HARDI has recently filed comments on two issues which will undoubtedly have a great impact on HVACR distributors.

HARDI recently filed comments on the Environmental Protection Agency’s (EPA) proposed R-22 allocation rule for 2012-2014. While HARDI supports an orderly reduction of R-22 it was our view that significant market confusion resulted from both the delay in EPA beginning this rulemaking process and concerns and delays with EPA’s “non-enforcement letters” which allow companies to produce and import refrigerants while the rulemaking process is taking place.
 

Last week, HARDI submitted comments to the Department of Energy regarding possible enforcement proposals for the newly established regional efficiency standards for furnaces and air-conditioners. HARDI stated in its comments that while distributors will likely play an active and voluntarily role in communicating the new standards to contractors, the Department of Energy lacks the legal authority to include distributors in enforcement schemes. HARDI maintained that legislative language clearly outlines responsible entities for the energy efficiency of furnaces and air-conditioners and distributors are not a named party.
 

HARDI will continue to update membership on these important issues as developments occur.

EPA Proposes Faster R-22 Phaseout

By Peter Powell

How much HCFC-22 will be available to contractors in 2012 is an unanswered question as the Environmental Protection Agency (EPA) considers a faster phaseout of HCFCs.

The EPA began the year by issuing a 75-page proposal called Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export.

When and if the proposal takes effect, it would allow less virgin HCFCs to come to market than the previous phasedown announced on Jan. 1, 2010. The previous rule allocated 45.4 KT (100 million pounds) in 2011 and 40.7 KT (90 million pounds) of R-22 for 2012. In this latest proposed rule, the EPA could reduce the quantity available for production and import in 2012 to between 25.1 to 36.2 KT (55 million to 80 million pounds).

The latest proposal from EPA says that the phasedown will range from 11 to 47 percent per year beginning in 2012 and ending in 2014, which is in addition to the 10 percent annual reduction built into the previous rule.

A Proposal for Now

The proposal is just that — a proposal. Comments were invited through Feb. 3, but the EPA may not issue a final ruling until summer.

However, the delay in issuing solid production numbers has led to a period of confusion in the industry. For three weeks, production and importation was not allowed until the EPA issued a non-enforcement letter on Jan. 20 saying the agency would not fine producers as long as they do not exceed the amount of allowances outlined in the letter. The letter said producers and importers combined cannot exceed 55 million pounds for 2012, a 45 percent reduction from 2011, while the EPA finalizes the rule.

As producers resumed production, there were reports of price increases. At the same time R-22 manufacturers were looking at allocation options for their own wholesaler customers.

Richard Rowe, global group president for Arkema, said in late January that Arkema would strive “to serve existing customers with [the amount] of refrigerant they had used in the past for as long as possible during the phaseout of R-22.”

Lincoln Germain, global business director of heat transfer and fluorine products for Honeywell, also noted Honeywell’s focus on current customers and said, “We will not be accepting new customers.”

Jim Bachman, national sales and marketing manager for DuPont Refrigerants, said, “DuPont’s focus is on ensuring supply to our existing, loyal distributors and their downstream customers. Clearly, though, we feel it’s extremely important that industry participants focus on implementing plans to reduce their dependence on R-22 as soon as possible.”

All this factored into a comment from Jay Kestenbaum, senior vice president for product management at Airgas, who stressed the importance of those who deal with refrigerants to rely on “reliable, solid suppliers.” He noted the situation “is not new to our industry as we have seen similar situations during the phaseouts of CFCs, and more recently during shortage periods for HFC-134a in 2005, and just last year during the worldwide shortages of all HFC-125 based blends.”

Reasons for a Faster Phasedown

Those who have followed the issue closely point to several reasons that may be behind the EPA’s proposal to speed up the HCFC phasedown. These include the following:

• The EPA’s concern over a lack of adequate reclamation of R-22, whose reuse is not factored into virgin allocations.

• The agency is perhaps upset over the industry’s aggressive use of an allowance in the 2010 ruling that permits dry-shipping of R-22 components such as condensing units — this despite the fact that many in the industry have campaigned to have the EPA close the so-called loophole.

• The fact that the industry did not use its entire 2010 allocation of R-22 in part because of a sluggish economy and OEM focus on HFC refrigerants in new equipment.

The HFC Aspect

Another aspect of the equation is that nearly all refrigerant manufacturers capable of making virgin R-22 are also manufacturing a wide range of HFC refrigerants that can be retrofitted into R-22 systems — and those HFCs are not subject to any phasedown. Refrigerant manufacturers have been promoting wider use of such refrigerants for a number of years.

In fact, during the AHR Expo in late January in Chicago, a number of manufacturers referenced that.

For example, Gordon Mc-Kinney, vice president and CEO of ICOR International, said, “If HCFC pricing increases at the pace that many predict it will, refrigerant users and equipment owners will be quickly adjusting their own priorities. Many are already ahead of the curve and well acclimated to using R-22 alternatives.”

A statement from Honeywell said, “As R-22 supplies become more expensive and supplies tighten, many of our customers will be looking for alternatives to R-22 to retrofit into their systems.”

DuPont’s Bachman said, “It is critical to consider the impact of the R-22 supply reductions on your business and the benefits that R-22 replacement refrigerants can provide to equipment owners. HFCs offer a viable alternative to R-22.”

And all continued to urge contractors to make more use of the numerous refrigerant reclamation options in place, which allow recovered R-22 to be brought back to ARI-700 purity standards and reintroduced to the market without being counted as part of the virgin R-22 allocations.

Gauging Supply

With the industry currently assuming 55 million pounds — rather than the 90 million pounds anticipated — coming to market in 2012, the question of shortages is being brought up.

Honeywell’s Germain said in late January he anticipates “spot” shortages through 2012.

Jonathan Melchi, director of government affairs for the Heating, Airconditioning, and Refrigeration Distributors International (HARDI), a wholesaler trade association, said he did believe the market would tighten yet does not anticipate a large shortfall through 2012. He credited this to large supplies of R-22 currently being held by wholesalers and their customers, as well as a still sluggish economy.

DuPont’s Bachman said, “The reductions in the proposed rule are significant and major changes in business practices are necessary to avoid a supply shortfall.”

However the allocation situation plays out, there is general support for the willingness of the EPA to set up a timeline for continual phasedown through 2014, although there are differing views on what the percentages should be. And it was noted that even though the phaseout is being sped up, there still appears there will be some virgin R-22 available until the spigot is turned off in 2020, except for a 0.5 percent trickle continuing to 2030.

The EPA Works to Finalize its Allocation and Production Rights for HCFC-22 for 2012-2014

There has been much recent discussion regarding the market for HCFC-22 in 2012, as the EPA works to finalize its allocation and production rights for 2012-2014. Here are some basic facts HARDI wanted to communicate to our membership.
 

1.)    There is an ongoing EPA rulemaking concerning the allocation of refrigerants, including R-22 for 2012-2014. The EPA has suggested a reduction of allocation rights of R-22 between 11% and 47% in each year (2012-2014), in addition to the annual 10% reduction each of those years set by the 2009 Allocation Rule. EPA’s proposed reduction was not unexpected, and is supported by some industry stakeholders.

2.)    Since the current rule is not final, it is illegal for a company with 2011 allocation rights to produce or imports HCFCs into the United States until receipt of a “non-enforcement” letter from EPA which was expected by many companies to arrive the first week of January; however this letter was delayed until Friday, January 20. Thereby, 15 work days had passed where no refrigerant production or importation occurred.

3.)    In this “non-enforcement” letter, EPA stated that production and importation should be limited to approximately 17% of a company's 2011 baseline until the rulemaking is complete. If, when the rulemaking is completed, the final reduction is less than 17% of the 2011 baseline, a company will be allowed to increase production and importation to their allocated limits. HARDI does not expect this rulemaking to be completed by the beginning of summer.

4.)    From 2005-2010 (2011 data is not yet available), only 77% of Consumption Allowances for HCFC-22 were used. These figures along with comment from stakeholders to the EPA, regarding the oversupply of R-22 in the marketplace and concerns of stockpiling, have led EPA to consider a more aggressive phasedown.

5.)    In 2011, EPA sought comment from the Alliance for Responsible Atmospheric Policy, of which HARDI and all major refrigerant producers are members, regarding a suggestion for a more aggressive reduction in R-22. The Alliance formally submitted a suggestion for a 20% reduction in Consumption Allowances.   

HARDI’s Refrigerants & Refrigeration Council is currently accepting member comments on what the annual reduction should be in this rule. 

HARDI National Conference

RemTec International and Patti Ellingson personally invite you to stop by our booth (#304) for important information about our Buy Back & Recovery Program during the 2011 HARDI National Conference October 22^nd -26^th

Let us help you turn your used refrigerants into CA$H!

If you are interested in scheduling a meeting with me one on one prior to the booth please call me at 419-575-9490.

I look forward to seeing you there.

Women in HVACR would like to introduce its 2011 Executive Board.

Serving as President this year will be Nita Brooks. Nita is the Business Product Development and Member Services Manager for the business level of membership with NCI- National Comfort Institute http://www.nationalcomfortinstitute.com. During the eleven years she has been with ISL, her areas of responsibility have included enhancing and developing vendor programs, coaching and training members on business practices, helping to develop tools to support the member’s business practices, recruiting, and supporting the accounting functions. Nita brings over 24 years of successful business development experience to the HVAC arena. As an Area Controller for Purina Mills, Inc., Nita developed local controls to focus on the support of ethical practices and processes to ensure profitability for multiple facilities. Nita’s experience in auditing business practices to provide compliance with standards needed for improved profit margins has aided to develop results-driven solutions for HVAC contractors.

The Vice President for 2011 is Patti Ellingson. Patti has an extensive background in sales, business development and marketing within the HVACR industry since 1993. She currently heads up RemTec International’s www.remtec.net Wholesale Division featuring the Refrigerant Buy Back and Recovery Program, Destruction of ODS gas for Carbon Credits Program and virgin & reclaimed refrigerant sales. Through a defined vision, she has produced successful market tactics resulting in profitable growth for her partners within the industry. Her ability to motivate others through goals, challenges and coaching have contributed to her proven sales record. Patti earned her degree in Human Resource Management with a minor in Marketing from Saint Leo University (1993). She is active in the HVACR industry as a member of HARDI, Women in HVACR, AHRI, and the USGBC. She is focused on the issues of environmentally beneficial “green” solutions, indoor air quality and energy efficiency within the industry.

The position of Treasurer will be shared this year by Karen Riffice and Barbara Keil. Karen grew up in a family of service pipefitters. Although eager to join the trade after high school, she received a less-than-enthusiastic reply to her interest. She worked with her two brothers at their contracting firm prior to finishing her four-year degree and MBA. She realized that there are many ways to make a great living in this industry. With her education, she chose the financial side. Karen worked for Soderlund Bros., Inc., a HVACR contractor for 26 years as the company Controller. When the owner decided to retire, she started her own HVACR and Plumbing company, Amalgamated Services, Inc.

She has developed important skills in contractor financial management as well as sales development, service scheduling, fieldwork personnel supervision, union contract negotiation, customer service, collections, and banking relationships. Karen also has participated in numerous trade and professional organizations, serving as an officer and board member in several instances. Her many years in the industry have prepared her well for the task of ownership. Her goals include increasing the outreach into schools to raise awareness about careers in the HVAC industry.

KEIL Heating & Air www.keilheatac.com was founded by Barbara's grandfather in 1908. Although she recalls helping out at a very young age, Barbara's father suggested she put her accounting degree to work at KEIL until she found a "real job." Truly enjoying the perspective of running a business, Barbara never left! Celebrating 100 years in business, KEIL has earned the Contractor of the Year Award from Contracting Business magazine and the Best Contractor to Work for (Northeastern USA) Award from the Air Conditioning, Heating and Refrigeration News. Barbara is an active member of International Service Leadership (ISL), Toastmasters International and The Alternative Board.

The position of Secretary is held by Tammy Smith. Tammy and her husband, Hal, started Halco Plumbing & Heating www.halcoheating.com in 1984. In 2004 they expanded their business ownership by opening a supply house called PBS Supply, Inc. between the two ventures; they employ approximately 125 people in the Finger Lakes Region in upstate NY. They are active members of International Service Leadership (ISL), where Hal assists with training for light commercial contractors. Married for 25 years, they have three children: Seth, 21; Brock, 17; and Paige, 8. Tammy actively supports the local schools and their community. In what spare time they find, Tammy enjoys riding her Boss Hoss motorcycle with Hal, bowling, skeet shooting and taking vacations.

And Past President is Kimberly O’Neal, who will remain active on the board. As a Channel Marketing Specialist for the Home Comfort and Energy Systems business for Honeywell, www.customer.honeywell.com. Kim has an active role in identifying marketing opportunities, developing plans and executing the tactics within the HVACR channel. A former employee of the Heating, Air-conditioning and Refrigeration Distributors International (HARDI), she has a unique perspective on many facets of the HVACR Distribution side of the industry. She has been a member of WHVACR since its inception and a WHVACR Board member since 2005.

Additional Board members are:
Kathy Corr, NATE - Ruth Ann Davis, Williams Furnace - Alyssa Peluso - DuroDyne Leslie Titcomb, Harvey Hottel