NHTSA’s Consistent Understanding that California’s Tailpipe GHG Standards Are Unlawful

October 27 is the deadline for submitting final legal briefs to the D.C. Circuit Court of Appeals in Union of Concerned Scientists v. National Highway Traffic Safety Administration (NHTSA). The case pits California and its allies against the Trump administration and its allies in a battle over the administration’s One National Program Rule. If upheld by the court (or subsequently by the Supreme Court), the One National Program Rule will terminate California’s tailpipe greenhouse gas (GHG) emission standards and zero-emission vehicle (ZEV) mandate.

More broadly, the rule will thwart California policy makers’ ambitions to centrally plan the U.S. auto industry. California Governor Gavin Newsom recently issued an executive order directing the California Air Resources Board (CARB) to adopt regulations banning the sale of gasoline-powered motor vehicles in the state by 2035. New Jersey and New York are expected to follow suit. Such mandates would massively restrict the economic liberties of automobile consumers, dealers, and manufacturers. Whether states have the authority to prohibit the sale—hence, effectively, the manufacture—of gasoline-powered vehicles, which currently comprise about 98 percent of U.S. new car sales, may be decided by USC v. NHTSA.

Background

As discussed previously in this space, the controversy in UCS v. NHTSA turns on the meaning and legal effect of two preemption statutes. Section 32919 of the Energy Policy Conservation Act (EPCA) prohibits states from adopting or enforcing laws or regulations “related to” fuel economy standards. In the One National Program Rule, NHTSA determined that EPCA expressly preempts California’s tailpipe GHG and ZEV standards. Those policies are directly and substantially related to fuel economy standards because they regulate tailpipe carbon dioxide (CO2) emissions, which are physically and mathematically related to fuel consumption.

NHTSA further determined that EPCA impliedly preempts state CO2 motor vehicle standards, because such requirements interfere with the uniform national system of fuel economy regulation established by Congress.

Section 209(a) of the Clean Air Act (CAA) prohibits states from adopting or enforcing motor vehicle emission standards. However, CAA Section 209(b) makes an exception for California. The EPA “shall” grant California’s vehicle emission standards a waiver of Clean Air Act preemption, albeit subject to certain stipulations. Most critically, “no such waiver shall be granted” if the EPA determines that California “does not need such state standards to meet compelling and extraordinary conditions.”

In the One National Program Rule, the EPA determined that California does not need its tailpipe GHG and ZEV standards, for two reasons. First, California has no distinctive or special (“extraordinary”) nexus to either the causes or effects of global climate change. Second, the standards will make no discernible difference to global temperatures or climate impacts, and California cannot “need” an ineffectual remedy. Accordingly, the EPA has withdrawn the tailpipe GHG and ZEV portions of the CAA preemption waiver it granted to California in 2013.

Of the One Program Rule’s two statutory bases, the EPCA preemption is the more fundamental. Unlike CAA Section 209, which authorizes the EPA to waive Clean Air Act preemption if California’s emission standards meet certain criteria, EPCA does not allow any agency for any reason to waive federal preemption of state laws or regulations “related to” fuel economy.

Federal preemption statutes derive their authority from the Supremacy Clause (Art. VI, cl. 2). As the Supreme Court has observed: “It is basic to this constitutional command that all conflicting state provisions be without effect,” Maryland v. Louisiana (1981). It is important to understand that preemption statutes apply ab initio—from the moment a prohibited state policy is adopted or enacted.  Years before the EPA could even consider California’s request for a CAA preemption waiver, EPCA had already turned California’s greenhouse gas motor vehicle law (AB 1493) into a legal phantom.

NHTSA’s Consistent Understanding of EPCA Preemption

Petitioners claim the One National Program Rule “flouts four decades of NHTSA’s consistent understanding” that California emission standards receiving a CAA preemption waiver are “federal standards” and thus exempt from EPCA preemption, which applies solely to state and local standards (pp. 91-93). Petitioners cite five separate corporate average fuel economy (CAFE) rulemakings during 1978-2006, in which NHTSA reviewed California’s motor vehicle emission standards as “other federal motor vehicle standards” (p. 91, fn. 27).

Those examples illustrate NHTSA’s “consistent understanding,” but not in the way petitioners profess to believe. All the California standards NHTSA classified as “federal” regulated conventional air pollutants, not carbon dioxide. Such standards do not directly and substantially regulate fuel consumption, and hence are lawful under EPCA. The examples cited in no way contradict NHTSA’s position that EPCA voided California’s motor vehicle CO2 standards ab initio. Indeed, petitioners unwittingly concede the point when they describe EPCA’s preemption statute as “self-executing” (p. 79).

Petitioners get things backwards. NHTSA’s “consistent understanding” since the early 2000s is that EPCA preempts California’s tailpipe CO2 and ZEV standards. The One National Program Rule concisely summarizes the pertinent regulatory history:

The United States explained in a 2002 amicus brief that EPCA preempted California’s then-existing zero-emissions vehicle (ZEV) regulations. NHTSA continued the discussion of preemption later that year in a notice of proposed rulemaking setting CAFE standards for model year 2005 through 2007 light trucks, and reiterated its position in the 2003 final rule. NHTSA’s 2005 notice of proposed rulemaking setting standards for model year 2008 through 2011 light trucks also discussed preemption and the 2006 final rule elaborated on the issue at length, including in a specific discussion finding California’s then-existing tailpipe greenhouse gas emissions regulations were preempted. NHTSA’s 2008 proposed rule for model year 2011 through 2015 passenger cars and light trucks also addressed preemption and proposed adding a summary of NHTSA’s position on the issue to the Code of Federal Regulations. That proposed rule also addressed recent developments, specifically the Supreme Court’s decision in Massachusetts v. EPA, the enactment of EISA [the Energy Independence and Security Act], and two district court decisions finding that State tailpipe greenhouse gas emissions standards were not preempted by EPCA. NHTSA explained that those developments did not change its view of preemption and it reaffirmed the detailed analysis and conclusions from the 2006 final rule. Subsequent CAFE rulemaking documents, prior to the August 2018 proposal, did not discuss EPCA preemption. Thus, this final rule is consistent with NHTSA’s longstanding position on EPCA preemption over the course of nearly two decades. [FR 84 51312]

The most informative document mentioned above is NHTSA’s 2006 final CAFE standards rule, which contains a detailed discussion of the preemption debate over California’s tailpipe CO2 and ZEV standards (71 FR 17654-17670). Some pithy excerpts follow.

Preemption: Excerpts from NHTSA’s 2006 CAFE Rule

EPCA’s express preemption is broad; legislative history confirms Congress intended it to be so:

The legislative history of that provision confirms that Congress intended to be broadly preemptive in the area of fuel economy regulation. The Senate bill 182 would have preempted State laws only if they were ‘‘inconsistent’’ with federal fuel economy standards, labeling, or advertising, while the House bill 183 would have preempted State laws only if they were not ‘‘identical to’’ a Federal requirement. The express preemption provision as enacted preempts all State laws that relate to fuel economy standards. No exception is made for State laws on the ground that they are consistent with or identical to federal requirements. [71 FR 17657]

California’s tailpipe CO2 standards are expressly preempted:

In mandating federal fuel economy standards under EPCA, Congress has expressly preempted any state laws or regulations relating to fuel economy standards. A State requirement limiting CO2 emissions is such a law or regulation because it has the direct effect of regulating fuel consumption. CO2 emissions are directly linked to fuel consumption because CO2 is the ultimate end product of burning gasoline. Moreover, because there is but one pool of technologies for reducing tailpipe CO2 emissions and increasing fuel economy available now and for the foreseeable future, regulation of CO2 emissions and fuel consumption are inextricably linked. It is therefore NHTSA’s conclusion that such regulation is expressly preempted. [71 FR 17654]

California’s tailpipe CO2 standards are impliedly preempted:

NHTSA has concluded that were a State to establish a fuel economy standard or de facto fuel economy standard, e.g., a CO2 emission standard, it would not choose one that has the effect of requiring lower levels of average fuel economy than the CAFE standards applicable under EPCA or even one requiring the same level of average fuel economy. … Instead, a State would establish a standard that has the effect of requiring a higher level of average fuel economy. [71 FR 17667]

An interpretation that allowed more stringent State fuel economy standards would nullify the statutory limits that Congress placed in EPCA on the level of CAFE standards, and the efforts of NHTSA in its CAFE rulemaking to observe those limits. Congress expressly listed four analytical, decision guiding factors in EPCA because fuel economy was not the only value that Congress sought to protect and promote in the mandating the setting of CAFE standards. Congress did not want improved fuel economy to come at the price of adverse effects on sales, jobs, and consumer choice. Further, in choosing the level of future CAFE standards, NHTSA has traditionally considered the potential impact on safety.

In selecting the maximum feasible level, NHTSA strives to set the standards as high as it can without causing significant adverse consequences for the manufacturers or consumers. Since NHTSA should not, as a matter of sound public policy, and in fact may not as a matter of law, set standards above the level it determines to be the maximum feasible level, EPCA should not be interpreted as permitting the States to do so. [71 FR 17668]

The relationship between fuel economy standards and CO2 emissions is physical and mathematical:

Under the procedures established by EPA, compliance with the CAFE standards is based on the rates of emission of CO2, CO, and hydrocarbons from covered vehicles, but primarily on the emission rates of CO2. In the measurement and calculation of a given vehicle model’s fuel economy for purposes of determining a manufacturer’s compliance with federal fuel economy standards, the role of CO2 is approximately 100 times greater than the combined role of the other two relevant carbon exhaust gases. Given that the amount of CO2, CO, and hydrocarbons emitted by a vehicle varies directly with the amount of fuel it consumes, EPA can reliably and accurately convert the amount of those gases emitted by that vehicle into the miles per gallon achieved by that vehicle. [71 FR 17656]

Although practical technology that reduces motor vehicle CO2 emissions without reducing fuel consumption is imaginable, it does not now and may never exist:

Theoretically, on-board scrubbers could be used separate carbon dioxide from the exhaust stream. Chemical processes for removing carbon dioxide are currently used in underwater rebreathers and space applications (e.g., the international space station), and are contemplated for stationary applications (e.g., electric utilities). … However, for a variety of reasons (e.g., size, cost, energy demands, use of dangerous reactants such as calcium hydroxide), these processes would not be even remotely practical for motor vehicles.

Even if a practical process to separate carbon dioxide from the exhaust stream were available, the carbon dioxide would, to prevent its release, need to be compressed or solidified for temporary onboard storage, and frequently removed for disposal (e.g., in underground facilities). For example, if fifteen gallons of gasoline are added at each refueling of a vehicle, about 290 pounds of carbon dioxide (or, without any separation of the carbon dioxide, about 1,400 pounds of exhaust gases) would be produced through the combustion of that fuel. At these rates of production, no practical means of onboard storage and periodic removal are foreseeable. [71 FR 17670]

It does not matter that California’s CO2 standards do not explicitly aim to regulate fuel economy:

Commenters opposing preemption suggested that the purpose of a State law, not its effects, should determine whether there is preemption. … [California’s tailpipe GHG standards aim to address climate change, not regulate fuel economy.] A federal statute’s broadly worded express preemption provision does not lose its preemptive effect because a State cites a purpose other than or in addition to the purpose of that federal statute. In Gade, the Supreme Court said that ‘‘[i]n assessing the impact of a state law on the federal scheme, we have refused to rely solely on the legislature’s professed purpose and have looked as well to the effects of the law.’’ The agency’s conclusions here that the EPCA preemption provision is expansive and preempts State emissions regulations that have the practical effect of regulating fuel economy are fully in keeping with earlier views expressed by the government. [71 FR 17658]

EPCA’s directive to “consider … the effect of other motor vehicle standards of the government on fuel economy” does not implicitly acknowledge the validity of a California tailpipe CO2 standard:

EPCA does not include any exception to its preemption provision that would cover State GHG and CO2 standards. Nevertheless, some commenters opposing preemption suggested that Section 32902(f), which lists the factors that NHTSA must consider in determining the level at which to set fuel economy standards, prevents preemption by requiring consideration, by NHTSA, of the effect of other Government standards, including emissions standards, on fuel economy. EPCA’s decision making factor provision is neither a saving clause nor a waiver provision. Nor does NHTSA interpret it as saving state emissions standards that effectively regulate fuel economy from preemption. The agency interprets that provision only to direct NHTSA to consider those State standards that can otherwise be validly adopted and enforced under State and Federal law. [71 FR 17669]

There is no way NHTSA may construe a state tailpipe CO2 standard to avoid preemption:

NHTSA has no discretion not to issue the CAFE standards established by this final rule. EPCA mandates that the ‘‘Secretary of Transportation … prescribe by regulation average fuel economy standards’’ for light trucks (49 U.S.C. 32902). Given that a State CO2 regulation is the functional equivalent of a CAFE standard, there is no way that NHTSA can tailor a fuel economy standard for light trucks so as to avoid preemption. Further, EPCA itself precludes a State from adopting or enforcing a law or regulation related to fuel economy (49 U.S.C. 32919(a)). [71 FR 17674]