Regulatory Developments

EPA’s 2015 HFC Rule Nullified by D.C. Circuit

In a 2-to-1 opinion, the U.S. Court of Appeals for the D.C. Circuit found that the EPA veered outside its statutory authority when it issued a rule in 2015 that ordered manufacturers to stop using hydrofluorocarbons (HFCs) in their products because the substances contributed to climate change. Accordingly, the court remanded that part of the rule to the Agency for “further proceedings consistent with this opinion.”

The court’s action was a major setback to President Barack Obama’s 2013 Climate Action Plan, which specifically targeted the elimination of HFCs in commercial products via the use of EPA’s authority under Clean Air Act (CAA) Section 612, which requires replacement of ozone-depleting substances (ODSs) with safer alternatives or non-ODSs.

2015 Rule

HFCs have long been used in a variety of products and particularly in aerosol spray cans, motor vehicle air conditioners, commercial refrigerators, and foams. Pursuant to section 612, in 1994, the EPA promulgated regulations requiring manufacturers to replace ODSs with safe alternatives, which included the HFC class of chemicals. Section 612(c) further requires the EPA to publish a list of both safe and prohibited substitutes. In the 1994 rule, the EPA indicated that once a manufacturer has replaced its ODS with a non-ozone-depleting substitute, Section 612(c) does not give the Agency the authority to require the manufacturer to later replace that substitute with a different substitute.

In the 2015 rule, the Agency reversed itself and asserted that Section 612 empowered the Agency to order continuous replacement of HFCs even after manufacturers had complied with Section 612 by replacing their ODSs with non-ozone-depleting HFCs. The majority said this “boundless interpretation of EPA’s authority under Section 612(c) borders on the absurd.”

HFC-134(a) Manufacturers

The case against the Agency and the 2015 rule was brought by Mexichem Fluor Inc. and Arkema, two businesses that make HFC-134a for use in a variety of products. The companies argued, first, that the 2015 rule exceeds EPA’s statutory authority because the CAA does not require manufacturers to replace non-ozone-depleting HFCs with alternative substances. They also asserted that EPA’s decision in the 2015 rule to remove HFCs from the list of safe substitutes was arbitrary and capricious because the Agency failed to adequately explain its decision and failed to consider several important aspects of the problem. While agreeing with the first claim, the court rejected all arguments by the petitioners to support the arbitrary and capricious claim.

Majority Reasoning

The majority ruled against the EPA for two reasons:

  • First, EPA’s authority to regulate ozone-depleting substances under Section 612 and other statutes does not give EPA authority to order the replacement of substances that are not ozone depleting but that contribute to climate change. “Congress has not yet enacted general climate change legislation,” wrote the majority. “Although we understand and respect EPA’s overarching effort to fill that legislative void and regulate HFCs, EPA may act only as authorized by Congress. Here, EPA has tried to jam a square peg (regulating non-ozone-depleting substances that may contribute to climate change) into a round hole (the existing statutory landscape).”
  • Second, the majority rejected EPA’s argument that manufacturers continue to “replace” the ozone-depleting substance every time the manufacturer uses the substitute substance indefinitely into the future. “According to EPA, replacement is not a one-time occurrence but a never-ending process,” said the majority. “In EPA’s view, because manufacturers continue to ‘replace’ ozone-depleting substances with HFCs every time they use HFCs in their products, EPA continues to have authority to require manufacturers to stop using HFCs and to use a different substitute.”

“Manufacturers ‘replace’ an ozone-depleting substance when they transition to making the same product with a substitute substance,” continued the majority. “After that transition has occurred, the replacement has been effectuated, and the manufacturer no longer makes a product that uses an ozone-depleting substance.”

The majority used a colorful example to emphasize its point:

“President Obama replaced President Bush at a specific moment in time: January 20, 2009, at 12 p.m. President Obama did not ‘replace’ President Bush every time President Obama thereafter walked into the Oval Office. By the same token, manufacturers ‘replace’ an ozone-depleting substance when they transition to making the same product with a substitute substance. After that transition has occurred, the replacement has been effectuated, and the manufacturer no longer makes a product that uses an ozone-depleting substance. At that point, there is no ozone-depleting substance to ‘replace,’ as EPA has long recognized.”

Dissent

In his dissent, Justice Robert L. Wilkins contends that term “replace” is susceptible to multiple interpretations in the context of the case and cannot serve as the basis for discerning clear congressional intent. Essentially, Wilkins believes that “replace” can also mean providing any number of substitutes for over the course of years, “and it may be the case that one substitute is succeeded by a better substitute at some point in time.” Given the ambiguity of “replace” and the fact that Congress left that term ambiguous, Wilkins wrote that the EPA is entitled here to the Chevron deference.

Retroactive Disapproval 

Interestingly, the majority appeared to find it unfortunate that it was compelled to reject an important climate related regulation.

“However much we might sympathize or agree with EPA’s policy objectives, EPA may act only within the boundaries of its statutory authority,” the majority wrote. “Here, EPA exceeded that authority.”

The majority noted that in the future, the EPA may present a reasonable argument that it has legitimate authority to retroactively conclude that a manufacturer’s past decision to replace an ozone-depleting substance with HFCs is no longer lawful, even though the original replacement with HFCs was lawful at the time it was made.

“Under such a ‘retroactive disapproval’ approach, EPA could prohibit manufacturers from making products that use HFCs even though those HFCs were deemed safe substitutes at the time the manufacturers decided to initially replace an ozone-depleting substance with HFCs,” said the court.

The court thus offered the Agency an opening to continue the work of the 2015 rule. Whether the Trump administration will follow up on the suggestion is another matter.

The D.C. Circuit’s opinion in Mexichem Fluor Inc. v. EPA is here.

Author's nameJoin Greg Haunschild, PE, the founder, CEO, and owner of ACS Engineering, for BLR’s on-demand webinar presentation of Revised Refrigerant Requirements: End-User Best Practices for Recordkeeping, Leak Inspections, Reporting, and More.
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