[00:00:00] Speaker 01:
They place the court.

[00:00:30] Speaker 08:
Joanne Sandifer, I'm here on behalf of the IGAS petitioners.

[00:00:34] Speaker 08:
The IGAS petitioners bring a narrow challenge to EPA's 2024 rule promulgating consumption allowances for hydrofluoric carbons, HFCs, pursuant to the AIM Act.

[00:00:47] Speaker 08:
In the AIM Act, Congress reduced the production and consumption of HFCs through a phased step down that lasted through 2023.

[00:00:55] Speaker 08:
EPA initially allocated

[00:00:58] Speaker 08:
allowances under this rule and a framework rule for years 2022 and 2023.

[00:01:02] Speaker 08:
It based the entity's allocations on their market share and it determined market share by looking at the entity's highest, it took the entity's highest three years of data between 2011 and 2019, averaged that data and determined the market share and allocated accordingly.

[00:01:24] Speaker 08:
In doing so, it determined this was the most equitable manner of making the allocations.

[00:01:30] Speaker 06:
Ms.

[00:01:30] Speaker 06:
Sandifer, before you get much further into the merits, could you address the standing to seek relief here?

[00:01:41] Speaker 08:
Yes, Your Honor.

[00:01:43] Speaker 08:
IGAS is one of the entities.

[00:01:46] Speaker 08:
IGAS and the petitioners are entities that receive allocations.

[00:01:49] Speaker 08:
Under the APA rule every year, they are continuing to receive allocations under the rule.

[00:01:54] Speaker 08:
They submitted comments in response to the EPA's request for comments.

[00:01:59] Speaker 06:
So what would happen in the HFC market and the allocation trading system if we vacated and remanded the 2024 rule for failure to include the 2020 data?

[00:02:12] Speaker 06:
Would there be no allocations at all?

[00:02:18] Speaker 08:
No, Your Honor, we're not suggesting that.

[00:02:20] Speaker 08:
We understand that there's a desire to not disrupt the market.

[00:02:24] Speaker 08:
What we're asking for is forward-looking relief.

[00:02:26] Speaker 08:
In fact, the 2025 allocations were set just last week on October 1st.

[00:02:31] Speaker 08:
We aren't suggesting a change to those.

[00:02:32] Speaker 06:
So is it your position that if it's just unclear what would be in place in terms of allocations if the rule is to be vacated?

[00:02:47] Speaker 08:
Let me address that.

[00:02:48] Speaker 08:
First of all, we're not asking you to vacate the entire rule.

[00:02:51] Speaker 08:
We're asking to vacate one very narrow section 84 11 B2 that deals with the specific allocation methodology.

[00:02:59] Speaker 08:
We understand that it would remain in place for 2025.

[00:03:03] Speaker 08:
We aren't suggesting any action be taken because those allocations were set last week.

[00:03:07] Speaker 08:
Those would continue in 2025 unaffected.

[00:03:11] Speaker 08:
What we're suggesting is that the court should vacate that portion of the rule on a going forward basis.

[00:03:16] Speaker 08:
on the grounds that the failure to include the 2020 data was arbitrary capricious, and remand for further proceedings before the EPA with respect to the 2026, 27, and 28 allocations, which are all governed by the 2024 rule.

[00:03:30] Speaker 08:
Thank you.

[00:03:36] Speaker 08:
So to jump to the heart of our challenge here,

[00:03:45] Speaker 08:
In enacting the 2024 rule, I asked for comments on whether it should include more recent data.

[00:03:51] Speaker 08:
More recent data would have necessarily been limited to 2020 and 2021.

[00:03:55] Speaker 08:
That would be the only new available data since it enacted the framework rule.

[00:04:01] Speaker 08:
And as I said, enacting the framework rule, the EPA recognized this was the best way to do the allocations, this three-year averaging system, because it incorporated both industry history and ongoing growth and market change.

[00:04:13] Speaker 08:
So in response to those comments, IGAS and others submitted comments suggesting that 2020 and 2021 data should be considered.

[00:04:23] Speaker 08:
EPA considered those comments but decided that both years were atypical and declined to include them.

[00:04:30] Speaker 08:
This is the definition of arbitrary and capricious arbitrary action because for 2020, there was no substantial basis in the records, no factual basis for EPA's conclusions.

[00:04:41] Speaker 05:
So I thought that they said that

[00:04:43] Speaker 05:
there is evidence of stockpiling, which distorts the market shares.

[00:04:48] Speaker 05:
And even though the aggregate amount was similar, you would have expected it to be different based on the pandemic, et cetera.

[00:04:56] Speaker 08:
That is exactly what the EPA did, Your Honor.

[00:04:58] Speaker 08:
But we don't believe that was evidence.

[00:05:00] Speaker 08:
We believe those were just assumptions made by the EPA.

[00:05:03] Speaker 08:
And I'd like to address that.

[00:05:05] Speaker 08:
So EPA based its conclusions on market data regarding supply and import over the years.

[00:05:13] Speaker 08:
We recreated the chart in page 17 of our brief that shows that data.

[00:05:17] Speaker 08:
And what it shows is for 2017-18, supply increasing, imports increasing, 19 levels off, 2,000 decreases.

[00:05:25] Speaker 08:
Now if you were going to see stockpiling, as EPA acknowledges, you would expect to see an increase in supply, an increase in imports.

[00:05:31] Speaker 08:
Companies would be bringing more in.

[00:05:33] Speaker 08:
The data does not show that.

[00:05:36] Speaker 08:
So EPA then backed into its conclusion that they were stockpiling by saying, well,

[00:05:42] Speaker 08:
We think the data would have shown higher imports, but for the COVID pandemic and supply issues, associated supply issues.

[00:05:50] Speaker 08:
But again, there was no facts.

[00:05:52] Speaker 08:
There was no facts to support either the stockpiling or the COVID assumptions.

[00:05:56] Speaker 05:
Well, if I could ask you about that.

[00:05:57] Speaker 05:
The agency said the agency has reviewed updated GHGRP data through 2021 and notes that both the net supply of AIM listed HFCs

[00:06:08] Speaker 05:
and the imports of aim-listed HFCs increased at rates that are unlikely to be explained as changing business models to meet increased aftermarket consumer demand.

[00:06:17] Speaker 05:
So they're assuming that it's stockpiling.

[00:06:20] Speaker 05:
And then they later say, the commenters have provided no evidence, including explanations of their own business plans, that could attribute this type of growth due to demand.

[00:06:32] Speaker 05:
And it is the agency's view that changes to business models were a response to the AIMS acts pending restrictions on production

[00:06:38] Speaker 05:
and imports of regulated substances.

[00:06:41] Speaker 05:
So even if you disagree with this, this isn't arbitrary and capricious.

[00:06:45] Speaker 05:
They thought about it, they looked at the comment, and they believed that this is what happened.

[00:06:49] Speaker 05:
And then the commenters didn't give them data to the contrary.

[00:06:53] Speaker 08:
Well, Your Honor, if I could address that.

[00:06:55] Speaker 08:
The quote that you just read is based upon the significant increases of supply in 2021.

[00:07:00] Speaker 08:
And there were.

[00:07:02] Speaker 08:
Supply almost doubled in 2021.

[00:07:05] Speaker 08:
And EPA attributed that to stockpiling.

[00:07:08] Speaker 08:
We aren't questioning the EPA's decision not to include 2021.

[00:07:11] Speaker 08:
There was data that they based it on.

[00:07:14] Speaker 08:
Well, our argument is there was not similar data for 2020.

[00:07:18] Speaker 08:
In fact, those two years show market differences.

[00:07:22] Speaker 08:
2020 imports went down.

[00:07:24] Speaker 08:
2021 almost doubled.

[00:07:28] Speaker 08:
So if parties were stockpiling in 2020, you would have expected to see the same thing.

[00:07:32] Speaker 08:
And blaming it on the COVID pandemic just isn't rational.

[00:07:35] Speaker 08:
because the COVID pandemic extended through 2021.

[00:07:39] Speaker 08:
So any supply chain problems would have had the same impact in 2021.

[00:07:44] Speaker 08:
EPA actually used the stockpiling to reach the same conclusions about very different data for 2020 and 2021.

[00:07:50] Speaker 05:
And so I guess it said, I'm looking at, I want to give you where I am.

[00:08:01] Speaker 05:
Well, it's 46845 of the federal register

[00:08:05] Speaker 05:
But after it talks about 2021, it says, by commenters' own views, if import activity in 2020, when compared to 2019, were representative of changing business models, where the net supply, including imports, of HFCs decreased slightly, one would expect, within reason, a subsequent increase in imports between 2020 and 21.

[00:08:26] Speaker 05:
I guess they're talking about 21 then.

[00:08:29] Speaker 08:
And that's exactly what they said.

[00:08:32] Speaker 08:
We think there was stockpiling, so we should have seen an increase, but we didn't, so we're gonna blame it on COVID.

[00:08:37] Speaker 08:
And again.

[00:08:38] Speaker 06:
But they also, EPA does identify a bunch of market participants reporting supply problems because of COVID.

[00:08:50] Speaker 08:
Yes, and there were some, and we don't dispute the- And in 2020 also.

[00:08:54] Speaker 08:
In 2020 also.

[00:08:56] Speaker 06:
But there was no evidence that it had distorted- So that you can't dispute, that there were a supply chain

[00:09:01] Speaker 06:
blockages in 2020.

[00:09:02] Speaker 08:
We don't dispute that there were problems in 20.

[00:09:05] Speaker 08:
Those continued in 21 because the pandemic obviously continued well through 21.

[00:09:08] Speaker 08:
Is that right though?

[00:09:11] Speaker 02:
I mean, I think part of the, I mean, maybe this is the answer because I'm not sure it's explicit, but the nature of the pandemic was abrupt changes.

[00:09:20] Speaker 02:
And then by 2021, there's adjustments being made that might resolve some of these supply chain issues.

[00:09:25] Speaker 02:
Why isn't that a rational explanation of

[00:09:28] Speaker 08:
I think there were a lot of those adjustments made in 2020 itself.

[00:09:31] Speaker 08:
If you look at the individual data for 2020, a lot of the importers had significant increases in supply in 2020.

[00:09:38] Speaker 08:
They were able to overcome these challenges.

[00:09:41] Speaker 08:
and and also the first part of 2020 wasn't affected by the pandemic at all.

[00:09:46] Speaker 08:
It wasn't even declared a pandemic till mid-March.

[00:09:49] Speaker 02:
So I understood part of the rationale to be based on what you exactly what you just said which is put aside stockpiling but the pandemic essentially scrambled the otherwise natural state of the market so that some companies did well

[00:10:04] Speaker 02:
for reasons related to supply chain, and we just don't want to credit those developments in our allowance allocations.

[00:10:13] Speaker 02:
Why is that an unreasonable view?

[00:10:16] Speaker 08:
Because every year, every company faces different challenges and some overcome it and some don't.

[00:10:20] Speaker 08:
And you don't dig under it.

[00:10:23] Speaker 08:
EPA certainly isn't digging into the data every year to see why one company does better than another.

[00:10:27] Speaker 08:
That's why it adopted the averaging approach.

[00:10:29] Speaker 06:
But that precisely supports EPA or arguably supports EPA.

[00:10:34] Speaker 06:
If EPA is not digging into the data every year, but using data that it thinks is more typical of the arc of the market over time, then it's more strongly supported to exclude a year that I think anybody trying to procure anything in an international supply chain knows was atypical.

[00:10:57] Speaker 06:
That alone seems to be a reason to say, you know, whatever, balance it out.

[00:11:01] Speaker 06:
It's just that was atypical.

[00:11:03] Speaker 06:
We're just not going to include that data.

[00:11:05] Speaker 08:
It's a decision based upon speculation.

[00:11:07] Speaker 08:
In particular, how the supply chain issues affected this particular product for the entire year of 2020.

[00:11:13] Speaker 06:
But even your client acknowledges that there were supply chain problems in 2020.

[00:11:21] Speaker 08:
But our client also managed to increase significantly its supply during that year.

[00:11:26] Speaker 06:
So it overcame those challenges.

[00:11:28] Speaker 06:
But that overcoming of those challenges, I think that the implication of the record is that that too was atypical and we're just going to treat that as a one-off in a system where, as you point out, the EPA is not every year doing a recalculation.

[00:11:48] Speaker 08:
I think the EPA has to have some factual basis for the decisions it makes.

[00:11:53] Speaker 08:
When you look at the data, it does not support the conclusions.

[00:11:57] Speaker 05:
But your position seems to boil down to, it was arbitrary and capricious for the agency to say that the pandemic year 2020, the data was not representative.

[00:12:09] Speaker 08:
That's right, Your Honor, without some factual basis for that, which we do not believe is in the record.

[00:12:17] Speaker 08:
In terms of even the incentive for stockpiling, you've got to look at the timing of the AIM Act.

[00:12:21] Speaker 08:
The AIM Act wasn't passed until the end, December 22, 2020.

[00:12:24] Speaker 08:
The HFC allowances

[00:12:28] Speaker 08:
The whole section was added that very day, the day the AMAC was passed.

[00:12:32] Speaker 08:
So entities.

[00:12:33] Speaker 05:
But there was a lot of activity.

[00:12:35] Speaker 05:
Sure.

[00:12:35] Speaker 05:
Starting in January.

[00:12:36] Speaker 05:
There was activity.

[00:12:37] Speaker 05:
There was activity.

[00:12:38] Speaker 05:
Signaling to the market that this was coming.

[00:12:40] Speaker 08:
There was activity, actually, if you go back to 2016, when the Kigali Amendment was passed, and various companies agreed to phase down hydrochloral HFCs.

[00:12:50] Speaker 08:
And EPA recognized that.

[00:12:52] Speaker 08:
It recognized that there could have been years, especially after 2016, when entities were stockpiling,

[00:12:57] Speaker 08:
It chose to include those years in the methodology anyways, again, looking to the averaging to smooth out any anomalies.

[00:13:07] Speaker 08:
And the hallmark of the decision is the inconsistency in the treatment between those prior years and the decision to exclude 2020 and its treatment of 2020 and 2021.

[00:13:18] Speaker 02:
Can you address the argument that EPA emphasizes in the brief and in the rule is this distinct argument about continuity and that it's mainly on JA 346, but essentially it says EPA believes that supply chains have been adjusting to the entity's specific allocations.

[00:13:37] Speaker 02:
And so if we make big changes, that's going to result in increased cost and price spikes.

[00:13:42] Speaker 02:
And so could you just address that and explain why that is not a separately sufficient basis?

[00:13:49] Speaker 08:
Very good question, Your Honor.

[00:13:50] Speaker 08:
And it certainly was a big theme of EPA's, the desire to mean continuity, the status quo during the phase down process.

[00:13:57] Speaker 08:
But continuity and status quo shouldn't trump the objective of the AIM Act, which was to phase down the use of this

[00:14:04] Speaker 08:
product while also meeting near-term market needs.

[00:14:07] Speaker 08:
And what the EPA did by excluding 2020 actually has the more disruptive effect on the market here.

[00:14:14] Speaker 08:
What EPA didn't recognize is that market had been changing.

[00:14:16] Speaker 08:
HFCs were initially really used by the big manufacturers, 2011 to 2013 timeframe.

[00:14:22] Speaker 08:
That's when they had their big years.

[00:14:24] Speaker 08:
As that refrigerant equipment started to age, there was increased demand for product to serve the aftermarket, to service existing aging units.

[00:14:33] Speaker 08:
So by allocating as it did, including 2011 to 2019, all the big manufacturers had their big years early, 2011 and 2013.

[00:14:42] Speaker 08:
That set their three-year high.

[00:14:44] Speaker 08:
They therefore ended up with really large allocations.

[00:14:47] Speaker 08:
In 2024, they got 60% of the allocations.

[00:14:50] Speaker 08:
Many of those went unused because their markets, their models, business models had changed.

[00:14:56] Speaker 08:
They were looking for alternatives.

[00:14:59] Speaker 08:
over $5 million of unused allocations in 2022.

[00:15:03] Speaker 08:
What that caused was not enough allocations to meet demand, especially the demand for the aftermarket.

[00:15:12] Speaker 08:
It creates an artificial scarcity.

[00:15:15] Speaker 08:
You've got unused allocations and then suppliers seeking to serve the aftermarket who cannot get the supply they need.

[00:15:21] Speaker 06:
All right.

[00:15:21] Speaker 06:
We are going to give you reserve time for rebuttal, but we're going to move on now and hear from the council.

[00:15:28] Speaker 06:
Thank you.

[00:15:31] Speaker 06:
And next, we hear from Ms.

[00:15:32] Speaker 06:
Brown.

[00:15:47] Speaker 07:
Good morning.

[00:15:49] Speaker 07:
May it please the court, Jeanette Brown, on behalf of Petitioner RMS of Georgia, doing business as choice refrigerants.

[00:15:54] Speaker 07:
I'd like to resolve three minutes for a bottle.

[00:15:58] Speaker 07:
The aim acts complete

[00:16:00] Speaker 07:
lack of a standard to constrain EPA's power to create and destroy market share is exceedingly unique, justifying the rare finding that Congress divested itself of legislative power.

[00:16:17] Speaker 07:
The standard that EPA claims to have found in the AIM Act does not exist in the text

[00:16:23] Speaker 07:
and was not in the purpose or the context of the AIM Act either as recognized by EPA during rulemaking and its conduct and statements therein.

[00:16:33] Speaker 07:
Ultimately, subsection E3 of the AIM Act is an unconstitutional divestment of legislative power.

[00:16:40] Speaker 05:
In your view, what should Congress have done to avoid this problem?

[00:16:45] Speaker 07:
In our view, Congress should have provided a standard

[00:16:48] Speaker 07:
for allocating, for how the allowances would be allocated.

[00:16:52] Speaker 07:
So in your view, they had to spell it out with a formula or something?

[00:16:57] Speaker 07:
No, absolutely not.

[00:16:58] Speaker 07:
They did not have to spell it out.

[00:16:59] Speaker 07:
They had to merely set a standard.

[00:17:02] Speaker 07:
This case is different from other non-delegation cases that this court has faced or that the Supreme Court has faced in our lifetime.

[00:17:10] Speaker 07:
There is no standard in the AIM Act specifically related to the power

[00:17:16] Speaker 07:
to grant or take away market share, to the liberty to destroy the liberty of acting in the market.

[00:17:23] Speaker 05:
If you look at- All regulations affect liberty, right?

[00:17:26] Speaker 05:
That's correct, Your Honor.

[00:17:27] Speaker 05:
So why is this one somehow different?

[00:17:30] Speaker 07:
This one is different because if you look at American Power and Light, if you look at Lictor, if you look at any of the prior non-delegation cases, there was a standard, a primary standard,

[00:17:44] Speaker 07:
that was set for Congress for the exercise of the power.

[00:17:49] Speaker 07:
It is that standard that prevents the power from being legislative when it's granted to an agency.

[00:17:56] Speaker 07:
That standard does not have to be definitive.

[00:17:59] Speaker 07:
It does not have to be concrete.

[00:18:01] Speaker 07:
It does not have to be a formula.

[00:18:03] Speaker 07:
So for instance.

[00:18:04] Speaker 05:
So looking at the context and the structure of this particular statute, we can also look at the legislative history.

[00:18:12] Speaker 05:
Is that correct?

[00:18:13] Speaker 07:
That's an interesting question, Your Honor, because I'm not sure there is legislative history specific to this version.

[00:18:18] Speaker 05:
Well, there was legislative history saying that this is very similar to the Title VI of the Clean Air Act cap and trade program.

[00:18:27] Speaker 05:
There was repeated statements that this is modeled after that, this is related to that, and in that Title VI program, the EPA set the initial allocations based on market share.

[00:18:40] Speaker 07:
Well, Your Honor, if you look at Title VI, number one, Title VI itself in the statute provides that the phase out of the Class I substances are going to be by market share.

[00:18:49] Speaker 07:
That's not something that the EPA put in by regulation.

[00:18:53] Speaker 07:
Where does it say that in the Title VI legislation?

[00:18:56] Speaker 05:
We took a look at this, and I didn't see that.

[00:18:59] Speaker 07:
It says that, Your Honor, for example, at 42 USC 7671C, subsection A refers to production phase outs.

[00:19:09] Speaker 07:
And it specifies that the phase outs and the limitations apply to the substance produced by the person concerned.

[00:19:19] Speaker 07:
In other words, the producers are subject to these caps.

[00:19:24] Speaker 05:
So isn't every phase out by definition phasing down?

[00:19:27] Speaker 05:
People who are using it now have to use less?

[00:19:30] Speaker 05:
No, that's absolutely not true.

[00:19:32] Speaker 07:
And if you look at the EPA's statements in the rulemaking, the EPA proposed and has consistently proposed sought advance notice or comment on

[00:19:42] Speaker 07:
and suggested that it can change completely the allocation method to use an auction that would allow them to sell allowances for the purposes of non-use.

[00:19:53] Speaker 07:
In fact... Wait, wait, wait.

[00:19:55] Speaker 06:
But that's not the program before us.

[00:19:57] Speaker 06:
And that's the view of the agency.

[00:19:58] Speaker 06:
But what we're looking at is what the agency did and whether there's an intelligible principle in the statute.

[00:20:05] Speaker 07:
What you're looking at...

[00:20:06] Speaker 06:
But do you agree that what we're looking for is whether there's some intelligible principle in the statute that guides EPA's grant of allocations?

[00:20:18] Speaker 07:
I agree that the intelligible principle standard requires... I'm sorry, allocation of allowances, yeah?

[00:20:26] Speaker 07:
Yes, Your Honor.

[00:20:26] Speaker 07:
I agree that the intelligible principle requires Congress to set a standard for

[00:20:33] Speaker 07:
the allocation of allowances here because of the way that it affects liberty and to set a primary standard.

[00:20:39] Speaker 07:
It doesn't have to be the full standard.

[00:20:41] Speaker 07:
They don't have to spell it out, but they have to set a standard.

[00:20:44] Speaker 06:
There was a standard in the ozone depleting substances in the provision that you were just discussing with Judge Pan, right?

[00:20:53] Speaker 07:
there was a standard in the prior statute.

[00:20:55] Speaker 07:
And in the rulemaking and in all of the comments, EPA explains why that standard is not applicable here.

[00:21:03] Speaker 07:
The two statutes are very different in that under, for example, the Clean Air Act and the phase out of the class one substances, there were exemptions rather than priorities.

[00:21:15] Speaker 07:
There was the requirement that it be by company, which wasn't here.

[00:21:22] Speaker 07:
There were a lot of other differences between the Clean Air Act and the EPA specifically noted that it had the power to apply allowances, to apply a completely different allowance methodology here because of those differences between Title VII and the AIM Act.

[00:21:45] Speaker 02:
I just want to go back to what would be a sufficient standard.

[00:21:49] Speaker 02:
So imagine that E3 said EPA shall allocate allowances in a manner that accomplishes this phase down in an orderly way.

[00:21:59] Speaker 07:
I think that Congress could have said they shall allocate the phase down in accordance with pre-existing markets to share.

[00:22:06] Speaker 07:
But they didn't do that.

[00:22:07] Speaker 02:
They could have said... My hypothetical was, the statute prescribes exactly the phase down that's to occur, and it prescribes the manner, essentially a cap and trade system, and what's left unanswered is how to allocate.

[00:22:25] Speaker 02:
the allowances on your view.

[00:22:27] Speaker 02:
And my question is, what if it had just said, allocate the allowances in an orderly way to accomplish the phase down that we have prescribed?

[00:22:38] Speaker 07:
I don't think that would be sufficient, your honor.

[00:22:39] Speaker 07:
I think that would be comparable to saying allocate the allowances in a way that's not arbitrary and capricious.

[00:22:45] Speaker 07:
And that itself does not provide an adequate standard.

[00:22:48] Speaker 07:
If you look at the requirements of

[00:22:50] Speaker 07:
Panama refining if you look at the requirements of Yakas if you look at the requirements of cotton mills The standard Congress has to set a standard and it has to be one where Congress

[00:23:03] Speaker 07:
the courts and the regulated people as well as the public can determine whether or not the agency is acting in accordance with not just a policy, but with the standard that has been set by Congress.

[00:23:16] Speaker 02:
I appreciate that argument.

[00:23:20] Speaker 02:
How would you have us distinguish the Sanchez case?

[00:23:22] Speaker 02:
So that's a decision from our court that involved authority to prescribe regulations for child care centers.

[00:23:36] Speaker 02:
And on my read, there was certainly not an explicit standard in that case.

[00:23:43] Speaker 02:
Are you familiar with that case?

[00:23:44] Speaker 02:
And if you are, how would you suggest that we distinguish it in our opinion?

[00:23:49] Speaker 07:
Yes, Your Honor.

[00:23:50] Speaker 07:
At the end of the day, to your point, the question of whether or not there's an intelligible principle is a point of statutory interpretation.

[00:23:59] Speaker 07:
So in the Sanchez case, in interpreting the statute at issue, the court found that there was an appropriate standard.

[00:24:07] Speaker 07:
It's similar to, for instance, American Power and Light and Lichter,

[00:24:10] Speaker 07:
where there is an extensive common law background that provides established meaning to what would otherwise be vague statutory terms such as excess profits or inequitable distribution of market share.

[00:24:24] Speaker 07:
Here, there is no established common law background or practice for the United States to have an agency distribute

[00:24:32] Speaker 07:
take and grant and ban people from a market.

[00:24:36] Speaker 06:
I'd love to hear your response.

[00:24:37] Speaker 06:
I mean, I appreciate that, but isn't it kind of analogous that there was the ozone depleting substances statute, and yes, there are expressed differences, but the basic tenet, the one that you're pointing to that would have been adequate,

[00:24:53] Speaker 06:
allocate by market share to existing market participants, that was a core also of that program.

[00:25:02] Speaker 06:
So why isn't it something that Congress is aware of?

[00:25:06] Speaker 06:
And then when Congress shorthands by saying, do a market allocation, allocation of permission to use these substances, why isn't that kind of

[00:25:23] Speaker 06:
part of the common law background or here the statutory familiar background?

[00:25:28] Speaker 07:
Sure, Judge Pillard.

[00:25:29] Speaker 07:
In action, I would refer to your dissent in the Friar Hardy case where you reasoned appropriately that when Congress doesn't provide a specific standard, it's not a prohibition.

[00:25:45] Speaker 07:
It is a permission.

[00:25:47] Speaker 07:
It is leaving it to the agency.

[00:25:49] Speaker 07:
It is leaving that power to the agency to give the agency flexibility.

[00:25:54] Speaker 07:
And so the fact that Congress here incorporated certain sections of the Clearing the Air Act but did not incorporate the substantive provisions relating to market share should be viewed as Congress leaving it to the agency to decide how to do it, consistent with your prior argument, your prior reasoning, Your Honor.

[00:26:14] Speaker 07:
I see I'm out of time.

[00:26:15] Speaker 07:
I would like to just address the severance issue.

[00:26:22] Speaker 06:
Very briefly.

[00:26:23] Speaker 07:
Yes, Your Honor.

[00:26:25] Speaker 07:
For the reasons stated, subsection E3 is unconstitutional.

[00:26:28] Speaker 07:
It is an unconstitutional grant or divestment of legislative power.

[00:26:32] Speaker 07:
Subsection E2 of the AIM Act is not severable from subsection E3.

[00:26:38] Speaker 07:
And therefore, any part of the final rule that derives either from subsection E3 or subsection E2 should be reversed.

[00:26:46] Speaker 06:
So I take it that invalidating E3 while leaving E2 in place would only exacerbate your injury.

[00:26:51] Speaker 07:
Not necessarily, Your Honor.

[00:26:53] Speaker 07:
As we argue in our brief, my client is a reclaimer, so our client would be able to reclaim some of the products.

[00:27:02] Speaker 07:
Also, our injury is a competitive injury, and so it would put us on an evenly playing field with all other persons using consumption allowances to rely on existing stockpiles.

[00:27:15] Speaker 06:
All right.

[00:27:15] Speaker 06:
Thank you.

[00:27:22] Speaker 00:
Ms.

[00:27:22] Speaker 00:
Buckley.

[00:27:34] Speaker 04:
Good morning, Your Honors, May it please the Court, Sarah Buckley for the Environmental Protection Agency.

[00:27:38] Speaker 04:
With me at council table is Karen Bianco of EPA's Office of General Counsel.

[00:27:43] Speaker 04:
The AIM Act sets out a detailed scheme that establishes Congress's policy ends, means for achieving it,

[00:27:50] Speaker 04:
and specific deadlines for executing on those means.

[00:27:53] Speaker 04:
And specifically, that is that Congress is seeking to phase down the production and import of specified hydrofluorocarbons using an allowance allocation and trading program that would achieve a graduated step down on a specific schedule.

[00:28:08] Speaker 04:
Giving EPA the authority to determine how to allocate allowances within that detailed scheme was not a delegation of legislative authority.

[00:28:17] Speaker 04:
And EPA's decision to continue using 2011 to 2019 data to determine those allocations was reasonable.

[00:28:24] Speaker 02:
So how would you, when it comes to the method for allocating, how would you describe the intelligible principle that the AIM Act gives to the EPA?

[00:28:36] Speaker 04:
Right.

[00:28:36] Speaker 04:
I think the intelligible principle here is that EPA has to ensure that entities engaged in the activities that are going to be prohibited, the production and import,

[00:28:46] Speaker 04:
are given a chance, those allocations should, those allowances should make it into their hands.

[00:28:51] Speaker 04:
So that's one.

[00:28:52] Speaker 04:
And then the second, that it has to be allocated in a way that's going to further the broader policy design of the program.

[00:29:00] Speaker 04:
So it's gotta be hitting the graduated phase down, not exceeding it too much.

[00:29:05] Speaker 04:
It's gotta be getting things into the hands of entities that are going to use them and not relying completely on trading, for instance.

[00:29:13] Speaker 04:
And that that broader structure

[00:29:15] Speaker 04:
gives sufficient direction under the Supreme Court and this court's precedence.

[00:29:20] Speaker 02:
Would part of what you just said suggest that there's not authority to do a pure auction?

[00:29:25] Speaker 02:
That you have to be getting them into the hands of people who will actually use them?

[00:29:28] Speaker 04:
Yeah, I think that EPA would concede that, Your Honor.

[00:29:31] Speaker 04:
And in fact, when EPA proposed potentially or considered the possibility to not actually propose using an option,

[00:29:38] Speaker 04:
it noted that it would use an auction to get it to those producers and importers.

[00:29:43] Speaker 04:
The participants in the auction may be those same entities receiving allocations.

[00:29:48] Speaker 06:
So are you, just to make sure I'm understanding you, are you saying that it would have authority to use an auction as long as the auction was limited to market participants?

[00:30:01] Speaker 04:
Yes, Your Honor.

[00:30:05] Speaker 04:
I think that

[00:30:08] Speaker 04:
Choice is getting three important things wrong in their briefs and here today.

[00:30:12] Speaker 04:
First is the standard that applies.

[00:30:14] Speaker 04:
As we've been discussing, the standard that the Supreme Court has applied since 1925 in J.W.

[00:30:20] Speaker 04:
Hampton through 1989 with Stretta Sanchez, 2022, is that Congress articulates a sufficient intelligible principle and does not then delegate legislative authority if there's a general policy, an agency to apply it, and boundaries on the delegated authority.

[00:30:38] Speaker 04:
And their brief choice suggests additional limitations on that authority that is refuted by existing established distributing court law.

[00:30:47] Speaker 04:
So, for instance, agencies can issue rules governing private conduct.

[00:30:52] Speaker 04:
The court affirmed just that grant of power in a case like Yakus in Tubi regarding criminalizing new drugs.

[00:31:00] Speaker 04:
agencies can articulate policy beyond just finding facts that the statute makes dependent on that.

[00:31:10] Speaker 04:
And I think that a case like National Broadcasting Company is a good analogy to what we've seen here.

[00:31:16] Speaker 04:
So in National Broadcasting Company, Congress articulated a policy that they wanted greater

[00:31:23] Speaker 04:
greater profligation of radio licenses.

[00:31:26] Speaker 04:
They want to use a licensing model as the mechanism for achieving that means.

[00:31:31] Speaker 04:
And then it gave the broad mandate that the executive should distribute those licenses in a way that furthers the public interest, convenience and necessity.

[00:31:42] Speaker 04:
I think here we have even further specific direction than we had in national broadcasting company because we have the specified phase down schedule, we have the graduated step down, we have specific conduct, we even have the application specific mandatory allowances and a program or a process for EPA to be able to designate additional essential uses that should receive all the allowances they need.

[00:32:09] Speaker 06:
Ms.

[00:32:09] Speaker 06:
Brown, why do the application-specific allowances and the procedure for designating additional such entitlements help when the question is for the remaining pool, what is the intelligible principle for allocating those allowances?

[00:32:28] Speaker 04:
Well, I think that that's taking the question that's presented at too narrow an area, too narrow an area of focus.

[00:32:37] Speaker 04:
Because really the question is, is there an intelligible principle for EPA to promulgate regulations to administer the allowance allocation and trading program?

[00:32:47] Speaker 04:
And Congress made clear that its priority in doing that, its policy for the allocation of allowances, was please ensure that these specific listed applications

[00:32:59] Speaker 04:
receive all the allowances they need, regardless of the face down level that we're at.

[00:33:04] Speaker 04:
If you find there are additional uses that need that, you have a system for designating that.

[00:33:09] Speaker 04:
And after that, the agency is given the discretion to administer the statute and figure out the best way to allocate the remaining allowances in a way that furthers the statutory purpose.

[00:33:22] Speaker 04:
and meets all the various other policy design elements.

[00:33:24] Speaker 06:
So what is the statutory language that provides the limiting principle in your view other than the application specific allowances that are secured?

[00:33:41] Speaker 04:
Yes, Your Honor.

[00:33:42] Speaker 04:
E3 says that EPA is to promulgate the regulations in accordance with this section and in accordance with the phase down schedule.

[00:33:50] Speaker 04:
So if you see in accordance with this section, you go back, what is the section doing?

[00:33:54] Speaker 04:
The section prohibits the import or production of these substances without an allowance.

[00:34:00] Speaker 04:
And I think it's fair to say based on that, that Congress was intending EPA to get those allowances into the hands of entities that needed it for the prohibited activity.

[00:34:10] Speaker 04:
And I think a useful thought exercise on this is this.

[00:34:13] Speaker 04:
If EPA had gone out on Pennsylvania Avenue and handed out allowances to the first thousand people that walked by,

[00:34:19] Speaker 04:
or if EPA had allocated allowances to, say, the pool noodle industry, we would think, we would think, well, that's contrary to the statute.

[00:34:35] Speaker 04:
And that instinct, I think, is evidence of the intelligible principle here.

[00:34:40] Speaker 04:
Why is that?

[00:34:41] Speaker 04:
Well, EPA was directed to ensure that the phase down is achieved on a specific schedule, assuming the other policy design elements

[00:34:49] Speaker 04:
expressly written into the statute.

[00:34:52] Speaker 04:
And then it has the administrative task of making sure that allowances go out to achieve that statutory scheme.

[00:34:58] Speaker 05:
Do you think the word phase down implies sort of by market share?

[00:35:02] Speaker 05:
Because it seems to imply everybody who's doing this now needs to phase down or needs to cut their production or consumption.

[00:35:11] Speaker 04:
I do think that that would make EPA's scheme here a reasonable exercise, a reasonable interpretation of the

[00:35:18] Speaker 04:
of the task that Congress gave it here.

[00:35:22] Speaker 04:
I think it's also important to note speaking somewhat to Choice's last argument on the severability question that Choice today and Choice in their brief notes that E3 is structurally inseparable from the rest of the act.

[00:35:38] Speaker 04:
And I think that that again shows that this last piece of discretion in the policy structure that EPA was given is confined

[00:35:47] Speaker 04:
by the broader policy structure that makes up the whole scheme that Congress set out.

[00:35:53] Speaker 06:
So I think you've answered this, but could EPA issue allowances by auction and allow environmental groups to purchase the allowances with express plan not to use them?

[00:36:07] Speaker 04:
We don't think that would be the best interpretation of the statute, Your Honor.

[00:36:12] Speaker 06:
Not a permissible interpretation.

[00:36:15] Speaker 04:
I don't think it would be the best interpretation to assume.

[00:36:20] Speaker 04:
And I think a couple of places to point there is one, there's an express provision in the statute saying the process by which EPA can accelerate the phase down.

[00:36:30] Speaker 04:
And in addition, there's an assumption that when you trade an allowance that, or not assumption, there's a provision in the statute that when you trade an allowance, you actually have to achieve a greater reduction.

[00:36:42] Speaker 04:
So again, there's an assumption that the allowances are going to get primarily into the hands of the people who are going to use them to meet near-term needs.

[00:36:49] Speaker 06:
And is there anything in the statute that guides whether the agency could issue all the allowances to domestic HFC producers as distinct from importers or vice versa?

[00:37:00] Speaker 04:
Right.

[00:37:01] Speaker 04:
I don't think that there is anything in the statute on that point, Your Honor, but I think that that would be policed by other doctrines such as the APA's arbitrary and capricious standard.

[00:37:11] Speaker 04:
I don't think that we need to make non-delegation the ultimate test against which the lawfulness of agency action is measured.

[00:37:18] Speaker 04:
The non-delegation doctrine is intended to police the outer boundaries of the separation of powers, and that is in part why the standard is articulated pretty broadly, right, policy and boundaries.

[00:37:32] Speaker 02:
I was gonna ask about the eye gas issues.

[00:37:36] Speaker 02:
Is that all right?

[00:37:39] Speaker 02:
I understand you have several different rationales for excluding 2020 and 2021, but just on stockpiling, it is a little bit striking that every single time EPA discusses this in the rule, it says there's a lot of evidence of stockpiling in 2021, and there's no reference that I could find to data showing stockpiling in 2020.

[00:38:00] Speaker 02:
Why shouldn't that concern us for that specific rationale?

[00:38:04] Speaker 04:
I think for two reasons.

[00:38:05] Speaker 04:
One is the effects of the COVID-19 pandemic are a separate rationale that fully justifies excluding that data.

[00:38:14] Speaker 04:
And second, it speaks to our exhaustion argument here, is that I guess, nor any other commenter specifically said,

[00:38:22] Speaker 04:
hey, let's treat 2020 differently.

[00:38:25] Speaker 04:
And I know that sounds silly, but the argument in the brief that I guess made was an EE.

[00:38:29] Speaker 02:
It kind of does sound a little silly.

[00:38:31] Speaker 02:
Frankly, it's a little surprising to me.

[00:38:32] Speaker 02:
You invite comment, should we include 2020 and 2021?

[00:38:37] Speaker 02:
And the forfeiture argument you're making suggests that it just never occurred to you to think about whether the reasons you had for excluding one year also applied to the other.

[00:38:48] Speaker 04:
I think the force of the argument is maybe this.

[00:38:51] Speaker 04:
I guess that the EPA failed to independently consider 2020 to the extent that's their argument.

[00:38:56] Speaker 04:
Our response is you didn't tell us to independently consider 2020.

[00:39:00] Speaker 04:
But more importantly you didn't give us the data that the level of data that you now say EPA needed to have analyzed in the record to make EPA's point.

[00:39:13] Speaker 04:
As noted before in the earlier argument EPA said that nobody gave any business plans or other

[00:39:20] Speaker 04:
explanation for the import activity in that very unusual year, 2020, that would have explained that.

[00:39:27] Speaker 04:
And EPA is concerned by the overall principle that- But they would have explained what?

[00:39:32] Speaker 02:
Because I guess the point is, their point is, there doesn't seem to be any anomaly in the 2020 data.

[00:39:38] Speaker 02:
And your explanation is, well, stockpiling cut one way and pandemic cut the other way, and that's why it looks sort of normal.

[00:39:46] Speaker 02:
And they're saying that's based on speculation.

[00:39:50] Speaker 04:
Right.

[00:39:50] Speaker 04:
Well I think that's looking again at the aggregate data maybe that the aggregate data one it's not entirely normal because it did decrease after years of increasing year over year for one but to sort of missing the trees for the forest because it's the distribution of import activity during that year that EPA feared reasonably was not reflective of the actual market.

[00:40:13] Speaker 04:
And note here how the allocation system works.

[00:40:16] Speaker 04:
It's only those companies that did better in that unusual year who are going to be affected by including that year, except to the extent then that they get a larger share of the fixed pool.

[00:40:28] Speaker 04:
So it's this unusual year that EPA doesn't think is reflective of market realities that would then go in and reorder the allocation of allowances.

[00:40:37] Speaker 02:
And in your view,

[00:40:38] Speaker 02:
Do we need to think that EPA actually thought about the entity specific level or just that it's enough to have sort of a reasonable fear that the distribution was altered?

[00:40:51] Speaker 02:
Do you need evidence in this kind of a case?

[00:40:54] Speaker 04:
No, Your Honor.

[00:40:54] Speaker 04:
I think it is reasonable enough for EPA to have supported, I would say, by plenty of qualitative evidence in the record, right?

[00:41:02] Speaker 04:
Lots of comments from entities.

[00:41:04] Speaker 04:
in the market, including comments from I guess, and I do want to highlight the comments from I guess on the effect of the COVID pandemic.

[00:41:13] Speaker 04:
At J60, they wrote in their comments, 2020 and 2021 were anomalous as a result of the COVID-19 pandemic where supply chain difficulties dominated all markets.

[00:41:24] Speaker 04:
Manufacturing in other countries was curtailed due to the coronavirus.

[00:41:28] Speaker 04:
Ships were unavailable and shipments were not unloaded.

[00:41:32] Speaker 04:
imports were very difficult to achieve.

[00:41:35] Speaker 04:
So EPA's judgment that those disruptions would make it very unlikely that the distribution of imports in that year was truly representative of the market was reasonable.

[00:41:45] Speaker 04:
It was not truly representative.

[00:41:46] Speaker 04:
And given that, it would be a market distortion to benefit those companies that had unusual success during that year.

[00:41:54] Speaker 06:
I have a question about the

[00:41:57] Speaker 06:
interest in promoting market stability.

[00:41:59] Speaker 06:
And I understand your argument about 2020 having been an unusual, atypical year.

[00:42:08] Speaker 06:
But is promoting stability sufficient justification for continuing over coming years to leave the allocation formula unchanged?

[00:42:19] Speaker 06:
I mean, at what point does it

[00:42:21] Speaker 06:
Is it not rational to keep giving the allowances to legacy equipment manufacturers based on their market share from, let's say, 2011 to 2013?

[00:42:35] Speaker 04:
Your Honor, there certainly may be a point at which that is true.

[00:42:38] Speaker 04:
And EPA has left the door open to reconsidering its allocation methodology past 2028.

[00:42:44] Speaker 04:
Things that it could take into account would be things like whether entities are not using their allowances

[00:42:50] Speaker 04:
whether the trading is not really working to make sure that those allowances get into the hands of people who need them for their near term needs.

[00:42:57] Speaker 04:
But in this particular circumstance, EPA rightly credited commenter's concern that stability was especially important because there had just been two years of a phase down.

[00:43:06] Speaker 04:
Supply chains, business planning was adjusting to that phase down right as we were going into the first big jump from 90% of baseline to 60% of baseline.

[00:43:16] Speaker 04:
And so surely the additional stability in, importantly, it's the capped market, not the market that is a supplier.

[00:43:24] Speaker 02:
One question I have about this is that if you wanted to promote stability in supply chains, wouldn't you want to know what the supply chains are doing now, more recently?

[00:43:34] Speaker 02:
In other words, you're saying that we have to preserve allocations based on data from a decade ago.

[00:43:42] Speaker 02:
So that, but in reality, won't the supply chains be, if you had perfect data, whatever they are today, or at least in 2020, 2021, and it's actually going to be more disruptive to shift away from what the market's doing on its own.

[00:43:57] Speaker 04:
Well, again, your honor, first point is that we have already shifted into the capped market of people adjusting to their proportion of the limited pool of allowances.

[00:44:08] Speaker 04:
But, you know, second,

[00:44:10] Speaker 04:
This is, I've forgotten my second point.

[00:44:13] Speaker 04:
Go ahead.

[00:44:15] Speaker 02:
No, I understand.

[00:44:16] Speaker 02:
So once this cap, we shouldn't rely on 2020 for stability because once the cap system comes online, that's going to be shaping the.

[00:44:27] Speaker 04:
Right.

[00:44:28] Speaker 04:
And I think there's a little technical point here just about the data and what the importance of predictability and knowing your share is because all of this market data is confidential business information.

[00:44:40] Speaker 04:
Until EPA published the first allocation action where people saw what their high three years were compared to everyone else, they wouldn't have known what their proportion of the pool would be.

[00:44:50] Speaker 04:
So maintaining that consistency into the next one to be able to predict the share of the now 60% pool was certainly a rational concern.

[00:45:00] Speaker 04:
And in the end, this is EPA choosing between potentially reasonable policy outcomes, right?

[00:45:07] Speaker 04:
And the question for the court is whether EPA's choice here was rational.

[00:45:11] Speaker 04:
And we think the rule surely meets that standard.

[00:45:14] Speaker 06:
You had a point about

[00:45:16] Speaker 06:
the your forfeiture argument that they that people commented in support of including both years data 2020 2021 and you said we didn't have the ability to do a more granular analysis of 2020 because they hadn't provided that data.

[00:45:36] Speaker 06:
Is that not the agency's burden to ask for that data?

[00:45:41] Speaker 04:
I think the point we're trying to make your honor is that without

[00:45:46] Speaker 04:
making specific points and providing company-specific information that would allow or indicate to EPA that it needed to more granularly dive into the 2020 data than it was reasonable for EPA to respond in the more general manner that it did.

[00:46:03] Speaker 04:
The notice and comment process is a two-way street.

[00:46:07] Speaker 04:
EPA's obligation to respond and the detail in which it has to respond has to be in response to the level of detail and the kinds of arguments raised in comment.

[00:46:19] Speaker 04:
We ask you to deny the petitions.

[00:46:39] Speaker 03:
Good morning, Your Honors, and may it please the Court.

[00:46:41] Speaker 03:
Elizabeth Dawson, appearing on behalf of Intervenor Respondents Alliance for Responsible Atmospheric Policy,

[00:46:46] Speaker 03:
and air conditioning, heating and refrigeration Institute.

[00:46:50] Speaker 03:
EPA's 2024 to 2028 HFC allocation framework should be upheld because Congress lawfully delegated EPA specific limited authority to create an allowance allocation and trading program

[00:47:02] Speaker 03:
and EPA lawfully exercised that authority when determining that the best approach was to continue using 2011 to 2019 data in determining allowance allocations.

[00:47:13] Speaker 03:
While these few petitioners take issue with EPA's approach, this allocation rule has the support of the vast majority of the entities regulated by it, and it is a crucial step in effectuating Congress's implementation of the Kigali Amendment to the Montreal Protocol, and more broadly, to reducing GHGs.

[00:47:31] Speaker 03:
Turning first to the non-delegation argument, petitioner choice makes three fundamental errors.

[00:47:36] Speaker 03:
First, myopically focusing on just one provision, 42 USC 7675E3, to the exclusion of the entire statutory scheme.

[00:47:45] Speaker 03:
to regulate and phase down HFCs because that entire scheme provides ample mandatory guardrails constraining EPA's discretion.

[00:47:54] Speaker 03:
Second, it errs in maintaining that without any grounding in precedent that who receives allowances is somehow a crucial missing link that separates lawful delegation of executive authority from unlawful delegation of legislative authority.

[00:48:08] Speaker 03:
And third, it errs in claiming that EPA is unilaterally determining what businesses may remain in the marketplace and what businesses may not.

[00:48:16] Speaker 03:
Ford is the market itself, really, that is determining that.

[00:48:19] Speaker 03:
Both Congress's framework and EPA's methodology track the market by looking to historical market share and overall HFC production and consumption.

[00:48:28] Speaker 03:
EPA is not picking winners and losers.

[00:48:31] Speaker 03:
Petitioner IGAS's arguments fair no better for three reasons.

[00:48:34] Speaker 03:
First, EPA's retention of 2011 to 2019 as the appropriate years from which to determine market share was reasonable and reasonably explained.

[00:48:43] Speaker 03:
EPA sought comment on adjusting its approach to include 20 and 2021, but concluded that commenters did not provide sufficient reason to change its methodology.

[00:48:53] Speaker 03:
The Clean Air Act's rulemaking standards, which are applicable here, require no more.

[00:48:58] Speaker 03:
Second, EPA fully explained why it determined that both the COVID-19 pandemic and evidence of stockpiling led to the conclusion that 2020 and 2021 were anomalous years.

[00:49:08] Speaker 03:
And third, EPA reached the same conclusion for 2020 and 2021 reasonably, and that does not mean that it improperly lumped the years together.

[00:49:17] Speaker 03:
EPA had sufficient reasons for excluding each beyond COVID and stockpiling, including maintaining continuity and stability and predictability for regulated entities, as this court has discussed.

[00:49:29] Speaker 03:
So unless the court has any questions, I conclude and thank you and urge the court to uphold EPA's decisions and deny the petitions.

[00:49:37] Speaker 06:
I wonder if you can cast any further light on the treatment of stockpiling.

[00:49:42] Speaker 06:
EPA acknowledged there was potential stockpiling before it applied that rationale to the 2020-2021 data.

[00:49:51] Speaker 06:
In particular, EPA acknowledged that if the data were limited to 2017 to 2019, the knowledge that some kind of HSC limits were in the offing in light of the Kigali Amendment

[00:50:05] Speaker 06:
might have already triggered some stockpiling and therefore the EPA responded by taking the relevant data back to 2011 and having a three-year average system to counteract any non-representative year stockpiling impact.

[00:50:24] Speaker 06:
Why aren't those safeguards sufficient to address concerns about stockpiling in 2020?

[00:50:30] Speaker 03:
Well, Your Honor, another reason that EPA excluded both 2020 and 2021 was because EPA concluded that its ability to validate the 2020 and 2021 data was not as robust as the set of data and its validation process for 2011 to 2019.

[00:50:45] Speaker 06:
Well, does EPA have any reason to think that the data it has from 2020 is unreliable?

[00:50:51] Speaker 06:
I mean, that seems a little bit of a self-fulfilling rationale.

[00:50:55] Speaker 06:
They've had time.

[00:50:56] Speaker 06:
They just haven't wanted to put the resources in to validate that.

[00:50:59] Speaker 06:
So I'm not sure that's a compelling... Well, Your Honor, I can't speak to EPA's motivations behind... It just doesn't seem... Do you have any other argument that doesn't strike me as the most compelling?

[00:51:09] Speaker 03:
Well, Your Honor, I think the EPA asked for comments on whether it should include 2020 and 2021.

[00:51:16] Speaker 03:
So it asked for entities to provide it the data from which it could conclude that 2020 and 2021 were more representative years, but that information simply wasn't provided.

[00:51:26] Speaker 03:
And overall, looking at all of the data, and in addition to reasons beyond COVID and beyond stockpiling, EPA reasonably concluded that it made sense to continue with its prior framework rule

[00:51:37] Speaker 03:
year span of 2011 to 2019 instead of adding additional years.

[00:51:46] Speaker 06:
Thank you.

[00:51:46] Speaker 06:
Thank you.

[00:51:51] Speaker 06:
Did Ms.

[00:51:51] Speaker 06:
Sandifer save any time for rebuttal?

[00:51:54] Speaker 06:
Two minutes.

[00:51:56] Speaker 08:
Two minutes.

[00:51:56] Speaker 08:
Thank you, Your Honors.

[00:51:57] Speaker 08:
I'm going to start with the argument that several of us here agree is silly and that is the forfeiture argument.

[00:52:04] Speaker 08:
EPA did ask for comments on 2020 and 2021, and the IGAS petitioners responded in like kind.

[00:52:14] Speaker 08:
But the crux of what EPA was asking for, and it made clear in its notice, was it was asking for comments on whether to include more recent data.

[00:52:22] Speaker 08:
And IGAS consistently advocated for inclusion of more recent data, which necessarily included 2020 and 2021.

[00:52:32] Speaker 08:
That argument subsumes, including just one of those years.

[00:52:36] Speaker 08:
And basically, they're faulting us for using an and instead of an or in the comments.

[00:52:41] Speaker 08:
And this courts.

[00:52:42] Speaker 06:
Well, is there 2020 specific data in support of the comments on which the challengers rely?

[00:52:54] Speaker 06:
In other words, do the comments enable the disaggregation that you say should obviously have been on the table?

[00:53:02] Speaker 08:
Yes, Your Honor, they do, because even in the proposed rule, what EPA was looking at was the aggregate supply data for those years.

[00:53:10] Speaker 08:
It had, and this is really important, I think, to the waiver argument and to the crux of it, it was that EPA had the opportunity to consider this year separately, because it looked at the year separately.

[00:53:20] Speaker 08:
It looked at annual

[00:53:22] Speaker 08:
import and consumption data for 2020 and annual import and consumption data for 2021.

[00:53:27] Speaker 08:
Totally separate frames of reference.

[00:53:31] Speaker 05:
So I came into this argument kind of agreeing that this was kind of silly because people will often make several arguments in the proceeding below and then come up and just challenge one of them.

[00:53:43] Speaker 05:
But the way this argument has played out, EPA is saying you never ask them to independently look at 2020.

[00:53:50] Speaker 05:
And then as this argument is played out, it's like one can see or imagine a scenario where you come in saying, look at 20 and 21, and then the final rule comes out as it did here, and it focuses more on 2021.

[00:54:03] Speaker 05:
So you come in and say, aha, you didn't consider 2020 independently.

[00:54:09] Speaker 05:
If you had asked them to consider 2020 independently, maybe we'd have more information in this record about 2020 as opposed to 2021.

[00:54:16] Speaker 05:
But since you never asked them to,

[00:54:18] Speaker 05:
It does seem to me a little unfair for you to come in and just say your final rule only focuses on 2021 and didn't look at 2020 independently.

[00:54:27] Speaker 08:
I don't think that's the case here because we did consistently ask consideration of more recent data, which includes both of those years.

[00:54:34] Speaker 08:
And the data that was relied on was independent data for those years.

[00:54:37] Speaker 08:
In other words, EPA had the same data for 2020 and 2021 that it based its decision on.

[00:54:43] Speaker 08:
It didn't look at individual data for individual entities.

[00:54:46] Speaker 08:
It looked at the aggregate supply data and reached this conclusion about stockpiling for both years based upon that.

[00:54:52] Speaker 05:
No, I understand that they could have done this, but you didn't ask them to, and now you're faulting them for not focusing on 2020.

[00:54:57] Speaker 08:
We didn't specifically say either or year, but we did ask for inclusion of more recent data, which I certainly believe includes her.

[00:55:03] Speaker 08:
No, I understand.

[00:55:04] Speaker 06:
You said they had aggregate supply data.

[00:55:07] Speaker 06:
Could they have?

[00:55:10] Speaker 06:
Given what EPA posits were countervailing forces operating in 2020, without more individuated data, can they separate out a stockpiling and a supply chain analysis?

[00:55:28] Speaker 08:
Can EPA do what you mean?

[00:55:29] Speaker 08:
Yeah, could EPA do that?

[00:55:30] Speaker 06:
Commentators do it.

[00:55:31] Speaker 08:
Well, they certainly had to have some basis for the decision they reached in 2021.

[00:55:36] Speaker 06:
Right, right, right.

[00:55:36] Speaker 06:
No, I get that it's their burden to have a basis, but the interplay here is between the commenter's burden to raise the defect and then whether they can fault EPA for not addressing the defect they raised.

[00:55:51] Speaker 06:
And so I guess the question is, do you think EPA had the data

[00:55:57] Speaker 06:
that it would have needed to do more precise attribution of the causes of the aggregate numbers that show up for 2020.

[00:56:07] Speaker 06:
For example, as between supply chain problems and putative stockpiling.

[00:56:14] Speaker 08:
It didn't cite any data in its role.

[00:56:16] Speaker 08:
But do you think it had the data?

[00:56:19] Speaker 08:
speak to that your honor I don't know exactly what data it might have looked at but I mean any data you know what data was in the record now certainly yes no I don't think it was provided I mean at that time I don't know if entities were able to provide specifics about well we had stockpiling problems this month of 2020 or I'm not stockpiling we had supply chain issues this month of 2020 and that month of 2020 I don't think it had to go to that level because the because I

[00:56:45] Speaker 08:
the data that it was defending EPA and I guess specifically did address Judge Pan 2020 in its comments.

[00:56:53] Speaker 08:
It did specifically point out that the data for 2020 just did not support stack piling.

[00:56:59] Speaker 08:
So there was no reason for it to go further.

[00:57:01] Speaker 08:
I mean if you look at the data and the COVID problems there wasn't there wasn't even any stack

[00:57:07] Speaker 08:
to pile, for instance, in 2020 because of these problems with the supply issues.

[00:57:12] Speaker 06:
I think you said that there was no evidence of stockpiling in 2021.

[00:57:14] Speaker 06:
I thought you just said that.

[00:57:16] Speaker 08:
No, 2020.

[00:57:17] Speaker 08:
If I did, I apologize.

[00:57:18] Speaker 08:
I'm speaking solely to 2021.

[00:57:22] Speaker 08:
The data certainly indicates large increases in supply.

[00:57:27] Speaker 08:
Provided the basis for EPA is ruling, and we aren't challenging that.

[00:57:30] Speaker 08:
But 2020 is a very different situation.

[00:57:33] Speaker 08:
EPA chose to base its decision on the aggregate supply data, and it just does not support the decision it reached.

[00:57:40] Speaker 08:
Great.

[00:57:40] Speaker 08:
Thank you.

[00:57:41] Speaker 08:
Thank you very much.

[00:57:48] Speaker 06:
Ms.

[00:57:48] Speaker 06:
Brown has reserved three minutes for rebuttal.

[00:57:55] Speaker 07:
Thank you, Your Honor.

[00:57:56] Speaker 07:
I think it's important to pay attention to the arguments that the interveners made.

[00:58:00] Speaker 07:
In particular, they stand up and say the majority of the industry supports this.

[00:58:05] Speaker 07:
But that highlights the importance of the separation of powers, of the divesting of powers in the executive branch.

[00:58:11] Speaker 07:
This isn't about majority rule.

[00:58:13] Speaker 07:
This is about the legislative process.

[00:58:16] Speaker 07:
They also said that it's a narrow issue as to who will have the allowances granted.

[00:58:21] Speaker 07:
That is not a narrow issue.

[00:58:23] Speaker 07:
That is the decision that brings this act home to the people in the marketplace and to others.

[00:58:30] Speaker 07:
It is the decision as to who will be allowed to do business and who will not.

[00:58:35] Speaker 07:
And in Rodriguez versus United States, the Supreme Court specifically said that citing what competing values will or will not be sacrificed in the achievement of a particular objective

[00:58:48] Speaker 07:
is the very essence of legislative choice.

[00:58:51] Speaker 07:
Here, EPA exercised that choice when it decided how to grant allowances.

[00:58:57] Speaker 07:
Also, three quick points in response to the government's arguments.

[00:59:01] Speaker 07:
First, the standard has to relate to the power.

[00:59:05] Speaker 07:
In other words, if you look at, for example, Panama refining and even Gandhi, what was important in Panama refining was the transportation of hot oil, essentially oil in excessive state limits.

[00:59:17] Speaker 07:
The court said we look to the statute to see whether or not there is a policy and a standard as it relates to the subject of that power.

[00:59:27] Speaker 07:
Here the subject of the power is issuing or withholding allowances, banning people even from the marketplace.

[00:59:35] Speaker 07:
There is no standard in the AIM Act in its text.

[00:59:39] Speaker 05:
in its purpose or its context.

[00:59:40] Speaker 05:
Well, no one's banned from the market because they can still buy.

[00:59:42] Speaker 05:
They can trade and buy these allowances.

[00:59:44] Speaker 07:
Yes, but you don't have to buy your liberty.

[00:59:46] Speaker 07:
The fact that you can buy your trading allowances doesn't mean that there wasn't a constitutional violation.

[00:59:52] Speaker 07:
You can buy your way out of jail if you're submitted there in violation of your constitutional rights.

[00:59:57] Speaker 07:
That doesn't mean there wasn't a constitutional violation.

[01:00:00] Speaker 07:
And EPA recognized in rulemaking that it creates a disadvantage to smaller companies.

[01:00:05] Speaker 06:
Miss Brown, you were about to talk about Gandhi, and in some ways this case feels quite similar to Gandhi, where the principle there was to get the pre-act offenders registered as quickly as possible in an orderly manner.

[01:00:21] Speaker 06:
That was actually not ever spelled out in the statute.

[01:00:25] Speaker 06:
And here, similarly, one might argue that there's an implicit principle that the baseline references the existing market, the existing market participants, and the desire to not be disruptive implies a principle of

[01:00:46] Speaker 06:
treating the status quo as the baseline and then using an allocation that reflects that baseline as the starting point for the phase down.

[01:01:00] Speaker 06:
So why isn't Gundy pretty strong support for what EPA did here?

[01:01:06] Speaker 07:
Well, number one, if you look at what the Supreme Court said in Gandhi was you have to look at the task that was signed and the instruction given as to that task.

[01:01:17] Speaker 07:
Here, there are no instructions given.

[01:01:19] Speaker 07:
And the reason that you can't fall back on the ODS if you look at what EPA did here.

[01:01:25] Speaker 07:
And one thing that hasn't come up in argument this morning is the set-asides that EPA made in the consumption allowances

[01:01:32] Speaker 07:
for new market entrance.

[01:01:35] Speaker 07:
So in other words, even as it relates to consumption allowances, which is what my client uses, EPA decided that it was free to set aside over 7 million allowances, more than my client receives, for new market entrance.

[01:01:49] Speaker 07:
And while EPA here disclaims the ability to use an auction, I suggest that that's a litigation-driven

[01:01:56] Speaker 07:
post-hoc rationalization, because it won't be the initial.

[01:01:58] Speaker 06:
But that's not before us.

[01:01:59] Speaker 06:
That's not before us, because they haven't used an option.

[01:02:01] Speaker 06:
So what we're looking at is whether they subjectively appreciate it or not, whether we see what they did as bounded by an intelligible principle in the statute.

[01:02:11] Speaker 07:
No?

[01:02:12] Speaker 07:
We cannot look at what they did.

[01:02:13] Speaker 07:
And I think that Whitman makes that clear, because EPA cannot save an unconstitutional statute by the actions that it takes.

[01:02:20] Speaker 07:
Whatever standards EPA supplies here don't change the fact

[01:02:25] Speaker 07:
that the statute either does or does not give an intelligible principle.

[01:02:28] Speaker 07:
It wouldn't make that clear.

[01:02:29] Speaker 06:
That's a slightly distinct point.

[01:02:30] Speaker 06:
I mean, in the Gundy-type situation, where I guess you don't see the analogy, but where there is a task, which there is getting people onto a registry here, it's running an allocation system that will allow the EPA, according to the statute, to push down the levels on the schedule that Congress set

[01:02:55] Speaker 06:
That's the task, and that's what the allocation is tailored to accomplish, just as the speedy signing up of the preact offenders was the task.

[01:03:07] Speaker 07:
But I think, Your Honor, if you look at Gandhi, it is a question of statutory interpretation.

[01:03:12] Speaker 07:
So in Gandhi, the Supreme Court looked at Sorna and said, if we look at this statute, and particularly if we look at these parts of the statute and we look at the legislative history, those other parts of the statute say that you had to do this as soon as possible.

[01:03:27] Speaker 07:
That power wasn't reserved to the attorney general in that case to either do or do not register pre-existing offenders.

[01:03:34] Speaker 07:
Here, when you look at the AIM Act, and you have to look again at the set-asides, and also look at the application-specific allowances, the fact that there's a general pool is a creation of EPA's making.

[01:03:49] Speaker 07:
And so when you look at EPA's rulemaking, even on the application-specific allowances, EPA said there is nothing in the statute that identifies who's to receive these.

[01:04:00] Speaker 07:
And they gave them to the end users.

[01:04:02] Speaker 07:
They created an opportunity for new market entrants.

[01:04:05] Speaker 07:
And so there's nothing that EPA saw in this statute prior to this case that restricted granting allowances to pre-existing importers or producers as it now claims.

[01:04:17] Speaker 07:
And the final rule should be reversed.

[01:04:19] Speaker 07:
Thank you very much.

[01:04:21] Speaker 07:
Case is submitted.