HCFC Companies Win on Retroactivity Challenge

     (CN) – A federal regulation to slash production of ozone-depleting chemicals cannot be made retroactive, the D.C. Circuit ruled.

     The Environmental Protection Agency finalized the regulation this year as part of a step-down program to phase out production of all chlorofluorocarbons and hydrochlorofluorocarbons by 2030, as required by the 1987 Montreal Protocol.
     In 2003, the agency promulgated a rule to bring production of CFCs and HCFCs down 35 percent. The rule allowed inter-pollutant transfers, or a switch in the kind of ozone-depleting chemical allowed to be produced.
     A 2010 rule, intended to comply with a 65 percent reduction of ozone-depleting HCFCs by this year, refused to recognize such transfers, especially permanent, believing it would change the baseline production allowance.
     The EPA argued that recognizing permanent inter-pollutant transfers would disrupt the cap-and-trade market, provide an advantage to bigger producers and shift away from a desired “worst-first” approach.
     HCFC companies Arkema and Solvay challenged the rule, saying that the agency arbitrarily changed its mind from recognizing the transfers in 2003.
     The three-judge panel agreed with the companies. Judge Janice Brown wrote that the EPA “attempts an awkward straddle” in its most recent rule, saying that it didn’t change its policy while justifying it at the same time.
     The agency is “entitled to change its mind” if the shift is adequately explained, but making any policy change retroactive is “easy to state, less easy to apply.” The new rule changes the legal landscape by altering transactions and baseline allowances approved in 2003, a power that only Congress can grant, the court said.
     The rule, otherwise proper, should be cleared of retroactivity language, the court ruled.

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