[Federal Register Volume 75, Number 194 (Thursday, October 7, 2010)]
[Notices]
[Pages 62115-62120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25324]



[[Page 62115]]

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DEPARTMENT OF ENERGY

[Docket Number EERE-BT-PET-0024]


Energy Conservation Program for Consumer Products: Commonwealth 
of Massachusetts Petition for Exemption From Federal Preemption of 
Massachusetts' Energy Efficiency Standard for Residential Non-
Weatherized Gas Furnaces

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of Denial of a Petition for Waiver from Federal 
Preemption.

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SUMMARY: This notice announces the U.S. Department of Energy's (DOE) 
denial of a petition filed by the Commonwealth of Massachusetts seeking 
an exemption from Federal preemption of certain energy conservation 
standards affecting residential non-weatherized natural gas furnaces.

DATES: A request for reconsideration of the denial must be received by 
DOE not later than November 8, 2010.

ADDRESSES: A request for reconsideration must be submitted, identified 
by docket number EERE-BT-PET-0024, by one of the following methods:
    1. Federal eRulemaking Portal: http://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. E-mail: <a href="/cdn-cgi/l/email-protection#733e32360b161e03072316071a071a1c1d3316165d171c165d141c05"><span class="__cf_email__" data-cfemail="b0fdf1f5c8d5ddc0c4e0d5c4d9c4d9dfdef0d5d59ed4dfd59ed7dfc6">[email protected]</span></a>. Include either the docket 
number EERE-BT-PET-0024, and/or ``Massachusetts Petition'' in the 
subject line of the message.
    3. Mail: Ms. Brenda Edwards-Jones, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, Room 1J-018, 1000 
Independence Avenue, SW., Washington, DC 20585-0121. Please submit one 
signed original paper copy.
    4. Hand Delivery/Courier: Ms. Brenda Edwards-Jones, U.S. Department 
of Energy, Building Technologies Program, Room 1J-018, 1000 
Independence Avenue, SW., Washington, DC 20585-0121.
    5. Instructions: All submissions received must include the agency 
name and docket number for this proceeding. For detailed instructions 
on submitting comments and additional information on the proceeding, 
see section II. C of this document (Submission of Comments).
    Docket: For access to the docket to read background documents, or 
comments received, go to the Federal eRulemaking Portal at 
www.regulations.gov. In addition, electronic copies of the Petition are 
available online at DOE's Web site at the following URL address: http://www.eere.energy.gov/buildings/appliance_standards/state_petitions.html.

FOR FURTHER INFORMATION CONTACT: Mohammed Khan, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, 
DC 20585-0121, (202) 586-7892, or e-mail: <a href="/cdn-cgi/l/email-protection#bff2d0d7ded2d2dadb91f4d7ded1ffdada91dbd0da91d8d0c9"><span class="__cf_email__" data-cfemail="55183a3d34383830317b1e3d343b1530307b313a307b323a23">[email protected]</span></a>.
    Michael Kido, U.S. Department of Energy, Office of General Counsel, 
GC-71, 1000 Independence Avenue, SW., Washington, DC 20585, (202) 586-
8145, e-mail: <a href="/cdn-cgi/l/email-protection#115c78727970747d3f5a78757e5179603f757e743f767e67"><span class="__cf_email__" data-cfemail="fdb0949e959c9891d3b6949992bd958cd3999298d39a928b">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Summary of Notice
II. Background
    A. Applicable Legal Standard
    B. Previous Preemption Waiver Requests
III. Massachusetts' Petition Summary
IV. DOE Analysis and Discussion
    A. Massachusetts Has More Heating Degree-Days than the National 
Average
    B. Massachusetts Has Higher Gas Rates than the Nation as a Whole
    C. Massachusetts Residential Heating Loads Compete with Power 
Plant Loads
    D. The High Percentage of Rental Housing Creates Market Barriers
    E. Massachusetts Has a Unique Set of Statutes and Policies 
Promoting Increased Energy Efficiency and Reductions in Greenhouse 
Gas Emissions
    F. Potential Impacts on Manufacturers
    G. Potential Impacts on Consumers from Installation Issues
    H. Current Energy Conservation Standards Rulemaking and the 
Consensus Agreement
V. Conclusion
VI. Denial
VII. Approval of the Office of the Secretary

I. Summary of Notice

    This notice addresses a petition received by the U.S. Department of 
Energy (DOE) regarding a request from the Commonwealth of Massachusetts 
(``Massachusetts,'' ``the Commonwealth,'' or, in context, ``the 
State'') for a waiver from Federal preemption of a State law pertaining 
to the energy efficiency of a certain type of consumer product. 
Specifically, Massachusetts sought an exemption to permit it to set a 
minimum efficiency level for non-weatherized natural gas furnaces that 
would exceed the stringency prescribed by the minimum Federal level set 
by DOE. After carefully considering the Commonwealth's request, 
supporting materials accompanying the request, submitted comments, and 
the current rulemaking activities underway that would be likely to have 
a direct impact on the issues raised in the petition, DOE is declining 
to grant this request.

II. Background

    On October 6, 2009, DOE received a petition from Massachusetts 
(dated October 1, 2009) seeking a preemption waiver to permit it to 
impose a 90-percent annual fuel utilization efficiency (``AFUE'') 
requirement on all natural gas furnaces sold within the State. 
(Commonwealth of Massachusetts, No. 4.1) AFUE is a thermal efficiency 
measurement used to rate combustion equipment such as furnaces and 
represents the actual season-long average efficiency of a particular 
piece of equipment. Under the Energy Policy and Conservation Act of 
1975, as amended (EPCA), any local or state regulation concerning the 
energy efficiency or energy use of a product covered under EPCA is 
preempted if DOE has established an energy conservation standard for 
that product. States may seek a waiver from preemption provided that 
certain criteria are met. See 42 U.S.C. 6297(d)(5). In this instance, 
if DOE were to grant the waiver, all non-weatherized natural gas 
furnaces sold in Massachusetts would need to satisfy a 90-percent AFUE 
level starting three years after the publication of the decision by DOE 
(i.e., approximately October 2013). (The three-year lead time is a 
statutory requirement under 42 U.S.C. 6297(d)(5) that can be extended 
to a period of five years if DOE determines that retooling, redesign, 
or distribution burdens merit the additional time.) The current Federal 
standards require that these products satisfy an AFUE level of 78%. 10 
CFR 430.32(e).
    In support of its petition, Massachusetts provided supplemental 
information, including a report prepared by Optimal Energy, Inc. (``the 
Optimal Report''). This supplemental information consisted of the 
relevant text setting out the furnace efficiency requirements that the 
Commonwealth proposed to adopt, the Commonwealth's energy plan, a 
projected forecast of natural gas furnace sales, an analysis of the 
Commonwealth's energy situation, and the projected impacts of other, 
non-regulatory-based alternatives. DOE published a notice announcing 
the receipt of this petition and to solicit public comment. 75 FR 4548 
(Jan. 28, 2010). As required under EPCA, the agency provided the public 
with a reasonable opportunity to provide comments (in this instance, 60 
days) and a subsequent rebuttal period of 30

[[Page 62116]]

days, which closed on July 7, 2010. 75 FR 32177 (June 7, 2010).
    The agency received comments from 19 different organizations and 
the Commonwealth of Massachusetts. Commenters included local 
governments (the City of Boston, including separate comments filed by 
the City of Boston's Environmental and Energy Services, and the City of 
Cambridge), energy and consumer advocacy groups (joint and individual 
comments filed by Environment Northeast (ENE), the Consumer Assistance 
Council, the Massachusetts Consumers' Council, the Massachusetts 
Consumers' Coalition, and the Massachusetts Public Interest Research 
Group (MASSPIRG); Conservation Law Foundation; Appliance Standards 
Awareness Project (ASAP); National Consumer Law Center (NCLC); 
Northeast Energy Partnership (NEEP); Massachusetts Climate Action 
Network; and the Massachusetts Union of Public Housing), industry 
organizations (Air-Conditioning, Refrigeration, and Heating Institute 
(AHRI) and American Gas Association (AGA)), utilities (Bay State Gas 
Company; Berkshire Gas; Nationalgrid; the New England Gas Company; 
NSTAR Electric Gas; and Unitil), and others (the Cape Light Compact) 
(an inter-municipal regional energy services organization). The agency 
has reviewed and docketed these materials. See http://www.regulations.gov (search under ``DOE'' and enter ``PET-0024'').
    In general, energy and consumer advocacy groups, as well as local 
governments and utility companies, supported the petition. These 
commenters stated their collective belief that Massachusetts faces 
``unusual and compelling'' energy-related circumstances due to its 
geography, climate, and energy markets. (ENE, No. 6 at pp. 1-2; the 
Consumer Assistance Council, the Massachusetts Consumers' Council, the 
Massachusetts Consumers' Coalition, and MASSPIRG, No. 7 at pp. 2-3; Bay 
State Gas Company, No. 8 at pp. 2-3; the Conservation Law Foundation, 
No. 11 at pp. 2-3; NEEP, No. 13 at pp. 2-3; the Massachusetts Climate 
Action Network, No. 14 at pp. 2-3; the Cape Light Compact, No. 15 at p. 
1-2; the City of Bost on, No. 16 at pp. 1-2; the City of Cambridge, No. 
17 at p. 1; the Massachusetts Union of Public Housing, No. 18 at pp. 1-
2; the City of Boston Environmental and Energy Services, No. 20 at pp. 
1-2; Nationalgrid, No. 26.1 at pp. 1-2; NCLC, No. 25 at pp. 1-3; 
Unitil, No. 24.1 at pp. 1-2; Berkshire Gas, No. 27 at pp. 1-2; NSTAR 
Electric Gas, No. 28 at pp. 1-2; and the New England Gas Company, No. 
29 at p. 1)
    AHRI and AGA opposed the petition. AHRI held the view that the 
Massachusetts waiver fails to satisfy the waiver justification criteria 
set forth in EPCA and presented a variety of arguments in response to 
Massachusetts' claims. (AHRI, No. 9 at pp. 2-6) Specifically, AHRI 
noted that: (1) DOE should proceed with the current energy conservation 
standards rulemaking for residential furnaces and adopt the consensus 
agreement presented to DOE by certain industry and energy-efficiency 
organizations; (2) Massachusetts does not have unusual or extreme 
climates; (3) Massachusetts does not have any projected shortage of 
natural gas; (4) more stringent furnace standards for Massachusetts 
should not be allowed to override preemption of the Federal standards; 
and (5) the petition overstates the energy savings that would result 
from granting the waiver request and does not consider the high 
percentage of condensing furnaces already shipped to Massachusetts. 
(AHRI, No. 9 at pp. 3-4)
    In addition, AHRI questioned whether the waiver petition applied to 
other types of residential heating equipment, including oil-fired 
furnaces, gas-fired boilers, and oil-fired boilers. Specifically, AHRI 
pointed out that the petition refers to the Commonwealth's furnace 
efficiency regulation, which AHRI believes encompasses other product 
classes of residential furnaces. (AHRI, No. 9 at p. 1) DOE notes that 
the petition centers on a 90-percent AFUE standard for natural gas 
furnaces. Consequently, based on the discussion presented in the 
petition, DOE believes that the petition applies only to this one 
particular product class of residential furnaces.
    Similarly, AGA also opposed the petition. It asserted that DOE 
should deny the petition and proceed with the current energy 
conservation standards rulemaking for residential furnaces as the more 
appropriate means to address the issues raised by AGA in response to 
the petition. AGA specifically pointed out the potential impacts to 
Massachusetts consumers seeking to replace their furnaces and noted 
that consumers would likely face additional costs to vent the 
condensing furnace to permit safe operation in the field. (AGA, No. 12 
at pp. 2-4) Implied in this comment is AGA's view that using a 
condensing furnace system is the only way for a furnace manufacturer to 
meet a 90-percent AFUE level. (A condensing furnace system is one that 
recovers more heat from the combustion products such that the water 
vapor in the exhaust condenses.)

A. Applicable Legal Standard

    To obtain a waiver from Federal preemption, a State must meet the 
specified criteria laid out in 42 U.S.C. 6297(d)(1). In particular, a 
State must face ``unusual and compelling'' State or local energy 
interests in order to obtain a preemption waiver. For purposes of 
meeting this requirement, a State needs to demonstrate that these 
interests are ``substantially different'' in nature or magnitude from 
those prevailing in the United States generally and that the costs, 
benefits, burdens, and reliability of energy savings that would result 
from the State regulation make that regulation preferable or necessary 
when measured against the costs, benefits, burdens, and reliability of 
alternative approaches to energy savings or production. (42 U.S.C. 
6297(d)(1)(C)) By statute, these factors are to be evaluated within the 
context of the State's energy plan and forecast. Id.

B. Previous Preemption Waiver Requests

    DOE previously addressed preemption waiver issues in two contexts. 
The first dealt with a waiver request related to standards for 
residential clothes washers. See 71 FR 78157 (Dec. 28, 2006) (denying a 
California petition seeking a waiver from preemption for standards 
related to residential clothes washers). The second instance involved 
amended energy conservation standards for furnaces and boilers. See 71 
FR 59204, 59209-10 (Oct. 6, 2006) (notice of proposed rulemaking 
addressing the preemption waiver factors and noting the possibility of 
contiguous States availing themselves of the preemption waiver 
provision to help establish standard levels tailored to their 
particular circumstances while helping to lessen manufacturer burdens) 
and 72 FR 65136, 65150-52 (Nov. 19, 2007) (final rule declining to 
develop separate standards based on geography due to an absence of 
statutory authority but explaining how multiple contiguous States could 
use the waiver process to create a regionally-based standard). In both 
instances, the agency explained how a petitioning State could help 
demonstrate that it meets the statutory criteria to obtain a waiver 
from preemption.
    In the case of the California petition, the State sought a waiver 
to enable it to set more stringent standards for residential clothes 
washers. DOE denied that petition, citing three primary reasons: (1) 
The petition did not provide DOE with sufficient information to enable 
the agency to promulgate a final rule that would comply with the

[[Page 62117]]

scheduling requirements prescribed under EPCA; (2) the petition did not 
establish by a preponderance of the evidence that the State faced 
unusual and compelling circumstances as contemplated under the statute; 
and (3) other interested parties who commented on the petition 
sufficiently demonstrated by a preponderance of the evidence that the 
State's regulation would likely result in the unavailability of a class 
of residential clothes washers in California. Although the State filed 
suit over this denial and DOE's decision was ultimately vacated, see 
California Energy Comm'n v. DOE, 585 F.3d 1143 (9th Cir. 2009), the 
Court in that case did not address whether the information furnished by 
the State, if evaluated, would have satisfied the statutory criteria. 
See id. at 1153.
    DOE also addressed the application of waivers in its 2007 
rulemaking considering amended energy conservation standards for 
furnaces. That rulemaking occurred prior to the enactment of the Energy 
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140 
(Dec. 19, 2007), which granted DOE with the authority to establish 
geographically-based regional standards for furnaces. EISA 2007, sec. 
306(a). In the 2007 rulemaking, DOE explained that in evaluating a 
State's supporting evidence, the agency would consider whether regional 
climatic effects would have a significant impact on the technological 
feasibility and economic justifiability of a particular energy 
conservation standard. DOE noted that those states having higher-than-
average, population-weighted heating degree days ``would seem to have 
the best prospects'' for demonstrating the presence of ``unusual and 
compelling'' interests required under EPCA. 71 FR at 59209. DOE also 
offered other examples of how a State might be able to satisfy these 
criteria. Id. at 59210. Possible factors included identifying the 
saturation of homes with products that already satisfy the higher 
standard being sought and the existence of any subsidies and other 
incentives currently offered by the State and to show how mandatory 
regulations would be preferable to these current programs.
    Additionally, DOE explained that States seeking a waiver would need 
to address the extent of potential impacts on manufacturers--
specifically, the likelihood of cost increases of manufacturers, 
distributors, and others. The agency noted that one way of addressing 
this requirement would be to show how current shipments to the 
petitioning State already vary from current DOE-prescribed efficiency 
levels. Id.
    Through its accompanying attachments, Massachusetts provided 
supplemental information to help support its view that it faces unusual 
and compelling circumstances. These attachments, along with the 
accompanying petition, attempted to address each element noted above.

III. Massachusetts' Petition Summary

    The Massachusetts petition makes several points in favor of a 
waiver from Federal preemption.
    First, the petition claims that Massachusetts experiences more 
heating degree days than the nation as a whole. A heating degree day 
(HDD) is an index that reflects the demand for energy required to heat 
a home or business. HDDs compare the average outdoor temperature to a 
standard of 65 degrees Fahrenheit. The heating requirements for a 
particular structure at a specific location are directly proportional 
to the number of HDDs at that location. The more extreme the 
temperature, the higher the degree-day number and the more energy 
needed for in-door space heating. Massachusetts contends that it 
exceeds the national average of HDDs by approximately 50%. (Mass. 
Petition, No. 4 at 4)
    Second, the petition contends that the rates of natural gas prices 
within the Commonwealth are higher than the Nation as a whole. 
According to its supplemental information, natural gas price rates in 
Massachusetts are approximately 20% higher than the median and average 
prices found throughout the United States as a whole. (Mass. Petition 
(Attachment D), at 3-4).
    Third, the petition states that its residential heating loads 
compete with power generation loads. In other words, the demand for 
residential heating faces competition from the demands of natural gas-
fired electric generators. In the Commonwealth's view, because natural 
gas supplies are scarce, in part, because Massachusetts depends on 
natural gas to produce electricity, the amount of gas available for 
residential heating is limited by the demands of electricity generating 
plants. These demands would then cause residential consumers to face 
the prospect of potentially higher prices as utilities that rely on 
natural gas use this fuel in increased amounts to generate electricity.
    Fourth, the petition argues that Massachusetts has a higher 
percentage of rental housing than the rest of the United States. In its 
view, this fact creates market barriers that prevent the introduction 
of more efficient furnaces. As a result, those individuals who rent 
their residences are less likely to benefit from the introduction of 
more efficient furnaces (e.g. lower utility bills) because of their 
higher costs when compared to less efficient (but Federally-compliant) 
furnaces and the unwillingness of owners to pay these initial up-front 
costs. In effect, Massachusetts argues that without the mandatory 
introduction of more energy efficient furnaces, these consumers, who 
are more likely to be price sensitive to utility price increases than 
individuals who own their residences, will be more likely to face 
increased utility costs as natural gas prices rise.
    Fifth, the petition notes that the statutory framework and policies 
put into place by Massachusetts, which are designed in part to promote 
increased energy efficiency and reduce greenhouse gas emissions, have 
helped to create ``unusual and compelling interests'' because a 
decrease in natural gas consumption is necessary to help satisfy these 
State-imposed requirements. Examples of these requirements cited by 
Massachusetts include its Global Warming Solutions Act (2008 Mass. 
Acts, Ch. 298) and Clean Communities Act (2008 Mass. Acts, Ch. 169). 
These laws, among other things, required Massachusetts to take steps to 
improve energy efficiency and, in collaboration with other States, to 
reduce greenhouse gas emissions. In short, Massachusetts asserts that 
it needs a 90-percent AFUE standard to help it meet its own self-
imposed obligations under these laws.

IV. DOE Analysis and Discussion

    In its petition for waiver, Massachusetts cited five ``interests/
characteristics'' to bolster its claim of ``unusual and compelling 
interests.'' These five areas are addressed below with the most recent 
statistics compiled from the Energy Information Administration's (EIA) 
State Energy Data System (SEDS). See http://www.eia.doe.gov/emeu/states/_seds.html. DOE used the EIA data to makes its comparisons 
because EIA collects the same data for all states, including 
Massachusetts, which allows for consistent cross-comparisons between 
individual States and national averages.

A. Massachusetts Has More Heating Degree-Days Than the National Average

    DOE agrees that Massachusetts generally experiences more heating 
degree-days (HDDs) than the national average. In 2008, Massachusetts 
experienced 38-percent more heating degree-days than the national 
average.

[[Page 62118]]

The petition points to the Optimal Report and notes that ``there is a 
direct correlation between HDD and fuel use.'' However, even with 38-
percent more HDDs, Massachusetts residential natural gas customers 
consumed only 7 percent more natural gas per household than the 
national average. By comparison, in the same year, Connecticut 
experienced 30-percent more HDDs than the national average, and its 
residents consumed 17 percent more natural gas on a per residential 
customer basis. While Massachusetts generally experiences more HDDs 
than the U.S. average, the available data indicate that the weather has 
far less influence on its residential natural gas use than in 
neighboring states. In fact, the EIA data indicate that less than half 
(44 percent) of Massachusetts homes rely on natural gas for space 
heating. Massachusetts ranks 25th highest in natural gas use per 
residential customer, and 15th highest in total gas consumed by 
residences. These factors suggest that energy efficiency, among other 
factors, results in Massachusetts residents using natural gas much less 
intensively than states with similar climates.

B. Massachusetts Has Higher Gas Rates Than the Nation as a Whole

    DOE agrees with Massachusetts in that the natural gas rates seen by 
consumers are higher than the U.S. average. Higher gas rates are, in 
part, responsible for Massachusetts ranking 9th highest in natural gas 
expenditures per residential customer. DOE compared the citygate 
prices, which track the price of the natural gas at the point which a 
distributing gas utility receives gas from a natural gas pipeline 
company or transmission system, to the residential prices published by 
EIA. For this comparison, DOE used a time series of data from EIA 
spanning January 2010 to June 2010. While DOE found there was only a 3 
percent increase in the citygate price of natural gas supplied to 
Massachusetts as compared to the national average, the residential 
prices over the same period were 30 percent higher than the national 
average. In addition, Massachusetts ranked 10th highest in 2008 in 
percentage markup in residential natural gas rates in the U.S. at 67 
percent, compared to the U.S. average of 51 percent. While DOE is 
unable to point to a specific cause for these pricing differences, 
these data suggest that factors (such as taxes and related surcharges) 
rather than natural gas prices alone, likely play a role in affecting 
the prices consumers pay for natural gas in Massachusetts. (Natural gas 
pricing data from EIA are available at: http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm.)

C. Massachusetts Residential Heating Loads Compete With Power Plant 
Loads

    While residential heating loads in Massachusetts compete with 
current power plant loads, this fact is mitigated by the fact that 44 
percent of Massachusetts homes are heated using natural gas (compared 
to over 51 percent for the Nation as a whole). Approximately 40 percent 
of the electricity used in Massachusetts is generated from natural gas 
(compared to only 17 percent for the Nation); however, the volume of 
natural gas used in Massachusetts to generate this electricity ranks 
the State as the 12th highest in volume. Furthermore, three of the 
Nation's ten liquefied natural gas (LNG) terminals are located in 
Massachusetts, which bolsters the Commonwealth's ability to supply 
natural gas relative to other areas of the country. (See the EIA State 
Energy Profiles at http://www.eia.gov/state/state_energy_profiles.cfm?sid=MA and natural gas consumption data http://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_m.htm.)

D. The High Percentage of Rental Housing Creates Market Barriers

    While Massachusetts has a significant percentage of rental housing, 
rental houses are smaller (apartments) and require less fuel on a per 
unit basis. EIA data from 2005 (RECS 2005) suggest that multifamily 
housing units in New England that rely on natural gas furnaces for 
heating purposes consumed 22 percent less natural gas than the average 
for all natural gas furnace-equipped houses in New England. 
Furthermore, renters in multifamily housing in the U.S. used 22 percent 
less natural gas for space heating per unit in 2005 than did owners. 
These facts indicate that multifamily units, which comprise the 
majority of the rental market, use significantly less natural gas per 
unit. Consequently, DOE believes the available data seem to show that 
renters spend less annually on natural gas and would be less impacted 
by a 90-percent AFUE standard than residents who own their homes. 
Consequently, renters are likely to see smaller benefits from the 
granting of the waiver than those projected by Massachusetts.

E. Massachusetts Has a Unique Set of Statutes and Policies Promoting 
Increased Energy Efficiency and Reductions in Greenhouse Gas Emissions

    DOE recognizes that Massachusetts may have certain self-imposed 
legal requirements to improve energy efficiency and reduce greenhouse 
gas emissions. The imposition of these requirements, however, does not 
create circumstances that would otherwise enable Massachusetts to 
demonstrate that it faces unusual and compelling interests that would 
justify a waiver from Federal preemption. As DOE indicated previously, 
the types of interests of most relevance under the statute are those 
that are of a substantially different nature or magnitude and that make 
regulation preferable to other measures when considering the costs, 
benefits, burdens and reliability of the projected energy savings. (42 
U.S.C. 6297(d)(1)(C)) State legal requirements to improve energy 
efficiency and reduce greenhouse gas emissions, which any State could 
impose on itself, do not satisfy these criteria.
    DOE does not make this decision lightly. Were DOE to make its 
decision based on these circumstances, any State could conceivably pass 
legislation that would impose stringent energy efficiency requirements 
and argue that it faced unusual and compelling circumstances. Such an 
outcome would undermine the general purpose behind a broad Federal 
regulatory framework for energy efficiency standards. See Geier v. 
American Honda Motor Company, 529 U.S. 861, 870 (2000) (declining to 
apply savings clauses where doing so would upset careful regulatory 
schemes established by Federal law). Accordingly, in order to give 
meaning to the authority granted by Congress to permit a waiver from 
preemption to individual States, the circumstances faced by a given 
State must be sufficiently unusual and compelling as to warrant an 
exception from the regulatory scheme developed under Federal law.

F. Potential Impacts on Manufacturers

    DOE examined the potential impacts on manufacturers if the 
Massachusetts petition were granted. Massachusetts argued that there 
will be no impact to the furnace manufacturing industry doing business 
in Massachusetts. AHRI points out that 80 percent of the average annual 
residential gas furnace shipments going to the state of Massachusetts 
were already at or above 90-percent AFUE. (AHRI, No. 19 at p. 5) Using 
the voluntary measures already in place, these numbers point to the 
ability of manufacturers to readily produce, market, and sell 
residential gas furnaces in Massachusetts that satisfy the 90-percent 
AFUE level that the Commonwealth seeks to make mandatory. This 
situation suggests that

[[Page 62119]]

rather than having an adverse impact on the industry, applying a higher 
level may have little or no impact on the industry's ability to 
manufacture and sell its furnaces in Massachusetts. These numbers are 
consistent with national data, which show increasing national shipments 
of high efficiency furnaces. (See DOE's shipments model from the 2007 
rulemaking Chapter 9 of the final rule technical support document) at 
http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/fb_fr_tsd/chapter_9.pdf.) These data are also supported by 
Federal ENERGY STAR program data confirming that high efficiency 
furnaces are readily available in the market. (See the ENERGY STAR 
product list for residential furnaces at http://downloads.energystar.gov/bi/qplist/gas_furnaces_prod_list.pdf.) 
Thus, collectively, these data demonstrate that manufacturers of non-
weatherized natural gas furnaces are already capable of producing at a 
level to meet the demands of the Massachusetts housing market.
    After evaluating the arguments raised by AHRI and the information 
provided, DOE does not believe that AHRI has sufficiently demonstrated 
under the statute that there is likely to be an adverse impact on the 
industry. Based on the slim evidence provided by the commenters 
opposing the petition, neither commenter provided sufficiently useful 
evidence in support of such a finding. Accordingly, although DOE is 
declining to grant a waiver in this instance, the information provided 
by these groups, in DOE's view, indicates that it is unlikely that an 
adverse impact on the industry would result if such a waiver were 
granted.

G. Potential Impacts on Consumers From Installation Issues

    AGA explained that moving to a mandatory 90-percent AFUE level 
would require substantial changes to existing homes in order to 
properly install high-efficiency furnaces into homes. It noted that in 
order to accommodate the positive pressure characteristics found in 
typical high-efficiency furnaces, many structures would need to be 
modified--for example, the chimney may need relining to accommodate the 
gas water heater that would need to be installed to work in conjunction 
with the furnace. Additionally, a given structure may need a dedicated 
vent to discharge by-products of combustion away from the furnace. 
These changes would be likely to raise the installation costs of these 
products and may, in AGA's view, significantly impact manufacturers' 
sales. (AGA, No. 12 at pp. 2)
    DOE agrees with AGA that additional consideration should be given 
to any potential impacts of existing residences as a result of 
installing condensing furnaces, especially in cases where safety issues 
could arise. DOE plans to further evaluate these issues in the existing 
furnace energy conservation standards rulemaking and believes that 
venue is the more appropriate one in which to address the variety of 
installations that may need to be modified to accommodate a condensing 
furnace in homes across the U.S.

H. Current Energy Conservation Standards Rulemaking and the Consensus 
Agreement

    On January 26, 2010, AHRI, American Council for an Energy Efficient 
Economy (ACEEE), Alliance to Save Energy (ASE), ASAP, Natural Resources 
Defense Council (NRDC), and NEEP submitted a joint comment (hereafter 
referred to as the Joint Comment) to DOE recommending minimum energy 
conservation standards for residential central air conditioners, heat 
pumps, and furnaces. (Docket Number EE-2009-BT-STD-0022, AHRI, ACEEE, 
ASE, ASAP, NRDC, and NEEP, the Joint Comment, No. 1 at pp. 1-33) In 
describing the negotiating process that led to these recommended 
standards, the Joint Comment explains that the original consensus 
agreement was completed on October 13, 2009 and had 15 signatories, 
including AHRI, ACEEE, ASE, NRDC, ASAP, NEEP, Northwest Power and 
Conservation Council (NPCC), California Energy Commission (CEC), Bard 
Manufacturing Company Inc., Carrier Residential and Light Commercial 
Systems, Goodman Global Inc., Lennox Residential, Mitsubishi Electric & 
Electronics USA, National Comfort Products, and Trane Residential.
    The Joint Comment recommends standards that divide the nation into 
two regions for residential furnaces based on the population-weighted 
number of heating degree days (HDD) of each state. States with 5000 
HDDs or more are considered as part of the northern region, while 
states with less than 5000 HDDs are considered part of the southern 
region. The Joint Comment further recommends a 90-percent AFUE standard 
for the northern region, which includes the Commonwealth of 
Massachusetts, with a compliance date of May 1, 2013 for non-
weatherized natural gas furnaces.
    DOE notes that it is currently conducting a rulemaking to consider 
amending the energy conservation standards for residential furnaces. 
While DOE is examining a variety of options for consideration, 
including the levels recommended by the Joint Comments, the agency has 
not yet decided which set of options it plans to propose. Among the 
options that the agency is considering is the possible exercise of 
DOE's recently granted statutory authority to develop and implement 
geographically-based regional standards. See EISA 2007, sec. 306(a). 
The agency notes, however, that, when comparing the potential benefits 
to Massachusetts that would be likely to flow from the adoption of the 
levels recommended by the Joint Comments against the potential benefits 
from granting the petition, DOE believes that any additional benefits 
from granting the petition are likely to be small. Specifically, if DOE 
were to grant the waiver, the earliest compliance date under the waiver 
would be October 2013, compared to the May 2013 compliance date 
prescribed under the consensus agreement. The full consensus agreement 
can be found at http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/furnaces_framework_jointstakeholdercomments.pdf. A potential Federal standard for the 
northern regions of 90-percent AFUE through adoption of the consensus 
agreement will provide slightly more energy savings (i.e., an estimated 
0.000002 quads) as compared to granting the waiver. The small energy 
savings difference can be attributed to the small heating energy use 
over the period spanning May to October, which accounts for only 7% of 
the annual heating energy use in Massachusetts. Consequently, given the 
on-going rulemaking, DOE believes that addressing this issue in one 
collective rulemaking action, rather than on a piece-meal basis, would 
be more likely to offer a comprehensive solution should DOE decide to 
adopt a regionally-based approach.

V. Conclusion

    Taking into account all of the factors discussed above, DOE is 
declining to grant the Commonwealth's request. DOE also emphasizes that 
it will give consideration to those levels proposed in the consensus 
agreement presented by industry and environmental advocacy groups. 
These levels are currently being evaluated within the context of the 
agency's rulemaking to address standards for furnaces. See http://www1.eere.energy.gov/buildings/appliance_standards/residential/furnaces_nopm_rulemaking_analysis.html.

[[Page 62120]]

VI. Denial

    In light of the reasons noted above, and consistent with the 
requirements under EPCA, DOE is denying the Commonwealth's petition for 
a waiver from Federal preemption.

VII. Approval of the Office of the Assistant Secretary

    The Assistant Secretary of DOE's Office of Energy Efficiency and 
Renewable Energy has approved publication of this notice of denial.

    Issued in Washington, DC, on September 30, 2010.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 2010-25324 Filed 10-6-10; 8:45 am]
BILLING CODE 6450-01-P


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