January 01, 2018

U.S. Refrigerant Regulation and Climate Change

Kristin H. Gladd

Refrigerants play a significant, if underappreciated, role in climate change. Indeed, “refrigerant management” ranked first out of 100 strategies with the potential to reduce greenhouse gases, as identified by a team of researchers presented in a new book, Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming (Paul Hawken ed., Penguin Books 2017). This ranking may surprise some, but consider the following. First, some chemical substances used as common refrigerants are thousands of times more potent than carbon dioxide in their effect on the climate when leaked or released into the atmosphere through improper handling or disposal. Second, they are ubiquitous: refrigerants are used in air-conditioning units, including those in motor vehicles; refrigerator and freezer units; and large-scale commercial applications, such as building chillers. Because of its potential impact on climate, refrigerant management is drawing increased attention and is the focus of new or expanded regulation in the United States and internationally.

This article provides a high-level overview of refrigerant regulation in the United States, focusing on a 2016 update to the refrigerant management regulations under section 608 of the Clean Air Act (CAA), legal challenges to this rule, and subsequent action by the Environmental Protection Agency (EPA). This article also discusses the landmark 2016 Kigali Amendment to the Montreal Protocol that—assuming it is ratified and becomes effective—will phase down the production and use of hydrofluorocarbons, substances with high global warming potential that are used primarily for refrigeration and air conditioning.

Background. As a group, refrigerants comprise several kinds of chemical classes, including chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), hydrofluroolefins (HFOs), and so-called “natural” refrigerants, such as ammonia, carbon dioxide, and hydrocarbons. CFCs and HCFCs, first- and second-generation substances, respectively, long have been used as refrigerants but contain chlorine, which destroys stratospheric ozone. Ozone depleting substances (ODS) were first regulated internationally by the Vienna Convention for the Protection of the Ozone Layer, Mar. 22, 1985, T.I.A.S. No. 11,097, 1513 U.N.T.S. 293, and a protocol to that treaty, the Montreal Protocol on Substances that Deplete the Ozone Layer, Sept. 16, 1987, S. Treaty Doc. No. 100-10 (1987), 1522 U.N.T.S. 3 (Montreal Protocol or Protocol). The Montreal Protocol, finalized in 1987, is a global agreement to phase out the production and consumption of nine specific categories of ODSs.

The Montreal Protocol is implemented by individual nations through domestic regulatory programs. In the United States, Congress amended the CAA in 1990 to add Title VI, which contains provisions to protect the stratospheric ozone layer and mandates that EPA develop and implement regulations for managing ODSs consistent with the Montreal Protocol. Title VI requires the phaseout of domestic production and import of ODSs, and Section 602 of the CAA provides an initial list of substances (since updated) for phase-out, organized into Class I and II ODSs. 42 U.S.C. § 7671a. Class I substances include CFCs, halons, carbon tetrachloride, methyl chloroform, methyl bromide, hydrobromofluorocarbons, and chlorobromomethane. Class II substances are all HCFCs. Most Class I substances have now been phased out; Class II substances are currently in the process of being phased out.

Under Title VI, EPA created an array of regulatory programs to manage ODSs, which are used in a variety of applications in addition to refrigeration. These programs include, among others, the ODS phase-out program (phasing out the production and import of ODSs), the stationary refrigeration and air conditioning program (implementing regulations for the service, certification, and sales of refrigeration and air conditioning equipment), the Significant New Alternatives Policy (SNAP) program (controlling the commercialization of ODS substitutes into the marketplace), and the motor vehicle air conditioning program (regulating their servicing, certification, and sales). This article focuses on the refrigerant management program and touches on the SNAP program, which prohibits or restricts the use of substances in certain end uses where alternatives with less adverse environmental effects, such as lower global warming potential, are available or potentially available. 42 U.S.C. § 7671k.

Refrigerant management program. Section 608 of the CAA establishes the National Recycling and Emission Reduction Program, which grants EPA the authority to manage refrigerants to protect the stratospheric ozone layer. Section 608(a) requires EPA to establish standards for the use and disposal of Class I and Class II substances during the service, repair, or disposal of appliances and industrial process refrigeration equipment to reduce the emissions and use of such substances to the “lowest achievable level” and maximize the recapture and recycling of such substances (the refrigerant management requirements). 42 U.S.C. § 7671g(a). The implementing regulations addressing CFCs and HCFCs are in Subpart F of 40 C.F.R. part 82 and create obligations relating to record keeping and reporting, certification, product evacuation, and sales restrictions.

CAA Section 608(c) prohibits intentionally venting into the environment (with an exemption for de minimis releases) any Class I or Class II substance used as a refrigerant or any substance used as a substitute for a Class I or Class II substance (the venting prohibition). 42 U.S.C. § 7671g(c). In 2004, EPA amended the Section 608 regulations to exempt certain non-ODS substances—but not HFCs and PFCs—from the venting prohibition on the grounds that they did not pose a threat to the environment. Unlike CFCs and HCFCs, HFCs do not deplete the ozone layer (although they have high global warming potential) and so have been used as a substitute, or third-generation refrigerant, stemming from the phaseout of Class I and Class II substances.

In November 2016, EPA finalized a rule tightening certain provisions of the existing refrigerant management program to include more stringent leak inspection and repair requirements, and record-keeping and reporting requirements. Protection of Stratospheric Ozone: Update to the Refrigerant Management Requirements under the Clean Air Act, Final Rule, 81 Fed. Reg. 82,272 (Nov. 18, 2016) (Final Rule). Changes from the old program include more frequent leak inspections, lower thresholds for mandatory repairs, verification testing after repairs, sales restrictions, changes to technician certification and service and reclamation practices, and increased record-keeping and reporting requirements. The Final Rule also extended these requirements to non-ozone depleting substitute refrigerants that are not exempt from the venting prohibition under CAA Section 608(c), such as HFCs. The Final Rule became effective January 1, 2017, and contains staggered compliance deadlines from 2017 to 2019 for the provisions newly applicable to substitute refrigerants.

Two industry coalitions, the Air Permitting Forum (APF) and the National Environmental Development Association’s Clean Air Project (NEDA/CAP), petitioned for review of the Final Rule in the Court of Appeals for the District of Columbia Circuit (D.C. Circuit) on procedural and substantive grounds, arguing, among other things, that EPA does not have the authority to extend the refrigerant management provisions for Class I and Class II substances to substitutes such as HFCs that are not ODSs. The cases have been consolidated into National Environmental Development Association’s Clean Air Project v. EPA, No. 17-1016, which is being held in abeyance at the time of this writing. The APF also submitted a petition for reconsideration to EPA. On August 10, 2017, EPA stated in a letter to the petitioners that it “is planning to issue a proposed rule to revisit aspects of the 2016 rule’s extension of the 40 CFR part 82 subpart F refrigerant management requirements to non-exempt substitutes” (i.e., HFCs, HFOs, and PFCs). Letter from E. Scott Pruitt, Administrator, EPA, to Ms. Leslie Ritts, Counsel for NEDA/CAP (Aug. 10, 2017). EPA also acknowledged the petitioners’ concerns regarding the feasibility of meeting the January 1, 2018, compliance dates and stated that it will consider options for relief if petitioners adequately substantiate the need for relief. Id.

Just prior to EPA’s August 2017 letter, the D.C. Circuit issued an opinion on a challenge to a 2015 SNAP rule that prohibited certain HFCs or HFC blends in various end uses in four industrial sectors, including retail food refrigeration and air conditioning for new cars. Mexichem Fluor, Inc. v. EPA, No. 15-1328 (D.C. Cir. Aug. 8, 2017) (Mexichem). The court vacated part of the rule “to the extent the Rule requires manufacturers to replace HFCs with a substitute substance” and remanded to EPA the issue of whether the agency “has authority to conclude that a manufacturer’s past decision to replace an ozone-depleting substance with HFCs is no longer lawful.” Mexichem v. EPA, slip op. at 18. While the Mexichem decision has no immediate bearing on the refrigerant management program and is likely to be appealed, it changes the current landscape for HFC regulation in the United States.

Kigali Amendment to the Montreal Protocol. The Montreal Protocol implements a legally binding system for phasing out the production and consumption of nine specific categories of ODSs by parties to the Protocol on an agreed-upon schedule. The Montreal Protocol has been ratified by 197 parties, including the United States, and has been amended five times, most recently in October 2016 at the Twenty-Eighth Meeting of the Parties (MOP28) in Kigali, Rwanda (Kigali Amendment). The Kigali Amendment, arrived at after nearly seven years of negotiation, expands the scope of the Montreal Protocol from its original focus on ODSs to include 18 HFCs. While HFCs are not ozone-depleting substances, they have high global warming potential and are used as substitutes for ODSs, which is the key linkage that justified including HFCs in the Montreal Protocol. The Kigali Amendment will become effective January 1, 2019, provided at least 20 parties to the agreement have ratified it, or 90 days after the condition on ratification is met.

The Kigali Amendment is expected to be ratified and go into effect. It is unclear, however, how the United States will proceed. If the Trump administration seeks ratification—which is still an unknown, despite broad support for the Kigali Amendment by U.S. industry and the environmental community—President Trump likely will seek Senate advice and consent, which requires a two-thirds vote of the Senate. This has been the approach taken with every other Montreal Protocol amendment to date, and, traditionally, the Montreal Protocol and its amendments have received bipartisan support in Congress. Related questions, thus far unanswered, are how the United States would implement the HFC phase-down obligations under the Kigali Amendment and whether EPA will rely on a regulatory program to phase down production and consumption of HFCs that is modeled on the prior ODS phase-out regulations or design something new.

The two August 2017 developments—the Mexichem decision and EPA’s subsequent letter to the NEDA/CAP petitioners stating that it will revisit the portion of the 2016 rule extending the refrigerant management requirements to HFCs—indicate that the agency’s ability to regulate HFCs through its existing CAA Title VI authority may be on shakier footing than previously believed. Presently, it is also uncertain whether the United States will ultimately ratify the Kigali Amendment; if it does, the Mexichem decision appears to narrow the likelihood that EPA would be able to implement HFC controls in line with the Kigali Amendment without seeking additional statutory authority under the CAA from Congress. It is clear, however, that widespread use of refrigerants with high global warming potential poses a serious threat to limiting greenhouse gas emissions—as well as a significant potential opportunity for reductions if the United States finds a viable way forward.

Kristin H. Gladd

Ms. Gladd is an attorney with Beveridge & Diamond, P.C., in the firm’s Washington, D.C., office and a member of the editorial board of Natural Resources & Environment. She may be reached at kgladd@bdlaw.com.