ORAL ARGUMENT NOT YET SCHEDULED
Nos. 10–1347 et al. UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

________________ H ONEYWELL I NTERNATIONAL I NC

. AND E. I. D U P ONT D E N EMOURS A ND C OMPANY , Petitioners ,

v. E NVIRONMENTAL P ROTECTION A GENCY AND L ISA P EREZ J ACKSON , 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 49i TABLE OF CONTENTS TABLE OF AUT HORITIES .................................................................................... ii GLOSSARY .............................................................................................................. vi INTRODUCTI ON ..................................................................................................... 1 ARGUMENT ............................................................................................................. 3 I. THE COURT HAS JURISDICTION OVER PETITIONERS’ CLAIMS ...... 3 A. Petitioners Have Cons titutional And Pruden tial 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 TH E 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 Cha nge In EPA’s Interpretation Of Its Regulations That Requi red Notice And Comment ........................ 18 C. EPA Failed To Comply With Appli cable Regulations In Issuing The 2008 Approva ls ................................................................................... 21 III. EPA’S ISSUANCE OF THE 2008 TR ANSFER APPROVAL S DEPRIVED PETITIONERS OF VESTED RIGH TS WITHOUT DUE PROCESS OF LAW .............................................................................................................. 25 CONCLUSI ON ........................................................................................................ 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) C ASES 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 (19 71) ............................................................................................ 25 Chevron U.S.A. Inc. v. Na tural Res. Def. Council , 467 U.S. 837 (19 84) ............................................................................................ 15 Clarke v. Sec. Indus. Ass’n , 479 U.S. 388 (1 987) .............................................................................................. 7 Cooper Indus., Inc. v. Availl Servs., Inc. , 543 U.S. 157 (20 04) ............................................................................................ 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 (19 97) ............................................................................................ 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 (19 70) ............................................................................................ 27 *Group Against Smog & Pollution, Inc. v. EPA , 665 F.2d 1284 (D.C. Ci r. 1981) .................................................................... 10, 11 Harper v. Virginia Dep’t of Taxation , 509 U.S. 86 (199 3) .............................................................................................. 11 *Honeywell Int’l, Inc. v. EPA , 374 F.3d 1363 (D.C. Ci r. 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. Ci r. 1998) ........................................................................ 3, 12 La. Envtl. Action Ne twork v. Browner , 87 F.3d 1379 (D.C. Cir. 1996) ............................................................................ 12 Lujan v. Defenders of Wildlife , 504 U.S. 555 (19 92) .......................................................................................... 3, 4 *Mathews v. Eldridge , 424 U.S. 319 (1976) ...................................................................................... 26, 27 Morrissey v. Brewer , 408 U.S. 471 (19 72) ............................................................................................ 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 Ci r. 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. Ci r. 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 (19 94) ............................................................................................ 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 (19 63) ............................................................................................ 27 *Sherley v. Sebelius , 610 F.3d 69 (D.C. Ci r. 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 S TATUTES AND F EDERAL R EGULATORY M ATERIAL 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 (D ec. 23, 2 008) ......................................................................... 8 74 Fed. Reg. 66,412 (D ec. 15, 2009) ....................................................................... 13 76 Fed. Reg. 47,451 (Aug. 5, 2011)........................................................................... 4 77 Fed. Reg. 237 (J an. 4, 2012) ................................................................................. 4 O THER A UTHORITIES Lewis Carroll, Through the Looking Glass (Edmund R. Brown ed., Colonial Press Inc. 1971) (1871) ......................................................................................... 8 Merriam Webster, http://www.merriam-w ebster.com/dictionary/ground (last visited Mar. 20, 2012) ......................................................................................... 10 USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 6 of 49vi GLOSSARY Abbreviation

2003 Rule Protection of Stratospheri c Ozone: Allowance System for Controlling HCFC Producti on, 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 Cont rolling 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. 1296 479 (filed Mar. 4, 2011) HCFCs Hydrochlorofluorocarbons HCFC-22 Hydrochlorofluorocarbon-22 HCFC-142b Hydrochlorofluorocarbon-142b USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 7 of 491 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 a llowances 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 litigat ion is Petitioner’s only bite at that apple. Petitioners have standing to pursu e their challenge because the 2008 Approvals—which were given entirely new meaning by the Arkema Court— inexorably affected Petitione rs’ rights in the closed, “ zero-sum” HCFC allocation system. Subsequent EPA actions—sp ecifically, 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. Re spondents 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 492 after” that both ripened Pe titioners’ claims and provided them with new grounds to bring this action. Additionally, those appr ovals were irrefutabl y final when made. The 2008 Approvals should be vacated. First, the Arkema Court did not directly address the plain meani ng of 42 U.S.C. § 7601f(b)(1), despite Respondents’ assertion to the contrary. Th at provision establishes one irreducible requirement: that interpollutant transfer s 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 HC FC-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-s um” nature of the HCFC allocation scheme means that, when EP A allocates allowances to one company, it must take from the others. This further demonstrat es that EPA could not have upset the USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 9 of 493 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 Constitution al And Prudential Standing 1. Petitioners meet the test for constitu tional standing. Fi rst, Petitioners’ declarations provided evidence of concre te injuries, namely increased competition and lost market share and profits occas ioned 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, th e 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 c ontest 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 appellan ts was sufficient to confer competitor standing on appellants even though neither ha d been denied any grant. 610 F.3d at USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 10 of 494 72. “Because increased competition almost surely injures a seller in one form or another, he need not wait until ‘allege dly 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 In tervenors with more allowances and Petitioners with less, 1 its 2011 rule allocating allowances for 2011 in the same manner, and its recent proposed allocati on 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 th e basis of the 2008 Approvals); 77 Fed. Reg. 237, 245 (Jan. 4, 2012) (same). Injury-i n-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 challe nged 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 2 012 letters were not issued until after Petitioners’ opening br ief was filed. See Addendum, Appendix C. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 11 of 495 2011 rule would not alleviate the full ex tent of Petitioners’ current injuries. 2 The 2008 Approvals are the final actions that authorized what would otherwise have been unlawful, and therefore Petitioners’ inju ries 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 comp laints from federa l 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 gr anted petitioner the relief it requested);

2 If a “live” challenge to the 2011 rule we re relevant to sta nding, Petitioners note that they have petitioned to review Re spondents’ constructive denial of their administrative petition for recons ideration of the 2011 rule. See No. 12-1121, Docket No. 1360814. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 12 of 496 Crowley Caribbean Transp., Inc. v. Pena , 37 F.3d 671, 674 (D.C. Cir. 1994) (petitioner lacked standing to appeal deni al 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 harm ed Petitioners here. There is no doubt that Petitioners’ inju ries will be redressed by vacating the 2008 Approvals. Respondents argue that , even if the 2008 Approvals were vacated, EPA still has the ability subseq uently 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 ne w regulatory scheme is irrelevant. Redressibility turns on whethe r 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 regula tions. 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 497 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 pruden tial standing doctrine “exclude[es] only those whose interests are ‘so marginally related to or inconsistent with the purposes implicit in the statute that it can not 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 restricti ons” 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 restrict ion” on competitors that they are also subject to themselves. Honeywell , 374 F.3d at 1370. Therefore, Petitioners have prudential standing. Respondents erroneously argue that Petiti oners “are neither the subject of nor directly affected by another company’s in ter-pollutant transfer s.” Resp. Br. 37. Yet, Respondents have already conceded this point. See EPA Resp. to MTD at 3 (“EPA must extract the corresponding pr oduction allowances from somewhere, e.g., from the allowances of DuPont, Honeywell and other su ppliers.”). This is the natural and unavoidable product of a “zero-sum” allocation system. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 14 of 498 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 revi ew 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 time ly 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 addre ss 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 th at 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 transfer s 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 499 Approvals was never pub lished, 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 “w indow” 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 inte nds 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 Regis ter final action by simply withholding publication. Yet, this Court has re peatedly invalidated CAA “guidance” documents that were never publis hed in the Fede ral 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 Interv enors 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-pub lication rulemaking because “until Federal Register publication has occurred, the Ad ministrator has not ‘made a final decision’”) (quoting 40 C.F. R. § 260.20(e) (alte rations 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 4910 2. Respondents and Intervenors mistak enly claim that the only way to challenge the 2008 Approvals was by petiti oning for review of the 2011 rule. But that rule was in effect for less than fi ve 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 la nguage of the CAA. Section 7607(b)(1) provides this Court with jurisdicti on 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 aris e, and parties cannot wait for later developments to occur. So long as th e new grounds ripen the claim, challengers must act within the time allotted. The term “grounds” 5 encompasses a spectrum of ev ents 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 juri sdiction over a challenge to process furnace emission standards based on new in formation regardi ng 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 4911 technology. It noted that Congress exp licitly created the “grounds arising after” exception to allow for “any person [to] ch allenge any promulgation whenever it is alleged that significant new inform ation has become available.’” Id. at 1289-90 (citing S. Rep. No. 91-1196, 91 st 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 whic h they were granted) was “significant new information” that was never consider ed 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 mu st 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 Intervenor s would have argued that Petitioners failed to challenge the 2008 Appr ovals 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 statutor y reopener clause like that found in § 7607(b)(1). USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 18 of 4912 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 in jure Petitioners through the 2012 enforcement discretion letter and the proposed allocation for 2012-2014. Had EPA resorted to a different allocati on system that effectively nullified the 2008 Approvals, Intervenors woul d 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 t hus 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), rec ognized 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. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 19 of 4913 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 ag ainst which the Commission rendered its interpretation has been so dr amatically – and, no doubt, unexpectedly – altered.” Id. at 1249-50. The same is the case here. 3. Intervenors also argue that Petit ioners are too late and should have challenged the 2008 proposed rulemaking—one where the final rule sided with Petitioners’ interests by refusing to ca rry over the 2008 transfers–because the proposed rule alerted the public to the existe nce of interpollutant transfers. 74 Fed. Reg. 66,412, 66,421 (Dec. 15, 2009). Responde nts themselves have already ably refuted this argument, see Resp. Br. 41 n.6; EPA Re sp. 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,’ re view is ‘premature[.]’”). C. The 2008 Transfer Approvals We re Final Agency Actions Respondents’ argument that the 2008 Approvals were not final agency actions is meritless. A final agency ac tion “marks the consummation of the EPA’s decisionmaking process and it determines the rights and obligations of both USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 20 of 4914 applicants and the Agency.” Gen. Elec. Co. v. EPA , 290 F.3d 377, 380 (D.C. Cir. 2002). Here, there is no dispute that Res pondents approved the transfer requests, Intervenors obtained the right s to produce or consume more HCFC-22 allowances than they had previously as a result, a nd 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 Res pondents 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 pr ecise 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. § 7 671f(b)(1) plainly does not permit such transfers, the Court “must give effect to the unambi guously expressed intent of Congress,” USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 21 of 4915 Chevron U.S.A. Inc. v. Na tural Res. Def. Council , 467 U.S. 837, 842-43 (1984), and vacate the 2008 Approvals . Despite Respondents’ asse rtion to the contrary, the meaning of the language in that s ection was nowhere e xpressly 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 doe s 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 inte rpollutant transfers and inter-company transfers by placing a “same year” limita tion on the former, but not the latter. Compare id. with § 7671f(c). The contrast betw een those provisions shows that Congress intended different re quirements 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 stat ute but omits it in another section of the

8 Respondents’ and Intervenor s’ attempts to characteri ze 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 a ddressed whether § 7671f(b)(1) prohibits baseline transfer s 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 th e meaning of § 7671f(b)(1). USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 22 of 4916 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 interpolluta nt transfers were given lasting effect “such a shift would increase the aggreg ate baseline for HCFC-22 while EPA is simultaneously acting under the CAA to phase out that chem ical.” Resp. Br. 14. Furthermore, neither Respondents nor In tervenors dispute that a permanent interpollutant transfer effectuates a tran sfer of allowances from one substance to another substance not only in the “same ye ar” but also in subsequent years. Intervenors implausibly assert that the “same year” limitation “means the same thing as the [annual] limitation o[n] intercompany transf ers,” Int. Br. 31, even though the statute plainly distinguishe s between how inter pollutant and intercompany transfers are to be conducted. Intervenors ignore the well-established principle that courts must give meani ng 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 interpolluta nt 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 te rms “baseline” or “permanent” in the statute is irrelevant because the “same ye ar” limitation definitively resolves the question. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 23 of 4917 different terms than inter-company transfer s, and this Court “[sh]ould not presume to ascribe this difference to a si mple mistake in draftsmanship.” Id. Equally implausible are Intervenors’ suggestions that Petitioners are incorrect because § 7671f(b)(1) does not e xpressly forbid interpollutant transfers beyond the “same year,” and transfers need only “result in great er total reductions [of HCFCs] in each year . . . than would occur in that y ear 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, th e 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)—tha t transfers result in greater total reductions than would otherwise occur—is not the sole limitation on interpollutant transfers. That limitation applies to a ll “transactions under the authority of this section,” whether they are interpollutant or inter-company transfers, and it does not displace the additional limitations that ar e specific to each t ype of transfer. Intervenors’ reading of § 7671f, howev er, improperly renders the “same year” USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 24 of 4918 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 “s ame year” limitation in § 7671f(b)(1) “tracks the Montreal Protocol” and is onl y 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 HC FC emissions; the CAA does. In § 7671f, Congress provided for the issuance and transfer of allowances under certain conditions, including the “same year” limitation. Mo reover, 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). T hus, the Montreal Protocol does not guide the interpretation of this section.
B. The 2008 Approvals Effected A Chan ge In EPA’s Interpretation Of Its Regulations That Required Notice And Comment EPA and Intervenors misinterpret Pe titioners’ argument that EPA unlawfully changed its regulatory interpretation (tha t phasedowns must follow interpollutant allowance transfers) wit hout 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 th e transferred pollutant—exactly what USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 25 of 4919 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 interpollu tant or inter-company transfers took place prior to the phaseout. Indeed, EPA articul ated this principle numerous times in promulgating its 2003 Rule. See Pet. Br. 31-33 (citing Fede ral Register notices). In that rule, EPA also clarif ied that “at the time of a reduction step or a phaseout of the substance, the current holder of base line allowances that were received in a permanent transfer would be the person w ho would have them deducted.” 68 Fed. Reg. 2,820, 2,835 (Jan. 21, 2003) (emphasi s 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 ci ted 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 ta ke issue with is EPA’s abandonment of the “phasedown follows the allowance” prin ciple. None of the materials cited by Intervenors reflects that EPA has consisten tly allowed interpollutant transfers to persist from one regulato ry period to another. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 26 of 4920 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 c onvincing explanation as to why EPA specifically articulated that this principle applies in th e 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 ot her agency actions to phase out HCFCs. It is also manifest in view of EPA’s de cision, 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 ex tent 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 change s 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 ca nnot have it both ways. They cannot USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 27 of 4921 argue that Petitioners lack standing becau se any injury was caused by the 2011 rule while at the same time arguing that change s 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 allowanc e” without first providing for notice and comment. EPA’s failure to adhere to th ese procedural requirements renders the 2008 Approvals unlawful. C. EPA Failed To Comply With Applic able Regulations In Issuing The 2008 Approvals The parties agree that EPA’s regulatio ns required the Agency to determine whether Intervenors “posse sse[d] unexpended allowances sufficient to cover the transfer claim[s] on the date[s ] the transfer clai m[s] [were] proce ssed[.]” 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 cove r the requested baseline transfers beyond 2009 because EPA had not yet allocated allo wances 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 ve rify that Intervenors had sufficient unexpended allowances to cover the transfers in 2008 and thus, EPA did not need USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 28 of 4922 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 seek ing 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 be ing converted.” 40 C.F.R. § 82.23(b)(3)(vii). Because EPA is require d 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 clai m 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 th is 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 a ssume that the current 99.53% phasedown of HCFC-142b had been in place at the ti me of the 2008 Approvals, the violations

11 The regulations define the terms “ unexpended consumpti on allowances” and “unexpended production allowances,” but do not separately de fine “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.

. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 29 of 4923 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 transf erred. 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 tr ansfer 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 Petitione rs’ challenge to the r ecord underlying the 2008 Approvals. See Resp. Br. 52 n.7; Int. Br. 38. They misconstrue Petitioners’ arguments on this issue. Petitioners’ ar guments do not turn on whether the 2003 Rule authorized permanent tr ansfers. For purposes of th is argument, that point can be assumed. See Pet. Br. 35. Instead, Petitioners are arguing that the record in this case does not sufficiently demonstrate th at EPA complied with those regulations because there is no evidence that EP A 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 Appr ovals 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 co mpany’s inter-polluta nt transfers would permanently and forever alter the compa ny’s baselines for these pollutants.” 618 USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 30 of 4924 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, Responde nts 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 Appr ovals were not final agency actions. Id. Neither of these arguments is convinci ng. Respondents ignore the fact that Petitioners raised these regulatory viol ations 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. More over, as explained above, Petitioners’ inability to raise a contemporan eous challenge to the record for the 2008 Approvals does not render t hose approvals any less fina l 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. N one of the citations to the Arkema decision offered by EPA and Intervenors reflects that the pane l in that case evaluated whether there was sufficient evidence that the 2008 A pprovals satisfied the particular requirements in 40 C.F.R. § 82.23. See Resp. Br. 52; Int. Br. 38. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 31 of 4925 III. EPA’S ISSUANCE OF THE 2008 TRANSFER APPROVALS DEPRIVED PETITIONERS OF VE STED 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 ta ntamount 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 alte r who receives allowances in th e future, and in what manner, does not mean it can diminish pre-existi ng 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 discussi ng 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 cas es the licenses are not to be taken away without that pro cedural due process required by the Fourteenth Amendment. Bell v. Burson , 402 U.S. 535, 539 (1971). Unde r 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, significan tly altering Petitioners’ market share, Petitioners will lose millions of dollars. See Pet. Br., Diggs Decl. ¶ 12; Austin USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 32 of 4926 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 vest ed 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 proce ss do not disappear because the substantive right affected is not a full-grown ve sted right[.]”) (footnote omitted). Respondents appear to misapprehend th e 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. Th e 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” – meani ng that the agency lacked discretion in issuing the permit. Id. at 263. Here, by contrast, Pe titioners’ due process claim is not premised on the right to receive allo wances; 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). USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 33 of 4927 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 pub lic 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 app licable[.]”). Since this rejection, the application of due process has been decided under the Mathews three-part balancing test, under which courts consid er: (1) the significance of the protected party’s interest; (2) the government’s in terest; 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 go vernment’s interest in preventing “manipulation of the alloca tion system,” Resp. Br. 19; 13 and (3) the high value in

13 Respondents have extensiv ely outlined the government’s interest in preventing parties, such as the Intervenors, fro m carrying forward prior inter-pollutant baseline transfers into new regulatory periods. See Resp. Br. 19-20. Petitioners USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 34 of 4928 providing safeguards against the manipulation of a regulatory system as intricate as the phasedown program. Respondents’ and Intervenors’ suggest ion that Petitioners should have challenged the 2003 Rule as providing inad equate process are without merit. See Resp. Br. 57; Int. Br. 42. At the time EP A promulgated its transfer regulations in 2003, it did not include procedures for cha llenging interpollutant transfers because the need for due process coul d 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 perm anent alteration of pa rticipants’ baselines through manipulative transfers by other par ticipants, 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 corres pondence 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 th e 2003 Rule would have been absurd as EPA had not yet adopted the “permanent ba seline” 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. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 35 of 4929 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 Intervenor s argue that the ability to comment on proposed rulemakings, and the opportun ity to intervene in another party’s lawsuit, is “ample process.” Int. Br. 43; see also Resp. Br. 58. First, Petitioners never had the timely opportun ity 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 argum ent 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. Res pondents and Intervenor s have given this Court no cause or rationale to be the first. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 36 of 4930 CONCLUSION For the foregoing reasons and those stat ed 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. USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 37 of 49CERTIFICATE OF COMPLIANCE This brief complies with the type-vol ume 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 wo rd-processing system used to prepare the brief), excluding the parts of the brie f 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) a nd the type-style requireme nts 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 USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 38 of 49

# APPENDIX C

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 39 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 40 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 41 of 49

# APPENDIX D

USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 42 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 43 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 44 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 45 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 46 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 47 of 49USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 48 of 49CERTIFICATE OF SERVICE I certify that on this 20th day of Marc h, 2012, I caused the foregoing Reply Brief of Petitioners to be filed via the Cour t’s CM/ECF System. All participants in the case are registered CM/E CF users and will be served by the appellate CM/ECF system. /s/ Timothy K. Webster Timothy K. Webster USCA Case #10-1347 Document #1364738 Filed: 03/20/2012 Page 49 of 49