What the HARDI v. EPA Decision Means for the Industry

I want to share an update on our lawsuit against the EPA. Yesterday the DC Circuit Court of Appeals announced that HARDI won its lawsuit against the EPA over the non-refillable cylinder ban and the QR code tracking requirement. You can read HARDI’s press release here. In addition to the press release, I wanted to share what the decision means for HARDI members and the HVACR industry. Three important takeaways for HARDI members:

1. The court overturned EPA’s non-refillable cylinder ban and QR code tracking requirement. This means no changes to the cylinders for bulk refrigerant sales, however, the phase-down is still in place, so less refrigerant will be available in coming years.

2. A separate lawsuit was combined with HARDI’s that challenged how allocations are given out for HFC blends. The court rejected this challenge to the allocation system for HFC blends. The current 10% reduction in HFC production and imports remains in place, and next year production and imports will drop to 60% of the baseline.

3. While the court did order the EPA to strike the cylinder ban and tracking requirement from the final rule, the EPA can appeal to the Supreme Court. We don’t think this is likely based on the makeup of the Supreme Court.

More details on the lawsuit and the impact of the decision:

The case contained three components: HARDI, ACCA, PHCC (the joint trade associations), and Worthington Industries' challenge of the ban on non-refillable cylinders, the joint trade associations' challenge to the QR code tracking requirement for all cylinders, and a third challenge filed by another petitioner to overturn the allocation system for HFC blends. The court unanimously rejected the third petitioner’s argument that EPA could not require an allocation to import HFC blends. HARDI, and the larger HVACR industry, supported the court’s decision to keep the allowance allocation program intact as written by the EPA. This decision does not change the allocation program that phases down HFC production and imports in 2022 and 2023. EPA is still finalizing the allocation rule for the 60% of the baseline step to determine how many HFCs each company can produce and import in 2024 and beyond.

On the non-refillable cylinder ban and QR code tracking requirement, the court sided with HARDI and our joint petitioners in a split 2-1 decision, a simple majority is needed to win the case. Judges Walker and Henderson sided with us, while Judge Pillard sided with the EPA. Judge Walker wrote the opinion for the court and echoed our arguments that the EPA had no authority to ban non-refillable cylinders or require the tracking of all cylinders through the supply chain. In the opinion released by the court, Judge Walker said, “Ordinary readers of English do not expect provisions setting out math equations to empower an agency to prescribe other ‘fundamental details of a regulatory scheme.’” EPA claimed authority under the AIM Act subsection (e)(2)(B), a section that tells the EPA to ensure that production and consumption of HFCs stay below the appropriate baseline for each year of the phase-down by multiplying the overall baseline by the percentage phasedown for a given year. The legislative text does not grant EPA unlimited authority to develop “complementary measures” to increase compliance costs on the supply chain, as EPA claimed.

In an order accompanying the opinion, the Court has instructed the EPA to strike the refillable cylinder and QR code tracking requirements from the final rule, however, the court is giving the agency time to petition for a rehearing or appeal before the order goes into effect. It is unknown if the EPA plans to petition for a rehearing or appeal the decision to the Supreme Court, but we believe it to be unlikely.

With this win and the judicial precedent set for limiting the authority of the EPA within the AIM Act, the industry is in a stronger position to stop bad ideas from being implemented by the EPA. An example of this is the proposed Technology Transition rule from late last year. In the proposed rule, the EPA sought to implement a one-year sell-through for equipment using high-GWP refrigerants. HARDI, and many in the industry, argued the EPA’s interpretation of the word “use” was too broad to give the agency the authority to implement a limited sell-through. With the court’s opinion saying, “The touchstone of statutory interpretation is always to ‘interpret the words consistent with their ordinary meaning at the time Congress enacted the statute,’” HARDI has a stronger argument to say the word “use,” in ordinary meaning, does not include the storage of a system for future sale. An argument we made in our comments to the EPA. We expect the final rule to be published by the EPA before October 7, 2023. If EPA does move forward with a limited sell-through, HARDI can rely on this new judicial precedent to overturn the provision.

Lastly, I want to thank the Legal Defense Fund supporters, having this resource available to defend the industry from government overreach is invaluable, however, continued support from HARDI members is needed. Please contribute to HARDI’s Legal Defense Fund here.

If you have any questions about the lawsuit or the HFC phase-down, please contact Alex Ayers.