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The EPA’s Supply-Chain Disruption

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This article originally appeared here.

The pandemic isn’t solely to blame for the broken supply chain. For America’s refrigeration and air-conditioning businesses, the main culprit is the Environmental Protection Agency.

Worthington Industries is the only U.S. maker of lightweight recyclable cylinders for transporting refrigerants. Chinese manufacturers are our main competitors. In April 2021 the Commerce Department found that China acted illegally in subsidizing this market by selling at less than fair market value. Two weeks later the EPA made a surprise announcement that it would ban making nonrefillable cylinders in the U.S. starting July 1, 2025. This will result in shortages and higher prices.

Worthington’s cylinders are used by 99% of the nation’s heating, ventilation, air-conditioning and refrigeration industry. Each weighs about 35 pounds when filled; refillable cylinders, which the EPA permits, each weigh more than 50 pounds filled. The EPA’s ruling will require the industry’s 400,000 employees to carry the heavier cylinders up stairs to rooftop HVAC systems, threatening workplace injuries.

In 2020, Congress passed the American Innovation and Manufacturing Act, a bipartisan law that authorizes the EPA to phase out hydrofluorocarbons—substances used for refrigeration with a high global-warming potential. The EPA claimed in its final rule that the AIM Act granted it “inherent” authority to adopt “complementary measures,” including the cylinder ban. Yet no one mentioned such a ban during debate on the bill, and it’s not in the text of the law.

In Ohio and Kentucky, where Worthington makes the cylinders, hundreds of workers could lose their jobs.

The domestic market can’t supply alternatives to disposable cylinders. The California Air Resources Board, the state regulator, estimates that “for every disposable cylinder sold, four refillable cylinders must be in circulation.” The EPA figured on a 2-to-1 replacement ratio and concluded that the cylinder ban is feasible because “there is sufficient global capacity for the production of refillable cylinders.”

There isn’t. Worthington’s facilities already operate around the clock on manufacturing lines specifically designed to produce either disposable or refillable cylinders. That leaves our customers with no domestic alternative. There isn’t global capacity to produce enough refillable cylinders to meet the requirements of the EPA’s rule. Worthington would have to build a new facility, which would take more than three years and cost nearly $100 million.

The ban won’t help keep counterfeit or smuggled refrigerants out of the U.S.—one of the EPA’s main justifications. The agency’s own evidence shows rampant smuggling of nonrefillable cylinders into the European Union, the largest market to ban them.

In November, Worthington petitioned the EPA to reconsider the ban, citing the significant costs and unproven environmental benefits associated with switching to only refillable cylinders. We received no response, so in December we sued the agency.

The EPA’s unauthorized action will mean supply shortages and higher prices, fewer jobs, more injuries and more business for China.

Andy Rose
Latest posts by Andy Rose (see all)

Posted In: Government, Supply Chain

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