Rule2025-10586
Resetting the Corporate Average Fuel Economy Program
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
June 11, 2025
Issuing agencies
Transportation DepartmentNational Highway Traffic Safety Administration
Abstract
The National Highway Traffic Safety Administration is issuing this interpretive rule to set forth the agency's interpretation of the factors the agency is prohibited by law from considering when setting maximum feasible fuel economy standards under the Energy Policy and Conservation Act of 1975, the Energy Independence and Security Act of 2007, and other applicable law. This rule describes NHTSA's interpretation of its authority to establish the necessary legal foundation for bringing the Corporate Average Fuel Economy (CAFE) program into compliance with relevant statutory requirements. The rule also describes NHTSA's interpretation of its authority for a commercial medium- and heavy-duty (MDHD) on-highway vehicle and work truck fuel efficiency improvement program, also establishing the necessary legal foundation for bringing that program into compliance with the law. Pending the rulemaking process for the establishment of replacement standards, NHTSA will exercise its enforcement authority with regard to all existing CAFE and MDHD standards in accordance with the interpretation set forth in this rule.
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 111 (Wednesday, June 11, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 111 (Wednesday, June 11, 2025)]
[Rules and Regulations]
[Pages 24518-24527]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-10586]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 531, 533, and 535
[Docket No. NHTSA-2025-0055]
Resetting the Corporate Average Fuel Economy Program
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Interpretive rule.
-----------------------------------------------------------------------
SUMMARY: The National Highway Traffic Safety Administration is issuing
this interpretive rule to set forth the agency's interpretation of the
factors the agency is prohibited by law from considering when setting
maximum feasible fuel economy standards under the Energy Policy and
Conservation Act of 1975, the Energy Independence and Security Act of
2007, and other applicable law. This rule describes NHTSA's
interpretation of its authority to establish the necessary legal
foundation for bringing the Corporate Average Fuel Economy (CAFE)
program into compliance with relevant statutory requirements. The rule
also describes NHTSA's interpretation of its authority for a commercial
medium- and heavy-duty (MDHD) on-highway vehicle and work truck fuel
efficiency improvement program, also establishing the necessary legal
foundation for bringing that program into compliance with the law.
Pending the rulemaking process for the establishment of replacement
standards, NHTSA will exercise its enforcement authority with regard to
all existing CAFE and MDHD standards in accordance with the
interpretation set forth in this rule.
DATES: This interpretive rule is applicable as of June 11, 2025.
FOR FURTHER INFORMATION CONTACT: For technical and policy issues,
Joseph Bayer, CAFE Program Division Chief, Office of Rulemaking,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue
SE, Washington, DC 20590; email: <a href="/cdn-cgi/l/email-protection#0f65607c6a7f67216d6e766a7d4f6b607b21686079"><span class="__cf_email__" data-cfemail="caa0a5b9afbaa2e4a8abb3afb88aaea5bee4ada5bc">[email protected]</span></a>; phone: (202)
366-1810. For legal issues, Hannah Fish, NHTSA Office of the Chief
Counsel, National Highway Traffic Safety Administration, 1200 New
Jersey Avenue SE, Washington, DC 20590; email: <a href="/cdn-cgi/l/email-protection#9ff7fef1f1fef7b1f9f6ecf7dffbf0ebb1f8f0e9"><span class="__cf_email__" data-cfemail="08606966666960266e617b60486c677c266f677e">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: The National Highway Traffic Safety
Administration (NHTSA) is issuing this interpretation as the foundation
for resetting its Corporate Average Fuel Economy (CAFE) \1\ and medium-
and heavy-duty fuel efficiency (MDHD) programs as authorized by law. In
accordance with the President's Executive Order, Unleashing American
Energy, and the Secretary's Memorandum, Fixing the CAFE Program, NHTSA
is in the process of reviewing and reconsidering fuel economy standards
applicable to vehicles produced from model year (MY) 2022 forward.\2\
NHTSA is also reviewing the existing MDHD standards, including those
standards for heavy-duty pickup trucks and vans referenced in the
Secretary's Memorandum. NHTSA will apply this interpretation to ensure
any changes to these standards and standards set in the future comply
with the law, including the legal prohibition on considering dedicated
alternative and dual-fueled vehicles and credit trading when setting
CAFE standards.\3\
---------------------------------------------------------------------------
\1\ NHTSA's light-duty program for automobiles. See, e.g., 49
U.S.C. 32902(b)(1)(A)-(B).
\2\ Unleashing American Energy, Executive Order 14154 of January
20, 2025, 90 FR 8353 (Jan. 29, 2025); Memorandum from the Secretary
of Transportation to Office of the Administrator of the National
Highway Traffic Safety Administration (NHTSA), Office of the
Assistant Secretary for Policy (OST-P) and Office of the General
Counsel (OGC) (Jan. 28, 2025), available at <a href="https://www.transportation.gov/sites/dot.gov/files/2025-01/Signed%20Secretarial%20Memo%20re%20Fixing%20the%20CAFE%20Program.pdf">https://www.transportation.gov/sites/dot.gov/files/2025-01/Signed%20Secretarial%20Memo%20re%20Fixing%20the%20CAFE%20Program.pdf</a>.
\3\ See 49 U.S.C. 32902(h).
---------------------------------------------------------------------------
I. Background
The Energy Policy and Conservation Act of 1975 (EPCA), as amended
by the Energy Independence and Security Act of 2007 (EISA), directs the
Secretary of Transportation--and NHTSA by delegation--to prescribe
average fuel economy standards for the United States passenger
automobile and non-passenger automobile fleets, separately, for each
model year at the maximum feasible average fuel economy level.\4\
Passenger automobiles are those that the Secretary decides by
regulation are manufactured primarily for transporting not more than
ten individuals, but do not include automobiles that the Secretary
decides by regulation have a significant feature designed for off-
highway operation and are 4-wheel
[[Page 24519]]
drive automobiles or are rated at more than 6,000 pounds gross vehicle
weight.\5\ Non-passenger automobiles are defined as not passenger
automobiles or work trucks.\6\ Thus, by elimination, non-passenger
automobiles are, in general, those that are not primarily for
transporting individuals and those that have significant features
designed for off-highway operation. Non-passenger automobiles are also
referred to as light trucks.
---------------------------------------------------------------------------
\4\ 49 U.S.C. 32902(b)(2)(B); 49 CFR 1.95.
\5\ 49 U.S.C. 32901(a)(18).
\6\ 49 U.S.C. 32901(a)(17).
---------------------------------------------------------------------------
NHTSA also is required to prescribe fuel economy standards for
``work trucks and commercial medium-duty or heavy-duty on-highway
vehicles.'' \7\ NHTSA is required to ``determine in a rulemaking
proceeding how to implement a commercial medium- and heavy-duty on-
highway vehicle and work truck fuel efficiency improvement program
designed to achieve the maximum feasible improvement.'' \8\
---------------------------------------------------------------------------
\7\ 49 U.S.C. 32902(b)(1)(C).
\8\ 49 U.S.C. 32902(k)(2).
---------------------------------------------------------------------------
When deciding what levels of fuel economy are ``maximum feasible,''
the statute states that NHTSA ``shall consider technological
feasibility, economic practicability, the effect of other motor vehicle
standards of the Government on fuel economy, and the need of the United
States to conserve energy.'' \9\ When carrying out its statutory
directive to set fuel economy standards at the maximum feasible level,
NHTSA must not consider the fuel economy of dedicated automobiles; must
consider dual-fueled automobiles to be operated only on gasoline or
diesel fuel; and must not consider, when prescribing a fuel economy
standard, the trading, transferring, or availability of credits under
section 32903.\10\ A dedicated automobile is one ``that operates only
on alternative fuel,'' which includes, among others, fuels such as
methanol, hydrogen, electricity, or ``any other fuel the Secretary of
Transportation prescribes by regulation that is not substantially
petroleum and that would yield substantial energy security and
environmental benefits.'' \11\ Non-exhaustive examples of dedicated
automobiles include electric vehicles (EVs) when powered solely by
electricity, natural gas vehicles (NGVs), and other similar vehicles
including fuel-cell electric vehicles (FCEVs) powered by hydrogen or
dedicated propane vehicles. A dual-fueled automobile is, among other
requirements, ``capable of operating on alternative fuel . . . and on
gasoline or diesel fuel,'' \12\ and includes plug-in hybrid electric
vehicles (PHEVs) that can be powered in a ``gasoline only'' mode
(charge-sustaining mode) or with a mix of electricity and gasoline
(charge-depleting mode), or ``flex-fuel vehicles'' (FFVs) that can
operate on gasoline or a high-ethanol blend.
---------------------------------------------------------------------------
\9\ 49 U.S.C. 32902(f).
\10\ 49 U.S.C. 32902(h).
\11\ 49 U.S.C. 32901(a)(1).
\12\ 49 U.S.C. 32901(a)(9).
---------------------------------------------------------------------------
Finally, 49 U.S.C. 32902(h) prohibits NHTSA from considering the
trading, transferring, or availability of credits under section 32903.
The credits in section 32903 are those that manufacturers earn when
their CAFE compliance value exceeds their CAFE standard.\13\
Manufacturers can apply these ``overcompliance'' credits up to three
years before and five years after the model year in which the credits
are earned; \14\ they can transfer these credits between their own
passenger and non-passenger automobile fleets,\15\ subject to statutory
restrictions; \16\ and trade these credits to other manufacturers under
a program established by NHTSA pursuant to discretionary statutory
authority, again subject to certain statutory restrictions.\17\
---------------------------------------------------------------------------
\13\ 49 U.S.C. 32903.
\14\ 49 U.S.C. 32903(a).
\15\ 49 U.S.C. 32903(g).
\16\ 49 U.S.C. 32903(g)(3), (4).
\17\ 49 U.S.C. 32903(f).
---------------------------------------------------------------------------
These three limitations--referred to herein as section 32902(h)
limitations or factors for their location in the United States Code at
49 U.S.C. 32902(h)--are the primary focus of this interpretive rule. In
this interpretive rule, NHTSA affirms that the agency cannot consider
the section 32902(h) factors for any purpose and at any point in the
process of setting fuel economy standards. NHTSA also examines other
aspects of the agency's CAFE and MDHD programs to ensure that both
programs are compliant with the law.
a. Congress Prohibited NHTSA's Consideration of the Section 32902(h)
Factors in Standard-Setting
EPCA was passed in the context of the Arab oil embargoes of the
1970s when American consumers and the U.S. economy were threatened by
gasoline shortages and high fuel prices. The House report accompanying
the legislation noted that, as a result, the legislation sought to
address the national security dangers of America's dependence on
foreign oil.\18\ Consistent with that context, the House report stated
that the purpose of the CAFE program was to induce automakers into
offering America's consumers more fuel-efficient vehicle options to
advance the national goal of conserving energy while simultaneously
``recogniz[ing] that the automobile industry has a central role in our
national economy and that any regulatory program must be carefully
drafted so as to require of the industry what is attainable without
either imposing impossible burdens on it or unduly limiting consumer
choice as to capacity and performance of motor vehicles.'' \19\
---------------------------------------------------------------------------
\18\ See, e.g., H.R. Rep. No. 94-340, at 6-10, 87-88 (1975)
(available in the docket for this action) (``In 1973 the embargo
affected 14 percent of U.S. petroleum consumption and precipitated a
$10- to $20-billion drop in GNP. . . . In June of 1973 the average
selling price for regular gasoline was reported to be approximately
38.8 cents per gallon, including tax. By June of 1974 that price had
increased to 55.1 cents per gallon, an addition in excess of 42
percent. Yet in the same period, gasoline demand went from 6.8
million barrels per day to 7.0 million barrels per day. In other
words, gasoline demand actually increased by 2.9 percent even though
prices had jumped by over 42 percent. . . . Part B of title V of the
bill establishes a long range program for improving automobile fuel
economy by requiring manufacturers and importers to meet
increasingly stringent average fuel economy standards, and to
disclose the fuel economy of each new automobile sold in the United
States.'').
\19\ Id. at 87.
---------------------------------------------------------------------------
As originally enacted, EPCA did not limit the Secretary's
consideration of factors when setting maximum feasible standards.
Limitations in section 32902(h) first appeared in the Alternative Motor
Fuels Act of 1988 (AMFA).\20\ AMFA aimed to displace energy derived
from imported oil to help achieve energy security and improve air
quality by encouraging the development of widespread use of methanol,
ethanol, and natural gas as transportation fuels by consumers and the
production of methanol, ethanol, and natural gas-powered motor
vehicles. The statute specified that, in carrying out responsibilities
to set maximum feasible fuel economy standards, ``the Secretary shall
not consider the fuel economy of alcohol powered automobiles or natural
gas powered automobiles, and the Secretary shall consider dual energy
automobiles and natural gas dual energy automobiles to be operated
exclusively on gasoline or diesel fuel.'' \21\ One member of Congress
described AMFA's approach as ``evenhanded'' in that the bill did not
favor one alternative fuel over another; rather, ``it allow[ed] the
market to pick the non-petroleum alternative fuel of the future.'' \22\
---------------------------------------------------------------------------
\20\ Alternative Motor Fuels Act of 1988, Public Law 100-494
(1988).
\21\ Id. at 102 STAT. 2450.
\22\ 134 Cong. Rec. H25122 (Sept. 23, 1988) (statement of Rep.
Sharp).
---------------------------------------------------------------------------
The conferees specifically noted their intent to ensure that the
Secretary of Transportation did not erase the AMFA
[[Page 24520]]
incentives by setting the CAFE standards for passenger or non-passenger
automobiles ``at a level that assumes a certain penetration of
alternative fueled vehicles.'' \23\ Specifically, ``i[t] is intended
that [NHTSA's maximum feasibility] examination will be conducted
without regard to the penetration of alternative fuel vehicles in any
manufacturer's fleet, in order to ensure that manufacturers taking
advantage of the incentives offered by this bill do not then find DOT
including those incentive increases in the manufacturer's `maximum fuel
economy capability.' '' \24\
---------------------------------------------------------------------------
\23\ Id. at 25124 (statement of Rep. Dingell).
\24\ Id.
---------------------------------------------------------------------------
The Energy Policy Act of 1992 expanded the section 32902(h)
limitations to include all dedicated alternative-fueled vehicles.\25\
The Energy Policy Act's accompanying House report acknowledged that the
widespread use of alternative fuels faced several problems, but
expanded the AMFA requirements to keep the program ``fuel neutral.''
\26\ This was because ``all the data, experience, and knowledge
gathered concerning alternative fuels over the past two decades points
to the fact that no one fuel is `the winner.' '' \27\
---------------------------------------------------------------------------
\25\ Energy Policy Act of 1992, Public Law 102-486 (1992)
(``Title V of the Motor Vehicle Information and Cost Savings Act (15
U.S.C. 2001 et seq.) is amended . . . in section 502(e)--(A) by
striking ``alcohol powered automobiles or natural gas powered'' and
inserting in lieu thereof ``dedicated'').
\26\ H.R. Rep. No. 102-474, at 35 (1992).
\27\ Id.
---------------------------------------------------------------------------
There have been no subsequent substantive changes to the language
in 49 U.S.C. 32902(h),\28\ including with the enactment of EISA in
2007. The statutory prohibition was clear at the time of enactment and
has remained clear: it is impermissible for NHTSA to consider the fuel
economy of dedicated automobiles in setting maximum feasible fuel
economy standards.
---------------------------------------------------------------------------
\28\ In 1994, Congress restated the laws related to
transportation in one comprehensive title in the recodification of
title 49 of the United States Code, see S. Rep. No. 103-265 (1994);
H.R. Rep. No. 103-180 (1993). The recodification, which was enacted
to restate without substantive change all transportation laws in one
title, substituted simple language for ``awkward and obsolete
terms,'' and eliminated superseded, executed, and obsolete laws. The
standard changes made uniformly throughout the revised section are
explained in a report preceding the law. Important for this
interpretation, ``the words `may not' are used in a prohibitory
sense, as `is not authorized to' and `is not permitted to.' ''
---------------------------------------------------------------------------
b. Statutory Requirement for MDHD Standards
NHTSA is required to also prescribe average fuel economy standards
for work trucks and commercial medium-duty or heavy-duty on-highway
vehicles in accordance with 49 U.S.C. 32902(k).\29\ In subsection (k),
the statute specifically requires NHTSA ``to determine in a rulemaking
proceeding how to implement a commercial medium- and heavy-duty on-
highway vehicle and work truck fuel efficiency improvement program
designed to achieve the maximum feasible improvement,'' and to ``adopt
and implement appropriate test methods, measurement metrics, fuel
economy standards, and compliance and enforcement protocols that are
appropriate, cost-effective, and technologically feasible.'' \30\
NHTSA's civil penalty authorities for violations of the agency's fuel
economy standards also do not include a civil penalty for violations of
the MDHD standards.\31\
---------------------------------------------------------------------------
\29\ Public Law 110-140 (2007), 121 Stat. 1499 (codified at 49
U.S.C. 32902(b)(1)(C)).
\30\ 49 U.S.C. 32902(k)(2).
\31\ The Energy Independence and Security Act of 2007 (EISA),
Public Law 110-140 (2007), 121 Stat. 1499, amended the civil penalty
provision of NHTSA's fuel economy statute to add a provision
addressing the use of civil penalties for research and development,
but it did not include a civil penalty for MDHD standards. See 121
Stat. 1508 (codified at 49 U.S.C. 32912(e)). EISA also included a
civil penalty for violations of a tire fuel efficiency information
program. Id. at 1507.
---------------------------------------------------------------------------
c. Presidential Executive Orders and the Secretary of Transportation's
Memorandum on Fixing the CAFE Program
On January 20, 2025, the President issued several Executive Orders,
with two in particular pertaining to NHTSA's fuel economy program and
directly relevant to this action. Executive Order 14148, Initial
Rescission of Harmful Executive Orders and Actions, revoked various
Executive orders issued by the previous administration, including
several that directed NHTSA to reconsider the fuel economy standards
finalized in 2020.\32\ Executive Order 14154, Unleashing American
Energy, announced the Administration's policy regarding energy
resources, specifically to promote the production, distribution, and
use of reliable domestic energy supplies, including oil, natural gas,
and biofuels; to ensure that all regulatory requirements related to
energy are ``grounded in clearly applicable law;'' and ``to eliminate
the `electric vehicle (EV) mandate' and promote true consumer choice.''
\33\ The Order directed that the United States do this by ``removing
regulatory barriers to motor vehicle access; by ensuring a level
regulatory playing field for consumer choice in vehicles; by
terminating, where appropriate, state emissions waivers that function
to limit sales of gasoline-powered automobiles; and by considering the
elimination of unfair subsidies and other ill-conceived government-
imposed market distortions that favor EVs over other technologies and
effectively mandate their purchase by individuals, private businesses,
and government entities alike by rendering other types of vehicles
unaffordable.'' \34\
---------------------------------------------------------------------------
\32\ 90 FR 8237 (Jan. 28, 2025). Among others, Executive Order
14148 rescinded Executive Order 14008 of January 27, 2021 (Tackling
the Climate Crisis at Home and Abroad) (instituting a whole-of-
government effort to reduce carbon dioxide emissions); Executive
Order 14037 of August 5, 2021 (Strengthening American Leadership in
Clean Cars and Trucks) (``setting a goal that 50 percent of all new
passenger cars and light trucks sold in 2030 be zero-emission
vehicles'' and directing the Secretary of Transportation to set fuel
economy standards accordingly); Executive Order 14057 of December 8,
2021 (Catalyzing Clean Energy Industries and Jobs Through Federal
Sustainability) (promoting government procurement of electric
vehicles); Executive Order 14082 of September 12, 2022
(Implementation of the Energy and Infrastructure Provisions of the
Inflation Reduction Act of 2022) (applying incentives for production
and sale of electric vehicles); Executive Order 14094 of April 6,
2023 (Modernizing Regulatory Review) (directing use of modified
cost-benefit analysis that inflates the estimated long-term benefits
of carbon-reduction regulations, such as higher CAFE standards).
\33\ 90 FR 8353 (Jan. 29, 2025).
\34\ Id.
---------------------------------------------------------------------------
On January 28, 2025, the Secretary of Transportation issued a
memorandum, titled Fixing the CAFE Program, stating that there is
``strong reason to conclude that the [2022 and 2024 final rule] CAFE
standards promulgated by NHTSA are contrary to Administration policy as
reflected in President Trump's Executive Orders and are inconsistent
with the substantive statutory requirements applicable to the CAFE
program enacted by Congress and codified in chapter 329 of title 49,
United States Code.'' \35\ The memorandum directed NHTSA, accordingly,
to ``commence an immediate review and reconsideration of all existing
fuel economy standards applicable to all models of motor vehicles
produced from model year 2022 forward, including in particular the
rules titled Corporate Average Fuel Economy Standards for Model Years
2024-2026 Passenger Cars and Light Trucks (87 FR 25710) and Corporate
Average Fuel Economy Standards for Passenger Cars and Light Trucks for
[[Page 24521]]
Model Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-
Duty Pickup Trucks and Vans for Model Years 2030 and Beyond (89 FR
52540).'' \36\ Furthermore, the Secretary directed NHTSA, at the
earliest opportunity, to ``propose the rescission or replacement of any
fuel economy standards as determined necessary to bring the CAFE
program into compliance with Administration policy and the requirements
of the law.'' \37\
---------------------------------------------------------------------------
\35\ Memorandum from the Secretary of Transportation to Office
of the Administrator of the National Highway Traffic Safety
Administration (NHTSA), Office of the Assistant Secretary for Policy
(OST-P) and Office of the General Counsel (OGC) (Jan. 28, 2025),
available at <a href="https://www.transportation.gov/sites/dot.gov/files/2025-01/Signed%20Secretarial%20Memo%20re%20Fixing%20the%20CAFE%20Program.pdf">https://www.transportation.gov/sites/dot.gov/files/2025-01/Signed%20Secretarial%20Memo%20re%20Fixing%20the%20CAFE%20Program.pdf</a>.
\36\ Id.
\37\ Id.
---------------------------------------------------------------------------
After the President and Secretary's initial direction on
reconsidering the CAFE program, the President issued Executive Order
14219, Ensuring Lawful Governance and Implementing the President's
``Department of Government Efficiency'' Deregulatory Initiative.\38\
That Executive Order directed agencies, among other things, to identify
regulations that are ``based on anything other than the best reading of
the underlying statutory authority or prohibition'' and work with White
House offices and personnel to rescind or modify these regulations, as
appropriate.\39\ That Order also directed agencies, when proposing new
regulations, to take account of specific factors related to law or
Administration policy laid out in the order,\40\ such as whether the
regulation is based on the best reading of the underlying statutory
authority or prohibition.
---------------------------------------------------------------------------
\38\ 90 FR 10583 (Feb. 25, 2025).
\39\ Id. at Sec. 2(iii) and 2(d).
\40\ Id. at Sec 4.
---------------------------------------------------------------------------
In accordance with direction from the President and the Secretary
of Transportation, and pursuant to NHTSA's authority under Chapter 329
of Title 49, the agency is issuing this interpretive rule to affirm
that the agency cannot consider the section 32902(h) factors for any
purpose and at any point in the process of setting fuel economy
standards. Not only does the plain text of the statute make clear that
NHTSA's prior consideration of the section 32902(h) limitations was
inconsistent with the substantive statutory requirements applicable to
the CAFE program, but the legislative history affirms this
interpretation as well. In this interpretative rule, NHTSA also
addresses the statutory provisions applicable to the MDHD program,
including the absence of a civil penalty for violations of standards
established under that program. This interpretation provides the
foundation for subsequent fuel economy standards rulemakings to reset
the CAFE program to implement the President and Secretary's directives
on CAFE, to reset the MDHD program, and to ensure that future
regulatory actions are consistent with the agency's underlying
statutory authority and specific prohibitions in the law.
II. Interpretation of Statutory Limitations in 49 U.S.C. 32902(h) as
Applied to NHTSA's Standard-Setting Analysis
Since the beginning of the CAFE program in the late 1970s, NHTSA
has evaluated vehicle manufacturers' ability to comply with different
levels of CAFE standards by, among other things, performing an analysis
that evaluates a cost-effective pathway for manufacturers to apply
fuel-economy-improving technologies to their vehicles.\41\ More
recently, NHTSA has used the CAFE Compliance and Effects Model
(commonly referred to as ``the CAFE Model'') to perform this analysis.
NHTSA uses the model as a tool to estimate how manufacturers could
attempt to comply with a given CAFE standard by adding technology to
anticipated vehicle fleets and to estimate the impacts of additional
technology application. NHTSA also uses the model to evaluate the
sensitivity of these estimated outcomes to key analytical inputs (e.g.,
fuel prices), and to perform probabilistic uncertainty analysis. While
the analytical results are used to inform the maximum feasible
determination,\42\ the analytical results do not dictate the maximum
feasible determination.\43\ It is ultimately up to the agency to
balance the available information regarding technological feasibility,
economic practicability, the effect of other motor vehicle standards of
the Government on fuel economy, and the need of the United States to
conserve energy--whether from the technical and economic analysis or
other legally appropriate considerations--to set maximum feasible CAFE
standards.
---------------------------------------------------------------------------
\41\ See, e.g., Rulemaking Support Paper Concerning the 1981-
1984 Passenger Auto Average Fuel Economy Standards (July 1977).
\42\ See, e.g., Pub. Citizen v. Nat'l Highway Traffic Safety
Admin., 848 F.2d 256 (D.C. Cir. 1988).
\43\ See, e.g., 85 FR 24174, at 24227 (April 30, 2020) (``As
explained elsewhere in this document and as made repeatedly clear
over the past several rulemakings, the CAFE model (or, for that
matter, any model) neither sets standards nor dictates where and how
to set standards; it simply informs as to the potential effects of
setting different levels of standards.''); 89 FR 52540, at 52855
(June 24, 2024) (``We underscore again that the modeling analysis
does not dictate the ``answer,'' it is merely one source of
information among others that aids NHTSA's balancing of the
standards.''). As an example, a non-exhaustive list of modeled
estimated impacts of manufacturers adding fuel-economy-improving
technology to vehicles could include technology penetration rates,
per-vehicle increases in technology costs, fuel savings to the
consumer, or total fuel savings by the entire fleet manufactured in
a given model year. It is then up to NHTSA to balance these results
within the framework of the 49 U.S.C. 32902(f) factors, e.g., total
fleetwide fuel savings and per-vehicle increases might be two
relevant metrics to explore across alternatives as NHTSA considers
how heavily to weigh ``the need of the United States to conserve
energy'' against ``economic practicability.''
---------------------------------------------------------------------------
In the 2012, 2020, 2022, and 2024 final rules, NHTSA took the
position that it could account for the factors prohibited from
consideration in section 32902(h) by using a narrow construction of
that provision. This narrow interpretation permitted dedicated
alternative and dual-fueled vehicles to be added to an existing
reference fleet of vehicles \44\ in response to reasons other than
NHTSA's CAFE standards,\45\ and outside of the years for which NHTSA
was setting standards.\46\ NHTSA prohibited the consideration of
dedicated or dual-fueled vehicles only as a compliance option in
response to the agency's fuel economy standards during ``standard-
setting'' years (i.e., the model years being evaluated as the subject
of the active rulemaking), and similarly prohibited consideration of
manufacturers' use of compliance credits only during the standard-
setting years. In other words, the model did not apply dedicated or
dual-fueled technology to a manufacturer's fleet of vehicles when
simulating a cost-effective pathway for the manufacturer to comply with
a given level of CAFE standards only in standard-setting years, but
application of the technology was otherwise permitted.
---------------------------------------------------------------------------
\44\ NHTSA's ``reference fleet'' is a snapshot of an existing
U.S. vehicle fleet in a particular model year. NHTSA uses its CAFE
compliance data and publicly available manufacturer materials to
capture vehicle technologies that already exist in the fleet as a
starting point from which to measure further potential technology
application.
\45\ In accordance with Executive Order 12866 of September 30,
1993 (58 FR 51735) and OMB Circular A-4 (September 17, 2003), to
evaluate properly the benefits and costs of regulations and their
alternatives, agencies must identify a ``no action'' baseline: what
the world will be like if the proposed rule is not adopted.
\46\ Based on the nature of NHTSA's analysis and CAFE rulemaking
cycles, NHTSA's reference fleet often precedes the first year for
which the agency is setting standards by a handful of years. As an
example, in the 2020 final rule, NHTSA used a MY 2017 reference
fleet for a standard-setting analysis that covered MYs 2021-2026;
similarly, in the 2024 final rule, NHTSA used a MY 2022 reference
fleet for a standard-setting analysis that covered MYs 2027-2031.
This means that the CAFE Model must ``walk up'' the reference fleet
in years prior to the standard-setting years to the latest year
prior to the first standard-setting year; continuing the example
from above, in the 2020 final rule the CAFE Model added technology
to the MY 2017 fleet from MYs 2018-2020, prior to the first year of
standard-setting, which was MY 2021. In addition, NHTSA's analysis
also considers explicitly years beyond standard-setting years,
because the effects of a fleet of vehicles subject to a particular
year's CAFE standards will have effects over the full useful lives
of those vehicles.
---------------------------------------------------------------------------
[[Page 24522]]
However, NHTSA's prior consideration of the factors prohibited in
section 32902(h)--even if in response to reasons other than NHTSA's
standards and even if in non-standard-setting years--is inconsistent
with a plain reading of section 32902(h) and with the most faithful
approach to standard-setting in furtherance of the design and purposes
of EPCA.
a. Improper Consideration of Dedicated Alternative Vehicle Fuel Economy
The text of the statute is unequivocal: section 32902(h) prohibits
the Secretary from considering the fuel economy of ``dedicated
vehicles.'' Specifically, subsection (h)(1) states that the Secretary
``may not consider the fuel economy of dedicated automobiles.'' This
does not mean that NHTSA may consider the fuel economy of dedicated
automobiles in certain circumstances or during certain timeframes of
the agency's choosing or provided that certain criteria specified by
the agency are met. Rather, the prohibition means that NHTSA may not
consider the fuel economy of dedicated vehicles in any respect and at
any point in the process of setting fuel economy standards. Yet that is
precisely what the agency did in promulgating the previous standards.
In prior rules, NHTSA exercised certain analytical options that
prevented the CAFE Model from applying dedicated alternative fueled
vehicle technologies in standard-setting years beyond those already in
the reference fleet. However, NHTSA did not restrict dedicated
alternative fueled vehicle application in the model years either before
or after the standard-setting years. NHTSA also modeled that
manufacturers would apply dedicated alternative fueled vehicle
technology in the absence of CAFE standards if that technology recouped
fuel savings for the consumer within 30 months.
In the two most recent prior rulemakings, NHTSA also included
dedicated alternative fueled vehicle technologies in the analysis by
accounting for three policies that would be expected to result in
significant continued electrification of the fleet. Specifically, NHTSA
accounted for Zero Emission Vehicle (ZEV) mandates applicable in
California and the other states that have adopted them; \47\ some
vehicle manufacturers' voluntary commitments to the state of California
to continued annual nationwide reductions of vehicle greenhouse gas
emissions through model year (MY) 2026, with greater rates of
electrification than would have been expected under NHTSA's 2020 final
rule; and manufacturers' joint responses to previously promulgated fuel
economy and greenhouse gas emissions standards, which included
dedicated electric vehicles. These decisions meant that NHTSA assumed
significant numbers of EVs would continue to be produced regardless of
the standards set by the agency, in turn increasing the level of
standards that could be considered maximum feasible.
---------------------------------------------------------------------------
\47\ 42 U.S.C. 7507. Other states have adopted California's ZEV
program requirements under Section 177 of the Clean Air Act (so-
called ``Section 177 states'').
---------------------------------------------------------------------------
The prior consideration of dedicated vehicles' fuel economy in the
agency's analysis sets the floor for what was deemed feasible and
therefore made improvements beyond what is achievable by an internal
combustion engine fleet seem attainable. The inclusion of EVs
inherently impacts the agency's determination of maximum feasible
standards because EVs are generally imputed to have significantly
higher fuel economy than vehicles with an internal combustion
engine.\48\ Likely, NHTSA would not have proposed or adopted standards
as stringent as the previous standards if NHTSA had not considered the
fuel economy of EVs in its modeling analysis. NHTSA reasoned that this
was appropriate because ``accounting for technology improvements that
manufacturers would make even in the absence of CAFE standards allows
NHTSA to gain a more accurate understanding of the effects of the final
rule.'' \49\ However, the inclusion of dedicated vehicles in NHTSA's
previous analysis impacted materially the standards that ultimately
were promulgated.
---------------------------------------------------------------------------
\48\ Fuel economy for EVs is determined using a petroleum
equivalency factor (PEF) set by the Department of Energy. For
example, one EV manufacturer had a fuel economy performance of 739.9
and 751.9 miles per gallon for its MY 2020 domestic passenger and
light truck fleets as compared to the 43.4 and 30.2 miles per gallon
overall performance of the same fleets for all manufacturers.
\49\ 89 FR 52540, at 52611 (June 24, 2024).
---------------------------------------------------------------------------
This situation is precisely what the drafters of AMFA were
protecting against when imposing limitations on the Secretary's
consideration of certain factors when setting maximum feasible
standards. As one member of Congress stated specifically: ``i[t] is
intended that [NHTSA's maximum feasibility] examination will be
conducted without regard to the penetration of alternative fuel
vehicles in any manufacturer's fleet, in order to ensure that
manufacturers taking advantage of the incentives offered by this bill
do not then find DOT including those incentive increases in the
manufacturer's `maximum fuel economy capability.' '' \50\
---------------------------------------------------------------------------
\50\ 134 Cong. Rec. H25124 (Sept. 23, 1988) (statement of Rep.
Dingell).
---------------------------------------------------------------------------
b. Improper Consideration of Dual-Fueled Vehicle Fuel Economy
Section 32902(h)(2) requires NHTSA to consider ``dual fueled
automobiles to be operated only on gasoline or diesel fuel.''
Accordingly, NHTSA must consider PHEVs' fuel economy only when running
on gasoline or diesel fuel, i.e., in charge-sustaining mode, not their
fuel economy when also running on electricity, i.e., charge-depleting
mode. Yet NHTSA expressly considered the fuel economy of PHEVs
factoring in their operation using electricity in previous rulemakings,
failing to comply faithfully with section 39202(h)(2)'s prohibition.
NHTSA's application of dual-fueled vehicle technology has evolved
continuously over successive standard-setting analyses but failed to
adhere to the section 32902(h) prohibition each time. In the 2012 final
rule, NHTSA interpreted section 32905 (``Manufacturing incentives for
alternative fuel vehicles'') to authorize consideration of PHEVs'
electric fuel economy post-model year 2019,\51\ reasoning that the
expiration of the statutory credit in 2019 would somehow render section
32902(h)(2)'s prohibition ``moot.'' \52\ NHTSA believed that ``[i]t
would be an unreasonable result if the phase-out of the credit meant
that manufacturers would be effectively penalized, in CAFE compliance,
for building dual-fueled automobiles like plug-in hybrid electric
vehicles, which may be important `bridge' vehicles in helping consumers
move toward full electric vehicles.'' \53\
---------------------------------------------------------------------------
\51\ See 49 U.S.C. 32905(b), (f); 77 FR 62624, at 63127-28. That
provision created ``[m]anufacturing incentives for alternative fuel
automobiles'' manufactured from MYs 1993 to 2019 by directing the
Environmental Protection Agency (EPA) to use a formula that enhanced
the fuel economy of dual-fueled vehicles above what they could
obtain on gasoline for the limited purpose of calculating compliance
with fuel economy standards.
\52\ 77 FR 62624, at 63020 (Oct. 15, 2012).
\53\ Id.
---------------------------------------------------------------------------
NHTSA's reasoning does not explain how the expiration of a
statutory incentive would allow the agency to consider the PHEV's
electric fuel economy in formulating CAFE standards after model year
2019 when the statute expressly prohibits NHTSA from considering PHEV
electric fuel economy in formulating CAFE standards, without caveat or
exception. In addition, section 32902(h)(2) has never been repealed,
and repeals by
[[Page 24523]]
implication are not favored.\54\ Moreover, despite several cross-
references to other provisions, section 32902(h)(2) does not mention or
cross-reference the manufacturing incentives in section 32905 of the
statute, nor does it reference credits at all. Congress knows precisely
how to sunset provisions and must do so expressly.\55\ Indeed, Congress
has included express sunset provisions in other sections of the fuel
economy statute (sections 32905(b) and 32906(a)), and there is no
sunset provision in Section 32902(h)(2). As a result, section
32902(h)(2)'s prohibition on considering the electric fuel economy of
PHEVs remains in force. Unlike other subsections of section 32902,
which specify the application of certain provisions to certain model
years, section 32902(h) does not have limited applicability.\56\
---------------------------------------------------------------------------
\54\ Posadas v. Nat'l City Bank of N.Y., 296 U.S. 497, 503
(1936).
\55\ See HollyFrontier Cheyenne Refin., LLC v. Renewable Fuels
Ass'n, 141 S. Ct. 2172, 2180 (2021).
\56\ See 49 U.S.C. 32902(b)(2).
---------------------------------------------------------------------------
NHTSA carried its interpretation through the 2020 and 2022 final
rule analyses but has since reconsidered this issue and determined that
doing so was based on an erroneous reading of the statute, separate
from the 2012 rule logic relating to how to give effect to both section
32902(h) and section 32905.\57\ \58\ The agency now explicitly
repudiates both prior approaches.
---------------------------------------------------------------------------
\57\ Specifically, in the 2020 and 2022 final rules, the agency
failed to account for Congress's 2014 amendment that provided a
method for calculating the fuel economy of electric dual-fueled
automobiles manufactured after model year 2015, by carrying forward
the 2012 final rule reasoning without change. Carl Levin and Howard
P. `Buck' McKeon National Defense Authorization Act for Fiscal Year
2015, Public Law 113-291, Sec. 318, 128 Stat. 3292, 3341-3342
(2014).
\58\ USCA Case #22-1080, Document #1991134, at 91 (filed March
21, 2023).
---------------------------------------------------------------------------
Most recently, the 2024 final rule analysis considered PHEV fuel
economy only when operated in charge sustaining mode during standard-
setting years but considered PHEV fuel economy when operating in charge
depleting mode in the years before and after the standards.\59\ In
addition, NHTSA allowed PHEV technology application for the same
reasons as the dedicated alternative fueled vehicle technology
application, i.e., outside of the standard-setting years or for reasons
other than in direct response to NHTSA's CAFE standards, including for
the same reasons that the model could apply dedicated alternative
fueled vehicle technology, discussed above. This consideration also
goes too far. The statutory text of section 32902(h)(2), which states
that NHTSA ``shall consider dual fueled automobiles to be operated only
on gasoline or diesel fuel'' does not mean that NHTSA may consider
dual-fueled automobiles to be operated by electricity or other fuel in
certain circumstances or during certain timeframes of the agency's
choosing, or provided that certain criteria specified by the agency are
met. The prohibition means that NHTSA may not consider the fuel economy
of dual-fueled automobiles operated by electricity or other fuel in any
respect and at any point in the process of setting fuel economy
standards. NHTSA's decisions to do otherwise increased the level of
average fuel economy standards for each fleet in the baseline, making
higher standards appear more feasible.
---------------------------------------------------------------------------
\59\ See, e.g., 89 FR 52540, at 52634-35 (June 24, 2024)
(``Unlike with other technologies in the analysis, including other
electrification technologies, Congress placed specific limitations
on how we consider the fuel economy of alternative fueled vehicles
(such as PHEVs, [battery electric vehicles (BEVs)], and [fuel cell
electric vehicles FCEVs)] when setting CAFE standards. We implement
these restrictions in the CAFE Model by using fuel economy values
that assume ``charge sustaining'' (gasoline-only) PHEV operation,
and by restricting technologies that convert a vehicle to a BEV or a
FCEV from being applied during ``standard-setting'' years.'').
---------------------------------------------------------------------------
c. Improper Consideration of Compliance Credits
NHTSA cannot consider compliance credits that manufacturers earn by
exceeding the CAFE standards and then use to achieve compliance in
years in which their measured average fuel economy falls below the
standards. Section 32902(h)(3) provides that the agency ``may not
consider, when prescribing a fuel economy standard, the trading,
transferring, or availability of credits under section 32903.''
However, the agency expressly considered compliance credits in setting
the previous standards.\60\
---------------------------------------------------------------------------
\60\ See 87 FR 25710, at 25747, 25778-79 (May 2, 2022); 89 FR
52540, at 52598 (June 24, 2024).
---------------------------------------------------------------------------
NHTSA estimated the state of vehicle manufacturers' credit banks
prior to the standard-setting years, simulating the use of credits as a
means of compliance with previously promulgated standards.\61\ The CAFE
Model included a setting to establish a ``last year to consider
credits,'' set at the last year prior to the standard-setting years.
NHTSA explained that this allowed the model to ``replicate the
practical application of existing credits toward compliance in the
early years but also to examine the impact of proposed standards based
solely on fuel economy improvements in all years for which new
standards are being considered.'' \62\ This consideration, however,
allowed NHTSA to underestimate manufacturer costs to comply with
standards by assuming that manufacturers could use credit application
as a means of baseline compliance, rather than by paying civil
penalties or by applying additional fuel-economy-improving technology.
---------------------------------------------------------------------------
\61\ See e.g., 85 FR 24174, at 24309 (April 30, 2020). Note that
the CAFE Model has never simulated the ability to trade credits
between manufacturers but can simulate the strategic accumulation
and application of compliance credits, as well as the ability to
transfer credits between fleets to improve the compliance position
of a less efficient fleet by leveraging credits earned by a more
efficient fleet. The model prefers to hold on to earned compliance
credits within a given fleet, carrying them forward into the future
to offset potential future deficits. This assumption is consistent
with observed strategic manufacturer behavior dating back to 2009.
\62\ See, e.g., id. at 24307.
---------------------------------------------------------------------------
NHTSA has taken the position in the past that section 32902(h)(3)
extends only to ``model years for which the agency is establishing
maximum feasible standards'' in a particular rulemaking.\63\ Upon
further consideration, however, NHTSA concludes that that
interpretation does not reflect the most faithful application of the
statute, which prohibits the agency's taking into account compliance
credits in setting fuel economy standards.\64\ The statute does not
grant NHTSA discretion to consider compliance credits in any manner--as
with the section 32902(h)(1) and section 32902(h)(2) criteria discussed
above, section 32902(h)(3) does not allow NHTSA to consider credit
trading in certain circumstances or during certain timeframes of the
agency's choosing, or provided that certain criteria specified by the
agency are met. The prohibition means that NHTSA may not consider
credit trading in any respect and at any point in the process of
setting fuel economy standards.\65\ By creating an exception where the
statute does not provide one, the agency deviated from the requirements
of section 32902(h)(3).\66\
---------------------------------------------------------------------------
\63\ 85 FR 25710, at 25778 (May 2, 2022).
\64\ See American Heritage Dictionary 313 (2d ed. 1985)
(defining ``consider'' to mean ``take into account'').
\65\ Cf. United States v. Palomar-Santiago, 593 U.S. 321, 325-26
(2021); Ass'n of Civilian Technicians v. FLRA, 22 F.3d 1150, 1153
(D.C. Cir. 1994).
\66\ See Lomax v. Ortiz-Marquez, 140 S. Ct. 1721, 1725 (2020).
---------------------------------------------------------------------------
Congress's grant of authority to NHTSA to set maximum feasible fuel
economy standards specifies that the fuel economy standards established
by the agency must be feasible and practicable for gas-powered vehicles
without regard to any reliance on non-gas-powered alternatives or
compliance credits. Automakers remain, of course, free to produce
dedicated and dual
[[Page 24524]]
alternative fueled vehicles like electric vehicles and plug-in hybrid
electric vehicles in response to market demand. However, as the statute
and legislative history make clear, NHTSA cannot, in any respect and at
any point in the process, consider these elements when setting fuel
economy standards.
III. CAFE Program Regulations Based on the Best Reading of the
Underlying Statute Would Minimize Market Distortion
Consistent with the President's directive to identify classes of
regulations that are based on anything other than the best reading of
the underlying statutory authority or prohibition,\67\ and pursuant to
NHTSA's own statutory and delegated authority, the agency will consider
in the upcoming rulemaking various CAFE program provisions to ensure
that its interpretation of the statute results in regulations that are
consistent with the statutory text. In particular, the agency has
identified CAFE program regulations not explicitly required by EPCA and
EISA that run counter to the purpose and intent of both statutes, and
that have likely induced reactions in the market that impact producers
and consumers without effectuating Congress' intent to insulate the
U.S. from major disruptions in the global oil market. These reactions
include major non-market-based changes in automobile designs and the
introduction of fundamental alterations in their production processes
not primarily driven by market demand.
---------------------------------------------------------------------------
\67\ Ensuring Lawful Governance and Implementing the President's
``Department of Government Efficiency'' Regulatory Initiative,
Executive Order 14219 of Feb. 19, 2025, 90 FR 10583 (Feb. 25, 2025).
---------------------------------------------------------------------------
As one example, NHTSA's prior interpretation of the section
32902(h) factors in standard-setting has had secondary effects that the
agency intends to address in its subsequent standard-setting
rulemaking. NHTSA has determined that credit trading between
manufacturers has become necessary in recent years due to standards
that are unattainable by manufacturers with diversified powertrain
technologies. By creating standards that are feasible without
considering dedicated or dual fueled vehicle technologies or the use of
compliance credits, distortions are minimized. The availability of
credits is uncertain, and eliminating reliance on credit trading as a
compliance option would help verify that the standards established by
NHTSA are achievable by manufacturers. Thus, the agency is considering
whether credit trading between manufacturers, as authorized but not
required by 49 U.S.C. 32903(f), should be retained. The agency does not
intend to impact automakers' ability to transfer earned credits between
different categories of vehicles in their fleets, including between
their passenger car and non-passenger car fleets, as prescribed by
statute.
As another example, NHTSA will examine in its future rulemaking how
its regulations at 49 CFR 523.5, Non-passenger automobile, effectuate
the definitions in 49 U.S.C. 32901. Importantly, NHTSA will investigate
and seek comment on how its regulatory definitions may have caused, if
any, shifts in the type and characteristics of vehicles offered in the
market that otherwise may not have occurred. In the 2010 and 2012 final
rules, NHTSA reconsidered its vehicle classification regulations but
ultimately concluded to monitor and revisit them in future rulemakings.
Notably, NHTSA stated that ``no one can predict with certainty how the
market will change between now and 2025'' specifically regarding how
vehicle manufacturers may ``make more deliberate redesign efforts to
move vehicles out of the car fleet and into the truck fleet in order to
obtain the lower target.'' \68\ As it is now 2025, NHTSA plans to
update agency analysis using actual data. As both the agency and
stakeholders have previously noted (as in the 2012 final rule for
example), revisiting the vehicle classification regulations would
likely need to be accompanied by changes to the shapes of the footprint
curves or the stringency of the standards to ensure the standards still
reflect maximum feasibility for the adjusted fleets.\69\ To the extent
that such changes in the aggregate effectuate the best reading of the
statute and prevent unnecessary market distortion, NHTSA believes that
investigating its vehicle classification regulations is a necessary
undertaking. NHTSA will examine the data it now has in considering any
reconsideration.
---------------------------------------------------------------------------
\68\ 77 FR 62624, at 63122.
\69\ Id. at 63123 (``One important point to note in the
comparative analysis in the MYs 2012-2016 rulemaking is that, due to
time constraints, the agency did not attempt to refit the respective
fleet target curves or to change the intended required stringency in
MY 2016 of 34.1 mpg for the combined fleets. If we had refitted
curves, considering the vehicles in question, we might have obtained
a somewhat steeper passenger car curve, and a somewhat flatter light
truck curve, which could have affected the agency's findings.'').
---------------------------------------------------------------------------
NHTSA will consider whether to reconsider or repeal any other
market-distorting incentives it identifies in the standard-setting
rulemaking following this interpretive rule. Specifically, NHTSA will
evaluate applicable technology-specific incentives and analyze their
impacts for the future rulemaking.
IV. Interpretation of Statutory Authority and Requirements Applicable
to the MDHD Program
Section 32902(b)(1)(C) requires NHTSA to prescribe ``average fuel
economy standards for . . . work trucks and commercial medium-duty and
heavy-duty on-highway vehicles in accordance with subsection (k),'' and
subsection (k) requires a ``fuel efficiency improvement program
designed to achieve the maximum feasible improvement.'' \70\ Section
32902(f) sets forth the specific parameters that NHTSA is to consider
in establishing ``maximum feasible'' standards or improvements:
``[w]hen deciding maximum feasible average fuel economy under this
section, the Secretary of Transportation shall consider technological
feasibility, economic practicability, the effect of other motor vehicle
standards of the Government on fuel economy, and the need of the United
States to conserve energy.'' Despite this statutory enunciation of the
specific factors NHTSA is to consider in rulemaking involving a
determination of ``maximum feasible'' fuel economy, NHTSA did not apply
the section 32902(f) factors when setting MDHD standards.\71\ This
failure to apply expressly applicable statutory criteria merits
reconsideration of the MDHD standards.
---------------------------------------------------------------------------
\70\ 49 U.S.C. 32902(b)(1)(C), (k).
\71\ 76 FR 57112 (Sept. 15, 2011) (``Congress emphasized that
the test methods, measurement metrics, standards, and compliance and
enforcement protocols must all be appropriate, cost-effective, and
technologically feasible for commercial medium-duty and heavy-duty
on-highway vehicles and work trucks. NHTSA notes that these criteria
are different from the `four factors' of 49 U.S.C. 32902(f) that
have long governed NHTSA's setting of fuel economy standards for
passenger cars and light trucks, although many of the same issues
are considered under each of these provisions.'') (footnote
omitted). NHTSA does not explain in the 2011 rule why the
requirement for standards that are ``appropriate, cost-effective,
and technologically feasible'' and ``designed to achieve the maximum
feasible improvement'' in subsection (k) means that NHTSA can
disregard the requirement in subsection (f) that NHTSA must consider
the four enumerated factors in developing standards.
---------------------------------------------------------------------------
In addition, in establishing the MDHD program in 2011, NHTSA
created a non-statutory civil penalty scheme that it lacked the
statutory authority to promulgate.\72\ NHTSA asserted that the ability
to set ``compliance and enforcement protocols'' provided in subsection
(k) enabled it to establish,
[[Page 24525]]
through regulation, a civil penalty of its choosing.\73\ NHTSA did not
argue that the civil penalties in 49 U.S.C. 32912 apply,\74\ and NHTSA
continues to believe that section 32912 does not provide authority for
civil penalties for work trucks and commercial medium-duty or heavy-
duty on-highway vehicles subject to MDHD standards.
---------------------------------------------------------------------------
\72\ See 76 FR 57106 (Sept. 15, 2011) (adopting civil penalty of
up to $37,500 per vehicle or engine in 49 CFR 535.9).
\73\ See id. at 57132-33 (``NHTSA continues to believe that it
is reasonable to interpret `compliance and enforcement protocols' to
include authority to impose civil penalties . . . . NHTSA believes
that if Congress had intended for a predetermined penalty scheme to
apply to the new HD program, it would have been specific.'').
\74\ See id. at 57133 (``NHTSA believes that Section 32912 does
not apply to the new HD program . . . .'').
---------------------------------------------------------------------------
Section 32912 establishes civil penalties both for violations of
CAFE standards and for other violations of 49 U.S.C. chapter 329.\75\
The general penalty in 49 U.S.C. 32912(a) of up to $10,000 per
violation expressly excludes violations of standards prescribed under
section 32902.\76\ The civil penalty for violations of standards
prescribed under section 32902 is set forth in section 32912(b). While
both CAFE and MDHD fuel economy standards are prescribed under section
32902,\77\ the civil penalty applicable to violations of CAFE standards
does not apply to MDHD standards because it is calculated by reference
to ``automobiles.'' \78\ ``Automobiles'' are vehicles subject to CAFE
standards, and are distinct from ``work trucks and commercial medium-
duty or heavy-duty on highway vehicles'' subject to MDHD standards.\79\
Thus, the only civil penalties established in chapter 329 plainly do
not apply to violations of MDHD standards.
---------------------------------------------------------------------------
\75\ 49 U.S.C. 32912(a)-(b).
\76\ See id. at 32912(a) (``A person that violates section
32911(a) of this title is liable to the United States Government for
a civil penalty of not more than $10,000 for each violation.'');
32911(a) (``A person commits a violation if the person fails to
comply with this chapter and regulations and standards prescribed
and orders issued under this chapter (except sections 32902, 32903,
32908(b), 32917(b), and 32918 and regulations and standards
prescribed and orders issued under those sections).'').
\77\ Id. at 32902(b).
\78\ Id. 32912(b).
\79\ Compare id. 32901(a)(3) (defining ``automobile''), with
(a)(7), (19) (defining ``commercial medium- and heavy-duty on-
highway vehicle'' and ``work truck''); see also id. 32912(b)
(requirements to set CAFE standards and MDHD standards).
---------------------------------------------------------------------------
In the absence of an applicable statutory civil penalty, NHTSA
adopted a civil penalty equal to that in the Clean Air Act, a statute
that does not confer authority on NHTSA and that it does not
administer.\80\ NHTSA reasoned it could ``fill gaps'' left by Congress
and that Congress intended a penalty despite not actually adopting one
in the statute.\81\ As noted above, however, Congress did amend the
civil penalty provision of the fuel economy statute at the same time as
it required NHTSA to set MDHD standards and adopted penalties for other
violations of law, but Congress did not adopt a penalty for violations
of MDHD standards.\82\ NHTSA has reconsidered this issue and determined
that because NHTSA has not been statutorily authorized to impose civil
penalties for violations of MDHD standards, NHTSA's civil penalty
scheme adopted by regulation--currently up to $51,668 per vehicle or
engine--is unauthorized.\83\
---------------------------------------------------------------------------
\80\ 76 FR 56132-33 (Sept. 15, 2011).
\81\ See id.
\82\ See 121 Stat. 1508-08 (adopting civil penalty of up to
$50,000 per violation for tire fuel efficiency information program
and adding provision addressing use of civil penalties for research
and development to 49 U.S.C. 32912).
\83\ See 49 CFR 535.9(b); 578.6(i).
---------------------------------------------------------------------------
NHTSA also established a credit program for the MDHD program that
allows for transfers and trading. Contrasted with the detailed
statutory provision that enables manufacturers to earn credits in the
CAFE program, permits NHTSA to establish a credit trading program, and
constrains the use of credits, the statute does not even mention
credits in the rulemaking mandate for the MDHD program from which NHTSA
claimed vast discretion, but instead contains only an ambiguous
reference to ``compliance and enforcement protocols.'' \84\ NHTSA has
reconsidered its authority to establish credit trading for the MDHD
program and determined that Congress knew how to authorize NHTSA to
establish a credit trading program and provide specific direction to
NHTSA regarding how to establish a credit trading program, and did not
do so in authorizing NHTSA to establish ``compliance and enforcement
protocols.''
---------------------------------------------------------------------------
\84\ Compare 49 U.S.C. 32903 with 49 U.S.C. 32902(k)(2).
---------------------------------------------------------------------------
NHTSA also considered credits and EVs, resulting in more stringent
MDHD standards, without express authority to do so and in contrast with
the explicit limitations applicable to the CAFE program in section
32902(h) on these issues.\85\
---------------------------------------------------------------------------
\85\ See 76 FR 57129 (Sept. 15, 2011). While the limitations on
considering credits and EVs in 49 U.S.C. 32902(h) do not apply to
the MDHD program, the broad authority claimed by the agency raises
legal concerns that merit reconsideration in future rulemaking.
---------------------------------------------------------------------------
NHTSA will engage in rulemaking to reconsider the standards
established for the MDHD program and other aspects of the program
consistent with the interpretations set forth in this interpretive
rule.
V. Next Steps in Resetting the CAFE Program and Enforcement
Considerations
All Americans are harmed by CAFE-imposed price increases, but those
most harmed are lower-income Americans who cannot afford to buy an EV
or to pay more for a gas-powered vehicle. As the Secretary stated,
``[a]rtificially high fuel economy standards designed to meet non-
statutory policy goals, such as those NHTSA has promulgated in recent
years, impose large costs that render many new vehicle models
unaffordable for the average American family and small business
owner.'' \86\ The Secretary explained that these regulatory costs,
market distortions from technology-specific incentives, and pressures
on automakers result in more Americans driving older used vehicles,
``which statistics show are much less safe in a highway crash. Thus,
there is reason to be concerned these standards will actually increase
the number of fatalities and serious injuries occurring each year on
America's roadways--an unacceptable outcome that is contrary to NHTSA's
mission of advancing highway traffic safety for all Americans.'' \87\
---------------------------------------------------------------------------
\86\ Fixing the CAFE Program Secretarial Memorandum, at 2-3.
\87\ Id. at 3.
---------------------------------------------------------------------------
With respect to the MDHD program, which is explicitly for
commercial vehicles, a reset is also necessary to ensure appropriate
regulation consistent with law. Reevaluation of this program is
necessary to ensure that the agency's MDHD program is lawful and does
not result in market distortions. Commercial purchasers are well aware
of their own fuel economy needs. Their purchases of MDHD vehicles are
informed business decisions that occur in a highly competitive and
self-regulating market. Government intervention in excess of statutory
requirements and authority interferes with the efficient functioning of
this market.
NHTSA believes that the interpretation set forth in this rule
appropriately clarifies the scope of its authority related to setting
maximum feasible CAFE standards and with respect to the MDHD program.
This interpretation does not, itself, change existing CAFE or MDHD
standards or any rights or obligations under the CAFE or MDHD programs.
Instead, this interpretation lays the appropriate groundwork for
standard-setting rulemakings that will reset the agency's regulatory
programs as determined necessary to bring them into compliance
[[Page 24526]]
with Administration policy and applicable substantive statutory
requirements as enacted by Congress and codified in chapter 329 of
title 49 of the United States Code.
In light of the legal interpretation set forth in this interpretive
rule, NHTSA will reset the CAFE and MDHD standards programs consistent
with the law. Pending the rulemaking process for the establishment of
replacement standards, NHTSA will exercise its enforcement authority
with regard to all existing CAFE and MDHD standards in accordance with
the interpretation set forth in this rule.
Regulatory Analyses
NHTSA has examined this interpretive rule in accordance with the
requirements of Executive Order 12866, Regulatory Planning and Review;
Executive Order 13563, Improving Regulation and Regulatory Review;
Executive Order 14192, Unleashing Prosperity Through Deregulation;
Executive Order 14219, Ensuring Lawful Governance and Implementing the
President's ``Department of Government Efficiency'' Deregulatory
Initiative; Executive Order 13132, Federalism; Executive Order 12988,
Civil Justice Reform; Executive Order 13175, Consultation and
Coordination with Indian Tribal Governments; the Unfunded Mandates
Reform Act of 1995; the Regulatory Flexibility Act of 1980; the
Paperwork Reduction Act; the National Environmental Policy Act of 1969;
statutes relevant to privacy issues, and the Congressional Review Act.
NHTSA is issuing this interpretive rule to explain the statute the
agency administers and how the agency will apply its interpretation to
subsequent substantive CAFE and MDHD program rules. This interpretive
rule does not amend or alter the meaning of any regulations, and any
costs and benefits of any subsequent proposed changes to regulations
will be analyzed in forthcoming rules to reset the CAFE and MDHD
programs. As such, notice and comment under the Administrative
Procedure Act is not required for this interpretive rule, see 5 U.S.C.
553(b)(A), and the rule similarly is not subject to a 30-day delay in
effective date, see 5 U.S.C. 553(d)(2).
A. Executive Order 12866, Regulatory Planning and Review; Executive
Order 13563, Improving Regulation and Regulatory Review; Executive
Order 14192, Unleashing Prosperity Through Deregulation; and Executive
Order 14219, Ensuring Lawful Governance and Implementing the
President's ``Department of Government Efficiency'' Deregulatory
Initiative
Executive Order (E.O.) 12866, ``Regulatory Planning and Review''
(58 FR 51735, Oct. 4, 1993), reaffirmed by E.O. 13563, ``Improving
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011),
provides for determining whether a regulatory action is ``significant''
and therefore subject to the Office of Management and Budget (OMB)
review process and to the requirements of the E.O. This is a
``significant regulatory action'' under section 3(f)(4) of E.O. 12866.
Accordingly, NHTSA submitted this action to OMB for review. However,
there are no costs or benefits associated with this interpretive rule.
Any costs and benefits of the forthcoming rules implementing the
interpretation and resetting the CAFE and MDHD programs will be
analyzed in those subsequent rulemakings.
E.O. 14192, ``Unleashing Prosperity Through Deregulation'' (90 FR
9065, Feb. 6, 2025) requires an agency, unless prohibited by law, to
identify at least ten existing regulations to be repealed when the
agency publicly proposes for notice and comment or otherwise
promulgates a new regulation. In furtherance of this requirement,
section 3(c) of Executive Order 14192 requires that the new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least ten prior regulations. As discussed above, there are no costs or
benefits associated with this interpretive rule. However, this
interpretive rule, which sets forth NHTSA's interpretation of its
statutory authority for the issuance of CAFE and MDHD standards,
ensures that, going forward, NHTSA will no longer regulate beyond its
statutory authority with respect to the CAFE and MDHD programs. Any
costs and benefits of the forthcoming rules implementing the
interpretation and resetting the CAFE and MDHD programs will be
analyzed in those rulemakings. The subsequent substantive CAFE and MDHD
rules could be deregulatory actions that result in significant cost
savings.
E.O. 14219, Ensuring Lawful Governance and Implementing the
President's ``Department of Government Efficiency'' Deregulatory
Initiative requires agency heads to review their regulations and
identify regulations that, among other things, are based on anything
other than the best reading of the underlying statutory authority or
prohibition, or that implicate matters of social, political, or
economic significance that are not authorized by clear statutory
authority. As described above, NHTSA has identified its CAFE and MDHD
standards as falling within an enumerated category(ies) of E.O. 14219.
NHTSA is issuing this interpretive rule to set forth the agency's
interpretation of the factors the agency is prohibited by law from
considering when setting maximum feasible fuel economy standards. This
rule describes NHTSA's interpretation of its authority to establish the
necessary legal foundation for bringing the CAFE and MDHD programs into
compliance with relevant statutory requirements.
B. Executive Order 13132, Federalism
A rule has implications for federalism under section 1(a) of E.O.
13132 if it has ``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.'' NHTSA has determined that this interpretive rule will not
have substantial direct costs on or for States, nor would it limit the
policymaking discretion of States. Nothing in this document preempts
any State law or regulation. Therefore, this interpretive rule does not
have sufficient federalism implications to warrant the preparation of a
Federalism Impact Statement.
C. Executive Order 12988, Civil Justice Reform
E.O. 12988, ``Civil Justice Reform'' (61 FR 4729, Feb. 7, 1996),
requires that agencies promulgating new regulations or reviewing
existing regulations take steps to minimize litigation, eliminate
ambiguity, and to reduce burdens on the regulated public. NHTSA has
reviewed this rule and determined that this action conforms to the
applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988, Civil
Justice Reform.
D. Executive Order 13175, Consultation and Coordination With Indian
Tribal Governments
This interpretive rule does not have Tribal implications under E.O.
13175, Consultation and Coordination with Indian Tribal Governments,
because it does not have a substantial direct effect on one or more
Indian Tribes, on the relationship between the Federal
[[Page 24527]]
Government and Indian Tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian Tribes.
E. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
(UMRA) requires Federal agencies to assess the effects of their
discretionary regulatory actions. UMRA addresses actions that may
result in the expenditure by a State, local, or Tribal government, in
the aggregate, or by the private sector of $206 million (which is the
value equivalent of $100 million in 1995, adjusted for inflation to
2024) or more in any 1 year. As discussed above, this interpretive rule
by itself results in no expenditures and therefore the analytical
requirements of UMRA do not apply. Any costs and benefits will be
analyzed in forthcoming rules resetting the CAFE and MDHD programs
subject to the principles laid out in this document.
F. Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires
agencies to prepare a regulatory flexibility analysis for any rule
where the agency is required by law to publish a general notice of
proposed rulemaking. See 5 U.S.C. 603. NHTSA is not required to
complete a regulatory flexibility analysis because, as discussed above,
this action is not subject to notice and public comment under the
Administrative Procedure Act (APA). See 5 U.S.C. 553(b)(A).
G. Paperwork Reduction Act
This interpretive rule contains no new information collection
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520).
H. National Environmental Policy Act of 1969
In accordance with 42 U.S.C. 4336, ``[a]n agency is not required to
prepare an environmental document with respect to a proposed agency
action if the proposed agency action is not a final agency action
within the meaning of such term in chapter 5 of title 5 [of the United
States Code]. As discussed above, this action is not a final agency
action within the meaning of 5 U.S.C. chapter 5. Any environmental
effects will be analyzed in forthcoming rules resetting the CAFE and
MDHD programs subject to the principles laid out in this document.
I. Privacy
The Consolidated Appropriations Act, 2005 (Pub. L. 108-447, 118
Stat. 2809, 3268, Dec. 8, 2004 (5 U.S.C. 552a note)), requires certain
parties (Federal agencies and any non-Federal entity that receives
records contained in a system of records from a Federal agency for use
in a matching program) to conduct a privacy impact assessment of a
regulation that will affect the privacy of individuals. Because this
interpretive rule does not require the collection of personally
identifiable information, NHTSA is not required to conduct a privacy
impact assessment.
The E-Government Act of 2002 (Pub. L. 107-347, sec. 208, 116 Stat.
2899, 2921, Dec. 17, 2002), requires Federal agencies to conduct a
privacy impact assessment for new or substantially changed technology
that collects, maintains, or disseminates information in an
identifiable form. No new or substantially changed technology will
collect, maintain, or disseminate information as a result of this
interpretive rule. Accordingly, NHTSA has not conducted a privacy
impact assessment.
J. Congressional Review Act
Pursuant to the Congressional Review Act (CRA) (5 U.S.C. 801 et
seq.), the Office of Information and Regulatory Affairs designated this
rule as not a ``major rule,'' as defined by 5 U.S.C. 804(2). NHTSA will
submit this rule to Congress and the Government Accountability Office
as required by the CRA.
Issued in Washington, DC, under authority delegated in 49 CFR
1.95, 501.4, and 501.5.
Peter Simshauser,
Chief Counsel.
[FR Doc. 2025-10586 Filed 6-10-25; 8:45 am]
BILLING CODE 4910-59-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on June 11, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.