In September 2019, the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) promulgated a joint rule known as Part One of the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule. As explained in a recent Trends article, Part One of the SAFE Rule involves two interwoven actions by EPA and NHTSA to deny California and other states the ability to adopt greenhouse gas (GHG) tailpipe standards and electric vehicle programs that are more stringent than federal standards on emissions or fuel economy. The agencies then stated that they would issue new (and presumably more relaxed) fuel economy and emission standards in what we assume will be called the Part Two Rule.
This article focuses on EPA’s decision under the Clean Air Act (CAA) to withdraw an important preemption waiver granted to California in 2013. The article will explain the preemption structure of the CAA, the waiver provision that allows California to continue with its own program, the legal issues surrounding this unprecedented effort by EPA to withdraw a previously granted waiver, and the ongoing litigation. Because EPA’s action is so intertwined with NHTSA’s, this article also discusses NHTSA’s groundbreaking determination that California’s standards are preempted by federal fuel economy standards under the Energy Policy and Conservation Act (EPCA).
Preemption under the CAA and the 2013 preemption waiver for California
Under section 202 of the CAA, EPA sets emission standards for new motor vehicles, and section 209 preempts any state from adopting its own such standards, with one important exception: California can request permission to adopt and enforce its own vehicle emission standards—technically called a “waiver of preemption” under section 209(b)—if the state finds that its standards “will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards.” California was given this special authority because, in the 1960s, the state was already regulating tailpipe emissions to address its significant air pollution problems.
EPA must grant California’s waiver request unless the agency finds (1) the state’s determination of equivalency is “arbitrary and capricious,” (2) the state does not need its standards “to meet compelling and extraordinary conditions,” or (3) the state standards “are not consistent” with the vehicle emission standards adopted by EPA under section 202. Once EPA grants a waiver, other states can adopt and enforce the California emission standards.
In more than 50 years, EPA has never withdrawn a waiver, and it has only fully denied one of California’s waiver requests—in 2008, when California first requested permission for its GHG tailpipe standards. That denial was quickly reversed by the Obama administration in 2009.
In 2013, EPA again granted California a waiver, this time for its “Advanced Clean Cars” program, which included GHG emission standards for Model Years 2015–2025, the Zero Emission Vehicle (ZEV) mandate (designed to increase the use of electric vehicles), and emission standards on soot- and smog-producing pollutants. Now, in the SAFE Rule, EPA has withdrawn the 2013 waiver as to California’s GHG standards for Model Years 2021–2025 and the ZEV mandate.
EPA’s action raises many complicated legal issues, and this article will summarize just a few primary topics. First, it is unclear whether EPA has any authority to withdraw a previously granted preemption waiver. The CAA does not expressly authorize a withdrawal, but EPA rightly notes that agencies generally have inherent authority to reconsider their actions. Case law provides, however, that doing so is inappropriate if the reversal would harm the reliance interests of affected parties. California and the other states using California’s emission standards argue they have relied on the 2013 waiver in their statewide plans to reduce pollution levels to meet federal air quality requirements. EPA, however, argues the states could not reasonably assume the California standards would always be available because the agency repeatedly emphasized that it would be revisiting the standards for Model Years 2022–2025.
Assuming the states’ reliance interests do not prevent EPA from withdrawing the 2013 waiver, the next question is whether EPA’s justifications for doing so are reasonable. EPA’s first justification is not tied to any language in the CAA and instead depends entirely on NHTSA and the EPCA. The EPCA preempts all state requirements “related to fuel economy standards,” and it offers no carve-out for California. NHTSA is now taking the position that California’s GHG emission standards “relate to” fuel economy and, therefore, are preempted by the EPCA. In turn, EPA claims that because NHTSA’s position renders California’s standards “void ab initio,” EPA’s 2013 grant is “invalid” and must be withdrawn.
EPA is on shaky ground here. The agency acknowledges that it previously refused to consider consistency with EPCA when considering waiver requests because that is not one of the listed criteria under CAA section 209(b). Now, however, it claims justification for doing so because this is a “unique situation” in which EPA is coordinating its actions with NHTSA. Even if this situation were unique—which seems doubtful since EPA and NHTSA have been coordinating for many years—EPA will have a difficult time convincing a court that the agency can withdraw a waiver based on a factor the agency could not consider under its own statutory mandate.
EPA’s second justification is tied directly to the criterion in section 209(b) that allows the agency to deny a waiver if it finds that California “does not need [its] standards to meet compelling and extraordinary conditions.” Although historically EPA has considered whether the state needs a vehicle emissions program at all, now EPA is assessing whether California needs a specific element of that program—here the GHG tailpipe standards and the ZEV mandate. EPA maintains California does not “need” its own GHG standards and ZEV mandate because climate change is a global phenomenon, not one with a “particularized nexus to California’s specific characteristics.” The agency acknowledges that “this interpretation . . . departs in major respects” from EPA’s position in the 2009 and 2013 waivers. Moreover, EPA recently sent California a letter chastising it for failing to adequately address air pollution in that state, noting that California has the worst air pollution in the nation.
EPA and NHTSA are now taking legal positions that contradict their earlier interpretations of the governing statutes. Agencies, of course, have discretion to alter their policies, but they must do so in a thoughtful manner with a record that acknowledges and deals with previously established facts and legal interpretations. FCC v. Fox Television Stations, 556 U.S. 502 (2009). Whether EPA and NHTSA have pulled that off here remains to be seen in the ongoing litigation.
The litigation is currently bifurcated. California and 23 other states sued over EPA’s waiver withdrawal in the U.S. Court of Appeals for the District of Columbia Circuit because, under CAA section 307(b)(1), actions that EPA declares (as here) to be “of nationwide scope or effect” must be litigated in that court. The challengers include not only California and the other states, but also municipalities and environmental groups, with electric car manufacturers intervening in support. Major automakers and other states intervened on behalf of the federal defendant agencies. Union of Concerned Scientists v. National Highway Traffic Safety Administration, No. 19-1230 (D.C. Cir.).
Many of the same challengers filed suit against NHTSA’s preemption determination in the federal district court in the District of Columbia, relying on the federal question jurisdiction of the district courts per 28 U.S.C. § 1331. California v. Chao, No. 19-cv-2826 (D.D.C.). NHTSA filed a motion to dismiss the district court litigation, or to transfer the cases to the D.C. Circuit, arguing that the issue of EPCA preemption is so intertwined with EPA’s CAA waiver withdrawal that they have to be heard together. The district court has not yet ruled on the motion to dismiss or transfer.
In the meantime, the petitioners in the D.C. Circuit asked for their cases to be placed in abeyance pending resolution of the federal district court case on the NHTSA determination, as well as resolution of their administrative reconsideration petitions. By contrast, the federal defendants asked the D.C. Circuit for expedited briefing and argument, noting that protracted litigation would create significant uncertainty and costs for both car manufacturers and consumers. At least two automakers have joined that motion for expedited consideration. (Right at press-time, the D.C. Circuit denied the requests for abeyance and expedited action, and it directed the parties to submit briefing proposals by early March.)
In the coming months, we will be watching for the courts to issue rulings on the jurisdictional questions and on the merits of this controversial Part One Rule. We will also be watching for EPA and NHTSA to issue the Part Two Rule with relaxed federal tailpipe standards and fuel economy standards. Stay tuned.