Court Opinion

ID: 9386876
Source: CourtListenerOpinion
Date Created: 2023-04-13 21:00:39.038029+00
Date Added: 2024-06-11T17:18:09.159348
License: Public Domain

USCA11 Case: 21-14213     Document: 73-1         Date Filed: 04/13/2023   Page: 1 of 14

                                                                  [PUBLISH]
                                        In the
                 United States Court of Appeals
                          For the Eleventh Circuit

                            ____________________

                                      No. 21-14213
                            ____________________

        RMS OF GEORGIA, LLC,
        d.b.a. Choice Refrigerants,
                                                                   Petitioner,
        versus
        U.S. ENVIRONMENTAL PROTECTION AGENCY,
        ADMINISTRATOR, U.S. ENVIRONMENTAL PROTECTION
        AGENCY,

                                                                Respondents.

                            ____________________

                     Petition for Review of a Decision of the
                       Environmental Protection Agency
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        2                      Opinion of the Court                21-14213

                        Agency No. EPA-2021-21942-55841
                            ____________________

        Before WILSON, BRASHER, and MARCUS, Circuit Judges.
        WILSON, Circuit Judge:
               Congress gave the Courts of Appeals jurisdiction to hear pe-
        titions for review of Environmental Protection Agency (EPA) ac-
        tions under the Clean Air Act. 42 U.S.C. § 7607(b)(1). But it man-
        dated that petitions for review of “nationally applicable” actions be
        heard in the Court of Appeals for the District of Columbia Circuit
        (D.C. Circuit), while petitions for review of “locally or regionally
        applicable” actions should be heard in the regional circuit Courts
        of Appeals. Id. Our task today is to determine which type of action
        this petition challenges.
                Petitioner RMS of Georgia d/b/a Choice Refrigerants
        (RMS) challenges the EPA’s allocation of permits to consume hy-
        drofluorocarbons—a type of chemical refrigerant—under the
        American Innovation and Manufacturing Act. Pub. L. No. 116-260,
        Div. S., § 103, 134 Stat. 1182, 2255–71 (2020) (codified at 42 U.S.C.
        § 7675). RMS argues that it received fewer permits than it was en-
        titled because the EPA improperly allocated some historic HFC us-
        age to RMS’s competitors. However, because we hold that the
        EPA’s action, was nationally applicable we TRANSFER this peti-
        tion to the D.C. Circuit for further consideration.
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        21-14213                  Opinion of the Court                              3

                                             I.

                 The United States has been a site of rapid innovation in the
        field of refrigeration technology since the mid-nineteenth century.
        In the 1840s, Dr. John Gorrie of Apalachicola, Florida invented one
        of the world’s first mechanical refrigeration systems to soothe his
        patients’ malaria-induced fevers in the Florida panhandle. By the
        early 1900s Carrier Engineering of New York was installing similar
        mechanical refrigeration systems to cool enormous auditoriums
        and theaters. While these early machines relied on water and com-
        pressed air, these systems gave way to those relying on volatile and
        toxic chemicals such as ammonia. But in 1928, Thomas Midgley
        Jr. at the General Motors Corporation, successfully synthesized the
        first formulations of chlorofluorocarbon (CFC)-based refrigerants,
        commonly known as “Freon.” These chemicals were safer and less
        combustible than their predecessors, and soon dominated the mar-
        ketplace. 1
              With this rapid innovation came calls for increased national
        and international oversight. In 1974, F. Sherwood Rowland and
        Mario Molina at the University of California, Irvine proved that the
        emission of CFCs depleted the Earth’s ozone layer, exposing the

        1 See generally Paul Lester, U.S. Dep’t of Energy, History of Air Conditioning
        (July 20, 2015), https://www.energy.gov/articles/history-air-conditioning;
        James W. Elkins, Nat’l Oceanic & Atmospheric Admin., Chlorofluorocarbons
        (CFCs), https://gml.noaa.gov/hats/publictn/elkins/cfcs.html (last visited
        Mar. 29, 2023).
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        4                       Opinion of the Court                   21-14213

        Earth’s surface to harmful UV radiation. So in 1987, the United
        States, together with the international community, signed the
        Montreal Protocol, which mandated the gradual phaseout of CFCs.
        As CFCs were phased out, a new class of chemicals called hydro-
        fluorocarbons (HFCs) took their place. HFCs, unlike CFCs, do not
        contribute significantly to ozone layer depletion, making them a
        suitable substitute under the Montreal Protocol. But, while the
        substitution of HFCs protects the ozone layer, it greatly contrib-
        utes to the risks of climate change as HFCs are a potent greenhouse
        gas. So just as they had decades prior for CFCs, the United States
        and the international community began considering a phaseout of
        HFCs as well. In 2016, they agreed to the Kigali Amendment to
        the Montreal Protocol which requires states parties to the Protocol
        to phasedown HFC usage over the next thirty years. 2
               While the Kigali Amendment was under consideration, the
        United States Congress took steps in 2020 to address domestic HFC
        usage by passing the American Innovation and Manufacturing Act
        (AIM Act), 42 U.S.C. § 7675. The AIM Act directs the EPA to phase
        down the consumption and production of HFCs in the United
        States over the next fifteen years until 2036. In 2036, the Act re-
        quires that HFC usage in the United States be capped at 15% of

        2 U.S. Env’t Prot. Agency, Recent International Developments under the
        Montreal      Protocol     (last    updated      Sept.    16,      2022),
        https://www.epa.gov/ozone-layer-protection/recent-international-develop-
        ments-under-montreal-protocol.
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        21-14213                 Opinion of the Court                           5

        baseline levels. See 42 U.S.C. § 7675(e)(2)(C). To implement the
        phasedown, Congress provided that certain consumption and pro-
        duction activities would require “allowances”—essentially, usage
        permits—and placed a cap on the number of permits available each
        year. See id. §§ 7675(e)(2)(A), (e)(2)(D); see also id. § 7675(b)(2), (3),
        (7) (defining “allowance,” “consumption,” and “produce,” respec-
        tively). Over time the cap diminishes by a fixed percentage pro-
        vided in the Act each year. Id. § 7675(e)(2)(B). The Act also allows
        the firms that receive permits to transfer their permits between one
        another pursuant to regulations promulgated by the EPA. Id.
        § 7675(g). The Act directs the EPA to conduct appropriate rule-
        makings to establish “an allowance allocation and trading pro-
        gram” consistent with these requirements. Id. § 7675(e)(3).
               This petition concerns the permit allocations made for cal-
        endar year 2022, which were issued in October 2021. There are
        two Federal Register notices relevant to this petition. The first was
        a notice of final rulemaking for what is called the “Framework
        Rule,” which sets forth the EPA’s methodology for collecting data
        on historical HFC usage and a formula for calculating the allocation
        of permits. Phasedown of Hydrofluorocarbons: Establishing the
        Allowance Allocation and Trading Program Under the American
        Innovation and Manufacturing Act, 86 Fed. Reg. 55,116 (Oct. 5,
        2021) (codified at 40 C.F.R. § 84.1–84.35) [hereinafter Framework
        Rule]. The second was an “Allocation Notice,” which set forth the
        annual allocations in a series of tables line-by-line, firm-by-firm.
        Phasedown of Hydrofluorocarbons: Notice of 2022 Allowance
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        6                        Opinion of the Court                21-14213

        Allocations for Production and Consumption of Regulated Sub-
        stances under the American Innovation and Manufacturing Act of
        2020, 86 Fed. Reg. 55,841 (Oct. 7, 2021) [hereinafter Allocation No-
        tice].
                At a high level, the Framework Rule’s methodology worked
        like this: First, the EPA collected HFC-usage data for the compa-
        nies involved in the domestic HFC industry. Second, the EPA used
        this industry-wide data to calculate the baseline levels of domestic
        HFC-usage. Third, the agency calculated the annual nationwide
        allowance cap by multiplying the baseline level by a target percent-
        age specified by statute. See 42 U.S.C. § 7675(e)(1)(A)–(C),
        (e)(2)(B). At this step, some allowances are removed from the pool
        and set aside for application-specific allowances and for allocation
        later in the year. 40 C.F.R. § 84.11(a)(3). Fourth, the EPA identified
        each industry participant’s three highest years of usage for the pe-
        riod 2011–2019 and found the average of these numbers. Id.
        § 84.11(a)(1). Fifth, the EPA determined each firm’s percentage
        share of the industry by taking that firm’s individual three-year av-
        erage (step 4) and dividing it by the sum of all firms’ three-year av-
        erage numbers. Id. § 84.11(a)(2). 3 Sixth, the EPA multiplied each
        participant’s percentage by the annual allowance cap (step 3) to de-
        termine each firm’s allocation of yearly allowances.                Id.
        § 84.11(a)(4).

        3 Forty firms received consumption allowances in 2022.
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        21-14213                  Opinion of the Court                               7

               In this case, Petitioner-RMS, a Georgia-based manufacturer
        of an HFC blend called R-421A, or “Choice,” challenges its alloca-
        tion of HFC consumption allowances for calendar year 2022. 4 On
        the merits, RMS brings an arbitrary and capricious challenge alleg-
        ing that two other entities—here, named Companies A and B—re-
        ceived credit for historical usage that should have been credited to
        RMS. Specifically, RMS alleges that Company A was merely its
        shipping agent for certain HFCs, and that RMS should qualify as
        the “importer” entitled to credit for this historical usage under the
        regulations. See 40 C.F.R. § 84.3. As to Company B, RMS alleges
        that Company B infringed its patent on R-421A, and thus RMS
        should receive credit for the usage attributable to that infringe-
        ment. While the merits of these arguments turn on different legal
        principles, they have the same practical effect for RMS: Because
        the EPA allegedly short-changed RMS in these instances, RMS’s
        three-year average (step 4) was lower than it should have been.
                                          *      *        *
                To aid our discussion, we provide a visual representation of
        this critical step in the EPA’s methodology:
        Figure 1
                                   RMS Three-Year Avg.
         RMS Three-Year Avg.+ Firm 2 Three-Year Avg.+. . .+ Firm 40Three-Year Avg.

        4 RMS does not challenge the Framework Rule itself in this petition.
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        8                         Opinion of the Court                     21-14213

                In essence, RMS argues that the “RMS Three-Year Avg.” term was
        too small due to the EPA’s arbitrary and capricious actions with
        respect to Companies A and B, and therefore, the output of this
        formula was smaller than it should have been. Because the output
        of this formula represents RMS’s percentage share of the total per-
        mit allocation if this number was too small, then it also means RMS
        received fewer allowances than it should have in step 6.
                                             II.

               The AIM Act adopts the judicial review provision of the
        Clean Air Act, 42 U.S.C. § 7607, and makes it applicable “as though
        [the AIM Act] were expressly included in title VI of [the Clean Air]
        Act.” 42 U.S.C. § 7675(k)(1)(C). Section 7607(b)(1) provides that
        challenges to “nationally applicable” actions “may be filed only in”
        the D.C. Circuit, while challenges to “locally or regionally applica-
        ble” actions “may be filed only” in the regional Courts of Appeals. 5
        A petition for review of a locally or regionally applicable action
        may be heard only in the D.C. Circuit if the EPA Administrator first
        makes and publishes a finding that the action has a “nationwide
        scope or effect.” Id. Because the EPA made no such finding, our

        5 We do not consider today whether § 7607 is a jurisdictional or venue provi-
        sion. By its text, the “may be filed only” phrasing makes this forum provision
        mandatory, leaving us no discretion. The EPA asks that we enforce the pro-
        vision, and that is enough for our purposes today. The nuances of the distinc-
        tion between jurisdictional and venue provisions are not relevant to the dis-
        position of this petition, and so we reserve that question for a later day.
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        21-14213                Opinion of the Court                         9

        decision today turns entirely on whether the EPA’s action is “na-
        tionally” or “locally or regionally” applicable.
               Whether a petition under the Clean Air Act is “nationally
        applicable” is an issue of first impression for this court. That said,
        we do not write on an entirely blank slate—our sister circuits have
        established a consensus that we should begin our analysis by ana-
        lyzing the nature of the EPA’s action, not the specifics of the peti-
        tioner’s grievance. See, e.g., ATK Launch Sys., Inc. v. EPA, 651
        F.3d 1194, 1199 (10th Cir. 2011) (“The nature of the regulation, not
        the challenge, controls.”); Am. Road & Transp. Builders Ass’n v.
        EPA, 705 F.3d 453, 456 (D.C. Cir. 2013) (“[I]n determining that [an
        action] is a ‘locally or regionally applicable’ action, this Court need
        look only to the face of the rulemaking, rather than to its practical
        effects.”); S. Ill. Power Coop. v. EPA, 863 F.3d 666, 670 (7th Cir.
        2017) (“Under the straightforward (if wordy) statutory text, venue
        depends entirely on—and is fixed by—the nature of the agency's
        action . . . .”).
               Our own review of § 7607(b)(1)’s text leads us to the same
        conclusion. The text makes no reference to the nature of the peti-
        tion. Instead, it reads, “[a] petition for review of action of the Ad-
        ministrator [under specified sections], or any other nationally ap-
        plicable regulations promulgated, or final action taken . . . may be
        filed only in the [D.C. Circuit].” 42 U.S.C § 7607(b)(1). As the Sev-
        enth Circuit put it, the text is “wordy,” but clear. S. Ill. Power
        Coop., 863 F.3d at 670. The phrase “nationally applicable”
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        10                         Opinion of the Court                      21-14213

        describes the “regulations promulgated, or final action taken,” not
        the nature of the “petition for review.”
                With this in mind, we look to the face of the challenged EPA
        action, and RMS designated the Allocation Notice in its petition as
        the challenged action. The Allocation Notice is three pages long
        and, except for a brief introduction, consists entirely of three tables
        listing each firm’s permit allocation for calendar year 2022. Alloca-
        tion Notice, 86 Fed. Reg. at 55,841–43. Table 1 addresses alloca-
        tions set aside for specific uses required by 42 U.S.C.
        § 7675(e)(4)(B)(iv). 86 Fed. Reg. at 55,842 tbl.1. Table 2 addresses
        the allocation of production allowances. Id. at tbl.2. Finally, and
        relevant here, table 3 addresses consumption allowances. Id. at
        55,843 tbl.3. Table 3 has forty-two line-item entries; forty of these
        are company names followed by their calculated consumption al-
        location for the year. Id. 6 RMS appears on the list under the entry
        for “RMS of Georgia,” and it received 1,615,592.9 allowances for
        2022.
               We conclude that the Allocation Notice was nationally ap-
        plicable. First, as a textual matter, nothing in it limits the scope of
        the EPA’s action based on geography. Indeed, the Allocation No-
        tice assigns allowances to firms nationwide. Second, the

        6 The two other entries account for the application-specific allocations re-
        ferred to in table 1 and permits set-aside for allocation later in the year. See
        Framework Rule, 86 Fed. Reg. at 55,155 (describing the purpose of set-aside
        permits).
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        21-14213                Opinion of the Court                        11

        allowances themselves are not geographically restricted. See 42
        U.S.C. § 7675(e)(2)(D)(ii) (describing the “[n]ature of allowances”).
        If RMS decided to do so, it could relocate its facilities anywhere else
        in the country and utilize its permits elsewhere. The permits were
        allocated on a firm-specific basis, not a site-specific basis.
                RMS advances two theories for why the Allocation Notice is
        locally applicable, but neither is persuasive. First, RMS argues that
        the EPA’s allocation of permits to it is based on local factors rele-
        vant only to its facility in Alpharetta, Georgia. RMS relies on the
        Seventh Circuit’s decision in Madison Gas & Electric Co. v. EPA,
        which addressed a similar allowance trading regime under the
        EPA’s acid rain program. See 4 F.3d 529, 530 (7th Cir. 1993), over-
        ruled by S. Ill. Power Coop., 863 F.3d at 668 & n.1. There, the
        Seventh Circuit concluded that it was the proper forum—despite
        permits being allocated to firms nationwide, in a single table and in
        a single notice—because “the challenge is based upon an entirely
        local factor . . . .” Id. at 531 (emphasis added). First, Madison Gas
        is of dubious persuasiveness because it has been overruled in its
        own circuit. Second, as explained above, we have rejected for our-
        selves the petition centric approach it advocates. Third, the argu-
        ment fails on its own terms as RMS’s allocation of permits is not
        “based upon an entirely local factor.” The Allocation Notice, by its
        terms, is an implementation of the EPA’s separately promulgated
        Framework Rule, and allowances are made consistent with it. Al-
        location Notice, 86 Fed. Reg. at 55,841. The formula described in
        the Framework Rule does not base each firm’s allowance on
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        12                        Opinion of the Court                     21-14213

        entirely firm-specific factors. Recall our representation of the cal-
        culation of RMS’s share of the allowance pool:
        Figure 1
                                   RMS Three-Year Avg.
         RMS Three-Year Avg.+ Firm 2 Three-Year Avg.+. . .+ Firm 40Three-Year Avg.

               As part of its methodology, the EPA identified RMS’s three
        highest years of HFC usage between 2011 and 2019 and averaged
        them together; this is the “RMS Three-Year Avg.” term. The local fac-
        tors RMS identifies are essentially its disputes with Companies A
        and B, and RMS’s own historic usage of HFCs. The EPA’s resolu-
        tion of these factual disputes, RMS argues, resulted in its three-year
        average, represented as “RMS Three-Year Avg.,” being improperly low
        and thus its share of the allowance pool being improperly low as
        well. But while the “RMS Three-Year Avg.” term appears by itself in the
        numerator of this formula, it is combined with the thirty-nine other
        HFC industry firms in the denominator. Thus, RMS’s allocation is
        not based on its own “entirely local” historical HFC usage but is
        instead relative to and based on every single other firm’s historical
        usage.
               RMS’s second argument has a similar theme. It argues that
        the Allocation Notice is not one big action but instead a document
        detailing many smaller individual actions. Viewed this way, RMS
        argues that it is challenging only its line-item in table 3, not table 3
        as a whole or the other firm’s allocations. But this argument pre-
        sents too narrow a view of the EPA’s final action. Rather, the
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        21-14213               Opinion of the Court                       13

        Allocation Notice is better understood as one EPA action, and
        RMS’s allocation an inseparable component of it. By placing a cap
        on allowances, Congress created a kind of “zero-sum” game for the
        HFC industry. Any gain in permits that one firm gets must be off-
        set by a loss to another firm and vice versa. The Framework Rule’s
        methodology bears this out. Recall again the formula in figure 1.
        While our version features RMS, each firm in table 3 is also subject
        to the same formula—just with its own three-year average in the
        numerator in place of RMS’s. Of course, any shift in one firm’s
        three-year average will change the output of that firm’s formula.
        But it will also change every other firm’s formula as well. This is
        because each firm’s three-year average term appears not just in the
        numerator, but in the denominator as well and the denominator is
        shared across firms nationwide. Any shift in any single firm’s three-
        year average demands a recalculation of the shared denominator
        and thus the formulas for every single firm listed in table 3. The
        EPA’s Allocation Notice in table 3 is thus the result of a singular
        EPA action allocating HFC allowances nationwide, and RMS can-
        not isolate its individual component of it.
              We conclude that because the Allocation Notice allocated
        permits nationwide and was not restricted in geographic scope it
        was nationally applicable. Accordingly, RMS’s challenge to its
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        14                         Opinion of the Court                       21-14213

        allocation, as an inseparable component of that action, must be
        heard in the D.C. Circuit. See 42 U.S.C. § 7607(b)(1). 7
                                              III.

                All that is left for us to do is to transfer this case to the D.C.
        Circuit. Because Congress vested that court, and not this court,
        with the authority to hear this petition we think the D.C. Circuit is
        better suited to rule on the pending motion to intervene made by
        FluoroFusion, Inc, and so, we leave that motion pending and trans-
        fer it as well.
               Accordingly, the Clerk is directed to TRANSFER this peti-
        tion, with the pending motion to intervene, to the United States
        Court of Appeals for the District of Columbia Circuit.
                PETITION TRANSFERRED.

        7 By utilizing the Clean Air Act’s judicial review provision for the AIM Act, it
        is reasonable to assume Congress would not have intended every challenge to
        AIM Act agency actions be heard in the D.C. Circuit and our decision is not in
        conflict with this principle. The EPA’s regulations authorize it to take firm
        specific actions to “retire, revoke, or withhold the allocation of allowances” to
        firms that violate the EPA’s regulations. See 40 C.F.R. § 84.35(a); see also
        Framework Rule, 86 Fed. Reg. at 55,168–72 (discussing EPA’s enforcement
        authority). At oral argument, EPA’s counsel suggested that it could “retire,
        revoke, or withhold” allowances to a firm that failed to maintain “documen-
        tation of . . . final payment of the antidumping” duties on HFC imports, as re-
        quired by 40 C.F.R. § 84.31(c)(2)(xix), and such an action might be considered
        “locally” applicable as it modifies only one firm’s allocations. As we have dis-
        cussed though, the EPA’s action here did not act on the individual firm level
        and instead distributed permits to multiple firms, nationwide.