The D.C. Circuit Court of Appeals has vacated and remanded to EPA a rule governing allowances for production and consumption of hydrochlorofluorocarbons (HCFC) for the years 2010-2014. Arkema Inc. v. EPA, No. 09-1318 (D.C. Cir. 08/27/10). As part of the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol), the United States is required to eliminate the use of HCFCs by 2030. In response to these obligations, EPA issued a final rule that would cut their production and consumption by 75 percent from 1989 levels between 2010 and 2014. 74 Fed. Reg. 66,412 (12/14/09).  

Several chemical companies challenged the rule, alleging that it retroactively penalized them when it apportioned the baseline allocations for 2010. In determining that baseline, the agency decided it would no longer recognize intra-company transfers of HCFC allowances from one substance to another. EPA had previously included transfer of allocated stocks, such as from HCFC-142b to HCFC-22, when making baseline determinations.  

In a 2-1 decision, the court’s majority ruled that EPA’s decision to revise its baseline calculation process for HCFC allowances for 2010-2014 was “impermissibly retroactive” because it no longer credited companies for previously transferred allowances. According to the majority, EPA’s decision was inconsistent with a process the agency had approved in a 2003 rulemaking. The dissent argued that EPA had no legal obligation to carry the policy of recognizing inter-pollutant transfers forward for the period 2010-2014.