ORAL ARGUMENT NOT YET SCHEDULED

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Nos. 10-1347, 10-1348, 10-1349, 10-1350 (Consolidated)

HONEYWELL INTERNATIONAL, INC., et al. 

Petitioners,

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al.,

Respondents.

Petitions for Review of Administrative Action

of The United States Environmental Protection Agency 

__________________________________________________________________ 

BRIEF OF RESPONDENTS

__________________________________________________________________ 

OF COUNSEL:

DIANE E. McCONKEY

Office of General Counsel

U.S. Environmental Protection Agency

Ariel Rios Building,

1200 Pennsylvania Avenue, N.W.

Mail Code: 2344A

Washington, D.C. 20460

Tel: (202) 564-5588

DATE: January 30, 2012

IGNACIA S. MORENO

Assistant Attorney General 

Environment & Natural Resources Div.

 

PERRY M. ROSEN

United States Department of Justice

Environment & Natural Resources Div.

Environmental Defense Section

P.O. Box 7611

Washington D.C. 20044

Tel: (202) 353-7792

Counsel for Respondents

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CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES

Pursuant to Circuit Rule 28(a)(1), counsel for Respondents acknowledges 

that Petitioner’s Brief correctly sets out the parties, rulings and related cases. 

References to the Ruling at issue appear in the brief for the Petitioner.

CORPRATE DISCLOUSRE STATEMENT

Respondent EPA is a governmental entity for which a corporate disclosure 

statement is not required.

So certified this 30th day of January, 2012, by

/s/ Perry M. Rosen

Perry M. Rosen

Counsel for Respondents

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TABLE OF CONTENTS

JURISDICTIONAL STATEMENT .....................................................................1

STATEMENT OF ISSUES ..................................................................................4

STATUTES AND REGULATIONS....................................................................6

STATEMENT OF THE CASE.............................................................................6

STATEMENT OF FACTS ................................................................................ 11

I. Statutory Background .............................................................................. 11

II. Regulatory Background........................................................................... 14

A. The 1993 Regulation: Governing the 1994-2002 Regulatory

Period............................................................................................. 14

B. The 2003 Regulation: Governing the 2003-2009 Regulatory

Period............................................................................................. 15

III. Intervenors’ Inter-Pollutant Transfers and the Rulemaking for the 

2010- 2014 Regulatory Period................................................................. 16

IV. This Court’s Decision in Arkema v. EPA ................................................ 20

V. EPA’s Actions Following the Decision in Arkema v. EPA..................... 24

SUMMARY OF ARGUMENT......................................................................... 27

ARGUMENT..................................................................................................... 30

I. STANDARD OF REVIEW..................................................................... 30

II. THE COURT LACKS JURISDICTION TO ADDRESS 

PETITIONERS’ CLAIMS ...................................................................... 31

A. Petitioners Lack Standing.............................................................. 31

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B. The 2008 Approvals Are Not Final Orders Subject to Challenge

by Non-Parties to the Approvals................................................... 42

III. PETITIONERS’ SUBSTANTIVE ARGUMENTS ARE FLAWED ..... 44

A. The 2008 Approvals Cannot be Struck Down as Violative

of the Clean Air Act Under Chevron Step One............................. 44

B. EPA Did Not Alter Past Interpretations Without Notice and

Comment ....................................................................................... 47

C. Petitioners Have No Basis to Challenge the Record Supporting

the 2008 Approvals ....................................................................... 51

IV. PETITIONERS WERE NOT DENIED DUE PROCESS....................... 54

CONCLUSION.................................................................................................. 59

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TABLE OF AUTHORITIES

CASES:

Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S. 461 (2004)........................30

Allen v. Wright, 468 U.S. 737 (1984) .....................................................................37

Am. Family Life Assurance Co. v. FCC, 129 F.3d 625 (D.C. Cir. 1997)...............36

Am. Forest & Paper Ass'n, Inc. v. EPA, 294 F.3d 113 (D.C. Cir. 2002)................30

Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40 (1999).......................................54

*Arkema, Inc. v. EPA, 618 F.3d 1(D.C. Cir. 2010) . 2, 8-9, 18, 20-24, 45-46, 52, 55

Bennett v. Spear, 520 U.S. 154 (1997)....................................................................42

Brazos Elec. Power Coop., Inc. v. FERC, 208 Fed. Appx. 2 (D.C. Cir. 2006).......36

Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984) .....................................46

Crowley Caribbean Transp., Inc. v. Pena, 37 F.3d 671 (D.C. Cir. 1994) ...............36

*DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006)............................. 31, 32, 35

DRG Funding Corp. v. Sec’y of Housing & Urban Dev.,

76 F.3d 1212 (D.C. Cir. 1996) .............................................................................43

FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800 (2009)................................31

General Electric Co. v. Jackson, 610 F.3d 110 (D.C. Cir. 2010) ..................... 54, 55

General Motors Corp. v. EPA, 363 F.3d 442 (D.C. Cir. 2004)...............................42

Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979) ............................31

*Authorities upon which we chiefly rely are marked with asterisks.

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Greenbriar Village, LLC v. Mountain Brook, City, 

345 F.3d 1258 (11th Cir. 2003)............................................................................56

Harper v. Virginia Dep’t of Taxation, 509 U.S. 86 (1993) .....................................39

Honeywell Int'l, Inc. v. EPA, 374 F.3d 1363 (D.C. Cir. 2004), 

withdrawn in part, 393 F.3d 1315 (D.C. Cir. 2005).............................................12

James B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991).............................40

Kentucky Dept. of Corrections v. Thompson, 490 U.S. 454 (1989).......................56

*Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).................................... 32, 37

Mathews v. Eldridge, 424 U.S. 319 (1976) ............................................................54

Meijer, Inc. v. Biovail Corp., 533 F.3d 857 (D.C. Cir. 2008).................................53

Michigan Gambling Opposition v. Kempthorne, 

525 F.3d 23 (D.C. Cir. 2008) ...............................................................................53

Mossville Envtl. Action Now v. EPA, 370 F.3d 1232 (D.C. Cir. 2004).................51

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 

463 U.S. 29 (1983) ...............................................................................................31

Natale v. Town of Ridgefield, 170 F.3d 258 (2d Cir. 1999) ...................................56

Nat'l Ass'n of Clean Air Agencies v. EPA, 489 F.3d 1221 (D.C. Cir. 2007)..........51

Nat'l Ass'n of Home Builders v. Norton, 415 F.3d 8 (D.C. Cir. 2005) ...................43

Nat'l Ass'n of Home Builders v. EPA, No. 10-5341, 

2011 WL 6118589 (D.C. Cir. Dec. 9, 2011)........................................................32

NRDC v. EPA, 464 F.3d 1 (D.C. Cir. 2006)...........................................................11

NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009).....................................................37

P&V Enters. v. Corps of Eng'rs, 516 F.3d 1021 (D.C. Cir. 2008) ..........................42

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Radiofone, Inc. v. FCC, 759 F.2d 936 (D.C. Cir. 1985) .........................................36

Shell Oil Co. v. FERC, 47 F.3d 1186 (D.C. Cir. 1995)...........................................36

Summers v. Earth Island Inst., 555 U.S. 488 (2009)...............................................37

Texas v. United States, 523 U.S. 296 (1998)...........................................................40

Town of Castle Rock v. Gonzales, 545 U.S. 748 (2005).................................. 55, 56

United States v. Mead Corp., 533 U.S. 218 (2001).................................................31

Village of Bensenville v. FAA, 457 F.3d 52 (D.C. Cir. 2006)................................42

Whitman v. Am. Trucking Ass'ns, 531 U.S. 457 (2001).........................................39

STATUTES:

Administrative Procedure Act,

5 U.S.C. §706...........................................................................................................31

Clean Air Act, 42 U.S.C. §§7401-7671q:

Title VI, 42 U.S.C. §§7671-7671q.......................................................................6, 12

Section 307(b), 42 U.S.C. §7607(b) ............................................................. 4, 42, 57

*Section 307(b)(1), 42 U.S.C. §7607(b)(1).......................................... 27, 37, 38, 41

Section 307(d)(1), 42 U.S.C. §7607(d)(1)...............................................................30

Section 307(d)(2)-(6), 42 U.S.C. §7607(d)(2)-(6)...................................................52

Section 307(d)(9)(D), 42 U.S.C. §7607(d)(9)(D)....................................................30

Section 601(6), (11), 42 U.S.C. §7671(6), (11).........................................................6

*Section 607, 42 U.S.C. §7671f ....................................................................... 12, 46

Section 607(b), 42 U.S.C. §7671f(b).......................................................... 13, 14, 44

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Section 607(c), 42 U.S.C. §7671f(c)........................................................................13

REGULATIONS:

40 C.F.R. §82.3 ........................................................................................................55

*40 C.F.R. §82.23(b)(4).............................................................................. 17, 53, 57

40 C.F.R. §82.23(b)(4)(iii).......................................................................................54

40 C.F.R. §82.23(d) .................................................................................................48

FEDERAL REGISTERS:

58 Fed. Reg. 65,018, 65,025, 65,026 (Dec. 10, 1993).............................................14

64 Fed. Reg. 16,373, 16,378 (Apr. 5, 1999)............................................................48

65 Fed. Reg. 42,653, 42,655 (July 11, 2000)...........................................................11

66 Fed. Reg. 38,064, 38,068-69 (July 20, 2001) .....................................................48

68 Fed. Reg. 2820 (Jan. 21, 2003)...........................................................................12

68 Fed. Reg. at 2821 ................................................................................................16

68 Fed. Reg. at 2822 ................................................................................................12

68 Fed. Reg. at 2824 ................................................................................................15

68 Fed. Reg. at 2827 ................................................................................................15

68 Fed. Reg. at 2831-33...........................................................................................15

68 Fed. Reg. at 2832 ................................................................................................15

68 Fed. Reg. at 2833 ................................................................................................16

68 Fed. Reg. at 2835 ................................................................................... 16, 48, 49

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68 Fed. Reg. at 2848 ................................................................................................57

68 Fed. Reg. at 2849 ................................................................................................15

73 Fed. Reg. 78,680 (Dec. 23, 2008) ("Proposed Rule") ............................. 7, 17, 41

73 Fed. Reg. at 78,686 ...............................................................................................7

73 Fed. Reg. at 78,687 .............................................................................................18

74 Fed. Reg. 66,412 (Dec. 15, 2009) ..................................................................2, 19

74 Fed. Reg. at 66,414 . ...........................................................................................11

74 Fed. Reg. at 66,415 . ...........................................................................................15

74 Fed. Reg. at 66,419-22 .........................................................................................8

74 Fed. Reg. at 66,420. ............................................................................................50

74 Fed. Reg. at 66,420-21........................................................................................20

74 Fed. Reg. at 66,420-22........................................................................................22

74 Fed. Reg. at 66,421-22................................................................................. 20, 45

74 Fed. Reg. at 66,424 . ...........................................................................................17

74 Fed. Reg. at 66,446-47........................................................................................19

76 Fed. Reg. 47,451 (Aug. 5, 2011") ("Interim Final Rule")..............................4, 26

76 Fed. Reg. at 47,455 .............................................................................................41

76 Fed. Reg. at 47,462, 47,467-68...........................................................................33

76 Fed. Reg. at 47,464 .............................................................................................26

76 Fed. Reg. at 47,467 .............................................................................................26

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GLOSSARY

General Terms

CAA Clean Air Act, 42 U.S.C. §§ 7401-7671q

EPA United States Environmental Protection Agency

HCFCs Hydrochlorofluorocarbons 

JA Joint Appendix

Protocol Montreal Protocol on Substances that Deplete the Ozone 

Layer 

Pertinent Regulations

1993 Regulation 58 Fed. Reg. 65,018 (Dec. 10, 1993)

2003 Regulation 68 Fed. Reg. 2820, 2821 (Jan. 21, 2003)

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

2010 Regulation 74 Fed. Reg. 66,412 (Dec. 15, 2009)

Interim Final Rule 76 Fed. Reg. 47,451 (Aug. 5, 2011) 

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JURISDICTIONAL STATEMENT

Under a program implementing the Montreal Protocol on Substances that 

Deplete the Ozone Layer (the “Protocol”) through Title VI of the Clean Air Act 

(“CAA”), the Environmental Protection Agency (“EPA”) is required to allocate 

among a small group of suppliers a limited and ever-diminishing number of 

allowances to produce and consume ozone-depleting substances known as 

hydrochlorofluorocarbons (“HCFCs”), which EPA must almost entirely phase out 

(99.5%) by 2020. In accordance with the terms of the Protocol, EPA has been 

phasing out HCFCs by reducing suppliers’ allowances through a series of 

regulatory step-down periods.

During the 2003-2009 regulatory period, the Intervenors in this case, 

Arkema Inc. (“Arkema”), Solvay Fluorides, LLC, and Solvay Solexis, Inc. 

(“Solvay”) (collectively “Intervenors”), secured EPA’s approval of four 2008 

inter-pollutant transfers of HCFC baseline allowances that each company 

conducted through intra-company transfers (the “2008 Approvals”). Through such 

transfers, a company could essentially increase its ability to produce a higherdemand HCFC during the regulatory period by converting its own baseline in a 

less desirable HCFC into that of a more marketable HCFC, since production 

allowances were based on an EPA-designated percentage of each company’s 

baseline in a given HCFC. 

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At the time of the 2008 Approvals, EPA did not intend for such interpollutant transfers to survive beyond the existing regulatory period, which 

terminated at the end of 2009. Nevertheless, in reviewing EPA’s new regulation 

for the 2010-2014 regulatory period (the “2010 Regulation”),

1

Petitioners in the present case, Honeywell International, Inc. (“Honeywell”) 

and E.I. DuPont de Nemours (“DuPont”), competitors of the Intervenors who also 

are governed by the HCFC allowance program, do not challenge the 2008 

Approvals to the extent they allowed for the transfer of Intervenors’ baseline

allowances from one HCFC to another for 2008 or 2009, i.e., within the prior 

regulatory period. Instead, Petitioners challenge the 2008 Approvals only to the 

extent that they allow those transferred baseline allowances to be carried forward 

this Court held that 

although EPA was free to stop recognizing inter-pollutant baseline transfers 

prospectively, Intervenors in the present case (who were petitioners in the prior 

case) had gained vested rights in their 2008 transferred baselines that could not be 

extinguished by EPA when it promulgated a new regulation designed to cover the 

2010-2014 regulatory period, assuming the Agency continued to use the same 

baseline system for allocating HCFC allowances. Arkema, Inc. v. EPA

(“Arkema”), 618 F.3d 1 (D.C. Cir. 2010).

 1

 “Protection of Stratospheric Ozone: Adjustments to the Allowance System for 

Controlling HCFC Production, Import, and Export,” 74 Fed. Reg. 66,412 (Dec. 15, 

2009), which became effective on January 1, 2010.

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into the new 2010-2014 regulatory period. In other words, Petitioners challenge 

this Court’s prior holding in Arkema, not as a direct challenge to the express ruling 

in that case (that Intervenors’ inter-pollutant baseline transfers must be carried 

forward into the 2010-2014 regulatory period), but rather through a collateral 

attack on the original 2008 Approvals.

 Although EPA generally agrees with Petitioners’ substantive position that 

inter-pollutant transfers should not be carried forward into a new regulatory stepdown period, the Court is without jurisdiction to address Petitioners’ specific 

claims in this case. Petitioners lack standing to challenge the 2008 Approvals 

because, quite simply, they were neither a party to, nor were they injured by, those 

Approvals. In fact, those Approvals were not even final agency actions as they 

relate to Petitioners. Whatever lasting effect it may have had on Arkema and 

Solvay’s right to produce HCFCs in the 2010-2014 regulatory period, EPA’s 

action of approving Intervenors’ inter-pollutant transfers in 2008 did nothing to 

alter the HCFC production, consumption or baseline allowances of the Petitioners. 

Indeed, not even the Arkema decision reshuffled HCFC allowances at the expense 

of Petitioners. 

The administrative action that gave Petitioners fewer allowances relative to 

the number of allowances provided to them under the 2010 Regulation (the 

specific injury asserted by Petitioners here), was the Interim Final Rule that EPA 

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issued in 2011 in response to the Court’s decision in Arkema.

2

STATEMENT OF THE ISSUES

 Petitioners might 

have had standing to challenge that rule, and Petitioners in fact filed a challenge to 

that Rule. But, having filed that action two days too late, and then dismissing it 

voluntarily, any such challenge to the Interim Final Rule is now barred under the 

applicable 60-day statute of limitations. See 42 U.S.C. §7607(b). Petitioners may 

not now use notions of ripening of stale claims or “after-arising” events such as the 

Arkema decision, to provide a jurisdictional basis to challenge an agency action 

(the 2008 Approvals) that did not actually cause Petitioners’ alleged injury. 

1. Does the Court have jurisdiction over Petitioners’ claims?

A. Do the Petitioners have standing to challenge the approval by 

EPA of inter-pollutant transfers of baseline allowances for ozone-depleting 

substances conducted by the Intervenors in 2008, when Petitioners were neither a 

party to those approvals nor did they suffer any direct injury as a result of those 

approvals, and where Petitioners’ own share of allowances was reduced through a 

separate rulemaking which Petitioners cannot now challenge?

B. Are the 2008 Approvals final agency actions with regard to the 

claims being made by Petitioners?

 2

 “Protection of Stratospheric Ozone: Adjustments to the Allowance System for 

Controlling HCFC Production, Import and Export,” 76 Fed. Reg. 47,451 (Aug. 5, 

2011) (“Interim Final Rule”)

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2. Does Title VI of the CAA declare on its face that inter-pollutant 

baseline transfers may not be carried forward to a new regulatory period?

3. Did EPA alter any policy in issuing the 2008 Approvals, when it has 

consistently taken the position that it is not required to carry forward interpollutant baseline transfers into a new regulatory period and only even arguably 

took actions inconsistent with that view in its 2011 Interim Final Rule issued in 

response to this Court’s holding in Arkema?

4. Does the record fail to adequately support EPA’s approval of 

Intervenors’ 2008 inter-pollutant baseline transfers because EPA did not assess 

whether Intervenors had adequate allowances to transfer in future years (2010-

2014), when EPA was not approving future transfers of allowances and when there 

did not even exist a regulation governing allowances in future years?

5. Were Petitioners denied due process or otherwise deprived of any 

right to challenge the lasting nature of EPA’s approval of the 2008 inter-pollutant 

baseline transfers of Intervenors, where EPA expressly called for comment on this 

issue, Petitioners provided comments on this issue, and Petitioners had the ability 

to challenge the rule that actually reduced their own share of allowances as a result 

of the challenged inter-pollutant transfers, filed such a challenge beyond the 

applicable statute of limitations period, and then voluntarily withdrew that 

challenge?

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STATUTES AND REGULATIONS

Pertinent statutes and regulations are contained in the statutory addendum to 

Petitioners’ brief. 

STATEMENT OF THE CASE

Pursuant to Title VI of the CAA, 42 U.S.C. §§7671-7671q, EPA has 

implemented the required phase-out of ozone-depleting substances primarily 

through the grant of allowances to those companies that historically produced and 

“consumed” these substances.3

During the prior regulatory period of 2003-2009, companies were permitted 

to conduct both inter-company and inter-pollutant transfers of HCFC allowances. 

“Inter-company” transfers permit one company to transfer (sell) allowances for a 

single HCFC to another company. In contrast, “inter-pollutant” transfers generally 

permit a single company to convert its own allowances allocated for one HCFC 

 Allowances, which act as a cap on production, 

permit companies to produce a designated percentage (established by EPA for each 

regulatory period) of each individual company’s baseline production of specific 

ozone-depleting substances. The baselines for the ozone-depleting substances at 

issue in this case, HCFCs, were established by EPA in 2003 and are measured by 

each company’s maximum historical production of HCFCs. 

 3 “Production” refers to the manufacture of a covered substance. “Consumption” 

means production, plus imports and minus exports. 42 U.S.C. §7671(6),(11). For 

ease of reference, EPA describes the program in the context of production 

allowances and differentiates between the two types of allowances where relevant.

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into allowances for a different HCFC that is in greater demand. In the 2008 

Approvals, Arkema and Solvay availed themselves of the regulations governing 

the 2003-2009 regulatory period to conduct inter-pollutant transfers to exchange 

baseline allowances they possessed for the low-demand HCFC-142b (used 

primarily as a foam blowing agent) for baseline allowances for the high-demand

HCFC-22 (used in air-conditioning and refrigeration equipment). 

Under this 2003-2009 regulatory regime, transfers of allowances generally 

occurred within a single control period (i.e., a calendar year), but companies could, 

under certain circumstances, trade baseline allowances in a manner that would 

effectively increase (for the transferee) and decrease (for the transferor) their 

baseline apportionment of allowances for that pollutant for the remainder of the 

regulatory period. Transfers of baseline allowances were, however, designed to be 

limited to inter-company, single-pollutant transfers, to ensure that the overall 

baseline associated with each chemical was not altered. To the extent interpollutant baseline transfers occurred, they had no defined status under the 

regulations past the applicable regulatory period, which expired on December 31, 

2009. 73 Fed. Reg. 78,680, 78,686 (Dec. 23, 2008).

In proposing a new regulation to govern HCFC allowances for the next stepdown period of 2010-2014 (the “2010 Regulation”), EPA expressly addressed the 

issue of treatment of inter-pollutant transfers such as the 2008 Approvals given to 

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the Intervenors. In the preamble to its proposed regulation, EPA called for 

comments on whether inter-pollutant transfers of baseline allowances approved 

during the 2003-2009 regulatory period should be reflected in companies’ baseline 

allowances beginning in 2010. After receiving comments on this issue – including 

comments from both Petitioners – EPA determined that it was both imprudent and

inconsistent with the underlying statute to carry forward into this new regulatory 

period transfers of baseline allowances for different HCFCs that an individual 

company had conducted with itself (i.e., intra-company, inter-pollutant baseline 

transfers) during the regulatory period of 2003-2009. 74 Fed. Reg. at 66,419-422.

The Intervenors in this case, Arkema and Solvay, challenged EPA’s refusal 

to recognize their prior inter-pollutant baseline transfers from HCFC-142b to 

HCFC-22 in setting the baseline allowances for those pollutants for 2010-2014. In 

that case, Arkema, Inc. v. EPA, 618 F.3d 1 (D.C. Cir. 2010), EPA took the same 

core position that Petitioners take here: that such inter-pollutant transfers should 

not be carried forward into the new regulatory period. Dkt. 1237311 (EPA’s brief 

in Arkema). The Court in Arkema did not disagree with EPA’s view that: (a) the 

underlying statute does not support treating inter-pollutant baseline transfers as 

perpetual; (b) it was not good policy to carry forward such transfers into a new 

regulatory period; and (c) EPA had fully articulated its position and views on this 

issue in its rulemaking. Nevertheless, the Court held that Arkema and Solvay had 

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gained vested rights in their 2008 transferred baselines that must be reflected in 

any new rulemaking for the 2010-2014 regulatory period, at least to the extent the 

new rulemaking incorporated the same historic baseline concept that EPA had 

previously used. 618 F.3d at 8-10. The Court therefore ordered the 2010 

Regulation vacated “insofar as it operates retroactively” to deprive Arkema and 

Solvay of their transferred baseline allowances for HCFC-22 and remanded the 

case for resolution consistent with the Court’s opinion. Id. at 10.

In the present action, Petitioners challenge the 2008 Approvals in which 

EPA allowed Arkema and Solvay to conduct the inter-pollutant transfers of 

allowances from HCFC-142b to HCFC-22. Petitioners assert that, in light of the 

Court’s holding in Arkema that the 2008 Approvals created vested rights in 

Arkema and Solvay to have their transferred baselines carried forward into future 

regulatory periods, the 2008 Approvals were improper because neither the statute, 

EPA’s regulations, nor EPA’s actions, support carrying forward inter-pollutant 

baseline transfers into an entirely new regulatory period. 

For the most part, EPA agrees with Petitioners’ central argument that interpollutant baseline transfers approved during one regulatory period should not be 

carried forward to a new regulatory period. This argument, however, was

proffered by EPA and expressly rejected by this Court in Arkema, at least with 

regard to the baseline transfers that were the subject of the 2008 Approvals that are 

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challenged in this case. While Petitioners have attempted to repackage the same 

argument in slightly different wrapping, e.g., asserting that carrying forward 

baseline allowances violates the CAA under Chevron step I, not under Chevron

step II as EPA argued in Arkema, that central argument already has been rejected 

by this Court. 

Petitioners do accurately state that EPA did not provide notice of the 2008 

Approvals at the time they occurred, because EPA’s regulations provided for no 

such notice. Nor did EPA indicate that it was required to carry the baseline 

transfers forward to a new regulatory period. Indeed, both Petitioners and EPA

became aware of this obligation only as a result of the Court’s decision in Arkema. 

This sequence of events does not, however, mean that Petitioners were deprived of 

due process because they never had an opportunity to comment on or challenge the 

now-perpetual effect of the 2008 Approvals. To the contrary, Petitioners were

given the opportunity to comment – and did comment in detail – on the potential 

carry-forward of baseline inter-pollutant transfers, in comments they submitted on 

the proposed 2010 Regulation. Petitioners had the further opportunity to comment 

on and challenge the perpetual treatment of transferred baseline allowances in the 

Arkema litigation, which they again did (but only after the panel’s decision in that 

case, during the en banc petitioning process). Finally, Petitioners had the 

opportunity to challenge the perpetual treatment of transferred baseline allowances 

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– and, even more importantly, the effect of such treatment on their own allowances 

– by commenting on EPA’s Interim Final Rule (which Petitioners again took 

advantage of) and by challenging that Rule in this Court (which they did in an 

untimely manner and then voluntarily dismissed). Having either afforded 

themselves of these opportunities or failed to properly do so in a timely manner, 

Petitioners may not now pursue yet one more challenge to the same alleged 

injurious action by reaching back to challenge the original 2008 Approvals.

STATEMENT OF FACTS

I. Statutory Background

In the 1970s, scientists determined that certain man-made chemicals that 

were used as refrigerants and for other industrial purposes, such as HCFCs, were 

destroying the stratospheric ozone layer, which absorbs ultraviolet radiation and 

thereby protects us from skin cancer and a host of other ailments. NRDC v. EPA, 

464 F.3d 1, 3 (D.C. Cir. 2006). In 1987, the United States signed the Montreal 

Protocol, which sought “to limit or eliminate the production and/or consumption of 

ozone-depleting substances in a stepwise fashion over time.” 65 Fed. Reg. 42,653, 

42,655 (July 11, 2000). Under the terms of the Protocol and amendments thereto, 

the United States was required to phase out 35% of its historic HCFC production 

(measured by 1989 levels) by 2004, 75% by 2010, 90% by 2015, 99.5% by 2020, 

and 100% by 2030. 74 Fed. Reg. 66,412, 66,414 (Dec. 15, 2009). 

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In 1990, Congress enacted Title VI (Sections 601-618) of the CAA, 42 

U.S.C. §§7671-7671q, to protect the stratospheric ozone layer consistent with the 

Protocol. Honeywell Int’l, Inc. v. EPA, 374 F.3d 1363, 1364 (D.C. Cir. 2004), 

withdrawn in part, 393 F.3d 1315 (D.C. Cir. 2005). To effectuate the phase-out of 

these substances, Congress directed EPA to promulgate rules that would create and 

manage allowances, which affirmatively limit the amount of HCFCs a 

manufacturer/importer may produce and consume. 42 U.S.C. §7671f. This 

provision does not direct EPA to use any specific system for determining: (a) the 

underlying nature of allowances (e.g., whether they are based on specific 

chemicals or the overall ozone-depletion potential of a basket of chemicals); (b) 

the method of measuring the allowances (e.g., whether the allowances would be 

based on gross tonnage or a percentage of a defined baseline); or (c) the method of 

allocating the allowances (e.g., whether they will be auctioned to the highest 

bidder, allocated based on historical production, or adjusted to reflect changes in 

the marketplace). All of these (and other) elements of the program were left to 

EPA’s discretion.

Pursuant to the broad authority it was granted, EPA promulgated regulations 

that, inter alia, allocated allowances on a chemical-by-chemical basis, rather than 

based on the ozone-depleting potential of a basket of chemicals, the system used 

by some other countries subject to the Protocol. 68 Fed. Reg. 2820, 2822 (Jan. 21, 

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2003). Under the “basket” concept, manufacturers can continue to produce all 

types of HCFCs so long as the aggregate ozone-depletion potential of the entire 

basket of HCFCs does not exceed the overall cap set by the administering agency. 

In contrast, the chemical-by-chemical approach, which EPA found considerably 

easier to administer for regulated entities, focuses on reaching the same overall cap 

(e.g., 90% reduction by 2015) by initially eliminating those HCFCs with the 

highest ozone-depletion potential, the so-called “worst-first” approach.

In addition to authorizing EPA to allocate allowances, CAA section 607 

specifically provides for two types of allowance transfers. Subsection (c), entitled 

“Trades with other persons,” permits a company to transfer its allowances for a 

pollutant to another company (“inter-company” transfers). 42 U.S.C. §7671f(c). 

For instance, a company that has excess allowances for the production of HCFC-22 

may transfer (sell) some of those allowances to another company. When such a 

single-pollutant transfer occurs between companies, the ultimate number of 

allowances for a particular HCFC to be potentially utilized by all U.S. producers 

and importers does not increase, since those allowances are merely shifted from 

one entity to another.

Subsection (b) of CAA §607 permits “inter-pollutant” transfers. 42 U.S.C. 

§7671f(b). Under this provision, a company that had, for example, expanded its 

market for HCFC-22, could convert its own unused baseline allowances for a lessUSCA Case #10-1347 Document #1355558 Filed: 01/30/2012 Page 23 of 71
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demanded chemical, such as HCFC-142b, to allowances for the high-demand 

HCFC-22. If 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. Unsurprisingly then, §607(b) only permits “a production 

allowance for a substance for any year to be transferred for a production allowance 

for another substance for the same year . . . .” 42 U.S.C. §7671f(b) (emphasis 

added). No similar “same-year” restriction exists for inter-company, singlepollutant transfers. As explained above, this is understandable since such singlepollutant transfers do not result in an increase in the production of the transferred 

HCFC, as occurs with an inter-pollutant transfer.

II. Regulatory Background

A. The 1993 Regulation: Governing the 1994-2002 Regulatory Period

In 1993 EPA established its chemical-by-chemical phase-out approach for 

HCFCs. 58 Fed. Reg. 65,018, 65,025 (Dec. 10, 1993) (the “1993 Regulation”). 

As part of this approach, EPA restricted the production of particular HCFCs to 

specified uses at the beginning of certain regulatory step-down periods. Id. at 

65,026. For the two HCFCs at issue in this case, HCFC-22 and HCFC-142b, the 

1993 Regulation prohibited production in 2010 and thereafter for all domestic uses, 

with an exemption allowing production until 2020 only for the servicing of airconditioning and refrigeration equipment manufactured before January 1, 2010 

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(the “after-market”). 68 Fed. Reg. at 2827. HCFC-22 is used primarily as a 

refrigerant and thus will be in demand as long as there is a need to replace 

refrigerant in older equipment. HCFC-142b, on the other hand, is used primarily 

as a foam-blowing agent and there is virtually no demand for its use for postconstruction servicing, i.e., after 2009.

B. The 2003 Regulation: Governing the 2003-2009 Regulatory Period

In 2003 EPA set the baselines for the production and consumption of three 

HCFCs (HCFC-141b, HCFC-22, and HCFC-142b) and established the allowances 

for each company that would apply through December 31, 2009. 68 Fed. Reg. at 

2831-33 (the “2003 Regulation”). EPA first determined that each company’s 

baseline would be measured by the maximum HCFCs produced and consumed by 

the company in any year between 1994 and 1997. 68 Fed. Reg. at 2824, 2832. 

EPA next determined that each company could produce 100% of its baseline 

of HCFC-22 and HCFC-142b in 2003-2009. Id. at 2849. This is because, using its 

“worst-first” approach, EPA achieved the initial phase-out levels of HCFCs 

required by the Protocol (35% reduction) through a total ban of HCFC-141b, 

which had a higher ozone depletion potential than either HCFC-22 or HCFC-142b. 

74 Fed. Reg. at 66,415. Identifying the two chemicals at issue in this case as next 

on the “worst-first” list, EPA expressly warned in the 2003 Regulation that prior to 

2010 it would issue a new regulation to implement the 2010-2014 step-down 

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reductions for HCFC-22 and HCFC-142b, consistent with the obligation of the 

United States under the Protocol to achieve a 65% reduction (later changed to 

75%) of HCFCs from 1989 levels. 68 Fed. Reg. at 2821.

The 2003 Regulation also spoke directly to the transfer of allowances. 

EPA explained that while companies might choose to “conduct [] inter-pollutant 

transfers during the short term . . . , the opportunities for inter-pollutant transfers 

will decrease over time.” 68 Fed. Reg. at 2833 (emphasis added). The 2003 

Regulation also included a specific section labeled “Permanent Transfers of 

Baseline Allowances,” in which EPA expressly defined a “permanent” transfer of 

baseline allowances as one that occurs, not through intra-company, inter-pollutant 

transfers, but rather as inter-company transfers: “The permanent transfer of 

baseline allowances is a lasting shift of some quantity of a company’s allowances

to another company.” Id. at 2835 (emphasis added). Thus, permanent baseline 

transfers did not include intra-company, inter-pollutant baseline transfers such as 

those that were the subject of the 2008 Approvals.

III. Intervenors’ Inter-Pollutant Transfers and the Rulemaking

For the 2010-2014 Regulatory Period

EPA’s actions challenged in this Petition (the 2008 Approvals) are four 

“non-objection notices” sent by EPA to Intervenors covering inter-pollutant 

transfers that occurred within Arkema and within Solvay between February 15 and 

April 18, 2008. Pet. Br. 2-3. Each of these non-objection notices was sent only to 

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the requesting party (Arkema and Solvay). That is because EPA’s regulations 

provide only for notice to the transfer applicant. 40 C.F.R. §82.23(b)(4). 

Whatever inter-company or inter-pollutant transfers may have occurred 

between 2003 and 2009, all allowances of all entities expired on December 31, 

2009. As EPA explained in 2008, unless EPA issued a new regulation establishing 

new allowances, as of January 1, 2010, no company would be permitted to produce 

or consume any of the HCFCs at issue. See, e.g., JA __[80] (“EPA noted that until 

a [new] rule is finalized, there are no allowances after 2009 for HCFC-22 or 

HCFC-142b production or import.”); JA __[63] (“No allowances exist after 2009 

without [a new] rulemaking, [which] means no HCFC-22 or HCFC-142b 

production or import unless the rule is complete.”). 

Because of the pending expiration of all allowances on December 31, 2009, 

EPA initiated early steps to evaluate how to structure and operate an allowance 

system in the next regulatory period, 74 Fed. Reg. at 66,424, and to analyze its 

“regulatory options for allocating HCFC allowances after 2009.” JA __[15-23]. 

Approximately eight months after the last approval of Intervenors’ transfers, on 

December 23, 2008, EPA issued its initial proposal for allocating allowances for 

the 2010-2014 regulatory period. 73 Fed. Reg. 78,680 (“Proposed Rule”). As 

explained in that Proposed Rule, in the next regulatory period EPA was not 

wedded to using an allowance system that relied on each company’s historical 

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production and consumption baselines. EPA stated, for instance, that it was 

considering alternatives such as an auction system or a system based on recent 

sales and use data, both of which would have abandoned the historic production 

and consumption baselines as bases for allocating allowances. Id. at 78,687. 

In proposing as one alternative the possible continued use of the baselines it 

had used for the 2003-2009 regulatory period, EPA explained that although the 

Proposed Rule contained a table that reflected adjustments resulting from past 

inter-company and inter-pollutant transfers, EPA was still considering whether to 

allocate allowances “with or without considering any permanent baseline transfers 

and/or inter-pollutant transfers that resulted in a different amount of production or 

consumption for a specific HCFC.” Id. at 78,687/2 (emphasis added). Thus, 

recognizing that it was not required by law to include inter-pollutant baseline 

transfers in baselines for the new regulatory period, EPA publicly announced that it 

was considering whether it was good policy to recognize those past transfers in 

setting baselines for the new regulatory period, assuming that EPA chose to 

continue to apply an allocation system that utilized historic production and 

consumption baselines. See Arkema, 618 F.3d at 11 (Randolph, J., dissenting). 

Both Petitioners in this case commented on the Proposed Rule, focusing 

specifically on the possibility that EPA might carry forward baseline allowances 

that were effectuated through past inter-pollutant transfers. JA __[163-193]. 

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Petitioners asserted that it was both bad public policy and legally insupportable to 

carry forward such transfers into the new regulatory period. Id. 

On December 15, 2009, EPA issued its final rule governing the 2010-2014 

regulatory period. 74 Fed. Reg. 66,412. Under this 2010 Regulation, Arkema and 

Solvay did not receive credit for their past inter-pollutant baseline transfers. 

Instead, each was granted the identical baseline it received in the 2003 Regulation, 

which was based on each company’s highest consumption and production years 

and on the same metric applied to all other regulated companies. Id. at 66,446-47. 

In rejecting the option to carry forward past inter-pollutant baseline transfers to the 

new regulatory period, EPA explained that recognition of such baseline transfers 

for the new regulatory period could likely: (a) create incentives for manipulation of 

the allocation system; (b) effectively transform EPA’s chemical-by-chemical, 

“worst-first” phase-out system into one based instead on ozone depletion potential 

aggregated over a basket of chemicals, the system EPA rejected in 2003 and again 

as one of the alternatives in the 2010 Regulation; (c) have an outsized impact on 

small companies involved in the production of HCFCs and interfere with market 

expectations; (d) adversely impact not only manufacturers and importers of HCFCs 

but also distributors and customers; (e) encourage disruption in future control 

periods and reduce market flexibility; and (f) potentially require 19 of the 21 

companies originally granted allowances in 2003 to relinquish nearly 16% of their 

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allowances to compensate for Arkema and Solvay being awarded baselines 38% 

and 912%, respectively, above their original baselines, an action that could 

significantly impact the market for HCFCs. 74 Fed. Reg. at 66,420-21; Arkema, 

618 F.3d at 5-6, 8-9. EPA further concluded that the language of Title VI of the 

CAA did not support giving long-term effect to inter-pollutant baseline transfers. 

74 Fed. Reg. at 66,421-422; Arkema, 618 F.3d at 5-6. 

IV. This Court’s Decision in Arkema v. EPA

In Arkema, Arkema and Solvay challenged the 2010 Regulation, asserting 

that they were entitled to baselines of HCFC-22 for the 2010-2014 regulatory 

period larger than their original baselines because of the inter-pollutant transfers 

that EPA approved in 2008. The Court in Arkema did not find either EPA’s policy 

reasoning or its conclusion that the CAA did not support the carry-forward of interpollutant baseline transfers between regulatory periods, to be unreasonable or 

inconsistent with the provisions of the CAA. Nevertheless, in a 2-1 decision, the 

panel majority concluded that EPA’s non-objection to the 2008 inter-pollutant 

transfers by Arkema and Solvay had created “vested rights” in permanent interpollutant baseline transfers from HCFC-142b to HCFC-22 that must be reflected in 

any subsequent rule using the historical production and consumption baselines for 

the 2010-2014 regulatory period. 618 F.3d at 7-10. 

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According to the majority, it was not the statute or regulation that created 

these vested rights, but rather actions of EPA, specifically: (1) an EPA application

form that allowed suppliers to request “inter-pollutant baseline transfers,” although 

the form said nothing about those transfers being permanent; (2) EPA’s nonobjection notice regarding inter-pollutant baseline transfer requests made by 

Arkema and Solvay, although those notices contained no reference to the transfers

being permanent; (3) EPA’s subsequent recognition of those transfers in a letter, 

again without any statement implying those transfers were permanent; and (4) 

EPA’s statement, in a proposed rule, that it was considering allocations for the new 

regulatory period based on prior inter-pollutant transfers, a proposal that EPA 

affirmatively rejected in the final rule. 618 F.3d at 6-8. In fact, nothing on the 

approval forms or related documents that EPA issued stated that baseline transfers 

applied beyond the existing 2003-2009 regulatory period. As Judge Randolph 

summarized in his dissent, “EPA never stated, not once, that a company’s interpollutant transfers would permanently and forever alter the company’s baselines 

for these pollutants . . . . In fact, the regulations indicated otherwise.” 618 F.3d at 

10 (Randolph, J., dissenting). 

In the end, the majority in Arkema found that EPA had created vested rights 

for increased baselines in the 2010-2014 regulatory period, even though: (a) the 

regulation under which those transfers occurred expired in 2009 and there did not 

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exist any allowances for 2010-2014 until EPA announced its new allocation system 

in a new rulemaking; (b) as Judge Randolph pointed out, EPA’s regulations 

indicated that inter-pollutant transfers were not permanent; (c) EPA was not bound 

even to use a system incorporating baselines in establishing allowances for the 

2010-2014 regulatory period; (d) EPA’s interpretation that the CAA did not 

support treating inter-pollutant transfers as permanent was never deemed 

unreasonable, even by the panel majority; (e) there was no disagreement with 

EPA’s conclusion that carry-over of inter-pollutant baseline transfers from one 

regulatory period to a subsequent period would allow producers to manipulate the 

allowance allocation system and could destroy the carefully-crafted worst-first 

regulatory framework; (f) allowances are expressly identified in EPA’s regulations 

as “privileges,” not enforceable entitlements, and their allocation is fully subject to 

EPA’s discretion; and (g) one of the two transfer applicants, Solvay, expressly 

acknowledged that the inter-pollutant transfers for which it sought EPA’s approval

in 2008, “are for Baseline Year Allowances and, therefore, are being done on a 

permanent basis (i.e. multi-year transfer for 2008 and 2009),” i.e., Solvay clearly 

understood that “permanent basis” in the context of inter-pollutant transfers meant 

only through the end of the 2003-2009 regulatory period. 74 Fed. Reg. at 66,420-

22; JA __[3, 261-65]. 

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Judge Randolph, writing in dissent, explained, inter alia, that: (a) EPA never

took the position that inter-pollutant transfers were permanent; (b) there was no 

expectation, as evidenced by language in one of the Petitioners’ own transfer 

requests, that baseline transfers were required to be carried forward into a wholly 

new regulatory period; (c) in any event, EPA was free to change course in its 

treatment of inter-pollutant transfers and had good reason to do so in this case; (d) 

Petitioners held no vested rights in future baselines; and (e) the majority failed to 

grant EPA proper deference in interpreting its own regulations and application 

forms. 618 F.3d at 10-13. 

Noting that the Court’s decision in Arkema could have potentially troubling 

consequences not only on EPA’s statutory mandate to eliminate ozone-depleting 

substances in accordance with the schedule set forth in the Montreal Protocol and 

with Title VI of the CAA, but also on other “cap-and-trade” programs, EPA 

petitioned for rehearing and rehearing en banc. Honeywell and DuPont, having 

failed to seek to intervene in the Arkema case previously, on or about October 18, 

2010, filed motions to intervene out-of-time in EPA’s petitions for rehearing. Dkt. 

1272251, 1271929. Eight days later, Honeywell and DuPont filed their Petitions 

for Review in this case challenging the 2008 Approvals. 

Honeywell and DuPont’s motions to intervene out-of-time in the Arkema

case were denied on December 7, 2010. Dkt. 1281676. EPA’s petitions for 

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rehearing and rehearing en banc in Arkema were denied on January 21, 2011. Dkt.

1289392, 1289396. 

V. EPA’s Actions Following the Decision in Arkema v. EPA

While the decision in Arkema required EPA to address the retroactive effect 

of the 2010 Regulation on the baseline allowances of Arkema and Solvay, it did 

not directly affect the allowances – either baseline, production or consumption 

allowances – of any other company. EPA had yet to consider precisely how it 

would address the Court’s mandate, and its response could have been to eliminate

any retroactive effect of the 2010 Regulation on the Intervenors by completely 

eliminating the use of baselines and instead turning to a different allowance 

allocation system, such as those considered as alternatives in the proposed 2010 

Regulation, e.g., an auction system or basing allocation of allowances on recent 

sales data. Under either of these two systems, there would be no “reallocation” of 

allowances from Petitioners (and other suppliers) to Intervenors.

On January 21, 2011, EPA issued a “No Action Assurance” to Honeywell, 

DuPont, and all other suppliers of HCFCs. Pet. Br., Austin Decl., Ex. 1 (“First NoAction Letter”). In that Letter, EPA informed Petitioners that while EPA was 

seeking en banc review of Arkema in the D.C. Circuit, EPA would not pursue an 

enforcement action against an HCFC producer so long as Petitioners (and other 

suppliers) did not exceed the lesser of the allowances allocated to them in the 

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Proposed 2010 Rule or the final 2010 Regulation. Id. Both the Proposed and Final 

Rules maintained Petitioners’ baseline allowances at exactly the same level they 

had always been set. The difference was that because the Proposed Rule reflected 

the carry-forward of the inter-pollutant transfers by Arkema and Solvay, it 

assigned a higher HCFC-22 baseline to those companies. Because the Proposed 

rule then had a higher aggregate HCFC-22 baseline, the percentage of each 

company’s baseline allocated as production allowances was lower in the Proposed 

Rule than in the final 2010 Regulation, so as to keep the absolute number of 

production allowances (and hence the environmental impact) the same.

For example, Honeywell was allocated 42,638,049 baseline production 

allowances for HCFC-22 in both the Proposed and Final Rule. The Proposed Rule 

allowed Honeywell to produce 32% of those baseline allowances while the Final 

Rule allowed Honeywell to produce 38% of those same baseline allowances for 

2011. Under the First No-Action Letter, Honeywell could be subject to an 

enforcement action by EPA if it produced in excess of 32% of its baseline 

allowances (the lesser of the two). Thus, Honeywell was subject to an enforcement 

action if it exceeded the allowances granted it in the Proposed Rule, which

reflected the carry-forward of Intervenors’ inter-pollutant transfers.

On April 28, 2011, EPA issued another “No Action Assurance” to 

Honeywell, DuPont, and all other suppliers of HCFCs. Pet. Br., Austin Decl., Ex. 

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2 (“Second No-Action Letter”). Because by that time this Court had denied EPA’s 

petition for rehearing en banc, EPA eliminated the option of allowing Petitioners to 

produce the number of allowances permitted in the Final 2010 Regulation and 

instead made clear that it would only assure that a producer would not be subject to 

an enforcement action if it produced no more than the amount permitted under the 

Proposed Rule: 32% of the company’s baseline allowances of HCFC-22. 

On August 5, 2011, EPA issued its Interim Final Rule. In that Rule, EPA 

once again kept the baselines of Honeywell and DuPont constant, the same as they 

have always been since originally set in 2003. 76 Fed. Reg. at 47,464. Under the 

Interim Final Rule, Honeywell and DuPont could produce 32% of their baseline, 

the identical amount they were permitted to produce under both No-Action Letters. 

Id. at 47,467. While EPA issued the Rule as an interim final rule to address the 

urgent need for certainty regarding the allowance allocations for the 2011 control 

period, EPA made clear that it would consider written comments submitted 

through September 6, 2011. Id. at 47,451. Honeywell and DuPont both submitted

comments. JA __.

Honeywell and DuPont filed a Petition for Review challenging the Interim 

Final Rule. Honeywell International, Inc., et al. v. EPA, No. 11-1370 (D.C. Cir., 

Oct. 6, 2011) (Dkt. 1334076). For reasons unknown to EPA, that petition was filed 

two days too late. Before EPA had an opportunity to move to dismiss that Petition 

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as untimely, on October 26, 2011, Petitioners (with the assent of EPA) filed a 

Stipulation of Dismissal of that action. Dkt. 1337833. The Order dismissing that 

action was issued on Nov. 18, 2011. Dkt. 1342874. Because the Interim Final 

Rule could only have been challenged within sixty days of its issuance, which 

occurred on August 5, 2011, 42 U.S.C. §7607(b)(1), Petitioners’ challenge to the 

Interim Final Rule may not be resubmitted or otherwise resurrected. 

SUMMARY OF ARGUMENT

From the very outset of the HCFC allowance program EPA has worked 

assiduously to implement the mandate of the Montreal Protocol and Title VI of the 

CAA in a manner that is as equitable as possible to all suppliers of HCFCs. 

Accordingly, in defending this Petition for Review, EPA has no interest or intent to 

favor one set of suppliers over another. Instead, EPA responds to the Petition based 

on its paramount interest, which is to ensure that it is free to carry out its statutory 

duty to complete the phase-out of HCFCs in accordance with the step-down 

periods of the Protocol and the requirements of Title VI of the CAA, while at the 

same time ensuring, to the extent possible given the required reductions, that the 

marketplace as a whole has an adequate supply of HCFCs for after-market use.

It should come as no surprise, given the position it took in Arkema, that EPA 

agrees with Petitioners’ central contention that the baseline transfers that were the 

subject of the 2008 Approvals should not be carried forward into the 2010-2014 

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regulatory period. Moreover, as outlined in its en banc petition in Arkema, EPA is 

concerned that a ruling that accords vested rights to future allowances for periods 

of time for which there does not even exist a regulation establishing how or at what 

levels allowances will be allocated, could significantly hinder EPA’s ability to 

achieve the phase-out of pollutants that Congress has mandated. 

That being said, the Court rejected EPA’s position in Arkema. Thus, unless 

and until the Court limits or overrules that decision, EPA is duty-bound to abide by

the holding in that case. As part of that duty, EPA must address the legal 

infirmities in Petitioners’ specific arguments. 

Petitioners assert that they may challenge the 2008 Approvals through 

petitions for review filed in 2010 because they could not have understood the 

impact of the 2008 Approvals prior to the Arkema decision. Regardless of whether 

this assertion is accurate, it is of no import, because it is not the 2008 Approvals 

that injured the Petitioners; thus, Petitioners lack standing to challenge those 

Approvals. Petitioners themselves explain that their injury is the loss of production 

and consumption allowances deducted from what they would otherwise have 

received under the 2010 Regulation, which they explain was effectuated by EPA in 

order to accommodate the Court’s ruling in Arkema. As Petitioners readily admit, 

that injury did not occur until the Interim Final Rule was issued. That Rule is not a 

subject of the present challenge and, when Petitioners did challenge the Interim 

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Final Rule, they did so too late. Petitioners then correctly withdrew that challenge

and it may not now be reinstated. Petitioners may not seek to cure their 

jurisdictional defect by using notions of ripening of claims or the “arising after”

doctrine to challenge an agency action (the 2008 Approvals) that had no direct 

effect on them, even when the Arkema decision is applied to those Approvals. 

In setting forth their substantive claims, Petitioners have labored mightily to 

repackage the arguments made by EPA to the Court in Arkema into what appear to 

be new arguments. In seeking to reconfigure these arguments, however, Petitioners 

expose the flaws in each of them. Thus, for example, while both Petitioners and 

EPA agree that Title VI of the CAA does not support carrying forward interpollutant baseline transfers into a new regulatory period, Petitioners’ efforts to 

argue this point under Chevron step I, rather than Chevron step II as EPA did in 

Arkema, must be rejected because the statute simply is not clear on its face. To the 

extent Petitioners raise arguments not specifically addressed in Arkema, such as 

purported procedural flaws in the 2008 Approvals or EPA’s purported change in 

policy, they are legally and factually flawed and otherwise fail to present a proper 

basis for reversing the 2008 Approvals. Finally, while Petitioners feel aggrieved 

because they were left out of the 2008 Approval process to their ultimate 

detriment, Petitioners were not denied an entitlement protected under the Due 

Process Clause and, in any event, they were provided considerable opportunities to 

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both comment on (which they did) and affirmatively challenge the decisions that 

affected their purported entitlement, i.e., their allowances to produce HCFCs. 

While EPA believes that Petitioners’ position reflects the proper and superior 

means to implement Title VI of CAA in accordance with its language and intent, 

EPA must oppose the arguments made by Petitioners in this case due to their 

internal flaws. Accordingly, unless the Court was to overrule, limit or otherwise 

revisit the decision in Arkema, EPA submits that the Petition for Review must be 

denied.

ARGUMENT

I. STANDARD OF REVIEW

Contrary to Petitioners’ assertion (Pet. Br. 17), the Court’s review of the 

2008 Approvals is not subject to the standard of review set forth in 42 U.S.C. 

§7607(d)(9)(D). Section 7607(d) applies only to the specifically-denoted 

rulemakings set forth in that section and the 2008 Approvals cannot in any manner 

be classified as rulemaking, let alone one of the specific types of rules issued under 

subsection (d). See 42 U.S.C. §7607(d)(1) (listing the rulemakings covered by 

subsection (d)). See also Alaska Dep’t of Envtl. Conservation v. EPA, 540 U.S. 

461, 497 n.18 (2004); Am. Forest & Paper Ass’n, Inc. v. EPA, 294 F.3d 113, 116

n.3 (D.C. Cir. 2002). Nevertheless, EPA’s action in approving the 2008 interpollutant transfers should be reviewed under essentially the same standard as 

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provided for in §7607(d): it may only be set aside to the extent it is arbitrary, 

capricious, an abuse of discretion, not in accordance with law, or in excess of 

EPA's statutory jurisdiction and authority. 5 U.S.C. §706; United States v. Mead 

Corp., 533 U.S. 218, 227 (2001). See also Pet. Br. 17 (explaining that the two 

statutory standards are similarly applied). “The scope of review under the 

‘arbitrary and capricious’ standard is narrow and a court is not to substitute its 

judgment for that of the agency.” Motor Vehicle Mfrs. Ass'n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983). See also FCC v. Fox Television Stations, 

Inc., 129 S. Ct. 1800, 1810 (2009). 

II. THE COURT LACKS JURISDICTION TO ADDRESS

PETITIONERS’ CLAIMS

A. Petitioners Lack Standing

As the Supreme Court has explained, “‘[n]o principle is more fundamental 

to the judiciary’s proper role in our system of government than the constitutional 

limitation of federal-court jurisdiction to actual cases or controversies.’” 

DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341-42 (2006) (quoting Raines v. 

Byrd, 521 U.S. 811, 881 (1997)). This jurisdictional bar is based not only on the 

requirement that the Court have statutory jurisdiction over a matter. For a court to 

exercise jurisdiction over a claim, the petitioner also must have standing. 

Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99 (1979); Nat’l Ass’n of 

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Home Builders v. EPA, No. 10-5341, 2011 WL 6118589, at *2, *5 (D.C. Cir. Dec. 

9, 2011). 

To establish standing, a petitioner must have suffered an “injury in fact”

that: (a) is personal, distinct, palpable, actual, concrete, and imminent, not 

conjectural, speculative or hypothetical; (b) was caused by the conduct complained 

of; and (c) is likely to be redressed by a favorable decision. Lujan v. Defenders of 

Wildlife, 504 U.S. 555, 560-61 (1992); Pet. Br. 14. Petitioners have the burden of 

establishing that the action they challenge, the 2008 Approvals, resulted in a 

“personal injury fairly traceable to the defendant’s allegedly unlawful conduct and 

likely to be redressed by the requested relief.” DaimlerChrysler, 547 U.S. at 342

(citations omitted, emphasis added).

As Petitioners explain, the cap-and-trade system utilized by EPA for 

stratospheric ozone allowances is a “zero sum game,” in which the permanent 

enlargement of one company’s baseline allowances necessarily affects all other 

companies in the same market if EPA extracts corresponding production 

allowances from other companies to keep the total allowance allocation at the same 

level. Pet. Br. 15. Petitioners are quite correct that, so long as EPA determined in 

response to Arkema that it would continue to allocate allowances using the 

previous baseline system, and kept the overall allocation level the same by 

lowering the percentage of all suppliers’ HCFC baselines permitted to be 

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produced, thus effectively reducing the allowances of other suppliers as compared 

to Arkema and Solvay, such action would arguably “injure” Petitioners. 

The fatal flaw in Petitioners’ argument, however, is that Petitioners were not 

injured by the 2008 Approvals because those Approvals did not in any way adjust 

the percentage of Petitioners’ baseline that was to be used to allocate production 

allowances. As Petitioners themselves repeatedly explain, that injury did not occur 

until EPA issued its Interim Final Rule, which actually made such adjustment.

As Petitioners explain, “on remand from Arkema, EPA has reduced 

Petitioners’ HCFC-22 production and consumption allowances from the amount 

that would have been annually allocated under the Final 2010-2014 Step-down

Rule [the 2010 Regulation]. This deprived Petitioners of allowances and 

significantly reduced Petitioners’ share of the HCFC-22 market, with considerable 

economic effect.” Pet. Br. 12. The EPA action that Petitioners cite for imposing 

this economic injury is “the interim final rule . . . .” Id. Similarly, Petitioners 

explain that it was through “its 2011 interim rule, [that] EPA increased HCFC-22 

baseline allowances apportioned to Intervenors, and allocated Intervenors 

additional allowances, to the detriment of Petitioners and all other allowances 

recipients. 76 Fed. Reg. at 47,462, 47,467-68 [the Interim Final Rule].” Pet. Br. 

15. As Petitioners further explain, “the [2008 inter-pollutant] transfers [were] 

made effective, for the first time, in an interim final rule on remand from the 

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Arkema Court.” Pet. Br. 40-41. See also id. at 41, n.16 (explaining precisely how 

the Interim Final Rule injured the Petitioners by lowering the percentage of 

allowances allocated); id. at 16 (explaining that it is “[t]hese decreases in 

Petitioners’ production and consumption allowances and market share of baseline 

allowances themselves [that] have resulted, and will continue to result, in 

significant harm to Petitioners”); id. at 2 (noting that it is “[s]uch reduction [that] 

harms the Petitioners economically”); Pet. Appx. B, Diggs Decl. at 7, ¶12 

(explaining that it was the Interim Final Rule that reduced Honeywell’s production 

and consumption allowances by 16% and thereby caused the Company to suffer 

“severe economic consequences . . . .”); Pet. Appx. B, Austin Decl. at 4, ¶9 (citing 

the No-Action Letters as well as the Interim Final Rule as the agency actions 

which caused a 16% reduction in DuPont’s allowances). 

Petitioners admit that they are not challenging the validity of the 2008 

Approvals as they were applied in 2008-09. Instead, Petitioners are challenging 

only the effect of those transfers in the 2010-2014 regulatory period. Pet. Br. 25, 

n.9, p. 38, n.14. As noted, that effect did not even exist until EPA issued the 

Interim Final Rule. Indeed, Petitioners assert that EPA had a policy prior to 2008 

of not carrying forward inter-pollutant transfers and that such policy could not be 

changed without a rulemaking. Pet. Br. 13. In fact, EPA had no such policy, as it 

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had not considered the issue until the 2010 Regulation, but even if it did have such 

a policy, the rulemaking that would have changed it was the Interim Final Rule.

The reality that Petitioners were not injured by the 2008 Approvals but 

rather by the Interim Final Rule is made clear by the fact that EPA was not 

required to reduce the percentage of baseline allowances – and thereby injure 

Petitioners – in issuing its response to the Arkema decision. As outlined above, 

EPA considered at least five options for allocating allowances in the 2010-2014 

regulatory period, and EPA could have applied any of those options (or others) in 

responding to the Arkema decision. Some of those options included an auction 

system or basing allowances on recent sales, neither of which would have even 

utilized the previous baseline concept. Not only may an auction system or a 

system based on recent sales data not have injured Petitioners, each may have 

significantly benefited Petitioners, since both Petitioners are the largest producers 

of HCFC-22. Because it was not until EPA issued the Interim Final Rule that the 

Agency reduced production and consumption allowances of the Petitioners relative 

to the 2010 Rule, it was not until EPA issued the Interim Final Rule that Petitioners 

suffered any injury. 

An injury is speculative, hypothetical or conjectural, i.e., there is no “injury 

in fact,” and hence no standing, when the injury depends on how regulators will act 

at some time in the future. DaimlerChrysler, 547 U.S. at 344. Any potential injury 

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from the 2008 Approvals or even the Arkema decision depended on the final 

response by EPA to the Arkema decision which, as noted above, could have 

resulted in no injury whatsoever to Petitioners, or even a benefit. Thus, any injury 

that may have resulted from the 2008 Approvals would have been speculative, 

hypothetical and conjectural and therefore cannot support standing to challenge 

those Approvals. 

Moreover, the 2008 Approvals did not, in contrast to the Interim Final Rule, 

occur as part of a rule but, at best, occurred in the context of an agency 

adjudication. Decisions made in adjudications may often have a potential or 

precedential effect on competitors. As this Court has stated numerous times, 

however, the potential impact of the precedential effect from an agency action or 

decision relating to industry competitors is not sufficient to establish an injury 

supporting standing. See Brazos Elec. Power Coop., Inc. v. FERC, 208 Fed. 

Appx. 2 (D.C. Cir. 2006); Am. Family Life Assurance Co. v. FCC, 129 F.3d 625, 

629 (D.C. Cir. 1997); Shell Oil Co. v. FERC, 47 F.3d 1186, 1202-03 (D.C. Cir. 

1995); Crowley Caribbean Transp., Inc. v. Pena, 37 F.3d 671, 674 (D.C. Cir. 

1994); Radiofone, Inc. v. FCC, 759 F.2d 936, 939 (D.C. Cir. 1985). Petitioners 

needed to wait until they were injured – that is, until the Interim Final Rule was 

promulgated – to have standing, and challenge their purported injury in a petition 

seeking review of that Rule, which is not presently before this Court. 

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In addition to Article III standing, courts also require that prudential notions 

of standing be met. Allen v. Wright, 468 U.S. 737, 750-51 (1984). Under these 

requirements, "[w]hen the plaintiff is not himself the object of the government 

action or inaction he challenges, standing is not precluded, but it is ordinarily 

'substantially more difficult' to establish." Summers v. Earth Island Inst., 555 U.S. 

488, 493-94 (2009) (quoting Lujan, 504 U.S. at 562). Here, Petitioners were not 

the subject of the 2008 Approvals. Indeed, because they are neither the subject of 

nor directly affected by another company’s inter-pollutant transfers, EPA’s 

regulations do not even provide for notice of such Approvals. Petitioners were

the subject (along with other suppliers) of the Interim Final Rule, but again that 

Rule is not challenged in this case.

Recognizing that their purported injury was, in fact, caused by the Interim 

Final Rule, Petitioners filed a Petition for Review of that Rule, but voluntarily 

withdrew it. See p. 26-27, supra. Because 42 U.S.C. §7607(b)(1) requires a 

petition for review to be filed within 60 days of the challenged action, and because 

that requirement “‘is jurisdictional in nature, and may not be enlarged or altered by 

the courts,’” NRDC v. EPA, 571 F.3d 1245, 1265 (D.C. Cir. 2009) (citation 

omitted), Petitioners, whose original petition challenging the Interim Final Rule 

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was filed 62 days after the August 5, 2011 publication of the Rule in the Federal 

Register, may not now reinstate their challenge to the Interim Final Rule.4

Petitioners seek to circumvent the fatal infirmity to their assertion of 

standing by contending that the doctrine of “competitor standing” provides a basis 

to challenge the 2008 Approvals. Pet. Br. 16. While the cases announcing this 

doctrine help define what type of injury may form a basis for standing, they do not 

eliminate the requirements that the action being challenged must be the direct 

cause of the injury. In this case, the alleged injury is Petitioners’ effective loss of 

production allowances. As noted, that injury was not caused by the 2008 

Approvals, but rather by the Interim Final Rule. 

Focusing instead on the “advantage” afforded to the Intervenors, Petitioners 

cite several cases for the proposition that a business may suffer an injury when the 

government lifts restrictions on one of its competitors. Pet. Br. 16. But just as 

Petitioners were not injured until the Interim Final Rule assigned them a lower 

level of production allowances relative to the previous rule, Intervenors were not 

advantaged until that same Rule increased Intervenors’ baseline allowances (and 

 4

 It is not necessary for the purposes of this case to determine whether the NoAction letters are final agency actions that injured Petitioners and, therefore, would 

be the trigger for the 60-day filing period in which to challenge the effect of the 

2008 Approvals. Because Petitioners failed to challenge either of these letters or

the Interim Final Rule in a timely manner, any such challenge would now be 

barred. 42 U.S.C. §7607(b)(1).

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thereby their production allowances), i.e., any “restriction” on Intervenors was not 

lifted until issuance of the Interim Final Rule. 

Petitioners further seek to cure their jurisdictional defect by relying on the 

“arising-after” doctrine and the argument that their challenge to the 2008 approvals 

did not ripen until the Arkema decision was issued. Pet. Br. 2. For a claim to be 

ripe, a plaintiff must establish that it will suffer significant hardship if review is 

delayed and that the issue is fit for judicial review at this time. Whitman v. Am.

Trucking Ass’ns, 531 U.S. 457, 479 (2001). Here, a challenge to the 2008 

Approvals at the time they were issued would clearly have been unripe. Indeed, 

Petitioners concede that a challenge to the 2008 Approvals would not have been 

ripe at the time of those approvals. Pet. Br. 21 (explaining that a challenge to the 

2008 Approvals would have been “clearly unripe.”); Pet. Br. 2 (noting that the 

claim they raise in this case “was ripened by the Arkema Court’s findings.”). 

The so-called “ripening event,” the Arkema decision, did not occur until 

2010, two years after the 2008 Approvals. But a change in an interpretation of a 

statute, regulation or agency action does not allow a party to go back and challenge 

past administrative actions from time in memoriam. Indeed, even decisions of the 

Supreme Court announcing wholly new interpretations of law or agency actions 

may be applied retroactively only to challenges still pending in court. See, e.g., 

Harper v. Virginia Dept of Taxation, 509 U.S. 86, 97 (1993) (the Supreme Court’s 

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new “controlling interpretation of federal law ... must be given full retroactive 

effect in all cases still open on direct review . . . .); James B. Beam Distilling Co. v. 

Georgia, 501 U.S. 529, 539-41 (1991).

Moreover, the Arkema decision cannot be said to have ripened Petitioners’ 

claim because it caused no injury to Petitioners. “A claim is not ripe for 

adjudication if it rests upon ‘contingent future events that may not occur as 

anticipated, or indeed may not occur at all.’” Texas v. United States, 523 U.S. 296, 

300 (1998) (citations omitted). As outlined above, Petitioners’ injury was 

contingent on what actions EPA would take in response to the Arkema decision. 

That purportedly injurious action, the Interim Final Rule, was a separate action 

subject to challenge; it does not ripen for challenge partial, non-injurious 

administrative actions that may have occurred along the way.5

Petitioners raise the “arising-after” doctrine, under which they assert that 

they may bring their challenge to the 2008 Approvals because that challenge is 

based solely on actions arising after the challenged action, in this case the decision 

in Arkema. Pet. Br. 19-22. This doctrine, however, applies only to the 60-day 

filing requirement under 42 U.S.C. §7607(b)(1) and, indeed, the express “arising 

after” wording of that provision is the sole source of the arising-after doctrine. 

 

 5 EPA does not assert that Petitioners’ claims are unripe because Petitioners’ 

administrative Petition for Reconsideration has not been acted upon, and thus does 

not address this issue. See Pet. Br. 22-24.

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EPA does not assert that a direct challenge to the 2008 Approvals would be barred 

by 42 U.S.C. §7607(b)(1), since Petitioners filed such challenge (albeit 

prematurely) within sixty days of EPA’s publication in the Federal Register of 

notice of the 2008 approvals, which occurred in the context of publishing the 

Interim Final Rule. See 76 Fed. Reg. at 47,455.6

Finally, Petitioners’ purported injury cannot be redressed by overturning the 

2008 Approvals, since EPA action to implement any ruling overturning the 2008 

Approvals would not necessarily reinstate the 2010 Regulation (Petitioners’ 

preferred result). EPA might instead choose to address a new ruling by this Court 

 Instead, EPA contends that even 

if timely filed, Petitioners simply lack standing to challenge the 2008 Approvals, 

and the arising-after language contained in section 7607(b)(1) provides no relief 

for this jurisdictional defect. Petitioners simply may not circumvent their failure to 

challenge the proper action by using a court decision to “ripen” challenges to old 

agency actions that Petitioners had no standing to challenge in the first instance.

 6 Intervenors assert that Petitioners’ challenge to the 2008 Approvals should be 

barred by 42 U.S.C. §7607(b)(1) because Petitioners failed to file their petition for 

review within 60 days of publication in the Federal Register of EPA’s Proposed 

Rule for 2010-2014, in which the Agency explained that it was considering

carrying forward inter-pollutant transfers into the next regulatory period. 

Petitioners’ Motion to Dismiss at 8-10 (citing 73 Fed. Reg. 78,680 (Dec. 23, 

2008)). But that was notice of a proposed rule, not notice of EPA’s approval of 

individual companies’ past HCFC allowance transfers, such as the 2008 Approvals 

at issue in this case, and that proposal was never adopted. Additionally, neither the 

Proposed Rule nor its preamble ever mentions the specific inter-pollutant transfers 

by Arkema and Solvay that Petitioners challenge in this case.

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by scrapping the concept of historical production and consumption baselines 

altogether. Lacking both a direct injury from the 2008 Approvals or the ability to 

redress their claimed injury by overturning those Approvals, Petitioners lack 

standing to bring the challenge raised in this action.

B. The 2008 Approvals Are Not Final Orders Subject to Challenge 

by Non-Parties to the Approvals

An agency action may not be challenged unless it is final. Bennett v. Spear, 

520 U.S. 154, 177-78 (1997). Indeed, this Court lacks statutory jurisdiction to 

review non-final actions since the provision under which Petitioners have brought 

this action, 42 U.S.C. §7607(b), expressly covers only final actions taken by EPA. 

Agency policy statements, enforcement letters and other statements of an agency’s 

view that do not have binding applicability on specific parties, are not final agency 

actions. See, e.g., P&V Enters. v. Corps of Eng’rs, 516 F.3d 1021, 1025-26 (D.C. 

Cir. 2008); Village of Bensenville v. FAA, 457 F.3d 52, 68-69 (D.C. Cir. 2006); 

General Motors Corp. v. EPA, 363 F.3d 442, 449-50 (D.C. Cir. 2004).

In this case, the 2008 Approvals (nothing more than letters to Arkema and 

Solvay) were not final agency actions as applied to Petitioners because, as outlined 

above, the granting of a request for an inter-pollutant baseline transfer has no direct 

effect on other allowance holders unless and until EPA takes a separate action that 

affects the actual allowances of those other parties. Moreover, as noted supra, 

Petitioners do not challenge the 2008 Approvals as they were immediately applied 

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but challenge only the long-term effect of such transfers starting in 2010. Pet. Br. 

25, n.9, p. 38, n.14. EPA did not decide what long-term effect those transfers 

would have until the 2010 Regulation. Thus, the determination being challenged

in this case could not possibly have been final until EPA issued the 2010 

Regulation. For example, if EPA determined in the 2010 Regulation that prior 

inter-pollutant baseline transfers should, in fact, be carried forward into the new 

regulatory period, that would have been a final decision subject to challenge. The 

fact that EPA came to the opposite determination, later overturned by this Court in 

Arkema, does not push back EPA’s final decision two years to the 2008 Approvals.

An agency order is “non-final [where it] ‘does not itself adversely affect 

complainant but only affects his rights adversely on the contingency of future 

administrative action.’” Nat’l Ass’n of Home Builders v. Norton, 415 F.3d 8, 15 

(D.C. Cir. 2005) (quoting DRG Funding Corp. v. Sec’y of Housing & Urban Dev., 

76 F.3d 1212, 1214 (D.C. Cir. 1996)). As noted, the 2008 Approvals did not 

adversely affect Petitioners. The adverse affect of that non-final decision was 

contingent on future administrative action by EPA to actually reduce the 

production allowances Petitioners would otherwise have received. That contingent 

action, as noted, did not occur until the promulgation of the Interim Final Rule. 

That Rule was the final agency action that Petitioners should have challenged. 

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That Petitioners failed to challenge that Rule in a timely manner is not license to 

mount a challenge to the 2008 Approvals.

III. PETITIONERS’ SUBSTANTIVE ARGUMENTS ARE FLAWED

Petitioners make a series of substantive arguments attacking EPA’s approval 

of the 2008 inter-pollutant transfers made by the Intervenors. A number of these 

arguments are consistent with EPA’s position on the proper treatment of interpollutant transfers, as espoused by EPA in the Arkema case. Nevertheless, in 

repackaging EPA’s arguments in somewhat different forms (in an apparent effort 

to assert that they are raising new claims not considered by the Arkema Court), 

Petitioners’ arguments are fraught with internal inconsistencies and infirmities. 

A. The 2008 Approvals Cannot be Struck Down as Violative of the 

Clean Air Act Under Chevron Step One

EPA argued in Arkema that although the CAA was ambiguous with regard 

to the permanence of inter-pollutant baseline transfers, the Act as EPA interpreted 

it prohibits the carrying forward of inter-pollutant transfers into a new regulatory 

period. As EPA explained, CAA §607 declares: “The rules under this section [to 

be promulgated by EPA] shall permit a production [and consumption] allowance 

for a substance for any year to be transferred for a production [or consumption] 

allowance for another substance for the same year on an ozone depletion weighted 

basis.” 42 U.S.C. §7671f(b) (emphasis added). EPA summed up its analysis of 

this operative language as follows:

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After considering the language of section 607 and the legislative 

history, EPA believes that section 607(b) is best read as permitting 

only year-by-year inter-pollutant transfers. Section 607(b) states that 

EPA’s rules are to permit “a production allowance for a substance for 

any year to be transferred for a production allowance for another 

substance for the same year.” This language emphasizes the year-byyear nature of such transactions. No parallel language appears in 

section 607(c) [which governs inter-company transfers]. That section 

does, however, provide that any inter-pollutant transfers between two 

or more persons must meet the requirements of section 607(b). 

Hence, EPA interprets section 607 as requiring that all inter-pollutant 

transfers, whether occurring between companies or within a single 

company, be conducted on a yearly – and thus temporary – basis.

74 Fed. Reg. at 66,421-22 (emphasis added), quoted in EPA’s brief, Dkt. 1237311. 

Contrary to Petitioners’ assertion that the Court in Arkema never examined 

the statutory language that governs EPA’s inter-pollutant transfers, Pet. Br. 26, the 

Court did exactly that. See, e.g., Arkema, 618 F.3d at 9 (explaining that the 2010 

Regulation, which does not treat the 2008 baseline transfers as permanent, “may 

more accurately track the statutory mandate and may better reflect the Agency’s 

commitment to a ‘worst-first’ HCFC reduction strategy . . . .”). While the Court 

agreed that EPA applied a reasonable interpretation of the statute in concluding 

that EPA is required to treat inter-pollutant transfers as non-permanent, it 

nevertheless concluded that failing to carry forward the 2008 inter-pollutant 

transfers, i.e., failing to treat those transfers as permanent, would interfere with

what it characterized as Intervenors’ vested right to increased baselines. Id. 

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Relying on essentially the identical language, legislative history and 

reasoning as presented by EPA in Arkema, Petitioners seek to circumvent the 

Court’s ruling by asserting that the 2008 Approvals violate the statute under 

Chevron step I. Pet Br. 26-28 (“Congress has spoken clearly and directly.”). 

Under Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984), the Court first 

inquires whether Congress “has directly spoken to the precise question at issue,” in 

which case the Court “must give effect to the unambiguously expressed intent of 

Congress.” Id. at 842-43 (“Chevron step I”). If the statute is "silent or ambiguous 

with respect to the specific issue," the Court moves to Chevron's second step and 

must defer to the agency's interpretation so long as it is "based on a permissible 

construction of the statute." Id. at 843 (“Chevron step II”).

It is quite evident that CAA §607, the provision dealing with transfers of 

allowances, does not expressly address whether inter-pollutant transfers 

characterized as “baseline” are to be deemed “permanent” and reflected in 

subsequent regulatory periods. Indeed, the words “permanent” and “baseline” 

appear nowhere in section 607. As outlined at p. 12, supra, Congress left it to the 

broad discretion of EPA to determine how transfers of baselines are to be treated. 

Given this built-in discretion and the silence of section 607, EPA may reasonably 

interpret what constraints, if any, Congress placed on the establishment of 

baselines for each regulatory period.

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It is apparent that EPA agrees with Petitioners’ view that the better reading 

of Title VI precludes carrying forward inter-pollutant transfers into a new 

regulatory period. EPA cannot, however, agree with Petitioners’ view that 

Congress “has directly spoken to the precise question at issue” and that, therefore, 

the Court must reach this conclusion under Chevron step I.

B. EPA Did Not Alter Past Interpretations Without

Notice and Comment

Petitioners argue that in issuing the 2008 Approvals, EPA altered its past 

interpretations of the CAA without providing notice and an opportunity for 

comment. Pet. Br. 29-35. Asserting that EPA had historically applied a 

“phasedown follows the allowance” principle, a label conjured up by Petitioners, 

Petitioners contend that EPA altered this “policy” in issuing the 2008 Approvals 

without allowing Petitioners the opportunity to comment on this purported change 

in policy. Id.

First, Petitioners are misinterpreting past EPA statements to derive a 

principle that simply does not exist. Petitioners cite several statements contained 

in the preambles leading up to and accompanying the 2003 Regulation, which 

addressed the complete phase-out of a single HCFC not at issue in this case. In 

contrast, the 2010 Regulation and the Interim Final Rule implement a partial 

phase-out (or “phase-down”) of certain other HCFCs. Petitioners attempt to apply 

a concept directed to the complete contemporaneous elimination of a chemical,

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instead to a mere phase-down of chemicals that are not scheduled for elimination 

until 2020. This is an extension of EPA’s explanatory statements that is 

unsupportable and that certainly does not reflect any established EPA policy.

For example, in the preambles cited by Petitioners, EPA addressed 

permanent inter-company transfers of baseline allowances, stating that upon the 

phase-out date of a specific HCFC, the baseline allowances associated with that 

chemical would be deducted from the current holder’s balance. See, e.g., 64 Fed.

Reg. 16,373, 16,378 (April 5, 1999), 66 Fed. Reg. 38,064, 38,068-69 (July 20, 

2001). EPA further noted that the deduction would occur even if the recipient of 

the inter-company transfer performed a subsequent inter-pollutant transfer: “EPA 

will allow permanent transfers of baseline allowances with those allowances 

disappearing at the phase-out date for the specific HCFC, regardless of what interpollutant transfers had taken place.” 68 Fed. Reg. at 2835. While the preamble to 

the 2003 Regulation leaves open the possibility that an adjustment to the current 

holder’s baseline allowances could also be made “at the time of a reduction step,”

id., EPA had no reason to determine at that time what adjustments, if any, it might 

make to baseline allowances prior to a chemical’s complete phase-out.

Petitioners also rely upon the regulatory language at 40 C.F.R. §82.23(d) for 

their “phase-down follows the allowance” argument. But that provision addresses 

permanent transfers of baseline allowances, explained as “a lasting shift of some 

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quantity of a company’s allowances to another company,” 68 Fed. Reg. at 2835 

(emphasis added), and does not even mention inter-pollutant transfers. It merely 

identifies the recipient of the transfer as the person whose baseline will be adjusted 

“in accordance with phase-out schedules.”

Second, and perhaps most importantly, EPA did not change any policy in 

issuing the 2008 Approvals. Petitioners do not contend that it was improper or 

inconsistent with prior policy or interpretations for EPA to approve inter-pollutant 

transfers. To the contrary, Petitioners affirmatively state that they are not 

challenging the 2008 Approvals to the extent they allowed for transfers in 2008 

and 2009 (the last two years of the 2003-2009 regulatory period). Pet. Br. 25, n.9, 

38, n.14. Petitioners’ complaint is that the decision to make inter-pollutant 

transfers permanent was inconsistent with past policy. But EPA neither had a 

policy about whether inter-pollutant transfers would carry forward into the next 

regulatory period nor did it change any prior policy. As outlined above, in the 

Proposed Rule for 2010-2014, issued after the 2008 Approvals, EPA sought

comment on whether it should, or should not, carry forward past inter-pollutant 

baseline transfers. Thus, EPA was creating a policy as part of the 2010 

Regulation; it had no policy prior to that time.

Furthermore, to the extent EPA can be said to have had a policy prior to the 

2008 Approvals not to carry forward inter-pollutant transfers, any change in that 

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policy was caused by the Arkema Court’s opinion, not by any action of EPA. An 

agency cannot be required to provide notice of, comment on, or explanation of, a 

policy change it is not itself making and that occurs only by virtue of a court 

decision issued two years later. 

Moreover, EPA did provide an opportunity to comment on the central issue 

in this case: the permanence of inter-pollutant transfers. In the proposed 2010 

Regulation, EPA expressly called for comment on whether inter-pollutant baseline 

transfers approved in the 2003-2009 regulatory period should be carried forward to 

the 2010-2014 regulatory period. 74 Fed. Reg. at 66,420/3. Both Petitioners 

commented on such a policy and EPA eventually adopted the general position 

argued for by Petitioners in those comments. The fact that the Court in Arkema

rejected EPA’s conclusion in light of what the Court saw as Arkema and Solvay’s 

“vested” interests in previously transferred allowances, does not mean that EPA 

failed to provide opportunity for comment on the very issue raised by Petitioners in 

this case. Moreover, EPA provided opportunity for comment as part of its issuance 

of the Interim Final Rule. While Petitioners could have asserted that the 

opportunity for comment was insufficient, any such challenge was waived as a 

result of Petitioners’ withdrawal of their challenge to that Rule.

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C. Petitioners Have No Basis to Challenge the Record 

Supporting the 2008 Approvals

Petitioners raise a number of issues regarding the adequacy of the 

administrative record supporting the 2008 Approvals. This Court, however, may 

not consider issues not raised before the Agency during the challenged 

administrative process. Nat’l Ass’n of Clean Air Agencies v. EPA, 489 F.3d 1221, 

1231 (D.C. Cir. 2007) (“Petitioners who fail to comply with this exhaustion 

requirement are barred from seeking judicial review.”); Mossville Envtl. Action 

Now v. EPA, 370 F.3d 1232, 1238 (D.C. Cir. 2004). None of the “adequacy of the 

record” issues asserted by Petitioners was raised before the Agency. While 

Petitioners would rightly explain that they had no opportunity to raise such issues

because they were neither a party to, nor directly informed of, the process EPA 

was conducting to issue the 2008 Approvals, this further evidences the fact that the 

2008 Approvals were not final agency actions with regard to Petitioners. Instead, 

any opportunity to challenge the record for the 2008 Approvals arose, if at all, in 

conjunction with the promulgation of the Interim Final Rule, which as noted is 

unchallenged. 

Turning to Petitioners’ specific arguments, they assert that EPA could not 

have approved the 2008 inter-pollutant transfers on a permanent basis because 

EPA regulations provide for transfers only during the control period (i.e., the 

specific calendar year) and for 30 days thereafter. Pet. Br. 37-38. As noted supra, 

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notwithstanding the holding in Arkema that Arkema and Solvay gained “vested 

rights” in the transferred baseline allowances through EPA’s issuance of the 2008 

Approvals, EPA did not intend to approve the 2008 transfers on a permanent basis. 

Indeed, EPA argued in Arkema that its regulations did not, in fact, support 

transfers lasting beyond the existing regulatory period. The permanent nature of 

these transfers arose only as a result of the Court’s decision in Arkema. EPA can 

hardly be said to have approved the permanent nature of the transfers on an 

inadequate record (or in an arbitrary and capricious manner) when EPA has never

approved the permanent nature of those transfers.7

Petitioners further contend that because EPA’s regulations require it to 

assure that the applicant has sufficient allowances to transfer, and because the 

Arkema Court decided that the 2008 inter-pollutant transfers are permanent, it was 

impossible for EPA to certify that Intervenors had enough allowances to transfer in 

the years 2010-2014, because EPA had not even established baseline allowances 

for 2010-2014 at the time it approved the 2008 transfers. Pet. Br. 35-37.

 

8

 7

 Petitioners describe this as an “adequacy of the record” issue, but they essentially 

argue that EPA’s regulations do not support treating the 2008 transfers as 

permanent. Pet. Br. 37-38. EPA (and Judge Randolph, Arkema, 618 F.3d at 10) 

agree, but this view was rejected by the panel majority in Arkema. 

 But 

8 Petitioners alternatively assert that EPA’s failure to assess whether Intervenors 

had sufficient allowances in years 2010-2014 means that EPA failed to comply 

with the CAA’s procedural requirements set forth in 42 U.S.C. §7607(d)(2)-(6). 

Pet. Br. 38. As noted at p. 30, supra, §7607(d) has no application to this case 

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EPA looks only at whether the company has sufficient allowances to cover the 

transfer “on the date the transfer claim is processed,” 40 C.F.R. §82.23(b)(4); 

because the transfer occurs only once, EPA has no need to consider future years’ 

allowances. Under Petitioners’ reasoning, no inter-pollutant baseline transfers can 

ever occur because, under the Arkema decision, they live on in perpetuity while

under the statute every HCFC will be phased out, so eventually everyone will have 

insufficient allowances to transfer. While Petitioners’ argument may accentuate 

the difficulties of implementing the Court’s decision in Arkema, it does not mean 

that EPA’s decision at the time was improper, arbitrary or based on an insufficient 

administrative record.

In a footnote, Petitioners make a third argument, asserting that the record 

fails to establish that the EPA employee who signed the 2008 Approvals was 

authorized to do so. Pet. Br. 38, n.15. This Court has often explained that it will 

not address arguments made only in a footnote. Meijer, Inc. v. Biovail Corp., 533 

F.3d 857, 864 n.4 (D.C. Cir. 2008); Michigan Gambling Opposition v. 

Kempthorne, 525 F.3d 23, 29 (D.C. Cir. 2008). Moreover, this is also an issue not 

raised before EPA as part of the 2008 Approvals and that presumably could have 

been raised in a challenge to the Interim Final Rule. In any event, EPA’s 

 

because that provision applies only to specifically designated rulemakings, and the 

2008 Approvals are not rulemakings of any kind, much less rulemakings subject to 

section 7607(d). 

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regulations provide that "[t]he transferor may proceed with the transfer if the 

Administrator does not respond to a transfer claim within the three working days 

specified...." 40 C.F.R. § 82.23(b)(4)(iii). Thus, even if Petitioners could 

establish that the person who approved the 2008 transfers was not authorized to 

provide such approval, such approval would nevertheless have occurred by 

operation of regulation three working days after submission of the transfer 

requests.

IV. PETITIONERS WERE NOT DENIED DUE PROCESS

Petitioners assert that they have been deprived of a property right – the right 

to a certain number of HCFC production allowances – without due process because 

they were never given the opportunity to comment on the permanence of the 2008 

Approvals. Pet. Br. 39-44. 

The basis for assessing a due process claim was summed up in General 

Electric Co. v. Jackson, 610 F.3d 110 (D.C. Cir. 2010). As the Court explained:

“The first inquiry in every due process challenge is whether the 

plaintiff has been deprived of a protected interest in ‘liberty’ or 

‘property.’ Only after finding the deprivation of a protected interest 

do we look to see if the [government’s] procedures comport with due 

process.” Amer. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 . . . . 

At this second step, we apply the now-familiar Mathews v. Eldridge

balancing test, considering (1) the significance of the private party’s 

protected interest, (2) the government’s interest, and (3) the risk of 

erroneous deprivation and the “probable value, if any, of additional or 

substitute procedural safeguards.” 424 U.S. at 335.

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General Electric, 610 F.3d at 117. Because Petitioners were not deprived of a 

property right, and because they were nevertheless provided full due process to 

comment on the permanence of the 2008 Approvals and did in fact comment, no 

due process rights were deprived.

EPA’s regulations make clear that permission to produce and consume 

HCFCs (through the grant of allowances) is not a right but a “privilege” granted by 

EPA under the terms of its own regulations. See, e.g., 40 C.F.R. §82.3: 

“Consumption allowances means the privileges granted by this subpart to produce 

and import controlled substances . . . . Production allowances means the privileges 

granted by this subpart . . . .” (Emphasis in original and added). While the Court in 

Arkema found that the transferred baselines that Solvay and Arkema created for 

themselves were vested rights, it did not hold that such transferred baselines, or 

allowances in general, are property rights or entitlements protected under the Due 

Process Clause, nor did it hold that companies had any right whatsoever to a specific 

number of production allowances. In fact, the Court noted that “the 2010 stepdown 

gave the EPA occasion to adjust its distribution of allowances.” 618 F.3d at 25.

To have a protectable property interest in a government benefit, the party 

“must have a legitimate claim of entitlement to it.” Town of Castle Rock v. 

Gonzales, 545 U.S. 748, 756 (2005). As the Supreme Court explained, “[o]ur 

cases recognize that a benefit is not a protected entitlement if government officials 

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may grant or deny it in their discretion.” Id. (citing Kentucky Dept. of Corrections 

v. Thompson, 490 U.S. 454, 462-63 (1989)). See also Natale v. Town of 

Ridgefield, 170 F.3d 258, 263 (2d Cir. 1999) (“Entitlement turns on whether the 

issuing authority lacks discretion to deny [it].”). As outlined at p. 12, supra, the 

number of allowances, the type of allowances, the basis for allocating allowances, 

and even the continued existence of allowances for each HCFC, was within the full 

and broad discretion of EPA. Indeed, Petitioners readily admit that in the 2003 

Regulation “EPA was clear that it was allocating each company’s HCFC baseline 

allowances ‘on a one-time-basis’ and that the same number of allowances would 

not necessarily be granted for future step-down periods.” Pet. Br. 7. Moreover, 

uncertainty as to whether a specific grant of allowances would or would not be 

carried forward does not create a protectable entitlement. See, e.g., Town of Castle 

Rock, 545 U.S. at 763; Greenbriar Village, LLC v. Mountain Brook, City, 345 

F.3d 1258, 1265-66 (11th Cir. 2003) (“[U]ncertainty in the existence of a property 

right . . . does not add up to a federally protectable property claim.”). Under EPA’s 

regulatory regime, Petitioners possessed no entitlement to any specific number or 

percentage of HCFC production allowances, and thus no due process rights were 

deprived.

Even if Petitioners could assert that they possessed an entitlement subject to 

due process protection, such process was provided. Petitioners contend that they 

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were not provided notice of the 2008 Approvals, so they could not challenge the 

Agency’s action. Pet. Br. 40-42. EPA’s regulations establish the process for 

seeking approval of inter-pollutant transfers and call for notice only to the 

requesting party and for an appeal process only if the transfer request is rejected.

40 C.F.R. §82.23(b)(4). This is because, as discussed supra, the approval of an

inter-pollutant transfer does not on its own affect the allowances granted to 

competitors. If Petitioners believed that such notice and appeal process would be 

inadequate because of the possibility that approvals of baseline transfers might 

eventually be deemed to create vested rights, they were required to challenge that 

regulation when issued in 2003 (see 68 Fed. Reg. 2820, 2848 (Jan. 21, 2003)), and 

they may not do so now. See 42 U.S.C. §7607(b) (requiring challenge to such an 

EPA regulation to be filed within 60 days of its issuance). 

Moreover, as Petitioners themselves assert, a challenge to the 2008 

Approvals would not have been ripe at the time because it was only the 2010 

Arkema decision that “ripened” their claim. Indeed, it is unclear what notice 

Petitioners assert EPA was required to give. If EPA did not believe at the time that 

the 2008 Approvals would have any effect on future allowances unless EPA 

decided in its discretion after a separate rulemaking to carry forward baseline 

transfers, there was nothing EPA could have given notice of, except perhaps an 

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approval of inter-pollutant transfers that had no known effect on other allowance 

holders.

Finally, Petitioners were given the opportunity to comment the first time 

EPA considered whether to treat inter-pollutant transfers as permanent transfers (in 

response to the Proposed Rule for 2010-2014), and they did in fact submit 

substantial comments on that issue. JA __[163-93]. The fact that the Court in 

Arkema eventually disagreed with Petitioners – and with EPA – does not mean that 

they were denied full consideration of the issue. Moreover, Petitioners had an 

opportunity to seek to participate in the Arkema case and, in fact, did seek to so 

participate, albeit in an untimely manner. Again, the fact that this Court denied 

Petitioners’ out-of-time request to participate, or that Petitioners failed to 

understand that the Arkema litigation had been filed and was being briefed, does 

not equate to a denial of due process. 

Lastly, Petitioners were afforded due process when the Interim Final Rule, 

the rule that actually caused their alleged injury, was issued. Comments were 

requested on that rule, Petitioners submitted such comments, and Petitioners had 

the opportunity to challenge that rule. Again, the fact that Petitioners failed to 

challenge that rule in a timely manner does not equate to the government denying 

Petitioners a forum to challenge the rule that visited upon them the injury they 

assert. 

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CONCLUSION

For the foregoing reasons, the Petition for Review should be dismissed for 

lack of jurisdiction or denied on its merits.

Respectfully submitted, 

OF COUNSEL:

DIANE E. McCONKEY

Office of General Counsel

U.S. Environmental Protection Agency

Ariel Rios Building,

1200 Pennsylvania Avenue, N.W.

Mail Code: 2344A

Washington, D.C. 20460

Tel: (202) 564-5588

DATE: January 30, 2012

IGNACIA S. MORENO

Assistant Attorney General 

Environment & Natural Resources Div.

 

/s/ Perry M. Rosen

PERRY M. ROSEN

United States Department of Justice

Environment & Natural Resources Div.

Environmental Defense Section

P.O. Box 7611

Washington D.C. 20044

Tel: (202) 353-7792

Counsel for Respondents

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CERTIFICATE OF COMPLIANCE UNDER FED. R. APP. P. 37(A)(7)(b)

This brief complies with the type-volume limitation of Fed. R. App. P. 32 

(a)(7)(B) and the orders of the Court in this case because this brief contains 13,823, 

excluding the parts of the brief exempt under Fed. R. App. P. 32 (a)(7)(B)(iii). 

This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and 

the typeface style requirements of Fed. R. App. P. 32(a)(6) because the brief was 

prepared in proportionally spaced typeface using Microsoft Word 14 point Times 

New Roman type.

So certified this 30th day of January, 2012, by

/s/ Perry M. Rosen

Perry M. Rosen

Counsel for Respondents

USCA Case #10-1347 Document #1355558 Filed: 01/30/2012 Page 70 of 71
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CERTIFICATE OF SERVICE

I hereby certify that the foregoing BRIEF OF RESPONDENTS was 

electronically filed with the Clerk of the Court using the CM/ECF system, which 

will send notification of said filing to the attorneys of record for Petitioners and all 

other parties who have registered with the Court’s CM/ECF system.

Date: January 30, 2012 /s/ Perry M. Rosen 

Perry M. Rosen 

Counsel for Respondents

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