ORAL ARGUMENT NOT YET SCHEDULED 

Nos. 10–1347 et al. 

UNITED STATES COURT OF APPEALS 

FOR THE DISTRICT OF COLUMBIA CIRCUIT 

________________ 

HONEYWELL INTERNATIONAL INC. AND 

E. I. DU PONT DE NEMOURS AND COMPANY, 

 Petitioners, 

v. 

ENVIRONMENTAL PROTECTION AGENCY 

AND LISA PEREZ JACKSON, 

 Respondents.

________________ 

On Petitions for Review of 

Rules of the Environmental Protection Agency 

________________ 

REPLY BRIEF OF PETITIONERS 

________________ 

Chet M. Thompson 

Robert J. Meyers 

David Y. Chung 

CROWELL & MORING LLP 

1001 Pennsylvania Avenue, N.W. 

Washington, D.C. 20004-2595 

(202) 624-2500 

Counsel for E. I. du Pont de Nemours 

and Company 

Timothy K. Webster 

James R. Wedeking 

SIDLEY AUSTIN LLP 

1501 K Street, NW 

Washington, DC 20005 

(202) 736-8000 

Richard Ayres 

Jessica Olson 

AYRES LAW GROUP 

1707 L Street, N.W., Suite 850 

Washington, D.C. 20036 

(202) 452-9200 

Counsel for Honeywell International 

Inc. 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 1 of 49
i 

TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................... ii

GLOSSARY .............................................................................................................. vi

INTRODUCTION ..................................................................................................... 1

ARGUMENT ............................................................................................................. 3

I. THE COURT HAS JURISDICTION OVER PETITIONERS’ CLAIMS ...... 3

A. Petitioners Have Constitutional And Prudential Standing .................... 3

B. Petitioners’ Claims Are Timely And Ripe ............................................ 8

C. The 2008 Transfer Approvals Were Final Agency Actions ............... 13

II. THIS COURT SHOULD GRANT THE PETITIONS BECAUSE THE 2008 

APPROVALS ARE UNLAWFUL ............................................................... 14

A. The 2008 Approvals Are Contrary To The Plain Language Of The 

CAA ..................................................................................................... 14

B. The 2008 Approvals Effected A Change In EPA’s Interpretation Of 

Its Regulations That Required Notice And Comment ........................ 18

C. EPA Failed To Comply With Applicable Regulations In Issuing The 

2008 Approvals ................................................................................... 21

III. EPA’S ISSUANCE OF THE 2008 TRANSFER APPROVALS DEPRIVED 

PETITIONERS OF VESTED RIGHTS WITHOUT DUE PROCESS OF 

LAW .............................................................................................................. 25

CONCLUSION ........................................................................................................ 30 

CERTIFICATE OF COMPLIANCE 

ADDENDUM, APPENDIX C 

ADDENDUM, APPENDIX D 

CERTIFICATE OF SERVICE 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 2 of 49
* Indicates authorities primarily relied upon. 

ii 

TABLE OF AUTHORITIES

 Page(s) 

CASES

Am. Family Life Assurance Co. v. FCC, 

129 F.3d 625 (D.C. Cir. 1997) .............................................................................. 5 

Am. Petroleum Inst. v. EPA, 

52 F.3d 1113 (D.C. Cir. 1995) ............................................................................ 17 

Am. Portland Cement Alliance v. EPA, 

101 F.3d 772 (D.C. Cir. 1996) ............................................................................ 13 

Animal Legal Def. Fund, Inc. v. Glickman, 

154 F.3d 426 (D.C. Cir. 1998) .............................................................................. 5 

*Arkema Inc. v. EPA, 

618 F.3d 1 (D.C. Cir. 2010) ....................................... 1, 12, 14, 15, 23, 24, 25, 28 

Appalachian Power Co. v. EPA, 

208 F.3d 1015 (D.C. Cir. 2000) ............................................................................ 9 

Bell v. Burson, 

402 U.S. 535 (1971) ............................................................................................ 25 

Chevron U.S.A. Inc. v. Natural Res. Def. Council, 

467 U.S. 837 (1984) ............................................................................................ 15 

Clarke v. Sec. Indus. Ass’n, 

479 U.S. 388 (1987) .............................................................................................. 7 

Cooper Indus., Inc. v. Availl Servs., Inc., 

543 U.S. 157 (2004) ............................................................................................ 18 

Crowley Caribbean Transp., Inc. v. Pena, 

37 F.3d 671 (D.C. Cir. 1994) ................................................................................ 6 

Dunn v. Commodity Futures Trading Comm’n, 

519 U.S. 465 (1997) ............................................................................................ 18 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 3 of 49
* Indicates authorities primarily relied upon. 

iii 

Gen. Elec. Co. v. EPA, 

290 F.3d 377 (D.C. Cir. 2002) ............................................................................ 14 

Goldberg v. Kelly, 

397 U.S. 254 (1970) ............................................................................................ 27 

*Group Against Smog & Pollution, Inc. v. EPA, 

665 F.2d 1284 (D.C. Cir. 1981) .................................................................... 10, 11 

Harper v. Virginia Dep’t of Taxation, 

509 U.S. 86 (1993) .............................................................................................. 11 

*Honeywell Int’l, Inc. v. EPA, 

374 F.3d 1363 (D.C. Cir. 2004) ........................................................................ 6, 7 

Horsehead Res. Dev. Co. v. EPA, 

130 F.3d 1090 (D.C. Cir. 1997) ............................................................................ 9 

*La. Energy & Power Auth. v. FERC, 

141 F.3d 364 (D.C. Cir. 1998) ........................................................................ 3, 12 

La. Envtl. Action Network v. Browner, 

87 F.3d 1379 (D.C. Cir. 1996) ............................................................................ 12 

Lujan v. Defenders of Wildlife, 

504 U.S. 555 (1992) .......................................................................................... 3, 4 

*Mathews v. Eldridge, 

424 U.S. 319 (1976) ...................................................................................... 26, 27 

Morrissey v. Brewer, 

408 U.S. 471 (1972) ............................................................................................ 27 

Nat’l Broadcasting Co. v. FCC, 

132 F.2d 545 (D.C. Cir. 1942) ............................................................................ 26 

Natale v. Town of Ridgefield, 

170 F.3d 258 (2d Cir. 1999) ............................................................................... 26 

Nat’l Fuel Gas Supply Corp. v. FERC, 

59 F.3d 1281 (D.C. Cir. 1995) ............................................................................ 12 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 4 of 49
* Indicates authorities primarily relied upon. 

iv 

*Nat’l Fuel Gas Supply Corp. v. FERC, 

899 F.2d 1244 (D.C. Cir. 1990) .................................................................... 12, 13 

Natural Res. Def. Council v. EPA, 

643 F.3d 311 (D.C. Cir. 2011) .............................................................................. 9 

Oljato Chapter of Navajo Tribe v. Train, 

515 F.2d 654 (D.C. Cir. 1975) ............................................................................ 10 

*Paralyzed Veterans of Am. v. DC Arena LP, 

117 F.3d 579 (D.C. Cir. 1997) ............................................................................ 19 

Public Utilities Comm’n v. FERC, 

894 F.2d 1372 (D.C. Cir. 1990) .......................................................................... 12 

Radiofone, Inc. v. FCC, 

759 F.2d 936 (D.C. Cir. 1985) .............................................................................. 6 

Rivers v. Roadway Express, Inc., 

511 U.S. 298 (1994) ............................................................................................ 12 

*Russello v. United States, 

464 U.S. 16 (1983) .................................................................................. 15, 16, 17 

Shell Oil Co. v. FERC, 

47 F.3d 1186 (D.C. Cir. 1995) .............................................................................. 5 

Sherbert v. Verner, 

374 U.S. 398 (1963) ............................................................................................ 27 

*Sherley v. Sebelius, 

610 F.3d 69 (D.C. Cir. 2010) ............................................................................ 3, 4 

Simon v. Eastern Ky. Welfare Rights Organization, 

426 U.S. 26 (1976) ................................................................................................ 6 

Waterway Commc’ns Sys., Inc. v. FCC, 

851 F.2d 401 (D.C. Cir. 1988) .............................................................................. 9 

Western Union Telegraph Co. v. FCC, 

773 F.2d 375 (D.C. Cir. 1985) .............................................................................. 9 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 5 of 49
* Indicates authorities primarily relied upon. 

v 

STATUTES AND FEDERAL REGULATORY MATERIAL

42 U.S.C. § 7413 ...................................................................................................... 25 

42 U.S.C. § 7601f ....................................................................................................... 2 

42 U.S.C. § 7607 .................................................................................................. 8, 10 

42 U.S.C. § 7671f ..................................................................................................... 15 

42 U.S.C. § 7671m ................................................................................................... 18 

40 C.F.R. § 82.3 ....................................................................................................... 22 

40 C.F.R. § 82.15 ..................................................................................................... 25 

40 C.F.R. § 82.23 ............................................................................................... 21, 22 

68 Fed. Reg. 2,820 (Jan. 21, 2003) .................................................................... 19, 20 

73 Fed. Reg. 78,680 (Dec. 23, 2008) ......................................................................... 8 

74 Fed. Reg. 66,412 (Dec. 15, 2009) ....................................................................... 13 

76 Fed. Reg. 47,451 (Aug. 5, 2011)........................................................................... 4 

77 Fed. Reg. 237 (Jan. 4, 2012) ................................................................................. 4 

OTHER AUTHORITIES

Lewis Carroll, Through the Looking Glass (Edmund R. Brown ed., Colonial 

Press Inc. 1971) (1871) ......................................................................................... 8 

Merriam Webster, http://www.merriam-webster.com/dictionary/ground (last 

visited Mar. 20, 2012) ......................................................................................... 10 

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vi 

GLOSSARY

Abbreviation

2003 Rule Protection of Stratospheric Ozone: Allowance System 

for Controlling HCFC Production, Import, and Export, 

Final Rule, 68 Fed. Reg. 2,820 (Jan. 21, 2003) 

2008 Approvals The four 2008 interpollutant transfer approvals at issue 

in this matter (see Jurisdictional Statement of opening 

brief for a list) 

2011 rule Protection of Stratospheric Ozone: Adjustments to the 

Allowance System for Controlling HCFC Production, 

Import, and Export, Interim Final Rule, 76 Fed. Reg. 

47,451 (Aug. 5, 2011) 

CAA Clean Air Act 

EPA U.S. Environmental Protection Agency 

EPA Resp. to MTD EPA’s Substantive Response to Intervenors’ Motion to 

Dismiss, Doc. No. 1296479 (filed Mar. 4, 2011) 

HCFCs Hydrochlorofluorocarbons 

HCFC-22 Hydrochlorofluorocarbon-22 

HCFC-142b Hydrochlorofluorocarbon-142b 

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1 

INTRODUCTION

This Court’s decision in Arkema Inc. v. EPA, 618 F.3d 1 (D.C. Cir. 2010) 

fundamentally altered how EPA’s HCFC phasedown program operates. As a 

result of that decision, transfers of allowances from HCFC-142b to HCFC-22 that 

EPA approved in 2008 must now be given life by EPA beyond the end of the prior 

regulatory period. Arkema furthermore compelled the Agency to seize part of 

Petitioners’ market share of allowances. But the Arkema Court was not asked to, 

and did not, address the lawfulness of 2008 Approvals themselves; that was 

assumed. This litigation is Petitioner’s only bite at that apple. 

Petitioners have standing to pursue their challenge because the 2008 

Approvals—which were given entirely new meaning by the Arkema Court—

inexorably affected Petitioners’ rights in the closed, “zero-sum” HCFC allocation 

system. Subsequent EPA actions—specifically, issuance of “enforcement 

discretion” letters effectuating the 2008 Approvals prior to rulemaking, 

promulgation of a “good cause” rule that carried the 2008 transfers forward in 

2011, and proposal of an allocation rule for 2012-2014 that does the same—further 

evidence Petitioners’ injuries. Moreover, Petitioners neither filed their petitions 

for review too early nor too late. Respondents and Intervenors incorrectly posit 

that the 2011 rule constituted publication of the 2008 Approvals and thus was the 

trigger for judicial review. Not so. The Arkema decision was the “grounds arising 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 8 of 49
2 

after” that both ripened Petitioners’ claims and provided them with new grounds to 

bring this action. Additionally, those approvals were irrefutably final when made. 

The 2008 Approvals should be vacated. First, the Arkema Court did not 

directly address the plain meaning of 42 U.S.C. § 7601f(b)(1), despite 

Respondents’ assertion to the contrary. That provision establishes one irreducible 

requirement: that interpollutant transfers of one type of allowance can only be 

made to allowances “for the same year” as the transferred allowances. Id. Yet the 

Arkema decision confirms that EPA violated that principle through the 2008 

Approvals. Second, neither Respondents nor Intervenors dispute that EPA has 

consistently interpreted its own regulations to mean that the complete phasedown 

of an HCFC must result in the phasedown of any interpollutant transfers that 

originated with that HCFC. But EPA has also been clear that the same principle 

applies to partial phasedowns, a principle the 2008 Approvals violate by 

permitting transfers of allowances of HCFC-142b right before that substance was 

phased down by more than 99%. Finally, the paltry record for the 2008 Approvals 

does not evidence that EPA’s own regulations were followed here. 

All parties acknowledge that the “zero-sum” nature of the HCFC allocation 

scheme means that, when EPA allocates allowances to one company, it must take 

from the others. This further demonstrates that EPA could not have upset the 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 9 of 49
3 

marketplace by approving the Intervenors’ allegedly permanent interpollutant 

transfers without providing Petitioners, at a minimum, the due process of law. 

ARGUMENT

I. THE COURT HAS JURISDICTION OVER PETITIONERS’ CLAIMS 

A. Petitioners Have Constitutional And Prudential Standing 

1. Petitioners meet the test for constitutional standing. First, Petitioners’ 

declarations provided evidence of concrete injuries, namely increased competition 

and lost market share and profits occasioned by the 2008 Approvals. Second, these 

injuries were caused by the 2008 Approvals, now that the Arkema decision 

compels EPA to honor them beyond 2009, the end of the last regulatory step-down 

period. Third, by vacating and remanding the 2008 Approvals, Petitioners’ injuries 

would be redressed. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 

(1992). 

Neither Respondents nor Intervenors contest that Petitioners have suffered 

economic and competitive injury. See Pet. Br., Diggs Decl. ¶ 12; Austin Decl. ¶ 9 

(Addendum, Appendix B). Those injuries arise from the 2008 Approvals and are 

plainly sufficient for standing. See, e.g., Sherley v. Sebelius, 610 F.3d 69, 72-74 

(D.C. Cir. 2010); La. Energy & Power Auth. v. FERC, 141 F.3d 364, 367-68 (D.C. 

Cir. 1998). In Sherley, new National Institute of Health guidelines that effectively 

increased grant competition for the appellants was sufficient to confer competitor 

standing on appellants even though neither had been denied any grant. 610 F.3d at 

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4 

72. “Because increased competition almost surely injures a seller in one form or 

another, he need not wait until ‘allegedly illegal transactions ... hurt [him] 

competitively’ before challenging the regulatory ... governmental decision that 

increases competition.” Id. (quoting La. Energy, 141 F.3d at 367). Here, the case 

for standing is even stronger: Respondents’ use of “enforcement discretion” letters 

in 2011 and 2012 to effectively provide Intervenors with more allowances and 

Petitioners with less,1

 its 2011 rule allocating allowances for 2011 in the same 

manner, and its recent proposed allocation rule for 2012-2014 all demonstrate that 

Petitioners’ injuries are not supposition. See 76 Fed. Reg. 47,451, 47,459 (Aug. 5, 

2011) (allocating allowances in part on the basis of the 2008 Approvals); 77 Fed. 

Reg. 237, 245 (Jan. 4, 2012) (same). Injury-in-fact must be “actual or imminent,” 

Lujan, 504 U.S. at 560, and here it is both. 

Respondents argue that EPA’s 2011 rule is the true source of Petitioners’ 

injuries—because the 2008 Approvals did not actually deprive Petitioners of any 

HCFC allowances—and that Petitioners should have challenged the 2011 rule 

instead. Resp. Br. 33; Int. Br. 16-17. Respondents are wrong. Petitioners injuries 

go well beyond the 2011 rule (which was in effect for less than five months), 

extending both farther into the past and into the present and future. Vacatur of the 

 

1 See Austin Decl. ¶ 9 and Ex. 1-2. The 2012 letters were not issued until after 

Petitioners’ opening brief was filed. See Addendum, Appendix C. 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 11 of 49
5 

2011 rule would not alleviate the full extent of Petitioners’ current injuries.2

 The 

2008 Approvals are the final actions that authorized what would otherwise have 

been unlawful, and therefore Petitioners’ injuries are traceable to those actions. 

Animal Legal Def. Fund, Inc. v. Glickman, 154 F. 3d 426, 440-41 (D.C. Cir. 1998). 

This case is not, as Respondents assert, a vague dispute over the intangible 

precedential effect of an agency adjudication (i.e., the 2008 Approvals). Resp. Br. 

36. The cases Respondents cite, which largely examine whether there is an 

exception to the mootness doctrine in agency review cases, involve situations that 

lack any tangible harm. For example, in Am. Family Life Assurance Co. v. FCC, 

the Court found no standing to pursue an otherwise moot appeal where a party 

concerned about the precedential effect of the underlying ruling had not manifested 

any actual or imminent injury. 129 F.3d 625, 628 (D.C. Cir. 1997) (“Petitioner 

reports no litigation on the horizon, no complaints from federal candidates on the 

verge of filing, no simmering disputes about to erupt into a lawsuit[.]”). None of 

the others are any more compelling. See, e.g., Shell Oil Co. v. FERC, 47 F.3d 

1186, 1202-03 (D.C. Cir. 1995) (petitioner lacked standing to appeal Commission 

order’s rationale because Commission granted petitioner the relief it requested); 

 

2

 If a “live” challenge to the 2011 rule were relevant to standing, Petitioners note 

that they have petitioned to review Respondents’ constructive denial of their 

administrative petition for reconsideration of the 2011 rule. See No. 12-1121, 

Docket No. 1360814. 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 12 of 49
6 

Crowley Caribbean Transp., Inc. v. Pena, 37 F.3d 671, 674 (D.C. Cir. 1994) 

(petitioner lacked standing to appeal denial of competitor’s request for immunity 

from future enforcement action that was actually in petitioner’s favor); Radiofone, 

Inc. v. FCC, 759 F.2d 936, 939 (D.C. Cir. 1985) (adjudication involving defunct 

company had no impact on former competitors). By contrast, at least five postArkema EPA actions have harmed Petitioners here. 

There is no doubt that Petitioners’ injuries will be redressed by vacating the 

2008 Approvals. Respondents argue that, even if the 2008 Approvals were 

vacated, EPA still has the ability subsequently to create a new rulemaking 

“scrapping the concept of historical production and consumption baselines 

altogether.” Resp. Br. 41-42. First, EPA has not done so nor proposed to do so; in 

fact, it has done and proposed the opposite—to continue with the current system. 

Second, the vague possibility of a new regulatory scheme is irrelevant. 

Redressibility turns on whether an injury “is likely to be redressed by a favorable 

decision” by the Court, Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 38 

(1976), not on speculation about whether an injury could be nullified in the future 

were EPA to unexpectedly change its regulations. This Court has already rejected 

such speculation before, Honeywell Int’l, Inc. v. EPA, 374 F.3d 1363, 1369 (D.C. 

Cir. 2004), and should do so here. 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 13 of 49
7 

2. Petitioners fall within the “zone of interests” for prudential standing, a 

measure that “is not meant to be especially demanding.” Clarke v. Sec. Indus. 

Ass’n, 479 U.S. 388, 399 (1987). The prudential standing doctrine “exclude[es] 

only those whose interests are ‘so marginally related to or inconsistent with the 

purposes implicit in the statute that it cannot reasonably be assumed that Congress 

intended to permit the suit.’” Honeywell, 374 F.3d at 1370 (quoting Clarke, 479 

U.S. at 399). Where “entry-like restrictions” are involved, such as the allowance 

system under 40 C.F.R. Part 82, the interests of a competitor company in 

“‘guarding a congressionally drawn boundary’” align “with those of the statute to 

make it a suitable challenger.” Id. at 1371 (quoting First Nat’l Bank and Trust Co. 

v. Nat’l Credit Union Admin., 988 F.2d 1272, 1278 (D.C. Cir. 1993)). Here, 

Petitioners are “suing to enforce a restriction” on competitors that they are also 

subject to themselves. Honeywell, 374 F.3d at 1370. Therefore, Petitioners have 

prudential standing. 

Respondents erroneously argue that Petitioners “are neither the subject of 

nor directly affected by another company’s inter-pollutant transfers.” Resp. Br. 37. 

Yet, Respondents have already conceded this point. See EPA Resp. to MTD at 3 

(“EPA must extract the corresponding production allowances from somewhere, 

e.g., from the allowances of DuPont, Honeywell and other suppliers.”). This is the 

natural and unavoidable product of a “zero-sum” allocation system. 

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8 

B. Petitioners’ Claims Are Timely And Ripe 

Respondents and Intervenors follow the White Queen’s logic, claiming that 

Petitioners are both too early and too late.3

 On the one hand, both claim that 

EPA’s 2011 rule triggered a right to review the 2008 Approvals. Resp. Br. 33-34; 

Int. Br. 22. On the other, Intervenors argue that a 2008 proposed rulemaking, 73 

Fed. Reg. 78,680 (Dec. 23, 2008), triggered that right. Int. Br. 17-21. Both are 

incorrect. Neither claimed, however, that Petitioners could have challenged the 

2008 Approvals within 60 days of when they were actually issued. Thus, the real 

question is whether this challenge is timely because either (i) the original 60-day 

period has not yet run or (ii) the Arkema decision provided “grounds arising after” 

the initial review period, if there was one. See 42 U.S.C. § 7607(b)(1). 

1. Respondents do not directly address Petitioners’ contention that the 

initial review period never commenced because the 2008 Approvals were not 

published in the Federal Register. See Pet. Br. 17-19; 42 U.S.C. § 7607(b)(1). 

Instead, they argue merely in passing that the 2008 Approvals were published in 

the Federal Register “in the context” of the 2011 rule. Resp. Br. 41; see also Int. 

Br. 22. The publication of a different rule does not constitute notice that EPA 

approved four inter-pollutant transfers from 2008. Since notice of the 2008 

 

3 See Lewis Carroll, Through the Looking Glass 81 (Edmund R. Brown ed., 

Colonial Press Inc. 1971) (1871) (“The rule is, jam to-morrow and jam yesterday 

– but never jam to-day.”). 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 15 of 49
9 

Approvals was never published, the petitions for review here are timely, and they 

are also ripe for the reasons discussed herein. 

Intervenors, in turn, assert that Petitioners missed a “window” of time in 

which to file their petitions. Int. Br. 22-23. While such a “window” may exist in 

situations where EPA releases a rule that it intends to publish in the Federal 

Register, that interpretation can have no application where the final action is one 

EPA never intended to publish.4

 Otherwise, EPA could effectively preclude 

judicial review of any non-Federal Register final action by simply withholding 

publication. Yet, this Court has repeatedly invalidated CAA “guidance” 

documents that were never published in the Federal Register. See, e.g., Natural 

Res. Def. Council v. EPA, 643 F.3d 311 (D.C. Cir. 2011); Appalachian Power Co. 

v. EPA, 208 F.3d 1015 (D.C. Cir. 2000). There is no rule requiring challengers to 

await Federal Register publication when it is never to come. 

 

4

 Thus, the cases cited by Intervenors are all distinguishable. Horsehead Res. Dev. 

Co. v. EPA, is really a finality decision. 130 F.3d 1090, 1093-95 (D.C. Cir. 1997) 

(Petitioners cannot challenge pre-publication rulemaking because “until Federal 

Register publication has occurred, the Administrator has not ‘made a final 

decision’”) (quoting 40 C.F.R. § 260.20(e) (alterations omitted)). The other two 

involve rules that were in the process of being published. Waterway Commc’ns 

Sys., Inc. v. FCC, 851 F.2d 401, 405-06 (D.C. Cir. 1988) (denying petition for 

review filed 18 days before public notice as premature because statute sought to 

avoid “a race to the courthouse”); Western Union Telegraph Co. v. FCC, 773 F.2d 

375, 377 (D.C. Cir. 1985) (dismissing appeal filed 7 days before publication in 

Federal Register). 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 16 of 49
10 

2. Respondents and Intervenors mistakenly claim that the only way to 

challenge the 2008 Approvals was by petitioning for review of the 2011 rule. But 

that rule was in effect for less than five months and did not provide “grounds 

arising after” for a challenge to the 2008 Approvals. It was at most further 

evidence of Petitioners’ injury-in-fact. By fixing on the 2011 rule, Respondents 

and Intervenors neglected the plain language of the CAA. Section 7607(b)(1) 

provides this Court with jurisdiction over petitions for review based on “grounds

arising after” the initial 60-day review period. Id. (emphasis added). A new 60-

day clock starts when new grounds arise, and parties cannot wait for later 

developments to occur. So long as the new grounds ripen the claim, challengers 

must act within the time allotted. 

The term “grounds”5

 encompasses a spectrum of events that is broader than 

just new agency actions. Section 7607(b)(1) provides jurisdiction for petitions 

based on new information that was not previously available. See, e.g., Oljato 

Chapter of Navajo Tribe v. Train, 515 F.2d 654, 666 (D.C. Cir. 1975). For 

example, in Group Against Smog & Pollution, Inc. v. EPA, 665 F.2d 1284, 1289-

91 (D.C. Cir. 1981), this Court found jurisdiction over a challenge to process 

furnace emission standards based on new information regarding emission control 

 

5

 “[A] basis for belief, action, or argument.” See http://www.merriamwebster.com/dictionary/ground. 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 17 of 49
11 

technology. It noted that Congress explicitly created the “grounds arising after” 

exception to allow for “any person [to] challenge any promulgation whenever it is 

alleged that significant new information has become available.’” Id. at 1289-90 

(citing S. Rep. No. 91-1196, 91st Cong., 2d Sess. 41-42 (1970)).6

 

This Court’s announcement in Arkema that market participants have vested 

rights in their allowances that cannot be retroactively impaired (even after the 

expiration of the regulatory period in which they were granted) was “significant 

new information” that was never considered by EPA when it approved Intervenors’ 

2008 transfer requests. Neither Respondents nor Intervenors provide a single 

citation requiring that the “grounds arising after” be limited to rulemakings. 

Furthermore, Respondents have already conceded that Arkema ripened 

Petitioners’ claims of injury, stating that to carry out the Court’s mandate “without 

further damaging the environment, EPA must extract the corresponding production 

allowances from somewhere, e.g., from the allowances of DuPont, Honeywell and 

other suppliers.” EPA Resp. to MTD at 3. Had Petitioners waited for EPA to issue 

the 2011 rule, Respondents and Intervenors would have argued that Petitioners 

failed to challenge the 2008 Approvals within 60 days of the Arkema decision, 

 

6 Harper v. Virginia Dep’t of Taxation, 509 U.S. 86 (1993), is inapposite because it 

did not involve an explicit statutory reopener clause like that found in 

§ 7607(b)(1). 

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 18 of 49
12 

which injured Petitioners by applying the 2008 Approvals beyond 2009. La. Envt’l 

Action Network v. Browner, 87 F.3d 1379, 1385 (D.C. Cir. 1996). 

Respondents now plead that EPA was “not required” to injure the Petitioners 

“in issuing its response to the Arkema decision” because it “considered at least 

five” alternative allocation options. Resp. Br. 35. But EPA did not actually set a 

different course in the 2011 rule, and it continues to injure Petitioners through the 

2012 enforcement discretion letter and the proposed allocation for 2012-2014. 

Had EPA resorted to a different allocation system that effectively nullified the 

2008 Approvals, Intervenors would have returned to this Court alleging that EPA 

had circumvented Arkema’s mandate. 

Finally, Intervenors errantly claim that the Arkema decision cannot be 

“grounds arising after” because courts only declare what the law has always been. 

Int. Br. 24. This may be true for statutes, e.g., Rivers v. Roadway Express, Inc., 

511 U.S. 298, 312-13 & n.12 (1994), but Arkema involved an agency “policy 

outlined in [a] Final Rule...,” and it thus declared the effect of EPA’s actions, not a 

statute. 618 F.3d at 6. Nat’l Fuel Gas Supply Corp. v. FERC, 899 F.2d 1244, 

1249-50 (D.C. Cir. 1990), recognized that court decisions involving agency actions 

can change the law.7

 It described this Court’s decision in Public Utilities Comm’n 

 

7

 Intervenors misleadingly cite to another case by the same name, Nat’l Fuel Gas 

Supply Corp. v. FERC, 59 F.3d 1281, 1289 (D.C. Cir. 1995), which merely quoted 

in dicta from a concurring opinion in a Supreme Court decision. 

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13 

v. FERC, 894 F.2d 1372 (D.C. Cir. 1990) as “an intervening change in the law” 

that invalidated a FERC order. Nat’l Fuel, 899 F.2d at 1249. The Court there 

remanded to FERC because “the legal background against which the Commission 

rendered its interpretation has been so dramatically – and, no doubt, unexpectedly 

– altered.” Id. at 1249-50. The same is the case here. 

3. Intervenors also argue that Petitioners are too late and should have 

challenged the 2008 proposed rulemaking—one where the final rule sided with

Petitioners’ interests by refusing to carry over the 2008 transfers–because the 

proposed rule alerted the public to the existence of interpollutant transfers. 74 Fed. 

Reg. 66,412, 66,421 (Dec. 15, 2009). Respondents themselves have already ably 

refuted this argument, see Resp. Br. 41 n.6; EPA Resp. to MTD at 4-6, and 

Petitioners agree that any challenge to the 2008 Approvals by petitioning for 

review of that proposed rule would have resulted in summary dismissal for lack of 

a final agency action, lack of case or controversy, and lack of an injury. See Am. 

Portland Cement Alliance v. EPA, 101 F.3d 772, 777 (D.C. Cir. 1996) (Where an 

agency proposal “is still in ‘flux,’ review is ‘premature[.]’”). 

C. The 2008 Transfer Approvals Were Final Agency Actions 

Respondents’ argument that the 2008 Approvals were not final agency 

actions is meritless. A final agency action “marks the consummation of the EPA’s 

decisionmaking process and it determines the rights and obligations of both 

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applicants and the Agency.” Gen. Elec. Co. v. EPA, 290 F.3d 377, 380 (D.C. Cir. 

2002). Here, there is no dispute that Respondents approved the transfer requests, 

Intervenors obtained the rights to produce or consume more HCFC-22 allowances 

than they had previously as a result, and EPA has credited Intervenors with those 

transfers beyond 2009, the end of the last regulatory period. See, e.g., Addendum, 

Appendix C. To the extent that Respondents argue that the 2008 Approvals were 

final agency actions only for 2008 and 2009 but not for later years, Arkema has 

already foreclosed this argument. The Arkema Court found that it was the 

language of the 2008 Approvals themselves that made them effective beyond the 

prior stepdown period. 618 F.3d at 8. As stated above, implementing the Arkema 

mandate was not “contingent on future administrative action” as Respondents 

claim. Resp. Br. 43. The 2008 Approvals are final, and EPA has been treating 

them as such. 

II. THIS COURT SHOULD GRANT THE PETITIONS BECAUSE THE 

2008 APPROVALS ARE UNLAWFUL 

A. The 2008 Approvals Are Contrary To The Plain Language Of The 

CAA 

Congress “has directly spoken to the precise question at issue”—whether the 

CAA permits the transfer of one type of HCFC allowances for another for future 

years. Because 42 U.S.C. § 7671f(b)(1) plainly does not permit such transfers, the 

Court “must give effect to the unambiguously expressed intent of Congress,” 

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Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (1984), 

and vacate the 2008 Approvals. Despite Respondents’ assertion to the contrary, 

the meaning of the language in that section was nowhere expressly addressed by 

the Arkema Court.8

Petitioners do not assert that § 7601f(b)(1) speaks clearly to all issues related 

to interpollutant transfers, but it does to one: It undeniably provides that 

allowances “for any year” can only be transferred to allowances for another 

substance “for the same year.” 42 U.S.C. § 7671f(b)(1). Thus, only “same year” 

transfers, not indefinite transfers, are authorized. Furthermore, Congress 

deliberately distinguished between interpollutant transfers and inter-company 

transfers by placing a “same year” limitation on the former, but not the latter. 

Compare id. with § 7671f(c). The contrast between those provisions shows that 

Congress intended different requirements to apply to each type of transfer. See 

Russello v. United States, 464 U.S. 16, 23 (1983) (“[W]here Congress included 

particular language in one section of a statute but omits it in another section of the 

 

8

 Respondents’ and Intervenors’ attempts to characterize Petitioners’ argument as a 

collateral attack on the Arkema decision, see Resp. Br. 44-46; Int. Br. 30-31, are 

unconvincing. No court, including the Arkema panel, has addressed whether 

§ 7671f(b)(1) prohibits baseline transfers beyond the vintage of the transferred 

allowance. Indeed, the Arkema case turned on a “policy outlined in [a] Final 

Rule,” 618 F.3d at 6, not the meaning of § 7671f(b)(1). 

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same Act, it is generally presumed that Congress acts intentionally and purposely 

in the disparate inclusion or exclusion.”).9

Respondents do not convincingly refute that § 7607f(b)(1) places a “same 

year” limitation on interpollutant transfers. In fact, they reference this same 

language and emphasize that if interpollutant transfers were given lasting effect 

“such a shift would increase the aggregate baseline for HCFC-22 while EPA is 

simultaneously acting under the CAA to phase out that chemical.” Resp. Br. 14. 

Furthermore, neither Respondents nor Intervenors dispute that a permanent 

interpollutant transfer effectuates a transfer of allowances from one substance to 

another substance not only in the “same year” but also in subsequent years. 

Intervenors implausibly assert that the “same year” limitation “means the 

same thing as the [annual] limitation o[n] intercompany transfers,” Int. Br. 31, 

even though the statute plainly distinguishes between how interpollutant and intercompany transfers are to be conducted. Intervenors ignore the well-established 

principle that courts must give meaning to distinctions made by Congress. See 

Russello, 464 U.S. at 23. Section 7671f(b)(1) permits interpollutant transfers on 

 

9

 The “same year” limitation on interpollutant transfers leaves no room for such 

transfers to be reflected in any year other than the year in which the transfer takes 

place. That Congress did not use the terms “baseline” or “permanent” in the 

statute is irrelevant because the “same year” limitation definitively resolves the 

question. 

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different terms than inter-company transfers, and this Court “[sh]ould not presume 

to ascribe this difference to a simple mistake in draftsmanship.” Id. 

Equally implausible are Intervenors’ suggestions that Petitioners are 

incorrect because § 7671f(b)(1) does not expressly forbid interpollutant transfers 

beyond the “same year,” and transfers need only “result in greater total reductions 

[of HCFCs] in each year . . . than would occur in that year in the absence of such 

transactions,” to be lawful. Int. Br. 32-33 (quoting 42 U.S.C. § 7671f(a)). These 

arguments fail for two reasons. First, the fact that § 7607f(b)(1) does not expressly 

forbid a transfer beyond the “same year” does not defeat Petitioners’ Chevron step 

one argument. Am. Petroleum Inst. v. EPA, 52 F.3d 1113, 1120 (D.C. Cir. 1995) 

(“[t]o suggest [] that Chevron step two is implicated any time a statute does not 

expressly negate the existence of a claimed administrative power (i.e. when the 

statute is not written in ‘thou shalt not’ terms), is both flatly unfaithful to the 

principles of administrative law . . . , and refuted by precedent”). 

Second, the directive in § 7671f(a)—that transfers result in greater total 

reductions than would otherwise occur—is not the sole limitation on interpollutant 

transfers. That limitation applies to all “transactions under the authority of this 

section,” whether they are interpollutant or inter-company transfers, and it does not 

displace the additional limitations that are specific to each type of transfer. 

Intervenors’ reading of § 7671f, however, improperly renders the “same year” 

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limitation in § 7671f(b)(1) “mere surplusage.” Dunn v. Commodity Futures 

Trading Comm’n, 519 U.S. 465, 472 (1997); Cooper Indus., Inc. v. Availl Servs., 

Inc., 543 U.S. 157, 167 (2004 (“[Courts] must, if possible, construe a statute to 

give every word operative effect.”). 

Intervenors final argument—that the “same year” limitation in § 7671f(b)(1) 

“tracks the Montreal Protocol” and is only meant to prevent the United States from 

exceeding its maximum limit on ozone depleting substances in a year—is 

unavailing. Int. Br. 31-32. The Montreal Protocol does not instruct Parties to use 

allowances to control HCFC emissions; the CAA does. In § 7671f, Congress 

provided for the issuance and transfer of allowances under certain conditions, 

including the “same year” limitation. Moreover, the CAA provides that in the case 

of any conflict between it and the Montreal Protocol, “the more stringent provision 

shall govern.” 42 U.S.C. § 7671m(b). Thus, the Montreal Protocol does not guide 

the interpretation of this section. 

B. The 2008 Approvals Effected A Change In EPA’s Interpretation 

Of Its Regulations That Required Notice And Comment 

EPA and Intervenors misinterpret Petitioners’ argument that EPA unlawfully 

changed its regulatory interpretation (that phasedowns must follow interpollutant 

allowance transfers) without notice and comment. See Resp. Br. 49; Int. Br. 34-36. 

Petitioners argued that EPA’s approval of interpollutant transfers in 2008 that 

would survive future phasedowns of the transferred pollutant—exactly what 

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occurred here as a result of Arkema—was unlawful. See Paralyzed Veterans of 

Am. v. DC Arena LP, 117 F.3d 579, 586 (D.C. Cir. 1997). Whether EPA changed 

its principle by granting the 2008 Approvals was not an issue that the Arkema

panel considered.10

Neither Respondents nor Intervenors dispute that EPA has consistently 

interpreted its regulations to require that baseline allowances for an HCFC that has 

been completely phased out must be deducted from the current allowance holder’s 

balance, regardless of whether interpollutant or inter-company transfers took place 

prior to the phaseout. Indeed, EPA articulated this principle numerous times in 

promulgating its 2003 Rule. See Pet. Br. 31-33 (citing Federal Register notices). 

In that rule, EPA also clarified that “at the time of a reduction step or a phaseout

of the substance, the current holder of baseline allowances that were received in a 

permanent transfer would be the person who would have them deducted.” 68 Fed. 

Reg. 2,820, 2,835 (Jan. 21, 2003) (emphasis added). In other words, EPA has 

interpreted its regulations to require the phasedown to follow the allowance both 

 

10 Intervenors devote most of their efforts to rebutting arguments that Petitioners 

did not make. Specifically, Intervenors cited to various materials that they claim 

demonstrate EPA’s consistent policy of allowing permanent interpollutant 

transfers. See Int. Br. 34-36. The meaning of that material is beside the point here. 

The interpretive change that Petitioners take issue with is EPA’s abandonment of 

the “phasedown follows the allowance” principle. None of the materials cited by 

Intervenors reflects that EPA has consistently allowed interpollutant transfers to 

persist from one regulatory period to another. 

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where this is a complete phaseout of a HCFC and where there is a partial 

phasedown in the form of a “reduction step.” Id. 

Respondents and Intervenors attempt to confine the “phasedown follows the 

allowance” principle to only the complete phaseout of an HCFC, Resp. Br. 47-48; 

Int. Br. 33, but they offer no basis to distinguish between “phaseouts” and 

“phasedowns.” They do not offer a convincing explanation as to why EPA 

specifically articulated that this principle applies in the event of either a reduction 

step or a phaseout. See 68 Fed. Reg. at 2,835. That such a principle would apply 

in both instances is obvious given EPA’s concern that the “lasting effect” of 

shifting baselines would be contrary to other agency actions to phase out HCFCs. 

It is also manifest in view of EPA’s decision, beginning in 2010, to reduce HCFC142b production and consumption by 99.53%—a reduction step that is virtually 

indistinguishable from a complete phaseout of that substance. 

 Respondents also state that, to the extent the Agency had a policy prior to 

the 2008 Approvals, “any change in that policy was caused by the Arkema Court’s 

opinion, not by any action of EPA.” Resp. Br. 49-50. This argument runs contrary 

to Respondents’ assertion that other changes in Agency policy were the result of 

the 2011 rule. See id. at 35 (stating that “even if it did have such a policy [of not 

carrying forward interpollutant transfers], the rulemaking that would have changed 

it was the [2011 rule].”). Respondents cannot have it both ways. They cannot 

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argue that Petitioners lack standing because any injury was caused by the 2011 rule 

while at the same time arguing that changes in Agency interpretations that would 

have alleviated the injury were the result of the Arkema decision. 

In sum, EPA could not have taken action contrary to its prior interpretation 

that the “phasedown follows the allowance” without first providing for notice and 

comment. EPA’s failure to adhere to these procedural requirements renders the 

2008 Approvals unlawful. 

C. EPA Failed To Comply With Applicable Regulations In Issuing 

The 2008 Approvals 

The parties agree that EPA’s regulations required the Agency to determine 

whether Intervenors “possesse[d] unexpended allowances sufficient to cover the 

transfer claim[s] on the date[s] the transfer claim[s] [were] processed[.]” 40 C.F.R. 

§ 82.23(b)(4). In addition, Respondents and Intervenors effectively concede that 

EPA did not verify, when it processed the 2008 Approvals, that Intervenors had 

sufficient unexpended allowances to cover the requested baseline transfers beyond 

2009 because EPA had not yet allocated allowances to any market participant for 

2010 and beyond. See Resp. Br. 52-53; Int. Br. 37-38. Respondents and 

Intervenors nevertheless claim that the 2008 Approvals complied with 

§ 82.23(b)(4) because EPA was able to verify that Intervenors had sufficient 

unexpended allowances to cover the transfers in 2008 and thus, EPA did not need 

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to consider allowances in future years. See Resp. Br. 52-53; Int. Br. 37-38. This 

argument finds no support in the regulatory text. 

Under EPA’s regulations, a company seeking to carry out an interpollutant 

transfer must submit a “transfer claim” to EPA that specifies, among other things, 

“[t]he control period(s) for which the allowances are being converted.” 40 C.F.R. 

§ 82.23(b)(3)(vii). Because EPA is required to verify “on the date the transfer 

claim is processed” that the transferor has “unexpended allowances sufficient to 

cover the transfer claim,”11 EPA would have to do so for all applicable control 

periods—not just the current control period. See id. § 82.23(b)(4). Obviously, 

EPA could not approve a transfer claim covering control periods for which 

allowances have not yet been allocated, because the Agency could not verify the 

existence of such allowances. Because the record in this case lacks any indication 

that EPA complied with 40 C.F.R. § 82.23(b)(4) in processing the 2008 Approvals, 

those approvals must be vacated. 

For example, were this Court to assume that the current 99.53% phasedown 

of HCFC-142b had been in place at the time of the 2008 Approvals, the violations 

 

11 The regulations define the terms “unexpended consumption allowances” and 

“unexpended production allowances,” but do not separately define “unexpended 

allowances.” See 40 C.F.R. § 82.3. In context, those terms mean essentially the 

total allowances an entity is authorized to hold within a given control period, 

minus whatever allowances that entity has used in that control period up until that 

time. Id.. 

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of § 82.23(b)(4) would be even more obvious. Intervenors would have had only 

154,178 kilograms of unexpended HCFC-142b allowances to transfer, not the 

34,653,771 kilograms they actually transferred. While that phasedown did not 

occur until 2010, this example shows that EPA could not have verified in 2008 that 

Intervenors had sufficient unexpended allowances to transfer in 2010 and beyond. 

The 2008 Approvals thus ran afoul of 40 C.F.R. § 82.23(b)(4). 

Both Respondents and Intervenors inaccurately assert that the Arkema

decision addressed Petitioners’ challenge to the record underlying the 2008 

Approvals. See Resp. Br. 52 n.7; Int. Br. 38. They misconstrue Petitioners’ 

arguments on this issue. Petitioners’ arguments do not turn on whether the 2003 

Rule authorized permanent transfers. For purposes of this argument, that point can 

be assumed. See Pet. Br. 35. Instead, Petitioners are arguing that the record in this 

case does not sufficiently demonstrate that EPA complied with those regulations 

because there is no evidence that EPA confirmed whether Intervenors had 

sufficient unexpended allowances to transfer. Id. at 36. The Arkema panel did not 

consider these arguments, nor did it have to because neither EPA nor Intervenors 

contested in that case whether the 2008 Approvals satisfied the relevant regulatory 

requirements in 40 C.F.R. § 82.23.12

 

12 The Arkema dissent’s discussion of this regulatory provision focused on whether 

40 C.F.R. § 82.23 contemplated that “a company’s inter-pollutant transfers would 

permanently and forever alter the company’s baselines for these pollutants.” 618 

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Respondents also seek to deflect Petitioners’ arguments regarding the 

adequacy of the record based on Petitioners’ purported failure to raise these issues 

before the Agency. Resp. Br. 51. In particular, Respondents assert that Petitioners 

could not have raised these specific issues to the Agency at any point other than 

perhaps at the time of promulgation of the 2011 rule and, in Respondents’ view, 

this further evidences that the 2008 Approvals were not final agency actions. Id. 

Neither of these arguments is convincing. Respondents ignore the fact that 

Petitioners raised these regulatory violations to EPA upon learning of the 2008 

Approvals by filing a petition to reconsider and rescind those approvals on October 

26, 2010. See Addendum, Appendix D. Moreover, as explained above, 

Petitioners’ inability to raise a contemporaneous challenge to the record for the 

2008 Approvals does not render those approvals any less final or ripe for challenge 

in this action. See Section I(B) supra. 

 

F.3d at 10. For purposes of challenging the record underlying the 2008 Approvals, 

Petitioners are assuming arguendo that the CAA does allow for permanent 

interpollutant transfers. None of the citations to the Arkema decision offered by 

EPA and Intervenors reflects that the panel in that case evaluated whether there 

was sufficient evidence that the 2008 Approvals satisfied the particular 

requirements in 40 C.F.R. § 82.23. See Resp. Br. 52; Int. Br. 38.

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III. EPA’S ISSUANCE OF THE 2008 TRANSFER APPROVALS 

DEPRIVED PETITIONERS OF VESTED RIGHTS WITHOUT DUE 

PROCESS OF LAW 

Arkema held that market participants have vested rights in their allowances. 

618 F.3d at 7. These allowances are tantamount to licenses. Without them, no 

market participant may lawfully produce or consume HCFCs. See 42 U.S.C. 

§ 7413(b)-(d); 40 C.F.R. § 82.15(a), (c). The fact that EPA may be able, as a 

general matter, to alter who receives allowances in the future, and in what manner, 

does not mean it can diminish pre-existing rights. Respondents’ and Intervenors’ 

arguments to the contrary, see Resp. Br. 55-56; Inv. Br. 39-41, have already been 

rejected by the Supreme Court in discussing the issuance and revocation of drivers’ 

licenses: 

Once licenses are issued, as in petitioner’s case, their 

continued possession may become essential in the pursuit 

of a livelihood. Suspension of issued licenses thus 

involves state action that adjudicates important interests 

of the licensees. In such cases the licenses are not to be 

taken away without that procedural due process required 

by the Fourteenth Amendment. 

Bell v. Burson, 402 U.S. 535, 539 (1971). Under the HCFC phasedown program, 

allowances are no less essential to “the pursuit of a livelihood” than drivers’ 

licenses. Without them, Petitioners are out of the HCFC business. Even if only a 

portion of them are diminished, significantly altering Petitioners’ market share, 

Petitioners will lose millions of dollars. See Pet. Br., Diggs Decl. ¶ 12; Austin 

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Decl. ¶ 9. Under Respondents’ theory, EPA could withdraw allocations for any 

reason and at any time, even post-issuance, without recourse. Such actions would 

be prohibited even without vested rights in the allowances. See Nat’l Broadcasting 

Co. v. FCC, 132 F.2d 545, 549 (D.C. Cir. 1942) (that an agency may rescind a 

license does “not mean that it can do so in an unfair manner or without hearing. 

The protections of procedural due process do not disappear because the substantive 

right affected is not a full-grown vested right[.]”) (footnote omitted). 

Respondents appear to misapprehend the distinction between due process 

rights to receive a license and due process rights for the revocation of a license. 

Their reliance on Natale v. Town of Ridgefield, 170 F.3d 258, 263 (2d Cir. 1999), 

is therefore misplaced. See Resp. Br. 56. There, the court rejected a homeowner’s 

claim that the refusal of an agency to issue a permit violated his property rights 

without due process. 170 F.3d. at 259. The court in that case held that there was 

no due process right to receive a license because the plaintiff could not show a 

“clear entitlement to the permit” – meaning that the agency lacked discretion in 

issuing the permit. Id. at 263. Here, by contrast, Petitioners’ due process claim is 

not premised on the right to receive allowances; it is premised on EPA’s unlawful 

diminution of rights to granted allowances. See Pet. Br. 39-40. Such action 

requires a different analysis than under Natale, i.e., it requires an analysis of due 

process under Mathews v. Eldridge, 424 U.S. 319, 333 (1976). 

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Respondents and Intervenors errantly argue that vested rights under Arkema

are not actually rights that give rise to a property interest, Resp. Br. 55-56; Int. Br. 

39-40, relying on a distinction between privileges and rights that the Supreme 

Court discarded decades ago. See Sherbert v. Verner, 374 U.S. 398, 404-05 

(1963); Goldberg v. Kelly, 397 U.S. 254, 262 (1970) (due process “challenge[s] 

cannot be answered by an argument that public assistance benefits are a ‘privilege’ 

and not a ‘right.’”); Morrissey v. Brewer, 408 U.S. 471, 474 (1972) (“the 

traditional view of parole as a privilege rather than a vested right is no longer 

dispositive as to whether due process is applicable[.]”). Since this rejection, the 

application of due process has been decided under the Mathews three-part 

balancing test, under which courts consider: (1) the significance of the protected 

party’s interest; (2) the government’s interest; and (3) the risk of erroneous 

deprivation and the probable value of additional or substitute procedural 

safeguards. 424 U.S. at 335. 

Here, all three Mathews factors weigh in Petitioners’ favor. Petitioners 

should be afforded due process protections in light of: (1) the millions of dollars in 

potential losses to Petitioners; (2) the government’s interest in preventing 

“manipulation of the allocation system,” Resp. Br. 19;13 and (3) the high value in 

 

13 Respondents have extensively outlined the government’s interest in preventing 

parties, such as the Intervenors, from carrying forward prior inter-pollutant 

baseline transfers into new regulatory periods. See Resp. Br. 19-20. Petitioners 

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providing safeguards against the manipulation of a regulatory system as intricate as 

the phasedown program. 

Respondents’ and Intervenors’ suggestion that Petitioners should have 

challenged the 2003 Rule as providing inadequate process are without merit. See 

Resp. Br. 57; Int. Br. 42. At the time EPA promulgated its transfer regulations in 

2003, it did not include procedures for challenging interpollutant transfers because 

the need for due process could not have been foreseen at that time. First, the 

Arkema decision—issued seven years later—changed the nature of the phasedown 

program by announcing for the first time that market participants had vested rights 

in their allowances. This makes the permanent alteration of participants’ baselines 

through manipulative transfers by other participants, such as Intervenors, all the 

more important. Second, the Arkema court inferred EPA’s “permanent baseline” 

interpretation through forms created in 2006 and correspondence between EPA and 

the Intervenors in 2008. 618 F.3d at 7-8. Third, this correspondence was not made 

public until the Arkema appeal. See EPA Resp. to MTD at 9 (“Each of these nonobjection notices was sent only to the requesting party[.]”). 

Further, a due process challenge to the 2003 Rule would have been absurd as 

EPA had not yet adopted the “permanent baseline” interpretation that was at issue 

 

agree with Respondents and argue only that Petitioners should have had the 

opportunity to make these points before EPA approved the Intervenors’ 2008 

transfer requests. 

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29 

in Arkema, and Respondents still deny that EPA ever did so. See Resp. Br. 20-23 

(continuing to dispute the holding in Arkema). Petitioners would have had to argue 

to this Court that they required notice and an opportunity to be heard regarding a 

legal interpretation that EPA did not hold at the time. This Court should resist 

condoning such a spectacle. 

Finally, both Respondents and Intervenors argue that the ability to comment 

on proposed rulemakings, and the opportunity to intervene in another party’s 

lawsuit, is “ample process.” Int. Br. 43; see also Resp. Br. 58. First, Petitioners 

never had the timely opportunity to comment on a proposal to approve Intervenors’ 

2008 transfer requests, because notice and a request for comment was never 

provided. Second, the argument that due process is satisfied by the prospect of 

intervening in another party’s lawsuit after-the-fact is meritless. Neither 

Respondents nor Intervenors support this argument with any legal citation. This is 

unsurprising given that such an impotent view of procedural due process rights has 

never been adopted by any court. Respondents and Intervenors have given this 

Court no cause or rationale to be the first. 

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30 

CONCLUSION

For the foregoing reasons and those stated in Petitioners’ opening brief, the 

Court should vacate the 2008 Approvals. 

March 20, 2012 

/s/ Chet M. Thompson

Chet M. Thompson 

Robert J. Meyers 

David Y. Chung 

CROWELL & MORING LLP 

1001 Pennsylvania Avenue, N.W. 

Washington, D.C. 20004-2595 

(202) 624-2500 

Counsel for E. I. du Pont de Nemours 

and Company 

Respectfully submitted, 

/s/ Timothy K. Webster

Timothy K. Webster 

James R. Wedeking 

SIDLEY AUSTIN LLP 

1501 K Street, NW 

Washington, DC 20005 

(202) 736-8000 

Richard Ayres 

Jessica Olson 

AYRES LAW GROUP 

1707 L Street, N.W., Suite 850 

Washington, D.C. 20036 

(202) 452-9200 

Counsel for Honeywell International 

Inc. 

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CERTIFICATE OF COMPLIANCE 

This brief complies with the type-volume limitations of Federal Rule of 

Appellate Procedure 32(a)(7)(B)(ii) because it contains 6,949 words (as 

determined by the Microsoft Word 2007 word-processing system used to prepare 

the brief), excluding the parts of the brief exempted by Federal Rule of Appellate 

Procedure 32(a)(7)(B)(iii). 

This brief complies with the typeface requirements of Federal Rule of 

Appellate Procedure 32(a)(5) and the type-style requirements of Federal Rule of 

Appellate Procedure 32(a)(6) because it has been prepared in a proportionally 

spaced typeface using the Microsoft Word 2007 word-processing system in 14-

point Times New Roman font. 

 /s/ Timothy K. Webster

 Timothy K. Webster 

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APPENDIX C

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APPENDIX D

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CERTIFICATE OF SERVICE 

I certify that on this 20th day of March, 2012, I caused the foregoing Reply 

Brief of Petitioners to be filed via the Court’s CM/ECF System. All participants in 

the case are registered CM/ECF users and will be served by the appellate CM/ECF 

system. 

 /s/ Timothy K. Webster

 Timothy K. Webster 

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