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Honeywell International, Inc. v. Environmental Protection Agency

July 23, 2004


On Petition for Review of an Order of the Environmental Protection Agency

Before: Sentelle, Randolph and Rogers, Circuit Judges.

Per curiam.

Argued February 26, 2004

Concurring opinion filed by Circuit Judge RANDOLPH, with whom Circuit Judge SENTELLE joins.

Opinion concurring in part and dissenting in part filed by Circuit Judge ROGERS.


The opinion of the court is presented in two parts. In the first part, Judge Rogers writes for a unanimous court to introduce the issues presented and to hold that Honeywell International, Inc. has standing to challenge the rule on review promulgated by the Environmental Protection Agency ("EPA"). In the second part, Judge Sentelle writes for himself and Judge Randolph on Honeywell's challenge to EPA's reliance on economic considerations in promulgating the rule on review, concluding that the rule must be vacated; Judge Randolph writes on the remedy; and Judge Rogers concurs in part and dissents in part, and would remand the rule to EPA for further explanation.


ROGERS, Circuit Judge, writing in PART I the opinion of the court: Title VI of the Clean Air Act ("CAA"), 42 U.S.C. §§ 7671-7671q (2004), implements the policies and directives of the Montreal Protocol on Substances that Deplete the Ozone Layer, Sept. 16, 1987, 26 I.L.M. 1550 (entered into force Jan. 1, 1989), in two ways relevant to this appeal: first, by setting timetables for phasing out production and importation of chemicals that deplete the protective stratospheric ozone layer, such as chlorofluorocarbons ("CFCs") and hydrochlorofluorocarbons ("HCFCs"), and second, by identifying substitutes for ozone-depleting substances thus phased out. Among the industrial uses of CFCs and HCFCs is the manufacture of foam products. In 1999 the Environmental Protection Agency ("EPA") designated HFC-245fa, a nonozone depleting hydrofluorocarbon ("HFC") product developed by Honeywell International, Inc. ("Honeywell"), as an acceptable listed substitute for HCFC-141b, an ozonedepleting chemical scheduled to be phased out in 2003, for all foam uses. Honeywell now challenges a final rule also authorizing as substitutes for HCFC-141b the use of two ozonedepleting chemicals -- HCFC-22 and HCFC-142b -- in certain foam end-uses if technical constraints prevent use of an approved listed alternative. Honeywell contends that EPA exceeded its statutory authority and departed from its policy without rational explanation by approving ozonedepleting chemicals because EPA (1) failed to provide adequate notice of its decision to approve HCFC-22 and HCFC-142b where its rule had proposed the opposite; (2) had previously approved substitutes that, in relative terms, present a reduced risk to human health and the environment; and (3) improperly considered potential economic impact when rendering its final decision. EPA responds, as a threshold matter, that Honeywell lacks standing, and on the merits, that there was adequate notice, and that Honeywell misconstrues the effect of the listing of an approved substitute chemical and ignores that continued use of ozone-depleting chemicals under the rule turns only on technical feasibility and not costs. On reply, Honeywell also contends that the rule impermissibly delegates certain determinations to the regulated end users. We hold that Honeywell has standing.


Title VI of the Clean Air Act, 42 U.S.C. §§ 7671-7671q, sets restrictions on the use of chemicals known to have ozone-depleting properties as part of the implementation of a set of policies aimed at protecting the ozone layer. Sections 604 and 605 of the CAA, id. §§ 7671c & 7671d, set timetables phasing out, over time, most uses of "Class I" substances (which include chlorofluorocarbons) and "Class II substances" (which include hydrochlorofluorocarbons). As many such chemicals had been put to use in a wide array of commercial applications, the CAA seeks to ensure the availability of ozone-friendly replacements through § 612, id. § 7671k, which establishes the "safe alternatives policy." Section 612(a) provides that, "[t]o the maximum extent practicable, class I and class II substances shall be replaced by chemicals, product substitutes, or alternative manufacturing processes that reduce overall risks to human health and the environment." The Administrator of EPA is directed to take several steps to promote this transition, such as recommending research efforts to identify and develop alternatives for Class I and Class II substances. See CAA § 612(b).

As relevant to Honeywell's petition for review, the Administrator must also "promulgate rules ... providing that it shall be unlawful to replace any class I or class II substance with any substitute substance which the Administrator determines may present adverse effects to human health or the environment, where the Administrator has identified an alternative to such replacement that -- (1) reduces the overall risk to human health and the environment; and (2) is currently or potentially available." CAA § 612(c). The Administrator is required to publish lists of substitute chemicals that are prohibited or permitted for specific uses. Id. EPA has implemented CAA § 612 through the Significant New Alternatives Program ("SNAP"), 40 C.F.R. §§ 82.170-82.184 (2004), which establishes criteria and procedures for listing chemicals as approved substitutes for chemicals phased out pursuant to the CAA. Under the SNAP program, substitutes can be listed as "acceptable" or "unacceptable," but the regulations also contemplate that substitutes may be listed as acceptable subject to "use conditions" (in which use of the substitute is permitted if certain procedures to minimize environmental and human risk are followed) or "use limits" (in which use of the substitute is permitted for a "narrowed range of use ... because of the lack of alternatives for specialized applications"). See id. § 82.180(b).

In 1993, EPA, acting pursuant to CAA § 606, 42 U.S.C. § 7671e, which authorizes the acceleration of statutory phaseout dates, promulgated bans on the importation and production of three Class II chemicals relevant to this petition: HCFC-141b, HCFC-22, and HCFC-142b. 58 Fed Reg. 65,-018, 65,028 (Dec. 10, 1993). The ban is effective in 2003 for HCFC-141b, and in 2010 for HCFC-22 and HFCF-142b. Id. However, in 1994, EPA also approved these three hydrochlorofluorocarbons, in the interim, as alternatives, in foam uses, to more ozone-damaging chlorofluorocarbons phased out pursuant to CAA Title VI. See 59 Fed. Reg. 13,044, 13,083 (March 18, 1994). In anticipation of the 2003 ban on the importation and manufacture of HCFC-141b, Honeywell developed a non-ozone-depleting hydrofluorocarbon, HFC-245fa, to function as a substitute for HCFC-141b in foam applications. In 1999, EPA approved Honeywell's petition to list HCFC-245fa as an acceptable substitute for HCFC-141b in all foam end uses. See 64 Fed. Reg. 68,039, 68,041 (Dec. 6, 1999).

The final rule followed upon intervenor ATOFINA Chemicals, Inc.'s petition of February 17, 1999, requesting that HCFC-22 and HCFC-142b, along with a third chemical, HCFC-124, also be approved as acceptable substitutes for HCFC-141b in foam applications. 65 Fed. Reg. 42,653, 42,-656 (July 11, 2000). HCFC-22 and HCFC-142b were already in use in several foam applications, due to EPA's 1994 approval of those chemicals as CFC substitutes, 59 Fed. Reg. at 13,083, and ATOFINA's petition, if granted, would have permitted their use as substitutes for HCFC-141b as well. EPA issued a notice of proposed rulemaking, in which it proposed to revisit the status of HCFC-141b, HCFC-22, HCFC-124, and HCFC-142b, and to list all four as unacceptable in all foam applications, both as substitutes for CFCs and for each other. 65 Fed. Reg. at 42,656. The proposed rule, inter alia, had the effect of denying ATOFINA's petition to allow new users to use HCFC-22, HCFC-124 and HCFC-142b as substitutes for HCFC-141b, but also swept more broadly by effectively proposing to disallow all existing use of the four hydrochlorofluorocarbons. EPA explained that it was proposing to list the chemicals as unacceptable because they had significant ozone-depleting potential and "there are technically feasible zero-ODP [ozone-depleting-potential] substitutes available." Id. at 42,657-58.

EPA received numerous comments on the proposed rule, many of which focused on the economic impact, particularly to small businesses, of comprehensively de-listing the four chemicals at issue; the bulk of these related to the economic hardship that existing users of HCFC-22 and HCFC-142b would face from the proposed ban. After the comment period closed, EPA obtained additional information through new comments, meetings with industry representatives, and a consultant it hired to gather additional information on the feasibility of alternatives to HCFC-141b in certain sectors. EPA's consultant's report in particular expressed doubts about the ability of existing approved alternatives to HCFC-141b to function as viable substitutes across all specific foam end-uses, for economic reasons, such as the cost of HFC-245fa and the cost of equipment adjustments, and for technical reasons, such as the inability of foams manufactured with approved alternatives, at least those that had been tested, to meet certain insulation and space requirements. EPA then published a notice of data availability inviting comment, noting that the new information pertained to, inter alia, "alternatives currently used in each sector and technically viable alternatives." 66 Fed. Reg. 28,408, 28,408 (May 23, 2001).

After receiving additional comment, EPA issued a final rule implementing its proposed rule in some respects but not others. 67 Fed. Reg. 47,703 (July 22, 2002). First, EPA deferred reaching a decision on whether it would permit continued use of HCFC-141b. Id. at 47,706. Second, EPA abandoned its proposal to limit existing use of HCFC-22 and HCFC-142b as substitutes for CFCs, and allowed existing users of those chemicals continued use of them, noting that "there would be a significant impact on small businesses" if EPA proceeded as proposed and that switching to alternatives "would be difficult and prohibitively costly." Id. at 47,706-09. Third, EPA implemented its proposal to list HCFC-124 as unacceptable in all foam uses, thus denying ATOFINA's petition in that respect. Id. at 47,708. Fourth, as to ATOFINA's petition to allow new use of HCFC-22 and HCFC-142b, as substitutes for HCFC-141b, EPA established different rules for their use based on the specific application.

Observing that it "is strongly opposed to listing HCFCs as acceptable where non-ozone-depleting alternatives are available," EPA listed HCFC-22 and HCFC-142b as unacceptable substitutes for HCFC-141b in several end-uses (polyurethane boardstock, spray foam, and appliances) because manufacturers in those sectors had "identified and, in many cases, implemented viable non-ozone-depleting alternatives to HCFC-141b." Id. at 47,707. For uses in commercial refrigeration, sandwich panel applications, polyurethane slabstock, and other foams, however, which EPA noted were "comprised of a wide range of diverse applications with unique technical considerations," EPA stated that for these three uses "ozonefriendly alternatives to HCFC-141b have not yet been fully developed and implemented across the spectrum of applications." Id. Because "technical information is scarce for these applications" and it is "difficult to assess, in the absence of detailed information, the viability of alternatives in each narrow application," EPA expressed concern that some endusers in specific applications might not be able to switch to approved alternatives because of thermal performance, dimensional, and flammability control requirements. Id. at 47,713-14. In the final rule, EPA, pursuant to 40 C.F.R. § 82.180(b)(3), listed HCFC-22 and HCFC-142b as acceptable substitutes for HCFC-141b within those three end-uses, subject to narrowed use limits conditioned on the user's ability first to "ascertain that other acceptable alternatives are not technically feasible." Id. at 47,705. Users would be required to "document the results of their evaluation, and retain the results on file for the purpose of demonstrating compliance." Id. Notwithstanding its decision to allow some substitution of HCFC-22 and HCFC-142b for HCFC-141b, EPA advised that it was "continuing to review" the end-uses in question "to determine the progress of non-ozone-depleting alternatives," and that "[a]s non-ozone-depleting alternatives become more widely available, the agency will reevaluate the acceptability of HCFCs in these end-uses." Id. at 47,707. The rule also advised end-users to begin using non-ozonedepleting substitutes as they became available "in anticipation of future EPA action restricting the use of HCFCs." Id.

Anticipating based on its own market analysis that it will lose sales volume for HFC-245fa if some users are permitted to substitute HCFC-22 and HCFC-142b for HCFC-141b, Honeywell filed this petition for review. See CAA § 307, 42 U.S.C. § 7607. Honeywell, which also manufactures HCFC-22 and sells stockpiles of HCFC-141b and HCFC-142b, does not challenge EPA's decisions to defer a decision regarding the permissibility of HCFC-141b use, to allow continued use of HCFC-22 and HCFC-142b as CFC substitutes, and to bar use of HCFC-124. Rather, Honeywell's petition is limited to EPA's fourth decision, to permit some new use of HCFC-22 and HCFC-142b, as substitutes for HCFC-141b.


As a threshold matter, we address EPA's contention that Honeywell lacks standing under Article III of the Constitution as well as prudential standing to challenge the final rule. EPA sees this lawsuit as "nothing more than a futile effort to bolster the demands for [Honeywell's] product, HFC-245fa, in a market that cannot use the product because of technical constraints." Resp. Br. at 3. For Article III standing, Honeywell points to its "substantial economic injury -- lost sales of HCFC 245fa." Pet. Br. at 13. For prudential standing, Honeywell points to "its role in the market for substitutes to ozone-depleting substance that Congress created in Section 612 of the CAA." Id. at 14. Essentially, we agree that Honeywell has standing to challenge the final rule for these reasons.


A party wishing to challenge agency action must meet the familiar Article III requirements of injury in fact, traceability, and redressability. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Ethyl Corp. v. EPA, 306 F.3d 1144, 1147 (D.C. Cir. 2002). The final rule authorizes the use of HCFC-22 and HCFC-142b as substitutes for HCFC-141b only pursuant to narrowed use limits, conditioned upon the user's ability first to ascertain and document that non-ozonedepleting alternatives, such as HFC-245fa, are not technically feasible for the specific application of HCFC-22 and HCFC-142b. EPA contends, therefore, that Honeywell suffers no "injury in fact" from having those chemicals listed as acceptable because the rule permits their use only by parties who are not potential purchasers of Honeywell's product.

While the narrowed use limits may very well cause Honeywell's injury to be smaller than it would have been if the EPA had approved ATOFINA's petition outright, they defeat standing only if the court can conclude that there are no additional foam manufacturers that would purchase HFC-245fa if HCFC-22 and HCFC-142b were unavailable. This assumption is not justified on the rulemaking record. The final rule, 40 C.F.R. Pt. 82, Subpt. G, App. K (table) (2004), requires only documentation that alternative chemicals would not satisfy existing "performance or safety requirements," not documentation that it would be impossible to manufacture foam at all. Presumably some manufacturers would be forced, in the absence of other alternatives, to relax their performance standards and use HCFC-245fa. Honeywell has submitted an affidavit from the Vice President and General Manager of its Chemicals Operating Unit, Richard V. Preziotti, stating that Honeywell performed a market analysis in 1999 estimating domestic demand for HFC-245fa of approximately 20 million pounds over the period 2003-2010 for use in commercial refrigeration and sandwich panel applications, rigid polyurethane slabstock, and "other foams" categories, assuming users of HCFC-141b would not be permitted to use other HCFCs after December 31, 2002 when production of HCFC-141b was phased out. According to the affidavit, projected losses from the final rule are approximately 2-3 million pounds per year until the phase out of HCFC-22 and HCFC-142b in 2010, for a total loss of approximately 16-24 million pounds. EPA has submitted nothing other than its own speculation to counter this evidence. Cf. Sierra Club v. EPA, 292 F.3d 895, 899-901 (D.C. Cir. ...

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