Opinion ID: 538360
Heading Depth: 2
Heading Rank: 4

Heading: Reviewing the Reasonableness of NHTSA's Decision

Text: 34 Since we are unable to discern precise congressional intent on the issue of retroactively amending the CAFE standards, we must defer to the agency's interpretation of its statute so long as it represents a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute.... Chevron, 467 U.S. at 845, 104 S.Ct. at 2783 (citations omitted). In our view, NHTSA's decision does just that. 35 The EPCA scheme embodies a carefully-crafted balance of conflicting policies, over which NHTSA exerts considerable control. See Public Citizen v. NHTSA, 848 F.2d 256 (D.C.Cir.1988). We first examine NHTSA's assessment that it would be inconsistent with that statutory scheme and its policy objectives to lower the industry-wide CAFE standards after the model year had begun. We then investigate petitioners' contention that we need not defer to NHTSA's decision because it is inconsistent with prior agency action granting retroactive amendments. 36 1. Disruption of Statutory Scheme. Petitioners contend that retroactive amendments would not disrupt the EPCA scheme, and that NHTSA's concerns to that effect are overblown. In fact, they argue that unamended, excessive CAFE standards themselves undermine the scheme because they lead to inappropriate CAFE shortfalls. 37 NHTSA's analysis provides two responses to that contention. First, as NHTSA said in its initial policy statement on the timing of CAFE amendments, Congress intended CAFE standards to be established before production begins in each model year to encourage achievement of particular fuel economy levels. Post-model year amendments, on the other hand, would simply ratify past conduct. See 49 Fed.Reg. 41,253, 41,255 (1984). Second, NHTSA believed that retroactive amendments are inconsistent with the manner in which Congress chose to deal with manufacturers whose actual CAFE levels for a given model year fall short of or exceed CAFE standards for that model year. 38 In our view, NHTSA struck an appropriate balance between the need for the auto industry as a whole to achieve steady progress toward EPCA's energy conservation goal and the practical constraints on individual manufacturers that would impede that goal. To achieve EPCA's fuel economy goals, Congress provided the industry with a clear CAFE target for 1985 and beyond. But, in light of the constraints on individual manufacturers, Congress also included provisions in the CAFE scheme that permit flexibility for them. That carefully-designed flexibility has limits, however. In that context, NHTSA determined that it would be an abuse of its authority to amend the CAFE standards after the model year had begun because it would disrupt the manner in which Congress chose to deal with manufacturer CAFE shortfalls and excesses. 39 In particular, NHTSA said that retroactive amendments of the CAFE standards would disrupt the manner in which Congress chose to deal with noncompliance and civil penalties. To assure compliance with EPCA, Congress imposed a system of financial penalties for companies failing to meet the annual CAFE standards. 15 U.S.C. Secs. 2007 and 2008(b)(1)(A). NHTSA can compromise, modify, or remit a penalty only where it is necessary to prevent insolvency, where the shortfall resulted from an act of God, strike or a fire, or where the Federal Trade Commission certifies that modification is necessary to prevent a substantial lessening of competition within the automobile industry. 15 U.S.C. Secs. 2008(b)(3) and (4); see also 15 U.S.C. Sec. 2002(l )(3) (provision specifying NHTSA can refund a civil penalty in the amount of any credits earned during subsequent three years). 40 Lowering the CAFE standards after the model year had begun would undermine the limits Congress placed on NHTSA's authority to mitigate penalties. NHTSA concluded that if Congress had intended to permit retroactive amendments any time a civil penalty appeared to present difficulties for a manufacturer, it would not have needed to provide this specific and narrow penalty mitigation authority. 41 NHTSA's conclusion is supported by the legislative history of the penalty-mitigation provision. The original Senate version of the mitigation provision would have allowed the agency to waive or mitigate civil penalties to the extent that a manufacturer's noncompliance was attributable to an unanticipated retail sales mix. S. 1883, Sec. 508(b)(3); S.Rep. No. 94-179, 94th Cong., 1st Sess. 25, 44 (1975). The final bill, however, did not include retail sales mix as a justification for mitigating penalties. GM and MBNA based their claimed inability to meet the CAFE standards for MYs 1984 and 1985 on an unanticipated retail sales mix. NHTSA reasoned that if it were to grant their petitions, it would have the effect of mitigating civil penalties already paid by MBNA and of forgiving the large shortfall incurred by GM in that year, thereby specifically undermining Congress' decision to preclude mitigation based on unanticipated consumer demand shifts. To do so would negate Congress' decision not to let the industry off the hook under such circumstances. 9 42 NHTSA also determined that retroactive amendments would be inconsistent with the statutory scheme of establishing annual standards, but permitting compliance with them through the earning of credits to handle shortfalls. Recognizing that manufacturers would not always be able to attain the CAFE standard for a particular year, Congress built into the statute additional means for compliance. Through a credit mechanism, manufacturers can avoid financial liability for one year's shortfall if they exceed the annual CAFE standards in other years. 15 U.S.C. Sec. 2002(l ). 43 Since 1980, credits earned in one model year (one credit is earned per each tenth of a mile by which the standard has been surpassed, multiplied by the number of automobiles it has manufactured that model year) are available to offset any penalties incurred in the preceding three model years, or as a cushion against future deficiencies in the subsequent three model years. 15 U.S.C. Sec. 2007(b). 10 In other words, credits earned in any particular model year have a six model year life during which they can count in favor of a manufacturer which falls below CAFE requirements. See CAS I, 793 F.2d at 1325. 44 In NHTSA's opinion, retroactive reductions would make the credit mechanism redundant and largely irrelevant. The legislative history of the 1980 amendments that extended the availability of credits from one to three years supports NHTSA's view. The objective of the three-year timeframe was to improve flexibility, provide better planning, and provide an incentive to manufacturers to exceed the standards as a safeguard against future shortfalls. See H.R.Rep. No. 96-1026, 96th Cong., 2d Sess. 19 (1980). Congress seemed intent on achieving this additional flexibility without compromising the steady progress toward the ultimate fuel economy goal. See H.R.Rep. No. 96-1026, 96th Cong., 2d Sess. 18 (1980). NHTSA reasonably concluded that Congress would not have been so intent on building this additional flexibility into the complicated credit scheme if the agency was expected to freely amend standards retroactively to account for industry-wide or manufacturer-specific shortfalls. 53 Fed.Reg. at 15,243. 45 For these reasons, we conclude that NHTSA had reason to be concerned about potential disruption to the EPCA program from reducing the CAFE standards after the model year was underway. 46 2. NHTSA's Other Policy Considerations. NHTSA also stated that retroactive reductions of CAFE standards would be inequitable to those manufacturers that had already absorbed the costs and burdens of complying with the original standards. 53 Fed.Reg. at 15,244. NHTSA further noted that retroactive reductions could discourage future compliance with standards if manufacturers believed that retroactive amendments might be available down the line. Such concerns are legitimate and provide additional support for the reasonableness of the agency's decision. 47 3. Consistency of Prior Agency Actions. An agency's consistently held interpretation of a statutory provision is entitled to considerable deference. See Immigration and Naturalization Service v. Cardoza-Fonseca, 480 U.S. 421, 446 n. 30, 107 S.Ct. 1207, 1221 n. 30, 94 L.Ed.2d 434 (1987). On the other hand, where an agency's interpretation is inconsistent with its prior analysis in similar situations without any acknowledgement of the fact, or cogent explanation as to why, the result reached by the agency is impermissible under the second prong of Chevron. King Broadcasting Co. v. FCC, 860 F.2d 465, 470 (D.C.Cir.1988). Petitioners contend that NHTSA's view of its statutory authority to act retroactively has been inconsistent, and is, therefore, entitled to little deference. 48 a. Prior agency statements. In November 1983, Ford petitioned NHTSA to lower the light truck CAFE standards for MYs 1984 and 1985. In response, NHTSA published a notice of proposed rulemaking in May 1984, in which it proposed to deny Ford's request as to the MY 1984 standards because the model year was already underway. See 49 Fed.Reg. at 22,516. Ford then withdrew its petition for MY 1984, but requested that the agency issue a more definitive interpretation about its amendment authority. NHTSA responded to Ford by a publicly-available letter in August 1984, confirming the interpretation that its authority to reduce a standard was limited to a time period before the beginning of the model year and repeated that conclusion in its final rule reducing the MY 1985 light truck standards. See 49 Fed.Reg. 41,250, 41,254 (1984). 49 In that decision, NHTSA acknowledged that the statute does not expressly preclude retroactive rulemaking. After reviewing the legislative history and the policies underlying EPCA, NHTSA nevertheless concluded that it would be inconsistent with congressional intent to reduce the stringency of CAFE standards after the beginning of the model year in question. It also refused to specify a precise date by which petitions to amend fuel economy standards must be filed. Instead, it announced that petitions must be filed in time to permit the agency to complete a rulemaking proceeding on the petition prior to the start of the model year, 49 Fed.Reg. at 41,255, and that the time necessary for responding to petitions would vary depending on the type of issues raised in them. 11 50 NHTSA's position in this proceeding is clearly consistent with its 1984 position. 12 And, if an inconsistency exists between that position and NHTSA's general statements in the 1977 final rule establishing the MYs 1981-1984 standards, to the effect that amendments reducing a standard for a model year could be issued at any time, it must be pointed out that the 1977 statement carries little weight since no question of retroactive amendment of a CAFE standard was at issue there. See Final Rule, 42 Fed.Reg. 33,534 (June 30, 1977). We are more persuaded by the fact that the first time the retroactivity question arose, in 1984, the agency articulated the same basic position that it has reaffirmed in these proceedings. We are, accordingly, justified in granting deference to an agency position that has been consistently stated since that time. 51 b. Amendment of Light Truck Standards. Petitioners complain that NHTSA's current position is inconsistent with its prior decisions to amend the MY 1982 and MY 1985 standards for light trucks after the beginning of the respective model years. Upon careful review of NHTSA's prior rulemaking action, however, we do not find the circumstances of those rulemakings to conflict with NHTSA's conclusion that retroactive amendments of a CAFE standard after the start of a model year are inconsistent with the statutory scheme. 52 In February 1982, several months after MY 1982 had begun, NHTSA adopted an alternative compliance option for light truck manufacturers--permitting manufacturers to combine their 2-wheel and 4-wheel drive light truck fleets to comply with CAFE. Interim Final Rule, 47 Fed.Reg. 7,245, 7,247 (1982) (implementing the new option on an interim basis while allowing for public comment); Final Rule, 47 Fed.Reg. 32,721 (1982). That action does not support petitioners' claim of inconsistency, however, because it was not a retroactive amendment of a CAFE standard. NHTSA accurately described it as a change in conditions of compliance made available to light truck manufacturers. 47 Fed.Reg. at 7,247 ([T]his action makes no change in the level of fuel economy required of manufacturers, but does allow a manufacturer the choice of placing all of its 2-wheel drive and 4-wheel drive light trucks together ... [and] provides an additional method of compliance, i.e., selling larger numbers of the higher fuel economy 2-wheel drive light trucks.). 53 NHTSA's final rule amending the MY 1985 light truck standards was issued on October 22, 1984, at a time when NHTSA considered the model year to begin in the fall. NHTSA was obviously acting in compliance with the opinion it espoused contemporaneously that CAFE amendments should be promulgated prior to the beginning of the model year. See 49 Fed.Reg. at 41,255. Even were we to conclude that the model year actually began on October 1, and the MY 1985 light truck amendment came later on October 22, we would not likely label a three week delay as inconsistent with NHTSA's articulated timeframe, especially when the petition itself had been timely filed (unlike GM's and MBNA's petition in this case). Therefore, we find nothing sufficiently inconsistent in NHTSA's treatment of light truck standards to warrant less deference in this case. 54 c. Low-Volume Manufacturer Exemptions. A low-volume manufacturer is a manufacturer that produces fewer than 10,000 passenger cars annually. NHTSA may exempt low-volume manufacturers from the generally applicable average fuel economy standards for passenger cars if those standards are more stringent than the maximum feasible average fuel economy for that manufacturer and if NHTSA establishes an alternative standard at the manufacturer's maximum level. 15 U.S.C. Sec. 2002(c). NHTSA can establish these alternative standards for each individual manufacturer, for all low-volume manufacturers, or for a class of automobile. NHTSA has chosen to proceed on an individual manufacturer basis. See 49 C.F.R. pt. 531. 55 NHTSA has established procedures governing the submission and disposition of petitions filed by low-volume manufacturers. 49 C.F.R. pt. 525. Pursuant to those regulations, manufacturers must submit a petition no later than 24 months before the beginning of the affected model year. As a general rule, NHTSA will dismiss untimely petitions, unless the petitioner can show good cause for later submission. See, e.g., 54 Fed.Reg. 40,665 (Oct. 3, 1989) (denying several exemption petitions as not timely filed, but finding good cause to accept late filing for one manufacturer where company's financial difficulties were extremely serious). Despite the lead time it requires, NHTSA has occasionally exercised its discretion to grant such exemptions even after the model year in question had begun. See, e.g., 44 Fed.Reg. 3,708 (Jan. 18, 1979) (exemption for Excalibur for MY 1978) and 44 Fed.Reg. 11,548 (March 1, 1979) (exemption for Maserati for MY 1978), aff'd, Center for Auto Safety v. Claybrook, 627 F.2d 346 (D.C.Cir.1980); 46 Fed.Reg. 29,944 (June 4, 1981) (exemption for Rolls-Royce for MYs 1979 and 1980); 47 Fed.Reg. 55,684 (Dec. 13, 1982) (exemptions for Aston Martin, Avanti, Excalibur, and Rolls-Royce for MYs 1981-1985). 56 Petitioners assert that NHTSA's willingness to grant post-model year exemptions to these individual manufacturers is inconsistent with its position that post-model year CAFE reductions would disrupt the CAFE scheme. We disagree. As NHTSA explained, granting retroactive exemptions from the generally applicable standard for low-volume manufacturers does not have the same potential for disrupting the statutory scheme as retroactively amending that standard as it applies to the rest of the industry. See 53 Fed.Reg. at 15,246. 57 The statutory provisions governing low-volume manufacturers and their legislative history send out strong signals that these manufacturers are to be treated differently from the rest of the industry. 13 And, the difference in treatment is justified on sound policy grounds. Low-volume manufacturers cumulatively account for only a fraction of one percent of the total annual production of passenger automobiles. See 53 Fed.Reg. at 15,246. Congress believed exemptions for low-volume manufacturers were necessary given their limited engineering staff and modest financial resources. See 44 Fed.Reg. 3,710 (Jan. 18, 1979). And, each exemption applies to only one manufacturer. As a result, NHTSA is well within its authority to proceed on a case-by-case basis to exempt small manufacturers from the industry-wide CAFE standards, and establish an individualized CAFE for each exempted manufacturer. 58 In our view, NHTSA properly determined that such exemptions do not affect the validity of the industry-wide standard, or the compliance of major manufacturers, both of which are compromised by retroactive amendments to the generally applicable CAFE standard. Even assuming a general policy of granting retroactive exemptions after the model year had begun for a segment of the industry accounting for significantly less than one percent of the product, NHTSA could reasonably have a different policy for the other 99 percent.