Opinion ID: 6929862
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Text: Developments Leading up to the Clean Air Act The Clean Air Act (Act), 42 U.S.C. §§ 7401-7671q (1988 & Supp. Ill 1991), is one of the most comprehensive pieces of legislation in our nation’s history. In order to better understand the issues it is helpful to trace briefly the development of that Act. The original Clean Air Act, enacted by Congress in 1955, was aimed primarily at increasing federal research and assistance in air pollution prevention. It made no provision for federal motor vehicle emission standards. See Air Pollution Control-Research and Technical Assistance Act of 1955, Pub.L. No. 84-159, 69 Stat. 322. Because the several states had begun to adopt their own motor vehicle emission standards, the Senate Committee on Public Works, after noting that California was the leader in regulating automotive pollutant emissions, decided that national standards were to be preferred over having each state go its own way, “which could result in chaos insofar as manufacturers, dealers, and users are concerned.” S.Rep. No. 192, 89th Cong., 1st Sess. 5-6 (1965). As a result, the Committee proposed and Congress enacted in 1965 emission standards for new motor vehicle engines. See Motor Vehicle Air Pollution Control Act of 1965, Pub.L. No. 89-272, § 202(a), 79 Stat. 992. A number of states, in addition to California, nonetheless continued to develop separate emission, programs. Congress thereupon promptly amended the Clean Air Act in 1967 to impose federal preemption over motor vehicle emission standards. See Air Quality Act of 1967, Pub.L. No. 90-148, § 208, 81 Stat. 485. Over the adamant objection of the auto industry, which sought a single national standard to avoid undue economic strain for manufacturers, California was excepted from preemption as the only state regulating auto emissions “prior to March 30, 1966”. Id. § 208(b). The reason for this lone exception was because the Senate Committee on Public Works was persuaded by California’s then Senator Murphy that his state’s “unique problems and pioneering efforts” warranted a waiver from preemption. S.Rep. No. 403, 90th Cong., 1st Sess. 33 (1967). Comprehensive revisions made to the Act in 1970 established national ambient air quality standards (NAAQS) and required even more stringent uniform emission standards for new motor vehicles. See Clean Air Amendments of 1970, Pub.L. No. 91-604, §§ 4, 6, 84 Stat. 1676. In further amendments to the Act in 1977, § 209 (formerly § 208) was amended to require the U.S. Environmental Protection Agency (EPA) to consider California’s standards as a package, so that California could seek a waiver from preemption if its standards “in the aggregate” protected public health at least as well as federal standards. See Clean Air Act Amendments of 1977, Pub.L. No. 95-95, § 207, 91 Stat. 685. Significantly, for the issues on this appeal, the Clean Air Act Amendments of 1977 added § 177, which permitted other states to “piggyback” onto California’s standards, if the state’s standards “are identical to the California standards for which a waiver has been granted for such model year.” Pub.L. No. 95-95, § 129(b), 91 Stat. 685, 750. In order for another state, here New York, to use California standards in a given model year, the House Committee on Interstate and Foreign Commerce made clear that California must adopt its standards two years in advance of such year, California must receive a waiver for its standards, and the adopting state must adopt California standards at least two years before the model year. See H.R.Rep. No. 294, 95th Cong., 1st Sess. 310 (1977), U.S.Code Cong. & Admin.News 1977, pp. 1077, 1389. Clean Air Act Amendments of 1990 With this statutory evolution as background, we reach the Clean Air Act Amendments of 1990 and the current statute that lies at the heart of this litigation. The ami-cus brief of the United States describes the Clean Air Act as an extremely complex law and tells us that the “enormity of the 1990 amendments beggars description.” Congress, amicus informs us, took what was ■widely perceived as an “unapproachable piece of legislation” and tripled the Act’s length and “geometrically increased its complexity.” After reviewing the Clean Air Act and the voluminous record pertaining to the Act submitted on this appeal, we have no reason to doubt the validity of the government’s description of it. Title I of the Act directs the Administrator of the EPA (Administrator) to develop NAAQS for pollutants the Administrator determines “cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7408(a)(1)(A); see id. § 7409(a). The several states are vested with the primary responsibility for attaining and maintaining the NAAQS through the development and operation of a state implementation plan (SIP). See Act § 110, 42 U.S.C. § 7410. Each state’s SIP, which is submitted to the EPA, must explain exactly how the state intends to reduce or maintain the concentration of pollution in the air to meet the NAAQS. The states have broad license to institute their own programs for the reduction of air pollution, principally through the regulation of stationary sources, such as industrial stacks and vents. In Title II of the Act Congress endeavors to resolve the problems caused by moveable sources or vehicle emissions. The emission standards applicable to any given vehicle depend upon its weight and use classification, and its model year designation. See Act §§ 202, 207(c), 42 U.S.C. §§ 7521, 7541(c). Section 202 authorizes the Administrator to promulgate emission standards for motor vehicles sold in the United States. Motor vehicle emission standards primarily regulate emissions of carbon monoxide (CO), hydrocarbons or volatile organic compounds (VOCs) and nitrogen oxides (NOx). Hydrocarbons and nitrogen oxides are two classes of chemicals that combine in the presence of sunlight to form ozone, a major component of urban smog. The cornerstone of Title II is Congress’ continued express preemption of state regulation of automobile emissions. See Act § 209(a), 42 U.S.C. § 7543(a) 1 . Pursuant to the Act, the great majority of states have chosen to rely on the federal emission standards as set forth in § 202 of the Act, 42 U.S.C. § 7521. Only California, because its unique Los Angeles smog problem caused it to begin regulating auto emissions “prior to March 30, 1966,” enjoys a statutory exemption allowing it to promulgate its own emission standards. See Act § 209(b), 42 U.S.C. § 7543(b)(1) 2 . Even so, as § 209(b) spells out, California may only adopt and enforce its own emission standards after applying to and obtaining the approval of the EPA for a waiver of preemption. The California Air Resources Board (CARB) submits an application upon determining that its proposed standards “will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards.” Id. The Administrator can deny the waiver request if she finds (1) that the protectiveness determination of California is arbitrary or capricious, (2) that California does not need separate state standards to meet “compelling and extraordinary conditions,” or (3) California’s “standards and accompanying enforcement procedures are not consistent with [§ 202(a) of the Act].” Id. Those standards are deemed not to be consistent with § 202(a) “if there is inadequate leadtime to permit the development of technology necessary to meet the proposed requirements, giving appropriate consideration to the cost of compliance within [the proposed] time frame.” U.S. Environmental Protection Agency, Waiver of Federal Preemption, California Low-Emission Vehicle Standards 57-58 (Jan. 7, 1992). Were California simply to change its standards, and such change were found to be within the scope of an existing waiver, California need not submit a new waiver application. See 46 Fed.Reg. 36742 (July 15, 1981) (setting forth standards for a change to be within the scope of a previous waiver). The effect of the Clean Air Act is that motor vehicles manufactured for sale in the United States must be either “federal cars” — certified to meet federal vehicle emission standards as set by the EPA — or “California cars” — certified to meet that state’s standards. Both the EPA and California utilize the same two-step certification procedure. First, prototypes from each model year of a particular class of vehicles are tested prior to sale. See 42 U.S.C. § 7525; Cal.Code Regs. tit. 13 §§ 2050-2110. The test is designed to establish whether the vehicle will be in compliance with its designated standard for its “useful life”. The second and more rigorous test for emissions compliance occurs after the vehicles in a given model year have been sold to the public. See 42 U.S.C. § 7541(b); Cal.Code Regs, tit. 13 §§ 2136-2140. Samples are procured from the driving public and tested following the same procedures used during pre-sale certification. If the vehicles are not in compliance with the standards, both the EPA and CARB have the authority to order their recall at the manufacturer’s expense. See 42 U.S.C. § 7541(c); Cal.Code Regs. tit. 13 §§ 2133-2135. The Act also restricts the states’ power to enact motor vehicle fuel requirements, though the EPA may approve state regulations if necessary to meet federal air quality standards. See Act § 211(c)(4)(C), 42 U.S.C. § 7545(c)(4)(A), (C). Again, California has a special exception from federal preemption allowing it to enact its own fuel requirements. Noteworthy is the fact that under the terms of the Act, EPA approval of California fuel regulations is not required. See. Act § 211(c)(4)(B), 42 U.S.C. § 7545(c)(4)(B). Many states, including New York, are in danger of not meeting increasingly stringent federal air pollution limits. Congress has directed the Administrator to impose mandatory sanctions on states failing to timely submit approvable SIPs or SIP revisions. See 42 U.S.C. §§ 7410(m), 7509(a). The Administrator may either impose a 2:1 emission offset requirement to new and modified stationary sources of pollution, such as stacks and vents, or authorize the withholding of federal highway funds. See 42 U.S.C. § 7509(b). With the exception of certain safety or air quality related projects, the imposition of highway sanctions would prohibit federal approval or award of grants for highway construction or improvement projects. See id. It was in an effort to assist those states struggling to meet federal pollution standards that Congress, as noted earlier, directed in 1977 that other states could promulgate regulations requiring vehicles sold in their state to be in compliance with California’s emission standards or to “piggyback” onto California’s preemption exemption. This opt-in authority, set forth in § 177 of the Act, 42 U.S.C. § 7507, is carefully circumscribed to avoid placing an undue burden on the automobile manufacturing industry. Specifically, (1) an opt-in state must adopt standards that are identical to California’s; (2) California must receive a waiver from the EPA for the standards; and (3) both California and the opt-in state must adopt the standards at least two years before the beginning of the automobile model year to which they apply. See Act § 177, 42 U.S.C. § 7507. In the 1990 sweeping amendments to the Act two further restrictions were added to the last paragraph of § 177 3 . First, Congress added new language providing that § 177 shall not be construed as authorizing an opt-in state to limit the sale of California-certified vehicles. Second, it forbade opt-in states from taking’ any action that has the effect of creating a car different from those produced to meet either federal or California emission standards, a so-called “third vehicle.” See Clean Air Act Amendments of 1990, Pub.L. No. 101-549, § 232, 104 Stat. 2399, 2529. This amendment to § 177 was not included in either the House or Senate versions of the 1990 amendments to the Act. It was added by the Conference Committee in October 1990. This came about as the Joint House-Senate Staff completed work on Title II of the Act, covering Mobile Sources. On October 10, 1990 the Joint Staff recommended to the legislative conferees that states not be allowed, when adopting California standards, to take any action that would result in a motor vehicle or engine different from a California or a federal vehicle, that is, no third vehicle could be required because of the burden such action would place on the auto industry. See H.R.Conf.Rep. No. 952, 101st Cong., 2d Sess. 337 (1990), U.S.Code Cong. & Admin.News 1990, pp. 3385, 3869. When Congress amended § 177 in 1990, it adopted these recommendations. California’s Plan With the evolution and scope of the Clean Air Act in mind, we turn now to examine the development of California’s emission limitation plan. In 1988 the California Legislature directed CARB to adopt the most cost-effective combination of motor vehicle controls, vehicle fuel restrictions, and in-use vehicle control requirements so as to achieve a 55 percent reduction in organic gas emissions by December 31, 2000. See Cal.Health & Safety Code §§ 43018(b), (e). CARB proceeded to establish low-emission vehicles (LEV) and clean fuels (CF) requirements, which became effective on September 28, 1991. California’s LEV program applies to passenger cars and light-duty trucks (collectively light-duty vehicles) and medium-duty vehicles, and requires the creation of four classes of California light- and medium-duty vehicles, to be phased in over the next decade. The four categories are (1) Transitional Low-Emission Vehicles (TLEVs), (2) Low-Emission Vehicles (LEVs), (3) Ultra-Low-Emission Vehicles (ULEVs), and (4) Zero-Emission Vehicles (ZEVs). See Cal.Code Regs, tit. 13 § 1960.1(g)(2). For each category a set of more stringent emission standards for carbon monoxide, nitrogen oxides and formaldehyde applies. The average emissions from the mix of these categories of vehicles produced by a given manufacturer in a given year must meet an overall “fleet average” requirement. See id. In addition, the fleet average for allowable exhaust emissions beginning in 1994 declines each year until 2003. See id. Automobile manufacturers, under CARB’s regulations, have the flexibility to decide how many vehicles of each type they manufacture and sell in order to meet the fleet average. Additional flexibility is provided through the establishment of a marketable credit system: manufacturers may earn credits if they sell more low-emission vehicles than needed to meet the fleet average. • Credits many be banked internally to offset future short-falls or sold to other manufacturers unable to meet their fleet average. The only limitation on this fleet averaging approach is the sales quota established for ZEVs — vehicles with no tailpipe emissions of any pollutants throughout their lifetimes, which are presumably electric cars. By 1998, 2 percent of all vehicles certified for sale in California must be ZEVs, with the rate increasing to 5 percent in 2001 and to 10 percent in 2003. See id. The ZEV quota initially applies to all manufacturers who sell annually more than 35,000 light- and medium-duty vehicles in California. But, beginning in 2003 i':at threshold drops to manufacturers who sell only 3,000 or more vehicles in California. See id. The ZEV quota also has a marketable credit system that works just like the fleet averaging credit system. See id. The CF component of California’s plan, see Cal.Code Regs. tit. 13 §§ 2300-2317, entails a two-step introduction of “reformulated gasoline,” which is referred to as Phase 1 and Phase 2 gasoline. These fuels will have a lower sulfur content than gas sold in the rest of the nation, such as the Venezuelan gasoline sold on the east coast, which has a high sulphur content. With limited exceptions, gasoline sold in California after January 1, 1992 had to be Phase 1. Compliance with the Phase 2 gas requirements — which are considerably more stringent than the Phase 1 requirements — commences on March 1,1996. Officials of CARB have frequently stated that “[t]he primary purpose of the specifications will be to reduce emissions from pre-1993 and off-road vehicles.” Notwithstanding that fact, California will allow vehicle manufacturers to certify, both pre-sale and in-use, their new vehicles using a test fuel with properties of the Phase 2 reformulated gasoline. Manufacturers need not wait until the commercial introduction of these fuels; rather they can begin certifying vehicles on Phase 2 gas immediately. In fact, General Motors has already done so in an attempt to secure LEV credits for the upcoming years. Prior to this plan, California tested vehicles using Indolene, a special non-commercial certification fuel used by the EPA in the rest of the nation. The Chief Deputy Executive Officer of CARB has stated that “allowing vehicle manufacturers to certify gasoline-powered low-emission vehicles on Phase-2 reformulated gasoline certification fuel ... [is] an integral part of the [C]ARB’s new motor vehicle standards and test procedures.” In October 1991 California submitted its plan to the EPA for approval as required by § 209(b). See 42 U.S.C. § 7643(b). While the ability to use Phase 2 gas for certification was not in the waiver application, CARB intends to ask the EPA for a waiver or assurance that the Phase 2 amendments are within the scope of the October 1991 application. The EPA approved California’s plan on January 7, 1993. Significantly, despite requests by automobile manufacturers, this approval was not conditioned on the commercial availability of Phase 2 gasoline. New York’s Adoption of California’s Plan According to DEC, New York currently has one of the most intractable air pollution problems in the nation due largely to automobile emissions. Mobile sources emit more than 90 percent of the carbon monoxide and nitrogen oxides that pollute its air. New York — like 39 other states and the District of Columbia — is not in compliance with the ozone NAAQS or carbon monoxide NAAQS established pursuant to the 1990 amendments to the Act. New York City suffers from serious carbon monoxide pollution and has been classified as a “moderate” nonat-tainment area. See 56 Fed.Reg. 56,694 (Nov. 6, 1991). In addition, eight counties in New York are not in compliance with the carbon monoxide NAAQS and 22 counties failed to meet the ozone requirements. See id. at 56,804. Of these 22, the New York City area has been designated a “severe” nonattainment area. New York therefore must prepare a SIP adequate to meet the federal air quality standards for carbon monoxide by the end of 1995 and for ozone by late 2007. See 42 U.S.C. §§ 7512(a)(1), 7511(a)(2). The SIP must demonstrate to the satisfaction of the EPA that New York (1) will meet the health-based standards by the dates specified in the Act, and (2) will achieve a 15 percent reduction in volatile organic compounds from 1990 baseline emissions by 1996, and a 3 percent reduction on average each year thereafter until the federal standard is achieved. See id. §§ 7511a(b), (c). Failure to meet these obligations will trigger the sanctions discussed earlier. See id. § 7509. In order to combat its serious persistent pollution problem, New York, pursuant to § 177 and through regulations promulgated by the DEC, adopted California’s LEV program on May 28,1992. Although these regulations were filed on April 28, 1992, they did not become effective until May 28,1992. For purposes of this opinion the term “adoption” refers to the latter date. New York’s regulation' applies at present only to light-duty vehicles and does not apply to medium-duty vehicles as in California. New York’s adoption took place more than six months before the EPA granted California a waiver. The DEC acted under its rulemaking authority, and the regulations contain new standards for tailpipe and evaporative emissions for model year 1995. The regulations were published at 6 NYCRR Part 218. New York did not adopt California’s CF program, but the regulations do provide that motor vehicles sold in New York will be certified, both pre-sale and in-use, under the identical procedures used in California, which currently permit manufacturers to use the reformulated gasoline — Phase 1 and Phase 2 — as noted above. See id. § 218-5. Federal reformulated gasoline — while not as “clean” as California’s Phase 2 gas — will be marketed in New York beginning January 1, 1995 in all ozone nonattainment areas classified marginal or worse. See 57 Fed.Reg. 7926, 7926-27 (Mar. 5, 1992). New York says it elected not to adopt the California CF plan because it concluded the plan was not cost-effective.' In addition to New York’s adoption of the California plan, a letter of understanding was signed by all the states of the Northeast Ozone Transport Commission — a group composed of 12 states along the eastern seaboard from Virginia to Maine and the District of Columbia — on October 29, 1991 pledging to adopt the LEV plan. Other than New York, so far only Massachusetts has promulgated regulations to this effect. The other states of the Commission, we are advised, are awaiting the outcome of this litigation. Prior Proceedings We pass now to the proceedings held in the district court. The complaint alleges in six counts that DEC’s adoption of the LEV standards violates § 177 of the Act: (1) DEC’S failure to adopt the CF component of California’s regulations violates the “identically” requirement and (2) violates the “undue burdens” and “third vehicle” prohibitions of § 177; (3) DEC’S adoption of California’s regulations before California had received a waiver from the EPA violates § 177 and (4) did not comply with the two year leadtime requirement; (5) DEC’S ZEV sales quota contravenes the prohibition on all plans that limits the sales of California certified vehicles and (6) contravenes the prohibition against a “third vehicle”. In October and November 1992 all parties moved for summary judgment. The district court’s initial decision and order was entered on January 26, 1993 and reported as Motor Vehicle Manufacturers Ass’n of the United States v. New York State Department of Environmental Conservation, 810 F.Supp. 1331 (N.D.N.Y.1993) (MVMA I). Defendants’ motion for reargument persuaded the district court to modify in part its decision on counts two and four. See Motor Vehicle Mfrs. Ass’n v. New York State Dep’t of Envtl. Conservation, 831 F.Supp. 57 (N.D.N.Y.1993) (MVMA II). As a result of the district court’s rulings, the present posture of the six counts alleged in the complaint is as follows: On count one, the district court granted summary judgment for DEC. Because New York could adopt California’s emission standards “for which a waiver has been granted” pursuant to § 177, because California did not need a waiver for its CF requirements, and because the CF requirements were not part of the plan California submitted to the EPA, the trial court concluded that New York did not violate the “identicality” requirement of § 177. See MVMA I, 810 F.Supp. at 1343. On count two, the manufacturers had claimed that New York’s failure to adopt California’s CF requirements will have the effect of obliging them to modify their California LEVs for sales in other states because of the higher sulfur content in non-California fuels, and thereby violate § 177’s third vehicle prohibition. The district court initially granted summary judgment to plaintiffs, see id, at 1345, but upon reconsideration it found there were genuine questions of material fact as to this issue and therefore denied summary judgment to both sides and ordered a trial, see MVMA II, 831 F.Supp. at 61. That ruling is not before us on this appeal. Summary judgment was granted to DEC on count three. Because the Act does not prevent California from adopting regulations — it merely requires their approval prior to enforcement — the court concluded “it would be illogical to read the Act as allowing California to adopt standards without a waiver, and not allow other states to do the same.” MVMA I, 810 F.Supp. at 1347. On count four, the trial court initially held DEC’s May 28,1992 adoption did not provide manufacturers with, the required two year leadtime for their 1995 model year vehicles. See id. at 1348. Upon defendant’s motion for reconsideration, it modified this holding to include a finding that only those manufacturers who could demonstrate that they commenced production of model year 1995 vehicles prior to May 28, 1994 would be exempt from the plan for 1995. See MVMA II, 831 F.Supp. at 64. This decision is challenged on appeal by plaintiffs and defendants. Plaintiffs argue that “model year” is an industry-wide uniform period for all manufacturers, and because model year 1995 commences prior to May 28,1994, a delay of implementation of DEC’s regulations until model year 1996 must be granted to all manufacturers. In response, DEC maintains that each manufacturer should be required to demonstrate commencement of production on an engine-family-by-engine-family or model-by-model basis. On count five, the trial court concluded that because the ZEV sales quota would require the sale of a specified number of ZEVs, it would have the effect of limiting the sales of other California-certified vehicles. See MVMA I, 810 F.Supp. at 1346. Summary judgment was granted to the manufacturers on this count, as well as on count six. According to the district court, because ZEVs in New York State would require distinct features — principally due to climatic and market differences — the ZEV quota would force manufacturers to design the prohibited-by-statute third vehicle. See id. at 1347. Final judgment on counts one, three, four, five and six was entered on August 23, 1993 pursuant to Fed.R.Civ.P. 54(b). Defendants filed a notice of appeal on September 7, 1993 and plaintiffs cross-appealed on September 14, 1993. Plaintiffs thereafter successfully moved for the appeal to be expedited, at which time plaintiffs were redesignated as the appellants.