og96011.txt

Office of the General Counsel
B-271810.2
May 7, 1996
The Honorable Larry Pressler Chairman The Honorable Ernest F.
Hollings Ranking Minority Member Committee on Commerce, Science,
and Transportation United States Senate
The Honorable Thomas J. Bliley, Jr. Chairman The Honorable John
D. Dingell Ranking Minority Member Committee on Commerce House of
Representatives
Subject: Light Truck Average Fuel Economy Standard, Model Year
1998
Pursuant to section 801(a)(2)(A) of title 5, United States Code,
this is our report on a major rule promulgated by the National
Highway Traffic Safety Administration (NHTSA), Department of
Transportation, entitled "Light Truck Average Fuel Economy
Standard, Model Year 1998" (RIN 2127-AF16). We received the rule on
April 22, 1996. It was published in the Federal Register as a final
rule on April 3, 1996. 61 Fed. Reg. 14680.
Section 32902(a) of title 49, United States Code, requires the
Secretary of Transportation to prescribe by regulation, at least 18
months in advance of each model year, average fuel economy
standards (known as "Corporate Average Fuel Economy" or "CAFE"
standards) for non-passenger automobiles manufactured in that model
year. Under subsections 32902(a) and (f), the standard is to be the
maximum feasible average fuel economy level that the Secretary
decides manufacturers can achieve in that model year taking into
consideration technological feasibility, economic practicability,
the effect of other Government
GAO/OGC-96-11 motor vehicle standards on fuel economy, and the
need of the United States to
1
conserve energy.
The light truck CAFE standard for model year 1997 was
established at 20.7 miles per gallon (mpg). During the development
of the CAFE standard for model year 1998, the Department of
Transportation and Related Agencies Appropriations Act, 1996, Pub.
L. No. 104-50 (Nov. 15, 1995), 109 Stat. 436, was enacted. Section
330 of the Appropriations Act, 109 Stat. 457, provides:
"None of the funds in this Act shall be available to prepare,
propose, or promulgate any regulations pursuant to title V of the
Motor Vehicle Information and Cost Savings Act (49 U.S.C. 32901, et
seq.) prescribing corporate average fuel economy standards for
automobiles, as defined in such title, in any model year that
differs from standards promulgated for such automobiles prior to
the enactment of this section."
NHTSA interprets section 330 of the Appropriations Act as
requiring it to prescribe the same light truck CAFE standard for
model year 1998 that applies to model year 1997. Accordingly, the
rule continues the 20.7 mpg standard for 1998.
Enclosed is our assessment of NHTSA's compliance with the
procedural steps required by section 801(a)(1)(B)(i) through (iv)
of title 5 with respect to the rule. As discussed in the enclosure,
NHTSA did not follow many of the steps that ordinarily would apply
to the rule, based in part on its interpretation that section 330
of the Appropriations Act required it to fix the 1998 standard at
20.7 mpg and thereby deprived the agency of any discretion over the
standard. NHTSA's interpretation of section 330, while not
necessarily the only plausible approach, is supported by the
language and legislative history of this provision. Nevertheless,
we do not view section 330 as exempting the rulemaking from the
requirements referred to in 5 U.S.C. § 801(a)(1)(B)(i) through
(iv), particularly the analysis called for by 49 U.S.C. §
32902.
If you have any questions about this report, please contact
Henry R. Wray, Senior Associate General Counsel, at [phone].
The official responsible for GAO's
1Authority to prescribe fuel economy standards under section
32902 has been delegated by the Secretary to the Administrator of
NHTSA.
Page 2 GAO/OGC-96-11 evaluation work relating to the Department
of Transportation is John H. Anderson, Director of Transportation
and Telecommunications Issues. Mr. Anderson can be reached at (202)
512-2834.
Sincerely yours,
Robert P. Murphy General Counsel
Enclosure
cc: Ms. Nancy E. McFadden General Counsel Department of
Transportation
Page 3 GAO/OGC-96-11
ENCLOSURE
ANALYSIS OF NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION 1998
LIGHT TRUCK CAFE STANDARD RULE UNDER 5 U.S.C. §
801(a)(1)(B)(i)-(iv)



(i)
Cost-benefit analysis

On January 3, 1996, NHTSA published a notice of proposed
rulemaking which proposed a 1998 standard of 20.7 mpg. See 61 Fed.
Reg. 145. The Supplementary Information accompanying the proposed
rule contains a discussion and assessment of the economic impacts
of the proposed standard, including its potential costs, benefits,
and alternatives. In addition, NHTSA prepared a Preliminary
Regulatory Evaluation of the proposed standard, which was included
in the docket for the rulemaking and contained more detailed
analyses of these and other affects of the proposed standard. The
agency did not prepare a Final Regulatory Impact Analysis in
connection with the final rule "because of the restrictions imposed
by Section 330 of the FY 1996 DOT Appropriations Act." 61 Fed. Reg.
at 14682.


(ii)
Agency actions relevant to the Regulatory Flexibility
Act, 5 U.S.C. §§ 603-605, 607 and 609


Section 603: Initial regulatory flexibility analysis
The Supplementary Information accompanying the proposed
rulemaking includes a certification, pursuant to section 605(b) of
title 5, that the proposal would not have a significant impact on a
substantial number of small entities, thereby exempting the
proposed rule from the requirement for an initial regulatory
flexibility analysis. The certification was accompanied by a
statement that few, if any, light truck manufacturers subject to
the proposed rule would be classified as small businesses. See 61
Fed. Reg. at 155.
Section 605(b) states that the certification and statement shall
be provided to the Chief Counsel for Advocacy of the Small Business
Administration (SBA). According to Department of Transportation
officials, the certification and statement were not separately
provided to the SBA Chief Counsel for Advocacy. They stated that,
in accordance with the Department's practice, publication of
section 605(b) certifications in the Federal Register is treated as
providing notice to SBA. An SBA official confirmed that some
agencies follow this practice, and that SBA has not objected to it.
The official indicated, however, that SBA's policy may change since
future certifications will need to be justified more specifically
and will be subject to judicial review.
Page 1 GAO/OGC-96-11 Section 604: Final regulatory flexibility
analysis
NHTSA did not conduct a final regulatory flexibility analysis
under section 604, nor did it make a section 605(b) certification,
in connection with the final rule. The agency viewed such an
analysis as "unnecessary" in light of its lack of discretion with
respect to the rule, but stated that past evaluations indicated few
if any small businesses would be affected. See 61 Fed. Reg. at
14682.
Section 605: Avoidance of duplicative or unnecessary
analysis
As noted above, NHTSA invoked the exemption from the initial
regulatory flexibility analysis requirement with respect to the
proposed rule.
Section 607: Preparation of analysis
As noted above, NHTSA did not prepare an initial or final
regulatory flexibility analysis.
Section 609: Participation by small entities
The requirements of section 609 are inapplicable to this rule
since NHTSA did not determine that it would have a significant
impact on a substantial number of small entities.
(iii) Agency actions relevant to sections 202-205 of the
Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532-1535
Since the standard appears to constitute a federal mandate
resulting in aggregate annual private sector expenditures of $100
million or more, it would be subject to the requirements of section
202 of the Act (Statements to Accompany Significant Regulatory
Actions). Neither the proposed nor the final rulemaking expressly
refers to the Unfunded Mandates Reform Act or includes the
statements required by section 202. The Supplementary Information
accompanying the proposed rule does include some of the information
covered by section 202.
The rule also appears subject to section 205 of the Act,
relating to consideration of regulatory alternatives. While NHTSA
did not explicitly address section 205, it complied in substance
with the requirements of this section. Potential alternatives were
considered and discussed at the proposed rulemaking stage, and the
final rulemaking describes NHTSA's determination that there was no
alternative to the standard adopted.
The requirements of section 203 (Small Government Agency Plan)
and section 204 (State, Local, and Tribal Government Input) appear
to be inapplicable to the rule.
Page 2 GAO/OGC-96-11 (iv) Other relevant information or
requirements under Acts and Executive orders
Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
The rule was promulgated through the general notice of proposed
rulemaking procedures of the Act, 5 U.S.C. § 553. NHTSA afforded
interested persons the opportunity to comment on the proposed rule.
The final rulemaking, however, does not address comments.
Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520
The rule does not refer to information collection requirements
subject to the Act, and, according to NHTSA, the rule imposes no
such requirements.
National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq.
NHTSA did not conduct an evaluation of the impacts of the rule
under the National Environmental Policy Act. The Supplementary
Information accompanying the final rule states in this regard:
"There is no requirement for such an evaluation where Congress
has eliminated the agency's discretion by precluding any action
other than the one announced in this notice." 61 Fed. Reg. at
14682.
Statutory authorization for the rule
The Supplementary Information accompanying the final rule
discusses at length its legal basis. Section 32902(a) of title 49,
United States Code, requires that light truck CAFE standards be
prescribed for each model year in accordance with the "Maximum
feasible" criteria specified in that subsection and subsection
32902(f). However, section 330 of the Appropriations Act
effectively prohibited issuance of any CAFE standard "that differs
from standards promulgated . . . prior to the enactment of this
section." According to NHTSA's legal analysis detailed in the
Supplementary Information, section 330 of the Appropriations Act
precluded the agency from prescribing any CAFE standard different
from the most recent standards prescribed at the time of its
enactment--those applicable to model year 1997. Thus, according to
NHTSA, section 330 deprived the agency of the discretion it
otherwise would have under section 32902 to determine the
applicable standard under the criteria set forth therein. NHTSA
concluded that while section 330 superseded the section 32902
criteria, it did not supersede the section 32902 mandate that there
be CAFE standards for model year 1998.
NHTSA noted that the only other possible interpretation of
section 330 was to treat the phrase "standards promulgated . . .
prior to the enactment of this section" as
Page 3 GAO/OGC-96-11 encompassing any standard prescribed for
any prior model year. In addition to the
20.7 mpg standard, nine other light truck standards--ranging
from 17.5 to 21.0 mpg--were promulgated for prior model years.1
However, NHTSA rejected this interpretation on the basis that it
could also conflict with the "maximum feasible" criteria under 49
U.S.C. § 32902, and that it would be illogical to assume that
Congress intended to arbitrarily limit the 1998 standard to one of
these prior year levels even if some other level was determined to
be the "maximum feasible" for model year 1998.
Accordingly, NHTSA concluded that the only legally permissible
alternative was to establish the model year 1998 standard at 20.7
mpg. As a result, the agency did not complete its analysis to
determine what the "maximum feasible" level actually would be for
model year 1998 under the 49 U.S.C. § 32902 criteria.
NHTSA's legal interpretation is supported by the language and
legislative history of section 330. As the analysis points out, the
House Appropriations Committee report and a floor statement by the
principal sponsor of section 330--Representative DeLay--describe
section 330 as permitting NHTSA to establish a 1998 standard
"identical to" the model year 1997 standard. The conference report
describes section 330 as prohibiting the use of funds for
"regulations that prescribe changes in" the CAFE standards.
On the other hand, we question whether NHTSA was compelled by
section 330 to forego completion of the analysis otherwise mandated
by 49 U.S.C. § 32902 to determine the "maximum feasible" level for
model year 1998. The legislative history of section 330, taken as a
whole, suggests that the fundamental purpose of this provision was
to prevent an anticipated increase in the CAFE standards.
Representative DeLay observed in his floor statement that NHTSA was
engaged in a rulemaking "which could result in a sharp increase in
the standards for light trucks and vans" and that "this action
would be devastating to the Nation's economy." 141 Cong. Rec. H7605
(daily ed., July 25, 1995). He also stated that section 330
"imposes a 1-year freeze on the ability of NHTSA to increase the
CAFE standards" and that "it was my intent that NHTSA would
withhold any further action directed toward increasing CAFE
standards . . .." Id. In this context, the references in the
history to requiring an identical standard or precluding any
changes for 1998 may have been based on the assumption that the
outcome of any change would be an increase in the standard.
Completing the analysis under 49 U.S.C. § 32902 would have
provided NHTSA more information on which to assess the relationship
between that section and section
1These standards are listed in a table included in the final
rule. The 21 mpg standard was initially prescribed for model year
1985, but was amended to 19.5 mpg before the start of that model
year
Page 4 GAO/OGC-96-11 330. For example, if the analysis indicated
that the "maximum feasible" level for 1998 was at or closer to one
of the lower prior year standards than it was to the 1997 standard,
prescribing that lower standard would not necessarily be
impermissible. Such an action would give greater effect to 49
U.S.C. § 32902 than using the 20.7 mpg standard and would satisfy
the plain terms of section 330. Nor is it clear that such action
would conflict with the purpose underlying section 330. The history
does not explicitly address the possibility that the 20.7 mpg
standard might exceed the "maximum feasible" level for 1998
indicated under 49 U.S.C. § 32902.
Executive Order No. 12866
Based on its economic impact, the rule was determined to be a
"significant regulatory action" within the meaning of Executive
Order No. 12866. Consistent with the Executive order, the rule was
initiated through an advance notice of proposed rulemaking
published on April 6, 1994. 59 Fed. Reg. 16324. As noted
previously, the proposed rulemaking published on January 3, 1996,
includes a Preliminary Regulatory Evaluation. The final rule,
however, does not include a Final Regulatory Impact Analysis.
According to NHTSA, the Office of Information and Regulatory
Affairs reviewed the rule at the proposed and final stages and
suggested no changes.
Executive Order 12612
The Supplementary Information accompanying the proposed rule
states that, based on an analysis of the principles and criteria
contained in Executive Order No. 12612, NHTSA determined that the
proposed rule would not have sufficient federalism implications to
warrant preparation of a Federalism Assessment. 61 Fed. Reg. at
155. The Supplementary Information accompanying the final rule
states that the final rule was not analyzed under Executive Order
No. 12612 because of the NHTSA's lack of discretion with respect to
the rule. It adds that prior light truck standards have not been
viewed as having federalism implications warranting preparation of
a Federalism Analysis. 61 Fed. Reg. at 14682.
NHTSA did not identify any other statutes or Executive orders
imposing requirements relevant to the rule.
Page 5 GAO/OGC-96-11