Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-01210/USCOURTS-caDC-93-01210-0/pdf.json

Parties Involved:
Competitive Enterprise Institute
Petitioner
Consumer Alert
Petitioner
National Highway Traffic Safety Administration
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 16, 1994 Decided February 3, 1995

No. 93-1210

COMPETITIVE ENTERPRISE INSTITUTE,

AND CONSUMER ALERT,

PETITIONERS

v.

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION,

RESPONDENT

Petition for Review of an Order of the

National Highway Traffic Safety Administration

Sam Kazman argued the cause and filed the briefs for petitioners.

Peter R. Maier, Attorney, United States Department of Justice, argued the cause for respondent.

With himon the briefwere Eric H. Holder, Jr., United States Attorney, Barbara C. Biddle, Attorney,

United States Department of Justice, and Kenneth N. Weinstein, Assistant Chief Counsel, and Enid

Rubenstein, Attorney, National Highway Traffic Safety Administration.

Before EDWARDS, Chief Judge, GINSBURG and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge: The Competitive Enterprise Institute and Consumer Alert

(hereinafter referred to jointly asthe CEI) petition for review of the National Highway Traffic Safety

Administration rulemaking setting the corporate average fuel economy (CAFE) standard for 1990

passenger cars. The petitioners claim that the agency arbitrarily and capriciously failed to

acknowledge significant adverse safety effects of setting the standard at 27.5 rather than 26.5 miles

per gallon or somewhere in between. Finding that the agency adequately rooted its decision in the

record of the rulemaking, we deny the petition for review.

I. BACKGROUND

In response to the then-restricted world supply of oil, the Congress enacted the Energy Policy

and Conservation Act of 1975, which was intended, among other things, to induce automobile

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manufacturersto improve the fuel economy oftheir cars. The Act set a CAFE standard for passenger

cars that increased several times and then leveled off at 27.5 miles per gallon for model years 1985

and beyond. 15 U.S.C. § 2002(a)(1). The NHTSA is authorized to raise or lower the standard for

a particular model year, however, in order to achieve the "maximum feasible average fuel economy,"

taking into account technological feasibility, economic feasibility, the effect upon fuel economy of

other federal motor vehicle standards, and the need of the nation to conserve energy. See 15 U.S.C.

§ 2002(e) (listing factors); 15 U.S.C. § 2002(a)(4) (granting Secretary of Transportation discretion

to amend CAFE standard); 49 C.F.R. § 1.50(f) (delegating authority to NHTSA). Although the Act

does not list safety as a factor that the agency is to consider in setting the CAFE standard, the

NHTSA has previously considered safety as an aspect of technological or economic feasibility. See

Competitive Enterprise Institute v. National Highway Traffic Safety Admin., 956 F.2d 321, 322

(D.C. Cir. 1992) ("CEI II").

Under the Act, a manufacturer that fails to meet the CAFE standard is liable for a monetary

penalty. 15 U.S.C. § 2008(b)(1). A manufacturer may, however, offset its shortfall in meeting the

CAFE standard one year with credits it earns by exceeding the standard in other years. 15 U.S.C.

§ 2002(l). A manufacturer may carry credits backward or forward up to three model years.

Eachmanufacturermust meet theCAFEstandard separatelyforits domestically manufactured

fleet and for its "not domestically manufactured" fleet, which is defined to exclude cars built in the

United States from imported parts. In 1988 the NHTSA was concerned that the 27.5 mpg standard

might lead American automobilemanufacturersto shiftsome oftheir large-car manufacturing activity

overseas in order to average the fuel economy of those cars with more of their small cars, thereby

raising the average fuel economy of their domestic fleets and lowering the comfortably high average

fuel economy oftheir non-domestic fleets. Notice of Proposed Rulemaking: Passenger Automobile

Average Fuel Economy Standardsfor Model Years 1989 and 1990, 53 Fed. Reg. 33,080, 33,080-81

(1988). Foreseeing the job loss and "potential economic harm" that might occur, the NHTSA

proposed to lower the MY 1989 and 1990 CAFE standardsfrom27.5 mpg to not lessthan 26.5 mpg.

Id. at 33,083.

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Later in 1988 the NHTSA lowered the CAFE standard for MY 1989 from 27.5 mpg to 26.5

mpg. Final Rule: Passenger Automobile Average Fuel Economy Standards for Model Year 1989,

53 Fed. Reg. 39,275 (1988). We affirmed. See Competitive Enterprise Institute v. National

Highway Traffic Safety Admin., 901 F.2d 107, 110 (D.C. Cir. 1990) ("CEI I"). In 1989, however,

the agency terminated the MY 1990 aspect of the rulemaking without changing the CAFE standard

for that year. "This decision [was] based largely on the increasing need of the nation to conserve

energy and a conclusion by the agency that retention of the 27.5 mpg standard for MY 1990 [would]

not have a significant adverse effect on U.S. employment or on the competitiveness of the U.S. auto

industry." Termination of Rulemaking: Passenger Automobile Average Fuel Economy Standard

for Model Year 1990, 54 Fed. Reg. 21,985, 21,989 (1989). The NHTSA also concluded, contrary

to the submission of the CEI, that leaving the MY 1990 CAFE standard at 27.5 mpg would not have

an adverse effect upon automotive safety. Id. at 21,992-94.

Upon the CEI's petition for review, we remanded the MY 1990 decision to the agency to

address whether the 27.5 mpg standard for that year would cause automobile manufacturers either

to limit the availability of larger cars in their fleets, or (what is in substance the same thing) to raise

the price of their larger cars in order to discourage some consumersfrom purchasing them; in either

event, some consumers would be priced out of the market for larger, safer cars. CEI II, 956 F.2d at

323. Accordingly, the NHTSA reopened the rulemaking in October 1992 and requested comments

on: whether it should lower the MY 1990 CAFE standard; any actions that the automobile

manufacturers would take if it did so; the potential safety effect of lowering the standard; and the

appropriate role ofsafety concerns generally in setting CAFE standards. Reopening of Rulemaking

Proceeding; Request for Comments, Passenger Automobile Average Fuel Economy Standard for

Model Year 1990, 57 Fed. Reg. 48,777 48,778-79 (1992). No manufacturer suggested that lowering

the MY 1990 CAFE standard would affect its production or sale of cars, and no other commenter

provided evidence that a standard of 27.5 mpg would cause any manufacturer to increase the price

of larger, safer cars. Therefore, finding no significant safety effect of leaving the statutory CAFE

standard in place for MY 1990, the agency terminated the rulemaking without taking further action.

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Termination of Rulemaking: Passenger Automobile Average Fuel Economy Standard Model Year

1990, 58 Fed. Reg. 6939, 6943 (1993). The CEI now petitions for review of that decision.

II. ANALYSIS

Our review of the NHTSA's decision is limited to determining whether it is "arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A).

See CEI I, 901 F.2d at 120. We must uphold the decision if the agency provided a "reasoned

explanation for terminating its inquiry into whether ... to relax the 27.5[mpg] standard." CEI II, 956

F.2d at 323. While we are mindful that the NHTSA has adhered to the position it first took in the

decision that we remanded, cf. Greyhound Corp. v. ICC, 668 F.2d 1354, 1358 (D.C. Cir. 1981)

(according greater scrutiny to order that on remand from court reaches same result as in original

order), our review is still a matter of determining whether the agency's final decision "was based on

a consideration of the relevant factors and whether there has been a clear error of judgment." Motor

Vehicle Mfrs. Ass'n, Inc. v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 43 (1983).

The CEI contends that the NHTSA, on remand, failed to give adequate consideration to the

petitioners' contention that retaining the statutory CAFE standard for MY 1990 would have

significant adverse safety effects. Specifically, the CEI claims that the agency failed to consider that

(1) the CAFE standard causes automobile manufacturers to downsize passenger cars, resulting in

significantlymore traffic fatalities because larger, heavier cars are safer than smaller, lighter cars; and

(2) the CAFE standard constrains automobile manufacturers from upsizing cars, thereby pricing

consumers out of the market for larger, heavier, and (presumably) safer cars. The substance of the

CEI's position is intuitively appealing. We must deal here, however, not with our intuition and not

with the petitioners' position in the abstract, but with the concrete record before us and with the

conclusionsthat the agency drew from it. That record adequately supports the NHTSA's conclusion

that maintaining the 27.5 mpg CAFE standard for MY 1990 would not significantly affect the safety

of the motoring public.

First, the NHTSA reasonably concluded fromthe evidence before it that the MY 1990 CAFE

standard did not cause automobile manufacturers either to downsize or to refrain from upsizing their

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cars. In its notice reopening the rulemaking proceeding, the agency asked commenters to address:

What specific actions [manufacturers would] actually take, if any, depending upon

whether the MY 1990 CAFE standard remained at 27.5 mpg or were reduced to some

level between 26.5 mpg and 27.5 mpg? If the standard remained at 27.5 mpg, would

manufacturers downsize vehicles, refrain from upsizing vehicles[,] or change the mix

or pricing policies of the vehicles they offer for sale?

Reopening of Rulemaking Proceeding: Passenger Automobile Average Fuel Economy Standard for

Model Year 1990, 57 Fed. Reg. 48,777, 48,778 (1992). Further, recognizing that a regulatory

change made in 1992 would not affect the production of vehiclesin MYs 1990-92, the NHTSA asked

the automobile manufacturers to state what specific actions they would take with respect to any

model year (presumably by carrying credits backward or forward) were the agency to lower the 1990

standard. Id.

No manufacturer identified any change that it would make in the size or weight ofits vehicles,

in its product mix, or in its pricing strategyfor any model yearif the NHTSA were to lower the

MY 1990 CAFE standard. In fact, the Ford Motor Company asserted that it "did not reduce its

average car size over what would have been offered absent such 1990 standard." The General

Motors Corporation stated that "relaxing the standard could in some cases generate credits giving

manufacturers more flexibility to offer larger, safer cars in later model years," but did not go so far

asto suggest that it would be one of the beneficiaries. Accordingly, the NHTSA reasonably decided

that maintaining the MY 1990 CAFE standard would have no appreciable effect upon the size or

weight of automobiles offered for sale in any model year.

Second, the factual record simply does not support the CEI's contention that consumers are

priced out of the market for larger, heavier cars by reason of the 27.5 mpg standard. As part of the

rulemaking for the MY 1986 CAFE standard, the NHTSA analyzed the cost-effectiveness of various

technological changes that manufacturers have used to meet fuel economy standards. That analysis

showed that most of the technological changes paid for themselves with fuel savings over the first

four years of ownership and that all but one were cost-effective over the life of the vehicle. See Final

Regulatory Impact Analysis for MY 1986 Passenger Car CAFE Standard III-32, III-33 (1985).

Moreover, the NHTSA noted that the technological changesincluding improved aerodynamics,

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substitution of lighter materials, fuel injection, electronic engine control, wide ratio gearing, reduced

lubricant viscosity, and reduced rolling resistanceare widely available on large and small cars alike.

Therefore, any increase in the purchase price of cars owing to those features would not impose a

relative penalty upon the purchase of a large car. Finally, while the NHTSA recognized that a

manufacturer could attempt to induce a shift in its product mix either byreducing the price ofitssmall

cars or by increasing the price of its large cars (or both), see 58 Fed. Reg. at 6944, the agency noted

that no manufacturer commented in the rulemaking on remand that it had taken either step in order

to meet the MY 1990 CAFE standard of 27.5 mpg.

Finally, the NHTSA considered the study upon which the CEI rested its contention that the

MY 1990 CAFE standard had a significant effect on safety. See Robert W. Crandall & John D.

Graham, The Effect of Fuel Economy Standards on Automobile Safety, 32 JOURNAL OF LAW &

ECONOMICS 97, 109-10 (1989). That study suggests that in the 1980s manufacturers significantly

reduced the average weight of their cars due to the CAFE standards. Using a model describing the

relationship of automobile weight to safety, and explaining weight as a function solely of CAFE

regulation and of the expected prices of gasoline and steel (as forecast four years in advance),

Crandall and Grahamestimated that theCAFE programcaused a "500-pound or 14 percent reduction

in the average weight of 1989 cars," which was "associated with a 14-27 percent increase in occupant

fatality risk." Id. at 111.

The NHTSA did not directly dispute the general finding of the Crandall and Graham study,

i.e., that there is a relationship between safety and the size or weight of automobiles. See 58 Fed.

Reg. at 6946 ("The agency ... fully agrees ... that all other things being equal, a large car issafer than

a small car"). Instead the agency faulted Crandall and Graham for failing to take account of factors

in addition to gasoline and steel pricesnamely, "technological advances," "increased competition,"

and "changes in consumer preferences"that in the agency's view would explain almost all of the

average car's weight loss that the authors instead attributed to the CAFE standard. (Indeed the

agency even suggested that "any CAFE standard effect [on weight] is negligible." Id.)

Although phrased in a varietyofways, the NHTSA'sresponse to Crandall and Grahamcomes

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down to suggesting that a change in consumers' preferences, rather than any constraining effect of

the CAFE standards, accounts for vehicle downsizing over the period that they studied. (After all,

"increased competition" only facilitates the satisfaction of consumers' preferences; nor, if

manufacturers were not constrained by the CAFE standards to adopt them, are "technological

advances" relevant unless consumers demanded them). While the agency speculated that consumers

might have preferred "downsized vehicles[because they] offered better handling, easier parking, and

potential cost savings associated with reduced materials usage," it offered no reason whatsoever to

think that consumer preferences actually did change at allduring the relevant time, much lessthat they

changed in the direction of preferring smaller and apparently more dangerous cars. Merely to assert

the existence of another possible explanation, which is all that the NHTSA has done, does nothing

to undermine the significance ofthe findings carefully documented byCrandall and Graham. It is like

asserting that regulation ofthe airlines had no effect because it occurred at a time when all consumers

preferred amenitiessuch as gourmet meals rather than cheaper fares; that is, of course, possible, but

the only evidence is to the contrary.

The NHTSA's failure adequately to respond to the Crandall and Graham study is troubling,

but it is not a basis, upon this record, for overturning the agency's decision to adhere to the 27.5 mpg

CAFE standard for MY 1990. The overwhelming fact is that no automobile manufacturer is on

record stating that it would have added weight to its automobiles (or taken any other action) in any

model year had the NHTSA relaxed the 1990 CAFE standard. Therefore, record evidence

documenting a correlation between the safety and the size or weight of a vehicle, and the contribution

of the CAFE standard to determining size or weight, while potentially relevant to any future decision

to retain or amend the CAFE standard, simply does not require the NHTSA to amend the MY 1990

CAFE standard.

III. CONCLUSION

The NHTSA has identified sufficient support in the record for its decision not to amend the

MY 1990 CAFE standard. The manufacturers did not assert in their comments to the agency on

remand that they would implement any design or product mix changes if the NHTSA amended the

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MY 1990 CAFE standard and there is no hard evidence in the record that the MY 1990 CAFE

standard caused any manufacturer to price any consumers out of the market for larger, safer cars.

The petition for review is therefore

Denied.

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