# 69 FR 52366: Protection of Stratospheric Ozone: Process for Exempting Critical Uses From the Phaseout of Methyl Bromide

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_04-18933

## Section

- **Citation:** 69 FR 52366
- **Heading:** Protection of Stratospheric Ozone: Process for Exempting Critical Uses From the Phaseout of Methyl Bromide
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 69 / 69 FR 52366

## Text

ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82 [FRL-7802-3] RIN 2040-0170 Protection of Stratospheric Ozone: Process for Exempting Critical Uses From the Phaseout of Methyl Bromide AGENCY:
Environmental Protection Agency (EPA).

ACTION:
Notice of proposed rulemaking.

SUMMARY:
EPA is proposing to amend the accelerated phaseout regulations that govern the production, import, export, transformation and destruction of substances that deplete the ozone layer under the authority of Subchapter VI of the Clean Air Act (CAA), as amended. Today's proposed amendments provide the framework for an exemption permitted under the Montreal Protocol on Substances that Deplete the Ozone Layer (Protocol) and Subchapter VI of the CAA and specify the amount of methyl bromide that may be supplied in 2005 from available stocks and new production and consumption to meet proposed critical uses. Specifically, EPA is proposing requirements to govern the “critical use” exemption from the production and consumption (defined as production plus imports minus exports) phaseout for quantities of class I, Group VI controlled substances (methyl bromide) that are produced or imported for critical uses. EPA is also proposing the list of uses that qualify for the critical use exemption in 2005, the amount of additional methyl bromide that may be produced or imported for those uses in 2005, and limitations on the sale of existing inventories for use in critical use categories that are a necessary condition applicable to those who are granted the privilege in 2005 of obtaining a dedicated supply of methyl bromide from new production and imports for critical uses after the scheduled phaseout date.

DATES:
Written comments on the proposed rule must be received on or before October 12, 2004. Any party requesting a public hearing must notify the contact person listed below by 5 p.m. eastern standard time on September 7, 2004. If a hearing is requested it will be held September 10, 2004
y of methyl bromide from new production and imports for critical uses after the scheduled phaseout date.

DATES:
Written comments on the proposed rule must be received on or before October 12, 2004. Any party requesting a public hearing must notify the contact person listed below by 5 p.m. eastern standard time on September 7, 2004. If a hearing is requested it will be held September 10, 2004. If a hearing is held, commenters will have 30 days to submit follow up comments before the close of the comment period. Persons interested in attending a public hearing should consult with the contact person below regarding the location and time of the hearing.

ADDRESSES:
Submit your comments, identified by Docket ID No. OAR-2003-0230, by one of the following methods:
• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.
• Agency Web site: http://www.epa.gov/edocket. EDOCKET, EPA's electronic public docket and comment system, is EPA's preferred method for receiving comments. Follow the on-line instructions for submitting comments.
• E-mail: finman.hodayah@epa.gov.
• Fax: 202-343-2337 attn: Hodayah Finman.
• Mail: Air Docket, Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 20503.
• Hand Delivery: EPA Air Docket, EPA West 1301 Constitution Avenue, NW., Room B108, Mail Code 6102T, Washington, DC 20460. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.
Instructions: Direct your comments to Docket ID No.OAR-2003-0230
for EPA, 725 17th St., NW., Washington, DC 20503.
• Hand Delivery: EPA Air Docket, EPA West 1301 Constitution Avenue, NW., Room B108, Mail Code 6102T, Washington, DC 20460. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.
Instructions: Direct your comments to Docket ID No.OAR-2003-0230. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at http://www.epa.gov/edocket, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through EDOCKET, regulations.gov, or e-mail. The EPA EDOCKET and the Federal regulations.gov Web sites are “anonymous access” systems, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through EDOCKET or regulations.gov, your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket visit EDOCKET on-line or see the Federal Register of May 31, 2002 (67 FR 38102).
Docket: All documents in the docket are listed in the EDOCKET index at http://www.epa.gov/edocket
may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket visit EDOCKET on-line or see the Federal Register of May 31, 2002 (67 FR 38102).
Docket: All documents in the docket are listed in the EDOCKET index at http://www.epa.gov/edocket. Although listed in the index, some information is not publicly available, i.e. , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in EDOCKET or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Air Docket is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT:
For further information about this proposed rule, contact Hodayah Finman by telephone at (202) 343-9246, or by e-mail at finman.hodayah@epa.gov , or by mail at Hodayah Finman, U.S. Environmental Protection Agency, Stratospheric Protection Division, Stratospheric Program Implementation Branch (6205J), 1200 Pennsylvania Avenue, NW., Washington, DC 20460. You may also visit the Ozone Depletion Web site of EPA's Global Programs Division at http://www.epa.gov/ozone for further information about EPA's Stratospheric Ozone Protection regulations, the science of ozone layer depletion, and other related topics.

SUPPLEMENTARY INFORMATION:
This proposed rule concerns Clean Air Act restrictions on the consumption, production and on the use of methyl bromide (class I, Group VI controlled substance) for critical uses after the phaseout date of January 1, 2005
for further information about EPA's Stratospheric Ozone Protection regulations, the science of ozone layer depletion, and other related topics.

SUPPLEMENTARY INFORMATION:
This proposed rule concerns Clean Air Act restrictions on the consumption, production and on the use of methyl bromide (class I, Group VI controlled substance) for critical uses after the phaseout date of January 1, 2005. Under the Clean Air Act, methyl bromide consumption and production will be phased out on January 1, 2005, apart from allowable exemptions, namely the proposed critical use exemption and the existing quarantine and pre-shipment exemption. With today's action, EPA is
Table of Contents
I. General Information A. Regulated Entities B. How Can I Get Copies of This Document and Other Related Information? C. How and to Whom Do I Submit Comments? D. How Should I Submit Confidential Business Information (CBI) to the Agency? II. What Is the Background to the Phaseout Regulations for Ozone-Depleting Substances? III. What Is Methyl Bromide? IV. What Is the Legal Authority for Exempting the Production and Import of Methyl Bromide for Critical Uses Authorized by the Parties to the Montreal Protocol? V. What Is the Critical Use Exemption Process? VI. What Are the Details of Today's Proposed Action To Implement the Critical Use Exemption for Methyl Bromide? A. What Is the Total Amount of Methyl Bromide That May Be Supplied for U.S. Critical Uses? B. What Is the Proposed Regulatory Framework for Implementing the Critical Use Exemption and What Is a Critical Use Allowance (CUA) and a Critical Stock Allowance (CSA)? C. How Will Critical Use Allowances (CUAs) be Distributed? D. How Are Critical Stock Allowances (CSAs) Distributed? E. Are Allowances To Be Allocated on a Sector-Specific Basis or as One Lump Sum for All Sectors? F. How Many Critical Use Allowances (CUAs) and Critical Stockpile Allowances (CSAs) Will Producers, Importers and Distributors Be Allocated? G
(CUA) and a Critical Stock Allowance (CSA)? C. How Will Critical Use Allowances (CUAs) be Distributed? D. How Are Critical Stock Allowances (CSAs) Distributed? E. Are Allowances To Be Allocated on a Sector-Specific Basis or as One Lump Sum for All Sectors? F. How Many Critical Use Allowances (CUAs) and Critical Stockpile Allowances (CSAs) Will Producers, Importers and Distributors Be Allocated? G. What Are the Tracking Requirements for a Sector- or Applicant-Specific Allocation? H. How Do “Approved Critical Users” Acquire Methyl Bromide Under Today's Proposal? I. Who Is an Approved Critical User? J. Can New Market Entrants or New Consortia Members Be Approved Critical Users? K. What Uses and “Limiting Critical Conditions” Are Permitted Access to the Methyl Bromide Under the Critical Use Exemption? L. What Are the Reporting Requirements? M. What Are the Record-Keeping Requirements? N. How Often Will Critical Use Allowances (CUAs) Be Distributed and How Are Allowances Expended? O. Can Allowances Be Traded? P. Are Allowances Bankable From One Year to the Next? Q. How Is Unused Critical Use Methyl Bromide Treated at the End of the Compliance Period? R. What Are the Enforcement Provisions Governing Critical Uses? VII. What Are Other Options on Which EPA Seeks Comment? A. Distribution of Critical User Permits (CUPs) to End Users of Methyl Bromide? B. What Is a Critical Use Permit (CUP) and Can It Be Traded? C. Who Is Eligible To Receive an Initial Allocation of CUPs and Who May Use CUPs? D. Who May Hold a CUP? E. Methods for Distribution of Critical User Permits: Distribution Based on Data. F. Submitting Individual Entity Data To Obtain Critical User Permits (CUPs). G. Methods for Distribution of Critical User Permits: Distribution Using Auctions. H. Frequency of Auctions and Set Asides. I. Other Methods for Distributing CUPs. J. Tracking Permits. K. Redeeming CUPs for Methyl Bromide. L. Reporting Requirements for CUP Holders. M. Interaction Between CUPs and CUAs. VIII
Based on Data. F. Submitting Individual Entity Data To Obtain Critical User Permits (CUPs). G. Methods for Distribution of Critical User Permits: Distribution Using Auctions. H. Frequency of Auctions and Set Asides. I. Other Methods for Distributing CUPs. J. Tracking Permits. K. Redeeming CUPs for Methyl Bromide. L. Reporting Requirements for CUP Holders. M. Interaction Between CUPs and CUAs. VIII. What Conforming Amendments Is EPA Proposing With Respect to Essential Use Allowances? IX. Statutory and Executive Order Reviews A. Executive Order No. 12866: Regulatory Planning and Review. B. Paperwork Reduction Act. C. Regulatory Flexibility Act. D. Unfunded Mandates Reform Act. E. Executive Order No. 13132: Federalism. F. Executive Order No. 13175: Consultation and Coordination With Indian Tribal Governments. G. Executive Order No. 13045: Protection of Children From Environmental Health & Safety Risks. H. Executive Order No. 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use. I. National Technology Transfer Advancement Act. I. General Information
A. Regulated Entities
Entities potentially regulated by this proposed action are those associated with the production, import, export, sale, application and use of methyl bromide. Potentially regulated categories and entities include:
Category Examples of regulated entities Industry Producers, Importers and Exporters of methyl bromide; Applicators, Distributors of methyl bromide; Users of methyl bromide, e.g. farmers of vegetable crops, fruits and seedlings; and owners of stored food commodities and structures such as grain mills and processors, Government and non-government researchers. The above table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this proposed action. This table lists the types of entities that EPA is aware could potentially be regulated by this proposed action
and owners of stored food commodities and structures such as grain mills and processors, Government and non-government researchers. The above table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this proposed action. This table lists the types of entities that EPA is aware could potentially be regulated by this proposed action. To determine whether your facility, company, business, or organization is regulated by this proposed action, you should carefully examine the regulations promulgated at 40 CFR part 82, subpart A. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.
B. How Can I Get Copies of This Document and Other Related Information?
1. Docket. EPA has established an official public docket for this action under the Office of Air and Radiation Docket & Information Center, Electronic Air Docket ID No. OAR-2003-0230. The official public docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The official public docket is the collection of materials that is available for public viewing at EPA West, 1301 Constitution Ave., NW., Room B108, Mail Code 6102T, Washington, DC 20460, phone: (202) 566-1742, fax: (202) 566-1741. The materials may be inspected from 8:30 a.m. until 4:30 p.m. Monday through Friday, excluding legal holidays. A reasonable fee may be charged for copying docket materials.
2. Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/
, phone: (202) 566-1742, fax: (202) 566-1741. The materials may be inspected from 8:30 a.m. until 4:30 p.m. Monday through Friday, excluding legal holidays. A reasonable fee may be charged for copying docket materials.
2. Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/. An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. EPA prefers that you use the electronic EPA Dockets at http:// to submit or view public comments and access the index listing of the contents of the official public docket. To locate the docket on EPA's docket Web site, select “search,” then key in the appropriate docket identification number, in this case OAR-2003-0230. Additional supporting documents related to this proposed action may be found in EPA's electronic docket system, docket numbers OAR-2002-0018 and OAR-2003-0017 and in EPA's paper docket, Air Docket ID No. A-2000-24.
Certain types of information will not be placed in the EPA Dockets. Information claimed as confidential business information (CBI) and other information whose disclosure is restricted by statute, will not be included in the official public docket and will not be available for public viewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified in Unit B
ewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified in Unit B.
For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or in paper, will be made available for public viewing in EPA's electronic public docket as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in EPA's electronic public docket.
Public comments submitted on computer disks that are mailed or delivered to the docket will be transferred to EPA's electronic public docket. Public comments that are mailed or delivered to the Docket will be scanned and placed in EPA's electronic public docket. Where practical, physical objects will be photographed, and the photograph will be placed in EPA's electronic public docket along with a brief description written by the docket staff.
C. How and to Whom Do I Submit Comments?
EPA is seeking comments on options that are proposed, as well as all other options and methods that are discussed. You may submit comments electronically, by mail or through hand delivery/courier. The preferred method for submitting comments on this proposed rulemaking is to submit comments to the electronic docket OAR-2003-0230. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your comment, in this instance OAR-2003-0230
discussed. You may submit comments electronically, by mail or through hand delivery/courier. The preferred method for submitting comments on this proposed rulemaking is to submit comments to the electronic docket OAR-2003-0230. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your comment, in this instance OAR-2003-0230. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of comment period will be marked late. EPA is not required to consider late comments. If you plan to submit comments, please notify Hodayah Finman, U.S. Environmental Protection Agency, Stratospheric Protection Division (6205J), 1200 Pennsylvania Ave., NW., Washington, DC 20460, (202) 343-9246.
Information designated as Confidential Business Information (CBI) under 40 CFR part 2, subpart 2, must be sent directly to the contact person for this notice. However, the Agency is requesting that all respondents submit a non-confidential version of their comments to the docket as well.
To submit an electronic comment as described below, EPA recommends that you include your name, mailing address, and an e-mail address or other contact information in the body of your comment. Also include this contact information on the outside of any disk or CD ROM you submit, and in any cover letter accompanying the disk or CD ROM. This ensures that you can be identified as the submitter of the comment and allows EPA to contact you in case EPA cannot read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket
u in case EPA cannot read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment.
i. EPA Dockets. Your use of EPA's electronic public docket to submit comments is the preferred method for submitting comments. Go directly to EPA dockets at http://www.epa.gov/edocket, and follow the online instructions for submitting comments to docket OAR-2003-0230.
ii. By Mail. Send one copy of your comments to each of the following two offices: U.S. Environmental Protection Agency, Air and Radiation Docket (6102), Electronic Air Docket ID No. OAR-2003-0230 Washington, DC 20460 and to U.S. Environmental Protection Agency, (6205J) 1200 Pennsylvania Ave., NW., Washington, DC 20460, attn: Hodayah Finman docket no. OAR-2003-0230.
iii. By Hand Delivery or Courier. Deliver your comments to: Hodayah Finman 1310 L Street, NW., Washington, DC 20005, Attention Electronic Air Docket ID No. OAR-2003-0230. Such deliveries are only accepted during the normal hours of operation 9 a.m to 5 p.m.
iv. By Facsimile. Fax your comments to both: (202) 566-1741, Attention Electronic Air Docket ID No. OAR-2003-0230 and to (202) 343-2337, Attention Hodayah Finman, Electronic Air Docket No. OAR-2003-0230.
D. How Should I Submit Confidential Business Information (CBI) to the Agency?
Do not submit information that you consider to be CBI electronically through EPA's electronic public docket or by e-mail. Send or deliver information identified as CBI only to the mail or courier addresses listed in the FOR FURTHER INFORMATION CONTACT section, Electronic Air Docket ID No. OAR-2003-0230
OAR-2003-0230.
D. How Should I Submit Confidential Business Information (CBI) to the Agency?
Do not submit information that you consider to be CBI electronically through EPA's electronic public docket or by e-mail. Send or deliver information identified as CBI only to the mail or courier addresses listed in the FOR FURTHER INFORMATION CONTACT section, Electronic Air Docket ID No. OAR-2003-0230. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI (if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI should be submitted for inclusion in the public docket and EPA's electronic public docket. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and EPA's electronic public docket without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the FOR FURTHER INFORMATION CONTACT section.
II. What Is the Background to the Phaseout Regulations for Ozone-Depleting Substances?
The current regulatory requirements of the Stratospheric Ozone Protection Federal Register on August 12, 1988 (53 FR 30566), in response to the 1987 signing of the Montreal Protocol on Substances that Deplete the Ozone Layer (Protocol). The U.S. was one of the original signatories to the 1987 Montreal Protocol and the U.S. ratified the Protocol on April 21, 1988
s for Ozone-Depleting Substances?
The current regulatory requirements of the Stratospheric Ozone Protection Federal Register on August 12, 1988 (53 FR 30566), in response to the 1987 signing of the Montreal Protocol on Substances that Deplete the Ozone Layer (Protocol). The U.S. was one of the original signatories to the 1987 Montreal Protocol and the U.S. ratified the Protocol on April 21, 1988. Congress then enacted, and President Bush signed into law, the Clean Air Act Amendments of 1990 (CAAA) that included Title VI on Stratospheric Ozone Protection to ensure that the United States could satisfy its obligations under the Protocol. EPA has made several amendments to the regulations since that time.
III. What Is Methyl Bromide?
Methyl bromide is an odorless, colorless, toxic gas, which is used as a broad-spectrum pesticide and is controlled under the CAAA as a Class I ozone depleting substance (ODS). Methyl bromide is used in the U.S. and throughout the world as a fumigant to control a wide variety of pests such as insects, weeds, rodents, pathogens, and nematodes. Additional characteristics and details about the uses of methyl bromide can be found in the proposed rule on the phaseout schedule for methyl bromide published in the Federal Register on March 18, 1993 (58 FR 15014), and the final rule published in the Federal Register on December 10, 1993 (58 FR 65018). The phaseout schedule for methyl bromide was revised in a concurrent proposal and direct final rulemaking on November 28, 2000 (65 FR 70795), which allowed for the phased reduction in methyl bromide consumption and extended the phaseout to 2005. The revised phaseout schedule was again amended to allow for an exemption for quarantine and preshipment purposes on July 19, 2001 (66 FR 37751), with an interim final rule and with a final rule (68 FR 238) on January 2, 2003
oposal and direct final rulemaking on November 28, 2000 (65 FR 70795), which allowed for the phased reduction in methyl bromide consumption and extended the phaseout to 2005. The revised phaseout schedule was again amended to allow for an exemption for quarantine and preshipment purposes on July 19, 2001 (66 FR 37751), with an interim final rule and with a final rule (68 FR 238) on January 2, 2003. Information on methyl bromide can be found at the following sites of the World Wide Web: http://www.epa.gov/ozone/mbr and http://teap.org or by contacting the Stratospheric Ozone Hotline at 1-800-296-1996.
Because it is a pesticide, methyl bromide is also regulated by EPA under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and other statutes and regulatory authority and by states under their own statutes and regulatory authority. Under FIFRA, methyl bromide is a restricted use pesticide. Because of this status, a restricted use pesticide is subject to certain federal and state requirements governing its sale, distribution, and use. Nothing in this proposed rule implementing the Clear Air Act is intended to derogate from provisions in any other federal, state, or local laws or regulations governing actions including, but not limited to, the sale, distribution, transfer, and use of methyl bromide. All entities that would be affected by the proposed provisions must continue to comply with FIFRA and other pertinent statutory and regulatory requirements for pesticides (including, but not limited to, requirements pertaining to restricted use pesticides) when importing, exporting, acquiring, selling, distributing, transferring, or using methyl bromide for critical uses. The proposed regulations in today's rulemaking are intended only to implement Clean Air Act restrictions on the production, consumption and use of methyl bromide for critical uses exempted from the phaseout of methyl bromide.
IV
quirements pertaining to restricted use pesticides) when importing, exporting, acquiring, selling, distributing, transferring, or using methyl bromide for critical uses. The proposed regulations in today's rulemaking are intended only to implement Clean Air Act restrictions on the production, consumption and use of methyl bromide for critical uses exempted from the phaseout of methyl bromide.
IV. What Is the Legal Authority for Exempting the Production and Import of Methyl Bromide for Critical Uses Authorized by the Parties to the Montreal Protocol?
Methyl bromide was added to the Protocol as an ozone depleting substance in 1992 through the Copenhagen Amendment to the Protocol. The Parties to the Protocol established a freeze in the level of methyl bromide production and consumption for industrialized countries at the 1992 Meeting in Copenhagen. The Parties agreed that each industrialized country's level of methyl bromide production and consumption in 1991 should be the baseline for establishing the freeze. EPA published a final rule in the Federal Register on December 10, 1993 (58 FR 69235), listing methyl bromide as a class I, Group VI controlled substance, freezing U.S. production and consumption at this 1991 level, and, in section 82.7 of the rule, setting forth the percentage of baseline allowances for methyl bromide granted to companies in each control period (each calendar year) until the year 2001 (58 FR 65018). This phaseout date was consistent with requirements under section 602(d) of the CAA for newly listed class I ozone-depleting substances that “no extension under this subsection may extend the date for termination of production of any class I substance to a date more than 7 years after January 1 of the year after the year in which the substance is added to the list of class I substances.” Therefore, the 1993 regulation established a United States phaseout for methyl bromide in 2001
or newly listed class I ozone-depleting substances that “no extension under this subsection may extend the date for termination of production of any class I substance to a date more than 7 years after January 1 of the year after the year in which the substance is added to the list of class I substances.” Therefore, the 1993 regulation established a United States phaseout for methyl bromide in 2001.
At their 1995 meeting, the Parties made adjustments to the methyl bromide control measures and agreed to reduction steps and a 2010 phaseout date for industrialized countries with exemptions permitted for critical uses. At this time, the U.S. continued to have a 2001 phaseout date in accordance with the Clean Air Act language. At their 1997 meeting, the Parties agreed to further adjustments to the phaseout schedule for methyl bromide in industrialized countries, with reduction steps leading to a 2005 phaseout for industrialized countries. In October 1998, the U.S. Congress amended Subchapter VI of the CAA to prohibit the termination of production of methyl bromide prior to January 1, 2005, to bring the U.S. phaseout of methyl bromide in line with the global requirements specified under the Protocol and to provide for the exemptions under the Protocol. These amendments were contained in section 764 of the 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act (Pub. L. 105-277, October 21, 1998) and were codified in section 604 of the CAA. On November 28, 2000, EPA issued regulations to amend the phaseout schedule for methyl bromide and extend the complete phaseout of production and consumption to 2005 (65 FR 70795).
Today, in accordance with the 1998 amendments to the CAA, EPA is proposing to further amend 40 CFR part 82 to implement an exemption to the 2005 phaseout of methyl bromide that allows continued production and consumption of methyl bromide for critical uses
tions to amend the phaseout schedule for methyl bromide and extend the complete phaseout of production and consumption to 2005 (65 FR 70795).
Today, in accordance with the 1998 amendments to the CAA, EPA is proposing to further amend 40 CFR part 82 to implement an exemption to the 2005 phaseout of methyl bromide that allows continued production and consumption of methyl bromide for critical uses. Section 604(d)(6) of the Clean Air Act provides that “[t]o the extent consistent with the Montreal Protocol, the Administrator, after notice and the opportunity for public comment, and after consultation with other departments or instrumentalities of the Federal Government having regulatory authority related to methyl bromide, including the Secretary of Agriculture, may exempt the production, importation, and consumption of methyl bromide for critical uses.” 42 U.S.C. 7671c(d)(6). Article 2H (5) of the Montreal Protocol provides that the 2005 methyl bromide phaseout shall not apply “to the extent the Parties decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses.”
Both section 604(d)(6) and section 614(b) of the CAA address the relationship between the Montreal
EPA must take into account not only the text of Article 2H but also the related Decisions of the Protocol Parties that interpret that text. Under customary international law, as codified in the 1969 Vienna Convention on the Law of Treaties (8 International Legal Materials 679 (1969)) both the treaty text and the practice of the parties in interpreting that text form the basis for its interpretation. Although the United States is not a party to the 1969 Convention, the United States has regarded it since 1971 as “the authoritative guide to current treaty law and practice.” See Secretary of State William D. Rodgers to President Richard Nixon, October 18, 1971, 92d Cong., 1st Sess., Exec. L (November 22, 1971)
actice of the parties in interpreting that text form the basis for its interpretation. Although the United States is not a party to the 1969 Convention, the United States has regarded it since 1971 as “the authoritative guide to current treaty law and practice.” See Secretary of State William D. Rodgers to President Richard Nixon, October 18, 1971, 92d Cong., 1st Sess., Exec. L (November 22, 1971). Specifically, Article 31(1) of the Vienna Convention provides that “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.” Article 31(3) goes on to provide that “[t]here shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions.” In the current circumstances Decisions of the Parties can be construed as subsequent consensus agreements among the Parties to the Montreal Protocol, including the United States, regarding the interpretation and application of the Protocol.
In accordance with Article 2H(5), the Parties have issued several Decisions pertaining to the critical use exemption. At their Ninth Meeting in 1997, the Parties issued Decision IX/6 which established criteria applicable to the critical use exemption. In paragraph 1 of Decision IX/6, the Parties agreed as follows:
(a) That a use of methyl bromide should qualify as “critical” only if the nominating Party determines that:
(i) The specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption; and
(ii) There are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination;
that:
(i) The specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption; and
(ii) There are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination;
(b) That production and consumption, if any, of methyl bromide for critical uses should be permitted only if:
(i) All technically and economically feasible steps have been taken to minimize the critical use and any associated emission of methyl bromide;
(ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked or recycled methyl bromide, also bearing in mind the developing countries' need for methyl bromide;
(iii) It is demonstrated that an appropriate effort is being made to evaluate, commercialize and secure national regulatory approval of alternatives and substitutes, taking into account the circumstances of the nomination * * * Non-Article V [Developed country] parties must demonstrate that research programmes are in place to develop and deploy alternatives and substitutes* * *
The Parties also agreed in Decision IX/6 that the technical panel (discussed below) that reviews nominations and makes recommendations to the Parties regarding approval of critical use exemptions, would base its review and recommendations on the criteria in paragraphs (a)(ii) and (b). The criterion in paragraph (a)(i) was not subject to review by this technical panel.
At the First Extraordinary Meeting of the Parties in March of 2004, the Parties issued several decisions that address the agreed critical uses, the allowable levels of new production and consumption for critical uses, the conditions for granting critical use exemptions, and reporting obligations. Decision Ex. I/3 covers the agreed critical uses and allowable levels of new production and consumption for the year 2005
rdinary Meeting of the Parties in March of 2004, the Parties issued several decisions that address the agreed critical uses, the allowable levels of new production and consumption for critical uses, the conditions for granting critical use exemptions, and reporting obligations. Decision Ex. I/3 covers the agreed critical uses and allowable levels of new production and consumption for the year 2005. This Decision includes the following terms:
1. For the agreed critical uses set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol for each Party, to permit, subject to the conditions set forth in decision Ex. I/4, the levels of production and consumption set forth in annex II B to the present report which are necessary to satisfy critical uses, with the understanding that additional levels and categories of uses may be approved by the Sixteenth Meeting of the Parties in accordance with decision IX/6;
2. That a Party with a critical-use exemption level in excess of permitted levels of production and consumption for critical uses is to make up any such difference between those levels by using quantities of methyl bromide from stocks that the Party has recognized to be available;
3. That a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol when amounts from stocks combined with allowable production and consumption for critical uses exceed the total level for that Party set forth in annex II A to the present report;
4. That Parties should endeavor to allocate the quantities of methyl bromide recommended by the Technology and Economic Assessment Panel as listed in annex II A to the report of the First Extraordinary Meeting of the Parties;
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ts from stocks combined with allowable production and consumption for critical uses exceed the total level for that Party set forth in annex II A to the present report;
4. That Parties should endeavor to allocate the quantities of methyl bromide recommended by the Technology and Economic Assessment Panel as listed in annex II A to the report of the First Extraordinary Meeting of the Parties;
5. That each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks. Each Party is requested to report on the implementation of the present paragraph to the Ozone Secretariat;
The agreed critical uses and allowable levels of production and consumption are set forth in annexes to the Parties' report. Decision Ex I/4 addresses the conditions for granting and reporting critical-use exemption for methyl bromide.
Decisions IX/6, Ex. I/3, and Ex. I/4 are subsequent consensus agreements of the Parties that address the interpretation and application of the critical use provision in Article 2H(5) of the Protocol. For example, Decision Ex. I/3 reflects a decision called for by the text of Article 2H(5) where the parties are directed to “decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses.” EPA intends to follow the terms of Decisions IX/6, Ex. I/3, and Ex. I/4. This would ensure consistency with the Montreal Protocol and satisfy the requirements of Section 604(d) (6) and Section 614(b) of the CAA. [?USGPO Galley End:?]
Decision Ex. I/3 recognizes that article 2H(5) of the Protocol contemplates that the Parties will make two separate determinations when establishing the critical use exemption
to follow the terms of Decisions IX/6, Ex. I/3, and Ex. I/4. This would ensure consistency with the Montreal Protocol and satisfy the requirements of Section 604(d) (6) and Section 614(b) of the CAA. [?USGPO Galley End:?]
Decision Ex. I/3 recognizes that article 2H(5) of the Protocol contemplates that the Parties will make two separate determinations when establishing the critical use exemption. First, the Parties agree on the total amount and categories
Under Decision Ex I/3, the United States is allowed to use a total of 8,942 metric tons of methyl bromide in 2005 to satisfy critical uses. In accordance with Decision Ex I/3, the quantity of new production and consumption in combination with the amount of stocks determined to be available for the specified critical uses cannot exceed for 2005 the amount of 8,942 metric tons. Because of the cap on the amount of methyl bromide available for the specified critical uses, EPA will not authorize new production and consumption that, when combined with use of available stocks, would exceed the agreed critical use level of 8,942 metric tons. The methyl bromide to satisfy those uses may be derived from available stocks of material or new production and consumption. The upper limit on the amount of new production and consumption for the specified critical uses is 7,659 metric tons. However, this level of new production and consumption was authorized by the Parties subject to compliance with the conditions set forth in Decisions Ex. I/3 and Ex. I/4. One of these conditions, in paragraph 5 of Decision Ex
ble stocks of material or new production and consumption. The upper limit on the amount of new production and consumption for the specified critical uses is 7,659 metric tons. However, this level of new production and consumption was authorized by the Parties subject to compliance with the conditions set forth in Decisions Ex. I/3 and Ex. I/4. One of these conditions, in paragraph 5 of Decision Ex. I/3, provides that “each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks.” Thus, in deciding the level of new production and consumption allowed in the United States, EPA is proposing to consider the amount of methyl bromide from stocks recognized by EPA to be “available” for critical uses.
In addition, to prevent the total use levels of methyl bromide from exceeding the critical use cap, Paragraph 3 of Decision Ex I/3 requires that Parties prohibit the use of stocks of methyl bromide under certain circumstances. This provision states “that a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol when amounts from stocks combined with allowable production and consumption exceed the total level for that Party set forth in annex II A to the present report.” This restriction applies in countries where methyl bromide material necessary to meet the agreed critical uses is derived from a combination of available stocks and new production or imports. In this situation, a Party may not allow the total amount of material supplied from stocks and new production and consumption to exceed the level of use for categories determined by the Parties to be critical
This restriction applies in countries where methyl bromide material necessary to meet the agreed critical uses is derived from a combination of available stocks and new production or imports. In this situation, a Party may not allow the total amount of material supplied from stocks and new production and consumption to exceed the level of use for categories determined by the Parties to be critical. This restriction is necessary to ensure that a Party's total level of use in critical use categories does not exceed the level which formed the basis for the Parties' decision to authorize new production and consumption at particular levels. This limitation was deemed to be a necessary condition applicable to Parties authorized under the critical use exemption to produce or import a dedicated supply of methyl bromide to meet critical needs after the 2005 phaseout of methyl bromide.
Thus, in accordance with Decision Ex. I/3, if EPA authorizes new production and consumption to supplement available stocks, EPA will restrict the use of existing stocks of methyl bromide in cases where use of stocks combined with the authorized level of new production and consumption could exceed the critical use cap. In light of the Parties' agreement in Decision Ex. I/3 that such a restriction is needed to implement Article 2H(5) of the Protocol, EPA is authorized under sections 604(b)(6) and 614(b) of the Clean Air Act to regulate the use of existing stocks of methyl bromide. EPA's power under section 604(b)(6) to exempt new production, importation, and consumption of methyl bromide for critical uses exists “to the extent consistent with the Montreal Protocol.” 42 U.S.C. 7671c(b)(6). Because the Parties have interpreted the Protocol to impose such a use restriction as a condition for the authorization of new production and consumption for critical uses, EPA will adhere to the same restriction in its domestic implementation of the critical use exemption. This adherence is consistent with section 614(b) of the Clean Air Act. 42 U.S.C
he Montreal Protocol.” 42 U.S.C. 7671c(b)(6). Because the Parties have interpreted the Protocol to impose such a use restriction as a condition for the authorization of new production and consumption for critical uses, EPA will adhere to the same restriction in its domestic implementation of the critical use exemption. This adherence is consistent with section 614(b) of the Clean Air Act. 42 U.S.C. 7671m(b).
Although many parts of the Montreal Protocol and Subchapter VI of the Clean Air Act focus on controlling the production and consumption of ozone depleting substances, select provisions also require restrictions on the use of such substances. For example, section 605 of the Clean Air Act restricts the use of class II substances (hydrochlorofluorocarbon) to a limited number of applications starting in 2015. 42 U.S.C. 7671d(a). Section 608 of the CAA requires the Administrator to promulgate regulations to reduce the use and emission of class I substances during the service, repair, and disposal of appliances and refrigeration equipment. 42 U.S.C. 7671g. The essential use exemption in sections 604(d)(1)-(3) authorizes limited production of controlled substances subject to the limitation that such substances may only be used in specific applications. 42 U.S.C. 7671c(d). Likewise, the critical use exemption under section 604(d)(6) permits exempted production, importation, and consumption but only “for critical uses.” 42 U.S.C. 7671c(d)(6). Thus, under the essential use and critical use exemptions, new production and consumption is necessarily restricted to particular use categories.
In the case of the critical use exemption for methyl bromide, the Parties recognized in Decision Ex. I/3 that the use restrictions on newly produced material must also extend to the use of existing stocks of such material in those use categories for which new production and consumption has been permitted by the Parties under the exemption
n is necessarily restricted to particular use categories.
In the case of the critical use exemption for methyl bromide, the Parties recognized in Decision Ex. I/3 that the use restrictions on newly produced material must also extend to the use of existing stocks of such material in those use categories for which new production and consumption has been permitted by the Parties under the exemption. As noted above, such a restriction is necessary to ensure that Parties abide by the critical use representations underlying the authorization of new production and consumption. Where new production and consumption is authorized because sufficient material is not available from
This kind of a restriction on the use of existing stocks is also authorized under the essential use exemption for production or import of CFCs and other class I controlled ozone-depleting substances as a condition for allowing new production and consumption. However, for practical reasons the Parties and EPA have never needed to expressly impose such restrictions under the essential use exemption. The limited quantities of CFCs and methyl chloroform produced and consumed in the United States under the essential use exemption have historically been held by the users of such substances. In addition, the number of essential uses and size of the user community is very small. Essential uses have been limited to use of CFCs as propellants in asthma inhalers by not more than 10 companies and the servicing of space vehicles by the National Aeronauticsal and Space Administration. Thus, it has been much easier under the essential use exemption for the Parties and EPA to determine how much existing material is available to the essential users and to ensure that the exempted production and consumption in a given year was not grossly exceeding the level of essential need. In the case of the essential use exemption, the Parties never agreed to a Decision that limited the amount of material available from stocks for uses deemed essential
ion for the Parties and EPA to determine how much existing material is available to the essential users and to ensure that the exempted production and consumption in a given year was not grossly exceeding the level of essential need. In the case of the essential use exemption, the Parties never agreed to a Decision that limited the amount of material available from stocks for uses deemed essential. However, the Parties track the stocks of these essential use materials to ensure the exempted production and consumption does not result in a growing stockpile.
In contrast, in the case of methyl bromide, the majority of existing stocks of methyl bromide are not owned and controlled by users but by producers, distributors, and importers of such material. There are also hundreds of potential users and many uses for methyl bromide. In addition, the Parties have authorized a greater number of critical uses for methyl bromide (16 categories in the U.S. for 2005), and these uses were identified based on specific limiting conditions under which methyl bromide use in those categories becomes critical. In this situation, there is more risk that the use level in critical use categories could exceed the level of agreed critical use without express regulation. In the case of essential use allowances, there was no need for an express restriction on use of existing stocks because the marketplace and the user community self-regulated. However, in a situation such as methyl bromide where the distribution patterns of the material are different and the user group and critical use profile is much larger, the EPA can no longer rely solely on self-regulation to ensure the appropriate use level.
Thus, in accordance with these authorities, EPA is proposing a limit on the sale of stocks of methyl bromide to the approved users permitted to obtain new production and consumption for their critical uses
ion patterns of the material are different and the user group and critical use profile is much larger, the EPA can no longer rely solely on self-regulation to ensure the appropriate use level.
Thus, in accordance with these authorities, EPA is proposing a limit on the sale of stocks of methyl bromide to the approved users permitted to obtain new production and consumption for their critical uses. We propose that holders of stocks will only be authorized to sell methyl bromide for critical uses by expending critical stock allowances (CSAs) allocated by EPA through this rulemaking action. The proposed limitation on the sale of stocks is narrowly defined and applicable only to the categories of critical uses for which new production and consumption has been authorized because of a demonstrated critical need for methyl bromide in that category under certain limiting conditions. Consistent with Decision Ex. I/3, those critical users who benefit from the greater assurance of obtaining a dedicated supply of methyl bromide for critical uses in 2005 from new production or imports, as a condition of obtaining this benefit, have limited access to existing stocks of methyl bromide to avoid exceeding the overall critical use cap established in Decision Ex. I/3.
EPA is proposing a limitation on the amount of stocks that may be sold to the end-users, defined as “approved critical users” ( see description below in Section VI.I.), who may obtain a dedicated supply of methyl bromide from new production or imports under the critical use exemption. In addition, EPA is proposing that end-users in these same categories listed in Decision Ex. I/3, who applied for an exemption but were determined in the preparation of the U.S. government nomination to have technically and economically feasible alternatives to methyl bromide available for their circumstances of use (thus lacking the critical need for methyl bromide) would not have access to methyl bromide from stockpiles
sing that end-users in these same categories listed in Decision Ex. I/3, who applied for an exemption but were determined in the preparation of the U.S. government nomination to have technically and economically feasible alternatives to methyl bromide available for their circumstances of use (thus lacking the critical need for methyl bromide) would not have access to methyl bromide from stockpiles. Thus, EPA is proposing that holders of pre-phaseout stocks would not be permitted to sell these stocks in 2005 to end-users in nominated sectors who do not have the “limiting critical conditions” ( see Section VI.K below) that make methyl bromide use critical for the categories listed in Decision Ex I/3. In reviewing applications and developing the U.S. nomination for 2005 critical use exemptions, the U.S. government determined and submitted documentation that in particular circumstances there is a critical need for methyl bromide, and that for the other circumstances in that sector there are technically and economically available alternatives to methyl bromide ( e.g. , curcurbit production in Michigan with less than moderate fungal pathogen infestation). EPA is proposing that end-users in sectors nominated by the U.S. that do not have the specified “limiting critical conditions” would not have access to stocks of methyl bromide because, without the limiting critical conditions, they can use the technically and economically feasible alternatives. EPA seeks comment on these proposed limitations.
The Agency recognizes there may be other options for controlling access to methyl bromide inventories after the phaseout if necessary to maintain use below the cap set forth in Decision Ex. I/3. Other groups of users who might be subject to controls on use of stocks could include: (1) Those users who did not apply for a critical use exemption, (2) those users who did apply but whose category of use did not, under any limiting condition, meet the conditions necessary to be included in the U.S
ories after the phaseout if necessary to maintain use below the cap set forth in Decision Ex. I/3. Other groups of users who might be subject to controls on use of stocks could include: (1) Those users who did not apply for a critical use exemption, (2) those users who did apply but whose category of use did not, under any limiting condition, meet the conditions necessary to be included in the U.S. government nomination for critical use exemptions, or (3) those users who applied and were nominated by the U.S. government but whose use was not included among the agreed critical uses for 2005 set forth in the Parties' Decision Ex I/3. Thus, we request comment on whether these groups of users should also be subject to a limitation on the use of stocks of methyl bromide produced or imported prior to the phaseout and whether we may establish such a limitation under applicable legal authority.
V. What Is the Critical Use Exemption Process?
The procedural requirements for the critical use exemption are delineated in Decision IX/6 of the Parties to the Protocol. As applied in the United States, users of methyl bromide who believe they may meet the criteria to qualify for a critical use exemption may make an application to EPA for inclusion in the U.S. nomination of critical uses. Starting in 2002, EPA began notifying applicants as to the availability of the application, and the Federal Register (68 FR 24737) and an announcement on the methyl bromide Web site at http:/www.epa/.gov/ozone/mbr. Applicants for the critical use exemption must provide information demonstrating to the U.S. government that the specific use of methyl bromide is critical because (1) the lack of availability of methyl bromide for that use would result in significant market disruption, and (2) the applicants have no technically and economically feasible alternatives or substitutes to methyl bromide available to them that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of use
e of methyl bromide is critical because (1) the lack of availability of methyl bromide for that use would result in significant market disruption, and (2) the applicants have no technically and economically feasible alternatives or substitutes to methyl bromide available to them that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of use. Applicants for the exemption must also submit information on their use of methyl bromide, on research into the use of alternatives to methyl bromide, on efforts to minimize use of methyl bromide and to reduce emissions and on the specific technical and economic results of testing alternatives to methyl bromide. Applicants may apply as individuals or as part of a group of users (a “consortium”) who face the same limiting critical conditions ( i.e. specific conditions which establish a critical need for methyl bromide).
The U.S. government reviews applications and creates a package for submission to the Ozone Secretariat of the Protocol for uses nominated as having a critical need for methyl bromide beyond the phaseout. Each Party must justify such a request by determining that (1) the specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption; and (2) there are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination.
The critical use nominations (CUNs) of various countries are then reviewed by a technical committee that advises the countries that have ratified the Protocol (the “Parties” to the Protocol). This technical committee is known as the Methyl Bromide Technical Options Committee (“MBTOC”) of the Technical and Economic Assessment Panel (“TEAP”)
itable to the crops and circumstances of the nomination.
The critical use nominations (CUNs) of various countries are then reviewed by a technical committee that advises the countries that have ratified the Protocol (the “Parties” to the Protocol). This technical committee is known as the Methyl Bromide Technical Options Committee (“MBTOC”) of the Technical and Economic Assessment Panel (“TEAP”). The TEAP is an advisory body to the Parties to the Protocol and is directed by the Parties to provide assessments and reviews for consideration by the Parties at their annual meetings. The TEAP has subgroups called Technical Option Committees that are organized to focus on specific topic areas of interest to the Parties. Based on the recommendations of MBTOC and TEAP and their own review of the Critical Use Nominations (CUNs) submitted by various countries seeking a critical use exemption, the Parties, at their annual meetings, take decisions to authorize critical use exemptions which “permit the level of production or consumption [of methyl bromide] that is necessary to satisfy uses agreed to them to be critical uses” (Article 2H, paragraph 5).
After decisions by the Parties, for each control period, EPA will provide an opportunity such as this for comment on the amounts of methyl bromide that may be supplied under the critical use exemption and the end uses eligible to use critical use methyl bromide.
EPA recognizes that users of methyl bromide who qualify for a critical use exemption and producers and importers of methyl bromide, need to have certainty regarding the amounts of methyl bromide that will be available under this proposed exemption and the additional regulatory procedures that govern the production and use of critical use methyl bromide before the phaseout date of January 1, 2005. Therefore, EPA is considering all available regulatory procedures that will allow affected entities to have operational certainty about an exemption in advance of the phaseout date.
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bromide that will be available under this proposed exemption and the additional regulatory procedures that govern the production and use of critical use methyl bromide before the phaseout date of January 1, 2005. Therefore, EPA is considering all available regulatory procedures that will allow affected entities to have operational certainty about an exemption in advance of the phaseout date.
VI. What Are the Details of Today's Proposed Action To Implement the Critical Use Exemption for Methyl Bromide?
In today's proposed action, the Agency is proposing both (1) the regulatory framework for how the critical use exemption will operate; (2) and the allocation of allowances established under this framework to methyl bromide producers, importers and suppliers for the 2005 control period.
A. What Is the Total Amount of Methyl Bromide That May Be Supplied for U.S. Critical Uses?
EPA is proposing a determination that the United States has a critical use level for methyl bromide of 8,942,214 kilograms for 2005 (including amounts from available stocks and new production or imports). This is the amount that the U.S. government included in the U.S. Critical Use Nomination as adjusted by the Parties in Decision Ex I/3. This amount is adjusted from the 9,777,288 kilograms originally nominated by the U.S. government. The difference between the two amounts is accounted for by the following adjustments as determined by MBTOC, TEAP and the Parties to the Montreal Protocol: (a) The removal of methyl bromide for tobacco seedling float trays, totaling 1,323 kilograms, a use category that the Parties agreed did not meet the conditions for a critical use exemption, (b) a reduction of 53,328 kilograms to account for the market uptake of sulfuryl fluoride, a newly registered alternative for the fumigation of stored food items, (c) a reduction of 635,027 kilograms from strawberry field uses of methyl bromide due to further adoption of alternatives, in particular emulsified 1,3 dichloropropene formulations, (d) a reduction of 145,
s for a critical use exemption, (b) a reduction of 53,328 kilograms to account for the market uptake of sulfuryl fluoride, a newly registered alternative for the fumigation of stored food items, (c) a reduction of 635,027 kilograms from strawberry field uses of methyl bromide due to further adoption of alternatives, in particular emulsified 1,3 dichloropropene formulations, (d) a reduction of 145,367 kilograms for turfgrass production to reflect lower application rates using mixtures with lower concentrations of methyl bromide, and (e) a small number of kilograms based on rounding adjustments. EPA seeks comment on the amount of methyl bromide the Agency has determined to be necessary to satisfy the critical uses authorized by the Parties for 2005. EPA refers commenters to the E-Docket where the U.S. nominations and additional responses to MBTOC are available. These are the technical documents which are the basis for the Parties and EPA's determination. At this time, EPA does not have additional information to indicate that it should adjust the amounts authorized by the Parties, but seeks comments on whether additional research and data is available with respect to the deployment of alternatives, the adoption of emission reduction technologies, and the other criteria listed in Decision IX/6.
Based on the review of the nominations discussed above, the Parties to the Montreal Protocol allowed the United States to permit up to 7,659 metric tons of newly produced and imported quantities of methyl bromide for the agreed critical uses set forth in Annex II.a of Decision Ex I/3 if this amount is determined by EPA to be necessary to satisfy the agreed critical uses. Supplies of methyl bromide for critical uses may be obtained by end users from available stocks of methyl bromide, or, new production or imports
to permit up to 7,659 metric tons of newly produced and imported quantities of methyl bromide for the agreed critical uses set forth in Annex II.a of Decision Ex I/3 if this amount is determined by EPA to be necessary to satisfy the agreed critical uses. Supplies of methyl bromide for critical uses may be obtained by end users from available stocks of methyl bromide, or, new production or imports.
EPA is proposing to consider adjusting the authorized level of new production and consumption for critical uses by the amount of “available” stocks (consumption is defined as production plus imports minus exports). As recognized by the Parties, the level of existing stocks may differ from the level of available stocks. Under this approach, EPA will assess how much methyl bromide is available from existing inventories and then determine how much is available to meet market demand for critical uses. The Decisions by the Parties recognize that assessment
EPA has solicited information on existing and available stocks from approved critical users and from producers, importers, and major distributors of methyl bromide in the United States through a combination of the critical use exemption applications and information request letters sent to entities pursuant to Section 114 of the Clean Air Act. In developing today's action for the 2005 compliance period, EPA believes it has sufficient information to make a preliminary assessment about the level of existing and available stocks. However, to update this information about existing and available stocks, EPA is publishing in today's Federal Register a Section 114 Information Request asking any person who has stocks of methyl bromide they hold for sale or transfer to another entity as of August 25, 2004, that are unrestricted (not for quarantine and preshipment and produced solely for export to Article 5 countries) and not under contract for delivery to a specific end-user to submit information to EPA by September 23, 2004
y's Federal Register a Section 114 Information Request asking any person who has stocks of methyl bromide they hold for sale or transfer to another entity as of August 25, 2004, that are unrestricted (not for quarantine and preshipment and produced solely for export to Article 5 countries) and not under contract for delivery to a specific end-user to submit information to EPA by September 23, 2004. For years beyond 2005, EPA describes later in this proposed rulemaking annual reporting requirements that will provide the Agency with sufficient information to assess the level of existing and available stocks.
EPA proposes to use the following approach, based on reasoning described below in this section, to assess how much of the existing stocks are available for critical uses. EPA seeks comment on the proposed method and reasoning described in the following paragraphs. EPA proposes to use a top-down methodology which involves deducting the amounts of stocks that are unavailable (not available for critical uses) from the existing stocks. This methodology can be represented as follows: AS = (ES + B)−E1−E2−C−N−D, where AS = available stocks; ES = existing stocks or unrestricted total stocks held in the United States by producers, importers, distributors, and applicants in 2004; B = banked stocks of methyl bromide that were produced or imported with expended critical use allowances in a given year that were unused during that year; E1 = stocks not produced with Article 5 allowances held for export to developing countries; E2 = amounts held for export to developed countries in 2004; C = amounts held in catastrophic reserve; N = amounts held for transition management in non-critical use categories in 2005, and; D = the estimated drawdown of stocks by U.S. and international consumers in 2004
r that were unused during that year; E1 = stocks not produced with Article 5 allowances held for export to developing countries; E2 = amounts held for export to developed countries in 2004; C = amounts held in catastrophic reserve; N = amounts held for transition management in non-critical use categories in 2005, and; D = the estimated drawdown of stocks by U.S. and international consumers in 2004. In this methodology, existing stocks (ES) do not include restricted stocks of methyl bromide that were produced under the exemptions for quarantine and preshipment and with expended Article 5 allowances to meet the basic domestic needs of Article 5 countries. The information, judgments, and assumptions we used to quantify each of the factors in the methodology described above are further elaborated below and also in a Technical Support Document that can be obtained following the specific instructions below.
Although the discussion of the methodology and factors above and below are specific to the proposed determination of available stocks for 2005, EPA is proposing this methodology as part of the regulatory framework that EPA will use in each control period after 2005 for the U.S. determinations of available stocks.
Export is an important global consideration in determining the level of available stocks for domestic critical uses. The U.S. faces different circumstances from many other Parties because it is a methyl bromide producer country as well as a user country. Unlike the majority of the Parties that have authorized critical uses for 2005, the U.S. has stocks of methyl bromide to meet global demands in 2004 for methyl bromide not just for developing countries but for developed countries as well. Therefore, particularly in the case of the U.S., stocks held by U.S. companies are not necessarily available for U.S. users. This is a different case from Parties that satisfy their demand for methyl bromide strictly through imports
or 2005, the U.S. has stocks of methyl bromide to meet global demands in 2004 for methyl bromide not just for developing countries but for developed countries as well. Therefore, particularly in the case of the U.S., stocks held by U.S. companies are not necessarily available for U.S. users. This is a different case from Parties that satisfy their demand for methyl bromide strictly through imports. Any stocks available in the distribution chain of an importing country are presumably imported for the express purpose of meeting the demands of domestic end users. EPA believes that an accurate accounting of available stocks must take into account the global demand for the product in both developed (E2) and developing (E1) countries as authorized under the Protocol.
Furthermore, the U.S. is the world's largest supplier of methyl bromide. In the event of an unforeseen catastrophe such as the destruction of a production plant, EPA believes that a strategic buffer should be held in reserve in order to meet real time global demand for methyl bromide. Since U.S. companies supply a significant portion of the world, a catastrophe in the U.S. would not only affect U.S. users but would affect those users who have authorized critical uses in developed countries as well as the users in developing countries who have not yet phased out methyl bromide. EPA estimates that a catastrophic plant incident that resulted in unforeseen shutdown could result in a three month supply disruption and that a catastrophic buffer (C) equal to the amount of methyl bromide produced for both domestic and overseas markets for transformation, quarantine and preshipment, and critical uses for that period of time is necessary to prevent a significant impact on many industrial sectors using methyl bromide as a feedstock, on global trade that relies on methyl bromide to protect the introduction of invasive species, and on agricultural sectors globally that have recognized critical needs to fumigate with methyl bromide
s for transformation, quarantine and preshipment, and critical uses for that period of time is necessary to prevent a significant impact on many industrial sectors using methyl bromide as a feedstock, on global trade that relies on methyl bromide to protect the introduction of invasive species, and on agricultural sectors globally that have recognized critical needs to fumigate with methyl bromide.
In addition, some entities in the U.S. did not apply for a critical use exemption because they intend to meet their small, limited needs through existing U.S. inventories of methyl bromide. EPA therefore would set aside an amount (N) from the existing stockpile to meet the needs of end users who did not apply for an exemption but who are still using methyl bromide during their transition to alternatives.
Finally, stocks in the United States will continue to be sold and used by domestic and international consumers throughout the 2004 calendar year, in advance of the January 1, 2005 phaseout date. This drawdown (D) should be considered in determining the amount of stocks available for critical uses in 2005.
EPA is proposing to use the methodology described above to develop an estimate of the portion of existing stocks available for critical uses. In Decision Ex. I/3, the Parties agreed that for 2005 the United States had demonstrated a level of critical use of 8,942,214 kilograms of methyl bromide. However, the Parties only authorized the United States to produce up to 7,659,000 kilograms of methyl bromide for critical uses in 2005 with the understanding that the United States
As discussed in the Technical Support Document, this methodology (AS = (ES + B)−E1−E2−C−N−D), yields a range of methyl bromide available from existing stocks from 5 percent to 9 percent of U.S. consumption baseline (1,283,214 to 2,326,000 kilograms)
zed the United States to produce up to 7,659,000 kilograms of methyl bromide for critical uses in 2005 with the understanding that the United States
As discussed in the Technical Support Document, this methodology (AS = (ES + B)−E1−E2−C−N−D), yields a range of methyl bromide available from existing stocks from 5 percent to 9 percent of U.S. consumption baseline (1,283,214 to 2,326,000 kilograms). Therefore EPA proposes to allocate critical use allowances (CUAs) authorizing 7,659,000 to 6,616,214 kilograms of new methyl bromide production or import for the agreed critical-use categories in 2005. This proposed quantity of new production or import is the difference between the total amount of methyl bromide use authorized by the Parties for the agreed critical-use categories in Decision Ex I/3, an amount of 8,942,214 kilograms, and the amount of available stocks of 1,283,214 to 2,326,000 kilograms. Since EPA is proposing a range of available stocks equal to or greater than 1,283,214 kilograms, which is equal to five percent of the U.S. baseline, final action may allocate somewhat less than the full amount of new production and import that was authorized by the Parties in Ex I/3.
In making the proposed determination of available stocks described above, EPA derived the total amount of existing stocks (ES) from information that EPA currently has on the amount of methyl bromide stocks held by a small number of companies in the United States as of the end of 2003. As described above, EPA is seeking to update its information on existing stocks (ES). Because no methyl bromide has been produced to date under the critical use exemption, the quantity of banked critical use methyl bromide (B) is zero in 2005.
The majority of the information EPA currently has on existing stocks was obtained through responses to Section 114 requests that EPA sent to a small group of companies. However, each of these companies claimed their responses to EPA's request to be Confidential Business Information
d to date under the critical use exemption, the quantity of banked critical use methyl bromide (B) is zero in 2005.
The majority of the information EPA currently has on existing stocks was obtained through responses to Section 114 requests that EPA sent to a small group of companies. However, each of these companies claimed their responses to EPA's request to be Confidential Business Information. As a result, EPA is not authorized to release this information until it completes the process for evaluating these claims prescribed by the Agency's CBI regulations at 40 CFR part 2, subpart B. EPA is currently evaluating the merits of these claims in accordance with these procedures and expects to make a final determination on the CBI claims prior to finalizing the proposed critical use exemption regulation. Pending the completion of the process required under 40 CFR part 2, subpart B, EPA is treating the companies' methyl bromide stockpile information as CBI. In addition, EPA is treating the aggregate total of the stocks held by these companies as CBI because of concerns that publication of the aggregate amount could allow the small number of producers, imports, and distributors who know the size of their own holdings to calculate the amounts claimed as CBI by their competitors.
Because EPA has not yet completed its review of these CBI claims regarding methyl bromide stocks, this notice does not include the total amount of existing stocks (ES) and other quantitative values that EPA derived to determine available stocks using the methodology set forth above. EPA is concerned that the amount of existing stocks (ES) could be revealed by simple arithmetic if EPA were to publish its methodology for determining available stocks and quantify all the values used to derive the amount of available stocks except for the amount of existing stocks
) and other quantitative values that EPA derived to determine available stocks using the methodology set forth above. EPA is concerned that the amount of existing stocks (ES) could be revealed by simple arithmetic if EPA were to publish its methodology for determining available stocks and quantify all the values used to derive the amount of available stocks except for the amount of existing stocks.
However, to provide the public with a meaningful opportunity to comment on its approach, EPA has published the estimated amount of available stocks in this notice and described the methodology used to derive this figure. EPA has also prepared a detailed Technical Support Document which elaborates on the reasoning and methodology that EPA used in developing estimates for each of the factors described above. Interested parties may find a copy of this document within EPA's electronic docket, Electronic Air Docket ID No. OAR-2003-0230, and EPA's paper docket, Air Docket ID No. A-2000-24. If, in accordance with the procedures set forth in 40 CFR part 2, subpart B, EPA determines that all or part of the information on existing stocks of methyl bromide stocks may be released to the public, EPA will place this information in the docket and quantify the other values in the formula.
To implement this limitation on total methyl bromide use in critical use categories on a national basis in 2005, EPA proposes to prohibit entities holding stocks of methyl bromide from selling or distributing such material to critical use categories for which new production and import is authorized under Decision Ex I/3, unless that entity holds a “critical stock allowance” allocated by EPA. EPA proposes to allocate “critical stock allowances” (CSAs) in an amount between 1,283,214 to 1,987,000 kilograms estimated by EPA to be available from stocks for the agreed critical-use categories
or distributing such material to critical use categories for which new production and import is authorized under Decision Ex I/3, unless that entity holds a “critical stock allowance” allocated by EPA. EPA proposes to allocate “critical stock allowances” (CSAs) in an amount between 1,283,214 to 1,987,000 kilograms estimated by EPA to be available from stocks for the agreed critical-use categories. In the event that market forces reveal that EPA has under-predicted the amount of material available from stocks, EPA proposes that holders of critical use allowances (CUAs) may retire such allowances in exchange for additional critical stock allowances (CSAs) which would be issued by EPA.
The Agency seeks comment on an additional option for making the determination regarding the amount of methyl bromide available from existing stocks and seeks comments on this option and the proposal. For the 2005 calendar year, the Agency could make a determination that the amount of methyl bromide available from existing stocks is simply based on the difference between the limit on methyl bromide for critical uses (8,942 metric tons) and the limit on new production and import (7,659 metric tons) in the Decision Ex. I/3. This approach would reflect the fact that the Decision anticipates that each Party will determine how to take into account methyl bromide available from existing stocks.
EPA seeks comment on the amounts of critical use allowances (CUAs) and critical stock allowances (CSAs) proposed for allocation under the critical use exemption framework. EPA also seeks comment on its methodology for quantifying available stocks for 2005. In particular, EPA requests comment on whether it should employ the methodology for identifying available methyl bromide from existing stocks in a more qualitative than quantitative manner.
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llowances (CUAs) and critical stock allowances (CSAs) proposed for allocation under the critical use exemption framework. EPA also seeks comment on its methodology for quantifying available stocks for 2005. In particular, EPA requests comment on whether it should employ the methodology for identifying available methyl bromide from existing stocks in a more qualitative than quantitative manner.
B. What Is the Proposed Regulatory Framework for Implementing the Critical Use Exemption and What Is a Critical Use Allowance (CUA) and a Critical Stock Allowance (CSA)?
EPA proposes to implement the critical use exemption by using an allowance system.
EPA believes an allowance system that regulates the production and import of critical use methyl bromide, as opposed to regulating the actual users of methyl bromide, is the simplest and most transparent method available for ensuring U.S. compliance with Protocol obligations. There are relatively few entities that produce and import methyl bromide that EPA regulates under the CAA and these entities are already
Thus, EPA proposes to create critical use allowances (CUA) which would entitle the allowance holder (producer or importer) to produce or import 1 kilogram of methyl bromide for the exclusive purpose of satisfying the needs in agreed critical-use categories during the 2005 control period (calendar year). A CUA holder would expend one allowance for producing or importing one kilogram of methyl bromide.
In addition, in order to implement its obligations under the Protocol to control the amount of methyl bromide used in 2005 in the agreed critical use categories, EPA is also proposing to create critical stock allowances (CSAs). A CSA would entitle the allowance holder (producer, importer, distributor or applicator) to sell 1 kilogram of methyl bromide of available stockpiled material to an approved critical user
order to implement its obligations under the Protocol to control the amount of methyl bromide used in 2005 in the agreed critical use categories, EPA is also proposing to create critical stock allowances (CSAs). A CSA would entitle the allowance holder (producer, importer, distributor or applicator) to sell 1 kilogram of methyl bromide of available stockpiled material to an approved critical user. For example, a distributor with 100 CSAs may sell 100 kilograms of stockpiled methyl bromide to an approved critical user for use in an agreed critical use category of fumigation. EPA is proposing to prohibit the sale of methyl bromide stocks to an approved critical user for critical uses without a critical stock allowance. Thus, EPA would control the total amount of stocks that can be sold or distributed to the critical use categories authorized by the Parties through the allocation of a limited number of critical stock allowances.
The issuance of critical stock allowances (CSAs) does not obligate holders of stocks to make these quantities available to critical uses if they choose for practical or business reasons not to sell or distribute stocks to critical uses. However, EPA believes that these firms will respond to market conditions.
The CSA would be expended upon the sale of methyl bromide to an approved critical user, which would include instances where an approved critical user contracts with a distributor to provide fumigation services. A CSA would not be expended upon the transfer of methyl bromide from producers or importers to a distributor. See the additional discussion below on transfers of CSAs.
EPA seeks comments on the proposed allowance allocation framework for implementing the “double cap” agreed to in Decision Ex I/3 by the Parties to the Protocol
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user contracts with a distributor to provide fumigation services. A CSA would not be expended upon the transfer of methyl bromide from producers or importers to a distributor. See the additional discussion below on transfers of CSAs.
EPA seeks comments on the proposed allowance allocation framework for implementing the “double cap” agreed to in Decision Ex I/3 by the Parties to the Protocol
C. How Will Critical Use Allowances (CUAs) Be Distributed?
With today's action, EPA is proposing to allocate critical use allowances (CUAs) to producers and importers of methyl bromide on a pro-rata basis based on their 1991 consumption baseline levels. EPA proposes using historic 1991 baseline levels of consumption allowances to allocate CUAs because it is consistent with the method of allocation currently in place under the phaseout of methyl bromide and because EPA has easily verifiable baseline data for 1991.
EPA is proposing to use consumption baselines and not production baselines because critical use methyl bromide can be legally sourced in the U.S. through either domestic production or import. A critical use allowance (CUA), as described in Section VI..B. of this proposed rule, entitles the allowance holder either to produce or to import one (1) kilogram of methyl bromide. Therefore, EPA believes that the production baseline would be inappropriate to use since it would exclude importers from meeting the needs of critical uses.
Although EPA is proposing to distribute allowances to producers and importers based on the 1991 baseline, EPA recognizes an option of allocating allowances to producers and importers based on the volume of material marketed over a previous historic period, such as the immediate past four years. EPA does not have adequate data to create a new baseline of marketed material for methyl bromide producers and importers
proposing to distribute allowances to producers and importers based on the 1991 baseline, EPA recognizes an option of allocating allowances to producers and importers based on the volume of material marketed over a previous historic period, such as the immediate past four years. EPA does not have adequate data to create a new baseline of marketed material for methyl bromide producers and importers. EPA believes that acquiring sufficient, credible data of this nature would require the Agency to review all transaction records for each sale made by a methyl bromide producer or importer to a distributor, other supplier, or directly to end users. The Agency is concerned that it would take a long time to compile, receive and analyze such detailed information. In addition, such a process of compiling and submitting the information to make a new baseline determination would impose additional burden on the regulated community. This burden would likely be annual since the volumes of marketed material would not remain static from year-to-year after 2005.
EPA also recognizes another allocation method that would equally divide the number of allowances amongst those entities with historic production and consumption. EPA believes that this would be the simplest approach to allocating allowances. However, a simple division of the critical use allowances (CUAs) based on the number of entities involved would grossly distort historic and current relative market shares of the regulated entities; some would receive far more than their historic production and consumption and others would receive far less. Allocating allowances based on volume of recently marketed material may more closely reflect current market shares for each company, but, for reasons involving the annual burden on industry and government discussed above, this is not a desirable distributional mechanism. Therefore, EPA is proposing to allocate allowances based on the 1991 historic baseline that has been used for more than a decade in the U.S
allowances based on volume of recently marketed material may more closely reflect current market shares for each company, but, for reasons involving the annual burden on industry and government discussed above, this is not a desirable distributional mechanism. Therefore, EPA is proposing to allocate allowances based on the 1991 historic baseline that has been used for more than a decade in the U.S. to determine relative market shares among producers and importers. Allocating CUAs based on each company's 1991 baseline allowances (on a pro-rata basis) is a better reflection of market share than simply dividing the number of allowances by the total number of entities, and would be less burdensome than conducting a detailed recent historical market share analysis on a an annual basis. Using the 1991 historic baseline method for distributing CUAs is consistent with how EPA has allocated methyl bromide production and consumption allowances for the past decade under the methyl bromide phaseout.
During stakeholder meetings prior to development of this rule, one stakeholder suggested that EPA give the allowances to a third party not-for-profit entity who would in turn auction the allowances to the producers, importers, and distributors. After the producer, importer and distributor purchased the requisite number of allowances, these entities could then expend the allowances as described in Sections VI.B. and VI.N. of this proposed rule. The revenue derived from the auction would be used by the not-for-profit entity to fund transitions to alternatives where the alternatives are technically available but not economically feasible and research into alternatives to methyl bromide where no technically feasible alternatives exist to date. Under the allowance auction approach, no additional activities would be required of the end users but they would receive
A second stakeholder commented that an auction could be established as follows
alternatives where the alternatives are technically available but not economically feasible and research into alternatives to methyl bromide where no technically feasible alternatives exist to date. Under the allowance auction approach, no additional activities would be required of the end users but they would receive
A second stakeholder commented that an auction could be established as follows. EPA would distribute allowances to producers and importers as described in this NPRM which would entitle the companies to take two actions (a) produce and import kilograms of methyl bromide up to the number of allowances held, or (b) auction the allowances to critical end users. The end users would then turn in their allowances to the methyl bromide supplier at the time of purchase.
A similar allocation method that would address the windfall profit issue is as follows. EPA would distribute CUAs to end users. The users would then sell the allowances to producers and importers who would then be able to produce or import critical use methyl bromide. This distribution system would allow windfall profits to be captured by the users. Problems with this system are the same ones discussed with distributing allowances to a not-for profit entity as described in the preceding paragraph.
EPA seeks comments on today's proposed method for allocating critical use allowances (CUAs) and the many other options for allocating CUAs described above, as well as the magnitude of burden associated with any of the options that would adjust existing baselines.
D. How Are Critical Stock Allowances (CSAs) Distributed?
EPA proposes to allocate CSAs on a pro-rata basis between each of the identified entities that holds stocks. EPA will pro-rate the total amount of stocks that the Agency has determined are available between each known entity relative to the percentage of the total existing stocks they hold
he options that would adjust existing baselines.
D. How Are Critical Stock Allowances (CSAs) Distributed?
EPA proposes to allocate CSAs on a pro-rata basis between each of the identified entities that holds stocks. EPA will pro-rate the total amount of stocks that the Agency has determined are available between each known entity relative to the percentage of the total existing stocks they hold. For example, if company A holds one percent of all existing stocks and EPA determines that 1,000 kilograms of stocks are available, EPA will issue that company 10 critical stock allowances (CSAs). EPA believes this is the most equitable and least arbitrary method available for allocating CSAs.
Based on information currently available, EPA proposes to issue CSA's to the small group of companies that had stocks of methyl bromide in 2003. The amount allocated to each of these companies (and any other company that may come forward) will be determined in the final rule on the basis of comments and additional information collected by EPA. EPA proposes to allocate critical stock allowances (CSAs) on a pro-rata basis to the companies based on the amount of stocks held by each entity and the Agency's assessment of the available methyl bromide from stocks for critical uses.
In today's Federal Register , EPA is requesting additional information on the amount of available stocks in the United States. Elsewhere in today's Federal Register EPA is publishing a notice under Section 114 of the CAA calling for every entity to submit to EPA by September 23, 2004, information on their stocks of methyl bromide that are unrestricted (not for quarantine and preshipment and produced solely for export to Article 5 countries). An entity that does not submit information to EPA regarding stocks of methyl bromide they hold for sale or transfer to another entity as of August 25, 2004, will not receive critical stock allowances (CSAs) in the allocation made in the final rule
tion on their stocks of methyl bromide that are unrestricted (not for quarantine and preshipment and produced solely for export to Article 5 countries). An entity that does not submit information to EPA regarding stocks of methyl bromide they hold for sale or transfer to another entity as of August 25, 2004, will not receive critical stock allowances (CSAs) in the allocation made in the final rule. Such entities will not, therefore, be able to sell methyl bromide to any of the approved critical users in the 16 agreed critical-use categories defined in Decision Ex I/3 by the Parties to the Protocol.
As noted above, EPA is currently evaluating (in accordance with the procedures in 40 CFR part 2, subpart B) whether the inventory amounts held by individual entities are entitled to be withheld from the public as confidential business information. If EPA makes a final determination that the amount of stocks held by each entity is not confidential business information, then the final rule will contain the specific amounts of CSAs allocated to each entity on the basis of the information submitted to EPA. However, if EPA determines that individual company holdings of methyl bromide stocks are CBI, then the final rule will list the names of the entities issued CSAs without including the amounts. EPA would then confidentially inform each party of amount of CSAs allocated to them for 2005. Alternatively, EPA might be able to allocate CSAs on a pro-rata basis without revealing the amount of existing stocks held by each party. This is because the CSA allocation would be a pro-rata percentage of “available” stocks, which may be a lesser amount than the aggregate of existing stocks held by all the companies, and therefore would not reveal the actual amount held by each of the companies.
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rnatively, EPA might be able to allocate CSAs on a pro-rata basis without revealing the amount of existing stocks held by each party. This is because the CSA allocation would be a pro-rata percentage of “available” stocks, which may be a lesser amount than the aggregate of existing stocks held by all the companies, and therefore would not reveal the actual amount held by each of the companies.
E. Are Allowances To Be Allocated on a Sector-Specific Basis or as One Lump Sum for All Sectors?
Decision Ex I/3 (4) states that, “Parties should endeavor to allocate quantities of methyl bromide” in accordance with the recommendations made by the Technology and Economic Assessment Panel (TEAP) as listed in agreed critical-use categories. EPA is therefore requesting comment on a sector-based allocation of allowances, as well as several other more flexible methods for making allocations.
1. Sector-Specific Allocation
EPA seeks comments on a sector-specific allocation of critical-use allowances (CUAs) and also a sector-specific allocation of critical stock allowances (CSAs). Under a sector-specific option, in 2005 EPA would create and allocate 16 different types of CUAs, one type for each critical use category authorized by the Parties. End users of methyl bromide made applications to EPA for an exemption and the U.S. government created a nomination of uses with similar circumstances to be considered by the Parties. The nomination aggregated similar circumstances of methyl bromide use into sectors. In a sector-specific allocation scheme, each producer and importer of methyl bromide would be allocated 16 different types of CUAs on a pro-rata basis in relation to their overall 1991 consumption baseline. For example, assume producer A has a consumption baseline that equals 50% of total allowable U.S. consumption
The nomination aggregated similar circumstances of methyl bromide use into sectors. In a sector-specific allocation scheme, each producer and importer of methyl bromide would be allocated 16 different types of CUAs on a pro-rata basis in relation to their overall 1991 consumption baseline. For example, assume producer A has a consumption baseline that equals 50% of total allowable U.S. consumption. If the Parties authorized new production of 100 kilograms of methyl bromide for tomatoes and 20 kilograms of methyl bromide for flower nurseries, EPA would allocate 50 tomato critical use allowances (tomato CUAs) and 10 flower nursery critical use allowances (flower nursery CUAs) to company A. See Section VI.F. below for the proposed sector-specific allocation of
EPA recognizes that not all allowance holders (producer/importers) may want or need allowances of all types. For example, some allowance holders may supply only certain geographic markets or certain sectors. If EPA were to implement an allocation scheme, such as a sector-specific system, that is more restrictive than the current market, EPA would permit allowance trading amongst allowance holders. For instance, a tomato CUA holder in Region A would be able to trade with a tomato CUA holder in Region B; however, a tomato CUA holder would not be allowed to trade with a strawberry CUA holder in Regions A and B. Section 607 of the CAA allows for trading in part to encourage rationalization in the industry. It would be difficult for EPA to know exactly which company services which particular group of end users. However, the market-based mechanisms (transfers of allowances) described later in this preamble may rectify such issues under a sector-specific allocation scheme
berry CUA holder in Regions A and B. Section 607 of the CAA allows for trading in part to encourage rationalization in the industry. It would be difficult for EPA to know exactly which company services which particular group of end users. However, the market-based mechanisms (transfers of allowances) described later in this preamble may rectify such issues under a sector-specific allocation scheme.
EPA believes that an allocation scheme that is more restrictive than the “lump sum” approach described below, such as the sector-or applicant-specific allocation, would provide greater assurance to each sector or group of applicants that some defined amount of methyl bromide would be available for that particular user group. However, under a sector-or applicant-specific system, if the user group did not use its entire allowable amount of methyl bromide, it would not be available for other approved critical users. So too, if a group needed more methyl bromide because they had a particularly bad pest infestation or demand for their product suddenly increased, the group would not be able to secure additional quantities without first seeking approval from the Parties during the annual nomination process and obtaining a higher allocation through EPA's subsequent notice-and-comment rulemaking which is resource and time intensive. A more restrictive sector-or applicant-specific allocation provides more certainty to each group but at the cost of flexibility.
2. Lump Sum Allocation
EPA requests comment on the option of creating one pool of CUAs and one pool of CSAs that can be used to supply critical use methyl bromide across sectors in what is known as a “lump sum” or “universal” approach. This means that critical use methyl bromide produced or imported with CUAs could be used for any of the agreed critical-use categories
the cost of flexibility.
2. Lump Sum Allocation
EPA requests comment on the option of creating one pool of CUAs and one pool of CSAs that can be used to supply critical use methyl bromide across sectors in what is known as a “lump sum” or “universal” approach. This means that critical use methyl bromide produced or imported with CUAs could be used for any of the agreed critical-use categories. Likewise, with a lump sum allocation of critical stock allowances (CSAs), the limited inventory that is available for sale into the critical use market would be for any of the agreed critical-use categories.
Under a universal allocation system, EPA anticipates that the actual critical use will closely follow the sector breakout listed by the TEAP and incorporated into Decision Ex I/3. The TEAP recommendations are based on data submitted by the U.S. which in turn are based on recent historic use data under the current methyl bromide phaseout market which is a “universal” system. In other words, the TEAP recommendations agreed to by the Parties are based on current use and the current uses are taking place in a marketplace where all methyl bromide users compete for the lump sum. Thus, EPA expects that 2005 use under a universal approach will look similar to the TEAP recommendations and annex II a in Decision Ex I/3. To the extent that any discrepancies between expected and actual use in 2005 occurs, a later section of today's proposed rulemaking describes tracking and reporting requirements that will help verify actual use by sector and help refine future U.S. nominations for critical use exemptions by highlighting differences between amounts nominated for a sector, recommended by TEAP, and agreed by the Parties and the actual use by that sector during the 2005 control period.
EPA would like to note that currently the methyl bromide market under the phaseout reductions (since 1994) operates as a “universal” or “lump sum” system
help refine future U.S. nominations for critical use exemptions by highlighting differences between amounts nominated for a sector, recommended by TEAP, and agreed by the Parties and the actual use by that sector during the 2005 control period.
EPA would like to note that currently the methyl bromide market under the phaseout reductions (since 1994) operates as a “universal” or “lump sum” system. All end users of methyl bromide compete in the same marketplace for methyl bromide under the phaseout regulations. EPA believes that no critical user will face a situation where they cannot access approximately the same levels of methyl bromide that they have historically been able to access during the years of the phaseout because the U.S. government used recent historic data (1997-2001) in determining how much to nominate for each sectors critical use and this use data is based on amounts of methyl bromide obtained under a universal market.
In addition to the logistic and administrative reasons for implementing a universal allocation scheme, there are significant economic reasons to implement such a lump sum approach. The more restrictive the methyl bromide caps are, the less efficient the distribution of methyl bromide one would expect in the market. According to economic theory, under a universal cap, methyl bromide would go to those users with the highest marginal cost of substitution who would set the price of methyl bromide. This price of methyl bromide would lead those users with marginal costs of substitution lower than the price of methyl bromide to move instead to an alternative that may not have been previously economically feasible, thus resulting in a comparatively more efficient distribution of material and an overall lower cost of compliance for the regulated community as a whole
the price of methyl bromide. This price of methyl bromide would lead those users with marginal costs of substitution lower than the price of methyl bromide to move instead to an alternative that may not have been previously economically feasible, thus resulting in a comparatively more efficient distribution of material and an overall lower cost of compliance for the regulated community as a whole. EPA estimates that the cost savings to the regulated entities of an illustrative sector-specific approach may be between $20 to $27 million when compared to a complete phase out of methyl bromide; the cost savings under an illustrative universal approach may be $22 to $31 million (see section VII a for more information on this analysis). Thus, the universal approach results in a greater cost savings to the regulated entities overall. A full discussion of this cost estimate may be found in the docket for today's rulemaking.
3. Applicant-Specific Allocation
EPA requests comment on making allowances specific to critical use exemption applicants. Under this option, in 2005 EPA would create and allocate 51 different types of CUAs and 51 different types of CSAs, one for each authorized critical use exemption applicant. Again, these allowances would be distributed to producers and importers in a pro-rated fashion and would be tradable amongst them. EPA recognizes that the more types of allowances we create, the more administratively and logistically complex the regulation becomes for the regulated community. With added administrative complexity generally comes a higher cost of implementation which may include costs associated with generating more specific information and greater inflexibility in the market.
4. Hybrid Allocation Options
EPA also is requesting comment on a hybrid approach that would create sector- or applicant-specific CUAs and universal or “lump sum” CSAs
r the regulated community. With added administrative complexity generally comes a higher cost of implementation which may include costs associated with generating more specific information and greater inflexibility in the market.
4. Hybrid Allocation Options
EPA also is requesting comment on a hybrid approach that would create sector- or applicant-specific CUAs and universal or “lump sum” CSAs. EPA realizes that stocks may be held by
EPA recognizes that another option would be to make CUAs and CSAs universal but require distributors and others who sell methyl bromide directly to end users to “endeavor” to make quantities of critical use methyl bromide available to their customers as prescribed in Decision Ex I/3 annex IIA. This option would rely on entities at the point of sale to ration methyl bromide to their customers the same way they have been doing under the phaseout—based on each client's historical purchases—in essence giving each sector (customer) the right of first refusal to a specific quantity of methyl bromide. However, under a scheme where distributors endeavor to make the critical use methyl bromide available in accordance with the quantities associated with specific-sectors in annex IIA of Decision Ex I/3, the methyl bromide, whether from CUAs or CSAs would still be “universal,” and distributors would have the flexibility to move quantities of critical use methyl bromide from one sector that does not need their full amount, to another sector that may have higher than anticipated need.
Finally, regarding the allocation of critical use allowances (CUAs) for new production and import of methyl bromide after the January 1, 2005, phaseout, EPA recognizes another hybrid option that would allocate a percentage on a sector-specific basis and a percentage on a universal, lump sum basis
that does not need their full amount, to another sector that may have higher than anticipated need.
Finally, regarding the allocation of critical use allowances (CUAs) for new production and import of methyl bromide after the January 1, 2005, phaseout, EPA recognizes another hybrid option that would allocate a percentage on a sector-specific basis and a percentage on a universal, lump sum basis. This option of allocating a percentage of the CUAs as sector-specific and a percentage of CUAs as universal would provide some measure of assurance for each applicant as well as providing flexibility if a few of the sectors faced greater need for methyl bromide in the 2005 control period.
EPA wishes to note that the circumstances that are the basis for the U.S. sector nominations and the TEAP recommendations for specific sectors may have changed since that data was submitted. However, since EPA will not issue allowances for more critical use methyl bromide than the amount authorized by the Parties, this proposed rulemaking provides stakeholders with the opportunity to request flexibility in how allowances are distributed to accommodate changes in the marketplace that have transpired since the TEAP review. This NPRM represents part of EPA's endeavor to allocate methyl bromide in accordance with TEAP's recommendations. Thus, EPA seeks comment on the universal, sector-specific, applicant-specific, and hybrid methods for allocating CUAs and CSAs. In addition, for the hybrid approaches, EPA also requests comment on the portion of the authorized quantity that should be made sector- or applicant-specific, if any, and what portion should be made universal. EPA will evaluate and reconcile these comments and then publish a final rule that describes how allowances will be distributed.
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specific, and hybrid methods for allocating CUAs and CSAs. In addition, for the hybrid approaches, EPA also requests comment on the portion of the authorized quantity that should be made sector- or applicant-specific, if any, and what portion should be made universal. EPA will evaluate and reconcile these comments and then publish a final rule that describes how allowances will be distributed.
F. How Many Critical Use Allowances (CUAs) and Critical Stockpile Allowances (CSAs) Will Producers, Importers and Distributors Be Allocated?
EPA proposes using one of the options described in the immediately preceding sections of this rulemaking notice to allocate critical use allowances and critical stock allowances to producers, importers, and distributers. We described two basic options for making the allocation of critical use allowances (CUAs)—a sector-specific allocation or a universal allocation—and hybrids of these two options. In addition, we propose a universal allocation of critical stock allowances (CSAs).
The Tables immediately below are illustrative examples of how a CUA allocation would appear under a universal allowance allocation scheme (Table I) as compared to a sector-specific allowance allocation scheme (Table II). For purposes of this illustration, we assumed an overall allocation of critical use allowances equal to 7,285,414 kilograms, which is approximately the middle of the range that we are proposing. When we take final action on this proposal, the individual allocations reflected in the following tables may increase or decrease by a proportionate amount depending on whether the total amount of critical use allowances that we issue is on the higher or lower end of the proposed range. Likewise, the amounts in the tables would differ if we were to employ one of the hybrid options to allocate allowances
e take final action on this proposal, the individual allocations reflected in the following tables may increase or decrease by a proportionate amount depending on whether the total amount of critical use allowances that we issue is on the higher or lower end of the proposed range. Likewise, the amounts in the tables would differ if we were to employ one of the hybrid options to allocate allowances. In addition, the Agency is still collecting information in a Section 114 Information Request being published concurrently with today's action, so the final rule will take into account updated data on the amount of inventory that is available for critical uses.
The distribution of CUAs to specific producers and importers of methyl bromide for a universal allocation may appear as in Table I. The distribution of CUAs to specific producers and importers of methyl bromide for a sector-specific allocation may appear as in Table II. The proposed distribution of CSAs would be as follows for a universal allocation (Table III).
Table I.—Critical Use Allowance Allocation for the Calendar Year 2005 (Universal) Company/universal allocation Number of critical use allowances (kilograms) Great Lakes Chemical Corporation 4,427,693 Albemarle Corporation 1,820,736 AmeriBrom, Inc. 1,005,814 Trical, Inc. 31,171 Total 7,285,414 Table II.—Critical Use Allowance Allocation for the Calendar Year 2005 (Sector Specific) Sector-specific allocation; approved critical-use sectors Number of critical use allowances (kilograms) for each company for each sector Great Lakes Chemical Corporation Albemarle Corporation AmeriBrom, Inc. Trical, Inc
bemarle Corporation 1,820,736 AmeriBrom, Inc. 1,005,814 Trical, Inc. 31,171 Total 7,285,414 Table II.—Critical Use Allowance Allocation for the Calendar Year 2005 (Sector Specific) Sector-specific allocation; approved critical-use sectors Number of critical use allowances (kilograms) for each company for each sector Great Lakes Chemical Corporation Albemarle Corporation AmeriBrom, Inc. Trical, Inc. Chrysanthemum cuttings—rose plants 14,563 5,989 3,308 103 Curcurbits—field 588,133 241,850 133,603 4,141 Dried fruit, beans and nuts 42,955 17,664 9,758 302 Eggplant—field 36,423 14,978 8,274 256 Forest tree nurseries 95,323 39,198 21,654 671 Fruit tree nurseries 22,678 9,325 5,152 160 Ginger production—field 4,555 1,873 1,035 32 Mills and processors 239,155 98,344 54,327 1,684 Orchard replant 349,660 143,785 79,430 2,462 Peppers—field 537,381 220,979 122,074 3,783 Smokehouse ham 449 185 102 3 Strawberry fruit—field 908,020 373,392 206,269 6,393 Strawberry runners 27,227 11,196 6,185 192 Sweet potato— field 40,023 16,458 9,092 282 Tomato—field 1,418,739 583,408 322,287 9,988 Turfgrass 102,409 42,112 23,264 721 Total 4,427,693 1,820,736 1,005,814 31,173 Table III.—Critical Stock Allowance Allocation Company Number of critical stock allowances (kilograms) Company A Reserved, pending resolution of CBI claim and Section 114 request. Company B Reserved, pending resolution of CBI claim and Section 114 request. Total 1,656,800 G. What Are the Tracking Requirements for a Sector- or Applicant-Specific Allocatio

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_04-18933. Check the current official text before relying on it. Not legal advice.