# United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

A rgued November 7, 2012 Decided January 22, 2013

No. 10

- 1347

H ONEYWELL I NTERNATIONAL , I NC

. AND E. I. DU P ONT DE N EMOURS AND C OMPANY , P ETITIONERS

v.

E NVIRONMENTAL P ROTECTION A GENCY , R ESPONDENT

A RKEMA I NC ., ET AL ., I NTERVENORS

Consolidated with 10

- 1348, 10

- 1349, 10

- 1350

On Petitions for Review of Rules of the Environmental Protection Agency

Timothy K. Webster argued the cause for petitioners. With him on the briefs were James R. Wedeking

, Richard Ayres

, Jessica Olson

, Chet M. Thompson

, Robert J. Meyers

, and David Y. Chung

.
Perry M. Rosen , Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief was USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 1 of 92
Diane E. McConkey , Attorney. Matthe w R. Oakes , Trial Attorney, entered an appearance.

Dan Himmelfarb argued the cause for intervenors. With him on the brief were John S. Hahn

, Roger W. Patrick

, Brian J. Wong
, William J. Hamel

, Roscoe C. Howard Jr. , and Gia V. Cribbs

.

Before: R OGERS , B ROWN , and K AVANAUGH , Circuit Judges

. Opinion for the Court filed by Circuit Judge K AVANAUGH , with whom Circuit Judge R OGERS joins

. Dissenting opinion filed by Circuit Judge B ROWN

.

K AVANAUGH , Circuit Judge : Under the Clean Air Act,
t he Environmental Pr otection Agency administers a cap

- and

trade program regulating the production and consumption of hydrochlorofluorocarbons, a clas s of ozone

- depleting pollutants. (We frown on excessive use of acronyms

, but in a

case involv ing a 24

- letter word , we think it appropriate to use HCFCs for hydrochlorofluorocarbons .) This cap

- and

- trade
program entails overall caps on production and consumption of various HCFCs for each year , as well as EPA

- administered baseline allowances of HCFCs for each participating
company

. Companies are then permitted to transfer their allowances

, subject to certain statutory and regulatory restrictions

. Honeywell and DuPont
, whom we refer to collectively as Honeywell

, complain that certain 2008 transfers made by their competitors Arkem a and Solvay were deemed to permanently increase those competitors’ future baseline allowances of HCFC

- 22 . Because there is an overall cap on USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 2 of 93

HCFC

- 22 production, this is a zero

- sum system: T he increased allowances to Arkema and Solvay in turn redu c ed Honeywell’s market share and allowances of HCFC

- 22

. The problem for Honeywell here is that this Court concluded in Arkema Inc. v. EPA that those permanent transfers were valid under the Clean Air Act

. 618 F.3d 1 , 6

- 9 (D.C. Cir. 2010). Honeywell believe s that Arkema was incorrectly decided. A bsent en banc review, we must adhere to circuit precedent

. A nd because Honeywell’s other challenges to the 2008 transfers are meritless, we deny the petition s for review.

I

T he Clean Air Act gradually phase s ou t all HCFCs over five regulatory periods spanning to 2030

. See 42 U.S.C. § § 7671d (c)

, 7671e(b). In the meantime, t he Act regulate s HCFCs through a cap

- and

- trade program administered by the Environmental Protection Agency

. There are overall caps on
pro duction and consumption of each HCFC for each year. And f or each regulatory per iod, EPA allots a baseline allowance for each regulated HCFC to each company participating in the cap

- and

- trade program

. EPA has always
set baseline allowances by considering historical usage of HCFCs by participating companies.

T he Clean Air Act permits companies to transfer their allowances. Two kinds of transfers are permitted

– interpollutant transfers and intercompany transfers. In an interpollutant transfer, a company swaps its allowance of a particular HCFC for a particular year for its allowance of a different HCFC for the same year. See 42 U.S.C. § 7671f(b)(1). In an intercompany transfer, t wo companies swap allowances of the same HCFC

. See 42 U.S.C. § 7671f(c). Intercompany transfers may permanently affect the trading compan ies ’ baseline allowances of that HCFC, USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 3 of 94
with one company having a higher allowance and one having a lower allowance

. 76 Fed. Reg. 47,451 , 47,45 9

- 60 (Aug. 5, 2011).

In 2008, EPA approved the interpollutant tr ansfers at issue in this case. Arkema made transfers swap p ing its allowance of HCFC

- 142b for an increase in its allowance of HCFC

- 22

. Solvay did the same.

In 2009, EPA set baseline allowances for the 2010

- 2014 regulatory period

. EPA did not recognize the 2008 interpollutant transfers by Arkema and Solvay in setting their baseline allowances for HCFC

- 22

. 74 Fed. Reg. 66,412, 66,419 (Dec. 15, 2009). Arkema and Solvay then challenge d EPA’s rule. In Arkema Inc

. v. EPA

, this Court held that EPA had to honor the transactions EPA previously approved and had to recognize the 2008 transfers in setting Arkema and Solvay’s baseline allowances for HCFC

- 22 for 2010

- 2014, at least so long as EPA continued to set baselines by considering the historical usage of HCFCs by participating companies. 618 F.3d 1, 6

- 9 (D.C. Cir. 2010).

Following Arkema , EPA incorporated the 2008 transfers into the baseline allowances of HCFC

- 22 for 2010

- 2 014, thereby reducing Honeywell’s HCFC

- 22 market share and allowances

. 76 Fed. Reg. at 47,459. Honeywell filed a petition for review in this Court, challenging t he 2008 transfers that formed the basis for the new baseline HCFC

- 22 allowances for 2010

- 20 14

. EPA, along with i ntervenors Arkema and Solvay, respond that Honeywell lacks standing; that Honeywell’s petitions are untimely; and that our decision in Arkema forecloses Honeywell’s claims. We conclude that we have jurisdiction and that the petitions are timely. But based on Arkema , we deny the petitions on the merits. USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 4 of 95

I I

The initial question is whether Honeywell ha s standing to challenge EPA’s approval of the 2008 interpollutant transfers by Arkema and Solvay and the transfers’ corresponding effect on the baseline allowances for the 2010

- 2014 period

. To establish standing

, Honeywell must show a cognizable injury in fact that is concrete and particul arized and actual or imminent; that its injuries are fairly t raceabl e to EPA’s allegedly unlawful conduct; a nd that a fa vorable ruling will likely remedy its injuries. Lujan v. Defenders of Wildlife , 504 U.S. 555, 560

- 61 (1992).

Honeywell has suffered an injury in fact. T he decrease in Honeywell’s market share and in allowances of HCFC

- 22 is a concrete and particularized injury. Honeywell ’ s injury is fairly traceable to the now

- permanent 2008 interpollutant transfers by Arkema and Solvay because the injury would not have occurred but for the 2008 transfers

. Se e Duke Power Co. v. Carolina Environmental Study Group, Inc. , 438 U.S. 59, 74

- 75 (1978); LaRoque v. Holder , 650 F.3d 777, 789 (D.C. Cir. 2011); Community Nutrition Institute v. Block , 698 F.2d 1239, 12 47 (D.C. Cir. 1983) (“A plaintiff need only make a reas onable showing that ‘but for’ defendant’s action the alleged injury would not have occurred.”). And because Honeywell’s market share and allowances of HCFC

- 22 would not have decreased but for the now

- permanent 2008 transfers, invalidating the 2008 transfe rs would remedy Honeywell’s injuries. Honeywell has therefore satisfied all of th e requirements of standing

.

EPA relatedly suggests that Honeywell’s challenge is untimely. We disagree. Although many challenges to EPA action under the Clean Air Act must be filed within 60 days USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 5 of 96

from the date that the notice ap pears in the Federal Register, challenges “based solely on grounds arising after” the

ex piration of the 60

- day period are permitted so long as they are filed within 60 day s of the new grounds

. 42 U.S.C

. § 7607(b)(1).

Here, this Court’s decision in Arkema constitutes after

arising grounds, and Honeywell filed within 60 days of that decision. Honeywell could not have raised its merits arguments until our decision in Arke ma

. In particular, s everal of Honeywell’s arguments depend on the premise that the 2008 interpollutant transfers by Arkema and Solvay were permanent. Prior to Arkema

, however, EPA viewed the transfers as lasting only for a limited time

– that is, not permanently. Arkema changed the legal landscape on that issue , which suffices to constitute after

- arising grounds under the circumstances of this case

. Having resolved the vari ous threshold arguments in Honeywell’s favor , we turn to the merits of Honeywell’s arguments.

II I

On the merits, Honeywell’s main contention ultimately boils down to a claim that permanent interpollutant transfers

ar e prohibited by Section 607 of the Clean Air Act. Honeywell notes that Section 607 permits interpollutant transfers of a n allowance of one HCFC for an allowance of a different HCFC onl y “ for the same year.” 42 U.S.C. § 7671f(b)(1). Honeywell explains , moreover, that t here is n o similar “for the same year” limitation on intercompany transfers

. See id. at § 7671f(c). Intercompany transfers may permanently affect baseline allowances. Honeywell thus
argues that interpollutant transfers are good only for the same USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 6 of 97
year in which th e transfers are made and should not be permanent or affect a company’s baseline allowance for a new regulatory period

. Put simply, Honeywell’s claim is foreclosed by this Court’s decision in Arkema

. Arkema held that EPA , having approved the 2008 interpollutant transfers, had to honor them in the future , at least so long as EPA continued to set baselines by considering the historical usage of HCFCs by participating companies. Arkema , 618 F.3d at 6

- 9. To reach that conclusion, as EPA correctly exp lains in its brief here, the Arkema Court necessarily concluded that permanent interpollutant transfers were permissible under the statute

. That conclusion controls in this case.

Honeywell disagrees strongly with this Court’s decision in Arkema

. For that mat ter, EPA says that it too disagrees with Arkema . (Intervenors Arkema and Solvay are of course happy with Arkema .) Absent en banc review, we are bound by the Arkema decision.

In a roundabout attempt to undermine the now

- permanent 2008 transfer s, Honeywell also raises longshot procedural challenges to the 2008 transfers themselves. The basic

answer to those various arguments is that Honeywell had notice and an opportunity to present its views during EPA’s
pre

- Arkema regulatory proceedings , duri ng the Arkema litigation

, and during EPA’ s subsequent post

- Arkema proceedings. Because Honeywell had notice and an opportunity to comment, and EPA’s reasonable interpretation of its regulation controls, see Auer v. Robbins , 519 U.S. 452, 461 (1997), its procedural objections to the 2008 transfers are unavailing. As is apparent from the briefing

, Honeywell’s real problem here is the permanence of the 2008 interpollutant transfers by Arkema and Solvay a n d the altered USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 7 of 98

HCFC

- 22 allowances for the 2010

- 2014 p eriod. In other words, Honeywell’s real problem is Arkema . But a panel cannot remedy that problem.

* * *

W e deny the petition s for r eview

.

S o ordered. USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 8 of 9B ROWN , Circuit Judge , dissenting: In Arkema , this Court held that EPA changed the legal landscape by not giving effect to the 2008 transfers in the new regulatory period—in other words, that the 2008 transfers had always been permanent. See 618 F.3d at 8–9. Thus, Arkema cannot constitute after-arising grounds and the petitions for review are untimely. USCA Case #10-1347 Document #1416368 Filed: 01/22/2013 Page 9 of 9