EPA mandate heats up freon prices

by Ryan Naquin

You may be singing the summertime blues the next time your air conditioner runs out of freon. An EPA mandate is pushing up the costs for air conditioning units made before 2010.

The freon used in air conditioners is called r-22, and it's expected to more than double in price.

Verlon Wulf, a local repairman, has worked with air conditioners for more than 25 years. He says the majority of the work he does during the summer months is on one thing.

"We get a lot of calls where they have a leak and something is going on, when we do have to get out there and add some refrigerants to it, and of course most of that is for r-22," says Wulf.

Unfortunately, r-22 is about to get more expensive.

"Before, if you wanted to add some r-22 it was probably about $20 a pound something like that, now it's up closer to$45 to $50 a pound."

The price will now increase due to an Environmental Protection Agency mandate that forced a change in all A/C units built at the beginning of 2010. Those units take r-4-10-A freon, which is better for the environment.

"The new refrigerants, because of the mix and the blend that they are, dissipate a whole lot quicker so when it does leak out into the atmosphere it does a lot less damage," adds Wulf.

The EPA mandate also forced manufacturers to cut back on the production of r-22 freon, which makes the price go up because inventory is down.

The newer freon is still about $20 a pound. The average air conditioner holds between five and ten pounds.

The EPA mandate also phases out the production of r-22 freon by 2020.

Freon For Older Air Conditioners Is Being Phased Out

Written by Patrick Phillippi

Greensboro, NC - Approximately eighty percent of air conditioners across the country are going to have to replaced by 2020, and the price to simply service air conditioners with Freon is going to triple, this as a result of new emission standards from the Environmental Protection Agency.

Air conditioners five to ten years old or older use R22 Freon, which is being phased out for the new Freon, R422.

This phase out is causing the prices for R22 to skyrocket, according to Vicky Maness of Kay Heating and Air. The prices consumers will be pay this summer will be almost triple the price, Manes said,"It is definitely going to be a shock knowing what they paid last year."

The R22 Freon will no longer be produced after 2020, and because older air conditioners only use R22, they will all have to be replaced.

And with the cost of replacing an air conditioner starting at $5,000, many consumers will be faced with a hard reality.

Rodney Smith, a supplier of R22, says of the price rise, "It is like nothing I have ever seen, ever. I think the reaction from consumers is going to bordering on outrage."

As R22 Freon continues to phase out of production, the price of this freon could continue to rise, making it even more expensive to service air conditioners.

And the impact will be widespread, "Apartment complexes, homeowners, businesses, any equipment that has R22 Freon it's going to affect them right now." said Maness.

What’s Going on with R-22

By Charlie McCrudden | January 30, 2012
Recent actions by the U.S. Environmental Protection Agency (EPA) regarding HCFCs have led to uncertainty about the availability of R-22 in the coming months and years. In response, contractors have noticed a ramp-up in the chatter about R-22 and price changes as some manufacturers and importers have amended their sales policies.

This situation is the culmination of several factors, including the continued implementation of the federal government’s policies regarding HCFCs, current market conditions, and delays in the regulatory process.

As most contractors know, the EPA controls the production of HCFCs, including the refrigerant known as R-22, through allowances that limit how much each gas manufacturer and importer can produce or import in a given year. Under the implementation of the Montreal Protocol, the production and use of R-22 is slowly being phased out.

In August 2011, the EPA proposed to adjust the allocations in place for the years 2012-2014. This adjustment was necessary because of a lawsuit filed by two HCFC producers who had completed a legal trade of allocations that EPA had failed to recognize in its allocations released in 2009.

EPA consulted with industry stakeholders before proposing to reduce the annual allocations. In gathering information used to develop the August 2011 allocation adjustment, EPA found that there was an oversupply of R-22 in the marketplace, partly evident by a lack of demand, increased reuse of R-22, and low wholesale prices. In fact, in 2010, producers of R-22 only utilized 86% of their allocations. A trade organization representing the manufacturers and importers of R-22 supported these claims, and advocated for a 20% reduction in allocations for 2012-2014.

By the end of 2011, EPA had yet to finalize its adjustment proposal for the 2012-2014 allocations. But EPA did release a subsequent version of the August 2011 adjustment proposal on December 30, 2011, one that proposed to reduce the allocations for 2012-2014 between 11-47%.

Without a finalized adjustment rule, the producers and importers of R-22 were stuck in a legal limbo – on January 1, 2012, they did not have the authority to manufacture or import R-22. Recognizing this problem, on January 20, 2012, EPA sent “non-enforcement” letters to the producers and importers of R-22, alerting them that they could resume the manufacture and import of R-22 in the interim even though EPA had yet to set the new allocation amounts. The non-enforcement letter advised that production would be curtailed by 45% of their last allocation amount, the high end of the allocation adjustment proposal.

It is expected that the EPA adjustment proposal will take at least until the summer of 2012 to be completed. The end result could be a reduction in R-22 allocations somewhere between 11-47%, meaning it is likely the final adjustment proposal will be less than the interim 45% reduction and that more R-22 may be produced or imported.

ACCA has been following this issue to provide contractors with the most up-to-date and precise information available. We will continue to monitor the allocation adjustment rulemaking process and alert members of any progress or actions taken by EPA.

UPDATE: February 2, 2012

The last two weeks have been like no other in the industry.

As a follow-up to the regulatory alert posted last week, I thought I would try to give some further background on what’s driving the uncertainty in the R-22 marketplace.

Two factors make the R-22 market different from a typical open and competitive marketplace where the rules of supply and demand govern.

First, as everyone knows, the use of R-22 is slowly, but actively being phased out by the EPA under the Montreal Protocol. About every five years, the manufacture and import of R-22 is stepped down under a program http://www.epa.gov/ozone/title6/phaseout/hcfc.html designed to phase out the production and use by 2030.

Second, under the phase down, the production and import of R-22 marketplace is tightly controlled through production and consumption allocations granted by the EPA, typically on a five year basis.
In regulating the marketplace and setting the production and import allocations, EPA is making certain assumptions about how much R-22 will be necessary for servicing needs going forward. (Remember that as of 2010, newly manufactured R-22 cannot be used in newly manufactured appliances, only servicing existing equipment.)

During the phase down, EPA has repeatedly tried to make clear that it wants to oversee a smooth transition away from the HCFCs. That’s partly the reason for the allowing the continued manufacture of dry charged R-22 condensing units.

As part of that transition, EPA wants to promote recovery and reclamation of R-22 for continued servicing needs, but also encourage changeover to non-ozone depleting substance alternatives, refrigerants like 410A.

It’s impossible to predict exactly where EPA will decide to set the allocation amounts for 2012-2014. As noted in the regulatory alert, the earliest their decision will come out is this summer. Until then you can expect to see more uncertainty about price and availability.

Charlie McCrudden is ACCA Vice President for Government Relations.

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R-22 Update

Friday, January 27, 2012

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). EPA’s proposed reduction was not unexpected.

2.) While the rulemaking process is underway, it is illegal for a company to produce or import refrigerant into the United States. The EPA therefore must send out a “non-enforcement” letter, which allows companies to legally produce or import refrigerant. This letter was expected by many companies to arrive the first week of January; however it was delayed until Friday, January 20. Thereby 15 work days had passed where no refrigeration production or importation occurred.

3.) The EPA's "non-enforcement" letter called for a 17% reduction from the original R-22 baseline, or a 45% reduction off of the 2011 allocation. In 2011 the total R-22 allocation was approximately 100 million pounds. Currently manufacturers and producers are operating under guidance that only 55 million pounds will be approved in 2012. If the finalized rule calls for less than a 45% reduction, a manufacturer/producer could produce and import up to their allocated amount.

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, 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.

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. 

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