     November 13, 2006

Mr. William Wehrum

Acting Assistant Administrator for Air and Radiation

U.S. Environmental Protection Agency 

1200 Pennsylvania Avenue, NW 

Mail Code: 6101A 

Washington, DC 20460

Mr. Daniel Reifsnyder

Acting Deputy Assistant Secretary for Oceans and

     International Environmental Scientific Affairs

U.S. Department of State 

2201 C Street, NW 

Washington, DC 20520

			Re:  2007 Critical Use Exemptions for Methyl Bromide

Dear Messrs. Wehrum and Reifsnyder:

	I am writing in regard to the pending proposed regulations to establish
2007 critical use exemptions for methyl bromide, and in follow-up to the
18th Meeting of the Parties to the Montreal Protocol earlier this month
in New Delhi.  The purpose of this letter is to call upon EPA to carry
out the stockpile-related commitments made in New Delhi without further
delay in the final 2007 exemption rule.  

	At the 18th MOP, the United States met with strong expressions of
concern by other countries about the size of American stockpiles of
methyl bromide.  In response, the U.S. renewed and increased its
commitment to account for stockpiles.  First, in Decision XVIII/13,
paragraph 6, the U.S. “renew[ed] its commitment to ensure that the
criteria in paragraph 1 of decision IX/6 are applied when licensing,
permitting or authorizing critical use of methyl bromide and, in
particular, the criterion laid down in paragraph 1(b) (ii) of decision
IX/6.” 

Further, the U.S. amplified this commitment in a statement to the
plenary made at the time of the adoption of the critical use exemption
decision  The Report of the Meeting summarizes Mr. Reifsnyder’s
comments thusly:  “In the context of decision IX/6, the United States
had been seeking to reduce and eliminate stocks of methyl bromide
produced before the 2005 phase-out. To the extent consistent with
national and international law, his Government intended to increase its
efforts to accelerate the phase-out of those pre-existing stocks.”

The first available opportunity to carry out these commitments is in the
final 2007 exemption rule.  This will also be the only opportunity to
demonstrate action on these commitments before the Parties convene again
in June to consider the U.S.’s next exemption nominations.  Thus, it
is important that EPA demonstrate in the final 2007 rule that the
government is serious about living up to these renewed and increased
stockpile commitments.  

It is also important that EPA act now to stop the diversion of methyl
bromide stockpiles into the hands of users who do not have critical use
exemptions.  As demonstrated below, there is now reason to believe that
a very large amount of stockpiles was used in 2005 by persons without
critical use exemptions.

As in previous comments, NRDC calls on EPA to take two steps in the
final 2007 rules.  The first step is to reduce the amount of production
and import of new methyl bromide permitted in 2007 to account for the
existence of ample stockpiles. The second step is to limit access to
stockpiles only to persons with approved critical uses.  Both steps are
within EPA’s authority under Section 604(d)(6) of the Clean Air Act.

In the remainder of this letter, I will first address pertinent legal
issues.  I will then review certain factual and policy issues that arose
in the New Delhi meeting.    

Legal Issues

NRDC submits that a construction of Section 604(d)(6) that disregards
the political commitments made in the Montreal Protocol Decisions is an
unreasonable construction under Step 2 of Chevron v. NRDC, 467 U.S. 837
(1984).  Likewise, acting contrary to those political commitments is
arbitrary and capricious under Section 307(d)(9) of the Act.

As an initial matter, NRDC recognizes that a panel of the D.C. Circuit
has ruled that that the Decisions of the Parties under the Montreal
Protocol are “political commitments,” not “law.”  NRDC v. EPA,
464 F.3d 1 (D.C. Cir. 2006).  Thus, the panel rejected a Chevron Step 1
argument that the Clean Air Act unambiguously incorporated the
Protocol’s exemption decisions as binding law.  See 464 F.3d at 8
(“The ‘decisions’ of the Parties-post-ratification side agreements
reached by consensus among 189 nations-are not ‘law’ within the
meaning of the Clean Air Act and are not enforceable in federal
court.”)  Even under this ruling, however, it remains EPA’s duty to
give Section 604(d)(6) a reasonable construction under Chevron Step 2,
and to act in a non-arbitrary, non-capricious manner.  The Executive
Branch’s “political commitments” are relevant to both points.  

Section 604(h) and Section 604(d)(6) of the Act were enacted in 1998,
the year following the Montreal Protocol Parties’ adoption of Article
2H and the accompanying Decision IX/6 in 1997.  Section 604(h) bans
methyl bromide on the schedule in effect under the Protocol as of the
date of enactment, i.e., no further production and consumption is
allowed after December 31, 2004.  Section 604(d)(6) provides for
exemptions for “critical uses” – the same term used in Article
2H(5) of the Protocol.  EPA is authorized – but not compelled – to
issue exemptions for methyl bromide production, importation and
consumption “[t]o the extent consistent with the Montreal Protocol.”
 

(a)  Chevron Step 2 analysis.  Even if the Decisions of the Parties are
not directly incorporated into U.S. law under Section 604(d)(6), Chevron
Step 2 still requires EPA to interpret Section 604(d)(6)  in a
reasonable manner.  Even if there is some range of discretion in the
terms “[t]o the extent consistent with the Montreal Protocol,” EPA
must supply a construction that is reasonable in light of Congressional
intent and in light of the agreements – the “political
commitments” – that the Executive Branch has subsequently made.  In
other words, those Executive Branch “political commitments”
constrain the range of interpretations of Section 604(d)(6) that the
Executive Branch may reasonably adopt.

As a matter of Congressional intent, it is apparent from the language of
Sections 604(h) and 604(d)(6), and from the sequence of events leading
to the adoption of those provisions, that Congress was fully aware of
the process that the Montreal Protocol Parties (including the U.S.) had
agreed upon for making critical use exemptions, embodied in the Protocol
adjustment made in 1997.  Section 604(h) unquestionably directly
incorporated into the Clean Air Act the schedule contained in Protocol
Article 2H.   Thus, under Section 604(h) production and consumption of
methyl bromide must be “zero” after December 31, 2004.  Section
604(d)(6) – by authorizing EPA to “exempt production, importation,
and consumption of methyl bromide for critical uses” only “[t]o the
extent consistent with the Montreal Protocol” – demonstrates
Congress’s awareness of the Decision-based process the Montreal
Protocol Parties had agreed on for making critical use exemptions from
the “zero” limit.  

As a matter of Executive Branch intent, the U.S. has repeatedly
committed to issue domestic exemptions only after seeking, and
obtaining, exemptions under the Protocol via Decisions of the Parties. 
The U.S. has also repeatedly committed to the use-the-stockpile-first
policy.  The commitment to that policy was made in Decision IX/6, para
1(b)(ii), adopted in 1997, which states that “production and
consumption, if any, of methyl bromide for critical uses should be
permitted [after 2004] only if … [m]ethyl bromide is not available in
sufficient quantity and quality from existing stocks.”  In every
subsequent critical use decision, including the one governing 2007
exemptions, the U.S. has agreed to “ensure that the criteria in
paragraph 1 of decision IX/6 are applied when licensing, permitting or
authorizing critical use of methyl bromide.”  Each of these Decisions,
with some minor wording differences, has specifically emphasized the
para 1(b)(ii) obligation to reduce production to account for stockpiles.
 And, as mentioned above, the U.S. heightened its commitment during the
most recent Meeting of the Parties by promising increased efforts to
phase out the stockpiles to the extent consistent with national and
international law.  

NRDC submits that any construction of Section 604(d)(6)’s consistency
requirement which does not require EPA to comply with these repeated
political commitments is an unreasonable construction of the law. 
Simply put, EPA cannot reasonably construe Section 604(d)(6) in a manner
inconsistent with the political commitments that the U.S. government has
willingly and repeatedly entered into in the Protocol Decisions.

In the proposed rules for 2004, EPA suggested that the word
“available” could be interpreted to authorize EPA to fence off
various amounts of the stockpile – amounts asserted appropriate for
supply chain considerations, exports, emergencies, and use by
non-critical users – and not count them when determining how much
methyl bromide production and importation to allow.  NRDC maintains that
this is an irrational construction and application of the term
“available.”  There is no indication in the record of the 1997
negotiations leading to the adjustment and Decision IX/6, nor in the
record of the negotiations on any of the subsequent critical use
exemption decisions, that the U.S. or other Parties intended to tuck
such enormous discretion into this one word.  As the Supreme Court said
in Whitman v. American Trucking Assns, 531 U.S. 457, 468 (2002),
“Congress, we have held, does not alter the fundamental details of a
regulatory scheme in vague terms or ancillary provisions—it does not,
one might say, hide elephants in mouseholes.”  The same rule goes for
the Executive Branch when it interprets its own political commitments.

(b)  Arbitrary and capricious analysis.  The same analysis flows under
the arbitrary and capricious test set forth in Clean Air Act Section
307(d)(9).  EPA has a duty to act rationally under Section 604(d)(6) –
to take actions that consider all the relevant factors and provide a
reasonable explanation of the agency’s decision.  NRDC submits that it
is arbitrary and capricious to continue allowing production and import
of methyl bromide when available stocks exceed the annual critical use
amount.  As will be shown in the next section of this letter, EPA has
not offered a rational basis for the agency’s past and now-proposed
actions.  

	(c)  Authority to restrict use by non-critical users.  As a final legal
point, NRDC wishes to address the argument that EPA does not have
authority to bar non-critical users from accessing stockpiles.  NRDC
submits that this authority flows from Section 604(d)(6) itself.  

Section 604(d)(6a) permits EPA to issue exemptions by rules that are
consistent with the Montreal Protocol.  The U.S. has repeatedly agreed
and committed to allow methyl bromide production and import only if
stockpiles are insufficient to meet the amounts allowed for critical
uses.  It is inconsistent with that commitment to allow use of the
stockpiles by non-critical users, because that results in increasing
production and import above the levels contemplated by the agreements. 
In light of those commitments – even if they are viewed as only
political commitments – that result is both an unreasonable
construction of Section 604(d)(6) and arbitrary and capricious behavior.

In contrast, Section 604(d)(6) can reasonably be interpreted to give EPA
the authority to protect the interests of the critical users for whom
the stockpiles are to be reserved.  Restricting use of the stockpile to
bona fide critical users operating within the authorized critical use
amounts is a rational and necessary way to protect the ozone layer from
unnecessary production while at the same time protecting the interests
of the critical users.

As a final matter, some of the stockpile holders apparently are claiming
that any regulation restricting the sale of their stocks to only
critical users would be an unconstitutional taking.  This is a meritless
claim.  For example, the Supreme Court has repeatedly held that
regulatory restrictions do not effect a taking merely because they
reduce the economic value of property.  A reduction in value must be
nearly complete to constitute a regulatory taking, and even then there
are significant exceptions, for example, for the abatement of common law
nuisances.  See e.g., Lingle v. Chevron U.S.A. Inc., 544 U.S. 528
(2005).

In this case, it is not at all clear that the action NRDC is seeking
would reduce the value of the stockpiles that these entities now hold. 
Barring sale of stocks to non-critical users would not prevent the sale
of those stocks to critical users.  Indeed, if EPA limited production
and import of new methyl bromide to account for stockpiles, and if EPA
also barred non-critical users from access to existing stocks, the
market value of the stocks might be unaffected, or might even increase. 
But there is no reasonable scenario in which these actions would reduce
the value of the stocks to, or even near, zero.

Factual and Policy Issues

	(a) Updating Stocks Accounting.  Attached is a table showing data on
stockpiles, critical uses, and production and import of methyl bromide
for the years 2005 through 2007.  This table is similar to one NRDC
prepared before the New Delhi meeting, but it has been modified to take
into account certain data that became available during the meeting. 
(Because this letter is focused on 2007, this version of the table does
not address later years.)  

The first modifications concern the data for 2005.  The top line for
2005 is based on the amount that the EPA regulations authorized for
critical uses and for production and import in 2005.  The line below, in
brackets, reflects figures reported by the U.S. to the Parties for 2005,
with a substantially lower amount reported for actual critical uses in
that year, and with a slightly smaller amount reported for production
and import.  In both cases, the year-end stocks amount is the same –
the amount EPA made public in September, or 9,974 metric tons.  

The second modification of the data for 2005 is the entry of a figure
– under 500 tons – for the amount of stockpiles exported to both
developed and developing countries combined.  While NRDC does not
possess the exact figure that was provided to other countries during the
meeting, I have been assured that the sum of the exports to both groups
of countries was less than 500 tons.

Here are the major conclusions that emerge from the updated table
regarding production, critical use, and stockpiles in 2005: 

Stockpiles going into 2005 greatly exceeded the actual critical uses in
2005.  No production was needed in 2005.

Counting stockpiles, new production, and imports, the total supply of
methyl bromide available in 2005 exceeded critical uses by 13,437 metric
tons – nearly 30 million pounds.  

The amount of stockpiles needed for exports to both developed and
developing countries was small – under 500 metric tons.  

It is now apparent that (after accounting for exports) as much as about
3,000 metric tons – 6.6 million pounds – of methyl bromide was used
in 2005 by persons who did not have critical use exemptions.  

Here are the major conclusions that emerge from the updated table
regarding 2006: 

Stockpiles going into 2006 greatly exceeded authorized critical uses in
2006.  No production was needed in 2006.

Stocks at the end of 2006, before accounting for exports and diversion
to non-critical users, should be as much as 8,723 metric tons – nearly
19.2 million pounds.

It is unlikely that exports from stockpiles will rise in 2006.

There are no publicly available data yet for 2006 on the amount of
stockpiled methyl bromide being diverted into the hands of persons who
do not have critical use exemptions.  Diversions to non-critical users
should be smaller in 2006 than 2005, based on representations to NRDC in
New Delhi by an EPA staff person involved in reviewing critical use
nominations.  The staff person suggested that the reported 2005 CUE use
was lower than expected because some qualified critical users purchased
stocks instead of the full amount they were allowed through the CUE
system.  The delegation member thought this was a first-year
learning-the-rules phenomenon that should taper off in 2006.    

If diversions of stocks to non-critical users in 2006 are only half what
they were in 2005, then there will be more than 6,700 metric tons –
14.7 million pounds – of stocks available at the beginning of 2007.

If the diversion of stocks to non-critical users is on the same scale as
in 2005, there will still be more than 5,200 metric tons – 11.4
million pounds – of methyl bromide stocks available at the beginning
of 2007.  

If EPA takes any issue with these figures, it is incumbent on the agency
to supply corrections or supplementary data. 

(b) Stockpile Policy Considerations.  In New Delhi, the U.S. delegation
offered a number of reasons for its large stockpile.  None of these
considerations provide a rational basis for not reducing new production
and import in conformity with the U.S.’s policy commitments.

(i) Supply chain inventories.  Mr. Reifsnyder’s intervention claimed
the need for a “supply chain inventory” of three to four months, if
I recall correctly.  This is less than prior suggestions that as much as
a year’s supply of methyl bromide is needed for the “supply chain
inventory.”  Three to four months is an improvement but still larger
than necessary to keep the supply chain functioning.  The typical
industry practice for similar chemicals is to keep no more than two or
three months supply in the supply chain inventory.  

No other country with critical use exemptions has maintained a total
stockpile, including supply chain inventory, exceeding 20 percent of its
annual critical use amount.  Simple calculations from Table 5 in the
September report of the Technological and Economic Assessment Panel
(TEAP) demonstrate that stocks in other critical use exemption (CUE)
countries in 2005 totaled 20 percent or less of those countries’ CUE
amounts.  Yet the U.S. stockpile was 170 percent of the U.S. CUE amount
in 2005.  An annotated version of Table 5 appears on the next page.

(ii) Emergencies.  Mr. Reifsnyder also claimed that the stockpiles are
needed as a reserve against the hypothetical catastrophic accident
causing a prolonged loss of production at the Chemtura plant.  The
hypothetical catastrophic plant accident with a prolonged production
outage, of course, never happened, and no one seriously fears it. 
Moreover, in the unlikely event of this catastrophe, even critical users
have options.  The first option would be for Ameribrom to step up
imports.  Further, in almost every instance, the U.S. nomination notes
the existence of alternative chemicals that could do most of the job
done by methyl bromide, albeit sometimes at higher cost.  Those options
could fill in on at least a temporary basis.   

 

Mr. Reifsnyder also said that the stockpile is needed to cope with
emergencies like Hurricane Katrina, after which some fields in the
Southeast needed to be re-fumigated prior to re-planting.  Mr.
Reifsnyder made no reference, however, to a country’s authority under
the Protocol to issue emergency exemptions of up 80 tons of methyl
bromide, as often as necessary, without prior approval in emergency
circumstances.

NRDC observes that these two potential reasons for keeping an emergency
stockpile expose a rather large logical problem.  If the stockpile is to
be available to address either kind of emergency, it must be segregated
and placed off-limits for other uses.  In particular, it cannot be
allowed to be used by non-critical users, for if the emergency stockpile
has been eaten up by other users, it will not be there when needed. 
Thus, in order to have any rational basis for keeping a stockpile for
these emergency purposes, EPA must bar the use of the emergency reserve
for any other purposes.

(iii) Exports.  Mr. Reifsnyder’s intervention also explained that some
amounts of methyl bromide stockpiles were needed for exports to
developing and developed countries.  First, there is no reason why those
export amounts should not be satisfied from critical use production. 
Second, as already noted, the amount of stocks exported to both
categories of countries appears to have been less than 500 metric tons
in 2005 – a very small part of the stockpile.

	(iv) Feedstocks.  Members of the U.S. delegation also mentioned the
potential use of methyl bromide stockpiles as feedstocks in
manufacturing processes outside the Chemtura production plant.  The U.S.
delegation, however, was unable to supply NRDC (or apparently the other
Parties) with any figures on feedstock uses.

(v)  Use by non-critical users.  The last factor to consider is use of
stockpiles by persons not eligible for critical use exemptions.  Merely
to state this issue is to indicate the irrationality of EPA’s
position.  It makes no sense for Congress to create, and for the U.S. to
agree to, a highly restricted system of critical use exemptions for
post-2004 methyl bromide use, and then to allow unlimited access to
stockpiles for others who did not apply for or qualify for critical use
exemptions.  

Allowing stockpile access to non-critical users conflicts with the
obvious meaning of Decision IX/6, which allows new production, “if
any,” “only if … [m]ethyl bromide is not available in sufficient
quantity and quality from existing stocks.”  As demonstrated in the
previous section of these comments, this appears to be far and away the
dominant usage of the stockpiles.  Approximately 3,000 metric tons –
7.6 million pounds – of methyl bromide stockpiles appear to have been
diverted to non-critical users in 2005. Never before have we had
evidence of the scale of such use.  Allowing unrestricted use of the
stocks by persons who do not have critical use exemptions is plainly
arbitrary and capricious. 

Conclusion

For all these reasons, NRDC calls on EPA to act now, in the final 2007
exemption rule, to take the following actions to fulfill its renewed and
amplified commitments to account for stockpiles in conformity with
Decision IX/6.  The final 2007 regulations should:

Reduce new production and import for 2007 to zero, or near zero, on
account of the availability of existing stocks.   

Bar non-critical users from using stockpiled methyl bromide.

Sincerely,

David D. Doniger

Policy Director

NRDC Climate Center

Attachments:  Table

		Report of the 18th Meeting of the Parties

		Report of the Technological and Economic Assessment Panel

U.S. Stocks Exceed Critical Uses Every Year – No Need for New
Production 

(all figures in metric tons)

Each year stocks on-hand Jan. 1  exceed amounts allowed for critical
uses	Big stock surpluses remain	But U.S. allows new production anyway
Leaving large stocks on-hand Dec. 31

Year	Stocks 

Jan. 1 a	CUEs b	Jan. 1 stocks minus CUEs 	New production and import c
Stock surplus plus new production d	Minus non-critical uses, exports e 
Equals stocks Dec. 31 f



2005

	

12,994 	

 9,553  

[7,170]	

 3,441

[5,824]  	

 7,659  

[7,613]	

 11,100 

[13,437]	

 1,126

[3,463] 	Since  exports = < 500 tons, non-critical uses = about

3000 tons	

 9,974 g





2006

	

  9,974	

 8,074  	

 1,900  	

 6,823  	

   8,723	

 ?	

Up to 8,723



2007 (projected)	

Up to 8,723  	

 6,681  	

 Up to 2,042  	

 4,301 - 4,616 h  	 

 Up to 6,658 

	

 ?	

Up to 6,658



Source:  NRDC, based on EPA and MBTOC data.

a Stock figures for January 1, 2005 and 2006 reported by EPA,  
HYPERLINK "http://www.epa.gov/ozone/mbr/index.html" 
http://www.epa.gov/ozone/mbr/index.html .  Figures for 2007 projected by
NRDC.  As explained in the table and these notes, stocks at start of
2007 depend on stock amounts diverted to non-critical users and exported
in earlier years (see notes d - f).

b CUEs amounts as authorized by EPA  for 2005 and 2006 and proposed by
EPA for 2007. 

c Production and import authorized by EPA for 2005 and 2006 and proposed
– but not yet authorized – by EPA for 2007.  

d Jan. 1 stocks minus CUEs plus new production/import.  This figure does
not account for amounts of stocks exported or diverted to non-critical
uses.  (Exports from new production for basic domestic need are not
included in this accounting.)  

e EPA has not officially reported the amount of stocks diverted to
non-critical users or the amount of stocks exported.  Figures provided
during New Delhi talks indicate that total stockpile exports to
developing and developed countries were less than 500 metric tons. 
Thus, the total diverted to non-critical users was approximately 3000
metric tons.   Stock amounts diverted to non-critical uses and exported
in 2006 are not yet known.

f  Stock amount at end of 2005 as reported by EPA (see note a).  Stock
amounts at end of 2006 and 2007 expressed as a maximum, dependent on the
amount diverted to non-critical uses and exported. 

g EPA reports an additional 443 metric tons were left over at the end of
2005.  EPA has proposed to deduct that amount from 2007 production.  

h Figure reflects deduction for 443 metric tons left over in 2005 (see
note g).  

 Please include this letter as a supplementary comment in the docket for
the 2007 proposed rules.

 United Nations Environment Programme, Report of the Eighteenth Meeting
of the Parties to the Montreal Protocol on Substances that Deplete the
Ozone Layer at pp. 39-41, UNEP/OzL.Pro.18/10 (Nov. 8, 2006) (attached to
this letter for inclusion in the docket).

 Id. at 61 (paragraph 224).

 While NRDC today makes the alternative arguments described above, these
comments should not be taken as acceptance that the D.C. Circuit opinion
is good law.  NRDC is considering whether to seek rehearing of the panel
opinion from the D.C. Circuit or review by the Supreme Court.  

 Section 604(d)(6) provides:

To 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.

  

 Congress also should be presumed to have been aware of the criteria for
exemption decisions that the Parties had agreed in Decision IX/6, given
the fact that Decision IX/6 was adopted simultaneously with Article 2H
as a package.  Thus, even if the D.C. Circuit panel were correct that
Section 604(d)(6) does not directly incorporate future Decisions of the
Parties into law, it is apparent that Congress intended EPA’s own
exemption decisions to be guided by – in short to be “consistent
with” – the process the Parties agreed on.  

 That proposal was not promulgated, but neither has it gone away, as we
see it being implicitly revived in Mr. Reifsnyder’s comments to the
Meeting of the Parties, and, at least in part, in the 2007 proposal.  

 This table is also a revision of one included in NRDC’s supplemental
comments of September 21, 2006.

 The U.S. delegation also asserted in New Delhi that some amount of
stockpiles – NRDC never heard a specific figure – was sold for
“feedstock” uses.  This number appears to be very small, if it
exists at all.  Use of methyl bromide as a feedstock at the Great Lakes
plant is not even counted as production, assuming it is consumed in the
follow-on chemical process.  The only example of a feedstock use from
stockpiles mentioned by U.S. representatives during the New Delhi
meeting was the possible use of a small amount in the manufacture of
halogen light bulbs.  NRDC has seen no data on the amounts involved or
to document that it came from stockpiles.

 Report of the Technology and Economic Assessment Panel, “Evaluations
Of 2006 Critical Use Nominations for Methyl Bromide and Related
Matters” at 18 (Table 5) (Sept. 2006).  A copy of the report is
attached for the record.

 As noted above, feedstock amounts consumed without emissions within the
Chemtura plant do not count as production.

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