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Nov 3 -- 1) Proposed rule

The U.S. Environmental Protection Agency is proposing to amend existing regulations to implement certain provisions of the American Innovation and Manufacturing Act, as enacted on December 27, 2020. This rulemaking proposes to establish the methodology for allocating hydrofluorocarbon production and consumption allowances for the calendar years of 2024 through 2028. EPA is also proposing to amend the consumption baseline to reflect updated data and to make other adjustments based on lessons learned from implementation of the hydrofluorocarbon phasedown program thus far, including proposing to: codify the existing approach of how allowances must be expended for import of regulated substances; revise recordkeeping and reporting requirements; and implement other modifications to the existing regulations. Comments on this notice of proposed rulemaking must be received on or before December 19, 2022.  

On December 27, 2020, the AIM Act was enacted as section 103 in Division S, Innovation for the Environment, of the Consolidated Appropriations Act, 2021 (42 U.S.C. 7675). The AIM Act authorizes EPA to address HFCs in three main ways: phasing down HFC production and consumption through an allowance allocation program; facilitating sector-based transitions to next-generation technologies; and promulgating certain regulations for purposes of maximizing reclamation and minimizing releases of HFCs and their substitutes from equipment. This rulemaking focuses on the first area—the phasedown of the production and consumption of HFCs.

Subsection (e) of the AIM Act gives EPA authority to phase down the production and consumption of listed HFCs through an allowance allocation and trading program. Subsection (c)(1) of the AIM Act lists 18 saturated HFCs, and by reference any of their isomers not so listed, that are covered by the statute's provisions, referred to as “regulated substances” under the Act. Congress also assigned an “exchange value” to each regulated substance (along with other chemicals that are used to calculate the baseline). EPA has codified the list of the 18 regulated substances and their exchange values in appendix A to 40 CFR part 84.

The AIM Act requires EPA to phase down the consumption and production of the statutorily listed HFCs on an exchange value-weighted basis according to the schedule in subsection (e)(2)(C) of the AIM Act. The AIM Act requires that the EPA Administrator ensures the annual quantity of all regulated substances produced or consumed in the United States does not exceed the applicable percentage listed for the production or consumption baseline. EPA has codified the phasedown schedule at 40 CFR 84.7.

To implement the directive that the production and consumption of regulated substances in the United States does not exceed the statutory targets, the AIM Act in subsection (e)(3) requires EPA to issue regulations establishing an allowance allocation and trading program to phase down the production and consumption of the listed HFCs. These allowances are limited authorizations for the production or consumption of regulated substances. Subsection (e)(2) of the Act has a general prohibition that no person shall produce or consume a quantity of regulated substances in the United States without a corresponding quantity of allowances.

EPA published a final rule on October 5, 2021 (86 FR 55116; hereinafter called the Framework Rule), that, among other things: established the HFC production and consumption baselines; determined an initial approach to allocating production and consumption allowances for 2022 and 2023, identifying both the entities receiving allowances and how to determine what quantities of allowances they would receive; established a process for issuing “application-specific” allowances to entities in six specific applications listed in subsection (e)(4)(B)(iv) of the AIM Act; created a set-aside pool of allowances for new entrants and entities for which the Agency did not have verifiable data prior to the finalization of the rule; established provisions for the transfer of allowances; established recordkeeping and reporting requirements; and established a suite of compliance and enforcement-related provisions. Unless otherwise stated in the proposal sections included in this notice, EPA's proposed requirements and revisions are based on the same interpretations of the AIM Act, and the Clean Air Act as applicable under subsection (k) of the AIM Act, as discussed in the Framework Rule. EPA also has inherent authority to prevent and identify noncompliance, to ensure the Agency can meet the statutory directive in subsection (e)(2)(B), and to create a level playing field for the regulated community.

EPA proposes to:

• Establish a methodology for issuing production and consumption allowances for calendar years 2024 through 2028; 
• Confirm that entities may confer or transfer allowances as soon as allowances are allocated;
• Adjust the consumption baseline to reflect corrected data;
• Codify requirements related to the expenditure of allowances for import;
• Clarify and revise recordkeeping and reporting requirements, including a new requirement to report emissions from HFC production facilities; and
• Implement other revisions.

EPA is also carrying out further analyses in light of these proposed actions, including:

• Estimating incremental changes in costs and benefits of the HFC phasedown from 2024 through 2050 due to the proposal to adjust the consumption baseline and revising an abatement option used in the analysis; and
• Providing further consideration of potential environmental justice impacts, including updating the analysis with more recent data, adding another facility, and providing more demographic detail on potentially affected communities.

EPA is proposing to establish a methodology for allocating production and consumption allowances for calendar year 2024 through 2028. During these five years, the annual production and consumption caps established in the AIM Act are 60 percent of the baseline. EPA is proposing to establish a consistent methodology for the duration of this next phasedown step.

Docket: https://www.regulations.gov/document/EPA-HQ-OAR-2022-0430-0001
FRN: https://www.federalregister.gov/d/2022-23269 [38 pages]

2) Proposed data collection

The information collection activities in this proposed rule have been submitted for approval to OMB under the PRA. The ICR document that EPA prepared has been assigned EPA ICR number 2685.03 and proposes to revise OMB Control No. 2060-0734. You can find a copy of the ICR in the docket for this rule (Docket ID. No. EPA-HQ-OAR-2022-0430), and it is briefly summarized here.

Subsection (d)(1)(A) of the AIM Act specifies that on a periodic basis, but not less than annually, each person that, within the applicable reporting period, produces, imports, exports, destroys, transforms, uses as a process agent, or reclaims a regulated substance shall submit to EPA a report that describes, as applicable, the quantity of the regulated substance that the person: produced, imported, and exported; reclaimed; destroyed by a technology approved by the Administrator; used and entirely consumed (except for trace quantities) in the manufacture of another chemical; or, used as a process agent. EPA collects such data regularly to support implementation of the AIM Act's HFC phasedown provisions. EPA requires quarterly reporting to ensure that annual production and consumption limits are not exceeded. It is also needed for EPA to be able to review allowance transfer requests, of which remaining allowances is a major component of EPA's review. In addition, EPA collects information in order to calculate allowances, to track the movement of HFCs through commerce, and to require auditing. Collecting these data elements allows EPA to ensure that the annual quantity of all regulated substances produced or consumed in the United States does not exceed the cap established by the AIM Act, consistent with subsection (e)(2)(B) of the Act. As described above in this preamble, EPA proposes revisions to the recordkeeping and reporting requirements and new requirements, including annual reporting of estimated emissions from HFC production facilities and recordkeeping of analysis results on regulated substances.

All information sent by the submitter electronically is transmitted securely to protect information that is CBI or claimed as CBI consistent with the confidentiality determinations made in the Framework Rule. The reporting tool guides the user through the process of submitting such data. Documents containing information claimed as CBI must be submitted in an electronic format, in accordance with the recordkeeping requirements.

For reference, EPA continued to use data collected under the ICR for the GHGRP (OMB Control No. 2060-0629) as well as the associated reporting tool, the e-GGRT in developing this proposed rulemaking. EPA also earlier requested an emergency ICR for a one-time collection request pertaining to data necessary to establish the U.S. consumption and production baselines as well as to determine potential producers, importers, and application-specific end users who were not subject to the GHGRP (OMB Control No. 2060-0732). EPA is not revising either ICR through this proposed rule.

Respondents/affected entities: Respondents and affected entities will be individuals or entities that produce, import, export, transform, distribute, destroy, or reclaim certain HFCs that are defined as a regulated substance under the AIM Act. Respondents and affected entities will also be individuals and entities who produce, import, or export products in six statutorily specified applications: a propellant in metered dose inhalers; defense sprays; structural composite preformed polyurethane foam for marine and trailer use; the etching of semiconductor material or wafers and the cleaning of chemical vapor deposition chambers within the semiconductor manufacturing sector; mission-critical military end uses, such as armored vehicle and shipboard fire suppression systems and systems used in deployable and expeditionary applications; and, on board aerospace fire suppression.

Respondent's obligation to respond: Mandatory (AIM Act).
Estimated number of respondents: 10,195.
Frequency of response: Quarterly, biannual, annual, and as needed depending on the nature of the report.

HFCS reduction webpage: https://www.epa.gov/climate-hfcs-reduction
EPA submission to OMB: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202211-2060-001 Click IC List for information collection instrument, View Supporting Statement for technical documentation. Submit comments through this webpage.
FRN: https://www.federalregister.gov/d/2022-23269 [38 pages]

For AEA members wishing to submit comments, "A Primer on How to Respond to Calls for Comment on Federal Data Collections" is available at https://www.aeaweb.org/content/file?id=5806

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