Civil Penalties |
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Heidi R. King
National Highway Traffic Safety Administration
26 July 2019
[Federal Register Volume 84, Number 144 (Friday, July 26, 2019)]
[Rules and Regulations]
[Pages 36007-36034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15259]
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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: Final rule.
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SUMMARY: This final rule confirms the determination NHTSA announced in
the notice of proposed rulemaking (NPRM) that the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation
Adjustment Act or 2015 Act) does not apply to the 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. In addition, this final
rule is finalizing the agency's determination that even if the
Inflation Adjustment Act applies, increasing the CAFE civil penalty
rate would have a negative economic impact, and therefore, in
accordance with the Energy Policy and Conservation Act of 1975 (EPCA)
and the Energy Independence and Security Act of 2007 (EISA), the
current CAFE civil penalty rate of $5.50 should be retained, instead of
increasing to $14 in model year 2019.
DATES:
Effective dates: This rule is effective as of September 24, 2019.
Upon reconsideration, this rule supersedes the final rule published at
81 FR 95489, December 28, 2016 (delayed at 82 FR 8694, January 30,
2017, 82 FR 15302, March 28, 2017, 82 FR 29010, June 27, 2017, and 82
FR 32139, July 12, 2017), which went into force in accordance with the
decision of the United States Court of Appeals for the Second Circuit
in NRDC v. NHTSA, Case No. 17-2780.
Petitions for reconsideration: Petitions for reconsideration of
this final rule must be received not later than September 9, 2019.
ADDRESSES: Any petitions for reconsideration should refer to the docket
number of this document and be submitted to: Deputy Administrator,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue
SE, West Building, Fourth Floor, Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief
[[Page 36008]]
Counsel, NHTSA, telephone (202) 366-5263, facsimile (202) 366-3820,
1200 New Jersey Ave. SE, Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Table of Contents
A. Executive Summary
B. Background
1. CAFE Program
2. Civil Penalties Inflationary Adjustment Act Improvements Act
of 2015
3. NHTSA's Actions to Date Regarding CAFE Civil Penalties
a. Interim Final Rule
b. Final Rule
c. Initial Reconsideration and Request for Comments
d. Notice of Proposed Rulemaking
C. Overview of the Comments
D. Response to the Comments
1. NHTSA's Reconsideration Authority
2. Applicability of the 2015 Act
3. Harmonizing the 2015 Act and EPCA
4. ``Negative Economic Impact''
a. EPCA Factors
b. Other Economic Considerations
5. $10 Cap
E. 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
As explained in the proposed rule (83 FR 13904 (April 2, 2018)),
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. The CAFE civil penalty provisions 49 U.S.C.
32912(b) and (c), established by EPCA, are complex, containing
statutory requirements that must be met if the penalty amount is to be
increased, as well as a statutory cap of $10 on the maximum penalty
amount, among other provisions, that distinguish it from ordinary civil
penalty provisions, such as the general penalty for CAFE violations
found in 49 U.S.C. 32912(a).
After the new administration took office and upon further
consideration of the issues, NHTSA determined that it was appropriate
and necessary to reconsider the applicability of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation
Adjustment Act or 2015 Act) to the CAFE civil penalty provision found
in EPCA. In reconsidering the CAFE civil penalty rule and the
applicability of the 2015 Act to the statutory provision, NHTSA had two
objectives: First, to determine whether the CAFE civil penalty rate was
the kind of penalty to which the 2015 Act applied, and second, if it
did apply, whether increasing the civil penalty rate for the CAFE
provision will have a negative economic impact. NHTSA has carefully
considered these objectives and comments received in reconsidering the
CAFE civil penalty statute that NHTSA administers and the application
of the 2015 Act to it.\1\
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\1\ This final rule is promulgated under NHTSA's authority,
delegated to it by the Secretary (49 CFR 1.95(a)), under 49 U.S.C.
Chapter 329. Cf. Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17-
2780, at 13, 17 (2d Cir., June 29, 2018) (citing the ``judicial
review provision of EPCA [49 U.S.C. 32909(a)] as ``the legislative
authorization to petition for review'' of NHTSA's indefinite delay
rule; ``Judicial review here is authorized by Section 32909 of
EPCA.'').
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As a result of this review, including consideration of all the
comments received on its proposed rule, NHTSA has reconsidered its
earlier decisions that accepted applicability of the 2015 Act and its
predecessors to the CAFE civil penalty provision in 49 U.S.C.
32912(b).\2\ Accordingly, NHTSA is finalizing its determination that
the CAFE civil penalty rate is not a ``civil monetary penalty'' that
must be adjusted for inflation under the 2015 Act. Prior to the
proposed rule, NHTSA's Federal Register notifications 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 proceeding--without
analysis--as if the 2015 Act applied to the CAFE civil penalty rate.
After taking the opportunity to reconsider this matter and fully
analyze the issue and consider the comments received on its proposal,
NHTSA concludes that the CAFE civil penalty rate is not covered by the
2015 Act.
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\2\ NHTSA has the authority to reconsider its prior rules for
the reasons described in Section D.1.
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NHTSA is finalizing its determination that 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.'' \3\ As explained in the proposed rule, 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,
after NHTSA determines there is a violation, 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.\4\ Manufacturers can also claim future credits as a means
of meeting their current liability based upon projected credits to be
earned within three subsequent model years. The amount that a
manufacturer might actually pay under the CAFE civil penalty statute is
dependent upon a fluid, multi-year process, involving credit trading
with other manufacturers at unknown prices and unverifiable credits to
be earned in the future. In other words, what the noncompliant
manufacturer pays is much more the function of market forces, trading
of credits, and manufacturers' projections of future performance, than
it is just the application of the CAFE penalty rate.
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\3\ As discussed below, this determination 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 in 1997 and its earlier
announcements of adjustments of the rate to $14 in its July 2016
interim final rule and its December 2016 final rule.
\4\ See 49 U.S.C. 32903.
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Moreover, after consideration of comments, NHTSA 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.\5\ 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 left in place
unaltered both the mechanism for increases and the upper limit of an
increased civil penalty under the
[[Page 36009]]
statute. NHTSA's determination regarding the applicability of the 2015
Act to the EPCA CAFE civil penalty provision is also confirmed by the
Office of Management and Budget (OMB), the office directed by Congress
to issue guidance on the implementation of the 2015 Act. OMB's views
regarding the applicability of the 2015 Act to the EPCA CAFE civil
penalty provision are set forth in a comprehensive opinion included in
the docket for this final rule, in which OMB concurs with NHTSA's
assessment that the 2015 Act does not apply to the CAFE civil penalty
rate.\6\ OMB supported its conclusion by noting first, that it was not
aware of any other penalty scheme with the unique features of the CAFE
civil penalty scheme, and also ``[i]n light of (1) EPCA's distinction
between the penalty rate and the penalty itself, (2) the
incompatibility of the structure of the CAFE penalty scheme and the
2015 Act, and (3) the inconsistent treatment of the CAFE penalty rate
under inflation adjustment schemes over time.'' These factors, which
OMB found supportive of NHTSA's conclusion that the 2015 Act does not
apply to the CAFE civil penalty rate, are discussed throughout this
document.
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\5\ NHTSA concludes the 2015 Act also does not apply to the $10
cap.
\6\ July 12, 2019 Letter from Russell T. Vought, Acting Director
of the Office of Management and Budget, to Elaine L. Chao, Secretary
of the United States Department of Transportation, available at
Docket No. NHTSA-2018-0017-0018 (OMB Non-Applicability Letter).
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In addition to reconsidering the application of the 2015 Act to the
EPCA CAFE civil penalty provision, NHTSA has reconsidered its decisions
in the July 2016 interim final rule and December 2016 final rule to
increase the CAFE civil penalty rate and, as a result, is retaining the
current civil penalty rate applicable to 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, rather than increasing the rate to $14 in
model year 2019.
Even if the 2015 Act is applied to the CAFE civil penalty rate,
NHTSA has determined that the rate should remain 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 of
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 persuasive evidence to support making the EPCA findings--
NHTSA concludes that increasing the CAFE civil penalty rate would have
a negative economic impact. Thus, NHTSA is not adjusting the rate under
the 2015 Act, even if it applied.
Even if EPCA's statutory factors for increasing civil penalties are
not applied, NHTSA has determined, after consideration of comments,
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 would potentially
drastically increase manufacturers' costs of compliance. OMB has
concurred with NHTSA's determination that increasing the CAFE civil
penalty rate by the otherwise required amount will have a negative
economic impact.\7\
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\7\ July 12, 2019 Letter from Russell T. Vought, Acting Director
of the Office of Management and Budget, to Elaine L. Chao, Secretary
of the United States Department of Transportation, available at
Docket No. NHTSA-2018-0017-0019 (OMB Negative Economic Impact
Letter).
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In summary, NHTSA concludes that:
The 2015 Act does not apply to the CAFE civil penalty
rate, so no rate increase is permitted, except pursuant to the scheme
established in EPCA;
Even if the 2015 Act did apply to the CAFE civil penalty
rate, the 2015 Act must be read in conjunction with EPCA, and
considering the EPCA factors, increasing the CAFE penalty rate to $14
would have a ``negative economic impact''; and
Even if the EPCA factors did not apply, increasing the
CAFE civil penalty rate to $14 would still have a ``negative economic
impact.''
The result is the same under all of these scenarios: The CAFE civil
penalty rate is and will continue to be set at $5.50, rather than
increasing to $14 in MY 2019.\8\
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\8\ Without this rule, the CAFE civil penalty rate would
increase to $14 beginning with civil penalties assessed for model
year 2019.
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In EPCA, Congress also imposed a cap of $10 on the CAFE civil
penalty rate. NHTSA has determined that this statutory cap also does
not meet the definition of a ``civil monetary penalty'' that requires
adjustment under the 2015 Act. OMB agrees with this assessment.\9\
Thus, 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,'' NHTSA has determined that
any increase would be statutorily capped by EPCA at $10.
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\9\ OMB Non-Applicability Letter.
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The general penalty in 49 U.S.C. 32912(a) for other violations of
EPCA, as amended, promulgated in 49 CFR 578.6(h)(1), is subject to
additional inflationary adjustments for 2017, 2018, and 2019. In this
rule, NHTSA is finalizing the 2017, 2018, and 2019 inflationary
adjustments to this general penalty amount.
B. Background
1. CAFE Program
NHTSA sets \10\ and enforces \11\ 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 the standards and are unable to make up the shortfall
with credits.\12\ 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 the applicable
standard. This shortfall amount is then multiplied by the number of
vehicles in that manufacturer's fleet.\13\ The basic
[[Page 36010]]
equation for calculating a manufacturer's civil penalty amount before
accounting for credits, is as follows:
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\10\ 49 U.S.C. 32902.
\11\ 49 U.S.C. 32911, 32912.
\12\ 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.
\13\ 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 import 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.
(penalty rate) x (amount of shortfall, in tenths of an mpg) x (number
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of vehicles in manufacturer's fleet).
Automakers have paid more than $890 million in CAFE civil
penalties, up to and including model year (MY) 2014 vehicles.\14\ On
top of the costs of paying these civil penalties, manufacturers have
also spent additional money towards generating overcompliance credits
and purchasing credits from other manufacturers. Starting with the
model year 2011, provisions in the CAFE program provided for credit
transfers among a manufacturer's various fleets. Commencing 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. Thus, while
NHTSA is not aware of the amount of money manufacturers spend on
generating overcompliance credits or purchasing credits from other
manufacturers, NHTSA believes it is likely that credit generation and
credit purchases involve significant expenditures. Moreover, NHTSA
expects that an increase in the penalty rate, which would apply to all
manufacturers, would result in an increase in such expenditures.\15\
Because of expected shortfalls in CAFE compliance in current and
upcoming model years, the agency currently anticipates many
manufacturers will face the possibility of larger expenditures on CAFE
penalties or increased costs to acquire credits over the next several
years than at present.\16\
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\14\ Penalty reporting for MY15 and newer vehicles was not
reported at the time of this rule. The highest CAFE penalty paid to
date for a shortfall in a single fleet was $30,257,920, paid by
DaimlerChrysler for its import 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.
\15\ See 83 FR 13904, 13916 (Apr. 2, 2018) (``[I]ncreasing 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.''). NHTSA did not receive any comments providing
information to the contrary.
\16\ NHTSA's ``Manufacturer Projected Fuel Economy Performance
Report'' indicates that the total U.S. fleet projected fuel economy
value fails to meet the standards for model year 2017 and
increasingly so for model year 2018. Available at https://one.nhtsa.gov/CAFE_PIC/MY_2017_and_2018_Projected_Fuel_Economy_Performance_Report.pdf (Apr.
30, 2018).
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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
makes certain findings,\17\ as well as the authority to compromise and
remit such penalties under certain circumstances.\18\ Recognizing the
economic harm that increases in 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--Congress has forbidden
NHTSA from increasing the CAFE civil penalty rate under EPCA unless
NHTSA 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.
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\17\ 49 U.S.C. 32912.
\18\ 49 U.S.C. 32913.
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The authority to compromise and remit penalties is extremely
limited and must be applied on a case-by-case basis. 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. To date, NHTSA has
never utilized its ability to compromise or remit a CAFE civil penalty.
These various statutory provisions and requirements, coupled with the
formula for determining the total potential civil penalty due from a
manufacturer, demonstrate the unique nature of the CAFE civil penalty
provision and distinguish it from a typical civil penalty provision
that merely sets forth an amount to be paid for a regulatory violation.
2. 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.\19\ 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. Unless an exception
applied, agencies were required to issue an interim final rule for the
initial ``catch-up'' adjustment--without providing the opportunity for
public comment ordinarily required under the Administrative Procedure
Act (APA)--by July 1, 2016.\20\
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\19\ A `` `civil monetary penalty' means any penalty, fine, or
other sanction'' that meets three requirements: 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''; the ``penalty, fine, or other sanction'' must be
``assessed or enforced by an agency pursuant to Federal law''; and
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 U.S.C. 2461 note, Federal Civil
Penalties Inflation Adjustment 3(2).
\20\ The 2015 Act authorized full notice-and-comment rulemaking
procedures if the head of an agency was adjusting the amount of a
civil monetary penalty by less than the otherwise required amount
because she determined either that increasing the civil monetary
penalty by the otherwise required amount would have a negative
economic impact or that the social costs of increasing the civil
monetary penalty by the otherwise required amount outweighed the
benefits. Such a determination required the concurrence of the
Director of the Office of Management and Budget. 28 U.S.C. 2461
note, Federal Civil Penalties Inflation Adjustment 4(c).
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[[Page 36011]]
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. For example, any
increase determined under the 1990 Inflation Adjustment Act had to be
rounded to the nearest multiple of $25,000 in the case of penalties
greater than $200,000. Under these rules, NHTSA never adjusted the CAFE
civil penalty rate above $5.50.
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.
Significantly, Congress also included a provision in the 2015 Act
that directed the Director of OMB to issue periodic guidance to
agencies implementing the inflation adjustments required under the 2015
Act. The Director of OMB provided initial guidance to agencies in a
February 24, 2016 memorandum.\21\ In that guidance, OMB specifically
instructed agencies to identify the penalties to which the 2015 Act
would apply among the penalties that each agency is responsible for
administering, and noted that:
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\21\ 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
May 22, 2018).
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.\22\
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\22\ Id.
Subsequent guidance from OMB reiterated agencies' responsibility to
identify applicable penalties and to consult with the individual
agency's Office of General Counsel and to seek clarifying guidance from
OMB with questions regarding the applicability of the 2015 Act to
particular penalties.\23\
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\23\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 Annual
Adjustment Pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available
online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (last accessed July 10, 2018);
Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2018, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015 (Dec. 15, 2017),
available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf (last accessed July 10, 2018); Memorandum from
the Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2019, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 (Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last
accessed May 31, 2019).
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For those penalties subject to the statute's definition of ``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, 2016 memorandum or an amount equal to 250% of the current penalty.
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.\24\ 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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\24\ Public Law 114-74, Sec. 701(c).
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3. NHTSA's Actions to Date Regarding CAFE Civil Penalties
a. Interim Final Rule
On July 5, 2016, NHTSA published an interim final rule, without
notice and comment, 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.\25\ 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.\26\ NHTSA made these
adjustments without seeking public comment and without discussing with
the Department of Transportation Office of General Counsel whether the
2015 Act applied to these rates, whether the adjustments conflict with
EPCA's penalty rate increase procedures, or whether making the
adjustments would have negative economic consequences. NHTSA also
raised the maximum civil penalty for other violations of EPCA, as
amended, to $40,000.\27\
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\25\ 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.
\26\ For the reasons described in Section D.5, the maximum
penalty rate that the Secretary is permitted to establish for such
violations is $10.
\27\ 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).\28\ The
Industry
[[Page 36012]]
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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\28\ 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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b. Final Rule
In response to the Industry Petition, NHTSA issued a final rule on
December 28, 2016.\29\ 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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\29\ 81 FR 95489 (December 28, 2016). The December 2016 final
rule did not impact the portions of the July 5, 2016 interim final
rule not dealing with CAFE, which are expected to be finalized as
part of NHTSA's 2019 inflationary adjustments.
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Beginning in January 2017, NHTSA took action to delay the effective
date of the December 2016 final rule.\30\ As a result of a recent
decision of the United States Court of Appeals for the Second Circuit,
that December 2016 final rule is now in force.\31\ That decision by the
Second Circuit does not affect NHTSA's authority to reconsider the
applicability of the 2015 Act to the EPCA CAFE civil penalty provision
through notice-and-comment rulemaking and to issue this final rule.\32\
Absent this final rule determining that the 2015 Act does not apply to
the CAFE civil penalty rate, the rate would have increased beginning
with model year 2019 for noncompliances that will likely be determined
in approximately late 2020.\33\
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\30\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28,
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017).
\31\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No.
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule,
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is
now in force.'').
\32\ NHTSA is permitted to issue this final rule for the reasons
explained in Section D.1.
\33\ See 81 FR 95489, 95492 (Dec. 28, 2016). Civil penalties are
determined after the end of a model year, following NHTSA's receipt
of final reports from the Environmental Protection Agency (EPA),
i.e., no earlier than April 2020 for model year 2019 noncompliance.
See 77 FR 62624, 63126 (Oct. 15, 2012).
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c. Initial Reconsideration and Request for Comments
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,\34\ in July 2017, the agency indicated it was reconsidering
its earlier decision in the July 2016 interim final rule to increase
the CAFE civil penalty rate. In that reconsideration announcement, the
agency explained that it was, for the first time, seeking public
comment on the legal, factual, and policy issues implicated by the
question of whether the rate should be increased. NHTSA requested
public comment on whether and, if so, how to amend the CAFE civil
penalty rate.\35\
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\34\ ``MYs 2016 and 2017 Projected Fuel Economy Performance
Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm.
\35\ 82 FR 32140 (July 12, 2017). Comments on this document can
be found at: https://www.regulations.gov/docket?D=NHTSA-2017-0059.
In the NPRM, NHTSA generally described the comments it received in
response to its reconsideration notice, including that ``[v]ehicle
manufacturers, either directly or via their respective representing
organizations, also expressed support for the reconsideration of the
2016 final rule.'' 83 FR 13904, 13907 (Apr. 2, 2018). NHTSA did not
intend to suggest, as one commenter to the NPRM read it, that all
``the vehicle manufacturers who submitted comments uniformly
supported reconsideration of the CAFE penalty increase.'' Comment by
Workhorse Group Inc., NHTSA-2018-0017-0010 (Workhorse Comment), at 2
n.3. NHTSA acknowledges that one electric vehicle manufacturer,
Faraday Future, submitted a comment to the reconsideration notice
requesting that NHTSA consider the economic impact of a change to
the CAFE civil penalty rate on electric vehicle manufacturers. See
Docket ID NHTSA-2017-0059-0016. NHTSA discusses this issue below.
---------------------------------------------------------------------------
d. Notice of Proposed Rulemaking
On April 2, 2018, NHTSA published a notice of proposed rulemaking
(NPRM) announcing that it had 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 proposed
to retain the current civil penalty rate of $5.50 per .1 of a mile per
gallon, rather than to increase it to $14 beginning in model year
2019.\36\ Through its reconsideration of the applicability of the 2015
Act to the CAFE civil penalty rate, NHTSA is carrying out its
responsibility, as OMB instructed in its guidance, to determine whether
the penalties under its jurisdiction are ``civil monetary penalt[ies]''
as defined by the 2015 Act.\37\ The agency's proposal is based on a
legal determination, after reconsideration, that the CAFE civil penalty
rate is not a ``civil monetary penalty'' as contemplated by the 2015
Act and that therefore the 2015 Act does not apply to the NHTSA CAFE
civil penalty formula. Specifically, NHTSA proposed that the formula is
not a ``penalty, fine, or other sanction'' that is either ``a specific
monetary amount'' or ``a maximum amount.'' Instead, as OMB highlights
in the docketed opinion,\38\ Congress expressly described the rate in
the CAFE statute as an ``amount . . . to be used in calculating a civil
penalty,'' not a ``civil penalty'' itself.\39\ The CAFE statute
outlines a process that NHTSA uses to determine a potential penalty and
that manufacturers use to determine 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 potential penalty
amount, but the actual civil penalty amount ultimately depends on the
decisions of both the violator and potentially other manufacturers.
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\36\ NHTSA's reconsideration authority is discussed in Section
D.1.
\37\ 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].'' 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, at 2 (Feb. 24, 2016),
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
\38\ OMB Non-Applicability Letter, at 4-5.
\39\ 49 U.S.C. 32912(c)(1)(A).
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This proposal reflected a change in NHTSA's position on this issue
from when NHTSA previously adjusted the CAFE civil penalty rate from $5
to $5.50. Mindful of the Alliance and Global's comment that ``the
practical and legal issues implicated by such a reduction may prove to
be insuperable,'' \40\ at this time, NHTSA is
[[Page 36013]]
exercising its judgment not to revisit its determination from more than
twenty years ago to increase the rate by fifty cents, even if that
decision did not take into account the agency's considered
interpretation of the statute.\41\
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\40\ Comment by Alliance of Automobile Manufacturers and
Association of Global Automakers, NHTSA-2018-0017-0011 (Alliance and
Global Comment), 18 n.75. Because of these practical and legal
issues and because the agency is ``reluctant to draw inferences from
Congress' failure to act,'' Schneidewind v. ANR Pipeline Co., 485
U.S. 293, 306 (1988), Congress not reinstating the $5 rate--in 2007
in EISA or otherwise--means little, contrary to the suggestion of
some commenters. See Comment by California Air Resources Board,
California Department of Transportation, District of Columbia
Department of Energy and Environment, and New Jersey Department of
Environmental Protection, NHTSA-2018-0017-0014 (CARB Comment), at
20; Comment by Attorneys General of New York, California, Delaware,
the District of Columbia, Illinois, Iowa, Maryland, Massachusetts,
New Jersey, Oregon, Vermont, Virginia, and Washington, NHTSA-2018-
0017-0015 (Attorneys General Comment), at 8, 9-10.
\41\ In light of the conclusions that NHTSA reaches in this
final rule and the agency's decision to maintain the current $5.50
civil penalty rate at this time, rather than increase it to $14
beginning in MY 2019, any modifications to the civil penalty rate,
as appropriate, would be more properly the subject of future
rulemakings. As stated in the NPRM, NHTSA is considering a separate
rulemaking to determine whether the CAFE civil penalty rate should
be reduced to $5, in light of NHTSA's decision here that the 2015
Act should not be applied to the CAFE civil penalty rate. In
addition, some commenters here have contended that the CAFE civil
penalty rate of $5.50 should be increased under EPCA, even if the
2015 Act is not applied. See infra at Section D.4.a. NHTSA plans to
consider these potentially conflicting positions and any further
changes to the CAFE civil penalty rate that might be appropriate in
a future rulemaking.
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Even if one were to assume that the CAFE penalty rate was subject
to the 2015 Act, NHTSA proposed in the alternative to maintain the
current $5.50 civil penalty rate based on a tentative finding that--
either in light of the statutory factors Congress requires NHTSA to
analyze under EPCA in determining whether an increase in the civil
penalty rate will have ``a substantial deleterious impact on the
economy'' or otherwise--increasing the CAFE civil penalty rate would
result in a ``negative economic impact.'' Pursuant to OMB's guidance,
NHTSA consulted with OMB before proposing this reduced catch-up
adjustment determination and submitted its NPRM to the Office of
Information and Regulatory Affairs (OIRA) for review. In any event,
NHTSA proposed that any adjustment would be capped by the $10 limit in
49 U.S.C. 32912(c)(1)(B), which would remain unadjusted.
NHTSA also proposed to finalize the 2017 and 2018 inflationary
adjustments for the maximum penalty for general CAFE violations in 49
U.S.C. 32912(a).\42\
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\42\ In this final rule, NHTSA also finalizes the 2019
inflationary adjustments for the general CAFE maximum penalty.
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C. Overview of the Comments
NHTSA received sixteen comments on the NPRM. NHTSA received
comments from the following entities and individuals: The Alliance of
Automobile Manufacturers; the Association of Global Automakers; Jaguar
Land Rover North America LLC; Center for Biological Diversity; Natural
Resources Defense Council; Sierra Club (and some of its members); the
Union of Concerned Scientists; Center for American Progress; Attorneys
General of New York, California, Delaware, the District of Columbia,
Illinois, Iowa, Maryland, Massachusetts, New Jersey, Oregon, Vermont,
Virginia, and Washington; the California Air Resources Board; the
California Department of Transportation; the District of Columbia
Department of Energy and Environment; the New Jersey Department of
Environmental Protection; the Institute for Policy Integrity at New
York University School of Law; Workhorse Group Inc.; and other
individuals.
D. Response to the Comments
1. NHTSA's Reconsideration Authority
As a threshold matter, NHTSA must address the various comments
submitted regarding the agency's ability to reconsider its previous
rules on this issue and upon reconsideration, change its position
regarding the applicability of the 2015 Act to the CAFE civil penalty
rate and the need to invoke the ``negative economic impact''
exception.\43\ NHTSA, like all agencies, is permitted to change its
views based upon its experience and expertise, provided that the
requirements of the APA and other governing statutes are met. To do so,
an agency must show that it is aware it is changing its position and
provide a reasoned explanation for the change.\44\ This holds true even
if the agency's position has been ``longstanding,'' as some commenters
characterized here,\45\ because the agency must continually consider
varying interpretations and reassess their validity.\46\
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\43\ See, e.g., Workhorse Comment, at 3; Comment by Center for
American Progress, NHTSA-2018-0017-0013 (CAP Comment), at 3;
Attorneys General Comment, at 6; Comment by Institute for Policy
Integrity at New York University School of Law, NHTSA-2018-0017-0017
(IPI Comment), at 2-3.
\44\ Alliance and Global Comment, at 4-5 (citing Encino
Motorcars LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016); FCC v. Fox
Television Stations, Inc., 556 U.S. 502, 515-16 (2009)).
\45\ See, e.g., Workhorse Comment, at 3; Attorneys General
Comment, at 6; IPI Comment, at 1.
\46\ Rust v. Sullivan, 500 U.S. 173, 186-87 (1991); see also
Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126 (2016); FCC
v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009); Nat'l
Cable & Telecommunications Ass'n v. Brand X internet Servs., 545
U.S. 967, 981 (2005); GenOn REMA, LLC v. U.S. E.P.A., 722 F.3d 513,
525 (3d Cir. 2013) (An agency ``is not forever held to its prior
interpretations, as the continued validity and appropriateness of
the agency's rules is an evolving process.''); Strickland v. Comm'r,
Maine Dep't of Human Servs., 48 F.3d 12, 18 (1st Cir. 1995) (``[A]n
explained modification, even one that represents a sharp departure
from a longstanding prior interpretation, ordinarily retains
whatever deference is due.''). Given that the current penalty rate
has been in effect since it was set decades ago, however, NHTSA will
apply its new position on a prospective basis only from the
effective date of this final rule.
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Here, NHTSA expressly acknowledged in the NPRM that its tentative
determination that the CAFE civil penalty rate is not a ``civil
monetary penalty'' subject to inflationary adjustment under the 2015
Act ``reflects a change in NHTSA's position on this issue.'' \47\ As
NHTSA explained in the NPRM, NHTSA proposed the change because it
previously ``did not consider'' the issue and had proceeded in the July
2016 interim final rule ``without analysis'' of the statutory
interpretation and policy issues considered in this rulemaking and
without the benefit of public comment.\48\ Accordingly, after providing
a comprehensive ``reasoned explanation'' in the NPRM,\49\ NHTSA reached
a tentative determination that a change was appropriate and that its
proposed change was justified--an analysis upon which it then sought
comment.\50\
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\47\ 83 FR 13904, 13908 (May 2, 2018). As established in OMB's
opinion and explained further below, NHTSA's changed position
comports with OMB's interpretation of the 2015 Act--that is, the
interpretation provided by the office designated by Congress to
issue guidance to all agencies on how the 2015 Act should be
implemented. OMB Non-Applicability Letter.
\48\ 83 FR 13904, 13904-05 (May 2, 2018). Comments noting that
NHTSA has previously ``acknowledged'' that the 2015 Act applies to
the CAFE civil penalty rate, Comment by Center for Biological
Diversity, Natural Resources Defense Council, Sierra Club, and the
Union of Concerned Scientists, NHTSA-2018-0017-0012 (CBD Comment),
at 9; see also CARB Comment, at 6; IPI Comment, at 2, miss the
point: NHTSA expressly recognized its past position in the NPRM, but
the agency noted that it had adopted that position without analyzing
the issue. After appropriate examination, NHTSA changed its position
to comport with the applicable statutes. It is irrelevant that
``none of the commenters who responded to NHTSA's [previous] request
for comments offered the legal interpretation that NHTSA is now
proposing,'' Workhorse Comment, at 3-4, or that the Alliance and
Global have previously stated that ``NHTSA is not empowered to
exempt the CAFE program from th[e] directive'' of the 2015 Act,
Industry Petition, at 1. NHTSA is permitted to--and, in fact, has
the responsibility to--interpret Federal statutes related to matters
under its purview, see U.S. ex rel. Hall v. Payne, 254 U.S. 343,
347-48 (1920) (``[The Secretary of the Interior] could not
administer or apply the act without construing it.''), and the
public has now had a full opportunity to comment on the proposed
interpretation.
\49\ 83 FR 13904, 13908-11 (May 2, 2018).
\50\ One commenter noted that ``NHTSA did not consult with the
Department of Justice or any other agencies besides DOT and OMB in
crafting its interpretation of the Inflation Adjustment Act
applicable to the entire federal government,'' as evidence that
NHTSA's interpretation does not merit deference. Workhorse Comment,
at 3. As noted above, OMB has provided its views on the
applicability of the 2015 Act to the CAFE civil penalty rate in a
comprehensive opinion included in the docket for this rulemaking.
OMB Non-Applicability Letter. In addition, as part of its review of
the NPRM before publication in the Federal Register, OIRA within OMB
managed an interagency review process, in which the Department of
Justice and other agencies were able to review and provide comments
on NHTSA's proposal. Moreover, consultation principally with OMB was
appropriate as the 2015 Act directed OMB to provide guidance to
agencies on implementing the inflation adjustments required under
the 2015 Act.
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[[Page 36014]]
To the extent that NHTSA's ``prior policy has engendered serious
reliance interests that must be taken into account,'' NHTSA has
provided ``a more detailed justification'' than what sufficed to create
its previous policy.\51\ As explained in the NPRM and further below,
NHTSA did not previously consider the issue at all and thus any
explanation is ``more detailed'' than the one it previously provided.
Regardless, ``reliance does not overwhelm good reasons for a policy
change,'' even in instances that would ``necessitate systemic,
significant changes'' to regulated entities' practices.\52\ NHTSA
believes that correcting an erroneous legal interpretation of a statute
to align its practice with what Congress required and exercising
authority conferred by Congress to avoid a ``negative economic impact''
both constitute ``good reasons for a policy change.'' Moreover, ``the
extent to which the Department is obliged to address reliance will be
affected by the thoroughness of public comments it receives on the
issue,'' \53\ and only one regulated entity submitted a comment
containing any argument that its reliance on NHTSA's previous policy
supports an increase in the CAFE civil penalty rate to $14.\54\ The
reliance argued in this single comment does not override NHTSA's
obligation to apply the 2015 Act as enacted or to act in accord with
the statute--and with OMB's concurrence \55\--to avoid imposing a
``negative economic impact.''
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\51\ Fox, 556 U.S. at 515.
\52\ Navarro, 136 S. Ct. at 2128 (2016) (Ginsburg, J.,
concurring).
\53\ Id. at 2128 n.2.
\54\ See Workhorse Comment, at 3.
\55\ OMB Negative Economic Impact Letter.
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It is of no consequence that the 2015 Act does not expressly state
that NHTSA may reconsider its previous rules on the initial inflation
adjustment. For one, the APA defines ``rule making''--the mechanism
mandated by the 2015 Act for enacting the initial catch-up adjustment
and for invoking the ``negative economic impact'' exception--to include
the process of ``amending, or repealing a rule.'' \56\ But in any
event, no specific statutory or codified regulatory authority is
required. It is well-established that agencies have various inherent
powers.\57\ And it has been affirmed repeatedly that, in the absence of
a Congressional prohibition, agencies have the inherent power to
reconsider their own decisions.\58\ This inherent authority encompasses
an agency reconsidering how it previously interpreted a statute and
amending an
[[Page 36015]]
existing regulation by going through the notice-and-comment rulemaking
process under the APA, particularly when its updated interpretation
``closely fits the design of the statute as a whole and its object and
policy.'' \59\
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\56\ 5 U.S.C. 551(5) (`` `[R]ule making' means agency process
for formulating, amending, or repealing a rule.''). Moreover,
NHTSA's regulations provide that ``[t]he Administrator may initiate
any further rulemaking proceedings that he finds necessary or
desirable.'' 49 CFR 553.25.
\57\ See, e.g., Vermont Yankee Nuclear Power Corp. v. Nat. Res.
Def. Council, Inc., 435 U.S. 519, 544 (1978) (noting ``the very
basic tenet of administrative law that agencies should be free to
fashion their own rules of procedure''); Morton v. Ruiz, 415 U.S.
199, 231 (1974) (``The power of an administrative agency to
administer a congressionally created and funded program necessarily
requires the formulation of policy and the making of rules to fill
any gap left, implicitly or explicitly, by Congress.''); Gadda v.
Ashcroft, 377 F.3d 934, 948 n.8 (9th Cir. 2004) (``Of course, our
statutory and inherent powers to regulate attorneys admitted to the
Ninth Circuit bar coexist with the separate, independent powers of
federal administrative agencies to do the same. . . . In the case of
agencies, this power, though limited, exists whether or not
expressly authorized by statute.''); Ober v. Whitman, 243 F.3d 1190,
1194-95 (9th Cir. 2001) (indicating that agencies have the inherent
authority to exempt de minimis violations from regulation if not
prohibited by statute); Tate & Lyle, Inc. v. C.I.R., 87 F.3d 99, 104
(3d Cir. 1996) (``Inherent in the powers of an administrative agency
is the authority to formulate policies and to promulgate rules to
fill any gaps left, either implicitly or explicitly, by Congress.'')
(citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 843 (1984)); Nat. Res. Def. Council, Inc. v. Sec. & Exch.
Comm'n, 606 F.2d 1031, 1056 (D.C. Cir. 1979) (``An agency is allowed
to be master of its own house, lest effective agency decisionmaking
not occur in [a]ny proceeding.'').
\58\ See, e.g., Motor Vehicles Mfrs. Ass'n v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 42 (1983) (``[A]n agency must be given
ample latitude to `adapt their rules and policies to the demands of
changing circumstances.' '' (quoting Permian Basin Area Rate Cases,
390 U.S. 747, 784 (1968))); Am. Trucking Associations v. Atchison,
T. & S. F. Ry. Co., 387 U.S. 397, 416 (1967) (``We agree that the
Commission, faced with new developments or in light of
reconsideration of the relevant facts and its mandate, may alter its
past interpretation and overturn past administrative rulings and
practice. . . . This kind of flexibility and adaptability to
changing needs and patterns of transportation is an essential part
of the office of a regulatory agency. Regulatory agencies do not
establish rules of conduct to last forever; they are supposed,
within the limits of the law and of fair and prudent administration,
to adapt their rules and practices to the Nation's needs in a
volatile, changing economy. They are neither required nor supposed
to regulate the present and the future within the inflexible limits
of yesterday.'') (cleaned up); Cobra Nat. Res., LLC v. Fed. Mine
Safety & Health Review Comm'n, 742 F.3d 82, 101 (4th Cir. 2014)
(``[A]n administrative agency, charged with the protection of the
public interest, is certainly not precluded from taking appropriate
action because of a mistaken action on its part in the past.''
(quoting NLRB v. Balt. Transit Co., 140 F.2d 51, 55 (4th Cir.
1944))); Kindred Nursing Centers E., LLC v. N.L.R.B., 727 F.3d 552,
560 (6th Cir. 2013) (``An agency may depart from its precedents, and
provided that the departure from precedent is explained, our review
is limited to whether the rationale is so unreasonable as to be
arbitrary and capricious. An administrative agency may reexamine its
prior decisions and may depart from its precedents provided the
departure is explicitly and rationally justified.'') (cleaned up);
ConocoPhillips Co. v. U.S. E.P.A., 612 F.3d 822, 832 (5th Cir. 2010)
(``Embedded in an agency's power to make a decision is its power to
reconsider that decision.''); 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.''); Friends of Boundary
Waters Wilderness v. Bosworth, 437 F.3d 815, 823-24 (8th Cir. 2006)
(``Agencies given the authority to promulgate a quota are presumed
to have the authority to adjust that quota.''); S. California Edison
Co. v. F.E.R.C., 415 F.3d 17, 22-23 (D.C. Cir. 2005) (``[O]f course,
agencies may alter regulations. Agencies may even alter their own
regulations sua sponte, in the absence of complaints, provided they
have sufficient reason to do so and follow applicable
procedures.''); Macktal v. Chao, 286 F.3d 822, 825-26 (5th Cir.
2002) (``[I]t is generally accepted that in the absence of a
specific statutory limitation, an administrative agency has the
inherent authority to reconsider its decisions.''); Harrington v.
Chao, 280 F.3d 50, 59 (1st Cir. 2002) (``Agencies do have leeway to
change their interpretations of laws, as well as of their own
regulations, provided they explain the reasons for such change and
provided that those reasons meet the applicable standard of
review.''); Belville Mining Co. v. United States, 999 F.2d 989, 997
(6th Cir. 1993) (``Even where there is no express reconsideration
authority for an agency, [ ] the general rule is that an agency has
inherent authority to reconsider its decision.''); Rainbow Broad.
Co. v. F.C.C., 949 F.2d 405, 409 (D.C. Cir. 1991) (``Agencies enjoy
wide latitude when using rulemaking to change their own policies and
the manner by which their policies are implemented. . . . According
agencies the power to change their minds about their own policies,
practices and procedures rests on a sound policy basis. Agencies
need some flexibility in carrying out their authority.''); Dun &
Bradstreet Corp. Found. v. United States Postal Serv., 946 F.2d 189,
193 (2d Cir. 1991) (``It is widely accepted that an agency may, on
its own initiative, reconsider its interim or even its final
decisions, regardless of whether the applicable statute and agency
regulations expressly provide for such review.''); Dawson v. Merit
Sys. Prot. Bd., 712 F.2d 264, 267 (7th Cir. 1983) (describing ``the
general rule that administrative agencies have the power to
reconsider decisions on their own initiative''); Dana Corp. v. ICC,
703 F.2d 1297, 1305 (D.C. Cir. 1983) (``[T]he agency is entitled to
have second thoughts, and to sustain action which it considers in
the public interest upon whatever basis more mature reflection
suggests.''); Trujillo v. Gen. Elec. Co., 621 F.2d 1084, 1086 (10th
Cir. 1980) (``Administrative agencies have an inherent authority to
reconsider their own decisions, since the power to decide in the
first instance carries with it the power to reconsider.'');
Mazaleski v. Treusdell, 562 F.2d 701, 720 (D.C. Cir. 1977) (``We
have many times held that an agency has the inherent power to
reconsider and change a decision if it does so within a reasonable
period of time.'') (quoting Gratehouse v. United States, 512 F.2d
1104, 1109 (Ct. Cl. 1975)); Albertson v. FCC, 182 F.2d 397, 399
(D.C. Cir. 1950) (``The power to reconsider is inherent in the power
to decide.'').
\59\ Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417-18
(1993) (cleaned up); see also U.S. Telecom Ass'n v. F.C.C., 400 F.3d
29, 35 (D.C. Cir. 2005) (``[I]f an agency adopts `a new position
inconsistent with' an existing regulation, or effects `a substantive
change in the regulation,' notice and comment are required.'')
(quoting Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995));
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).
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It is common practice for agencies--including NHTSA--to exercise
their inherent reconsideration authority.\60\ That is because
``reconsideration is often the sole means of correcting errors of
procedure or substance,'' and ``[t]here may also be instances when
unmistakable shifts in our basic judgments about law or policy
necessitate the revision or amendment of previously established rules
of conduct.'' \61\ In fact, agencies may even have a duty to reconsider
their rules. As the Supreme Court has noted:
---------------------------------------------------------------------------
\60\ See, e.g., 82 FR 14671, 14671 (Mar. 22, 2017) (``The EPA
[in a joint notice with NHTSA] has inherent authority to reconsider
past decisions and to revise, replace or repeal a decision to the
extent permitted by law and supported by a reasoned explanation.''
(citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009))); 76 FR 22565, 22578 (Apr. 21, 2011) (``An agency generally
remains free to revise improperly promulgated or otherwise
unsupportable rules, even in the absence of a remand from a Court. .
. . Agencies have particularly broad authority to revise their
regulations to correct their errors. . . . Moreover, an agency may
reconsider its methodologies and application of its statutory
requirements and may even completely reverse course, regardless of
whether a court has determined that its original regulation is
flawed, so long as the agency explains its bases for doing so.'')
(citations omitted); 75 FR 6883, 6884 (Feb. 12, 2010) (``The
Department [of Labor] has inherent authority to change its
regulations in accordance with the Administrative Procedure Act
(APA).''); 64 FR 60556, 60580 (Nov. 5, 1999) (NHTSA ``believe[s]
that nothing in [the statute] derogates our inherent authority to
make temporary adjustments in the requirements we adopt if, in our
judgment, such adjustments are necessary or prudent to promote the
smooth and effective achievement of the goals of the amendments.'').
\61\ Bookman v. United States, 453 F.2d 1263, 1265 (Ct. Cl.
1972).
An initial agency interpretation is not instantly carved in
stone. On the contrary, the agency, to engage in informed
rulemaking, must consider varying interpretations and the wisdom of
its policy on a continuing basis.\62\
---------------------------------------------------------------------------
\62\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 863-64 (1984) (emphasis added). In a subsequent case, the
Supreme Court confirmed that such reconsiderations should be done,
at a minimum, ``in response to changed factual circumstances, or a
change in administrations.'' Nat'l Cable & Telecommunications Ass'n
v. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (citing Motor
Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut.
Automobile Ins. Co., 463 U.S. 29, 59 (1983) (Rehnquist, J.,
concurring in part and dissenting in part)).
At bottom, ``[i]f an agency is to function effectively, however, it
must have some opportunity to amend its rules and regulations in light
of its experience.'' \63\
---------------------------------------------------------------------------
\63\ Fla. Cellular Mobil Commc'ns Corp. v. F.C.C., 28 F.3d 191,
196 (D.C. Cir. 1994).
---------------------------------------------------------------------------
OMB's February 2016 guidance on implementing the 2015 Act confirms
that each agency is ``responsible for identifying the civil monetary
penalties that fall under the statutes and regulations [it]
enforce[s].'' \64\ This is an ongoing responsibility for each agency,
as confirmed in OMB's subsequent guidance in December 2016, December
2017, and December 2018.\65\ In the docketed opinion regarding NHTSA's
determination that the 2015 Act does not apply to the CAFE civil
penalty rate, OMB affirms that it is appropriate for NHTSA to
reconsider its previous interpretation of the 2015 Act.\66\ NHTSA has
specific statutory authority to administer the CAFE standards program
\67\ and retains general authority--beyond its inherent authority--to
do so efficiently and in the public interest.\68\ In the text of the
2015 Act, 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.
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\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, at 2
(Feb. 24, 2016), available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
\65\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 annual
adjustment pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015, at 2 (Dec. 16, 2016),
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (``Agencies are responsible for
identifying the civil monetary penalties that fall under the
statutes and regulations they enforce.''); Memorandum from the
Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2018, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015, at 2 (Dec. 15, 2017), available at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf
(``Agencies are responsible for identifying the civil monetary
penalties that fall under the statutes and regulations within their
jurisdiction.''); Memorandum from the Director of OMB to Heads of
Executive Departments and Agencies, Implementation of Penalty
Inflation Adjustments for 2019, Pursuant to the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015, at 2
(Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019)
(``Agencies are responsible for identifying the civil monetary
penalties that fall under the statutes and regulations within their
jurisdiction.'').
\66\ See generally OMB Non-Applicability Letter.
\67\ See, e.g., 49 U.S.C. 32902, 32912. The Secretary's
authority under EPCA is delegated to NHTSA. 49 CFR 1.95(a)
(delegating authority to NHTSA to exercise the authority vested in
the Secretary under chapter 329 of title 49 of the U.S. Code); see
also 1.94(c).
\68\ See 49 U.S.C. 302(a) (stating the Secretary of
Transportation is governed by the transportation policy described in
part in 49 U.S.C. 13101(b), which provides that oversight of the
modes of transportation ``shall be administered and enforced to
carry out the policy of this section and to promote the public
interest''); 49 U.S.C. 322(a) (``The Secretary of Transportation may
prescribe regulations to carry out the duties and powers of the
Secretary. An officer of the Department of Transportation may
prescribe regulations to carry out the duties and powers of the
officer.''); 49 U.S.C. 105(c)(2) (directing the NHTSA Administrator
to ``carry out . . . additional duties and powers prescribed by the
Secretary''); 49 CFR 1.81(a)(3) (``Except as prescribed by the
Secretary of Transportation, each Administrator is authorized to . .
. [e]xercise the authority vested in the Secretary to prescribe
regulations under 49 U.S.C. 322(a) with respect to statutory
provisions for which authority is delegated by other sections in
this part.'').
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2. Applicability of the 2015 Act
Multiple commentators disagreed with NHTSA's proposed determination
that the $5.50 civil penalty rate used in the formula 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.\69\ After thorough consideration of all these comments, NHTSA
adopts its tentative determination. To be a ``civil monetary penalty''
that must be adjusted for inflation under the 2015 Act, a ``penalty,
fine, or other sanction'' must be, among other things, ``for a specific
monetary amount as provided by Federal law'' or have ``a maximum amount
provided for by Federal law.'' \70\ The CAFE civil penalty rate is
neither.
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\69\ See, e.g., Workhorse Comment, at 3; CBD Comment, at 7; CAP
Comment, at 2-3; CARB Comment, at 7-8; Attorneys General Comment, at
7; IPI Comment, at 1.
\70\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 3(2).
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For one, the CAFE civil penalty rate is an input in a formula that
is used to calculate a penalty. And although the CAFE civil penalty
rate is capped at $10 by statute,\71\ the civil penalty for
manufacturers that violate an average fuel economy standards, as
defined in 49 U.S.C. 32912(b), has no maximum amount. The higher the
shortfall or the higher the number of vehicles in the fleet, the higher
the potential penalty (before accounting for credits). This formula
stands in stark contrast to the immediately preceding provision
specifying the ``general penalty'' for
[[Page 36016]]
EPCA violations: ``A person that violates section 32911(a) of this
title is liable to the United States Government for a civil penalty of
not more than $10,000 for each violation.'' \72\ The phrase ``not more
than'' plainly denotes that the $10,000 civil penalty is a maximum
amount for each violation, and, as such, this amount (as promulgated in
49 CFR 578.6(h)(1)) was properly adjusted pursuant to the 2015 Act.\73\
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\71\ 49 U.S.C. 32912(c)(1)(B). The $10 cap is addressed further
in Section D.5.
\72\ 49 U.S.C. 32912(a); see also 49 U.S.C. 30165(a)
(establishing that violations of the National Traffic and Motor
Vehicle Safety Act are generally subject to ``a maximum amount'' of
``not more than'' $21,000 per violation and a ``maximum penalty'' of
$105 million for a related series of violations).
\73\ 81 FR 43524, 43526 (July 5, 2016). The penalty in 49 U.S.C.
32912(a), promulgated in 49 CFR 578.6(h)(1), is subject to
additional inflationary adjustments for 2017 and 2018, which were
proposed in the NPRM, and for 2019, which is being finalized in this
rule. 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 guidance, results in an
adjusted maximum penalty of $41,484. NHTSA received no comments
objecting to these proposed adjustments and finalizes those
inflationary adjustments in this rule. Applying the multiplier for
2019 of 1.02522, as specified in OMB's December 14, 2018 guidance,
results in an adjusted maximum penalty of $42,530. In accordance
with the procedures provided in the 2015 Act, and confirmed by OMB's
guidance on implementing the 2015 Act, NHTSA finalizes the 2019
adjustment for the general CAFE penalty through this final rule. 28
U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment
4(b)(2); Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2019, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015, at 4 (Dec. 14,
2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) (``In
accordance with the 2015 Act, agencies shall adjust civil monetary
penalties notwithstanding Section 553 of the Administrative
Procedure Act (APA). This means that the public procedure the APA
generally requires (i.e., notice, an opportunity for comment, and a
delay in effective date) is not required for agencies to issue
regulations implementing the annual adjustment.'') (footnote
omitted).
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The $5.50 rate also is not a ``penalty'' for a ``specific monetary
amount.'' Again, the rate is one factor in a complex formula that is
used to calculate the penalty. Moreover, the portion of the penalty
calculated by NHTSA is only the potential penalty. The ultimate penalty
owed is determined by the manufacturer based on the statutory provision
authorizing the deduction of ``the credits available to the
manufacturer.'' \74\ The CAFE civil penalty statute states expressly
that this credit reduction process is part of the calculation of the
civil penalty.\75\ It is not, as some commenters suggested,\76\ a
distinct process that is conducted after the penalty has already been
calculated.\77\ The inputs to the civil penalty formula, including the
reduction for available credits, are joined by the conjunctive ``and''
in the statute.\78\ And while it is true, as one commenter noted, that
``a specific penalty amount will still result after manufacturer
credits are taken into account,'' \79\ that is not ``a specific
monetary amount as provided by Federal law,'' as required by the 2015
Act. The amount is determined by a process codified in Federal law, but
the specific final penalty amount itself is not ``provided by Federal
law.'' The ``specific monetary amount'' is unknown until the
manufacturer decides to use any available credits it has, or can
acquire, to make up for the shortfall identified by NHTSA.\80\ In fact,
if a manufacturer has enough credits or has a plan to earn sufficient
credits in the future, the penalty ultimately calculated may be
zero.\81\ It is the manufacturer who decides this, not the agency.\82\
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\74\ 49 U.S.C. 32912(b)(3).
\75\ 49 U.S.C. 32912(b)(3). Section 32903(h) is not to the
contrary, as one commenter suggested. See CAP Comment, at 2. That
provision describes a refund process that is relevant only after ``a
civil penalty has been collected,'' not before the civil penalty--
including any credit reduction--is fully calculated.
\76\ See, e.g., CARB Comment, at 11 (``NHTSA knows exactly how
much a manufacturer owes and must pay in civil penalties for failing
to meet the CAFE standard--NHTSA calculates that amount. What NHTSA
may not know is how exactly the manufacturer will satisfy that
amount (direct payment vs. credits), but the specific amount owed,
i.e., the civil penalty, is very much known.''); Attorneys General
Comment, at 7 (``Nor does the availability of a credit mechanism
that allows a manufacturer an alternate means to fully or partially
comply with the CAFE standards have any bearing on the nature of the
penalty. . . .''); IPI Comment, at 3 (``Credit trading and transfers
allow the manufacturer to reduce its incidence of non-compliance,
but the penalty per incidence of non-compliance remains fixed and
specific. . . .'').
\77\ One commenter stated ``many, if not all, civil monetary
penalties assessed by any agency depend, on some level, on the
regulated entity's decisions about whether, and how, to comply with
a regulatory standard.'' IPI Comment, at 2-3. The comment cited no
specific examples, but regardless, the unique feature in the CAFE
civil penalty scheme relevant in this context is that the
calculation of the civil penalty amount expressly includes a
reduction for the credits available to the manufacturer. A
manufacturer could both decide not to meet an applicable CAFE
standard and not to pay a civil penalty (or to pay a smaller
penalty). Under other civil penalty schemes, a person who does not
comply with a regulatory standard does not get to decide whether or
how much of a penalty to pay.
\78\ 49 U.S.C. 32912(b).
\79\ CBD Comment, at 8. The comment further stated that ``[t]his
is no different from other rate-based penalty systems which allow
for some reduction of liability,'' but cited no example.
\80\ 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.
\81\ 49 CFR 536.5(d). A manufacturer may propose a plan to earn
future credits within the subsequent three model years in order to
comply with its regulatory obligations for the current model year,
and NHTSA will not even initiate compliance proceedings until the
time that the manufacturer's approved plan indicates that credits
will be earned or acquired to achieve compliance. 49 CFR 536.7.
Although many manufacturers have not met applicable standards, only
one manufacturer paid civil penalties for MY 2014 and only two paid
civil penalties for MYs 2012 and 2013. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
\82\ Manufacturers instruct NHTSA on how they wish to allocate
their credits or otherwise account for shortfalls. See 49 CFR
536.5(d)(2), (6).
---------------------------------------------------------------------------
Credit flexibilities were expressly included in the statute by
Congressional design to give industry the ability to decide how to
achieve the required fuel economy improvements efficiently. Notably, as
mentioned in the NPRM, Congress gave manufacturers the ability to trade
credits with other manufacturers in 2007 in EISA, introducing an
additional level of complexity to the calculation process, which is
different from other civil penalty calculations. This is far from a
direction to the agency to execute a ``minor mathematic calculation
used to figure up a total penalty number,'' as one commenter described
it.\83\
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\83\ CARB Comment, at 9-10. Although the introductory language
of the statutory provision may be ``similar'' to that of the general
penalty for EPCA violations, as noted by the commenter, the process
described for calculating the penalty is the material difference, as
explained above.
---------------------------------------------------------------------------
As explained in the opinion included in the docket for the rule,
OMB concurs with NHTSA's interpretation of the 2015 Act: OMB agrees
that the CAFE civil penalty rate is not a ``penalty, fine, or other
sanction'' that ``is for a specific monetary amount'' because EPCA
distinguishes between the rate, the ``amount . . . used in calculating
a civil penalty,'' and the ``civil penalty'' itself.\84\ Nor does OMB
believe that the CAFE penalty has a ``maximum amount provided for by
Federal law'': There is no limit to the level of civil penalty that can
be imposed under EPCA because the civil penalty rate is merely one
factor in the formula used to calculate the potential civil penalty
liability. OMB explains further that the $10 cap does not qualify as
``maximum amount provided for by Federal law'' because it limits the
``amount . . . used in calculating a civil penalty,'' not the ``civil
penalty'' itself. Moreover, the $10 cap cannot be ``assessed or
enforced'' at the time of the violation as required by the 2015 Act.
Rather, it serves as a limitation on NHTSA's authority to alter the
penalty rate.
---------------------------------------------------------------------------
\84\ OMB Non-Applicability Letter, at 4-5.
---------------------------------------------------------------------------
Because of the changes that Congress enacted to the CAFE program
through
[[Page 36017]]
EISA in 2007, Congress was not necessarily ``on notice'' that NHTSA
would apply the 2015 Act to the CAFE civil penalty rate, as one comment
stated, merely because it had done so in 1997.\85\ In fact, NHTSA did
not make any subsequent adjustments to the $5.50 rate, even as it
repeatedly made adjustments to its other civil penalties--including an
adjustment to the maximum general penalty under EPCA in 49 U.S.C.
32912(a).\86\
---------------------------------------------------------------------------
\85\ Attorneys General Comment, at 9.
\86\ 64 FR 37876 (July 14, 1999); 66 FR 41149 (Aug. 7, 2001); 69
FR 57864 (Sept. 28, 2004); 70 FR 53308 (Sept. 8, 2005); 71 FR 28279
(May 16, 2006); 73 FR 9955 (Feb. 25, 2008) (adjusting maximum
general penalty under EPCA and another NHTSA penalty); 75 FR 5244
(Feb. 2, 2010).
---------------------------------------------------------------------------
Apparently concerned about the ease with which the CAFE civil
penalties program could damage the economy and the automobile industry
in particular,\87\ Congress imposed a strict, tailored procedure for
adjusting the CAFE civil penalty rate, requiring robust substantive
findings and specific procedures, including providing opportunity for
the Federal Trade Commission to comment and requiring at least eighteen
months before an increased rate can go into effect.\88\ This process
stands in stark contrast to the summary approach delineated in the 2015
Act, which presumptively requires an interim final rule without notice
and comment for the initial catch-up adjustment and similarly requires
subsequent adjustments to be made without the traditional notice-and-
comment process outlined in the APA.\89\
---------------------------------------------------------------------------
\87\ See, e.g., ``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.''); H.R. Rep. No.
94-340, at 87 (1975) (``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.''); 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.'').
\88\ See 49 U.S.C. 32912(c).
\89\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 4(b).
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One comment observed that ``the 2015 Act provides that an agency
need not make inflation-based adjustments if it has implemented a
discretionary adjustment . . . greater than the annual inflation
adjustment.'' \90\ NHTSA agrees with the general notion offered by the
commenter that this provision suggests Congress intended the inflation
adjustments required under the 2015 Act to coexist with discretionary
adjustments provided for under other statutes. But as described in the
NPRM and below--and recognized by OMB in the opinion included in the
docket for this rulemaking \91\--the CAFE civil penalty program is
unique--namely, that the amount in question is a single input in a
complex market-based penalty program, and not the penalty amount
itself. And as OMB further explains in its opinion, the statutory
structure of EPCA itself strongly indicates that Congress did not
intend the 2015 Act to apply to the CAFE civil penalty rate. Under
EPCA, there is no automatic increase in the penalty rate, the burden is
on the Secretary to demonstrate an absence of economic harm before
increasing the rate, and any increase is capped at $10. In contrast,
under the 2015 Act, increases are automatic, the Secretary has the
burden of demonstrating economic harm to stop an initial increase and
has no power to stop future increases, and the potential penalty
increases are unlimited. It is highly unlikely that Congress intended
to shift from the EPCA scheme to the 2015 Act scheme without any
reference to EPCA. Accordingly, NHTSA determines that Congress did not
intend for the 2015 Act to apply to the CAFE civil penalty rate.\92\
---------------------------------------------------------------------------
\90\ Attorneys General Comment, at 9 (citing 28 U.S.C. 2461
note, Federal Civil Penalties Inflation Adjustment 4(d)).
\91\ OMB Non-Applicability Letter, at 4-6.
\92\ To the extent the 2015 Act does apply to the CAFE civil
penalty rate, EPCA prohibits NHTSA from increasing the CAFE civil
penalty rate--for an inflation adjustment or otherwise--at this
time, for the reasons described below.
---------------------------------------------------------------------------
Some commenters noted that the 2015 Act is designed to keep civil
monetary penalties at the same levels, in real terms, not increase
them.\93\ In response, NHTSA notes that the 2015 Act itself repeatedly
refers to the adjustments as ``increases.'' \94\ Accepting the
commenters' point, however, would actually provide further support for
NHTSA's determination that the 2015 Act does not apply to the CAFE
civil penalty rate. Because of the unique nature of the CAFE civil
penalty formula, applying the 2015 Act to it would exceed the purpose
of the 2015 Act noted by those commenters to ``maintain'' the real
value of civil monetary penalties: Instead, doing so would constitute
an increase.\95\ Moreover, as OMB noted in the opinion included in the
docket, the unique features of EPCA also make the 2015 Act inconsistent
with the CAFE civil penalty rate because, under EPCA, Congress required
the Secretary of Transportation to regularly establish the maximum
feasible fuel efficiency standards based on, among other things,
developing technology, as opposed to applying a rote, formulaic
increase to the penalty rate.\96\ Rather than ``maintain[ing]'' the
real value of the CAFE civil penalty formula through inflation
adjustment procedures, Congress chose other means: The CAFE civil
penalty formula is based in part on the amount of the manufacturer's
shortfall, and Congress requires NHTSA to prescribe the maximum
feasible average fuel economy standards annually.\97\ If a manufacturer
failed to
[[Page 36018]]
adapt to the increasing standards, its shortfall--and in turn, its
penalty calculation (before accounting for credits)--increases
automatically.\98\ Requiring an inflation adjustment on top of that
would be gratuitous. The fact that Congress deliberately enacted a
mechanism that would increase the potential CAFE penalty amounts
without requiring inflation adjustments--fully ``aware that inflation
would effectively reduce the real value of the [CAFE] civil penalty
rate over time'' \99\--indicates that Congress did not intend for the
CAFE civil penalty rate to be subject to inflation adjustments and thus
that the 2015 Act was not intended to apply to that calculation.\100\
---------------------------------------------------------------------------
\93\ See, e.g., CBD Comment, at 7; CAP Comment, at 3-4; CARB
Comment, at 13; IPI Comment, at 19-20. One of these commenters
claimed that ``Congress especially intended inflationary adjustments
to apply in areas of heightened regulatory concern, such as health
and safety, the environment, and consumer protection.'' CBD Comment,
at 6 (citing James Ming Chen, Inflation-Based Adjustments in Federal
Civil Monetary Penalties, 34 Yale L. & Pol'y Rev. 1, 3 (2015)).
There is nothing in the 2015 Act that supports this claim. The
original source cited by the comment's cited source is not the
legislative history of the 2015 Act--or even the 1990 Inflation
Adjustment Act--but a Federal Register notice from 1973, identifying
various recommendations from the Administrative Conference of the
United States. 38 FR 19782, 19792 (July 23, 1973). The
recommendation in question had nothing to do with inflation
adjustments; the Administrative Conference merely noted that ``[i]n
many areas of increased concern (e.g., health and safety, the
environment, consumer protection) availability of civil money
penalties might significantly enhance an agency's ability to achieve
its statutory goals.'' 38 FR 19782, 19792 (July 23, 1973).
\94\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 4(c), 5(a), 5(b)(2)(C), 6.
\95\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 2(b)(2). One commenter noted that ``remedial legislation
should be construed broadly to effectuate its purposes.'' CARB
Comment, at 10, 16-17 (quoting Tcherepnin v. Knight, 389 U.S. 332,
336 (1967)). As one of the cases cited by this commenter expressly
affirms, ``[t]hat principle, however, `does not give the judiciary
license, in interpreting a provision, to disregard entirely the
plain meaning of the words used by Congress.' '' Belland v. Pension
Ben. Guar. Corp., 726 F.2d 839, 844 (D.C. Cir. 1984) (quoting Symons
v. Chrysler Corp. Loan Guar. Bd., 670 F.2d 238, 241 (D.C. Cir.
1981)).
\96\ OMB Non-Applicability Letter, at 6.
\97\ 49 U.S.C. 32902(a). One commenter noted that ``[w]hile
Congress has directed NHTSA to set CAFE standards at the maximum
feasible level, this does not necessarily amount to `continuous fuel
standard increases,''' pointing out that ``CAFE standards have once
decreased and otherwise, until a few years ago, remained the same
for 20 years.'' CARB Comment, at 13. This is an accurate but
misleading characterization. What the comment failed to mention was
that it was Congress' decision to keep the standards flat over this
period, not the agency's. For a significant portion of this period,
Congress prohibited NHTSA from using funds ``to prepare, propose, or
promulgate any regulations . . . prescribing corporate average fuel
economy standards for automobiles . . . in any model year that
differs from standards promulgated for such automobiles prior to
enactment of this section.'' Public Law 104-50, Sec. 330; see also
Public Law 104-205, Sec. 323; Public Law 105-66, Sec. 322; Public
Law 105-277, Sec. 322; Public Law 106-69, Sec. 321; Public Law 106-
346, Sec. 320. Moreover, from 1985 until EISA was signed into law in
2007, Congress set the average fuel economy standard for passenger
automobiles at 27.5 miles per gallon by default and did not require
any increases--annually or otherwise, or to the maximum feasible
level or otherwise. See Public Law 94-163, Sec. 301; Public Law 103-
272, Sec. 1(d). Instead, Congress permitted, but did not require,
that NHTSA establish a higher or lower standard for passenger cars
if the agency found that the maximum feasible level of fuel economy
is higher or lower than 27.5 miles per gallon.
\98\ See, e.g., Workhorse Comment, at 1 (``In effect, increasing
the civil penalty rate increases the stringency of the CAFE
Standards.''). This mechanism also counters the argument that a CAFE
civil penalty rate of $5.50 ``effectively stall[s] fuel economy.''
CARB Comment, at 10; see also CAP Comment, at 2 (``[R]educing the
penalty below the statutorily-mandated rate will likely lead to many
more manufacturers electing to pay penalties rather than to comply
with the law.''). The CAFE civil penalty formula enacted by Congress
already incentivizes automakers to improve fuel economy without the
need to conduct inflation adjustments--a reality that the same
commenter that made this argument appeared to recognize just a few
pages later: ``Increases in the CAFE standards reflect continuing
improvements in the technological ability of manufacturers to
increase fuel economy, as reflected in the fact that most
manufacturers have been meeting or exceeding the CAFE standards in
recent years even as the standards have been increasing.'' CARB
Comment, at 13.
\99\ 83 FR 13904, 13910-11 (May 2, 2018).
\100\ One commenter argued that ``other agencies have had no
trouble applying inflation adjustments to the civil penalties
associated with'' regulatory standards that ``undergo statutorily
required reviews at regular intervals to increase stringency.'' IPI
Comment, at 4. The comment only cited one example: An adjustment by
the Department of Energy to the maximum civil penalties it can
impose for violations of its energy efficiency standards, among
other violations. See 83 FR 1289, 1291 (Jan. 11, 2018) (``Any person
who knowingly violates any provision of Sec. 429.102(a) may be
subject to assessment of a civil penalty of no more than $449 for
each violation.''; ``In accordance with sections 333 and 345 of the
Act, any person who knowingly violates any provision of paragraph
(a) of this section may be subject to assessment of a civil penalty
of no more than $449 for each violation.''). This example is wholly
distinct from the CAFE civil penalty calculation, in which the
increased stringency is expressly included as a factor.
---------------------------------------------------------------------------
It is important to keep in mind that the overarching purpose of the
CAFE program is to conserve petroleum. Thus, although the penalty is
expressed based on the shortfall from the standard rather than the
additional amount of fuel that will be consumed as a result of the
shortfall, the cost of the penalty per increased gallon consumed shows
how the actual penalty rate for excessive fuel consumption has
increased as the standards themselves have increased.
Assume the CAFE civil penalty rate is fixed at $5, and consider two
cases. In the first case, Manufacturer A has a fuel economy shortfall
of 1.0 mpg and a production volume of 1 million passenger cars for MY
1978 in which the applicable CAFE standard is 18.0 mpg. Before
accounting for credits, the civil penalty for MY 1978 would be $50
million [= (10 tenths of a mile per gallon shortfall) x ($5.00 per
tenth of a mile per gallon shortfall) x (1,000,000 vehicles)]. Assuming
an average lifetime of 130,000 miles for Manufacturer A's vehicles, the
fuel use over the lifetimes of all of Manufacturer A's vehicles would
be 7.65 billion gallons [= (130,000 miles)/(17 miles per gallon) x
(1,000,000 vehicles)]. Had Manufacturer A met the CAFE standard of 18.0
mpg, the total fuel use would have been 7.22 billion gallons [=
(130,000 miles)/(18 miles per gallon) x (1,000,000 vehicles)]. Thus,
the increased fuel use impact on society attributed to the CAFE non-
compliance would be 0.43 billion gallons [= (7.65 billion gallons)-
(7.22 billion gallons)]. This means that the penalty cost per gallon is
$0.116.
In the second case, Manufacturer A's MY 2017 vehicle attribute-
based CAFE standard is 36.0 mpg, double the MY 1978 standard. Holding
everything else identical, Manufacturer A's fuel economy shortfall
would have to be 3.8 mpg (for a fuel economy of 32.2 mpg) to produce
the same 0.43 billion gallons of societal impact of increased fuel use:
Assuming the same average lifetime of 130,000 miles for Manufacturer
A's vehicles, the fuel use over the lifetimes of all of Manufacturer
A's vehicles would be 4.04 billion gallons [= (130,000 miles)/(32.2
miles per gallon) x (1,000,000 vehicles)]. Had Manufacturer A met the
CAFE standard of 36.0 mpg, the fuel use would have been 3.61 billion
gallons [= (130,000 miles)/(18 miles per gallon) x (1,000,000
vehicles)]. The increased fuel use impact on society attributed to the
CAFE non-compliance would be 0.43 billion gallons [= (4.04 billion
gallons)-(3.61 billion gallons)]. With this 3.8 mpg shortfall,
Manufacturer A would incur, before accounting for credits, a civil
penalty of $190 million [= (38 tenths of a mile per gallon shortfall) x
($5.00 per tenth of a mile per gallon shortfall) x (1,000,000
vehicles)]. For the same impact on societal fuel use, Manufacturer A's
MY 2017 potential civil penalty is 3.8 times higher than the MY 1978
potential civil penalty, meaning that the penalty cost per gallon is
$0.442.
Three comments argued that Congress demonstrated it knew how to
exempt statutes from the application of the 2015 Act by expressly
excepting statutes like the Internal Revenue Code of 1986 and the
Tariff Act of 1930 from the adjustment process.\101\ But the penalties
under these statutes are not exempted from the definition of ``civil
monetary penalty''; rather, Congress acknowledged that the penalties
under these statutes are ``civil monetary penalties'' that would
otherwise need to be adjusted but for Congress' express exemption. In
contrast, NHTSA's determination is that the CAFE civil penalty rate
does not satisfy the definition of ``civil monetary penalty'' given by
Congress and thus does not need to be exempted from Congress'
adjustment mandate.
---------------------------------------------------------------------------
\101\ CBD Comment, at 6; CARB Comment, at 8; Attorneys General
Comment, at 9.
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One comment noted ``on a fundamental level that Congress
specifically designated the CAFE penalty as `a civil penalty.' '' \102\
As NHTSA noted in its NPRM, however, ``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.'' \103\ Moreover, as explained above, the
``civil penalty'' referenced in 32912(b) is not referring to the $5.50
rate, but the result of the entire complex calculation and credit
application process.
---------------------------------------------------------------------------
\102\ CARB Comment, at 9 (quoting 49 U.S.C. 32912(b)); see also
Attorneys General Comment, at 7 (``Congress expressly designated the
CAFE penalty, which is monetary, as `a civil penalty.' '').
\103\ 83 FR 13904, 13908 n.24 (Apr. 2, 2018).
---------------------------------------------------------------------------
Several commenters pointed out that other agencies adjusted civil
penalties for inflation under the 2015 Act that involved what the
commenters characterized as a rate or formula.\104\ In support, these
commenters provided numerous examples of penalties involving a simple
multiplier that other agencies adjusted for inflation. The examples
involve maximum penalties
[[Page 36019]]
per violation and/or per day.\105\ NHTSA did not and does not take the
position that any penalty involving a multiplier is not a ``civil
monetary penalty'' subject to inflationary adjustment under the 2015
Act. Indeed, most of the civil penalties that NHTSA properly adjusted
for inflation under the 2015 Act in its interim final rule are like the
examples provided by commenters: Maximum penalties involving a simple
multiplier.\106\ NHTSA acknowledged in the NPRM that these types of
maximum penalties are subject to inflationary adjustment.\107\ As NHTSA
explained in its NPRM: ``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.' This sets `a maximum amount' of
$10,000 per violation. . . . Accordingly, this civil penalty level was
properly adjusted. . . .'' \108\ NHTSA is finalizing its inflationary
adjustment of that maximum penalty per violation in this final rule.
NHTSA also adjusted many non-CAFE penalties that are maximum penalties
that use a simple multiplier of the number of violations or number of
days.\109\
---------------------------------------------------------------------------
\104\ CBD Comment, at 8 (citing numerous examples of agencies
adjusting ``rate-based penalties'' to account for inflation); CAP
Comment, at 3; CARB Comment, at 8-9; Attorneys General Comment, at
8.
\105\ See CBD Comment, at 8; CAP Comment, at 3; CARB Comment, at
8-9; Attorneys General Comment, at 8.
\106\ NHTSA is not reconsidering portions of the interim final
rule (81 FR 43524 (July 5, 2016)) that address non-CAFE penalties.
Most of the penalties adjusted for inflation are maximum penalties
that involve a multiplier. For example, NHTSA adjusted the penalties
for school bus-related violations of the National Traffic and Motor
Vehicle Safety Act from a maximum of $10,000 per violation, as set
by statute, to a maximum of $11,940 per violation. Id. at 43525
(adjusting 49 CFR 578.6(a)(2)) A separate violation occurs for each
school bus or item of school bus equipment, ``and for each failure
or refusal to allow or perform a required act.'' 49 CFR 578.6(a)(2).
\107\ See 83 FR at 13909.
\108\ 83 FR at 13909 (citations omitted).
\109\ See 81 FR 43524 (July 5, 2016).
---------------------------------------------------------------------------
NHTSA agrees with commenters that maximum penalties such as these
are properly subject to inflationary adjustment. But the penalty for
violations of CAFE standards is not a maximum penalty that uses a
simple multiplier. As a threshold matter, the CAFE civil penalty rate
alone is not a ``civil monetary penalty'' as defined by the 2015 Act.
The CAFE statute expressly states that the rate is an ``amount . . . to
be used in calculating a civil penalty,'' not a ``civil penalty'' on
its own.\110\ In any event, unlike maximum penalties that use a simple
multiplier, the CAFE civil penalty rate is not subject to inflation as
a ``maximum amount provided by federal law.'' Other penalties expressly
include language, such as ``a maximum civil penalty'' or a ``civil
penalty of not more than'' a specified value per violation, which
indicate they are for a maximum amount.\111\ No such language is
included for the CAFE penalty, which instead expressly may not ``be
compromised or remitted'' except in extremely rare circumstances.\112\
This stands in stark contrast to maximum penalties, where the agency
has authority to determine the appropriate penalty amount.\113\
---------------------------------------------------------------------------
\110\ 49 U.S.C. 32912(c)(1)(A).
\111\ See, e.g., 49 U.S.C. 30165(a)(3); 32912(a).
\112\ See 49 U.S.C. 32913(a). Contrast this constraint with the
broad, discretionary authority delegated by Congress for NHTSA's
other civil penalties: ``The Secretary of Transportation may
compromise the amount of a civil penalty imposed under this
section.'' 49 U.S.C. 30165(b)(1).
\113\ See, e.g., 49 U.S.C. 30165(c). Statutory schemes that
allow for mitigation, as pointed out by commenters, are not
comparable because those are for maximum penalties, and thus subject
to inflationary adjustment. Moreover, it is up to the agency to
determine the appropriate mitigation. Under the CAFE penalty, it is
the violator who determines how much to pay, based on use of
credits, not the agency.
---------------------------------------------------------------------------
Additionally, the penalty for violating a CAFE standard does not
use a simple multiplier comparable to the examples provided by
commenters. For the examples provided, as well as the penalties NHTSA
properly adjusted for inflation, the agency can readily determine the
penalty inputs by adding up the number of violations and/or the number
of days as appropriate under the statute. The multiplier for a
regulated entity that violated a provision of law can only go up (if
the penalty uses a multiplier of the number of days); it cannot go
down. Even if there were a set penalty per day (as opposed to a
maximum), that is a certain penalty: For every day that an entity
violates the law, it must pay the specific penalty set by law.
None of this is true of the penalty for violations of CAFE
standards. Unlike other penalties, the entity that violated the law can
take unilateral action to decrease or eliminate the penalty.\114\ A
reduction in the control of the entity that violated the law means the
penalty is not for ``a specific monetary amount.'' The agency cannot
readily calculate the penalty inputs: It needs instructions from the
regulated entity to do so. That makes this a complex formula unlike any
other. The CAFE penalty is not a fixed penalty based on the number of
violations and amount of time that has passed. The law allows
manufacturers to base their penalty on future actions (a carry-back
plan or acquisition of credits from a competitor), on actions unrelated
to the specific violation at issue (transfers or trades), or even to
obtain a refund of a civil penalty previously paid.\115\ The
multipliers in other penalty schemes relate to how much the entity
violated the law (how many violations, or for how long). The CAFE
penalty calculation, on the other hand, includes a reduction unrelated
to the manufacturer's actions to meet the standard. A manufacturer can
intentionally design its vehicles to exceed the standard and yet still
not pay a penalty. But that decision is up to the manufacturer, not the
agency--which is compelled by law to reduce the penalty if the
manufacturer elects to use credits available to it. NHTSA is not aware
of any comparable penalty structure with a similarly complex statutory
formula that must factor in decisions of the violator and third-party
actors (i.e., other manufacturers), and no commenter has provided an
example of one.
---------------------------------------------------------------------------
\114\ See 49 U.S.C. 32912(b)(3).
\115\ 49 U.S.C. 32903(f), (g), (h); 32912(b).
---------------------------------------------------------------------------
The Institute for Policy Integrity critiqued NHTSA for relying on
the Congressional Budget Office's (CBO's) assessment of the 2015 Act's
revenue effects across all applicable penalties for ten years.\116\
Some courts have relied on CBO cost estimates to determine legislative
intent.\117\ The Institute for Policy Integrity provided no evidence
that the CBO's assessment was flawed nor did it provide its own
calculation of the amount of fines NHTSA should expect to collect to
compare to the CBO estimate, much less one that would offset the
significant disparity between the CBO's estimate and the Alliance and
Global's calculation as described in the NPRM.\118\ OMB has reviewed
CBO's assessment and, as stated in its opinion, reached the same
conclusion as NHTSA: The billions of dollars estimated to be paid in
CAFE civil penalty payments grossly exceeds CBO's projection of
additional revenue that would be collected across the entire Federal
Government under the 2015 Act over the same time period--an analysis
Congress was aware of when it enacted the 2015 Act.\119\ Regardless,
the CBO estimate is not the sole support NHTSA relied on to make its
determination that
[[Page 36020]]
the 2015 Act is not applicable to the CAFE civil penalty rate; rather,
it served as additional evidence--on top of the plain language of the
statute, the unique complexity of the CAFE civil penalty scheme, the
legislative history of EPCA, and other indicators--further justifying
NHTSA's determination.
---------------------------------------------------------------------------
\116\ IPI Comment, at 5.
\117\ See, e.g., Nunes-Correia v. Haig, 543 F. Supp. 812, 815
(D.D.C. 1982) (``[T]he Congressional Budget Office (`CBO') cost
estimates . . . demonstrate that Congress clearly intended the Act
to apply retroactively.'')
\118\ 83 FR 13904, 13911 (Apr. 2, 2018). CARB and the co-
signatories to its comment similarly failed to provide such evidence
when they asserted that ``the costs estimated by the automakers are
not just the cost of facing an adjusted penalty but also include
technology costs and other costs such as insurance, financing, and
taxes--with the latter two (technology and other costs) making up
the bulk of the estimated costs.'' CARB Comment, at 11-12.
\119\ OMB Negative Economic Impact Letter, at 5.
---------------------------------------------------------------------------
NHTSA also received some comments about the rounding rule in the
2015 Act, which provides that ``[a]ny increase determined under this
subsection shall be rounded to the nearest multiple of $1.'' \120\
NHTSA observed in the NPRM that 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).\121\
---------------------------------------------------------------------------
\120\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]5(a).
\121\ 83 FR 13904, 13911 (Apr. 2, 2018).
---------------------------------------------------------------------------
One commenter argued that this interpretation ``ignores basic math
because applying the [2015] Act results in more than a de minimis
increase from $5.50.'' \122\ This misconstrues NHTSA's point: NHTSA was
referring to subsequent annual inflationary increases after the initial
catch-up adjustment. For example, if the CAFE civil penalty rate was
adjusted to $14 in the initial catch-up adjustment, the rate would not
have been adjusted applying either the 2017, 2018, or 2019 multipliers
(1.01636, 1.02041, and 1.02522, respectively) and rounding to the
nearest dollar. If the original rate was $6, the last time the
multiplier would have allowed an inflation adjustment to $7 under the
rounding rule was 1981, during a time of significant inflation.\123\
---------------------------------------------------------------------------
\122\ IPI Comment, at 5.
\123\ Data available at https://data.bls.gov/pdq/SurveyOutputServlet.
---------------------------------------------------------------------------
Another commenter conceded that ``such rounding may prevent some
annual inflationary adjustment for small penalties,'' but nonetheless
observed that ``[i]f Congress had wanted small penalties to be excluded
. . . , it would have explicitly said so.'' \124\ But statutes must be
read to avoid rendering provisions ``insignificant, if not wholly
superfluous.'' \125\ As NHTSA has shown, having to apply the statute's
rounding rule to such a small rate would violate that principle,
particularly when the rounding rule is viewed, as NHTSA must, in
``context'' and in line with the ``overall statutory scheme.'' \126\
---------------------------------------------------------------------------
\124\ CARB Comment, at 12.
\125\ Duncan v. Walker, 533 U.S. 167, 174 (2001); see also Green
v. Bock Laundry Mach. Co., 490 U.S. 504, 509 (1989) (rejecting an
interpretation that ``would compel an odd result'').
\126\ Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809
(1989) (citing United States v. Morton, 467 U.S. 822, 828 (1984)).
---------------------------------------------------------------------------
The same commenter also asserted that even ``if the rounding rule
does trap small penalties at their catch-up adjustment level, agencies
can always adjust them through their own penalty adjustment
procedures.'' \127\ True enough, but the commenter went on to claim
that in this specific case, ``this would just be an inflation
adjustment, [so] NHTSA should not have difficulty with satisfying [the
EPCA] factors.'' \128\ This heavily underestimates the burden required
by statute to increase the CAFE civil penalty rate,\129\ discussed in
more detail in the NPRM and below. And this burden is there for a
reason: Given that the CAFE civil penalty rate serves as one element in
a formula that yields an actual potential penalty, rounding the rate to
the nearest dollar has outsized impacts that must be carefully
considered. For instance, rounding the current $5.50 rate to $6.00 is
not merely a $0.50 increase in a penalty, but a 9% increase. An
automaker who sells 100,000 vehicles of a single model that fails to
meet its target fuel economy standard by one mile per gallon would face
a potential penalty of $6,000,000 instead of $5,500,000. This is not a
minor difference.
---------------------------------------------------------------------------
\127\ CARB Comment, at 12.
\128\ CARB Comment, at 13.
\129\ See 49 U.S.C. 32912(c).
---------------------------------------------------------------------------
Because NHTSA is not ``increas[ing]'' the CAFE civil penalty rate--
because the 2015 Act does not apply or because doing so would have a
negative economic impact--the rounding rule is inapplicable.\130\
---------------------------------------------------------------------------
\130\ See Alliance and Global Comment, at 16-17. If the 2015 Act
applies to the CAFE civil penalty rate, rounding up to the nearest
dollar would constitute an increase in the rate that would be
permissible only if NHTSA made the requisite findings--and followed
the congressionally-mandated procedure--under EPCA, discussed
further below.
---------------------------------------------------------------------------
3. Harmonizing the 2015 Act and EPCA
In the alternative, even if the 2015 Act did apply, the ``negative
economic impact'' exception of the 2015 Act is best read in harmony
with EPCA to ensure both statutes are given meaning. A few commenters
argued that the 2015 Act and EPCA should not be read together because
they have different purposes.\131\ NHTSA agrees that the overarching
purposes of the two statutes are different. But that does not obviate
the need to harmonize the statutes. Indeed, both statutes recognize the
importance of limiting increases to penalties to avoid damaging the
economy. Although the statutes may have different ultimate objectives,
they share that motivating concern and should be read together, as part
of a unified code of Federal law, with the goal of upholding that
common principle. NHTSA believes its interpretation achieves that goal.
---------------------------------------------------------------------------
\131\ See, e.g., CAP Comment, at 4; Attorneys General Comment,
at 11; IPI Comment, at 4.
---------------------------------------------------------------------------
Relatedly, NHTSA is mindful of the comments that argued that the in
pari materia canon of statutory interpretation may not be the perfect
tool for the interpretive question here.\132\ But as NHTSA noted in the
NPRM, the ``principles underlying'' this canon--most notably, that the
statutes enacted by Congress should be read as a whole and interpreted
harmoniously--provided further support for NHTSA's proposed position,
which it now adopts.\133\ None of the comments objected to NHTSA's
point that ``[t]his approach to statutory interpretation is consistent
with NHTSA's past practice.'' \134\
---------------------------------------------------------------------------
\132\ See, e.g., CARB Comment, at 15; Attorneys General Comment,
at 11.
\133\ 83 FR 13904, 13912 (Apr. 2, 2018).
\134\ 83 FR 13904, 13912 (Apr. 2, 2018) (citing 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'')).
---------------------------------------------------------------------------
Here, NHTSA is interpreting a statutory provision about whether
increasing a civil monetary penalty by the otherwise required amount
will have a negative economic impact. Even statutes that apply broadly
across agencies must be interpreted and reconciled with other Federal
laws. NHTSA must presume that Congress knew each agency would have to
determine what ``negative economic impact'' meant and whether raising
any of its civil monetary penalties by the otherwise required amount
would cause one. And NHTSA must also presume that in passing the 2015
Act, Congress was aware of the longstanding CAFE civil penalty scheme
it had previously enacted, including the constraints it imposed on
raising the penalty rate if doing so would have a substantial
deleterious impact on the economy.\135\ Congress established these
specific
[[Page 36021]]
constraints for a reason, and without any evidence that Congress
intended to override those constraints, NHTSA cannot do so
unilaterally. Most importantly, no commenter provided persuasive
argument or evidence that NHTSA's interpretation was contrary to the
plain meaning of the 2015 Act or Congress' intent.
---------------------------------------------------------------------------
\135\ As NHTSA noted in the NPRM, the CAFE civil penalty
structure is also constrained by NHTSA's exceptionally--and
atypically--limited ability to compromise or remit CAFE civil
penalties. 83 FR 13904, 13912 (Apr. 2, 2018). One commenter sought
to minimize the effect of this constraint by noting ``the CAFE
program's numerous built-in compliance flexibility mechanisms which
soften the sting of the penalties.'' Attorneys General Comment, at
11-12. But the ``compliance flexibility mechanisms'' described by
the commenter are all actions taken by the manufacturer, not NHTSA.
---------------------------------------------------------------------------
One comment challenged NHTSA's position that a broad interpretation
of the 2015 Act would be ``punitive,'' instead characterizing CAFE
civil penalties as ``safety valves, because they allow the car
manufacturers to avoid the requirements imposed by vehicle standards in
case compliance costs are too high.'' \136\ But whether or not the
effect is properly understood as punitive, if compliance costs and the
calculated levels of civil penalties are both ``too high,'' then the
``safety valve'' is not so ``safe'': Either option would impose a
``negative economic impact.'' With respect to the CAFE civil penalty
rate specifically, the statutory civil penalty formula already provides
for increases over time, as described above. Construing ``negative
economic impact'' to require a full inflation adjustment to the CAFE
civil penalty rate--on top of the built-in adjustment to the standards
themselves--would subject manufacturers to unduly harsh levels of civil
penalties (before accounting for credits). As discussed in the NPRM, it
is particularly important to avoid a punitive interpretation 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.'' \137\ EPCA itself imposes a
similar ``one-way ratchet'' constraint.\138\
---------------------------------------------------------------------------
\136\ IPI Comment, at 15-16.
\137\ 83 FR 13904, 13913 (Apr. 2, 2018).
\138\ H.R. Rep. No. 95-1751, at 113 (1978) (Conf. Rep.) (``No
provision [in EPCA] is made for lowering the penalty.'').
---------------------------------------------------------------------------
One comment argued that ``Congress . . . intended the Inflation
Adjustment Act to apply broadly and uniformly to federal civil monetary
penalties across all agencies unless specifically exempted, regardless
of how the subject penalty programs are structured.'' \139\ Even though
Congress did not ``specifically exempt[ ]'' CAFE by name in the 2015
Act, Congress unquestionably recognized that some penalty schemes would
not be covered: For example, it defined ``civil monetary penalty'' to
exclude some penalties, fines, and other sanctions.\140\ Nonetheless,
NHTSA agrees that Congress intended the 2015 Act to apply ``broadly''--
and in practice, the 2015 Act has applied broadly, across other
penalties administered by NHTSA and across a wide swath of Federal
agencies. But the unique nature of the CAFE program commands a
different result. Indeed, as NHTSA explained in the NPRM, the ``broad''
scope of the 2015 Act reinforces NHTSA's determination that 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. This approach to statutory interpretation is consistent with
NHTSA's past practice.\141\
---------------------------------------------------------------------------
\139\ Attorneys General Comment, at 11-12.
\140\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]3(2).
\141\ 83 FR 13904, 13912 (Apr. 2, 2018).
---------------------------------------------------------------------------
The same reasoning responds to those commenters that argued the
2015 Act controls because it was passed more recently than EPCA and
EISA.\142\ Indeed, the sole case cited by one of the commenters
purportedly to support its point makes this clear: The more recent act
can only constitute an implied repeal if the intent of the legislature
to repeal is ``clear and manifest.'' \143\ No such intention is
apparent here at all.
---------------------------------------------------------------------------
\142\ See, e.g., Workhorse Comment, at 1 (``Because the
Inflation Adjustment Act was enacted more recently than EPCA and
EISA, the Inflation Adjustment Act controls.''); Attorneys General
Comment, at 9 (``[B]ecause the penalty adjustments in the 2015 Act
are both mandatory and were enacted more recently than EPCA, they
should be given controlling effect.'') (citing Kremer v. Chem.
Constr. Corp., 456 U.S. 461, 468 (1982)).
\143\ Kremer v. Chem. Constr. Corp., 456 U.S. 461, 468 (1982)
(cleaned up).
---------------------------------------------------------------------------
4. ``Negative Economic Impact''
Some comments noted that NHTSA did not previously invoke the
``negative economic impact'' exception before the deadline to complete
the initial catch-up adjustment expressed in the 2015 Act or by the
date suggested in OMB's initial guidance on the statute.\144\ But the
passage of that deadline does not deprive an agency of its statutory
authority to act under the statute, including its authority to
reconsider its initial decision to issue an interim final rule and to
seek public comment on complex legal, factual, and policy questions
related to that action. An agency would not be prohibited from making
an otherwise required initial catch-up adjustment simply because it did
not meet the statutory deadline: It would still need to complete the
process.\145\ And there is no separate statutory deadline for when
agencies needed to invoke the ``negative economic impact'' exception:
It is part of making the initial catch-up adjustment. Congress could
have established a separate deadline for invoking the exception prior
to the deadline for making the initial catch-up adjustment if it deemed
it necessary, but it did not. Instead, Congress impliedly linked the
determination of the initial catch-up adjustment and exercise of the
``negative economic impact'' exception, and it established a procedure
through which the OMB Director would be required to concur with NHTSA's
assessment that adjusting the penalty the otherwise required amount
would have a negative economic impact before the agency could rely on
the exception. As the docketed opinion indicates, OMB has concurred
with NHTSA's assessment here.\146\ Notably, OMB staff indicated to the
Government Accountability Office that ``[b]ecause of the complex nature
of the initial catch-up inflation adjustments, . . . its preference was
for federal agencies to take the necessary time to publish accurate and
complete initial catch-up inflation adjustments . . . even if agencies
were not able to meet the Inflation Adjustment Act publication
deadline.'' \147\
---------------------------------------------------------------------------
\144\ See, e.g., CARB Comment, at 14; Attorneys General Comment,
at 10, 14.
\145\ Multiple agencies were unable to complete their initial
catch-up adjustments by the deadline identified in the 2015 Act, but
later completed those adjustments. U.S. Gov. Accountability Office,
GAO-17-634, ``Certain Federal Agencies Need to Improve Efforts to
Comply with Inflation Adjustment Requirements, at 6 (2017).
\146\ OMB Negative Economic Impact Letter. Nothing about OMB's
concurrence with NHTSA's determination here calls into question
OMB's guidance that it ``expects determination concurrences to be
rare.'' 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, at 3
(Feb. 24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last
accessed May 22, 2018). NHTSA is not aware of any other agency that
even sought such a concurrence determination. Thus, while OMB's
concurrence here is ``rare,'' it is appropriate given the uniqueness
of the CAFE civil penalty scheme.
\147\ U.S. Gov. Accountability Office, GAO-17-634, ``Certain
Federal Agencies Need to Improve Efforts to Comply with Inflation
Adjustment Requirements, at 6 (2017).
---------------------------------------------------------------------------
Moreover, nothing in the 2015 Act prohibits the head of an agency
from reconsidering its initial decision about the economic impact of
making the otherwise required initial adjustment to a civil monetary
penalty. To the contrary, Congress committed the authority to make such
a determination--with no substantive constraints--to the head of each
agency, provided that the agency head publishes an NPRM, provides an
opportunity for comment, and obtains concurrence from
[[Page 36022]]
the OMB Director.\148\ NHTSA has satisfied those procedural steps in
this rulemaking. As noted in the NPRM, ``[p]ursuant 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.'' \149\ To the extent that NHTSA's interpretation of
``negative economic impact'' represents a change in position, the
agency has explained the reasons for that change, and its position in
this final rule is well-supported by the record and by careful legal
analysis.\150\
---------------------------------------------------------------------------
\148\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]4(c).
\149\ 83 FR 13904, 13908 (Apr. 2, 2018).
\150\ Alliance and Global Comment, at 5 (citing FCC v. Fox
Television Stations, 556 U.S. 502, 515-16 (2009); Philip Morris USA
v. Vilsack, 736 F.3d 284, 290 (4th Cir. 2013)).
---------------------------------------------------------------------------
The OMB Director's concurrence in NHTSA's determination not only
resolves the comments about NHTSA not meeting OMB's deadline, but also
carries considerable weight in establishing that NHTSA acted
appropriately with regards to the 2015 Act's deadline. Congress not
only provided the OMB Director with the authority to determine whether
a negative economic impact exists, but also expressly authorized the
OMB Director to issue guidance to agencies on implementing the 2015
Act, both of which establish that Congress conferred significant
deference to OMB's interpretation of the statute.\151\
---------------------------------------------------------------------------
\151\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]7(a).
---------------------------------------------------------------------------
Some comments stated or implied that the $14 rate is currently in
effect.\152\ That is wrong and misunderstands the effect of prior
agency actions. As a result of a recent decision by the United States
Court of Appeals for the Second Circuit, NHTSA's December 28, 2016
final rule is now in force.\153\ Pursuant to that rule, the current
CAFE civil penalty rate is $5.50 for model years before model year 2019
and, but for NHTSA's reconsideration, would not increase to $14 until
penalties are assessed for MY 2019.\154\ Thus, this final rule--which
maintains the $5.50 rate through model year 2019 and beyond--does not
serve as a reduction as applied to any shortfalls for vehicles fleets
in those model years.\155\ Although NHTSA's December 2016 final rule
had set a $14 CAFE civil penalty rate that--but for NHTSA's
reconsideration--would go into effect beginning with MY 2019, that
announcement had no practical effect before 2020--the earliest that
CAFE civil penalties could be assessed for noncompliance in MY
2019.\156\ Nothing in the CAFE statute or the 2015 Act precludes the
agency from reconsidering its earlier decision before that decision has
any practical significance. Indeed, NHTSA's earlier reconsideration
decision in December 2016, which recently took effect, did just
that.\157\
---------------------------------------------------------------------------
\152\ See, e.g., CAP Comment, at 2 (describing NHTSA's proposed
action as ``reducing the penalty below the statutorily-mandated
rate''); CARB Comment, at 6, 14, 16 (``NHTSA's NPRM, therefore, is
improperly characterized as `retaining' the $5.50 penalty per tenth
of a mpg when in fact NHTSA would be decreasing from $14 back to
$5.50. . . .''; ``NHTSA's adjustment to $14 in its interim final
rule in July 2016 is already in effect anyway.''; characterizing
``what NHTSA is attempting to do here'' as ``a CAFE penalty decrease
. . . to lower the penalty from $14 to $5.50'').
\153\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No.
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule,
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is
now in force.'').
\154\ 81 FR 95489, 95492 (Dec. 28, 2016).
\155\ Because this final rule does not prescribe ``a higher
amount'' for the CAFE civil penalty rate, 49 U.S.C. 32912(c)(1)(D),
NHTSA does not need to give 18 months' lead time before it becomes
effective.
\156\ 82 FR 32139, 32140 (July 12, 2017).
\157\ 81 FR 95489, 95491 (Dec. 28, 2016).
---------------------------------------------------------------------------
A few commenters critiqued NHTSA's proposed interpretation of the
2015 Act in light of EPCA as ``invert[ing] the burden of proof''
required by the 2015 Act.\158\ These comments misconstrued NHTSA's
interpretation. 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 interpret
the term ``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.\159\ Instead, Congress
expressly delegated the authority to determine whether adjusting the
amount of any given civil monetary penalty by the otherwise required
amount would have a negative economic impact to the head of each
agency. Without further guidance about what constitutes a ``negative
economic impact,'' each agency has to make an independent determination
of what constitutes a ``negative economic impact'' and whether one
would result from making each adjustment within its purview.
---------------------------------------------------------------------------
\158\ CBD Comment, at 12; see also CARB Comment, at 15-16
(``[T]he statutes build in opposing presumptions and require
opposite findings. . . .''); Attorneys General Comment, at 12-13
(``NHTSA impermissibly inverts the presumption Congress built into
the 2015 Act . . . .'').
\159\ 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.
---------------------------------------------------------------------------
For NHTSA to determine whether increasing the CAFE civil penalty
rate by the otherwise required amount would have a ``negative economic
impact,'' it considered what Congress had previously identified for it
in EPCA--in the context of establishing the statutory standard required
to raise the CAFE civil penalty rate--as constituting a ``substantial
deleterious impact on the economy.'' Specifically, Congress had
decreed--unchanged for decades before the 2015 Act--that (i) a
significant increase in unemployment in a State or a region of a State,
(ii) an adverse effect on competition, or (iii) a significant increase
in automobile imports would represent ``a substantial deleterious
impact on the economy.''
Additionally, Congress established in EPCA that, by requiring such
a substantial showing, the burden to increase the CAFE civil penalty
rate is heavy. NHTSA determined, as explained in the NPRM, that it is
reasonable to expect that, taking the EPCA factors into account,
increasing the CAFE civil penalty rate to $14 would result in a
``negative economic impact.'' Without sufficient data to the contrary,
NHTSA's determination remains unchanged: The likely effects raising the
CAFE civil penalty rate to $14 would have on unemployment, competition,
and automobile imports lead NHTSA to conclude that increasing the CAFE
civil penalty rate by the otherwise required amount would have a
negative economic impact.\160\
---------------------------------------------------------------------------
\160\ One commenter asserted, without any citations or
reasoning, that to keep the CAFE civil penalty rate at $5.50, the
``negative economic impact'' exception of the 2015 Act requires
NHTSA to show that any upward adjustment to the CAFE civil penalty
rate will have a negative economic impact and that NHTSA failed to
meet this burden. CBD Comment, at 23; see also Attorneys General
Comment, at 16 (arguing that, if necessary, NHTSA should ``reduce
the catch-up inflation adjustment by as little as possible . . .
based on an analysis of the relevant factors, including but not
limited to an estimate of compliance costs, the number and types of
vehicles affected, the average increased cost to consumers, and how
that cost compares to fuel cost savings''). No such showing is
required. The 2015 Act authorizes the head of each agency to
``adjust the amount of a civil monetary penalty by less than the
otherwise required amount'' if the ``negative economic impact''
exception is satisfied (with the OMB Director's concurrence). But
neither the statute nor OMB guidance establish any standards that
the agency must use in determining how much less than the otherwise
required amount to make the adjustment. As NHTSA stated in the NPRM,
``[w]ithout 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.'' 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat'l
Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214-15 (D.C.
Cir. 2013)); see also Alliance and Global Comment, at 15 & n.63.
Nonetheless, NHTSA believes it has made an adequate showing that any
increase in the CAFE civil penalty rate would have a ``negative
economic impact'' for the reasons detailed in the NPRM and
throughout this final rule. See, e.g., 83 FR 13904, 13916 (Apr. 2,
2018) (``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.'').
---------------------------------------------------------------------------
[[Page 36023]]
Some commenters contended that NHTSA's interpretation would make it
``impossible'' for the CAFE civil penalty to ever be increased.\161\
NHTSA acknowledges that it may be difficult to meet the high standard
Congress established in EPCA. In fact, NHTSA has never been able to
make the findings required to increase the rate before. However,
nothing in the 2015 Act relieves NHTSA of its statutory obligation to
make those findings as a prerequisite for increasing the CAFE civil
penalty rate.
---------------------------------------------------------------------------
\161\ Workhorse Comment, at 4; see also CARB Comment, at 18.
---------------------------------------------------------------------------
One commenter argued that EPCA's specific definitions of
``substantial deleterious impact on the economy'' should not be carried
over to the 2015 Act's term ``negative economic impact'' because the
2015 Act is ``is intended for broad application across a range of
regulatory schemes'' and the EPCA factors ``may simply be irrelevant in
enforcing compliance with other regulatory systems.'' \162\ The fact
that the EPCA factors are irrelevant to determinations by other
agencies (which do not administer the same statutory program) does not
make them irrelevant to NHTSA's determination, which requires the
agency to reconcile multiple statutory provisions. And both the 2015
Act and EPCA address the effect on the economy as part of their
respective statutory standards for determining the appropriateness of
an increase in a penalty rate.
---------------------------------------------------------------------------
\162\ CBD Comment, at 13.
---------------------------------------------------------------------------
Although the 2015 Act applies across all agencies, it is up to the
head of agency to determine whether ``increasing the civil monetary
penalty by the otherwise required amount will have a negative economic
impact.'' Each agency head must determine how to interpret that
statutory standard in light of other statutory constraints and any
other factors that may be appropriate for each agency to consider.\163\
---------------------------------------------------------------------------
\163\ See Sutton v. United States, 65 Fed. Cl. 800, 806 (2005)
(deferring to the Army's interpretation of a statute that is
administered on a shared basis with the other military services
because ``there is no inconsistency'' between its interpretation and
that of another military branch and because the statutory language
``confers plenary discretion on each individual service secretary to
develop whatever procedures he or she deems appropriate''); Bd. of
Trade of City of Chicago v. SEC., 187 F.3d 713, 719 (7th Cir. 1999)
(``[I]t is possible to defer simultaneously to two incompatible
agency positions.''); see also F.T.C. v. Ken Roberts Co., 276 F.3d
583, 593 (D.C. Cir. 2001) (``Because we live in `an age of
overlapping and concurring regulatory jurisdiction,' a court must
proceed with the utmost caution before concluding that one agency
may not regulate merely because another may.'' (quoting Thompson
Med. Co. v. FTC, 791 F.2d 189, 192 (D.C. Cir. 1986))); National
Ass'n of Cas. & Sur. Agents v. Bd. of Governors of Fed. Reserve
Sys., 856 F.2d 282, 287 (D.C. Cir. 1988) (upholding different agency
interpretations of the same phrase because of ``their different
economic impact''); cf. Citizens Awareness Network, Inc. v. United
States, 391 F.3d 338, 349 (1st Cir. 2004) (``The APA lays out only
the most skeletal framework for conducting agency adjudications,
leaving broad discretion to the affected agencies in formulating
detailed procedural rules.'') (citation omitted). The Second Circuit
asserted in its opinion on the indefinite delay rule that NHTSA's
interpretation of the 2015 Act is entitled to no deference because
``the [2015] Act applies to all federal agencies, meaning NHTSA has
no special expertise in interpreting its language.'' Opinion, ECF
No. 205, NRD.C. v. NHTSA, Case No. 17-2780, at 34 n.10 (2d Cir.,
June 29, 2018) (citations omitted). To support this dictum, the
Court cited only Chevron, U.S.A., Inc. v. Nat. Res. Def. Council,
Inc., 467 U.S. 837 (1984), which predates all of the cases just
cited. The issue was not briefed to the Second Circuit, which gave
no indication that it considered NHTSA's position.
---------------------------------------------------------------------------
Regardless, the concern about the possibility of inconsistent
interpretations of ``negative economic impact'' is purely hypothetical:
As far as NHTSA is aware, no other agency has invoked the ``negative
economic impact'' exception. Moreover, NHTSA's interpretation has now
gone through the notice-and-comment process, as required by the 2015
Act, and comports with the interpretation provided by OMB--the agency
that Congress vested with the authority to issue guidance on
implementing the statute.\164\ OMB has also concurred with NHTSA's
ultimate determination regarding the ``negative economic impact'' of
increasing the CAFE civil penalty rate for the reasons explained in its
opinion included in the docket for this rulemaking.\165\
---------------------------------------------------------------------------
\164\ See generally OMB Negative Economic Impact Letter.
\165\ Id.
---------------------------------------------------------------------------
One commenter challenged NHTSA's proposed interpretation that ``
`negative economic impact,' as used in the Inflation Adjustment Act,
need not mean `net negative economic impact,' '' \166\ arguing that the
exception must be read to account for a net weighing of the positive
and negative impacts and that it would be arbitrary and capricious for
NHTSA to ignore the benefits of a regulatory action.\167\ NHTSA
disagrees. As NHTSA noted in the NPRM, the very next provision of the
2015 Act--the other exception to conducting the otherwise required
initial catch-up adjustment--depends upon a determination of whether
``the social costs of increasing the civil monetary penalty by the
otherwise required amount outweigh the benefits.'' \168\ Congress could
have stated the ``negative economic impact'' exception using similar
phrasing: ``the negative economic impact of increasing the civil
monetary penalty by the otherwise required amount outweighs the
positive economic impact.'' But it did not do so, implying that it must
mean something different. The commenter asserted that Congress' use of
the term ``negative'' ``must entail some analysis of what it means to
be `negative,' '' and ``the only rational way of understanding that
term is to look at it in comparison to the benefits.'' \169\ NHTSA did
analyze what ``negative'' means, thoroughly explaining its reasoning in
the NPRM and in this final rule. The agency can readily consider the
economic harms that would likely be caused by increasing the CAFE civil
penalty rate to $14--such as those identified in the EPCA factors--
without needing to compare them to any potential benefits.
---------------------------------------------------------------------------
\166\ 83 FR 13904, 13913 (Apr. 2, 2018).
\167\ IPI Comment, at 11-12; see also id. at 5-10 (arguing that
``NHTSA has caused forgone benefits'' and its ``failure to address
the forgone benefits is arbitrary and capricious''); cf. Workhorse
Comment, at 2-3 (arguing that setting the CAFE civil penalty rate at
$5.50 would have a negative economic impact on companies in the
electric vehicle industry and that NHTSA must quantify the economic
impact on all businesses, including manufacturers that will be
selling credits).
\168\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 4(c)(1)(B). NHTSA has not invoked this social costs
exception, so comments that discussed a social cost-benefit analysis
are irrelevant and do not merit a response. See, e.g., CBD Comment,
at 20-23; IPI Comment, at 6-10.
\169\ IPI Comment, at 12.
---------------------------------------------------------------------------
a. EPCA Factors
i. Unemployment
Some commenters provided data purporting to show that increasing
the CAFE civil penalty rate will not increase unemployment.\170\ These
comments omitted the larger employment context: employment across the
entire U.S. economy has grown over the period in question as the
economy recovered from the recession. Employment in the automobile
industry sector had plummeted during the recession, as new
[[Page 36024]]
vehicle sales dropped. After the economy recovered, automobile sales
and industry employment nearly doubled relative to the recession, but
are only marginally higher than historical levels.\171\
---------------------------------------------------------------------------
\170\ See, e.g., Workhorse Comment, at 1; CBD Comment, at 14;
CARB Comment, at 17.
\171\ Employment and sales data available at https://fred.stlouisfed.org/series/N4222C0A173NBEA and https://fred.stlouisfed.org/series/ALTSALES.
---------------------------------------------------------------------------
The data provided also should be viewed cautiously. For example,
the Synapse Energy Economics study cited acknowledges that positive
employment impacts it identifies that will result from implementation
of federal and state fuel economy standards ``are not large in the
context of the national economy''--``less than 0.2 percent of current
U.S. employment levels.'' \172\ But the study only discusses the net
employment effect on the United States as a whole; it does not discuss
unemployment in every state or every region of a state at all, as NHTSA
is required to consider under EPCA.\173\ As NHTSA explained in the
NPRM, job losses resulting from an increase in the CAFE civil penalty
rate ``may be concentrated in particular States and regions within
those States where automobile manufacturing plants are located [such as
those] located in the Midwest and Southeastern U.S.'' \174\ The Synapse
study does nothing to disprove this point.\175\
---------------------------------------------------------------------------
\172\ Synapse Energy Economics, Cleaner Cars and Job Creation:
Macroeconomic Impacts of Federal and State Vehicle Standards, at 17
(Mar. 27, 2018), available at http://www.synapseenergy.com/sites/default/files/Cleaner-Cars-and%20Job-Creation-17-072.pdf. The study
also acknowledges that its results ``are necessarily uncertain,
especially farther out in the modeling period.''
\173\ The EPCA requirement to consider the impact on the economy
of states and regions of states also demonstrates why the comment
arguing that NHTSA must ``us[e] an economy-wide analysis'' to
measure employment effects is misplaced. IPI Comment, at 17. By
statute, NHTSA is prohibited from only considering the impact of
raising the CAFE civil penalty rate on national unemployment.
Moreover, as noted in the NPRM, 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''--an impact
that the Synapse study also fails to discuss. 83 FR 13904, 13913
(Apr. 2, 2018).
\174\ 83 FR 13904, 13914 (Apr. 2, 2018).
\175\ The reports from the Blue Green Alliance cited in a couple
of comments suffers from similar shortcomings.
---------------------------------------------------------------------------
Another commenter argued that ``the $14 penalty has been in effect
since August 2016 . . . , and there is no evidence that this has caused
an increase in the national unemployment rate or the unemployment rate
in any State or region of a State.'' \176\ The premise is faulty: NHTSA
disputes that ``the $14 penalty has been in effect since August 2016,''
as explained above. Furthermore, the comment only cited as evidence the
national unemployment rate for one month and a single state's
unemployment rate for one month, ``both of which are comparatively low
and reflect a robust economy.'' \177\ ``[C]omparatively low'' compared
to what? The comment provided no evidence of what the unemployment
rates it cites would be with a different CAFE civil penalty rate in
effect.
---------------------------------------------------------------------------
\176\ CARB Comment, at 17.
\177\ CARB Comment, at 17 n.64.
---------------------------------------------------------------------------
Another commenter offered that ``a recent survey of Tier 1
automotive suppliers conducted by Ricardo concluded that the increased
stringency of the CAFE Standards encouraged job growth at their
companies.'' \178\ In fact, the survey question did not specifically
ask about ``the increased stringency of the CAFE standards.'' Rather,
the survey question asked, ``[i]n general, do US policies that
encourage or force the uptake of new technologies also encourage job
growth for your company in the US?'' \179\ Only 23 respondents answered
out of the 143 potential participants who received the survey,
including two that believed ``[a]dapting to such policies does not
change the number of jobs at our company.'' \180\ The suppliers were
not asked to and did not provide any empirical data supporting their
opinions nor were they asked to quantify the level of job growth they
believed was encouraged by the increased stringency. Additionally, the
geographical breakdown of the respondents was not provided. Without any
sense of magnitude or location, there is no way to evaluate the
economic impact on the United States, any State, or any region of a
State.
---------------------------------------------------------------------------
\178\ Workhorse Comment, at 1 (citing Ricardo Energy &
Environment, Survey of Tier 1 automotive suppliers with respect to
the US 2025 LDV GHG emissions standards (Feb. 21, 2018), available
at http://www.calstart.org/Libraries/CALSTART_Press_Releases/CALSTART_Report_Supplier_Survey_Final_for_Web.sflb.ashx) (Ricardo
Report).
\179\ Ricardo Report, at 20.
\180\ Ricardo Report, at 2, 40.
---------------------------------------------------------------------------
Note also that economic harms suffered by suppliers may be
different from those suffered by OEMs. In fact, a separate survey
question did ask specifically about the CAFE standards in connection to
the effect on employment nationally: ``Will the current 2025 standards
help encourage job growth in the wider US economy?'' \181\ In response
to this question, less than half of the respondents agreed that ``such
policies tend to encourage job growth in the industry overall.'' \182\
---------------------------------------------------------------------------
\181\ Ricardo Report, at 20.
\182\ Ricardo Report, at 41.
---------------------------------------------------------------------------
In any event, the data provided conflicts with other available
studies, such as the peer-reviewed Indiana University study, which
shows the planned vehicle standards will result in short-term
macroeconomic losses, including job losses.\183\ Specifically, the
study concludes that ``the vehicle price effects, which increase as
standards become more stringent, cause significant losses of
employment, GDP, and disposable income through a decline in new vehicle
sales and higher vehicle prices for consumers, which in turn curbs
spending on other goods and services,'' potentially for more than a
decade.\184\ The study indicates that the negative economic effects hit
Illinois, Indiana, Michigan, Ohio, and Wisconsin particularly hard,
with the region taking longer than the national average to recover, and
that Arkansas, Louisiana, Oklahoma, and Texas never fully recover.\185\
Without a clearer picture, NHTSA does not have the evidence needed to
make the determination required under EPCA to raise the CAFE civil
penalty rate.
---------------------------------------------------------------------------
\183\ Sanya Carley, Denvil Duncan, John D. Graham, Saba Siddiki
& Nikolaos Zirogiannis, A Macroeconomic Study of Federal and State
Automotive Regulations (Mar. 2017) (``IU Study''). Revised/corrected
versions of this report that ultimately come to the same conclusions
are also available at https://spea.indiana.edu/doc/research/working-groups/comet-2018.pdf (Jan. 2018), and https://spea.indiana.edu/doc/research/working-groups/comet-022018.pdf (Feb. 2018).
\184\ IU Study, at 3.
\185\ IU Study, at 3, 103.
---------------------------------------------------------------------------
One commenter quoted EPA as projecting ``job growth in the
automotive manufacturing sector and automotive parts manufacturing
sector due specifically to the need to increase expenditures for the
vehicle technologies needed to meet the standards.'' \186\ EPA's
employment projection came with a number of caveats that the commenter
omitted. EPA was unable to ``quantitatively estimate the total effects
of the standards on the automobile industry, due to the significant
uncertainties underlying any estimate of the impacts of the standards
on vehicle sales.'' \187\ EPA also could not ``quantitatively estimate
the total effects on employment at the national level, because such
effects depend heavily on the state of overall employment in the
economy,'' but noted that, under conditions of full employment, any
changes in employment in the regulated sector would primarily be offset
by changes in
[[Page 36025]]
employment in other sectors.\188\ Ultimately, EPA concluded that it
would be unable to distinguish the effect of the standards on
employment ``from other factors affecting employment, especially
macroeconomic conditions and their effect on vehicle sales.'' \189\
---------------------------------------------------------------------------
\186\ CBD Comment, at 14 (quoting ``Final Determination on the
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle
Greenhouse Gas Emissions Standards under the Midterm Evaluation,''
available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100QQ91.pdf
(Final Determination), at 26).
\187\ Final Determination, at 26.
\188\ Final Determination, at 26.
\189\ Final Determination, at 26.
---------------------------------------------------------------------------
Regardless, since that projection, EPA--in reconsidering the
emission standards for model year 2022-2025 light-duty vehicles that
were ``based on outdated information''--has concluded that ``a more
rigorous analysis of job gains and losses is needed to determine the
net effects of alternate levels of the standards on employment and
believes this is an important factor to consider in adopting
appropriate standards.'' \190\
---------------------------------------------------------------------------
\190\ 83 FR 16077, 16077, 16086 (Apr. 13, 2018).
---------------------------------------------------------------------------
The same commenter also highlighted that ``industry groups like the
Motor and Equipment Manufacturers Association, and the Manufacturers of
Emissions Controls have expressed grave concerns about potential
rollbacks of federal standards, which would threaten the technological
and manufacturing investments they have already made.'' \191\ Notably,
neither of these industry groups submitted a comment on the NPRM.
Regardless, this rulemaking does not involve ``rollbacks of federal
standards.'' It relates to civil penalties for those who violate the
standards.
---------------------------------------------------------------------------
\191\ CBD Comment, at 14.
---------------------------------------------------------------------------
ii. Competition
As a threshold matter, one commenter contested NHTSA's
understanding of the competition factor in EPCA: ``EPCA does not
inquire into competitive effects among manufacturers. To the contrary,
EPCA expressly acknowledges that CAFE standards will treat different
manufacturers differently.'' \192\ EPCA does not define
``competition,'' and Congress gave sole discretion to the Secretary of
Transportation to decide whether it is likely that an increase in the
CAFE civil penalty rate would adversely affect competition, along with
the determinations of the other EPCA factors.\193\ In applying EPCA,
``NHTSA has consistently evaluated risks to competition, including the
potential effects on individual automakers.'' \194\ NHTSA has adopted
and followed this approach for decades. Accordingly, NHTSA believes
that it is appropriate for it to continue analyzing the potential
effect of its regulations on competition in this ``broad manner.''
\195\
---------------------------------------------------------------------------
\192\ CBD Comment, at 15 (citing, as an example, 49 U.S.C.
32903, ``providing for credit trading, and allowing manufacturers
who have over-complied with standards to trade credits with
manufacturers who have failed to meet fuel economy requirements'').
\193\ 49 U.S.C. 32912(c)(1)(C)(ii).
\194\ 83 FR 13904, 13914 (Apr. 2, 2018).
\195\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------
In any event, NHTSA also explained in the NPRM how increasing the
CAFE civil penalty rate could also adversely affect competition through
``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.'' \196\ The same commenter
disputed this effect on consumer choice, declaring--without evidence--
that having the CAFE civil penalty rate at $5.50 ``disadvantages
consumers by reducing the number of more fuel-efficient vehicle choices
in the marketplace.'' \197\ NHTSA disagrees. The CAFE standards--and
the natural competitive incentive for manufacturers to design vehicles
that allow consumers to pay less for fuel--already ensure a significant
variety of fuel efficient vehicles in the marketplace, and those
manufacturers are unlikely to change a course if that CAFE civil
penalty rate is not increased. As NHTSA described in the NPRM,
increasing the CAFE civil penalty rate could actually have the opposite
effect of that described by the commenter, for example if a
manufacturer ``decide[s] that it makes financial sense to shift
resources from its planned investments in capital towards payment of
possible future penalties,'' or ``[i]f the possibility of paying
penalties looms too large,'' driving the manufacturer out of business
entirely.\198\
---------------------------------------------------------------------------
\196\ 83 FR 13904, 13915 (Apr. 2, 2018).
\197\ CBD Comment, at 23.
\198\ 83 FR 13904, 13915 (Apr. 2, 2018); see also Comment by
Jaguar Land Rover North America LLC, NHTSA-2018-0017-0016, at 1 (``A
significant increase in the CAFE penalty rate would fundamentally
change the dynamics of how companies may make investment decisions,
and would force IVM specialist manufacturers to disregard consumer
demand by restricting the availability of vehicles that consumers
want.''). The commenter noted that EPA has previously stated that
under the standards, ``consumers can continue to have a full range
of vehicle choices that meet their needs.'' CBD Comment, at 16
(quoting Final Determination, at 9). But EPA has since reconsidered
the emission standards for model year 2022-2025 light-duty vehicles,
which were ``based on outdated information.'' 83 FR 16077, 16077
(Apr. 13, 2018). Accordingly, EPA cannot be held to its earlier
forecast regarding choices available to consumers.
---------------------------------------------------------------------------
Another commenter argued that ``[a]llowing the penalty to remain
indexed to inflation as mandated by Congress does not adversely affect
competition, but actively changing the rate to a lower value does,'' by
``express[ing] a preference for companies that have failed or will fail
to comply with the standards and disrupt[ing] the normal market
competition by effectively subsidizing these companies.'' \199\ As
explained above, NHTSA is not ``actively changing the rate to a lower
value''; the rate was $5.50 during reconsideration, the rate is
currently $5.50, and the rate will continue to be $5.50 as a result of
this final rule, rather than increasing to $14 beginning with MY 2019.
But NHTSA agrees with the general principle that ``actively changing
the rate'' would ``disrupt[ ] the normal market competition.'' For the
reasons described in the NPRM, NHTSA believes 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.'' \200\ Thus, to avoid adversely affecting
competition by interfering, NHTSA will not increase the CAFE civil
penalty rate.
---------------------------------------------------------------------------
\199\ CAP Comment, at 4; see also CBD Comment, at 15 (reasoning
that keeping the rate ``artificially low'' would ``create an unfair
market environment,'' in which less established, innovative
companies that have invested in technology to meet the standards
would find themselves at a competitive disadvantage to more
established, larger companies that may be more willing to pay
penalties, rather than comply).
\200\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------
Relatedly, one commenter argued that polling, reinforced by sales
data, shows that ``consumers value access to fuel-efficient vehicles.''
\201\ If true, then normal market competition will incentivize non-
compliant manufacturers to invest in increasingly efficient technology
and increasing compliance with the standards. NHTSA would have no need
to increase the CAFE civil penalty rate if it would never be applied
because market forces would ensure compliance.
---------------------------------------------------------------------------
\201\ CBD Comment, at 16.
---------------------------------------------------------------------------
The same commenter also argued that increasing the CAFE civil
penalty rate ``enhances the competitiveness of U.S.-made vehicles in
domestic and global markets.'' \202\ Specifically, the commenter
maintained that ``more U.S. fuel-efficient vehicles means fewer
consumer and production shifts when gas prices are volatile, and more
efficient fleets have increased chances of competing with the tighter
standards set in Europe and Asia, allowing automakers to build global
vehicle platforms and significantly reduce their costs.'' For similar
reasons as described above, automakers are already naturally
incentivized to ``reduce their costs.'' If becoming increasingly
efficient would
[[Page 36026]]
allow them to do so--and sell more vehicles in Europe and Asia--they
will do so. As explained in more detail below, domestic manufacturers
already must overcome hurdles that foreign manufacturers do not face,
such as a separate minimum standard for domestically-manufactured
passenger automobiles and prohibiting manufacturers from using traded
credits to satisfy a shortfall of passenger automobiles manufactured
domestically.
---------------------------------------------------------------------------
\202\ CBD Comment, at 15-16. This argument overlaps to some
extent with the imports EPCA factor.
---------------------------------------------------------------------------
Another commenter challenged NHTSA's rationale on the competition
factor, arguing that ``if the stringency of the penalty is not
maintained over time . . . , then manufacturers increasingly have the
incentive merely to pay the penalty and not further invest in greater
fuel efficiency.'' \203\ This is a moot point because the stringency of
CAFE civil penalties is maintained over time, just not through
inflation adjustments. As explained above, Congress chose an
alternative mechanism for ensuring that the CAFE stringency retains its
salience over time, by requiring the fuel economy standards to be set
at the maximum feasible level for each model year, rather than
requiring adjustments for inflation of the penalty rate alone.
Consequently, increasing the penalty rate would serve to ``adversely
impact the affected manufacturers through higher prices for their
products (without corresponding benefits to consumers), restricted
product offerings, and reduced profitability''--i.e., adversely
affecting competition.\204\
---------------------------------------------------------------------------
\203\ CARB Comment, at 18.
\204\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------
iii. Imports
One commenter argued that ``if anything, the proper inflation
adjustment would aid domestic manufacturing,'' rather than cause a
significant increase in automobile imports.\205\ Specifically, the
comment noted that ``historically, the only manufacturers to pay fines
for non-compliance have been those who import a large fraction (and, in
many cases, all) of the vehicles sold in the United States.'' \206\
This misses a key part of the picture. In the NPRM, NHTSA noted that
``[f]inal model year fuel economy performance reports published by
NHTSA indicate import passenger car fleets are performing better than
domestic passenger car fleets.'' Since then, the model year 2016 fleet
performance report has been made available, indicating that the
performance of the import passenger car fleet again has an advantage
over the domestic passenger car fleet, now almost a full mile per
gallon difference.\207\ Although the magnitude of the advantage has
varied, the import passenger car fleet has consistently had a superior
fuel economy performance to the domestic passenger car fleet for over
ten years. Because of that existing advantage, increasing the CAFE
civil penalty rate would likely have a harsher impact on domestic
manufacturers, who would need to invest more to reduce fuel economy
shortfalls. As those increased investments get translated into higher
prices for vehicles, relatively cheaper imported vehicles become more
attractive to consumers. The comment seemed to grasp this point in its
very next paragraph, describing a situation in which ``a higher fine is
going to either push a manufacturer to deploy more technology to comply
. . . or ensure that domestic production of more efficient cars is
sufficient to offset the shortfall of its domestically produced''
vehicles--both of which must be paid for somehow.\208\
---------------------------------------------------------------------------
\205\ CBD Comment, at 18-19.
\206\ CBD Comment, at 18 (citing CAFE Public Information Center,
available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html).
\207\ Available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_fleet_LIVE.html (last accessed May 22, 2018).
\208\ CBD Comment, at 18.
---------------------------------------------------------------------------
Moreover, the comment fails to mention that domestic manufacturers
face some heavier statutory burdens. For example, manufacturers are
barred by statute from using traded credits to satisfy a shortfall for
``the category of passenger automobiles manufactured domestically.''
\209\ Passenger automobiles manufactured internationally are not
subject to the same limitation, affording foreign manufacturers a
competitive advantage. Domestically-manufactured passenger automobiles
are also subject to a minimum standard, beyond the general average fuel
economy standards: 27.5 miles per gallon or ``92 percent of the average
fuel economy projected by the Secretary for the combined domestic and
non-domestic passenger automobile fleets manufactured for sale in the
United States by all manufacturers in the model year,'' whichever is
greater.\210\ In fact, this statutory domestic passenger vehicle
requirement has already resulted in the imposition of record penalties
for model year 2016. As noted in NHTSA's MY 2011-2018 Industry CAFE
Compliance report, one manufacturer paid over $77 million in civil
penalties for failing to meet or exceed the minimum domestic passenger
car standard for MY 2016--the single highest civil penalty assessed in
the history of the CAFE program. NHTSA anticipates that such penalties
will increase as stringency levels continue to rise. These disparities
against the domestic passenger automobile industry increase the
likelihood that an upward adjustment to the CAFE civil penalty rate
will create greater incentives for manufacturers to shift their
production of passenger vehicles overseas to avoid such penalties, and
that would have a negative economic impact on the United States--one
that is likely to hit particularly hard on states and regions of states
where domestic passenger automobile manufacturing is concentrated.
---------------------------------------------------------------------------
\209\ 49 U.S.C. 32903(f)(2); see also 49 CFR 536.9(c).
\210\ 49 U.S.C. 32902(b)(4). Since the minimum standard for
domestically-produced passenger automobiles was promulgated, the
``92 percent'' has always been greater than 27.5 mpg. For model year
2016, the most recent year for which data is publicly available,
some manufacturers were unable to meet the domestic passenger car
fleet standard. CAFE Public Information Center, https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Mfr_LIVE.html.
---------------------------------------------------------------------------
The comment also cited the ``history of Detroit manufacturing'' as
another illustration for how ``adjusting the fine upward acts to pull
manufacture of more efficient vehicles into domestic production as
opposed to overseas production and imported.'' \211\ The comment's
portrayal of history, however, omitted that many of the most efficient
vehicles already had thin margins and production had been moved, at
least in part, to plants in Mexico to reduce costs. Moreover, the
strength of the connection between the civil penalty rate and domestic
production is tenuous. An alternative explanation is that higher fuel
prices allow manufacturers to charge more for fuel efficient vehicles.
Consequently, manufacturers can spend more on production domestically
without having to shift production abroad for cheaper.
---------------------------------------------------------------------------
\211\ CBD Comment, at 18-19.
---------------------------------------------------------------------------
b. Other Economic Considerations
Even if the EPCA factors do not apply, NHTSA concludes that raising
the CAFE civil penalty rate to $14 would have a ``negative economic
impact'' for the reasons explained in the NPRM.\212\ One comment
asserted that NHTSA ``has not identified any facts or analysis that
would support its belated invocation of the `negative economic impact'
provision.'' \213\ This comment ignores that the NPRM expressly stated
that it was relying on ``the estimate provided by industry showing
annual costs of at least one billion dollars.'' \214\
---------------------------------------------------------------------------
\212\ 83 FR 13904, 13916 (Apr. 2, 2018).
\213\ Attorneys General Comment, at 14.
\214\ 83 FR 13904, 13916 (Apr. 2, 2018).
---------------------------------------------------------------------------
[[Page 36027]]
Some commenters challenged NHTSA's reliance on the Alliance and
Global's estimate of annual costs of at least one billion dollars under
NHTSA's augural standards for MY 2022 to 2025, largely relying on the
Union of Concerned Scientists' (UCS's) critique of the estimate.\215\
The Alliance and Global addressed UCS's criticisms in their
comment.\216\ Specifically, the Alliance and Global observed that ``UCS
did not factor in the costs of CAFE penalties in their analysis,'' as
NHTSA has in its analyses of the economic impact of CAFE
standards.\217\ Consistent with NHTSA's past methodology and in light
of the particular question at issue here, NHTSA continues to agree that
it was appropriate to incorporate the costs of civil penalties in an
analysis to determine whether raising the CAFE civil penalty rate would
have a ``negative economic impact.''
---------------------------------------------------------------------------
\215\ See, e.g., CBD Comment, at 19; Attorneys General Comment,
at 10; IPI Comment, at 13-14. UCS's critique of the Alliance and
Global's analysis is available at https://www.regulations.gov/document?D=NHTSA-2017-0059-0019.
\216\ Alliance and Global Comment, at 17-18.
\217\ Alliance and Global Comment, at 17-18 (citing 77 FR 62624,
63047 (Oct. 15, 2012)). Contrary to one comment's critique,
Attorneys General Comment, at 15; cf. IPI Comment, at 16 (``[A]ny
negative effects of higher penalties on profits would be experienced
only by those firms that, in the absence of the inflation
adjustment, would not comply with the standards. . . .''), the
Alliance and Global's analysis did account for the increased costs
to manufacturers that would comply with the fuel economy standards.
---------------------------------------------------------------------------
One commenter argued, relying on the July 2016 Draft Technical
Assessment Report (TAR), that because ``the model year 2022-25
greenhouse gas/CAFE standards were technologically feasible at
reasonable cost for auto manufacturers . . . the industry's $1 billion
penalty estimates are unreasonable since any `massive' increase would
be the result of the manufacturers' deliberate non-compliance rather
than any inability to comply.'' \218\ Since the draft TAR, however, the
EPA Administrator has reconsidered the emission standards for model
year 2022-2025 light-duty vehicles and determined that they ``are based
on outdated information, and that more recent information suggests that
the current standards may be too stringent.'' \219\ Accordingly, EPA
announced that it ``will initiate a notice and comment rulemaking in a
forthcoming Federal Register notice to further consider appropriate
standards for model year 2022-2025 light-duty vehicles, as
appropriate,'' in partnership with NHTSA.\220\ In particular, EPA
observed that due to a variety of challenges of feasibility and
practicability, many companies have already started to rely on banked
credits to remain in compliance, which may be increasingly difficult to
continue as the stringency standards tighten.\221\ To the extent that
the draft TAR expressed that ``the model year 2022-25 greenhouse gas/
CAFE standards were technologically feasible at reasonable cost for
auto manufacturers,'' that conclusion is no longer operative.
---------------------------------------------------------------------------
\218\ Attorneys General Comment, at 10.
\219\ 83 FR 16077, 16077 (Apr. 13, 2018).
\220\ 83 FR 16077, 16077 (Apr. 13, 2018). As part of this
reconsideration, ``NHTSA is obligated to conduct a de novo
rulemaking, with fresh inputs and a fresh consideration and
balancing of all relevant factors, to establish final CAFE standards
for [MYs 2022-2025].'' 82 FR 34740, 34741 (July 26, 2017).
\221\ 83 FR 16077, 16079 (Apr. 13, 2018).
---------------------------------------------------------------------------
Another commenter identified purported ``substantial shortcomings''
with the CAFE model used by the Alliance and Global to formulate
generate its cost estimates, which it claimed ``will tend to
overestimate fuel economy costs.'' \222\ NHTSA disagrees strongly with
that statement. As the comment itself noted, ``the [CAFE] model is one
of the best publicly available tools for analyzing the effects of fuel
economy regulation and offers substantial transparency and
comparability for the analyses.'' \223\ Further, the CAFE model has
been used in numerous fuel economy rulemakings. Finally, the commenter
did not provide an alternative calculation of what it believes the
additional costs associated with increasing the CAFE civil penalty rate
would be. As such, NHTSA's reliance on the CAFE model is eminently
reasonable, and the agency continues to believe that ``the estimate
provided by the Alliance and Global showing annual costs of at least
one billion dollars is a reasonable estimate'' of what would occur if
the CAFE civil penalty rate was increased to $14 under the agency's
augural standards and that this would constitute a ``negative economic
impact'' under the 2015 Act.\224\
---------------------------------------------------------------------------
\222\ IPI Comment, at 13-14.
\223\ IPI Comment, at 13.
\224\ 83 FR 13904, 13916 (Apr. 2, 2018).
---------------------------------------------------------------------------
Some commenters argued that even assuming the Alliance and Global's
analysis was accurate, the impact of the additional costs it calculates
is minimal when spread across the industry.\225\ These arguments gloss
over the fact that if the Alliance and Global's analysis is correct,
there is a ``negative economic impact.'' Instead, these comments seem
to be directed towards the irrelevant question of how ``negative'' the
``economic impact'' would be.\226\
---------------------------------------------------------------------------
\225\ See, e.g., Comment by Kendl Kobbervig, NHTSA-2018-0017-
0009, at 1; Attorneys General Comment, at 14-15; IPI Comment, at 15;
cf. IPI Comment, at 16 (arguing that ``the increase in costs should
not be thought of as severe'' because the total additional costs due
to an increase in the CAFE civil penalty ``will occur mostly for
luxurious and sports cars'').
\226\ This question is irrelevant for the reasons discussed in
footnote 160: once NHTSA determines that increasing the civil
penalty to $14 would have a negative economic impact, it has broad
discretion to determine how much less than the otherwise required
amount the adjustment, if any, should be.
---------------------------------------------------------------------------
Other commenters criticized NHTSA for purportedly not conducting a
sufficiently thorough analysis of the negative economic impact of the
increased penalty rate, asserting that NHTSA must consider factors,
such as ``which vehicles would be subject to penalties, how much of the
costs would be passed through to consumers, and whether the average per
vehicle cost would have any impact at all on consumer demand for
vehicles.'' \227\ The 2015 Act does not require such an analysis to
determine whether making an otherwise required adjustment would have a
``negative economic impact.'' As NHTSA explained in the NPRM and above,
because the term ``negative economic impact'' is not defined nor any
guidance provided by Congress or OMB, NHTSA has broad discretion to
determine how to determine whether a ``negative economic impact'' would
result from such an adjustment.\228\
---------------------------------------------------------------------------
\227\ Attorneys General Comment, at 13-14; see also CARB
Comment, at 19 (commenting that NHTSA did ``not provide an estimate
of the increased compliance costs, the number and types of vehicles
affected, the average increased costs that consumers would bear, the
price sensitivity of consumers of the affected vehicles, or how the
cost increase compares to fuel cost savings and other benefits to
consumers resulting from increased compliance'').
\228\ See 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat'l
Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214-15 (D.C.
Cir. 2013)); Alliance and Global Comment, at 15 & n.63.
---------------------------------------------------------------------------
Contrast the ``negative economic impact'' exception in the 2015 Act
with the statutory provision describing the relevant factors that
Congress requires NHTSA to consider in determining the amount of a
civil penalty imposed for a variety of violations of the Safety
Act.\229\ Congress has demonstrated that it can, and will, delineate
specific factors agencies should consider in making comparable
determinations. It chose not to do so in the 2015 Act, affording
agencies the ability to determine what would be most appropriate for
each.
---------------------------------------------------------------------------
\229\ See 49 U.S.C. 30165(c) (requiring the Secretary to
``consider the nature, circumstances, extent, and gravity of the
violation'' in determining the amount of a civil penalty under that
section and detailing specific factors the Secretary must include,
as appropriate, in making such determination).
---------------------------------------------------------------------------
Imposing an additional billion dollars in costs to the automobile
industry--
[[Page 36028]]
every year--would have the type of ``negative economic impact''
envisioned by Congress when it provided this exception, and this
negative economic impact is magnified by the statutory domestic minimum
standard for passenger vehicles, whose penalties cannot be avoided with
credits. In fact, in other instances when Congress has imposed
additional procedural requirements on agencies, it has drawn the line
at economic impacts around $100 million.\230\ It appears reasonable
that a projected economic impact ten times the amount required for a
rule to be considered ``major'' under the Congressional Review Act
would be more than enough to reach this threshold. Furthermore, as
noted above, it is apparent that a significant part of the negative
impact would occur within the United States--and specifically within
regions of the United States where traditional automobile manufacturing
is concentrated--because raising the penalty rate would not only harm
manufacturers generally. It would also create a specific incentive for
manufacturers to shift domestic production of small, low-profit-margin
passenger vehicles either to Mexico (where production costs are lower)
or outside of North America (because those vehicles would not be
subject to the domestic minimum standard).
---------------------------------------------------------------------------
\230\ See, e.g., 5 U.S.C. 804(2)(A).
---------------------------------------------------------------------------
Another commenter alleged that NHTSA did ``not analyze the obvious
alternative available to manufacturers who want to avoid the higher
penalty: compliance with the fuel economy standards'' and ``entirely
fail[ed] to address'' how increasing the CAFE civil penalty rate to $14
would raise the value of credits, ``making violations more expensive
for those manufacturers that voluntarily choose not to comply with the
CAFE standards.'' \231\ This comment is wrong: In the NPRM, NHTSA
expressly acknowledged manufacturers' option to comply with the
applicable fuel economy standards, the resulting effect on the value of
credits, and the economic impact.\232\ Further, the $1 billion estimate
was for total costs, including technology costs, not just increased
penalty payments.
---------------------------------------------------------------------------
\231\ Attorneys General Comment, at 15-16.
\232\ See, e.g., 83 FR 13904, 13916 (Apr. 2, 2018)
(``[I]ncreasing 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.'').
---------------------------------------------------------------------------
Therefore, the agency continues to believe that the estimate
provided by the Alliance and Global is a reasonable estimate of the
economic impact of increasing the penalty rate under the augural
standards--perhaps even be understated--and that this impact is
sufficient for the agency to conclude that the CAFE civil penalty rate
statute falls within the ``negative economic impact'' exception to the
2015 Act.
In addition, two recent NHTSA publications--NHTSA and EPA's Safer
Affordable Fuel-Efficient (SAFE) Vehicles proposed rule as well as the
MY 2011-2018 Industry CAFE Compliance Report--provide further
confirmation for NHTSA's conclusion that increasing the CAFE civil
penalty rate pursuant to the 2015 Act would have a ``negative economic
impact.'' \233\ The SAFE Vehicles rule proposed CAFE and greenhouse gas
(GHG) standards for model years 2020 through 2026 and used the most
recent version of the CAFE model. As discussed in greater detail in
that rulemaking, at a high level, the CAFE model is the tool the
agencies use to determine how the industry could respond to potential
standards. It includes a wide range of assumptions on the cost,
effectiveness, and availability of different technologies, and then a
decision-making tool to determine how each manufacturer could apply
technologies, while accounting for various considerations that
manufacturers typically evaluate when establishing, choosing, and
incorporating the technologies. In the case of the CAFE standards, the
model also estimates when a manufacturer is likely to use existing
credits or pay penalties in lieu of meeting the required standards.
Using the same publicly-available modeling and underlying data as that
relied upon in the SAFE Vehicles NPRM, the negative economic impact of
increasing the CAFE civil penalty rate to $14 remains apparent.
Analyses conducted for the SAFE Vehicles NPRM to determine the effect
of other inputs--in this case, the CAFE civil penalty rate--on the
sensitivity of results show that, as seen in Table 1 in Appendix A,
under the augural standards, manufacturers are projected to face more
than $500 million in additional civil penalty liability before
accounting for credits every year through at least MY 2026 if the rate
is increased to $14 in MY 2019, as compared to retaining the rate at
$5.50--with the added burden exceeding $1 billion for some model
years.\234\ Even under the proposed standards,\235\ which were the
least stringent option analyzed in that rule, the additional projected
penalty liability before accounting for credits from an increase in the
rate to $14 would be substantial: Over $750 million in the first model
year for which the increase would be in effect and over $100 million
every year through model year 2025, as shown in Table 2 in Appendix A.
These additional penalties are on top of any increased costs
manufacturers would incur in making technological or design changes to
reduce their shortfalls--costs that would likely be passed along to
consumers. It is important to note that, as described above, these
added potential penalties could be offset through the application
[[Page 36029]]
of credits earned, transferred, or traded in ways the model cannot
predict--subject to the limitations on domestic fleets described
above--but NHTSA expects that if the civil penalty rate was increased,
the price of credits would increase as well.
---------------------------------------------------------------------------
\233\ 83 FR 42986 (Aug. 24, 2018). Although the SAFE Vehicles
NPRM and the CAFE Compliance Report were published after the comment
period in this rulemaking had closed, ``an agency may use
supplementary data, unavailable during the notice and comment
period, that expands on and confirms information contained in the
proposed rulemaking and addresses alleged deficiencies in the pre-
existing data, so long as no prejudice is shown.'' Solite Corp. v.
U.S. E.P.A., 952 F.2d 473, 484 (D.C. Cir. 1991) (cleaned up) (citing
Cmty. Nutrition Inst. v. Block, 749 F.2d 50, 57-58 (D.C. Cir.
1984)). Moreover, since the SAFE rule was published, NHTSA has not
received any additional comments on--or any requests to re-open the
comment period for--this CAFE civil penalty rate rulemaking.
Pursuant to NHTSA's regulations, ``[l]ate filed comments will be
considered to the extent practicable.'' 49 CFR 553.23.
\234\ A description of the modeling assumptions and parameters
for the SAFE NPRM are located at 83 FR 43000- 43188 (Aug. 24, 2018)
(``Technical Foundation for NPRM Analysis''). The data supporting
the calculations presented here are available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system in the ``Central Analysis'' and ``Sensitivity
Analysis'' for the ``2018 NPRM for Model Years 2021-2026 Passenger
Cars and Light Trucks.'' The data utilized are the same data
presented in the SAFE Vehicles NPRM ``Sensitivity Analysis'' section
(beginning at 83 FR 43352), but tabulated to show the impacts of
this particular action. The calculations here specifically compare
the total projected fines across all manufacturers and all fleets,
both under the augural standards and the proposed standards, in the
central analysis that assumes the rate will remain at $5.50 and the
sensitivity analysis that, holding all else in the central analysis
the same, assumes the rate would be increased to $14. The numbers
presented here are based on the ``unconstrained'' analysis of the
CAFE model--which allows for the possibility that credits may be
earned, transferred, and applied to CAFE shortfalls--rather than the
standard-setting analysis--which assumes that each fleet must comply
with the CAFE standard separately in each year because of the
statutory limitation in EPCA and EISA that prohibits NHTSA from
considering the availability of credits when setting standards--but
the magnitudes of the amounts and the trends are similar under both
analyses. For additional information about the assumptions
underlying this data, please refer to the Preliminary Regulatory
Impact Analysis (PRIA) and the NPRM for the SAFE Vehicles
rulemaking, both available at https://www.nhtsa.gov/corporate-average-fuel-economy/safe.
\235\ The analysis provided by the Alliance and Global was
conducted and submitted before the proposed standards were publicly
available.
---------------------------------------------------------------------------
Moreover, the MY 2011-2018 Industry CAFE Compliance report recently
published by NHTSA shows that the number of fleets with credit
shortfalls has substantially increased since 2011, while the number of
fleets generating credit surpluses has decreased, leading to the MY
2018 estimate of 28 fleets with projected shortfalls and only 11 with
projected surpluses.\236\ While most manufacturers have so far avoided
making civil penalty payments by using earned and traded credits, more
manufacturers are expected to need to pay penalties going forward
because credit surpluses across the entire fleet are diminishing; \237\
manufacturers will no longer be able to use their own credits or
purchase credits from other entities to fully satisfy their shortfalls.
The shrinking credit surplus is particularly challenging for domestic
fleets: The MY 2011-2018 Industry CAFE Compliance report shows that the
remaining surplus credits for domestically-produced vehicles were cut
nearly in half from MY 2014 to MY 2016.\238\ In addition, since non-
compliance with the domestic passenger car minimum standard required by
49 U.S.C. 32903(g)(3) and 49 CFR 536.9 cannot be covered with credits
acquired by another automaker or transferred from another fleet,
shortfalls for domestic vehicles must be covered by penalty payments
when a manufacturer's domestic surplus credits run out. Manufacturers
are already beginning to realize this impact: As noted above, one
manufacturer paid over $77 million in civil penalties for failing to
meet the minimum domestic passenger car standard for MY 2016, which is
the single highest civil penalty assessed in the history of the CAFE
program. These facts show that the estimate provided by the Alliance
and Global is supported by the actual behavior of the industry in the
face of increasing standards, which bears out the conclusions already
reached by NHTSA in this rulemaking.
---------------------------------------------------------------------------
\236\ NHTSA, ``MY 2011-2018 Industry CAFE Compliance,'' https://one.nhtsa.gov/cafe_pic/MY%202011%20-%20MY%202018%20Credit%20Shortfall%20Report.pdf (Dec. 21, 2018).
\237\ Id.
\238\ Id.
---------------------------------------------------------------------------
5. $10 Cap
Two comments claimed that NHTSA failed to provide a ``reasoned
explanation'' for why it departed from its previous position that the
$10 cap for the CAFE civil penalty rate, established by Congress in
1978 in 49 U.S.C. 32912(c)(1)(B), needs to be adjusted pursuant to the
2015 Act.\239\ As explained above, NHTSA is permitted to change its
views. And in doing so here, NHTSA provided a ``reasoned explanation''
in its NPRM: The $10 cap is not ``assessed or enforced'' and thus is
not a ``civil monetary penalty'' that requires adjustment under the
2015 Act.
---------------------------------------------------------------------------
\239\ CBD Comment, at 23; Attorneys General Comment, at 17. The
Attorneys General comment also claimed that NHTSA adjusted the cap
from $10 to $25 in its interim final rule and that this adjustment
``has never been suspended or reversed, and remains in effect.''
Attorneys General Comment, at 16. As NHTSA noted in its NPRM,
however, while NHTSA did announce in the interim final rule that the
adjusted maximum civil penalty would be increased from $10 to $25,
81 FR 43524, 43526 (July 5, 2016), ``this change was never formally
codified in the Code of Federal Regulations nor adopted by
Congress.'' 83 FR 13904, 13916 n.96 (Apr. 2, 2018). Regardless,
NHTSA gave notice that ``[e]ven if the adjustment is considered to
have been adopted, however, NHTSA is now reconsidering that decision
for the reasons explained'' in the notice. 83 FR 13904, 13916 n.96
(Apr. 2, 2018).
---------------------------------------------------------------------------
Multiple commenters disagreed with NHTSA's proposed determination
in the alternative that any potential adjustment NHTSA makes to the
CAFE civil penalty rate be capped by the $10 limit, without adjusting
the cap to $25.\240\ These comments--including those that had argued
that NHTSA's adjustment in 1997 from $5 to $5.50 constitutes evidence
that an adjustment is warranted here--almost unanimously ignored that
this cap was not adjusted when the previous inflation adjustment was
made in 1997. These comments also failed to reconcile the fact the $10
cap was left intact when Congress amended the civil penalty provision
by enacting EISA in 2007.
---------------------------------------------------------------------------
\240\ See, e.g., CAP Comment, at 3; CBD Comment, at 23.
---------------------------------------------------------------------------
Instead, the comments focused largely on the ``maximum amount''
provision of definition of ``civil monetary penalty'' in the 2015 Act.
One comment observed that the statutory language establishing the $10
cap is ``virtually identical'' to the statutory language establishing
the general EPCA penalty of $10,000, which NHTSA adjusted, only
identifying the shared phrase ``not more than'' to indicate that they
are both maximum amounts.\241\ But NHTSA did not, and still does not,
dispute that the $10 cap is a ``maximum amount.'' Rather, NHTSA
tentatively determined, and today finalizes, that the $10 cap is not
``assessed or enforced'' as required to be a ``civil monetary penalty''
under the 2015 Act.\242\ Other penalties that have a maximum amount,
such as the general EPCA penalty, can actually be ``assessed or
enforced'': A violator could theoretically be assessed a civil penalty
of the now-adjusted maximum amount.
---------------------------------------------------------------------------
\241\ CARB Comment, 9.
\242\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]3(2)(B), (C).
---------------------------------------------------------------------------
Only two comments provided any argument on this specific
point.\243\ One of those comments conceded that the cap ``is not being
assessed or enforced now.'' \244\ Nonetheless, that comment maintained
that the cap ``may'' be assessed or enforced ``in the future if [NHTSA]
exercises its discretionary authority to increase the penalty to
further energy conservation.'' \245\ Similarly, the other comment
asserted that ``the condition of contemporaneous enforceability of the
statutory maximum amount is not a condition precedent in order to
qualify as a `civil monetary penalty.' . . . [T]he maximum itself does
not need to be actively assessed or enforced.'' \246\ Even setting
aside the hypothetical circumstances that NHTSA would need to establish
to raise the EPCA rate all the way to the cap (discussed above), it is
not the cap that is ever ``assessed or enforced''; it is the ``civil
penalty,'' as defined in 49 U.S.C. 32912(b). The statutory cap merely
sets a limit to which the $5.50 multiplier--which is used to calculate
the ``civil penalty''--can be raised.
---------------------------------------------------------------------------
\243\ CARB Comment, at 9; Attorneys General Comment, at 17.
\244\ Attorneys General Comment, at 17.
\245\ Attorneys General Comment, at 17.
\246\ CARB Comment, at 9.
---------------------------------------------------------------------------
Other commenters discussed how the $10 cap must be adjusted to
avoid undermining the purpose of the 2015 Act.\247\ As discussed above,
NHTSA disagrees that retaining the CAFE civil penalty rate runs counter
to the purposes of the 2015 Act, even if the 2015 Act applies to the
CAFE civil penalty rate. Congress chose means other than inflation
adjustments to maintain the deterrent effect of the CAFE civil penalty
formula over time (and to incentivize energy conservation under EPCA).
Regardless, the purpose of the statute would not justify completing an
adjustment unauthorized by Congress. The $10 cap does not satisfy the
definition of a ``civil monetary penalty'' required by Congress to be
[[Page 36030]]
adjusted, and therefore, the 2015 Act is not a basis for NHTSA to
adjust the $10 cap.
---------------------------------------------------------------------------
\247\ See, e.g., CARB Comment, at 19-20 (Not adjusting the $10
cap ``would completely defeat the purpose of the 2015 Act in
avoiding the eroded value and deterrence of penalties by
inflation.''); Attorneys General Comment, at 17 (``[T]o read the
2015 Act as not applying to the CAFE standards' statutory maximum
would undermine the purpose of both the 2015 Act and EPCA.''); IPI
Comment, at 4 (``[I]f the $10 maximum were a permanent cap never
subject to inflation, that would defeat Congress's stated purposes
for the 2015 Act. . . .'').
---------------------------------------------------------------------------
One commenter proposed the $10 cap be subject to an inflationary
adjustment calculated from 2007.\248\ Because NHTSA has concluded that
the $10 cap should not be adjusted at all under the 2015 Act, it is
unnecessary for NHTSA to determine what the appropriate base year would
be if such an adjustment were required, and NHTSA declines to do so.
---------------------------------------------------------------------------
\248\ Workhorse Comment, at 3.
---------------------------------------------------------------------------
E. 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. NHTSA believes that this rulemaking is
``economically significant'' because this rule avoids imposing a future
economic impact of $100 million or more annually.
Certain commenters criticized the agency's decision to not include
a separate economic analysis. The agency notes first that nothing in
either the 2015 Act or EPCA require that NHTSA conduct a cost-benefit
analysis when determining issues related to CAFE penalties. Further,
the agency's first argument in this final rule that these penalties are
not ``civil monetary penalties'' under the 2015 Act would not be
affected by any cost-benefit analysis, as it relies on purely legal
reasoning, not on any economic finding. Similarly, although one could
argue that other arguments relied on in this final rule require some
degree of analysis, the relevant statutes expressly identify specific
factors the agency must consider, and the agency made the appropriate
considerations of substantial deleterious harm under EPCA and negative
economic impact under the 2015 Act. In addition, since this rule merely
maintains the existing penalty rate, it has no economic impact.
Certainly, some alternatives, particularly raising it to $14 or even
just $10, would have had economic impacts, but analyzing the impacts of
alternatives that would have changed the status quo is different than
analyzing an actual rule that does so. In some ways, this compares to
an agency's decision to deny a petition rulemaking, where the denial
does not ordinarily include a thorough economic analysis, but any
regulatory action in response granting a petition would likely benefit
from some an analysis the reflects the impacts of any change. Finally,
Executive Order 12866 by its own terms does not, ``does not create any
right or benefit, substantive or procedural, enforceable at law or
equity by a party against the United States, its agencies or
instrumentalities, its officers or employees, or any other person.''
Therefore, whether the agency complies with the Order is not grounds
for legal challenge. To the extent there is any ambiguity as to what
analysis is required, OMB not only reviewed both the NPRM and final
rule, but also affirmatively concurred with NHTSA's economic
determination and the interpretations of the 2015 Act in this final
rule.\249\
---------------------------------------------------------------------------
\249\ OMB Non-Applicability Letter; OMB Negative Economic Impact
Letter.
---------------------------------------------------------------------------
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 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 (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
[[Page 36031]]
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 does not 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.\250\ 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.'' \251\ Based on the environmental assessment, the agency
must ``make its determination whether to prepare an environmental
impact statement'' and ``prepare a finding of no significant impact . .
. if the agency determines on the basis of the environmental assessment
not to prepare a statement.'' \252\ NHTSA prepared a Draft
Environmental Assessment (Draft EA), which was included in the preamble
of the NPRM. This section serves as the agency's Final Environmental
Assessment (Final EA) and Finding of No Significant Impact (FONSI).
---------------------------------------------------------------------------
\250\ 42 U.S.C. 4332(2)(C).
\251\ 40 CFR 1508.9(b).
\252\ 40 CFR 1501.4(c) & (e).
---------------------------------------------------------------------------
i. Purpose and Need
This final rule sets forth the purpose of and need for this action.
NHTSA considered 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
Inflation Adjustment Act does apply, it has considered the appropriate
approach to undertake pursuant to the legislation and consistent with
the agency's responsibilities under EPCA (as amended by EISA). NHTSA
has considered the findings of this Final EA prior to selecting the
$5.50 rate in this final rule.
ii. Alternatives
NHTSA considered a range of alternatives for this action, including
a civil penalty amount of $5.50 per each tenth of a mile per gallon
\253\ and a civil penalty amount of $14.00 per each tenth of a mile per
gallon.\254\ NHTSA also considered a civil penalty amount of $6.00 per
each tenth of a mile per gallon (rounding to the nearest dollar
pursuant to the 2015 Act) and whether the civil penalty amount is
capped at $10.00 per each tenth of a mile per gallon (pursuant to
EPCA). This allowed the agency to consider selecting any value along
this range of alternatives, including any civil penalty amount between
$5.50 and $14.00. In consideration of the information presented in this
Final EA, NHTSA is selecting a civil penalty rate of $5.50 per each
tenth of a mile per gallon as its final rule. NHTSA is also increasing
the ``general penalty'' to a maximum penalty of $42,530,\255\ pursuant
to the requirements of the Inflation Adjustment Act.
---------------------------------------------------------------------------
\253\ As previously noted, the rate was $5.50 during
reconsideration, the rate is currently $5.50, and the rate will
continue to be $5.50 as a result of this final rule, rather than
increasing to $14 beginning with MY 2019. Manufacturers would at no
time be responsible for paying a higher civil penalty rate.
\254\ Absent this final rule, the $14 rate would have gone into
effect beginning with model year 2019.
\255\ 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. Applying
the multiplier for 2019 of 1.02522, as specified in OMB's December
14, 2018, results in an adjusted maximum penalty of $42,530.
---------------------------------------------------------------------------
In the Draft EA, NHTSA identified $5.50 as the agency's No Action
Alternative. Two commenters noted that, as a result of the U.S. Court
Appeals for the Second Circuit decision, the $14 rate should be
considered the agency's No Action Alternative.\256\ NHTSA believes this
notice adequately explains the complicated factual and legal
circumstances that apply to this rulemaking. This Final EA considers
the environmental impacts associated with the $5.50 and $14 rates in
comparison with each other, thus allowing a reasoned consideration of
the greatest potential environmental impacts regardless of which is
appropriately considered the No Action Alternative.
---------------------------------------------------------------------------
\256\ IPI Comment, at 10; Attorneys General Comment, at 19.
---------------------------------------------------------------------------
iii. Environmental Impacts of the Proposed Action and Alternatives
NHTSA considered a range of alternatives from a rate of $5.50 to a
rate of $14 as 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
[[Page 36032]]
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
the levels of compliance with the applicable fuel economy targets for
each of the alternatives under consideration in this notice could
result, at most, in relatively small differences in 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.\257\ The analyses assumed a civil monetary penalty of $5.50 per
each tenth of a mile per gallon. The agency has considered the
information and trends presented in those Final Environmental Impact
Statements (Final EISs). 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 those fuel economy standards resulting in
modest 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. In fact, one commenter used NHTSA's CAFE Model from its
most recent CAFE stringency rulemaking to approximate the potential
impact on compliance.\258\ That commenter concluded that, compared to a
$14 rate, the $5.50 rate would ``cause average passenger car fuel
economy to drop almost 5 mpg [in the year 2032], from a baseline
scenario of 54.75 mpg to 49.75 mpg. . . . For the total fleet, the
expected increased fuel consumption amounts to 54 billion gallons
between 2017 and 2032.'' \259\ In the MY 2017-2025 CAFE EIS, the final
rule was associated with reductions in fuel consumption for calendar
years 2017 through 2060 ranging from 585 billion gallons to 1,508
billion gallons, depending on the analysis. Thus, the commenter's
analysis confirms that a civil penalty rate of $5.50, as compared to
$14, would result in environmental impacts that are a fraction of those
shown in the MY 2017-2025 CAFE EIS. Such impacts would mean global mean
surface temperature increases even less than 0.016 [deg]C by 2100, and
criteria and toxic pollutant emissions changes well less than those
reported in that EIS. Therefore, NHTSA anticipates that the
environmental impacts resulting from any of the alternatives would be
very small and consistent with, but to a much smaller degree than, the
trends reported in the Final EISs associated with its stringency
rulemakings.
---------------------------------------------------------------------------
\257\ 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).
\258\ IPI comment, at 11.
\259\ Id.
---------------------------------------------------------------------------
As stated in the NPRM, NHTSA believes that the environmental impact
trends reported in its recent Final EISs remain adequate and valid for
purposes of this Final EA even if the particular values reported are no
longer replicable due to updated assumptions and new information
obtained since their publication. In fact, since the NPRM, NHTSA
prepared a Draft EIS for its proposal for new CAFE standards, called
the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule.\260\ The
Draft EIS affirms NHTSA's reliance in this Final EA on its prior Final
EISs as it reported similar environmental impact trends and values at a
similar scale to those reported in those prior documents. NHTSA
received public comments associated with the Draft EIS and is currently
reviewing those comments in anticipation of issuing a Final EIS. The
agency does not believe the civil penalty rate being finalized in this
rulemaking 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.
---------------------------------------------------------------------------
\260\ The Draft EIS is available on http://www.regulations.gov,
Docket No. NHTSA-2017-0069-0178 and on NHTSA's website at http://www.nhtsa.gov/safe.
---------------------------------------------------------------------------
NHTSA is also finalizing an increase to the ``general penalty''
pursuant to the 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
preamble. NHTSA and DOT have also consulted with the U.S. Department of
Justice and provided other Federal agencies with the opportunity to
review and provide feedback on this rulemaking.
v. Conclusion
NHTSA has reviewed the information presented in this Final EA and
concludes that the final rule and alternatives would have minimal
impacts on the quality of the human environment. Regardless of whether
a rate of $5.50 is considered no change, as compared to current law, or
a reduction from a rate of $14, the environmental impacts are
anticipated to be very small. Further, the change to the ``general
penalty'' is not anticipated to affect on-road emissions.
vi. Finding of No Significant Impact
I have reviewed this Final EA. In determining whether this action
``significantly'' affects the quality of the human environment, I have
considered 40 CFR 1508.27, in which CEQ explains that ``significantly .
. . requires consideration of both context and intensity.'' In this
action, the context for the environmental impacts includes localities
for issues such as air pollutant emissions and the world as a whole for
issues such as GHG emissions. In terms of intensity, the impacts of
this rule would be spread across the entire nation or the entire world,
depending on the particular environmental impact. Viewed in light of
recent CAFE
[[Page 36033]]
stringency rulemakings, the potential environmental impacts of this
rule are expected to be small. Based on the Final EA, I conclude that
implementation of any of the action alternatives (including the final
rule) will not have a significant effect on the human environment and
that a ``finding of no significant impact'' (see 40 CFR 1501.4(e)(1)
and 1508.13) is appropriate. This statement constitutes the agency's
``finding of no significant impact,'' and an environmental impact
statement will not be prepared.
6. Executive Order 12778 (Civil Justice Reform)
This rule does not have a retroactive or preemptive effect. Even if
some MY 2019 vehicles are already being sold, compliance determinations
will not be made until 2020 at the earliest, after this rule has gone
into effect. Moreover, compliance determinations and penalty
calculations are based on the average fuel economy of the fleet, not
individual vehicles that have been sold prior to the rule going into
effect. Judicial review of this rule 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 submissions received into any of DOT's dockets by the name of the
individual submitting the document (or signing the document, 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 final rule is a deregulatory action under Executive Order
13771. Potential economic impacts are reported in Appendix A.
Appendix A
Table 1--Projected Additional Penalties Under Augural Standards if Rate is Increased
----------------------------------------------------------------------------------------------------------------
Projected Projected
penalties under penalties under Difference
$5.50 rate, $14 rate, (projected
Model year central analysis sensitivity additional
(augural analysis (augural penalties if rate
standards) standards) is increased)
----------------------------------------------------------------------------------------------------------------
2019............................................. $402,661,295.97 $979,857,995.69 $577,196,699.71
2020............................................. 424,626,535.48 1,074,571,984.97 649,945,449.49
2021............................................. 296,664,715.42 858,535,520.00 561,870,804.58
2022............................................. 435,761,242.00 1,161,920,853.58 726,159,611.58
2023............................................. 493,426,421.72 1,323,396,714.35 829,970,292.63
2024............................................. 806,729,507.15 2,108,481,177.18 1,301,751,670.03
2025............................................. 1,038,128,818.83 2,695,259,330.77 1,657,130,511.93
2026............................................. 674,517,279.88 1,541,685,503.03 867,168,223.15
--------------------------------------------------------------
Total........................................ 4,572,515,816.46 11,743,709,079.56 7,171,193,263.09
----------------------------------------------------------------------------------------------------------------
Note: Projected penalties could be offset by the application of credits.
Table 2--Projected Additional Penalties Under Proposed Standards if Rate is Increased
----------------------------------------------------------------------------------------------------------------
Projected Projected
penalties under penalties under Difference
$5.50 rate, $14 rate, (projected
Model year central analysis sensitivity additional
(proposed analysis (proposed penalties if rate
standards) standards) is increased)
----------------------------------------------------------------------------------------------------------------
2019............................................. $505,612,917.19 $1,269,742,039.02 $764,129,121.83
2020............................................. 455,216,572.77 1,131,135,706.97 675,919,134.20
2021............................................. 302,262,154.89 704,833,149.24 402,570,994.35
2022............................................. 257,659,098.79 575,460,915.48 317,801,816.69
2023............................................. 188,672,069.76 384,423,537.48 195,751,467.72
2024............................................. 183,904,369.42 355,182,994.82 171,278,625.40
2025............................................. 165,483,877.30 312,608,273.21 147,124,395.91
2026............................................. 103,265,737.66 188,049,420.14 84,783,682.48
--------------------------------------------------------------
Total........................................ 2,162,076,797.79 4,921,436,036.37 2,759,359,238.58
----------------------------------------------------------------------------------------------------------------
Note: Projected penalties could be offset by the application of credits.
List of Subjects in 49 CFR Part 578
Imports, Motor vehicle safety, Motor vehicles, Penalties, Rubber
and rubber products, Tires.
In consideration of the foregoing, 49 CFR part 578 is 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, 104 Stat. 890; Pub. L. 104-134, 110
Stat. 1321; Pub. L. 109-
[[Page 36034]]
59, 119 Stat. 1144; Pub. L. 114-74, 129 Stat. 584; Pub. L. 114-94,
129 Stat. 1312; 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 $42,530 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. 2019-15259 Filed 7-25-19; 8:45 am]
BILLING CODE 4910-59-P