From: William Charmley/AA/USEPA/US

To: "Achanta, Chandana L." <Chandana_L._Achanta@omb.eop.gov> Cc: "'james.tamm@dot.gov'" <james.tamm@dot.gov>, "'Joanne.Petrie@dot.gov'" <Joanne.Petrie@dot.gov>, Maureen Delaney/DC/USEPA/US@EPA, "'Neil.Eisner@dot.gov'" <Neil.Eisner@dot.gov>, "'rebecca.yoon@dot.gov'" <rebecca.yoon@dot.gov>, Robin Moran/AA/USEPA/US@EPA,

"' Steve.Wood@dot.gov'" <Steve.Wood@dot.gov> Date: 09/29/2010 11:14 AM Subject: RE: Summary of interagency working comments received on draft Notice and Technical Assessment under EO 12866 review

Chandana

- Here is EPA and NHTSA responses to the comments we heard during the Monday conference call. We are working through the interagency comments from last night right now and plan to provide you with a response as soon as we can.

Thanks Bill

From: "Achanta, Chandana L." <Chandana_L._Achanta@omb.eop.gov> To: William Charmley/AA/USEPA/US@EPA, "'Neil.Eisner@dot.gov'" <Neil.Eisner@dot.gov>, "'rebecca.yoon@dot.gov'" <rebecca.yoon@dot.gov>, "'james.tamm@dot.gov'" <james.tamm@dot.gov>, "'Steve.Wood@dot.gov'" <Steve.Wood@dot.gov>, "'Joanne.Petrie@dot.gov'" <Joanne.Pe trie@dot.gov>, Maureen Delaney/DC/USEPA/US@EPA, Robin Moran/AA/USEPA/US@EPA Date: 09/29/2010 10:12 AM Subject: RE: Summary of interagency working comments received on draft Notice and Technical Assessment under EO 12866 review

What is the status of responses to these interagency comments?

From: Achanta, Chandana L. Sent: Tuesday, September 28, 2010 5:56 PM To: Charmley.William@epamail.epa.gov; Neil.Eisner@dot.gov; rebecca.yoon@dot.gov; james.tamm@dot.gov; Steve.Wood@dot.gov ; Joanne.Petrie@dot.gov; Delaney.Maureen@epamail.epa.gov; Moran.Robin@epamail.epa.govSubject: Summary of interagency working comments received on draft Notice and Technical Assessment

under EO 12866 review

Please find attached additional interagency wor king comments we received under EO 12866 review of the draft notice and technical assessment. They are for your consideration and subject to further policy review.EPA and NHTSA Document

– Deliberative Process

- Do Not Cite or Quote

List of Comments raised by OMB/CEQ /CEA Inter

- agency during 27 Sept 2010 Conference Call on the
NOI and TAR

This document contains a response to the action items EPA and NHTSA heard as a result of the Sept 27
conference call.

1. Can the Agencies commit in t he NOI to examining as one of the alternatives for an NPRM
standards which maximize net social benefits ?

Agencies Response: See suggested text insert for the NOI in response to request #2.

2. Could the Agencie s in the NOI state for the NPRM, when a full ru lemaking assessment is performed which is consistent with EISA statutory requirements the agencies will consider stringencies ou tside of the range of 3 to 6% per year , for passenger cars and/or truck standards

.

Agencies R esponse: The agencies will add th e following highlighted text to section II.A.4 of the
NOI

“ The agencies emphasize that the analysis presented in this notice , while reasonable for conducting an initial assessment , is a first step. M uch more work must be completed for the upcoming NPRM

. As noted above, we expect to issue updated assessments by November 30 of this year. The upcoming rulemaking to develop the next phase of the National Program will be based on a full analysis that is consistent with both the statutory framework that NHTSA must account for, and the flexibilities that EPA may account for, just as the detailed analysis for the
MYs 2012

- 2016 was conducted. 1 For purposes of this initial assessment, the agencies examined stringencies in the 3% to 6% per year range. However, t he agencies have not reach any conclusions at this time regarding the appropriate level of stringency for MY 2017 and later, and the assessment presented in this Joint Notice does not preclude the agencies from considering standards outside of this range f or the upcoming rulemaking. The future Joint NPRM will consider a number of alternative levels of stringency, including an alternative which is estimated

to maximize net benefits W hile the single fleet analysis approach simplifies some aspects of
the analysis and offer s some advantages, there are also important limitations which will be
addressed during the rulemaking process.”

3. In the NOI, can the agencies include language making it clear that the TAR assessment does not
meet all of the EISA statutor y requirements ?

1 For further information on the kinds of comprehensive analyses performed for the MYs 2012

- 2016 rulemaking, see 75 Fed. Reg. at 25348

- 396.EPA and NHTSA Document

– Deliberative Process

- Do Not Cite or Quote

Agencies R esponse: This issue is discussed in the last paragraph of Section II.A.1, the last two paragraphs of Section II.A.2, and the three paragraphs of Section II.A.4 . To provide additional clarification, the agencies will add an ad ditional statement in Section II.A.2:

“ In the full analysis for the rulemaking, as required by EPCA/EISA and as permitted by the CAA, the agencies will make more refined assessments, including separate analyses for car and light truck vehicle fleets, year

- by

- year attribute

- based standards, and manufacturer

- specific estimates of potential attribute

- based standard targets and costs, and other statutory requirements. The agencies note that consideration of these statutory factors may affect the potential ran ge of standards. NHTSA and EPA also will perform a more thorough assessment of the impacts of proposed standards, as was done for the MY 2012

- 2016 rulemaking, including analysis of improved energy security, monetized benefits of CO 2 reductions, co

- polluta nt impacts, an assessment of the societal costs and benefits of potential standards, an assessment of potential safety impacts, an assessment of impacts on automobile sales and related employment, and other relevant impacts. ”

4. In Chapter 5 of the TAR, ca n the agencies identify which of the existing 2012

- 2016 flexibilities are considered in the Chapter 6 analysis, and which are not ?

Agencies response: The Agencies will discuss with the California Air Resources Board ( CARB ) adding the following text to t he introduction to Chapter 5. EPA and NHTSA have no reason to believe CARB will not concur with this insert, but as a co

- author of the TAR we need to check
with them.

“This Chapter includes three sections. Chapter 5.1 provides an overview of the regul atory flexibilities and incentives contained in the MYs 2012

- 2016 final rule for the National Program. Chapter 5.2 includes a discussion of the potential regulatory flexibilities and incentives
for MYs 2017 and later which the agencies received input on d uring our meetings with stakeholders. Chapter 5.3 contains a summary of the non

- regulatory incentives which the agencies received input on during our meetings with stakeholders. We note that some of the flexibilities discussed in this Chapter were used i n our analysis of future scenarios in Chapter 6, though not all. As a result, when EPA and NHTSA undertake analysis for the upcoming federal rulemaking, we would not project additional per

- vehicle cost reduction potential attributable to
the flexibilities that have already been used to the current analysis. Chapter 6 contains a detailed discussion of the flexibilities we considered in the analytical assessment.”EPA and NHTSA Document

– Deliberative Process

- Do Not Cite or Quote

5. Regarding learning curves, is there a citation for the use of the “time

- based learning”? I f not, can the agencies revert to the use only of the volume

- based learning ?

Agencies R esponse: As discussed in the 2012

- 2016 final rule, “time

- based” and “volume

- based” learning are the phrases EPA and NHTSA have used to implement manufacturing learnin g

- by

doing cost reductions. There is no separate economic theory which needs to be cited, they are the same observed phenomenon. In addition, t he agencies note that the following language
which is already in the TAR in Chapter 3.2.7

“3.2.7. Costs Effe cts due to Learning

The agencies have also reconsidered learning effects. For this assessment, we continue to employ both volume

- based and time

- based learning effects. Volume

- based learning is estimated to result in 20 percent lower costs after two full years of implementation (i.e., a 2014 MY cost would be 20 percent lower than the 2012 and 2013 model year costs for a new technology being implemented in 2012). Time

- based learning is estimated to result in 3 percent lower costs in each year following fir st introduction of a given technology. Once two volume

based learning steps have occurred (for technologies having volume

- based learning applied), time based learning would begin. For technologies to which time based learning is applied, learning would b egin in year 2 at 3 percent per year for 5 years. Beyond 5 years of time

- based learning at 3 percent per year, 5 years of time

- based learning at 2 percent per year, then 5 at 1 percent per year become effective

. Going forward, the agencies intend to inve stigate industry learning curves in more detail and whether time based learning should continue to be applied indefinitely, or whether cost reductions due to learning should go to zero after some period of
time. The learning curve used in this assessment may be modified for the rule making. ”

6. In the NOI, can the agencies check to see if the use of the pathways as one means to consider
uncertainties is identified ?

Agencies r esponse: This issue is discussed in Section II.A.1 of the NOI, in the paragraph a bove
the bullet

- listing of the four technical pathways.