Gina McCarthy — President Obama’s pick to succeed Lisa Jackson as EPA Administrator — is often described as a “straight shooter” and “honest broker.” As my colleague Anthony Ward and I explain in Forbes, McCarthy has a history of misleading Congress about the EPA’s greenhouse gas regulatory agenda.

Specifically, McCarthy and the Air Office over which she presides gave Congress and the electric power sector false assurances that the EPA’s greenhouse gas regulations would not require utilities planning to build new coal-fired power plants to “fuel switch” to natural gas. McCarthy also denied under oath that greenhouse gas motor vehicle standards are “related to” fuel economy standards, even though anyone with her expertise must know that the former implicitly and substantially regulate fuel economy.

McCarthy and the Air Office’s misleading statements about fuel switching discredited critics who claimed the EPA was waging a war on coal and would, if left to its own devices, ban new coal generation. The fiction that greenhouse gas emission standards are unrelated to fuel economy standards gave the EPA legal cover to gin up a regulatory nightmare for auto makers — the prospect of a market-balkanizing, state-by-state, fuel-economy ”patchwork“ – just so the White House, in hush-hush negotiations, could demand auto industry support for the administration’s motor vehicle mandates as the price for averting the dreaded patchwork. This is a complicated tale, which I will discuss in Part 2 of this series.

The bottom line is that if the EPA had not dissembled on fuel switching and not obfuscated on fuel economy, more Senators might have voted for legislative measures, sponsored by Sen. Lisa Murkowski (R-Alaska) in 2010 and Sen. James Inhofe (R-Okla.) in 2011, to rein in the agency. In addition to their well-publicized transparency concerns about the EPA under the leadership of Lisa Jackson and Gina McCarthy, Senators should also have separation of powers concerns.

Earlier this week, Sen. David Vitter (R-La.), Ranking Member of the Senate Environment & Public Works Committee, released a 123 page document containing McCarthy’s responses to hundreds of questions on a wide range of issues. In today’s post, I comment on McCarthy’s responses to Sen. Vitter’s questions about fuel switching. In Part 2 of this series, I will comment on McCarthy’s responses regarding the administration’s motor vehicle program.

The fuel switching issue is somewhat arcane, so it may be helpful if I provide a quick overview before commenting on McCarthy’s answers.

In April 2010, at an event hosted by the Johns Hopkins School of Advanced International Studies, McCarthy stated that best available control technology (BACT) standards for major greenhouse gas emitters would require only efficiency upgrades, not fuel switching from coal to gas. “We haven’t done it [fuel switching] in the past, and there’s been good reason why we haven’t done it in the past,” she reportedly said.

The Air Office’s permitting guidance for greenhouse gases, both as proposed in November 2010 and as adopted in March 2011, similarly states that the “initial list of control options for a BACT analysis does not need to include ‘clean fuel’ options that would fundamentally redefine the source.” In other words, coal power plants would not be lumped together with natural gas combined cycle (NGCC) power plants in the same industrial source category subject to the same emission standards. Accordingly, an applicant would not be required to “switch to a primary fuel type other than the type of fuel that an applicant proposes to use for its primary combustion process.”

Lest there be any confusion on this point, a Q&A document published along with the March 2011 guidance asks whether “fuel switching (coal to natural gas) should be selected as BACT for a power plant?” The document answers: “No.” It states that BACT for carbon dioxide (CO2) should “consider the most energy efficient design,” but “does not necessarily require a different type of fuel from the one proposed.”

In March 2012, however, the EPA proposed a ‘Carbon Pollution’ Rule that does exactly what McCarthy and the Air Office said the EPA would not do. The rule lumps coal power plants and NGCC plants into a single newly-minted industrial source category — “fossil fuel electric generating units.” Moreover, the rule requires fuel switching, proposing a new source performance standard (NSPS) — 1,000 lbs CO2/MWh — that nearly all new NGCC plants already meet (77 FR 22396) and exactly zero commercial coal power plants can meet.

What makes this volta face all the more unexpected is that BACT standards, which apply to individual facilities on a case-by-case basis, are generally more stringent than NSPS, which set minimum emission control standards for categories of industrial sources. In regulatory parlance, NSPS provide the ”floor” for BACT determinations. If the EPA would not use BACT to require fuel switching, then it would seem unreasonable – even paranoid – to suspect the EPA of planning to use NSPS for that purpose.

The timeline of these actions is critical. In June 2010, the Senate voted on Sen. Murkowski’s resolution (S.J.Res.26) to overturn the EPA’s Endangerment Rule, the prerequisite for all EPA global warming regulations. The resolution fell short by four votes (47-53). In April 2011, the Senate voted on Sen. Inhofe’s legislation to overturn all EPA global warming regulations except those auto companies had already made investments to comply with. The bill failed on a 50-50 tie vote. Had McCarthy and the EPA been candid about their anti-coal agenda in 2010 and 2011, more Senators might have voted for those measures.

In any case, agencies are not supposed to provide false or misleading information to influence how Members of Congress vote.

Let’s now see how McCarthy addresses these issues. Vitter’s questions are in bold type, McCarthy’s responses are indented, my comments are in blue.

BACT standards apply to individual sources on a case-by-case basis. They generally are more stringent – and by law may not be less stringent – than Clean Air Act new source performance standards (NSPS), which the EPA establishes for categories of industrial sources. In other words, NSPS are the “floor” or minimum emission control standards for BACT determinations. Is that correct?

Response: Yes. The Clean Air Act specifies that BACT for a source cannot be less stringent than an applicable NSPS. Thus, when EPA completes an NSPS for a source category, BACT determinations that follow for applicable sources would need to consider the levels of the pollutant standards and the supporting rationale of the NSPS.

Comment: The EPA’s ‘Carbon Pollution’ Rule proposes NSPS for CO2 from “fossil fuel electric generating units.” The standard is 1,000 lbs CO2/MWh. The EPA estimates that most NGCC power plants already meet that standard, whereas the most efficient commercial coal power plants emit 1,800 lbs CO2/MWh (77 FR 22417).  

If BACT does not require fuel-switching, we should have no reason to expect that NSPS would require fuel switching or “redefine the source” to impose identical CO2 control requirements on coal boilers and on gas turbines. Is that correct?

Response: EPA’s GHG Permitting Guidance (March 2011) says: “… a permitting authority retains the discretion to conduct a broader BACT analysis and to consider changes in the primary fuel in Step 1 of the analysis.” Thus, EPA never ruled out the possibility that a permitting agency could require that an applicant consider natural gas, or other cleaner fuels, when proposing a coal-fired EGU.

Comment: McCarthy omits the first word of the quoted sentence: “Ultimately.” The unexpurgated sentence reads: “Ultimately, a permitting authority retains the discretion to conduct a broader BACT analysis and to consider changes in the primary fuel in Step 1 of the analysis” (emphasis added). ”Ultimately” suggests something that might happen several years down the road, not the agency’s next move, and then only as a matter of “discretion” in individual cases, not as the industry-wide default position. The guidance document’s weasel words, which occur in only one sentence out of a 96-page text, do not obviate the fact that McCarthy and the EPA misled Congress and industry about the scope of the agency’s regulatory ambition.

[McCarthy continues:] However, it is important to note that under the proposed carbon pollution standard for new power plants, companies would not be required to build natural gas combined cycle units; they would be required to meet a standard of 1000 lbs/MWh, which can be met either through the use of natural gas or by burning coal along with carbon capture and storage [CCS].

Comment: This is a distinction without a difference. No commercial coal plants with carbon capture and storage exist, and none is being built without substantial taxpayer support. The levelized cost of new coal plants already exceeds that of new NGCC plants, and “today’s CCS technologies would add around 80% to the cost of electricity for a new pulverized coal (PC) plant, and around 35% to the cost of electricity for a new advanced gasification-based (IGCC) plant,” according to the EPA (77 FR 22415). Since building an NGCC plant is far cheaper than building a coal plant with CCS, the proposed 1,000 lbs CO2/MWh standard is a de-facto requirement to fuel switch from coal to gas. Offering an alternative no one will choose because it is prohibitively costly does not make fuel switching optional. 

[McCarthy concludes:] The agency is still actively considering a wide range of comments on this issue, and any final decision will reflect careful consideration of the issue.

Comment: In other words, the agency is still trying to figure out how to tweak the NSPS in light of detailed legal criticism so that the rule still puts the kibosh on new coal generation without being tossed out in court.

In their guidance establishing what could be considered Best Available Control Technology (BACT) for regulating GHGs in the permitting process, EPA stated that fuel-switching from coal to natural gas would not and could not be considered BACT: Since NSPS are traditionally interpreted to set the BACT “floor” for permitting purposes, how can a NSPS that eliminates the ability to construct new coal units without the implementation of commercially infeasible carbon capture and storage (CCS) be consistent with EPA’s previous guidance?

Response: As explained in responses to related questions, the statement that “EPA stated that fuel-switching from coal to natural gas would not and could not be considered BACT” is not entirely correct. While EPA did not propose that CCS represented BSER [best system of emission reduction], EPA stated in the preamble of the proposed NSPS rule that “CCS is technologically feasible for implementation at new coal-fired power plants and its core components (CO2 capture, compression, transportation and storage) have already been implemented at commercial scale.” [77 FR 22414].

Comment: This response does not address the criticism that even if one sentence of the guidance document anticipates that permitting agencies may “ultimately” exercise the “discretion” to require fuel switching in individual cases, the EPA gave no hint that next year it would require all new fossil fuel power plants to be either NGCC or non-economical coal with CCS. Note, too, that “implemented at commercial scale” is not the same as commercially viable, i.e., sustainable without taxpayer subsidies.

McCarthy does not address the convoluted weirdness of the rule. The Clean Air Act defines “performance standard” as a “standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which . . . the Administrator determines has been adequately demonstrated.” The EPA picked 1,000 lbs CO2/MWh as the standard because that is a typical emissions rate of new NGCC power plants. But NGCC is a type of power plant, not a system of emission reduction. Gas turbines have been “adequately demonstrated” only as power sources – not as emission reduction systems for coal boilers. To my knowledge, the EPA has never before selected a performance standard such that one type of facility can comply only by being something other than what it is.

Why propose something so contorted? The EPA does not anticipate any quantifiable climate or health benefits from the NSPS (77 FR 22430). The rule’s only discernible purpose is to ban construction of new coal generation. The greenhouse gas permitting guidance document concealed that purpose.

The Air Office’s PSD and Title V Permitting Guidance for Greenhouse Gases, both as proposed in November 2010 and as adopted in March 2011, similarly states that the “initial list of control options for a BACT analysis does not need to include ‘clean fuel’ options that would fundamentally redefine the source.” In other words, an applicant would not be required to “switch to a primary fuel type other than the type of fuel that an applicant proposes to use for its primary combustion process.” In addition, a Q&A document published along with March 2011 guidance asks whether “fuel switching  (coal to natural gas) should be selected as BACT for a power plant?” The document answers: “No.” It goes on to state that BACT for CO2 should “consider the most energy efficient design,” but “does not necessarily require a different type of fuel from the one proposed.” These documents suggest that the EPA will not require fuel switching in BACT determinations. Was that a reasonable conclusion for Congress and electric utilities to draw at the time?

Response: That is a reasonable interpretation, and EPA continues to believe that its BACT guidance is reasonable for the specific purposes for which the guidance is intended.

Comment: Bingo! If the conclusion that the EPA would not require fuel switching is a reasonable interpretation of the BACT guidance, then Congress and electric utilities had no reason to expect the agency to require fuel switching only one year later, much less do so via a form of regulation — NSPS — that is generally less stringent than BACT. In hindsight, the BACT guidance was the setup for a bait-and-fuel-switch.

Some Senators wonder how they can trust Gina McCarthy to be a “straight shooter” as EPA administrator given the agency’s FOIA failures, reliance on secret data in rulemakings, and use of private email accounts to conduct official business. These issues are significant but so is the agency’s trickery on greenhouse gas regulation of stationary sources.

Note also that the proposed 1,000 lb CO2/MWh performance standard is substantially similar to the NSPS proposed in section 116 the Waxman-Markey cap-and-trade bill, which would require a 50% reduction in CO2 emissions from new coal plants permitted before Jan. 2020. The Waxman-Markey legislation narrowly passed in the House but companion legislation died in the Senate. The ‘Carbon Pollution’ Rule sure looks like an attempt to end-run the legislative process and enact a policy Congress has rejected.

Looking at this from a wider angle, Senators might ponder what would have happened if Reps. Waxman and Markey, instead of introducing a cap-and-trade bill, had introduced legislation authorizing the EPA to do exactly what it is doing now — regulate greenhouse gases through the Clean Air Act as it sees fit. Such a bill almost certainly would have been dead on arrival. Under the leadership of Lisa Jackson and Gina McCarthy, the EPA has morphed into a Super Legislature, ‘enacting’ climate and fuel economy policies Congress has not approved and would reject if introduced as legislation and put to a vote. The Senate cannot confirm McCarthy as EPA Administrator without rewarding the agency’s regulatory overreach.

Nor can it do so without encouraging the agency to fool and trick Congress, as it did during the Senate debates on the the Murkowski resolution and Inhofe legislation, when statements by McCarthy and the Air Office seemingly disavowed any ambition to “bankrupt” investors in new coal power plants. Whatever their party affiliation or views on climate change, Senators should dislike being hoodwinked.

Earlier this month, the House Oversight and Government Reform Committee issued a staff report on the Obama Administration’s fuel economy/greenhouse gas (GHG) regulatory program. The report, A Dismissal of Safety, Choice, and Cost, is the product of a “multi-year Committee investigation” that includes three hearings, a transcribed interview of EPA Assistant Administrator Gina McCarthy, and a review of more than 15,000 documents obtained by the Committee from the EPA, the National Highway Traffic Safety Administration (NHTSA), the California Air Resources Board (CARB), and 15 automobile manufacturers.

Some key findings:

• The Administration performed an end-run around the law and ran a White House-based political negotiation, led by “czars” who marginalized NHTSA, the federal agency charged in statute with setting fuel economy standards.
• Contrary to the statutory scheme Congress created, the EPA became the lead agency in fuel economy regulation and NHTSA was sidelined. Contrary to Congress’s preemption of State laws or regulations “related to” fuel economy, CARB became a “major player” and an “aggressive participant in the process,” allowing unelected state regulators in Sacramento to set national policy outside the federal rulemaking process.
• The Administration violated the spirit – and possibly the letter – of the Administrative Procedure Act, Presidential Records Act, and Federal Advisory Committee Act by negotiating agreements on both the Model Year (MY) 2012-2016 and MY 2017-2025 standards behind closed doors with only a select group of stakeholders.
• The new fuel-economy/GHG standards will add thousands of dollars to the cost of new vehicles. Consumers are likely to incur net financial losses unless annual gasoline prices reach $5-$6 per gallon.
• Compliance with the new standards will require mass reductions that will, in turn, compromise vehicle safety. EPA and CARB officials mocked and belittled safety concerns raised by NHTSA.

In a law journal article and regulatory comment letter, I also make the case that the administration’s fuel-economy agenda trashes the separation of powers and administrative procedures. But the Committee’s report provides the first, detailed behind-the-scenes chronology of Team Obama’s fuel economy machinations, confirming what other critics suspected but could not document.

Some secrets of the sausage factory, though, may never come to light: “Despite multiple requests, the Executive Office of the President refused to provide any information on its involvement in developing the fuel economy and GHG emissions standards.”

In related news, House Oversight and Government Reform Chairmain Darrell Issa (R-Calif.), Rep. Jim Jordan (R-Ohio), who chairs the regulatory affairs subcommittee, and Rep. Mike Kelly (R-Pa.), an auto dealer, yesterday requested the White House Office of Information and Regulatory Affairs (OIRA) ”to return the [MY 2017-2025 fuel-economy/GHG] rule to the agencies for further consideration of its adverse consequences to consumers and the economy” (Detroit News, Aug. 22, 2012).

It’s doubtful OIRA will grant the request, and not only because NHTSA administrator David Strickland said the rule would be published “in days, not weeks,” and Department of Transportation Secretary Ray LaHood said, “It is going to happen . . . there’s no backing away.”

Team Obama wants to lock in the fuel-economy/GHG rule before the November elections. As the Committee’s report notes, “The Administration rushed to set the second round of fuel economy standards before the 2012 presidential election because, according to one EPA official, the President ‘wants to secure his legacy.’”

Particularly revealing in this regard is the November 2011 joint press release that LaHood and EPA Administrator Lisa Jackson issued when they proposed the new fuel-economy/GHG rule. The two agency heads actually boasted they were bypassing Congress: ”Today‘s announcement is the latest in a series of executive actions the Obama Administration is taking to strengthen the economy and move the country forward because we can’t wait for Congressional Republicans to act” [emphasis added].

A legislative proposal boosting average fuel economy to 54.5 mpg would not pass in the 112th Congress. Note also that NHTSA need not propose fuel economy standards for MYs 2017 and later until 2014. “We can’t wait” really means: We won’t let the people’s representatives decide — not now, not after the 2012 elections.

So don’t hold your breath waiting for EPA and NHTSA to reconsider their handiwork. In the meantime, check out this informative YouTube video by the National Automobile Dealers Association (NADA).

The EPA and NHTSA estimate the fuel-economy/GHG rule will add $3,000 to the average cost of a new motor vehicle in 2025. According to NADA, the $3,000 higher price tag means that 7 million drivers who can now afford to buy a new vehicle, won’t in 2025. The rule will also regulate out of existence the most affordable new vehicles, i.e. those costing $15,000 or less.

As noted here last week, the sparks flew at a Jan. 25 House Oversight and Government Reform Committee hearing titled “The Volt Fire: What Did NHTSA Know and When Did They Know It?“ Three witnesses testified: National Highway Traffic Safety Administration (NHTSA) Administrator David Strickland, General Motors (GM) CEO Daniel Akerson, and John German of the International Council on Clean Transportation. My earlier post was based on newspaper accounts of the hearing. Over the weekend, I watched the archived video of the proceeding and read the testimonies and Committee Staff Report. Here are the key facts and conclusions as I see them:

• The Volt battery fire occurred on June 2, 2011 in the parking lot of a Wisconsin crash test facility. The car caught fire three weeks after the vehicle had been totaled, on May 12, in a side-pole collision. The fire caused an explosion that destroyed not only the Volt but three other vehicles. The blast hurled one of the Volt’s components (a strut) a distance of nearly 80 feet.
• The fire was caused by the leaking of coolant into the Volt’s powerful 300-volt battery, which had been punctured by the crash.
• NHTSA could have avoided the fire had it run down (“drained,” “depowered,” “discharged”) the battery after the crash. This raises obvious questions: Was NHTSA responsible for the fire? Was the agency’s six-month silence partly an attempt to hide regulatory incompetence?
• The Volt is a safe car; consumers should not fear to drive it. Gasoline-powered vehicles are more likely than battery-powered vehicles to burn after a crash. The post-crash explosion from a damaged gas tank can occur in seconds as opposed to weeks. Electric vehicle batteries are harder to puncture than gas tanks. NHTSA tried and failed to replicate the fire by crashing other Volt test vehicles. To induce another battery fire, NHTSA had to impale the battery with a steel rod and rotate it in coolant with special laboratory equipment.
• GM is retrofitting Volt batteries to make them stronger and more leak proof, and is updating safety protocols to ensure batteries are depowered after crashes.
• NHTSA kept silent about the fire for six months, acknowledging it only after Bloomberg News broke the story on November 11, 2011.
• GOP Committee members produced no smoking gun evidence of collusion to cover up the Volt battery fire, such as an email saying ‘We’ve got to keep this under wraps or it will depress Volt sales, jeopardize EPA’s fuel economy negotiations with automakers, and make President Obama look bad.’
• Nonetheless, the Obama administration’s heavy investment (financial and political) in GM in general and the Volt in particular creates an undeniable conflict of interest.
• NHTSA determined the cause of the fire in August 2011, yet waited until November 25 to advise emergency responders, salvage yard managers, and Volt owners how to avoid, and reduce the safety risks associated with, post-crash fires.
• Administrator Strickland’s protestations to the contrary notwithstanding, it is difficult to explain the agency’s secretiveness apart from political considerations that should not influence NHTSA’s regulatory deliberations.

Conflict of Interest

The Committee’s Staff Report makes a strong case that the Obama administration has invested too much financial and political capital in GM and the Volt to be an honest broker of potentially damaging information about the vehicle. Consider the business side of the relationship:

• President Obama made the unilateral decision to use $50 billion in Troubled Asset Recovery Program (TARP) funds to bailout GM. Through the bailout, the government acquired a 60% equity stake in GM plus $8.8 billion in debt and preferred stock; it still owns 26.5% of GM stock.
• The Administration spent $2.4 billion of Stimulus funds on the development of technologies for the Volt and other electric vehicles. Such funds include ”$105.9 million directly to GM for production of high-volume battery packs for the Volt, $105 million to GM to construct facilities for electric drive systems, and $89.3 million to Delphi Automotive Systems, a former division of GM, to expand manufacturing facilities for electric drive power components,” the Staff Report notes.
• The U.S. Treasury picked four of five new GM board members in July 2009, including Mr. Akerson, who became CEO in January 2011.
• Volt buyers already qualify for a $7,500 federal tax credit but President Obama thinks they shouldn’t have to wait until after filing their taxes to get the rebate. The President’s FY 2012 Budget (p. 36) proposes to “transform the existing $7,500 tax credit for electric vehicles into a rebate that will be available to all consumers immediately at the point of sale.”

They don’t call it “Government Motors” for nothing. Although the company is paying off its debt to taxpayers, “ward of the state” is not a completely unfair description. In effect, when NHTSA investigated the Volt battery fire, the government was investigating a partly-owned subsidiary of — itself.

On the political side, President Obama has tied his reputation (hence his re-election prospects) to GM and the Volt:

• Obama claims the GM/Chrysler bailout saved one million auto industry jobs.
• He touts the Volt as “the car of the future.”
• The Volt’s success is critical to his goal, announced in the 2011 State of the Union speech, of putting “a million electric vehicles on the road by 2015.”
• Consumer acceptance of electric vehicles like the Volt may also be critical to the economic practicability of EPA and NHTSA’s proposed carbon dioxide (CO2)/fuel economy standards for model years (MYs) 2017-2025, which the White House considers one of the administration’s “hallmark achievements.”

At the hearing, Mr. German testified that plug-in hybrid and battery-electric vehicles are not needed to meet the new fuel economy standards, because improvements in turbochargers and other technologies are rapidly increasing the fuel efficiency of internal combustion engines. That may be so.

Nonetheless, the administration wants and expects the standards to expand the market for electric vehicles. As the Staff Report points out, according to EPA and NHTSA’s proposed rule (p. 75085), “After MY 2020, the only current vehicles that continue to meet the proposed footprint-based CO2 targets (assuming improvements in air conditioning) are hybrid-electric, plug-in hybrid-electric, and fully electric vehicles.” Accordingly, the proposal provides ”regulatory incentives” to encourage manufacture of electric vehicles during MYs 2017-2021 (pp. 75012-75013).†

Also relevent in this connection, the California Air Resources Board (CARB) — EPA and NHTSA’s partner in developing the CO2/fuel economy standards — projects that, under the standards, plug-in hybrids, battery-electric vehicles, and fuel cell vehicles will account for 15.4% of all new cars sold in California by 2025.

It just so happens that the Volt battery fire and NHTSA’s “preliminary” (off-the-record) investigation occurred while EPA, NHTSA, CARB, automakers, union labor, and environmental groups were negotiating the MY 2017-2025 fuel economy standards. Adverse publicity sparked by the battery fire could have complicated the “optics” of the negotiations, recharging the old debate over the safety risks of fuel economy regulation.

In short, the auto bailout, the Stimulus subsidies, the fuel economy rulemaking, and President Obama’s high-profile endorsement of the Volt created incentives for NHTSA to keep the Volt fire incident under wraps. A NHTSA Administrator would have to be a saint not to be tempted. Saints don’t lie. At a previous hearing before the Committee, Strickland denied under oath plain facts that he must know to be true.‡

The Timeline

The Staff Report also lays out a timeline that suggests a plan to keep Congress and the public in the dark until NHTSA and GM figured out how to eliminate the safety concern that the fire and explosion undeniably created.

The Wisconsin testing facility performed the crash test on May 12, 2011. NHSTA first learned of the fire on June 6. The agency retained a fire investigation firm to determine the cause of the explosion, because one of the other vehicles — or even an arsonist — might have started the fire. On July 5, the firm notified NHTSA that the Volt caused the fire. According to Strickland’s testimony, NHTSA determined in August that coolant leaking into the damaged battery was the source of the fire, although a second side-pole test in September did not damage the battery, leak coolant, or start a fire.

Bloomberg broke the story of the June fire on November 11, 2011. Not until November 25, the day after the previously described laboratory test caused a Volt battery to catch on fire, did NHTSA open a formal safety defect investigation. The formal inquiry took eight weeks. On January 20, 2012, NHTSA announced it was officially closing the safety probe following GM’s announcement that it would strengthen the structure around the battery and make other modifications to prevent and detect coolant leaks. But, on December 6, 2011, only two weeks into the investigation, and months in advance of the modifications GM is now implementing, Transportation Secretary Ray LaHood declared the Volt to be safe to drive.

During the formal investigation the agency evaded Committee requests for information:

Upon learning of the vehicle fire through press reports, Chairman [Darrell] Issa, Chairman Jordan, and Rep. [Mike] Kelly wrote to NHTSA Administrator Strickland on December 7, 2011, asking for answers about the Volt fires and NHTSA’s investigation of the matter. After failing to respond before a December 21, 2011 deadline, NHTSA promised to respond in full by January 6, 2012. However, NHTSA once again failed to respond to the new deadline, providing the Committee with no response and no explanation for the delay. . . .Only after a second letter sent on January 10, 2012, reiterating the Committee’s request for cooperation, did the Committee finally receive an incomplete response to the narrative questions posed in the latter on January 12, 2012, followed by a staff briefing on January 17, 2012. After six weeks of stonewalling, NHTSA provided the Committee with some documents on Thursday, January 19, 2012.

More troubling, though, is NHTSA’s long silence between June 6, when the agency learned of the fire, and November 11, when Bloomberg reported the incident. The Staff Report comments:

NHTSA’s six month silence on the Volt’s fire risks has baffled safety advocates. Joan Claybrook, a former Administrator of NHTSA and well-known auto safety expert, told the industry newspaper Automotive News that “not to tell [the public] anything for six months makes no sense to me. NHTSA could have put out a consumer alert and I think they should have done so.” She went on to say, “I believe they delayed it because of the fragility of sales.”

During the Q&A portion of the hearing, Administrator Strickland asserted it would be “irresponsible and frankly illegal” for NHTSA to “disclose anything” or say there was “something wrong” with the Volt while still engaged in “fact finding.” He did not cite the statutory provision that supposedly imposes such restraint. Although no fan of the risk-averse Precautionary Principle, I am at a loss to understand how a car fire and explosion could be serious enough to warrant ongoing tests over six months but not serious enough to mention to Congress, Volt owners, emergency responders, or potential customers.

On November 25, when NHTSA launched its formal investigation, the agency issued several safety guidelines such as keep damaged vehicles in open areas rather than inside garages or enclosed buildings, contact experts at the vehicle’s manufacturer who can discharge the propulsion system, and do not store damaged vehicles near other vehicles. Those precautions made practical sense the moment NHTSA figured out what caused the fire, in August 2011. Yet NHTSA waited another three months, and only after Bloomberg spilled the beans, to communicate important safety information to emergency responders, salvage yard managers, and Volt owners.

Concern about the “fragility of sales” may account for the delay. As noted earlier, another factor may have been negotiations over MY 2017-2025 fuel economy standards. From the Staff Report:

The fire occured on June 2, 2011. NHTSA’s investigation and response to that fire proceeded concurrently as the agency finalized negotiations on fuel economy and emissions regulation for model years 2017-2025. Bloomberg News broke the story on the Volt fires on November 11, 2011. NHTSA and EPA formally proposed the joint rulemaking for fuel economy on November 16, 2011, and nine days after the joint proposal was official, on November 25, 2011, NHTSA officially addressed the questions raised by the Volt fire and announced a formal defect investigation. Clearly, it would be inappropriate if NHTSA had stayed silent on the Volt battery’s safety risks in exchange for GM’s cooperation in the rulemaking.

Agency Error?

Another plausible motive for keeping mum may simply be embarrassment. The fire would not have occurred had NHTSA depowered the battery after the May 12 test crash. According to the Staff Report:

After news of the June Fire became public in November, GM Spokesman Greg Martin insisted that GM had long since established a set of safety protocols to prevent a fire after the Volt’s battery had been damaged. “The engineers tested the Volt’s battery pack for more than 300,000 hours to come up with the procedures, which include discharge and disposal of the battery pack,” he said. Mr. Martin went so far as to claim that “had those protocols been followed after [the May 12th test], this incident would not have occurred.” Clarence Ditlow, executive director of the Center for Auto Safety, stated he was “surprised NHTSA didn’t depower the battery after the first test in May, since it is standard procedure to drain fuel out of a conventional gasoline powered vehicle.”

German testified that, “All junkyards know to discharge the battery pack before storing, just as they remove fuel from the gas tank.” Implication: NHTSA, or its test facility, was incompetent or careless. When pressed on this point by Subcommittee Chair Jim Jordan (R-Ohio), German responded that he wrote his testimony in haste and meant to say “disconnect” rather than “discharge.” However, in the follow up, German did not challenge Jordan’s argument, based on German’s written testimony, that NHTSA should have done what junkyards know to do — depower, not merely disconnect, the battery. Asked why NHTSA did not do that, German replied: ”Again, those questions are better directed to NHTSA. The one thing I can say is there has not been a recorded case of a battery pack catching on fire. So it may have just been oversight. I don’t know.”

Conclusion

In the Q&A, Administrator Strickland said that “it took every second” for NHTSA’s technical team to determine what went wrong and how to fix it, and that is why NHTSA did not notify the public about the Volt battery fire and explosion until six months after the incident. That is not credible.

NHTSA understood the cause of the fire in August 2011, and the practical steps required to minimize safety risk – don’t keep a crashed electric vehicle in enclosed spaces or near other vehicles, arrange for experts to depower the battery — did not take another three months to figure out.

The administration’s heavy political and financial investment in GM and the Volt created a conflict of interest. The government’s ownership stake in GM and President Obama’s cheerleading for the Volt gave NHTSA an improper incentive to balance its safety mission against the administration’s political goal of boosting Volt sales. The perceived importance of electric vehicle sales to NHTSA, EPA, and CARB’s fuel economy agenda created an additional incentive to hide information that might depress Volt sales. Finally, agencies are not immune to the all-too-human desire to avoid blame for mistakes, and some experts say NHTSA should have known to drain the Volt battery after the crash test.

Absent smoking gun evidence, it is not possible to prove that political considerations account for NHTSA’s six-month silence. On the other hand, there is a simple way for Administrator Strickland to prove that political considerations were not a factor: Produce documents dated well prior to the Bloomberg story discussing when and how NHTSA planned to share the information with the public. If such documents exist, Strickland did not mention them at the hearing.

† During MYs 2017-2021, emissions from grid-based power used to recharge an electric vehicle will not be counted when assessing its compliance with EPA’s CO2 standards, and each plug-in vehicle sold will count as more than one car when calculating the manufacturer’s fleet-wide average fuel economy.

‡ Strickland, along with EPA officials Gina McCarthy and Margo Oge, denied that motor vehicle greenhouse gas (GHG) emission standards are ”related to” fuel economy standards. They surely know better. CO2 constitutes 94.9% of all GHGs emitted by motor vehicles, and “there is a single pool of technologies . . . that reduce fuel consumption and thereby CO2 emissions as well” (EPA/NHTSA Tailpipe Rule, pp. pp. 25424, 25327). Motor vehicle GHG standards are, thus, strongly “related to” fuel economy standards. Strickland, McCarthy, and Oge had to deny this because otherwise they would have to admit (1) that EPA’s grant of a waiver allowing California to regulate motor vehicle GHG emissions conflicts with the Energy Policy Conservation Act’s express preemption of state laws or regulations “related to” fuel economy, and (2) that EPA is implicitly prescribing fuel economy standards, even though the Clean Air Act grants the agency no such power. 

James Hohman of Michigan’s Mackinac Center for Public Policy estimates that state and federal incentives for GM’s plug-in hybrid vehicle, the Chevy Volt, total $3 billion. That works out to between $50,000 and $250,000 in taxpayer support for each of 6,000 Volts sold so far, “depending on how many of the subsidy milestones are realized.”

The per vehicle subsidy cost is bound to decrease as more Volts are sold and as current subsidies expire.

Nonetheless, as GM acknowledges, the typical Volt purchaser earns $170,000 a year, so it’s hard to avoid the conclusion that the Volt program is a reverse-Robin Hood wealth tranfer from middle-income households to GM, other big corporations, and high-income auto buyers.

Hohman’s analysis appears below in full.

Chevy Volt Costing Taxpayers Up to $250K Per Vehicle

Analyst: ‘This might be the most government-supported car since the Trabant’

By Tom Gantert | Dec. 21, 2011      Follow Tom Gantert on Twitter

(Editor’s note: This article has been updated with a reaction from a General Motor’s official.)

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. Some tax credits and subsidies are offered for periods up to 20 years, though most have a much shorter time frame.

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

If those manufacturers awarded incentives to produce batteries the Volt may use are included in the analysis, the potential government subsidy per Volt increases to $256,824. For example, A123 Systems has received extensive state and federal support, and bid to be a supplier to the Volt, but the deal instead went to Compact Power. The $256,824 figure includes adding up the subsidies to both companies.

The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.

Additional state and local support provided to Volt suppliers was not included in the analysis, Hohman said, and could increase the level of government aid. For instance, the Volt is being assembled at the Poletown plant in Detroit/Hamtramck, which was built on land acquired by General Motors through eminent domain.

“It just goes to show  there are certain folks that will spend anything to get their vision of what people should do,” said State Representative Tom McMillin, R-Rochester Hills. “It’s a glaring example of the failure of central planning trying to force citizens to purchase something they may not want. … They should let the free market make those decisions.”

“This might be the most government-supported car since the Trabant,” said Hohman, referring to the car produced by the former Communist state of East Germany.

According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.

~~~~~

(Updated Information)

Greg Martin, director of Policy and Washington Communications for GM, wrote in an email, “While much less than the hundreds of billions of dollars that Japanese and Korean auto and battery manufacturers have received over the years, the investments provided by several different Administrations and Congresses to jump-start the country’s fledgling battery technology and domestic electric vehicle industries (not just specifically for the Volt as Ford’s offering will also use LG Chem batteries and Fisker will use the A123 system for example) matches the same foresight and innovation  leadership that other countries are exhibiting and which America has historically taken pride in.”

Martin added that the Mackinac Center’s math was “simple and selective.” However, he offered no data or specifics to support his assertion.

“This is a matter of simple math,” said Hohman. “I added the known state and federal incentives that have been offered and divided by the number of Volts sold. If GM has additional information to add to the public data on the use of taxpayer money, I look forward to seeing it.”

I keep coming back to this topic because fuel economy zealots are trashing our constitutional system of separated powers and democratic accountability. Only Congress can make them stop. Leading the counter-offensive is House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.), who has been watch-dogging the Obama administration’s fuel economy agenda since 2009.

The Energy Policy Conservation Act (EPCA) delegates the responsibility to prescribe fuel economy standards solely to the National Highway Traffic Safety Administration (NHTSA); the Clean Air Act (CAA) provides EPA no authority to regulate fuel economy; and EPCA specifically preempts state laws or regulations  “related to” fuel economy. Yet ever since May 2009, when Obama environment czar Carol Browner brokered the so-called Historic Agreement between EPA, auto makers, and the California Air Resources Board (CARB), EPA and CARB have effectively determined the stringency of the fuel economy standards NHTSA prescribes.

How so? EPA and CARB impose greenhouse gas emission standards on auto makers. Carbon dioxide (CO2) constitutes almost 95% of motor vehicle greenhouse gas emissions, and there being no commercial technologies to capture or filter out CO2 emissions, the only way to reduce CO2 emissions per mile is to reduce fuel consumption per mile — that is, increase fuel economy (EPA/NHTSA Tailpipe Rule, pp. 25424, 25327).

So under the Obama administration, instead of one agency regulating fuel economy through one set of rules pursuant to one statute, as Congress intended, three agencies regulate fuel economy through three sets of rules pursuant to three statutes (EPCA, CAA, and California Assembly Bill 1493). EPA is implicitly regulating fuel economy outside the scope of its statutory authority and CARB is implicitly regulating fuel economy in defiance EPCA’s express preemption.

As my colleague David Bier noted earlier this week, Browner negotiated the Historic Agreement in “put nothing in writing, ever” closed-door meetings that flouted Presidential Records Act and Federal Advisory Committee Act transparency provisions. And as I explain in a recent column, auto makers agreed to the ‘triplification’ of fuel economy regulation to escape an even worse regulatory fate – a market-balkanizing fuel-economy patchwork that EPA teed up when, defying EPCA, it authorized California and other states to adopt greenhouse gas emission standards, which are highly “related to” fuel economy.

The Alliance of Automobile Manufacturers once argued forthrightly that EPCA preempts California’s greenhouse gas emission standards. But that was before the Historic Agreement — and before the auto industry bailout and GM and Chrysler evolved into “Government Motors.”

If Congress ever overturns or merely limits EPA and CARB’s power grabs, it will largely be due to Chairman Issa’s unrelenting investigation of the administration’s fuel economy policies and related actions. On Monday, Issa sent a strongly-worded oversight letter to CARB Chairman Mary Nichols.

Issa’s letter faults Nichols for refusing to turn over documents relating to CARB’s role in negotiating model year (MY) 2012-2016 fuel economy standards, for “intentionally misleading” the Committee by erroneously suggesting there is a ”single national program” rather than at least two different standards (NHTSA’s and EPA/CARB’s), and for disingenuously denying CARB’s involvement in negotiating fuel economy standards despite the Committee’s possession of evidence that Nichols or her staff met with NHTSA officials on 116 separate occasions.

Issa’s letter also effectively rebuts Nichols’s assertion that CARB’s greenhouse gas emission standards are not “related to” fuel economy and, thus, are not preempted by EPCA. In her response to an earlier letter from Issa, Nichols asserted that regulation of fuel economy and greenhouse gases are “separate and independent” from each other, that the phrase “related to” in the EPCA preemption should be construed narrowly to prohibit states from adopting fuel economy standards, that a broader reading that would prohibit CARB from regulating greenhouse gases is a “legalistic contortion that defies common sense,” and that two district court decisions have “definitively rejected” such notions. Issa responds as follows (footnotes omitted):

I would respectfully suggest that CARB’s view of its regulatory authority of greenhouse gases not only overstates its legal certainty in this area and conflicts with the facts at issue here, but is itself a “legalistic contortion that defies common sense.” As you know, CARB has required automobile manufacturers to drop all litigation challenging CARB’s actions on the basis of the EPCA preemption indefinitely as a condition for CARB’s agreement to adhere to EPA’s greenhouse emission standards [thereby averting the market-balkanizing patchwork]. By insisting on this condition, CARB has deprived automobile manufacturers of the full protection of law. Insofar as CARB’s legal authority rests on two non-precedential decisions and CARB has obstructed further development of the law, CARB should not in good faith boldly proclaim the definitiveness of its legal authority.

Moreover, the facts here suggest that the overlap between greenhouse gas regulations and fuel economy regulations is so great that they are nearly indistinguishable. As you are aware, 95 percent of the reductions in greenhouse gases obtained through EPA’s greenhouse gas standards, which CARB has accepted as an adequate substitute for its own standard, are obtained through reductions in carbon dioxide. Fuel economy and carbon dioxide emissions are so closely related that tests for fuel economy are performed by measuring carbon dioxide emissions. Accordingly, the same control technology used to increase fuel economy is used to decrease 95 percent of all greenhouse gas emissions from vehicles. Nitrous oxide and methane emissions comprise less than one percent of total greenhouse gas emissions, and hydroflourocarbons, a refrigerant used in air conditioners, makes up the remainder of emissions. In fact, the relationship between greenhouse gas emissions and fuel economy is so close that in California’s commitment letter for MY 2012-2016, California agreed to allow manufacturers “to use data generated by [corporate average fuel economy] test procedures . . . to demonstrate compliance.” In light of these facts, your response that the regulation of fuel economy and greenhouse gases are not related lacks completeness and candor. These facts suggest that CARB — whether intentionally or not — is indeed regulating fuel economy.

In addition to these facts, in your own response to the Committee, you boast about the fuel savings that would result from CARB’s regulatory activities, stating: “Under this program, the U.S. will reduce its consumption of oil by 12 billion barrels . . .” The reduction in fuel consumption is not an accidental or indirect benefit of CARB’s regulatory activities. It is the expected outcome that results from increased fuel economy standards. Accordingly, it is abundantly clear that CARB’s regulation of greenhouse gases is “related to” the regulation of fuel economy within the meaning of EPCA. CARB cannot escape this conclusion simply by calling its fuel economy regulations by another name.

And if that is not enough to persuade you, dear reader, take a gander at CARB official Michael Kenny’s deposition in Central Valley Chrysler-Plymouth v. CARB, one of the two cases Mary Nichols cited as having “definitively rejected” the proposition that greenhouse gas emission standards are “related to” fuel economy standards:

Federal agencies are not supposed to be overtly partisan. They are also not supposed to legislate. EPA Administrator Lisa Jackson and Department of Transportation Secretary Ray LaHood apparently didn’t get the memo. Or maybe they just don’t give a darn.

In a press release announcing their plan to raise fuel economy standards to 54.5 miles per gallon by 2025, the agency heads boast: “Today’s announcement is the latest in a series of executive actions the Obama Administration is taking to strengthen the economy and move the country forward because we can’t wait for Congressional Republicans to act” [emphasis added]. Jackson and LaHood even title their press release, “We Can’t Wait.”

‘What do we want? Energy independence! When do we want it? Now!’ Even if that means trashing the separation of powers, the essential constitutional foundation for accountable government.

Team Obama has turned the nation’s fuel economy law, the Energy Policy Conservation Act (EPCA), into a non-controlling legal authority.

EPCA specifically limits the setting of fuel economy standards to “not more than 5 model years.” EPA and DOT plan to establish fuel economy standards for model years (MYs) 2017-2025 — a nine-year period. No matter how long government lawyers squint at the page, five does not mean nine.

To get around the five-year EPCA limitation, the administration invokes EPA’s alleged authority to regulate greenhouse gases through the Clean Air Act (CAA). Yet EPCA delegates to DOT sole responsibility for prescribing fuel economy standards, and the CAA provides no authority for fuel economy regulation.

Contradictorily, EPA and DOT officials deny that greenhouse gas emission standards are even “related to” fuel economy standards. This easily refuted falsehood allows the administration to pretend that EPA did not defy EPCA when it authorized California and other states to regulate motor vehicle greenhouse gas emissions.

The administration’s proposed MY 2017-2025 fuel economy standards, like the current MY 2012-2016 standards, are explicitly designed to “harmonize” with the California Air Resources Board’s greenhouse gas emission standards. But greenhouse gas emission standards implicitly regulate fuel economy, and EPCA prohibits states from adopting laws or regulations “related to” fuel economy.

By threatening to allow states to create a “patchwork” of conflicting fuel economy requirements, EPA frightened auto makers into supporting the agency’s greenhouse gas emission standards as the lesser regulatory evil. EPA then parlayed its new role as de-facto fuel economy regulator into a mandate to regulate greenhouse gases from from stationary sources.

To pull off these power grabs, Obama officials negotiated with auto makers, California, environmental groups, and union labor behind closed doors, in defiance of federal accountability statutes.

The agencies’ press release should be re-written as follows:

We can’t wait for Congressional Republicans to amend EPCA. We want more power over the auto industry and consumer choice. So we’re going to amend EPCA by administrative action. To thwart congressional oversight, we’re also going negotiate these deals, er, “Historic Agreements,” in the Chicago style – mum’s da woid. And if you auto guys don’t come along quietly, we’re gonna let the California Air Resources Board muss ya up.

The Union of Concerned Scientists (UCS) and seven other green groups sent the National Automobile Dealers Association (NADA) a letter (dated October 19) criticizing NADA’s opposition to President Obama’s plan to increase new-car fuel economy standards to 54.5 miles per gallon by Model Year (MY) 2025.

The UCS letter parrots the administration’s claims about the many wonderful benefits more stringent fuel economy standards will achieve during MYs 2017-2025. In a letter dated November 2, NADA points out that the claimed benefits depend on assumptions, such as future gasoline prices and, most importantly, whether consumers will want to buy the cars auto makers are forced to produce.

The UCS letter neglects to mention that, according to the administration’s own estimates, the MY 2025 standard would add at least $3,100 to the average cost of a new vehicle. NADA also notes other likely consumer impacts:

• Vehicles that currently cost $15,000 and less effectively regulated out of existence.
• Weight reductions of 15%-25%, with potential adverse effects on vehicle safety in collisions.
• 25% to 66% of the fleet required to be hybrid or electric, even though hybrids today account for only 2-3% of new vehicle sales.

The “concerned” scientists also completely ignore NADA’s critique of the legal basis of Obama’s fuel economy agenda. EPA and the California Air Resources Board are implicitly regulating fuel economy. Yet EPA has no statutory authority to prescribe fuel economy standards, and federal law expressly prohibits states from adopting laws or regulations “related to” fuel economy.

To help restore the statutory scheme Congress created, NADA supports Reps. Steve Austria (R-Ohio) and John Carter’s (R-Texas) amendment to the fiscal year 2012 EPA/Interior appropriations bill. The amendment would bar EPA from spending any money in FY 2012 to develop greenhouse gas/fuel economy standards for MY 2017 and beyond, or to consider or grant a waiver for California to develop such standards.

NADA explains:

As Congress never explicitly authorized EPA to regulate fuel economy, and explicitly preempted all states — including California — from regulating fuel economy, enactment of the Austria-Carter amendment would simply return regulation of fuel economy back to its congressional design for fiscal year 2012. Thus, the Austria-Carter amendment does not do more than give a one-year “time out” to two agencies that should not be setting fuel economy standards to begin with.

Green group claims that Austria-Carter would jeopardize important public health and welfare benefits are poppycock even if you view oil imports and global warming as the worst perils facing America and humanity. NADA explains:

The amendment would not delay the introduction or implementation of any fuel economy or auto pollution standards. Under the amendment, the fuel economy regulations for MYs 2012-2016 that were recently finalized by DOT [Department of Transportation] and EPA would remain in full force. In addition, DOT could continue without delay to propose additional fuel economy regulations under CAFE for later years. And because fuel economy rules for MY 2017 are not due until April 1, 2015 – more than three and a half years from now — a one year “time out” would not result in any loss of oil savings or greenhouse gas reductions.

More evidence — if any were needed — that UCS should change its name to “Union of Alarmist Scientists.”

Earlier this week, House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) sent letters to three Obama administration officials regarding the veracity of their testimonies at an October 12 subcommittee hearing on the administration’s fuel economy policies.*

Issa’s letters — to National Highway Traffic Safety Administration (NHTSA) Administrator David Strickland, EPA Assistant Administrator for Air and Radiation Gina McCarthy, and EPA Director of Transportation and Air Quality Margo Oge – are identical in content.

The gist of the letters is that each administration witness denied under oath that EPA and California’s greenhouse gas emission standards are “related to” fuel economy standards, whereas in fact, according to Issa, ”regulating greenhouse gases and regulating fuel economy is a distinction without a difference.”

This matters for three inter-related reasons: (1) EPA is currently regulating fuel economy by setting motor vehicle greenhouse gas emission standards even though the Clean Air Act provides no authority for fuel economy regulation; (2) EPA in June 2009 granted California a waiver to establish motor vehicle greenhouse gas emission standards despite the Energy Policy Conservation Act’s (EPCA’s) express prohibition (U.S.C. 49 § 32919) of state laws or regulations “related to” fuel economy; and (3) the California waiver, by threatening to create a market-balkanizing “regulatory patchwork,” enabled the Obama administration to extort the auto industry’s support for EPA’s new career as greenhouse gas/fuel economy regulator in return for California and other states’ agreement to deem compliance with EPA’s greenhouse gas/fuel economy standards as compliance with their own.

As I will demonstrate below, greenhouse gas emission standards are highly “related to” fuel economy standards, and the administration witnesses cannot possibly be ignorant of the relationship. Do their denials of plain fact rise to the level of perjury?

In his letters to the Obama officials, Issa excerpts pertinent exchanges between them and Members of the Subcommittee:

Chairman Jordan: I guess maybe here’s the question — I’m not a legal scholar on this — but it seems that when you read the statute [EPCA], it talks about a regulation related to fuel economy standards, and greenhouse gases are certainly related to fuel economy standards, is that right?

Administrator McCarthy: They are closely aligned but they are different, Mr. Chairman.

*  *  *

Vice Chair Buerkle: I just have a quick question for the three of you. It’s a yes or no question, if you wouldn’t mind. Are the greenhouse gas rules — either EPA’s or the California rules — are they they related to fuel economy? Mr. Strickland, yes or no?

Administrator Strickland: No, they regulate greenhouse gas emissions.

Administrator McCarthy: They regulate greenhouse gas emissions.

Ms. Oge: They regulate greenhouse gas emissions.

Vice Chair Buerkle: So they’re not related to fuel economy, under oath.

Administrator Strickland: No. They’re greenhouse gas emission regulations.

Administrator McCarthy: We do not regulate fuel economy standards.

Vice Chair Buerkle: And all three of you agree with that?

Ms. Oge: Yes.

Administrator Strickland: Yes.

When asked if EPA and California’s standards are “related to” fuel economy standards, the administration witnesses offer a tautology: Greenhouse gas emission standards regulate greenhouse gas emissions. It is as if John Smith were asked whether he is related to Joe Smith and replied, “I am not my brother, I am me.”

Motor vehicle greenhouse gas emission standards implicitly – and inescapably – regulate fuel economy. EPA and NHTSA confirm this – albeit not in so many words – in their joint May 2010 greenhouse gas/fuel economy Tailpipe Rule.

As the agencies acknowledge (Tailpipe Rule, pp. 25424, 25327), no commercially proven technologies exist to filter out or capture carbon dioxide (CO2) emissions from fossil fuel-powered vehicles. Consequently, the only way to decrease grams of CO2 per mile is to decrease fuel consumption per mile, i.e., 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 reduce CO2 emissions as well.”

That EPA and CARB are regulating fuel economy is also evident from the administration’s current plan to increase average fuel economy to 54.5 miles per gallon by 2025. The plan derives from EPA, NHTSA, and the California Air Resources Board’s (CARB’s) Interim Joint Technical Assessment Report, which proposed a range of fuel economy targets from 47 mpg to 62 mpg. The mpg targets are determined by – are simple reciprocals of – CO2 reduction scenarios:

Four scenarios of future stringency are analyzed for model years 2020 and 2025, starting with a 250 grams/mile estimated fleet-wide level in MY 2016 and lowering CO2 scenario targets at the rate of 3% per year, 4% per year, 5% per year, and 6% per year [p. viii].

The 54.5 mpg target represents a negotiated compromise between the 4% per year (51 mpg) and 5% per year (56 mpg) CO2 reduction scenarios (p. ix).

That the California greenhouse gas motor vehicle emissions law, AB 1493, is highly “related to” fuel economy is obvious from CARB’s 2004 Staff Report presenting the agency’s “initial statement of reasons” for its regulatory program.  The Staff Report’s recommended options for reducing greenhouse gas emissions (Table 5.2-3) are identical in substance, and often in detail, to fuel saving options presented in the National Research Council’s (NRC’s) 2002 fuel economy report (Tables 3-1, 3-2). A few options in the CARB list are not included in the NRC list. In each case, however, the CARB option is a fuel-saving technology, not an emission-control technology.

In addition, the text of AB 1493 clearly implies that CARB is to regulate fuel economy. AB 1493 requires CARB to achieve “maximum feasible” greenhouse gas reductions that are also “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 rightly interprets this to mean that the reduction in “operating expenses” over the average life of the vehicle (assumed to be 16 years) must exceed the “expected increases in vehicle cost [purchase price] resulting from the technology improvements needed to meet the standards in the proposed regulation” (Staff Report, p. 148). Virtually all of the “operating expenses” to be reduced are expenditures for fuel. The CARB program cannot be “cost-effective” unless CARB regulates fuel economy.

Strickland, McCarthy, and Oge could not acknowledge what they must know to be true because otherwise they would have to admit:

1. EPA is regulating fuel economy, which is outside the scope of its delegated authority; and
2. CARB is regulating fuel economy, which is prohibited by EPCA.

Since EPA contends that its greenhouse gas/fuel economy motor vehicle standards compel the agency to regulate greenhouse gas emissions from large stationary sources, the administration witnesses also could not acknowledge the obvious without admitting that EPA’s entire greenhouse gas regulatory agenda rests on shaky legal grounds.

* I testified at the Subcommittee’s October 12 hearing on the first, private-sector witness panel, which also included Jeremy Anwyl (Edmunds.Com), Roland Hwang (Natural Resources Defense Council), and Scott Grenerth (Independent Trucker). The three Obama officials testified on the second, public-sector witness panel.   

Costco is removing its electric vehicle (EV) charging stations, citing lack of consumer demand, reports Jim Motavalli in the New York Times. Plug-In America, an EV advocacy group, has issued an “action alert” urging its members to email Costco CEO James Sinegal and ask him to maintain and upgrade the charging stations.  From Montavalli’s article:

Costco, the membership warehouse-club chain, was an early leader in offering electric-vehicle charging to its customers, setting an example followed by other retailers, including Best Buy and Walgreen. By 2006, Costco had installed 90 chargers at 64 stores, mostly in California but also some in Arizona, New York and Georgia. Even after General Motors crushed its EV1 battery cars, the Costco chargers stayed in place.

Yet just as plug-in cars like the Nissan Leaf and Chevrolet Volt enter the market, Costco is reversing course and pulling its chargers out of the ground, explaining that customers do not use them.

“We were early supporters of electric cars, going back as far as 15 years. But nobody ever uses them,” said Dennis Hoover, the general manager for Costco in northern California, in a telephone interview. “At our Folsom store, the manager said he hadn’t seen anybody using the E.V. charging in a full year. At our store in Vacaville, where we had six chargers, one person plugged in once a week.”

Mr. Hoover said that E.V. charging was “very inefficient and not productive” for the retailer. “The bottom line is that there are a lot of other ways to be green,” he said. “We have five million members in the region, and just a handful of people are using these devices.

Why is consumer demand for EVs – hence for charging stations – so low?

Most consumers cannot afford a battery electric car or a plug-in hybrid. The biggest part of the expense is the lithium-ion batteries that power EVs.

Three recent studies by the Boston Consulting Group (BCG) shed light on this formidable barrier to consumer acceptance.

The Comeback of the Electric Car? How real, how soon, and what must happen next (2009) estimates that even if battery prices drop from about $2,000 per kilowatt hour (kWh) in 2008 to $700 per kWh in 2020, “a 20 kWh battery, which is needed for a driving range of 80 miles (about 130 kilometers) would still cost $14,000.” Absent tax rebates or other consumer subsidies, the five-year fuel savings would not offset the cost of the battery unless oil hits $280 a barrel.

Batteries for Electric Cars: Challenges, Opportunities, and Outlook to 2020 (2010) estimates that, excluding subsidies, consumers paid $1,400 to $1,800 per kWh for EV battery packs in 2009. The report projects that costs will fall to between $570 and $700 per kWh by 2020. However, that would still be more than twice the 2020 commercial viability cost target of $250 per kWh set by the United States Advanced Battery Consortium.

Most consumers won’t purchase an EV unless the reduction in fuel costs offsets the higher vehicle cost within three years, BCG’s 2010 study goes on to say. For U.S. purchasers of EVs in 2020 to break even in three years, some combination of the following conditions would have to obtain: “an oil price increase from $100 per barrel (the forecast price) to $300 per barrel; a 200 percent increase in gasoline prices caused by higher oil prices, higher taxes, or both; or $7,500 in government incentives available per car purchased, consistent with currently approved electric-vehicle incentives.”

The study projects that automakers will sell about 1.5 million fully electric vehicles and 1.5 million plug-in hybrids worldwide in 2020, capturing 3-5% of the passenger car market in developed countries. That’s not trivial, and maybe a decade from now Costco could operate EV recharging stations at a profit. But as of August 2011, only 8,000 EVs were sold (or delivered to showrooms?) in the USA – about 0.1% of total light duty U.S. vehicle sales in 2011.

Powering Autos to 2020: The Era of the Electric Car? (2011) contains, among other information, the results of survey research BCG conducted.

• Only 6% of U.S. and 9% of EU respondents in the survey were willing to buy a “green” car that costs more over the life of the vehicle.
• 38% of U.S. respondents were willing to pay $3,900 more on average for a “green” car if they can break even via fuel savings over time.
• A whopping 56% were not willing to buy a green car even if they could break even.
• Of those willing to spend more for a green car if fuel savings offset the higher purchase price, 71% expected a maximum payback time of 1-3 years.

The bottom line: EVs may some day be a smart choice for cost-conscious consumers, but a mass market is unlikely to develop in the next decade. From which I conclude that Costco understands its customers better than its green critics do.

On Monday, I noted that Team Obama plans to set new-car fuel-economy standards for model years (MYs) 2017-2025, a nine-year period, despite the fact that the authorizing statute, the Energy Policy Conservation Act, 49 U.S.C. 32902(b)(3)(B), restricts the setting of fuel-economy standards to “not more than 5 model years.” No matter how hard or long government lawyers squint at the text, 5 does not mean 9. In the words of House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.), the standards proposed for MYs 2022-2025, which reach 54.5 mpg in 2025, are “outside the scope of law.”

Since writing that post, I have learned that Team Obama will try to finesse the legal problem by basing the MYs 2022-2025 fuel economy standards solely on EPA’s authority to set emission standards under CAA Sec. 202. This is Bizarro World jurisprudence.

EPA will be setting de-facto fuel-economy standards, pretending that GHG standards are not fuel-economy standards, but specifying CO2 reduction percentages that the agency avows, and everybody knows, convert directly into percentage increases in fuel economy.

Nobody but the judicial activists who gave us Massachusetts v. EPA can say with a straight face that when Congress enacted CAA Sec. 202, it meant to transfer the power of setting fuel-economy standards from the National Highway Traffic Safety Administration (NHTSA) to EPA. Nor would any non-Bizarro lawyer contend that CAA Sec. 202 authorizes EPA to set fuel economy standards as many years into the future as the agency sees fit, despite EPCA’s explicit limit of “not more than 5 model years.”