Friday, September 20, 2019

Some Observations on EPA and NHTSA’s Rule Revoking California’s Authority to Regulate Greenhouse Gas Emissions from Vehicles

As the media has widely reported, yesterday EPA and the National Highway Traffic Safety Administration (NHTSA) revoked California’s authority to regulate greenhouse gas emissions from vehicles.  California, other states, and environmental groups will file suit to challenge the new rules.  The agencies’ action raises lots of issues that will be litigated in the court challenges.  Here a few of my observations after reading the new rules.

The NHTSA rule relates to the agency’s authority under the Energy Policy and Conservation Act of 1975 (EPCA) to set fuel economy standards for vehicles.  EPCA gives NHTSA authority to regulate fuel economy in motor vehicles.  Section 509 of EPCA also preempts some state regulation; it provides that states “may not adopt or enforce a law or regulation related to fuel economy standards.”  49 U.S.C. § 32919(a).  The question NHTSA addressed in yesterday’s rule is whether a state emission standard that does not directly regulate fuel economy standards, but that nevertheless affects fuel economy standards, is “related to fuel economy standards” and thus preempted.  Everyone agrees that California’s greenhouse gas emission standards affect fuel economy.  NHTSA’s rule announced yesterday clarifies the agency’s position that EPCA preempts state vehicle emission standards that “directly or substantially affect” fuel economy.  If NHTSA’s interpretation broad interpretation is correct, then it would seem that the agency is correct that EPCA preempts California’s greenhouse gas emission standards.  But it looks to me that the agency’s interpretation goes farther than even it would like and therefore must be wrong.  Here’s why.

California has long regulated pollutant emissions from vehicles under special authority granted to it under the Clean Air Act.  More on that below.  It would thus be very difficult for NHTSA to argue that California lacks authority to regulate vehicle emissions of traditional pollutants, known under the Clean Air Act as criteria air pollutants.  Rather, the agency wants to limit the reach of its new rule to preempt only standards that regulate greenhouse gas emissions, which California has only started doing in the 2000s.  But vehicle emission standards for traditional pollutants substantially affect fuel economy.  So, NHTSA’s theory that EPCA preempts any state emission standard that substantially affects fuel economy would seem to wipe out all of California’s emission standards, not just its greenhouse gas emission standards.  Even if this Administration might like that, it is an untenable legal position, because the Clean Air Act explicitly gives California authority to adopt vehicle emission standards.  In other words, NHTSA’s rule seems incompatible with the Clean Air Act, which is a pretty good indication that it goes too far. 

As to the EPA side of yesterday’s rule, I think the issues are murkier.  Clean Air Act Section 209 preempts state vehicle emission standards but also directs EPA to waive preemption for California for any state emission standards that are at least as stringent as federal standards, as long as the state standards are needed “to meet compelling and extraordinary conditions” and are consistent with federal emission standards.  42 U.S.C. § 7543.  As EPA readily admits, it has traditionally granted California’s requests for waivers under Section 209 after only cursory review.  In yesterday’s rule, EPA decided that California’s greenhouse gas emission standards for vehicles are not needed “to meet compelling and extraordinary conditions” in California because climate change is a global problem, and emissions from California vehicles do not affect California particularly.  EPA argues that greenhouse gas emission standards are in this respect fundamentally different than emission standards for criteria air pollutants.  This seems like a key underlying issue in this dispute:  Should greenhouse gases be treated like other air pollutants under the Act (in which case California probably should authority to regulate them through emission standards), or are they different in ways that matter to the application of the statute?  The Supreme Court’s decision in Massachusetts v. EPA, which essentially concluded that greenhouse gases are air pollutants under the Clean Air Act, supports the former position, while its later decision in UARG v. EPA, which held that not all Clean Air Act regulatory programs should apply to greenhouse gases, provides some support for the latter. 

A court also will have to decide whether the dire effects of climate change in California make the need for state emission standards “compelling and extraordinary,” or whether the effects must be California-specific and different from other states to be “compelling and extraordinary.”  One weakness in EPA’s position is its repeated insistence in yesterday’s rule that Congress’s sole motivation for giving California authority to set emission standards under Clean Air Act Section 209 was California’s special air pollution problems.  This supports EPA’s current position, because climate change is not a California-specific air pollution problem.  But the text of Section 209 makes clear, and the legislative history supports, that Congress also was motivated to give California special authority to regulate because the state already had shown leadership and initiative in tackling air pollution issues, before Congress enacted the Clean Air Act.  This seems to support allowing California to play a similar role with respect to climate change, and it’s a factor that EPA does not acknowledge in its rule.

Both agencies, but especially EPA, also will have to grapple with the fact that they are attempting to revoke regulatory authority that EPA previously granted to California, as opposed to denying that authority when California first requested it.  Some have argued that EPA lacks authority under the Clean Air Act to revoke a Section 209 waiver it has granted.  I am skeptical of that argument, because agencies generally have authority to reconsider past decisions and to correct past mistakes.  If EPA were to make a blatant error in granting a Section 209 waiver, I would think it would—and should—have authority to reconsider and revoke the waiver.  But I do think it should matter that EPA greenlighted the California standards.  Exactly how this should play into the court’s analysis is unclear.  Arguably it should increase the burden of the agencies to justify their position.  It also may affect the way that the court treats statutory ambiguity.  Under the Chevron doctrine, Courts often give deference to an agency’s interpretation of an ambiguous statutory provision.  Application of the Chevron doctrine here will already be in dispute, because of the agencies’ shifting position.  But, if one accepts that Clean Air Act Section 209 is ambiguous as to the scope of California’s authority to adopt emission standards, there seems to be a decent argument that EPA acted arbitrarily and capriciously simply by changing its interpretation after already approving California’s waiver under a different interpretation.  In other words, the agency may have acted arbitrarily and capriciously by revoking a prior decision based on a change from one otherwise reasonable statutory interpretation to another.  

--Todd Aagaard

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