Opinion ID: 6104167
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Heading: facts

Text: The Energy Policy and Conservation Act, as amended in 1992, prescribes energy efficiency standards for certain commercial and industrial equipment. See 42 U.S.C. § 6313. It also authorizes the Secretary of Energy to amend a standard if certain conditions are met. See id. § 6313(a)(6). The Congress tethered the Secretary’s amendment of a standard for equipment covered by Section 6313 to the internationally recognized standards promulgated by the ASHRAE, known as ASHRAE/IES Standard 90.1. Id. Specifically, if the ASHRAE amends Standard 90.1 for equipment covered by Section 6313, then the Secretary must at the least amend her standard correspondingly. Id. § 6313(a)(6)(A)(ii)(I). The Secretary may, however, instead adopt a more stringent standard if she determines by clear and convincing evidence that doing so (a) “would result in significant additional conservation of energy,” (b) is “technologically feasible” for the industry, and (c) is “economically justified,” id. § 6313(a)(6)(A)(ii)(II), in which case she must issue a rule establishing the more stringent standard within 30 months of ASHRAE’s publication of its amendment to Standard 90.1, id. § 6313(a)(6)(B)(i). In determining whether a more stringent standard is “economically justified,” the Secretary is required to consider “to the maximum extent practicable” (1) “the economic impact of the standard on the manufacturers and on the consumers of the products subject to the standard”; (2) “the savings in operating costs throughout the estimated average life of the product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses 5 of, the products that are likely to result from the imposition of the standard” or, in other words, the difference in the life-cycle cost (LCC) of equipment with and without a more stringent standard; (3) “the total projected quantity of energy savings likely to result directly from the imposition of the standard”; and other factors not relevant here. Id. § 6313(a)(6)(B)(ii). As originally enacted, the statute authorized the Secretary to amend an energy efficiency standard for equipment covered by Section 6313 only in response to a corresponding amendment of Standard 90.1 by the ASHRAE. In 2007, however, the Congress added a “lookback” provision, providing that if the ASHRAE has not amended Standard 90.1 for six years for a category of covered equipment, then the Secretary must evaluate whether a more stringent standard is necessary for that category of equipment. Energy Independence and Security Act of 2007, Pub. L. 110-140, § 305(b), 121 Stat. 1554 (codified at 42 U.S.C. § 6313(a)(6)(C)(i)). As all parties agree, however, even under the “lookback” provision, the Secretary may establish a more stringent standard only if she determines by clear and convincing evidence that the standard will result in significant conservation of energy, is technologically feasible, and is economically justified. See id. § 6313(a)(6)(C)(i)(II) (seemingly incorporating by reference the clear and convincing standard of § 6313(a)(6)(A)); see also Energy Conservation Program for Appliance Standards: Procedures for Use in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment, 85 Fed. Reg. 8626, 8643 (2020) (noting that the plain language of the statute indicates the clear and convincing standard applies to the “lookback” provision). Commercial packaged boilers are covered by Section 6313. 42 U.S.C. § 6311(1)(J). A commercial packaged boiler 6 is one that, among other things, has a rated input of at least 300 kBtu/h and is used “for space conditioning and/or service water heating in buildings.” 10 C.F.R. § 431.82(1)-(2). The DOE categorizes packaged boilers based upon their size (small, large, and very large), the type of fuel they use (gas-fired or oilfired), and their heating medium (hot water or steam). Thus, there are 12 categories of packaged boilers. 85 Fed. Reg. at 1594. In July 2009, the DOE promulgated a Final Rule for commercial packaged boilers, adopting the ASHRAE’s 2007 amendment to Standard 90.1. Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards and Test Procedures for Commercial Heating, AirConditioning, and Water-Heating Equipment, 74 Fed. Reg. 36312. Since then, Standard 90.1 has been updated several times but never with respect to the efficiency standards for commercial packaged boilers. In 2016, the DOE, pursuant to the “lookback” provision, proposed new, more stringent energy efficiency standards for eight of the twelve categories of commercial packaged boilers. Energy Conservation Program: Energy Conservation Standards for Commercial Packaged Boilers (Proposed Rule), 81 Fed. Reg. 15836. Based upon data it had gathered and analyzed, the DOE “tentatively concluded that there is,” as required, “clear and convincing evidence to support more stringent standards” for most types of commercial packaged boilers. Id. at 15838. In order to satisfy its statutory mandate to consider “the economic impact of the [proposed] standard … on the consumers of the products subject to the standard” and the difference in LCC savings the standard would bring about, 42 U.S.C. § 6313(a)(6)(B)(ii)(I)-(II), the DOE set out to compare 7 the LCC of equipment with and without an amended standard. The LCC of any piece of equipment is the sum of (a) the purchase price (including installation cost and sales tax) and (b) the lifetime cost of operating it (fuel, maintenance, and repair), discounted to present value. Conceptual simplicity belies operational complexity. The DOE had to construct a no-new-standards, or base, case and a new-standards case and compare the two. Construction of each case required the DOE to compile a representative sample of commercial and residential buildings, for which it used the Energy Information Administration’s 2012 Commercial Buildings Energy Consumption Survey (CBECS) and 2009 Residential Energy Consumption Survey (RECS). Next, for both the base case and the new-standards case, the DOE had to assign boilers with specific efficiency levels to buildings. Assigning boilers in the base case is particularly tricky, as it involves predicting how the world would look without new standards. Historical shipping data provides the most accurate picture of the mix of boilers in a world without new standards, but the DOE had historical shipping data for only two of the eight relevant categories of boilers, so it assumed the distribution of efficiency levels in shipped equipment was the same as the distribution of efficiency levels among models listed in the database maintained by the AHRI. After accounting for the mix of efficiency levels in shipped boilers, the DOE assigned boilers to buildings randomly: An efficiency level associated with 30 per cent of the models listed in the AHRI data base had a 30 per cent chance of being selected for any given boiler/building combination. For both the base case and the new-standards case, the DOE also had to calculate the burner operating hours and the energy use of a given boiler in any boiler/building combination. 8 To this end, the DOE had to make assumptions about the heat load (the amount of heat energy per unit of time that is needed to maintain a certain temperature in a defined space) of the sample buildings, namely that for every square foot of heated area, a building uses an average of 30 Btu/h, and about the number and size of the boilers in those buildings. 85 Fed. Reg. at 1624. Finally, in order to estimate the operating cost associated with energy use for any given boiler/building combination, the DOE had to predict the cost of energy over the lifetime of the equipment, which the DOE assumed was 24.8 years. Id. at 1594. For this, the DOE turned to the energy prices forecasted in the Energy Information Administration’s 2016 Annual Energy Outlook. During the period for comment on the proposed standards, many parties raised concerns regarding the DOE’s data and conclusions. Those relevant to the petitions for review are discussed in Part II below. In January 2020 the DOE published its Final Rule, which was, as relevant here, substantively equivalent to its Proposed Rule. The DOE did, however, somewhat update its justification for the amended standards. Whereas the preamble to the Proposed Rule simply said the “lookback” provision demands clear and convincing evidence and the proposed standards satisfy that requirement, see 81 Fed. Reg. at 15837, the preamble to the Final Rule initially responded to comments questioning whether the heightened standard was satisfied by disputing their premise, claiming the “lookback” provision does not demand clear and convincing evidence. 85 Fed. Reg. at 1607. The preamble went on, however, to say “assuming that clear and convincing evidence is required here, DOE believes its findings fully satisfy that threshold.” Id. 1607-08. 9 The American Public Gas Association (APGA), the members of which are publicly owned gas distribution systems, petitioned for review of the Final Rule. That petition was consolidated with the petitions of the Air-Conditioning, Heating & Refrigeration Institute (AHRI), a trade association representing manufacturers of covered equipment, and of Spire Inc., an owner and operator of natural gas utilities, and its subsidiary Spire Missouri Inc., a natural gas utility. The American Gas Association, representing more than 200 local energy companies, intervened in support of the petitioners. The DOE agrees with the petitioners that the Final Rule is invalid but solely on the ground that the DOE failed to apply the clear and convincing standard required by statute; it urges the court not to reach the merits of the petitioners’ more specific challenges to the analysis supporting the rule, which it unhelpfully failed to address in its brief. Because the DOE refused to defend the legality of the Rule, 11 states, two municipalities, and four non-profit organizations intervened to do so. Furthermore, in contrast to the petitioners, who have consistently asked us to vacate the Final Rule, the DOE has revised its initial position and now seeks a remand without vacatur.