Bipartisan Attorney General Letter Opposes Electric Vehicle Industrial Policy in EPA-VW Settlement

In October 2016, the Department of Justice and the Environmental Protection Agency reached a settlement with Volkswagen partially addressing the Clean Air Act violations attendant to the car company’s “defeat device” scandal, in which it knowingly cheated air quality rules on more than 500,000 vehicles.

While civil settlements are well and good insofar as they conserve judicial resources, this consent decree included an objectionable stipulation requiring the company to spend $1.2 billion on electric vehicle infrastructure across the United States.

I say this provision was “objectionable” for a number of reasons.

For starters, the EV infrastructure spending has no nexus with the Clean Air Act. According to the EPA, the EV investment was meant to remedy the company’s false advertising in selling cars that didn’t perform as promised; yet the Clean Air Act does not regulate false advertising. Rather, false advertising is regulated federally by the Federal Trade Commission, which also settled with Volkswagen. So the EPA’s statutory justification for the EV infrastructure policy was nonsensical.

Second, the EV investment stipulation is constitutionally objectionable because it is an end run around Congress’s power of the purse. President Obama promised to put 1 million EVs on the road in his 2011 State of the Union Address. To this end, he asked Congress for $300 million. Congress refused. Now, the EPA is achieving four times that amount for the same purpose, and the agency is doing so without either a congressional delegation of authority or an appropriation of taxpayer money.

We raised these issues to the Department of Justice, but they ignored our comments. We then raised them to the Trump administration. At the same time, congressional committees—House Judiciary and also House Oversight & Government Reform—sent letters questioning the propriety of the EV investment.

For the last two months, I’ve been hopeful that the Trump administration would seek to overturn the EV investment stipulation of the EPA-VW settlement. After all, the White House is seeking budget cuts at the agency, which suggests they are looking to render the EPA more efficient. Yet the EV infrastructure provision in the settlement commits significant resources at the EPA to pervasive and plenary oversight of VW’s investment. Why would the Trump administration want to allocate scarce EPA resources to the purpose of advancing a failed “green jobs” legislative proposal advanced by his predecessor in office?

Pursuant to the settlement, VW had to submit a draft National Electric Vehicle Investment Plan by February 22nd. Thereafter, the settlement required the EPA to review VW’s plan, and either approve it or send it back to the company for revisions.

Since Trump took office, the EPA has remained mum on the EV infrastructure settlement. It was reported that the plan was submitted in a timely manner, and I know that reporters made inquiries to the agency regarding its intentions, but EPA officials maintained radio silence. Then, on April 12th, a link appeared on the VW settlement page of the EPA’s website, to a document with the title “EPA-Approved National ZEV Investment Plan.” The link takes the reader to a pdf of the company’s plan. There was no announcement. Nor did the EPA offer any explanation that sheds any light on the agency’s review process. Congressional committees were not notified in advance, which is unusual given their previous interest.

So what’s going on? I honestly don’t know, and I don’t think anyone does. The EPA has yet to explain itself. At this point, it seems that VW’s infrastructure plan, which invests almost exclusively on the I-95 northeastern corridor between D.C. and Boston, appears to be moving forward, much to my dismay.

Yesterday, the settlement saga took another twist, with the release of a letter opposing the EV infrastructure plan from a bipartisan group of state attorneys general. The strange-bedfellow coalition includes AGs from Arizona, Rhode Island, Connecticut, Iowa, Nevada, Texas, and Wisconsin. The letter notes the statutory and constitutional issues raised by our comments, but the AGs’ main argument is that VW shouldn’t be allowed to benefit from its punishment by executing what amounts to a business plan in lieu of civil penalties to the Treasury. Hear, hear!

So what’s next? I don’t know, but here are a few possibilities, assuming VW’s plan was approved:

  • A competitor (i.e., a gas station owner or a rival EV infrastructure company) might sue. Arguably, the agency’s approval of the settlement is a final agency action subject to judicial review. It is both the consummation of the agency’s deliberative process and it engenders legal consequences (the car company is subject to fines if the agency determines it deviates from the EPA-approved plan). If such a movant got its feet in the door thusly, then it could make the aforementioned constitutional claims on the merit. To be sure, this is a legal terra incognita, because no administration before Obama ever tried to fund its preferred industrial policy through settlement pursuant to regulatory enforcement.
  • Congress should continue to ask questions. If I were the chair of the Oversight & Government Reform Committee or the Judiciary Committee, I’d request a hearing with both the director of the Office of Civil Enforcement and also the deputy counsel at the General Counsel’s Air & Radiation Office. Then I’d ask them, inter alia:
    • How much staff time and resources has the agency spent overseeing the VW EV investment plan?
    • Where is the statutory authorization for this oversight?
    • Where is the appropriation for the resources spent on this oversight?
    • Does it skew prosecutorial discretion—within a strict liability regime for civil air quality enforcement—for the agency to seek industrial policy in settlements pursuant to regulatory enforcement?