Average Fuel Economy Standards for Light Trucks; Model Years 2008-2011, 51414-51466 [05-17006]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Proposed Rules]
[Pages 51414-51466]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-17006]



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Part II





Department of Transportation





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National Highway Traffic Safety Administration



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49 CFR Parts 523, 533, and 537

49 CFR Part 533



Light Trucks, Average Fuel Economy; Model Years 2008-2011; Proposed 
Rules

Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / 
Proposed Rules

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 533 and 537

[Docket No. 2005-22223]
RIN 2127-AJ61


Average Fuel Economy Standards for Light Trucks; Model Years 
2008-2011

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This notice proposes to reform the structure of the corporate 
average fuel economy (CAFE) program for light trucks and proposes to 
establish higher CAFE standards for model year (MY) 2008-2011 light 
trucks. Reforming the CAFE program would enable it to achieve larger 
fuel savings while enhancing safety and preventing adverse economic 
consequences.
    During a transition period of MYs 2008-2010, manufacturers may 
comply with CAFE standards established under the reformed structure 
(Reformed CAFE) or with standards established in the traditional way 
(Unreformed CAFE). This will permit manufacturers to gain experience 
with the Reformed CAFE standards. In MY 2011, all manufacturers would 
be required to comply with a Reformed CAFE standard.
    The reform is based on vehicle size. Under Reformed CAFE, fuel 
economy standards are restructured so that they are based on a measure 
of vehicle size called ``footprint,'' the product of multiplying a 
vehicle's wheelbase by its track width. Vehicles would be divided into 
footprint categories, each representing a different range of footprint. 
A target level of average fuel economy is proposed for each footprint 
category, with smaller footprint light trucks expected to achieve more 
fuel economy and larger ones, less. Each manufacturer would still be 
required to comply with a single overall average fuel economy level for 
each model year of production. A particular manufacturer's compliance 
obligation for a model year is calculated as the harmonic average of 
the fuel economy targets in each size category, weighted by the 
distribution of manufacturer's production volumes across the size 
categories.
    The proposed Unreformed CAFE standards are: 22.5 miles per gallon 
(mpg) for MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. The 
Reformed CAFE standards for those model years would be set at levels 
intended to ensure that the industry-wide costs of the Reformed 
standards are roughly equivalent to the industry-wide costs of the 
Unreformed CAFE standards in those model years. For MY 2011, the 
Reformed CAFE standard would be set at the level that maximizes net 
benefits, accounting for unquantified benefits and costs. We believe 
that all of the proposed standards would be set at the maximum feasible 
level, while accounting for technological feasibility, economic 
practicability and other relevant factors.
    Since a manufacturer's compliance obligation for a model year under 
Reformed CAFE depends in part on its actual production in that model 
year, the obligation cannot be calculated with absolute precision until 
the final production figures for that model year become known. However, 
a manufacturer could calculate its obligation with a reasonably high 
degree of accuracy in advance of that model year, based on its product 
plans for the year. Prior to and during the model year, the 
manufacturer would be able to track all of the key variables in the 
formula used for calculating the obligation (e.g., distribution of 
production among the categories and vehicle fuel economy). This notice 
publishes estimates of the compliance obligations, by manufacturer, for 
MYs 2008-2011 under Reformed CAFE, using the fuel economy targets 
proposed by NHTSA and the product plans submitted to NHTSA by the 
manufacturers in response to a request for product plans published in 
December 2003.
    This rulemaking is mandated by the Energy Policy and Conservation 
Act (EPCA), which was enacted in the aftermath of the energy crisis 
created by the oil embargo of 1973-74. The concerns about energy 
security and the effects of energy prices and supply on national 
economic well-being that led to the enactment of EPCA remain alive 
today. Sustained growth in the demand for oil worldwide, coupled with 
tight crude oil supplies, is the driving force behind the sharp price 
increases seen over the past several years. Increasingly, the oil 
consumed in the U.S. originates in countries with political and 
economic situations that raise concerns about future oil supply and 
prices.
    We recognize that financial difficulties currently exist in the 
motor vehicle industry and that a substantial number of job losses have 
been announced recently at large full-line manufacturers. Accordingly, 
we have carefully balanced the cost of the rule with the benefits of 
conservation. We believe that, compared to Unreformed CAFE, Reformed 
CAFE would enhance overall fuel savings while providing vehicle makers 
the flexibility they need to respond to changing market conditions. 
Reformed CAFE would also provide a more equitable regulatory framework 
by creating a level-playing field for manufacturers, regardless of 
whether they are full-line or limited-line manufacturers. We are 
particularly encouraged that Reformed CAFE would reduce the adverse 
safety risks generated by the Unreformed CAFE program. The transition 
from the Unreformed to the Reformed system would begin soon, but ample 
lead time is provided before Reformed CAFE takes full effect in MY 
2011.
    We recognize also that our proposals were derived from analyses of 
information from a variety of sources, including the product plans 
submitted by the manufacturers in early 2004. We fully anticipate that 
the manufacturers will respond to this proposal by providing revised 
plans that reflect events since then. We will evaluate the revised 
plans, the public comments, and other information and analysis in 
selecting the most appropriate standards for MYs 2008-2011.

DATES: Comments must be received on or before November 22, 2005. We 
have provided more than the normal 60-day comment period because of the 
complexity of this rulemaking. However, because of that complexity, the 
necessity for ensuring sufficient time for careful analysis of the 
public comments and other available information, and for meeting the 
April 1, 2006 statutory deadline for issuing a final rule on the CAFE 
standard for MY 2008, extensions of the comment due date will not be 
possible. To ensure the agency's consideration of their comments, the 
public should submit them to the agency not later than the comment due 
date.

ADDRESSES: You may submit comments by any of the following methods:
     Web site: https://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
     Fax: 1-202-493-2251.
     Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal Holidays.

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     Federal eRulemaking Portal: Go to https://
www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
rulemaking. For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Request for 
Comments heading of the Supplementary Information section of this 
document. Note that all comments received will be posted without change 
to https://dms.dot.gov, including any personal information provided. 
Please see the Privacy Act heading under Rulemaking Analyses and 
Notices.
    Docket: For access to the docket to read background documents or 
comments received, go to https://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: For technical issues, call Ken Katz, 
Lead Engineer, Fuel Economy Division, Office of International Policy, 
Fuel Economy, and Consumer Programs, at (202) 366-0846, facsimile (202) 
493-2290, electronic mail kkatz@nhtsa.dot.gov. For legal issues, call 
Stephen Wood or Christopher Calamita of the Office of the Chief 
Counsel, at (202) 366-2992, or e-mail them at swood@nhtsa.dot.gov or 
ccalamita@nhtsa.dot.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive summary
    A. Our proposal
    B. Energy demand and supply and the value of conservation
II. Background
    A. 1974 DOT/EPA report to Congress on potential for motor 
vehicle fuel economy improvements
    B. Energy Policy and Conservation Act of 1975
    C. 1979-2002 light truck standards
    D. 2001 National Energy Policy
    E. 2002 NAS study of CAFE reform
    F. 2002 request for comments on NAS study
    G. 2003 final rule establishing MY 2005-2007 light truck 
standards
    H. 2003 comprehensive plans for addressing vehicle rollover and 
compatibility
    I. 2003 ANPRM
    1. Need for reform
    2. Reform options
    J. Recent developments
    1. Factors underscoring need for reform
    2. Reports updating fuel economy potential
III. The Unreformed CAFE proposal for MYs 2008-2010
    A. Baseline for determining manufacturer capabilities in MYs 
2008-2010
    1. General Motors
    2. Ford
    3. DaimlerChrysler
    4. Other manufacturers
    B. Selection of proposed Unreformed CAFE standards--process for 
determining maximum feasible levels
    C. Technologically feasible additions to baseline
    D. Economic practicability and other economic issues
    1. Costs
    2. Benefits
    3. Comparison of estimated costs to estimated benefits
    4. Uncertainty
IV. The Reformed CAFE proposal for MYs 2008-2011
    A. Proposed approach to reform
    1. Establishment of footprint categories
    2. Targets
    a. Overview of target selection process
    b. Industry-wide considerations in selecting the targets
    c. Relative position of the targets
    d. Level of the targets
    3. Standards and required CAFE levels for individual 
manufacturers
    4. Why this approach to reform and not another?
    a. Step-function vs. continuous function
    b. Categories and targets vs. classes and standards
    c. Footprint vs. shadow or weight
    d. Reformed standard vs. Reformed standard plus backstop
    5. Benefits of reform
    a. Increased energy savings
    b. Reduced incentive to respond to the CAFE program in ways 
harmful to safety
    i. Reduces incentive to offer smaller vehicles and to reduce 
vehicle size
    ii. Effectively reduces the difference between car and light 
truck CAFE standards
    c. More equitable regulatory framework
    d. More responsive to market changes
    B. Authority for proposed reform
    C. Comparison of estimated costs to estimated benefits
    1. Costs
    2. Benefits
    3. Uncertainty
    D. Proposed standards
V. Implementation of options
    A. Choosing the Reformed or Unreformed CAFE system
    B. Application of credits between compliance options
VII. Impact of other Federal Motor Vehicle Standards
    A. Federal Motor Vehicle Safety Standards
    1. FMVSS 138, tire pressure monitoring system
    2. FMVSS 202, head restraints
    3. FMVSS 208, occupant crash protection
    4. FMVSS 214, side impact protection
    5. FMVSS 301, fuel system integrity
    6. Cumulative weight impacts of the FMVSSs
    B. Federal Motor Vehicle Emissions Standards
    1. Tier 2 requirements
    2. Onboard vapor recovery
    3. California Air Resources Board LEV II
    C. Impacts on manufacturers' baselines
VIII. Need for nation to conserve energy
IX. Applicability of the CAFE standards
    A. MDPVs
    B. ``Flat-floor'' provision
X. Rulemaking analyses and notices
    A. Executive Order 12866 and DOT Regulatory Policies and 
Procedures
    B. National Environmental Policy Act
    C. Regulatory Flexibility Act
    D. Executive Order 13132 Federalism
    E. Executive Order 12988 (Civil Justice Reform)
    F. Unfunded Mandates Reform Act
    G. Paperwork Reduction Act
    H. Regulation Identifier Number (RIN)
    I. Executive Order 13045
    J. National Technology Transfer and Advancement Act
    K. Executive Order 13211
    L. Department of Energy review
    M. Plain language
    N. Privacy Act
XI. Comments

I. Executive Summary

A. Our Proposal

    This proposal is part of a continuing effort by the Department of 
Transportation to reform the structure of the CAFE regulatory program 
so that it achieves higher fuel savings while enhancing safety and 
preventing adverse economic consequences. We have previously set forth 
our concerns about the way in which the current CAFE program operates 
and sought comment on approaches to reforming the CAFE program. We have 
also previously increased light truck CAFE standards, from the 
``frozen'' level of 20.7 mpg applicable from MY 1996 through MY 2004, 
to a level of 22.2 mpg applicable to MY 2007. In adopting those 
increased standards, we noted that we were limited in our ability to 
make further increases without reforming the program.
    This notice proposes to reform the structure of the CAFE program 
for light trucks based on vehicle size and proposes to establish higher 
CAFE standards for MY 2008-2011 light trucks. Reforming the CAFE 
program would enable it to achieve larger fuel savings while enhancing 
safety and preventing adverse economic consequences.
    During a transition period of MYs 2008-2010, manufacturers may 
comply with CAFE standards established under the reformed structure 
(Reformed CAFE) or with standards established in the traditional way 
(Unreformed CAFE). This will permit manufacturers to gain experience 
with the Reformed CAFE standards. The Reformed CAFE standards for those 
model years would

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be set at levels intended to ensure that the industry-wide cost of 
those standards are roughly equivalent to the industry-wide cost of the 
Unreformed CAFE standards for those model years. The additional 
leadtime provided by the transition period would aid, for example, 
those manufacturers that would, for the first time, face a binding CAFE 
constraint and be required to make fuel economy improvements beyond 
those that they planned on their own to make.
    In MY 2011, all manufacturers would be required to comply with a 
Reformed CAFE standard. The Reformed CAFE standard for that model year 
would be set at the level that maximizes net benefits.
    The Unreformed standards for MYs 2008-2010 are set with particular 
regard to the capabilities of and impacts on the ``least capable'' full 
line manufacturer (i.e., one that produces a wide variety of types and 
sizes of vehicles) with a significant share of the market. A single 
CAFE level, applicable to each manufacturer, is established for each 
model year.
    The Unreformed CAFE standards for MYs 2008-2010 would be:
    MY 2008: 22.5 mpg
    MY 2009: 23.1 mpg
    MY 2010: 23.5 mpg
    We estimate that these standards could save 5.4 billion gallons of 
fuel over the lifetime of the vehicles sold during those model years, 
compared to the savings that would occur if the standards remained at 
the MY 2007 level of 22.2 mpg.
    The Reformed CAFE approach to establishing light truck CAFE 
standards has the potential of providing even greater fuel savings. 
Under Reformed CAFE, each manufacturer's required level of CAFE would 
be based on target levels of average fuel economy set for vehicles of 
various size categories. The categories would be defined by vehicle 
``footprint''--the product of the average track width (the distance 
between the centerline of the tires on the same axle) and wheelbase 
(basically, the distance between the centers of the axles). The target 
values would reflect the technological and economic capabilities of the 
industry within each of the footprint categories. The target for a 
given size category would be the same for all manufacturers, regardless 
of differences in their overall fleet mix. Compliance would be 
determined by comparing a manufacturer's harmonically averaged fleet 
fuel economy in a model year with a required fuel economy level 
calculated using the manufacturer's actual production levels and the 
category targets.
    The range of targets for each model year would be as follows:
    MY 2008: From 26.8 mpg for the smallest vehicles to 20.4 mpg for 
the largest;
    MY 2009: From 27.4 mpg for the smallest vehicles to 21.0 mpg for 
the largest;
    MY 2010: From 27.8 mpg for the smallest vehicles to 20.8 mpg for 
the largest;
    MY 2011: From 28.4 mpg for the smallest vehicles to 21.3 mpg for 
the largest.
    The standards based on these targets would save approximately 10.0 
billion gallons of fuel over the lifetime of the vehicles sold during 
those four model years, compared to the savings that would occur if the 
standards remained at the MY 2007 level of 22.2 mpg. The Reformed 
standards for MYs 2008-2010 would save 650 million more gallons of fuel 
than the Unreformed standards for those years. As noted above, the 
Reformed standard for MY 2011 would be the first Reformed standard set 
at the level that maximizes net benefits. It would save an additional 
4.1 billion gallons of fuel.
    If all manufacturers complied with the Reformed CAFE standards, the 
total costs would be approximately $6.2 billion for MYs 2008-2011, 
compared to the costs they would incur if the standards remained at the 
MY 2007 level of 22.2 mpg. The resulting vehicle price increases to 
buyers of MY 2008 light trucks would be paid back\1\ in additional fuel 
savings in an average of 37 months and to buyers of MY 2011 light 
trucks in an average of 47 months, assuming fuel prices ranging from 
$1.51 to $1.58 per gallon.\2\ We estimate that the total benefits under 
the Unreformed CAFE standards for MYs 2008-2010 plus the Reformed CAFE 
standard for MY 2011 would be approximately $7.0 billion, and under the 
Reformed CAFE standards for MYs 2008-2011 would be approximately $7.5 
billion.
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    \1\ The payback period represents the length of time required 
for a vehicle buyer to recoup the higher cost of purchasing a more 
fuel-efficient vehicle through savings in fuel use. When a more 
stringent CAFE standard requires a manufacturer to improve the fuel 
economy of some of its vehicle models, the manufacturer's added 
costs for doing so are reflected in higher prices for these models. 
While buyers of these models pay higher prices to purchase these 
vehicles, their improved fuel economy lowers their owners' costs for 
purchasing fuel to operate them. Over time, buyers thus recoup the 
higher purchase prices they pay for these vehicles in the form of 
savings in outlays for fuel. The length of time required to repay 
the higher cost of buying a more fuel-efficient vehicle is referred 
to as the buyer's ``payback period.''
    The length of this payback period depends on the initial 
increase in a vehicle's purchase price, the improvement in its fuel 
economy, the number of miles it is driven each year, and the retail 
price of fuel. We calculated payback periods using the fuel economy 
improvement and average price increase for each manufacturer's 
vehicles estimated to result from the proposed standard, the U.S. 
Energy Information Administration's forecast of future retail 
gasoline prices, and estimates of the number of miles light trucks 
are driven each year as they age developed from U.S. Department of 
Transportation data. Energy Information Administration, Annual 
Energy Outlook 2005 (AEO 2005), Table 100, https://www.eia.doe.gov/
oiaf/aeo/supplement/; and U.S. Department of 
Transportation, 2001 National Household Travel Survey, https://
nhts.ornl.gov/2001/index.shtml. Under these assumptions, payback 
periods ranged from as short as 22 months to as long as 48 months, 
averaging 35 months for the seven largest manufacturers of light 
trucks.
    \2\ The fuel prices used to calculate the length of the payback 
periods are those expected over the life of the MY 2008-2011 light 
trucks, not the current fuel prices. Those future fuel prices were 
obtained from the AEO 2005.
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    We have tentatively determined that the proposed standards under 
both Unreformed CAFE and Reformed CAFE represent the maximum feasible 
fuel economy level for each system. In reaching this conclusion, we 
have balanced the express statutory factors and other relevant 
considerations, such as safety concerns, effects on employment and the 
need for flexibility to transition to a Reformed CAFE program that can 
achieve greater fuel savings in a more economically efficient way.
    The Reformed CAFE approach incorporates several important elements 
of reform suggested by the National Academy of Sciences in its 2002 
report (Effectiveness and Impact of Corporate Average Fuel Economy 
(CAFE) Standards). The agency believes that the Reformed CAFE approach 
has four basic advantages over the Unreformed CAFE approach.
    First, Reformed CAFE will enlarge energy savings. The energy-saving 
potential of Unreformed CAFE is limited because only a few full-line 
manufacturers are required to make improvements. In effect, the 
capabilities of these full-line manufacturers, whose offerings include 
larger and heavier light trucks, constrain the stringency of the 
uniform, industry-wide standard. As a result, the Unreformed CAFE 
standard is generally set below the capabilities of limited-line 
manufacturers, who sell predominantly lighter and smaller light trucks. 
Under Reformed CAFE, which accounts for size differences in product 
mix, virtually all light-truck manufacturers would be required to 
improve the fuel economy of their vehicles. Thus, Reformed CAFE will 
continue to require full-line manufacturers to improve the overall fuel 
economy of their fleets, while also

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requiring limited-line manufacturers to enhance the fuel economy of the 
vehicles they sell.
    Second, Reformed CAFE will offer enhanced safety. The vehicle 
manufacturers constrained by Unreformed CAFE standards are encouraged 
to pursue the following compliance strategies that entail safety risks: 
downsizing of vehicles, design of some vehicles to permit 
classification as ``light trucks'' for CAFE purposes, and offering 
smaller and lighter vehicles to offset sales of larger and heavier 
vehicles. The adverse safety effects of downsizing and downweighting 
have already been documented in the CAFE program for passenger cars. 
When a manufacturer designs a vehicle to permit its classification as a 
light truck, it may increase the vehicle's propensity to roll over.
    Reformed CAFE is designed to lessen each of these safety risks. 
Downsizing of vehicles is discouraged under Reformed CAFE since smaller 
vehicles are expected to achieve greater fuel economy. Moreover, 
Reformed CAFE lessens the incentive to design smaller vehicles to 
achieve a ``light truck'' classification, since small light trucks 
would be regulated at roughly the same degree of stringency as 
passenger cars.
    Third, Reformed CAFE provides a more equitable regulatory framework 
for different vehicle manufacturers. Under Unreformed CAFE, the cost 
burdens and compliance difficulties have been imposed primarily on the 
full-line manufacturers who have large sales volumes at the larger and 
heavier end of the light-truck fleet. Reformed CAFE spreads the 
regulatory cost burden for fuel economy more broadly across vehicle 
manufacturers within the industry.
    Fourth, Reformed CAFE is more market-oriented because it more fully 
respects economic conditions and consumer choice. Reformed CAFE does 
not force vehicle manufacturers to adjust fleet mix toward smaller 
vehicles unless that is what consumers are demanding. As the industry's 
sales volume and mix changes in response to economic conditions (e.g., 
gasoline prices and household income) and consumer preferences (e.g., 
desire for seating capacity or hauling capability), the level of CAFE 
required of manufacturers under Reformed CAFE will, at least partially, 
adjust automatically to these changes. Accordingly, Reformed CAFE may 
reduce the need for the agency to revisit previously established 
standards in light of changed market conditions, a difficult process 
that undermines regulatory certainty for the industry. In the mid-
1980's, for example, the agency relaxed several Unreformed CAFE 
standards because fuel prices fell more than had been expected when 
those standards were established and, as a result, consumer demand for 
small vehicles with high fuel economy did not materialize as expected. 
By moving to a more market-oriented system, the agency may also be able 
to pursue more multi-year rulemakings that span larger time frames than 
the agency has attempted in the past.
    The agency is also issuing, along with this notice, a notice 
requesting updated product plan information and other data to assist in 
developing a final rule. We recognize that the manufacturer product 
plans relied upon in developing this proposal--those plans received in 
early 2004 in response to a 2003 request for information--may already 
be outdated in some respects. We fully expect that manufacturers have 
revised those plans to reflect subsequent developments.
    We solicit comment on all aspects of this proposal. In particular, 
we solicit comment on (1) whether the proposed levels of maximum 
feasible CAFE reflect an appropriate balancing of the explicit 
statutory factors and other relevant factors, (2) whether CAFE reform 
should be designed based on size categories or as a continuous 
function, (3) whether the reform should be based on a single size 
attribute or whether adjustments should also be made for attributes 
such as towing capability and cargo hauling capability, and (4) whether 
the three-year transition period is necessary or whether it can be 
reduced to achieve a more rapid transition to the Reformed CAFE system. 
Other specific areas where we request comments are identified elsewhere 
in this preamble and in the Preliminary Regulatory Impact Analysis 
(PRIA). Based on public comments and other information, including new 
data and analysis, and updated product plans, the standards adopted in 
the final rule could well be different.

B. Energy demand and supply and the value of conservation

    Many of the concerns about energy security and the effects of 
energy prices and supply on national economic well-being that led to 
the enactment of EPCA in 1975 persist today.\3\ The demand for oil is 
steadily growing in the U.S. and around the world. By 2025, U.S. demand 
for oil is expected to increase 40 percent and world oil demand is 
expected to increase by nearly 60 percent. Most of these increases 
would occur in the transportation sector. To meet this projected 
increase in world demand, worldwide productive capacity would have to 
increase by more than 44 million barrels per day over current levels. 
OPEC producers are expected to supply nearly 60 percent of the 
increased production. By 2025, nearly 70 percent of the oil consumed in 
the U.S. would be imported oil. Strong growth in the demand for oil 
worldwide, coupled with tight crude oil supplies, is the driving force 
behind the sharp price increases seen over the past four years. 
Increasingly, the oil consumed in the U.S. originates in countries with 
political and economic situations that raise concerns about future oil 
supply and prices.
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    \3\ The sources of the figures in this section can be found 
below in section VIII, ``Need for Nation to conserve energy.''
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    Energy is an essential input to the U.S. economy and having a 
strong economy is essential to maintaining and strengthening our 
national security. Conserving energy, especially reducing the nation's 
dependence on petroleum, benefits the U.S. in several ways. Reducing 
total petroleum use decreases our economy's vulnerability to oil price 
shocks. Reducing dependence on oil imports from regions with uncertain 
conditions enhances our energy security and can reduce the flow of oil 
profits to certain states now hostile to the U.S. Reducing the growth 
rate of oil use will help relieve pressures on already strained 
domestic refinery capacity, decreasing the likelihood of future product 
price volatility.

II. Background

A. 1974 DOT/EPA report to Congress on potential for motor vehicle fuel 
economy improvements

    In 1974, the Department of Transportation (DOT) and Environmental 
Protection Agency (EPA) submitted to Congress a report entitled 
``Potential for Motor Vehicle Fuel Economy Improvement'' (1974 
Report).\4\ This report was prepared in compliance with Section 10 of 
the Energy Supply and Environmental Coordination Act of 1974, Public 
Law 93-319 (the Act). The Act directed EPA and DOT to report on the 
practicability of a production-weighted fuel economy improvement 
standard of 20 percent for new motor vehicles in the 1980 time frame. 
As required by Section 10 of the Act, the report included an assessment 
of the technological challenges of meeting any such standard, including 
lead times involved, the test procedures required to determine 
compliance, the economic

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costs and benefits, the enforcement means, the effect on energy and 
other resources, and the relationship of safety and emission standards 
to CAFE.
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    \4\ The 1974 report is available in the docket for this 
rulemaking.
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    In the 1974 Report, DOT/EPA said that performance standards 
regulating fuel economy could take either of two modes: A production-
weighted average standard for each manufacturer's entire fleet of 
vehicles or a fuel economy standard tailored to individual classes of 
vehicles. They identified three forms that a production-weighted 
standard could take:
     A common standard (e.g., 16.8 mpg for all manufacturers);
     A standard stated as a uniform per cent improvement (e.g., 
20% improvement for each manufacturer); or
     A variable standard based on the costs or potential to 
improve for each manufacturer.
    (1974 Report, p. 77)
    As to standards for individual classes, they identified two 
different forms:
     A standard stated as uniform quantity of improvement 
(e.g., 2.8 mpg for all classes); or
     A variable standard based on the potential to improve each 
class.
    (1974 Report, p. 77-78)
    DOT/EPA concluded in the 1974 Report that a production-weighted 
standard establishing one uniform specific fuel economy average for all 
manufacturers would, if sufficiently stringent to have the needed 
effect, impact most heavily on manufacturers who have lower fuel 
economy, while not requiring manufacturers of current vehicles with 
better fuel economy to maintain or improve their performance. (1974 
Report, p. 12) Production-weighted standards specifically tailored to 
each manufacturer would eliminate some inequities, but were considered 
to be difficult to administer fairly. (Ibid.)

B. Energy Policy and Conservation Act of 1975

    Congress enacted the Energy Policy and Conservation Act (EPCA Pub. 
L. 94-163) during the aftermath of the energy crisis created by the oil 
embargo of 1973-74. The Act established an automobile fuel economy 
regulatory program by adding Title V, ``Improving Automotive 
Efficiency,'' to the Motor Vehicle Information and Cost Savings Act. 
Title V has been amended from time to time and codified without 
substantive change as Chapter 329 of title 49, United States Code. 
Chapter 329 provides for the issuance of average fuel economy standards 
for passenger automobiles and separate standards for automobiles that 
are not passenger automobiles (light trucks).
    For the purposes of the CAFE statute, ``automobiles'' include any 
``4-wheeled vehicle that is propelled by fuel (or by alternative fuel) 
manufactured primarily for use on public streets, roads, and highways 
(except a vehicle operated only on a rail line), and rated at not more 
than 6,000 pounds gross vehicle weight.'' They also include any such 
vehicle rated at between 6,000 and 10,000 pounds gross vehicle weight 
(GVWR) if the Secretary decides by regulation that an average fuel 
economy standard for the vehicle is feasible, and that either such a 
standard will result in significant energy conservation or the vehicle 
is substantially used for the same purposes as a vehicle rated at not 
more than 6000 pounds GVWR.
    In 1978, NHTSA published a final rule in which we determined that 
standards for vehicles rated between 6000 and 8500 pounds GVWR are 
feasible, that such standards will result in significant energy 
conservation on a per-vehicle basis and that those vehicles are used 
for substantially the same purposes as vehicles rated at not more than 
6000 pounds GVWR (March 23, 1978; 43 FR 11995, at 11997). Vehicles 
rated at between 6000 and 8500 pounds GVWR first became subject to the 
CAFE standards in MY 1980.
    The CAFE standards set a minimum performance requirement in terms 
of an average number of miles a vehicle travels per gallon of gasoline 
or diesel fuel. Individual vehicles and models are not required to meet 
the mileage standard. Instead, each manufacturer must achieve a 
harmonically averaged level of fuel economy for all specified vehicles 
manufactured by a manufacturer in a given MY. The statute distinguishes 
between ``passenger automobiles'' and ``non-passenger automobiles.'' We 
generally refer to non-passenger automobiles as light trucks.
    In enacting EPCA, Congress made a clear and specific choice about 
the structure of the average fuel economy standard for passenger cars. 
After considering the variety of approaches presented in the 1974 
Report, Congress established a common statutory CAFE standard 
applicable to each manufacturer's fleet of passenger automobiles. The 
Secretary of Transportation has the authority to change the standard if 
it no longer represents the ``maximum feasible'' standard consistent 
with the criteria set forth in the statute. Pursuant to that authority, 
the Secretary amended the passenger car standard with regard to MYs 
1986-1989 to address situations in which, despite manufacturers' good 
faith compliance plans, market conditions rendered the statutory 
standard impracticable and infeasible. Since 1990, the CAFE standard 
for passenger automobiles has been 27.5 mpg and compliance is 
determined in accordance with detailed procedures set forth in Section 
32904(a) and (b).
    Congress was considerably less decided and prescriptive with 
respect to what sort of standards and procedures should be established 
for light trucks. It neither made a clear choice among the approaches 
(or among the forms of those approaches) identified in the 1974 Report 
nor precluded the selection of any of those approaches or forms. 
Further, it did not establish by statute a CAFE standard for light 
trucks. Instead, Congress provided the Secretary with a choice of 
establishing a form of a production-weighted average standard for each 
manufacturer's entire fleet of light trucks, as suggested in the 1974 
Report, or a form of production-weighted standards for classes of light 
trucks. Congress directed the Secretary to establish maximum feasible 
CAFE standards applicable to each manufacturer's light truck fleet, or 
alternatively, to classes of light trucks, and to establish them at 
least 18 months prior to the start of each model year. When determining 
a ``maximum feasible level of fuel economy,'' the Secretary is directed 
to balance factors including the nation's need to conserve energy, 
technological feasibility, economic practicability and the impact of 
other motor vehicle standards on fuel economy.
    Manufacturers are required to provide a series of fuel economy 
reports to both the EPA and NHTSA. NHTSA requires manufacturers to 
provide pre-model year and mid-model year reports. See 49 CFR part 537. 
The reports to NHTSA must include, in part, vehicle model fuel economy 
values as calculated under the EPA regulations, projected sales 
volumes, and actual sales volumes as available. A manufacturer must 
supply similar information to the EPA at the end of a model year, along 
with actual production volumes so that its fleet wide average fuel 
economy can be calculated. The EPA then certifies these reports and 
submits them to NHTSA so that we may determine a manufacturer's 
compliance with the CAFE standards.

C. 1979-2002 light truck standards

    NHTSA established the first light truck CAFE standards for MY 1979 
and applied them to light trucks with a GVWR up to 6,000 pounds (March 
14, 1977; 42 FR 13807). Beginning with MY 1980, NHTSA raised this GVWR 
ceiling to 8,500 pounds. For MYs 1979-1981, the agency established 
separate standards for two-wheel drive (2WD)

[[Page 51419]]

and four-wheel drive (4WD) light trucks without a ``combined'' standard 
reflecting the combined capabilities of 2WD and 4WD light trucks. 
Manufacturers that produced both 2WD vehicles and 4WD vehicles could, 
however, decide to treat them as a single fleet and comply with the 2WD 
standard.
    Beginning with MY 1982, NHTSA established a combined standard 
reflecting the combined capabilities of 2WD and 4WD light trucks, plus 
optional 2WD and 4WD standards. After MY 1991, NHTSA dropped the 
optional 2WD and 4WD standards. During MYs 1980-1995, NHTSA also 
separated the ``captive imports'' \5\ of U.S. light truck manufacturers 
from their other truck models in determining compliance with CAFE 
standards.
---------------------------------------------------------------------------

    \5\ ``Captive import'' means, with respect to a light truck, one 
which is not domestically manufactured but which is imported by a 
manufacturer whose principal place of business is the United States. 
49 CFR 533.4(b)(2).
---------------------------------------------------------------------------

    Since the agency sets standards at the maximum feasible level of 
average fuel economy, as required by EPCA, and since the agency's 
determinations about the maximum feasible level of average fuel economy 
in future model years are highly dependent on projections about the 
state of technology and market conditions in those years, NHTSA twice 
found it necessary to reduce a light truck standard when it received 
new information relating to the agency's past projections. In 1979, the 
agency reduced the MY 1981 2WD standard after Chrysler demonstrated 
that there were smaller than expected fuel economy benefits from 
various technological improvements and larger than expected adverse 
impacts from other federal vehicle standards and test procedures 
(December 31 1979; 44 FR 77199).
    In 1984, the agency reduced the MY 1985 light truck standards to 
the following levels: Combined standard-19.5 mpg, 2WD standard-19.7 mpg 
and 4WD standard-18.9 mpg (October 22, 1984; 49 FR 41250). The agency 
concluded that market demand for light truck performance, as reflected 
in engine mix and axle ratio usage, had not materialized as anticipated 
when the agency initially established the MY 1985 standards. The agency 
said that this resulted from lower than anticipated fuel prices. The 
agency concluded that the only actions then available to manufacturers 
to improve their fuel economy levels for MY 1986 would have involved 
product restrictions likely resulting in significant adverse economic 
impacts. The reduction of the MY 1985 standard was upheld by the U.S. 
Circuit Court of Appeals for the District of Columbia. Center for Auto 
Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986) (rejecting the 
contention that the agency gave impermissible weight to the effects of 
shifts in consumer demand toward larger, less fuel-efficient trucks on 
the fuel economy levels manufacturers could achieve).\6\
---------------------------------------------------------------------------

    \6\ NHTSA similarly found it necessary on occasion to reduce the 
passenger car CAFE standards in response to new information. The 
agency reduced the MY 1986 passenger car standard because a 
continuing decline in gasoline prices prevented a projected shift in 
consumer demand toward smaller cars and smaller engines and because 
the only actions available to manufacturers to improve their fuel 
economy levels for MY 1986 would have involved product restrictions 
likely resulting in significant adverse economic impacts. (October 
4, 1985; 40 FR 40528) This action was upheld in Public Citizen vs. 
NHTSA, 848 F.2d 256 (D.C. Cir. 1988). NHTSA also reduced the MY 
1987-88 passenger car standards (October 6, 1986; 51 FR 35594) and 
MY 1989 passenger car standard (October 6, 1988; 53 FR 39275) for 
similar reasons.
---------------------------------------------------------------------------

    In 1994, the agency departed from its usual past practice of 
considering light truck standards for one or two model years at a time 
and published an Advance Notice of Proposed Rulemaking (ANPRM) in the 
Federal Register outlining NHTSA's intention to set standards for some, 
or all, of MYs 1998-2006 (59 FR 16324; April 6, 1994).
    On November 15, 1995, the Department of Transportation and Related 
Agencies Appropriations Act for FY 1996 was enacted. Pub. L. 104-50. 
Section 330 of that Act provided:

    None of the funds in this Act shall be available to prepare, 
propose, or promulgate any regulations * * * prescribing corporate 
average fuel economy standards for automobiles * * * in any model 
year that differs from standards promulgated for such automobiles 
prior to enactment of this section.

Pursuant to that Act, we then issued a final rule limited to MY 1998, 
setting the light truck CAFE standard for that year at 20.7 mpg, the 
same level as the standard we had set for MY 1997 (61 FR 14680; April 
3, 1996).
    On September 30, 1996, the Department of Transportation and Related 
Agencies Appropriations Act for FY 1997 was enacted (Pub. L. 104-205). 
Section 323 of that Act included the same limitation on appropriations 
regarding the CAFE standards contained in Section 330 of the FY 1996 
Appropriations Act. The agency followed the same process as the prior 
year and established a MY 1999 light truck CAFE standard of 20.7 mpg, 
the same level as the standard that had been set for MYs 1997 and 1998. 
Because the same limitation on the setting of CAFE standards was 
included in the Appropriations Acts for each of FYs 1998-2001, the 
agency followed that same procedure during those fiscal years.
    While the Department of Transportation and Related Agencies 
Appropriations Act for FY 2001 (Pub. L. 106-346) contained a 
restriction on CAFE rulemaking identical to that contained in prior 
appropriation acts, the conference committee report for that Act 
directed NHTSA to fund a study by the NAS to evaluate the effectiveness 
and impacts of CAFE standards (H. Rep. No. 106-940, at p. 117-118).
    In a letter dated July 10, 2001, following the release of the 
President's National Energy Policy, Secretary of Transportation Mineta 
asked the House and Senate Appropriations Committees to lift the 
restriction on the agency spending funds for the purposes of improving 
CAFE standards. The Department of Transportation and Related Agencies 
Appropriations Act for FY 2002 (Pub. L. 107-87), which was enacted on 
December 18, 2001, did not contain a provision restricting the 
Secretary's authority to prescribe fuel economy standards.

D. 2001 National Energy Policy

    The National Energy Policy,\7\ released in May 2001, stated that 
``(a) fundamental imbalance between supply and demand defines our 
nation's energy crisis'' and that ``(t)his imbalance, if allowed to 
continue, will inevitably undermine our economy, our standard of 
living, and our national security.'' The National Energy Policy was 
designed to promote dependable, affordable and environmentally sound 
energy for the future. The Policy envisions a comprehensive long-term 
strategy that uses leading edge technology to produce an integrated 
energy, environmental and economic policy. It set forth five specific 
national goals: ``modernize conservation, modernize our energy 
infrastructure, increase energy supplies, accelerate the protection and 
improvement of the environment, and increase our nation's energy 
security.''
---------------------------------------------------------------------------

    \7\ https://www.whitehouse.gov/energy/National-Energy-Policy.pdf
_____________________________________-

 The National Energy Policy included recommendations regarding the 
path that the Administration's energy policy should take and included 
specific recommendations regarding vehicle fuel economy and CAFE. It 
recommended that the President direct the Secretary of Transportation 
to--

--Review and provide recommendations on establishing CAFE standards 
with due consideration of the National Academy of Sciences study 
released (in prepublication

[[Page 51420]]

form) in July 2001. Responsibly crafted CAFE standards should 
increase efficiency without negatively impacting the U.S. automotive 
industry. The determination of future fuel economy standards must 
therefore be addressed analytically and based on sound science.
--Consider passenger safety, economic concerns, and disparate impact 
on the U.S. versus foreign fleet of automobiles.
--Look at other market-based approaches to increasing the national 
average fuel economy of new motor vehicles.

E. 2002 NAS Study of CAFE Reform

    In response to direction from Congress, NAS published a lengthy 
report in 2002 entitled ``Effectiveness and Impact of Corporate Average 
Fuel Economy (CAFE) Standards.'' \8\
---------------------------------------------------------------------------

    \8\ The NAS submitted its preliminary report to the Department 
of Transportation in July 2001 and released its final report in 
January 2002.
---------------------------------------------------------------------------

    The report concludes that the CAFE program has clearly contributed 
to increased fuel economy and that it was appropriate to consider 
further increases in CAFE standards. (NAS, p. 3 (Finding 1)) It cited 
not only the value of fuel savings, but also adverse consequences 
(i.e., externalities) associated with high levels of petroleum 
importation and use that are not reflected in the price of petroleum 
(e.g., the adverse impact on energy security). The report further 
concluded that technologies exist that could significantly reduce fuel 
consumption by passenger cars and light truck fuels within 15 years, 
while maintaining vehicle size, weight, utility and performance. (NAS, 
p. 3 (Finding 5)) Light duty trucks were said to offer the greatest 
potential for reducing fuel consumption. (NAS, p. 4 (Finding 5)) The 
report also noted that vehicle development cycles--as well as future 
economic, regulatory, safety and consumer preferences--would influence 
the extent to which these technologies could lead to increased fuel 
economy in the U.S. market. To assess the economic trade-offs 
associated with the introduction of existing and emerging technologies 
to improve fuel economy, the NAS conducted what it called a ``cost-
efficient analysis''--``that is, the committee [that authored the 
report] identified packages of existing and emerging technologies that 
could be introduced over the next 10 to 15 years that would improve 
fuel economy up to the point where further increases in fuel economy 
would not be reimbursed by fuel savings.'' (NAS, p. 4 (Finding 6))
    Recognizing the many trade-offs that must be considered in setting 
fuel economy standards, the report took no position on what CAFE 
standards would be appropriate for future years. It noted, 
``(s)election of fuel economy targets will require uncertain and 
difficult trade-offs among environmental benefits, vehicle safety, 
cost, oil import dependence, and consumer preferences.''
    The report found that, to minimize financial impacts on 
manufacturers, and on their suppliers, employees, and consumers, 
sufficient lead-time (consistent with normal product life cycles) 
should be given when considering increases in CAFE standards. The 
report stated that there are advanced technologies that could be 
employed, without negatively affecting the automobile industry, if 
sufficient lead-time were provided to the manufacturers.
    The report expressed concerns about increasing the standards under 
the CAFE program as currently structured. While raising CAFE standards 
under the existing structure would reduce fuel consumption, doing so 
under alternative structures ``could accomplish the same end at lower 
cost, provide more flexibility to manufacturers, or address inequities 
arising from the present'' structure. (NAS, pp. 4-5 (Finding 10)) \9\ 
Further, almost all of the committee that authored the report, 
including the committee's safety specialists, said, ``to the extent 
that the size and weight of the fleet have been constrained by CAFE 
requirements * * * those requirements have caused more injuries and 
fatalities on the road than would otherwise have occurred.'' (NAS, p. 
29) Specifically, they noted: ``the downweighting and downsizing that 
occurred in the late 1970s and early 1980s, some of which was due to 
CAFE standards, probably resulted in an additional 1300 to 2600 traffic 
fatalities in 1993.'' (NAS, p. 3 (Finding 2))
---------------------------------------------------------------------------

    \9\ The report noted the following about the concept of equity:
    Potential Inequities
    The issue of equity or inequity is subjective. However, one 
concept of equity among manufacturers requires equal treatment of 
equivalent vehicles made by different manufacturers. The current 
CAFE standards fail this test. If one manufacturer was positioned in 
the market selling many large passenger cars and thereby was just 
meeting the CAFE standard, adding a 22-mpg car (below the 27.5-mpg 
standard) would result in a financial penalty or would require 
significant improvements in fuel economy for the remainder of the 
passenger cars. But, if another manufacturer was selling many small 
cars and was significantly exceeding the CAFE standard, adding a 22-
mpg vehicle would have no negative consequences.
    (NAS, p. 102).
---------------------------------------------------------------------------

    To address those structural problems, the report suggested various 
possible reforms.\10\ The report found that the ``CAFE program might be 
improved significantly by converting it to a system in which fuel 
targets depend on vehicle attributes.'' (NAS, p. 5 (Finding 12)) The 
report noted

    \10\ In assessing and comparing possible reforms, the report 
urged consideration of the following factors:
    Fuel use responses encouraged by the policy,
    Effectiveness in reducing fuel use,
    Minimizing costs of fuel use reduction,
    Other potential consequences
    --Distributional impacts
    --Safety
    --Consumer satisfaction
    --Mobility
    --Environment
    --Potential inequities, and
     Administrative feasibility.
     (NAS, p. 94).
---------------------------------------------------------------------------

    One such system would make the fuel economy target dependent on 
vehicle weight, with lower fuel consumption targets set for lighter 
vehicles and higher targets for heavier vehicles, up to some maximum 
weight, above which the target would be weight-independent. Such a 
system would create incentives to reduce the variance in vehicle 
weights between large and small vehicles, thus providing for overall 
vehicle safety. It has the potential to increase fuel economy with 
fewer negative effects on both safety and consumer choice. Above the 
maximum weight, vehicles would need additional advanced fuel economy 
technology to meet the targets. The committee believes that although 
such a change is promising, it requires more investigation than was 
possible in this study.

(NAS, p. 5 (Finding 12))

    The report noted further that under an attribute-based approach, 
the required CAFE levels could vary among the manufacturers based on 
the distribution of their product mix:

Attribute-Based Fuel Economy Targets

    The government could change the way that fuel economy targets 
for individual vehicles are assigned. The current CAFE system sets 
one target for all passenger cars (27.5 mpg) and one target for all 
light-duty trucks (20.7 mpg). Each manufacturer must meet a sales-
weighted average (more precisely, a harmonic mean * * *) of these 
targets. However, targets could vary among passenger cars and among 
trucks, based on some attribute of these vehicles such as weight, 
size, or load-carrying capacity. In that case a particular 
manufacturer's average target for passenger cars or for trucks would 
depend upon the fractions of vehicles it sold with particular levels 
of these attributes. For example, if weight were the criterion, a 
manufacturer that sells mostly light vehicles would have to achieve 
higher average fuel economy than would a manufacturer that sells 
mostly heavy vehicles.

(NAS, p. 87)

    Based on these findings, the report recommended

    Consideration should be given to designing and evaluating an 
approach with fuel economy targets that are dependent on

[[Page 51421]]

vehicle attributes, such as vehicle weight, that inherently 
influence fuel use. Any such system should be designed to have 
minimal adverse safety consequences.

(NAS, p. 6, (Recommendation 3))

    In February 2002, Secretary Mineta asked Congress ``to provide the 
Department of Transportation with the necessary authority to reform the 
CAFE program, guided by the NAS report's suggestions.''

F. 2002 Request for Comments on NAS Study

    On February 7, 2002, we issued a Request for Comments (RFC) (67 FR 
5767; Docket No. 2002-11419) seeking data on which we could base an 
analysis of manufacturer capability for the purpose of determining the 
appropriate CAFE standards to set for light trucks for upcoming model 
years, beginning with MY 2005. We also sought comments on possible 
reforms to the CAFE program, as it applies to both passenger cars and 
light trucks, to protect passenger safety, advance fuel-efficient 
technologies, and obtain the benefits of market-based approaches.
    While we have considered the comments, the original RFC was quite 
general and the comments received tended to focus on concerns with the 
current program or the generic admonishment against CAFE reform--and 
not on specific potential options. A more detailed summary of comments 
can be found in the advanced notice of proposed rulemaking (2003 ANPRM) 
published on December 29, 2003 (68 FR 74908; Docket No. 2003-16128).

G. 2003 Final Rule Establishing MY 2005-2007 Light Truck Standards

    On April 7, 2003, the agency published a final rule establishing 
light truck CAFE standards for MYs 2005-2007: 21.0 mpg for MY 2005, 
21.6 mpg for MY 2006, and 22.2 mpg for MY 2007 (68 FR 16868; Docket No. 
2002-11419; Notice 3). The agency determined that these levels are the 
maximum feasible CAFE levels for light trucks for those model years, 
balancing the express statutory factors and other included or relevant 
considerations such as the impact of the standard on motor vehicle 
safety and employment. NHTSA estimated that the fuel economy increases 
required by the standards for MYs 2005-2007 would generate 
approximately 3.6 billion gallons of gasoline savings over the 25-year 
lifetime of the affected vehicles.
    In establishing the standards, the agency analyzed cost-effective 
technological improvements that could be made to the product offerings 
planned by the manufacturers. The agency's projection of CAFE 
capability was based on the manufacturers' most recently submitted 
product plans and technological improvements we determined to be 
appropriate and feasible within the time frame. In the final rule, we 
stated that we did not believe the final rule will necessitate, nor did 
we believe it will result in, any ``mix shifting,'' e.g., decreasing 
the production volumes of vehicles that are heavier or larger and thus 
have relatively low fuel economy and increasing the production volumes 
of lighter or smaller vehicles, which might result in significant 
employment and/or average weight reductions were it to occur.
    We further expressed our belief that the final rule for MYs 2005-
2007 will neither necessitate nor induce manufacturers to make 
reductions in vehicle weight that will adversely affect the overall 
safety of people traveling on the roads of America. Indeed, as the NAS 
report noted, there are many technological means that are available to 
manufacturers for improving fuel economy and are much more cost-
effective than weight reduction through materials substitution. 
Accordingly, we did not rely on weight reduction.
    We recognized in the final rule that the standard established for 
MY 2007 could be a challenge for General Motors. We recognized further 
that, between the issuance of the final rule and the last (MY 2007) of 
the model years for which standards were being established, there was 
more time than in previous light truck CAFE rulemakings for significant 
changes to occur in external factors capable of affecting the 
achievable levels of CAFE. These external factors include fuel prices 
and the demand for vehicles with advanced fuel saving technologies, 
such as hybrid electric and advanced diesel vehicles. We said that 
changes in these factors could lead to higher or lower levels of CAFE, 
particularly in MY 2007. Recognizing that it may be appropriate to re-
examine the MY 2007 standard in light of any significant changes in 
those factors, the agency reaffirms its plans to monitor the compliance 
efforts of the manufacturers.

H. 2003 comprehensive plans for addressing vehicle rollover and 
compatibility

    In September 2002, NHTSA completed a thorough examination of the 
opportunities for significantly improving vehicle and highway safety 
and announced the establishment of interdisciplinary teams to formulate 
comprehensive plans for addressing the four most promising problem 
areas.\11\ Based on the work of the teams, the agency issued detailed 
reports analyzing each of the problem areas and recommending 
coordinated strategies that, if implemented effectively, will lead to 
significant improvements in safety.
---------------------------------------------------------------------------

    \11\ A fifth problem area was announced in 2004, improving 
traffic safety data.
---------------------------------------------------------------------------

    Two of the problems areas are vehicle rollover and vehicle 
compatibility. The reports on those areas identify a series of vehicle, 
roadway and behavioral strategies for addressing the problems.\12\ 
Among the vehicle strategies, both reports identified reform of the 
CAFE program as one of the steps that needed to be taken to reduce 
those problems:

    \12\ See https://www-nrd.nhtsa.dot.gov/vrtc/ca/capubs/
IPTRolloverMitigationReport/; https://www-nrd.nhtsa.dot.gov/
departments/nrd-11/aggressivity/IPTVehicleCompatibilityReport/.
---------------------------------------------------------------------------

    The current structure of the CAFE system can provide an 
incentive to manufacturers to downweight vehicles, increase 
production of vehicle classes that are more susceptible to rollover 
crashes, and produce a less homogenous fleet mix. As a result, CAFE 
is critical to the vehicle compatibility and rollover problems.
    (a) Highlights of Current Program
    In its final rule setting new CAFE standards for MY 2005-2007 
light trucks, NHTSA stated that it intends to examine possible 
reforms to the CAFE system, including those recommended in the 
National Academy of Sciences' CAFE report.
    (b) Proposed Initiatives
    Consistent with its statutory authority, the agency plans to 
address issues relating to the structure, operation and effects of 
potential changes to the CAFE system and CAFE standards. In taking 
this broad view, the agency recognizes that the regulation of the 
(sic) fuel economy can have substantial effects on vehicle safety, 
the composition of the light vehicle fleet, the economic well-being 
of the automobile industry and, of course, our nation's energy 
security.
    (c) Expected Program Outcomes
    It is NHTSA's goal to identify and implement reforms to the CAFE 
system that will facilitate improvements in fuel economy without 
compromising motor vehicle safety or American jobs. * * *
    * * * NHTSA intends to examine the safety impacts, both positive 
and negative, that may result from any modifications to CAFE as it 
now exists. Regardless of the root causes, it is clear that the 
downsizing of vehicles that occurred during the first decade of the 
CAFE program had serious safety consequences. Changes to the 
existing system are likely to have equally significant impacts. 
NHTSA is determined to ensure that these impacts are positive.

I. 2003 ANPRM

    On December 29, 2003, the agency published an ANPRM seeking comment 
on various issues relating to reforming the CAFE program (68 FR 74908; 
Docket

[[Page 51422]]

No. 2003-16128).\13\ The agency sought comment on possible enhancements 
to the program that would assist in further fuel conservation, while 
protecting motor vehicle safety and the economic vitality of the 
automobile industry. The agency indicated that it was particularly 
interested in structural reform. This document, while not espousing any 
particular form of reform, sought more specific input than the 2002 RFC 
on various options aimed at adapting the CAFE program to today's 
vehicle fleet and needs.
---------------------------------------------------------------------------

    \13\ On the same date, we also published a request for comments 
seeking manufacturer product plan information for MYs 2008-2012 to 
assist the agency in analyzing possible reforms to the CAFE program 
which are discussed in a companion notice published today. (68 FR 
74931) The agency sought information that would help it assess the 
effect of these possible reforms on fuel economy, manufacturers, 
consumers, the economy, motor vehicle safety and American jobs.
---------------------------------------------------------------------------

1. Need for reform
    The 2003 ANPRM discussed the principal criticisms of the current 
CAFE program that led the agency to explore light truck CAFE reform (68 
FR 74908, at 74910-13. First, the energy-saving potential of the CAFE 
program is hampered by the current regulatory structure. The Unreformed 
approach to CAFE does not di