Why Obama Officials Had to Lie to Congress About Fuel Economy Standards

Republicans were in an “Internet uproar” last week over a false report that EPA Administrator Lisa Jackson had called them “jack-booted thugs.” Meanwhile, deeply troubling statements that EPA officials did make have hardly stirred a ripple in the blogosphere.

At a recent hearing before a House oversight panel, three Obama administration witnesses — National Highway Traffic Safety Administration (NHTSA) Administrator David Strickland, EPA Assistant Air Administrator Gina McCarthy, and EPA Transportation and Air Quality Director Margo Oge – denied under oath that motor vehicle greenhouse gas emission standards are “related to” fuel economy standards. In so doing, they denied plain facts they must know to be true. They lied to Congress.

House Government Oversight and Reform Chairman Darrell Issa (R-Calif.) put it more diplomatically: “Your statements under oath misrepresented the relationship between regulating greenhouse gases and regulating fuel economy.” By “obstinately insisting” that regulating greenhouse gases and fuel economy are “separate and unrelated endeavors,” the officials “impede the Committee’s important oversight work.”

Why did they “misrepresent” and “impede”? Had the officials answered truthfully, they would have to admit that California’s greenhouse gas motor vehicle emissions law, AB 1493, which EPA approved in June 2009, violates the Energy Policy Conservation Act’s (EPCA) express preemption of state laws or regulations “related to” fuel economy. The officials would also have to admit that EPA is effectively regulating fuel economy, a function outside the scope of its statutory authority.

Strongly Related

That greenhouse gas emission standards implicitly regulate fuel economy is evident from the agencies’ own documents. As EPA and NHTSA acknowledge in their joint May 2010 Greenhouse Gas/Fuel Economy Tailpipe Rule (pp. 25424, 25327), no commercially available technologies exist to capture or filter out carbon dioxide (CO2) emissions from motor vehicles. Consequently, the only way to decrease grams of CO2 per mile is to reduce fuel consumption per mile — that is, increase fuel economy. Carbon dioxide constitutes 94.9% of vehicular greenhouse gas emissions, and “there is a single pool of technologies… that reduce fuel consumption and thereby CO2 emissions as well.”

That EPA and California are regulating fuel economy is also apparent from EPA, NHTSA, and the California Air Resources Board’s (CARB’s) Interim Joint Technical Assessment Report (pp. viii-ix), the framework document for President Obama’s plan to boost average fuel economy to 54.5 miles per gallon by Model Year 2025. The document considers four fuel economy standards, ranging from 47 mpg to 62 mpg; each is the simple reciprocal of an associated CO2 emission reduction scenario. The 54.5 mpg standard is a negotiated compromise between the 4% (51 mpg) and 5% (56 mpg) CO2 reduction scenarios.

CARB’s 2004 Staff Report presenting the agency’s plan to implement AB 1493 is another smoking gun. Nearly all of CARB’s recommended technologies for reducing greenhouse gas emissions (Table 5.2-3) were previously recommended in a 2002 National Research Council study on fuel economy (Tables 3-1, 3-2). CARB proposes a few additional options, but each is a fuel-saving technology, not an emissions-control technology.

Even the text of AB 1493 implies that CARB is to regulate fuel economy. CARB’s greenhouse gas standards are to be “cost-effective,” defined as “Economical to an owner or operator of a vehicle, taking into account the full life-cycle costs of the vehicle.” CARB reasonably interprets this to mean that the reduction in “operating expenses” over the average life of the vehicle must exceed the expected increase in vehicle cost (Staff Report, p. 148). Virtually all such “operating expenses” are expenditures for fuel. The CARB program cannot be “cost-effective” unless CARB regulates fuel economy.

Power Grab

The falsehood that greenhouse gas emission standards are not related to fuel economy standards does more than mask EPA and CARB’s poaching of NHTSA’s statutory authority. It also protects EPA’s efforts to legislate climate policy under the guise of implementing the Clean Air Act (CAA).

To begin with, the falsehood facilitated an extortion strategy enabling Team Obama to convert the auto industry from opponent to ally in any congressional debate over EPA’s greenhouse gas regulations. Although we may never know the details of these machinations, the basic thrust and outcome are clear.

In February 2009, EPA Administrator Jackson decided to reconsider Bush EPA Administrator Stephen Johnson’s denial of California’s request for a waiver to implement AB 1493. Because greenhouse gas emissions standards implicitly regulate fuel economy, because the waiver would allow other states to follow suit, and because auto makers would have to reshuffle the mix of vehicles sold in each “California” state to achieve the same average fuel economy, Jackson confronted the financially-distressed auto industry with the prospect of a market-balkanizing fuel-economy “patchwork.”

Then, in May 2009, in backdoor negotiations conducted under a vow of silence (“We put nothing in writing, ever,” CARB Chairman Mary Nichols told the New York Times), the White House offered to protect auto makers from the patchwork threat if, but only if, they agreed to support EPA and CARB’s newfound careers as greenhouse gas/fuel economy regulators. Specifically, under what President Obama dubbed the “Historic Agreement,” California and other states agreed to deem compliance with EPA’s greenhouse gas standards as compliance with their own in return for auto makers’ pledge not to challenge either the Tailpipe Rule or the California waiver.

The political payoff for Team Obama was not long in coming. In 2010, Alaska Sen. Lisa Murkowski introduced a resolution to overturn EPA’s greenhouse gas Endangerment Rule, the prerequisite for the Tailpipe Rule and all other EPA greenhouse gas regulations. The auto industry lobbied against the resolution, warning that it would undo the “Historic Agreement” and, thus, expose auto makers to a “multitude” of conflicting state and federal standards.

Of course, the threat of a patchwork exists only because Jackson granted the waiver, but to do so she needed the legal cover provided by the fiction that greenhouse gas emission standards are not “related to” fuel economy standards. A patchwork is exactly what the EPCA preemption of state fuel economy regulation was designed to prevent.

EPA then parlayed its new role as de-facto fuel economy regulator into a mandate to regulate greenhouse gases from stationary sources. The Tailpipe Rule – at least as EPA reads the CAA – compels the agency to regulate greenhouse gases from “major emitting facilities.” EPA is now applying CAA preconstruction and operating permit requirements to large CO2 emitters such as coal-fired power plants, petroleum refineries, cement production facilities, steel mills, and pulp and paper factories. EPA is also developing greenhouse gas “performance standards” for power plants and refineries, with greenhouse gas performance standards for other industrial categories sure to follow.

Constitutional Common Sense

EPA contends that its greenhouse gas regulations derive from the CAA as interpreted by Supreme Court in Massachusetts v. EPA (April 2007). The D.C. Circuit Court of Appeals is now reviewing arguments regarding that claim in Coalition for Responsible Regulation v. EPA.

But however that case is decided, Congress has an independent responsibility to assess whether an agency’s agenda comports with the statutory schemes it has created. Whether or not EPA correctly interprets Mass. v. EPA, it should be obvious that the agency has gone rogue.

Congress declined to give EPA explicit authority to regulate greenhouse gases only last year, when Senate leaders pulled the plug on companion legislation to the American Clean Energy and Security Act (ACESA) – the House-passed cap-and-trade bill sponsored by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.).

One of ACESA’s selling points was precisely that it would preempt regulation of greenhouse gases under several CAA programs. If instead of proposing cap-and-trade, Waxman and Markey had introduced legislation authorizing EPA to do exactly what it is doing now – regulating greenhouse gases via the CAA as it sees fit – their bill would have been dead on arrival.

The notion that Congress gave EPA such expansive authority when it enacted the CAA in 1970, years before global warming was even gleam in Al Gore’s eye, is preposterous.

* In the interests of full disclosure, I testified on the private sector witness panel at the hearing where the three Obama officials denied that greenhouse gas emission standards are “related to” fuel economy standards. My organization, the Competitive Enterprise Institute, is a petitioner in Coalition for Responsible Regulation v. EPA.