Civil Penalties |
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Heidi R. King
National Highway Traffic Safety Administration
2 April 2018
[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Proposed Rules]
[Pages 13904-13919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06550]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 578
[Docket No. NHTSA-2018-0017]
RIN 2127-AL94
Civil Penalties
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes a civil penalty rate applicable to
automobile manufacturers that fail to meet applicable corporate average
fuel economy (CAFE) standards and are unable to offset such a deficit
with compliance credits. The agency is proposing this civil penalty
rate based on a tentative determination regarding the applicability of
the Federal Civil Penalties Inflation Adjustment Act Improvements Act
of 2015, and in accordance with the Energy Policy and Conservation Act
of 1975 (EPCA) and the Energy Independence and Security Act of 2007
(EISA).
DATES: Comments: Comments must be received by May 2, 2018.
ADDRESSES: You may submit comments to the docket number identified in
the heading of this document by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting
comments.
Mail: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
Hand Delivery or Courier: U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m. Eastern
time, Monday through Friday, except Federal holidays.
Fax: 202-493-2251
FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief
Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820,
1200 New Jersey Ave, SE, Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Table of Contents
A. Executive Summary
B. Statutory and Regulatory Background
C. Civil Penalties Inflationary Adjustment Act Improvements Act of
2015
D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Interim Final Rule
2. Final Rule
3. Reconsideration and Request for Comments
E. Proposed Revisions to the CAFE Civil Penalty Rate
1. NHTSA is Proposing to Retain the $5.50 CAFE Civil Penalty
Rate Because the 2015 Act is Inapplicable
2. The Agency Proposes a Finding That Increasing the CAFE Civil
Penalty Rate Will Result in Negative Economic Impact
3. Increasing the CAFE Civil Penalty Rate to $14 Would Have a
``Negative Economic Impact,'' Even If The EPCA Factors Were Not
Mandatory
4. The CAFE Civil Penalty Rate is Capped At $10
F. Rulemaking Analyses and Notices
1. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
2. Regulatory Flexibility Act
3. Executive Order 13132 (Federalism)
4. Unfunded Mandates Reform Act of 1995
5. National Environmental Policy Act
6. Executive Order 12778 (Civil Justice Reform)
7. Paperwork Reduction Act
8. Privacy Act
9. Executive Order 13771
A. Executive Summary
NHTSA has almost forty years of experience in implementing the
corporate average fuel economy (CAFE) program and its civil penalty
component. This includes oversight and administration of the program's
operation, how the automobile manufacturers respond to CAFE standards
and increases, and the role of civil penalties in achieving the CAFE
program's objectives. NHTSA has carefully considered these objectives
in reconsidering the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) and its
application to the CAFE civil penalty statute NHTSA administers.
As a result of this review, NHTSA is proposing to retain the
current civil penalty rate in 49 U.S.C. 32912(b) of $5.50 per tenth of
a mile per gallon for automobile manufacturers that do not meet
applicable CAFE standards and are unable to offset such a deficit with
compliance credits. NHTSA's proposal is based on its tentative
determination that the CAFE civil penalty rate is not a ``civil
monetary penalty,'' as defined by the 2015 Act, that must be adjusted
for inflation. NHTSA's previous Federal Register notices on its
inflation adjustments under the 2015 Act did not consider whether the
CAFE civil penalty rate fit the definition of a ``civil monetary
penalty'' subject to adjustment under the 2015 Act, instead
[[Page 13905]]
proceeding--without analysis--as if the 2015 Act applied to the CAFE
civil penalty rate. After taking the opportunity to fully analyze the
issue, NHTSA tentatively concludes that the CAFE civil penalty rate is
not covered by the 2015 Act and seeks comment on four ways that the
provisions of the 2015 Act could be best approached.
First, civil penalties assessed for CAFE violations under Section
32912(b) are not a ``penalty, fine, or other sanction that'' is either
``a maximum amount'' or ``a specific monetary amount.'' Rather, the
civil penalties under consideration here are part of a complicated
market-based enforcement mechanism. Any potential civil penalties for
failing to satisfy fuel economy requirements, unlike other civil
penalties, are not determined until the conclusion of a complex
formula, credit-earning arrangement, and credit transfer and trading
program. In fact, the ultimate penalty assessed is based on the
noncompliant manufacturer's decision, not NHTSA's, on whether and how
to acquire and apply any credits that may be available to the
manufacturer, and on the decisions of other manufacturers to earn and
sell credits to a potentially liable manufacturer. In other words, what
the noncompliant manufacturer pays is as much a function of market
forces as it is the CAFE penalty rate.
Moreover, NHTSA tentatively concludes that Congress did not intend
for the 2015 Act to apply to this specialized civil penalty rate, which
has longstanding, strict procedures previously enacted by Congress that
limit NHTSA's ability to increase the rate. Congress specifically
contemplated that increases to the CAFE civil penalty rate for
manufacturer non-compliance with CAFE standards may be appropriate and
necessary and included a mechanism in the statute for such increases.
Critically, this mechanism requires the Secretary of Transportation to
determine specifically that any such increase will not lead to certain
specific negative economic effects. In addition, Congress explicitly
limited any such increase to $10 per tenth of a mile per gallon.\1\
These restrictions have been in place since the statute was amended in
1978. Though Congress later amended the CAFE civil penalty provision in
2007, Congress did not amend either the mechanism for increases or the
upper limit of an increased civil penalty under the statute. NHTSA
seeks comment on this analysis.
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\1\ NHTSA tentatively concludes the 2015 Act also does not apply
to the $10 cap.
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Second, in the alternative, NHTSA is proposing to keep the civil
penalty rate the same in order to comply with EPCA, which must be read
harmoniously with the 2015 Act. The 2015 Act confers discretion to the
head of each agency to adjust the amount of a civil monetary penalty by
less than the amount otherwise required for the initial adjustment,
with the concurrence with the Director of the Office of Management and
Budget, upon determining that doing so would have a ``negative economic
impact'' In EPCA, Congress previously identified specific factors that
NHTSA is required to consider before making a determination about the
``impact on the economy'' as a prerequisite to increasing the
applicable civil penalty rate. NHTSA believes that these statutory
criteria are appropriate for determining whether an increase in the
CAFE civil penalty rate would have a ``negative economic impact'' for
purposes of the 2015 Act. Under EPCA, NHTSA faces a heavy burden to
demonstrate that increasing the civil penalty rate ``will not have a
substantial deleterious impact on the economy of the United States, a
State, or a region of a State.'' Specifically, in order to establish
that the increase would not have that ``substantial deleterious
impact,'' NHTSA would need to affirmatively determine that it is likely
that the increase would not cause a significant increase in
unemployment in a State or a region of a State; adversely affect
competition; or cause a significant increase in automobile imports. In
light of those statutory factors--and the absence of evidence to the
contrary--NHTSA tentatively concludes it is likely that increasing the
CAFE civil penalty rate would have a negative economic impact and thus
is proposing not to adjust the rate under the 2015 Act. NHTSA is
soliciting comments on this proposal, including whether the inflation
adjustment would have a ``negative economic impact,'' and if so, how
much less than the amount otherwise required should the penalty level
be adjusted.
Third, even if EPCA's statutory factors for increasing civil
penalties are not applied, NHTSA has tentatively determined that the
$14 penalty will lead to a negative economic impact that merits leaving
the CAFE civil penalty rate at $5.50. Based on available information,
including information provided by commenters, the effect of applying
the 2015 Act to the CAFE civil penalty could potentially drastically
increase manufacturers' costs of compliance beyond those contemplated
when NHTSA established the current CAFE standards in 2012. NHTSA is
soliciting comments on this tentative conclusion, including the level
at which the CAFE civil penalty rate should be set.
Fourth, even if the CAFE civil penalty rate is a ``civil monetary
penalty'' under the 2015 Act and regardless of whether increasing it
would have a ``negative economic impact,'' the increase is capped by
statute at $10 by EPCA. NHTSA seeks comment on this alternative,
including whether the $10 cap is itself a ``civil monetary penalty''
that is required to be adjusted under the 2015 Act.
NHTSA is also proposing an inflationary adjustment to the general
penalty for other violations of EPCA, as amended.
B. Statutory and Regulatory Background
NHTSA sets \2\ and enforces \3\ corporate average fuel economy
(CAFE) standards for the United States light-duty vehicle fleet, and in
doing so, assesses civil penalties against vehicle manufacturers that
fall short of their compliance obligations and are unable to make up
the shortfall with credits.\4\ The civil penalty amount for CAFE non-
compliance was originally set by statute in 1975, and since 1997, has
included a rate of $5.50 per each tenth of a mile per gallon (0.1) that
a manufacturer's fleet average CAFE level falls short of its compliance
obligation. This shortfall amount is then multiplied by the number of
vehicles in that manufacturer's fleet.\5\ The basic equation for
calculating a manufacturer's civil penalty amount before accounting for
credits, is as follows:
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\2\ 49 U.S.C. 32902.
\3\ 49 U.S.C. 32911, 32912.
\4\ Credits may be either earned (for over-compliance by a given
manufacturer's fleet, in a given model year), transferred (from one
fleet to another), or purchased (in which case, another manufacturer
earned the credits by over-complying and chose to sell that
surplus). 49 U.S.C. 32903.
\5\ A manufacturer may have up to three fleets of vehicles, for
CAFE compliance purposes, in any given model year--a domestic
passenger car fleet, an imported passenger car fleet, and a light
truck fleet. Each fleet belonging to each manufacturer has its own
compliance obligation, with the potential for either over-compliance
or under-compliance. There is no overarching CAFE requirement for a
manufacturer's total production.
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(penalty rate, in $ per 0.1 mpg per vehicle) x (amount of
shortfall, in tenths of an mpg) x (# of vehicles in manufacturer's non-
compliant fleet).
Without even accounting for costs of generating or purchasing
credits, automakers have paid more than $890 million in CAFE civil
penalties, up to and including model year (MY) 2014
[[Page 13906]]
vehicles.\6\ Starting with the model year 2011, provisions in the CAFE
program provided for credit transfers among a manufacturer's various
fleets. Starting with that model year, the law also provided for
trading between vehicle manufacturers, which has allowed vehicle
manufacturers the opportunity to acquire credits from competitors
rather than paying civil penalties for non-compliance. Manufacturers
are required to notify NHTSA of the volumes of credits traded or sold,
but the agency does not receive any information regarding total cost
paid or cost per credit. NHTSA believes it is likely that credit
purchases involve significant expenditures and that an increase in the
penalty rate would correlate with an increase in such expenditures. The
agency currently anticipates many manufacturers will face the
possibility of paying larger CAFE penalties or incurring increased
costs to acquire credits over the next several years than at
present.\7\
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\6\ Fine reporting for MY15 and newer vehicles was not reported
at the time of this proposal. The highest CAFE penalty paid to date
for a shortfall in a single fleet was $30,257,920, paid by
DaimlerChrysler for its imported passenger car fleet in MY 2006.
Since MY 2012, only Jaguar Land Rover and Volvo have paid civil
penalties. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
\7\ NHTSA's Projected Fuel Economy Performance Report7 indicates
that many manufacturers are falling behind the standards for model
year 2016 and increasingly so for model year 2017.
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NHTSA has long had authority under the Energy Policy and
Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912
(1975), to raise the amount of the penalty for CAFE shortfalls if it
can make certain findings,\8\ as well as the authority to compromise
and remit such penalties under certain circumstances.\9\ If NHTSA were
to raise the penalty rate for CAFE shortfalls, the higher amount would
apply to any manufacturer that owed them; the authority to compromise
and remit penalties, however, is extremely limited and on a case-by-
case basis. To date, NHTSA has never utilized its ability to compromise
or remit a CAFE civil penalty.
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\8\ 49 U.S.C. 32912.
\9\ 49 U.S.C. 32913.
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Recognizing the economic harm that CAFE civil penalties could have
on the automobile industry and the economy as a whole, Congress capped
any increase in the original statutory penalty rate at $10 per tenth of
a mile per gallon. Further--and significantly--it provided that NHTSA
may only raise CAFE penalties under EPCA if it concludes through
rulemaking that the increase in the penalty rate both (1) will result
in, or substantially further, substantial energy conservation for
automobiles in model years in which the increased penalty may be
imposed, and (2) will not have a substantial deleterious impact on the
economy of the United States, a State, or a region of the State. A
finding of ``no substantial deleterious impact'' may only be made if
NHTSA determines that it is likely that the increase in the penalty (A)
will not cause a significant increase in unemployment in a State or a
region of a State, (B) adversely affect competition, or (C) cause a
significant increase in automobile imports. Nowhere does EPCA define
``substantial'' or ``significant'' in the context of this provision.
If NHTSA seeks to compromise or remit penalties for a given
manufacturer, a rulemaking is not necessary, but the amount of a
penalty may be compromised or remitted only to the extent (1) necessary
to prevent a manufacturer's insolvency or bankruptcy, (2) the
manufacturer shows that the violation was caused by an act of God, a
strike, or a fire, or (3) the Federal Trade Commission certifies that a
reduction in the penalty is necessary to prevent a substantial
lessening of competition. NHTSA has never previously attempted to
undertake this process.
C. Civil Penalties Inflation Adjustment Act Improvements Act of 2015
On November 2, 2015, the Federal Civil Penalties Inflation
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act),
Public Law 114-74, Section 701, was signed into law. The 2015 Act
required federal agencies to make an initial ``catch-up'' adjustment to
the ``civil monetary penalties,'' as defined, they administer through
an interim final rule and then to make subsequent annual adjustments
for inflation. The amount of increase for any ``catch-up'' adjustment
to a civil monetary penalty pursuant to the 2015 Act was limited to 150
percent of the then-current penalty. Agencies were required to issue an
interim final rule, without providing the opportunity for public
comment ordinarily required under the Administrative Procedure Act, for
the initial ``catch-up'' adjustment by July 1, 2016.
The method of calculating inflationary adjustments in the 2015 Act
differs substantially from the methods used in past inflationary
adjustment rulemakings conducted pursuant to the Federal Civil
Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation
Adjustment Act), Public Law 101-410. Civil penalty adjustments under
the 1990 Inflation Adjustment Act were conducted under rules that
sometimes required significant rounding of figures.
The 2015 Act altered these rounding rules. Now, penalties are
simply rounded to the nearest $1. Furthermore, the 2015 Act ``resets''
the inflation calculations by excluding prior inflationary adjustments
under the 1990 Inflation Adjustment Act. To do this, the 2015 Act
requires agencies to identify, for each civil monetary penalty, the
year and corresponding amount(s) for which the maximum penalty level or
range of minimum and maximum penalties was established (i.e.,
originally enacted by Congress) or last adjusted other than pursuant to
the 1990 Inflation Adjustment Act.
The Director of the Office of Management and Budget (OMB) provided
guidance to agencies in a February 24, 2016 memorandum.\10\ For those
penalties an agency determined to be ``civil monetary penalties,'' the
memorandum provided guidance on how to calculate the initial adjustment
required by the 2015 Act. The initial catch up adjustment is based on
the change between the Consumer Price Index for all Urban Consumers
(CPI-U) for the month of October in the year the penalty amount was
established or last adjusted by Congress and the October 2015 CPI-U.
The February 24, 2016 memorandum contains a table with a multiplier for
the change in CPI-U from the year the penalty was established or last
adjusted to 2015. To arrive at the adjusted penalty, the agency must
multiply the penalty amount when it was established or last adjusted by
Congress, excluding adjustments under the 1990 Inflation Adjustment
Act, by the multiplier for the increase in CPI-U from the year the
penalty was established or adjusted as provided in the February 24,
2016 memorandum. The 2015 Act limits the initial inflationary increase
to 150 percent of the current penalty. To determine whether the
increase in the adjusted penalty is less than 150 percent, the agency
must multiply the current penalty by 250 percent. The adjusted penalty
is the lesser of either the adjusted penalty based on the multiplier
for CPI-U in Table A of the February 24,
[[Page 13907]]
2016 memorandum or an amount equal to 250% of the current penalty.
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\10\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb.
24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last accessed
December 14, 2017).
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Additionally, the 2015 Act gives agencies discretion to adjust the
amount of a civil monetary penalty by less than otherwise required if
the agency determines that increasing the civil monetary penalty by the
otherwise required amount will have either a negative economic impact
or if the social costs of the increased civil monetary penalty will
outweigh the benefits.\11\ In either instance, the agency must publish
a notice, take and consider comments on this finding, and receive
concurrence on this determination from the Director of OMB prior to
finalizing a lower civil penalty amount.
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\11\ Public Law 114-74, Sec. 701(c).
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D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Interim Final Rule
On July 5, 2016, NHTSA published an interim final rule, adopting
inflation adjustments for civil penalties under its administration,
following the procedure and the formula in the 2015 Act. NHTSA did not
analyze at that time whether the 2015 Act applied to all of its civil
penalties. One of the adjustments NHTSA made at the time was raising
the civil penalty rate for CAFE non-compliance from $5.50 to $14.\12\
NHTSA also indicated in that notice that the maximum penalty rate that
the Secretary is permitted to establish for such violations would
increase from $10 to $25, although this was not codified in the
regulatory text.\13\ NHTSA also raised the maximum civil penalty for
other violations of EPCA, as amended, to $40,000.\14\
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\12\ 81 FR 43524 (July 5, 2016). This interim final rule also
updated the maximum civil penalty amounts for violations of all
statutes and regulations administered by NHTSA, and was not limited
solely to penalties administered for CAFE violations.
\13\ For the reasons described in Section E.1, NHTSA is
proposing to leave the maximum penalty rate that the Secretary is
permitted to establish for such violations at $10.
\14\ 81 FR 43524 (July 5, 2016).
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In response to the changes to the CAFE penalty provisions issued in
the interim final rule, the Alliance of Automobile Manufacturers
(Alliance) and the Association of Global Automakers (Global) jointly
petitioned NHTSA for reconsideration (the Industry Petition).\15\ The
Industry Petition raised concerns with the significant impact, which
they estimated to be at least $1 billion annually, that the increased
penalty rate would have on CAFE compliance costs. Specifically, the
Industry Petition raised: The issue of retroactivity (applying the
penalty increase associated with model years that have already been
completed or for which a company's compliance plan had already been
``set''); which ``base year'' (i.e., the year the penalty was
established or last adjusted) NHTSA should use for calculating the
adjusted penalty rate; and whether an increase in the penalty rate to
$14 would cause a ``negative economic impact.''
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\15\ Jaguar Land Rover North America, LLC also filed a petition
for reconsideration in response to the July 5, 2016 interim final
rule raising the same concerns as those raised in the Industry
Petition. Both petitions, along with a supplement to the Industry
Petition, can be found in Docket ID NHTSA-2016-0075 at
www.regulations.gov.
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2. Final Rule
In response to the Industry Petition, NHTSA issued a final rule on
December 28, 2016.\16\ In that rule, NHTSA agreed that raising the
penalty rate for model years already fully complete would be
inappropriate, given how courts generally disfavor the retroactive
application of statutes. NHTSA also agreed that raising the rate for
model years for which product changes were infeasible due to lack of
lead time, did not seem consistent with Congress' intent that the CAFE
program be responsive to consumer demand. NHTSA therefore stated that
it would not apply the inflation-adjusted penalty rate of $14 until
model year 2019, as the agency believed that would be the first year in
which product changes could be made in response to the higher penalty
rate.
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\16\ 81 FR 95489 (December 28, 2016).
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3. Reconsideration and Request for Comments
Before NHTSA's December 2016 final rule became effective, in
January 2017, NHTSA took action to delay the effective date of the
December 2016 CAFE civil penalties rule.\17\ As part of that action,
and in light of CAFE compliance data submitted by manufacturers to
NHTSA showing that many automakers would begin to fall behind in
meeting their applicable CAFE standards beginning in model years 2016
and 2017,\18\ the agency requested public comment on the civil
penalties--the first opportunity the public had to do so.\19\ The
comment period closed on October 10, 2017. NHTSA received thirteen
comments from various interested parties.
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\17\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28,
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017). The
portions of the July 5, 2016 interim final rule not dealing with
CAFE remain in effect and are expected to be finalized as part of
NHTSA's 2018 inflationary adjustments.
\18\ ``MYs 2016 and 2017 Projected Fuel Economy Performance
Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm
\19\ 82 FR 32140 (July 12, 2017).
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Commenters included industry stakeholders and citizens. The array
of commenters also included representatives from environmental groups,
academia, and state governments such as attorneys general and
environmental quality divisions. Industry stakeholders included
comments from trade organizations and vehicle manufacturers.\20\
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\20\ Comments on this notice of proposed rulemaking can be found
at: https://www.regulations.gov/docket?D=NHTSA-2017-0059.
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Generally, commenters from environmental organizations, attorneys
general of 10 states, and academia expressed support for upholding the
December 2016 final rule. In addition, those supporting the $14 civil
penalty generally asserted reconsidering the 2016 final rule was
outside of NHTSA's authority. None of the comments received from
commenters specifically addressed whether the CAFE civil penalty rate
was a ``civil monetary penalty'' as defined by the 2015 Act.
Vehicle manufacturers, either directly or via their respective
representing organizations, also expressed support for the
reconsideration of the 2016 final rule. These commenters provided an
analysis of how increased CAFE civil penalties could potentially impact
their efforts to develop and sell vehicles in the marketplace when
faced with anticipated increases in CAFE stringencies. These commenters
expressed support for using 2007 as the base year for calculating
inflation adjusted increases in CAFE civil penalty amounts.
Additionally, some commenters suggested civil penalty amounts of 47
dollars per 0.1 mpg and $8.47 per 0.1 mpg, the latter a 54% increase
over the $5.50 per 0.1 mpg value.
The California Air Resources Board (CARB) commented that NHTSA's
considerations when adjusting a civil penalty rate under EPCA do not
matter for purposes of making an adjustment under the 2015 Act. CARB
also stated that in past joint documents, NHTSA did not indicate that
the $5.50 civil penalty rate would have a negative economic impact.
The Alliance and Global suggested that NHTSA's considerations when
adjusting a civil penalty rate under EPCA are informative for purposes
of making a determination of negative economic impact under the 2015
Act.
The December 28, 2016 final rule is not yet effective, and during
reconsideration, the applicable civil penalty rate was $5.50 per tenth
of a
[[Page 13908]]
mile per gallon, which was the civil penalty rate prior to NHTSA's
inflationary adjustment.\21\ NHTSA's delay of the final rule pending
reconsideration did not affect the amount of any CAFE penalties that
would have otherwise applied prior to Model Year 2019.
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\21\ 82 FR 32140 (July 12, 2017). If the December 28, 2016 final
rule had gone into effect, the penalty rate would have remained
$5.50 until MY 2019.
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E. Proposed Revisions to the CAFE Civil Penalty Rate
In this notice of proposed rulemaking (NPRM), NHTSA is announcing
that it has tentatively determined, upon reconsideration, that the 2015
Act should not be applied to the CAFE civil penalty formula provision
found in 49 U.S.C. 32912 and is proposing to retain the current civil
penalty rate of $5.50 per .1 of a mile per gallon.\22\ The agency is
proposing this based on a legal determination that the CAFE civil
penalty rate is not a ``civil monetary penalty'' as contemplated by the
2015 Act and that therefore the 2015 Act should not be applied to the
NHTSA CAFE civil penalty formula. Additionally, in the alternative,
NHTSA is proposing to maintain the current civil penalty rate based on
a tentative finding that--in light of the factors Congress requires
NHTSA to analyze in determining whether an increase in the civil
penalty rate will have ``a substantial deleterious impact on the
economy''--increasing the CAFE civil penalty rate would result in
negative economic impact. Pursuant to OMB's guidance, NHTSA has
consulted with OMB before proposing this reduced catch-up adjustment
determination and submitted this notice of proposed rulemaking (NPRM)
to the Office of Information and Regulatory Affairs (OIRA) for review.
. In addition, if NHTSA determines that a reduced catch-up adjustment
is appropriate in its final rule, it will seek OMB's concurrence before
promulgating the rule, as required by the 2015 Act and confirmed by
OMB's guidance. Finally, in this NPRM NHTSA has provided a series of
tentative interpretations of the 2015 Act. In light of OMB's role in
providing agencies guidance about the 2015 Act, NHTSA has requested
OMB's views about the 2015 Act.
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\22\ NHTSA chose to reconsider its prior determination
consistent with its statutory authority to administer the CAFE
standards program and its inherent authority to do so efficiently
and in the public interest. See, e.g., Tokyo Kikai Seisakusho, Ltd.
v. United States, 529 F.3d 1352, 1360-61 (Fed. Cir. 2008)
(``[A]dministrative agencies possess inherent authority to
reconsider their decisions, subject to certain limitations,
regardless of whether they possess explicit statutory authority to
do so.''). OMB's February 2016 guidance confirms that each agency is
``responsible for identifying the civil monetary penalties that fall
under the statutes and regulations [it] enforce[s].'' And, as
repeatedly confirmed by courts, an agency may reconsider how it
previously interpreted a statute, particularly when its updated
interpretation ``closely fits the design of the statute as a whole
and its object and policy.'' Good Samaritan Hosp. v. Shalala, 508
U.S. 402, 417-18 (1993) (cleaned up); see also Nat'l Classification
Comm. v. United States, 22 F.3d 1174, 1177 (D.C. Cir. 1994) (``[A]n
agency may depart from its past interpretation [of a statute] so
long as it provides a reasoned basis for the change.'') (citing
Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 42 (1983)); Torrington Extend-A-Care Employee Ass'n v.
N.L.R.B., 17 F.3d 580, 589 (2d Cir. 1994) (similar). In the 2015 Act
specifically, Congress did not prohibit or otherwise restrict
agencies from reconsidering whether an initial catch-up adjustment
is required or, if so, the magnitude of such an adjustment.
Moreover, NHTSA's regulations provide broadly that ``[t]he
Administrator may initiate any further rulemaking proceedings that
he finds necessary or desirable.'' 49 CFR 553.25.
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NHTSA is also proposing to finalize the 2017 and 2018 inflationary
adjustments for the maximum penalty for general CAFE violations in 49
U.S.C. 32912(a).
1. NHTSA Is Proposing To Retain the $5.50 CAFE Civil Penalty Rate
Because the 2015 Act Is Inapplicable
Upon reconsideration, NHTSA has tentatively determined that the
2015 Act is not applicable to the CAFE civil penalty formula. The
penalty in 49 U.S.C. 32912(b) for a manufacturer that violates fuel
economy standards is not a ``civil monetary penalty'' subject to
inflationary adjustment under the 2015 Act. This reflects a change in
NHTSA's position on this issue from when NHTSA previously adjusted the
CAFE civil penalty rate from $5 to $5.50.\23\ Given that the current
penalty figure has been in effect since it was set twenty years ago,
NHTSA proposes to apply its new position on a prospective basis only
from the effective date of the final rule of this rulemaking. As a
result of this change, NHTSA is proposing to retain the $5.50
multiplier in the CAFE civil penalty formula. NHTSA requests comment on
this issue.
---------------------------------------------------------------------------
\23\ NHTSA may consider a separate rulemaking to consider
whether the CAFE civil penalty rate should be $5.
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The 2015 Act requires agencies to adjust ``civil monetary
penalties'' for inflation.\24\ A ```civil monetary penalty' means any
penalty, fine, or other sanction'' that meets three requirements.\25\
First, the ``penalty, fine, or other sanction'' must be ``for a
specific monetary amount as provided by Federal law'' or have ``a
maximum amount provided for by Federal law.'' \26\ Second, the
``penalty, fine, or other sanction'' must be ``assessed or enforced by
an agency pursuant to Federal law.'' \27\ Third, the ``penalty, fine,
or other sanction'' must be ``assessed or enforced pursuant to an
administrative proceeding or a civil action in the Federal courts.''
\28\
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\24\ EPCA's use of the terminology ``civil penalty'' in 49
U.S.C. 32912(b) is not dispositive. The 2015 Act does not apply to
all civil penalties, but rather ``civil monetary penalties,'' a
defined term.
\25\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 3(2).
\26\ Id.
\27\ Id.
\28\ Id.
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The 2015 Act required the Office of Management and Budget (OMB) to
``issue guidance to agencies on implementing the inflation
adjustments'' under the Act.\29\ OMB issued guidance on February 24,
2016 that stated: ``Agencies are responsible for identifying the civil
monetary penalties that fall under the statutes and regulations they
enforce'' and for determining the ``applicability of the inflation
adjustment requirement to an individual penalty . . . .'' \30\ In none
of NHTSA's July 2016 interim final rule, its December final rule, its
July 2017 request for comments, nor its earlier adjustment from $5 to
$5.50 did NHTSA specifically address whether the penalty for
manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b)
is a ``civil monetary penalty'' subject to inflationary adjustment
under the 2015 Act, or more generally, whether the 2015 Act should be
made applicable to the penalty in Section 32912(b). Instead, it applied
the 2015 Act without specific analysis of these issues.
---------------------------------------------------------------------------
\29\ Id. Sec. 7(a).
\30\ OMB Guidance at 2. OMB's guidance included the definition
of ``civil monetary penalty'' applicable to the 2015 Act and
explained: ``Agencies with questions on the applicability of the
inflation adjustment requirement to an individual penalty, should
first consult with the Office of General Counsel of the agency for
the applicable statute, and then seek clarifying guidance from OMB
if necessary.''
---------------------------------------------------------------------------
Upon evaluation, NHTSA has tentatively concluded the penalty for
manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b)
is not a ``civil monetary penalty'' subject to adjustment under the
2015 Act. Upon similar evaluation, NHTSA also has tentatively concluded
the $10 limit for such violations in 49 U.S.C. 32912(c)(1)(B) is not a
``civil monetary penalty'' subject to adjustment under the 2015 Act
either. To be a ``civil monetary penalty,'' a penalty must meet all
three criteria in the statutory definition.\31\ The penalty for
manufacturer violations of fuel economy
[[Page 13909]]
standards, which includes a rate of $5.50 per .1 mile in its formula,
does not meet the first set of criteria in the definition. It is not a
``penalty, fine, or other sanction'' that is either ``a specific
monetary amount'' or ``a maximum amount.'' Instead, the statute
outlines a process that NHTSA uses to determine a proposed penalty and
that manufacturers use to assess their specific penalty. In particular,
the $5.50 per .1 mile is merely a rate that goes into a complex,
statutory formula used to calculate a variable penalty. Other factors,
such as the manufacturer's credit earning arrangement and its
participation in the credit trading program, are also integral parts of
the multifaceted formula used to calculate a manufacturer's penalty for
violations of the fuel economy standards in 49 U.S.C. 32912(b).
Moreover, the decisions of other manufacturers to generate or not
generate and sell or not sell credits will also influence the amount
that a potentially liable manufacturer pays. NHTSA does not believe
this complex formula and credit trading program generates the kind of
simple civil penalty that lends itself to rote application of the 2015
Act.
---------------------------------------------------------------------------
\31\ The three criteria in the definition are joined by the
conjunctive ``and.''
---------------------------------------------------------------------------
Unlike other civil penalties under NHTSA's jurisdiction, the
penalty for manufacturer violations of fuel economy standards is not
for ``a maximum amount.'' One example of a penalty that is for ``a
maximum amount'' is the ``general penalty'' in EPCA for violations of
49 U.S.C. 32911(a). That ``general penalty'' is ``a civil penalty of
not more than $10,000 for each violation.'' \32\ This sets ``a maximum
amount'' of $10,000 per violation. In other words, EPCA set ``a maximum
amount'' of $10,000 per violation of requirements such as the
requirement for manufacturers to submit pre-model year and mid-model
year reports to NHTSA on whether they will comply with the average fuel
economy standards.\33\ Accordingly, this civil penalty level was
properly adjusted to $40,000 in NHTSA's interim final rule and is
further adjusted here for 2017 and 2018.\34\ Violations of the Safety
Act are also generally subject to ``a maximum amount'' of $21,000 per
violation and $105 million for a related series of violations.\35\ The
agency determines the appropriate amount of such penalties, up to the
statutory maximum. On the other hand, the penalty for manufacturer
violations of fuel economy standards in 49 U.S.C. 32912(b) does not
provide ``a maximum amount'' of a penalty and instead contains only a
complex process for determining a penalty. Setting aside any credits
available to the manufacturer, the greater shortfall there is in a
manufacturer's corporate average fuel economy, the greater the
potential exists for the eventual application of a civil penalty for
that shortfall.
---------------------------------------------------------------------------
\32\ 49 U.S.C. 32912(a). Since the penalty in 49 U.S.C. 32912(a)
is for a maximum amount, it is subject to inflationary adjustment
under the 2015 Act. NHTSA's inflationary adjustment of that civil
penalty in the July 2016 IFR to a maximum penalty of $40,000 was
therefore appropriate. The penalty in 49 U.S.C. 32912(a) is subject
to additional inflationary adjustment for 2017 and 2018. Applying
the multiplier for 2017 of 1.01636, as specified in OMB's December
16, 2016 guidance, results in an adjusted maximum penalty of
$40,654. Applying the multiplier for 2018 of 1.02041, as specified
in OMB's December 15, 2017, results in an adjusted maximum penalty
of $41,484. NHTSA is proposing to finalize that inflationary
adjustment.
\33\ See id.; 49 U.S.C. 32907(a).
\34\ 81 FR 43524, 43526 (July 5, 2016).
\35\ 49 U.S.C. 30165(a)(1). These civil penalty amounts were
established by Section 24110 of the Fixing America's Surface
Transportation Act (FAST Act), Public Law 114-94, after the 2015 Act
was enacted, and thus were not adjusted in the interim final rule.
---------------------------------------------------------------------------
The penalty for manufacturer violations of fuel economy standards
also does not meet the definition of a ``civil monetary penalty''
because the fuel economy standards statute does not provide a
``specific monetary amount'' for manufacturer violations of fuel
economy standards. In contrast to other provisions of the statute that
provide for a specific amount on a per violation basis, often in the
tens of thousands of dollars, section 32912(b) provides no specific
amount. It only provides a $5.50 rate, which is one input in a market-
based enforcement mechanism involving the calculation established in 49
U.S.C. 32912(b), the ultimate result of which--the penalty owed--is
determined by how a manufacturer decides to use any available credits
it has, or can acquire, to make up for the initial shortfall identified
by NHTSA which in turn is based on the market price for credits which
is dependent on the actions of other manufacturers.
For a manufacturer that does not meet an applicable fuel economy
standard, NHTSA sends what is known as a ``shortfall letter'' to the
manufacturer. NHTSA can only do so after it knows the average fuel
economy ``calculated under section 32904(a)(1)(A) or (B) of this title
for automobiles to which the standard applies manufactured by the
manufacturer during the model year.'' \36\ The fuel economy calculation
is conducted by the Environmental Protection Agency (EPA). Following
the end of a model year, manufacturers submit final model year reports
to EPA. EPA reviews and verifies the information and values
manufacturers provide before providing the reports to NHTSA, generally
more than six months after the end of a model year.
---------------------------------------------------------------------------
\36\ 49 U.S.C. 32912(b)(1).
---------------------------------------------------------------------------
Once NHTSA receives the average fuel economy calculation from EPA,
NHTSA must then determine whether the manufacturer's average fuel
economy fails to meet the applicable average fuel economy standard.\37\
If so, the manufacturer has a shortfall. NHTSA then prepares a
preliminary calculation of the manufacturer's potential civil penalty,
which, as described above, varies depending on the relationship between
the manufacturer's average fuel economy and the average fuel economy
standards. NHTSA sends the manufacturer a shortfall letter with the
preliminary calculation, which requires the manufacturer to respond by
either submitting a plan on how it intends to make up the shortfall or
by paying a penalty.
---------------------------------------------------------------------------
\37\ 49 U.S.C. 32912(b)(1).
---------------------------------------------------------------------------
NHTSA's preliminary calculation is determined by multiplying three
numbers: (1) $5.50, (2) each tenth of a mile per gallon by which the
average fuel economy falls short of the applicable average fuel economy
standard, and (3) the number of automobiles manufactured by the
manufacturer during the model year.\38\ That calculation does not yield
a final civil penalty amount because the statute requires that
calculation to include a reduction ``by the credits available to the
manufacturer under section 32903 of this title for the model year.''
\39\
---------------------------------------------------------------------------
\38\ 49 U.S.C. 32912(b)(2).
\39\ 49 U.S.C. 32912(b)(3).
---------------------------------------------------------------------------
However, applying the reduction for the number of available credits
is not a matter of simple mathematics because manufacturers have
control over both the amount of credits available to them and the use
of their credits. If a manufacturer's performance for a given fleet
does not meet the applicable standard, then the manufacturer must elect
how to satisfy its shortfall.
Whether and to what extent the penalty calculation is reduced ``by
the credits available to the manufacturer under section 32903 of this
title for the model year'' (i.e., how to deal with a non-compliance) is
ultimately determined by the manufacturer. Only after this step in the
process outlined in section 32912 occurs is the penalty calculation
complete. Each manufacturer controls the allocation of its own credits,
if credits are available.\40\ A manufacturer that earned credits in a
compliance category before MY 2008
[[Page 13910]]
may apply those credits to that same compliance category for the three
model years prior to, and three model years after, the year in which
the credits were earned.\41\ A manufacturer that earned credits in a
compliance category during and after MY 2008 may apply those credits to
the same compliance category for three model years prior to, and five
model years after, the year in which the credits were earned.\42\
Manufacturers instruct NHTSA on how they wish to allocate their
credits, or account for shortfalls.\43\
---------------------------------------------------------------------------
\40\ See 49 CFR 536.5(c), (d)(2), (6).
\41\ Id. 536.6(a).
\42\ Id. 536.6(b).
\43\ See 49 CFR 536.5(d)(2), (6).
---------------------------------------------------------------------------
Only once NHTSA hears back from the manufacturer on how it wishes
to satisfy its shortfall does NHTSA know the specific civil penalty
that the manufacturer owes for falling short of the applicable average
fuel economy standard. In other words, the manufacturer's decision
regarding use of credits is one of the several inputs in the complex
formula set forth in the fuel economy standards statute, which
ultimately produces the civil penalty for a manufacturer's violation of
fuel economy standards. In sum, the statute describes a process to
determine a penalty amount, but does not itself provide for a penalty,
fine or sanction that is ``for a specific amount.'' Instead,, due to
additional flexibilities of credit transfers and trades, a manufacturer
determines the amount of the civil penalty that is actually owed.\44\
Considering this framework, the formula established under 49 U.S.C.
32912(b) and the variable amounts that result from application of the
formula, are not a ``specific monetary amount'' of a penalty for
manufacturer violations of fuel economy standards subject to adjustment
pursuant to the 2015 Act.
---------------------------------------------------------------------------
\44\ Public Law 110-140, Title I, 104(a), 121 Stat. 1501 (2007).
---------------------------------------------------------------------------
NHTSA must conduct a preliminary calculation for each of the
manufacturer's fleets. CAFE standards are fleet-wide standards that
apply to the vehicles a manufacturer produced for sale in each of three
compliance categories: passenger cars manufactured domestically,
imported passenger cars, and light trucks.\45\ Within specified limits,
EISA permitted manufacturers to transfer credits across fleets. For
example, credits earned for a manufacturer's domestic passenger fleet
may be transferred to its domestic light-truck fleet. Likewise, EISA
permitted manufacturers to sell (i.e., trade) their credits to other
manufacturers. The ability to trade credits with another manufacturer,
authorized for the first time by EISA in 2007, introduced a new level
of complexity that further differentiated civil penalties for
violations of fuel economy requirements from other types of civil
penalties. This added wrinkle further supports NHTSA's current
understanding that the statutory CAFE civil penalty process is not
included within the scope of the 2015 Act.
---------------------------------------------------------------------------
\45\ Id. 32902-04.
---------------------------------------------------------------------------
Since manufacturers control the use of their available credits,
NHTSA has no way of determining on its own the amount of a penalty that
a manufacturer must pay, or even if a manufacturer must pay any penalty
at all.\46\ The options are plentiful.\47\ A manufacturer can choose to
use no credits and pay a penalty. A manufacturer can choose to use
credits from the same compliance category and pay no penalty. A
manufacturer can choose to use some credits from the same compliance
category and pay a smaller penalty. A manufacturer can choose to
transfer credits from another compliance category and pay no penalty. A
manufacturer can choose to transfer some credits from another
compliance category and pay a smaller penalty. A manufacturer can
choose to purchase credits from another manufacturer and pay no
penalty. A manufacturer can choose to purchase some credits from
another manufacturer and pay a smaller penalty. A manufacturer can
combine credits from the same compliance category and/or transfer
credits from another compliance category and/or purchase credits from
another manufacturer and pay no penalty or a smaller penalty.
---------------------------------------------------------------------------
\46\ NHTSA is able to request supplemental reports and audit a
manufacturer's compliance plan, see, e.g., 49 CFR 537.8, but
ultimately, it is the manufacturer's decision on how to use the
credits available to it.
\47\ See 49 U.S.C. 32903.
---------------------------------------------------------------------------
Those are just the options for credits already earned. A
manufacturer can also elect not to pay a penalty or pay a smaller
penalty by using a ``carryback'' plan, in which the manufacturer
applies credits it expects to earn in future model years.\48\
---------------------------------------------------------------------------
\48\ See 49 CFR 536.5(d).
---------------------------------------------------------------------------
There are additional considerations that strongly supports NHTSA's
conclusion that the 2015 Act should not be applied to the CAFE civil
penalty. Congress already adopted a specific scheme for increasing the
civil penalty in 49 U.S.C. 32912(b) that requires a far more intensive
and restrictive process than the summary approach in the 2015 Act.
First, EPCA placed an absolute limit on such an increase to ``not more
than $10 for each .1 of a mile a gallon.'' \49\ Moreover, Congress set
a high bar for adopting an increase. Specifically:
---------------------------------------------------------------------------
\49\ 49 U.S.C. 32912(c).
The Secretary of Transportation shall prescribe by regulation a
higher amount for each .1 of a mile a gallon to be used in
calculating a civil penalty under subsection (b) of this section, if
the Secretary decides that the increase in the penalty--(i) will
result in, or substantially further, substantial energy conservation
for automobiles in model years in which the increased penalty may be
imposed; and (ii) will not have a substantial deleterious impact on
the economy of the United States, a State, or a region of a
State.\50\
---------------------------------------------------------------------------
\50\ 49 U.S.C. 32912(c)(1)(A).
Further, the Secretary must decide that an increase will not have a
substantial deleterious impact ``only when the Secretary decides that
it is likely that the increase in the penalty will not--(i) cause a
significant increase in unemployment in a State or a region of a State;
(ii) adversely affect competition; or (iii) cause a significant
increase in automobile imports.'' \51\ These factors, which appear to
demonstrate Congress' concern that the CAFE civil penalties program
could damage the economy, are far more specific and tailored to the
CAFE program than any provisions in the 2015 Act. Although it is not
specifically identified in the statute, the legislative history
indicates that the ``impact'' of concern relates to ``the automobile
industry.'' \52\ In its report on EPCA's original fuel economy
provisions in 1975, the House Commerce Committee recognized:
---------------------------------------------------------------------------
\51\ Id. 32912(c)(1)(C).
\52\ ``Energy Initiatives of the 95th Congress,'' S. Rep. No.
96-10, at 175-76 (1979) (``Representative Dingell (D-Mich.),
concerned that increasing the penalties could lead to layoffs in the
automobile industry, insisted that raising the penalties be
contingent upon findings by the Secretary of Transportation that
increasing the penalties would achieve energy savings and would not
be harmful to the economy.'').
The automobile industry has a central role in our national economy
and that any regulatory program must be carefully drafted so as to
require of the industry what is attainable without either imposing
impossible burdens on it or unduly limiting consumer choice as to
capacity and performance of motor vehicles.\53\
---------------------------------------------------------------------------
\53\ H.R. Rep. No. 94-340, at 87 (1975). See also 121 Cong. Rec.
18675 (June 12, 1975) (statement of Rep. Sharp) (``[W]e recognize
that we have serious unemployment in the American auto industry and
we want to preserve this important segment of the economy.'').
Notably, Congress was aware that inflation would effectively reduce
the real value of the civil penalty rate over time--the CBO Director
and NHTSA Administrator recognized that the civil penalty structure
under 1975 EPCA
[[Page 13911]]
``actually become less stringent over time . . . as inflation erodes
[the penalties'] effect''--yet chose to require this strict procedure
to increase the rate without allowing for inflationary adjustments to
the multiplier in the formula. In contrast, Congress expressly purposes
of the 2015 Act (and its predecessor) ``to establish a mechanism that
shall . . . maintain the deterrent effect of civil monetary penalties .
. . .'' The omission of any inflation adjustment procedure makes sense
in light of Congress' requirement for NHTSA to continually increase
fuel economy standards to maximum feasible levels.\54\ Rather than
increase the penalty each year, Congress directed NHTSA to determine
whether fuel economy standards should be increased, because the goal of
the CAFE standards is to increase fuel economy not punish
manufacturers, as with other penalties subject to the 2015 Act.
Requiring mandatory penalty inflation adjustments and continuous fuel
standard increases would multiply the amount assessed against
manufacturers in a way that does not occur with other types of
penalties.
---------------------------------------------------------------------------
\54\ 49 U.S.C. 32902(a).
---------------------------------------------------------------------------
Congress also recognized the need for lead time in increasing the
civil penalty for violations of fuel economy standards by specifying
that an increase ``is effective for the model year beginning at least
18 months after the regulation stating the higher amount becomes
final.'' \55\
---------------------------------------------------------------------------
\55\ Id. 32912(c)(1)(D).
---------------------------------------------------------------------------
Congress additionally recognized the need for extensive input from
the public and other parts of the Government before any such increase.
It required that:
The Secretary shall publish in the Federal Register a proposed
regulation under this subsection and a statement of the basis for
the regulation and provide each manufacturer of automobiles a copy
of the proposed regulation and the statement. The Secretary shall
provide a period of at least 45 days for written public comments on
the proposed regulation. The Secretary shall submit a copy of the
proposed regulation to the Federal Trade Commission and request the
Commission to comment on the proposed regulation within that period.
After that period, the Secretary shall give interested persons and
the Commission an opportunity at a public hearing to present oral
information, views, and arguments and to direct questions about
disputed issues of material fact to--(A) other interested persons
making oral presentations; (B) employees and contractors of the
Government that made written comments or an oral presentation or
participated in the development or consideration of the proposed
regulation; and (C) experts and consultants that provided
information to a person that the person includes, or refers to, in
an oral presentation.\56\
---------------------------------------------------------------------------
\56\ Id. 32912(c)(2).
These extensive, statutorily-mandated procedures specifically
applicable to increases in the penalty rate in 49 U.S.C. 32912(b) are
in stark contrast to the procedures applicable to the 2015 Act. For the
initial catch-up adjustment, the 2015 Act specified that agencies
should use an interim final rule.\57\ For subsequent annual
adjustments, the 2015 Act specified that agencies ``shall make the
adjustment notwithstanding section 553 of title 5, United States
Code,'' which contain the Administrative Procedure Act's requirements
for rulemaking.\58\
---------------------------------------------------------------------------
\57\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 4(b)(1)(A).
\58\ Id. Sec. 4(b)(2).
---------------------------------------------------------------------------
Finally, before Congress passed the 2015 Act, the CBO provided an
assessment of the revenue that inflation adjustments pursuant to the
2015 Act would provide the Federal government. CBO determined that all
inflation adjustments pursuant to the 2015 Act (across every Federal
agency) would provide in total $1.3 billion of revenue across ten
years.\59\ Commenters indicate that adjusting the civil penalty rate to
$14 could cost up to $1 billion annually in penalty payments.\60\
Across ten years, the penalty payments under this provision of the
statute alone could dwarf CBO's contemporaneous estimate of the 2015
Act's effect on revenues from all civil monetary penalties across all
statutes. The drastic difference between CBO's estimate of revenue from
all inflation adjustments across ten years and the potential revenue
from this adjustment alone further suggests Congress had not considered
the civil penalty rate subject to the 2015 Act's inflation adjustment.
This is bolstered by the rounding rule adopted by Congress. The 2015
Act states, ``[a]ny increase determined under this subsection shall be
rounded to the nearest multiple of $1.'' \61\ This rounding rule
suggests the Act was not intended to apply to the small dollar value
CAFE civil penalty rate, since it would not serve a de minimis rounding
function. As a practical matter, if the rounding rule applied to a
small dollar penalty rate, it would prevent any annual inflationary
increases (absent extraordinary inflation).
---------------------------------------------------------------------------
\59\ See ``Estimate of the Budgetary Effects of H.R. 1314, the
Bipartisan Budget Act of 2015, as reported by the House Committee on
Rules on October 27, 2015,'' at 4, available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/costestimate/hr1314.pdf. Title VII of the Bipartisan Budget Act of 2015 includes
three sections and the revenue estimate was for title VII in its
entirety. Section 701 is the 2015 Act. The other two sections are
the rescission of money deposited or available in two funds which
CBO recognized would decrease direct government spending. Therefore,
the 2015 Act is likely the only portion of title VII to provide
revenue, and the CBO's revenue estimate for title VII can be
understood as a revenue estimate for the 2015 Act.
\60\ See, e.g., Comment ID NHTSA-2017-0059-0019, available at
https://www.regulations.gov/.
\61\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 5(a).
---------------------------------------------------------------------------
NHTSA believes that applying the 2015 Act to the penalty in 49
U.S.C. 32912(b) would evade the statutory safeguards and limitations
directly applicable to that penalty, in contrast to Congress's original
awareness of penalty rate adjustments, and could result in the
imposition of a potentially massive increase in civil penalties, in
contrast to contemporaneous, pre-enactment evidence about the effect of
the 2015 Act.
NHTSA has previously sought comment on related issues, but NHTSA
believes it is important to provide the public with an opportunity to
provide additional comments in light of NHTSA's analysis. Accordingly,
NHTSA requests comments on this analysis. For these reasons, NHTSA
tentatively concludes that it is not appropriate to apply the 2015 Act
and is proposing to retain the $5.50 rate in the CAFE civil penalty.
2. The Agency Tentatively Finds That Increasing the CAFE Civil Penalty
Rate Will Result in Negative Economic Impact
NHTSA is proposing to retain the CAFE civil penalty rate of $5.50
per tenth of a mile per gallon, even if one were to assume that the
penalties are subject to the 2015 Act, because NHTSA tentatively
concludes that, in light of the statutory requirements in EPCA for
raising the penalty rate, applying the increase would lead to a
``negative economic impact'' under the 2015 Act.
The 2015 Act states, ``[a]ny increase determined under this
subsection shall be rounded to the nearest multiple of $1.'' \62\ NHTSA
requests comment on whether, and if so, how, this rounding rule should
apply if NHTSA ultimately concludes that adjusting the $5.50 CAFE civil
penalty rate upwards would have a ``negative economic impact.''
Specifically, does the 2015 Act rule require a $5.50 civil penalty
rate, if finalized, to be rounded to $6? Commenters should consider the
potential application of the rounding rule to the initial catch-up
adjustment,
[[Page 13912]]
as well as the 2017 and 2018 adjustments and future annual adjustments.
Commenters should also consider the relationship, if any, between the
rounding rule and the criteria required to be met to raise the civil
penalty under EPCA.
---------------------------------------------------------------------------
\62\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 5(a).
---------------------------------------------------------------------------
a. Negative Economic Impact
i. ``Negative Economic Impact'' Is Not Defined
Under the 2015 Inflation Adjustment Act, NHTSA, under authority
delegated by the Secretary, may adjust the amount of a civil monetary
penalty by the less than the amount otherwise required for the ``catch-
up adjustment'' upon determining in a final rule, after notice-and
comment, that increasing the civil monetary penalty by the otherwise
required amount will have a ``negative economic impact,'' or the social
costs of increasing the civil monetary penalty by the otherwise
required amount outweigh the benefits.\63\ In either case, the Director
of the Office of Management and Budget must concur with the agency's
determination.
---------------------------------------------------------------------------
\63\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 4(c)(1).
---------------------------------------------------------------------------
To determine whether increasing the CAFE civil penalty rate by the
amount calculated under the inflation adjustment formula would have a
``negative economic impact,'' NHTSA must first establish the meaning of
``negative economic impact.'' The statute does not define ``negative
economic impact.'' OMB issued a memorandum providing guidance to the
heads of executive departments and agencies on how to implement the
Inflation Adjustment Act, but the guidance does not define ``negative
economic impact'' either.\64\
---------------------------------------------------------------------------
\64\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb.
24, 2016), available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
---------------------------------------------------------------------------
ii. How To Interpret ``Negative Economic Impact''
In interpreting ``negative economic impact,'' NHTSA cannot just
consider the Inflation Adjustment Act in isolation: statutory
interpretation is not conducted in a vacuum.\65\ ``It is a fundamental
canon of statutory construction that the words of a statute must be
read in their context and with a view to their place in the overall
statutory scheme.'' \66\
---------------------------------------------------------------------------
\65\ Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809
(1989).
\66\ Id. (citing United States v. Morton, 467 U.S. 822, 828
(1984)).
---------------------------------------------------------------------------
Accordingly, NHTSA must interpret Congress' Inflation Adjustment
Act in light of the longstanding CAFE civil penalty structure
previously enacted by Congress. Interpreting the Inflation Adjustment
Act in context is particularly important in determining the appropriate
adjustment to make to the CAFE civil penalty rate given the unique
nature of the CAFE civil penalties program. For example, in contrast to
other federal civil penalty programs, the CAFE statute requires a
minimum of eighteen months' lead time in advance of a model year before
a higher civil penalty amount can become effective.\67\ Congress
mandated this interval because ``manufacturers' product and compliance
plans are difficult to alter significantly for years ahead of a given
model year.'' \68\ Indeed, ``NHTSA believes that this approach
facilitates continued fuel economy improvements over the longer term by
accounting for the fact that manufacturers will seek to make
improvements when and where they are most cost-effective.'' \69\ For
similar reasons, when DOT amends a fuel economy standard to make it
more stringent, that new standard must be promulgated ``at least 18
months before the beginning of the model year to which the amendment
applies.'' \70\
---------------------------------------------------------------------------
\67\ 49 U.S.C. 32912(c)(1)(D).
\68\ 81 FR 95491 (December 28, 2016).
\69\ Id.
\70\ 49 U.S.C. 32902(a)(2).
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CAFE civil penalties are also atypical in that they follow a
prescribed formula that can only be compromised or remitted by NHTSA in
exceptionally limited circumstances.\71\ In practice, therefore, any
increase in the CAFE civil penalty rate would apply to all non-
compliant manufacturers, regardless of the circumstances, and in turn,
would likely increase the price of credits.\72\ Contrast this
constrained structure with NHTSA's general civil penalty authority,
which allows the Secretary to determine or compromise the amount of a
civil penalty and delineates multiple factors for the Secretary to
consider in making such a determination, including the nature,
circumstances, extent, and gravity of the violation.\73\
---------------------------------------------------------------------------
\71\ 49 U.S.C. 32913 (authorizing the Secretary to ``compromise
or remit the amount of civil penalty imposed'' under CAFE ``only to
the extent'' (1) necessary to prevent a manufacturer's insolvency or
bankruptcy; (2) the manufacturer shows that the violation was caused
by an act of God, a strike, or a fire; or (3) the Federal Trade
Commission certifies that a reduction is necessary to prevent a
substantial lessening of competition). NHTSA has never attempted to
utilize this provision to compromise or remit a CAFE civil penalty.
\72\ See H.R. Rep. No. 95-1751, at 112 (1978) (Conf. Rep.)
(``[T]he higher penalty . . . will be the same for all manufacturers
when adopted. . ..'').
\73\ 49 U.S.C. 30165(b)-(c).
---------------------------------------------------------------------------
The principles underlying other traditional canons of statutory
interpretation further support NHTSA's proposed approach. For example,
statutes that relate to the same or to similar subjects are in pari
materia. Such statutes should be construed together, even if they do
not expressly reference each other or were passed at different times,
unless a contrary intent is clearly expressed by Congress. Here, both
the inflationary adjustment statute and the relevant provisions of the
CAFE statute involve civil penalties and must be read in pari
materia.\74\ And when one of the statutes is generalized and passed
later--like the Inflation Adjustment Act--it cannot be read to
implicitly repeal an earlier, more specific statute--like EPCA's
establishment of the CAFE civil penalties structure.\75\ This approach
to statutory interpretation is consistent with NHTSA's past
practice.\76\
---------------------------------------------------------------------------
\74\ See Wisconsin Cent. Ltd. v. United States, 194 F. Supp. 3d
728, 738 (N.D. Ill. 2016), aff'd, 856 F.3d 490 (7th Cir. 2017)
(```[C]onceptual similarity' . . . is precisely the point of the in
pari materia canon: `statutes addressing the same subject matter
generally should be read as if they were one law,' with the
traditional tools of statutory interpretation applied accordingly. .
. . [A]lthough FICA does not by completely define the RRTA's various
contours, examining the former to elucidate related provisions of
the latter is an acceptable mode of statutory interpretation given
the close linkages between the statutes.'') (internal citation
omitted) (emphasis in original); cf. Pound v. Airosol Co., 498 F.3d
1089, 1094 n.2 (10th Cir. 2007) (``The penalty provisions of the CAA
and the Clean Water Act (CWA) are virtually identical; thus, CWA
cases are instructive in analyzing issues arising from the CAA'');
United States v. Dell'Aquilla, 150 F.3d 329, 338 n.9 (3d Cir. 1998)
(``[T]he Clean Water Act and the Clean Air Act are in pari materia,
and courts often rely upon interpretations of the Clean Water Act to
assist with an analysis under the Clean Air Act.'') (citations
omitted).
\75\ See Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S.
437, 445 (1987) (``Where there is no clear intention otherwise, a
specific statute will not be controlled or nullified by a general
one, regardless of the priority of enactment.'') (cleaned up);
Radzanower v. Touche Ross & Co., 426 U.S. 148, 153 (1976) (``It is a
basic principle of statutory construction that a statute dealing
with a narrow, precise, and specific subject is not submerged by a
later enacted statute covering a more generalized spectrum.'').
\76\ See, e.g., 80 FR 40137, 40171 (Aug. 12, 2015) (interpreting
a term in EISA by looking to how the term is defined in the Motor
Vehicle Safety Act, ``[g]iven the absence of any apparent contrary
intent on the part of Congress in EISA'').
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The principles underlying the rule of lenity also substantiate
interpreting the Inflation Adjustment Act narrowly in light of EPCA.
This canon instructs that statutes imposing penalties should be
construed narrowly in favor of those against whom the penalties will be
imposed. Although the rule of lenity is
[[Page 13913]]
traditionally applied in criminal contexts,\77\ the principles
underlying the rule are worth considering when there are severe
punitive implications of a broad interpretation, as is the case here.
Construing the statute strictly is particularly important here because
the inflation adjustment essentially acts as a ``one-way ratchet,''
where all subsequent annual adjustments will be based off this ``catch-
up'' adjustment with no ensuing opportunity to invoke the ``negative
economic impact'' exception.\78\
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\77\ Some courts have applied the rule of lenity in civil and
administrative contexts as well. See, e.g., United States v.
Thompson/Ctr. Arms Co., 504 U.S. 505, 518 (1992); Rand v. C.I.R.,
141 T.C. 376, 393 (2013), overturned on other grounds due to
legislative action.
\78\ This ``one-way ratchet'' constraint is also imposed by
EPCA. H.R. Rep. No. 95-1751, at 113 (1978) (Conf. Rep.) (``No
provision [in EPCA] is made for lowering the penalty.'').
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iii. Reading Section 32912 With the Inflationary Adjustment Act
Under 49 U.S.C. 32912(b), a manufacturer that violates a fuel
economy standard is potentially subject to a civil penalty rate for
each tenth of a mile per gallon that the manufacturer misses the
applicable average fuel economy standard for the number of automobiles
manufactured by the manufacturer during the model year, unless the
manufacturer is able and willing to apply credits or establish a plan
to generate and apply credits in subsequent years, as discussed above.
NHTSA has exceptionally limited discretion in whether to impose the
penalty or the amount of the preliminary calculation of the penalty
when it does indeed apply.
The Secretary is required to increase the applicable civil penalty
rate up to $10 per each tenth of a mile per gallon if she decides that
the increase in the penalty:
(i) will result in, or substantially further, substantial energy
conservation for automobiles in model years in which the increased
penalty may be imposed; and
(ii) will not have a substantial deleterious impact on the economy
of the United States, a State, or a region of a State.\79\
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\79\ 49 U.S.C. 32912(c)(1)(A)-(B).
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The Secretary can only decide that the increase ``will not have a
substantial deleterious impact on the economy'' if she decides that it
is likely that the increase in the penalty will not:
(i) Cause a significant increase in unemployment in a State or a
region of a State;
(ii) adversely affect competition; or
(iii) cause a significant increase in automobile imports.\80\
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\80\ 49 U.S.C. 32912(c)(1)(C).
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Thus, to increase the civil penalty rate for CAFE violations, the
Secretary must affirmatively determine that doing so ``will not have a
substantial deleterious impact on the economy of the United States, a
State, or a region of a State.'' Critically, if she is unable to make
such a determination or, put another way, if she determines that
increasing the civil penalty may have ``a substantial deleterious
impact on the economy of the United States, a State, or a region of a
State,'' she is prohibited by statute from increasing the applicable
civil penalty rate.\81\ Therefore, in determining whether adjusting the
CAFE civil penalty rate for inflation will have a ``negative economic
impact,'' it is appropriate to consider the potential negative economic
impact the adjustment would have not just on the United States in
general, but also, at a minimum, on whether such impact could occur in
any particular State or region of a State.
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\81\ In addition to the substantive findings that must be made
before the civil penalty rate can be increased, Section 32912 also
imposes procedural requirements. For instance, the Secretary must
hold a public hearing during which interested persons and the
Federal Trade Commission be allowed to make presentations. 49 U.S.C.
32912(c)(2).
---------------------------------------------------------------------------
NHTSA also believes it is appropriate to consider the impact
raising the CAFE civil penalty rate would have on individual
manufacturers who fall short of fuel economy standards, and those
affected, such as dealers. Such a broad interpretation is consistent
with how other statutory provisions permitting or requiring agencies to
consider economic impacts have been interpreted. For example, under the
Safety Act, a discretionary factor in determining the amount of a
penalty is ``the appropriateness of such penalty in relation to the
size of the business of the person charged, including the potential for
undue adverse economic impacts.'' \82\ NHTSA interpreted that factor in
its regulation to include consideration of ``financial factors such as
liquidity, solvency, and profitability.'' \83\ Other federal statutes
likewise contemplate consideration of negative economic impacts on
individual actors in determining an appropriate civil penalty.\84\
NHTSA's proposal, which includes consideration of the ``negative
economic impact'' the level would have on individual noncompliant
actors, represents a uniform approach with how it determines the
appropriate civil penalty level in these other, non-CAFE cases.
Moreover, the Senate Conference report on the 1975 version of EPCA
directed ``the Secretary [to] weigh the benefits to the nation of a
higher average fuel economy standard against the difficulties of
individual automobile manufacturers.'' \85\
---------------------------------------------------------------------------
\82\ 49 U.S.C. 30165(c)(7) (emphasis added).
\83\ 49 CFR 578.8.
\84\ See 15 U.S.C. 2069(b), (c) (Consumer Product Safety
Commission); 33 U.S.C. 1232(a)(1) (Coast Guard); 33 U.S.C. 1319(d),
1321(b)(8) (Environmental Protection Agency).
\85\ S. Rep. No. 94-516, at 155 (1975) (Conf. Rep.).
---------------------------------------------------------------------------
Note also that ``negative economic impact,'' as used in the
Inflation Adjustment Act, need not mean ``net negative economic
impact.'' Congress expressly utilized the ``net'' concept in the very
next provision of the statute, authorizing a lesser increase to a civil
penalty if the agency determines that ``the social costs of increasing
the civil monetary penalty by the otherwise required amount outweigh
the benefits.'' \86\ The absence of comparable phrasing for the
``negative economic impact'' provision immediately prior implies either
that term is ambiguous or that Congress intentionally omitted the word
``net.'' Either way, without any express indications that Congress
meant ``net negative economic impact,'' NHTSA proposes that the
provision should be interpreted without reference to any potential
benefits of increasing the penalty.
---------------------------------------------------------------------------
\86\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 4(c)(1)(B) (emphasis added).
---------------------------------------------------------------------------
a. NHTSA has not Determined That an Increase in the CAFE Civil Penalty
Rate Will Not Have a Substantial Deleterious Impact on the Economy
To summarize: The 2015 Act allows an agency to set a lower penalty
amount than would otherwise be required if it can show that raising the
penalty in accordance with the 2015 Act will lead to a ``negative
economic impact,'' which is not defined either in the 2015 Act or OMB's
implementing guidance. However, the statute specifically related to
penalties for violations of NHTSA's fuel economy standards has a
provision allowing for an increase in the penalty rate only if the
agency can determine that increasing the rate will not have a
``substantial deleterious impact on the economy.'' To read these two
provisions together harmoniously, NHTSA interprets the statutes to mean
that the agency must be able to affirmatively show that increasing the
penalty as would be required by the 2015 Act will not have the adverse
economic effects identified in the definition of ``substantial
deleterious impact.'' Since the agency cannot make those affirmative
findings, discussed further
[[Page 13914]]
below, it is therefore prohibited from raising the penalty rate because
doing so would have a ``negative economic impact.''
Since NHTSA does not have sufficient evidence to make the requisite
finding under EPCA that an increase in the CAFE penalty rate will not
have a substantial deleterious impact on the economy, NHTSA is
proposing to retain the $5.50 penalty rate pursuant to the negative
economic impact exception to inflationary adjustments. NHTSA invites
comments on whether this is the appropriate penalty level, and if not,
requests data or other evidence that would support the findings
necessary under EPCA that would allow for such an increase.
The comments should take into account that the factors are
probabilistic and prospective, that is, to increase the penalty rate,
the Secretary must determine that doing so likely would not have the
statutorily-enumerated effects in the future.
The comments should also reflect the considerable burdens that must
be overcome to make the findings needed to increase the civil penalty
under EPCA, in part reflected in the statute's repeated use of
``substantial'' and ``significant.'' Indeed, the burden is so great
that NHTSA has been unable to make all of the determinations necessary
since the provisions were added in 1978.
The comments should also address the impact of increasingly
stringent fuel economy standards established in existing statute and
NHTSA regulation, and whether this increasing stringency has a
relationship to a ``negative economic impact'' or ``substantial
deleterious impact determination.''
b. NHTSA has not Determined That an Increase in the CAFE Civil Penalty
Rate Will Not Cause a Significant Increase in Unemployment in a State
or Region of a State
NHTSA tentatively concludes that an increase in the CAFE penalty
rate could plausibly cause a significant increase in unemployment in a
State or a region of a State. For instance, vehicle price increases--
resulting from increased penalty payments or compliance costs passed
through to customers--could result in customers keeping their current
vehicles longer or shifting purchases towards less expensive new
vehicles or toward the used vehicle market. Either outcome could lead
to fewer jobs with vehicle manufacturers. Losses may be concentrated in
particular States and regions within those States where automobile
manufacturing plants are located. Some manufacturers who have
historically paid civil penalties in lieu of compliance have automobile
assembly and parts manufacturing plants located in the Midwest and
Southeastern U.S. These plants employing thousands of people could be
most adversely impacted by a civil penalty increase resulting in
employment losses. In response to substantial increases in potential
penalties, some manufacturers could plausibly lose sales due to
resulting higher prices, which may result in reduced employment at
facilities currently producing vehicles and engines.
Fewer new vehicle sales attributable to price increases resulting
from increased penalty payments and/or compliance costs could also
plausibly result in fewer jobs within new motor vehicle dealerships
franchised to sell vehicles manufactured or distributed by
manufacturers subject to penalties and/or increased compliance costs. A
manufacturer's decision to change allocation of vehicles distributed to
dealers to address increased penalties and/or compliance costs could
also result in job losses within the franchised dealer network. For
example, one might expect that increased CAFE penalties could lead to a
decrease in the number of vehicles with powerful engines being produced
or sold. Dealers in States or intra-State regions where these types of
vehicles are more popular would be affected disproportionately.
c. NHTSA Has Not Determined That an Increase in the CAFE Civil Penalty
Rate Will Not Adversely Affect Competition
Notably, unlike the other two factors, this factor does not require
a finding of a ``significant'' effect. The absence of this modifier
implies that even a modest adverse effect on competition would suffice
to block a civil penalty increase. This phrasing similarly contrasts
with the provision in the next section of the Code, describing the
compromising or remitting the amount of a CAFE civil penalty. That
provision requires the Federal Trade Commission to certify that a
reduction in the penalty is ``necessary to prevent a substantial
lessening of competition.'' \87\
---------------------------------------------------------------------------
\87\ 49 U.S.C. 32913(a)(3).
---------------------------------------------------------------------------
In establishing CAFE stringency requirements, NHTSA has
consistently evaluated risks to competition, including the potential
effects on individual automakers. For instance, in the 1985 rulemaking,
NHTSA analyzed the potential effect of a 1.5 mpg fuel economy
improvement on the domestic auto industry, stating:
It is always possible that higher levels of fuel economy could be
achieved by the domestic manufacturers if they were to restrict
severely their product offerings. For example, sales of particular
larger light truck models and larger displacement engines could be
limited or eliminated entirely. As discussed by the October 1984
notice, Ford submitted an analysis of the potential effects of
restricting product offerings in this manner. This analysis showed
that to achieve a 1.5 mpg average fuel economy benefit through such
restrictions, sales reductions of 100,000 to 180,000 units at Ford
could occur, with resulting employment losses of 12,000 to 23,000
positions at Ford, its dealers and suppliers. The agency believes
this analysis to be a reasonable projection of the impacts of
restricting the availability of larger light trucks in the current
market.
Impacts of this magnitude go beyond the realm of ``economic
practicability'' as contemplated in the Act. This is particularly
true since it is likely that a standard set at a level resulting in
impacts of this magnitude would result in little or no net fuel
economy benefit. This is because consumers could meet their demand
for larger light trucks by merely shifting their purchases to other
manufacturers which continue to offer such trucks. The other
manufacturers could increase sales of these vehicles without risking
noncompliance with the standards. An additional possible negative
economic consequence would be reduced competition in the market for
larger light trucks. Given the small number of manufacturers
producing larger light trucks, a decision by Ford (or GM or
[Chrysler]) to significantly reduce its role in this market could
have serious consequences for competition.\88\
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\88\ 50 FR 40398, 40400-40401 (Oct. 3, 1985).
NHTSA continues to believe that, in the context of CAFE rulemakings, an
analysis of the effects of a regulation on competition should be
undertaken in a broad manner, similar to the analysis traditionally
used in establishing CAFE stringency requirements, and seeks comments
on this approach.
NHTSA tentatively concludes that it is reasonable to believe that
an increase in the CAFE penalty rate could distort the normal market
competition that would be expected in a free market by favoring one
group of manufacturers over another. This could adversely impact the
affected manufacturers through higher prices for their products
(without corresponding benefits to consumers), restricted product
offerings, and reduced profitability. An increased CAFE penalty
benefits fleets of already-compliant fuel efficient vehicles over
fleets of less fuel-efficient vehicles. A manufacturer who is already
generating or possesses over-compliance credits will find itself with
much more valuable credits to sell and may use this additional capital
to invest more heavily in research and development, marketing, add
other features to its
[[Page 13915]]
vehicles which make them more desirable to consumers, or reduce the
price of its vehicles. Through model year 2015, manufacturers with
positive credit balances had credits in varying amounts up to nearly
396 million credits.\89\ A hypothetical manufacturer with 10 million
credits could see the potential value of its credits increase from $55
million to $140 million, while a hypothetical manufacturer with 100
million credits could see the potential value even more dramatically
increase from $550 million to $1.4 billion. Meanwhile, a manufacturer
who is not compliant and facing increased difficulties in meeting
future stringency requirements may be forced to purchase credits at an
increased price, invest more heavily in fuel economy improvements,
discontinue less fuel-efficient models or configurations, increase
vehicle prices, or some combination of these options--instead of
investing in other areas to address consumer demands that would have
been satisfied if the manufacturer was able to pay a lower penalty.
While this result may be beneficial for purposes of fuel savings, it
would further diminish the competitiveness of those manufacturers who
are least able to comply with CAFE standards.
---------------------------------------------------------------------------
\89\ See ``CAFE Public Information Center,'' available at
https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Credit_LIVE.html.
---------------------------------------------------------------------------
In addition to the impact on competition an increase in penalties
might have on market participants, it could also have an impact on the
market itself by limiting consumer choice involving vehicles and
vehicle configurations that would otherwise be produced with penalties
at their current values. For instance, faced with the prospect of
having to pay larger penalties in the future, a manufacturer could
decide that it makes financial sense to shift resources from its
planned investments in capital towards payment of possible future
penalties. If the possibility of paying penalties looms too large, a
manufacturer could go out of business, reducing competition even
further.
d. NHTSA has not Determined That an Increase in the CAFE Civil Penalty
Rate will not Cause a Significant Increase in Automobile Imports
Final model year fuel economy performance reports published by
NHTSA indicate import passenger car fleets are performing better than
domestic passenger car fleets. The model year 2015 fleet performance
report \90\, the latest available, indicates the performance of the
imported passenger car fleet has a one-tenth of one mpg advantage.
While this slight advantage could be viewed as negligible, performance
has varied significantly in recent years--the most significant being
model year 2010 where the import fleet outpaced the domestic fleet by
more than two mpg.
---------------------------------------------------------------------------
\90\ Available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_fleet_LIVE.html (last accessed December 15, 2017)
---------------------------------------------------------------------------
In light of this historical variation, it is unclear whether
increasing the civil penalty fine amount would have a significant
effect on either the domestic or import passenger cars fleets, and
NHTSA seeks comment on potential positive or negative impacts civil
penalties may have on the domestic and import passenger car fleets,
along with any potential positive or negative impacts to the light
truck fleet. Please provide supporting information for your position.
iv. Analysis of Comments Received on ``Negative Economic Impact'' and
EPCA Considerations
NHTSA has reviewed the comments it received on the July 2017 notice
regarding ``negative economic impact,'' and--from previous requests for
comment--on the EPCA considerations. NHTSA did not identify anything
persuasive in the submissions that would undermine NHTSA's proposed
interpretation of ``negative economic impact.''
In its July 2017 request for comments, NHTSA specifically sought
comments on:
Whether the EPCA considerations for ``substantial
deleterious impact'' are relevant to a determination of ``negative
economic impact''?
And if so, whether those considerations must be accounted
for in determining negative economic impact, or simply that they are
informational, and what is the legal basis for that belief?
Only two commenters submitted comments touching on these questions.
But none of the comments addressed whether the EPCA criteria for
``substantial deleterious impact on the economy'' should guide NHTSA's
consideration of whether the inflation adjustment would have a
``negative economic impact,'' and if so, how much less than the
otherwise required amount should the penalty level be adjusted after
analyzing data relevant to the EPCA factors.
CARB observed that the 2016 joint Technical Assessment Report
stated that manufacturers ``who have consistently chosen to pay CAFE
fines in the past may continue to do so,'' even if the civil penalty
rate changes. CARB concluded from that NHTSA saw no reason at the time
to think its fines would have a negative economic impact. However, this
conclusion does not necessarily follow, as the greatly increased civil
penalty rate, in light of longstanding expectations about the
steadiness of that rate, could significantly upset manufacturers'
expectations about compliance and thus cause operational or other
challenges given the lead time necessary to make significant fuel
economy improvements in subsequent model years.
The Alliance and Global jointly submitted comments that also relate
to these issues. These associations contended that although the EPCA
factors ``do not override'' the Inflation Adjustment Act and ``are not
binding'' in the inflation adjustment, they provide ``helpful support''
and ``useful guidance'' in deciding whether there would be a ``negative
economic impact'' and, if so, how much to adjust the civil penalty
amount. In their view, the ``stringent'' factors required by EPCA
demonstrate that the CAFE civil penalty amount should not be increased
without evidence of ``substantial net benefits'' and evidence that
there would be ``no substantial harm to the economy.'' \91\
---------------------------------------------------------------------------
\91\ The groups go on to claim that the evidence shows that
adjusting the penalty to $14 ``will cost society $3.5 billion and
will not produce commensurate benefits.''
---------------------------------------------------------------------------
NHTSA has previously sought comment on the EPCA civil penalty
criteria in other rulemaking proceedings. In 2009, NHTSA sought comment
on whether it should initiate a proceeding to consider raising the CAFE
civil penalty under EPCA. Most of the comments on this issue focused on
the energy conservation factor, rather than the impact on the economy.
But no commenter argued that raising the penalty would have a positive
or neutral impact on the economy.\92\
---------------------------------------------------------------------------
\92\ 74 FR 14195, 14427 (Mar. 30, 2009).
---------------------------------------------------------------------------
In 2010, NHTSA specifically solicited comments on how raising or
not raising the penalty amount under EPCA would impact the economy.
Only Ferrari and Daimler commented on this issue. Both manufacturers
argued that raising the penalty would have no impact on fuel savings
and would simply hurt the manufacturers forced to pay it. Daimler
stated further that manufacturers pay fines because they cannot
increase energy savings any further. No commenter argued or provided
any information supporting the opposing
[[Page 13916]]
position that raising the penalty amount would have a positive or
neutral impact on the economy. Ultimately, NHTSA ``defer[red]
consideration of this issue for purposes of this rulemaking.'' \93\
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\93\ 75 FR 25323, 25666-67 (May 7, 2010).
---------------------------------------------------------------------------
In 2012, NHTSA again solicited comments on how raising or not
raising the penalty amount under EPCA would impact the economy. This
time, ``no comments specific to this issue were received,'' so NHTSA
declared it would ``continue to attempt to evaluate this issue on its
own.'' \94\
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\94\ 77 FR 62623, 63131 (Oct. 15, 2012).
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The public has had multiple opportunities to comment on the EPCA
civil penalty provisions and now the Inflation Adjustment Act. NHTSA
has considered all the comments it received in generating this proposed
rule.
Based on the findings discussed above, NHTSA has tentatively made a
determination that negative economic impact will result if the CAFE
civil penalty rate is increased. For this reason, NHTSA is proposing to
retain the existing CAFE civil penalty rate of $5.50 per .1 of a mile
per gallon. NHTSA also seeks comment on whether a modest increase in
the CAFE civil penalty rate, less than the amount that would otherwise
be required if the 2015 Act applies, would ``result in, or
substantially further, substantial energy conservation for automobiles
in model years in which the increased penalty may be imposed,'' as
expected by EPCA.
3. Increasing the CAFE Civil Penalty Rate to $14 Would Have a
``Negative Economic Impact,'' Even If The EPCA Factors Were Not
Mandatory
Even if NHTSA was not required to apply the EPCA factors, NHTSA has
tentatively determined that raising the CAFE civil penalty rate to $14
would have a ``negative economic impact.'' NHTSA believes that the
economic consequences described above are a reasonable estimate of what
would occur if the CAFE civil penalty rate was increased 150 percent,
regardless of any effect from EPCA. That is, increasing the penalty
rate to $14 would lead to significantly greater costs than the agency
had anticipated when it set the CAFE standards because manufacturers
who had planned to use penalties as one way to make up their shortfall
would now need to pay increased penalty amounts, purchase additional
credits at likely higher prices, or make modifications to their
vehicles outside of their ordinary redesign cycles. NHTSA believes all
of these options would increase manufacturers' compliance costs, many
of which would be passed along to consumers. Considering the agency's
past analyses of CAFE's impact on vehicle costs, NHTSA tentatively
concludes that the estimate provided by industry showing annual costs
of at least one billion dollars is a reasonable estimate of this
impact. NHTSA requests comments, including any substantive analysis, on
this issue. The agency further believes that an increase in costs of
this significant magnitude exceeds the range of adjustments Congress
intended to cover when it enacted the 2015 Act, as described above.
If NHTSA determines that raising the CAFE civil penalty rate to $14
would have a ``negative economic impact,'' it is permitted to adjust
the rate by less than the otherwise required amount. Without any
statutory direction or OMB guidance on how much to adjust the rate, if
at all, it falls to NHTSA to determine the appropriate adjustment--and
NHTSA has wide discretion in making this determination.\95\
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\95\ Nat'l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200,
214-15 (D.C. Cir. 2013) (``An agency has `wide discretion' in making
line-drawing decisions and `[t]he relevant question is whether the
agency's numbers are within a zone of reasonableness, not whether
its numbers are precisely right.' . . . An agency `is not required
to identify the optimal threshold with pinpoint precision. It is
only required to identify the standard and explain its relationship
to the underlying regulatory concerns.''') (quoting WorldCom, Inc.
v. FCC, 238 F.3d 449, 461-62 (D.C. Cir. 2001)).
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In light of the regulatory concerns described above, and in
consideration of the unique regulatory structure with non-discretionary
penalties tied to standards that increase over time, NHTSA is proposing
to keep the CAFE civil penalty rate at $5.50 because it tentatively
concludes that retaining the $5.50 rate would avoid the ``negative
economic impact'' caused by any adjustment upwards.
Although NHTSA has previously sought comment on these issues, NHTSA
believes it is important to provide the public with an opportunity to
provide additional information in light of NHTSA's analysis. Therefore,
NHTSA requests comment on whether increasing the CAFE civil penalty
rate to $14 would have a ``negative economic impact,'' and if so, to
what level the rate should be raised, if at all.
4. The CAFE Civil Penalty Rate is Capped At $10
Under 49 U.S.C. 32912(c)(1)(B), if the CAFE civil penalty rate is
increased, the rate at which it is set ``may not be more than $10 for
each .1 of a mile a gallon.'' This upper limit has been in effect since
EPCA was amended in 1978 and was left in place when Congress amended
the civil penalty provision in 2007.\96\
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\96\ In the interim final rule required by the 2015 Act, NHTSA
announced that the adjusted maximum civil penalty would be increased
from $10 to $25. 82 FR 32139 (July 12, 2017). However, this change
was never formally codified in the Code of Federal Regulations nor
adopted by Congress. Even if the adjustment is considered to have
been adopted, however, NHTSA is now reconsidering that decision for
the reasons explained above.
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The 2015 Act requires adjustments of ``civil monetary penalties,''
which must be penalties that are ``assessed or enforced by an agency
pursuant to Federal law.'' \97\ NHTSA believes that the $10 cap is not
the maximum amount of a penalty that is ``assessed or enforced.''
Rather, it is a limit on the amount NHTSA can set for the CAFE civil
penalty rate if the required determinations are made. NHTSA cannot
assess or enforce the $10 cap against anyone. In contrast, other
penalties in EPCA have a maximum amount that can be ``assessed or
enforced.'' One example of such a penalty is the ``general penalty'' in
EPCA for violations of 49 U.S.C. 32911(a). That ``general penalty'' is
``a civil penalty of not more than $10,000 for each violation.'' NHTSA
has the authority, without any additional rulemakings, to subject the
entity committing a violation to the maximum amount--$10,000--for that
violation, or a lower amount, in its discretion. By contrast NHTSA has
no discretion to enforce anything other than the result of the CAFE
formula against a manufacturer, which includes the current $5.50
multiplier. The $10 figure is not part of that formula and could only
become so after further rulemaking.
---------------------------------------------------------------------------
\97\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment Sec. 3(2)(B), (C).
---------------------------------------------------------------------------
Accordingly, NHTSA is tentatively proposing in the alternative that
any potential adjustment NHTSA makes to the CAFE civil penalty rate be
capped at $10 and seeks comment on this proposal. Commenters should
consider whether the $10 limit is itself a ``civil monetary penalty''
that must be adjusted under the 2015 Act, keeping in mind that the
level was kept the same when the previous adjustment was made in 1997.
Commenters should also consider the effect of the 2007 amendments in
ratifying the $10 level and whether the market-based complexities
established by those amendments bear on what Congress meant
subsequently by ``civil monetary penalty'' in the 2015 Act.
[[Page 13917]]
F. Rulemaking Analyses and Notices
1. Executive Order 12866, Executive Order 13563, and DOT Regulatory
Policies and Procedures
NHTSA has considered the impact of this rulemaking action under
Executive Order 12866, Executive Order 13563, and the Department of
Transportation's regulatory policies and procedures. This rulemaking
document has been considered a ``significant regulatory action'' under
Executive Order 12866. At this stage, NHTSA believes that this
rulemaking could also be ``economically significant,'' but cannot
definitively make that determination until the final rule stage, as it
depends entirely on the civil penalty rate established in the final
rule.
2. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of proposed rulemaking or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
No regulatory flexibility analysis is required if the head of an agency
certifies the proposal will not have a significant economic impact on a
substantial number of small entities. SBREFA amended the Regulatory
Flexibility Act to require Federal agencies to provide a statement of
the factual basis for certifying that a proposal will not have a
significant economic impact on a substantial number of small entities.
NHTSA has considered the impacts of this notice of proposed
rulemaking under the Regulatory Flexibility Act and certifies that this
rule would not have a significant economic impact on a substantial
number of small entities. The following provides the factual basis for
this certification under 5 U.S.C. 605(b).
The Small Business Administration's (SBA) regulations define a
small business in part as a ``business entity organized for profit,
with a place of business located in the United States, and which
operates primarily within the United States or which makes a
significant contribution to the U.S. economy through payment of taxes
or use of American products, materials or labor.'' 13 CFR 121.105(a).
SBA's size standards were previously organized according to Standard
Industrial Classification (``SIC'') Codes. SIC Code 336211 ``Motor
Vehicle Body Manufacturing'' applied a small business size standard of
1,000 employees or fewer. SBA now uses size standards based on the
North American Industry Classification System (``NAICS''), Subsector
336--Transportation Equipment Manufacturing. This action is expected to
affect manufacturers of motor vehicles. Specifically, this action
affects manufacturers from NAICS codes 336111--Automobile
Manufacturing, and 336112--Light Truck and Utility Vehicle
Manufacturing, which both have a small business size standard threshold
of 1,500 employees.
Though civil penalties collected under 49 CFR 578.6(h)(1) and 49
CFR 578.6(h)(2) apply to some small manufacturers, low volume
manufacturers can petition for an exemption from the Corporate Average
Fuel Economy standards under 49 CFR part 525. This would lessen the
impacts of this rulemaking on small business by allowing them to avoid
liability for penalties under 49 CFR 578.6(h)(2). Small organizations
and governmental jurisdictions will not be significantly affected as
the price of motor vehicles and equipment ought not change as the
result of this rule.
3. Executive Order 13132 (Federalism)
Executive Order 13132 requires NHTSA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive Order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' Under Executive Order 13132, the agency may not issue a
regulation with Federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, the agency
consults with State and local governments, or the agency consults with
State and local officials early in the process of developing the
proposed regulation.
This rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government, as specified in Executive Order 13132.
The reason is that this rule will generally apply to motor vehicle
manufacturers. Thus, the requirements of Section 6 of the Executive
Order do not apply.
4. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995, Public Law 104-4,
requires agencies to prepare a written assessment of the cost, benefits
and other effects of proposed or final rules that include a Federal
mandate likely to result in the expenditure by State, local, or tribal
governments, in the aggregate, or by the private sector, of more than
$100 million annually. Because this rule is not expected to include a
Federal mandate, no Unfunded Mandates assessment will be prepared.
5. National Environmental Policy Act
The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C.
4321-4347) requires Federal agencies to analyze the environmental
impacts of proposed major Federal actions significantly affecting the
quality of the human environment, as well as the impacts of
alternatives to the proposed action. 42 U.S.C. 4332(2)(C). When a
Federal agency prepares an environmental assessment, the Council on
Environmental Quality (CEQ) NEPA implementing regulations (40 CFR parts
1500-1508) require it to ``include brief discussions of the need for
the proposal, of alternatives [. . .], of the environmental impacts of
the proposed action and alternatives, and a listing of agencies and
persons consulted.'' 40 CFR 1508.9(b). This section serves as the
agency's Draft Environmental Assessment (Draft EA). NHTSA invites
public comments on the contents and tentative conclusions of this Draft
EA.
i. Purpose and Need
This notice of proposed rulemaking sets forth the purpose of and
need for this action. NHTSA is required to consider whether it is
appropriate, pursuant to the Inflation Adjustment Act, to make an
initial ``catch-up'' adjustment to the civil monetary penalties it
administers for the CAFE program. Further, if the agency determines
that the Inflation Adjustment Act applies, it must consider the
appropriate approach to undertake pursuant to the legislation. The
purpose of this notice of proposed rulemaking is to consider the
applicability of the Inflation Adjustment Act and to propose
adjustments pursuant to the Act, consistent with its
[[Page 13918]]
requirements as well as the agency's responsibilities under EPCA (as
amended by EISA).
ii. Alternatives
NHTSA has considered a range of alternatives for the proposed
action, including maintaining the civil penalty amount at $5.50 per
each tenth of a mile per gallon (the No Action Alternative) and
increasing the civil penalty amount to $14.00 per each tenth of a mile
per gallon (as previously proposed). This notice of proposed rulemaking
also seeks public comment on whether it is required to increase the
civil penalty amount to $6.00 per each tenth of a mile per gallon
(rounding pursuant to the 2015 Act) or whether the civil penalty amount
is capped at $10.00 per each tenth of a mile per gallon (pursuant to
EPCA). In this notice of proposed rulemaking, the agency proposes
maintaining the civil penalty amount at $5.50 as its preferred
alternative, although it may select any value along this range of
alternatives, including any civil penalty amount between $5.50 and
$14.00. NHTSA is also proposing to increase the ``general penalty'' to
a maximum penalty of $41,484,\98\ pursuant to the requirements of the
Inflation Adjustment Act.
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\98\ NHTSA adjusted this penalty to a maximum of $40,000 in its
July 2016 IFR. Applying 1.01636 multiplier for 2017 inflationary
adjustments, as specified in OMB's December 16, 2016 guidance,
results in an adjusted maximum penalty of $40,654. Applying the
multiplier for 2018 of 1.02041, as specified in OMB's December 15,
2017, results in an adjusted maximum penalty of $41,484.
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iii. Environmental Impacts of the Proposed Action and Alternatives
Under all of the alternatives under consideration, the agency would
maintain or increase the civil penalty amount for a manufacturer's
failure to meet its fleet's average fuel economy target (assuming the
manufacturer does not have sufficient credits available to cover the
shortfall). When deciding whether to add fuel-saving technology to its
vehicles, a manufacturer might consider the cost to add the technology,
the price and availability of credits, the potential reduction in its
civil penalty liability, and the value to the vehicle purchaser of the
change in fuel outlays over a specified ``payback period.'' A higher
civil penalty amount could encourage manufacturers to improve the
average fuel economy of their passenger car and light truck fleets if
the benefits of installing fuel-saving technology (i.e., lower civil
penalty liability and increased revenue from vehicle sales) outweigh
the costs of installing the technology.
However, there are many reasons why this might not occur to the
degree anticipated. Apart from the civil penalty rate, as CAFE
standards increase in stringency, manufacturers have needed to research
and install increasingly less cost-effective technology that may not
obtain levels of consumer acceptance necessary to offset the
investment. A higher civil penalty amount combined with the value of
the potential added fuel economy benefit of new, advanced technology to
the vehicle purchaser may not be sufficient to outweigh the added
technology costs (including both the financial outlays and the risk
that consumers may not value the technology or accept its impact on the
driving experience, therefore opting not to purchase those models).
This may be especially true when gas prices are low. If the added cost
in civil penalty payments is borne by the manufacturer, this may result
in reduced investment in fuel saving technology or reduced consumer
choice. If the added cost in civil penalty payments is passed on to the
consumer, the consumer would see higher vehicle purchase costs without
a corresponding fuel economy benefit or other benefits, resulting in
fewer purchases of newer, more fuel-efficient vehicles. Based on the
foregoing, NHTSA believes that each of the alternatives under
consideration in this notice of proposed rulemaking could result, at
most, only marginally better levels of compliance with the applicable
fuel economy targets.
An increase in a motor vehicle's fuel economy is associated with
reductions in fuel consumption and greenhouse gas (GHG) emissions for
an equivalent distance of travel. Increased global GHG emissions are
associated with climate change, which includes increasing average
global temperatures, rising sea levels, changing precipitation
patterns, increasing intensity of severe weather events, and increasing
impacts on water resources. These, in turn, could affect human health
and safety, infrastructure, food and water supplies, and natural
ecosystems. Fewer GHG emissions would reduce the likelihood of these
impacts. Changes in motor vehicle fuel economy are also associated with
impacts on criteria and hazardous air pollutant emissions, safety,
life-cycle environmental impacts, and more.
As part of recent rulemaking actions establishing CAFE standards,
NHTSA evaluated the impacts of increasing fuel economy standards for
passenger cars and light trucks on these and other environmental impact
areas.\99\ The analyses assumed a civil monetary penalty of $5.50 per
each tenth of a mile per gallon. Though particular values reported in
its recent Environmental Impact Statements (EISs) may no longer be
replicable due to updated assumptions and new information obtained
since their publication, the agency believes that the environmental
impact trends reported remain adequate and valid. The agency has
considered the information and trends presented in those EISs in
preparing this proposal. For example, the MY 2017-2025 CAFE EIS showed
that the large stringency increases in the fuel economy standards as a
result of that rulemaking would result in reductions of global mean
surface temperature increases of no more than 0.016[deg]C by 2100.
Further, that EIS showed nationwide reductions in most criteria
pollutant emissions in 2040 (usually in ranges of 10% or less) and
small increases or reductions in most toxic pollutant emissions in 2040
(usually in ranges of 3% or less). NHTSA believes the impacts on fuel
economy resulting from this action would be very small compared to the
impacts on fuel economy resulting from the stringency increases that
were reported in those EISs. Therefore, NHTSA anticipates that the
environmental impacts resulting from the proposed action would range
from no change (No Action Alternative) to negligible impacts consistent
with, but to a much smaller degree than, the trends reported in those
EISs (increase in the civil penalty).
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\99\ See, e.g., NHTSA, Final Environmental Impact Statement,
Corporate Average Fuel Economy Standards, Passenger Cars and Light
Trucks, Model Years 2017-2025. Docket No. NHTSA-2011-0056. July
2012.
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NHTSA will prepare a new EIS for its forthcoming proposal for new
CAFE standards.\100\ The agency's civil penalty rate is an input in the
CAFE Model that will inform the development of that EIS and,
ultimately, the agency's final decision for setting CAFE standards. The
agency does not believe the civil penalty rate being proposed will
limit its ability to set ``maximum feasible'' standards pursuant to 49
U.S.C. 32902(b)(2)(B), nor will it unreasonably constrain the potential
environmental outcomes associated with future rulemakings. In addition,
NHTSA will review the new EIS and the updated CAFE Model as it prepares
its final EA for this action, which will ultimately inform the
development of the final rule.
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\100\ NHTSA, Notice of Intent to Prepare an Environmental Impact
Statement for Model Year 2022-2025 Corporate Average Fuel Economy
Standards. 82 FR 34740 (Jul. 26, 2017).
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NHTSA is also proposing to increase the ``general penalty''
pursuant to the
[[Page 13919]]
Inflation Adjustment Act. This increase is not anticipated to have
impacts on the quality of the human environment. The ``general
penalty'' is applicable to other violations, such as a manufacturer's
failure to submit pre-model year and mid-model year reports to NHTSA on
whether they will comply with the average fuel economy standards. These
violations are not directly related to on-road fuel economy, and
therefore the penalties are not anticipated to directly or indirectly
affect fuel use or emissions.
iv. Agencies and Persons Consulted
NHTSA and DOT have consulted with OMB as described earlier in this
proposal. NHTSA and DOT have not consulted with any other agencies in
the development of this proposal.
v. Conclusion
NHTSA has reviewed the information presented in this Draft EA and
concludes that the proposed action and alternatives would have no
impact or a small positive impact on the quality of the human
environment. The preferred alternative is anticipated to have no impact
on the quality of the human environment, as it would result in no
change, as compared to current law, to the civil penalty amount for
failure to meet fuel economy targets. Further, the proposed change to
the ``general penalty'' is not anticipated to affect on-road emissions.
Any of the impacts anticipated to result from the alternatives under
consideration are not expected to rise to a level of significance that
necessitates the preparation of an Environmental Impact Statement.
Based on the information in this Draft EA and assuming no additional
information or changed circumstances, NHTSA expects to issue a Finding
of No Significant Impact (FONSI). Such a finding will not be made
before careful review of all public comments received. A Final EA and a
FONSI, if appropriate, will be issued as part of the final rule.
6. Executive Order 12778 (Civil Justice Reform)
This rule does not have a retroactive or preemptive effect.
Judicial review of a rule based on this proposal may be obtained
pursuant to 5 U.S.C. 702.
7. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980, NHTSA
states that there are no requirements for information collection
associated with this rulemaking action.
8. Privacy Act
Please note that anyone is able to search the electronic form of
all comments received into any of DOT's dockets by the name of the
individual submitting the comment (or signing the comment, if submitted
on behalf of an association, business, labor union, etc.). You may
review DOT's complete Privacy Act Statement in the Federal Register
published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78), or
you may visit http://dms.dot.gov.
9. Executive Order 13771
This proposed rule is expected to be a deregulatory action under
Executive Order 13771, although NHTSA, at this point, has not been able
to quantify potential cost savings.
Proposed Regulatory Text
List of Subjects in 49 CFR Part 578
Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber
products, Tires, Penalties.
In consideration of the foregoing, 49 CFR part 578 is proposed to
be amended as set forth below.
PART 578--CIVIL AND CRIMINAL PENALTIES
0
1. The authority citation for 49 CFR part 578 is revised to read as
follows:
Authority: Pub. L. 101-410, Pub. L. 104-134, Pub. L. 109-59,
Pub. L. 114-74, Pub. L. 114-94, 49 U.S.C. 30165, 30170, 30505,
32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115;
delegation of authority at 49 CFR 1.81, 1.95.
0
2. Amend Sec. 578.6 by revising paragraph (h) to read as follows:
Sec. 578.6 Civil penalties for violations of specified provisions of
Title 49 of the United States Code.
* * * * *
(h) Automobile fuel economy. (1) A person that violates 49 U.S.C.
32911(a) is liable to the United States Government for a civil penalty
of not more than $41,484 for each violation. A separate violation
occurs for each day the violation continues.
(2) Except as provided in 49 U.S.C. 32912(c), a manufacturer that
violates a standard prescribed for a model year under 49 U.S.C. 32902
is liable to the United States Government for a civil penalty of $5.50
multiplied by each .1 of a mile a gallon by which the applicable
average fuel economy standard under that section exceeds the average
fuel economy--
(i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for
automobiles to which the standard applies manufactured by the
manufacturer during the model year;
(ii) Multiplied by the number of those automobiles; and
(iii) Reduced by the credits available to the manufacturer under 49
U.S.C. 32903 for the model year.
* * * * *
Issued in Washington, DC, under authority delegated in 49 CFR
1.81, 1.95, and 501.5
Heidi R. King,
Deputy Administrator.
[FR Doc. 2018-06550 Filed 3-30-18; 8:45 am]
BILLING CODE 4910-59-P