Mexichem Fluor, Inc. v. EPA

The D.C. Circuit Court of Appeals denied petitions for panel rehearing and rehearing en banc of the court’s August 2017 decision vacating the U.S. Environmental Protection Agency’s (EPA’s) rule prohibiting use of hydrofluorocarbons (HFCs) as replacement for ozone-depleting substances under EPA’s Significant New Alternatives Policy program. HFCs are powerful greenhouse gases. Rehearing was sought by Natural Resources Defense Council and by two companies that had developed “new and better substitutes” for ozone-depleting substances. The court said that a majority of judges eligible to participate did not vote in favor of the rehearing en banc petitions and noted that Judges Millett and Katsas did not participate. The petitions for panel rehearing were denied because the current panel of two judges was equally divided. The third judge on the panel, Judge Brown, retired on August 31, 2017. She joined the entirety of the majority opinion, including the portion vacating the HFC prohibition.

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After the D.C. Circuit Court of Appeals vacated the U.S. Environmental Protection Agency’s (EPA’s) rule prohibiting use of hydrofluorocarbons (HFCs)—which are powerful greenhouse gases—as replacements for ozone-depleting substances, Natural Resources Defense Council (NRDC) and two companies that intervened as respondents to defend the rule filed petitions for panel rehearing and rehearing en banc. NRDC argued that the panel had committed “two serious errors”: (1) it had reached beyond the 2015 rule at issue to improperly invalidate a rule issued in 1994, and (2) it had adopted a “patently unfounded interpretation of the statutory term ‘replace’ at Step 1” of its Chevron analysis. The two companies also argued that the court had exceeded its jurisdiction by invalidating the 1994 regulation and had incorrectly applied Step 1 of Chevron. The companies asserted that the court had “paradoxically held that even though EPA properly placed HFCs on the prohibited substances list, EPA lacked authority to prohibit pre-existing uses of HFCs” and that the court’s holding amounted to finding that “EPA had one chance, and one chance only, to require a manufacturer to replace an ozone-depleting substance with a safer alternative, no matter how dangerous the replacement might turn out to be or how much safer a newly available alternative is.”

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In a split opinion, the D.C. Circuit Court of Appeals ruled that EPA lacked authority to issue a 2015 rule restricting manufacturers from making certain products containing hydrofluorocarbons (HFCs). Because HFCs were greenhouse gases that contribute to climate change, EPA removed certain HFCs from a list of safe substitutes created pursuant to Section 612 of the Clean Air Act, which requires manufacturers to replace ozone-depleting substances with safe substitutes. EPA added the HFCs, which are not ozone-depleting substances, to a list of prohibited substitutes. EPA said Section 612 gave EPA authority to prohibit manufacturers that had replaced ozone-depleting substances with HFCs previously on the safe substitutes list from making products containing the now-prohibited HFCs. The D.C. Circuit found that EPA’s “novel reading” of Section 612 was “inconsistent with the statute as written” because it stretched the meaning of “replace” beyond its ordinary meaning. The D.C. Circuit said manufacturers “replace” an ozone-depleting substance only once—when they transition to making the same product with a substitute substance. The court said EPA’s reading of “replace,” in which manufacturers continue to “replace” the ozone-depleting substance every time the substitute is used, would render EPA’s authority “boundless” and that such an interpretation “borders on the absurd.” The D.C. Circuit did, however, uphold EPA’s decision to remove the HFCs from the list of safe substitutes. The court also said EPA did not “squarely articulate” an alternative “retroactive disapproval” rationale for requiring manufacturers to replace HFCs, and said that EPA would have to justify such an approach on remand if it chose to rely on it. Judge Robert L. Wilkins dissented from the conclusion that Section 612 unambiguously prohibited EPA from requiring replacement of the HFCs. In his view, the statutory provision was ambiguous and EPA’s interpretation of the statutory scheme was reasonable.

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Parties filed a first round of briefs in a D.C. Circuit Court of Appeals proceeding in which two chemical manufacturers challenge EPA’s final rule prohibiting or restricting use of certain hydrofluorocarbons (HFCs) under its Significant New Alternatives Policy (SNAP) program. The program implements Section 612 of the Clean Air Act, which concerns alternatives to ozone-depleting substances. In their opening brief, the chemical manufacturers argued that EPA had exceeded its statutory authority by banning HFCs that were not ozone-depleting. The manufacturers also contended that EPA had acted arbitrarily and capriciously, arguing that EPA had not explained why differences in global warming potential (GWP) between banned HFCs and other chemicals were significant, had improperly used GWP as a “proxy” for atmospheric effects, and had not provided an objective standard for what levels of GWP are acceptable. In its brief, EPA responded that it had authority to change the listing of a non-ozone-depleting substance where alternatives were available that posed a lower risk to human health and the environment. EPA also defended its use of GWP in its analysis of atmospheric effects. Other industry participants intervened on EPA’s behalf and argued, among other things, that Section 612 was intended to foster continued development of safer alternatives to ozone-depleting substances. NRDC also intervened on EPA’s behalf, arguing that EPA acted within its statutory and regulatory authority.