A A IA 803 7th Street N.W., Suite 300 Washington, DC 20001 I VI IN OVAT 202.326.5500 I February 21, 2017 G. Scott Pruitt Administrator US. Environmental Protection Agency 1200 Avenue, NW. Mail Code 1101A Washington, DC. 20460 RE: Final Determination on the Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation Dear Administrator Pruitt, 1 write on behalf of the Alliance of Automobile Manufacturers (Alliance), an association representing twelve leading manufacturers of cars and light trucks,1 to request that the US. Environmental Protection Agency (EPA) withdraw the Final Determination on the Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation (Final Determination) which was announced on January 13, 2017 but never published in the Federal Register. For the auto industry, the Final Determination may be the single most important decision that EPA has made in recent history. The Alliance requests that EPA withdraw the Final Determination and resume the Midterm Evaluation, in accordance with its original timetable, to remedy the severe procedural and substantive defects that have infected the process to date. We explain, in more detail below, authority to withdraw the Final Determination and why that withdrawal is appropriate and essential. 1. EPA Should Exercise Its Authority to Withdraw the Final Determination As you know, on January 20, the White House issued a memorandum to the heads of all executive departments and agencies instituting a freeze on regulatory activity, pending review by the Of?ce of Management and Budget (OMB) Director.2 The Alliance urges EPA to withdraw the Final Determination on its own initiative in accordance with the regulatory freeze. Irrespective of whether EPA considers the Final Determination a rule or an adjudication, the Final Determination should be reviewed 1 Alliance members are BMW Group, FCA US LLC, Ford Motor Company, General Motors Company, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche Cars North America, Toyota, Volkswagen Group of America, and Volvo Car USA. 2 See Memorandum for the Heads of Executive Departments and Agencies, Jan. 20, 2017, and?agencies. BMW Group @Meroades-Benz panama:- Tove-m VOLKSWAGEN m' ?nun-nu . ?awn-in and withdrawn. As the Alliance has noted, a wealth of precedents con?rm that the Final Determination is a rule, and all rules not yet published in the Federal Register are subject to the regulatory freeze.3 Even if EPA continues to construe the Final Determination as an adjudication, however, it is still subject to the regulatory freeze as an ?agency statement of general applicability and future effect ?that sets forth a policy on a statutory, regulatory, or technical issue or an interpretation of a statutory or regulatory issue.? The Final Determination reaf?rms and reinstates industry?wide greenhouse gas emissions standards for all light vehicles sold in America for MY 2022- 2025, and thereby establishes a policy on a regulatory issue of central importance to the auto industry. Furthermore, EPA has ample authority to withdraw the Final Determination on its own initiative, irrespective of whether EPA considers it a rule or an adjudication. If the Final Determination is a rule, it is clearly a nonfmal one, because it has not been published in the Federal Register. See 5 U.S.C. 553(d); Kenneeott Utah Copper Corp. v. US. Dep?t? oflnterior, 88 F.3d 1191, 1209 (DC. Cir. 1996). And, as a nonfinal rule, EPA can readily withdraw the Final Determination without engaging in notice- and-comment rulemaking. Kennecott, 88 F.3d at 1206. Even if EPA continues to endorse the view that the Final Determination is an adjudication, however, EPA has broad inherent power to reconsider its decision ?within the period available for taking an appeal.? Am. Methy! Corp. v. EPA, 749 F.2d 826, 835 (DC. Cir. 1984). Agencies have long exercised this power to ?x determinations like this one that suffer from ?serious procedural and substantive de?ciencies.? BeZviZle Min. Co. v. United States, 999 F.2d 989, 998 (6th Cir. 1993). Regardless ofhow EPA classi?es the Final Determination, EPA should withdraw it in light of the many procedural and substantive ?aws described below. 2. EPA Has Abrogated Its Commitment to a Robust Midterm Evaluation As the Supreme Court has recognized, regulatory efforts to address greenhouse gases have already produced ?the single largest expansion in the scope of the [Clean Air Act] in its history.??4 In 2009, EPA issued an Endangerment Finding that motor vehicle greenhouse gas emissions contribute to climate change and thereby threaten public health and welfare. Thereafter, EPA and the National Highway Traffic Safety Administration (NHTSA) began jointly setting greenhouse gas emissions and fuel economy standards for new light-duty motor vehicles, starting with Model Year (MY) 2012-2016. Then, in 2012, EPA and NHTSA took the unprecedented step of 3 See Alliance Comments on Proposed Determination on Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation at 11-13, Dec. 30, 2016, Docket ID No. Memorandum for the Heads of Executive Departments and Agencies, Jan. 20, 2017. 4 Utitity Air Regzdatory Group v. EPA, 134 S. Ct. 2427, 2436 (2014) (internal quotation marks omitted). 20f6 setting joint greenhouse gas and fuel economy standards over a decade in advance for MY 2022-2025 vehicles. 77 Fed. Reg. 62,628 (Oct. 15, 2012). No agency ever had set emissions standards so far into the future, and all stakeholders understood that no one could accurately project the circumstances affecting the technological and economic feasibility of these standards. The Alliance supported these efforts?but only on the condition that EPA and NHTSA would reassess standards as data became available to test their feasibility. That commitment was essential because of the great uncertainty regarding the feasibility of the future standards. Based on the projections in the 2012 rule, manufacturers must achieve an average 54.5 miles per gallon equivalent across their new vehicle ?eets by 2025. Even today, no conventional vehicle today meets that target, and conventional vehicles comprise 96.5% of the new light-duty vehicle ?eet. Only some non- conventional vehicles hybrid, plug-in electric, and fuel~ce11 vehicles), which comprise fewer than 3.5% of today?s new vehicles, currently can do 80.5 Even under optimistic estimates, the automotive industry will have to spend a staggering $200 billion between 2012 and 2025 to comply, making these standards many times more expensive than the Clean Power Plan.6 EPA and NHTSA committed to a robust Midterm Evaluation that would take a fresh look at these standards by April 2018. The agencies promised that this review would be collaborative, so that the industry could offer the agencies real-life data to adjust their model-driven forecasts. The agencies also committed to developing greenhouse gas emissions standards and fuel economy standards in tandem? And they repeatedly represented that they would not complete the Proposed Determination/Notice of Proposed Rulemaking until mid-2017 at the earliest.8 The industry took the agencies at their word, commissioning complex studies critical to assessing the MY 2022-2025 standards and the processes used by EPA in its analysis, that we had expected to add to the administrative record for the Midterm Evaluation in 2017. On November 30, 2016, EPA abruptly abrogated these commitments. EPA issued a Proposed Determination that the MY 2022-2025 standards should go into force 5 ?Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975 through 2016,? at 118. US. Environmental Protection Agency. Nov. 2016. ?5 See EPA Regulatory Impact Analysis for 2012-2016 rule (EPA-420-R-10-009, Apr. 2010) at duty-vehicle; EPA Regulatory Impact Analysis for 2017?2025 rule (EPA-420-R-12-016, Aug. 2012) at light-duty-vehicle. 7 See 40 CPR. 77 Fed. Reg. 62,784 (Oct. 15, 2012), 40 C.F.R. 81 Fed. Reg. 49,219 (July 27, 2016). 8 See Alliance Comments on Proposed Determination at 10, Dec. 30, 2016, Docket ID No. EPA-HQ- OAR-2015-0827. 3of6 without modi?cation. EPA issued the Proposed Determination without coordinating with NHTSA. EPA demanded comments by December 30, 2016, even though the Proposed Determination was not published in the Federal Register until December 6. The public and industry had a mere 24 days, spanning a major national holiday, to comment on nearly 1,000 pages of documents, plus additional cited documents and computer modeling, regarding requirements that will profoundly affect the automobile industry and the more than 900,000 American workers it directly employs.9 After EPA denied requests by various stakeholders to extend the abbreviated comment period, we did our best to ?le substantive comments. EPA received more than 100,000 public comments, including 63 sets of comments from various organizations spanning hundreds of pages.10 Many objected that the comment period was inadequate. EPA denied all requests to extend the abbreviated comment period and yet EPA issued the Final Determination on January 13, 2017, just 14 days after the comment period closed. EPA brushed aside objections to its procedural shortcuts and never justi?ed the need for such an abbreviated comment period. EPA also rejected commenters? substantive and technical concerns by resting on its earlier analysis. 3. EPA Should Withdraw the Final Determination Immediately The Final Determination is the product of egregious procedural and substantive defects and EPA should withdraw it.11 In rush to promulgate the Final Determination before the new administration took of?ce, EPA bypassed required procedures, failing for instance to provide an adequate period for meaningful notice and comment. The Final Determination asserts that there was no need for more time because the Proposed Determination did not include much new material. But that contention is belied by acknowledgement that the Proposed Determination adjusted a number of EPA assumptions in response to commenters who pointed out errors at earlier stages. The industry also had an unacceptably short period to try to ascertain why EPA rejected many of its objections.12 These procedural defects are signi?cant irrespective of whether the Final Determination constitutes rulemaking or adjudication. unilateral announcement of its Final Determination also constitutes a failure to harmonize its greenhouse gas emissions standards with fuel- economy standards, contrary to the letter and intent of own regulations. NHTSA has not yet reached a determination on its fuel economy standards and continues its 9 US. Department of Labor, Bureau of Labor Statistics, 2015, US. Vehicle and Equipment Manufacturing Employment equaled 909,700 people. 1? Final Determination, Response to Comments at 1-3. See Alliance Comments on Proposed Determination, Dec. 30, 2016, Docket ID No. EPA-HQ-OAR- 2015-0827. 12 See Final Determination, Response to Comments at 7. 4of6 Midterm Evaluation rulemaking activities. failure to act in coordination with NHTSA also casts serious dOubt on the legitimacy of data and conclusions, given the substantial discrepancies between and analysis of the technologies and costs associated with the MY 2022-2025 standards.13 Furthermore, inal Determination that the MY 2022-2025 greenhouse gas standards should remain unchanged, is riddled with indefensible assumptions, inadequate analysis, and a failure to engage with contrary evidence. Here are just a few examples: 0 EPA estimated that these standards will cost the industry at least $200 billion. But EPA underestimated the burden. Contrary to assumptions, manufacturers will have to rely on much more expensive electri?ed technologies hybrids and plug-ins), driving up vehicle prices and depressing auto sales. 0 EPA refused to conduct an analysis of consumer acceptance and technology affordability needed for compliance, claiming this was too dif?cult. 0 EPA refused to analyze substantively the economic impact of the MY 2022-2025 standards, instead making cursory assertions that downplayed the impact of its mandate on auto sales and employment. 0 EPA refused to consider many of the Alliance?s technical concerns even when supported by an outside consultant?, asserted the Alliance provided insuf?cient data, and then refused further meetings for clari?cation. 4. Studies and Data Highly Relevant to the Midterm Evaluation Have Not Been Submitted to EPA Because They Still Are Pending It is particularly critical that EPA withdraw the current Final Determination and reopen the Midterm Evaluation process because analysis commissioned according to original timetable is ongoing and the Alliance expects that new information relevant to the Final Determination?s underlying assumptions and resulting analysis will soon emerge. rushed timetable, coupled with its about-face on the timing of the Midterm Evaluation, prevented consideration of this information. ?3 See Alliance Comments on US EPA, US DOT, California?s Air Resources Board Draft Technical Assessment Report of Greenhouse Gas Emissions and Fuel Economy Standards for Model Year 2022-2025 Cars and Light Trucks at Sept. 26, 2016, Docket ID No. EPA-HQ-OAR-2015-0827, costs are approximately 42% higher than (NHTSA Table ES-2 v. EPA ES-4 Table '4 See Novation Analytics Comments on Draft Technical Assessment, Sept. 26, 2016; Docket ID No. EPA-HQ-OAR-2015-0827. Sof6 We urge EPA to reconsider imposing such a far-reaching mandate on an entire industry without adequately considering the consequences, and without giving stakeholders a meaningful opportunity to comment. The MY 2022-2025 standards threaten to depress an industry that can ill afford Spiraling regulatory costs. If left unchanged, those standards could cause up to 1.1 million Americans to lose jobs due to lost vehicle sales.'5 And low-income households would be hit the hardest.16 The Alliance is not asking EPA to make a different Final Determination at this time. All we are asking is that EPA withdraw the Final Determination and resume the Midterm Evaluation, in conjunction with NHTSA, consistent with the timetable embodied in own regulations. We believe that, if carried out as intended, the Midterm Evaluation can lead to an outcome that makes sense for all affected stakeholders and for society as a whole. The Alliance welcomes the opportunity for further dialogue about ways to rekindle the industry?s longstanding cooperation with EPA on these issues. Sincerel Mitch Bainwol President and CEO Cc: Secretary Elaine Chao, DOT Kevin Green, DOT Bill Charmley, EPA Chris Grundler, EPA Michael Olechiw EPA Rebecca Yoon, NHTSA James Tamm, NHTSA Mike McCarthy, CARB Annette Hebert, CARB ?5 McAlinden, Sean, et al., The Potential Effects of the 2017?2025 Economy Mandates on the US. Economy, Center for Automotive Research (Sep. 2016) at 49. Referring to the $3.00 per gallon gasoline price $6,000 technology cost scenario. '6 Walton, Tom, et al., The Impact of Fuel Economy Standards on Low Income Households, Defour Group LLC (Sep. 2016); Walton, Tom, et al., Defoar Group Response to EPA Rejoinders to Defeat Group Alliance of Automobile Manufacturers Submission Regarding the Regressivity/A?ordability of EPA ?5 Proposed tiel Economy Standards, (Dec. 2016). 60f6