Proposed Rule2021-17842
Civil Penalties
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 20, 2021
Issuing agencies
Transportation DepartmentNational Highway Traffic Safety Administration
Abstract
On January 14, 2021, NHTSA published an interim final rule in response to a petition for rulemaking from the Alliance for Automotive Innovation (Alliance). The interim final rule provided that an inflation adjustment to the civil penalty rate applicable to automobile manufacturers that violate applicable corporate average fuel economy (CAFE) standards would apply beginning with vehicle Model Year 2022. The interim final rule also requested comment. In light of a subsequent Executive Order and the agency's review of comments, NHTSA is reviewing and reconsidering that interim final rule. Accordingly, NHTSA is issuing this supplemental notice of proposed rulemaking (SNPRM) to consider the appropriate path forward and to allow interested parties sufficient time to provide comments.
Full Text
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<title>Federal Register, Volume 86 Issue 159 (Friday, August 20, 2021)</title>
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[Federal Register Volume 86, Number 159 (Friday, August 20, 2021)]
[Proposed Rules]
[Pages 46811-46820]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17842]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 578
[Docket No. NHTSA-2021-0001]
RIN 2127-AM32
Civil Penalties
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Supplemental notice of proposed rulemaking.
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SUMMARY: On January 14, 2021, NHTSA published an interim final rule in
response to a petition for rulemaking from the Alliance for Automotive
Innovation (Alliance). The interim final rule provided that an
inflation adjustment to the civil penalty rate applicable to automobile
manufacturers that violate applicable corporate average fuel economy
(CAFE) standards would apply beginning with vehicle Model Year 2022.
The interim final rule also requested comment. In light of a subsequent
Executive Order and the agency's review of comments, NHTSA is reviewing
and reconsidering that interim final rule. Accordingly, NHTSA is
issuing this supplemental notice of proposed rulemaking (SNPRM) to
consider the appropriate path forward and to allow interested parties
sufficient time to provide comments.
DATES: Comments: Comments must be received by September 20, 2021.
ADDRESSES: You may submit comments to the docket number identified in
the heading of this document by any of the following methods:
<bullet> Federal eRulemaking Portal: Go to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the online instructions for submitting
comments.
<bullet> Mail: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
<bullet> Hand Delivery or Courier: U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m. Eastern
time, Monday through Friday, except Federal holidays.
<bullet> Fax: 202-493-2251.
<bullet> Instructions: NHTSA has established a docket for this
action. Direct your comments to Docket ID No. NHTSA-2021-0001. See the
SUPPLEMENTARY INFORMATION section on ``Public Participation'' for more
information about submitting written comments.
<bullet> Docket: All documents in the docket are listed on the
<a href="http://www.regulations.gov">www.regulations.gov</a> website. Although listed in the index, some
information is not publicly available, e.g., confidential business
information or other information whose disclosure is restricted by
statute. Certain other material, such as copyrighted material, is not
placed on the internet and will be publicly available only in hard copy
form. Publicly available docket materials are available either
electronically through <a href="http://www.regulations.gov">www.regulations.gov</a> or in hard copy at the
following location: Docket Management Facility, M-30, U.S. Department
of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590. The telephone number for the
docket management facility is (202) 366-9324. The docket management
facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through
Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT: Michael Kuppersmith, Office of Chief
Counsel, NHTSA, email <a href="/cdn-cgi/l/email-protection#8ee3e7ede6efebe2a0e5fbfefeebfcfde3e7fae6ceeae1faa0e9e1f8"><span class="__cf_email__" data-cfemail="ee83878d868f8b82c0859b9e9e8b9c9d83879a86ae8a819ac0898198">[email protected]</span></a>, telephone (202) 366-
2992, facsimile (202) 366-3820, 1200 New Jersey Ave. SE, Washington, DC
20590.
SUPPLEMENTARY INFORMATION:
Table of Contents
A. Public Participation
B. CAFE Statutory and Regulatory Background
C. Civil Penalties Inflation Adjustment Act Improvements Act of 2015
D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Initial Interim Final Rule
2. Initial Petition for Reconsideration and Response
3. NHTSA Reconsideration
4. Subsequent Petitions and Interim Final Rule
[[Page 46812]]
E. Summary of Comments Received
F. Supplemental Request for Public Comment
G. Rulemaking Analyses and Notices
1. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
2. Regulatory Flexibility Act
3. Executive Order 13132 (Federalism)
4. Unfunded Mandates Reform Act of 1995
5. National Environmental Policy Act
6. Executive Order 12778 (Civil Justice Reform)
7. Paperwork Reduction Act
8. Privacy Act
A. Public Participation
This section describes how you can participate in the commenting
process.
(1) How do I prepare and submit comments?
Your comments must be written. To ensure that your comments are
correctly filed in the docket, please include the docket number NHTSA-
2021-0001 in your comments. If you are submitting comments
electronically as a PDF (Adobe) file, we ask that the documents
submitted be scanned using the Optical Character Recognition (OCR)
process, thus allowing NHTSA to search and copy certain portions of
your submissions.\1\ Please note that pursuant to the Data Quality Act,
in order for the substantive data to be relied upon and used by NHTSA,
it must meet the information quality standards set forth in the Office
of Management and Budget (OMB) and Department of Transportation (DOT)
Data Quality Act guidelines. Accordingly, we encourage you to consult
the guidelines in preparing your comments. OMB's guidelines may be
accessed at <a href="https://www.whitehouse.gov/omb/information-regulatory-affairs/information-policy/">https://www.whitehouse.gov/omb/information-regulatory-affairs/information-policy/</a>. DOT's guidelines may be accessed at
<a href="https://www.transportation.gov/dot-information-dissemination-quality-guidelines">https://www.transportation.gov/dot-information-dissemination-quality-guidelines</a>.
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\1\ OCR is the process of converting an image of text, such as a
scanned paper document or electronic fax file, into computer-
editable text.
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(2) Tips for Preparing Your Comments
When submitting comments, please remember to:
<bullet> Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
<bullet> Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
<bullet> Describe any assumptions and provide any technical
information and/or data that you used.
<bullet> If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
<bullet> Provide specific examples to illustrate your concerns, and
suggest alternatives.
<bullet> Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
<bullet> Make sure to submit your comments by the comment period
deadline identified in the DATES section above.
(3) How can I be sure that my comments were received?
If you submit your comments by mail and wish Docket Management to
notify you upon its receipt of your comments, enclose a self-addressed,
stamped postcard in the envelope containing your comments. Upon
receiving your comments, Docket Management will return the postcard by
mail. If you submit information through email under a claim of
confidentiality, as discussed below, you may request a delivery
receipt.
(4) How do I submit confidential business information?
If you wish to submit any information under a claim of
confidentiality, you should submit your complete submission, including
the information you claim to be confidential business information
(CBI), to the NHTSA Chief Counsel. When you send a comment containing
CBI, you should include a cover letter setting forth the information
specified in our CBI regulation.\2\ In addition, you should submit a
copy from which you have deleted the claimed CBI to the docket by one
of the methods set forth above.
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\2\ See 49 CFR part 512.
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To facilitate social distancing due to COVID-19, NHTSA is treating
electronic submission as an acceptable method for submitting CBI to
NHTSA under 49 CFR part 512. Any CBI submissions sent via email should
be sent to an attorney in the Office of Chief Counsel at the address
given above under FOR FURTHER INFORMATION CONTACT. Likewise, for CBI
submissions via a secure file transfer application, an attorney in the
Office of Chief Counsel must be set to receive a notification when
files are submitted and have access to retrieve the submitted files. At
this time, regulated entities should not send a duplicate hardcopy of
their electronic CBI submissions to DOT headquarters.
Please note that these modified submission procedures are only to
facilitate continued operations while maintaining appropriate social
distancing due to COVID-19. Regular procedures for Part 512 submissions
will resume upon further notice, when NHTSA and regulated entities
discontinue operating primarily in telework status.
If you have any questions about CBI or the procedures for claiming
CBI, please consult the person identified in the FOR FURTHER
INFORMATION CONTACT section.
(5) How can I read the comments submitted by other people?
You may read the materials placed in the docket for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the online instructions for accessing the dockets. You may also
read the materials at the NHTSA Docket Management Facility by going to
the street addresses given above under ADDRESSES.
B. CAFE Statutory and Regulatory Background
NHTSA sets \3\ and enforces \4\ corporate average fuel economy
(CAFE) standards for the United States light-duty automobile fleet, and
in doing so, assesses civil penalties against manufacturers that
violate applicable standards and are unable to make up the shortfall
with credits.\5\ The civil penalty amount for CAFE violations was
originally set by statute in 1975, and beginning in 1997, included a
rate of $5.50 per each tenth of a mile per gallon (0.1) that a
manufacturer's CAFE performance falls short of its compliance
obligation. This shortfall amount is then multiplied by the number of
vehicles in that manufacturer's fleet.\6\ The basic equation for
calculating a manufacturer's civil penalty amount, before accounting
for credits, is as follows:
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\3\ 49 U.S.C. 32902. The authorities vested in the Secretary
under chapter 329 of Title 49, U.S.C., have been delegated to NHTSA.
49 CFR 1.95(a).
\4\ 49 U.S.C. 32911, 32912.
\5\ Within statutory constraints, credits may be either earned
(for over-compliance by a given manufacturer's fleet, in a given
model year), transferred (from one fleet to another), or purchased
(in which case, another manufacturer earned the credits by over-
complying and chose to sell that surplus). 49 U.S.C. 32903.
\6\ A manufacturer may have up to three fleets of vehicles, for
CAFE compliance purposes, in any given model year--a domestic
passenger car fleet, an imported passenger car fleet, and a light
truck fleet. Each fleet belonging to each manufacturer has its own
compliance obligation, with the potential for either over-compliance
or under-compliance. There is no overarching CAFE requirement for a
manufacturer's total production.
(penalty rate, in $ per 0.1 mpg per vehicle) x (amount of shortfall, in
[[Page 46813]]
tenths of an mpg) x (# of vehicles in manufacturer's fleet).\7\
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\7\ The process of determining civil penalties occurs after the
end of a model year, following NHTSA's receipt of final reports from
the Environmental Protection Agency (EPA). See 77 FR 62624, 63126
(Oct. 15, 2012).
Starting with Model Year 2011, the Energy Independence and Security
Act of 2007 (EISA) provided for credit transfers among a manufacturer's
various fleets.\8\ Starting with that model year, the law also provided
for trading between vehicle manufacturers, which has allowed vehicle
manufacturers the opportunity to acquire credits from competitors
rather than paying civil penalties for violations. Manufacturers can
choose to carry back credits to apply to any of three model years
before they are earned or carry them forward to apply to any of the
five model years after they are earned.
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\8\ Public Law 110-140, 104.
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In complement to NHTSA's regulation of fuel economy, the
Environmental Protection Agency (EPA) regulates the emissions of light-
duty vehicles. These regulations include standards to regulate
greenhouse gas emissions from the light-duty fleet. The Clean Air Act
requires EPA to set greenhouse gas (GHG) emissions standards from
light-duty vehicles since EPA has made an ``endangerment finding'' that
greenhouse gases ``cause[s] or contribute[s] to air pollution which may
reasonably be anticipated to endanger public health or welfare.'' \9\
Although NHTSA and EPA have different roles and independent enforcement
and compliance obligations, and operate under different statutory
authority, the agencies work together to achieve the goals of their
respective statutes. Since Model Year 2012, the agencies have issued
joint rulemakings regulating fuel economy (NHTSA) and GHGs (EPA) from
light-duty vehicles that have different requirements but are harmonized
to the extent possible to work in tandem. The CAFE program is subject
to various statutory requirements not applicable to the EPA GHG
program. One such requirement, for example, requires automakers to meet
a separate average fleet requirement for automobiles that are
manufactured domestically.\10\ The Clean Air Act does not include a
similar requirement for EPA's GHG standards.
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\9\ 42 U.S.C. 7521, see also 74 FR 66495 (Dec. 15, 2009)
(``Endangerment and Cause or Contribute Findings for Greenhouse
Gases under Section 202(a) of the Clean Air Act'').
\10\ 49 U.S.C. 32902(b)(4).
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C. Civil Penalties Inflation Adjustment Act Improvements Act of 2015
On November 2, 2015, the Federal Civil Penalties Inflation
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act),
Public Law 114-74, Section 701, was signed into law. The 2015 Act
required Federal agencies to promulgate an interim final rule to make
an initial ``catch-up'' adjustment to the civil monetary penalties they
administer, and then to make subsequent annual adjustments for
inflation. The 2015 Act limited the initial inflation increase to 150
percent of the then-current penalty.
In a February 24, 2016 memorandum, the Director of the Office of
Management and Budget (OMB) provided initial guidance to all Federal
agencies on how to calculate the initial adjustment required by the
2015 Act.\11\ The initial ``catch-up'' adjustment was based on the
change between the Consumer Price Index for all Urban Consumers (CPI-U)
for the month of October in the year the penalty amount was established
or last adjusted by Congress and the October 2015 CPI-U. The February
24, 2016 memorandum contained a table with a multiplier for the change
in CPI-U from the year the penalty was established or last adjusted to
2015. To arrive at the adjusted penalty, the agency multiplied the
penalty amount when it was established or last adjusted by Congress,
excluding adjustments under the 1990 Inflation Adjustment Act, by the
multiplier for the increase in CPI-U from the year the penalty was
established or adjusted. Ensuing guidance from OMB identifies the
appropriate inflation multiplier for agencies to use to calculate the
subsequent annual adjustments.\12\
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\11\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb.
24, 2016), available online at <a href="https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf">https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf</a>.
\12\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 Annual
Adjustment Pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available
online at <a href="https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf">https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf</a>; Memorandum from the Director of OMB to
Heads of Executive Departments and Agencies, Implementation of
Penalty Inflation Adjustments for 2018, Pursuant to the Federal
Civil Penalties Inflation Adjustment Act Improvements Act of 2015
(Dec. 15, 2017), available online at <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf</a>; Memorandum from the Director of
OMB to Heads of Executive Departments and Agencies, Implementation
of Penalty Inflation Adjustments for 2019, Pursuant to the Federal
Civil Penalties Inflation Adjustment Act Improvements Act of 2015
(Dec. 14, 2018), available online at <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf</a>; Memorandum from the Acting
Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2020, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 (Dec. 16, 2019), available online at <a href="https://www.whitehouse.gov/wp-content/uploads/2019/12/M-20-05.pdf">https://www.whitehouse.gov/wp-content/uploads/2019/12/M-20-05.pdf</a>;
Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2021, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015 (Dec. 23, 2020),
available online at <a href="https://www.whitehouse.gov/wp-content/uploads/2020/12/M-21-10.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/12/M-21-10.pdf</a>.
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D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Initial Interim Final Rule
On July 5, 2016, NHTSA published an interim final rule, adopting
inflation adjustments for all civil penalties under its administration,
following the procedure and the formula in the 2015 Act. One of the
adjustments NHTSA made at the time was raising the civil penalty rate
for CAFE violations from $5.50 to $14.\13\ NHTSA also indicated in that
notice that the maximum penalty rate that the Secretary is permitted to
establish for such violations would similarly increase to reflect
inflation from the statutory cap of $10 to $25, but did not codify this
change in the regulatory text. That initial interim final rule became
effective on August 4, 2016.
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\13\ 81 FR 43524 (July 5, 2016).
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2. Initial Petition for Reconsideration and Response
On August 1, 2016, the then-Alliance of Automobile Manufacturers
and the Association of Global Automakers (since combined to form the
Alliance for Automotive Innovation) jointly petitioned NHTSA for
reconsideration of the CAFE penalty provisions issued in the interim
final rule.\14\ This petition raised concerns with the impact that the
increased penalty rate would have on CAFE compliance costs, which they
estimated to be at least $1 billion annually. Specifically, this
petition identified several issues, including retroactivity. The
petitioners were concerned that applying the penalty increase
associated with model years that had already been completed or for
which a company's compliance plan had already been ``set'' was a
retroactive application of the inflation adjustment.
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\14\ Jaguar Land Rover North America, LLC also filed a petition
for reconsideration in response to the July 5, 2016 interim final
rule raising the same concerns as those raised in the joint
petition. Both petitions, along with a supplement to the joint
petition, can be found in Docket No. NHTSA-2016-0075 at
<a href="http://www.regulations.gov">www.regulations.gov</a>.
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In response to the joint petition, NHTSA issued a final rule on
December
[[Page 46814]]
28, 2016.\15\ In that rule, NHTSA agreed that raising the penalty rate
for model years already fully complete at the time the 2015 Act was
enacted would be inappropriate, given that courts generally disfavor
the retroactive application of statutes, and that applying penalties to
model years that were already completed could not deter non-compliance,
incentivize compliance, or lead to any improvements in fuel economy.
NHTSA also agreed that raising the rate for model years for which
product changes were infeasible due to lack of lead time from the
enactment of the 2015 Act did not seem consistent with Congress' intent
that the CAFE program be responsive to consumer demand. Accordingly,
NHTSA stated that it would not apply the inflation-adjusted penalty
rate of $14 (plus any adjustments for inflation that occurred or may
occur) until Model Year 2019, as the agency believed that 2019 would be
the first year after the 2015 Act in which product changes could
reasonably be made in response to the higher penalty rate. This final
rule had an effective date of January 27, 2017.
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\15\ 81 FR 95489 (December 28, 2016).
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3. NHTSA Reconsideration
Beginning in January 2017, NHTSA took a series of actions to delay
the effective date of the December 2016 final rule, ultimately leading
to a rule announcing that the effective date would be delayed
indefinitely.\16\ In April 2018, the United States Court of Appeals for
the Second Circuit vacated NHTSA's indefinite delay of the rule's
effective date, clarifying that the December 2016 rule was in
force.\17\
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\16\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28,
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017).
\17\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No.
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule,
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is
now in force.'').
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In July 2019, NHTSA finalized a rule determining that the 2015 Act
did not apply to the CAFE civil penalty rate. On August 31, 2020, the
United States Court of Appeals for the Second Circuit vacated the July
2019 rule and ruled that the December 2016 rule was back in force. The
Second Circuit denied panel rehearing on November 2, 2020.
4. Subsequent Petitions and Interim Final Rule
On September 9, 2019, the Institute for Policy Integrity at New
York University School of Law (IPI) submitted a petition for
reconsideration of NHTSA's July 2019 final rule. IPI argued that the
rule was unreasonable and not in the public interest because it did not
properly account for the associated costs and benefits. Additionally,
IPI challenged NHTSA's statutory interpretations. NHTSA did not issue a
decision on the petition prior to the Second Circuit's decision
vacating the rule.
Following the Second Circuit's decision, on October 2, 2020, NHTSA
received a petition for rulemaking from the Alliance for Automotive
Innovation requesting that the adjustment to $14 not be applied until
Model Year 2022.\18\ According to the Alliance Petition, ``Model Years
2019 and 2020 are effectively lapsed now,'' and ``[m]anufacturers are
unable to change MY 2021 plans at this point.'' The Alliance argued
that, as in the December 2016 rule, applying the increased penalty to
any violations that are temporally impossible to avoid or cannot
practically be remedied does not serve the statutory purposes of
deterring prohibited conduct or incentivizing favored conduct.
According to the Alliance, doing so would effectively be punishing
violators retroactively.
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\18\ The Alliance also submitted a supplement to its petition on
October 22, 2020 (Alliance Supplement).
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In addition to relying on the reasoning of the December 2016 rule
as it applied to the increase based on the timing of the enactment of
the 2015 Act, the Alliance Petition noted, but did not provide detailed
evidence of, the significant economic impact suffered by the industry
due to COVID-19. Accordingly, the Alliance Petition also cited the now-
revoked Executive Order 13924,\19\ requiring Federal agencies to take
appropriate action, consistent with applicable law, to combat the
economic emergency caused by COVID-19. Several individual vehicle
manufacturers submitted supplemental information to NHTSA further
articulating the negative economic position they were in due to the
COVID-19 public health emergency and the potential and significant
adverse economic consequences of the increased civil penalty rate.
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\19\ See Executive Order 14018, 86 FR 11855, ``Revocation of
Certain Presidential Actions'' (Feb. 24, 2021).
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After considering the issues raised, NHTSA granted the Alliance's
petition and promulgated an interim final rule providing that the
increase \20\ will apply beginning with Model Year 2022. The interim
final rule contended that applying the increased civil penalty rate to
vehicles in Model Years 2019, 2020, and 2021 would not result in
additional fuel savings and would impose higher penalties retroactively
because those model years were already completed, or, for Model Year
2021, production plans were set prior to the Second Circuit's decision
striking down the 2019 rule. The interim final rule relied in large
part on the reasoning in the December 2016 final rule, though it did
not discuss the extent to which the four years between the two rules
should affect that reasoning. Additionally, the interim final rule
attempted to account for the negative economic impact on the automotive
sector caused by the global outbreak of COVID-19.\21\ That interim
final rule amended the relevant regulatory text accordingly--effective
immediately and without having afforded prior notice or the ability to
comment in advance--and requested comment within ten days. The interim
final rule also noted that IPI's petition was moot, and, to the extent
it was not moot, NHTSA denied it.
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\20\ The rate is increasing to $14, plus any adjustments for
inflation that occurred or may occur. 49 CFR 578.6(h)(2).
\21\ The reasoning for the interim final rule is set forth more
fully in the January 14, 2021 notice published at 86 FR 3016.
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The interim final rule is currently the subject of legal challenges
in the Second Circuit and Ninth Circuit.\22\
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\22\ NRDC v. NHTSA, No. 21-139 (2d Cir.); New York v. NHTSA, No.
21-339 (2d Cir.); Tesla v. NHTSA, No. 21-70367 (9th Cir.).
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E. Summary of Comments Received
Before NHTSA's interim final rule was published but after the
agency had announced, through the publication of the Fall 2020 Unified
Agenda of Regulatory and Deregulatory Actions, that it had initiated a
rulemaking in response to the Alliance's petition, NHTSA received two
letters regarding the rulemaking: one jointly from the State of New
York, the Natural Resources Defense Council, and the Sierra Club, and
one from Tesla.\23\ These letters raised concerns with NHTSA's
rulemaking, particularly with the entities' inability to comment on the
Alliance's petition for rulemaking in advance. NHTSA did not respond to
these letters prior to the publication of the interim final rule, but
included both letters in the docket when the interim final rule was
published and noted that they ``will be treated as comments for
appropriate consideration.'' \24\
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\23\ NHTSA-2021-0001-0001; NHTSA-2021-0001-0009.
\24\ 86 FR 3016, 3023 n.74 (Jan. 14, 2021).
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After the interim final rule was published, NHTSA received eight
substantive comments.\25\ NHTSA received comments from:
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\25\ NHTSA received a ninth comment that simply said, ``Help.''
NHTSA-2021-0001-0018. Without any additional information, NHTSA
cannot reasonably address or respond to this commenter's concern.
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[[Page 46815]]
<bullet> The Attorneys General of California, New York,
Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts,
Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Washington,
and Vermont; \26\
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\26\ NHTSA-2021-0001-0017.
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<bullet> American Council for an Energy-Efficient Economy, Center
for Auto Safety, Center for Biological Diversity, Consumer Federation
of America, Consumer Reports, The Ecology Center (Michigan),
Environmental Law and Policy Center, Interfaith Power & Light, Sierra
Club, Union of Concerned Scientists; \27\
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\27\ NHTSA-2021-0001-0015.
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<bullet> Natural Resources Defense Council and Sierra Club; \28\
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\28\ NHTSA-2021-0001-0013.
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<bullet> The Institute for Policy Integrity at New York University
School of Law; \29\
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\29\ NHTSA-2021-0001-0011.
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<bullet> Tesla; \30\
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\30\ NHTSA-2021-0001-0012.
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<bullet> The Alliance for Automotive Innovation; \31\
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\31\ NHTSA-2021-0001-0014.
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<bullet> The National Automobile Dealers Association (NADA); \32\
and
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\32\ NHTSA-2021-0001-0016.
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<bullet> An anonymous individual.\33\
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\33\ NHTSA-2021-0001-0019.
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Most of the comments opposed the interim final rule, raising
serious procedural, legal, and substantive concerns. In general, these
comments argued that NHTSA did not have the authority to delay the
application of the inflation increase beyond Model Year 2019 and that,
regardless, NHTSA would have to do so through notice-and-comment, not
by an interim final rule that was effective immediately without prior
notice and without the opportunity to comment in advance. In supporting
these arguments, the commenters relied, in part, upon the two earlier
decisions by the Second Circuit.
Most of these comments also challenged the interim final rule as
arbitrary and capricious on multiple grounds. For example, the comments
discussed that applying the increased rate before Model Year 2022 would
not be retroactive because the increased rate was originally applied in
2016 when it was still prospective, and NHTSA's subsequent actions,
which were all stricken down by the Second Circuit, did not change that
fact. In these commenters' view, manufacturers have been on notice of
the increase well before Model Year 2019, and any reliance to the
contrary was undue. These comments argued that this was particularly
true given the rulings from the Second Circuit litigation, in which
many of these commenters and the Alliance were involved, with the
Alliance being an intervening party. The comments further argued that
delaying the application of the increased rate would affect future
compliance because manufacturers may be incentivized to hold credits
for model years when the higher rate will apply. The comments also
argued that the interim final rule improperly analyzed the economic
effects of the COVID-19 pandemic, for example, by not accounting for
any positive economic data and disregarding that some of the relevant
conduct occurred before the pandemic.
These comments also argued that the interim final rule violated the
National Environmental Policy Act of 1969 (NEPA). Lastly, in response
to NHTSA's request for comment about whether the adjustment should be
delayed further until Model Year 2023, these comments opposed any
additional delay. Some of these comments also expressed concern with
the short ten-day comment period provided by the interim final rule--
and only after the rule was already effective without any opportunity
to comment beforehand.
Two comments supported the interim final rule. The Alliance
reiterated the reasoning set forth in its petition, which NHTSA granted
in the interim final rule. According to the Alliance, the interim final
rule was consistent with NHTSA's December 2016 rule; appropriately
accounted for the industry's production and design processes, including
the unforeseen challenges of the COVID-19 public health emergency; and
fairly implemented the Second Circuit's decision. The Alliance also
noted that Model Year 2022 vehicles could have begun being produced as
early as January 2, 2021--about two weeks before the interim final rule
was published--but it believes NHTSA was reasonable to make the
inflation adjustment applicable beginning in Model Year 2022, declining
to request a further delay in the adjustment to Model Year 2023. NADA
supported the Alliance's comment, adding that increased CAFE civil
penalties before Model Year 2022 would lead to higher vehicle prices
for consumers or manufacturer shifts in available offerings, without
any associated environmental or safety benefits.
F. Supplemental Request for Public Comment
On January 20, 2021, the President issued Executive Order 13990,
entitled ``Protecting Public Health and the Environment and Restoring
Science to Tackle the Climate Crisis.'' E.O. 13990 directs the heads of
all agencies to immediately review all existing regulations, orders,
guidance documents, policies, and any other similar agency actions
promulgated, issued, or adopted between January 20, 2017 and January
20, 2021, that are or may be inconsistent with, or present obstacles
to, the policy set forth in E.O. 13990: A policy ``to listen to the
science; to improve public health and protect our environment; to
ensure access to clean air and water; to limit exposure to dangerous
chemicals and pesticides; to hold polluters accountable, including
those who disproportionately harm communities of color and low-income
communities; to reduce greenhouse gas emissions; to bolster resilience
to the impacts of climate change; to restore and expand our national
treasures and monuments; and to prioritize both environmental justice
and the creation of the well-paying union jobs necessary to deliver on
these goals.'' \34\ The Secretary of Transportation expressly
identified the January 14, 2021 CAFE civil penalties interim final rule
as one to be reviewed pursuant to E.O. 13990.\35\
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\34\ 86 FR 7037, 7037 (Jan. 25, 2021).
\35\ Memorandum from the Acting General Counsel of DOT to the
Chief Counsel and Acting Deputy Administrator of NHTSA and Special
Advisor, ``Implementation of Executive Order 13990, entitled
`Protecting Public Health and the Environment and Restoring Science
to Tackle the Climate Crisis' '' (Feb. 22, 2021). <a href="https://www.transportation.gov/sites/dot.gov/files/2021-02/Memo-to-NHTSA.pdf">https://www.transportation.gov/sites/dot.gov/files/2021-02/Memo-to-NHTSA.pdf</a>.
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In accord with E.O. 13990 and the Secretary's determination, and in
light of the significant concerns raised by the commenters, NHTSA is
reviewing and reconsidering the January 14, 2021 interim final rule.
Specifically, NHTSA is considering withdrawing the interim final rule
and reverting to the December 2016 final rule that would apply the
inflation adjustment beginning with Model Year 2019--the rule that the
Second Circuit has said twice is ``now in force.'' \36\ The vast
majority of comments submitted to date support returning to the
December 2016 final rule. Upon further consideration, automakers were
aware as of December 2016 that the inflation adjustment would apply
beginning with Model Year 2019. It was not until Model Year 2019 was
already nearly complete that the agency issued a final rule changing
that, which the Second Circuit subsequently determined was legally
invalid. The Alliance participated in that litigation as
[[Page 46816]]
an intervenor and was well aware of the possibility that the Second
Circuit would restore the applicability of the inflation increase
beginning with Model Year 2019. In fact, the Second Circuit did just
that. NHTSA is therefore of the view that it would be appropriate to
revisit the characterization of the application of the inflation
adjustment beginning with Model Year 2019 as ``retroactive.'' Moreover,
commenters have raised valid concerns regarding the procedures that the
agency used in issuing the interim final rule, which did not proceed
through a more typical notice-and-comment process and made the rule
effective immediately upon publication. In addition, based upon further
review and consideration of the Second Circuit's prior decisions and,
in light of the ongoing litigation, the agency is assessing the legal
risk of leaving the interim final rule in place, as the interim final
rule was based on an assertion of discretion that NHTSA now tentatively
believes is in conflict with the Inflation Adjustment Act and the
Second Circuit's decisions.
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\36\ Nat. Res. Def. Council v. Nat'l Highway Traffic Safety
Admin., 894 F.3d 95, 116 (2d Cir. 2018); New York v. Nat'l Highway
Traffic Safety Admin., 974 F.3d 87, 101 (2d Cir. 2020).
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For these reasons, the agency is now considering withdrawing the
interim final rule and reverting to the December 2016 final rule.
That said, the agency has not yet reached any final determinations,
and instead believes that an additional period of public comment would
aid the agency in its reexamination of the issues involved in the
interim final rule. Considering the importance of this rulemaking and
the short comment period--ten days--previously provided to interested
parties, NHTSA is issuing this notice to provide the public with an
appropriate amount of time to comment and to enable NHTSA to more fully
review and consider the issues. In doing so, NHTSA is expressly
requesting comment on whether it should proceed to a final rule that
withdraws the interim final rule and reverts to the December 2016 final
rule, restoring the application of the increased CAFE civil penalty
rate beginning with Model Year 2019. NHTSA will also accept comments on
whether the inflation adjustment should apply beginning with a model
year later than Model Year 2019. Commenters arguing for such a position
should explain how it is consistent with the 2015 Act and the Second
Circuit's decisions. NHTSA will also consider comments already
submitted in response to the interim final rule as part of its ongoing
review and the anticipated promulgation of a final rule following this
comment period.
G. Rulemaking Analyses and Notices
1. Executive Order 12866, Executive Order 13563, and DOT Regulatory
Policies and Procedures
NHTSA has considered the impact of this rulemaking action under
Executive Order 12866, Executive Order 13563, and the Department of
Transportation's regulatory policies and procedures. This rulemaking
document has been considered a ``significant regulatory action'' under
Executive Order 12866. NHTSA believes that this rulemaking will be
``economically significant,'' as NHTSA believes that the difference in
the amount of penalties received by the government as a result of this
rule are likely to exceed $100 million in at least one of the years
affected by this rulemaking and that there may be some further economic
effects as discussed below.
As a general matter, the civil penalty rate as adjusted for
inflation will likely induce some degree of greater compliance.
Manufacturers that are paying civil penalties for CAFE violations have
likely calculated that it is less costly or otherwise preferable to pay
the penalties than to meet the statutory and regulatory requirements.
An increased penalty rate changes this calculation, as it likely raises
either the costs of credits a noncompliant manufacturer may choose to
purchase, the total penalty amount a manufacturer will pay, or both.
However, the Second Circuit has made clear that the Inflation
Adjustment Act applies to these penalties and, thus, the question over
whether these penalties should be adjusted for inflation has been
settled.
In this rule, NHTSA is proposing to remove the interim final rule,
which delayed the inflation adjusted penalty rate by three model years,
two of which are already complete and the last one which is
considerably underway. An analysis here would be limited to estimating
over this short time horizon: (1) Which manufacturers did not produce
compliant fleets for Model Years 2019 and 2020 and are likely to not
produce compliant fleets for Model Year 2021; (2) what the shortfalls
will be for those non-compliant manufacturers; and (3) the extent to
which those manufactures will choose to use credits (either their own
or those purchased from over-compliant manufacturers) or pay penalties
to address these shortfalls. Pointedly, this analysis does not have
sufficient information to account for whether, and if so, how
manufacturers will adjust the composition of the fleet for these model
years in response to the penalty change.
Any analysis would estimate what the compliance shortfalls will be
and whether manufacturers will pay penalties or use credits. These
estimates could be used to estimate the effects on individual
manufactures in the form of higher penalty payments, higher payments to
other manufacturers for credits, or higher receipts for overcomplying
manufacturers for credits sold to other manufacturers. However, NHTSA
has only limited ability to estimate what strategies manufacturers will
take either to use credits or pay penalties to deal with any
noncompliance, as that is a decision that each manufacturer must take
based on their unique circumstances. In the past, the vast majority of
manufacturers pay no penalties, as only five manufacturers have paid
civil penalties since Model Year 2011.\37\ And only one of those
manufacturers faced particularly heavy penalties--even before the $14
rate would have gone into effect--for failing to comply with the
minimum domestic passenger car standard, which cannot be made up
through the application of transferred or traded credits.\38\
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\37\ See ``Civil Penalties,'' available at <a href="https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html">https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html</a>.
\38\ 49 U.S.C. 32903(f)(2), (g)(4); 49 CFR 536.9(c).
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Despite this uncertainty, NHTSA is confident that, based on the
experience of recent model years, this rule would lead to at least $100
million difference in the amount of penalties in at least one model
year. For example, based on mid-model year fuel economy performance
data, NHTSA projected a shortfall of 1.3 miles per gallon across the
U.S. fleet in Model Year 2019.\39\ Assuming a similar magnitude of
production from Model Year 2018 for Model Year 2019 would result in a
nationwide fleet-wide net shortfall of approximately $115.4 million at
the $5.50 rate or an approximately $293.9 million shortfall at the $14
rate--an approximately $178.5 million difference.\40\ As noted, it is
expected
[[Page 46817]]
that much of this increase would likely fall on a single automobile
manufacturer and likely due to a failure to comply with the minimum
domestic passenger car standard. NHTSA does not yet have enough
information for Model Year 2020, which is now complete, or Model Year
2021, which is still underway, to make a similar estimate, but requests
comment, data, or analysis on the potential compliance shortfalls,
penalty payments, and effect on credit sales for those model years.
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\39\ See ``MYs 2018 and 2019 Projected Fuel Economy Performance
Report,'' available at <a href="https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm">https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm</a>. This projection is based on information received
from manufacturers' mid[hyphen]model year reports required by 49 CFR
part 537. The data from these reports has not been verified by EPA
or NHTSA. NHTSA assesses manufacturers' compliance only using EPA-
verified final model year data. The final model year data may differ
from the mid-model year projections due to the mixture of vehicles
actually produced throughout the model year.
\40\ In looking at the total fleet performance across the
country, manufacturers who over-complied with the standard may
benefit from an expected increase in the value of credits as a
result of an inflation increase in the penalty rate, while those
that have made a business decision not to comply with the standards
would likely have to pay more for those credits. To the extent that
a manufacturer cannot meet their shortfall with these credits or, in
the case of the minimum domestic passenger car standard, are
prohibited from doing so by law, they would need to pay penalties.
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In addition, NHTSA believes that commenters have raised valid
questions about further economic effects. These commenters have argued
that, regardless of the impact of this rulemaking action on Model Year
2019 through 2021 vehicles, longer-term impacts may vary as a result of
manufacturer multi-year planning, the transfer of credits across model
years and between manufacturers, and the changing value of credits over
time. According to these commenters, if such variation were to occur,
applying the $14 penalty rate beginning in Model Year 2019 may result
in manufacturers applying credit balances to Model Year 2019 through
2021 vehicles and being incentivized to make fuel economy improvements
in their fleet beyond that timeframe. And for manufacturers that do not
currently have credits or cannot transfer or trade for them to make up
a shortfall of the minimum domestic passenger car standard, applying
the inflation adjusted penalty rate beginning in Model Year 2019 places
an even greater incentive on future compliance and fuel economy
improvements to avoid additional higher penalties going forward.
A brief explanation of the statutory scheme that governs the use of
credits is helpful in understanding how this could work. Manufacturers
comply separately with the domestic passenger car, imported passenger
car, and light truck standards. Thus, a manufacturer can comply (or
over comply) with all standards, comply with some but not all
standards, or fail to comply with all standards. To the extent that a
manufacturer over-complies with the standard for a particular fleet,
the manufacturer generates a credit for that over-compliance, which the
manufacturer can hold-on to for future compliance for that standard,
``transfer'' from one fleet (e.g., light trucks) to its other fleet
(e.g., imported passenger cars), or trade those credits to another
manufacturer. Those manufacturers can either ``bank'' those credits for
their own future use or sell them to non-compliant manufacturers, who
seek the credit to make up for a shortfall. These earned credits can be
``carried forward'' to apply to any of the five model years after they
are earned. Manufacturers can also choose to ``carry back'' credits to
apply to any of three model years before they are earned. However,
there are certain limitations on the use of credits, as manufacturers
may not transfer more than 2.0 miles per gallon in credits from one of
their fleets to another in a single model year and neither transferred
nor traded credits may be used to meet the minimum domestic passenger
car standard.
Consistent with these constraints, if the rate for civil penalties
instead remained at the $5.50 rate for Model Years 2019 through 2021,
some manufacturers might choose to pay the lower penalty earlier and
save the credits that could either carry forward or carry back for
future model years when they are valued more due to the inflation
adjustment. For example, a credit earned in Model Year 2017 could be
used for any year up to Model Year 2022, and, thus, if the adjusted
rate applied in Model Year 2019, they may use that credit at that
point, while they may have saved that credit for Model Year 2022 under
the delay provided in the interim final rule. Likewise, credits earned
in Model Years 2019 through 2021 may be used through Model Years 2024
and 2026, respectively. Thus, if the penalty rate remained $5.50 until
Model Year 2022, a manufacturer with shortfalls in one fleet in Model
Years 2019 through 2021 may choose to pay penalties and hold on to any
transferred or traded credits until the years in which the penalty rate
has been adjusted for inflation, rather than using the credits earlier
and making design changes to increase its compliance in the later model
years. Likewise, a manufacturer who has a shortfall in its domestic
passenger fleet might take actions to over-comply with the standard in
future years when the penalty is increased to generate credits to apply
to earlier years rather than paying the higher penalty.\41\ Finally,
credits earned in Model Year 2022, which is not yet underway, could be
applied back to Model Year 2019 shortfalls, which have not been
assessed yet, which a manufacturer may be more likely to do if the
penalty rate for Model Year 2019 is the rate as adjusted for inflation.
The agency has tentatively determined that these actions are possible
and, thus, may mean that the argument put forward in the interim final
rule that no effects beyond increased penalty payments are possible may
be incorrect. NHTSA requests further comments on such potential
effects, particularly as industry commenters did not provide detail as
to whether and the extent to which any such potential variations are
actually likely to occur.
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\41\ Although manufacturers' design cycles vary, since they have
been on notice since 2016 of an increase to the penalty beginning
with Model Year 2019, they have had and will continue to have
opportunities in the coming model years to make design choices to
increase compliance.
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In any event, based on further consideration of the 2015 Act and
the Second Circuit's decisions on this issue, NHTSA tentatively
believes that that it does not have discretion over when the inflation
adjustment should begin to take effect. Further, the Inflation
Adjustment Act provided NHTSA no discretion over what the adjusted rate
should be, as that is merely a function of the formula established by
Congress and calculated by OMB, and mandated streamlined processes for
making both the initial adjustment and any subsequent adjustments that
do not require accompanying analyses or public comment.\42\
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\42\ The 2015 Act, of course, did allow NHTSA one opportunity at
the time of the initial catch-up to use the notice-and-comment
process to adjust the rate ``less than the otherwise required
amount'' under two conditions, but the Second Circuit rejected
NHTSA's belated attempt to use this provision in its decision on the
July 2019 final rule. See New York, 974 F.3d at 100-01.
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2. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of proposed rulemaking or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
No regulatory flexibility analysis is required, however, if the head of
an agency certifies the proposal will not have a significant economic
impact on a substantial number of small entities.
NHTSA has considered the impacts of this document under the
Regulatory Flexibility Act and certifies that this rulemaking will not
have a significant economic impact on a substantial number of small
entities. The following provides the factual basis for this
certification under 5 U.S.C. 605(b).
[[Page 46818]]
The Small Business Administration's (SBA) regulations define a
small business in part as a ``business entity organized for profit,
with a place of business located in the United States, and which
operates primarily within the United States or which makes a
significant contribution to the U.S. economy through payment of taxes
or use of American products, materials or labor.'' 13 CFR 121.105(a).
SBA's size standards were previously organized according to Standard
Industrial Classification (``SIC'') Codes. SIC Code 336211 ``Motor
Vehicle Body Manufacturing'' applied a small business size standard of
1,000 employees or fewer. SBA now uses size standards based on the
North American Industry Classification System (``NAICS''), Subsector
336--Transportation Equipment Manufacturing. This action is expected to
affect manufacturers of motor vehicles. Specifically, this action
affects manufacturers from NAICS codes 336111--Automobile
Manufacturing, and 336112--Light Truck and Utility Vehicle
Manufacturing, which both have a small business size standard threshold
of 1,500 employees.
Though civil penalties collected under 49 CFR 578.6(h)(1) and (2)
apply to some small manufacturers, low-volume manufacturers can
petition for an exemption from the Corporate Average Fuel Economy
standards under 49 CFR part 525. This would lessen the impacts of this
rulemaking on small business by allowing them to avoid liability for
penalties under 49 CFR 578.6(h)(2). Small organizations and
governmental jurisdictions will not be significantly affected, as the
price of motor vehicles and equipment ought not change as the result of
this rule.
In the interim final rule, NHTSA stated that it did not believe
that the rule would have a significant economic impact on a substantial
number of small entities and requested comment on the issue. None of
the comments NHTSA received discussed this issue.
3. Executive Order 13132 (Federalism)
Executive Order 13132 requires NHTSA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the [N]ational [G]overnment and the States, or on
the distribution of power and responsibilities among the various levels
of government.'' Under Executive Order 13132, the agency may not issue
a regulation with federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal Government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, the agency
consults with State and local governments, or the agency consults with
State and local officials early in the process of developing the
proposed regulation.
As noted previously, this rulemaking will not have substantial
direct effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132. The reason is that this rulemaking is
expected to generally apply to motor vehicle manufacturers. Thus, the
requirements of Section 6 of the Executive Order do not apply.
4. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995, Public Law 104-4,
requires agencies to prepare a written assessment of the cost,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of more
than $100 million annually. Because this rulemaking is not expected to
include a Federal mandate, no unfunded mandate assessment will be
prepared.
5. National Environmental Policy Act
The National Environmental Policy Act of 1969 (NEPA) \43\ directs
that Federal agencies proposing ``major Federal actions significantly
affecting the quality of the human environment'' must, ``to the fullest
extent possible,'' prepare ``a detailed statement'' on the
environmental impacts of the proposed action (including alternatives to
the proposed action).\44\ However, there are some instances where NEPA
does not apply to a particular proposed One consideration is whether
the action at issue is a non-discretionary action to which NEPA may not
apply or for which NEPA may require less detailed analysis.\45\ Under
the 2015 Act, and as confirmed by the Second Circuit, NHTSA has no
discretion in whether to adjust the CAFE civil penalty rate to $14, and
NHTSA tentatively believes it has no discretion in when to do so.
Further, the 2015 Act provides no basis for the consideration of
environmental effects in making the required inflation adjustments,
outside of an exception not applicable here.\46\ Accordingly, in line
with legal precedent concerning non-discretionary agency action, NHTSA
believes that no further analysis pursuant to NEPA is required
regarding increasing the CAFE civil penalty rate for inflation.
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\43\ 42 U.S.C. 4321-4347.
\44\ 42 U.S.C. 4332.
\45\ See Dept. of Transp. v. Public Citizen, 541 U.S. 752, 768-
69 (2014) (holding that the agency need not prepare an Environmental
Impact Statement (EIS) or analyze certain environmental effects in
its EA, and stating, ``[s]ince FMCSA has no ability categorically to
prevent the cross-border operations of Mexican motor carriers, the
environmental impact of the cross-border operations would have no
effect on FMCSA's decisionmaking--FMCSA simply lacks the power to
act on whatever information might be contained in the EIS.'').
\46\ 28 U.S.C. 2461 note, 4(c) (allowing an agency to make the
first adjustment of the amount of a civil monetary penalty by less
than the otherwise required amount if increasing the civil monetary
penalty by the otherwise required amount would have a negative
economic impact; or the social costs of increasing the civil
monetary penalty by the otherwise required amount outweighed the
benefits). NHTSA's attempt to apply this exception through the
``negative economic impact'' prong was vacated by the Second Circuit
as too late, and the statute provides that the exception could only
be applied to the initial ``catch-up'' adjustment.
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Although NHTSA does not have discretion on whether to increase the
CAFE civil penalty rate for inflation, NHTSA has prepared this
environmental assessment to evaluate the effects of the timing of such
an increase on the environment. When a Federal agency prepares an
environmental assessment, the CEQ NEPA implementing regulations require
the agency to (1) ``[b]riefly provide sufficient evidence and analysis
for determining whether to prepare an environmental impact statement or
a finding of no significant impact,'' and (2) ``[b]riefly discuss the
purpose and need for the proposed action, alternatives . . . , and the
environmental impacts of the proposed action and alternatives, and
include a listing of [a]gencies and persons consulted.'' \47\
Generally, based on the environmental assessment, the agency must make
a determination to prepare an environmental impact statement or
``prepare a finding of no significant impact if the [a]gency
determines, based on the environmental assessment, not to prepare an
environmental impact statement because the proposed action will not
have significant effects.'' \48\
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\47\ 40 CFR 1501.5(c).
\48\ 40 CFR 1501.6(a).
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The interim final rule included an Environmental Assessment (EA)
and a Finding of No Significant Impact
[[Page 46819]]
(FONSI) regarding the agency's decision to increase the CAFE civil
penalty rate for inflation beginning with Model Year 2022. However, it
sought comment on the environmental impacts of a longer delay to Model
Year 2023. Two commenters alleged that the interim final rule violated
NEPA because the agency did not consider the effect of CAFE penalties
assessed in one year on manufacturers' compliance decisions in future
years.\49\ Like NHTSA's approach in the interim final rule, this
section may serve as NHTSA's Draft Environmental Assessment (Draft EA).
The issue raised by commenters on the EA presented in the interim final
rule is addressed below. NHTSA invites public comments on the
applicability of NEPA to this action and the contents and tentative
conclusions of this Draft EA.
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\49\ Comment from Natural Resources Defense Council and Sierra
Club, NHTSA-2021-0001-0013; Comment from the New York University
School of Law Institute of Policy Integrity, NHTSA-2021-0001-0011.
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I. Purpose and Need
This SNPRM sets forth the purpose of and need for this action.
Pursuant to the Inflation Adjustment Act and the Second Circuit's
decision, NHTSA is required to make an initial ``catch-up'' adjustment
to the civil monetary penalties it administers for the CAFE program.
The purpose of this SNPRM is to consider the timing of the application
of the adjustment to the CAFE civil penalty rate, consistent with the
statutory requirements.
II. Alternatives
The first alternative is to restore the status quo ante prior to
the interim final rule, which is adjusting the CAFE civil penalty rate
from $5.50 to $14 beginning in Model Year 2019. This timing was
originally established by the December 2016 final rule and was twice
made effective by decisions of the Second Circuit. The second
alternative is applying the adjustment beginning in Model Year 2022,
which reflects the action taken in the interim final rule. NHTSA is no
longer considering the alternative of applying the adjustment beginning
in Model Year 2023. NHTSA is accepting comments on whether it should
consider other alternatives of the inflation adjustment applying
beginning with a model year later than Model Year 2019. Commenters
arguing for such a position should explain how it is consistent with
the 2015 Act and the Second Circuit's decisions.
III. Environmental Impacts of the Action and Alternatives
In the interim final rule, NHTSA asserted that it anticipated no
differences in environmental impacts associated with the alternatives
of applying the adjustment beginning in Model Years 2019, 2020, 2021,
or 2022. NHTSA based this conclusion on the fact that vehicles for
Model Years 2019 and 2020 had largely if not entirely been produced
already, and many manufacturers were already selling Model Year 2021
vehicles.
After reviewing the comments received in response to the interim
final rule, NHTSA has reconsidered whether this assessment is complete.
Commenters have argued that, regardless of the impact of this
rulemaking action on Model Year 2019 through 2021 vehicles, longer-term
impacts may vary as a result of manufacturer multi-year planning, the
transfer of credits across model years and between manufacturers, and
the changing value of credits over time. If this is correct, applying
the adjustment earlier could result in manufacturers applying credit
balances to Model Year 2019 through 2021 vehicles and being
incentivized to make fuel economy improvements in their fleet beyond
that timeframe, rather than paying civil penalties at the $5.50 rate
for Model Years 2019 through 2021 and saving the credits for future
model years when they could be valued more due to the inflation
adjustment. Additionally, for manufacturers without credit balances,
the potential application of a significantly higher civil penalty for
Model Years 2019 through 2021 may spur more rapid implementation of
fuel-saving technology in order to allow the manufacturer to accrue
credits that may be carried back to cover the shortfall in Model Years
2019 through 2021.
Overall, NHTSA anticipates that applying the adjustment beginning
with Model Year 2019 may lead to the eventual application of more fuel-
saving technology, resulting in fewer greenhouse gas emissions and
reductions in many criteria and toxic air pollutants compared to
applying the adjustment beginning in Model Year 2022.\50\ Although
Model Years 2019 and 2020 are already completed, and Model Year 2021 is
underway, the civil penalty assessment process is not yet complete for
any of them.\51\ As a result, NHTSA does not yet know the anticipated
manufacturer compliance shortfall for these model years. Because
manufacturers can apply credits across a multi-year window, their
decisions about how to apply credits in earlier model years will affect
the availability of credits and the application of fuel-saving
technology in later model years. However, NHTSA does not know whether
and to what degree manufacturers will choose to pay fines in lieu of
applying accrued credits, trade credits with other manufacturers, or
rely on multi-year planning and credit carry-forward and carry-back to
address shortfalls. NHTSA invites comments, information, and analyses
from the public on the degree to which this may occur as a result of
changes to the civil penalty rate in Model Year 2019 versus Model Year
2022.
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\50\ See NHTSA's Final Environmental Impact Statements for the
CAFE rulemaking for MYs 2017 and beyond (Docket No. NHTSA-2011-0056)
and for MYs 2021-2026 (Docket No. NHTSA-2017-0069), both of which
illustrate these trends as fuel economy standard stringency
increases across alternatives. Both EISs are also available on the
agency's fuel economy website: <a href="https://www.nhtsa.gov/fuel-economy">https://www.nhtsa.gov/fuel-economy</a>.
\51\ Because NHTSA does not have final model year performance
data verified by EPA for these model years, any quantitative
projections of the environmental impact across multiple model years
would be too speculative to rely upon at this time.
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At this time, however, NHTSA anticipates the impacts to be small.
The difference between the alternatives contemplated in this action is
only whether or not the civil penalty rate increase applies to three
Model Years: 2019, 2020, and 2021. NHTSA continues to believe the
impacts on those Model Years alone is expected to be de minimis, as
Model Years 2019 and 2020 have largely if not entirely been produced
already, and manufacturers are already selling Model Year 2021
vehicles. Further, as NHTSA has addressed in its CAFE rulemakings, many
manufacturers have been unwilling to pay civil penalties historically.
Those manufacturers may continue to opt to apply credits even if a
lower civil penalty rate applied, rather than hold credits for future
model years when the civil penalty rate would be higher. NHTSA also
seeks comments on these conclusions.
IV. Agencies and Persons Consulted
NHTSA and DOT have consulted with OMB and the U.S. Department of
Justice and provided other Federal agencies with the opportunity to
review and provide feedback on this rulemaking.
V. Conclusion
NHTSA has reviewed the information presented in this Draft EA and
tentatively concludes that adjusting the CAFE civil penalty rate
beginning with Model Year 2019, as compared to Model Year 2022, would
have, at most, a more positive impact on the quality of the
[[Page 46820]]
human environment to the extent that manufacturers may be more likely
to expend credit balances on Model Year 2019 through 2021 vehicles than
if the civil penalty rate remained at $5.50 for those model years.
Lacking such credits in future years, manufacturers would be more
likely to make improvements to the fuel economy of their fleets to
avoid paying the higher civil penalty rates that would occur under
either alternative. Additionally, higher civil penalty rates in Model
Years 2019 through 2021 may cause manufacturers to more rapidly
implement fuel-saving technology so that they may accrue credits to be
carried back to cover compliance shortfalls. But NHTSA does not expect
any differences in the impacts under either of the alternatives to rise
to the level of significance that would necessitate the preparation of
an Environmental Impact Statement.
Based on the information in this Draft EA, and assuming no
additional information or changed circumstances, NHTSA expects to make
a Finding of No Significant Impact (FONSI). Such a finding will not be
made before careful review of all public comments received. If NHTSA
determines it is appropriate to do so, a Final EA and a FONSI will be
issued as part of the final rule.
6. Executive Order 12988 (Civil Justice Reform)
This rulemaking is not expected to have a preemptive effect. This
rulemaking is also not expected to have a retroactive effect, and NHTSA
requests comment on this point. Judicial review of the interim final
rule or a subsequent final rule may be obtained pursuant to 5 U.S.C.
702.
7. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980, NHTSA
states that there are no requirements for information collection
associated with this rulemaking action.
8. Privacy Act
Please note that anyone is able to search the electronic form of
all comments received into any of DOT's dockets by the name of the
individual submitting the comment (or signing the comment, if submitted
on behalf of an association, business, labor union, etc.). You may
review DOT's complete Privacy Act Statement in the Federal Register
published on April 11, 2000 (65 FR 19477), or you may visit <a href="https://www.transportation.gov/privacy">https://www.transportation.gov/privacy</a>.
List of Subjects in 49 CFR Part 578
Imports, Motor vehicle safety, Motor vehicles, Penalties, Rubber
and rubber products, Tires.
In consideration of the foregoing, the National Highway Traffic
Safety Administration proposes to amend 49 CFR part 578 as set forth
below.
PART 578--CIVIL AND CRIMINAL PENALTIES
0
1. The authority citation for 49 CFR part 578 continues to read as
follows:
Authority: Pub. L. 101-410, 104 Stat. 890; Pub. L. 104-134, 110
Stat. 1321; Pub. L. 109-59, 119 Stat. 1144; Pub. L. 114-74, 129
Stat. 584; Pub. L. 114-94, 129 Stat. 1312; 49 U.S.C. 30165, 30170,
30505, 32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115;
delegation of authority at 49 CFR 1.81, 1.95.
0
2. Amend Sec. 578.6 by revising paragraph (h)(2) to read as follows:
Sec. 578.6 Civil penalties for violations of specified provisions of
Title 49 of the United States Code.
* * * * *
(h) * * *
(2) Except as provided in 49 U.S.C. 32912(c), beginning with model
year 2019, a manufacturer that violates a standard prescribed for a
model year under 49 U.S.C. 32902 is liable to the United States
Government for a civil penalty of $14, plus any adjustments for
inflation that occurred or may occur (for model years before model year
2019, the civil penalty is $5.50), multiplied by each .1 of a mile a
gallon by which the applicable average fuel economy standard under that
section exceeds the average fuel economy--
(i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for
automobiles to which the standard applies produced by the manufacturer
during the model year;
(ii) Multiplied by the number of those automobiles; and
(iii) Reduced by the credits available to the manufacturer under 49
U.S.C. 32903 for the model year.
Issued in Washington, DC, under authority delegated in 49 CFR
1.95, and 501.5.
Steven S. Cliff,
Acting Administrator.
[FR Doc. 2021-17842 Filed 8-18-21; 11:15 am]
BILLING CODE 4910-59-P
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