ELR Citation: ELR 20232
No(s). 09-1318 (D.C. Cir. Aug 27, 2010)

The D.C. Circuit remanded an EPA rule that retroactively altered allowances for controlling the production, import, and export of hydrochlorofluorocarbons that had been allowed under prior regulations. A 2003 rule allowed both inter-pollutant and intercompany transfers of allowances, but in the 2010 rule, EPA chose to honor only intercompany transfers of baseline allowances and to disallow permanent baseline changes resulting from inter-pollutant trades. EPA's reasons for refusing to recognize inter-pollutant transfers may shield the Agency's prospective application of the final rule from an arbitrary and capricious challenge, but the rule has an impermissibly retroactive effect. The rule is a successive iteration in a long-running regulatory regime, and EPA's refusal to include inter-pollutant transfers in baseline allowances undoes what the Agency had, in practice, approved under the 2003 rule. The court therefore vacated the rule insofar as it operates retroactively.