Again this year, leading HVAC distributors from across the country came to Washington, D.C., in May to meet elected officials and staffers to speak on behalf of their collective interests as part of the Heating Air-conditioning & Refrigeration Distributors International (HARDI) Congressional Fly-In. However, the previous afternoon’s orientation and issues session contained a full agenda of updates, expert insights, and industry strategy for members.

TARIFFS AND OBAMACARE

Several dozen interested HARDI members packed into a hotel meeting room just a couple of blocks away from the U.S. Capitol to get briefed on recent industry progress in Congress and, more importantly, on HARDI’s two key near-term goals: federal legislation organizing a nationwide HFC phasedown, and further refinement and entrenchment of gains made in the previous Congress’ Tax Cuts and Jobs Act.

But first, members received some bonus content that comes with an influential association and the meeting’s geographical proximity to the White House. Paul Teller, special assistant to the president for legislative affairs, spoke to the group for a few minutes on a variety of issues.

Teller offered a bit of a sneak preview to open, informing the room that the next day, President Donald Trump would announce a proposal to reverse the merit/family ratio regarding reasons for granting legal immigration (which he did). He also cited concerns about certain definitions in the bill and potential lawsuits as the White House’s rationale for opposing H.R. 5, the Equality Act. The bill’s general intent is to codify sexual orientation in civil rights protections currently granted based for other reasons.

Teller referred to multiple past and present legislative and executive efforts to dismantle the Affordable Care Act.

“The president doesn’t give up on trying to repeal that — weaken it, claw it back, whatever you want to call it.”

The tariffs recently escalated by both China and the U.S. represented a sensitive issue for the room, and Talley was quick to place the impetus on Beijing.

“We are extremely aware of the harm that China has been doing to us through theft of intellectual property” and other ownership regulations, he said. “We’re also aware of the harm that a protracted trade war does to the American economy,” he said.

When a HARDI member asked which country was in better position for an ongoing dispute, Teller suggested that the U.S. enjoys more leverage.

“The president doesn’t want tariffs to last,” he continued. “Nobody wants an escalating trade war … but if we don’t get out from under what China has been doing, disadvantages to American businesses will continue.”

STATES OF UNREST

Speaking of protracted, the agenda then turned to the continued murky and complex situation surrounding HFC regulations. Or rather, what to do about it. HARDI’s handout at the session put the situation in plain terms.

“The HVACR industry needs Congress to pass HFC phasedown-authorizing legislation in order for the industry to move on to new refrigerants.”

For some time, the situation has turned conventional wisdom on its head. HARDI’s director of government affairs, Alex Ayers, noted that it continues to be a case of business asking government for regulation.

The catch there, of course, is the desire for a single, national phasedown approach. The worst-case scenario for the industry, as described by industry leadership at multiple levels, is a lack of action by the president and Congress, leaving individual states to act (or not) and create a patchwork of different requirements and laws regarding refrigerants and equipment.

As a HARDI-provided map illustrated, if a state-by-state regulatory quilt is the worst-case scenario, the sewing has already begun. More than 20 states have already made progress on their own legislation and/or joined the U.S. Climate Alliance, a group of governors committed to institute updated refrigerant regulation on the state level as part of a larger environmental agenda.

Click map to expand

STATE(S) OF DISARRAY: This map, distributed to members at the HARDI Fly-In, highlights the increasing number of states that are moving toward their own HFC phasedown strategies in the absence of a federal policy.

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STATE(S) OF DISARRAY: This map, distributed to members at the HARDI Fly-In, highlights the increasing number of states that are moving toward their own HFC phasedown strategies in the absence of a federal policy.

TO THE RESCUE?

Nature abhors a vacuum, as the saying goes, and distributors may be pleased to know that a cross-section of the HVAC industry — HARDI; Air-Conditioning, Heating & Refrigeration Institute (AHRI); ACCA; possibly others — have been collaborating in an attempt to compensate for the administration’s policy of inaction on this issue. The effort to coalesce around a unified message and solution on a manufacturer/contractor/distributor level has become more noticeable in recent months.

The effort was evidenced at this distributors’ event by the sizable contribution to the session from Samantha Slater and Helen Walter-Terrinoni. Slater is the vice president of government affairs for AHRI, while Walter-Terrinoni is that organization’s vice president of regulatory affairs.

The AHRI experts proceeded to discuss highlights of the HFC phasedown legislation that has been crafted with the industry’s help, and to caution members on

the perilous path it will have to navigate in order to become law. Slater said that last year, after meetings with the Environmental Protection Agency (EPA), interested parties realized chances were slim that the administration would provide a way forward by submitting the Kigali amendment to the Montreal Protocol to Congress for ratification.

While AHRI supports the Kigali amendment “100 percent” in its own words, it agrees the next best thing would be a legislative workaround that allows access to its economic benefits without ratification.

According to Slater and Walter-Terrinoni, the substantive goals for triangulating legislative wording that does just enough without raising too much opposition were:

• Avoid ratifying any Obama-era climate change international treaty (i.e., Kigali).
• Avoid allowing the EPA to regulate greenhouse gases any more than it already does.
• Avoid drafting any new Trump administration climate policy.

Furthermore, the political challenge the bill’s supporters face is how to promote the potential benefits while avoiding a number of partisan sensitivities to certain nouns and adjectives.

Factor in all of those considerations, and this intra-industry alliance has arrived at what is called “a jobs bill” rather than “a climate bill,” with emphasis on economic security rather than climate policy, per se. So what is the one-line description tailored to thread assorted political needles in approximately five seconds?

“An innovation-based approach for a necessary technology transition.”

POLITICAL LOGISTICS

As anyone with internet or TV access can confirm, the 2020 presidential campaign season has already begun, so time is getting even shorter. AHRI does believe there is still an opportunity late this year or early next to get this idea across the finish line and into law.

Republicans, controlling the Senate and the White House, actually are looking to support something related to climate change, Slater reported. Why not this bill, which involves an exceedingly narrow scope of federal action but holds the potential for significant benefit for business?

In the Senate, Slater said, Majority Leader Mitch McConnell “is a hurdle.” On the other hand, 13 Republican senators did sign a letter indicating some interest in a degree of action about a year ago, and that is one sign of a fragile foundation of support.

On the House side, the industry sees interest in moving bipartisan legislation in general. AHRI encouraged HARDI members to approach both sides of Congress in the same manner: “HFC phasedown” and “innovation” are the words of the day, as opposed to, say, “Kigali.”

“That’s a word I don’t use anymore,” said Walter-Terrinoni.

STAKES AND STATES

During some Q&A with AHRI’s representatives, HARDI’s Ayers added that while “Kigali” may be a taboo word in modern D.C. diplomacy, a provision in the amendment’s language does allow that a nation’s legislative action does count as ratification if the law essentially creates treaty compliance.

That matters quite a lot, as it turns out, with regard to other signatory countries’ long-term ability to do business with the U.S. in this area.

Other countries are also “looking to the U.S. to lead,” said Walter-Terrinoni. “If we’re not leading, they’re looking to someone else. The others are Germany and China. They have different technology approaches from ours.”

Those countries tend to focus on propane- and CO2-based solutions, she said. Walter-Terrinoni added that they can be done effectively and safely, but she believes the U.S. has “the upper hand” in how to do these things efficiently and well.

Back in the developing domestic patchwork, AHRI offered the possibility of a consolation prize of sorts, should the legislation begin the process but not come to fruition. Even failed legislation, a bill that is simply introduced in Congress, could act as a deterrent against more state-level regulatory sewing and stitching.

“The states don’t want to do this. It’s a lot of work, and their staffing is very small,” Slater said. “In New York, there are maybe two people doing this. The EPA has 20 people, very knowledgeable people, doing this. If [the states] see federal action, they will walk away from it.”

GRADUAL IS GOOD

HARDI’s Ayers attests that “if we don’t resolve this, manufacturing will move overseas.” He touted this jointly cultivated proposal’s phasedown timeline and the upside of pursuing this fix now.

“It’s a very gradual phasedown that starts with the manufacturer and works its way through the industry,” Ayers told attendees.

The graphic HARDI distributed showed stepping-stone HFC decreases of 10, 30, 30, 10, and 5 percent over a number of years. In this scenario, Ayers explained, changes may start earlier but won’t begin to affect the distributor sector until the end of the next decade. As proposed, this phasedown would not completely finish until 2036.

The time is now for a couple of reasons, he suggested. From an administration standpoint, the White House may not be receptive to a straightforward Kigali ratification, but Ayers said the current EPA leadership is more sympathetic to business concerns than others in recent years.

Also, should this proposal succeed on the federal level, HARDI and partners would proceed directly to coordinating support in a tightly scheduled series of scheduled opportunities to update and revise assorted international and/or building codes.

HARDI also emphasizes that regardless of how a phasedown happens, contractor training will be needed. Ayers said the association is collaborating with ACCA on this wording to ensure contractors and technicians will be using proper safety techniques when working with the next era of refrigerants, likely to include mildly flammable A2L options.

COMING UP

Will industry leadership be able to coax elected officials into embracing a single, coherent HFC phasedown — or at least avoid AHRI’s worst case of “a hard no” from the administration or other key leadership? Distributors trying to avoid unnecessary regulatory and transportation complexities, manufacturers making production decisions, and contractors facing updated procedural requirements all await the answer.

Not even those closest to the issue can predict the resolution, but this much is clearer: A great deal of industry thought and resources have gone into developing a best attempt at just the right workaround for these times, and critical phase approaches for that effort. Compared to the last couple of years of waiting and behind-the-scenes work, the situation is just about to get interesting.

For at least a little while longer, the counsel for distributors remains the same: Contact your representatives in support of this “innovation-based approach for a necessary technology transition” as desired, and otherwise, stay tuned.

Publication date: 6/3/2019

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