EPA Increases R-22 Availability
 
Discussion Regarding the EPA’s
MEMORANDUM: Overview of the Final Rule Regarding HCFC Allowances for 2012, 2013 and 2014

So, with the single stroke of a pen, the EPA has placed 28 Million more LBS of R-22 in the market.  What does that mean?
 
1)     This move, in effect, doubles the allocation previously established for 2013

2)     2015 still is set for an estimated 35,000,000 LBS – another sharp decline that will certainly impact the market at that time

3)      The result is, in effect, doubling the allocation previously established for 2013

4)      2015 still is set for an estimated 35,000,000 LBS – another sharp decline that will certainly impact the market at that time.

The price will likely fall, and this is going to be difficult, particularly with so many distributors and wholesalers having already purchased their spring inventories of available R-22 at significantly high prices.  While, at this time, we are unable to predict the outcome from this action and we can only anticipate a reduction in price.  If that occurs, millions of dollars will have been spent on inventories, just to have the value of those purchases potentially and severely compromised.
The allocation increase also has the potential to deflate the efforts being invested into conversions as well as decrease recovery and reclaim rates.  In 2012 we were proud of the outcome the industry produced with increased recovery rates and equipment retrofits and replacements.  Now, we are left with more questions than results:

• Was the US government even aware that their action would undermine the investment in refrigerants made by thousands of wholesale accounts?

• Why did the US EPA reduce allocation to 39 Million LBS earlier in the year only to double that after all the pre-season purchases were complete?[1]

• How will the industry deal with the any adjustment to the value of the material?
We intend to keep you updated with information and do our best to be transparent and objective with the results we gather.

However, one lesson needs to be learned from this exercise.  In 2015, the industry will face another “cliff” in the allocation reductions – just like the one we experienced in January 2012.  Are we going to collectively behave in a responsible manner and use the increased short-term availability to properly harvest R-22 for the future?  We’ve already misbehaved badly once.  Did we learn our lesson?

This ruling is in conflict with results anticipated by the industry and we look forward to hearing more from the EPA on this matter.  We will report what we hear.