We’ve reached the midpoint of 2014, and when it comes to refrigerants, the HVACR industry is warily watching the U.S. Environmental Protection Agency (EPA), the federal courts, the global market place, and the Obama administration. All are in the mix for directions when it comes to supplies of hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs).
The EPA is on the radar screen for how much new and imported HCFC-22 it will allow to come to market heading to a final phaseout in the next three to five years. The courts are in the mix due to active and pending suits against the EPA, all aimed at expediting R-22’s grand finale. The global community is being watched for actions that could lead to a phasedown in production of HFCs. And, the Obama administration is being eyed because of chatter over possible unilateral action against high global warming potential (GWP) HFCs in favor of lower GWP HFCs and increased use of hydrocarbons (HCs).
Here, as of June 2, is how things look.
In a webinar event for ACCA members, Charlie McCrudden, senior vice president for government relations, reviewed three phaseout options being considered by EPA to end the production and importation of R-22 no later than Jan. 1, 2020. The first, which he said is preferred by the EPA and ACCA, calls for a linear reduction of about 6 million pounds each year until none is allowed in 2020. A second option accelerates the phaseout to 2018. A third, called “an estimation approach,” is based on service needs and adjusts for recovery and reuse. McCrudden said, regarding the latter, the uncertainty of such determinations makes such an approach not plausible.
Industry leaders anticipate the EPA will make a decision by this summer or fall, allowing the next step down and final timeline to kick in, as scheduled, Jan. 1, 2015, McCrudden said.
Jay Kestenbaum, senior vice president, sales and purchasing, Airgas Inc., believes the EPA will choose the 2020 linear phaseout option, “which is consistent with what the EPA had always planned for — a total five-year draw down until production ends in 2020. This will clearly allow the industry to plan for all the years that were anticipated to still have production.”
That 2020 linear phasedown does include three starting points. With 51 million pounds of new and imported R-22 being allowed in 2014, the starting point for the final phasedown could be 36.8, 30.2, or 22 million pounds in 2015.
“We believe the allocation will be at the lowest proposed level, beginning at 22 million pounds based on the extensive input by so many in the industry at the EPA hearing in Washington as well as in written comments clearly pointing to the oversupply in the industry caused by EPA’s expansion of allowances last year,” said Kestenbaum.
Ken Gaglione, marketing manager, Honeywell Intl. Inc., said, “We believe EPA will act aggressively, providing a sufficient signal to the industry to make a smooth transition to alternatives while also providing a buffer against major market disruption should weather, production, or other factors impact supply. We believe the EPA will likely adopt the lower proposed allocation of 22 million pounds in 2015, and tightness in supply is possible this year, should major inventory holders choose to reserve volume for sale in later years.”
Mack McFarland, global environmental manager, DuPont, put that timeline in perspective: “With this approach, there will be a 57 percent reduction in allowances from 2014 to 2015. Therefore, it continues to be very important for contractors to move their customers to R-22 replacement products, to extend the life of their R-22 equipment, and to avoid any interruption of supply.”
At the same time, Robert Wilkins, vice president, public affairs, Danfoss, noted, “Ample nationwide inventories of R-22 to support service requirements appear to be available, and I expect that a faster phasedown would encourage increased recovery, reclaim, and recycling, which would help reduce emissions.”
In The Courts
While most are anticipating EPA’s R-22 timeline decision to take several years, there are ongoing legal actions aimed at speeding up the phaseout. Most involve an organization called New Era Group Inc., a Washington, District of Columbia-based consultancy firm that represents several reclaimers, alternative refrigerant manufacturers, and refrigerant distributors who are trying to force the EPA to end all allowances of new and imported R-22 by Jan. 1, 2015, if not sooner.
One suit is seeking the EPA to explain why it allowed 51 million pounds of R-22 to be made and imported in 2014, and another is an appeal with the U.S. Court of Appeals for the District of Columbia over a ruling issued in mid-2013 allowing the EPA to continue to permit production and importation of HCFC-22. That ruling came as the result of a lawsuit filed that year over the EPA allowing 64 million pounds of new R-22 in 2013.
“It has become painfully obvious that the EPA has allocated far more allowances than necessary and, in the process, devastated the reclamation and alternative-refrigerant industries, which can’t compete with the oversupply of cheap R-22,” said Gordon McKinney, vice president and COO, ICOR Intl. “The EPA has failed to collect enough reliable data to support any of their stated options. Any additional allocation will only add to the glut and lead to further uncertainty and market disruption.”
Steve Mella, CEO of Comstar Intl. Inc., said, “I think the general consensus of the HVACR industry is that they would like to see the end of R-22 sooner than later, but it seems the EPA is not hearing that.”
In the ACCA webinar, McCrudden expressed concern to ACCA members over some efforts within the industry and among some congressman to promote zero allocation of R-22 as of 2015. McCrudden said such a plan could result in “really problematic price spikes.”
With a phaseout of new and imported R-22 seeming like a foregone conclusion, the industry has, for some time, been looking at alternatives to keep current inventories of R-22 equipment up and running. One, as has been noted, relates to more reclamation and reuse of R-22. Another involves retrofitting equipment using HFCs.
Meanwhile, HFCs are being looked at in terms of global warming issues and some sort of phasedown — but not phaseout.
Wilkins said the industry is tuned in to what the future holds for HFCs. “Discussions about HFC phasedowns are becoming more frequent, both here in the U.S. and globally as part of the Montreal Protocol deliberations. This has been heightened by the passage of HFC phasedown laws in Europe at the end of 2013. However, in the short term, I foresee little impact for contractors in the field during 2014 and 2015.”
The timeline for any phasedown may be three or four years down the road, predicted McKinney. “There is still a lot of work to do to get a global agreement on the HFC phasedown.
“The proposal for a HFC/North American amendment to the Montreal Protocol was filed with the ozone secretariat on May 10, 2014. This will be a starting point for negotiations this year, and, most likely, it will take a few years to finalize. The earliest the phasedown would begin would be 2018.”
As DuPont’s McFarland said, “Between the EPA’s Significant New Alternatives Policy (SNAP) change on the proposed rule, which we anticipate being published by the EPA in the Federal Register in the next few months, new regulatory regimes in the European Union and Japan, and the ongoing deliberations on an HFC amendment to the Montreal Protocol, we expect to see ongoing attention to the issue of transitioning away from higher GWP HFCs. While some of these policy changes extend beyond 2015, HFCs continue to provide a smooth transition away from R-22.”
Kestenbaum said history has shown that once a phaseout or elimination regulation is in place, it is only a matter of time before those dates are drastically moved up to accommodate an industry that adapts rather quickly. “The range of HFCs currently being used is much more extensive than the array of products used at the time of chlorofluorocarbon (CFC) and HCFC phasedowns. There will be additional problems in recovery and reclamation of these products, as they will be coming back in much smaller quantities, each needing much more specialized reclamation, especially if there is a need to reconstitute products based on analysis of the recovered returns from contractors and users.”
The Obama Factor
The Obama administration is a key part of the equation as it continues to push the EPA to give more attention to lower GWP HFC refrigerants and encourages the use of HCs. Here, things can get a bit confusing for folks in the industry.
“We manufacture both HFC replacement refrigerants for R-22 and an EPA-approved blended hydrocarbon refrigerant,” said Mella. “So we deal with the EPA on both HFC and HC refrigerants. I can tell you that, even though the oval office is proposing more use of the natural refrigerants, the EPA has been dragging its ‘approval’ feet on all the submitted applications for the use of HC refrigerants in various applications. Therefore, when it comes to HCs, the service techs will not be having opportunities to use their HC handling skills.”
Those needed skills were noted by Brad Kivlan of Dynatemp Intl., who said: “Service technicians should always be aware of the working pressures and flammability of the new refrigerants entering the marketplace. They will need to ensure their service tools and equipment (recovery machines, manifold gauge sets, hoses, etc.) are designed and/or certified for these classes of refrigerants.”
Hopefully things can get sorted out, said Gaglione. “We remain hopeful the EPA will act quickly in the coming months to issue its proposed rule on the treatment of HFCs under the SNAP program.
“Honeywell supports President Obama’s focus on using SNAP to prohibit certain uses of HFCs. We are ready to help the president and EPA succeed in these important priorities by providing technologies that are better for the environment, and low GWP alternatives for several application segments are already commercially available or being tested by manufacturers.”
Publication date: 6/30/2014