Here is a beacon of good news to temporarily brighten your dark and stormy social media feeds. The U.S. Court of Appeals for the Second Circuit struck down an attempt by the Trump Administration to indefinitely delay a rule that was set to increase the fines automakers must pay for failing to meet fuel economy targets. Though Elaine Chao and the Department of Transportation have already begun a rulemaking to rollback the fine increase that was finalized during the last days of the Obama Administration, at least they now cannot indefinitely delay the effectiveness of the rule while they go through the rigmarole of rolling it back.
How did we get here: A brief history of CAFE fines and penalties
Get your waders on and join me in the weeds of the Corporate Average Fuel Economy (CAFE) standard, a regulation administrated by the National Highway Traffic Safety Administration (NHTSA) and not to be confused with, though inextricably linked to, the EPA rules that govern tailpipe emissions.
CAFE was created by the Energy Policy and Conservation Act (EPCA), which required NHTSA to set a penalty for automakers who fail to meet any federal fuel economy target. When EPCA became law in 1975, the CAFE penalty was set at $5.00 per tenth of an mpg per vehicle sold. Though Congress passed a law in 1990 requiring federal agencies to adjust civil penalties for inflation, NHTSA updated these fines just once, in 1997, up to just $5.50. This 50-cent increase was far short of what the fine should have been if it was truly adjusted inflation. According to the Department of Labor, $5.00 in January 1975 actually had the same buying power as $15.27 in January 1997.
In 2015 Congress updated its Inflation Adjustment Act to prevent agencies like NHTSA from setting artificially low penalties. In response, NHTSA (under President Obama) recalculated CAFE fines based on a formula laid out by Congress and set a new penalty of $14.00 per tenth of an mpg per vehicle. This recalculation was slated to go into effect for model year 2019 vehicles, and was finalized on December 28, 2016 – just 2 working days before President Trump and his cadre of regulation-slashing cabinet members and agency administrators took office.
Here is what President Trump is trying to do to reduce CAFE fines and penalties
In late January 2017, NHSTA published a series of rulemakings that delayed the effective date of the penalty increase – first for 60 days, then for 90 more days, then another 14 days, and finally, in July 2017, indefinitely while the agency reconsidered the penalty increase via a separate rulemaking. The decision to indefinitely delay the penalty increase was then challenged in the Second Circuit by a host of advocacy organizations and several states attorneys general. The two major trade groups representing automakers also joined the suit on the side of the government, who argued that federal agencies have an inherent authority to indefinitely delay a rule while it is being reconsidered. A panel of three judges (two of whom were appointed by a Republican president) disagreed.
This ruling may do nothing to incentivize automakers to improve fuel economy improvements
I know this is a good news post, but I do need to sprinkle in some bad news. The bad news is that NHTSA is moving forward with another rulemaking that will flatline the CAFE penalty at $5.50 per tenth of a mpg per vehicle – effectively rolling back the penalty increase that the Obama Admin worked to put in place. In that rulemaking, NHTSA argues that the CAFE penalty is not a “civil monetary penalty” as defined in the law requiring agencies to adjust penalties for inflation, and therefore does not need to be adjusted. I can’t wait for a court to get involved in these semantics if (when) this rule is challenged.
But this ruling could help other courts rule against the Trump Administration
On the one hand, the Second Circuit ruling on the indefinite delay rule may do nothing to incentivize automakers to meet fuel economy targets, since the penalty for missing mpg targets will likely be flatlined anyway. On the other hand, the finding that federal agencies cannot indefinitely delay a rule while it is pending reconsideration is a holding that could be applicable in other ongoing lawsuits and may become a major thorn in the side of President Trump’s rollback agenda – especially if other federal circuits agree with the Second Circuit here.
For example, UCS is a plaintiff in a lawsuit challenging an attempt by the EPA to effectively indefinitely delay standards designed to prevent accidents at facilities that use or store hazardous chemicals. This case resides in the D.C. Court of Appeals, who may now look to the Second Circuit in determining whether EPA exceeded its statutory authority when indefinitely delaying a rule. You better believe our attorneys at Earthjustice sent the Second Circuit opinion on the CAFE penalties to the D.C. Court of Appeals, who is expected to issue a final ruling on the Trump Admin’s decision to delay the effectiveness of chemical safety standards in the next several months.
More broadly, the Trump Administration’s M.O is to first delay the effective date of Obama-era rules – sometimes for months, other times indefinitely – and then roll them back. If the courts agree that an indefinite delay of a rule is inappropriate, this Second Circuit decision becomes a strong piece of judicial opinion (aka jurisprudence) for future challenges to President Trump’s attempt to erode public health and economic protections across all federal agencies.