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. 

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:

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.   

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.”

In a sharply worded letter (August 11, 2011) to White House Counsel Kathryn Ruemmler, House Oversight and Government Reform Committee Chairman Darrel Issa (R-Calif.) contends that “the new Corporate Average Fuel Economy (CAFE) and EPA vehicle greenhouse gas (GHG) standards announced by President Obama and select automobile manufacturers on July 29, 2011, were negotiated in secret, outside the scope of law, and could generate significant negative impacts for consumers.”

Issa is also concerned “that the government’s ownership interest in General Motors and Chrysler at the time these negotiations were conducted creates a troublesome conflict-of-interest.”

Accordingly, Issa is launching ”an investigation into the activities of the Administration leading up to the agreement for new CAFE standards for model years (MY) 2017-2025.”

I won’t try to summarize Issa’s 8-page letter, which among other things developes a detailed case that the 54.5 mpg fuel-economy deal will adversely affect vehicle prices, consumer choice, vehicle safety, and, hence, automotive sales and auto industry jobs. This post will only discuss the legal issues that Issa spotlights. My concern here — as in numerous previous columns — is with bureaucratic ‘lawmaking’: the trashing of the separation of powers and democratic accountability in the illusory pursuit of climate stability and energy independence.

The first legal problem on which Issa focuses is the backroom, special-interest character of the fuel-economy deal itself. Citing Jeremy Anwyl, CEO of Edmunds.com, and Jack Nerad of Kelley Blue Book, Issa notes that although the Administration conferred with environmentalists, automakers, and union labor, there was no one at the table representing “the very consumers who will be asked to buy a new generation” of higher-priced vehicles. The 54.5 mpg standard was the product of an off-the-record political negotiation. From this point on, the rulemaking process will be a “mere formality” – a criticism also voiced by Amy Siden of the left-leaning, pro-regulatory Center for Progressive Reform.

The Administrative Procedure Act “does provide agencies with the option of conducting a negotiated rulemaking,” Issa observes, “however, such a process is subject to additional transparency requirements, such as those required under FACA [Federal Advisory Committee Act].” Team Obama did not avail itself of that option, which requires an agency head to: (i) determine that a negotiated rulemaking committee serves the public interest (5.U.S.C. § 563); (ii) publish in the Federal Register a notice listing the persons proposed to represent the affected interests, describing the agenda of the negotiation, and soliciting public comment on the foregoing (5.U.S.C. § 564); and (iii) keep minutes and records as required by FACA Sec. 10(b) and (c) (5.U.S.C. § 566). Needless to say, EPA and NHTSA, the lead agencies in the negotiation, took none of those steps.

Next we come to the elephant in the room. EPA and National Highway Traffic Safety Administration (NHTSA) are promulgating greenhouse gas (GHG)/fuel economy standards for model years (MYs) 2017-2025. This is “outside the scope” of NHTSA’s authority. The Energy Policy Conservation Act (EPCA) as amended [49 U.S.C. § 32902(b)(3)(B)] states that the Secretary of Transportation “shall . . . issue regulations under this title prescribing average fuel economy standards for at least 1, but not more than 5 model years.” The deal Team Obama brokered sets fuel economy standards over a nine-year period. There’s no fudging the discrepancy. No matter how hard or long the lawyers squint at the page, 5 does not mean 9.

In addition, 49 U.S.C. § 32902(f) obligates the Secretary to consider ”economic practicability” when setting fuel economy standards. “At this time,” notes Issa, “it is impossible for NHTSA to adequately consider economic practicality for fuel standards in MYs 2022-25, primarily because car manufacturers themselves do not have product plans for that year, and market conditions are unknown 14 years into the future.”

Well, then, is it in the scope of EPA’s authority to promulgate GHG standards for MYs 2017-2025? Issa’s letter doesn’t address this question. The 5-4 Massachusetts v. EPA Supreme Court majority would likely say yes. My answer is no. GHG standards are essentially de-facto fuel economy standards, because 94.9% of GHG emissions from motor vehicles is carbon dioxide (CO2) from the combustion of motor fuel (EPA/NHTSA Tailpipe Rule, p. 25424), and “there is a single pool of technologies for addressing these twin problems [climate change, oil dependence], i.e., those that reduce fuel consumption and thereby reduce CO2 emissions as well” (p. 25327).  The Clean Air Act provides no statutory authority to any agency to establish fuel economy standards. EPCA vests that authority solely in the Secretary of Transportation (i.e. NHTSA).

Finally, Issa asks for information about the California Air Resource Board’s (CARB’s) role in the negotiations. Some background here may be helpful.

In 2009, EPA worked hand-in-glove with CARB to break the auto industry’s will to resist the imposition of new federal GHG/fuel economy standards. EPA agreed to reconsider CARB’s request for a Clean Air Act waiver to establish its own GHG standards program. A baker’s dozen other states were poised to follow suit if California got the okay. As noted above, GHG standards chiefly function as fuel-economy standards. The waiver thus threatened to create a “patchwork” of state-by-state fuel-economy regimes, balkanizing the U.S. auto market. As originally designed, the CARB program would have ruined what remained of the financially distressed auto industry.

So in backroom negotiations honchoed by White House environment czar Carol Browner, auto companies agreed to support EPA and NHTSA’s “national” GHG/fuel economy program as the lesser regulatory evil, with  CARB and the other ‘California’ states agreeing to consider compliance with the EPA/NHTSA program as compliance with their own.

In his letter to the White House counsel, Issa challenges the legality of state-level fuel economy standards:

Do you believe that when Congress enacted Section 209 of the Clean Air Act [the provision under which EPA granted CARB a waiver], Congress intended California regulators to establish fuel economy standards for the national fleet, despite the express language contained in EPCA [49. U.S.C. 32919(a)], which declares that states “may not adopt or enforce a law or regulation related to fuel economy”?

And again:

Federal law explicitly preempts States from “adopt[ing] or enforce[ing] a law or regulation related to fuel economy standards . . .Since CARB is currently enforcing its own fuel economy/greenhouse gas (GHG) regulation (CA LEV [Low Emission Vehicle program]), please state your reason(s) why 49 U.S.C. 32919(a) is not being enforced?

Issa also inquires whether in 2011, Team Obama again used the threat of a CARB-spawned fuel-economy patchwork as political leverage:

California needs a Clean Air Act preemption waiver to enforce its fuel economy/GHG vehicle program for MY 2017-2025. Since CARB has predicated not enforcing its “patchwork” fuel economy regulation upon EPA’s future decision to grant a CAA waiver, has the Administration already privately committed to grant California such a waiver even before California has submitted a waiver request? Please explain the precise nature of any agreement beween the Administration and the State of California and/or CARB as it relates to the development and or administration of CAFE and EPA light-duty vehicle greenhouse gas standards for MYs 2017-2025.

Finally, Issa asks whether, besides possible regulatory intimidation by CARB, the Administration deployed selective financial inducements to line up auto industry support for the 54.5 mpg standard – in effect, making auto companies an offer they could not refuse:

Did the Administration commit to provide any auto manufacturer with federal assistance, either in the form of grants or loans, in consideration for their cooperation on the development of the CAFE and EPA light duty vehicle greenhouse gas standards for MYs 2017-2025?

In November 2009 and again in March 2010, Issa asked similar questions about the May 2009 Browner-led, backroom, “put nothing in writing, ever“ fuel-economy/GHG negotiations. Back then, Issa was committee ranking member. Today, he’s the chairman. Does that cut any ice with an administration steeped in Chicago-style politics?

This much seems likely. Issa’s investigation will build support for legislation, like the appropriations language sponsored by Rep. Steve Austria (R-Ohio), to deny EPA funds to develop GHG emission standards for MYs 2017-2025, or to consider granting CARB a waiver to do likewise.

The investigation might also lay the groundwork for litigation to challenge the 54.5 mpg standard. After all, when the authorizing statute says “not more than 5 model years,” how can NHTSA lawfully issue fuel-economy standards for nine years?

Earlier this week, Politico published an op-ed by former Sen. Majority Leader George Mitchell (1989-1995) and former EPA Administrator William Reilly (1989-1993) that is as intellectually mushy as it is politically devious. 

In “Calif. Must Again Lead Way on Emission Standards,” Mitchell and Reilly pretend that the California Air Resources Board’s (CARB’s) proposal to establish a 62 mpg fuel economy standard is the moderate middle between automakers who “protest that the proposal is too demanding” and environmentalists who “want something more stringent.” Horsefeathers!

In September 2010, CARB, EPA, and the National Highway Traffic Safety Administration (NHTSA) issued an Interim Joint Technical Assessment Report where they considered raising the passenger car fuel economy standard from 35.5 mpg in 2016 to 47 mpg, 51 mpg, 56 mpg, or 62 mpg in 2025.

Let’s not forget that the 2016 standard imposed by EPA, CARB, and NHTSA accelerated by four years the standard Congress set in the 2007 Energy Independence and Security Act, which was itself 27% more stringent than the previous standard (27.5 mpg). In May 2011, the Auto Alliance, citing a U.S. Energy Information Administration assessment (p. 26), cautioned EPA Administrator Lisa Jackson and Transportation Secretary Ray LaHood that a 62 mpg standard would depress auto sales in 2025 by 14%. Team Obama subsequently settled on a 56 mpg standard. That’s a tad less extreme than the 62 mpg standard championed by CARB, but it’s still over the top.

A remarkable study by the Center for Automotive Research (CAR) – The U.S. Automotive Market and Industry in 2025 (June 2011) — reveals how cockamamie these proposals are. CAR’s estimates of the costs of fuel-saving technologies required to meet fuel economy standards ranging from 47 mpg to 62 mpg come straight out of the June 2011 National Academy of Sciences report, Assessment of Fuel Economy Technologies for Light-Duty Vehicles, the most comprehensive and up-to-date survey of its kind. 

Here are the key findings related to the 62 mpg standard that CARB, Mitchell, and Reilly are pushing:

• Only two technologies, battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) are capable of meeting a 62 mpg standard.
• BEV and PHEV technology would add $9,790 to the retail price of a new car in 2025 (compared to the price of a new car in 2009).
• Expected new safety regulations will add another $1,500 to new-car retail price in 2025.
• The total retail price increase of $11,290 due to fuel economy and safety regulations would exceed five-year fuel savings by $8,026 if gasoline prices average $3.50/gallon over the next 15 years and $4,551 if gasoline prices average $6.00/gallon.
• Consumer spending on new motor vehicles in 2025 would fall from $713 billion in the baseline case to $669 billion if gasoline prices average $6.00/gallon and $626 billion if gasoline prices average $3.50/gallon.
• Light motor vehicle sales in 2025 would fall from 17.9 million units in the baseline case to 14.5 million if gasoline prices average $6.00/gallon and 12.5 million if gasoline prices average $3.50/gallon.
• Light motor vehicle production in 2025 would fall from 10.8 million units in the baseline case to 8.7 million if gasoline prices average $6.00/gallon and 7.5 million if gasoline prices average $3.50/gallon.
• Automotive employment in 2025 would fall from 877,075 in the baseline case to 711,538 if gasoline prices average $6.00/gallon and 612,257 if gasoline prices average $3.50/gallon — a loss of 264,500 jobs.

CAR sums up the depressing chain of consequences of a 62 mpg standard combined with a $1,500 cost increase associated with new safety standards:

The cost to the consumer of purchasing a motor vehicle would rise by nearly 40 percent and the net cost by 27.7 percent over five years. As a result, U.S. sales of vehicles would fall by 5.4 million units and U.S. vehicle production by 3.3 million units. Motor vehicle and parts manufacturing employment would fall by 264,500, causing a total employment loss for the U.S. economy of 1.69 million. This loss would happen by 2025 but would start to cumulate with the increase in standards in 2017. Requirements to downsize vehicles [if fuel-economy targets could not be met via technology advances alone] would only increase these loss estimates, as the consumer value of vehicles would be seriously reduced.

Even omitting the $1,500 expense for new safety features, even the least stringent (47 mpg) standard CARB, EPA, and NHTSA were considering is a net money-loser for consumers if gasoline prices average $3.50/gallon. Only if gasoline prices average $6.00/gallon is the 47 mpg standard a net money saver. All of the more stringent standards are net money losers even with $6.00/gallon gasoline.

In the chart below, red numbers in parentheses are ‘negative savings,’ i.e. net losses. Numbers in the left-most column correspond to the four fuel-economy standards (47 mpg, 51 mpg, 56 mpg, and 62 mpg) proposed in CARB/EPA/NHTSA’s Interim Joint Technical Assessment Report. The numbers have been adjusted to reflect ”real world“ fuel economy, which is always lower than the official mpg ratings as determined by EPA laboratory tests.

A 62 mpg standard (49.6 mpg in “real world” fuel economy) imposes a $6,525 net loss on consumers over five years. The 56 mpg standard (44.8 mpg in “real world” fuel economy) imposes a $2,858 net loss.

As you’d expect, green groups like the Natural Resources Defense Council (NRDC) and the International Council on Clean Transportation (ICCT) claim the CAR study is rife with error. Earlier this month, CAR responded to the ICCT critique, which broadly overlaps with NRDC’s. I find CAR’s rebuttal persuasive. I won’t try to summarize this highly technical debate but do want to mention one point.

ICCT/NRDC argue that CAR overstates vehicle costs by assuming automakers would have to produce large numbers of BEVs and PHEVs to meet the 56 mpg and 62 mpg standards. It would be cheaper, they contend, to ramp up production of hybrid electric vehicles (HEVs). But, CAR responds, to meet a 56 mpg standard, almost 80% of all cars sold in 2025 would have to be HEVs, whereas under current policies HEVs are projected to capture only about 10% of the market in 2025. Moreover, HEVs would have to shed about 15% of their current mass. Other things being equal, the less mass a car has to absorb collision forces, the less protection it offers to motorists in crashes. “Small is beautiful” environmentalists may deny it, but when it comes to safety, size matters.

If I may translate, ICCT/NRDC are saying don’t worry, be happy, because a 56 mpg standard would function as a de-facto hybridization, weight-reduction mandate. But if so, the standard would create an automobile market that departs dramatically from revealed consumer preference (what people are actually buying). Making cars to please government planners rather than to satisfy consumers is no way to build a healthy auto industry. It’s a recipe for declining sales, profits, and employment. 

CARB, EPA, and NHTSA, aided and abetted by Mitchell, Reilly, ICCT, NRDC, and their ilk, are taking an enormous gamble with other people’s assets, livelihoods, and economic future. No doubt it’s loads of fun for them. But if we were living under a constitution of liberty, that sort of mischief would not be allowed.

The California Air Resources Board (CARB) boasts that its greenhouse gas (GHG) emission standards save more fuel than the National Highway Traffic Safety Administration’s (NHTSA) Corporate Average Fuel Economy (CAFE) standards – but denies that GHG standards are fuel economy standards. Huh?

Well, of course, CARB denies it, because the Energy Policy Conservation Act (EPCA) prohibits states from adopting laws or regulations “related to” fuel economy.

But CARB has to trumpet the fuel savings from its GHG standards to attack H.R. 910, the Energy Tax Prevention Act. H.R. 910, says CARB, would make America more dependent on foreign oil by prohibiting CARB and EPA from adopting tougher GHG standards.

H.R. 910 opponents talk as if policymaking were a game in which the regulatory option with the biggest fuel savings wins. By that criterion, why not just let EPA and CARB impose a de facto 100 mpg CAFE standard and declare America to be “energy independent”?

If Congress thinks NHTSA’s standards don’t go far enough, there is a simple fix. Pass a law! What H.R. 910 opponents want is for EPA and CARB to legislate in lieu of Congress. That is neither lawful nor constitutional.

EPA, NHTSA, and CARB claim that EPA’s GHG standards for model year (MY) 2012-2016 passenger cars and NHTSA’s CAFE standards for those same vehicles are “harmonized and consistent.” Yet they also contend that NHTSA’s standards de-coupled from EPA’s standards would result in 25% more oil consumption over the lifetimes of those vehicles. How is that possible?

That’s the question House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) asked California Air Resource Board (CARB) Executive Director James Goldstene regarding the latter’s testimony at a hearing on H.R. 910, the Energy Tax Prevention Act. (The House passed H.R. 910 by 255-172. Although the bill failed in the Senate, where it fell 10 votes shy of the 60 needed to overcome a filibuster, sponsors say they’ll try to force additional votes in the future.)

H.R. 910 would stop EPA from ‘legislating’ climate policy under the guise of implementing the Clean Air Act (CAA), a statute enacted in 1970, years before global warming was a gleam in Al Gore’s eye. H.R. 910 would overturn all of EPA’s GHG rules except for the agency’s current GHG standards for MY 2012-2016 passenger cars and the agency’s proposed GHG standards for MY 2014-2018 heavy trucks. However, H.R. 910 would preclude EPA from setting new, tougher GHG motor vehicle standards in later years. Similarly, it would prohibit EPA from granting waivers to CARB to set tougher standards. But that means, opponents argue, that H.R. 910 would have the effect of making America more dependent on foreign oil.

Are the opponents correct? And even if so, is that a valid reason for allowing CARB to determine the stringency of national fuel economy regulation or for allowing EPA to dictate climate policy?

As noted, H.R. 910 would not repeal EPA’s MY 2012-2016 GHG emission standards (a.k.a. Tailpipe Rule) nor EPA’s proposed GHG standards for MY 2014-2018 medium- and heavy-duty trucks (a.k.a. Heavy Truck Rule). It’s not that the bill’s sponsors — Rep. Upton and Sen. James Inhofe (R-Okla.) — have any great fondness for those rules. Nor is it the case that Congress would have adopted those standards anyway via legislation. H.R. 910 would leave EPA’s current and proposed GHG motor vehicle standards in place because automakers and engine manufacturers have already made plans and investments to comply with them.

But that just means EPA is using the regulatory process to preempt congressional deliberation and narrow Congress’s policy options. Congress must act soon before stationary sources (power plants, steel mills, pulp and paper factories, refineries, cement production facilities) also spend big bucks complying with GHG-related “best available control technology” (BACT) standards and New Source Performance Standards (NSPS).

A common argument by opponents of H.R. 910 is that, even though it would leave intact NHTSA’s Energy Policy Conservation Act (EPCA) authority to establish Coporate Average Fuel Economy (CAFE) standards for new motor vehicles, NHTSA-only regulation would do less than joint EPA-NHTSA regulation to reduce U.S. oil consumption. Typically, opponents cite CARB’s estimate that stripping EPA’s portion out of the Tailpipe Rule would reduce fuel savings by 25% over the lifetimes of MY 2012-2016 vehicles.

CARB is by no means a disinterested bystander. EPA’s GHG standards are none other than the GHG standards CARB developed and EPA approved (in May 2009) via a waiver from federal preemption of state emission standards.

Here’s the puzzle for which Upton sought clarification. EPA, NHTSA, and CARB claim that EPA and NHTSA’s portions of the Tailpipe Rule are “harmonized and consistent.” Yet the agencies also contend that NHTSA’s portion of the Tailpipe Rule would reduce oil consumption by 58.6 billion barrels over the lifetimes of MY 2012-2016 vehicles whereas the complete rule including CARB/EPA’s GHG standards would reduce oil consumption by 77.7 billion barrels. How can this be?

In a letter dated March 11, 2011, but just now making the email rounds, CARB executive director Goldstene offers this explanation:

That the National Program [NHTSA + EPA] achieves greater emissions reductions and fuel savings than the CAFE standards alone is a result of the different underlying statutory authority that results in different program components. The four key differences are: 1) unlike the Energy Policy Conservation Act (EPCA), the CAA allows for the crediting of direct emission reductions and indirect fuel economy benefits from improved air conditioners, allowing for greater compliance flexibility and lower costs; 2) EPCA allows Flexible Fuel Vehicle (FFV) credits through model year 2019, whereas the EPA standard requires demonstration of actual use of a low carbon fuel after model year 2015; 3) EPCA allows for the payment of fines in lieu of compliance but the CAA does not; and 4) treatment of intra firm trading of compliance credits between cars and light trucks categories. 

Difference 1) doesn’t get us anywhere near the additional 19.1 billion gallons in projected fuel savings. According to the Tailpipe Rule, (i) carbon dioxide (CO2) emissions related to air conditioner-related loads on automobile engines account for only 3.9% of total passenger car GHG emissions (p. 25427), and (ii) various technologies could reduce air conditioner CO2 emissions by 10% to 30% (p. 24528). Even a 30% reduction of the 3.9% of motor vehicle emissions associated with air conditioner engine load would reduce oil consumption by only 1.1% — nowhere near the additional 25% fuel savings that supposedly depend on EPA’s GHG standards.

Differences 2) and 3) are likely the big factors. Per difference 2), automakers cannot comply with EPA’s GHG standards by manufacturing flexible-fueled vehicles. And per difference 3), automakers cannot pay fines in lieu of compliance with EPA’s GHG standards. 

Why do those differences have the effect of tighening fuel economy standards? Because EPA’s GHG emission standards are basically fuel economy regulation by another name! As EPA acknowledges, 94-95% of motor vehicle GHG emissions are carbon dioxide from motor fuel combustion. And as both EPA and NHTSA acknowledge, “there is a single pool of technologies for addressing these twin problems [climate change, oil dependence], i.e., those that reduce fuel consumption and thereby reduce CO2 emissions as well” (Tailpipe Rule, p. 25327). 

Because of differences 2) and 3), EPA will always be able to make NHTSA’s fuel economy standards more stringent than they would be if administered under the statutory scheme Congress created.

What this means, of course, is that the Tailpipe Rule is “harmonized and consistent” only in the sense that EPA and CARB are now calling the shots. The consistency and harmony is that of the first mate saying “aye aye, sir” to the captain. That should trouble a Congress jealous of its constitutional prerogatives, because Congress delegated the power to prescribe fuel economy standards to NHTSA, not EPA — and certainly not CARB.

EPA’s authority to set motor vehicle emission standards, and to grant CARB waivers to regulate motor vehicle emissions, comes from the CAA. The CAA confers no authority on any agency to regulate fuel economy. EPCA authorizes EPA to monitor automakers’ compliance with CAFE standards, but it delegates to NHTSA only the authority to prescribe CAFE standards.

Moreover, EPCA prohibits states from adopting laws or regulations that are even “related to” fuel economy standards. CARB’s GHG standards are massively “related to” fuel economy standards.

EPCA Sec. 32919 states:

a) General. – When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.

In his letter to Upton, Goldstene tries to explain why EPCA does not preempt CARB’s GHG standards:

CARB has never claimed that there is no relation between the pollution [CO2] emitted by burning fossil fuels and the rate at which they are burned [gallons of fuel consumed per distance traveled, i.e. fuel economy].  CARB merely maintains the fact that pollution control and fuel economy are not identical — fuel economy and pollution control regulations have different policy objectives, utilize different incentive and flexibility features, and there are technologies that reduce pollution that are not counted under fuel economy measures, and some fuel economy improvements do not reduce emissions commensurately.

That doesn’t cut it. Let me count the ways.

1. A GHG standard does not have to be “identical” to a fuel economy standard to be “related to” it.
2. CARB is hardly one to maintain that fuel economy and GHG standards “have different policy objectives” when CARB’s big selling point for GHG regulation is that it saves more fuel than CAFE standards do! 
3. The fact that CARB/EPA’s GHG standards utilitize “different incentives and flexibility features” is irrelevant. Neither GHG regulation nor fuel economy regulation is defined by those features and incentives. The CAFE program, for example, would still be a fuel economy program even if it did not allow for payments of fines in lieu of compliance or award credits for flex-fuel vehicle sales. 
4. Just because some technologies — e.g., improved sealants for automobile air conditioning systems — “are not counted under fuel economy measures” does not mean that the Tailpipe Rule does not chiefly regulate fuel economy. Only 5.1% of motor vehicle GHG emissions are due to leakage of air conditioner refrigerants (Tailpipe Rule, p. 25424), which means CO2 from motor fuel combustion makes up 94.9% of all motor vehicle GHG emissions. To repeat, there is a “single pool of technologies . . . that reduce fuel consumption and thereby reduce CO2 emissions as well.” Almost 95% of EPA and CARB’s GHG reductions come from fuel economy enhancements.
5. Because 5.1% of motor vehicle GHGs are leaked air conditioner refrigerants, ”some fuel economy improvements do not reduce emissions commensurately.” But fuel economy improvements do reduce emissions commensurately for 94.9% of all motor vehicle GHG emissions.

H.R. 910 opponents talk as if policymaking were a game in which the regulatory option with the biggest fuel savings wins. By that criterion, why not just let EPA and CARB impose a de facto 100 mpg CAFE standard and declare America to be “energy independent”?

If Congress thinks NHTSA’s standards don’t go far enough, there is a simple fix. Pass a law! What H.R. 910 opponents want is for EPA and CARB to legislate in lieu of Congress. That is neither lawful nor constitutional.

What should drive fuel efficiency? Select the answer you think is correct: 

(a) Government;

(b) Markets; or

(c) Please pass the sweet and sour shrimp.

If you chose (a), then go straight to www.allsp.com (Season 10) and watch my favorite South Park episode, “Smug Alert.”

If you chose (c), then you’re on your way to a promising career as a diplomat.

Today, on National Journal’s energy blog, I explain why the correct answer is (b).