Last week a new bill was introduced into the Senate. This bill called ‘The American Innovation and Manufacturing Act,’ aims to give the power back to the Environmental Protection Agency. To understand this bill you have to know the history behind it and what has taken place over the past year.
Towards the end of the summer of 2017 a Federal Court struck down the EPA’s proposed phase out of HFC refrigerants under their SNAP program. The court’s reasoning was that the EPA had overstepped it’s bounds by using the Clean Air Act as a vassal to phase out non-Ozone depleting HFC refrigerants. While the August ruling was fought and appealed by Honeywell and Chemours the court’s decision stayed.
With the EPA no longer having the authority to unilaterally phase out HFC refrigerants such as R-410A, R-134a, and R-404A the United States is left with two options. The first is known as the Kigali Agreement. This agreement is actually an amendment made to the Montreal Protocol. While the amendment is nearly a few years old now we are still waiting on the United States’ Government to ratify it in the Senate. At this time there is some debate on rather or not the Trump Administration will move this amendment to the Senate or not.
The other option, which I have spoken of in previous articles, is legislation. In my opinion this is the way it should have been done in the first place. I’m never comfortable with goverment agencies making massive changes to the marketplace on their own. Big changes and regulations like these should go through Congress and be debated back and forth and that, as of last week, is now where we are heading.
The bill was introduced by two Senators: Republican Senator John Kennedy out of Louisiana and Democrat Senator Tom Carper out of Delaware. Now, it’s funny seeing what states these Senators represent. It’s very obvious why this bill was introduced. Delaware is home to DuPont and Chemours. Louisiana is home to one of Honeywell’s newest refrigerant manufacturing plants. This plant is designed for the new HFO refrigerants coming down the pike. So, we have two Senators from these states with a vested interested that these two companies succeed and bring jobs to their constituents. With HFC refrigerants on the way out that means that the demand for HFOs will only go up and up. This all comes down to money and jobs.
Power Back to the EPA
The bill’s goal is to give the power back to the Environmental Protection Agency when it comes to HFC refrigerants. In other words, the bill is designed to undo the court ruling back in August. Going way back to the summer of 2015 the EPA introduced the latest rule to their Significant New Alternative Policy, or SNAP. This new rule was known as Rule 20. This rule laid out the phase out of HFC refrigerants across the United States but the catch was that the EPA used the Clean Air Act as their cite for authority. This was the mistake that caused all of this controversy and which caused the courts to rule against the EPA. (Clean Air Act was designed for Chlorine containing refrigerant and additives and HFCs do not contain Chlorine.)
This new bill introduced last week resets all of this and allows the EPA to basically move forward with another type of SNAP Rule 20 plan. As stated from AHRInet.org, the bill is designed to have the EPA give a “market friendly approach to rule making that will help facilitate a cost-effective transition to alternative refrigerants while maintaining or enhancing the performance of the equipment that uses the new refrigerants.”
Besides that the bill also allows the EPA to initiate a cap and allocation system similar to what we saw with R-22. Like with all phase outs this cap and allocation would be staggered so that each year the numbers would shrink and shrink until the targeted HFC is deemed obsolete. This is nothing different to those of you in the industry.
The last thing that this bill mentions is that it gives the EPA the power of predictability. This goes hand in hand with the cap and allocation above. In order to successfully enact a cap and allocation program you have to have a baseline number and then a targeted number to shrink every year. We all know it’s a guessing game out there on how much refrigerant will be used each year. If this bill passes these yearly usage numbers and future predictions will be left in the hands of the Environmental Protection Agency.
Even if this bill does get past the Senate and the House it still has to get through the Trump White House. The question on everybody’s mind is would Trump sign it? I said it up above but the passage of this bill and or the passage of the Kigali Amendment is all going to come down to rather it will provide more jobs or if it will take away jobs and money from the United States. The whole ‘America First’ mindset. I do not believe Climate Change will be a factor in the administration’s decision.
At first glance yes, I can see the phase out of HFC refrigerants adding more jobs here in the United States. While there may be some shrinkage due to HFCs going away in the beginning I can definitely see the market growing as the HFO and Hydrocarbon refrigerants start to become the dominate refrigerant in the marketplace. After all, look at the new Honeywell plant in Louisiana and the new Chemours plant in Texas. Both of these plants are geared for producing HFO refrigerants. With HFCs out of the picture these plants can grow and grow all the while adding jobs. Perhaps Trump will see these new plants as a solid manufacturing add to the United States and push for phase out.
At this point though all of this is guessing. This bill was just introduced to the Senate and nothing has been done with it; and for the Kigali Amendment we’re still awaiting word from the Trump Administration on rather or not they will pass. For now we are in this weird limbo when it comes to HFC refrigerants. No one really knows what will happen. Will we continue using these refrigerants ten years down the road and slow the growth of HFOs, or will the Trump Administration see the light and either sign this bill or move the Kigali Amendment forward into the Senate? Only time will tell.
One thing is for certain the pricing on HFCs is definitely going to be interesting this summer with all of this uncertainty going around.