[Federal Register: August 25, 2004 (Volume 69, Number 164)]
[Proposed Rules]
[Page 52365-52402]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25au04-21]
[[Page 52365]]
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Part III
Environmental Protection Agency
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40 CFR Part 82
Protection of Stratospheric Ozone: Process for Exempting Critical Uses
From the Phaseout of Methyl Bromide; Request for Information on
Existing and Available Stocks of Methyl Bromide; Proposed Rule and
Notice
[[Page 52366]]
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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.
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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. 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.
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. 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. 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
[[Page 52367]]
proposing a framework for how the critical use exemption will operate
as well as specific amounts of methyl bromide to be made available for
proposed critical uses.
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. 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. 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:
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Category Examples of regulated entities
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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.
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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/. 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
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http://www.epa.gov/edocket/ 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.
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. 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. 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. 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
[[Page 52369]]
Program that limit production and consumption of ozone depleting
substances can be found at 40 CFR part 82 subpart A. The regulatory
program was originally published in the 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. 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. 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.
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. 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
[[Page 52370]]
Protocol and actions taken under Subchapter VI of CAA. Section
604(d)(6) addresses critical uses specifically, while section 614(b) is
more general in scope. Section 604(d)(6) states that ``to the extent
consistent with the Montreal Protocol,'' the Administrator may exempt
methyl bromide for critical uses. Section 614(b) states that Subchapter
VI ``shall be construed, interpreted, and applied as a supplement to
the terms and conditions of the Montreal Protocol, as provided in
Article 2, paragraph 11 thereof, and shall not be construed,
interpreted, or applied to abrogate the responsibilities or obligations
of the United States to implement fully the provisions of the Montreal
Protocol. In case of a conflict between any provision of this
subchapter and any provision of the Montreal Protocol, the more
stringent provision shall govern.''
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). 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;
(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. 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;
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.
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
[[Page 52371]]
of uses that are deemed critical under the criteria established in
Decision IX/6. Second, the Parties determine the maximum level of new
production and consumption that should be permitted because it is
necessary to satisfy those critical uses. Under paragraph 1 of Decision
Ex. I/3, the first of these determinations (the ``agreed critical
uses'') is reflected in annex II A to the report of the First
Extraordinary Meeting of the Parties. For the United States, the
Parties agreed to 16 critical uses for methyl bromide and authorized
use of 8,942 metric tons of methyl bromide for these critical uses. The
second of these determinations is set forth in annex II B which allows
the United States 7,659 metric tons of production and consumption of
methyl bromide to satisfy critical uses. Where the level of agreed
critical uses exceeds the level of new production and consumption
determined by the Parties to be necessary to satisfy those uses, a
Party is to utilize available stocks of methyl bromide to fill the gap.
Decision Ex. I/3, para. 2. Parties are to ensure that the total use of
methyl bromide material supplied from existing stocks and new
production and consumption does not exceed the overall level of use
agreed to be critical. Decisions Ex. I/3, para. 3. Thus, Decision Ex.
I/3 establishes two caps with respect to methyl bromide for 2005--one
on the level of new production and consumption for critical uses and
one on the total usage of methyl bromide in the agreed critical use
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. 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 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.
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. 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
[[Page 52372]]
existing stocks, then the predicate for this decision would be
undermined if Article 2H(5) of the Protocol was interpreted to permit
unrestricted use of existing stocks in the categories of use that may
utilize newly produced or imported material. Furthermore, placing such
a limitation on the use of existing stocks encourages the entities in
possession of the methyl bromide material to make it available for
critical uses. This limitation reduces the incentive for entities to
withhold methyl bromide material from the market in order to induce EPA
to authorize more new production.
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. 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. 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. 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. 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
[[Page 52373]]
deadline to apply, with a notice in 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. 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'').
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.
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 145,367
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.
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
[[Page 52374]]
of existing inventory should account for inventory intended to meet the
needs of developing countries. Decision Ex I/3 (2) further states,
``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.'' Thus, Decision IX/6 and Decision Ex I/3 recognize that not
all existing stocks may be available to meet critical uses. The EPA has
the authority to make this determination, and has developed an analysis
for developing an estimate of available stocks which it believes is
consistent with the Clean Air Act and with Decision Ex I/3.
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. 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. 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. 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.
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
[[Page 52375]]
would likely have stocks available. EPA is proposing to issue critical
use allowances (CUAs) for new production and import for the agreed
critical-use categories at a level not to exceed any amounts of methyl
bromide authorized by the Parties to be produced and imported to
satisfy critical uses. In the event that EPA determines that the
available stocks are greater than the difference between critical use
levels and authorized production, EPA is proposing to adjust the CUAs
issued by the additional amount of available stocks relative to the
level of production and import authorized by the Parties.
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. 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.
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. 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.
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
[[Page 52376]]
providing high quality reporting data to EPA that is verifiable and
easy to track. In accordance with Protocol obligations and CAA
requirements the EPA primarily regulates production and consumption
(defined as production plus imports minus exports) of ozone-depleting
substances. Given that the universe of producers and importers is
considerably smaller than the universe of end users, and that producers
and importers generally have more infrastructure for regulatory
compliance than end users, this method of regulation is proven to be
cost effective for ensuring U.S. compliance with obligations under the
Montreal Protocol and requirements under the CAA.
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. 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
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. 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. 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
[[Page 52377]]
a substantial benefit in the form of the transition fund described
above in this paragraph. One of the economic benefits of the auction
would be the redistribution of windfall profits that the producers and
importers of methyl bromide currently receive under the phaseout of
methyl bromide and that will be extended under the proposed critical
use exemption. There are relatively few producers and importers of
methyl bromide and the regulatory-induced scarcity created by the
Protocol and CAA means higher prices can be charged and the additional
profits are then received and kept by the producer and importer
companies. Under an auction however, producers and importers would pay
for the right to produce or import methyl bromide, thereby decreasing
their windfall profits. Apart from a small amount of money to maintain
operations of the not-for-profit entity, in theory the revenues derived
from the auction could be transferred to end users of methyl bromide to
ease the economic burden of their phaseouts.
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. 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. 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.
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. 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
[[Page 52378]]
CUAs to individual producers and importers. The methyl bromide produced
or imported with a tomato CUA could only be sold and used for growing
tomatoes by an approved critical user that has the limiting critical
conditions cited as the basis for the critical methyl bromide need in
the nomination that was subsequently authorized by the Parties.
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.
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. 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. 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. 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. EPA realizes that stocks may be held by
[[Page 52379]]
distributors and applicators. Unlike producers and importers whom EPA
has historically regulated, some of these entities are smaller or more
specialized. For example, EPA is aware of a distributor and custom
applicator based on the East Coast that only services customers in the
eastern part of the U.S. It is unlikely that this East Coast
distributor and applicator will have any customers from the California
fruit tree nursery sector that was authorized for critical use methyl
bromide, since this is a region the distributor and applicator does not
service. Thus, an allocation of fruit tree nursery CSAs would be of
little practical use to this company. If the allocation were sector-
specific, the company could trade its fruit tree nursery CSAs with one
of the distributor/applicator companies that operate in California.
However, if the company on the east coast was allocated only a small
number of fruit tree nursery CSAs, it may not be worth the time and
cost to find a suitable trading partner and engage in the trade.
Therefore, EPA recognizes a hybrid option that would allocate sector-
specific or even applicant-specific CUAs, but universal CSAs. The
universal CSAs would alleviate problems associated with dividing small
quantities of inventories scattered throughout the distribution system
into many different types of end uses that may be of little use to a
distributor in a specific geographic location. In addition, the
universal CSAs would provide some flexibility to the end user community
in the event that unanticipated market forces drive up demand in a
particular commodity area or pest outbreaks in a particular crop are
unusually high in a particular growing season.
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. 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.
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. 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)
------------------------------------------------------------------------
Number of
critical use
Company/universal allocation 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
------------------------------------------------------------------------
[[Page 52380]]
Table II.--Critical Use Allowance Allocation for the Calendar Year 2005 (Sector Specific)
----------------------------------------------------------------------------------------------------------------
Number of critical use allowances (kilograms) for each company
for each sector
Sector-specific allocation; approved critical------------------------------------------------------------------
use sectors Great Lakes
Chemical Albemarle AmeriBrom, Inc. Trical, Inc.
Corporation Corporation
----------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------
Number of critical stock
Company 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 Allocation?
In the event that EPA puts in place a final rule that issues
sector- or applicant-specific allowances, EPA must devise a system that
would ensure compliance with the sector/applicant level caps. EPA
believes that tracking types of allowances expended (e.g. pepper CUAs)
in order to ensure compliance with a sector cap is essentially an
accounting question and therefore describes a system that controls
production and import at a sector- or applicant-level through different
types of CUAs. EPA is proposing a system where entities in the supply
chain such as producers, importers, and distributors would create and
keep an on-going log of the amount and, if the final rule allocates on
a sector- or applicant-specific basis, the type of critical use methyl
bromide (i.e., eggplant CUAs), on a per kilogram basis, acquired and
sold during the year. In addition, entities that acquire critical use
methyl bromide from a supplier would sign a self certification form
indicating that they understand they are taking possession of a certain
number of kilograms of critical use methyl bromide of a specific type.
EPA believes that it is the responsibility of the distributor or other
supplier to place orders with producers or importers for critical use
methyl bromide of the appropriate type to meet the needs of their
customers which means that a distributor may have to call more than one
company to find the correct type of material in sufficient quantity to
meet demand (see Sections VI.L. and VI.M. for more information on
record keeping and reporting requirements).
During the public meetings on potential allocation framework
options held during the summer of 2003, a participant suggested that
EPA require the use of a database system to track critical use methyl
bromide. Currently, a real time database system is being used in the
state of California to track the use of 1,3-dichloropropene and ensure
that the township caps are not exceeded. Under this option, EPA would
require registrants to populate the database with information on the
allowable critical uses, the approved critical users, and the amount of
critical use methyl bromide produced, imported or available from
critical stockpiles. Distributors and applicators would consult the
database and reserve a specific amount of critical use methyl bromide
when an order is placed for the material or for fumigation with
critical use methyl bromide. The reservation would freeze the amounts
of critical use methyl bromide for 14 days--at which point the company
that made the reservation would lose its reservation unless it
indicated that the material had already been used in a fumigation. This
database could be created by EPA through a contractor or EPA could
require regulated entities to utilize existing commercial database
programs. EPA believes that producers, importers, distributors, and
applicators would likely have to make some capital expenditures to be
able to use the database for tracking purposes. EPA believes that the
database approach would provide high quality use data on critical use
of methyl bromide and that it could be used under a sector specific or
applicant specific approach to ensure that distributors and other
points of sale do not exceed total allowable amounts of critical use
methyl bromide for that particular use. EPA seeks comment on the use of
a commercially available database system to track the sale of critical
use methyl bromide.
H. How Do ``Approved Critical Users'' Acquire Methyl Bromide Under
Today's Proposal?
With today's action, EPA is proposing that approved critical users
(end users) within an agreed critical-use sector, that also have the
``limiting critical conditions'' for their specific circumstances of
use, acquire methyl bromide following a system nearly identical to the
existing procedures under the quarantine and preshipment exemption
(QPS) to the phaseout of methyl bromide (68 FR 237 (January 2, 2003)).
The phrases ``approved critical user'' and ``limiting critical
condition'' are further discussed below in Sections I. and K.,
respectively. EPA proposes that approved critical users of methyl
bromide who wish to acquire critical use methyl bromide, or who
contract for
[[Page 52381]]
fumigation with critical use methyl bromide, will self certify that
they are approved critical users at the time of purchase. The
certification requirement would be part of the reporting and
recordkeeping requirements set forth in section 82.13 of its
regulation.
To implement this regulation, EPA will create a form that an
approved critical user will complete with basic information about the
user (name, location of fumigation, consortium, etc), the number of
kilograms to be purchased and the area to be treated, the agreed
critical-use category (i.e. tomatoes, bean storage, etc.), and a check
list of the applicable limiting critical conditions approved by EPA and
the Parties (e.g. karst topography, heavy to moderate nutsedge
infestation). The form would be signed by the approved critical user
(purchaser) of the methyl bromide and given to the supplier of methyl
bromide to indicate that the purchaser is acquiring exempted critical
use methyl bromide from the supplier to use in accordance with the
exemption and bears the full penalty of law for providing false
information or for use that is not in accordance with the critical use
exemption regulations.
EPA is proposing that producers, importers, and distributors will
be prohibited from selling methyl bromide in critical use categories
without obtaining a self-certification from an approved critical user.
If an approved critical user seeks methyl bromide from stocks existing
prior to 2005, then the user must find a supplier who holds a
sufficient amount of critical stock allowances (CSAs) to sell methyl
bromide to an agreed critical-use category. To obtain methyl bromide
produced or imported in 2005 under the exemption, the approved critical
user must go to a supplier who has methyl bromide newly produced or
imported through expended 2005 critical use allowances (CUAs).
I. Who Is an Approved Critical User?
An approved critical user is entity who obtains the benefit of
acquiring newly produced or imported methyl bromide that is dedicated
for use in those use categories that have been agreed to be critical.
Such users benefit under the critical use exemption because they have
certainty that methyl bromide will be available for their critical
needs because this newly produced and imported methyl bromide cannot be
used for other purposes or by non-critical users. However, a condition
for obtaining the benefit of this dedicated supply of methyl bromide
after the phaseout date is that approved critical users will see their
access to existing, previously unrestricted stocks of methyl bromide
limited when necessary to ensure that total use of methyl bromide in
critical use categories does not exceed the overall critical use cap
established in Decision Ex. I/3.
EPA is proposing to define an ``approved critical user'' as an
entity whose circumstance of methyl bromide use is covered by an
application that is included in the U.S. nomination and subsequently
authorized by a Decision of the Parties to the Montreal Protocol for a
critical use exemption and then determined, through this EPA notice-
and-comment rulemaking, to be eligible for exempted critical use methyl
bromide (see Section A. of this notice of proposed rulemaking). Thus,
EPA proposes to define an ``approved critical user'' as a person
meeting the following two criteria:
(1) The user, for the applicable control period, applied to EPA for
a critical use exemption or is a member of a consortium that applied
for a critical use exemption for a use and location of use that was
included in the U.S. nomination, authorized by a Decision of the
Parties to the Montreal Protocol, and then finally determined by EPA in
a notice-and-comment rulemaking to be a critical use in that location,
AND
(2) The user has an area in the applicable location of use that
requires methyl bromide fumigation because the area is subject to a
limiting critical condition.
To summarize, EPA proposes that in order to qualify as an approved
critical user, you must satisfy the following conditions: (1) You must
have submitted or belong to a group that submitted an application to
EPA for a critical use exemption for the specific control period; (2)
the use and circumstances of use included in your application must have
been nominated by the U.S. for a critical use exemption; (3) the
Parties to the Protocol must agree in a Decision that your use and
circumstance is a critical use and then, (4) through this notice-and-
comment rulemaking EPA must identify your use as a critical use and
your circumstance as a limiting critical condition. EPA requests
comment on the proposed criteria for being an ``approved critical
user'' described above and, in particular, comment that addresses these
criteria in the context of the language of Decision IX/6 and Decision
Ex I/3.
The Agency recognizes there may be other ways of defining an
``approved critical user'' in the context of Decision IX/6 and Decision
Ex I/3, such as the following: (1) Not including criterion number two
above (the limiting critical condition); (2) not including criteria
numbers one and two above and instead defining approved critical user
broadly to include any user in one of the agreed critical-use
categories in Annex II.A. of Decision Ex I/3. We request comment on
whether such an alternative definition of ``approved critical user''
would be more appropriate and consistent with Decisions IX/6 and Ex. I/
3.
J. Can New Market Entrants or New Consortia Members Be Approved
Critical Users?
EPA proposes that an approved critical user can include a member of
a consortium during the control period even if the user was not a
member at the time the application was submitted to EPA. In today's
proposal, EPA is defining consortium as an organization representing a
group of methyl bromide users that has collectively submitted an
application for a critical use exemption on behalf of all members of
the group. The members of a consortium would be determined by the rules
established by the consortium. Members could either be required to
formally join the consortium (i.e., by submitting an application or
paying dues) or may automatically become members upon meeting
particular criteria (i.e. a grower of a specific crop in a particular
region). EPA does not believe that it is up to the Agency or to
distributors and third party applicators of methyl bromide to discern
between different types of consortium members.
For example, the Southern Forest Nursery Management Cooperative
consists of a certain number of forest seedling nursery operators. The
Cooperative made an application to EPA for a critical use exemption
that only included its members. Therefore, only members of the
Cooperative would qualify as approved critical users pursuant to the
consortium's application. However, if a company that was not a member
of the Cooperative at the time of the application in 2002 decided to
join the cooperative in 2004, EPA is proposing that the company be
eligible to access critical use methyl bromide available to members of
the consortium once the exemption takes effect in 2005 since the
company would be a member of the Cooperative during the control period.
A second example is the California Strawberry Commission, which
made an application to EPA to cover all strawberry growers in the state
of California. Because the initial application was made on behalf of
all growers in that state, any strawberry grower in California
regardless of the
[[Page 52382]]
date when he first entered the market is considered by EPA to be a
member of the consortium. Thus, a new strawberry grower who enters the
market in California in 2005 and who meets the limiting critical
condition for the agreed critical-use category would be able to access
the critical use methyl bromide under the framework set forth in
today's proposal.
In summary, EPA proposes that an approved critical user may include
an entity who newly enters the market of a crop/use that has a limiting
critical condition; an entity who switches to a crop/use that has a
limiting critical condition; an entity who increases production of a
crop/use that has a limiting critical condition; or an entity who
switches production of a crop/use with a limiting critical condition
from one physical location to another. In each instance, such an entity
would need to meet the limiting critical condition and qualify as a
member of consortium that applied for and obtained a critical use
exemption.
Under the second example described above, any consortium that
applied for an exemption for a broad geographic group of users may in
fact be encouraging free riders. However, EPA believes that those
consortia that applied on behalf of an entire state or region in their
initial application believe that all users in that location need a
critical use exemption based on technical and economic criteria.
Therefore, if a new user enters the market place in that same location,
EPA believes that the user would have automatically become a member of
the consortium as if he had entered the market at the time the
application was made. Therefore, the only remaining relevant question
is whether or not the new market entrant in the geographic area meets
the limiting critical condition and therefore may be an approved
critical user.
In public meetings, EPA received a suggestion from the affected
community which called for allowing critical use exemptions to only be
made available to those users who are ``users of record.'' A user of
record was suggested to be an approved critical user who was engaged in
production of a crop or commodity in a critically-exempted sector
immediately prior to the control period. The effect of such a provision
would be to require any entity that was not a user of record to use an
alternative to methyl bromide for the first year it engages in crop or
commodity production. After the first year, the new market entrant
would become a user of record and would be able to avail himself of
critical use methyl bromide. EPA believes that this system may provide
an incentive for new entrants to try alternatives to methyl bromide.
However, this system would be difficult to administer outside of the
state of California where such information is already tracked by state
regulators. In addition, critical use methyl bromide will only be
available for those users who do not have any technically and
economically feasible alternatives available to them; therefore, a
requirement such as the one suggested would foreclose any new entrants
altogether.
EPA believes that in order to accommodate the ever shifting
marketplace, growers and other users of methyl bromide should be
allowed to increase or move production as needed so long as total U.S.
production and import of methyl bromide for use in a given sector
remains under the limits authorized by the Parties and determined to be
a critical use in the U.S. through notice-and-comment rulemaking.
Therefore, EPA is proposing an option in today's notice that allows for
shifts in the marketplace (market entry and exit, and rotation into new
production areas) while still ensuring fairness to those groups who
applied for a CUE. It is important to note that the amount of methyl
bromide that may be supplied for critical uses in a calendar year
(control period) will not increase even if the number of users or
treated area increases. The only way the amount of methyl bromide
available for critical uses will be increased is if the Parties
authorize such an increase and EPA incorporates the increase into its
phaseout regulation through notice-and-comment rulemaking.
Under the proposed framework outlined in this section, users who
have the limiting critical condition but who are not users or members
of a group of users that submitted an application to EPA, are not
eligible critical users. For example, a consortium applied on behalf of
certain raspberry nurseries in California and Washington. This use was
determined by EPA to qualify for an exemption because of the limiting
critical condition that there are no technically feasible alternatives
which provide adequate control of pests for raspberry nursery
propagative stock. If a raspberry nursery operator in California met
the limiting critical condition but was not a member of the consortium
and needed to buy methyl bromide, under the proposed option, they would
not be an approved critical user because the application that was made
to EPA was not on behalf of all growers in California, only certain
identified companies. EPA did consider allowing such a person to
acquire critically exempted material. EPA decided not to propose this
option in order to discourage free riders who did not invest the time
and effort to apply for an exemption or even join a consortium that
submitted an application. EPA understands that users who applied for an
exemption sometimes spent hundreds of hours preparing an application
for a critical use exemption. EPA recommends that users who did not
submit an application or are not part of a consortium, consult with
USDA or EPA immediately to determine if they could be included in the
next U.S. nomination of critical users. Such users should also consider
contacting any consortium that applied for an exemption for their use
category. EPA is seeking comment on this manner of treating new market
entrants and users of methyl bromide that were not part of the
consortia or companies that submitted applications for critical use
exemptions.
K. What Uses and ``Limiting Critical Conditions'' Are Permitted Access
to the Methyl Bromide Under the Critical Use Exemption?
A ``limiting critical condition'' is the basis on which the
critical need for methyl bromide is demonstrated and authorized. The
limiting critical condition placed on a use category reflects certain
regulatory, technical or economic factors that either prohibit the use
of feasible alternatives or represent the lack of a technically or
economically feasible alternative for that use or circumstance. For
example, EPA may determine that a critical use exemption for tomatoes
is only necessary for areas of tomato production in karst topography
even if the EPA received applications for all of U.S. fresh market
tomato production. In this example, not all tomato growers would be
eligible to acquire exempted critical use methyl bromide. Only those
growers with production in an area with the limiting critical condition
of karst topography would have access to the methyl bromide under the
critical use exemption. Another example is as follows: EPA received
applications for exemptions for all U.S. grain milling companies that
are members of the North American Milling Association (NAMA). The
Parties authorized the exemption because grain milling companies have a
critical need for methyl bromide because the alternatives can not be
used, in part, due to corrosivity to electronic equipment. Thus, one of
the limiting critical conditions for this critical use category is the
presence of sensitive electronic equipment subject to corrosivity from
[[Page 52383]]
fumigation with the alternative. All grain mills that are members of
NAMA that have sensitive electronic equipment would be able to acquire
and use critical use methyl bromide.
Some approved critical users have limiting critical conditions that
are contingent. These ``contingent critical uses'' are those uses of
methyl bromide which qualify as an approved critical use only if a
specified condition has been met. For example, a number of potential
critical use needs for methyl bromide in California currently use the
alternative 1,3-Dichloropropene (1,3-D) in various formulations. This
chemical is regulated by the state of California so that specific
townships have limits on the amount of 1,3-D that can be used over a
given time period. Certain of the agreed critical-use categories in
Decision Ex I/3 may have a contingent need for critical use methyl
bromide in the event that the township cap for 1,3-D has been reached
or exceeded.
EPA proposes that producers and importers be allowed to produce and
import critical use methyl bromide for contingent uses at any time
during the control period. However, EPA is proposing that unused methyl
bromide produced or imported for such contingent purposes will be
deducted from the total number of CUAs that EPA makes available for the
following control period (as it would be included in the consideration
of inventory as factor B, because the unused methyl bromide would be
considered in the estimation of available stocks for the subsequent
control period).
Below EPA proposes the ``limiting critical conditions'' for each of
the agreed critical-use categories in Decision Ex I/3 and refers
commenters to the E-Docket where the U.S. nominations, additional
responses to MBTOC, and a memo describing the determination process are
available. EPA wishes to note that while we may, in response to
comments, reduce the types and conditions of a critical use compared to
what has been authorized by the Parties, EPA will not increase the
quantities, and sectors, beyond those authorized by the Parties.
Section 2H(5) of the Protocol limits the critical use exemption to
those uses agreed upon by the Parties. The agreed critical uses for
2005 are reflected in Decision Ex I/3.
EPA based the proposed ``limiting critical conditions'' on the data
submitted by critical use exemption applicants, as well as public and
propriety data sources. The U.S. government, in developing the
nomination, defined the limiting critical conditions for which exempted
methyl bromide was being sought. The U.S. government used this data to
determine if (a) the lack of availability of methyl bromide for a
particular use would result in significant market disruption, and (b)
if there were any technically and economically feasible methyl bromide
substitutes available to the user. The analysis was conducted and
described in the U.S. nomination of critical uses. This nomination was
then sent to the Parties to the Protocol, and the Parties used this
information as the basis for the decision which authorized critical
uses.
Based on the data described above, EPA determined that the
following uses with the limiting critical conditions specified below
qualify to obtain and use critical use methyl bromide.
EPA proposes, based on the determination described in the U.S.
nomination and its supporting documents, that users who are in a
specific geographic location, identified below, or who are members of a
specific industry consortia, identified below, or companies
specifically identified below, are approved critical users provided
that such users are subject to the specified limiting critical
condition.
Pre-Plant Uses
Cucurbits
(a) Michigan growers with moderate to severe fungal pathogen
infestation;
(b) Alabama, Arkansas, Georgia, North Carolina, South Carolina,
Tennessee, and Virginia growers with moderate to severe yellow or
purple nutsedge infestation.
Eggplant
(a) Georgia growers with one or more of the following limiting
critical conditions: Moderate to severe yellow or purple nutsedge
infestation, moderate to severe nematode infestation and/or moderate to
severe fungal pathogen infestation;
(b) Florida growers with limiting critical conditions: Moderate to
severe yellow or purple nutsedge infestation and/or moderate to severe
nematode infestation and/or moderate to severe fungal pathogen
infestation and/or karst topography.
Forest Seedlings
Approved critical users listed below with one or more of the
following limiting critical conditions: Moderate to severe fungal
pathogen infestation, moderate to severe yellow or purple nutsedge
infestation, and/or moderate to severe disease infestation.
(a) Members of the Southern Forest Nursery Management Cooperative
limited to growing locations in Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina,
Tennessee, Texas, and Virginia;
(b) International Paper and its subsidiaries limited to growing
locations in Arkansas, Alabama, Georgia, South Carolina and, Texas;
(c) Weyerhaeuser Company and its subsidiaries limited to growing
locations in Alabama, Arkansas, North Carolina, South Carolina, Oregon
and, Washington;
(d) Public (government owned) seedling nurseries in the states of
California, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland,
Missouri, Nebraska, New Jersey, Ohio, Oregon, Pennsylvania, Utah,
Washington, West Virginia and, Wisconsin;
(e) Members of the Nursery Technology Cooperative limited to
growing locations in Oregon and Washington; and
(f) Michigan seedling nurseries.
Ginger
(a) Hawaii growers with the limiting critical condition of moderate
to severe nematode infestation and/or moderate to severe bacterial wilt
infestation.
Orchard Nursery Seedlings
Approved critical users listed below with one or more of the
following limiting critical conditions: Moderate to severe nematode
infestation, medium to heavy clay soils, and/or a prohibition on the
use of 1,3-dichloropropene products due to reaching local township
limits on the use of this alternative;
(a) Members of the Western Raspberry Nursery Consortium limited to
growing locations in California and Washington (Driscoll's raspberries
and their contract growers in California and Washington).
(b) Members of the California Association of Nurserymen-Deciduous
Fruit and Nut Tree Growers.
(c) Members of the California Association of Nurserymen-Citrus and
Avocado Growers.
Orchard Replant
Approved critical users listed below with one or more of the
following limiting critical conditions: Replanted (non-virgin) orchard
soils to prevent orchard replant disease, and/or medium to heavy soils,
and/or a prohibition on the use of 1,3-dichloropropene products because
local township limits for this alternative have been reached.
(a) California stone fruit growers.
(b) California table and raisin grape growers.
(c) California walnut growers.
(d) California Almond growers.
Ornamentals
(a) Yoder Brothers Inc. for use in chrysanthemum production.
[[Page 52384]]
(b) California rose nurseries prohibited from using 1,3-
dichloropropene products because local township limits for this
alternative have been reached;
Peppers
(a) California growers with the limiting critical conditions of
moderate to severe fungal pathogens, and/or moderate to sever disease
infestation, and/or moderate to sever nematode infestation, and/or
moderate to severe yellow or purple nutsedge infestation, and/or a
prohibition on the use of 1,3-dichloropropene products because local
township limits for this alternative have been reached;
(b) Alabama, Arkansas, Georgia, North Carolina, South Carolina,
Tennessee and Virginia growers with one or more of the following
limiting critical conditions: moderate to severe yellow or purple
nutsedge infestation, and/or the presence of an occupied structure
within 76 meters of a grower's field the size of 100 acres or less;
(c) Florida growers with one or more of the following limiting
critical conditions: moderate to severe yellow or purple nutsedge
infestation, and/or karst topography;
Strawberry Nurseries
(a) California growers with one or more of the following limiting
critical conditions: moderate to severe black root rot or crown rot,
moderate to severe nematode infestation, and/or moderate to severe
yellow or purple nutsedge infestation;
(b) North Carolina and Tennessee growers with the presence of an
occupied structure within 76 meters of a grower's field the size of 100
acres or less;
Strawberry Fruit
(a) California growers with one or more of the following limiting
critical conditions: moderate to severe black root rot or crown rot,
moderate to severe nematode infestation, moderate to severe yellow or
purple nutsedge infestation, a prohibition of the use of 1,3-
dichloropropene products because local township limits for this
alternative have been reached;
(b) Florida growers with one or more of the following limiting
critical conditions: moderate to severe yellow or purple nutsedge, and/
or karst topography;
(c) Alabama, Arkansas, Georgia, North Carolina, South Carolina,
Tennessee, Virginia, Ohio and, New Jersey growers with one or more of
the following limiting critical conditions: moderate to severe yellow
or purple nutsedge, and/or the presence of an occupied structure within
76 meters of a grower's field the size of 100 acres or less;
Sweet Potatoes
(a) California growers with the contingent limiting critical
condition of a prohibition on the use of 1,3-dichloropropene products
because local township limits for this alternative have been reached;
Tomatoes
(a) Michigan growers with moderate to severe disease and/or fungal
pathogens;
(b) Alabama, Arkansas, Georgia, North Carolina, South Carolina,
Tennessee and Virginia growers with one or more of the following
limiting critical conditions: moderate to severe yellow or purple
nutsedge infestation, and/or the presence of an occupied structure
within 76 meters of a grower's field the size of 100 acres or less;
(c) Florida growers with one or more of the following limiting
critical conditions: moderate to severe yellow or purple nutsedge
infestation, and/or karst topography;
Turfgrass
(a) U.S. turfgrass sod nursery producers for the production of
industry certified pure sod.
(b) U.S. golf courses establishing sod in the construction of new
golf courses or the renovation of putting greens, tees, and fairways.
Post-Harvest Uses
Food Processing
Approved critical users listed below with one or more of the
following limiting critical conditions: older structures that can not
be properly sealed to use an alternative to methyl bromide, and/or the
presence of sensitive electronic equipment subject to corrosivity;
(a) Rice millers in Arkansas, California Louisiana, Florida,
Missouri, and Mississippi.
(b) Pet food manufacturing facilities in the U.S.
(c) Kraft Foods.
(d) Members of the North American Millers' Association.
Commodity Storage
(a) Smokehouse ham curing in facilities owned by Gwaltney of
Smithfield.
(b) Entities storing walnuts, beans, dried plums, and pistachios in
California with one or more of the following limiting critical
conditions: rapid fumigation is required to meet a critical market
window, such as during the holiday season, rapid fumigation is required
when a buyer provides short (2 days or less) notification for a
purchase, and/or there is a short period after harvest in which to
fumigate and there is limited silo availability for using alternatives.
L. What Are the Reporting Requirements?
In today's action, EPA is proposing that producers and importers of
critical use methyl bromide submit quarterly reports to EPA on the
number of kilograms of critical use allowances (CUAs) expended and
unexpended. In addition, those entities that sell critical use methyl
bromide to end users shall report to EPA on an annual basis, the total
amount of methyl bromide sold to each sector during the control period.
For example, a distributor would submit an annual report to EPA that he
sold 1,000 kilograms of critical use methyl bromide for pre-plant
tomato fumigation and 500 kilograms of critical use methyl bromide for
pre-plant strawberry fumigation. EPA is proposing this reporting on
sale of methyl bromide to end-users on a sector-by-sector basis
regardless of whether the final rule makes CUA and CSA allocations on a
lump sum or sector-specific basis, because the Agency believes the
sector-specific sales information will help improve the quality of data
in future U.S. nominations for critical use exemptions. EPA is also
proposing that data on sales be reported on a sector-specific basis to
ease the burden for future applicants for critical use exemptions and
to simplify U.S. government efforts to assemble and verify data
concerning the amount of methyl bromide used in a sector and/or
geographic region. EPA is further proposing that producers, importers,
distributors and applicators allocated critical stock allowances (CSAs)
file quarterly reports to EPA on the number of expended and unexpended
CSAs based on the amount of methyl bromide stocks sold during the
quarter to an approved critical user (from whom a self-certification
was received).
Information collection as proposed above is authorized under
Sections 603(b), 603(d) and 614(b) of the CAAA. EPA believes the
reporting requirements outlined above are necessary in order to meet
U.S. reporting obligations under Article 7 of the Protocol and CAAA
reporting requirements to Congress under Section 603(d).
M. What Are the Record-Keeping Requirements?
EPA proposes that producers, importers, and distributors of
critical
[[Page 52385]]
use methyl bromide maintain self certification records from buyers
(typically wholesale buyers) for 3 years, along with other
transactional records such as invoices and order forms. EPA proposes
that distributors, third party applicators, and any other entities that
directly sell critical use methyl bromide or fumigation services to
approved critical users, keep self-certification records signed by the
buyer of the critical use methyl bromide (whether from expended CUAs or
from expended CSAs) on file for 3 years, along with other transactional
records such as invoices and order forms.
EPA believes that mandatory record keeping requirements create a
disincentive for the illegal traffic of controlled ozone depleting
substances (ODS). In some instances, the phaseout of other chemicals
regulated under Subchapter VI of the Clean Air Act (CAA) has resulted
in a vigorous black market for the illegal sale of ODSs. The United
States is in close proximity to developing countries who have not yet
phased out of methyl bromide and who therefore may have supplies of
methyl bromide available to them at a lower price than methyl bromide
in the U.S. This price disparity between physically nearby markets
could result in an incentive to illegally re-import methyl bromide into
the United States. Unlike other ODS, the shipment, sale, and use of
methyl bromide is tightly controlled under other statutes such as FIFRA
making such activities not only dangerous but difficult to undertake.
Therefore, EPA does not anticipate that a significant black market will
develop in the United States for illegally produced or imported methyl
bromide. Stringent record-keeping requirements under the CAAA that bear
stiff penalties for violation on the creation, import, and sale of
methyl bromide for critical uses will, EPA believes, further dampen
interest in the illegal trade of methyl bromide. EPA seeks comment on
the ways to discourage the development of a significant black market
through record-keeping activities.
N. How Often Will Critical Use Allowances (CUAs) Be Distributed and How
Are Allowances Expended?
EPA proposes to allocate critical use allowances (CUAs), through
notice-and-comment rulemaking, on an annual basis (calendar year)
consistent with authorizations by the Parties and Section 604(d)(6)of
the CAAA. To the extent that the Parties continue to identify a need
for controls on available stocks, the Agency will also allocate
critical stock allowances (CSAs) on an annual basis. EPA proposes to
allow producers and importers to expend their critical use allowances
(CUAs) for production and import of methyl bromide at any time during
the control period (calendar year) so as to avoid disruptions in the
supply of methyl bromide. However, as with other allowances under EPA's
phaseout program for ozone-depleting substances, EPA is proposing that
companies would only be able to expend CUAs during the specified
control period (calendar year)--for today's proposed action that would
be during 2005. In other words, there would not be any banking of
unused critical use allowances (CUAs) from control period to control
period. If the Parties' decision authorizing 2006 critical use
exemptions is specific about controls of available stocks, then the
Agency would discuss such a control in its notice-and-comment
rulemaking for the 2006 allocations.
In developing today's action, EPA also recognizes other options for
addressing concerns about the need for mid-year adjustments in
allocations of CUAs and CSAs. One option would issue half of the
allowances at the beginning of the control period and then the
remainder of the allowances six months into the control period, or,
some other percentage split for two separate allocations. Under this
option, EPA would publish an annual rulemaking before the start of the
control period indicating how many allowances of each type could be
expended in the first two quarters of the year and how many allowances
of each type could be expended in the later two quarters of the year.
EPA also notes that complete information on stocks of methyl bromide
held on December 31st for a given year would not be reported to the
Agency until 45 days after December 31st, which might mean the
determination of available stocks could be designed as a two-step
process that could result in mid-year allocations for a control period.
In this second allocation of the remainder of allowances, EPA could, if
necessary, adjust the relative percentages of critical use allowances
and critical stock allowances to ensure that critical needs are
satisfied for the control period if EPA's initial projection of
available stocks is later found to be inaccurate. The combined total of
critical use allowances issued for the control period would not exceed
the cap on new production and consumption set forth in a Decision of
the Parties. Another option would be to allocate both CSAs and CUAs at
the beginning of a control period but the CSAs would expire in a short
time frame and the unexpended CSAs would, through rulemaking, be
allocated as additional CUAs up to the limit for new production and
import authorized by the Parties. EPA notes there are many steps in
publishing rulemakings, many of which can be time consuming. Publishing
two rulemakings to allocate allowances for a given year might result in
a lapse in available allowances and therefore a disruption in supply.
Publishing two rulemakings for each calendar year would also introduce
much greater uncertainty into the market. The Agency recognizes that an
alternative approach might be to base the determination of available
stocks on a ``fiscal'' year from September 31st to September 31st, and
then publish a single allocation rulemaking for the subsequent calendar
year. EPA requests comment on these options and whether any of them
address concerns regarding the availability of sufficient critical use
methyl bromide that were raised by entities in sectors who fumigate
later in the calendar year and other issues regarding the supply chain
for methyl bromide and the data available for subsequent allocation
rulemakings.
EPA proposes to allow producers and importers to expend (use) their
allowances for production and import of methyl bromide at any time
during the control period so as to avoid disruptions in the supply of
methyl bromide (see Section VI B. above regarding ``expending''
allowances). However, EPA also recognizes an option that would permit
allowances to be expended only when an order for methyl bromide had
been placed by a distributor or some other purchaser of methyl bromide,
making a so-called ``redeemable'' allowance system (see Section VII. on
a redeemable allowance system). However, EPA believes that such an
approach is unlikely to result in significantly less critical use
methyl bromide production, importation and stockpile draw down, and
would be more disruptive to the methyl bromide market.
EPA is proposing to allow producers, importers, distributors,
applicators, and other entities that hold critical stock allowances
(CSAs) to expend their stockpile allowances by selling a corresponding
amount of methyl bromide stocks, at any point during the control
period. Likewise, the Agency is proposing that producers and importers
allocated critical use allowances (CUAs) would be able to expend their
allowances to produce or import methyl bromide for the agreed critical-
use categories at any time during the control period (calendar year).
This approach is preferred because producers and importers need a
certain amount of time
[[Page 52386]]
to actually manufacture, and bring to market, quantities of methyl
bromide. Furthermore, producers and importers need to make business
decisions regarding manufacturing and marketing well before an order is
actually placed in order to efficiently batch their production and
import operations. EPA will allocate CUAs and CSAs before the control
period and the allowances, under today's proposal, may be expended at
any point during the one year control period. On December 31st of the
pertinent year, unexpended CUAs and CSAs disappear and the companies
must be re-allocated allowances for the subsequent calendar year
(control period). EPA seeks comments on today's proposal and the other
options described above regarding when allowances are allocated and
when allowances can be expended.
O. Can Allowances Be Traded?
In accordance with CAAA section 607, EPA proposes that producers
and importers allocated critical use allowances (CUAs) be permitted to
trade or transfer those allowances. EPA is proposing that CUAs would be
transferable as other allowances for controlled ozone-depleting
substances can be traded under existing regulatory provisions of the 40
CFR part 82, subpart A. Section 607 of the CAAA governs the allocation
of allowances for the production and consumption of class I and class
II ozone depleting substances and the transfers (trades) of such
allowances. Paragraph (c) of section 607 requires that such transfers
of allowances result in a lower level of production than if the trade
had not occurred. In accordance with the requirements of section 607 of
the CAAA, EPA is proposing an offset of one tenth of one percent of the
amount of CUAs being traded that would be deducted from the
transferor's allowance balance at the time of a trade. A one tenth of
one percent offset is consistent with the offset required for the
transfer of essential use allowances under the phaseout program for
class I controlled ozone-depleting substances, which, like critical use
allowances, permit the exempted production or import of ozone-depleting
substances beyond a phaseout date.
Critical stock allowances (CSAs) are not used in order to produce
or import methyl bromide but rather are rights to allowance holders to
sell pre-existing supplies of methyl bromide to the critical use
market. Because CSAs govern the amount of existing material that can be
sold, EPA is not proposing to require an offset associated with
transfers of CSAs. If the holder of a CSA does not wish to sell his
inventoried methyl bromide to the critical use market, he may sell his
critical stock allowances (CSAs) to another CSA holder. The second CSA
holder may then sell additional amounts of his methyl bromide inventory
to the agreed critical-use categories specified in the rulemaking.
There will be no offsets with trades of CSAs.
As noted earlier, a CSA is only expended when methyl bromide stocks
are sold to an approved critical user. Thus, normal distribution of
stocks of methyl bromide from a producer or importer to a distributor
does not require a CSA. For example, if a producer sends a distributor
10,000 kilograms of methyl bromide stocks for sale to approved critical
users, the producer would not need to expend CSAs to sell methyl
bromide to a distributor. However, if the distributor intended to sell
the methyl bromide to an approved critical user, the distributor would
need to have sufficient CSAs to sell to a self-certifying approved
critical user. If the distributor did not have sufficient CSAs, it
might request that the producer transfer CSAs to the distributor as
part of the sales transaction of stocks manufactured prior to January
1, 2005.
For consistency with the requirements governing other types of
allowance transfers under the stratospheric ozone phaseout regulations,
EPA proposes that the entity that is selling or giving allowances to
another entity must file an allowance transfer form with EPA, which the
existing regulation requires EPA process within 3 business days of
receipt. The current regulation states that trades not processed by EPA
in 3 working days are automatically approved. EPA established this
short review period to encourage trading and ensure the Agency does not
impede a fluid market. Today's action proposes that the information to
be provided to EPA would include the total number of CUAs to be
transferred and the name of the entity who is acquiring the allowances.
See 40 CFR 82.9, 82.10 and 82.12 under the current regulations and
below in the proposed regulatory text.
EPA is proposing an additional, special type of transfer for the
methyl bromide critical use exemption program. EPA is proposing that a
person holding critical use allowances (CUAs) could exchange them for
additional critical stock allowances (CSAs) and this exchange would not
require an offset. Under this option, the CUAs would be retired and EPA
would issue additional CSAs in an amount equal to the amount of retired
CUAs. This type of an exchange is consistent with Decision IX/6 and
section 607 of the Clean Air Act because it results in use of more
stocks and less production in a given control period. Because the
Parties specified the maximum amount of critical use methyl bromide
that may be derived from new production or import in Decision Ex I/3,
EPA is proposing that CUAs may be converted into CSAs in this manner,
but not vice versa. The Protocol and CAAA have no restriction on
meeting more critical use needs from stocks. However, because Decision
Ex I/3 limits the total amount of new production or import in 2005,
there cannot be an exchange that would increase the number of CUAs.
EPA is seeking comments on the programs proposed for trading
allowances and the options that are described above.
P. Are Allowances Bankable From One Year to the Next?
EPA proposes to prohibit banking of allowances (both CUAs and CSAs)
from one year to the next because the controls under the Montreal
Protocol and the Clean Air Act are calendar year ``control periods''.
The U.S. has obligations under the Montreal Protocol and the Clean Air
Act to control the production and consumption of ozone-depleting
``controlled substances'' on an annual, calendar year basis. To date,
the authorization for exempted production and import of methyl bromide
for agreed critical-use categories (Decision Ex I/3) is only for the
2005 calendar year. For the 2005 calendar year (control period), methyl
bromide production and import is prohibited, except where otherwise
exempted. In addition, the controls on the use of stocks by critical
use sectors are also limited to only the 2005 calendar year.
The Parties may allow for multiple year exemptions in the future
which may possibly allow for banking of allowances from one year to the
next so long as it is within the duration of the exemption authorized
by the Parties. In addition, it is not clear whether future Decisions
on the critical use exemption will employ the double cap concept and
effectively limit the amount of material that may be obtained from
stocks for critical uses. EPA will revisit the issue of banking
allowances under a multi-year scenario to reflect any framework changes
agreed to by the Parties in future decisions.
Q. How Is Unused Critical Use Methyl Bromide Treated at the End of the
Compliance Period?
The critical use exemption is currently an annual exemption
program. The amount of new production and
[[Page 52387]]
import authorized by the Parties for 2005 must be produced or imported
during that calendar year (control period) and not beyond December 31st
of the pertinent year. However, methyl bromide produced or imported
under the authorized exemption for a given year may still be unused at
the end of the compliance control period, and could be used in
subsequent years for critical uses. In the event there are inventories
of methyl bromide produced or imported with CUAs remaining at the end
of the control period, EPA proposes to include these quantities in the
calculation of available stocks (factor B) in the determination of
total CUAs to be allocated for the subsequent year.
EPA is proposing that if critical use allowances (CUAs) are
allocated on a sector-specific basis, and the methyl bromide is
produced or imported but unused in the control period, the material
could be used only for the approved critical uses in the subsequent
control period. This proposal would mean quantities produced or
imported with expended CUAs not used in the relevant control period
would, as stated in today's proposal, be taken into account in the
calculation of available stocks for determining the level of new
production or import for the subsequent control period (factor B in the
algorithm discussed in Section VI.A. above). EPA proposes including
unused critical use methyl bromide in the calculation of available
stocks for the subsequent year. EPA also proposes restricting the use
of critical use methyl bromide produced or imported with expended
sector-or applicant-specific allowances, if allocated in that manner in
the final rule, so that it could only be used in the sector for which
it was allocated. For example, if methyl bromide was produced in a
given year with expended eggplant CUAs, EPA could limit the use of
unused quantities to only approved critical use eggplant uses in the
subsequent control period. EPA seeks comments on the proposed method
for accounting for unused critical use methyl bromide and the other
options discussed above.
R. What Are the Enforcement Provisions Governing Critical Uses?
Section 113 of the CAAA controls enforcement activities for
violations of requirements under Title VI. Under the Stratospheric
Ozone Program regulations, EPA has historically defined each kilogram
of unauthorized production or importation of controlled substances to
be a separate violation of its regulations. See e.g. 40 CFR 82.4(a)(1)
(``Every kilogram of excess production constitutes a separate violation
of this subpart.''). Likewise, for the restricted distribution under
exemption programs of controlled substances, the Stratospheric Ozone
Program has also considered each kilogram of inappropriate sale for a
use other than the designated specific exempted purpose to be a
separate violation. To ensure U.S. compliance under the Montreal
Protocol, EPA believes this approach remains justified for enforcement
against producers, importers, and distributors of methyl bromide
because these are large companies that have an ability to pay higher
penalties and should face a substantial deterrent against producing,
importing, and selling large quantities of controlled substances in
excess of allowances or application limitations. In addition, these
producers, importers and distributors are larger companies that
typically have government affairs staff and retain legal counsel to
advise them on their regulatory requirements. Thus, EPA will continue
to define violations involving the unauthorized production, import, or
sale of critical use methyl bromide on a per kilogram basis.
In the case of methyl bromide end-users, defining each violation on
a per kilogram basis could mean a small farmer might face the potential
of a very high penalty if she applied critical use methyl bromide in an
unauthorized fashion. However, in assessing penalties under any
enforcement action, the Agency takes into consideration the size of the
violator, the economic benefit or advantage achieved from the violation
and the ability of the violator to pay a penalty. Farmers in many of
the agreed critical use categories typically use several hundred
kilograms of methyl bromide to treat a single acre. If the Agency were
to maintain that each kilogram that is wrongly used is a separate
violation, then a farmer ordering and applying 3,000 kilogram in error
to her 10 acre farm would face a potential maximum penalty of more than
$97 million.
EPA recognizes that there is a difference in scale of possible
violations and impact on compliance with U.S. obligations under the
Protocol and is therefore proposing to define each single violation for
the mis-use of critical use methyl bromide by an end-user differently
than a violation by a holder of a CUA or CSA so it reflects the typical
farm size and application rate of a person in the approved critical-use
categories, and also reflects the economic benefit/advantage that
accrues due to a mis-use violation by an end-user. EPA is proposing to
define each violation associated with the improper use of critical use
methyl bromide in increments of 200 kilograms. Taking the example of
the farmer described above, who ordered and submitted a self-
certification to use 3,000 kilograms of critical use methyl bromide in
accordance with today's proposed restrictions, but then wrongfully
applied the material, she would face 15 separate violations for this
mis-use with a potential maximum penalty of $487,000. EPA wishes to
note again that in assessing penalties, the Agency takes into account
the circumstances of the violation, the size of the violator and their
ability to pay. EPA believes it is important to retain a sizable
potential maximum penalty so there is a deterrent against abuse of this
exemption from the phaseout. EPA also notes that larger farms (that
might be operated by sizable agricultural corporations) will also be
ordering and certifying the proper use of large quantities of critical
use methyl bromide and if the material were to be mis-used they should
continue to face large potential maximum penalties. EPA requests
comments on whether the proposed definition for an end-user's violation
is appropriate for enforcement, especially in light of the fact that
the person is self-certifying that they will use the critical use
methyl bromide in accordance with today's proposed restrictions for the
exemption.
Under today's action, EPA is not proposing to use the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorities or
mechanisms to implement or enforce the critical use exemption. However,
under today's action, nothing precludes parallel implementation and
enforcement under FIFRA and other Federal, State, and local pesticide
regulations.
VII. What Are Other Options on Which EPA Seeks Comment?
In the section below, EPA describes other options for creating and
regulating the exemption for critical use methyl bromide beyond the
phaseout through the allocation of ``permits'' directly to end-users of
methyl bromide, in contrast to today's proposal to distribute critical
use allowances (CUAs) to producers and importers, and critical stock
allowances (CSAs) to all suppliers of methyl bromide. These permits,
hereafter referred to as ``critical user permits'' (CUPs) would differ
from the critical use allowances in the following manner. Critical user
permits would be redeemed to buy one (1) kilogram of methyl bromide for
an approved critical use whereas a critical use allowance (CUA) would
be an allowance for the production or import of one (1) kilogram
[[Page 52388]]
of methyl bromide by a manufacturer or importer of methyl bromide.
EPA believes that the options described in Section VII of this
proposed rulemaking would create a new burden on approved critical
users of methyl bromide. A full analysis of the burden associated with
providing permits to end users is described in the supporting
analytical documents that accompany this rule. The supporting analysis
primarily analyzed two options for who could hold critical use
allowances, producers and importers or end users. Under a system that
creates permits distributed to methyl bromide end-users, EPA estimated
that the annual burden would be about $6.4 million per year. In
contrast, a system designed to provide allowances only to producers and
importers would cost about $2.2 million. For a more complete discussion
of the supporting analysis, please see Section VIII.A of this proposal.
In conducting the analysis, in some cases EPA made only qualitative
assessments due to uncertainty about the future price of methyl bromide
and other unknown factors. In other instances, it was difficult to
create a direct quantitative comparison on the de-regulatory benefit of
one option compared to the other. EPA believes the options in Section
VII would be substantially more burdensome for approved critical users
(end-users) than the proposed option in Section VI. At the stakeholder
meetings held over the previous year EPA received public comment to
this effect. To the degree that not all potentially interested parties
were able to attend these stakeholder meetings, EPA requests comment on
these options to better understand if the benefits of these options
outweigh the additional regulatory burden.
A. Distribution of Critical User Permits (CUPs) to End Users of Methyl
Bromide?
Under the option of regulating downstream distribution of critical
use methyl bromide through the allocation of critical user permits
(CUPs) to methyl bromide end-users there are two options for initial
distribution of CUPs.
One option, similar to the method used in Canada under their
phaseout of methyl bromide, would involve the distribution of permits
to end users. The second option would employ an auction system whereby
the allowances would be sold to the user with the highest bid.
The first option, would involve distributing CUPs to end users
based on historical information and would require individual farms and
companies to provide data to EPA (see Section VIII.E for more detail on
distribution of permits). EPA would then examine the data and would
write an additional notice-and-comment rulemaking to distribute permits
to each entity. This process would take between one and two years to
complete, due the large number of critical use methyl bromide end-users
(approximately 2,000 farmers or companies), so permits would not be
available to end users until after the phaseout takes effect. In such a
scenario, EPA would implement the CUPs beginning in 2007 and rely on an
upstream system as described in Section VI as an interim control
measure until 2007.
The second method to distribute CUPs would be an auction; which
would circumvent the burden and time involved with directly
distributing permits to end-users based on historitical data. However,
the auction of CUPs, similar to a method where EPA uses historical data
to distribute CUPs, would impose more requirements on end users than
the proposed option. End users under the auction would be required to
familiarize themselves with auction procedures, participate in the
auction, keep records of all auction and CUP activities for three
years, and report to EPA annually on the use of CUPs acquired. Under
the proposed option, end users would not have any reporting or
recordkeeping obligations except self-certification when placing a
purchasing order. Again, similar to using historical data to distribute
CUPs, there are timing concerns regarding the auction. The time taken
to implement an auction would cause an implementation delay past
January 2005.
In stakeholder meetings held by EPA over the summer of 2003,
stakeholders universally commented that they wanted a simple regulation
and one that would impose minimum burden on end users. This comment was
regularly made in association with the two end-user permit options (CUP
options), which stakeholders viewed as presenting significant burden on
end-users without sufficient accompanying benefits.
Under either CUP scenario, EPA would abide by the parameters set by
the Parties in the authorization of critical use exemptions. Decision
Ex I/3 requests that Parties endeavor to allocate critical use permits
according to the use categories recommended by the TEAP. The two types
of auctions for distribution of CUPs could be an auction where all
critical users would vie for permits or it could be separate sector-
level auctions by approved critical use category. EPA may propose to be
more restrictive than required under the Protocol, as interpreted by
the Parties, but not less.
B. What Is a Critical User Permit (CUP) and Can It Be Traded?
A critical user permit (CUP) is a permit which would entitle the
holder to obtain one kilogram of methyl bromide for use for approved
critical uses. Once a user acquires an initial allocation of permits,
whether through rulemaking or auction, EPA would allow the user to
either redeem the permit to buy methyl bromide, hold that permit
unredeemed until the end of the control period when it would expire, or
sell the permit to another entity.
Although only approved critical users would be given CUPs
initially, EPA could restrict the type of entity to whom approved
critical users could sell permits. Allowing end-users to trade CUPs
with brokers, trading firms, citizen groups and others might affect the
methyl bromide market.
EPA has identified three additional ways that trades of CUPs might
be governed: (1) Allowing trades only within a sector (only allowing a
tomato trade with a tomato grower), (2) allowing trades of CUPs across
sectors (a tomato CUP for a strawberry CUP), or not allowing end-users
to trade their CUPs after the initial allocation (resulting in a more
command and control approach).
C. Who Is Eligible To Receive an Initial Allocation of CUPs and Who May
Use CUPs?
There are two options for who can receive an initial allocation of
CUPs. The first option would only allow those entities included in an
application to EPA to receive an initial allocation of CUPs. The second
option would allow those users not explicitly covered by an application
but who have the limiting critical condition to receive an initial
allocation. Once an entity receives its CUP allocation, it can either
use it to acquire critical use methyl bromide, or it can simply hold it
(holding a CUP is addressed in Section VII. D below). There are also
two options for who can use a CUP to acquire critical use methyl
bromide, namely only allowing those entities included in an application
to EPA to participate, or allowing those users not explicitly covered
by an application but who have the limiting critical condition to
redeem a CUP for methyl bromide.
EPA believes that it would be unfair to those groups that invested
the resources in applying to EPA for an exemption if EPA adopted an
option that would make an initial allocation of permits available to
users who meet the
[[Page 52389]]
limiting critical condition but are not covered by an application.
However, EPA believes that a hybrid approach which allows any user who
meets the limiting critical condition to buy permits after the initial
allocation would be reasonable in that the right of first refusal has
already been given to those that applied for the exemption.
D. Who May Hold a CUP?
Even though only approved critical users would be able to obtain
methyl bromide under the critical use exemption, EPA could allow any
entity to hold permits. For example, EPA could allow citizen groups and
brokers to hold permits, but not give such entities an initial
allocation and not allow them to use or redeem the CUPs.
E. Methods for Distribution of Critical User Permits: Distribution
Based on Data
EPA recognizes several methods for distributing CUPs to the end
user community using entity-level historic use and/or operational
information. One method would use entity-level historic methyl bromide
use data to create a baseline against which CUPs would be allocated.
Under this option, individual end users would have to provide 3 years
of historic use data and documentation to EPA which would include total
quantity (kilograms) of methyl bromide used in each year, the hectares
or cubic meters treated annually, the formulation rates, and data on
efforts to minimize use and emissions. Using these data, EPA would
establish a straight average baseline and would pro-rate amounts of
methyl bromide available to the sector by the total treated area
requested by entities that submitted the additional data.
If a user has not been a historic grower or owner of the commodity
for which he seeks an exemption but is now a member of a covered
consortium, EPA is considering having that user submit documentation to
support his plans to treat the specified acreage/volume. Alternatively,
a new entrant might not be given an initial allocation but be allowed
to buy and use CUPs from a willing seller so long as the entity met the
limiting critical condition.
Another method for distributing CUPs would involve economic
considerations for each entity. For example, EPA could distribute
permits to those users with the highest cost, in other words to those
end users with the greatest economic need. Alternatively, EPA is
considering distributing permits to end users with the lowest cost, who
would then be inclined to sell their permits to users who have a higher
cost. In order for EPA to make a determination as to how to distribute
permits under a scenario using cost criteria, individual entities would
have to submit historic use data to EPA and individual entity cost
data.
F. Submitting Individual Entity Data To Obtain Critical User Permits
(CUPs)
Under an option involving the distribution of CUPs, users would be
required to submit the additional data for baseline determination
either with the annual critical use application or under separate cover
to EPA. Each year, beginning in 2002, users interested in a critical
use exemption have been required to submit a detailed application to
EPA between August and September. A small number of users applied only
on behalf of their operations alone and therefore for these users, EPA
has sufficient use data on a per entity basis in order to create a
historic baseline of methyl bromide use for a few entities.
Most users however applied for a critical use exemption as groups
of similar users (e.g. all of tomato growers in Michigan). In these
instances, EPA does not have the bulk of the baseline data needed to
create per entity historic baselines of methyl bromide use.
Due to the amount of time it would take (a) for users to submit
additional data and documentation to EPA and (b) for EPA to analyze the
data and write a notice-and-comment regulation allocating baseline
allocations, EPA would implement the CUPs beginning in 2007 and relying
on an upstream system as described in Section VI of this proposal an
interim control measure until 2007.
G. Methods for Distribution of Critical User Permits: Distribution
Using Auctions
EPA notes that an auction could be used for distributing critical
use permits (CUPs) to operations (users) that meet the critical use
criteria. EPA understands that affected entities have expressed a
strong preference for a simple regulatory mechanism for the critical
use exemption. EPA believes that of all the options, an auction may be
by far the most complex to design, would be unlikely to be in place in
time for the beginning of the critical use exemption, and may impose a
steep learning curve on affected entities.
EPA does not have statutory authority to set a price for methyl
bromide under the Clean Air Act. Therefore, to implement an auction,
EPA could only consider an option that did not have the government set
a minimum or maximum price for material under the critical use
exemption. EPA therefore is only considering auctions using a sealed
bid method with no set minimum bid. Other bid options which EPA did not
consider include the ascending bid or English auction and the declining
bid or Dutch auction.
In a sealed bid auction, each bidder discloses the maximum bid they
would offer and the number of permits they are seeking. The auctioneer
then opens all of the bids and awards the permits to the highest
bidders until there are no more permits left. The price of the last
permit awarded could be used to set the price of all of the bids
awarded (clearing price) or the price could be determined by the bid
set by the bidder (``pay as you bid''). In an ascending auction bid,
the auctioneer offers a losing bidder the chance to increase his/her
bid. When the bidding has ended, the permits are distributed to the
highest bidders. In a declining bid auction, the auctioneer sets a
price for the permit at the high end of the spectrum. Bidders can then
accept the price and buy permits or can wait and see if the price comes
down. EPA believes that it only has authority for a ``pay as you bid''
auction.
To submit a bid, a user would first have to establish an account
via a letter of credit or similar mechanism with the auctioneer or
would have to submit a certified check for their maximum bid amount
with their bid form. Information on the bid form would include name of
bidder, contact information for bidder, name and contact information of
the authorized representative if applicable, number of kilograms the
bidder wishes to purchase at a given price, type of permits if
applicable, location to be fumigated, a description of other crops or
uses that would benefit from the fumigation (e.g. a double crop of
peppers), and a certification form that any methyl bromide obtained
will be used only for critical use purposes.
The bid price could be structured to include just the cost of the
permit (the bid premium) or the cost of the permit plus the price of
the actual methyl bromide purchased. In the former, the bidder only
obtains the right to buy methyl bromide at a price to be set by the
supplier; in the latter option, the price paid by the successful bidder
includes the right to buy methyl bromide and the cost of the methyl
bromide. However, since EPA does not have the authority to redistribute
revenues from the auction, EPA only considered a bid price that covers
the cost of the CUP (the right to buy methyl bromide) alone.
All revenues from the auction would be sent to the U.S. Treasury
since EPA does not have statutory authority to capture the revenue for
other purposes.
[[Page 52390]]
EPA is considering running the auction in house, having another
federal entity run the auction, or allowing a third party to administer
the auction. Each of these implementation schemes for operating the
bidding process would award the CUPs simply on the basis of price. In
the event that a third party were to run the auction, EPA examined the
options of having the party run the auction either for a fee or as a
gratuitous service to the government. If the auction would be run as
the latter, the third-party would then be able to charge a reasonable
administration fee from those in the user community that elected to
participate in the auction.
H. Frequency of Auctions and Set Asides
In order to make the auction feasible, EPA believes that two
auctions a year would be required, one shortly before the beginning of
the control period and one three to four months after the new control
period begins. The second, later auction would be required in order to
ensure that quantities of methyl bromide authorized by the Parties to
the Protocol in their meeting only two months before the control period
and approved through rulemaking during the early part of the compliance
period could be allocated to users.
EPA recognizes that it could create a set-aside program to hold
back CUPs from an auction and that there are options for the amount
that could be held for the subsequent auction(s), and the numbers of
times and dates during a year for subsequent auctions. Under such a
program, between 10% and 50% of the total allowable amount, would be
held in reserve for a second annual auction in order to accommodate
those users who typically acquire methyl bromide later on in the
season.
I. Other Methods for Distributing CUPs
Other options for distributing critical use permits (CUPs) would
not entail EPA giving permits directly to end users of methyl bromide,
such as giving the CUPs to the consortium that applied for an
exemption. The consortium could then determine how they would like to
distribute allowances to individual users, either through use of data
or through an auction. However, there are several consortia that do not
have any infrastructure to receive and distribute the permits and some
consortia are not even legally incorporated entities. Alternatively,
EPA is considering giving allowances to State governments to re-
distribute using a method of their choosing. However, due to concerns
about the possibility of creating an unfunded mandate, EPA has decided
not to further consider such an option.
J. Tracking Permits
EPA is evaluating the feasibility of developing a web-enabled
database program to allow for the tracking and trading of CUPs. Since
almost 10 million CUPs could be issued based on the number of kilograms
requested by the U.S. government for critical uses in the 2003
nomination, EPA believes that a new tracking system would have to be
developed to facilitate the trading and tracking of CUPs. Each entity
that applies for an initial allocation of CUPs would be required to
create an account in the web-enabled database as well as entities that
sell or distribute methyl bromide to end users and entities who acquire
permits through trading. Once allocated, EPA would place CUPs in the
account of the end user. All accounts would be frozen on an annual
basis on December 31st for the annual true-up period during which time
no transactions could take place.
K. Redeeming CUPs for Methyl Bromide
A CUP holder may redeem his permit with a methyl bromide supplier
such as a custom applicator or distributor by transferring his permits
to the supplier's account. To transfer the permits, EPA would require
the permit holder to electronically transfer his permits to the
supplier's account indicating the number of acres/square feet to be
treated, location of area to be treated (address, coordinates, parcel
ID number) and whether a second crop will benefit from the fumigation.
The permit holder would then transfer the permits electronically to the
supplier's account, at which point the permits would be deactivated
automatically by the system. Automatically, an electronic mail
notification would be sent to the supplier notifying him that the
specified CUPs have been transferred to his account. The user would
then print out a certification form that the material would only be
used for the specific critical use, sign it and send it to the supplier
before he or she could receive the methyl bromide. A supplier or end
user would have ten business days to dispute the transaction with EPA
in the event that an error was made by the permit holder in the
transfer of permits.
L. Reporting Requirements for CUP Holders
CUP holders would be required to annually reconcile their accounts
by submitting a written form to EPA no later than 15 days after the end
of the control period, i.e. December 31st or the date when all
unredeemed permits would expire. The form would be created by EPA and
available on the EPA's methyl bromide website. CUP holders would be
required to indicate how much critical use methyl bromide bought during
the year has not been used and/or remains held in inventory for future
use.
M. Interaction Between CUPs and CUAs
EPA could implement the CUP program as a stand alone program or in
conjunction with a CUA and CSA program. If the CUP program were to be
implemented as a stand alone program, CUP holders would sell their
permits to producers and importers of methyl bromide at a time of their
choosing. The producers and importers would not be able to produce or
import methyl bromide until they held sufficient CUPs to match their
production or import decisions. EPA believes that under such a system,
it is likely that producers and importers would solicit CUPs early in
the year in order to bundle them for planning the year's production or
import. Producers and importers might be likely to pay more for permits
they obtain early in the year since they seek certainty on the amounts
they will be able to produce and import during the year.
Under the stand alone CUP program, EPA is considering two options
for how permit holders would obtain methyl bromide. Under the first
option, the permit holder would be entitled to receive 1 kilogram of
methyl bromide for each permit sold. EPA believes that under this
scenario, the price producers and importers would be willing to pay is
likely to be lower than under the second option. Under the second
option, a permit holder would sell his permit to a producer or importer
and would then purchase methyl bromide at a later date through his
normal supplier as a separate transaction following the procedures
proposed in today's notice-and-comment rulemaking.
Under the stand alone CUP program, the reporting and recordkeeping
requirements for producers, importers, distributors, custom applicators
and fumigators would be required as described in Sections VI of this
preamble. EPA understands that creating a stand alone CUP system for
the creation of exempted methyl bromide could place some strain on the
methyl bromide production system unless producers and importers were
able to buy CUPs from permit holders several months in advance of the
control period. However, due to the time it would take to allocate CUPs
through a notice-and-comment rulemaking, it would be unlikely that
sufficient time
[[Page 52391]]
would be available before the control period for producers and
importers of methyl bromide to have sufficient certainty to make
production decisions.
Under a combined option, in which EPA might allocate CUPs, as well
as CUAs, and CSAs (as in the program described in Section VI of today's
notice) the tracking requirements on usage and sector-specific
limitations on CUAs and/or CSAs by sector might be able to be
eliminated since these requirements, in part, are designed to ensure
that the U.S. does not exceed the recommended amounts for each sector.
VIII. What Conforming Amendments Is EPA Proposing With Respect to
Essential Use Allowances?
To make it easier for the public to read and EPA to update the
allocation of critical use allowances and critical stock allowance each
year, EPA proposes to create a new regulation at 40 CFR 82.8. This
section number is currently reserved. EPA proposes to place the list of
critical use allowance and critical stock allowance allocations in this
section.
In addition, to be consistent with this improved formatting for the
critical use exemption regulations, EPA also proposes to include the
essential use allowance allocations in section 82.8. Moving these
essential use allowance allocations to section 82.8 requires certain
conforming amendments to sections 82.3 and 82.4(n) as reflected in the
proposed regulatory text below.
IX. Statutory and Executive Order Reviews
A. Executive Order No. 12866: Regulatory Planning and Review
Under Executive Order No. 12866, (58 FR 51735, October 4, 1993) the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to OMB review and the requirements of the
Executive Order. The Order defines ``significant regulatory action'' as
one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
OMB has notified EPA that it considers this a ``significant
regulatory action'' under Executive Order No. 12866 and EPA has
submitted it to OMB for review. We will document changes made in
response to OMB suggestions or recommendations in the public record.
EPA conducted an economic impact analysis (Economic Impact Analysis
for Methyl Bromide Allocation in the United States, hereafter EIA) that
attempts to assess the effect of allowing critical use exemptions on
the regulated entities. The analysis is conducted relative to the
complete phaseout of methyl bromide production and consumption in 2005
(consumption is defined as production plus imports minus exports).
Therefore, any change in the existing regulations that allows for
continued production and import of methyl bromide may be considered de-
regulatory in nature, and will likely result in overall cost savings to
the regulated entities. Note that this analysis focuses only on the
effects to the regulated entities.
EPA looked at three illustrative alternatives for implementing the
critical use exemption: (1) An upstream cap and trade allowance system
which would give critical use allowances to producers and importers of
methyl bromide; (2) an upstream cap and trade system with a downstream
permit trading system where the permits are distributed to end users
and; (3) an upstream cap and trade system with a downstream permit
trading system where the permits are initially obtained through an
auction. Alternative 1 mirrors the Agency's proposal; Alternatives 2
and 3 mirror the CUP option.
Given the illustrative nature of these alternatives, many
assumptions are invoked. One of the critical assumptions used to
generate the analysis is the assumed phaseout schedule. The analysis
assumes that in 2005, the CUE exemption would equal 39 percent of the
1991 U.S. baseline consumption. By 2018, the analysis assumes that
methyl bromide production and consumption would be phased out
completely.
EPA also assumes that under a universal approach, 80 percent of the
total available amount of methyl bromide would go to the two largest
groups of end users, tomatoes and strawberries. Eighty percent was used
to reflect the total amount of methyl bromide originally requested by
these applicants as a proportion of the amount requested by other
applicants. See EIA for more discussion.
The incremental cost savings estimated for today's proposed rule
includes two general components: cost savings from the continued use of
methyl bromide as compared to use of a more expensive substitute (under
the baseline), and the economic benefit associated with the increased
crop yield obtained through use of methyl bromide instead of a less
effective substitute (under the baseline). The analysis also estimates
the administrative costs associated with each option (e.g., reporting
and recordkeeping).
The estimated cost savings are approximately $19 million to $31
million on an annual basis and $380 million to $600 million on a Net
Present Value basis depending on the particular option and discount
rate used (EIA, p. 126).
Table I.--Annualized and Net Present Value of Private Sector Compliance Costs for Alternative 1*
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Annualized costs Net present value costs
-------------------------------------------------------------------
Discount rate Sector Illustrative Sector Illustrative
specific universal specific universal
approach approach approach approach
----------------------------------------------------------------------------------------------------------------
3%.......................................... -$19.5 -$21.9 -$616.6 -$695.6
7%.......................................... -26.8 -31.3 -382.7 -446.8
----------------------------------------------------------------------------------------------------------------
* Timeline: 2005-2018.
[[Page 52392]]
There are two factors which affect these estimates: the size of the
cap (i.e. the amount of critical use methyl bromide exempted) and how
the cap is constrained (i.e. if there is one ``universal'' amount of
methyl bromide made available to all approved critical users or if
there is a sub-cap for each sector/commodity group).
The EIA addresses the question of whether or not a framework option
that would create either an upstream cap and trade system (Alternative
1) or a downstream tradable permit system (Alternative 2) is more
economically efficient (Alternative 3, the auction approach for
allocating allowances, was not quantitatively analyzed in this EIA).
The EIA concluded that in fact who holds the allowances has relatively
little impact on the efficiency of compliance costs per se and that
such costs are impacted more by the size of the cap and constraints on
the cap as identified in the preceding paragraphs. Under both options,
methyl bromide is ultimately purchased by the user of methyl bromide
with the highest willingness to pay. The main driver of efficiency is
whether or not methyl bromide goes to the highest value use within a
commodity sector or if it goes to the use with the highest value across
sectors. According to Chapter 5 of the EIA, however, there are some
factors that could affect whether or not the options produce the same
result in terms of consumption of methyl bromide by end users and in
control costs, namely how smoothly the market functions under either
option. For more information on the qualitative factors that would
impact either option for who holds the allowances, as well as a
discussion of the limitations associated with the analysis, please
refer to the EIA available in docket OAR-2003-0230.
While option two is better than option one in compensating end
users who give up their de facto ``rights'' to methyl bromide, the
drawback to option two is the additional complexity in both
administering the system and in complying with the system. The EIA
estimates that the administrative burden for the regulated community
and EPA under options one and two as follows:
Table 2.--Administrative Burden of Alternatives 1 and 2
------------------------------------------------------------------------
EPA burden Industry burden
------------------------------------------------------------------------
Alternative One.................. \1\ $25 k \1\ $2,200
\2\ 15 k \2\ 86 k
Alternative Two.................. \1\ 2,100 k \1\ 6,400 k
\2\ 53 k \2\ 2,000 k
------------------------------------------------------------------------
Source: EIA pages 102 and 117.
\1\ Annual.
\2\ One time.
Because the general methodological framework of the model used for
the analysis of the 2000 Phaseout Rule was retained to calculate the
costs for today's proposed rule, and because the phaseout model relies
on an engineering approach, the EIA is not well suited to predict the
distribution of methyl bromide. In addition to this limitation, the
analysis does not take into account the full array of alternatives to
methyl bromide that are under development. Also, due to the limited
nature of the analysis, the EIA does not explore how the costs savings
would pass through the economy, and who (consumers and/or regulated
entities) will eventually realize the cost savings.
Further details regarding the de-regulatory benefits of the
proposed critical use exemption and a discussion on the relative merits
of the two main options are available in the EIA which is docketed with
this proposed rulemaking.
B. Paperwork Reduction Act
The information collection requirements in this rule have been
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The
information collection requirements are not enforceable until OMB
approves them.
EPA submitted an ICR to OMB concurrent with today's proposed rule.
In the ICR, EPA characterizes the paperwork burden that industry may
face as a result of today's proposed action. The Information Collection
Request (ICR) document prepared by EPA has been assigned EPA ICR number
1432.23.
The information collection under this rule is authorized under
sections 603(b), 603(d) and 614(b) of the Clean Air Act (CAA).
The mandatory reporting requirements included in this rule are
intended to:
(1) Satisfy U.S. obligations under the international treaty, the
Montreal Protocol on Substances that Deplete the Ozone Layer
(Protocol), to report data under Article 7;
(2) Fulfill statutory obligations under section 603(b) of Title VI
of the Clean Air Act (CAA) for reporting and monitoring;
(3) Provide information to report to Congress on the production,
use and consumption of class I controlled substances as statutorily
required in section 603(d) of the CAA.
Information will be collected through quarterly reporting by
producers and importers and annual reporting by distributors and third
party applicators of methyl bromide. In addition, distributors and
third party applicators would be required to provide quarterly updates
on the availability of critical use exempted methyl bromide.
----------------------------------------------------------------------------------------------------------------
Number of Total number Hours per
Collection activity respondents of responses response Total hours
----------------------------------------------------------------------------------------------------------------
Rule Familiarization............................ 54 54 4 216
Report Inventory Data (one time)................ 54 54 2.5 135
Data Compilation (quarterly basis).............. 4 16 4 64
Data Compilation (annual basis)................. 50 50 8 400
Data Reporting (quarterly basis)................ 4 16 .5 8
Data Reporting (annual basis)................... 50 50 .5 25
Reporting on Allowance Trading Activities....... 4 16 .5 8
Self Certification Activities by Producers, 54 100 .25 25
Importers, and Distributors....................
Self Certification Activities by End Users...... 2,000 2,500 .25 625
-----------------
Total Burden Hours.......................... .............. .............. 18 1,505
----------------------------------------------------------------------------------------------------------------
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying
[[Page 52393]]
information; process and maintain information; disclose and provide
information; adjust the existing ways to comply with any previously
applicable instructions and requirements; train personnel to be able to
respond to a collection of information; search data sources; complete
and review the collection of information; and transmit or otherwise
disclose the information.
An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, including the use of automated collection
techniques, EPA has established a public docket for this rule, which
includes this ICR, under Electronic Docket ID number OAR-2003-0230.
Submit any comments related to the rule ICR for this proposed rule to
EPA and OMB. See ADDRESSES section at the beginning of this notice for
where to submit comments to EPA. Send comments to OMB at the Office of
Information and Regulatory Affairs, Office of Management and Budget,
725 17th Street, NW., Washington, DC 20503 attn: Desk Officer for EPA.
Include the EPA ICR number (1432.23) in correspondence related to this
ICR.
EPA informs respondents that they may assert claims of business
confidentiality for any of the information they submit. Information
claimed confidential will be treated in accordance with the procedures
for handling information claimed as confidential under 40 CFR part 2,
subpart B, and will be disclosed only to the extent, and by means of
the procedures, set forth in that subpart. If no claim of
confidentiality is asserted when the information is received by EPA, it
may be made available to the public without further notice to the
respondents (40 CFR 2.203).
C. Regulatory Flexibility Act (RFA)
The RFA generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to notice-and-comment
rulemaking requirements under the Administrative Procedure Act or any
other statute unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
Small entities include small businesses, small organizations, and small
governmental jurisdictions. For purposes of assessing the impacts of
today's rule on small entities, small entity is defined as: (1) A small
business that is identified by the North American Industry
Classification System (NAICS) Code in the Table below; (2) A small
governmental jurisdiction that is a government of a city, county, town,
school district or special district with a population of less that
50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.
----------------------------------------------------------------------------------------------------------------
NAICS Small business size
Category NAICS code SIC code standard (in number of employees
or millions of dollars)
----------------------------------------------------------------------------------------------------------------
Agricultural production............. 1112--Vegetable and 0171--Berry $0.75 million.
Melon farming. Crops.
1113--Fruit and Nut 0172--Grapes
Tree Farming. 0173--Tree Nuts
1114--Greenhouse, 0175--Deciduous
Nursery, and Tree Fruits
Floriculture (except apple
Production. orchards and
farms).
0179--Fruit and
Tree Nuts,
NEC.
0181--Ornamenta
l Floriculture
and Nursery
Products.
...................... 0831--Forest
Nurseries and
Gathering of
Forest
Products.
Storage Uses........................ ...................... 2041--Flour and
Other Grain
Mill Products.
115114--Postharvest 2044--Rice $6 million.
Crop activities Milling.
(except Cotton
Ginning).
311211--Flour Milling. ............... .................................
311212--Rice Milling.. ............... .................................
...................... 4221--Farm
Product
Warehousing
and Storage.
493110--General ............... $21.5 million.
Warehousing and
Storage.
[[Page 52394]]
493130--Farm Product 4225--General .................................
Warehousing and Warehousing
Storage. and Storage.
----------------------------------------------------------------------------------------------------------------
Agricultural producers of minor crops and entities that store
agricultural commodities are categories of affected entities that
contain small entities. This rule only affects entities that applied to
EPA for a de-regulatory exemption. In most cases, EPA received
aggregated requests for exemptions from industry consortia. On the
exemption application, EPA asked consortia to describe the number and
size distribution of entities their application covered. Based on the
data provided, EPA estimates that there are 3,218 entities that
petitioned EPA for an exemption. Since many applicants did not provide
information on the distribution of sizes of entities covered in their
applications, EPA estimated that between \1/4\ to \1/3\ of the entities
may be small businesses based on the definition given above. In
addition, other categories of affected entities do not contain small
businesses based on the above description.
After considering the economic impacts of today's proposed rule on
small entities, EPA certifies that this action will not have a
significant economic impact on a substantial number of small entities.
In determining whether a rule has a significant economic impact on a
substantial number of small entities, the impact of concern is any
significant adverse economic impact on small entities, since the
primary purpose of the regulatory flexibility analyses is to identify
and address regulatory alternatives ``which minimize any significant
economic impact of the proposed rule on small entities.'' (5 U.S.C.
603-604). Thus, an Agency may certify that a rule will not have a
significant economic impact on a substantial number of small entities
if the rule relieves a regulatory burden, or otherwise has a positive
economic effect on all of the small entities subject to the rule. Since
this rule will make methyl bromide available for approved critical uses
after the phaseout date of January 1, 2005, this is a de-regulatory
action which will confer a benefit to users of methyl bromide. EPA
believes the estimated de-regulatory value for users of methyl bromide
is between $20 million to $30 million annually. We have therefore
concluded that today's proposed rule will relieve regulatory burden for
all small entities. We continue to be interested in the potential
impacts of the proposed rule on small entities and welcome comments on
issues related to such impacts.
D. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures by State, local and tribal governments, in
the aggregate, or by the private sector, of $100 million or more in any
one year. If a written statement is required under section 202, section
205 of the UMRA generally requires EPA to identify and consider a
reasonable number of regulatory alternatives and adopt the least
costly, most cost-effective or least burdensome alternative that
achieves the objectives of the rule, unless the Agency explains why
this alternative is not selected or the selection of this alternative
is inconsistent with law.
Section 203 of the UMRA requires the Agency to establish a plan for
obtaining input from and informing, educating, and advising any small
governments that may be significantly or uniquely affected by the rule.
Section 204 of the UMRA requires the Agency to develop a process to
allow elected State, local, and tribal government officials to provide
input in the development of any proposal containing a significant
Federal intergovernmental mandate.
EPA has determined that this rule does not contain a Federal
mandate that may result in expenditures of $100 million or more by
State, local and tribal governments, in the aggregate, or by the
private sector, in any one year. Today's proposed rule seeks to obtain
comment on provisions authorized under the international treaty, the
Montreal Protocol on Substances that Deplete the Ozone Layer, as well
as authorizations set forth by Congress in section 604(d)(6) of the
Clean Air Act. Viewed as a whole, all of today's amendments do not
create a Federal mandate resulting in costs of $100 million or more in
any one year for State, local and tribal governments, in the aggregate,
or for the private sector. Thus, today's proposed rule is not subject
to the requirements of sections 202 and 205 of the UMRA. EPA has also
determined that this proposed rule contains no regulatory requirements
that might significantly or uniquely affect small governments;
therefore, EPA is not required to develop a plan with regard to small
governments under section 203. Finally, because this proposal does not
contain a significant intergovernmental mandate, the Agency is not
required to develop a process to obtain input from elected State,
local, and tribal officials under section 204.
E. Executive Order No. 13132: Federalism
Executive Order No. 13132, entitled ``Federalism'' (64 FR 43255,
August 10, 1999), requires EPA to develop an accountable process to
ensure ``meaningful and timely input by State and local officials in
the development of regulatory policies that have federalism
implications.'' The phrase ``policies that have federalism
implications'' is defined in the Executive Order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.''
Under section 6 of Executive Order No. 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct control costs, and that is not required by statute, unless the
Federal government provides the funds necessary to pay the direct
control costs incurred by State and local governments, or EPA consults
with State and local officials early in the process of developing the
regulation. EPA also may not issue a regulation that has federalism
implications and that
[[Page 52395]]
preempts State law, unless the Agency consults with State and local
officials early in the process of developing the regulation.
This proposed rule does not have federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order No. 13132. Today's proposed rule is
expected to primarily affect producers, suppliers, importers and
exporters and users of methyl bromide. Thus, the requirements of
Section 6 of the Executive Order do not apply to this proposed rule.
F. Executive Order No. 13175: Consultation and Coordination With Indian
Tribal Governments
Executive Order No. 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This proposed rule does not
have tribal implications, as specified in Executive Order No. 13175.
Today's proposed rule does not significantly or uniquely affect the
communities of Indian tribal governments. The proposed rule does not
impose any enforceable duties on communities of Indian tribal
governments. Thus, Executive Order No. 13175 does not apply to this
proposed rule.
G. Executive Order No. 13045: Protection of Children From Environmental
Health & Safety Risks
Executive Order No. 13045: ``Protection of Children from
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23,
1997) applies to any rule that: (1) Is determined to be ``economically
significant'' as defined under Executive Order 12866, and (2) concerns
an environmental health or safety risk that EPA has reason to believe
may have a disproportionate effect on children. If the regulatory
action meets both criteria, the Agency must evaluate the environmental
health or safety effects of the planned rule on children, and explain
why the planned regulation is preferable to other potentially effective
and reasonably feasible alternatives considered by the Agency.
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that are based on health or safety risks, such that
the analysis required under Section 5-501 of the Order has the
potential to influence the regulation. This proposed rule is not
subject to Executive Order 13045 because it does not establish an
environmental standard intended to mitigate health or safety risks.
H. Executive Order No. 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use
This rule is not a ``significant energy action'' as defined in
Executive Order No. 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy. This rule does
not pertain to any segment of the energy production economy nor does it
regulate any manner of energy use. Therefore, we have concluded that
this rule is not likely to have any adverse energy effects.
I. The National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law No. 104-113, section 12(d) (15
U.S.C. 272 note) directs EPA to use voluntary consensus standards in
its regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. The NTTAA directs EPA
to provide Congress, through OMB, explanations when the Agency decides
not to use available and applicable voluntary consensus standards. This
rulemaking does not involve technical standards. Therefore, EPA is not
considering the use of any voluntary consensus standards.
List of Subjects in 40 CFR Part 82
Environmental protection, Chemicals, Exports, Imports, Methyl
bromide, Ozone, Production, Reporting and recordkeeping requirements,
and Treaties.
Dated: August 11, 2004.
Michael O. Leavitt,
Administrator.
For the reasons stated in the preamble, 40 CFR part 82 is proposed
to be amended as follows:
PART 82--PROTECTION OF STRATOSPHERIC OZONE
1. The authority citation for part 82 continues to read as follows:
Authority: 42 U.S.C. 7414, 7601, 7671-7671q.
Subpart A--Production and Consumption Controls
2. Section 82.3 is amended as follows:
a. By adding definitions in alphabetical order for the terms,
``Approved critical use,'' ``Approved critical user,'' ``Consortium,''
``Critical stock allowance,'' ``Critical stock allowance holder,''
``Critical use,'' ``Critical use allowance,'' ``Critical use allowance
holder,'' ``Critical use methyl bromide,'' ``End user,'' ``Limiting
critical condition,'' ``Location of use,'' ``Sell to approved critical
users,'' ``Third party applicator,'' ``Unexpended critical stock
allowance,'' and ``Unexpended critical use allowance;''
b. By revising definition of ``Confer.''
Sec. 82.3 Definitions for class I and class II controlled substances.
* * * * *
Approved critical use(s) means those uses of methyl bromide listed
in Appendix L to this subpart that have a limiting critical condition.
* * * * *
Approved critical user(s) means a person who:
(1) For the applicable control period, applied to EPA for a
critical use exemption or is a member of a consortium that applied for
a critical use exemption for a use and location of use that was
included in the U.S. nomination, authorized by a Decision of the
Parties to the Montreal Protocol, and then finally determined by EPA in
a notice-and-comment rulemaking to be a critical use in that location;
and
(2) Has an area in the applicable location of use that requires
methyl bromide fumigation because the area is subject to a limiting
critical condition.
* * * * *
Confer means to shift the essential-use allowances obtained under
Sec. 82.8 from the holder of the unexpended essential-use allowances
to a person for the production of a specified controlled substance, or
to shift the HCFC-141b exemption allowances granted under Sec.
82.16(h) from the holder of the unexpended HCFC-141b exemption
allowances to a person for the production or import of the controlled
substance.
* * * * *
Consortium means an organization representing a group of methyl
bromide
[[Page 52396]]
users that has collectively submitted an application for a critical use
exemption on behalf of all members of the group. The members of a
consortium shall be determined on the basis of the rules established by
the organization. Members may either be required to formally join the
consortium (i.e., by submitting an application or paying dues) or may
automatically become members upon meeting particular criteria (i.e. a
grower of a specific crop in a particular region).
* * * * *
Critical stock allowance (CSA) means the privilege granted by this
subpart to sell one (1) kilogram of methyl bromide to an approved
critical user during the specified control period to the extent
permitted by federal and state pesticide statutes and regulations other
than the Clean Air Act and regulations in this part. A person's
critical stock allowances are the total of the allowances obtained
under Sec. 82.8(c) as may be modified under Sec. 82.12 (transfer of
allowances).
Critical stock allowance (CSA) holder means an entity to which EPA
allocates a quantity of critical stock allowances as reflected under
Sec. 82.8(c).
Critical use means a circumstance in which the following two
conditions are satisfied:
(1) There are no technically and economically feasible alternatives
or substitutes for methyl bromide available to end users that are
acceptable from the standpoint of environment and health and are
suitable to the crops and circumstances involved, and
(2) The lack of availability of methyl bromide for a particular use
would result in significant market disruption in the United States.
Critical use allowance (CUA) means the privilege granted by this
subpart to produce or import on (1) kilogram of methyl bromide for an
approved critical user during the specified control period. A person's
critical use allowances are the total of the allowances obtained under
Sec. 82.8(c) as may be modified under Sec. 82.12 (transfer of
allowances).
Critical use allowance (CUA) holder means an entity to which EPA
allocates a quantity of critical use allowances as reflected in Sec.
82.8(c).
Critical use methyl bromide means the class I, Group VI controlled
substance produced and imported through expending a critical use
allowance.
* * * * *
End user means a person that treats or fumigates commodities,
crops, structures or land in his possession with methyl bromide or
contracts with a third party applicator for such treatment or
fumigation.
* * * * *
Limiting critical condition means the regulatory, technical, and
economic circumstances listed in Appendix L to this subpart that
establish conditions of critical use for methyl bromide in a fumigation
area. Such conditions may include, but are not limited, to:
(1) The absence of technically and economically feasible
alternatives to methyl bromide for a specific use;
(2) Regulatory restrictions that prohibit the use of available
alternatives in a specific fumigation area;
(3) Terrain, soil, or climatological conditions that render use of
available alternatives technically or economically infeasible in a
specific fumigation area.
* * * * *
Location of use means the geographic area (such as a state, region,
or the entire United States) covered by an application for a critical
use exemption in which the limiting critical condition may occur.
* * * * *
Sell to approved critical users means to sell quantities of methyl
bromide to an end user or to contract with an end user to provide
treatment or fumigation services on commodities, structures, crops, or
land in the possession of the end user.
* * * * *
Third party applicator means an applicator of critical use methyl
bromide who fumigates or treats commodities, structures, crops, or land
in the possession of an end user.
* * * * *
Unexpended critical stock allowances (CSA) means critical stock
allowances against which methyl bromide has not yet been sold or
distributed to approved critical uses. At any time in any control
period a person's unexpended critical stock allowances are the total of
the level of critical stock allowances the person has authorization
under this subpart to hold at that time for that control period, minus
the level of class I, Group VI controlled substances that the person
has sold or distributed to approved critical users in that control
period until that time.
* * * * *
Unexpended critical use allowances (CUA) means critical use
allowances against which methyl bromide has not yet been produced or
imported. At any time in any control period a person's unexpended
critical use allowances are the total of the level of critical use
allowances the person has authorization under this subpart to hold at
that time for that control period, minus the level of class I, Group VI
controlled substances that the person has produced or has imported
solely for approved critical uses in that control period until that
time.
* * * * *
3. Section 82.4 is amended by revising paragraphs (b), (d) and (n),
and by adding paragraph (p) as follows:
Sec. 82.4 Prohibitions for class I controlled substances.
* * * * *
(b) Effective January 1, 1996, for any class I, Group I, Group II,
Group III, Group IV, Group V, or Group VII controlled substances, and
effective January 1, 2005, for any class I, Group VI controlled
substance, and effective August 18, 2003, for any class I, Group VIII
controlled substance, no person may produce, at any time in any control
period, (except that are transformed or destroyed domestically or by a
person of another Party) in excess of the amount of conferred
unexpended essential use allowances or exemptions under this subpart,
or the amount of unexpended critical use allowances allocated under
this subpart, or the amount of unexpended Article 5 allowances as
allocated under Sec. 82.9, for that substance held by that person
under the authority of this subpart at that time for that control
period. Every kilogram of excess production constitutes a separate
violation of this subpart.
* * * * *
(d) Effective January 1, 1996, for any class I, Group I, Group II,
Group III, Group IV, Group V, or Group VII controlled substances, and
effective January 1, 2005, for any class I, Group VI controlled
substance, and effective August 18, 2003, for any class I, Group VIII
controlled substance, no person may import (except for transhipments or
heels), at any time in any control period, (except for controlled
substances that are transformed or destroyed) in excess of the amount
of unexpended essential use allowances or exemptions, or unexpended
critical use allowances, allocated in this subpart for that substance
held by that person under the authority of this subpart at that time
for that control period. Every kilogram of excess importation (other
than transhipments or heels) constitutes a separate violation of this
subpart. It is a violation of this subpart to obtain unused class I
controlled substances under the general laboratory exemption in excess
of actual need and to recycle that material for sale into other
markets.
* * * * *
(n) No person may use class I controlled substances produced or
[[Page 52397]]
imported under the essential use exemption for any purpose other than
those set forth in this paragraph. Effective January 1, 1996,
essential-use allowances are apportioned to a person under Sec.
82.8(a) and (b) for the exempted production or importation of specified
class I controlled substances solely for the purposes listed in
paragraphs (n)(1)(i) through (iii) of this section.
(1) Essential-uses for the production or importation of controlled
substances as agreed to by the Parties to the Protocol and subject to
the periodic revision of the Parties are:
(i) Metered dose inhalers (MDIs) for the treatment of asthma and
chronic obstructive pulmonary disease that were approved by the Food
and Drug Administration before December 31, 2000.
(ii) Space Shuttle--solvents.
(iii) Essential laboratory and analytical uses (defined in Appendix
G of this subpart).
(2) Any person acquiring unused class I controlled substances
produced or imported under the authority of essential-use allowances or
the essential-use exemption granted in Sec. 82.8 to this subpart for
use in anything other than an essential-use (i.e., for uses other than
those specifically listed in paragraph (n)(1) of this section) is in
violation of this subpart. Each kilogram of unused class I controlled
substance produced or imported under the authority of essential-use
allowances or the essential-use exemption and used for a non-essential
uses is a separate violation of this subpart. Any person selling unused
class I controlled substances produced or imported under authority of
essential-use allowances or the essential-use exemption for uses other
than an essential-use is in violation of this subpart. Each kilogram of
unused class I controlled substances produced or imported under
authority of essential-use allowances or the essential-use exemption
and sold for a use other than an essential-use is a separate violation
of this subpart. It is a violation of this subpart to obtain unused
class I controlled substances under the exemption for laboratory and
analytical uses in excess of actual need and to recycle that material
for sale into other markets.
* * * * *
(p) Critical use exemption. With respect to class I, Group VI
substances (methyl bromide):
(1) No person shall sell critical use methyl bromide to an end user
who is not an approved critical user. Every kilogram of critical use
methyl bromide sold to an end user that is not an approved critical use
constitutes a separate violation of this subpart.
(2) No person who acquires critical use methyl bromide may use such
quantities for a use other than the specified critical use listed in
Column A of Appendix L to this subpart. No person who acquires critical
use methyl bromide produced under an allowance for a specific use
sector listed in Appendix L to this subpart, if applicable, may use
such quantities in a different use sector. No person who acquires
critical use methyl bromide may use such material unless he meets a
limiting critical condition listed in Appendix L to this subpart. No
approved critical user shall take possession of quantities of critical
use methyl bromide or acquire fumigation services using quantities of
critical use methyl bromide without first certifying that they are
approved critical users in accordance with the requirements in Sec.
82.13. Every 200 kilograms of methyl bromide certified by an end user
to be acquired for an approved critical use that is used for a use
other than the specified critical use listed in Column A of Appendix L
to this subpart constitutes a separate violation of this subpart .
(3) No person shall sell critical use methyl bromide to an approved
critical user without first obtaining a signed certification form from
the approved critical user. Every kilogram of critical use methyl
bromide sold to an approved critical user without first obtaining
certification constitutes a separate violation of this subpart.
(4) No person shall sell methyl bromide produced or imported before
the phaseout date of January 1, 2005, to an approved critical user for
a critical use and location of use listed in Appendix L to this subpart
unless the person holds a critical stock allowance (CSA). Every
kilogram of methyl bromide sold to an approved critical user for
critical use in excess of the number of critical stock allowances held
by the seller constitutes a separate violation of this subpart.
(5) No person shall sell methyl bromide produced or imported before
the phaseout date of January 1, 2005, for a critical use listed in
Column A to an end user listed in Column B of Appendix L to this
subpart who is not an approved critical user because the end user does
not have an area subject to the limiting critical condition in Column C
of Appendix L.
* * * * *
4. Section 82.8 is added to read as follows:
Sec. 82.8 Grant of essential use allowances and critical use
allowances.
(a) Effective January 1, 1996, persons in the following list are
allocated essential-use allowances or exemptions for quantities of a
specific class I controlled substance for a specific essential-use (the
Administrator reserves the right to revise the allocations based on
future decisions of the Parties).
Table I.--Essential Use Allowances for Calendar Year 2004
----------------------------------------------------------------------------------------------------------------
Quantity
Company Chemical (metric tons)
----------------------------------------------------------------------------------------------------------------
(i) Metered Dose Inhalers (for oral inhalation) for Treatment of Asthma and Chronic Obstructive Pulmonary
Disease
----------------------------------------------------------------------------------------------------------------
Armstrong Pharmaceuticals............. CFC-11 or CFC-12 or CFC-114 390.60
Aventis Pharmaceutical Products....... CFC-11 or CFC-12 or CFC-114 48.40
Boehringer Ingelheim Pharmaceuticals.. CFC-11 or CFC-12 or CFC-114 500.20
PLIVA Inc............................. CFC-11 or CFC-12 or CFC-114 136.00
Schering-Plough Corporation........... CFC-11 or CFC-12 or CFC-114 918.00
3M Pharmaceuticals.................... CFC-11 or CFC-12 or CFC-114 84.71
---------------------------------------
(ii) Cleaning, Bonding and Surface Activation Applications for the Space Shuttle Rockets and Titan Rockets
----------------------------------------------------------------------------------------------------------------
National Aeronautics and Space Methyl Chloroform 141.877
Administration (NASA)/Thiokol Rocket.
----------------------------------------------------------------------------------------------------------------
[[Page 52398]]
(b) A global exemption for class I controlled substances for
essential laboratory and analytical uses shall be in effect through
December 31, 2005 subject to the restrictions in Appendix G of this
subpart, and subject to the record-keeping and reporting requirements
at Sec. 82.13(u) through (x). There is no amount specified for this
exemption.
(c) Effective January 1, 2005, critical use allowances are
apportioned as set forth in paragraph (c)(1) of this section for the
exempted production and import of class I, Group VI controlled
substances specifically for those approved critical uses listed in
Appendix L to this subpart for the applicable control period. Every
kilogram of production and import in excess of the total number and
type of unexpended critical use allowances held for a particular type
of use constitutes a separate violation of this subpart. Effective
January 1, 2005, critical stock allowances of a specific number are
apportioned as set forth in paragraph (c)(2) of this section, for those
uses listed in Appendix L to this subpart for the applicable control
period, for the sale to approved critical users of class I, Group VI
controlled substances held in inventory that were produced or imported
before the January 1, 2005 phaseout date. Every kilogram of sale to
approved critical users in excess of the total number of unexpended
critical stock allowances held constitutes a separate violation of this
subpart.
(1) Allocated critical use allowances for annual control period.
[Reserved]
(2) Allocated critical stock allowances for annual control period.
[Reserved]
5. Section 82.12 is amended by revising paragraph (a)(1)
introductory text, (a)(1)(i)(H), (a)(1)(ii) introductory text, and
(a)(1)(iii), and by adding paragraph (e) to read as follows:
Sec. 82.12 Transfers of allowances for class I controlled substances.
(a) Inter-company transfers. (1) Until January 1, 1996, for all
class I controlled substances, except for Group VI, and until January
1, 2005, for Group VI, any person (``transferor'') may transfer to any
other person (``transferee'') any amount of the transferor's
consumption allowances or production allowances, and effective January
1, 1995, for all class I controlled substances any person
(``transferor'') may transfer to any other person (``transferee'') any
amount of the transferor's Article 5 allowances. After January 1, 2002,
any essential-use allowance holder (including those persons that hold
essential-use allowances issued by a Party other than the United
States) (``transferor'') may transfer essential-use allowances for CFCs
to a metered dose inhaler company solely for the manufacture of
essential MDIs. After January 1, 2005, any critical use allowance
holder (``transferor'') may transfer critical use allowances to any
other person (``transferee''). After January 1, 2005, any critical
stock allowance holder (``transferor'') may transfer critical stock
allowances to any critical stock allowance holder (``transferee'').
(i) * * *
(H) The one percent offset applied to the unweighted amount traded
will be deducted from the transferor's production or consumption
allowance balance (except for trades from transformers and destroyers
to producers or importers for the purpose of allowance reimbursement).
In the case of transferring essential use allowances, the amount of one
tenth of one percent of the amount traded will be deducted from the
transferor's allowance balance. In the case of transferring critical
use allowances, the amount of one tenth of one percent of the amount
traded will be deducted from the transferor's critical use allowance
balance.
* * * * *
(ii) The Administrator will determine whether the records
maintained by EPA, taking into account any previous transfers and any
production, allowable imports and exports of controlled substances
reported by the transferor, indicate that the transferor possesses, as
of the date the transfer claim is processed, unexpended allowances
sufficient to cover the transfer claim (i.e., the amount to be
transferred plus, in the case of transferors of essential use
allowances and critical use allowances, one tenth of one percent of the
transferred amount). Within three working days of receiving a complete
transfer claim, the Administrator will take action to notify the
transferor and transferee as follows:
* * * * *
(iii) In the event that the Administrator does not respond to a
transfer claim within the three working days specified in paragraph
(a)(1)(ii) of this section the transferor and transferee may proceed
with the transfer. EPA will reduce the transferor's balance of
unexpended allowances by the amount to be transferred plus, in the case
of transfers of production or consumption allowances, one percent of
that amount, and in the case of essential use allowances and critical
use allowances, one tenth of one percent of that amount. However if EPA
ultimately finds that the transferor did not have sufficient unexpended
allowances to cover the claim, the transferor and transferee will be
held liable for any violations of the regulations of this subpart that
occur as a result of, or in conjunction with, the improper transfer.
* * * * *
(e) Exchange of critical use allowances for critical stock
allowances. (1) Critical use allowance holders may petition the
Administrator to exchange a quantity of their unexpended critical use
allowances for an equivalent amount of critical stock allowances
provided they hold this equivalent amount of class I, Group VI
controlled substance that was produced or imported in a prior control
period either with production allowances and consumption allowances or
critical use allowances. A person allocated critical stock allowances
may not petition to exchange unexpended critical stock allowances for
critical use allowances.
(2) [Reserved]
6. Section 82.13 is amended as follows:
a. By revising paragraphs (a), (f)(3)(iv) and (g)(4)(vii).
b. By adding paragraphs (f)(2)(xx) through (f)(2)(xxi),
(f)(3)(xvi), (g)(1)(xx) through (g)(1)(xxi), (g)(4)(xviii), and (bb)
through (dd).
Sec. 82.13 Recordkeeping and reporting requirements for class I
controlled susntances.
(a) Unless otherwise specified, the recordkeeping and reporting
requirements set forth in this section take effect on January 1, 1995.
For class I, Group VIII controlled substances, the recordkeeping and
reporting requirements set forth in this section take effect on August
18, 2003. For class I, Group VI critical use methyl bromide, the
recordkeeping and reporting requirements set forth in this section take
effect January 1, 2005.
(f) * * *
(2) * * *
(xx) For class I, Group VI controlled substances, dated records
such as invoices and order forms, and a log of the quantity of
controlled substances produced for critical use, by specified critical
use if applicable as per Appendix L of this subpart, and the quantity
sold for critical use, by specified critical use if applicable as per
Appendix L of this subpart, and;
(xxi) Written certifications that quantities of class I, Group VI
controlled substances produced for critical use were purchased by
distributors, applicators, or end users to be used or sold only for
critical use in accordance with the definitions and prohibitions in
[[Page 52399]]
this subpart. Certifications must be maintained by a producer for a
minimum of three years.
(3) * * *
(iv) The producer's total of expended and unexpended production
allowances, consumption allowances, Article 5 allowances, critical use
allowances by specified critical use if applicable, critical stock
allowances, and amount of essential-use allowances and destruction and
transformation credits conferred at the end of that quarter;
* * * * *
(xvi) For critical uses of class I, Group VI controlled substances,
an annual list of the total amount of critical use methyl bromide by
specified critical use, if applicable as per Appendix L of this
subpart, that was produced, bought, and sold as well as the amounts of
critical use methyl bromide held in inventory by the reporting entity
or held in inventory by the reporting entity on behalf of another
entity.
(g) * * *
(1) * * *
(xx) For class I, Group VI controlled substances, dated records
such as invoices and order forms, of the quantity of controlled
substances imported for critical use, by specified critical use if
applicable per Appendix L of this subpart, and the quantity sold for
critical use, by specified critical use if applicable as per Appendix L
of this subpart, and;
(xxi) Written certifications that quantities of class I, Group VI
controlled substances imported for critical use were purchased by
distributors, applicators, or end users to be used or sold only for
critical use in accordance with the definitions and prohibitions in
this subpart. Certifications must be maintained by an importer for a
minimum of three years.
(4) * * *
(vii) The importer's total sum of expended and unexpended
consumption allowances by chemical as of the end of that quarter and
the total sum of expended and unexpended critical use allowances by
specified critical use, if applicable, as per Appendix L of this
subpart;
* * * * *
(xviii) For critical uses of class I, Group VI controlled
substances, an annual list of the total amount of critical use methyl
bromide by specified critical use if applicable, as per Appendix L of
this subpart, that was imported, bought, and sold as well as the
amounts of critical use methyl bromide held in inventory by the
reporting entity or held in inventory by the reporting entity on behalf
of another entity.
* * * * *
(bb) Every distributor of methyl bromide (class I, Group VI
controlled substances) who purchases or receives a quantity of critical
use methyl bromide must comply with recordkeeping and reporting
requirements specified in this paragraph.
(1) Recordkeeping--Every distributor of critical use methyl bromide
must certify to the producer or importer or other entity from which
they are acquiring quantities of critical use methyl bromide that such
quantities received will be sold or used only for approved critical
use(s) in accordance with the definitions and prohibitions in this
subpart.
(i) Every distributor of a quantity of critical use methyl bromide
must receive from an applicator, or any other entity to whom they sell
critical use methyl bromide, a certification of the quantity of
critical use methyl bromide ordered, prior to delivery of the quantity,
stating that the quantity will be sold or used only for approved
critical uses in accordance with definitions and prohibitions in this
subpart.
(ii) Every distributor of methyl bromide who receives a
certification from an applicator or any other entity to which they sell
critical use methyl bromide must maintain the certifications as records
for 3 years.
(iii) Every distributor of a quantity of critical use methyl
bromide must maintain invoice and order records related to the sale of
such material for 3 years.
(2) Reporting--Every distributor of critical use methyl bromide
must report to the Administrator annually, the following items:
(i) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide bought,
organized by specified critical use if applicable as per Appendix L of
this subpart, and;
(ii) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide sold
organized by specified critical use and;
(iii) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide held by the
reporting entity or held by the reporting entity on behalf of another
entity, organized by specified critical use if applicable as per
Appendix L of this subpart.
(cc) Every third party applicator of methyl bromide (class I, Group
VI controlled substances) that purchases or receives critical use
methyl bromide must comply with recordkeeping and reporting
requirements specified in this paragraph.
(1) Recordkeeping--Every third party applicator of methyl bromide
must certify to the producer or importer or other entity from whom they
are acquiring quantities of critical use methyl bromide that such
quantities received will be sold or used only for approved critical use
in accordance with the definitions and prohibitions in this subpart.
(i) Every third party applicator of a quantity of critical use
methyl bromide must receive from an end user or any other entity, to
whom they sell critical use methyl bromide or for whom they fumigate an
area, a certification that the quantity of class I, Group VI controlled
substances ordered, prior to delivery of the quantity or prior to
providing fumigation services, will only be sold or used for critical
uses in accordance with definitions and prohibitions in this subpart.
(ii) Every third party applicator of methyl bromide who receives a
certification from an entity to which they sell critical use methyl
bromide must maintain the certifications as records for 3 years.
(iii) Every third party applicator of a quantity of critical use
methyl bromide must maintain invoice and order records related to the
sale of such material for three years.
(2) Reporting--Every third party applicator of critical use methyl
bromide must report to the Administrator annually, the following items:
(i) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide bought, and
from whom, organized by specified end use if applicable as per Appendix
L of this subpart and;
(ii) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide sold
organized by specified end use and;
(iii) For critical uses of class I, Group VI controlled substances,
an annual list of the amount of critical use methyl bromide held for
the reporting entity or held by the reporting entity on behalf of
another entity, organized by specified end use if applicable as per
Appendix L of this subpart.
(dd) Every approved critical user purchasing an amount of critical
use methyl bromide or purchasing fumigation services with critical use
methyl bromide must, for each request,
[[Page 52400]]
certify knowledge of the requirements associated with the exemption for
critical use in this subpart and provide such information that
identifies the use as a critical use and the user as an approved
critical user. The certification will state, in part: ``I certify,
under penalty of law, knowledge of the requirements associated with the
exempted critical use published in 40 CFR part 82, including the
requirement that this letter cite basic information identifying the end
use as an approved critical use and the end user as an approved
critical user.''
7. Add Appendix L to subpart A to read as follows:
Appendix L to Subpart A of Part 82--Approved Critical Uses, and
Limiting Critical Conditions for Those Uses for the 2005 Control Period
----------------------------------------------------------------------------------------------------------------
Column B--End user and Column C--Limiting critical
Column A--Approved critical use location of use conditions
----------------------------------------------------------------------------------------------------------------
Pre-Plant Uses
----------------------------------------------------------------------------------------------------------------
Cucurbits....................................... (a) Michigan growers...... with moderate to severe fungal
pathogen infestation.
-------------------------------------------------
(b) Alabama, Arkansas, with moderate to severe yellow or
Georgia, North Carolina, purple nutsedge infestation.
South Carolina,
Tennessee, and Virginia
growers.
Eggplant........................................ (a) Georgia growers....... with one or more of the following
limiting critical conditions:
moderate to severe yellow or
purple nutsedge infestation,
moderate to severe nematode
infestation, or moderate severe
fungal pathogen infestation.
(b) Florida growers....... with one or more of the following
limiting critical conditions:
moderate to severe yellow or
purple nutsedge infestation, or
moderate to severe nematode
infestation, or moderate to
severe fungal pathogen
infestation, or karst topography.
Forest Seedlings................................ (a) Members of the with one or more of the following
Southern Forest Nursery limiting critical conditions:
Management Cooperative moderate to severe fungal
limited to growing pathogen infestation, moderate to
locations in Alabama, severe yellow or purple nutsedge
Arkansas, Florida, infestation, or moderate to
Georgia, Louisiana, severe disease infestation.
Mississippi, North
Carolina, Oklahoma, South
Carolina, Tennessee,
Texas, and Virginia.
(b) International Paper with one or more of the following
and its subsidiaries limiting critical conditions:
limited to growing moderate to severe fungal
locations in Arkansas, pathogen infestation, moderate to
Alabama, Georgia, South severe yellow or purple nutsedge
Carolina and Texas. infestation, or moderate to
severe disease infestation.
(c) Weyerhaeuser Company with one or more of the following
and its subsidiaries limiting critical conditions:
limited to growing moderate to severe fungal
locations in Alabama, pathogen infestation, moderate to
Arkansas, North Carolina, severe yellow or purple nutsedge
South Carolina, Oregon, infestation, or moderate to
and Washington. severe disease infestation.
(d) Public (government with one or more of the following
owned) seedling nurseries limiting critical conditions:
in the states of moderate to severe fungal
California, Idaho, pathogen infestation, moderate to
Illinois, Indiana, severe yellow or purple nutsedge
Kansas, Kentucky, infestation, or moderate to
Maryland, Missouri, severe disease infestation.
Nebraska, New Jersey,
Ohio, Oregon,
Pennsylvania, Utah,
Washington, West Virginia
and Wisconsin.
(e) Members of the Nursery with one or more of the following
Technology Cooperative limiting critical conditions:
limited to growing moderate to severe fungal
locations in Oregon and pathogen infestation, moderate to
Washington. severe yellow or purple nutsedge
infestation, or moderate to
severe disease infestation.
(f) Michigan seedling with one or more of the following
nurseries. limiting critical conditions:
moderate to severe fungal
pathogen infestation, moderate to
severe yellow or purple nutsedge
infestation, or moderate to
severe disease infestation.
Ginger.......................................... Hawaii growers............ with the limiting critical
condition of moderate to severe
nematode infestation, or moderate
to severe bacterial wilt
infestation.
Orchard Nursery Seedlings....................... (a) Members of the Western with one or more of the following
Raspberry Nursery limiting critical conditions:
Consortium limited to moderate to severe nematode
growing locations in infestation, medium to heavy clay
California and Washington soils, or a prohibition of on the
(Driscoll's raspberries use of 1,3-dichloropropene
and their contract products due to reaching local
growers in California and township limits on the use of
Washington). this alternative.
(b) Members of the with one or more of the following
California Association of limiting critical conditions:
Nurserymen-Deciduous moderate to severe nematode
Fruit and Nut Tree infestation, medium to heavy clay
Growers. soils, or a prohibition of on the
use of 1,3-dichloropropene
products due to reaching local
township limits on the use of
this alternative.
(c) Members of the with one or more of the following
California Association of limiting critical conditions:
Nurserymen-Citrus and moderate to severe nematode
Avocado Growers. infestation, medium to heavy clay
soils, or a prohibition of on the
use of 1,3-dichloropropene
products due to reaching local
township limits on the use of
this alternative.
[[Page 52401]]
Orchard Replant................................. (a) California stone fruit with one or more of the following
growers. limiting critical conditions:
replanted (non-virgin) orchard
soils to prevent orchard replant
disease, or medium to heavy
soils, or a prohibition on the
use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
(b) California table and with one or more of the following
raisin grape growers. limiting critical conditions:
replanted (non-virgin) orchard
soils to prevent orchard replant
disease, or medium to heavy
soils, or a prohibition on the
use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
(c) California walnut with one or more of the following
growers. limiting critical conditions:
replanted (non-virgin) orchard
soils to prevent orchard replant
disease, or medium to heavy
soils, or a prohibition on the
use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
(d) California almond with one or more of the following
growers. limiting critical conditions:
replanted (non-virgin) orchard
soils to prevent orchard replant
disease, or medium to heavy
soils, or a prohibition on the
use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
Ornamentals..................................... (a) Yoder Brothers Inc. in for use in chrysanthemum
Florida. production.
(b) California rose prohibited from using 1,3-
nurseries. dichloropropene products because
local township limits for this
alternative have been reached.
Peppers......................................... (a) California growers.... with the limiting critical
conditions of moderate to severe
fungal pathogens, or moderate to
sever disease infestation, or
moderate to sever nematode
infestation, or moderate to
severe yellow or purple nutsedge
infestation, or a prohibition on
the use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
(b) Alabama, Arkansas, with one or more of the following
Georgia, North Carolina, limiting critical conditions:
South Carolina, Tennessee moderate to severe yellow or
and Virginia growers. purple nutsedge infestation, or
the presence of an occupied
structure within 76 meters of a
grower's field the size of 100
acres or less.
(c) Florida growers....... with one or more of the following
limiting critical conditions:
moderate to severe yellow or
purple nutsedge infestation, or
karst topography.
Strawberry Nurseries............................ (a) California growers.... with one or more of the following
limiting critical conditions:
moderate to severe black root rot
or crown rot, moderate to severe
nematode infestation, or moderate
to severe yellow or purple
nutsedge infestation.
(b) North Carolina and with the presence of an occupied
Tennessee growers. structure within 76 meters of a
grower's field the size of 100
acres or less.
Strawberry Fruit................................ (a) California growers.... with one or more of the following
limiting critical conditions:
moderate to severe black root rot
or crown rot, moderate severe
nematode infestation, moderate to
severe yellow or purple nutsedge
infestation, a prohibition of the
use of 1,3-dichloropropene
products because local township
limits for this alternative have
been reached.
(b) Florida growers....... with one or more of the following
limiting critical conditions:
moderate to severe yellow or
purple nutsedge, or karst
topography.
(c) Alabama, Arkansas, with one or more of the following
Georgia, North Carolina, limiting critical conditions:
South Carolina, moderate to severe yellow or
Tennessee, Virginia, Ohio purple nutsedge, or the presence
and New Jersey growers. of an occupied structure within
76 meters of a grower's field the
size of 100 acres or less.
Sweet Potatoes.................................. California growers........ with the contingent limiting
critical condition of a
prohibition on the use of 1,3-
dichloropropene products because
local township limits for this
alternative have been reached.
Tomatoes........................................ (a) Michigan growers...... with moderate to severe disease,
or fungal pathogens.
(b) Alabama, Arkansas, with one or more of the following
Georgia, North Carolina, limiting critical conditions:
South Carolina, Tennessee moderate to severe yellow or
and Virginia growers. purple nutsedge infestation, or
the presence of an occupied
structure within 76 meters of a
grower's field the size of 100
acres or less.
(c) Florida growers....... with one or more of the following
limiting critical conditions:
moderate to severe yellow or
purple nutsedge infestation, or
karst topography.
Turfgrass....................................... (a) U.S. turfgrass sod for the production of industry
nursery producers. certified pure sod.
(b) U.S. golf courses..... for establishing sod in the
construction of new golf courses
or the renovation of putting
greens, tees, and fairways.
-------------------------------------------------
[[Page 52402]]
Post-Harvest Uses
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Food Processing................................. (a) Rice millers in with one or more of the following
Arkansas, California, limiting critical conditions:
Louisiana, Florida, older structures that can not be
Missouri, and Mississippi. properly sealed to use an
alternative to methyl bromide, or
the presence of sensitive
electronic equipment subject to
corrosivity.
(b) Pet food manufacturing with one or more of the following
facilities in the U.S. limiting critical conditions:
older structures that can not be
properly sealed to use an
alternative to methyl bromide, or
the presence of sensitive
electronic equipment subject to
corrosivity.
(c) Kraft Foods in the with one or more of the following
U.S.. limiting critical conditions:
older structures that can not be
properly sealed to use an
alternative to methyl bromide, or
the presence of sensitive
electronic equipment subject to
corrosivity.
(d) Members of the North with one or more of the following
American Millers' limiting critical conditions:
Association in the U.S. older structures that can not be
properly sealed to use an
alternative methyl bromide, or
the presence of sensitive
electronic equipment subject to
corrosivity.
Commodity Storage............................... (a) Gwaltney of Smithfield for smokehouse ham curing
in the U.S.. facilities owned by the company.
(b) California entities with one or more of the following
storing walnuts, beans, limiting critical conditions:
dried plums, and rapid fumigation is required to
pistachios in California. meet a critical market window,
such as during the holiday
season, rapid fumigation is
required when a buyer provides
short (2 days or less)
notification for a purchase, or
there is a short period after
harvest in which to fumigate and
there is limited silo
availability for using
alternatives.
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[FR Doc. 04-18933 Filed 8-24-04; 8:45 am]
BILLING CODE 6560-50-P