California, CAFE Standards, and the Energy Policy and Conservation Act

Can California’s Clean Air Act waiver to implement its Advanced Clean Cars Program be preempted by NHTSA Fuel Economy Standards under the Energy Policy and Conservation Act? Here we summarize the state of current law. For more on this topic see our update “CAFE Standards and the California Preemption Plan”.

To stay up to date on these rules see our Regulatory Rollback Tracker post

June 18, 2018

Summary

  • The Trump administration is expected to propose revisions to Obama-era standards that limit greenhouse gases and improve the fuel efficiency of cars and light trucks.
  • The administration is also expected, as part of that action, to try to prevent California from setting its own, stricter, greenhouse gas emissions standards for these vehicles.
  • Reports suggest the administration will claim that California’s standards—which are authorized by the Clean Air Act and have been approved by the Environmental Protection Agency (EPA) —are “preempted” by another federal law. The Energy Policy and Conservation Act of 1975 reserves the power to set fuel efficiency standards exclusively to another agency, the National Highway Safety Transportation Administration (NHSTA, part of the Department of Transportation).
  • Whether the preemption argument succeeds will depend on whether courts accept the proposition that air pollution standards set by EPA under the Clean Air Act to protect “public health and welfare” are standards “relating to fuel economy standards” (NHTSA sets fuel efficiency standards to reduce oil consumption under the Energy Policy and Conservation Act ).
  • Two federal district courts have held, for separate reasons, that the Energy Policy and Conservation Act does not preempt California’s pollution standards, and that fuel economy standards can co-exist with pollution standards. In addition, the Supreme Court has held that pollution standards and fuel economy standards are legally distinct and aimed at fulfilling different congressional purposes, noting “… there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.”

Discussion

On May 31, 2018, the EPA and NHTSA sent the White House Office of Management and Budget draft proposed rules to change, and presumably relax, current greenhouse gas (GHG) emissions and fuel economy standards for automobiles and light trucks. This is usually the final step before a proposed rule is published in the Federal Register and open for comment. Internal administration documents that came to public light in late April suggest that the proposal will freeze standards for vehicle model years (MY) 2021-2026 at levels set for MY 2020 vehicles, significantly weakening them. If so, the proposed rule will also be significantly weaker than the GHG emissions standards now in place under California’s “Advanced Clean Cars Program.” California’s current program is authorized by a waiver EPA approved in 2013 under a provision of the Clean Air Act that allows California to set and enforce vehicle emissions standards more stringent than standards set by the EPA.

Emails from the early days of the Trump administration reveal that the White House has been planning both to revise the fuel economy standards and to revoke California’s 2013 waiver authority to regulate GHG emissions. Reports and leaked documents on the administration’s deliberations, suggest they will make an argument that California’s emissions standards are preempted by the fuel economy standards issued by NHSTA. Alternatively, the administration may seek to revoke California’s waiver. Revoking the waiver would be difficult to justify and would involve legal risks that the preemption argument might avoid.

In this post, we examine the law of preemption under the Energy Policy and Conservation Act.

New cars and light trucks operate under two sets of nationwide performance standards. One set limits greenhouse gas emissions and the other regulates fuel economy. Although the emissions limits and the fuel economy rules have been promulgated together, first in 2010 and then in 2012, they are distinct in at least three respects: they are adopted by two separate agencies, they are authorized under different statutes, and they serve discrete purposes.

Corporate Average Fuel Economy (CAFE) standards were first issued in 1975 by NHTSA “to provide for improved energy efficiency of motor vehicles….”[1] CAFE standards are expressed in miles per gallon and establish an average fuel economy standard to be achieved by the fleet of vehicles produced by auto manufacturers in a given model year. NHTSA is authorized to create these standards by Energy Policy and Conservation Act.

EPA emissions standards also apply to new vehicles. These standards, limiting the amount of pollution – in this case GHGs — new vehicles can emit, are expressed in grams per mile of a given pollutant. EPA first set GHG emissions standards for new vehicles in 2010. Increasing the fuel economy of vehicles has proven to be one of the principal ways that auto manufacturers have met their GHG emissions limits: they have improved fuel economy to reduce CO2, one of the gases that is a component of vehicle GHG emissions.

EPA is authorized to create these nationwide emissions standards by the Clean Air Act. Section 209 preempts states’ authority to set their own standards for automotive emissions. CAA section 209 (b)(1), however, requires the EPA to waive such preemption if California seeks authority to enforce its own state-adopted emissions standards. Section 209(b)(1) states that EPA “…shall, after notice and opportunity for public hearing, waive application of this section to any State which has adopted standards…for the control of emissions from new motor vehicles or new motor vehicle engines prior to March 30, 1966, if the State determines that the State standards will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards.”[2] To deny a waiver, EPA must make one of three findings: (1) the state’s determination that each standard would be as protective as the Federal standard is arbitrary and capricious, (2) the standards are unnecessary to meet compelling and extraordinary conditions in the state, or (3) the standards and enforcement procedures are inconsistent with Section 202(a) of the Clean Air Act.[3] CAA section 177 allows other states to opt into the California auto emissions program by adopting identical standards.

The Energy Policy and Conservation Act, the statute authorizing NHTSA to create CAFE standards, does not include a waiver provision similar to section 209 of the CAA and instead preempts states from setting fuel efficiency standards. Specifically, Section 509(a) of EPCA states: “When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.”

Since automakers have been relying mainly on increasing fuel economy to meet GHG emissions limits, can EPCA preempt California’s GHG emissions standards? Under current law, the answer depends on whether the emissions standards California sets constitute a “…law or regulation relating to fuel economy standards…” as opposed to regulations relating to air quality.

The EPA granted California its first waiver under Section 209 in 1972. Under that and subsequent waivers, the state has consistently regulated motor vehicle pollution that causes smog and soot, to protect public health and welfare.

The most recent waiver covered California’s Advanced Clean Cars regulations, which encompass pollutants that cause smog and soot, as well as GHGs, in one set of requirements for passenger cars, light-duty trucks, medium-duty passenger vehicles, and for some heavy-duty vehicles.[4] California’s Advanced Clean Cars regulations also include its Low Emission Vehicle and Zero Emission Vehicle programs.

The remainder of this post explores in the light of relevant case law the Trump administration’s potential argument that the Energy Conservation Policy Act preempts California’s waiver and its GHG emissions standards.

To succeed in its preemption argument, the administration would have to contend with decisions in two federal district courts cases as well as a Supreme Court case. The two district courts have found that EPA’s emissions standards serve a different purpose from that of fuel economy standards, since EPA’s Clean Air Act regulations are intended to protect public health and welfare whereas the regulations under EPCA target fuel savings and efficiency.[5] One court found that standards adopted by California with a waiver granted under section 209(b)(1) of the CAA and by other states pursuant to Section 177 were federal motor vehicle standards to be considered by NHSTA in setting its fuel economy standards. The other court found that the different purposes of NHSTA standards as compared with California and EPA standards prevented EPCA preemption and meant that NHSTA had to design its standards in light of what EPA and California adopted.

In Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, auto manufacturers challenged Vermont’s regulations, adopted on the basis of CAA section 177, as preempted by EPCA.[6] The court analyzed the legislative history of both EPCA and CAA and concluded that “once approved by EPA, California and Vermont’s GHG standards become part of the regulatory backdrop against which NHTSA must design maximum feasible fuel economy levels.”[7] Because section 209(b) standards become “federal” provisions once approved and constitute “other motor vehicle standards of the Government” under section 502 of EPCA, the court held that preemption analysis does not apply.

The court rejected the argument that GHG standards were de facto fuel economy standards by reviewing the ways in which GHG standards do not necessarily compel increased fuel economy. The court also considered the potential for conflict preemption by studying the legislative histories of the CAA and EPCA and concluding that Congress understood that standards under each statute could overlap, but they could coexist.[8] This conclusion was reinforced by the finding that “NHTSA and EPA have recognized since the inception of rule-making under EPCA that there is a technological overlap between emissions control and fuel economy.”[9]

In Central Valley Chrysler-Jeep, Inc. v. Goldstene, car dealers challenged the addition of GHG emissions standards to California’s existing motor vehicle standards as being preempted by EPCA and the CAA, unless a Section 209 waiver was issued.[10] The court upheld the standards and rejected the claims made by the car dealers. The court here conducted a different analysis from the court in Green Mountain, finding that the threshold question is whether EPCA can preclude EPA regulations aimed at preventing damage to public health or welfare, even if those regulations will impact fuel efficiency standards.

The court held that the burden was on NHTSA to “conform its mileage standards to what EPA determines is necessary for the protection of health and welfare.”[11] Finding that California’s standards do not function differently from EPA standards, the court held that EPCA did not preclude California from adopting GHG standards. The court went on to analyze whether EPCA preempts states from enforcing section 209(b) standards. Because the regulations serve a distinct purpose and are not aimed at establishing fuel economy standards or mileage equivalents, the court held that the California standards are not expressly preempted. The court stated that “EPA is empowered to lead because it is specifically tasked with the protection of public health and welfare; and DOT is empowered to follow because it is able to give consideration to ‘other motor vehicle standards of the Government’ that may affect fuel economy.”[12]

NHTSA itself has stated that it reviews California’s emissions requirements “to ensure that we do not establish a standard that is infeasible in light of other public policy considerations, including federal and state efforts to regulate emissions. Thus, we consider potential fuel economy losses due to more stringent emissions requirements when we determine maximum feasible fuel economy levels.” NHTSA did not foreclose that possibility of preemption and citing its preemption provision, clarified: “This does not mean that a state may issue a regulation that relates to fuel economy and which addresses the same public policy concern as the CAFE statute.”[13] Here, NHTSA makes clear that for EPCA’s preemption provision to operate on the California standards, the state’s regulations would need to focus on the same purposes as the NHTSA standards: to reduce energy consumption, improve energy security and save consumers money. Again, as expressed in the language of CAA section 209(b)(1), the basis of the current waiver authorizing California to implement its emissions standards is that they are “… protective of public health and welfare.”

Finally, in Massachusetts v. EPA, the Supreme Court addressed the question of whether EPA regulation of motor-vehicle carbon dioxide emissions under the Clean Air Act “…would require it to tighten mileage standards…” and interfere with DOT’s responsibility to set such standards.[14] The Court found that “EPA has been charged with protecting the public’s ‘health’ and ‘welfare,’ a statutory obligation wholly independent of DOT’s mandate to promote energy efficiency.”[15]

In sum, the difference in purpose between the two sets of standards will be a focal point of any debate on the potential for conflict between them. The respective statutory mandates and purposes of EPCA and of the CAA provide two separate frameworks to create standards for motor vehicles which, as the Supreme Court noted, “…may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.”[16]


Thank you Laura Bloomer JD/MPP 2019 for her assistance with this research.


[1] Energy Policy and Conservation Act, Pub. L. No. 94–163, § 2(5) (1975) (codified at 42 U.S.C. § 6201).

[2] 42 U.S.C. §7543(b)(1) (2018) (emphasis supplied).

[3] 42 U.S.C. §7543(b)(1) (2018).

[4] Environmental Protection Agency, California State Motor Vehicle Pollution Control Standards; Notice of Decision Granting a Waiver of Clean Air Act Preemption for California’s Advanced Clean Car Program and a Within the Scope Confirmation for California’s Zero Emission Vehicle Amendments for 2017 and Earlier Model Years, 78 Fed. Reg. 2112 (Jan. 9, 2013).

[5] Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007); Central Valley Chrysler-Jeep, Inc. v. Goldstene, 529 F.Supp.2d 1151 (E.D.Cal. 2007).

[6] Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007).

[7] Id. at 344.

[8] Id. at 344-47 and 356-57.

[9] Id. at 357 (citing Final Rule: Passenger Automobile Average Fuel Economy Standards, 42 Fed. Reg. 33,534, 33,541 (June 30, 1977)).

[10] Central Valley Chrysler-Jeep, Inc. v. Goldstene, 529 F. Supp.2d 1151 (E.D. Cal. 2007)

[11] Id. at 1170.

[12] Id. at 1177-78.

[13] National Highway Traffic Safety Administration, Light Truck Average Fuel Economy Standards Model Years 2005-07, 67 Fed. Reg. 77,025 (Dec. 16, 2002) (emphasis supplied).

[14] Massachusetts v. EPA, 549 U.S. 497, 531 (2007).

[15] Massachusetts v. EPA, 549 U.S. 497, 532 (2007) (internal citations removed).

[16] Id.

 

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