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Mexichem Fluor, Inc. v. Environmental Protection Agency

United States Court of Appeals, District of Columbia Circuit

August 8, 2017

Mexichem Fluor, Inc., Petitioner
v.
Environmental Protection Agency, Respondent The Chemours Company FC, LLC, et al., Intervenors

          Argued February 17, 2017

         On Petitions for Review of Final Action by the United States Environmental Protection Agency

          Dan Himmelfarb argued the cause for petitioners. With him on the joint briefs were John S. Hahn, Roger W. Patrick, Matthew A. Waring, William J. Hamel, W. Caffey Norman, T. Michael Guiffré, and Kristina V. Foehrkolb.

          Dustin J. Maghamfar, Attorney, U.S. Department of Justice, argued the cause for respondent. On the brief were John C. Cruden, Assistant Attorney General, Elizabeth B. Dawson, Attorney, U.S. Department of Justice, and Jan Tierney and Diane McConkey, Attorneys, U.S. Environmental Protection Agency.

          Thomas A. Lorenzen argued the cause for intervenors The Chemours Company FC, LLC, and Honeywell International Inc. in support of respondent. With him on the brief were Robert J. Meyers, Sherrie A. Armstrong, Jonathan S. Martel, and Eric A. Rey.

          David Doniger, Benjamin Longstreth, Melissa J. Lynch, and Emily K. Davis were on the brief for intervenor Natural Resources Defense Council in support of respondent.

          Before: Brown, Kavanaugh, and Wilkins, Circuit Judges.

          Opinion for the Court filed by Circuit Judge Kavanaugh, with whom Circuit Judge Brown joins, and with whom Circuit Judge Wilkins joins as to Part I and Part III.

          OPINION

          KAVANAUGH, CIRCUIT JUDGE

         The separation of powers and statutory interpretation issue that arises again and again in this Court is whether an executive or independent agency has statutory authority from Congress to issue a particular regulation. In this case, we consider whether EPA had statutory authority to issue a 2015 Rule regulating the use of hydrofluorocarbons, known as HFCs.

         According to EPA, emissions of HFCs contribute to climate change. In 2015, EPA therefore issued a rule that restricted manufacturers from making certain products that contain HFCs. HFCs have long been used in a variety of familiar products - in particular, in aerosol spray cans, motor vehicle air conditioners, commercial refrigerators, and foams. But as a result of the 2015 Rule, some of the manufacturers that previously used HFCs in their products no longer may do so. Instead, those manufacturers must use other EPA-approved substances in their products.

         As statutory authority for the 2015 Rule, EPA has relied on Section 612 of the Clean Air Act. 42 U.S.C. § 7671k. Section 612 requires manufacturers to replace ozone-depleting substances with safe substitutes.

         The fundamental problem for EPA is that HFCs are not ozone-depleting substances, as all parties agree. Because HFCs are not ozone-depleting substances, Section 612 would not seem to grant EPA authority to require replacement of HFCs. Indeed, before 2015, EPA itself maintained that Section 612 did not grant authority to require replacement of non-ozone-depleting substances such as HFCs. But in the 2015 Rule, for the first time since Section 612 was enacted in 1990, EPA required manufacturers to replace non-ozone-depleting substances (HFCs) that had previously been deemed acceptable by the agency. In particular, EPA concluded that some HFCs could no longer be used by manufacturers in certain products, even if the manufacturers had long since replaced ozone-depleting substances with HFCs.

         EPA's novel reading of Section 612 is inconsistent with the statute as written. Section 612 does not require (or give EPA authority to require) manufacturers to replace non-ozone-depleting substances such as HFCs. We therefore vacate the 2015 Rule to the extent it requires manufacturers to replace HFCs, and we remand to EPA for further proceedings consistent with this opinion.

         I

         A

         In the 1980s, an international movement developed to combat depletion of the ozone layer. Depletion of the ozone layer exposes people to more of the sun's harmful ultraviolet light, thereby increasing the incidence of skin cancer, among other harms. The international efforts to address ozone depletion culminated in the Montreal Protocol, an international agreement signed in 1987 by the United States and subsequently ratified by every nation in the United Nations. The Protocol requires signatory nations to regulate the production and use of a variety of ozone-depleting substances. Montreal Protocol on Substances that Deplete the Ozone Layer, opened for signature Sept. 16, 1987, S. Treaty Doc. No. 100-10, 1522 U.N.T.S. 29.

         Congress implemented U.S. obligations under the Montreal Protocol by enacting, with President George H.W. Bush's signature, the 1990 Amendments to the Clean Air Act. Those amendments added a new Title VI to the Clean Air Act. Title VI regulates ozone-depleting substances.

         Title VI identifies two classes of ozone-depleting substances: "class I" and "class II" substances. 42 U.S.C. § 7671a(a), (b). Section 612(a), one of the key provisions of Title VI, requires manufacturers to replace those ozone-depleting substances: "To the maximum extent practicable, class I and class II substances shall be replaced by chemicals, product substitutes, or alternative manufacturing processes that reduce overall risks to human health and the environment." Id. § 7671k(a). With a few exceptions, Title VI requires manufacturers to phase out their use of some ozone-depleting substances by 2000, and to phase out their use of other ozone-depleting substances by 2015. Id. §§ 7671c(b)-(c), 7671d(a).

         When manufacturers stop using ozone-depleting substances in their products, manufacturers may need to replace those substances with a substitute substance. Under Section 612(a), EPA may require manufacturers to use safe substitutes when the manufacturers replace ozone-depleting substances. Id. § 7671k(a).

         To implement the Section 612(a) requirement that ozone-depleting substances be replaced with safe substitutes, Section 612(c) requires EPA to publish a list of both safe and prohibited substitutes:

Within 2 years after November 15, 1990, the Administrator shall promulgate rules under this section providing that it shall be unlawful to replace any class I or class II substance with any substitute substance which the Administrator determines may present adverse effects to human health or the environment, where the Administrator has identified an alternative to such replacement that -
(1) reduces the overall risk to human health and the environment; and
(2) is currently or potentially available.
The Administrator shall publish a list of (A) the substitutes prohibited under this subsection for specific uses and (B) the safe alternatives identified under this subsection for specific uses.

Id. § 7671k(c). In short, Section 612(c) requires EPA to issue a list of both authorized and prohibited substitute substances based on the safety and availability of the substances.

         Importantly, the lists of safe substitutes and prohibited substitutes are not set in stone. Section 612(d) provides: "Any person may petition the Administrator to add a substance to the lists under subsection (c) of this section or to remove a substance from either of such lists." Id. § 7671k(d). In other words, if EPA places a substance on the list of safe substitutes, EPA may later change its classification and move the substance to the list of prohibited substitutes (or vice versa).

         In 1994, EPA promulgated regulations to implement Section 612(c). See Protection of Stratospheric Ozone, 59 Fed. Reg. 13, 044 (Mar. 18, 1994). At the time, EPA indicated that once a manufacturer has replaced its ozone-depleting substances with a non-ozone-depleting substitute, Section 612(c) does not give EPA authority to require the manufacturer to later replace that substitute with a different substitute. EPA explained that Section 612(c) "does not authorize EPA to review substitutes for substances that are not themselves" ozone-depleting substances covered under Title VI. EPA Response to Comments on 1994 Significant New Alternatives Policy Rule, J.A. 50.

         B

         Hydrofluorocarbons, known as HFCs, are substances that contain hydrogen, fluorine, and carbon. When HFCs are emitted, they trap heat in the atmosphere. They are therefore "greenhouse gases." But HFCs do not deplete the ozone layer. As a result, HFCs are not ozone-depleting substances covered by Title VI of the Clean Air Act. Instead, HFCs are potential substitutes for ozone-depleting substances in certain products.

         In 1994, acting pursuant to its authority under Section 612(c), EPA concluded that certain HFCs were safe substitutes for ozone-depleting substances when used in aerosols, motor vehicle air conditioners, commercial refrigerators, and foams, among other things. See Protection of Stratospheric Ozone, 59 Fed. Reg. at 13, 122-46. Over the next decade, EPA added HFCs to the list of safe substitutes for a number of other products. See, e.g., Protection of Stratospheric Ozone: Listing of Substitutes for Ozone-Depleting Substances, 68 Fed. Reg. 4004, 4005 (Jan. 27, 2003); Protection of Stratospheric Ozone; Listing of Substitutes for Ozone-Depleting Substances, 64 Fed. Reg. 22, 982, 22, 984 (Apr. 28, 1999).

         As a result, in the 1990s and 2000s, many businesses stopped using ozone-depleting substances in their products. Many businesses replaced those ozone-depleting substances with HFCs. HFCs became prevalent in many products. HFCs have served as propellants in aerosol spray cans, as refrigerants in air conditioners and refrigerators, and as blowing agents that create bubbles in foams.

         Over time, EPA learned more about the effects of greenhouse gases such as HFCs. In 2009, EPA concluded that greenhouse gases may contribute to climate change, increasing the incidence of mortality and the likelihood of extreme weather events such as floods and hurricanes. See Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66, 496, 66, 497-98 (Dec. 15, 2009).

         In 2013, President Obama announced that EPA would seek to reduce emissions of HFCs because HFCs contribute to climate change. Executive Office of the President, The President's Climate Action Plan 10 (2013). The President's Climate Action Plan indicated that "the Environmental Protection Agency will use its authority through the Significant New Alternatives Policy Program" of Section 612 to reduce HFC emissions. Id.

         Consistent with the Climate Action Plan, EPA promulgated a Final Rule in 2015 that moved certain HFCs from the list of safe substitutes to the list of prohibited substitutes. Protection of Stratospheric Ozone: Change of Listing Status for Certain Substitutes Under the Significant New Alternatives Policy Program, 80 Fed. Reg. 42, 870 (July 20, 2015) [hereinafter Final Rule]. In doing so, EPA prohibited the use of certain HFCs in aerosols, motor vehicle air conditioners, commercial refrigerators, and foams - even if manufacturers of those products had long since replaced ozone-depleting substances with HFCs. Id. at 42, 872-73.

         Therefore, under the 2015 Rule, manufacturers that used those HFCs in their products are no longer allowed to do so. Those manufacturers must replace the HFCs with other substances that are on the revised list of safe substitutes.

         In the 2015 Rule, EPA relied on Section 612 of the Clean Air Act as its source of statutory authority. EPA said that Section 612 allows EPA to "change the listing status of a particular substitute" based on "new information." Id. at 42, 876. EPA indicated that it had new information about HFCs: Emerging research demonstrated that HFCs were greenhouse gases that contribute to climate change. See id. at 42, 879. EPA therefore concluded that it had statutory authority to move HFCs from the list of safe substitutes to the list of prohibited substitutes. Because HFCs are now prohibited substitutes, EPA claimed that it could also require the replacement of HFCs under Section 612(c) of the Clean Air Act even though HFCs are not ozone-depleting substances.

         Mexichem Fluor and Arkema are businesses that make HFC-134a for use in a variety of products. The 2015 Rule prohibits the use of HFC-134a in certain products. The companies have petitioned for review of the 2015 Rule. They raise two main arguments. First, they argue that the 2015 Rule exceeds EPA's statutory authority under Section 612 of the Clean Air Act. In particular, they contend that EPA does not have statutory authority to require manufacturers to replace HFCs, which are non-ozone-depleting substances, with alternative substances. Second, they allege that EPA's decision in the 2015 Rule to remove HFCs from the list of safe substitutes was arbitrary and capricious because EPA failed to adequately explain its decision and failed to consider several important aspects of the problem. We address those arguments in turn.

         II

         A

         We first consider whether Section 612 of the Clean Air Act ...


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