Court Of Appeals Rules Against EPA In HFC Case
Ruling states agency failed to follow proper procedures in 2018 guidance
The Natural Resources Defense Council (NRDC), along with a coalition of states led by New York, declared victory in their lawsuit against the Environmental Protection Agency (EPA). On April 7, the U.S. Court of Appeals for the DC Circuit ruled that the EPA improperly suspended the limits on the use of HFCs in its 2018 guidance, which vacated Significant New Alternatives Policy (SNAP) Rules 20 and 21. The ruling thereby restores a prohibition on switching from ozone-depleting substances to HFCs in uses such as large refrigeration systems in supermarkets.
The ruling came down to an issue of both procedure and substance, with the court stating that EPA failed to follow proper notice-and-comment procedures when it issued its guidance and that the agency did not need to completely eliminate the requirements of SNAP Rules 20 and 21 as a result of the initial ruling.
Background on Refrigerant Regulations
The Court of Appeals recapped the case, noting that in 2015, EPA issued a regulation that disallowed the use of HFCs as a substitute for ozone-depleting substances. That rule was challenged in court (Mexichem Fluor v. EPA), and the court determined that EPA could validly forbid current users of ozone-depleting substances from switching to HFCs (e.g., switching from R-22 to R-404A in commercial refrigeration equipment). But the court also concluded that EPA lacked authority to force users who had already switched to HFCs to make a second switch to a different substitute. The court thus vacated the rule in part and remanded to EPA.
On remand, even though the court had sustained EPA’s bar against use of HFCs with regard to entities that were still using ozone-depleting substances, the agency decided to implement the court’s decision by suspending the rule’s listing of HFCs as unsafe substitutes in its entirety, meaning that even current users of ozone-depleting substances could then shift to any and all HFCs. EPA did this without going through notice-and-comment procedures, which is what the NRDC subsequently challenged – and won.
The court added that even though EPA recognized in its guidance from 2018 that the Mexichem ruling involved only a “partial vacatur of the 2015 Rule,” the agency decided to stop applying the HFC restrictions in their entirety, rather than only with respect to users who had already switched to HFCs. According to the court, the original Mexichem decision reinforced an intention only to forbid EPA from applying the 2015 Rule’s HFC listings to a discrete set of regulated parties (those that had already switched from ozone-depleting substances to HFCs), not to set aside the 2015 Rule’s HFC listings in their entirety. As such, the 2018 Rule goes further than Mexichem by instituting a complete vacatur of the 2015 Rule’s HFC listings.
These issues led the Court of Appeals to rule against the EPA.
The Response of the Refrigeration Industry
Following the ruling, the big question for many is, what does this mean for the HVACR industry? Francis Dietz, vice president of public affairs at AHRI noted that the full impact of the decision is not yet known and that the industry will have to seek guidance from the EPA on the next steps.
“Assuming that the decision is not appealed or overturned, then all stakeholders will be looking to the EPA to promulgate a regulation that threads the needle between the two DC Circuit decisions: Mexichem v. EPA and NRDC v. EPA,” he said. “This week’s ruling is effective when the judgment is filed, which is usually seven days after the EPA’s deadline to petition for rehearing en banc. We do not know if the government will appeal.”
Dietz added that even though some are hailing this decision as a total victory, that is misleading, noting, “This case in no way overturns the DC Circuit’s decision in Mexichem that states that the EPA does not have authority to require users to transition from HFCs. The Mexichem decision holds as good law, and this decision complicates matters, because it vacated, on purely procedural grounds, the interim guidance that had been set in place while the EPA was contemplating how to implement the Mexichem decision. Now, industry is without guidance and still has no rule implementing the Mexichem decision, so we are grappling with how to advise our members on how to comply.”
Refrigerant manufacturer, Arkema, challenged the 2015 rule along with Mexichem Fluor, and Allen Karpman, director of government affairs at Arkema Fluorochemicals Americas, stated that it is important to note that this ruling does not mean that the SNAP HFC delistings are back.
“The ruling affects only the EPA’s 2018 rule, but the original SNAP decisions stand – i.e. EPA cannot tell users who have already switched to HFCs to switch again,” he said. “Beyond that, this decision complicates the existing situation. For those still using ODSs, the court has reaffirmed EPA’s authority to prohibit users from switching to HFCs, but how this can work in practice is unclear. What is certain is the original decision by the court that the EPA does not have the authority to force those that have switched to HFCs to make another change.”
For supermarket owners and operators who are now wondering what refrigerants they will be able to use in their commercial refrigeration equipment, Dr. Rajan Rajendran, vice president of system innovation center and sustainability at Emerson, suggests referring to the original SNAP Rules 20 and 21. But only if they are considering replacing refrigeration equipment that still uses an HCFC such as R-22.
“If you've got an existing piece of equipment that's running on R-22, you can continue to use it and service it with reclaimed R-22. That has not been taken away,” he said. “If you have an R-22 system, and you're looking to replace it with a newer system, I would look at the SNAP 20/21 list and find someone who can provide a refrigerant that’s on that list. Regardless of this ruling, states such as California have already adopted SNAP Rules 20 and 21, so I think the most sensible thing to do is to make sure any new equipment is compatible with the SNAP rules.”
That said, there is no need to panic about this new ruling, said Rajendran, as it does not mean a ban on all HFCs. There are still many other alternatives available.
“SNAP Rules 20 and 21 do not ban all HFCs. They allow the use of many, many different HFCs, just not R-404A,” he said. “There are plenty of other refrigerants that are permitted – R-407A, R-448A, R-449A, R-134a, and so on. By the way, a lot of component manufacturers already have components for every one of these refrigerants, so end users should go ahead and adopt SNAP 20/21.”
Still, this ruling leaves a great deal of uncertainty in the industry, noted Jennifer Butsch, regulatory affairs manager at Emerson.
“The exact impact of the decision is unclear and further guidance from the EPA is necessary; however, the safest approach for commercial refrigeration end users looking to replace R-22 or other systems containing ODSs is to use replacements identified as acceptable under SNAP Rules 20 and 21,” she said. “This ruling also underscores the need for congressional action on federally regulating HFCs to deliver the certainty the industry needs.”
Rajendran agrees, noting that Congressional action on this issue is needed sooner rather than later.
“This ruling is all the more reason why Congress needs to enact the AIM Act, which is a federal approach to regulating HFCs,” he said. “It will give clear authority to the EPA on what they should do and what they cannot do. That is why we need the AIM Act now more than ever.”
The AIM Act is extremely important right now, added Dietz, because the crux of the original Mexichem case was that the EPA lacked Congressional authority to regulate HFCs under the Clean Air Act.
“This ruling made a complicated case even more complicated, further muddying the waters and increasing uncertainty for an industry already steeped in it because of varying state HFC regulations that have sprung forth in the absence of a national phase down structure,” he said. “Ultimately, we need legislation to clarify EPA’s authority to set a predictable phase down of HFCs so that environmental policy can be executed by experts, rather than judges.”