Amicus Curiae Brief — Natural Resources Defense Council, Petitioner v. Mexichem Fluor, Inc., et al.

Nos. 17-1703 & 18-2

IN THE

Supreme Court of the United States

————

HONEYWELL INTERNATIONAL INC., ET AL.,

Petitioners,

v.

MEXICHEM FLUOR, INC., ET AL.,

Respondents.

————

NATURAL RESOURCES DEFENSE COUNCIL,

Petitioner,

v.

MEXICHEM FLUOR, INC., ET AL.,

Respondents.

————

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

————

BRIEF FOR DAIKIN U.S. CORPORATION

AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

————

MARK V. STANGA

Counsel of Record

DAVID B. CALABRESE

DAIKIN U.S. CORPORATION

601 13th Street, NW

Suite 200 South

Washington, DC 20005

(202) 669-2002

mstanga@gmail.com

david.calabrese@daikinus.com

Counsel for Amicus Curiae

Daikin U.S. Corporation

July 26, 2018

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................

ii

INTEREST OF THE AMICUS CURIAE ............

1

INTRODUCTION AND

SUMMARY OF ARGUMENT .........................

1

ARGUMENT ........................................................

3

I. CLEAN AIR ACT SECTION 612 IS AN

ESTABLISHED REGIME TO MANAGE

THE USES OF OZONE-DEPLETING

SUBSTANCE SUBSTITUTES, AND

THE DECISION BELOW PLACES AT

RISK EPA’S CAREFULLY CRAFTED

IMPLEMENTING REGULATIONS ........

3

A. The Section 612 Statutory Framework Governing Uses of ODS

Substitutes Encourages the Orderly

Development of Substitutes and

Products that Benefit Human Health

and the Environment ..........................

3

B. The Majority Decision Creates Confusion in the Regulatory Regime that

EPA Carefully Crafted under Section

612 to Reduce Human Health Risks

and Improve Environmental Benefits...

7

II. THE DECISION BELOW DISCOURAGES THE DEVELOPMENT OF NEW

ODS SUBSTITUTES ................................

9

CONCLUSION ....................................................

10

(i)

ii

TABLE OF AUTHORITIES

CASES

Page(s)

Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc.,

467 U.S. 837 (1984) ................................... 9, 10

Encino Motorcars, LLC v. Navarro,

584 U.S. at __ (slip op., at 6) (2018) .........

9

Taniguchi v. Kan Pacific Saipan, Ltd.,

556 U.S. 560 (2012). ..................................

9

STATUTES AND REGULATIONS

Clean Air Act, Pub. L. No. 101-549, tit. VI,

§ 602(a), 104 Stat. 2667 (1990) .................

3

§ 612, 42 U.S.C. § 7671k ..........................passim

§ 612(a), 42 U.S.C. § 7671k(a) ..................

5

40 C.F.R. Part 82, Subpart G .......................

7, 8

40 C.F.R. 82.170 ...........................................

7

40 C.F.R. 82.170(a) .......................................

8

40 C.F.R. 82.172 ...........................................

7

INTEREST OF THE AMICUS CURIAE1

Daikin U.S. Corporation (“Daikin”) is one of several

affiliated companies based in the United States

(“the Daikin Group”). The Daikin Group has a unique

viewpoint from the corporate petitioners, in that

certain members of the Daikin Group manufacture

heating, ventilation and air conditioning (“HVAC”)

equipment while others manufacture refrigerant

used by and critical to the operation of that HVAC

equipment.2 By injecting uncertainty into a wellestablished regulatory regime, the majority opinion

below impairs the Daikin Group’s ability to replace

existing refrigerants and refrigerant-using equipment

with substitutes that are more environmentally beneficial and more energy efficient.

INTRODUCTION AND

SUMMARY OF ARGUMENT

The regulatory structure governing the introduction

and use of refrigerants that are substitutes for ozonedepleting substances (“ODS”) has been in place for

over twenty years. This structure has provided predictability and stability for both the manufacturers of

ODS-substitute refrigerants and the manufacturers of

equipment that use those ODS-substitute refrigerants,

1

Rule 37 statement: All parties received timely notice of

amicus’s intent to file this brief, and all parties consented to the

filing of this amicus curiae brief. Further, no counsel for any

party authored this brief in whole or in part, and no person or

entity other than amicus funded its preparation or submission.

2

The Daikin Group’s United States operations primarily

consist of the manufacture of HVAC equipment but also consist

of the manufacture of fluorochemicals including ODS substitutes.

Daikin appears in this matter as amicus as a manufacturer of

equipment that constitutes an end-use of ODS substitutes.

2

allowing each to conduct its businesses in an efficient

manner and to introduce environmentally beneficial

products. However, the majority opinion of the

District of Columbia Circuit Court of Appeals inserts

ambiguity that potentially hinders those efforts.

The majority opinion eliminates EPA’s ability to

reclassify ODS substitutes from approved to disapproved

under § 7671k if the substitute is not directly replacing

an ODS, potentially freezing the status of substitutes

on the safe substitutes list if they would replace a nonODS. Thus, the majority’s interpretation of Section

612 of the Clean Air Act, 42 U.S.C. § 7671k – which

applies both to manufacturers of class I and class II

substances [i.e., ODS] and to manufacturers of equipment that uses ODS and ODS substitutes – allows

certain members in the supply chain of HVAC

equipment to continue the use of ODS substitutes even

in cases where EPA determines that those previously

approved substitutes now constitute an environmental

or human health threat that prohibits their continuing

use. This disrupts the incentive for Daikin and other

companies to develop future ODS substitutes that

reduce environmental and human health risks since

many ODS substitute users will continue to use the

previously approved substitutes to avoid the cost of

converting to new substitutes.

These ambiguities threaten the business interests of

not only the manufacturers of ODS substitutes but

also the business interests of users of ODS substitutes

and the manufacturers of equipment in which ODS

substitutes play an essential operational role. Without

regulatory clarity, manufacturers and users of ODS

substitutes may be unable introduce the next generation of ODS substitutes and associated equipment that

can reduce human health risks and simultaneously

3

benefit the environment due to improved energy

efficiency.

A member of the Daikin Group recently opened the

Daikin Texas Technology Park, an approximately

$500 million research and manufacturing facility near

Houston, Texas, and other Daikin Group members

have invested many millions of dollars in developing

HVAC equipment to use environmentally beneficial

replacement refrigerants such as R-32. All of these

investments are at risk as a result of the majority

opinion in this matter.

ARGUMENT

I. CLEAN AIR ACT SECTION 612 IS AN

ESTABLISHED REGIME TO MANAGE

THE USES OF OZONE-DEPLETING

SUBSTANCE SUBSTITUTES, AND THE

DECISION BELOW PLACES AT RISK

EPA’S CAREFULLY CRAFTED IMPLEMENTING REGULATIONS

A. The Section 612 Statutory Framework

Governing Uses of ODS Substitutes

Encourages the Orderly Development

of Substitutes and Products that Benefit Human Health and the Environment

Section 612 of the Clean Air Act, Pub. L. No. 101549, tit. VI, § 602(a), 104 Stat. 2667 (1990) (codified at

42 U.S.C. §7671k), provides:

(a) Policy

To the maximum extent practicable, class I

and class II substances [i.e., ODS] shall be

replaced by chemicals, product substitutes

or alternative manufacturing processes that

4

reduce overall risks to human health and the

environment.

* * *

(c) Alternatives for class I or II substances

Within 2 years after November 15, 1990, the

Administrator shall promulgate rules under

this section providing that it shall be unlawful

to replace any class I or class II substance

with any substitute substance which the

Administrator determines may present adverse

effects to human health or the environment,

where the Administrator has identified an

alternative to such replacement that(1) reduces the overall risk to human health

and the environment; and

(2) is currently or potentially available.

The Administrator shall publish a list of

(A) the substances prohibited under this

subsection for specific uses and (B) the safe

alternatives identified under this subsection

for specific uses.

The Section 612 statutory framework provides for

the structured elimination of ODS, and for their

orderly replacement with ODS substitutes. However,

the majority opinion’s interpretation of the statute

creates confusion regarding a critical element in this

framework, EPA’s ability to replace ODS substitutes

in cases where new substitutes reduce overall risks to

human health and the environment, and are currently

or potentially available. Id.

Although the decision below recognizes that “the

lists of safe substitutes and prohibited substitutes

are not set in stone,” Appendix to the Petition for

5

Certiorari of Honeywell International, Inc. et al.

(hereinafter “App.”), at 6a, the majority opinion

proceeds effectively to freeze the status of substitutes

on the safe substances list if they would replace a

non-ODS. Id. at 26a. The dissent articulates some of

the confusion the majority opinion creates with this

holding:

Suppose a retailer needs to refurbish an air

conditioner manufactured in the early 1990s

that uses a class I substance as a refrigerant.

If the retailer chooses to have the air conditioner serviced by recharging it with new

refrigerant, she is prohibited from “replacing”

the class I substance with a chemical substitute “which the Administrator determines

may present adverse effects to human health

or the environment[,]” 42 U.S.C. § 7671k(a).

If the retailer chooses to purchase a new air

conditioner instead, she is still “replacing” a

class I substance, and the new air conditioner

cannot contain an unsafe substitute. Id.

Either way, the retailer’s action falls within

the scope of the mandates in Section 612. And

if the retailer purchases a new air conditioner, the fact that the manufacturer may

have previously “replaced” a class I substance

with an HFC as the refrigerant in its air

conditioners does not mean that “the replacement has [already] been effectuated” with

respect to that retailer. See Maj. Op. 14. By

the express terms of the statute, if the EPA

determines as of 2017 that HFCs are no

longer safe substitutes for class I substances

given available refrigerant alternatives, it

would appear that Congress has given EPA

the authority to prohibit the further use of

6

HFCs in air conditioners so that the retailer

in our example cannot “replace” her class I

substance-utilizing air conditioner with a

new air conditioner utilizing an unsafe

substitute. The majority holds otherwise.

Alternatively, the express terms of the statute

appear to give EPA the authority to prohibit

the retailer from recharging her old air conditioner with an HFC as the refrigerant, which

the agency could implement by restricting the

manufacture, marketing, and use of HFCs.

Given its focus on product manufacturers, the

majority opinion is curiously silent about how

its statutory interpretation affects retailers

and other end users who have products

utilizing class I and class II substances,

despite the obvious importance of the issue.

App. 32a-33a.

Since their enactment, Section 612 and EPA’s

implementing regulations have provided a reliable

and predictable framework for the manufacture of ODS

substitutes and equipment that uses them, facilitating

the development and introduction of new products

that have substantially reduced environmental impacts

and improved energy efficiency. Daikin and other

manufacturers of ODS substitutes and equipment

that uses ODS substitutes depend on a clear and

unambiguous statutory and regulatory regime to

justify the substantial investments necessary to continue to improve these products and to increase their

environmental benefits. And the absence of this

regulatory certainty jeopardizes the human health

and environmental benefits that would otherwise be

achieved.

7

B. The Majority Decision Creates Confusion in the Regulatory Regime that EPA

Carefully Crafted under Section 612

to Reduce Human Health Risks and

Improve Environmental Benefits

EPA’s regulations that implement Section 612 of the

Clean Air Act are contained in 40 C.F.R. Part 82,

Subpart G, and are reproduced in their entirety in the

Appendix to the Petition for Certiorari of Honeywell

International, Inc., et al., at App. 49a-128a. EPA’s

implementing regulations provide in pertinent part:

§ 82.170 Purpose and scope.

(a) The purpose of these regulations in this

subpart is to implement section 612 of the

Clean Air Act, regarding the safe alternatives

policy on the acceptability of substitutes

for ozone-depleting compounds . . . . The

objectives of this program are to identify

substitutes for ozone-depleting compounds, to

evaluate the acceptability of those substitutes, to promote the use of those substitutes

believed to present lower overall risks to

human health and the environment, relative

to the class I and class II compounds being

replaced, as well as other substitutes for the

same end-use, and to prohibit the use of those

substitutes found, based on the same comparisons, to increase overall risks.

* * *

§ 82.172 Definitions.

* * *

End-use means processes or classes of

specific applications within major industrial

8

sectors where a substitute is used to replace

an ozone-depleting substance.

* * *

Use means any use of a substitute for a

Class I or Class II ozone-depleting compound,

including but not limited to use in a manufacturing process or product, in consumption

by the end-user, or in intermediate uses, such

as formulation or packaging for other

subsequent uses.

The decision below deprives the regulatory regime

in 40 C.F.R. Part 82, Subpart G of an essential

element – EPA’s ability to move ODS substitutes from

the approved uses list to the prohibited uses list as

new substitutes emerge that present fewer human

health and environmental risks than the preceding

substitutes. As a result of this missing element in the

regulatory regime, it becomes difficult to achieve

a key regulatory objective stated in 40 C.F.R.

§ 82.170(a), which is to prohibit uses of substitutes

that increase overall risks.

The inability to place ODS substitutes on the

prohibited uses list and the resulting ambiguity also

hinder the achievement of the overall regulatory

purpose of § 82.170(a) to lower overall risks to human

health and the environment from ODS and ODS

substitutes. Because the decision below prevents

EPA from prohibiting the use of ODS substitutes

despite the emergence of new, environmentally superior

substitutes, the incentive is diminished for Daikin and

other companies to invest in the research and

development activities necessary to bring new, more

energy efficient and environmentally beneficial ODS

substances and the products that use them to the

9

market place. The majority opinion has introduced

significant ambiguity to the regulatory regime that

exists to implement Section 612.

This ambiguous regulatory posture discourages

Daikin, and others, from making continued business

investments to develop more energy efficient heating,

ventilating and air conditioning technologies based on

new ODS substitutes.

II. THE DECISION BELOW DISCOURAGES

THE DEVELOPMENT OF NEW ODS

SUBSTITUTES

Amicus Daikin endorses the conclusions stated by

the petitioners regarding the majority opinion’s interpretation of the word “replace” in Section 612 and

urges this Court to grant certiorari. Because the

Clean Air Act does not define “replace,” the term

should be given its ordinary meaning. See Encino

Motorcars, LLC v. Navarro, 584 U.S. at __ (slip op., at

6) (2018), Taniguchi v. Kan Pacific Saipan, Ltd., 556

U.S. 560, 566 (2012). As Circuit Judge Wilkins stated

in his dissent below, “the connotation of ‘replace’ as ‘to

provide a substitute for’ more accurately reflects the

intent of Congress given the use of the term and

sentence structure in [Section 612].” App. at 33a.

Based on its definition of “replace,” the majority

opinion stops at step one of the Chevron analysis. App.

at 16a. See Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 843 (1984).

However, the majority’s own definition introduces

even more ambiguity in understanding that statute.

Daikin agrees with the dissent (App. at 39a) that the

appropriate course would have been to apply step two

of the Chevron analysis of EPA’s interpretation of

Section 612, and that the appropriate conclusion of

10

applying the Chevron step two analysis is that EPA’s

interpretation of Section 612 as reflected in its

implementing regulations was reasonable and should

have been sustained.

Id.

EPA has effectively

administered Section 612 throughout the history of

the program, and it should be allowed to continue to

do so.

The result of the majority decision will be the chaotic

end of a decades-old predictable and stable regulatory

program that has well-served its statutory purposes of

reducing overall risks to human health and the

environment. The ongoing clarity and stability of this

program are critical for Daikin and others to be able to

continue to make the investments and to conduct the

research necessary to continue to provide consumers

with the environmental benefits of improved energy

efficiency and reduced risks to human health.

CONCLUSION

For the foregoing reasons, and for those stated by

petitioners, the Court should grant certiorari.

Respectfully submitted,

MARK V. STANGA

Counsel of Record

DAVID B. CALABRESE

DAIKIN U.S. CORPORATION

601 13th Street, NW

Suite 200 South

Washington, DC 20005

(202) 669-2002

mstanga@gmail.com

david.calabrese@daikinus.com

Counsel for Amicus Curiae

Daikin U.S. Corporation

July 26, 2018