Arkema Inc. v. Environmental Protection Agency

618 F.3d 1 (D.C. Cir. 2010)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

The United States signed the Montreal Protocol on Substances that Deplete the Ozone Layer. It agreed to incrementally decrease the manufacture or consumption of these substances using a series of decreasing caps, with an initial focus on chlorofluorocarbons (CFCs). It was amended to accelerate the phase-out schedule for CFCs and identified hydrochlorofluorocarbons (HCFCs) as the target. Section 607 of the Clean Air Act (CAA) requires D to use a market-based cap and trade regulatory system--a system of pollutant production allowances transferable between companies and between types of HCFCs--to control production and importation of HCFCs. In 2003, D promulgated a final rule for a cap and trade regulatory system. The Rule allowed companies to trade their allocations between companies and between regulated HCFCs on an annual or permanent basis. D sought to create a system with 'maximum flexibility,' making 'allowances easily tradable with minimum regulatory interference and oversight, thereby encouraging companies to make business decisions[s] as they would in an unregulated industry.' In 2008 D initiated new rulemaking. It outlined five possible approaches but in the Final Rule, D chose to honor only inter-company transfers of baseline allowances and to disallow permanent baseline changes resulting from inter-pollutant trades. Before the new rule transactions could take place between companies or within a company among different types of HCFCs. The new rule caused a retroactive reduction of the credits for the trades within a company that were made before the new rule. P sued claiming the Final Rule is arbitrary and capricious and has an impermissibly retroactive effect as to their HCFC baseline allowances.