subsection (e)(4)(B)(v) of the Act. EPA is proposing to renew the following applications for the full five-year period from 2026-2030: propellants in MDIs, the etching of semiconductor material or wafers and the cleaning of CVD chambers within the semiconductor manufacturing sector, MCMEU, and onboard aerospace fire suppression. EPA is co-proposing two options for defense sprays: do not renew or renew for a two-year period through 2027. EPA is co-proposing three options for SCPPU foams for marine and trailer uses: do not renew, renew for a two-year period through 2027, or renew for the full five-year period from 2026-2030 with allowance amounts determined based on the exchange value (EV) of a substitute HFC. In cases where EPA is proposing to change the status of ASA holders, this proposal also details how the Technology Transitions regulations would apply to those applications.

Application-specific allowance holder petitions: EPA is proposing the process and information requirements for submitting petitions under subsection (e)(4)(B) of the AIM Act which seek the designation of an application as an essential use.

Application-specific allowance methodology: EPA is proposing targeted revisions to the existing ASA methodology: to require companies to provide a total request for allowances for the calendar year, to expand permissible scenarios that could qualify as unique circumstances, to use a different allocation methodology for certain very small users of HFCs and entities with irregular purchasing history, how to account for inventory in allocation decisions, to establish a set-aside of allowances for situations that meet the criteria for unique circumstances related to medical conditions treated by MDIs, and to allow ASA holders to return a portion of their allowances voluntarily if they do not intend to use them. EPA is also proposing new requirements for conferrals of MCMEU allowances and an opportunity to return unneeded ASAs.

Other regulatory revisions: EPA is proposing other specific regulatory changes to: clarify the ability of the Federal government to pursue, if appropriate, auctioning illegally imported HFCs that are seized by enforcement officials, require exporting companies to report “Internal Transaction Numbers” (ITNs) quarterly, and simplify the reporting on “date of purchase” for a Request for Additional Consumption Allowances (RACA).

Authorization of production for export: EPA is proposing to authorize an entity to produce for export for application-specific uses abroad.

Handling of confidentiality for newly reported information: EPA is proposing certain confidentiality determinations for newly reported information if this rulemaking is finalized as proposed.

II. General Information

A. Does this action apply to me?

You may be potentially affected by this proposal if you use HFCs in one of the six applications eligible for an allocation under section (e)(4)(B)(iv) of the AIM Act. You may also potentially be affected if you produce, import, export, purify, destroy, reclaim, package, or otherwise distribute HFCs for end users in one of these six applications or are a current HFC allowance holder. Potentially affected categories, North American Industry Classification System (NAICS) codes, and examples of potentially affected entities are included in Table 1.