Opinion ID: 6104167
Heading Depth: 3
Heading Rank: 1

Heading: Random assignment of boilers to buildings

Text: As described above, in conducting the LCC analysis, the DOE had to and did describe the world as it would be if the agency issued no new standards and then compared that world to a world with new standards. In constructing the no-new14 standards case, the DOE assumed the distribution of efficiencies among shipped boilers is the same as the distribution of efficiencies across the models listed in the AHRI data base. As a result, when the DOE ran trials randomly assigning boilers to buildings in the no-new-standards case, the chance a boiler with a certain efficiency level would be assigned to a building in the sample was equal to the percentage of boilers in the AHRI database with that efficiency level, without regard to the characteristics of the building to which the boiler was assigned. Therefore, although the assignment of boilers to a building was not completely random, as it accounted for the relative prevalence of efficiency levels among boilers, it did not account for the type of building to which boilers were assigned. This means, the petitioners point out, the DOE failed to recognize that a purchaser of commercial packaged boilers would rationally consider the costs and benefits of its investment and is likely to buy the boiler that produces the best economic performance for its building. Indeed, it is difficult to believe purchasers of commercial packaged boilers, which are often large, sophisticated businesses, do not account for lifecycle costs when making a purchase. Random assignment, the petitioners contend, elides this reality. If a purchaser selects the most efficient unit for its building, then the DOE’s model will assign the benefits of that choice to its rule, rather than attributing it, correctly, to the purchaser’s rational decision making. As a result, the petitioners argue, the DOE inflated the economic value of a more stringent standard by attributing to a new regulation economic benefits that would be realized even without a new regulation. Responding in the Final Rule to comments raising this concern, the DOE rather dismissively noted that “development of a complete consumer choice model, to support an alternative 15 to random assignment in the no-new-standards case, for boiler efficiency would require data that are not currently available, as well as recognition of the various factors that impact the purchasing decision.” 85 Fed. Reg. at 1638. In a later section meant to justify the rule under Executive Orders 12866 and 13563, the DOE lists several possible market failures as “problems that this standards [sic] address, id. at 1676, but the DOE provided not actual evidence that these market failures affect the market for commercial packaged boilers and thus justify the assumptions that underly its analysis. The assignment of efficiencies to the buildings in the sample was a crucial part of the analysis supporting the DOE’s conclusion that a more stringent standard was warranted. The significant concerns the petitioners raised about this assignment therefore demand a more complete response. Instead of producing evidence of some market failure in this specific market, the DOE essentially said it did the best it could with the data it had. This is not enough to justify assuming a purchaser’s decisions will not align with its economic interests in purchasing a boiler. Indeed, the DOE’s lackadaisical response would have been inadequate even if the rulemaking were not governed by a heightened evidentiary standard, for the DOE’s failure to “engage the arguments raised before it,” Del. Dep’t of Natural Res. & Envtl. Control v. EPA, 785 F.3d 1, 11, 13-14 (D.C. Cir. 2015), bespeaks a failure to consider an “important aspect of the problem,” State Farm, 463 U.S. at 43. At any rate, the DOE’s response certainly is problematic under the heightened standard requiring clear and convincing evidence. Without a cogent and reasoned response to the substantial concerns the petitioners raised about this crucial part of its analysis, we cannot say it was reasonable for the DOE to conclude that clear and convincing evidence supports the adoption of a more stringent standard. 16