[00:00:00] Speaker 01:
Case number 21, not 51, Ed Al.

[00:00:03] Speaker 01:
Heating, air conditioning, and refrigeration distributors International, Ed Al, petitioners, versus Environmental Protection Agency, and Michael S. Reagan, an Esophageal Capacity as Administrator of the U.S.

[00:00:15] Speaker 01:
Environmental Protection Agency.

[00:00:18] Speaker 01:
Mr. Worth, for the Association of Petitioners.

[00:00:21] Speaker 01:
Mr. D'Angelo, for the Petitioner Reporting Committee, Hank.

[00:00:24] Speaker 01:
Mr. Lohningsen, for the Petitioner's Choice of Preference.

[00:00:28] Speaker 01:
Dr. Coughlan, for the Respondents.

[00:00:32] Speaker 03:
Mr. Worth, good morning.

[00:00:33] Speaker 07:
Good morning, your honors.

[00:00:34] Speaker 07:
May it please the court.

[00:00:35] Speaker 07:
Stephen Worth of the Association of Petitioners.

[00:00:37] Speaker 07:
I'll be addressing EPA's lack of statutory authority to regulate cylinders this morning.

[00:00:42] Speaker 07:
My colleague, Mr. D'Angelo, will be addressing our arbitrary and capricious agreements.

[00:00:47] Speaker 07:
The AMAC directs EPA to phase down the production and consumption of hydrocarbons through an allowance allocation and trading program.

[00:00:57] Speaker 07:
But Congress did not grant EPA authority to regulate the cylinders used to store

[00:01:01] Speaker 07:
transport HFCs.

[00:01:02] Speaker 07:
Indeed, the Act never mentioned cylinders.

[00:01:05] Speaker 07:
Instead, EPA bases its entire cylinder regulating regime on two words, chow and shore, found in section E to B. According to EPA, these two words grant the agency essentially unlimited authority to devise what it calls complementary measures that the agency thinks will help it to enforce phase down by reducing smuggling.

[00:01:30] Speaker 07:
The problem with EPA's implementation is that Section E2B does not grant EPA any power to issue regulations at all.

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It doesn't say shall by regulation ensure.

[00:01:42] Speaker 07:
Unlike all the other places where Congress has directed EPA to act by issuing regulations, Section E2B is different.

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It includes no rulemaking authority.

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And that lack of express rulemaking authority is, I think, very important

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Because if Congress intended to give EPA broad authority to regulate cylinders to address smuggling, we would expect Congress to confer that power in the section of the act that expressly grants EPA authority to enforce the phase down.

[00:02:16] Speaker 07:
And that's in section K. Section K is easy to overlook because it operates by incorporating sections 113 and 114 of the Clean Air Act.

[00:02:25] Speaker 07:
But those provisions of the Clean Air Act

[00:02:27] Speaker 07:
give EPA extraordinary powers to detect, to interdict, and to punish smuggling, including by requiring advanced notice and pre-clearance of all imports, by authorizing EPA to physically inspect records and premises, by granting EPA subpoena powers, and by authorizing EPA to bring administrative, civil, and criminal actions for violations of the AMAC, with penalties that range from revocation of allowances

[00:02:56] Speaker 07:
the civil monetary penalties to jail time.

[00:03:01] Speaker 07:
And for decades, EPA has run on those powers in order to combat smuggling of early refrigerant chemicals.

[00:03:10] Speaker 02:
Clean Air Act enforcement authority confer on EPA under the AIM Act authority to impose labeling requirements?

[00:03:24] Speaker 07:
No, I don't believe that it does.

[00:03:25] Speaker 02:
How about batch testing requirements, batch testing of blends, for example?

[00:03:30] Speaker 07:
I don't know off the top of my head yet.

[00:03:35] Speaker 02:
Auditing requirements?

[00:03:39] Speaker 07:
Potentially.

[00:03:40] Speaker 02:
The Clean Air Act General?

[00:03:41] Speaker 02:
Clean Air Act, yes.

[00:03:43] Speaker 02:
How about trans-shipment rules?

[00:03:45] Speaker 07:
I believe it would as well.

[00:03:47] Speaker 02:
With the Clean Air Act General?

[00:03:49] Speaker 02:
I believe so.

[00:03:51] Speaker 02:
And what about, there's some other alternatives raised by commenters and cited by the petitioners, things like certifying HFC packaging facilities,

[00:04:02] Speaker 02:
authentication programs, that kind of thing you say would be under.

[00:04:06] Speaker 07:
I think all of those could be potentially available under the Clean Air Act, which is incorporated, yes.

[00:04:13] Speaker 02:
But no labeling art or batch testing.

[00:04:16] Speaker 02:
Subsection E to B is about actual

[00:04:21] Speaker 02:
consumption, including consumption under the phase-down amounts and the allowances, but also any other consumption, right?

[00:04:31] Speaker 02:
It talks about annual quantities produced or consumed.

[00:04:35] Speaker 02:
Yes, it does.

[00:04:37] Speaker 02:
And when Congress enacted the AIM Act, presumably it was aware that globally most countries had taken measures to limit HFCs.

[00:04:52] Speaker 06:
Yes, that's right.

[00:04:53] Speaker 02:
And many of the leading markets had also adopted refillable cylinder requirements.

[00:05:02] Speaker 07:
Yes, I think that's meaningful because Congress did not then go to adopt those requirements.

[00:05:07] Speaker 07:
It could have, but it didn't.

[00:05:10] Speaker 07:
And to be clear, Congress knows how to regulate these cylinders.

[00:05:15] Speaker 07:
In fact, Congress has authorized

[00:05:18] Speaker 07:
the Department of Transportation specifically to regulate exactly the design of the cylinders in question here.

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And these cylinders we're talking about, they're called DOT 39s because that's the DOT regulation that governs their design.

[00:05:34] Speaker 07:
Everything from the surface.

[00:05:36] Speaker 02:
It's a familiar kind of

[00:05:38] Speaker 02:
It's a failure kind of cylinder.

[00:05:40] Speaker 02:
Exactly.

[00:05:43] Speaker 02:
So the Congress that enacted this law was aware that there would be significant pressure of illegal marketing into the United States, given what the markets that were closing down in other countries

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for HFCs.

[00:05:56] Speaker 02:
Everyone's dealing with potential circumvention.

[00:06:01] Speaker 07:
Well, other markets are, but I think other markets also have different methods of dealing with this type of circumvention.

[00:06:14] Speaker 07:
a really substantial power to interdict smuggling.

[00:06:17] Speaker 02:
So there's enforcement, but the question of sort of separately compliance, anti-circumvention, I don't see that dealt with in this act, in the AIM Act.

[00:06:31] Speaker 07:
Well, so I think there are a couple different ways that it does it.

[00:06:34] Speaker 07:
One is it allows you to punish after the fact.

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So you can punish after the fact.

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But it also does give the agency the authority to require pre-clearance and notification of all sorts of imports and shipments and EPA in the final rule has in fact adopted measures by which all importers must give 14 days notice to the agency and get pre-clearance for all of their imports.

[00:07:04] Speaker 02:
So that would be helpful, even with illegal importation, I guess, because if something comes in and it looks like HFCs, but it's not something that CBP was given advance warning of, that it would be another way of sort of separating the illegals from the illegal.

[00:07:25] Speaker 02:
Exactly.

[00:07:27] Speaker 02:
So you've not identified any authorization other than the General Clean Air Act enforcement regime for anti-circumvention measures.

[00:07:38] Speaker 02:
There just isn't any other provision in.

[00:07:40] Speaker 07:
No, there's not.

[00:07:41] Speaker 07:
No, there's not.

[00:07:42] Speaker 07:
And I think that is telling.

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I think it's because Congress knew that the existing measures that EPA has are, in fact, quite powerful.

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And EPA has used these in the past in order to introduce smuggling of other refrigerants.

[00:07:58] Speaker 02:
And would it have made a difference?

[00:08:01] Speaker 02:
I heard you to be suggesting that it might have if E2B had included authority to promulgate regulation.

[00:08:10] Speaker 07:
I think that would make a difference.

[00:08:12] Speaker 07:
I think you look at the act, and I would ask you all to read the act from top to bottom just to see how it all hangs together, because I really do think that

[00:08:24] Speaker 07:
There are many instances where Congress has given the agency very express rulemaking authority to all manner of things and E2B doesn't do that.

[00:08:34] Speaker 02:
Just to push back on that though, Congress conferred regulatory authority under K1A to promulgate regulations to carry out the functions of the administrator and in E2B,

[00:08:45] Speaker 02:
described one of the administrator's functions to be that he shall ensure that annual quantities produced or consumed not exceed the applicable maximum.

[00:08:53] Speaker 07:
Why these I think fairy telling the EPA expressly disclaim any reliance on?

[00:08:58] Speaker 07:
I didn't read it quite that way.

[00:08:59] Speaker 02:
I read them to say you're talking about the the response to comment where they said you know we're not relying on k1a for I took it to be for the substantive

[00:09:10] Speaker 02:
you know, scope of the regulatory authority that they're saying, look, we actually have a compliance, a provision in the AIM Act that's entitled compliance that says we shall ensure that excess is not imported or manufactured or consumed.

[00:09:27] Speaker 02:
And so we're not relying on K1A there.

[00:09:31] Speaker 07:
I understand.

[00:09:32] Speaker 07:
Just interesting.

[00:09:33] Speaker 07:
I see my time is expired.

[00:09:33] Speaker 07:
May I continue?

[00:09:35] Speaker 07:
Sure.

[00:09:37] Speaker 07:
Just to be very clear,

[00:09:39] Speaker 07:
putting waver aside or putting this disclaimer aside.

[00:09:42] Speaker 07:
Section K is not a broad grant.

[00:09:44] Speaker 07:
It's sort of whatever it takes, rulemaking authority.

[00:09:47] Speaker 07:
It does nearly authorize the agency to engage in the gap going to implement aspects of the administrator's authority.

[00:09:56] Speaker 07:
And that's how this court treated similar provision.

[00:10:00] Speaker 07:
in Iraq in the Alabama power case.

[00:10:03] Speaker 07:
But I really don't think that the agencies is relying on broad rulemaking authority and section.

[00:10:10] Speaker 02:
Now I take it to be relying on section K as providing what you pointed out to be the missing language in E2B that that is a duty of the administrator, a function of the administrator expressly under the AMAC is to ensure that annual quantities produced or consumed don't exceed the applicable maxima.

[00:10:28] Speaker 02:
And then because that's a duty if the administrator finds it, you know, a reasonable measure that would support that function that that would be,

[00:10:40] Speaker 02:
clearly within the agency's authority under K1A.

[00:10:45] Speaker 07:
I understand.

[00:10:46] Speaker 07:
I do want, however, really talk about the use of the word challenge more here.

[00:10:52] Speaker 07:
I think it's really important to understand how Section E2B functions in this regulatory scheme, in the statutory scheme.

[00:11:01] Speaker 07:
Section E2B, I think, serves two roles.

[00:11:05] Speaker 07:
And the first and most important role is that this is the only section of the act that sets out the aggregate production and consumption volume for all regulated substances under the act, and specifically describes how to calculate it by multiplying production consumption baselines by these declining percentages per year.

[00:11:24] Speaker 07:
And the resulting curve you get from making those calculations, that is the phase down.

[00:11:29] Speaker 07:
That really is the core of the act.

[00:11:31] Speaker 07:
And this is the only section of the act that actually describes it.

[00:11:34] Speaker 07:
As for the shall ensure language, I think what that language clarifies is the primacy of the declining phase out curve as a condition on all of the specific regulatory actions that the statute directs or authorizes EPA to take.

[00:11:50] Speaker 07:
So in other words, EPA's obligation to ensure that the aggregate production and consumption baselines are not exceeded is a condition on EPA's authority as it carries out all of its other assigned

[00:12:02] Speaker 07:
responsibilities on the staff.

[00:12:04] Speaker 02:
Right, so this is your words of constraint versus authorization argument.

[00:12:10] Speaker 02:
That's right.

[00:12:11] Speaker 02:
Yeah.

[00:12:12] Speaker 02:
So ensure they are only means to make certain that

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Other authorities are not seen to trump the core phase down authority.

[00:12:23] Speaker 02:
It doesn't give any other compliance authority.

[00:12:27] Speaker 07:
Yes.

[00:12:29] Speaker 07:
I think that's especially demonstrated in all of the cross references to section E2B that you see throughout the Act.

[00:12:35] Speaker 07:
Every time E2B is referenced, it is as a constraint on the agency's authority.

[00:12:41] Speaker 07:
It is not an affirmative grant.

[00:12:43] Speaker 02:
entirely follow that.

[00:12:45] Speaker 02:
It's not a constraint on the EPA's authority.

[00:12:49] Speaker 02:
It is putting a duty on the agency to act, which is what the act, generally the AIM Act is doing.

[00:12:59] Speaker 02:
It's putting a duty on the agency to constrain the market, to constrain the actor subject to the regulations.

[00:13:05] Speaker 02:
So the idea that it limits

[00:13:07] Speaker 02:
EPA, I just, that's sort of hard to follow.

[00:13:11] Speaker 07:
So I think we are talking a little about the same thing here.

[00:13:14] Speaker 07:
If you look at section, for example, section E2D Romanat 1, this is where Congress has told the agency, you need to do this through granting allowances.

[00:13:26] Speaker 07:
And it says, it tells EPA, you have to grant allowances in conformity with this phase now.

[00:13:32] Speaker 07:
And what it's saying is you can't grant more allowances than we've authorized under the first.

[00:13:36] Speaker 02:
Right.

[00:13:37] Speaker 02:
And similarly, E5B, Roman F3, authorizes EPA to allow export-oriented production in excess of a person's allowances, but only if it wouldn't violate E2B.

[00:13:48] Speaker 02:
So it's sort of if we're ahead of schedule, if things are going really well and there's some reservoir, then you could grant.

[00:13:53] Speaker 07:
more export-oriented production, but not otherwise, and similarly with... I think the violation language there is notable, because if this were a grant of authority, it would be strange to talk about violating E2B, right?

[00:14:09] Speaker 07:
It would be strange to talk... If this was a grant on EPA, it would be strange to talk about a violation.

[00:14:15] Speaker 07:
And the same goes for section J3,

[00:14:23] Speaker 07:
I think that's important because it creates an exception to E2B.

[00:14:28] Speaker 07:
And again, this is a kind of exception for the rule situation.

[00:14:31] Speaker 07:
If by expressly authorizing it to deviate from its duty under E2B, that proves that the section is conditioning it as authority.

[00:14:42] Speaker 02:
It's not sort of conferring more of... Well, it's reconciling the different provisions.

[00:14:48] Speaker 02:
But I guess what's not clear to me is why

[00:14:52] Speaker 02:
If that's the only function of the shall ensure it, it doesn't say that because given K and given that it's the only compliance provision in the act, it seems like maybe that's a.

[00:15:07] Speaker 02:
plausible reading, but it's not the reading that the agency here took and Congress does not clearly limit its function in that way.

[00:15:16] Speaker 02:
It's a clever argument and I think I really do follow it, but I'm not sure that it goes as far as implying that E2B is a limitation.

[00:15:28] Speaker 07:
I understand that, and I think that sort of draws us back into my prior arguments, which is to say that Congress did give express rulemaking authority in all these other places, and it did give the agency enforcement authority in section K. And so it's those express grants of authority, and that's what really matters here.

[00:15:48] Speaker 07:
Congress gave you tools to deal with these issues, and EPA needs to use those tools.

[00:15:53] Speaker 07:
It's not able to simply conjure

[00:15:56] Speaker 07:
on your compliance methods out of thin air.

[00:16:00] Speaker 07:
And again, just maybe push a little bit further on my textual argument with respect to the Shall Ensure language.

[00:16:07] Speaker 07:
And this is how the Act has used that language.

[00:16:13] Speaker 07:
Every time it uses the word ensure, it uses the word ensure three times.

[00:16:16] Speaker 07:
Every time it's not a grant of authority, it is a condition on the agency, it is a duty on the agency.

[00:16:24] Speaker 07:
than otherwise.

[00:16:28] Speaker 02:
Again, it's a duty and it's a duty to act consistent with what's stated.

[00:16:34] Speaker 07:
Yes, that's right.

[00:16:36] Speaker 07:
I've gone away from my time.

[00:16:37] Speaker 03:
I think just one question.

[00:16:42] Speaker 06:
I look at E2B, it looks like a math form.

[00:16:45] Speaker 06:
Yes, it looks like it's telling the agency, you need to use this math form.

[00:16:50] Speaker 06:
Absolutely.

[00:16:51] Speaker 06:
No more, no less.

[00:16:52] Speaker 06:
You agree?

[00:16:53] Speaker 06:
I agree.

[00:16:56] Speaker 06:
Is the government?

[00:17:00] Speaker 06:
Okay.

[00:17:00] Speaker 06:
Thank you all.

[00:17:01] Speaker 03:
Thank you.

[00:17:02] Speaker 03:
Mr. D'Angelo.

[00:17:15] Speaker 10:
Good morning, Your Honor.

[00:17:15] Speaker 10:
Please come in.

[00:17:16] Speaker 05:
I'm Wayne D'Angelo, Commissioner of Work and Industries.

[00:17:20] Speaker 05:
Your Honor, even if the EPA did possess the authority in claims, this court should still set aside the cylinder ban banning nonrefillable cylinders not rationally connected to the one and only reason the EPA claims to have promulgated this ban, and that is to address HFC smuggling.

[00:17:37] Speaker 05:
The EPA's final rule in brief, they disclaimed quite a few times that it banned nonrefillable cylinders to address refrigerant smuggling.

[00:17:43] Speaker 05:
There's a reason why they do so, of course, and I think it helps understand the rulemaking and why there appears to be such a mismatch

[00:17:49] Speaker 05:
the record between the rationale and the record.

[00:17:52] Speaker 05:
When EPA proposed the cylinder ban, justification was much more about emissions from the venting of residual gases that remain at the bottom of the cylinder, or heels, so heel venting.

[00:18:03] Speaker 05:
That's why so much of the rulemaking record in nearly all of EPA's analysis is focused on heel venting rather than smuggling.

[00:18:09] Speaker 05:
That's why the discussion of the connection between cylinder bans and smuggling based on a memo that EPA drafted and edited a docket two weeks before finalizing the rule.

[00:18:18] Speaker 05:
It's also why the presumed reduction in heel emissions are the only benefits EPA calculated in the regulatory impact analysis, and they are massive.

[00:18:26] Speaker 05:
30 million metric tons of emissions reductions are attributable to heel venting alone zero, attributable to smuggling.

[00:18:32] Speaker 05:
Billions of dollars of social benefits from eliminating heel venting and zero from smuggling prevention.

[00:18:41] Speaker 05:
The regulatory impact analysis is 50 pages talking about the cylinder van, all of it talking about venting,

[00:18:47] Speaker 05:
Smuggling comes in on the very last line, says, as noted in the preamble, the provision is an important compliance tool.

[00:18:54] Speaker 05:
This looks like a record for an anti-bending prohibition.

[00:18:59] Speaker 05:
But the final rule is clear, Your Honors, because EPA says, bending of heels was not, quote, a part of the fundamental rationale or related to the authority upon which the EPA is relying.

[00:19:12] Speaker 05:
And the question is, why be so emphatic about narrowing your justification for the cylinder ban?

[00:19:17] Speaker 05:
I think the answer relates to what Mr. Worth was talking about from the statutory side.

[00:19:21] Speaker 05:
What we believe the government's statutory construction may be, even EPA's interpretation of E2B can't construe cylinder venting prohibition as within its claim authority to force the AMAC's production and consumption limits.

[00:19:38] Speaker 05:
But this left EPA with just square pegs and round holes, a mismatch between the record that it established.

[00:19:44] Speaker 02:
Why isn't it?

[00:19:47] Speaker 02:
consumption limits.

[00:19:49] Speaker 05:
Because consumption is not defined to include venting from throwing away.

[00:19:56] Speaker 05:
Yeah.

[00:19:57] Speaker 05:
And EPA does not suggest it.

[00:20:02] Speaker 05:
So that's why we have a mismatch with the rule.

[00:20:06] Speaker 05:
And I'll describe a couple of ways that that sort of plays out.

[00:20:08] Speaker 05:
For one, it's utterly inconceivable that EPA could look at the European Union cylinder then and

[00:20:15] Speaker 05:
pull that out as an example of why we believe banning non-refillable cylinders has a proven track record of success, quoting the agency there.

[00:20:27] Speaker 05:
EU is a model not to be emulated, it is a model to be avoided.

[00:20:32] Speaker 05:
There's reasons for this.

[00:20:33] Speaker 05:
The EU cylinder ban was not something to address smuggling because it was never intended to address smuggling.

[00:20:39] Speaker 05:
EU banned non-refillable cylinders in 2007 for the purposes of prohibiting vending.

[00:20:47] Speaker 05:
And all of the records that EPA incites through an administrative record, they're all showing rampant smuggling a massive thriving black market.

[00:20:57] Speaker 05:
So EPA suggests that banning non-refillable cylinders will be an effective anti-smuggling tool because

[00:21:10] Speaker 05:
quote, they provide an easy mechanism for the flagging of a legal HSC activity on the border.

[00:21:18] Speaker 05:
But this is not the case, and we saw this has not been the case in the EU, because EPA's cylinder ban bans the use of non-refillable cylinders for the 18 regulated substances under the AMAP.

[00:21:32] Speaker 05:
So at the border, there's a perfectly legal reason why a customs agent would see

[00:21:39] Speaker 05:
non-refillable cylinders coming by, coming in, and refillable cylinders coming in.

[00:21:45] Speaker 05:
It is not a means of discerning at all whether that there's an illegal substance in there.

[00:21:54] Speaker 02:
Other substances are in disposable cylinders.

[00:21:58] Speaker 05:
Is that your point?

[00:21:59] Speaker 02:
But they wouldn't presumably have to be labeled correctly.

[00:22:02] Speaker 02:
And it is a big enforcement tool.

[00:22:05] Speaker 02:
If they were labeled incorrectly, it raises the likelihood that there could be enforcement.

[00:22:11] Speaker 02:
And if they're labeled correctly, then it's easy to distinguish.

[00:22:14] Speaker 05:
There's none of that has to do with the cylinder design, Your Honor.

[00:22:16] Speaker 02:
Well, doesn't it?

[00:22:17] Speaker 02:
I mean, if it's easy to see what's there, you know, and you're, I mean, it's just a heuristic.

[00:22:23] Speaker 02:
You're seeing masses of things coming in.

[00:22:27] Speaker 02:
piece of information that's useful and has been not fail safe in other countries but actually useful in respect in other countries according to this record.

[00:22:36] Speaker 05:
Your honor, I don't see that in the record at all because in fact when you're so it is not just the other substances that come in non-refillable cylinders it's other refrigerants as well.

[00:22:47] Speaker 05:
It will always be the case in order to determine that that cylinder and the substance in it are legal

[00:22:53] Speaker 05:
One would need to look at the substances on the inside.

[00:22:57] Speaker 05:
So a customs agent would have to either check the label to see is this among the 18 or the hundreds of other refrigerants that are on the market or adhesives or helium or otherwise.

[00:23:07] Speaker 05:
And in some cases, they would need to test because that is another obvious way of circumventing that they would just have a label that does not accurately identify what is in the cylinder.

[00:23:19] Speaker 05:
So looking at a cylinder doesn't tell you anything about whether that is a legal import or an illegal import.

[00:23:26] Speaker 02:
But looking at a cylinder together with a label is very, very helpful, no?

[00:23:33] Speaker 05:
Well, because the label is what is providing the visual cue to the customs.

[00:23:41] Speaker 05:
And Your Honor, even if there was a suggestion that

[00:23:46] Speaker 05:
or a reasonable basis by which EPA could say that banning non-refillable cylinders will provide the visual clue.

[00:23:57] Speaker 05:
There's evidence in the record that says it was so easily circumvented by smugglers who just would, if they thought they were drawing enforcement scrutiny based on the use of non-refillable cylinders, would use refillable cylinders.

[00:24:10] Speaker 05:
The high value of the refrigerant

[00:24:13] Speaker 05:
Makes it no barrier at all.

[00:24:14] Speaker 05:
That's the quote, no barrier at all to wishing to build refillable cylinders.

[00:24:18] Speaker 02:
There's also evidence that it does in fact deter smuggling because it's heavier and harder and the value of them would then have to go back overseas.

[00:24:28] Speaker 02:
I mean, part of what Congress was about here was encouraging a domestic market.

[00:24:32] Speaker 02:
And certainly the refillable cylinders is an anti-smuggling from major producers overseas and focusing on legal production.

[00:24:40] Speaker 02:
Yes, domestically, no.

[00:24:42] Speaker 05:
So what the record shows, this cooling post article, it shows that the refillable cylinders are not being used as refillable.

[00:24:52] Speaker 05:
They're one way.

[00:24:52] Speaker 05:
The smuggling transaction is still a one-way transaction.

[00:24:55] Speaker 05:
Smugglers are not setting up refillable return and refilling programs.

[00:25:00] Speaker 05:
So that's why it's no more traceable.

[00:25:02] Speaker 02:
I'm sorry.

[00:25:03] Speaker 02:
I apologize for interrupting.

[00:25:05] Speaker 02:
I just had a couple of questions I want to make sure to ask.

[00:25:11] Speaker 02:
Part of your argument is that the EPA can't rely on personal communications or has to place them in the record.

[00:25:18] Speaker 02:
EPA relies on Sierra Club versus CASEL, which requires only that the agency summarize in the record the significant points that it's learned during oral communications if they're of central relevance to the rulemaking.

[00:25:33] Speaker 02:
And it seems to me that EPA has done that here.

[00:25:38] Speaker 02:
So is there a reason that the CASEL standard is no longer applicable or that that is inadequate, the summarizing of the conclusions of the oral communications that it had with Australia and others?

[00:25:52] Speaker 05:
Yeah, thank you for the question.

[00:25:53] Speaker 05:
So there's two responses to that.

[00:25:56] Speaker 05:
One, EPA bases this on conversations with the counterpoints of the five jurisdictions that have banned nonrefillable cylinders.

[00:26:08] Speaker 05:
There's not even a citation to four of them.

[00:26:10] Speaker 05:
There is only one citation for Australia, and it's not connected to that statement.

[00:26:17] Speaker 05:
All of the other instances, and these are broader than just the instances of just related to whether there was a reason to believe that panic cylinders have a relationship to smuggling.

[00:26:32] Speaker 05:
They are simply the identity of either the person

[00:26:37] Speaker 05:
or the way that person works, and the date of that conversation.

[00:26:42] Speaker 05:
So that is no more a summary of that conversation than the caption for this case will be a summary of the holdings for this case.

[00:26:50] Speaker 05:
We don't know what was said, what was asked, what was the context, whether they presented the information to EPA in a range, and EPA took something from that.

[00:26:59] Speaker 05:
We know the conclusion EPA drew from it, but there's nothing that can be construed as a summary

[00:27:05] Speaker 05:
of any of those communications and those pervade this entire record.

[00:27:09] Speaker 02:
But those are footnotes to text that they support.

[00:27:13] Speaker 02:
So there actually are statements.

[00:27:15] Speaker 02:
I mean, it's more like a case citation in a brief where you make a statement of law, a substantive statement, and then there's the footnote is just the case citation.

[00:27:24] Speaker 02:
But that doesn't mean that you haven't actually given the key reasoning or the key proposition that was discussed in the cave.

[00:27:32] Speaker 05:
Your honor, I believe there could, you know, in many cases for these questions, there could be a distinction between what was communicated and the conclusion that was drawn.

[00:27:40] Speaker 02:
Well, that's always true if you don't have a verbatim transcript.

[00:27:42] Speaker 02:
I mean, that's why I'm asking about the costal point, because it seems like the standard allows some amount of flexibility.

[00:27:50] Speaker 02:
And I understand that it means it's harder to scrutinize.

[00:27:53] Speaker 05:
Yeah, we don't know the expertise.

[00:27:54] Speaker 05:
We don't know how to weigh that.

[00:27:56] Speaker 05:
And in most of these cases, the EPA is elevating that information of

[00:28:01] Speaker 05:
actual hard data that's submitted by commenters.

[00:28:04] Speaker 05:
And that is an unreasonable basis for rulemaking as well, Your Honor.

[00:28:10] Speaker 05:
My time has expired.

[00:28:11] Speaker 02:
Oh, and I know you're talking about arbitrary and capricious and not about the statutory argument, but you don't, your client does not object to the QR codes, am I right?

[00:28:21] Speaker 05:
We have not, Your Honor.

[00:28:22] Speaker 05:
From a manufacturer's perspective, my client manufacturers, standing at QR code on a cylinder is not burdensome.

[00:28:29] Speaker 02:
And what so you don't have a position or do you on the on the authority for the QR codes?

[00:28:35] Speaker 05:
We don't have a position on that.

[00:28:37] Speaker 05:
We're not articulated.

[00:28:39] Speaker 02:
Do you think there's no statutory authority?

[00:28:40] Speaker 05:
I don't think there's statutory authority for that either.

[00:28:47] Speaker 03:
Thank you.

[00:28:47] Speaker 03:
I'll give you a couple of times in reply, Mr. Williamson.

[00:29:03] Speaker 10:
the further it goes.

[00:29:05] Speaker 10:
Good morning.

[00:29:05] Speaker 04:
May I please report David Williamson for RMS of Georgia, which is known as police refrigerants.

[00:29:11] Speaker 04:
And I'll be talking about whether blends are part of the allowance program and the non-delegation issue.

[00:29:20] Speaker 04:
The AIM Act created a cap and trade program to phase out certain chemicals known as HSCs in favor of new chemicals patented by large US chemical companies.

[00:29:32] Speaker 04:
Congress specifically listed 18 of those chemicals in a table at subsection C1.

[00:29:39] Speaker 04:
That's at addendum 2.

[00:29:41] Speaker 04:
This is going to get a little complicated, so I want to follow along.

[00:29:46] Speaker 04:
I think that the addendum, even though it has small type, is quite helpful.

[00:29:51] Speaker 04:
Critically for this case, the statute prohibits EPA from listing blends in the table for purposes of the allowance

[00:30:01] Speaker 04:
purpose of the allowance program only.

[00:30:04] Speaker 04:
Despite this explicit listing prohibition, EPA says it can require allowances for blends.

[00:30:14] Speaker 04:
EPA is reading the second part of the savings clause at subsection C3E2, refer to that as E2, in a way that upends the first part, the prohibition on adding blends to the table.

[00:30:32] Speaker 04:
E2 preserves EPA's authority under the AMAC, but that begs the question of what authority does EPA have?

[00:30:44] Speaker 04:
EPA says that subsection E2, that's that addendum three, gives them the necessary authority to regulate lands, even if they're not listed on the table.

[00:30:57] Speaker 04:
But subsection E2 is the requirement to have an allowance for a regulated substance.

[00:31:04] Speaker 04:
And that's a legal duty that Congress legislated, not an authority that Congress delegated to EPA.

[00:31:13] Speaker 04:
EPA does have certain authorities under the AMAC, however, so the reference to authorities in the savings clause makes perfect sense.

[00:31:23] Speaker 04:
Chief among those authorities is at subsection I of the statute.

[00:31:28] Speaker 04:
which allows EPA to phase out HSEs in particular end uses, such as new refrigerators, new air conditioners.

[00:31:38] Speaker 04:
The DVA has to make factual findings in order to invoke that authority, unlike in the allowance program where Congress chose the 18 chemicals that are subject to the trading program.

[00:31:50] Speaker 04:
The factors that EPA looks at to use that authority are things like full ability, things like availability of substitutes for the old HFCs and safety.

[00:32:04] Speaker 04:
In fact, some of these substitutes for HFCs are flammable, so that's a problem in your kitchen, in your refrigerator.

[00:32:11] Speaker 06:
Can I ask about the science, which I usually need a lot of help with?

[00:32:21] Speaker 06:
When an HFC is, when there's a blend and the blend includes an HFC, does the HFC have the identical chemical composition that it would have outside of the blend?

[00:32:43] Speaker 04:
Your honor, there was a lot of sort of sniping back and forth in the briefs on this point.

[00:32:48] Speaker 04:
But I don't think that the parties actually disagree on the fundamental science of the blend is a blend of two agencies that comes together.

[00:32:59] Speaker 04:
And it has.

[00:33:02] Speaker 04:
The key is that the plant has different physical and performance properties.

[00:33:08] Speaker 04:
So there's not a chemistry or a molecular interchange.

[00:33:12] Speaker 04:
We've talked about whether this is like a cake with flour and sugar together.

[00:33:16] Speaker 04:
Don't do any cooking analysis.

[00:33:18] Speaker 04:
Well, I have to.

[00:33:19] Speaker 04:
The one that I think is the closest is it's like mayonnaise.

[00:33:25] Speaker 06:
The cooking analogies confused me more than they clarified.

[00:33:33] Speaker 02:
What about if we think about it as a bag of marbles?

[00:33:37] Speaker 02:
There are blue marbles which are the regulated HFCs and any other color is not regulated.

[00:33:45] Speaker 02:
blue marbles into a bag and the way I understand the savings provision and the ban on regulating blends is that the EPA cannot require allowances for the volume of the entire bag.

[00:34:02] Speaker 02:
It can only require allowances that correspond to the quantity or the volume of the blue marble.

[00:34:09] Speaker 02:
And that that is the distinction that to my reading and in the briefing made sense to me as in the savings clause allowing EPA to regulate a regulated substance within a blend.

[00:34:25] Speaker 02:
So the fact that the blue marbles have been put in a mixed bag doesn't deprive the EPA of authority to regulate the blue marbles.

[00:34:33] Speaker 02:
even though they can't list bags of marbles as regulated substances, and they can't use an allowance, require that allowances be used for the whole bag quantity.

[00:34:47] Speaker 04:
Yes, Your Honor, I hadn't thought of marbles analogy, but let's use that.

[00:34:52] Speaker 04:
That is EPA's interpretation.

[00:34:54] Speaker 04:
That is what EPA wants to do.

[00:34:57] Speaker 04:
But that approach is inconsistent with the text that Congress actually wrote.

[00:35:02] Speaker 04:
What Congress said is there's a list of 18 substances.

[00:35:07] Speaker 04:
There can be color of marbles.

[00:35:09] Speaker 04:
And it said you cannot add blends to that list.

[00:35:14] Speaker 04:
The list, the function of the list is to define what chemicals need allowances to be produced or to be imported into the country.

[00:35:25] Speaker 04:
So blends can never be on that list.

[00:35:27] Speaker 06:
But I took the question to be a science question and your question to be a statutory interpretation or your answer to be a statutory interpretation answer.

[00:35:37] Speaker 06:
Just forget what the statute says.

[00:35:40] Speaker 06:
Is the is the marbles blue marbles analogy a good analogy, an accurate analogy for what's going on?

[00:35:48] Speaker 04:
It's not a good analogy, Your Honor, because I think the bag of marbles

[00:35:53] Speaker 04:
that once the marbles are in a bag, it's a different product.

[00:35:58] Speaker 04:
And Congress said, do not add that product to the list.

[00:36:03] Speaker 06:
Again, you're labeling it differently than the EPA labels it.

[00:36:08] Speaker 06:
And I get that.

[00:36:10] Speaker 06:
Maybe you're right about how to label it or not.

[00:36:11] Speaker 06:
But if one of the 18 blends is a blue marble, and you put that blue marble with a bunch of other marbles that are not listed,

[00:36:23] Speaker 06:
I said blend, I meant HFC.

[00:36:25] Speaker 06:
If one of the HFCs is a blue marble, you put that blue marble in a bag with a bunch of marbles that are not regulated, is that in any way different than putting a regulated HFC in a mixture of other unregulated stuff?

[00:36:47] Speaker 04:
from a chemistry standpoint, perhaps not, but importantly, from a statutory standpoint.

[00:36:54] Speaker 02:
I understand.

[00:36:55] Speaker 02:
I mean, that's helpful.

[00:36:56] Speaker 02:
So let me ask you, in your statutory argument, if there was a blend that's the only contents of which are two or more listed substances, your position is that allowances cannot be required.

[00:37:14] Speaker 02:
The plain text

[00:37:15] Speaker 04:
Yes or no?

[00:37:20] Speaker 02:
Pardon?

[00:37:20] Speaker 02:
Unless it's added to the list.

[00:37:21] Speaker 02:
100% is regulated substances, but they're mixed.

[00:37:30] Speaker 02:
Then EPA lacks authority to regulate that.

[00:37:32] Speaker 02:
And a blend that is 95% listed substance and 5% something inert.

[00:37:41] Speaker 02:
Also, not subject to regulation, because it is not on the list.

[00:37:45] Speaker 02:
It can't be on the list.

[00:37:47] Speaker 02:
And it differs from what is on the list.

[00:37:48] Speaker 04:
Not subject to regulation, Your Honor.

[00:37:51] Speaker 04:
And EPA is troubled by that.

[00:37:55] Speaker 04:
But EPA is assuming the premise that Congress wanted to phase out blend.

[00:38:01] Speaker 04:
But there's nothing in the statute that indicates phasing out the blend.

[00:38:05] Speaker 02:
I don't read their reading.

[00:38:06] Speaker 02:
I don't understand their reading that way.

[00:38:08] Speaker 02:
That Congress is giving credit

[00:38:10] Speaker 02:
For blends, if they're using non-listed substances in large part, then it's going to be way cheaper in allowance terms to manufacture a blend than to manufacture something that's old school listed 100% HFC.

[00:38:26] Speaker 04:
I'm not sure that's the case, Your Honor.

[00:38:29] Speaker 04:
The blends are different products.

[00:38:32] Speaker 04:
They have different clinical definitions.

[00:38:33] Speaker 02:
That position I understand and register that that's your position.

[00:38:37] Speaker 02:
So now that I think I understand your statutory position, can you explain again your interpretation of what the tail end of the savings clause speaks to?

[00:38:48] Speaker 02:
Because it would seem to say you can still regulate the blue marbles.

[00:38:52] Speaker 02:
And I hear you saying, no, not when they're in a blend.

[00:38:57] Speaker 04:
Yes, Your Honor, not for purposes of the trading program.

[00:39:01] Speaker 04:
For other authorities, yes.

[00:39:04] Speaker 04:
But one has to reconcile the words that Congress chose in the first part of the savings clause, which is, do not add blends to that list for purposes of the trading program.

[00:39:19] Speaker 04:
If EPA's interpretation or their desire to regulate all HSEs and all the blends

[00:39:27] Speaker 04:
For the case, I have not been able to figure out why the drafter would not have simply said, don't add blends to the table for any purpose.

[00:39:39] Speaker 04:
And then EPA can use its authorities to regulate situations where there are substances within blends.

[00:39:46] Speaker 04:
But that's not what Congress said.

[00:39:50] Speaker 04:
You cannot reconcile EPA's interpretation.

[00:39:53] Speaker 04:
with that precise language.

[00:39:55] Speaker 04:
And again, if you follow the syllogism that there's a table, the blends cannot come into that table for purposes of the trading program.

[00:40:09] Speaker 04:
All that means is that blends cannot be subject to the allowance program.

[00:40:14] Speaker 04:
But there are other authorities in the Act that allow EPA, if it makes certain findings of availability, of safety, of acceptance by local codes, can address those plans in other ways.

[00:40:29] Speaker 04:
So it's not that blends entirely escape regulation under the Act.

[00:40:37] Speaker 06:
Let me ask an HFC.

[00:40:44] Speaker 06:
within a blend still retains identical chemical characteristics to an unblended HFC?

[00:40:56] Speaker 06:
No.

[00:40:57] Speaker 04:
That's a fundamental point is that the chemicals are still identifiable.

[00:41:05] Speaker 04:
You use a mass spectrometer.

[00:41:07] Speaker 04:
But that's how you figure out what's in any material.

[00:41:11] Speaker 04:
piece of stone, you can figure out what the chemicals are that make it up.

[00:41:16] Speaker 04:
But the blend takes on new performance character.

[00:41:21] Speaker 04:
You cannot use blends of substances.

[00:41:24] Speaker 04:
And people don't manufacture blends just to sort of fit the HFCs into the blend.

[00:41:32] Speaker 04:
If there were a situation where that was being done for certain bench and purposes, that could be dealt with.

[00:41:37] Speaker 06:
But what if you blend HFCs?

[00:41:41] Speaker 06:
Is there a chemical reaction?

[00:41:43] Speaker 04:
There's no chemical reaction, but there is a mixing that allows that substance to act in different ways than its component parts.

[00:41:52] Speaker 04:
And I know you don't want me to use the mayonnaise, but I think it's so apt is that you would not just spread like topped up egg and oil on your sandwich.

[00:42:05] Speaker 04:
Mayonnaise is an entirely different substance

[00:42:09] Speaker 04:
is physically a different substance, even though you could, if you had the right equipment and time and energy and money, you could potentially unmix it, but extremely difficult to do it.

[00:42:24] Speaker 02:
Well, I was wondering about this in reading your brief.

[00:42:26] Speaker 02:
And I think in your comment, you referred to feedstocks and EPA respondents.

[00:42:31] Speaker 02:
No, we're not really talking here about feedstocks, because if I'm understanding correctly, feedstocks are transformed

[00:42:39] Speaker 02:
in when they're used, whereas in a blend, EPA has asserted and you have not disagreed that the original regulated substance is still discernible.

[00:42:56] Speaker 02:
It has not transformed.

[00:42:58] Speaker 02:
So I guess my question is, is the identification of the regulated substances as feedstocks in any way critical to your position?

[00:43:09] Speaker 04:
Well, the statute doesn't use that term.

[00:43:12] Speaker 04:
The term is used generally in an industry in situations that doesn't necessarily require a chemical combination, right?

[00:43:20] Speaker 04:
Dr. Walker is going to hate me for this, but in mayonnaise, you could say that these stocks of mayonnaise are eggs and oil.

[00:43:28] Speaker 04:
That term itself, I've never understood that term to require a chemical reaction.

[00:43:34] Speaker 04:
And in the industry, I think it is... The emulsification is not a chemical reaction?

[00:43:40] Speaker 04:
No.

[00:43:41] Speaker 04:
Well, no, it's not in mayonnaise.

[00:43:44] Speaker 04:
I don't believe it.

[00:43:46] Speaker 04:
But, Your Honor, I want to emphasize, touching on this, because you're focused on it, these chemicals are given different, what we call, ASH rate numbers.

[00:43:58] Speaker 04:
They are different chemicals.

[00:44:00] Speaker 04:
In fact, in order to produce and manufacture one of these plans and put it into an air conditioner, one has to approach EPA under 608.

[00:44:12] Speaker 04:
regulations and actually get approval because they need to see that that new blend chemical is going to function correctly in the refrigerator and not destroy the refrigerator.

[00:44:26] Speaker 04:
So EPA itself treats these as different substances.

[00:44:30] Speaker 04:
And I'm not sure that the feedstock issue is bothered.

[00:44:37] Speaker 04:
We did not intend it to be.

[00:44:38] Speaker 03:
We'll give you a couple of minutes to reply.

[00:44:40] Speaker 04:
May I address the non-delegation

[00:44:43] Speaker 03:
No.

[00:44:43] Speaker 03:
No.

[00:44:44] Speaker 03:
In reply.

[00:44:44] Speaker 03:
Thank you.

[00:44:46] Speaker 03:
Thank you.

[00:44:47] Speaker 03:
Mr. Coughlin.

[00:45:00] Speaker 09:
Good morning, Your Honors.

[00:45:02] Speaker 08:
May it please the clerk, Andrew Coughlin, on behalf of Respondent United States Environmental Protection Agency.

[00:45:07] Speaker 08:
With me at council's table is Karen Bianco from EPA's Office of General

[00:45:12] Speaker 08:
Your Honor's Congress has the AMAC to phase down production and consumption of HFCs.

[00:45:17] Speaker 06:
Can you speak up a little bit, maybe?

[00:45:19] Speaker 06:
I'm sorry, Your Honor, we'll try to... Much better.

[00:45:21] Speaker 02:
You might see if you can make them closer to your face.

[00:45:24] Speaker 06:
I don't know if that's... How is this?

[00:45:26] Speaker 06:
Is that better?

[00:45:27] Speaker 06:
It's way better, but you look uncomfortable.

[00:45:30] Speaker 06:
I'll manage.

[00:45:31] Speaker 03:
You can raise the podium, too.

[00:45:34] Speaker 03:
That might help.

[00:45:39] Speaker 08:
As high as it goes, I'm afraid.

[00:45:42] Speaker 08:
Your Honor, Congress passed the AIM Act to phase down consumption and production of HFCs.

[00:45:47] Speaker 08:
It delegated to EPA the responsibility to implement those phase-down levels.

[00:45:52] Speaker 08:
Petitioners' reading of the AIM Act would seriously undermine EPA's authority to carry out its statutory responsibilities.

[00:45:59] Speaker 08:
The statutory arguments are at odds with the AIM Act's text and purpose and should therefore be rejected.

[00:46:05] Speaker 08:
I'd like to begin, if I could, by addressing Association Petitioners' statutory arguments.

[00:46:13] Speaker 08:
In that provision, Congress gave EPA a clear command, ensure that phase down limits are achieved.

[00:46:21] Speaker 08:
I think that clear command needs to be understood to carry with it authorization to implement actions necessary to carry out the command.

[00:46:30] Speaker 08:
Now EPA knows that when the HFC phase down limits in the EAM Act take effect, that there is going to be an increase in illegal HFC.

[00:46:39] Speaker 08:
activity in the United States.

[00:46:42] Speaker 08:
The EPA knows that that increase in illegal HFCs will threaten, will jeopardize achievement of the phase down limits in the AIM Act.

[00:46:51] Speaker 08:
So in order to carry out its statutory function, EPA adopted measures to identify and to prevent illegal HFCs, thereby ensuring that HFC production and consumption takes place within the framework of allowances

[00:47:10] Speaker 08:
that Congress provided specifically and as relevant here, EPA created a container tracking system in order to know if a unit of bulk HFCs in this country actually corresponded to a required allowance.

[00:47:26] Speaker 08:
and it also prohibited the use of disposable cylinders because disposable cylinders are going to be the most attractive vector for smuggling because prohibiting the use of disposable cylinders provides a valuable interdiction benefit.

[00:47:44] Speaker 06:
Can you speak to... Go ahead.

[00:47:49] Speaker 06:
Okay.

[00:47:50] Speaker 06:
If we're not with you on E2B, but

[00:47:54] Speaker 06:
there's some other part of this statute or maybe even another statute that allows you to do the QR code regulation and the cylinder regulation.

[00:48:04] Speaker 06:
What do we do as a court?

[00:48:06] Speaker 08:
Well, I think EPA explicitly relied on its section E2B authority.

[00:48:11] Speaker 08:
If the court disagrees with us on that statutory issue, then I think the appropriate course would be to remand to the agency.

[00:48:18] Speaker 06:
And this is pivoting a little bit, but the cost of the cylinders is debated

[00:48:24] Speaker 06:
I didn't see much or anything about the cost of the QR code.

[00:48:30] Speaker 06:
Do you know what the cost is?

[00:48:33] Speaker 08:
There isn't an explicit discussion of cost of the QR code tracking system in the preamble to the final rule.

[00:48:40] Speaker 08:
There are materials in the record, the regulatory impact assessment that assess cost of data requirements under this rule, including the QR code tracking system.

[00:48:50] Speaker 06:
What are they?

[00:48:52] Speaker 08:
I don't have off the top of my head, Judge Barker, the exact figures.

[00:48:56] Speaker 08:
My recollection is that the total cost of data requirements once fully phased in, that is including the QR tracking code, would be something on the order of 15 million thereabouts all part in cost per year on regulated entities.

[00:49:13] Speaker 08:
But again, I just want to stress that I'm going off memory here.

[00:49:16] Speaker 06:
That's okay.

[00:49:17] Speaker 06:
I appreciate it.

[00:49:20] Speaker 06:
If we think cost informs when a major question is triggered, do we separate the QR code cost and the cylinder cost, or do we look at them together?

[00:49:36] Speaker 08:
Well, I think if you're going to do a major questions analysis here, it would be fair to look at the costs separately.

[00:49:44] Speaker 08:
I mean, these are different regulatory provisions.

[00:49:46] Speaker 08:
They're challenged separately.

[00:49:47] Speaker 08:
And I think we in association, visionaries agree that they would be several.

[00:49:51] Speaker 08:
If I could step back for a second and perhaps address what's behind this, I think that to jump to major questions here based on cost would be, I think, a step too far.

[00:50:03] Speaker 08:
I mean, if you look at the West Virginia case, for example, you've got costs that are, I think, two or three orders of magnitude greater than the costs here.

[00:50:13] Speaker 08:
I think just about every regulation that an agency issues is probably going to have compliance costs that run into the millions

[00:50:20] Speaker 06:
I think there was one of the, I think it was NFI BV ocean, one of the cases from last term.

[00:50:25] Speaker 06:
And the cost there was, I think, single digit billions, uh, with that billions with the billions with the B. Um, so much less than West Virginia.

[00:50:37] Speaker 06:
Um, but enough that the court seemed to think it's expensive enough to, to trigger, maybe trigger a major question.

[00:50:46] Speaker 06:
So maybe,

[00:50:48] Speaker 06:
Once you get to billions with a B, you're talking major question or we're still well short of that.

[00:50:54] Speaker 08:
I think we're well, they say you're at two billion on the ceiling.

[00:50:57] Speaker 08:
Well, I think we dispute that cost.

[00:50:59] Speaker 08:
400 million in aggregate over the course of, I believe, until 2050.

[00:51:06] Speaker 08:
And so on an annual basis, about 22 million a year is the number that the agency came up with on this under band.

[00:51:13] Speaker 08:
But I don't need your questions as well.

[00:51:15] Speaker 08:
I mean, I think there are a number of other factors that just aren't present here that are present in those major question cases.

[00:51:21] Speaker 08:
This is not an example of the agency discovering some sweeping authority in a dormant statutory provision in a long-extant statute.

[00:51:30] Speaker 08:
I mean, this is the first rulemaking that EPA has ever done under the AIM Act.

[00:51:34] Speaker 08:
I think that places this on a pretty fundamentally different footing.

[00:51:37] Speaker 08:
I think even the association petitioners haven't really expressly invoked the major questions doctrine.

[00:51:43] Speaker 08:
They've cited some cases, but I don't think they've gotten there.

[00:51:46] Speaker 08:
I don't think this court should either.

[00:51:47] Speaker 02:
And in terms of one of the things they have suppressed on is as West Virginia referred to it as the weather is the agency's bread and butter and

[00:51:59] Speaker 02:
Petitioners have said, look, these are Department of Transportation cylinders, Customs and Border Patrol is really the agency tasked with figuring out how to detect smuggling or illegal importation.

[00:52:14] Speaker 02:
How do you respond to this?

[00:52:15] Speaker 02:
Is this the bread and butter of EPA to figure out what

[00:52:19] Speaker 02:
compliance measures along these lines are going to be helpful.

[00:52:23] Speaker 08:
I found that argument a little bit puzzling, Judge Buller, because the petitioners have also said that EPA is well equipped to conduct investigations and to root out illegal activity.

[00:52:34] Speaker 08:
And I think that's what EPA is saying that it's doing here in part with this disposable cylinder ban.

[00:52:39] Speaker 08:
I mean, the agency knows how to regulate an industrial sector.

[00:52:43] Speaker 08:
And it knows based on the experience of the European Union that the disposable cylinders are going to be the most attractive vector for smuggling.

[00:52:52] Speaker 08:
So I think it's well within EPA's compass to say, look,

[00:52:57] Speaker 08:
we've seen what our sister regulators and these other jurisdictions are doing.

[00:53:01] Speaker 08:
We've seen how they've used their enforcement authority and we've seen what tools have been helpful for them and so we're going to learn from their experience and we're going to adopt some of those measures as well.

[00:53:12] Speaker 02:
Is there anything about EPA's expertise as an environmental regulator that

[00:53:19] Speaker 02:
well equips it for determining the kinds of containers.

[00:53:23] Speaker 02:
And I know there are containers in pesticide area, there are containers in biofuels area that are regulated and specified by EPA, but I don't know enough about, you know, is what that has to do with and whether, you know, you have any comeback on the notion that this is just not in your wheelhouse.

[00:53:43] Speaker 08:
Well, exactly to your point there, I mean, I think EPA has extensive experience working with

[00:53:49] Speaker 08:
Customs and Border Protection, for example, to interdict supplies of other smuggled substances, pesticides being one example.

[00:53:57] Speaker 08:
EPA also knows quite a bit about regulating refrigerants, of which HSCs are one kind, to address a comment that my friend on the other side made about the availability of other types of disposable cylinders and the fact that that might lead to some confusion or undermine the interdiction

[00:54:14] Speaker 08:
value of those well cylinders.

[00:54:17] Speaker 08:
I spoke into the agency about this and there are chemicals that are transported in disposable cylinders, helium, certain phones, things like that.

[00:54:27] Speaker 08:
But the disposable cylinders that are used to transport those

[00:54:30] Speaker 08:
are not identical to disposable cylinders that are used to transport refrigerants.

[00:54:34] Speaker 08:
That's what we're talking about here.

[00:54:35] Speaker 08:
And when it comes to refrigerants, HFCs are the refrigerant that are transported in disposable cylinders.

[00:54:42] Speaker 08:
It's not a non-zero number of other refrigerants, but it's, as you put it, very valuable heuristic for somebody who's an inspector at court dealing with massive volumes of freight moving in to be able to separate the sheep from the goats.

[00:54:57] Speaker 02:
Just circling back,

[00:54:59] Speaker 02:
In your discussion with Judge Walker, he had asked if E2B

[00:55:07] Speaker 02:
It doesn't support it.

[00:55:08] Speaker 02:
Is there no other source?

[00:55:10] Speaker 02:
And I wanted to clarify your position on the K1A authority and, you know, brief embraces sort of K1A as the procedural authority and then the function that's assigned to the administrator is the E2B.

[00:55:28] Speaker 02:
And I wasn't sure whether you were walking away from that or?

[00:55:31] Speaker 08:
Yeah, thank you for the opportunity to clarify that.

[00:55:36] Speaker 08:
EPA relied on section E2B for substantive authority.

[00:55:40] Speaker 08:
Exactly as you put it, Judge Clert, EPA relied for procedural authority to issue regulations on K1A.

[00:55:47] Speaker 08:
So the two provisions work together, but when it comes to EPA's assertion of substantive authority to issue the QR tracking code system and disposable cylinder ban, it was relying on subsection E2B.

[00:55:58] Speaker 02:
And what about the blank check argument?

[00:56:00] Speaker 02:
I mean, we really have to be concerned when something is phrased as generally as it is, shall ensure, I mean, in some sense,

[00:56:09] Speaker 02:
the entire act is explaining how the EPA shall ensure that only the requisite phase down quantities are manufactured and consumed.

[00:56:24] Speaker 02:
So you have a problem there because there's a lot of specification in the rest of the act.

[00:56:28] Speaker 02:
And you're saying, no, that doesn't exhaust what we do.

[00:56:31] Speaker 02:
We have other residual authority.

[00:56:35] Speaker 02:
What are the limits on that?

[00:56:37] Speaker 08:
Let me make a point about statutory context, and then let me offer some additional limiting principles on how we understand Section E2P.

[00:56:46] Speaker 08:
So I think that the point about context is a fair one.

[00:56:49] Speaker 08:
There are specific grants of authority elsewhere in the AMAC.

[00:56:53] Speaker 08:
And the command in E2B is a general one.

[00:56:55] Speaker 08:
And I do think you have to read that general command in light of those specific authorities.

[00:56:59] Speaker 08:
But I think EPA's interpretation of Section E2B does that.

[00:57:03] Speaker 08:
EPA understands its authority under Section E2B to issue complementary measures that ensure that those specified mechanisms in the AIM Act actually work the way they're intended.

[00:57:16] Speaker 08:
So if you have illegal HFCs coming into the domestic market

[00:57:20] Speaker 08:
Those are not going to be HFCs for which an allowance is obtained and the design of the AAMAC is to set up a system of allowances.

[00:57:29] Speaker 08:
The AAMAC creates a system of allowances.

[00:57:32] Speaker 08:
that EPA then phases down over time, thereby lowering the consumption and production levels of HSE in the country.

[00:57:42] Speaker 08:
But that phase down of available allowances doesn't actually perform its intended function.

[00:57:47] Speaker 08:
If you don't have production and consumption actually occurring within the framework

[00:57:52] Speaker 08:
of allowances.

[00:57:53] Speaker 08:
So EPA is not looking to its E2B authority as a freestanding authority to just do whatever is necessary to ensure it understands that work in concert with the other more specific authorities that the agency has been provided with under the Act.

[00:58:08] Speaker 08:
And I do want to offer a couple of limiting principles in addition to that contextual point.

[00:58:12] Speaker 08:
I think this is important.

[00:58:14] Speaker 08:
And the first one I would offer is that

[00:58:16] Speaker 08:
The second E2B can't be read in any way to conflict with other provisions of the AIM Act.

[00:58:22] Speaker 08:
I realize that sounds fairly obvious to say it, but let me give you some examples of how that crashes out.

[00:58:28] Speaker 08:
So Congress set phased down limits in the AIM Act.

[00:58:31] Speaker 08:
Another way of looking at those phase-down limits is that Congress specified the allowable amount of HFC production and consumption in given years.

[00:58:40] Speaker 08:
And I think EPA could not use its Section E2B authority in a way that had the effect of driving down HFC production and consumption levels further and faster than Congress called for in the AMAC.

[00:58:55] Speaker 08:
I think another example is the AMAC clearly contemplates

[00:58:59] Speaker 08:
that there will be international trade in HFCs.

[00:59:02] Speaker 08:
In fact, it defines consumption as including importation.

[00:59:07] Speaker 08:
I don't think that EPA could, for example, ban all imports of HFCs just because that might help it ensure that phased out limits are achieved.

[00:59:16] Speaker 08:
I think that would be inconsistent with the statutory scheme.

[00:59:20] Speaker 06:
So you just answered the question I was about to ask, which is if you're right about E2B, what can EPA not do under E2B?

[00:59:32] Speaker 06:
But your answer

[00:59:34] Speaker 06:
is, well, they can't do under E2B what they're prohibited from doing by other parts of the statute.

[00:59:43] Speaker 06:
Okay.

[00:59:43] Speaker 06:
Is there anything else they can't do under your interpretation of E2B?

[00:59:48] Speaker 08:
Well, I'll give you a couple of other guardrails, I think, on the agency's authority under E2B.

[00:59:53] Speaker 08:
The second one that I would offer is that E2B allows the agency to ensure that phase-down limits are achieved.

[01:00:01] Speaker 08:
Now, any

[01:00:03] Speaker 08:
any measure that EPA implements under E2V has to be justified as a means to that end.

[01:00:10] Speaker 08:
It has to have a rationale that survives scrutiny and is actually linked the statutory end of facing down HFC.

[01:00:16] Speaker 08:
So I think that limits somewhat the scope of what EPA could do.

[01:00:20] Speaker 08:
And then, you know, the third limiting principle that I would offer actually comes from K1A.

[01:00:25] Speaker 08:
That's the general rulemaking, the procedural rulemaking authority that EPA relies on.

[01:00:30] Speaker 08:
And K1A

[01:00:31] Speaker 08:
allows the agency to take that regulatory action as necessary to fill its functions under the Act.

[01:00:38] Speaker 08:
We think that that word necessary does do some disciplining of what EPA is able to do.

[01:00:44] Speaker 08:
I want to be clear, I don't think necessary in that context means absolutely necessary or indispensable.

[01:00:48] Speaker 08:
I don't think any regulation would ever pass that test, but I think

[01:00:52] Speaker 08:
necessary in that context means something like well adapted or reasonably well suited.

[01:00:57] Speaker 08:
So there has to be a fit between what EPA is doing under section E2B and that function is going under the AIM Act.

[01:01:07] Speaker 02:
The petitioners use as their parade of horrible something you haven't mentioned, which is, I can't remember the exact phrase, but you know, rail cars and

[01:01:17] Speaker 02:
or planes, can you require they be fitted out in a certain way or that the rail cars be only of a certain color if they have HFCs in them?

[01:01:24] Speaker 02:
I mean, you get the point.

[01:01:28] Speaker 02:
What is the principle that limits that?

[01:01:31] Speaker 02:
If that would be helpful or necessary in the way you're referring to, it doesn't conflict with anything else.

[01:01:38] Speaker 02:
As Judge Walker pointed out, it would be justified as a means

[01:01:43] Speaker 02:
you know, are we only looking at the limits of arbitrary and capricious power or?

[01:01:47] Speaker 08:
Arbitrary and capricious power certainly backs up.

[01:01:49] Speaker 08:
I think that the necessary requirement probably does do some work to please some of those extremely far-flying examples like painting railcars a certain color.

[01:01:58] Speaker 08:
It's a little bit hard, frankly, though, to answer hypotheticals in the abstract like that.

[01:02:05] Speaker 08:
Honestly, I think that's sort of a function of the broad language that Congress used.

[01:02:09] Speaker 08:
It's difficult to draw bright lines when the command is as broad as the command in E2B.

[01:02:15] Speaker 08:
But what I would say is if EPA has an extremely compelling record that says that there is a certain means of conveyance that is the preferred vector for smuggling and in fact,

[01:02:27] Speaker 08:
90% of the smuggled HFCs that's interdicting are coming over rail.

[01:02:33] Speaker 08:
I don't think Congress would have intended, having told EPA to ensure that face down limits are achieved, that EPA has no regulatory authority to do anything in that area.

[01:02:45] Speaker 02:
Can you respond a little bit to opposing councils

[01:02:48] Speaker 02:
discussion of the future.

[01:02:50] Speaker 02:
I didn't really read the record to include this that much or the briefing, but just explaining why isn't labeling alone enough?

[01:03:02] Speaker 02:
Why refillable cylinders?

[01:03:05] Speaker 02:
Why isn't QR codes alone enough?

[01:03:07] Speaker 02:
Why refillable

[01:03:09] Speaker 08:
Yeah, I think the way that EPA conceived of the measures that it implemented under Section E2B is that they would work in tandem.

[01:03:17] Speaker 08:
They can all stand alone, but they complement each other.

[01:03:20] Speaker 08:
And I think that the why QR codes, why stickers aren't enough answer is they don't have the same interdiction benefit as the disposable cylinder.

[01:03:31] Speaker 08:
And I think

[01:03:33] Speaker 08:
One of the reasons for that is if you can imagine if somebody is going to smuggle and disposable cylinders are available to them as a means of doing that, all they have to do is slap a sticker on that.

[01:03:43] Speaker 08:
That's a lot easier than obtaining a refillable cylinder.

[01:03:48] Speaker 08:
impediment that the refillable cylinder span imposes on smugglers that I think is important.

[01:03:53] Speaker 08:
And if you think about it from the perspective of somebody who's doing an inspection, again, imagine a busy port.

[01:03:59] Speaker 08:
There's a lot of cargo you're having to do inspections on site.

[01:04:03] Speaker 08:
You're drilling down where you notice something maybe out of sorts.

[01:04:07] Speaker 08:
You're not checking every single canister to make sure that it stickers on it.

[01:04:11] Speaker 08:
Decker might be on the back of the canister, might be on the bottom of the canister.

[01:04:14] Speaker 08:
You're not certainly not scanning every QR code that's on one of those cylinders.

[01:04:18] Speaker 08:
And so that ability to do a quick visual inspection, which the disposable cylinder bin does, I think gives you a benefit that you don't get just from those other measures that EPA has implemented under Section E2P.

[01:04:32] Speaker 02:
And just on the record and causal and whether the

[01:04:41] Speaker 02:
whether it's still the case.

[01:04:43] Speaker 02:
I think there was a policy or a memorandum relied on in Sierra Club versus CASEL.

[01:04:52] Speaker 02:
And what I'm talking about is whether EPA can rely on oral communication so long as it summarizes the significant points made in the meaning.

[01:04:59] Speaker 02:
And the footnote in CASEL, this footnote 17, describes an EPA memorandum outlining when and how EPA dockets its meetings with interested persons.

[01:05:08] Speaker 02:
And I just wondered,

[01:05:09] Speaker 02:
Is that still in effect?

[01:05:11] Speaker 02:
Is that important for your argument that you've adequately documented those important discussions with counterparts in other countries?

[01:05:19] Speaker 08:
Judge Pollard, I'm not familiar with the exact memo that you're referring to.

[01:05:22] Speaker 08:
What I can say is that the way it documented its discussions with

[01:05:27] Speaker 08:
Experts in industry and in other countries regarding the utility of disposable cylinders, the availability of refillable cylinders is consistent with its practices in other regulatory areas.

[01:05:37] Speaker 08:
There's nothing out of the norm about what EPA did here.

[01:05:41] Speaker 08:
I do want to make one other point though, because I think

[01:05:44] Speaker 08:
Part of their objection was to conversations that EPA had not just with its counterparts, other countries, but also with industry experts.

[01:05:53] Speaker 08:
This was related to EPA's estimates of how many refillable cylinders would be needed to replace disposable cylinders.

[01:06:00] Speaker 08:
And the point I want to make there is those conversations were documented in the record.

[01:06:07] Speaker 08:
The subject matter of those conversations was also summarized in a document that was available for public comment and was explicitly referenced to the notice of proposed rulemaking.

[01:06:18] Speaker 08:
And so there were certainly an opportunity for the petitioners here to review what EPA got from those conversations and to respond to it.

[01:06:27] Speaker 08:
So I don't think there's any sort of procedural foul there by EPA, certainly not to those conversations with.

[01:06:33] Speaker 08:
with industry that the document that I'm referring to is at J 35.

[01:06:37] Speaker 08:
And the reference and the notice of proposed rulemaking is at J 2113.

[01:06:42] Speaker 06:
I can move to the non delegation issue.

[01:06:50] Speaker 06:
Can you name a limit on EPA's discretion over which companies get the allowances?

[01:06:58] Speaker 08:
Well, Judge Walker, before I get to the merits, the non-delegation argument, I do just want to address exhaustion and waiver, if I can.

[01:07:07] Speaker 06:
You can, if you want.

[01:07:08] Speaker 06:
I probably agree with you on the exhaustion point, so.

[01:07:11] Speaker 08:
Okay.

[01:07:12] Speaker 08:
If you want to move to the other.

[01:07:14] Speaker 08:
Well, I'll move then to the non-delegation merits, since we all seem to be on the same page here.

[01:07:18] Speaker 08:
I can't speak for my comp.

[01:07:19] Speaker 08:
Well, in that case, maybe I should just briefly summarize what our waiver position is.

[01:07:23] Speaker 08:
Section 307, D7,

[01:07:25] Speaker 08:
B, which is the applicable judicial review provision here imposes a mandatory issue exhaustion requirement.

[01:07:34] Speaker 08:
This court has held that statutory mandatory issue exhaustion requirements can't be accepted.

[01:07:41] Speaker 08:
And the petitioners did not raise their non-delegation argument in comments.

[01:07:48] Speaker 08:
Only those objections that are raised with reasonable specificity and comments are properly before the court.

[01:07:53] Speaker 08:
It did not raise that.

[01:07:54] Speaker 08:
Therefore, the issue was waived here.

[01:07:56] Speaker 02:
But does the exhaustion requirement even apply?

[01:08:01] Speaker 02:
The issue is a little bit novel in that the objection is not really to the regulation.

[01:08:09] Speaker 02:
It's to the statute.

[01:08:10] Speaker 02:
And if the purpose of exhaustion is raising something to give the agency an opportunity to address it, there's nothing the agency can do if the statute contains an unconstitutional delegation.

[01:08:26] Speaker 02:
I haven't seen a case like this saying that exhaustion applies not just to a constitutional issue, but a constitutional issue trained on the statute as to which the agency really doesn't have an opportunity to respond.

[01:08:46] Speaker 02:
For example, it would be one thing if the statute didn't ensure due process, but the agency could beef up its process or

[01:08:54] Speaker 02:
You know, if there was some first amendment problem with the statute, but the agency then regulated in a way that was clearly viewpoint neutral here, there's really not.

[01:09:04] Speaker 02:
It's hard to see the utility of imposing an exhaustion requirement here, and I just don't know if there's authority doing it in a similar situation.

[01:09:11] Speaker 08:
Well, I think three responses to that, Judge Bullard.

[01:09:15] Speaker 08:
I think the first thing I note is while their objection is to the constitutionality of the statute, the reason that choice petitioners are

[01:09:25] Speaker 08:
in this court right now is because this court has original jurisdiction to hear challenges to actions by the EPA administrator.

[01:09:34] Speaker 08:
So they're challenging an action by the EPA administrator, even if their objection sounds in constitutional grounds.

[01:09:40] Speaker 08:
That's the first point I would make.

[01:09:42] Speaker 08:
The second point that I would make is that I'm not sure it is completely pointless in this context to waive

[01:09:53] Speaker 08:
I mean, I'll grant that there's nothing EPA could do if there is a non-delegation problem here, but agencies that administer statutes know something about the statutes that they administer.

[01:10:04] Speaker 08:
And if somebody wants to raise a non-delegation problem in comments, it's at least conceivable to me that the agency could respond to that comment and explain to the commenter how the statute works, where the principles lie that we have guide agencies

[01:10:19] Speaker 08:
discretion and why there's no non-delegation problem.

[01:10:22] Speaker 08:
So it seems at least possible to me that giving the agency the opportunity to respond to a comment might winnow that issue and spare the court from having to decide this constitutional issue in the first place without any sort of record below.

[01:10:33] Speaker 08:
And then the third point I'd make, Judge Fullerton, this is perhaps the most important one.

[01:10:37] Speaker 08:
I think the first two points are, it is certainly the second one, perhaps academic, because this is a mandatory

[01:10:43] Speaker 08:
exhaustion requirement that's in statute.

[01:10:46] Speaker 08:
And the authority I give you for the proposition that structural constitutional claims are not subject to some special treatment under a mandatory exhaustion requirement embedded in statute is plumbing the U.S.

[01:10:59] Speaker 08:
Department of Agriculture, which is a case that we cite in our briefs.

[01:11:03] Speaker 08:
I believe the reasoning is on all fours here.

[01:11:05] Speaker 08:
This court explicitly held that the structural constitutional claim that issued there, which concerns dual level

[01:11:17] Speaker 08:
because there was a statutory exhaustion requirement that hadn't been satisfied, that issue was not before the court.

[01:11:26] Speaker 08:
So turning back to your question, Judge Henderson, perhaps on the merits of the non-delegation question.

[01:11:31] Speaker 08:
I mean, I think what non-delegation requires is an intelligible principle.

[01:11:36] Speaker 08:
I think we've got several intelligible principles

[01:11:41] Speaker 08:
And you have here Congress telling the agency what to phase out.

[01:11:47] Speaker 08:
HFC is telling them how quickly to phase out those HFCs.

[01:11:50] Speaker 08:
Telling them what mechanism to use to phase out HFCs that is the allowance system.

[01:11:56] Speaker 08:
Telling the agency who to give priority allowance.

[01:11:59] Speaker 08:
who to temporarily insulate from the phase down of the availability of allowances.

[01:12:05] Speaker 08:
We think in the statute also telling the agency with some reasonable clarity who to give those allowances to.

[01:12:13] Speaker 08:
Having said all of that, I think Congress, under non-delegation doctrine, could certainly leave it to the agency to decide who among the pool of people who use or produce or consume or might recently produce or consume HSCs to give remaining allowances to.

[01:12:32] Speaker 08:
I think that falls within scope of allowable agency discretion, certainly within the bounds of constitutional separation powers.

[01:12:39] Speaker 06:
At least in that universe of allowances.

[01:12:42] Speaker 06:
a subset of allowances.

[01:12:46] Speaker 06:
There's no limit on EPA's discretion.

[01:12:49] Speaker 08:
Well, I think that there is no congressional guideline on EPA's discretion.

[01:12:55] Speaker 08:
Of course, EPA's discretion in this area is going to be bound by general principles of arbitrary and capricious review.

[01:13:02] Speaker 08:
And I think arbitrary and capricious review is

[01:13:06] Speaker 08:
a perfectly fine tool to police the kinds of decision making that EPA makes in this area.

[01:13:11] Speaker 08:
I think courts are well equipped to determine if EPA... Would that break new ground in non-delegation jurisprudence?

[01:13:20] Speaker 06:
I mean, it's already the case that almost any delegation passes the current test for a non-delegation inquiry.

[01:13:29] Speaker 06:
And then we'd be going even further than that and saying the statute itself needs to have no intelligible principle, at least for this subset of allowances, so long as the APA provides some.

[01:13:47] Speaker 06:
limits discretion.

[01:13:48] Speaker 08:
No, I don't think that's what she would say.

[01:13:50] Speaker 02:
In this case, Judge Walker, I think what I just got a clarification because I maybe have may have misread the statute, but I thought that the statute with and we're talking about the general pool that isn't more specifically.

[01:14:02] Speaker 02:
So there's sort of the slush fund and the concern being.

[01:14:07] Speaker 02:
I mean, actually, you know, patronage or or punitive or random, you know,

[01:14:14] Speaker 02:
But I thought that the statute required EPA to consider historical consumption rates.

[01:14:21] Speaker 02:
And that in fact, the allocation of the general pool reflects actors in the market.

[01:14:28] Speaker 08:
Certainly, Judge Blair, when EPA set the consumption and production baselines, and those consumption and production baselines determine how many allowances there are, it looked to historical practices by HFC producers and consumers, and that was how it developed the allowable levels of HFCs.

[01:14:52] Speaker 08:
and how it determines how many allowances would be available.

[01:14:55] Speaker 02:
But you don't take that to also guide the assignments?

[01:15:03] Speaker 02:
The historical patterns of

[01:15:08] Speaker 02:
manufacturing consumption.

[01:15:09] Speaker 08:
That is how EPA elected to allocate allowances was based on historical patterns of consumption.

[01:15:16] Speaker 08:
I don't think that choice was compelled by the statute.

[01:15:19] Speaker 02:
But not also guided.

[01:15:21] Speaker 02:
I mean, we're talking about delegation.

[01:15:22] Speaker 02:
So we're talking about is there any intelligible principle that would prevent my

[01:15:29] Speaker 02:
slush fund parade of horrible.

[01:15:32] Speaker 08:
Yes.

[01:15:33] Speaker 08:
And you know, I think what we see in the statute, the intellectual principle that we discern is direction to allocate those allowances to the pool of

[01:15:43] Speaker 08:
companies that produce and consume HFCs or might reasonably be assumed to do so.

[01:15:48] Speaker 08:
And how you allocate within that pool, I don't think we think is something that the statute speaks to.

[01:15:54] Speaker 08:
We think that that's something that EK did on a reasonable basis here by looking at those into these historical consumption.

[01:16:01] Speaker 08:
But to turn back to your point, Judge Walker, I mean, I think to get to not delegation, you have to slice and dice the statute into such small parts before you can find

[01:16:10] Speaker 08:
something that you lack an intelligible principle for, and I just don't see that as what the courts use non-delegation doctrine to do.

[01:16:17] Speaker 08:
It's really the police at a very high level, whether something crosses some separation of powers line, and I think, I don't think it would break any new ground to hold that this does not run afoul of that problem.

[01:16:31] Speaker 08:
I see I'm out of time, Judge Anderson.

[01:16:45] Speaker 06:
I think we got to the bottom of, does the chemical composition of the HSC change when it's in a blend?

[01:16:56] Speaker 06:
And I think your opposing council conceded, no, it does not.

[01:16:59] Speaker 06:
You agree with that concession, I think, and you could maybe point me to something in the record that supports it.

[01:17:05] Speaker 08:
Yeah, certainly Judge Walker.

[01:17:07] Speaker 08:
I think if you want to see a record site for discussion on this point, I'd refer you to,

[01:17:12] Speaker 08:
Joint Appendix 1110 and 1112.

[01:17:17] Speaker 08:
Any other point I just note?

[01:17:19] Speaker 08:
I realize we're sort of distinguishing between scientific questions and statutory questions.

[01:17:25] Speaker 08:
What I'd note though is that the statute defines regulated substance by reference to the molecular structure of the regulated substance.

[01:17:34] Speaker 08:
So the fact that a

[01:17:36] Speaker 08:
regulated substance in a blend, we all agree, maintains its molecular structure, means it is still a regulated substance even though it is particulate.

[01:17:44] Speaker 06:
Because the 18 or however many listed regulated substances are like H2O and NACL and CO2.

[01:17:53] Speaker 06:
Precisely.

[01:17:53] Speaker 06:
Yeah.

[01:17:55] Speaker 02:
So I also had a chair collapse under me.

[01:17:59] Speaker 02:
I also had a question about the blends and the treatment of blends.

[01:18:04] Speaker 02:
At page 32 of your brief, you say, as a practical matter, it may be true that under the approach in the framework rule, the number of allowances required to import the regulated substances within a blend might be equal to the number of allowances that would be required if the blend itself were designated as a regulated substance.

[01:18:26] Speaker 02:
And given our discussion of blue marbles and mixed bags

[01:18:31] Speaker 02:
I just wanted some clarification of what you're referring to there.

[01:18:36] Speaker 08:
So the scenario we're referring to there, to use your example, blue marbles and red marbles and bags is a blend that consists entirely of blue marbles.

[01:18:47] Speaker 02:
If blue is one regulated substance and red is another regulated substance.

[01:18:52] Speaker 02:
So I had also had a question for opposing council about that.

[01:18:57] Speaker 08:
And so I think that the difference there would be if you had, let's say the bag contains blue marbles that are regulated substances and green marbles, which are not regulated substances.

[01:19:07] Speaker 08:
So I think what we're saying is the practical effect of not listing the blend means that you don't have any allowance requirement for those green marbles only for the blue marbles.

[01:19:17] Speaker 03:
All right.

[01:19:19] Speaker 03:
Thank you.

[01:19:20] Speaker 03:
Thank you.

[01:19:24] Speaker 03:
Mr. Worth, why don't you take two minutes?

[01:19:29] Speaker 03:
Thank you, Judge Anderson.

[01:19:38] Speaker 07:
I was surprised by the government's answer to your questions about K1A, because that section doesn't really appear at all in their brief.

[01:19:46] Speaker 07:
And it is not the basis that they relied on in the final rule.

[01:19:56] Speaker 07:
K1A is not general rulemaking authority.

[01:20:00] Speaker 07:
Otherwise, why would Congress, in many other provisions of the act, specifically require or authorize rulemaking?

[01:20:08] Speaker 07:
If all the government needed was K1A to do whatever it wants, it just simply doesn't make sense.

[01:20:13] Speaker 07:
And I think one way to know that this is not the way that K1A operates is with some historical context here.

[01:20:21] Speaker 07:
It's helpful to know that this is not a new issue.

[01:20:24] Speaker 07:
Smuggling is not a new issue.

[01:20:25] Speaker 07:
Prior refrigerants were phased down in the same way.

[01:20:29] Speaker 07:
And smuggling was an issue in the same way.

[01:20:32] Speaker 07:
And there was extensive enforcement.

[01:20:34] Speaker 07:
And Section 301 of the Clean Air Act has the same sort of necessary and proper language.

[01:20:38] Speaker 07:
But to my knowledge, there's never been an instance where the EPA has relied on this sort of necessary and proper rulemaking in order to come up with a full new enforcement scheme.

[01:20:48] Speaker 07:
And I think that's really telling here.

[01:20:52] Speaker 02:
Well, they do.

[01:20:54] Speaker 02:
I mean, the reason that I identified it as a source is because they do in their brief, I think it's in a footnote, but they do identify

[01:21:04] Speaker 02:
the K1A.

[01:21:06] Speaker 07:
Well, maybe I'm sorry, I missed it.

[01:21:08] Speaker 07:
But I do think it is important to know this extra context, which is that the Clean Air Act has this exact same necessary and proper language.

[01:21:15] Speaker 07:
I think that it is coming from and it is normally used in order to facilitate the administration of the Act in more gap filling ways, not to create a whole new enforcement scheme.

[01:21:27] Speaker 07:
And I think that's really important.

[01:21:28] Speaker 07:
And as we've said,

[01:21:31] Speaker 07:
I'm sorry, my time has expired.

[01:21:33] Speaker 07:
May I have just a moment more?

[01:21:35] Speaker 02:
Just for your benefit, it's page 53, note 14.

[01:21:40] Speaker 02:
Subsection K1A does provide EPA with general procedural authority to promulgate the rule, and they're relying on the substantive authority under E2B as the basis for this kind of rule.

[01:21:56] Speaker 07:
I understand it.

[01:21:57] Speaker 07:
I so I think all of that then goes back to all of our arguments by B obviously does not give them that authority.

[01:22:02] Speaker 07:
But putting that aside, I think the challenge for language needs to be, it really is not this general reservoir of rulemaking authority for anti-circumvention.

[01:22:14] Speaker 07:
Just Walker, you mentioned it.

[01:22:15] Speaker 07:
I don't think that we even need to go that far because this sort of elephant and mouse hole problem, it's there regardless of whether it's a major question or not.

[01:22:28] Speaker 07:
The EPA did not provide vast enforcement authority in the Lord's Challenge or the EPA enforcement authority in other provisions of the Act.

[01:22:38] Speaker 07:
And that's where EPA needs to find its authority.

[01:22:43] Speaker 07:
Finally, I just want to touch up on one thing about the QR code mandate, and that's to say that even if EPA does have labeling authority under section 114 of the Clean Air Act, just to be very clear, EPA did not rely on that authority.

[01:23:02] Speaker 07:
We don't think that the QR codes are

[01:23:08] Speaker 07:
under the Clean Air Act, but to be very clear, that's not the authority that they're relying on.

[01:23:11] Speaker 07:
And I think you'd have to remand the agency on that point if they wanted to try to rely on it.

[01:23:15] Speaker 07:
And then just very quickly on arbitrary and capriciousness on the QR code.

[01:23:20] Speaker 07:
Because my my co council is not interested in that issue.

[01:23:23] Speaker 07:
Just want to say briefly that we put into the record all sorts of ways that our code is simply not going to work because because these labels are going to get scratched off.

[01:23:33] Speaker 07:
They're not going to be visible.

[01:23:34] Speaker 07:
There's all sorts of reasons why it's going to be very difficult to work with them or for the people who actually have to deal with them on a day to day basis.

[01:23:40] Speaker 07:
And the EPA is only response only response was.

[01:23:43] Speaker 07:
was to push back the implementation date and said the agency, quote, the agency will now have more time to develop an appropriate tracking system.

[01:23:52] Speaker 07:
Frankly, it was time to develop that system before they issued the rule, not after the rule.

[01:23:57] Speaker 07:
So we would hold them to their requirements.

[01:24:01] Speaker 03:
All right.

[01:24:01] Speaker 03:
Thank you.

[01:24:02] Speaker 03:
Mr. Dianne, I'm sure it'll take two minutes.

[01:24:05] Speaker 05:
Thank you, Your Honor.

[01:24:13] Speaker 05:
Non-refillable cylinders are not the preferred vector for smuggling, or at least that is misleading.

[01:24:17] Speaker 05:
Non-refillable cylinders are the preferred vector for transporting refrigerants and many other things.

[01:24:23] Speaker 05:
To say otherwise is, to put it in an analogy, having no food, Judge Walker, I'm sure there's data that can show that people in airports who smuggle drugs in their suitcases are using black suitcases more than any other, right?

[01:24:41] Speaker 05:
because black suitcases are the predominant color for suitcases.

[01:24:46] Speaker 05:
Non-refillable cylinders are used by, except for five nations, by 99% of the people in the refrigeration industry.

[01:24:56] Speaker 05:
So it's not a preferred vector.

[01:24:59] Speaker 05:
It does not provide a visual cue to push back a little bit on the visual heuristic.

[01:25:05] Speaker 05:
We know it doesn't work because the only data in the EPA's record from the EU that showed it didn't work.

[01:25:11] Speaker 05:
And even if a ban on non-refillable cylinders caused customs officials to just start targeting those shipments that they saw in non-refillable cylinders, EPA's record also tells us it is no burden for these smugglers to be able to just switch over to refillable cylinders, right?

[01:25:31] Speaker 05:
If it's going through the airport, customers is pulling over, everybody who's pulling a black bag, smuggler is going to start using red bags.

[01:25:38] Speaker 05:
That record says that.

[01:25:39] Speaker 05:
Also, if a visible queue is helpful, why did EPA eliminate a cylinder based on its function, by a different function, when all they wanted was a different look?

[01:25:54] Speaker 05:
EPA never considered any other alternative to make it look different.

[01:25:58] Speaker 05:
And when they were presented those options for different looks for cylinders, which government acknowledges that different non-refillable cylinders

[01:26:08] Speaker 05:
can differ in look.

[01:26:11] Speaker 05:
They were provided those options by Worthington, which is the only domestic manufacturer of refillable and non-refillable cylinders.

[01:26:20] Speaker 05:
And they rejected it out of hand without really even engaging with that.

[01:26:26] Speaker 05:
I think this takes me back to what I initially talked about as far as the disconnect and mismatch between the record that the agency had a proposal and the rationale that they

[01:26:38] Speaker 05:
Singularly right relied on at the end.

[01:26:40] Speaker 05:
They focused on them.

[01:26:42] Speaker 05:
They banned the cylinder based on its function when the visual distinctions were readily available.

[01:26:48] Speaker 05:
Many of them.

[01:26:51] Speaker 03:
So why don't you wind up here over your time?

[01:26:53] Speaker 05:
Oh, thank you.

[01:26:56] Speaker 05:
That's all I have.

[01:26:56] Speaker 03:
Thank you, Mr. Williamson.

[01:27:10] Speaker 04:
Judge Miller, without offense, I'm troubled by the marble analogy.

[01:27:15] Speaker 04:
And I'll say that, Judge Walker, that I don't think the chemical reaction point is significant to the statute.

[01:27:22] Speaker 04:
But if you were to use a marble analogy, think about it as crushing the marbles and then fusing them together so that it was extraordinarily hard to take them apart.

[01:27:35] Speaker 06:
I will just say- We don't even need to do the- I mean, I actually think the marble's analogy

[01:27:39] Speaker 06:
contrary to what you just said, is very helpful to me.

[01:27:41] Speaker 06:
But you can throw all the analogies out.

[01:27:45] Speaker 06:
This statute lists 18 chemical compounds.

[01:27:48] Speaker 06:
A blend does not change chemical compounds in the HFC.

[01:27:54] Speaker 04:
Well, Your Honor, that is correct.

[01:27:57] Speaker 04:
It's also correct that it's entirely sensible to only require allowances for the regulated marbles in the bag of marbles.

[01:28:06] Speaker 04:
The problem is that that assumes that Congress wanted to regulate the plan.

[01:28:14] Speaker 04:
When you work through this, I urge the court, try to reconcile the listening prohibition.

[01:28:21] Speaker 04:
It cannot be reconciled with the EPA's view of the scope of what's being regulated

[01:28:28] Speaker 04:
No matter how sensible it is that once you assume that blends are regulated, you only require allowances for the regulated marbles, not for the other regulated marbles.

[01:28:39] Speaker 04:
But that listing prohibition means something.

[01:28:41] Speaker 04:
It means something that Congress said only for the trading program.

[01:28:45] Speaker 04:
Why didn't it just say, don't ever list the marbles at EPA.

[01:28:51] Speaker 04:
You can regulate the regulated.

[01:28:55] Speaker 04:
I do want to address the delegation and just to say, if the court finds a jurisdiction defect, we will be back.

[01:29:06] Speaker 04:
The rule that we're dealing with now only covered two years, 2022 and 2023.

[01:29:12] Speaker 04:
EPA has just proposed a 2024 and forward for the next five years.

[01:29:20] Speaker 04:
We were going to raise the delegation in those comments.

[01:29:23] Speaker 04:
We don't think there's a fictional bar, but that would be important.

[01:29:28] Speaker 06:
What if their responses to your comments were swaying you?

[01:29:32] Speaker 04:
Well, that goes to the point of, Your Honor, what could they possibly say?

[01:29:37] Speaker 04:
We're saying that Congress failed to provide any principle to define the most.

[01:29:45] Speaker 04:
And the proposing council described this as slice and dice.

[01:29:48] Speaker 04:
That delegation doesn't work that way.

[01:29:53] Speaker 04:
at least for my client.

[01:29:55] Speaker 04:
Once you have a program to phase out allowances, you dismantle entire sector, who gets the pieces?

[01:30:03] Speaker 04:
Now, PVA actually proposed an auction as one of the options for

[01:30:09] Speaker 04:
structuring the phase out.

[01:30:11] Speaker 04:
So if EPA thought an auction was available to them, then their arguments about, well, the allowances can only go to past participants in the market don't really hold up.

[01:30:25] Speaker 04:
But I did want to also, just my last point, address Judge Pillett's inquiry about the historical consumption.

[01:30:34] Speaker 04:
The historical consumption data was only used to set

[01:30:39] Speaker 04:
There's no mention of that when you get to how do you do the phase out.

[01:30:44] Speaker 04:
And there was certainly no individualized consideration of historical consumption in that cap setting.

[01:30:51] Speaker 04:
It's all aggregated data on total imports.

[01:30:57] Speaker 04:
Thank you.