Heating, Air-Conditioning, & Refrigeration Distributors International v. EPA ( 2023 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 18, 2022 Decided June 20, 2023
No. 21-1251
HEATING, AIR CONDITIONING & REFRIGERATION
DISTRIBUTORS INTERNATIONAL, ET AL.,
PETITIONERS
v.
ENVIRONMENTAL PROTECTION AGENCY AND MICHAEL S.
REGAN, IN HIS OFFICIAL CAPACITY AS ADMINISTRATOR OF THE
U.S. ENVIRONMENTAL PROTECTION AGENCY,
RESPONDENTS
Consolidated with 21-1252, 21-1253
On Petitions for Review of a Final Action
of the Environmental Protection Agency
Stephen K. Wirth and Wayne J. D’Angelo argued the
causes for Association Petitioners and Petitioner Worthington
Industries, Inc. With them on the briefs were Ethan G.
Shenkman and Jonathan S. Martel. Zachary J. Lee entered an
appearance.
2
David M. Williamson argued the cause and filed the briefs
for petitioner Choice Refrigerants.
Andrew S. Coghlan, Attorney, U.S. Department of Justice,
argued the cause for respondents. On the brief were Todd Kim,
Assistant Attorney General, and Eric G. Hostetler, Attorney.
Melissa J. Lynch and David Doniger were on the brief for
amicus curiae Natural Resources Defense Council in support
of respondents.
Before: HENDERSON, PILLARD and WALKER, Circuit
Judges.
Opinion for the Court filed by Circuit Judge WALKER.
Opinion concurring in part and dissenting in part filed by
Circuit Judge PILLARD.
WALKER, Circuit Judge: Fridges, freezers, and air-
conditioning are technological marvels, making our lives much
more comfortable. But those amenities rely on harmful
greenhouse gases called hydrofluorocarbons — HFCs for
short.
According to the Environmental Protection Agency, those
gases threaten the environment because they “can be hundreds
to thousands of times more potent than carbon dioxide.” 86
Fed. Reg. 55,123 (Oct. 5, 2021). To reduce their use, Congress
enacted the American Innovation and Manufacturing Act. 42
U.S.C. § 7675. The Act directs the EPA to pass a rule phasing
them out. Id. § 7675(e).
After the EPA passed that rule, two regulated companies
and three trade associations sought judicial review. They say
3
that the agency exceeded its statutory authority in two different
ways, and that the Act violates the nondelegation doctrine.
One of the statutory arguments fails, as does the
nondelegation challenge. But the remaining argument has
merit: The EPA lacked statutory authority to pass two measures
regulating the distribution of HFCs. So we vacate those parts
of the EPA’s rule and remand to the agency.
I. Background
A. Congress Tasked the EPA with Reducing HFC Use
The United States has long struggled with the
environmental impact of refrigeration technology. Before
fridges, freezers, and air conditioners used hydrofluorocarbons
as coolants, they used chlorofluorocarbons. But
chlorofluorocarbons deplete the ozone layer. So in 1990
Congress started to phase them out. 42 U.S.C. §§ 7671a,
7671c.
That prompted a shift to HFCs. But Congress’s change
swapped one environmental hazard for another. HFCs, the
EPA says, are harmful greenhouse gases — “hundreds to
thousands of times more potent than carbon dioxide.” 86 Fed.
Reg. at 55,123.
In 2020, Congress intervened again, this time passing the
American Innovation and Manufacturing Act to phase out
HFCs. 42 U.S.C. § 7675. The Act directs the EPA to “issue a
final rule . . . phasing down” HFCs “through an allowance
allocation and trading program.” Id. § 7675(e)(3). The Act
provides the outline for how that program will work, leaving
the agency to fill in the details.
4
Here’s how it works. The EPA first calculates the baseline
levels of HFC production and consumption in the United
States. Id. § 7675(e)(1)(C). The agency then caps maximum
annual HFC production and consumption at a percentage of
those baselines — for instance, ninety percent in 2023. Id.
§ 7675(e)(2)(B), (C). Over time, the caps come down,
eventually reaching fifteen percent in 2036. Id.
To ensure that production and consumption stay under the
respective caps, the Act puts in place a system of “allowances.”
Id. § 7675(e)(2)(D). An allowance is like a license; without
one, “no person shall . . . produce” or “consume” HFCs. Id.
§ 7675(e)(2)(A).
Allowances are initially distributed to HFC users by the
EPA. Once allocated, HFC users can buy and sell allowances
from one another to adjust their production or consumption
capacity. Id. § 7675(g). The total number of allowances in
circulation corresponds to the current HFC production or
consumption cap.
Late last year, the EPA issued its final Phasedown Rule,
implementing the cap-and-trade program. 40 C.F.R. pt. 84.
Among other things, the Phasedown Rule calculates the annual
production and consumption caps, explains how the agency
will distribute allowances, and establishes reporting and
auditing requirements for HFC consumers. Id.
B. The Petitioners Make Three Challenges to the Rule
The petitioners challenge three different aspects of the
Phasedown Rule.
5
First, Choice Refrigerants, a manufacturer of heating and
cooling chemicals, challenges the EPA’s authority to regulate
HFCs within blends.
An HFC blend is a mix of HFCs and other chemicals.
Blends are better than plain-vanilla HFCs for some heating and
cooling applications. Choice’s flagship product is an HFC
blend that it manufactures abroad and imports into the United
States.
The EPA says mixing an HFC with another chemical does
not exempt the HFC from the cap-and-trade program. So
importing blends “requires expenditure of allowances,” with
the number of “allowances necessary” determined according to
the “components of the blend that are regulated HFCs.” JA
1112; see also 86 Fed. Reg. at 55,133, 55,142. If that’s correct,
Choice must buy allowances to import its blend, and its
production costs will go up.
Second, Choice claims that Congress impermissibly
delegated legislative power to the EPA by giving it unguided
discretion to distribute HFC allowances.
The Act lists six types of HFC users — including
“mission-critical military” users — who get preferential access
to the pool of allowances. 42 U.S.C.
§ 7675(e)(4)(B)(iv)(I)(ee). The Act also lets the agency
designate other “essential” users who should get allowances.
Id. § 7675(e)(4)(B)(i)-(ii). But beyond that, Choice argues, the
Act lets the EPA decide who should get the remaining
allowances. And because the statute gives no additional
guidance, Choice says it violates the nondelegation doctrine.
Third, three trade associations challenge two HFC-
distribution regulations in the EPA’s rule. The first regulation
6
mandates refillable cylinders to transport HFCs, thus banning
the disposable cylinders used by the industry today. 40 C.F.R.
§ 84.5(h). The second regulation establishes a certification and
tracking system for HFC distribution. Id. § 84.23(a). Under
that system, “any person who imports, sells, or distributes”
HFCs “must permanently affix a QR code to the [HFC’s]
container that documents a valid certification identification.”
Id. § 84.23(c)(2).
The trade associations argue that the Act does not give the
EPA authority to pass those regulations — nowhere does the
Act say anything about QR codes or refillable cylinders. That
challenge is joined by Worthington Industries, the only
domestic manufacturer of refillable and disposable cylinders.
II. Analysis
Under the Clean Air Act, this Court may set aside the
EPA’s Phasedown Rule if it is “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.” 42
U.S.C. § 7607(d)(9)(A); see id. §§ 7607(d)(1)(I),
7675(k)(1)(C). We “apply the same standard of review under
the Clean Air Act as we do under the Administrative Procedure
Act.” Maryland v. EPA, 958 F.3d 1185, 1196 (D.C. Cir. 2020)
(cleaned up).
Applying that standard, we vacate in part the EPA’s
Phasedown Rule. Choice’s challenges fail: The AIM Act gives
the EPA authority to regulate HFCs within blends, and we may
not consider Choice’s nondelegation argument because Choice
failed to exhaust it before the agency. But the trade
associations’ petition fares better: The EPA does not identify a
statutory provision authorizing its QR-code and refillable-
cylinder rules. So we vacate those parts of the Phasedown Rule
and remand to the agency.
7
A. The EPA May Regulate HFCs Within Blends
The EPA has statutory authority to regulate HFCs within
blends. That’s because an HFC within a blend remains a
regulated HFC under the Act.
Start with the EPA’s statutory authority. The AIM Act
directs the EPA to “phas[e] down the production [and
consumption] of regulated substances . . . through an
allowance allocation and trading program.” 42 U.S.C.
§ 7675(e)(3)(A)-(B). So the EPA has authority to require
allowances for any regulated substance. Id. § 7675(e)(2)(A).
The Act defines a “regulated substance” to include HFCs
“listed” in a statutory table. Id. § 7675(b)(11), (c)(1) (table of
regulated substances). The HFCs listed in the table are
identified by their molecular formulas. Id.
Under that definition, an HFC within a blend is still a
“regulated substance” because it is chemically identical to an
HFC outside of a blend. Both have the same molecular
structure. As the EPA put it during notice and comment, “[t]he
components [of a blend] are not chemically altered in [the
blending] process.” JA 1112.
In other words, an HFC in a blend of other chemicals is
like a blue M&M in a bag of red M&Ms. The blue one does
not stop being blue just because it is tossed in with a bunch of
red ones. In the same way, an HFC mixed with other chemicals
does not stop being a regulated substance under the Act. Cf. 42
U.S.C. § 7675(e)(4)(A)(i) (when a chemical process
“consume[s]” an HFC to create some other chemically-distinct
product, that product is not covered by the allowance-trading
program).
8
In response, Choice argues that blended HFCs are different
enough from unblended HFCs that they are not regulated
substances. It says “blended products . . . have distinct
physical and chemical properties” and “cannot be readily
separated into their component[s] . . . without complex
fractionation equipment.” Choice Br. 4.
That may be true. But it does not go to whether an HFC
within a blend has a different molecular composition than an
unblended HFC. And when pressed at argument, Choice
repeatedly conceded that HFCs within blends are chemically
identical to HFCs outside of a blend.
Finally, Choice notes that under the Act, the EPA may not
“designate as a regulated substance a blend of substances that
includes a[n] [HFC] for purposes of phasing down production
or consumption of regulated substances.” 42 U.S.C.
§ 7675(c)(3)(B)(i). But that provision conditions the
Administrator’s authority to list new HFCs as “regulated
substances” subject to the allowance-trading program. Id.§ 7675(c)(3)(A). Here, the EPA has not exercised that
authority, let alone used it to list a blend as a regulated HFC. It
has instead regulated already-listed HFCs within a blend. And
the Act confirms that the prohibition on listing blends “does
not affect the authority of the Administrator to regulate under
this Act a regulated substance within a blend of substances.”
Id. § 7675(c)(3)(B)(ii) (emphasis added).
B. Choice Failed to Exhaust Its Nondelegation Challenge
Next, Choice says Congress impermissibly delegated its
legislative authority to the EPA. See 86 Fed. Reg. at 55,142
(noting EPA’s “considerable discretion” in allocating
allowances under the AIM Act), 55,203 (final rule allocating
9
allowances). But because Choice failed to make its
nondelegation argument to the EPA during notice and
comment, Choice may not raise that argument now.
Choice sues under § 307 of the Clean Air Act, which
“appl[ies] to” the AIM Act. 42 U.S.C. § 7675(k)(1)(C). That
cause of action has an exhaustion requirement: a litigant may
raise in court only “an objection to a rule or procedure which
was raised with reasonable specificity during the period for
public comment.” Id. § 7607(d)(7)(B).
Choice concedes that it did not raise its nondelegation
argument during notice and comment. Instead, it says it did not
need to exhaust its nondelegation argument because it is an
objection to the statute and not an “objection to a rule or
procedure” subject to exhaustion. Id. § 7607(d)(7)(B).
That argument collapses under scrutiny. The Clean Air
Act’s cause of action authorizes only a limited category of
suits: “petition[s] for review of action of the Administrator [of
the EPA].” Id. § 7607(b)(1) (emphasis added). So litigants
using the Clean Air Act’s cause of action must bring challenges
to agency action, not free-floating challenges to statutes.
Statutes are passed by Congress, not the “Administrator [of the
EPA].” Id.
Thus, to the extent that Choice’s suit is an objection to the
AIM Act alone, Choice fails to state a claim under the Clean
Air Act. And to the extent Choice is challenging the
Phasedown Rule, the Clean Air Act’s exhaustion requirement
applies. 42 U.S.C. § 7607(d)(7)(B). Either way, Choice’s
nondelegation claim is not properly before us.
That said, Choice’s petition is best read as a challenge to
the EPA’s rule. In substance, its argument is that the EPA’s
10
rule is unlawful because the statute authorizing it is an
unconstitutional delegation of legislative power. Indeed,
Choice characterizes its argument that way in its brief. It lists
the “ruling[ ] under review” as the “Cap-and-Trade Rule” and
it asserts that “[t]his Court has jurisdiction . . . to review EPA’s
final rule.” Choice Br. ii, 1. Because Choice’s challenge is to
the Phasedown Rule, any objections to that rule had to be made
first to the EPA. 42 U.S.C. § 7607(d)(7)(B). Choice did not
do that here. So we may not consider its nondelegation claim
now.
Requiring litigants to first bring nondelegation challenges
to the EPA may seem futile. After all, the agency cannot
change Congress’s grant of broad discretion. 1 But the Clean
Air Act’s exhaustion rule has no exception for futile
challenges. Texas Municipal Power Agency v. EPA, 89 F.3d
858, 876 (D.C. Cir. 1996) (per curiam) (no futility exception);
see also Lead Industry Association Inc. v. EPA, 647 F.2d 1130,
1172-74 (D.C. Cir. 1980) (no exception for constitutional
challenges to the rulemaking process). 2
1
The agency could, in the rulemaking process, decide for itself that
a statute unconstitutionally delegates too much power, rendering a
rule unlawful. Cf. U.S. Const., art. II (the executive branch, acting
under the President, has a duty to “take Care that the Laws be
faithfully executed”).
2
True, some constitutional challenges to agency action may be
brought directly in district court — even if a statute requires other
run-of-the-mill challenges to be first litigated before the agency. See
Axon Enterprise, Inc. v. Federal Trade Commission, 143 S. Ct. 890
(2023). But that doesn’t excuse Choice from the Clean Air Act’s
exhaustion requirement here. When litigants choose to use a
statutory review mechanism like the Clean Air Act’s, they must still
meet its strictures. So even if Choice could have bypassed the Act’s
exhaustion requirement by bringing its nondelegation claim directly
11
C. The Refillable-Cylinder and QR-Code Rules Lack
Statutory Basis
Finally, the trade associations and Worthington argue that
the EPA’s refillable-cylinder and QR-code rules lack a
statutory basis. We agree. The EPA has not identified a
provision of the AIM Act giving it the authority to require
refillable cylinders or a QR-code tracking system. 40 C.F.R.
§§ 84.5(h), 84.23(a).
To support those regulations, the EPA attempts to rely on
two provisions of the AIM Act. It initially points to Section
7675(k)(1)(A), which gives the agency authority to
“promulgate . . . such regulations as are necessary to carry out
the functions of the [EPA] under [the AIM Act].” The EPA
recognizes that (k)(1)(A) is a source of procedural not
substantive authority — it lets the agency pass rules to carry
out powers granted by other provisions of the statute.
For substantive authority, the EPA relies on Section
7675(e)(2)(B):
(B) Compliance
For each year [of the phasedown period],
the Administrator shall ensure that the
annual quantity of all regulated substances
produced or consumed in the United States
does not exceed the product obtained by
multiplying —
in district court (we take no position on whether it could), it did not
do that here.
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(i) the production baseline or
consumption baseline, as applicable;
and
(ii) the applicable percentage listed on the
table contained in subparagraph (C).
Relying on Congress’s instruction to “ensure” that HFC
production and consumption “do[ ] not exceed” the phasedown
cap, the EPA’s final rule claimed the “authority to establish
complementary measures . . . [to] meet the statutory reduction
[target],” 86 Fed. Reg. at 55,172 (citing 42 U.S.C.
§ 7675(e)(2)(B)).
But the EPA’s reading has two major problems: It ignores
the role that subsection (e)(2)(B) plays in the statutory scheme
and it reads too much into the word “ensure.”
To start, subsection (e)(2)(B) is a math equation, not a
grant of regulatory power. It tells the agency how to calculate
the production and consumption cap for each year of the
phasedown. To calculate the cap, the agency must
“multiply[ ]” the “production baseline or consumption
baseline” by the “applicable percentage listed on the table” in
(e)(2)(C). 42 U.S.C. § 7675(e)(2)(B).
Confirming that reading, statutory cross-references treat
(e)(2)(B) as a formula setting the cap for each year of the
phasedown. For example, subsection (e)(2)(D)(i) instructs the
EPA to “determine the quantity of allowances . . . that may be
used for the following calendar year” by referring to the cap
“calculated under” (e)(2)(B). Id. § 7675(e)(2)(D)(i).
Similarly, under (e)(5), the EPA may allow an HFC producer
to make more HFCs than authorized by his “production
allowances” if doing so “would not violate” the cap in
(e)(2)(B). Id. § 7675(e)(5), (B)(iii).
13
Given the role that (e)(2)(B) plays in the statutory scheme,
that subsection would be an odd place for Congress to locate a
grant of sweeping regulatory power letting the agency pass
additional measures to phasedown HFCs. True, the placement
of statutory language is only one part of the puzzle. Courts
must vindicate the plain meaning of the text wherever it is
placed in the statute. But here the statutory text does not
support the EPA’s assertion of power.
Reading subsection (e)(2)(B) to grant the EPA authority to
pass complementary measures leans heavily on the word
“ensure.” The EPA asserts that (e)(2)(B)’s use of “shall
ensure” reflects Congress’s “intentional effort to confer the
flexibility necessary [for] the agency to accomplish the
statute’s aims” and so gives the EPA “more general authority
to establish complementary measures to ensure that the
statutory phasedown is achieved.” EPA Br. 52 (cleaned up).
We disagree. To “ensure” is “to make sure, certain, or
safe.” Ensure (def. 1), Merriam-Webster (2023). So when
Congress told the EPA to “ensure” that the annual HFC
consumption cap is not “exceed[ed],” all it said was that the
agency should guarantee that result. 42 U.S.C. § (e)(2)(B).
Subsection (e)(2)(B) does not tell the agency anything about
how to “ensure” the cap is met.
The rest of the statute does that job. Congress gave the
EPA the power to ensure the cap is met by using the allowance-
trading program, id. § 7675(e), detailed statutory auditing and
reporting requirements, id. § 7675(d), and the EPA’s power to
pass rules regulating “practice[s], process[es], or activit[ies]”
for “servicing, repair[ing], dispos[ing of], or install[ing] [HFC]
equipment,” id. § 7675(h)(1).
14
Those detailed instructions undercut the agency’s claim
that (e)(2)(B) gives it power to pass other measures. When
“draftsmen[ ] mention . . . one thing, like a grant of authority”
it “necessarily, or at least reasonably, impl[ies] the preclusion
of alternatives.” Shook v. D.C. Financial Responsibility and
Management Assistance Authority, 132 F.3d 775, 782 (D.C.
Cir. 1998). Congress’s exhaustive instructions to the agency
throughout the AIM Act make it less plausible that Congress
meant the words “shall ensure” in (e)(2)(B) to give the EPA
broad power to pass new rules.
That intuition becomes even stronger when we consider
the breadth of the EPA’s claimed power. The refillable-
cylinder rule alone is likely to impose between $ 441 million
and $2 billion in costs on the regulated industry. 86 Fed. Reg.
at 55,174 ($ 441 million estimate); JA 119 ($ 2 billion
estimate). It is unlikely that Congress would have granted the
agency authority to pass a rule of that magnitude in a provision
of the statute that says nothing about complementary measures,
refillable cylinders, or QR Codes.
To be clear, we do not decide this case under the major-
questions doctrine. That doctrine holds that courts “expect
Congress to speak clearly if it wishes to assign to an agency
decisions of vast economic and political significance.” West
Virginia v. EPA, 142 S. Ct. 2587, 2605 (2022) (cleaned up).
And the EPA’s QR-code and refillable-cylinder rules are less
important and expensive than other regulations to which the
Supreme Court has applied that doctrine. See id. at 2609; NFIB
v. OSHA, 142 S. Ct. 661, 666 (2022).
Instead, we rely on another long-standing rule of
interpretation: “Congress . . . does not alter the fundamental
details of a regulatory scheme in vague terms or ancillary
provisions.” Whitman v. American Trucking Associations, 531
15
U.S. 457, 468 (2001). Whereas the major-questions doctrine
has a constitutional basis — safeguarding the “separation of
powers” by ensuring that agencies do not use statutory
ambiguities to make decisions vested in our elected
representatives — the American Trucking rule rests on a more
modest intuition about how we use language. West Virginia,
142 S. Ct. at 2609. The touchstone of statutory interpretation
is always to “interpret the words consistent with their ordinary
meaning at the time Congress enacted the statute.” Wisconsin
Central Ltd. v. United States, 138 S. Ct. 2067, 2070 (2018)
(cleaned up). Ordinary readers of English do not expect
provisions setting out math equations to empower an agency to
prescribe other “fundamental details of a regulatory scheme.”
Whitman, 531 U.S. at 468.
Because the EPA’s interpretation of (e)(2)(B) seeks to do
just that, it strains against the ordinary use of language. That
is an important clue that the EPA advances an implausible
reading of the statute.
* * *
The EPA has not identified a statute authorizing its QR-
code and refillable-cylinder regulations. We therefore vacate
those parts of the Phasedown Rule and remand to the agency.
We deny Choice’s challenges to other aspects of the rule.
So ordered.
PILLARD, Circuit Judge, concurring in part and dissenting
in part:
I agree with my colleagues that EPA has the statutory
authority to regulate hydrofluorocarbons (HFCs) that are
contained within blends. I also agree that we may not hear
Choice’s nondelegation argument because Choice failed to
exhaust it before the agency.
I write separately to explain why EPA has the authority to
require refillable cylinders for regulated HFCs and to
implement a QR-code tracking system to trace the import, sale,
and distribution of HFCs through the supply chain. In the
American Innovation and Manufacturing Act, Congress
imposed on EPA a duty to “ensure” compliance with the
schedule Congress mandated for phasing down HFC
production and consumption. 42 U.S.C. § 7675(e)(2)(B). The
Act makes clear that Congress intended its phasedown
schedule to be met. To that end, it empowered EPA to
“promulgate such regulations as are necessary” to effect
compliance. Id. § 7675(k)(1)(A).
The rule under review falls squarely within EPA’s
congressionally delegated authority: The agency determined
that, to accomplish the HFC phasedown, it was necessary to
require refillable cylinders with unique, trackable QR codes, so
it promulgated a final rule to that effect. After all, requiring
refillable and trackable cylinders is a straightforward way to
“ensure” that the regulated substances they contain correspond
to allowances the statute requires. Without such tools, it is hard
to see how EPA can ensure the phasedown.
My colleagues’ conclusion that EPA’s duty to ensure
compliance is nothing more than a “math equation,” Maj. Op.
12, understates and undercuts the responsibility Congress gave
the agency. Their reading runs counter to the statute’s text and
structure. It will hamstring EPA’s efforts to combat illicit trade
2
in HFCs, making it less likely that the United States
accomplishes the HFC reductions Congress mandated. And
the majority’s interpretation will have unfortunate side effects
for domestic industry and law enforcement: Even as it places
law-abiding U.S. importers and producers at a competitive
disadvantage by making the United States market an easy
target for illegal HFCs, it will help the illegal product to
circulate unseen by U.S. law enforcement.
I.
HFCs are highly potent greenhouse gases with global
warming potentials “that can be hundreds to thousands of times
more potent than carbon dioxide.” 86 Fed. Reg. 55,116,
55,123/3 (Oct. 5, 2021). “[T]heir use is growing worldwide,”
in part due to “the increasing use of refrigeration and air
conditioning equipment globally.” Id. The amount of HFCs in
the global atmosphere is thus increasing at “accelerating rates.”
Id. “[E]levated concentrations of [greenhouse gases] including
HFCs have been warming the planet, leading to changes in the
Earth’s climate,” such as “in the frequency and intensity of heat
waves, precipitation, and extreme weather events.” Id. at
55,124/2.
Recognizing that releases of these potent greenhouse gases
are projected to continue accelerating rapidly, the United States
joined with more than 140 countries to ratify the so-called
Kigali Amendment to the Montreal Protocol on Substances that
Deplete the Ozone Layer. The signatories to the 2016 Kigali
Amendment committed to a “global phasedown of the
production and consumption of HFCs.” Id. at 55,123/3-24/1;
see id. at 55,139/1-2. If fully implemented, the Kigali
3
Amendment “is expected to avoid up to 0.5 °C of warming by
2100.” Id. at 55,124/1.
In keeping with that international commitment to phase
down HFCs, Congress enacted the bipartisan American
Innovation and Manufacturing (AIM) Act. Pub. L. No. 116-
260, div. S, § 103, 134 Stat. 2255, 2255-71 (2020) (codified at
42 U.S.C. § 7675). Under the Act, HFC production and
consumption in the United States must be phased down to 15
percent of baseline levels by 2036. 42 U.S.C. § 7675(e)(2).
The Act imposes those steep restrictions on HFC supply while
other parties to the Kigali Amendment are also limiting the
supply of HFCs in “ways that are similar.” 86 Fed. Reg. at
55,139/1.
Ensuring compliance with that HFC phasedown will be no
small feat. As countries around the world tighten restrictions
on HFCs, incentives to trade illegally are surging. In EPA’s
experience—including during the United States’ participation
in the global phasedown of ozone-depleting substances and in
the early stages of the HFC phasedown elsewhere—declining
allowances for lawful import and production of a substance
tend to increase its illegal trade. See id. at 55,166/2-68/1,
55,166/2 n.63. Indeed, observed rates of noncompliance with
HFC quota systems have been dramatic. One study found that
even those imports that were reported to European customs
officials “exceeded the quota amount by 16 percent in 2019 and
33 percent in 2020.” Id. at 55,167/1. In another study, 72
percent of surveyed companies in Europe, where disposable
cylinders are illegal, “had seen or been offered refrigerants in
disposable cylinders.” Id. at 55,166/3. The United States faces
similar pressures. Id. at 55,167/2. Without appropriate
compliance measures to enable vigorous enforcement, illegal
trade will likely swamp the congressionally mandated
phasedown. Left unchecked, illicit trade in HFCs threatens to
4
“significantly harm the environment, the United States
economy, and consumer and worker safety.” Id. at 55,168/1.
In promulgating the phasedown rule mandated by the Act,
EPA thus took a “multifaceted approach . . . to deter, identify,
and penalize illegal activity.” Id. EPA adopted sensible
compliance measures to ensure the HFC phasedown and “to
create a level playing field for the regulated community.” Id.
Two such compliance measures are at issue here: first, a
prohibition on single-use cylinders for regulated HFCs and,
second, a container-tracking system requiring QR codes to
provide visibility into the import, sale, and distribution of
HFCs.
II.
Two provisions of the AIM Act work in tandem to
authorize EPA’s refillable-cylinder and QR-code regulations.
First is subsection 7675(k)(1)(A), which empowers EPA to
“promulgate such regulations as are necessary to carry out the
functions of the Administrator” under the Act. 42 U.S.C.
§ 7675(k)(1)(A). The majority explains that “(k)(1)(A) is a
source of procedural not substantive authority – it lets the
agency pass rules to carry out powers granted by other
provisions of the statute.” Maj. Op. 11. So far, so good. On
this much the majority and I agree: Whenever the Act assigns
to EPA a substantive responsibility or function, EPA may also
promulgate rules “as necessary” to carry out that function.
The second provision—and source of EPA’s substantive
responsibility—is subsection 7675(e)(2)(B). Recall that
subsection (e)(2)(B), entitled “Compliance,” says that EPA
“shall ensure” that annual HFC production or consumption
“does not exceed” the congressionally mandated cap for any
given year. 42 U.S.C. § 7675(e)(2)(B). On the meaning of that
provision, the majority and I part ways. To be sure, the
5
majority starts off on the right foot: Subsection (e)(2)(B) does
set out the production and consumption caps and provide the
formula for calculating them. But, while it includes a formula,
subsection (e)(2)(B) is not just a “math equation.” Maj. Op.
12.
In subsection (e)(2)(B), Congress called on EPA to make
certain that the HFC phasedown is achieved. That duty flows
from the plain text of the provision. The operative words are
“shall ensure.” “The first sign that the statute impose[s] an
obligation is its mandatory language: ‘shall.’” Me. Cmty.
Health Options v. United States, 140 S. Ct. 1308, 1320 (2020).
“[T]he word ‘shall’ usually connotes a requirement.” Id.(quoting Kingdomware Techs., Inc. v. United States, 579 U.S.
162, 171 (2016)). The duty subsection (e)(2)(B) places on EPA
is to “ensure”—that is, to guarantee—that annual HFC
production or consumption “does not exceed” the
congressionally mandated cap for any given year. 42 U.S.C.
§ 7675(e)(2)(B). In other words, as EPA put it, the agency has
“the responsibility to ensure that the statutorily required
phasedown occurs.” 86 Fed. Reg. at 55,172/3.
Congress supplied another cue as to the intended meaning
of subsection (e)(2)(B): its heading. See Merit Mgmt. Grp., LP
v. FTI Consulting, Inc., 138 S. Ct. 883, 893 (2018). In
subsection (e)(2)(B), Congress described EPA’s authority as
one of “Compliance”—not just “Calculation.” That choice of
heading underscores that Congress intended to impose on EPA
a duty to guard against non-compliance with the
congressionally mandated phasedown.
As the majority recognizes, however, subsection (e)(2)(B)
does not spell out in detail how the agency is to ensure the cap
is met. Maj. Op. 13. For that, we return to EPA’s procedural
authority found in subsection (k)(1)(A). Because one of the
6
Administrator’s functions under the Act is to “ensure”
compliance with the phasedown, 42 U.S.C. § 7675(e)(2)(B),
EPA may issue appropriate rules as necessary to do so, id.§ 7675(k)(1)(A). That is, Congress delegated to EPA the
authority to promulgate reasonable compliance measures, so
long as they are necessary to guaranteeing that the phasedown
is met (and do not conflict with any other provision of the Act).
The final rule under review is a run-of-the-mill exercise of
EPA’s compliance responsibilities under the Act. EPA
concluded that both the refillable-cylinder and QR-code
requirements were “necessary” to “ensure” annual HFC
production and consumption do not exceed the phasedown
limits. See id. § 7675(e)(2)(B), (k)(1)(A). As EPA explained,
“[a] program to control the production and import of HFCs is
only achievable to the extent it can be enforced.” 86 Fed. Reg.
at 55,175/1. Therefore, “[r]estrictions designed to deter and
identify illegal imports . . . are a necessary component to such
a program.” Id. (emphasis added).
A refillable-cylinder requirement is necessary because the
“visual differences” between disposable and refillable
cylinders “allow Customs officials and law enforcement
personnel to easily distinguish” between legally permitted
refillable cylinders and disposable ones that “are favored for
illicit trade.” Id. at 55,173/1. Indeed, refillable-cylinder
requirements have a “proven track record of facilitating
detection and interdiction of illegal HFCs.” Id. Several other
jurisdictions, including the European Union, Canada,
Australia, and India, have already adopted such requirements.
Similarly, “a comprehensive container tracking system is
needed” so as “[t]o help ensure the quantity of regulated
substances produced or consumed in the United States does not
exceed the Congressionally mandated cap.” Id. at 55,186/1.
7
The QR-code tracking system makes it easy to spot HFCs that
do not enter the market legally. Id. at 55,183/3. Such a system
is also “especially important for identifying illegal production
[within the United States]—as that material will not have a
check at the port like imports.” Id. at 55,185/3.
Not only were both measures permissibly promulgated
under the AIM Act, but they were also well within EPA’s
expertise. For example, EPA has long regulated the containers
and labeling for other substances it regulates, such as
pesticides, see, e.g., 40 C.F.R. § 156.3 et seq. (labeling
requirements); id. § 165.1 et seq. (container requirements), and
underground storage tanks for biofuels, see id. § 280.10 et seq.
And, in running other trading programs, EPA is familiar with
the need for systems to track substances subject to statutory
quantity controls. See, e.g., id. § 80.1425 et seq. (requiring
renewable identification numbers, or RINs, to account for
batches of qualifying renewable fuels). Furthermore, EPA has
long partnered with other federal agencies, including U.S.
Customs and Border Protection (CBP) and the Department of
Justice, to help curb illicit trade in substances that it regulates.
Since the 1990s, for instance, EPA has coordinated with CBP
and other agencies to ensure the phaseout of ozone-depleting
substances—an experience which informed EPA’s
promulgation of the rule at issue here. See 86 Fed. Reg. at
55,167/3.
As the final rule well illustrates, EPA’s compliance
function is vital to the statutory scheme. Ensuring compliance
with a stringent new HFC phasedown is a daunting task, for
which agency specialization and adaptability are paramount.
Rather than confine EPA to any one tool, Congress left it to
agency discretion to determine how best to root out non-
compliant trade in HFCs. Given sophisticated efforts to evade
HFC phasedowns elsewhere—as well as EPA’s own
8
experience combatting illicit trade in ozone-depleting
substances—it made sense for Congress not to specify precise
methods, but to charge EPA to adopt compliance measures as
necessitated by the circumstances, and to adapt and improve
them based on the lessons of experience. See id. at 55,166/2-
68/1.
The AIM Act is clear and robust on paper. But without the
subsection (e)(2)(B) compliance function, it may prove flimsy
in practice. As EPA explained, the steep domestic phasedown
of HFCs will meet forceful and sophisticated efforts from
around the globe to evade the HFC allowance system. See id.
The court’s decision today to read out of the Act the limited but
flexible authority to prevent such noncompliance leaves EPA
with few and inadequate tools to ensure the HFC phasedown is
achieved.
III.
The majority resists the plain meaning of subsection
(e)(2)(B) by characterizing it as only “a formula setting the cap
for each year of the phasedown.” Maj. Op. 12. That is a
cramped reading of the language Congress used in subsection
(e)(2)(B).
For one, Congress’ use of the word “ensure”—which, as
the majority agrees, means to make sure or to “guarantee,” Maj.
Op. 13—is a perplexing one for a provision that my colleagues
say describes only a calculation. If Congress wanted
subsection (e)(2)(B) to provide EPA only the limited authority
to calculate the production and consumption caps, it could
easily have done so. Subsection (e) is littered with instructions
for EPA to establish or calculate certain numerical values:
Congress instructed that EPA “shall establish” production and
consumption baselines for the phase-down of regulated
substances, 42 U.S.C. § 7675(e)(1)(A); that each of those
9
baselines “is the quantity equal to the sum of” certain
statutorily enumerated calculations, id. § 7675(e)(1)(B), (C);
and that, in calculating those baselines, “the Administrator
shall use” certain exchange values provided in the statute, id.
§ 7675(e)(1)(D). Put otherwise, Congress knew how to
prescribe a mere calculation. It did more than that in subsection
(e)(2)(B).
Nor should we read much into the fact that the Act at times
gives EPA “detailed instructions” regarding other agency
responsibilities. Maj. Op. 14. The expressio unius canon on
which the majority relies is “an especially feeble helper in the
administrative setting, where Congress is presumed to have left
to reasonable agency discretion questions that it has not
directly resolved.” Cheney R.R. Co. v. ICC, 902 F.2d 66, 69
(D.C. Cir. 1990). In the administrative context, “we have
consistently recognized that a congressional mandate in one
section and silence in another often ‘suggests not a prohibition
but simply a decision not to mandate any solution in the second
context, i.e., to leave the question to agency discretion.’”
Catawba Cnty., N.C. v. EPA, 571 F.3d 20, 36 (D.C. Cir. 2009)
(quoting Cheney R.R. Co., 902 F.2d at 69).
The majority’s reliance on the expressio unius canon is
doubly irksome, however, because we normally “do not read
the enumeration of one case to exclude another unless it is fair
to suppose that Congress considered the unnamed possibility
and meant to say no to it.” Barnhart v. Peabody Coal Co., 537
U.S. 149, 168 (2003). To read the statute as the majority does,
we would have to “be confident that a normal draftsman when
he expressed ‘the one thing’”—for example, the creation of an
allowance-allocation-and-trading program—“would have
likely considered the alternatives that are arguably
precluded”—that is, refillable-cylinder and QR-code
requirements—and by not mentioning them meant to put them
10
off limits. Shook v. D.C. Fin. Resp. & Mgmt. Assistance Auth.,
132 F.3d 775, 782 (D.C. Cir. 1998). But neither the majority
nor the trade associations have provided any reason to think
that Congress considered and rejected either a refillable-
cylinder requirement or container-tracking system.
Rather, recognizing that it could not foresee every way in
which regulated entities might evade the HFC phasedown,
Congress in subsection (e)(2)(B) stated EPA’s compliance
duties in general terms so as “‘to confer the flexibility
necessary’ for [EPA] to address yet unknown threats” to the
HFC phasedown. Corbett v. TSA, 19 F.4th 478, 488 (D.C. Cir.
2021) (quoting Massachusetts v. EPA, 549 U.S. 497, 532
(2007)). To the extent EPA’s compliance authority might be
viewed as “broad,” Maj. Op. 14, that reflects Congress’
deliberate choice to leave specific compliance measures to
EPA’s discretion. “Congress knows to speak in plain terms
when it wishes to circumscribe, and in capacious terms when it
wishes to enlarge, agency discretion.” City of Arlington v.
FCC, 569 U.S. 290, 296 (2013).
Finally, it bears emphasis that the compliance authority
granted and exercised here is not, relatively speaking,
particularly broad. My colleagues’ conclusion that the
authority EPA claims under subsection (e)(2)(B) is somehow
disproportionate to the terms in which Congress conferred it,
Maj. Op. 13-15, is badly misplaced. The modest regulatory
measures EPA promulgated are a far cry from the kinds of
sweeping or implausible measures that have triggered extra
skepticism from the Supreme Court—whether that scrutiny
takes the form the trade associations demand, see Association
Reply Br. 11-13 (citing West Virginia v. United States, 142 S.
Ct. 2587 (2022)), or the majority undertakes, see Maj. Op. 14-
15 (citing Whitman v. Am. Trucking Ass’ns, 531 U.S. 457(2001)). For one thing, EPA acted here within the limited
11
ambit of a recent, pollutant-specific statute to deploy familiar
tools to help effectuate a defined phasedown. For another, the
ostensible “magnitude” of the compliance costs on industry is
overstated. The prohibition on single-use cylinders is projected
to cost a mere $22 million annually on average, and the QR-
code tracking system would cost even less. 86 Fed. Reg. at
55,174/1; U.S. Env’t Prot. Agency, EPA-HQ-OAR-2021-
0044-0227-02, Regulatory Impact Analysis for Phasing Down
Production and Consumption of Hydrofluorocarbons (HFCs)
69 (2021) (J.A. 720). Those costs would seem to be a mere
drop in the bucket for a multi-billion-dollar regulated industry.
And they are no reason for enhanced judicial scrutiny in the
face of the far greater health and welfare costs likely to flow
from circumventing the phasedown. See 86 Fed. Reg. at
55,119/1-2 & tbl.1, 55,197 tbl.8 (estimating the rule’s
annualized net benefits at more than $14 billion).
In any case, the American Trucking decision relied on by
the majority “stands for the rather unremarkable proposition
that sometimes statutory silence, when viewed in context, is
best interpreted as limiting agency discretion.” Entergy
Corp. v. Riverkeeper, Inc., 556 U.S. 208, 223 (2009). But, as
we have already seen, the statutory text and context here point
in the other direction: Congress assigned to EPA the function
of “ensur[ing]” nationwide “[c]ompliance” with the HFC
phasedown schedule and empowered the agency to promulgate
rules “as are necessary to carry out” that function. 42 U.S.C.
§ 7675(e)(2)(B), (k)(1)(A). In so doing, Congress left the
development of specific compliance measures up to EPA’s
informed discretion. EPA’s entirely unsurprising choice to set
up a standardized system for transporting HFCs in refillable
cylinders labeled with trackable QR-codes falls comfortably
within that discretion.
12
***
In short, EPA validly exercised its authority under the
AIM Act to ban non-refillable cylinders and adopt a container-
tracking system. Because today’s decision understates and
undercuts EPA’s statutorily imposed authority and duty to
ensure compliance with the HFC phasedown, I respectfully
dissent from Section II.C of the majority opinion.