Written By: Brian Commaroto-Roverini*
EPA rules aimed at phasing down hydrofluorocarbons (HFCs) under the American Innovation and Manufacturing (AIM) Act largely survived a recent industry challenge from Heating, Air Conditioning, and Refrigeration Distributors International (HARDI), et al. in the D.C. Circuit. While core implementing rules remain intact, the plaintiff companies and trade associations convinced the court that the EPA exceeded its authority in developing new shipping and tracking protocols projected to cost at least $441 million – $2 billion. Further, the court did not substantively discuss whether Congress “impermissibly delegated legislative power to the EPA by giving it unguided discretion to distribute HFC allowances” designed to eliminate HFCs. The current decision, therefore, may encourage litigants to try to chip away further at individual regulations or challenge the agency’s general authority to create HFC phase down rules that the Biden Administration has described as part of the “most impactful federal efforts to reduce climate pollution in decades.”
AIMing to reduce HFC Emissions
The White House hailed the bipartisan AIM Act directive to the EPA to develop rules delivering an 85 percent reduction within 15 years of “super-polluting” HFCs – greenhouse gases that can be “hundreds to thousands of times more potent than carbon dioxide.” According to the EPA, the AIM Act authorizes it to phase down the production and consumption of HFCs, manage the regulated substances, and facilitate a technological transition from these chemicals whose popularity exploded as replacements for earlier ozone-depleting substances used in refrigeration and cooling. The AIM Act also aligns the domestic regulatory framework with U.S. ratification in October 2022 of the Kigali Amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer – the international agreement to phase down the production and consumption of HFCs by 80 – 85 percent by 2047.
EPA Maintains Ability to Regulate HFCs
In its challenge, HARDI sought to convince the court that the EPA could not regulate HFCs when “blended” with other chemicals. The court rejected this argument, finding that HFCs remain regulated substances regardless of whether they are blended. In its colorful analogy, the court reasoned that “an HFC in a blend of other chemicals is like a blue M&M in a bag of red M&Ms. The blue one does not stop being blue just because it is tossed in with a bunch of red ones.” EPA’s regulatory authority extends, therefore, to HFC blends.
Industry Convinces Court to Strike Container and Labeling Requirements
A divided court agreed, however, with HARDI that the EPA exceeded its statutory authority in requiring the use of QR codes and refillable cylinders in lieu of disposable containers to transport HFCs. The EPA rules at issue (albeit projected to cost at least hundreds of millions of dollars) were “less important and less expensive than other regulations to which the Supreme Court has applied [major questions] doctrine” on matters of “vast economic and political significance.” Rather, the conspicuous absence of any reference to QR codes and refillable cylinders undermined the EPA’s interpretation of the AIM Act’s mandate, especially considering the legislation’s detailed description of an HFC allowance-trading program, auditing and reporting, and rules related to HFC equipment. The court sided with the plaintiffs because the expensive shift to QR codes and refillable cylinders constituted “fundamental details” that Congress would have more clearly addressed in the AIM Act, if it had so intended. Judge Pillard noted in dissent, however, that EPA had sufficient authority to develop container and labeling rules likely to generate $14 billion in benefits because the AIM Act directed EPA to “promulgate…such regulations as are necessary” to secure compliance with the HFC phase down.
Important Constitutional “Nondelegation” Question Remains Open
HARDI also argued the EPA lacked constitutional authority to regulate HFCs under the AIM Act because Congress’s alleged awarding of excessive discretion, according to HARDI, violated the nondelegation doctrine. While the D.C. Circuit rejected the constitutional argument, it did so only because HARDI did not first exhaust its administrative challenges. Moreover, the court acknowledged the Supreme Court’s Axon Enterprise decision creates new opportunities for earlier judicial review in federal district court when a plaintiff raises certain constitutional challenge to agency action. The procedural nature of the D.C. Circuit’s holding means the EPA’s constitutional authority in this area remains unsettled. The EPA will likely be forced to continue to defend its implementation of the HFC phase down, especially if litigants anticipate a constitutional challenge would capitalize on interest among the Supreme Court Justices open to reexamining the nondelegation doctrine.
*The opinions and views expressed are the author’s own and not necessarily those of the author’s employer.
Sources
42 U.S.C. § 7675
Axon Enterprise v. FTC, 143 S. Ct. 890 (2023).
EPA, Background on HFCs and the AIM Act, (last visited July 16, 2023).
Gundy v. United States, 139 S. Ct. 2116 (2019).
Heating, Air Conditioning & Refrigeration Distribs. Int’l v. EPA, No. 21-1251 (D.C. Cir. June 20, 2023).
The White House, FACT SHEET: Biden Administration Combats Super-Pollutants and Bolsters Domestic Manufacturing with New Programs and Historic Commitments, (last visited July 16, 2023).
U.N. Environment Programme Ozone Secretariat, Montreal Protocol on Substances that Deplete the Ozone Layer, Annex F: Hydrofluorocarbons.