Civil Penalties, 36007-36034 [2019-15259]

Download as PDF jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations 340–142–0005 Definitions as Used in This Division Unless Otherwise Specified 340–142–0030 Emergency Action 340–142–0040 Required Reporting 340–142–0050 Reportable Quantities 340–142–0060 Cleanup Standards 340–142–0070 Approval Required for Use of Chemicals 340–142–0080 Disposal of Recovered Spill Materials 340–142–0090 Cleanup Report 340–142–0100 Sampling/Testing Procedures 340–142–0130 Incident Management and Emergency Operations (3) Oregon Administrative Rules, Chapter 340, Division 150. 340–150–0001 Purpose 340–150–0006 Applicability and General Requirements 340–150–0008 Exemptions and Deferrals 340–150–0010 Definitions 340–150–0020 UST General Permit Registration Certificate Required except insofar as this provision applies to a person who does not own or operate an underground storage tank and except insofar as the payment of fees is required 340–150–0021 Termination of Temporary Permits 340–150–0052 Modification of Registration Certificates for Changes in Ownership and Permittee except insofar as the payment of fees is required 340–150–0080 Denial, Suspension or Revocation of General Permit Registration Certificates except insofar as this provision applies to a person who does not own or operate an underground storage tank 340–150–0102 Termination of Registration Certificates 340–150–0110 UST General Permit Registration, Annual Compliance and Other Fees except insofar as the payment of fees is required 340–150–0135 General Requirements for Owners and Permittees 340–150–0137 UST Systems with FieldConstructed Tanks and Airport Hydrat Fuel Distribution Systems 340–150–0140 Requirements for Sellers of USTs 340–150–0156 Performance of UST Services by Owners or Permittees 340–150–0160 General Permit Requirements for Installing an UST System except insofar as this provision applies to a person who does not own or operate an underground storage tank 340–150–0163 General Permit Requirements for Operating an UST System except insofar as the payment of fees is required 340–150–0167 General Permit Requirements for Temporary Closure of an UST System except insofar as the payment of fees is required 340–150–0168 General Permit Requirements for Decommissioning an UST System by Permanent Closure except insofar as this provision applies to a person who does not own or operate an underground storage tank and except insofar as the payment of fees is required VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 340–150–0180 Site Assessment Requirements for Permanent Closure or Change-in-Service 340–150–0200 Training Requirements for UST System Operators and Emergency Response Information 340–150–0210 Training Requirements for UST Operators 340–150–0302 Installation of Used USTs 340–150–0310 Spill and Overfill Prevention Equipment and Requirements 340–150–0315 Priodic operation and maintenance walkthrough inspections 340–150–0320 Corrosion Protection Performance Standards for USTs and Piping 340–150–0325 Operation and Maintenance of Corrosion Protection 340–150–0350 UST System Repairs 340–150–0352 UST System Modifications and Additions 340–150–0354 UST System Replacements 340–150–0360 Requirements for Internally Lined USTs 340–150–0400 General Release Detection Requirements for Petroleum UST Systems 340–150–0410 Release Detection Requirements and Methods for Underground Piping 340–150–0420 Release Detection Requirements for Hazardous Substance UST Systems 340–150–0430 Inventory Control Method of Release Detection 340–150–0435 Statistical Inventory Reconciliation Method of Release Detection 340–150–0440 Manual Tank Gauging Release Detection Method 340–150–0445 Tank Tightness Testing for Release Detection and Investigation 340–150–0450 Automatic Tank Gauging Release Detection Method 340–150–0465 Interstitial Monitoring Release Detection Method 340–150–0470 Other Methods of Release Detection 340–150–0500 Reporting Suspected Releases 340–150–0510 Suspected Release Investigation and Confirmation Steps 340–150–0520 Investigation Due to Off Site Impacts 340–150–0540 Applicability to Previously Closed UST Systems 340–150–0550 Definitions for OAR 340– 150–0555 and 340–150–0560 340–150–0555 Compliance Dates for USTs and Piping 340–150–0560 Upgrading Requirements for Existing UST Systems (4) Oregon Administrative Rules, Chapter 340, Division 151 340–151–0001 Purpose 340–151–0010 Scope and Applicability 340–151–0015 Adoption and Applicability of United States Environmental Protection Agency Regulations 340–151–0020 Definitions 340–151–0025 Oregon-Specific Financial Responsibility Requirements * * * * * [FR Doc. 2019–15311 Filed 7–25–19; 8:45 am] BILLING CODE 6560–50–P PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 36007 DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 578 [Docket No. NHTSA–2018–0017] RIN 2127–AL94 Civil Penalties National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT). ACTION: Final rule. AGENCY: SUMMARY: This final rule confirms the determination NHTSA announced in the notice of proposed rulemaking (NPRM) that the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) does not apply to the civil penalty rate applicable to automobile manufacturers that fail to meet applicable corporate average fuel economy (CAFE) standards and are unable to offset such a deficit with compliance credits. In addition, this final rule is finalizing the agency’s determination that even if the Inflation Adjustment Act applies, increasing the CAFE civil penalty rate would have a negative economic impact, and therefore, in accordance with the Energy Policy and Conservation Act of 1975 (EPCA) and the Energy Independence and Security Act of 2007 (EISA), the current CAFE civil penalty rate of $5.50 should be retained, instead of increasing to $14 in model year 2019. DATES: Effective dates: This rule is effective as of September 24, 2019. Upon reconsideration, this rule supersedes the final rule published at 81 FR 95489, December 28, 2016 (delayed at 82 FR 8694, January 30, 2017, 82 FR 15302, March 28, 2017, 82 FR 29010, June 27, 2017, and 82 FR 32139, July 12, 2017), which went into force in accordance with the decision of the United States Court of Appeals for the Second Circuit in NRDC v. NHTSA, Case No. 17–2780. Petitions for reconsideration: Petitions for reconsideration of this final rule must be received not later than September 9, 2019. ADDRESSES: Any petitions for reconsideration should refer to the docket number of this document and be submitted to: Deputy Administrator, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, West Building, Fourth Floor, Washington, DC 20590. FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief E:\FR\FM\26JYR1.SGM 26JYR1 36008 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations Counsel, NHTSA, telephone (202) 366– 5263, facsimile (202) 366–3820, 1200 New Jersey Ave. SE, Washington, DC 20590. SUPPLEMENTARY INFORMATION: Table of Contents jbell on DSK3GLQ082PROD with RULES A. Executive Summary B. Background 1. CAFE Program 2. Civil Penalties Inflationary Adjustment Act Improvements Act of 2015 3. NHTSA’s Actions to Date Regarding CAFE Civil Penalties a. Interim Final Rule b. Final Rule c. Initial Reconsideration and Request for Comments d. Notice of Proposed Rulemaking C. Overview of the Comments D. Response to the Comments 1. NHTSA’s Reconsideration Authority 2. Applicability of the 2015 Act 3. Harmonizing the 2015 Act and EPCA 4. ‘‘Negative Economic Impact’’ a. EPCA Factors b. Other Economic Considerations 5. $10 Cap E. Rulemaking Analyses and Notices 1. Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures 2. Regulatory Flexibility Act 3. Executive Order 13132 (Federalism) 4. Unfunded Mandates Reform Act of 1995 5. National Environmental Policy Act 6. Executive Order 12778 (Civil Justice Reform) 7. Paperwork Reduction Act 8. Privacy Act 9. Executive Order 13771 A. Executive Summary As explained in the proposed rule (83 FR 13904 (April 2, 2018)), NHTSA has almost forty years of experience in implementing the corporate average fuel economy (CAFE) program and its civil penalty component. This includes oversight and administration of the program’s operation, how the automobile manufacturers respond to CAFE standards and increases, and the role of civil penalties in achieving the CAFE program’s objectives. The CAFE civil penalty provisions 49 U.S.C. 32912(b) and (c), established by EPCA, are complex, containing statutory requirements that must be met if the penalty amount is to be increased, as well as a statutory cap of $10 on the maximum penalty amount, among other provisions, that distinguish it from ordinary civil penalty provisions, such as the general penalty for CAFE violations found in 49 U.S.C. 32912(a). After the new administration took office and upon further consideration of the issues, NHTSA determined that it was appropriate and necessary to reconsider the applicability of the Federal Civil Penalties Inflation VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) to the CAFE civil penalty provision found in EPCA. In reconsidering the CAFE civil penalty rule and the applicability of the 2015 Act to the statutory provision, NHTSA had two objectives: First, to determine whether the CAFE civil penalty rate was the kind of penalty to which the 2015 Act applied, and second, if it did apply, whether increasing the civil penalty rate for the CAFE provision will have a negative economic impact. NHTSA has carefully considered these objectives and comments received in reconsidering the CAFE civil penalty statute that NHTSA administers and the application of the 2015 Act to it.1 As a result of this review, including consideration of all the comments received on its proposed rule, NHTSA has reconsidered its earlier decisions that accepted applicability of the 2015 Act and its predecessors to the CAFE civil penalty provision in 49 U.S.C. 32912(b).2 Accordingly, NHTSA is finalizing its determination that the CAFE civil penalty rate is not a ‘‘civil monetary penalty’’ that must be adjusted for inflation under the 2015 Act. Prior to the proposed rule, NHTSA’s Federal Register notifications on its inflation adjustments under the 2015 Act did not consider whether the CAFE civil penalty rate fit the definition of a ‘‘civil monetary penalty’’ subject to adjustment under the 2015 Act, instead proceeding—without analysis—as if the 2015 Act applied to the CAFE civil penalty rate. After taking the opportunity to reconsider this matter and fully analyze the issue and consider the comments received on its proposal, NHTSA concludes that the CAFE civil penalty rate is not covered by the 2015 Act. NHTSA is finalizing its determination that civil penalties assessed for CAFE violations under Section 32912(b) are not a ‘‘penalty, fine, or other sanction that’’ is either ‘‘a maximum amount’’ or ‘‘a specific monetary amount.’’ 3 As 1 This final rule is promulgated under NHTSA’s authority, delegated to it by the Secretary (49 CFR 1.95(a)), under 49 U.S.C. Chapter 329. Cf. Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17–2780, at 13, 17 (2d Cir., June 29, 2018) (citing the ‘‘judicial review provision of EPCA [49 U.S.C. 32909(a)] as ‘‘the legislative authorization to petition for review’’ of NHTSA’s indefinite delay rule; ‘‘Judicial review here is authorized by Section 32909 of EPCA.’’). 2 NHTSA has the authority to reconsider its prior rules for the reasons described in Section D.1. 3 As discussed below, this determination reflects a change in NHTSA’s position on this issue from when NHTSA previously adjusted the CAFE civil penalty rate from $5 to $5.50 in 1997 and its earlier announcements of adjustments of the rate to $14 in its July 2016 interim final rule and its December 2016 final rule. PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 explained in the proposed rule, the civil penalties under consideration here are part of a complicated market-based enforcement mechanism. Any potential civil penalties for failing to satisfy fuel economy requirements, unlike other civil penalties, are not determined until the conclusion of a complex formula, credit-earning arrangement, and credit transfer and trading program. In fact, after NHTSA determines there is a violation, the ultimate penalty assessed is based on the noncompliant manufacturer’s decision, not NHTSA’s, on whether and how to acquire and apply any credits that may be available to the manufacturer, and on the decisions of other manufacturers to earn and sell credits to a potentially liable manufacturer.4 Manufacturers can also claim future credits as a means of meeting their current liability based upon projected credits to be earned within three subsequent model years. The amount that a manufacturer might actually pay under the CAFE civil penalty statute is dependent upon a fluid, multi-year process, involving credit trading with other manufacturers at unknown prices and unverifiable credits to be earned in the future. In other words, what the noncompliant manufacturer pays is much more the function of market forces, trading of credits, and manufacturers’ projections of future performance, than it is just the application of the CAFE penalty rate. Moreover, after consideration of comments, NHTSA concludes that Congress did not intend for the 2015 Act to apply to this specialized civil penalty rate, which has longstanding, strict procedures previously enacted by Congress that limit NHTSA’s ability to increase the rate. Congress specifically contemplated that increases to the CAFE civil penalty rate for manufacturer noncompliance with CAFE standards may be appropriate and necessary and included a mechanism in the statute for such increases. Critically, this mechanism requires the Secretary of Transportation to determine specifically that any such increase will not lead to certain specific negative economic effects. In addition, Congress explicitly limited any such increase to $10 per tenth of a mile per gallon.5 These restrictions have been in place since the statute was amended in 1978. Though Congress later amended the CAFE civil penalty provision in 2007, Congress left in place unaltered both the mechanism for increases and the upper limit of an increased civil penalty under the 4 See 49 U.S.C. 32903. concludes the 2015 Act also does not apply to the $10 cap. 5 NHTSA E:\FR\FM\26JYR1.SGM 26JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations statute. NHTSA’s determination regarding the applicability of the 2015 Act to the EPCA CAFE civil penalty provision is also confirmed by the Office of Management and Budget (OMB), the office directed by Congress to issue guidance on the implementation of the 2015 Act. OMB’s views regarding the applicability of the 2015 Act to the EPCA CAFE civil penalty provision are set forth in a comprehensive opinion included in the docket for this final rule, in which OMB concurs with NHTSA’s assessment that the 2015 Act does not apply to the CAFE civil penalty rate.6 OMB supported its conclusion by noting first, that it was not aware of any other penalty scheme with the unique features of the CAFE civil penalty scheme, and also ‘‘[i]n light of (1) EPCA’s distinction between the penalty rate and the penalty itself, (2) the incompatibility of the structure of the CAFE penalty scheme and the 2015 Act, and (3) the inconsistent treatment of the CAFE penalty rate under inflation adjustment schemes over time.’’ These factors, which OMB found supportive of NHTSA’s conclusion that the 2015 Act does not apply to the CAFE civil penalty rate, are discussed throughout this document. In addition to reconsidering the application of the 2015 Act to the EPCA CAFE civil penalty provision, NHTSA has reconsidered its decisions in the July 2016 interim final rule and December 2016 final rule to increase the CAFE civil penalty rate and, as a result, is retaining the current civil penalty rate applicable to 49 U.S.C. 32912(b) of $5.50 per tenth of a mile per gallon for automobile manufacturers that do not meet applicable CAFE standards and are unable to offset such a deficit with compliance credits, rather than increasing the rate to $14 in model year 2019. Even if the 2015 Act is applied to the CAFE civil penalty rate, NHTSA has determined that the rate should remain the same in order to comply with EPCA, which must be read harmoniously with the 2015 Act. The 2015 Act confers discretion to the head of each agency to adjust the amount of a civil monetary penalty by less than the amount otherwise required for the initial adjustment, with the concurrence of the Director of the Office of Management and Budget, upon determining that doing so would have a ‘‘negative economic impact.’’ In EPCA, Congress previously identified specific factors that NHTSA is required to consider before making a determination about the ‘‘impact on the economy’’ as a prerequisite to increasing the applicable civil penalty rate. NHTSA believes that these statutory criteria are appropriate for determining whether an increase in the CAFE civil penalty rate would have a ‘‘negative economic impact’’ for purposes of the 2015 Act. Under EPCA, NHTSA faces a heavy burden to demonstrate that increasing the civil penalty rate ‘‘will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.’’ Specifically, in order to establish that the increase would not have that ‘‘substantial deleterious impact,’’ NHTSA would need to affirmatively determine that it is likely that the increase would not cause a significant increase in unemployment in a State or a region of a State; adversely affect competition; or cause a significant increase in automobile imports. In light of those statutory factors—and the absence of persuasive evidence to support making the EPCA findings— NHTSA concludes that increasing the CAFE civil penalty rate would have a negative economic impact. Thus, NHTSA is not adjusting the rate under the 2015 Act, even if it applied. Even if EPCA’s statutory factors for increasing civil penalties are not applied, NHTSA has determined, after consideration of comments, that the $14 penalty will lead to a negative economic impact that merits leaving the CAFE civil penalty rate at $5.50. Based on available information, including information provided by commenters, the effect of applying the 2015 Act to the CAFE civil penalty would potentially drastically increase manufacturers’ costs of compliance. OMB has concurred with NHTSA’s determination that increasing the CAFE civil penalty rate by the otherwise required amount will have a negative economic impact.7 In summary, NHTSA concludes that: • The 2015 Act does not apply to the CAFE civil penalty rate, so no rate increase is permitted, except pursuant to the scheme established in EPCA; • Even if the 2015 Act did apply to the CAFE civil penalty rate, the 2015 Act must be read in conjunction with EPCA, and considering the EPCA factors, increasing the CAFE penalty 6 July 12, 2019 Letter from Russell T. Vought, Acting Director of the Office of Management and Budget, to Elaine L. Chao, Secretary of the United States Department of Transportation, available at Docket No. NHTSA–2018–0017–0018 (OMB NonApplicability Letter). 7 July 12, 2019 Letter from Russell T. Vought, Acting Director of the Office of Management and Budget, to Elaine L. Chao, Secretary of the United States Department of Transportation, available at Docket No. NHTSA–2018–0017–0019 (OMB Negative Economic Impact Letter). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 36009 rate to $14 would have a ‘‘negative economic impact’’; and • Even if the EPCA factors did not apply, increasing the CAFE civil penalty rate to $14 would still have a ‘‘negative economic impact.’’ The result is the same under all of these scenarios: The CAFE civil penalty rate is and will continue to be set at $5.50, rather than increasing to $14 in MY 2019.8 In EPCA, Congress also imposed a cap of $10 on the CAFE civil penalty rate. NHTSA has determined that this statutory cap also does not meet the definition of a ‘‘civil monetary penalty’’ that requires adjustment under the 2015 Act. OMB agrees with this assessment.9 Thus, even if the CAFE civil penalty rate is a ‘‘civil monetary penalty’’ under the 2015 Act and regardless of whether increasing it would have a ‘‘negative economic impact,’’ NHTSA has determined that any increase would be statutorily capped by EPCA at $10. The general penalty in 49 U.S.C. 32912(a) for other violations of EPCA, as amended, promulgated in 49 CFR 578.6(h)(1), is subject to additional inflationary adjustments for 2017, 2018, and 2019. In this rule, NHTSA is finalizing the 2017, 2018, and 2019 inflationary adjustments to this general penalty amount. B. Background 1. CAFE Program NHTSA sets 10 and enforces 11 corporate average fuel economy (CAFE) standards for the United States lightduty vehicle fleet, and in doing so, assesses civil penalties against vehicle manufacturers that fall short of the standards and are unable to make up the shortfall with credits.12 The civil penalty amount for CAFE noncompliance was originally set by statute in 1975, and since 1997, has included a rate of $5.50 per each tenth of a mile per gallon (0.1) that a manufacturer’s fleet average CAFE level falls short of the applicable standard. This shortfall amount is then multiplied by the number of vehicles in that manufacturer’s fleet.13 The basic 8 Without this rule, the CAFE civil penalty rate would increase to $14 beginning with civil penalties assessed for model year 2019. 9 OMB Non-Applicability Letter. 10 49 U.S.C. 32902. 11 49 U.S.C. 32911, 32912. 12 Credits may be either earned (for overcompliance by a given manufacturer’s fleet, in a given model year), transferred (from one fleet to another), or purchased (in which case, another manufacturer earned the credits by over-complying and chose to sell that surplus). 49 U.S.C. 32903. 13 A manufacturer may have up to three fleets of vehicles, for CAFE compliance purposes, in any E:\FR\FM\26JYR1.SGM Continued 26JYR1 36010 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES equation for calculating a manufacturer’s civil penalty amount before accounting for credits, is as follows: (penalty rate) × (amount of shortfall, in tenths of an mpg) × (number of vehicles in manufacturer’s fleet). Automakers have paid more than $890 million in CAFE civil penalties, up to and including model year (MY) 2014 vehicles.14 On top of the costs of paying these civil penalties, manufacturers have also spent additional money towards generating overcompliance credits and purchasing credits from other manufacturers. Starting with the model year 2011, provisions in the CAFE program provided for credit transfers among a manufacturer’s various fleets. Commencing with that model year, the law also provided for trading between vehicle manufacturers, which has allowed vehicle manufacturers the opportunity to acquire credits from competitors rather than paying civil penalties for noncompliance. Manufacturers are required to notify NHTSA of the volumes of credits traded or sold, but the agency does not receive any information regarding total cost paid or cost per credit. Thus, while NHTSA is not aware of the amount of money manufacturers spend on generating overcompliance credits or purchasing credits from other manufacturers, NHTSA believes it is likely that credit generation and credit purchases involve significant expenditures. Moreover, NHTSA expects that an increase in the penalty rate, which would apply to all manufacturers, would result in an increase in such expenditures.15 given model year—a domestic passenger car fleet, an import passenger car fleet, and a light truck fleet. Each fleet belonging to each manufacturer has its own compliance obligation, with the potential for either over-compliance or under-compliance. There is no overarching CAFE requirement for a manufacturer’s total production. 14 Penalty reporting for MY15 and newer vehicles was not reported at the time of this rule. The highest CAFE penalty paid to date for a shortfall in a single fleet was $30,257,920, paid by DaimlerChrysler for its import passenger car fleet in MY 2006. Since MY 2012, only Jaguar Land Rover and Volvo have paid civil penalties. See https:// one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_ LIVE.html. 15 See 83 FR 13904, 13916 (Apr. 2, 2018) (‘‘[I]ncreasing the penalty rate to $14 would lead to significantly greater costs than the agency had anticipated when it set the CAFE standards because manufacturers who had planned to use penalties as one way to make up their shortfall would now need to pay increased penalty amounts, purchase additional credits at likely higher prices, or make modifications to their vehicles outside of their ordinary redesign cycles. NHTSA believes all of these options would increase manufacturers’ compliance costs, many of which would be passed along to consumers.’’). NHTSA did not receive any comments providing information to the contrary. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 Because of expected shortfalls in CAFE compliance in current and upcoming model years, the agency currently anticipates many manufacturers will face the possibility of larger expenditures on CAFE penalties or increased costs to acquire credits over the next several years than at present.16 NHTSA has long had authority under the Energy Policy and Conservation Act (EPCA) of 1975, Public Law 94–163, 508, 89 Stat. 912 (1975), to raise the amount of the penalty for CAFE shortfalls if it makes certain findings,17 as well as the authority to compromise and remit such penalties under certain circumstances.18 Recognizing the economic harm that increases in CAFE civil penalties could have on the automobile industry and the economy as a whole, Congress capped any increase in the original statutory penalty rate at $10 per tenth of a mile per gallon. Further—and significantly—Congress has forbidden NHTSA from increasing the CAFE civil penalty rate under EPCA unless NHTSA concludes through rulemaking that the increase in the penalty rate both (1) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed, and (2) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of the State. A finding of ‘‘no substantial deleterious impact’’ may only be made if NHTSA determines that it is likely that the increase in the penalty (A) will not cause a significant increase in unemployment in a State or a region of a State, (B) adversely affect competition, or (C) cause a significant increase in automobile imports. Nowhere does EPCA define ‘‘substantial’’ or ‘‘significant’’ in the context of this provision. The authority to compromise and remit penalties is extremely limited and must be applied on a case-by-case basis. If NHTSA seeks to compromise or remit penalties for a given manufacturer, a rulemaking is not necessary, but the amount of a penalty may be compromised or remitted only to the extent (1) necessary to prevent a manufacturer’s insolvency or bankruptcy, (2) the manufacturer shows that the violation was caused by an act 16 NHTSA’s ‘‘Manufacturer Projected Fuel Economy Performance Report’’ indicates that the total U.S. fleet projected fuel economy value fails to meet the standards for model year 2017 and increasingly so for model year 2018. Available at https://one.nhtsa.gov/CAFE_PIC/MY_2017_and_ 2018_Projected_Fuel_Economy_Performance_ Report.pdf (Apr. 30, 2018). 17 49 U.S.C. 32912. 18 49 U.S.C. 32913. PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 of God, a strike, or a fire, or (3) the Federal Trade Commission certifies that a reduction in the penalty is necessary to prevent a substantial lessening of competition. NHTSA has never previously attempted to undertake this process. To date, NHTSA has never utilized its ability to compromise or remit a CAFE civil penalty. These various statutory provisions and requirements, coupled with the formula for determining the total potential civil penalty due from a manufacturer, demonstrate the unique nature of the CAFE civil penalty provision and distinguish it from a typical civil penalty provision that merely sets forth an amount to be paid for a regulatory violation. 2. Civil Penalties Inflation Adjustment Act Improvements Act of 2015 On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act), Public Law 114–74, Section 701, was signed into law. The 2015 Act required Federal agencies to make an initial ‘‘catch-up’’ adjustment to the ‘‘civil monetary penalties,’’ as defined, they administer through an interim final rule and then to make subsequent annual adjustments for inflation.19 The amount of increase for any ‘‘catch-up’’ adjustment to a civil monetary penalty pursuant to the 2015 Act was limited to 150 percent of the then-current penalty. Unless an exception applied, agencies were required to issue an interim final rule for the initial ‘‘catch-up’’ adjustment— without providing the opportunity for public comment ordinarily required under the Administrative Procedure Act (APA)—by July 1, 2016.20 19 A ‘‘ ‘civil monetary penalty’ means any penalty, fine, or other sanction’’ that meets three requirements: the ‘‘penalty, fine, or other sanction’’ must be ‘‘for a specific monetary amount as provided by Federal law’’ or have ‘‘a maximum amount provided for by Federal law’’; the ‘‘penalty, fine, or other sanction’’ must be ‘‘assessed or enforced by an agency pursuant to Federal law’’; and the ‘‘penalty, fine, or other sanction’’ must be ‘‘assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.’’ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 3(2). 20 The 2015 Act authorized full notice-andcomment rulemaking procedures if the head of an agency was adjusting the amount of a civil monetary penalty by less than the otherwise required amount because she determined either that increasing the civil monetary penalty by the otherwise required amount would have a negative economic impact or that the social costs of increasing the civil monetary penalty by the otherwise required amount outweighed the benefits. Such a determination required the concurrence of the Director of the Office of Management and Budget. 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(c). E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations The method of calculating inflationary adjustments in the 2015 Act differs substantially from the methods used in past inflationary adjustment rulemakings conducted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation Adjustment Act), Public Law 101–410. Civil penalty adjustments under the 1990 Inflation Adjustment Act were conducted under rules that sometimes required significant rounding of figures. For example, any increase determined under the 1990 Inflation Adjustment Act had to be rounded to the nearest multiple of $25,000 in the case of penalties greater than $200,000. Under these rules, NHTSA never adjusted the CAFE civil penalty rate above $5.50. The 2015 Act altered these rounding rules. Now, penalties are simply rounded to the nearest $1. Furthermore, the 2015 Act ‘‘resets’’ the inflation calculations by excluding prior inflationary adjustments under the 1990 Inflation Adjustment Act. To do this, the 2015 Act requires agencies to identify, for each civil monetary penalty, the year and corresponding amount(s) for which the maximum penalty level or range of minimum and maximum penalties was established (i.e., originally enacted by Congress) or last adjusted other than pursuant to the 1990 Inflation Adjustment Act. Significantly, Congress also included a provision in the 2015 Act that directed the Director of OMB to issue periodic guidance to agencies implementing the inflation adjustments required under the 2015 Act. The Director of OMB provided initial guidance to agencies in a February 24, 2016 memorandum.21 In that guidance, OMB specifically instructed agencies to identify the penalties to which the 2015 Act would apply among the penalties that each agency is responsible for administering, and noted that: Agencies with questions on the applicability of the inflation adjustment requirement to an individual penalty, should first consult with the Office of General Counsel of the agency for the applicable statute, and then seek clarifying guidance from OMB if necessary.22 jbell on DSK3GLQ082PROD with RULES Subsequent guidance from OMB reiterated agencies’ responsibility to identify applicable penalties and to 21 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 24, 2016), available online at https:// www.whitehouse.gov/sites/whitehouse.gov/files/ omb/memoranda/2016/m-16-06.pdf (last accessed May 22, 2018). 22 Id. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 consult with the individual agency’s Office of General Counsel and to seek clarifying guidance from OMB with questions regarding the applicability of the 2015 Act to particular penalties.23 For those penalties subject to the statute’s definition of ‘‘civil monetary penalties,’’ the memorandum provided guidance on how to calculate the initial adjustment required by the 2015 Act. The initial catch up adjustment is based on the change between the Consumer Price Index for all Urban Consumers (CPI–U) for the month of October in the year the penalty amount was established or last adjusted by Congress and the October 2015 CPI–U. The February 24, 2016 memorandum contains a table with a multiplier for the change in CPI– U from the year the penalty was established or last adjusted to 2015. To arrive at the adjusted penalty, the agency must multiply the penalty amount when it was established or last adjusted by Congress, excluding adjustments under the 1990 Inflation Adjustment Act, by the multiplier for the increase in CPI–U from the year the penalty was established or adjusted as provided in the February 24, 2016 memorandum. The 2015 Act limits the initial inflationary increase to 150 percent of the current penalty. To determine whether the increase in the adjusted penalty is less than 150 percent, the agency must multiply the current penalty by 250 percent. The adjusted penalty is the lesser of either the adjusted penalty based on the multiplier for CPI–U in Table A of the February 24, 2016 memorandum or an amount equal to 250% of the current penalty. Additionally, the 2015 Act gives agencies discretion to adjust the amount of a civil monetary penalty by less than otherwise required if the agency determines that increasing the civil 23 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the 2017 Annual Adjustment Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available online at https://www.whitehouse .gov/sites/whitehouse.gov/files/omb/memoranda/ 2017/m-17-11_0.pdf (last accessed July 10, 2018); Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Dec. 15, 2017), available online at https:// www.whitehouse.gov/wp-content/uploads/2017/11/ M-18-03.pdf (last accessed July 10, 2018); Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of Penalty Inflation Adjustments for 2019, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Dec. 14, 2018), available online at https:// www.whitehouse.gov/wp-content/uploads/2017/11/ m_19_04.pdf (last accessed May 31, 2019). PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 36011 monetary penalty by the otherwise required amount will have either a negative economic impact or if the social costs of the increased civil monetary penalty will outweigh the benefits.24 In either instance, the agency must publish a notice, take and consider comments on this finding, and receive concurrence on this determination from the Director of OMB prior to finalizing a lower civil penalty amount. 3. NHTSA’s Actions to Date Regarding CAFE Civil Penalties a. Interim Final Rule On July 5, 2016, NHTSA published an interim final rule, without notice and comment, adopting inflation adjustments for civil penalties under its administration, following the procedure and the formula in the 2015 Act. NHTSA did not analyze at that time whether the 2015 Act applied to all of its civil penalties. One of the adjustments NHTSA made at the time was raising the civil penalty rate for CAFE non-compliance from $5.50 to $14.25 NHTSA also indicated in that notice that the maximum penalty rate that the Secretary is permitted to establish for such violations would increase from $10 to $25, although this was not codified in the regulatory text.26 NHTSA made these adjustments without seeking public comment and without discussing with the Department of Transportation Office of General Counsel whether the 2015 Act applied to these rates, whether the adjustments conflict with EPCA’s penalty rate increase procedures, or whether making the adjustments would have negative economic consequences. NHTSA also raised the maximum civil penalty for other violations of EPCA, as amended, to $40,000.27 In response to the changes to the CAFE penalty provisions issued in the interim final rule, the Alliance of Automobile Manufacturers (Alliance) and the Association of Global Automakers (Global) jointly petitioned NHTSA for reconsideration (the Industry Petition).28 The Industry 24 Public Law 114–74, Sec. 701(c). FR 43524 (July 5, 2016). This interim final rule also updated the maximum civil penalty amounts for violations of all statutes and regulations administered by NHTSA, and was not limited solely to penalties administered for CAFE violations. 26 For the reasons described in Section D.5, the maximum penalty rate that the Secretary is permitted to establish for such violations is $10. 27 81 FR 43524 (July 5, 2016). 28 Jaguar Land Rover North America, LLC also filed a petition for reconsideration in response to the July 5, 2016 interim final rule raising the same concerns as those raised in the Industry Petition. 25 81 E:\FR\FM\26JYR1.SGM Continued 26JYR1 36012 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations Petition raised concerns with the significant impact, which they estimated to be at least $1 billion annually, that the increased penalty rate would have on CAFE compliance costs. Specifically, the Industry Petition raised: The issue of retroactivity (applying the penalty increase associated with model years that have already been completed or for which a company’s compliance plan had already been ‘‘set’’); which ‘‘base year’’ (i.e., the year the penalty was established or last adjusted) NHTSA should use for calculating the adjusted penalty rate; and whether an increase in the penalty rate to $14 would cause a ‘‘negative economic impact.’’ jbell on DSK3GLQ082PROD with RULES b. Final Rule In response to the Industry Petition, NHTSA issued a final rule on December 28, 2016.29 In that rule, NHTSA agreed that raising the penalty rate for model years already fully complete would be inappropriate, given how courts generally disfavor the retroactive application of statutes. NHTSA also agreed that raising the rate for model years for which product changes were infeasible due to lack of lead time did not seem consistent with Congress’ intent that the CAFE program be responsive to consumer demand. NHTSA therefore stated that it would not apply the inflation-adjusted penalty rate of $14 until model year 2019, as the agency believed that would be the first year in which product changes could be made in response to the higher penalty rate. Beginning in January 2017, NHTSA took action to delay the effective date of the December 2016 final rule.30 As a result of a recent decision of the United States Court of Appeals for the Second Circuit, that December 2016 final rule is now in force.31 That decision by the Second Circuit does not affect NHTSA’s authority to reconsider the applicability of the 2015 Act to the EPCA CAFE civil penalty provision through notice-andcomment rulemaking and to issue this Both petitions, along with a supplement to the Industry Petition, can be found in Docket ID NHTSA–2016–0075 at www.regulations.gov. 29 81 FR 95489 (December 28, 2016). The December 2016 final rule did not impact the portions of the July 5, 2016 interim final rule not dealing with CAFE, which are expected to be finalized as part of NHTSA’s 2019 inflationary adjustments. 30 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28, 2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017). 31 Order, ECF No. 196, NRDC v. NHTSA, Case No. 17–2780 (2d Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17–2780, at 44 (2d Cir., June 29, 2018) (‘‘The Civil Penalties Rule, 81 FR 95,489, 95,489–92 (December 28, 2016), no longer suspended, is now in force.’’). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 final rule.32 Absent this final rule determining that the 2015 Act does not apply to the CAFE civil penalty rate, the rate would have increased beginning with model year 2019 for noncompliances that will likely be determined in approximately late 2020.33 c. Initial Reconsideration and Request for Comments In light of CAFE compliance data submitted by manufacturers to NHTSA showing that many automakers would begin to fall behind in meeting their applicable CAFE standards beginning in model years 2016 and 2017,34 in July 2017, the agency indicated it was reconsidering its earlier decision in the July 2016 interim final rule to increase the CAFE civil penalty rate. In that reconsideration announcement, the agency explained that it was, for the first time, seeking public comment on the legal, factual, and policy issues implicated by the question of whether the rate should be increased. NHTSA requested public comment on whether and, if so, how to amend the CAFE civil penalty rate.35 d. Notice of Proposed Rulemaking On April 2, 2018, NHTSA published a notice of proposed rulemaking (NPRM) announcing that it had tentatively determined, upon reconsideration, that the 2015 Act should not be applied to the CAFE civil 32 NHTSA is permitted to issue this final rule for the reasons explained in Section D.1. 33 See 81 FR 95489, 95492 (Dec. 28, 2016). Civil penalties are determined after the end of a model year, following NHTSA’s receipt of final reports from the Environmental Protection Agency (EPA), i.e., no earlier than April 2020 for model year 2019 noncompliance. See 77 FR 62624, 63126 (Oct. 15, 2012). 34 ‘‘MYs 2016 and 2017 Projected Fuel Economy Performance Report,’’ February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/ AdditionalInfo.htm. 35 82 FR 32140 (July 12, 2017). Comments on this document can be found at: https:// www.regulations.gov/docket?D=NHTSA-2017-0059. In the NPRM, NHTSA generally described the comments it received in response to its reconsideration notice, including that ‘‘[v]ehicle manufacturers, either directly or via their respective representing organizations, also expressed support for the reconsideration of the 2016 final rule.’’ 83 FR 13904, 13907 (Apr. 2, 2018). NHTSA did not intend to suggest, as one commenter to the NPRM read it, that all ‘‘the vehicle manufacturers who submitted comments uniformly supported reconsideration of the CAFE penalty increase.’’ Comment by Workhorse Group Inc., NHTSA–2018– 0017–0010 (Workhorse Comment), at 2 n.3. NHTSA acknowledges that one electric vehicle manufacturer, Faraday Future, submitted a comment to the reconsideration notice requesting that NHTSA consider the economic impact of a change to the CAFE civil penalty rate on electric vehicle manufacturers. See Docket ID NHTSA– 2017–0059–0016. NHTSA discusses this issue below. PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 penalty formula provision found in 49 U.S.C. 32912 and proposed to retain the current civil penalty rate of $5.50 per .1 of a mile per gallon, rather than to increase it to $14 beginning in model year 2019.36 Through its reconsideration of the applicability of the 2015 Act to the CAFE civil penalty rate, NHTSA is carrying out its responsibility, as OMB instructed in its guidance, to determine whether the penalties under its jurisdiction are ‘‘civil monetary penalt[ies]’’ as defined by the 2015 Act.37 The agency’s proposal is based on a legal determination, after reconsideration, that the CAFE civil penalty rate is not a ‘‘civil monetary penalty’’ as contemplated by the 2015 Act and that therefore the 2015 Act does not apply to the NHTSA CAFE civil penalty formula. Specifically, NHTSA proposed that the formula is not a ‘‘penalty, fine, or other sanction’’ that is either ‘‘a specific monetary amount’’ or ‘‘a maximum amount.’’ Instead, as OMB highlights in the docketed opinion,38 Congress expressly described the rate in the CAFE statute as an ‘‘amount . . . to be used in calculating a civil penalty,’’ not a ‘‘civil penalty’’ itself.39 The CAFE statute outlines a process that NHTSA uses to determine a potential penalty and that manufacturers use to determine their specific penalty. In particular, the $5.50 per .1 mile is merely a rate that goes into a complex, statutory formula used to calculate a potential penalty amount, but the actual civil penalty amount ultimately depends on the decisions of both the violator and potentially other manufacturers. This proposal reflected a change in NHTSA’s position on this issue from when NHTSA previously adjusted the CAFE civil penalty rate from $5 to $5.50. Mindful of the Alliance and Global’s comment that ‘‘the practical and legal issues implicated by such a reduction may prove to be insuperable,’’ 40 at this time, NHTSA is 36 NHTSA’s reconsideration authority is discussed in Section D.1. 37 OMB’s February 2016 guidance confirms that each agency is ‘‘responsible for identifying the civil monetary penalties that fall under the statutes and regulations [it] enforce[s].’’ Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 (Feb. 24, 2016), available at https:// www.whitehouse.gov/sites/whitehouse.gov/files/ omb/memoranda/2016/m-16-06.pdf. 38 OMB Non-Applicability Letter, at 4–5. 39 49 U.S.C. 32912(c)(1)(A). 40 Comment by Alliance of Automobile Manufacturers and Association of Global Automakers, NHTSA–2018–0017–0011 (Alliance and Global Comment), 18 n.75. Because of these practical and legal issues and because the agency is ‘‘reluctant to draw inferences from Congress’ failure to act,’’ Schneidewind v. ANR Pipeline Co., E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations exercising its judgment not to revisit its determination from more than twenty years ago to increase the rate by fifty cents, even if that decision did not take into account the agency’s considered interpretation of the statute.41 Even if one were to assume that the CAFE penalty rate was subject to the 2015 Act, NHTSA proposed in the alternative to maintain the current $5.50 civil penalty rate based on a tentative finding that—either in light of the statutory factors Congress requires NHTSA to analyze under EPCA in determining whether an increase in the civil penalty rate will have ‘‘a substantial deleterious impact on the economy’’ or otherwise—increasing the CAFE civil penalty rate would result in a ‘‘negative economic impact.’’ Pursuant to OMB’s guidance, NHTSA consulted with OMB before proposing this reduced catch-up adjustment determination and submitted its NPRM to the Office of Information and Regulatory Affairs (OIRA) for review. In any event, NHTSA proposed that any adjustment would be capped by the $10 limit in 49 U.S.C. 32912(c)(1)(B), which would remain unadjusted. NHTSA also proposed to finalize the 2017 and 2018 inflationary adjustments for the maximum penalty for general CAFE violations in 49 U.S.C. 32912(a).42 jbell on DSK3GLQ082PROD with RULES C. Overview of the Comments NHTSA received sixteen comments on the NPRM. NHTSA received 485 U.S. 293, 306 (1988), Congress not reinstating the $5 rate—in 2007 in EISA or otherwise—means little, contrary to the suggestion of some commenters. See Comment by California Air Resources Board, California Department of Transportation, District of Columbia Department of Energy and Environment, and New Jersey Department of Environmental Protection, NHTSA– 2018–0017–0014 (CARB Comment), at 20; Comment by Attorneys General of New York, California, Delaware, the District of Columbia, Illinois, Iowa, Maryland, Massachusetts, New Jersey, Oregon, Vermont, Virginia, and Washington, NHTSA–2018– 0017–0015 (Attorneys General Comment), at 8, 9– 10. 41 In light of the conclusions that NHTSA reaches in this final rule and the agency’s decision to maintain the current $5.50 civil penalty rate at this time, rather than increase it to $14 beginning in MY 2019, any modifications to the civil penalty rate, as appropriate, would be more properly the subject of future rulemakings. As stated in the NPRM, NHTSA is considering a separate rulemaking to determine whether the CAFE civil penalty rate should be reduced to $5, in light of NHTSA’s decision here that the 2015 Act should not be applied to the CAFE civil penalty rate. In addition, some commenters here have contended that the CAFE civil penalty rate of $5.50 should be increased under EPCA, even if the 2015 Act is not applied. See infra at Section D.4.a. NHTSA plans to consider these potentially conflicting positions and any further changes to the CAFE civil penalty rate that might be appropriate in a future rulemaking. 42 In this final rule, NHTSA also finalizes the 2019 inflationary adjustments for the general CAFE maximum penalty. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 comments from the following entities and individuals: The Alliance of Automobile Manufacturers; the Association of Global Automakers; Jaguar Land Rover North America LLC; Center for Biological Diversity; Natural Resources Defense Council; Sierra Club (and some of its members); the Union of Concerned Scientists; Center for American Progress; Attorneys General of New York, California, Delaware, the District of Columbia, Illinois, Iowa, Maryland, Massachusetts, New Jersey, Oregon, Vermont, Virginia, and Washington; the California Air Resources Board; the California Department of Transportation; the District of Columbia Department of Energy and Environment; the New Jersey Department of Environmental Protection; the Institute for Policy Integrity at New York University School of Law; Workhorse Group Inc.; and other individuals. D. Response to the Comments 1. NHTSA’s Reconsideration Authority As a threshold matter, NHTSA must address the various comments submitted regarding the agency’s ability to reconsider its previous rules on this issue and upon reconsideration, change its position regarding the applicability of the 2015 Act to the CAFE civil penalty rate and the need to invoke the ‘‘negative economic impact’’ exception.43 NHTSA, like all agencies, is permitted to change its views based upon its experience and expertise, provided that the requirements of the APA and other governing statutes are met. To do so, an agency must show that it is aware it is changing its position and provide a reasoned explanation for the change.44 This holds true even if the agency’s position has been ‘‘longstanding,’’ as some commenters characterized here,45 because the agency must continually consider varying interpretations and reassess their validity.46 43 See, e.g., Workhorse Comment, at 3; Comment by Center for American Progress, NHTSA–2018– 0017–0013 (CAP Comment), at 3; Attorneys General Comment, at 6; Comment by Institute for Policy Integrity at New York University School of Law, NHTSA–2018–0017–0017 (IPI Comment), at 2–3. 44 Alliance and Global Comment, at 4–5 (citing Encino Motorcars LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016); FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515–16 (2009)). 45 See, e.g., Workhorse Comment, at 3; Attorneys General Comment, at 6; IPI Comment, at 1. 46 Rust v. Sullivan, 500 U.S. 173, 186–87 (1991); see also Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126 (2016); FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009); Nat’l Cable & Telecommunications Ass’n v. Brand X internet Servs., 545 U.S. 967, 981 (2005); GenOn REMA, LLC v. U.S. E.P.A., 722 F.3d 513, 525 (3d Cir. 2013) (An agency ‘‘is not forever held to its prior PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 36013 Here, NHTSA expressly acknowledged in the NPRM that its tentative determination that the CAFE civil penalty rate is not a ‘‘civil monetary penalty’’ subject to inflationary adjustment under the 2015 Act ‘‘reflects a change in NHTSA’s position on this issue.’’ 47 As NHTSA explained in the NPRM, NHTSA proposed the change because it previously ‘‘did not consider’’ the issue and had proceeded in the July 2016 interim final rule ‘‘without analysis’’ of the statutory interpretation and policy issues considered in this rulemaking and without the benefit of public comment.48 Accordingly, after providing a comprehensive ‘‘reasoned explanation’’ in the NPRM,49 NHTSA reached a tentative determination that a change was appropriate and that its proposed change was justified—an analysis upon which it then sought comment.50 interpretations, as the continued validity and appropriateness of the agency’s rules is an evolving process.’’); Strickland v. Comm’r, Maine Dep’t of Human Servs., 48 F.3d 12, 18 (1st Cir. 1995) (‘‘[A]n explained modification, even one that represents a sharp departure from a longstanding prior interpretation, ordinarily retains whatever deference is due.’’). Given that the current penalty rate has been in effect since it was set decades ago, however, NHTSA will apply its new position on a prospective basis only from the effective date of this final rule. 47 83 FR 13904, 13908 (May 2, 2018). As established in OMB’s opinion and explained further below, NHTSA’s changed position comports with OMB’s interpretation of the 2015 Act—that is, the interpretation provided by the office designated by Congress to issue guidance to all agencies on how the 2015 Act should be implemented. OMB NonApplicability Letter. 48 83 FR 13904, 13904–05 (May 2, 2018). Comments noting that NHTSA has previously ‘‘acknowledged’’ that the 2015 Act applies to the CAFE civil penalty rate, Comment by Center for Biological Diversity, Natural Resources Defense Council, Sierra Club, and the Union of Concerned Scientists, NHTSA–2018–0017–0012 (CBD Comment), at 9; see also CARB Comment, at 6; IPI Comment, at 2, miss the point: NHTSA expressly recognized its past position in the NPRM, but the agency noted that it had adopted that position without analyzing the issue. After appropriate examination, NHTSA changed its position to comport with the applicable statutes. It is irrelevant that ‘‘none of the commenters who responded to NHTSA’s [previous] request for comments offered the legal interpretation that NHTSA is now proposing,’’ Workhorse Comment, at 3–4, or that the Alliance and Global have previously stated that ‘‘NHTSA is not empowered to exempt the CAFE program from th[e] directive’’ of the 2015 Act, Industry Petition, at 1. NHTSA is permitted to— and, in fact, has the responsibility to—interpret Federal statutes related to matters under its purview, see U.S. ex rel. Hall v. Payne, 254 U.S. 343, 347–48 (1920) (‘‘[The Secretary of the Interior] could not administer or apply the act without construing it.’’), and the public has now had a full opportunity to comment on the proposed interpretation. 49 83 FR 13904, 13908–11 (May 2, 2018). 50 One commenter noted that ‘‘NHTSA did not consult with the Department of Justice or any other E:\FR\FM\26JYR1.SGM Continued 26JYR1 36014 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES To the extent that NHTSA’s ‘‘prior policy has engendered serious reliance interests that must be taken into account,’’ NHTSA has provided ‘‘a more detailed justification’’ than what sufficed to create its previous policy.51 As explained in the NPRM and further below, NHTSA did not previously consider the issue at all and thus any explanation is ‘‘more detailed’’ than the one it previously provided. Regardless, ‘‘reliance does not overwhelm good reasons for a policy change,’’ even in instances that would ‘‘necessitate systemic, significant changes’’ to regulated entities’ practices.52 NHTSA believes that correcting an erroneous legal interpretation of a statute to align its practice with what Congress required and exercising authority conferred by Congress to avoid a ‘‘negative economic impact’’ both constitute ‘‘good reasons for a policy change.’’ Moreover, ‘‘the extent to which the Department is obliged to address reliance will be affected by the thoroughness of public comments it receives on the issue,’’ 53 and only one regulated entity submitted a comment containing any argument that its reliance on NHTSA’s previous policy supports an increase in the CAFE civil penalty rate to $14.54 The reliance argued in this single comment does not override NHTSA’s obligation to apply the 2015 Act as enacted or to act in accord with the statute—and with OMB’s concurrence 55—to avoid imposing a ‘‘negative economic impact.’’ It is of no consequence that the 2015 Act does not expressly state that NHTSA may reconsider its previous rules on the initial inflation adjustment. For one, the APA defines ‘‘rule making’’—the mechanism mandated by the 2015 Act for enacting the initial agencies besides DOT and OMB in crafting its interpretation of the Inflation Adjustment Act applicable to the entire federal government,’’ as evidence that NHTSA’s interpretation does not merit deference. Workhorse Comment, at 3. As noted above, OMB has provided its views on the applicability of the 2015 Act to the CAFE civil penalty rate in a comprehensive opinion included in the docket for this rulemaking. OMB NonApplicability Letter. In addition, as part of its review of the NPRM before publication in the Federal Register, OIRA within OMB managed an interagency review process, in which the Department of Justice and other agencies were able to review and provide comments on NHTSA’s proposal. Moreover, consultation principally with OMB was appropriate as the 2015 Act directed OMB to provide guidance to agencies on implementing the inflation adjustments required under the 2015 Act. 51 Fox, 556 U.S. at 515. 52 Navarro, 136 S. Ct. at 2128 (2016) (Ginsburg, J., concurring). 53 Id. at 2128 n.2. 54 See Workhorse Comment, at 3. 55 OMB Negative Economic Impact Letter. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 catch-up adjustment and for invoking the ‘‘negative economic impact’’ exception—to include the process of ‘‘amending, or repealing a rule.’’ 56 But in any event, no specific statutory or codified regulatory authority is required. It is well-established that agencies have various inherent powers.57 And it has been affirmed repeatedly that, in the absence of a Congressional prohibition, agencies have the inherent power to reconsider their own decisions.58 This inherent 56 5 U.S.C. 551(5) (‘‘ ‘[R]ule making’ means agency process for formulating, amending, or repealing a rule.’’). Moreover, NHTSA’s regulations provide that ‘‘[t]he Administrator may initiate any further rulemaking proceedings that he finds necessary or desirable.’’ 49 CFR 553.25. 57 See, e.g., Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 544 (1978) (noting ‘‘the very basic tenet of administrative law that agencies should be free to fashion their own rules of procedure’’); Morton v. Ruiz, 415 U.S. 199, 231 (1974) (‘‘The power of an administrative agency to administer a congressionally created and funded program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.’’); Gadda v. Ashcroft, 377 F.3d 934, 948 n.8 (9th Cir. 2004) (‘‘Of course, our statutory and inherent powers to regulate attorneys admitted to the Ninth Circuit bar coexist with the separate, independent powers of federal administrative agencies to do the same. . . . In the case of agencies, this power, though limited, exists whether or not expressly authorized by statute.’’); Ober v. Whitman, 243 F.3d 1190, 1194–95 (9th Cir. 2001) (indicating that agencies have the inherent authority to exempt de minimis violations from regulation if not prohibited by statute); Tate & Lyle, Inc. v. C.I.R., 87 F.3d 99, 104 (3d Cir. 1996) (‘‘Inherent in the powers of an administrative agency is the authority to formulate policies and to promulgate rules to fill any gaps left, either implicitly or explicitly, by Congress.’’) (citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984)); Nat. Res. Def. Council, Inc. v. Sec. & Exch. Comm’n, 606 F.2d 1031, 1056 (D.C. Cir. 1979) (‘‘An agency is allowed to be master of its own house, lest effective agency decisionmaking not occur in [a]ny proceeding.’’). 58 See, e.g., Motor Vehicles Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983) (‘‘[A]n agency must be given ample latitude to ‘adapt their rules and policies to the demands of changing circumstances.’ ’’ (quoting Permian Basin Area Rate Cases, 390 U.S. 747, 784 (1968))); Am. Trucking Associations v. Atchison, T. & S. F. Ry. Co., 387 U.S. 397, 416 (1967) (‘‘We agree that the Commission, faced with new developments or in light of reconsideration of the relevant facts and its mandate, may alter its past interpretation and overturn past administrative rulings and practice. . . . This kind of flexibility and adaptability to changing needs and patterns of transportation is an essential part of the office of a regulatory agency. Regulatory agencies do not establish rules of conduct to last forever; they are supposed, within the limits of the law and of fair and prudent administration, to adapt their rules and practices to the Nation’s needs in a volatile, changing economy. They are neither required nor supposed to regulate the present and the future within the inflexible limits of yesterday.’’) (cleaned up); Cobra Nat. Res., LLC v. Fed. Mine Safety & Health Review Comm’n, 742 F.3d 82, 101 (4th Cir. 2014) (‘‘[A]n administrative agency, charged with the protection of the public interest, is certainly not precluded from taking appropriate action because of a mistaken action on its part in the past.’’ (quoting PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 authority encompasses an agency reconsidering how it previously interpreted a statute and amending an NLRB v. Balt. Transit Co., 140 F.2d 51, 55 (4th Cir. 1944))); Kindred Nursing Centers E., LLC v. N.L.R.B., 727 F.3d 552, 560 (6th Cir. 2013) (‘‘An agency may depart from its precedents, and provided that the departure from precedent is explained, our review is limited to whether the rationale is so unreasonable as to be arbitrary and capricious. An administrative agency may reexamine its prior decisions and may depart from its precedents provided the departure is explicitly and rationally justified.’’) (cleaned up); ConocoPhillips Co. v. U.S. E.P.A., 612 F.3d 822, 832 (5th Cir. 2010) (‘‘Embedded in an agency’s power to make a decision is its power to reconsider that decision.’’); Tokyo Kikai Seisakusho, Ltd. v. United States, 529 F.3d 1352, 1360–61 (Fed. Cir. 2008) (‘‘[A]dministrative agencies possess inherent authority to reconsider their decisions, subject to certain limitations, regardless of whether they possess explicit statutory authority to do so.’’); Friends of Boundary Waters Wilderness v. Bosworth, 437 F.3d 815, 823–24 (8th Cir. 2006) (‘‘Agencies given the authority to promulgate a quota are presumed to have the authority to adjust that quota.’’); S. California Edison Co. v. F.E.R.C., 415 F.3d 17, 22–23 (D.C. Cir. 2005) (‘‘[O]f course, agencies may alter regulations. Agencies may even alter their own regulations sua sponte, in the absence of complaints, provided they have sufficient reason to do so and follow applicable procedures.’’); Macktal v. Chao, 286 F.3d 822, 825– 26 (5th Cir. 2002) (‘‘[I]t is generally accepted that in the absence of a specific statutory limitation, an administrative agency has the inherent authority to reconsider its decisions.’’); Harrington v. Chao, 280 F.3d 50, 59 (1st Cir. 2002) (‘‘Agencies do have leeway to change their interpretations of laws, as well as of their own regulations, provided they explain the reasons for such change and provided that those reasons meet the applicable standard of review.’’); Belville Mining Co. v. United States, 999 F.2d 989, 997 (6th Cir. 1993) (‘‘Even where there is no express reconsideration authority for an agency, [ ] the general rule is that an agency has inherent authority to reconsider its decision.’’); Rainbow Broad. Co. v. F.C.C., 949 F.2d 405, 409 (D.C. Cir. 1991) (‘‘Agencies enjoy wide latitude when using rulemaking to change their own policies and the manner by which their policies are implemented. . . . According agencies the power to change their minds about their own policies, practices and procedures rests on a sound policy basis. Agencies need some flexibility in carrying out their authority.’’); Dun & Bradstreet Corp. Found. v. United States Postal Serv., 946 F.2d 189, 193 (2d Cir. 1991) (‘‘It is widely accepted that an agency may, on its own initiative, reconsider its interim or even its final decisions, regardless of whether the applicable statute and agency regulations expressly provide for such review.’’); Dawson v. Merit Sys. Prot. Bd., 712 F.2d 264, 267 (7th Cir. 1983) (describing ‘‘the general rule that administrative agencies have the power to reconsider decisions on their own initiative’’); Dana Corp. v. ICC, 703 F.2d 1297, 1305 (D.C. Cir. 1983) (‘‘[T]he agency is entitled to have second thoughts, and to sustain action which it considers in the public interest upon whatever basis more mature reflection suggests.’’); Trujillo v. Gen. Elec. Co., 621 F.2d 1084, 1086 (10th Cir. 1980) (‘‘Administrative agencies have an inherent authority to reconsider their own decisions, since the power to decide in the first instance carries with it the power to reconsider.’’); Mazaleski v. Treusdell, 562 F.2d 701, 720 (D.C. Cir. 1977) (‘‘We have many times held that an agency has the inherent power to reconsider and change a decision if it does so within a reasonable period of time.’’) (quoting Gratehouse v. United States, 512 F.2d 1104, 1109 (Ct. Cl. 1975)); Albertson v. FCC, 182 F.2d 397, 399 (D.C. Cir. 1950) (‘‘The power to reconsider is inherent in the power to decide.’’). E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations existing regulation by going through the notice-and-comment rulemaking process under the APA, particularly when its updated interpretation ‘‘closely fits the design of the statute as a whole and its object and policy.’’ 59 It is common practice for agencies— including NHTSA—to exercise their inherent reconsideration authority.60 That is because ‘‘reconsideration is often the sole means of correcting errors of procedure or substance,’’ and ‘‘[t]here may also be instances when unmistakable shifts in our basic judgments about law or policy necessitate the revision or amendment of previously established rules of conduct.’’ 61 In fact, agencies may even have a duty to reconsider their rules. As the Supreme Court has noted: jbell on DSK3GLQ082PROD with RULES An initial agency interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis.62 59 Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417–18 (1993) (cleaned up); see also U.S. Telecom Ass’n v. F.C.C., 400 F.3d 29, 35 (D.C. Cir. 2005) (‘‘[I]f an agency adopts ‘a new position inconsistent with’ an existing regulation, or effects ‘a substantive change in the regulation,’ notice and comment are required.’’) (quoting Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 100 (1995)); Nat’l Classification Comm. v. United States, 22 F.3d 1174, 1177 (D.C. Cir. 1994) (‘‘[A]n agency may depart from its past interpretation [of a statute] so long as it provides a reasoned basis for the change.’’) (citing Motor Vehicles Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); Torrington Extend-A-Care Employee Ass’n v. N.L.R.B., 17 F.3d 580, 589 (2d Cir. 1994) (similar). 60 See, e.g., 82 FR 14671, 14671 (Mar. 22, 2017) (‘‘The EPA [in a joint notice with NHTSA] has inherent authority to reconsider past decisions and to revise, replace or repeal a decision to the extent permitted by law and supported by a reasoned explanation.’’ (citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009))); 76 FR 22565, 22578 (Apr. 21, 2011) (‘‘An agency generally remains free to revise improperly promulgated or otherwise unsupportable rules, even in the absence of a remand from a Court. . . . Agencies have particularly broad authority to revise their regulations to correct their errors. . . . Moreover, an agency may reconsider its methodologies and application of its statutory requirements and may even completely reverse course, regardless of whether a court has determined that its original regulation is flawed, so long as the agency explains its bases for doing so.’’) (citations omitted); 75 FR 6883, 6884 (Feb. 12, 2010) (‘‘The Department [of Labor] has inherent authority to change its regulations in accordance with the Administrative Procedure Act (APA).’’); 64 FR 60556, 60580 (Nov. 5, 1999) (NHTSA ‘‘believe[s] that nothing in [the statute] derogates our inherent authority to make temporary adjustments in the requirements we adopt if, in our judgment, such adjustments are necessary or prudent to promote the smooth and effective achievement of the goals of the amendments.’’). 61 Bookman v. United States, 453 F.2d 1263, 1265 (Ct. Cl. 1972). 62 Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 863–64 (1984) (emphasis added). In a subsequent case, the Supreme Court confirmed that such reconsiderations should be done, at a VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 At bottom, ‘‘[i]f an agency is to function effectively, however, it must have some opportunity to amend its rules and regulations in light of its experience.’’ 63 OMB’s February 2016 guidance on implementing the 2015 Act confirms that each agency is ‘‘responsible for identifying the civil monetary penalties that fall under the statutes and regulations [it] enforce[s].’’ 64 This is an ongoing responsibility for each agency, as confirmed in OMB’s subsequent guidance in December 2016, December 2017, and December 2018.65 In the docketed opinion regarding NHTSA’s determination that the 2015 Act does not apply to the CAFE civil penalty rate, OMB affirms that it is appropriate for NHTSA to reconsider its previous interpretation of the 2015 Act.66 NHTSA has specific statutory authority to administer the CAFE standards program 67 and retains general minimum, ‘‘in response to changed factual circumstances, or a change in administrations.’’ Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (citing Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 59 (1983) (Rehnquist, J., concurring in part and dissenting in part)). 63 Fla. Cellular Mobil Commc’ns Corp. v. F.C.C., 28 F.3d 191, 196 (D.C. Cir. 1994). 64 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 (Feb. 24, 2016), available at https:// www.whitehouse.gov/sites/whitehouse.gov/files/ omb/memoranda/2016/m-16-06.pdf. 65 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the 2017 annual adjustment pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 (Dec. 16, 2016), available at https:// www.whitehouse.gov/sites/whitehouse.gov/files/ omb/memoranda/2017/m-17-11_0.pdf (‘‘Agencies are responsible for identifying the civil monetary penalties that fall under the statutes and regulations they enforce.’’); Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 (Dec. 15, 2017), available at https://www.whitehouse.gov/wp-content/uploads/ 2017/11/M-18-03.pdf (‘‘Agencies are responsible for identifying the civil monetary penalties that fall under the statutes and regulations within their jurisdiction.’’); Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of Penalty Inflation Adjustments for 2019, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 (Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/ uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) (‘‘Agencies are responsible for identifying the civil monetary penalties that fall under the statutes and regulations within their jurisdiction.’’). 66 See generally OMB Non-Applicability Letter. 67 See, e.g., 49 U.S.C. 32902, 32912. The Secretary’s authority under EPCA is delegated to NHTSA. 49 CFR 1.95(a) (delegating authority to NHTSA to exercise the authority vested in the Secretary under chapter 329 of title 49 of the U.S. Code); see also 1.94(c). PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 36015 authority—beyond its inherent authority—to do so efficiently and in the public interest.68 In the text of the 2015 Act, Congress did not prohibit or otherwise restrict agencies from reconsidering whether an initial catchup adjustment is required or, if so, the magnitude of such an adjustment. 2. Applicability of the 2015 Act Multiple commentators disagreed with NHTSA’s proposed determination that the $5.50 civil penalty rate used in the formula for manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) is not a ‘‘civil monetary penalty’’ subject to adjustment under the 2015 Act.69 After thorough consideration of all these comments, NHTSA adopts its tentative determination. To be a ‘‘civil monetary penalty’’ that must be adjusted for inflation under the 2015 Act, a ‘‘penalty, fine, or other sanction’’ must be, among other things, ‘‘for a specific monetary amount as provided by Federal law’’ or have ‘‘a maximum amount provided for by Federal law.’’ 70 The CAFE civil penalty rate is neither. For one, the CAFE civil penalty rate is an input in a formula that is used to calculate a penalty. And although the CAFE civil penalty rate is capped at $10 by statute,71 the civil penalty for manufacturers that violate an average fuel economy standards, as defined in 49 U.S.C. 32912(b), has no maximum amount. The higher the shortfall or the higher the number of vehicles in the fleet, the higher the potential penalty (before accounting for credits). This formula stands in stark contrast to the immediately preceding provision specifying the ‘‘general penalty’’ for 68 See 49 U.S.C. 302(a) (stating the Secretary of Transportation is governed by the transportation policy described in part in 49 U.S.C. 13101(b), which provides that oversight of the modes of transportation ‘‘shall be administered and enforced to carry out the policy of this section and to promote the public interest’’); 49 U.S.C. 322(a) (‘‘The Secretary of Transportation may prescribe regulations to carry out the duties and powers of the Secretary. An officer of the Department of Transportation may prescribe regulations to carry out the duties and powers of the officer.’’); 49 U.S.C. 105(c)(2) (directing the NHTSA Administrator to ‘‘carry out . . . additional duties and powers prescribed by the Secretary’’); 49 CFR 1.81(a)(3) (‘‘Except as prescribed by the Secretary of Transportation, each Administrator is authorized to . . . [e]xercise the authority vested in the Secretary to prescribe regulations under 49 U.S.C. 322(a) with respect to statutory provisions for which authority is delegated by other sections in this part.’’). 69 See, e.g., Workhorse Comment, at 3; CBD Comment, at 7; CAP Comment, at 2–3; CARB Comment, at 7–8; Attorneys General Comment, at 7; IPI Comment, at 1. 70 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 3(2). 71 49 U.S.C. 32912(c)(1)(B). The $10 cap is addressed further in Section D.5. E:\FR\FM\26JYR1.SGM 26JYR1 36016 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES EPCA violations: ‘‘A person that violates section 32911(a) of this title is liable to the United States Government for a civil penalty of not more than $10,000 for each violation.’’ 72 The phrase ‘‘not more than’’ plainly denotes that the $10,000 civil penalty is a maximum amount for each violation, and, as such, this amount (as promulgated in 49 CFR 578.6(h)(1)) was properly adjusted pursuant to the 2015 Act.73 The $5.50 rate also is not a ‘‘penalty’’ for a ‘‘specific monetary amount.’’ Again, the rate is one factor in a complex formula that is used to calculate the penalty. Moreover, the portion of the penalty calculated by NHTSA is only the potential penalty. The ultimate penalty owed is determined by the manufacturer based on the statutory provision authorizing the deduction of ‘‘the credits available to the manufacturer.’’ 74 The CAFE civil penalty statute states expressly that this credit reduction process is part of the calculation of the civil penalty.75 It is 72 49 U.S.C. 32912(a); see also 49 U.S.C. 30165(a) (establishing that violations of the National Traffic and Motor Vehicle Safety Act are generally subject to ‘‘a maximum amount’’ of ‘‘not more than’’ $21,000 per violation and a ‘‘maximum penalty’’ of $105 million for a related series of violations). 73 81 FR 43524, 43526 (July 5, 2016). The penalty in 49 U.S.C. 32912(a), promulgated in 49 CFR 578.6(h)(1), is subject to additional inflationary adjustments for 2017 and 2018, which were proposed in the NPRM, and for 2019, which is being finalized in this rule. Applying the multiplier for 2017 of 1.01636, as specified in OMB’s December 16, 2016 guidance, results in an adjusted maximum penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as specified in OMB’s December 15, 2017 guidance, results in an adjusted maximum penalty of $41,484. NHTSA received no comments objecting to these proposed adjustments and finalizes those inflationary adjustments in this rule. Applying the multiplier for 2019 of 1.02522, as specified in OMB’s December 14, 2018 guidance, results in an adjusted maximum penalty of $42,530. In accordance with the procedures provided in the 2015 Act, and confirmed by OMB’s guidance on implementing the 2015 Act, NHTSA finalizes the 2019 adjustment for the general CAFE penalty through this final rule. 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(b)(2); Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of Penalty Inflation Adjustments for 2019, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 4 (Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/ uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) (‘‘In accordance with the 2015 Act, agencies shall adjust civil monetary penalties notwithstanding Section 553 of the Administrative Procedure Act (APA). This means that the public procedure the APA generally requires (i.e., notice, an opportunity for comment, and a delay in effective date) is not required for agencies to issue regulations implementing the annual adjustment.’’) (footnote omitted). 74 49 U.S.C. 32912(b)(3). 75 49 U.S.C. 32912(b)(3). Section 32903(h) is not to the contrary, as one commenter suggested. See CAP Comment, at 2. That provision describes a refund process that is relevant only after ‘‘a civil VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 not, as some commenters suggested,76 a distinct process that is conducted after the penalty has already been calculated.77 The inputs to the civil penalty formula, including the reduction for available credits, are joined by the conjunctive ‘‘and’’ in the statute.78 And while it is true, as one commenter noted, that ‘‘a specific penalty amount will still result after manufacturer credits are taken into account,’’ 79 that is not ‘‘a specific monetary amount as provided by Federal law,’’ as required by the 2015 Act. The amount is determined by a process codified in Federal law, but the specific final penalty amount itself is not ‘‘provided by Federal law.’’ The ‘‘specific monetary amount’’ is unknown until the manufacturer decides to use any available credits it has, or can acquire, to make up for the shortfall identified by NHTSA.80 In fact, if a manufacturer has enough credits or has a plan to earn sufficient credits in the future, the penalty ultimately calculated may be zero.81 It is the penalty has been collected,’’ not before the civil penalty—including any credit reduction—is fully calculated. 76 See, e.g., CARB Comment, at 11 (‘‘NHTSA knows exactly how much a manufacturer owes and must pay in civil penalties for failing to meet the CAFE standard—NHTSA calculates that amount. What NHTSA may not know is how exactly the manufacturer will satisfy that amount (direct payment vs. credits), but the specific amount owed, i.e., the civil penalty, is very much known.’’); Attorneys General Comment, at 7 (‘‘Nor does the availability of a credit mechanism that allows a manufacturer an alternate means to fully or partially comply with the CAFE standards have any bearing on the nature of the penalty. . . .’’); IPI Comment, at 3 (‘‘Credit trading and transfers allow the manufacturer to reduce its incidence of noncompliance, but the penalty per incidence of noncompliance remains fixed and specific. . . .’’). 77 One commenter stated ‘‘many, if not all, civil monetary penalties assessed by any agency depend, on some level, on the regulated entity’s decisions about whether, and how, to comply with a regulatory standard.’’ IPI Comment, at 2–3. The comment cited no specific examples, but regardless, the unique feature in the CAFE civil penalty scheme relevant in this context is that the calculation of the civil penalty amount expressly includes a reduction for the credits available to the manufacturer. A manufacturer could both decide not to meet an applicable CAFE standard and not to pay a civil penalty (or to pay a smaller penalty). Under other civil penalty schemes, a person who does not comply with a regulatory standard does not get to decide whether or how much of a penalty to pay. 78 49 U.S.C. 32912(b). 79 CBD Comment, at 8. The comment further stated that ‘‘[t]his is no different from other ratebased penalty systems which allow for some reduction of liability,’’ but cited no example. 80 NHTSA is able to request supplemental reports and audit a manufacturer’s compliance plan, see, e.g., 49 CFR 537.8, but ultimately, it is the manufacturer’s decision on how to use the credits available to it. 81 49 CFR 536.5(d). A manufacturer may propose a plan to earn future credits within the subsequent three model years in order to comply with its PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 manufacturer who decides this, not the agency.82 Credit flexibilities were expressly included in the statute by Congressional design to give industry the ability to decide how to achieve the required fuel economy improvements efficiently. Notably, as mentioned in the NPRM, Congress gave manufacturers the ability to trade credits with other manufacturers in 2007 in EISA, introducing an additional level of complexity to the calculation process, which is different from other civil penalty calculations. This is far from a direction to the agency to execute a ‘‘minor mathematic calculation used to figure up a total penalty number,’’ as one commenter described it.83 As explained in the opinion included in the docket for the rule, OMB concurs with NHTSA’s interpretation of the 2015 Act: OMB agrees that the CAFE civil penalty rate is not a ‘‘penalty, fine, or other sanction’’ that ‘‘is for a specific monetary amount’’ because EPCA distinguishes between the rate, the ‘‘amount . . . used in calculating a civil penalty,’’ and the ‘‘civil penalty’’ itself.84 Nor does OMB believe that the CAFE penalty has a ‘‘maximum amount provided for by Federal law’’: There is no limit to the level of civil penalty that can be imposed under EPCA because the civil penalty rate is merely one factor in the formula used to calculate the potential civil penalty liability. OMB explains further that the $10 cap does not qualify as ‘‘maximum amount provided for by Federal law’’ because it limits the ‘‘amount . . . used in calculating a civil penalty,’’ not the ‘‘civil penalty’’ itself. Moreover, the $10 cap cannot be ‘‘assessed or enforced’’ at the time of the violation as required by the 2015 Act. Rather, it serves as a limitation on NHTSA’s authority to alter the penalty rate. Because of the changes that Congress enacted to the CAFE program through regulatory obligations for the current model year, and NHTSA will not even initiate compliance proceedings until the time that the manufacturer’s approved plan indicates that credits will be earned or acquired to achieve compliance. 49 CFR 536.7. Although many manufacturers have not met applicable standards, only one manufacturer paid civil penalties for MY 2014 and only two paid civil penalties for MYs 2012 and 2013. See https:// one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_ LIVE.html. 82 Manufacturers instruct NHTSA on how they wish to allocate their credits or otherwise account for shortfalls. See 49 CFR 536.5(d)(2), (6). 83 CARB Comment, at 9–10. Although the introductory language of the statutory provision may be ‘‘similar’’ to that of the general penalty for EPCA violations, as noted by the commenter, the process described for calculating the penalty is the material difference, as explained above. 84 OMB Non-Applicability Letter, at 4–5. E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations EISA in 2007, Congress was not necessarily ‘‘on notice’’ that NHTSA would apply the 2015 Act to the CAFE civil penalty rate, as one comment stated, merely because it had done so in 1997.85 In fact, NHTSA did not make any subsequent adjustments to the $5.50 rate, even as it repeatedly made adjustments to its other civil penalties— including an adjustment to the maximum general penalty under EPCA in 49 U.S.C. 32912(a).86 Apparently concerned about the ease with which the CAFE civil penalties program could damage the economy and the automobile industry in particular,87 Congress imposed a strict, tailored procedure for adjusting the CAFE civil penalty rate, requiring robust substantive findings and specific procedures, including providing opportunity for the Federal Trade Commission to comment and requiring at least eighteen months before an increased rate can go into effect.88 This process stands in stark contrast to the summary approach delineated in the 2015 Act, which presumptively requires an interim final rule without notice and comment for the initial catch-up adjustment and similarly requires subsequent adjustments to be made without the traditional notice-andcomment process outlined in the APA.89 One comment observed that ‘‘the 2015 Act provides that an agency need not make inflation-based adjustments if it has implemented a discretionary adjustment . . . greater than the annual inflation adjustment.’’ 90 NHTSA agrees 85 Attorneys General Comment, at 9. FR 37876 (July 14, 1999); 66 FR 41149 (Aug. 7, 2001); 69 FR 57864 (Sept. 28, 2004); 70 FR 53308 (Sept. 8, 2005); 71 FR 28279 (May 16, 2006); 73 FR 9955 (Feb. 25, 2008) (adjusting maximum general penalty under EPCA and another NHTSA penalty); 75 FR 5244 (Feb. 2, 2010). 87 See, e.g., ‘‘Energy Initiatives of the 95th Congress,’’ S. Rep. No. 96–10, at 175–76 (1979) (‘‘Representative Dingell (D-Mich.), concerned that increasing the penalties could lead to layoffs in the automobile industry, insisted that raising the penalties be contingent upon findings by the Secretary of Transportation that increasing the penalties would achieve energy savings and would not be harmful to the economy.’’); H.R. Rep. No. 94– 340, at 87 (1975) (‘‘The automobile industry has a central role in our national economy and that any regulatory program must be carefully drafted so as to require of the industry what is attainable without either imposing impossible burdens on it or unduly limiting consumer choice as to capacity and performance of motor vehicles.’’); 121 Cong. Rec. 18675 (June 12, 1975) (statement of Rep. Sharp) (‘‘[W]e recognize that we have serious unemployment in the American auto industry and we want to preserve this important segment of the economy.’’). 88 See 49 U.S.C. 32912(c). 89 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(b). 90 Attorneys General Comment, at 9 (citing 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(d)). with the general notion offered by the commenter that this provision suggests Congress intended the inflation adjustments required under the 2015 Act to coexist with discretionary adjustments provided for under other statutes. But as described in the NPRM and below—and recognized by OMB in the opinion included in the docket for this rulemaking 91—the CAFE civil penalty program is unique—namely, that the amount in question is a single input in a complex market-based penalty program, and not the penalty amount itself. And as OMB further explains in its opinion, the statutory structure of EPCA itself strongly indicates that Congress did not intend the 2015 Act to apply to the CAFE civil penalty rate. Under EPCA, there is no automatic increase in the penalty rate, the burden is on the Secretary to demonstrate an absence of economic harm before increasing the rate, and any increase is capped at $10. In contrast, under the 2015 Act, increases are automatic, the Secretary has the burden of demonstrating economic harm to stop an initial increase and has no power to stop future increases, and the potential penalty increases are unlimited. It is highly unlikely that Congress intended to shift from the EPCA scheme to the 2015 Act scheme without any reference to EPCA. Accordingly, NHTSA determines that Congress did not intend for the 2015 Act to apply to the CAFE civil penalty rate.92 Some commenters noted that the 2015 Act is designed to keep civil monetary penalties at the same levels, in real terms, not increase them.93 In response, jbell on DSK3GLQ082PROD with RULES 86 64 VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 Non-Applicability Letter, at 4–6. the extent the 2015 Act does apply to the CAFE civil penalty rate, EPCA prohibits NHTSA from increasing the CAFE civil penalty rate—for an inflation adjustment or otherwise—at this time, for the reasons described below. 93 See, e.g., CBD Comment, at 7; CAP Comment, at 3–4; CARB Comment, at 13; IPI Comment, at 19– 20. One of these commenters claimed that ‘‘Congress especially intended inflationary adjustments to apply in areas of heightened regulatory concern, such as health and safety, the environment, and consumer protection.’’ CBD Comment, at 6 (citing James Ming Chen, InflationBased Adjustments in Federal Civil Monetary Penalties, 34 Yale L. & Pol’y Rev. 1, 3 (2015)). There is nothing in the 2015 Act that supports this claim. The original source cited by the comment’s cited source is not the legislative history of the 2015 Act—or even the 1990 Inflation Adjustment Act— but a Federal Register notice from 1973, identifying various recommendations from the Administrative Conference of the United States. 38 FR 19782, 19792 (July 23, 1973). The recommendation in question had nothing to do with inflation adjustments; the Administrative Conference merely noted that ‘‘[i]n many areas of increased concern (e.g., health and safety, the environment, consumer protection) availability of civil money penalties might significantly enhance an agency’s ability to achieve its statutory goals.’’ 38 FR 19782, 19792 (July 23, 1973). PO 00000 91 OMB 92 To Frm 00041 Fmt 4700 Sfmt 4700 36017 NHTSA notes that the 2015 Act itself repeatedly refers to the adjustments as ‘‘increases.’’ 94 Accepting the commenters’ point, however, would actually provide further support for NHTSA’s determination that the 2015 Act does not apply to the CAFE civil penalty rate. Because of the unique nature of the CAFE civil penalty formula, applying the 2015 Act to it would exceed the purpose of the 2015 Act noted by those commenters to ‘‘maintain’’ the real value of civil monetary penalties: Instead, doing so would constitute an increase.95 Moreover, as OMB noted in the opinion included in the docket, the unique features of EPCA also make the 2015 Act inconsistent with the CAFE civil penalty rate because, under EPCA, Congress required the Secretary of Transportation to regularly establish the maximum feasible fuel efficiency standards based on, among other things, developing technology, as opposed to applying a rote, formulaic increase to the penalty rate.96 Rather than ‘‘maintain[ing]’’ the real value of the CAFE civil penalty formula through inflation adjustment procedures, Congress chose other means: The CAFE civil penalty formula is based in part on the amount of the manufacturer’s shortfall, and Congress requires NHTSA to prescribe the maximum feasible average fuel economy standards annually.97 If a manufacturer failed to 94 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(c), 5(a), 5(b)(2)(C), 6. 95 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 2(b)(2). One commenter noted that ‘‘remedial legislation should be construed broadly to effectuate its purposes.’’ CARB Comment, at 10, 16–17 (quoting Tcherepnin v. Knight, 389 U.S. 332, 336 (1967)). As one of the cases cited by this commenter expressly affirms, ‘‘[t]hat principle, however, ‘does not give the judiciary license, in interpreting a provision, to disregard entirely the plain meaning of the words used by Congress.’ ’’ Belland v. Pension Ben. Guar. Corp., 726 F.2d 839, 844 (D.C. Cir. 1984) (quoting Symons v. Chrysler Corp. Loan Guar. Bd., 670 F.2d 238, 241 (D.C. Cir. 1981)). 96 OMB Non-Applicability Letter, at 6. 97 49 U.S.C. 32902(a). One commenter noted that ‘‘[w]hile Congress has directed NHTSA to set CAFE standards at the maximum feasible level, this does not necessarily amount to ‘continuous fuel standard increases,’’’ pointing out that ‘‘CAFE standards have once decreased and otherwise, until a few years ago, remained the same for 20 years.’’ CARB Comment, at 13. This is an accurate but misleading characterization. What the comment failed to mention was that it was Congress’ decision to keep the standards flat over this period, not the agency’s. For a significant portion of this period, Congress prohibited NHTSA from using funds ‘‘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.’’ Public Law 104–50, Sec. 330; see also Public Law 104–205, Sec. 323; Public Law 105–66, Sec. 322; E:\FR\FM\26JYR1.SGM Continued 26JYR1 36018 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES adapt to the increasing standards, its shortfall—and in turn, its penalty calculation (before accounting for credits)—increases automatically.98 Requiring an inflation adjustment on top of that would be gratuitous. The fact that Congress deliberately enacted a mechanism that would increase the potential CAFE penalty amounts without requiring inflation adjustments—fully ‘‘aware that inflation would effectively reduce the real value of the [CAFE] civil penalty rate over time’’ 99—indicates that Congress did not intend for the CAFE civil penalty rate to be subject to inflation adjustments and thus that the 2015 Act was not intended to apply to that calculation.100 Public Law 105–277, Sec. 322; Public Law 106–69, Sec. 321; Public Law 106–346, Sec. 320. Moreover, from 1985 until EISA was signed into law in 2007, Congress set the average fuel economy standard for passenger automobiles at 27.5 miles per gallon by default and did not require any increases—annually or otherwise, or to the maximum feasible level or otherwise. See Public Law 94–163, Sec. 301; Public Law 103–272, Sec. 1(d). Instead, Congress permitted, but did not require, that NHTSA establish a higher or lower standard for passenger cars if the agency found that the maximum feasible level of fuel economy is higher or lower than 27.5 miles per gallon. 98 See, e.g., Workhorse Comment, at 1 (‘‘In effect, increasing the civil penalty rate increases the stringency of the CAFE Standards.’’). This mechanism also counters the argument that a CAFE civil penalty rate of $5.50 ‘‘effectively stall[s] fuel economy.’’ CARB Comment, at 10; see also CAP Comment, at 2 (‘‘[R]educing the penalty below the statutorily-mandated rate will likely lead to many more manufacturers electing to pay penalties rather than to comply with the law.’’). The CAFE civil penalty formula enacted by Congress already incentivizes automakers to improve fuel economy without the need to conduct inflation adjustments—a reality that the same commenter that made this argument appeared to recognize just a few pages later: ‘‘Increases in the CAFE standards reflect continuing improvements in the technological ability of manufacturers to increase fuel economy, as reflected in the fact that most manufacturers have been meeting or exceeding the CAFE standards in recent years even as the standards have been increasing.’’ CARB Comment, at 13. 99 83 FR 13904, 13910–11 (May 2, 2018). 100 One commenter argued that ‘‘other agencies have had no trouble applying inflation adjustments to the civil penalties associated with’’ regulatory standards that ‘‘undergo statutorily required reviews at regular intervals to increase stringency.’’ IPI Comment, at 4. The comment only cited one example: An adjustment by the Department of Energy to the maximum civil penalties it can impose for violations of its energy efficiency standards, among other violations. See 83 FR 1289, 1291 (Jan. 11, 2018) (‘‘Any person who knowingly violates any provision of § 429.102(a) may be subject to assessment of a civil penalty of no more than $449 for each violation.’’; ‘‘In accordance with sections 333 and 345 of the Act, any person who knowingly violates any provision of paragraph (a) of this section may be subject to assessment of a civil penalty of no more than $449 for each violation.’’). This example is wholly distinct from the CAFE civil penalty calculation, in which the increased stringency is expressly included as a factor. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 It is important to keep in mind that the overarching purpose of the CAFE program is to conserve petroleum. Thus, although the penalty is expressed based on the shortfall from the standard rather than the additional amount of fuel that will be consumed as a result of the shortfall, the cost of the penalty per increased gallon consumed shows how the actual penalty rate for excessive fuel consumption has increased as the standards themselves have increased. Assume the CAFE civil penalty rate is fixed at $5, and consider two cases. In the first case, Manufacturer A has a fuel economy shortfall of 1.0 mpg and a production volume of 1 million passenger cars for MY 1978 in which the applicable CAFE standard is 18.0 mpg. Before accounting for credits, the civil penalty for MY 1978 would be $50 million [= (10 tenths of a mile per gallon shortfall) × ($5.00 per tenth of a mile per gallon shortfall) × (1,000,000 vehicles)]. Assuming an average lifetime of 130,000 miles for Manufacturer A’s vehicles, the fuel use over the lifetimes of all of Manufacturer A’s vehicles would be 7.65 billion gallons [= (130,000 miles)/ (17 miles per gallon) × (1,000,000 vehicles)]. Had Manufacturer A met the CAFE standard of 18.0 mpg, the total fuel use would have been 7.22 billion gallons [= (130,000 miles)/(18 miles per gallon) × (1,000,000 vehicles)]. Thus, the increased fuel use impact on society attributed to the CAFE non-compliance would be 0.43 billion gallons [= (7.65 billion gallons)¥(7.22 billion gallons)]. This means that the penalty cost per gallon is $0.116. In the second case, Manufacturer A’s MY 2017 vehicle attribute-based CAFE standard is 36.0 mpg, double the MY 1978 standard. Holding everything else identical, Manufacturer A’s fuel economy shortfall would have to be 3.8 mpg (for a fuel economy of 32.2 mpg) to produce the same 0.43 billion gallons of societal impact of increased fuel use: Assuming the same average lifetime of 130,000 miles for Manufacturer A’s vehicles, the fuel use over the lifetimes of all of Manufacturer A’s vehicles would be 4.04 billion gallons [= (130,000 miles)/(32.2 miles per gallon) × (1,000,000 vehicles)]. Had Manufacturer A met the CAFE standard of 36.0 mpg, the fuel use would have been 3.61 billion gallons [= (130,000 miles)/(18 miles per gallon) × (1,000,000 vehicles)]. The increased fuel use impact on society attributed to the CAFE noncompliance would be 0.43 billion gallons [= (4.04 billion gallons)¥(3.61 billion gallons)]. With this 3.8 mpg shortfall, Manufacturer A would incur, before accounting for credits, a civil penalty of $190 million [= (38 tenths of PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 a mile per gallon shortfall) × ($5.00 per tenth of a mile per gallon shortfall) × (1,000,000 vehicles)]. For the same impact on societal fuel use, Manufacturer A’s MY 2017 potential civil penalty is 3.8 times higher than the MY 1978 potential civil penalty, meaning that the penalty cost per gallon is $0.442. Three comments argued that Congress demonstrated it knew how to exempt statutes from the application of the 2015 Act by expressly excepting statutes like the Internal Revenue Code of 1986 and the Tariff Act of 1930 from the adjustment process.101 But the penalties under these statutes are not exempted from the definition of ‘‘civil monetary penalty’’; rather, Congress acknowledged that the penalties under these statutes are ‘‘civil monetary penalties’’ that would otherwise need to be adjusted but for Congress’ express exemption. In contrast, NHTSA’s determination is that the CAFE civil penalty rate does not satisfy the definition of ‘‘civil monetary penalty’’ given by Congress and thus does not need to be exempted from Congress’ adjustment mandate. One comment noted ‘‘on a fundamental level that Congress specifically designated the CAFE penalty as ‘a civil penalty.’ ’’ 102 As NHTSA noted in its NPRM, however, ‘‘EPCA’s use of the terminology ‘civil penalty’ in 49 U.S.C. 32912(b) is not dispositive. The 2015 Act does not apply to all civil penalties, but rather ‘civil monetary penalties,’ a defined term.’’ 103 Moreover, as explained above, the ‘‘civil penalty’’ referenced in 32912(b) is not referring to the $5.50 rate, but the result of the entire complex calculation and credit application process. Several commenters pointed out that other agencies adjusted civil penalties for inflation under the 2015 Act that involved what the commenters characterized as a rate or formula.104 In support, these commenters provided numerous examples of penalties involving a simple multiplier that other agencies adjusted for inflation. The examples involve maximum penalties 101 CBD Comment, at 6; CARB Comment, at 8; Attorneys General Comment, at 9. 102 CARB Comment, at 9 (quoting 49 U.S.C. 32912(b)); see also Attorneys General Comment, at 7 (‘‘Congress expressly designated the CAFE penalty, which is monetary, as ‘a civil penalty.’ ’’). 103 83 FR 13904, 13908 n.24 (Apr. 2, 2018). 104 CBD Comment, at 8 (citing numerous examples of agencies adjusting ‘‘rate-based penalties’’ to account for inflation); CAP Comment, at 3; CARB Comment, at 8–9; Attorneys General Comment, at 8. E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES per violation and/or per day.105 NHTSA did not and does not take the position that any penalty involving a multiplier is not a ‘‘civil monetary penalty’’ subject to inflationary adjustment under the 2015 Act. Indeed, most of the civil penalties that NHTSA properly adjusted for inflation under the 2015 Act in its interim final rule are like the examples provided by commenters: Maximum penalties involving a simple multiplier.106 NHTSA acknowledged in the NPRM that these types of maximum penalties are subject to inflationary adjustment.107 As NHTSA explained in its NPRM: ‘‘One example of a penalty that is for ‘a maximum amount’ is the ‘general penalty’ in EPCA for violations of 49 U.S.C. 32911(a). That ‘general penalty’ is ‘a civil penalty of not more than $10,000 for each violation.’ This sets ‘a maximum amount’ of $10,000 per violation. . . . Accordingly, this civil penalty level was properly adjusted. . . .’’ 108 NHTSA is finalizing its inflationary adjustment of that maximum penalty per violation in this final rule. NHTSA also adjusted many non-CAFE penalties that are maximum penalties that use a simple multiplier of the number of violations or number of days.109 NHTSA agrees with commenters that maximum penalties such as these are properly subject to inflationary adjustment. But the penalty for violations of CAFE standards is not a maximum penalty that uses a simple multiplier. As a threshold matter, the CAFE civil penalty rate alone is not a ‘‘civil monetary penalty’’ as defined by the 2015 Act. The CAFE statute expressly states that the rate is an ‘‘amount . . . to be used in calculating a civil penalty,’’ not a ‘‘civil penalty’’ on its own.110 In any event, unlike maximum penalties that use a simple multiplier, the CAFE civil penalty rate is not subject to inflation as a ‘‘maximum amount provided by federal 105 See CBD Comment, at 8; CAP Comment, at 3; CARB Comment, at 8–9; Attorneys General Comment, at 8. 106 NHTSA is not reconsidering portions of the interim final rule (81 FR 43524 (July 5, 2016)) that address non-CAFE penalties. Most of the penalties adjusted for inflation are maximum penalties that involve a multiplier. For example, NHTSA adjusted the penalties for school bus-related violations of the National Traffic and Motor Vehicle Safety Act from a maximum of $10,000 per violation, as set by statute, to a maximum of $11,940 per violation. Id. at 43525 (adjusting 49 CFR 578.6(a)(2)) A separate violation occurs for each school bus or item of school bus equipment, ‘‘and for each failure or refusal to allow or perform a required act.’’ 49 CFR 578.6(a)(2). 107 See 83 FR at 13909. 108 83 FR at 13909 (citations omitted). 109 See 81 FR 43524 (July 5, 2016). 110 49 U.S.C. 32912(c)(1)(A). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 law.’’ Other penalties expressly include language, such as ‘‘a maximum civil penalty’’ or a ‘‘civil penalty of not more than’’ a specified value per violation, which indicate they are for a maximum amount.111 No such language is included for the CAFE penalty, which instead expressly may not ‘‘be compromised or remitted’’ except in extremely rare circumstances.112 This stands in stark contrast to maximum penalties, where the agency has authority to determine the appropriate penalty amount.113 Additionally, the penalty for violating a CAFE standard does not use a simple multiplier comparable to the examples provided by commenters. For the examples provided, as well as the penalties NHTSA properly adjusted for inflation, the agency can readily determine the penalty inputs by adding up the number of violations and/or the number of days as appropriate under the statute. The multiplier for a regulated entity that violated a provision of law can only go up (if the penalty uses a multiplier of the number of days); it cannot go down. Even if there were a set penalty per day (as opposed to a maximum), that is a certain penalty: For every day that an entity violates the law, it must pay the specific penalty set by law. None of this is true of the penalty for violations of CAFE standards. Unlike other penalties, the entity that violated the law can take unilateral action to decrease or eliminate the penalty.114 A reduction in the control of the entity that violated the law means the penalty is not for ‘‘a specific monetary amount.’’ The agency cannot readily calculate the penalty inputs: It needs instructions from the regulated entity to do so. That makes this a complex formula unlike any other. The CAFE penalty is not a fixed penalty based on the number of violations and amount of time that has passed. The law allows manufacturers to base their penalty on future actions (a carry-back plan or acquisition of credits from a competitor), on actions unrelated to the specific violation at e.g., 49 U.S.C. 30165(a)(3); 32912(a). 49 U.S.C. 32913(a). Contrast this constraint with the broad, discretionary authority delegated by Congress for NHTSA’s other civil penalties: ‘‘The Secretary of Transportation may compromise the amount of a civil penalty imposed under this section.’’ 49 U.S.C. 30165(b)(1). 113 See, e.g., 49 U.S.C. 30165(c). Statutory schemes that allow for mitigation, as pointed out by commenters, are not comparable because those are for maximum penalties, and thus subject to inflationary adjustment. Moreover, it is up to the agency to determine the appropriate mitigation. Under the CAFE penalty, it is the violator who determines how much to pay, based on use of credits, not the agency. 114 See 49 U.S.C. 32912(b)(3). PO 00000 111 See, 112 See Frm 00043 Fmt 4700 Sfmt 4700 36019 issue (transfers or trades), or even to obtain a refund of a civil penalty previously paid.115 The multipliers in other penalty schemes relate to how much the entity violated the law (how many violations, or for how long). The CAFE penalty calculation, on the other hand, includes a reduction unrelated to the manufacturer’s actions to meet the standard. A manufacturer can intentionally design its vehicles to exceed the standard and yet still not pay a penalty. But that decision is up to the manufacturer, not the agency—which is compelled by law to reduce the penalty if the manufacturer elects to use credits available to it. NHTSA is not aware of any comparable penalty structure with a similarly complex statutory formula that must factor in decisions of the violator and third-party actors (i.e., other manufacturers), and no commenter has provided an example of one. The Institute for Policy Integrity critiqued NHTSA for relying on the Congressional Budget Office’s (CBO’s) assessment of the 2015 Act’s revenue effects across all applicable penalties for ten years.116 Some courts have relied on CBO cost estimates to determine legislative intent.117 The Institute for Policy Integrity provided no evidence that the CBO’s assessment was flawed nor did it provide its own calculation of the amount of fines NHTSA should expect to collect to compare to the CBO estimate, much less one that would offset the significant disparity between the CBO’s estimate and the Alliance and Global’s calculation as described in the NPRM.118 OMB has reviewed CBO’s assessment and, as stated in its opinion, reached the same conclusion as NHTSA: The billions of dollars estimated to be paid in CAFE civil penalty payments grossly exceeds CBO’s projection of additional revenue that would be collected across the entire Federal Government under the 2015 Act over the same time period—an analysis Congress was aware of when it enacted the 2015 Act.119 Regardless, the CBO estimate is not the sole support NHTSA relied on to make its determination that 115 49 U.S.C. 32903(f), (g), (h); 32912(b). Comment, at 5. 117 See, e.g., Nunes-Correia v. Haig, 543 F. Supp. 812, 815 (D.D.C. 1982) (‘‘[T]he Congressional Budget Office (‘CBO’) cost estimates . . . demonstrate that Congress clearly intended the Act to apply retroactively.’’) 118 83 FR 13904, 13911 (Apr. 2, 2018). CARB and the co-signatories to its comment similarly failed to provide such evidence when they asserted that ‘‘the costs estimated by the automakers are not just the cost of facing an adjusted penalty but also include technology costs and other costs such as insurance, financing, and taxes—with the latter two (technology and other costs) making up the bulk of the estimated costs.’’ CARB Comment, at 11–12. 119 OMB Negative Economic Impact Letter, at 5. 116 IPI E:\FR\FM\26JYR1.SGM 26JYR1 36020 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES the 2015 Act is not applicable to the CAFE civil penalty rate; rather, it served as additional evidence—on top of the plain language of the statute, the unique complexity of the CAFE civil penalty scheme, the legislative history of EPCA, and other indicators—further justifying NHTSA’s determination. NHTSA also received some comments about the rounding rule in the 2015 Act, which provides that ‘‘[a]ny increase determined under this subsection shall be rounded to the nearest multiple of $1.’’ 120 NHTSA observed in the NPRM that this rounding rule suggests the Act was not intended to apply to the small dollar value CAFE civil penalty rate, since it would not serve a de minimis rounding function. As a practical matter, if the rounding rule applied to a small dollar penalty rate, it would prevent any annual inflationary increases (absent extraordinary inflation).121 One commenter argued that this interpretation ‘‘ignores basic math because applying the [2015] Act results in more than a de minimis increase from $5.50.’’ 122 This misconstrues NHTSA’s point: NHTSA was referring to subsequent annual inflationary increases after the initial catch-up adjustment. For example, if the CAFE civil penalty rate was adjusted to $14 in the initial catch-up adjustment, the rate would not have been adjusted applying either the 2017, 2018, or 2019 multipliers (1.01636, 1.02041, and 1.02522, respectively) and rounding to the nearest dollar. If the original rate was $6, the last time the multiplier would have allowed an inflation adjustment to $7 under the rounding rule was 1981, during a time of significant inflation.123 Another commenter conceded that ‘‘such rounding may prevent some annual inflationary adjustment for small penalties,’’ but nonetheless observed that ‘‘[i]f Congress had wanted small penalties to be excluded . . . , it would have explicitly said so.’’ 124 But statutes must be read to avoid rendering provisions ‘‘insignificant, if not wholly superfluous.’’ 125 As NHTSA has shown, having to apply the statute’s rounding rule to such a small rate would violate that principle, particularly when the 120 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 5(a). 121 83 FR 13904, 13911 (Apr. 2, 2018). 122 IPI Comment, at 5. 123 Data available at https://data.bls.gov/pdq/ SurveyOutputServlet. 124 CARB Comment, at 12. 125 Duncan v. Walker, 533 U.S. 167, 174 (2001); see also Green v. Bock Laundry Mach. Co., 490 U.S. 504, 509 (1989) (rejecting an interpretation that ‘‘would compel an odd result’’). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 rounding rule is viewed, as NHTSA must, in ‘‘context’’ and in line with the ‘‘overall statutory scheme.’’ 126 The same commenter also asserted that even ‘‘if the rounding rule does trap small penalties at their catch-up adjustment level, agencies can always adjust them through their own penalty adjustment procedures.’’ 127 True enough, but the commenter went on to claim that in this specific case, ‘‘this would just be an inflation adjustment, [so] NHTSA should not have difficulty with satisfying [the EPCA] factors.’’ 128 This heavily underestimates the burden required by statute to increase the CAFE civil penalty rate,129 discussed in more detail in the NPRM and below. And this burden is there for a reason: Given that the CAFE civil penalty rate serves as one element in a formula that yields an actual potential penalty, rounding the rate to the nearest dollar has outsized impacts that must be carefully considered. For instance, rounding the current $5.50 rate to $6.00 is not merely a $0.50 increase in a penalty, but a 9% increase. An automaker who sells 100,000 vehicles of a single model that fails to meet its target fuel economy standard by one mile per gallon would face a potential penalty of $6,000,000 instead of $5,500,000. This is not a minor difference. Because NHTSA is not ‘‘increas[ing]’’ the CAFE civil penalty rate—because the 2015 Act does not apply or because doing so would have a negative economic impact—the rounding rule is inapplicable.130 3. Harmonizing the 2015 Act and EPCA In the alternative, even if the 2015 Act did apply, the ‘‘negative economic impact’’ exception of the 2015 Act is best read in harmony with EPCA to ensure both statutes are given meaning. A few commenters argued that the 2015 Act and EPCA should not be read together because they have different purposes.131 NHTSA agrees that the overarching purposes of the two statutes are different. But that does not obviate the need to harmonize the statutes. 126 Davis v. Michigan Dep’t of Treasury, 489 U.S. 803, 809 (1989) (citing United States v. Morton, 467 U.S. 822, 828 (1984)). 127 CARB Comment, at 12. 128 CARB Comment, at 13. 129 See 49 U.S.C. 32912(c). 130 See Alliance and Global Comment, at 16–17. If the 2015 Act applies to the CAFE civil penalty rate, rounding up to the nearest dollar would constitute an increase in the rate that would be permissible only if NHTSA made the requisite findings—and followed the congressionallymandated procedure—under EPCA, discussed further below. 131 See, e.g., CAP Comment, at 4; Attorneys General Comment, at 11; IPI Comment, at 4. PO 00000 Frm 00044 Fmt 4700 Sfmt 4700 Indeed, both statutes recognize the importance of limiting increases to penalties to avoid damaging the economy. Although the statutes may have different ultimate objectives, they share that motivating concern and should be read together, as part of a unified code of Federal law, with the goal of upholding that common principle. NHTSA believes its interpretation achieves that goal. Relatedly, NHTSA is mindful of the comments that argued that the in pari materia canon of statutory interpretation may not be the perfect tool for the interpretive question here.132 But as NHTSA noted in the NPRM, the ‘‘principles underlying’’ this canon—most notably, that the statutes enacted by Congress should be read as a whole and interpreted harmoniously— provided further support for NHTSA’s proposed position, which it now adopts.133 None of the comments objected to NHTSA’s point that ‘‘[t]his approach to statutory interpretation is consistent with NHTSA’s past practice.’’ 134 Here, NHTSA is interpreting a statutory provision about whether increasing a civil monetary penalty by the otherwise required amount will have a negative economic impact. Even statutes that apply broadly across agencies must be interpreted and reconciled with other Federal laws. NHTSA must presume that Congress knew each agency would have to determine what ‘‘negative economic impact’’ meant and whether raising any of its civil monetary penalties by the otherwise required amount would cause one. And NHTSA must also presume that in passing the 2015 Act, Congress was aware of the longstanding CAFE civil penalty scheme it had previously enacted, including the constraints it imposed on raising the penalty rate if doing so would have a substantial deleterious impact on the economy.135 Congress established these specific 132 See, e.g., CARB Comment, at 15; Attorneys General Comment, at 11. 133 83 FR 13904, 13912 (Apr. 2, 2018). 134 83 FR 13904, 13912 (Apr. 2, 2018) (citing 80 FR 40137, 40171 (Aug. 12, 2015) (interpreting a term in EISA by looking to how the term is defined in the Motor Vehicle Safety Act, ‘‘[g]iven the absence of any apparent contrary intent on the part of Congress in EISA’’)). 135 As NHTSA noted in the NPRM, the CAFE civil penalty structure is also constrained by NHTSA’s exceptionally—and atypically—limited ability to compromise or remit CAFE civil penalties. 83 FR 13904, 13912 (Apr. 2, 2018). One commenter sought to minimize the effect of this constraint by noting ‘‘the CAFE program’s numerous built-in compliance flexibility mechanisms which soften the sting of the penalties.’’ Attorneys General Comment, at 11–12. But the ‘‘compliance flexibility mechanisms’’ described by the commenter are all actions taken by the manufacturer, not NHTSA. E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations constraints for a reason, and without any evidence that Congress intended to override those constraints, NHTSA cannot do so unilaterally. Most importantly, no commenter provided persuasive argument or evidence that NHTSA’s interpretation was contrary to the plain meaning of the 2015 Act or Congress’ intent. One comment challenged NHTSA’s position that a broad interpretation of the 2015 Act would be ‘‘punitive,’’ instead characterizing CAFE civil penalties as ‘‘safety valves, because they allow the car manufacturers to avoid the requirements imposed by vehicle standards in case compliance costs are too high.’’ 136 But whether or not the effect is properly understood as punitive, if compliance costs and the calculated levels of civil penalties are both ‘‘too high,’’ then the ‘‘safety valve’’ is not so ‘‘safe’’: Either option would impose a ‘‘negative economic impact.’’ With respect to the CAFE civil penalty rate specifically, the statutory civil penalty formula already provides for increases over time, as described above. Construing ‘‘negative economic impact’’ to require a full inflation adjustment to the CAFE civil penalty rate—on top of the built-in adjustment to the standards themselves—would subject manufacturers to unduly harsh levels of civil penalties (before accounting for credits). As discussed in the NPRM, it is particularly important to avoid a punitive interpretation here because ‘‘the inflation adjustment essentially acts as a ‘one-way ratchet,’ where all subsequent annual adjustments will be based off this ‘catch-up’ adjustment with no ensuing opportunity to invoke the ‘negative economic impact’ exception.’’ 137 EPCA itself imposes a similar ‘‘one-way ratchet’’ constraint.138 One comment argued that ‘‘Congress . . . intended the Inflation Adjustment Act to apply broadly and uniformly to federal civil monetary penalties across all agencies unless specifically exempted, regardless of how the subject penalty programs are structured.’’ 139 Even though Congress did not ‘‘specifically exempt[ ]’’ CAFE by name in the 2015 Act, Congress unquestionably recognized that some penalty schemes would not be covered: For example, it defined ‘‘civil monetary penalty’’ to exclude some penalties, fines, and other sanctions.140 jbell on DSK3GLQ082PROD with RULES 136 IPI Comment, at 15–16. FR 13904, 13913 (Apr. 2, 2018). 138 H.R. Rep. No. 95–1751, at 113 (1978) (Conf. Rep.) (‘‘No provision [in EPCA] is made for lowering the penalty.’’). 139 Attorneys General Comment, at 11–12. 140 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 3(2). 137 83 VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 Nonetheless, NHTSA agrees that Congress intended the 2015 Act to apply ‘‘broadly’’—and in practice, the 2015 Act has applied broadly, across other penalties administered by NHTSA and across a wide swath of Federal agencies. But the unique nature of the CAFE program commands a different result. Indeed, as NHTSA explained in the NPRM, the ‘‘broad’’ scope of the 2015 Act reinforces NHTSA’s determination that when one of the statutes is generalized and passed later—like the Inflation Adjustment Act—it cannot be read to implicitly repeal an earlier, more specific statute—like EPCA’s establishment of the CAFE civil penalties structure. This approach to statutory interpretation is consistent with NHTSA’s past practice.141 The same reasoning responds to those commenters that argued the 2015 Act controls because it was passed more recently than EPCA and EISA.142 Indeed, the sole case cited by one of the commenters purportedly to support its point makes this clear: The more recent act can only constitute an implied repeal if the intent of the legislature to repeal is ‘‘clear and manifest.’’ 143 No such intention is apparent here at all. 4. ‘‘Negative Economic Impact’’ Some comments noted that NHTSA did not previously invoke the ‘‘negative economic impact’’ exception before the deadline to complete the initial catchup adjustment expressed in the 2015 Act or by the date suggested in OMB’s initial guidance on the statute.144 But the passage of that deadline does not deprive an agency of its statutory authority to act under the statute, including its authority to reconsider its initial decision to issue an interim final rule and to seek public comment on complex legal, factual, and policy questions related to that action. An agency would not be prohibited from making an otherwise required initial catch-up adjustment simply because it did not meet the statutory deadline: It would still need to complete the process.145 And there is no separate FR 13904, 13912 (Apr. 2, 2018). e.g., Workhorse Comment, at 1 (‘‘Because the Inflation Adjustment Act was enacted more recently than EPCA and EISA, the Inflation Adjustment Act controls.’’); Attorneys General Comment, at 9 (‘‘[B]ecause the penalty adjustments in the 2015 Act are both mandatory and were enacted more recently than EPCA, they should be given controlling effect.’’) (citing Kremer v. Chem. Constr. Corp., 456 U.S. 461, 468 (1982)). 143 Kremer v. Chem. Constr. Corp., 456 U.S. 461, 468 (1982) (cleaned up). 144 See, e.g., CARB Comment, at 14; Attorneys General Comment, at 10, 14. 145 Multiple agencies were unable to complete their initial catch-up adjustments by the deadline PO 00000 141 83 142 See, Frm 00045 Fmt 4700 Sfmt 4700 36021 statutory deadline for when agencies needed to invoke the ‘‘negative economic impact’’ exception: It is part of making the initial catch-up adjustment. Congress could have established a separate deadline for invoking the exception prior to the deadline for making the initial catch-up adjustment if it deemed it necessary, but it did not. Instead, Congress impliedly linked the determination of the initial catch-up adjustment and exercise of the ‘‘negative economic impact’’ exception, and it established a procedure through which the OMB Director would be required to concur with NHTSA’s assessment that adjusting the penalty the otherwise required amount would have a negative economic impact before the agency could rely on the exception. As the docketed opinion indicates, OMB has concurred with NHTSA’s assessment here.146 Notably, OMB staff indicated to the Government Accountability Office that ‘‘[b]ecause of the complex nature of the initial catchup inflation adjustments, . . . its preference was for federal agencies to take the necessary time to publish accurate and complete initial catch-up inflation adjustments . . . even if agencies were not able to meet the Inflation Adjustment Act publication deadline.’’ 147 Moreover, nothing in the 2015 Act prohibits the head of an agency from reconsidering its initial decision about the economic impact of making the otherwise required initial adjustment to a civil monetary penalty. To the contrary, Congress committed the authority to make such a determination—with no substantive constraints—to the head of each agency, provided that the agency head publishes an NPRM, provides an opportunity for comment, and obtains concurrence from identified in the 2015 Act, but later completed those adjustments. U.S. Gov. Accountability Office, GAO–17–634, ‘‘Certain Federal Agencies Need to Improve Efforts to Comply with Inflation Adjustment Requirements, at 6 (2017). 146 OMB Negative Economic Impact Letter. Nothing about OMB’s concurrence with NHTSA’s determination here calls into question OMB’s guidance that it ‘‘expects determination concurrences to be rare.’’ Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, at 3 (Feb. 24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse .gov/files/omb/memoranda/2016/m-16-06.pdf (last accessed May 22, 2018). NHTSA is not aware of any other agency that even sought such a concurrence determination. Thus, while OMB’s concurrence here is ‘‘rare,’’ it is appropriate given the uniqueness of the CAFE civil penalty scheme. 147 U.S. Gov. Accountability Office, GAO–17–634, ‘‘Certain Federal Agencies Need to Improve Efforts to Comply with Inflation Adjustment Requirements, at 6 (2017). E:\FR\FM\26JYR1.SGM 26JYR1 36022 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES the OMB Director.148 NHTSA has satisfied those procedural steps in this rulemaking. As noted in the NPRM, ‘‘[p]ursuant to OMB’s guidance, NHTSA has consulted with OMB before proposing this reduced catch-up adjustment determination and submitted this notice of proposed rulemaking (NPRM) to the Office of Information and Regulatory Affairs (OIRA) for review.’’ 149 To the extent that NHTSA’s interpretation of ‘‘negative economic impact’’ represents a change in position, the agency has explained the reasons for that change, and its position in this final rule is wellsupported by the record and by careful legal analysis.150 The OMB Director’s concurrence in NHTSA’s determination not only resolves the comments about NHTSA not meeting OMB’s deadline, but also carries considerable weight in establishing that NHTSA acted appropriately with regards to the 2015 Act’s deadline. Congress not only provided the OMB Director with the authority to determine whether a negative economic impact exists, but also expressly authorized the OMB Director to issue guidance to agencies on implementing the 2015 Act, both of which establish that Congress conferred significant deference to OMB’s interpretation of the statute.151 Some comments stated or implied that the $14 rate is currently in effect.152 That is wrong and misunderstands the effect of prior agency actions. As a result of a recent decision by the United States Court of Appeals for the Second Circuit, NHTSA’s December 28, 2016 final rule is now in force.153 Pursuant to that rule, the current CAFE civil penalty rate is $5.50 for model years before model year 148 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(c). 149 83 FR 13904, 13908 (Apr. 2, 2018). 150 Alliance and Global Comment, at 5 (citing FCC v. Fox Television Stations, 556 U.S. 502, 515–16 (2009); Philip Morris USA v. Vilsack, 736 F.3d 284, 290 (4th Cir. 2013)). 151 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 7(a). 152 See, e.g., CAP Comment, at 2 (describing NHTSA’s proposed action as ‘‘reducing the penalty below the statutorily-mandated rate’’); CARB Comment, at 6, 14, 16 (‘‘NHTSA’s NPRM, therefore, is improperly characterized as ‘retaining’ the $5.50 penalty per tenth of a mpg when in fact NHTSA would be decreasing from $14 back to $5.50. . . .’’; ‘‘NHTSA’s adjustment to $14 in its interim final rule in July 2016 is already in effect anyway.’’; characterizing ‘‘what NHTSA is attempting to do here’’ as ‘‘a CAFE penalty decrease . . . to lower the penalty from $14 to $5.50’’). 153 Order, ECF No. 196, NRDC v. NHTSA, Case No. 17–2780 (2d Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17–2780, at 44 (2d Cir., June 29, 2018) (‘‘The Civil Penalties Rule, 81 FR 95,489, 95,489–92 (December 28, 2016), no longer suspended, is now in force.’’). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 2019 and, but for NHTSA’s reconsideration, would not increase to $14 until penalties are assessed for MY 2019.154 Thus, this final rule—which maintains the $5.50 rate through model year 2019 and beyond—does not serve as a reduction as applied to any shortfalls for vehicles fleets in those model years.155 Although NHTSA’s December 2016 final rule had set a $14 CAFE civil penalty rate that—but for NHTSA’s reconsideration—would go into effect beginning with MY 2019, that announcement had no practical effect before 2020—the earliest that CAFE civil penalties could be assessed for noncompliance in MY 2019.156 Nothing in the CAFE statute or the 2015 Act precludes the agency from reconsidering its earlier decision before that decision has any practical significance. Indeed, NHTSA’s earlier reconsideration decision in December 2016, which recently took effect, did just that.157 A few commenters critiqued NHTSA’s proposed interpretation of the 2015 Act in light of EPCA as ‘‘invert[ing] the burden of proof’’ required by the 2015 Act.158 These comments misconstrued NHTSA’s interpretation. To determine whether increasing the CAFE civil penalty rate by the amount calculated under the inflation adjustment formula would have a ‘‘negative economic impact,’’ NHTSA must first interpret the term ‘‘negative economic impact.’’ The statute does not define ‘‘negative economic impact.’’ OMB issued a memorandum providing guidance to the heads of executive departments and agencies on how to implement the Inflation Adjustment Act, but the guidance does not define ‘‘negative economic impact’’ either.159 Instead, Congress expressly delegated the authority to determine whether adjusting the amount of any given civil monetary penalty by the otherwise required amount would have a negative economic impact to the head of each FR 95489, 95492 (Dec. 28, 2016). this final rule does not prescribe ‘‘a higher amount’’ for the CAFE civil penalty rate, 49 U.S.C. 32912(c)(1)(D), NHTSA does not need to give 18 months’ lead time before it becomes effective. 156 82 FR 32139, 32140 (July 12, 2017). 157 81 FR 95489, 95491 (Dec. 28, 2016). 158 CBD Comment, at 12; see also CARB Comment, at 15–16 (‘‘[T]he statutes build in opposing presumptions and require opposite findings. . . .’’); Attorneys General Comment, at 12–13 (‘‘NHTSA impermissibly inverts the presumption Congress built into the 2015 Act . . . .’’). 159 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 24, 2016), available at https:// www.whitehouse.gov/sites/whitehouse.gov/files/ omb/memoranda/2016/m-16-06.pdf. PO 00000 154 81 155 Because Frm 00046 Fmt 4700 Sfmt 4700 agency. Without further guidance about what constitutes a ‘‘negative economic impact,’’ each agency has to make an independent determination of what constitutes a ‘‘negative economic impact’’ and whether one would result from making each adjustment within its purview. For NHTSA to determine whether increasing the CAFE civil penalty rate by the otherwise required amount would have a ‘‘negative economic impact,’’ it considered what Congress had previously identified for it in EPCA—in the context of establishing the statutory standard required to raise the CAFE civil penalty rate—as constituting a ‘‘substantial deleterious impact on the economy.’’ Specifically, Congress had decreed—unchanged for decades before the 2015 Act—that (i) a significant increase in unemployment in a State or a region of a State, (ii) an adverse effect on competition, or (iii) a significant increase in automobile imports would represent ‘‘a substantial deleterious impact on the economy.’’ Additionally, Congress established in EPCA that, by requiring such a substantial showing, the burden to increase the CAFE civil penalty rate is heavy. NHTSA determined, as explained in the NPRM, that it is reasonable to expect that, taking the EPCA factors into account, increasing the CAFE civil penalty rate to $14 would result in a ‘‘negative economic impact.’’ Without sufficient data to the contrary, NHTSA’s determination remains unchanged: The likely effects raising the CAFE civil penalty rate to $14 would have on unemployment, competition, and automobile imports lead NHTSA to conclude that increasing the CAFE civil penalty rate by the otherwise required amount would have a negative economic impact.160 160 One commenter asserted, without any citations or reasoning, that to keep the CAFE civil penalty rate at $5.50, the ‘‘negative economic impact’’ exception of the 2015 Act requires NHTSA to show that any upward adjustment to the CAFE civil penalty rate will have a negative economic impact and that NHTSA failed to meet this burden. CBD Comment, at 23; see also Attorneys General Comment, at 16 (arguing that, if necessary, NHTSA should ‘‘reduce the catch-up inflation adjustment by as little as possible . . . based on an analysis of the relevant factors, including but not limited to an estimate of compliance costs, the number and types of vehicles affected, the average increased cost to consumers, and how that cost compares to fuel cost savings’’). No such showing is required. The 2015 Act authorizes the head of each agency to ‘‘adjust the amount of a civil monetary penalty by less than the otherwise required amount’’ if the ‘‘negative economic impact’’ exception is satisfied (with the OMB Director’s concurrence). But neither the statute nor OMB guidance establish any standards that the agency must use in determining how much less than the otherwise required amount to make the adjustment. As NHTSA stated in the NPRM, ‘‘[w]ithout any statutory direction or OMB guidance E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES Some commenters contended that NHTSA’s interpretation would make it ‘‘impossible’’ for the CAFE civil penalty to ever be increased.161 NHTSA acknowledges that it may be difficult to meet the high standard Congress established in EPCA. In fact, NHTSA has never been able to make the findings required to increase the rate before. However, nothing in the 2015 Act relieves NHTSA of its statutory obligation to make those findings as a prerequisite for increasing the CAFE civil penalty rate. One commenter argued that EPCA’s specific definitions of ‘‘substantial deleterious impact on the economy’’ should not be carried over to the 2015 Act’s term ‘‘negative economic impact’’ because the 2015 Act is ‘‘is intended for broad application across a range of regulatory schemes’’ and the EPCA factors ‘‘may simply be irrelevant in enforcing compliance with other regulatory systems.’’ 162 The fact that the EPCA factors are irrelevant to determinations by other agencies (which do not administer the same statutory program) does not make them irrelevant to NHTSA’s determination, which requires the agency to reconcile multiple statutory provisions. And both the 2015 Act and EPCA address the effect on the economy as part of their respective statutory standards for determining the appropriateness of an increase in a penalty rate. Although the 2015 Act applies across all agencies, it is up to the head of agency to determine whether ‘‘increasing the civil monetary penalty by the otherwise required amount will have a negative economic impact.’’ Each agency head must determine how to interpret that statutory standard in light of other statutory constraints and any on how much to adjust the rate, if at all, it falls to NHTSA to determine the appropriate adjustment— and NHTSA has wide discretion in making this determination.’’ 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat’l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214–15 (D.C. Cir. 2013)); see also Alliance and Global Comment, at 15 & n.63. Nonetheless, NHTSA believes it has made an adequate showing that any increase in the CAFE civil penalty rate would have a ‘‘negative economic impact’’ for the reasons detailed in the NPRM and throughout this final rule. See, e.g., 83 FR 13904, 13916 (Apr. 2, 2018) (‘‘In light of the regulatory concerns described above, and in consideration of the unique regulatory structure with nondiscretionary penalties tied to standards that increase over time, NHTSA is proposing to keep the CAFE civil penalty rate at $5.50 because it tentatively concludes that retaining the $5.50 rate would avoid the ‘negative economic impact’ caused by any adjustment upwards.’’). 161 Workhorse Comment, at 4; see also CARB Comment, at 18. 162 CBD Comment, at 13. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 other factors that may be appropriate for each agency to consider.163 Regardless, the concern about the possibility of inconsistent interpretations of ‘‘negative economic impact’’ is purely hypothetical: As far as NHTSA is aware, no other agency has invoked the ‘‘negative economic impact’’ exception. Moreover, NHTSA’s interpretation has now gone through the notice-and-comment process, as required by the 2015 Act, and comports with the interpretation provided by OMB—the agency that Congress vested with the authority to issue guidance on implementing the statute.164 OMB has also concurred with NHTSA’s ultimate determination regarding the ‘‘negative economic impact’’ of increasing the CAFE civil penalty rate for the reasons explained in its opinion included in the docket for this rulemaking.165 One commenter challenged NHTSA’s proposed interpretation that ‘‘ ‘negative economic impact,’ as used in the Inflation Adjustment Act, need not mean ‘net negative economic impact,’ ’’ 166 arguing that the exception must be read to account for a net 163 See Sutton v. United States, 65 Fed. Cl. 800, 806 (2005) (deferring to the Army’s interpretation of a statute that is administered on a shared basis with the other military services because ‘‘there is no inconsistency’’ between its interpretation and that of another military branch and because the statutory language ‘‘confers plenary discretion on each individual service secretary to develop whatever procedures he or she deems appropriate’’); Bd. of Trade of City of Chicago v. SEC., 187 F.3d 713, 719 (7th Cir. 1999) (‘‘[I]t is possible to defer simultaneously to two incompatible agency positions.’’); see also F.T.C. v. Ken Roberts Co., 276 F.3d 583, 593 (D.C. Cir. 2001) (‘‘Because we live in ‘an age of overlapping and concurring regulatory jurisdiction,’ a court must proceed with the utmost caution before concluding that one agency may not regulate merely because another may.’’ (quoting Thompson Med. Co. v. FTC, 791 F.2d 189, 192 (D.C. Cir. 1986))); National Ass’n of Cas. & Sur. Agents v. Bd. of Governors of Fed. Reserve Sys., 856 F.2d 282, 287 (D.C. Cir. 1988) (upholding different agency interpretations of the same phrase because of ‘‘their different economic impact’’); cf. Citizens Awareness Network, Inc. v. United States, 391 F.3d 338, 349 (1st Cir. 2004) (‘‘The APA lays out only the most skeletal framework for conducting agency adjudications, leaving broad discretion to the affected agencies in formulating detailed procedural rules.’’) (citation omitted). The Second Circuit asserted in its opinion on the indefinite delay rule that NHTSA’s interpretation of the 2015 Act is entitled to no deference because ‘‘the [2015] Act applies to all federal agencies, meaning NHTSA has no special expertise in interpreting its language.’’ Opinion, ECF No. 205, NRD.C. v. NHTSA, Case No. 17–2780, at 34 n.10 (2d Cir., June 29, 2018) (citations omitted). To support this dictum, the Court cited only Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), which predates all of the cases just cited. The issue was not briefed to the Second Circuit, which gave no indication that it considered NHTSA’s position. 164 See generally OMB Negative Economic Impact Letter. 165 Id. 166 83 FR 13904, 13913 (Apr. 2, 2018). PO 00000 Frm 00047 Fmt 4700 Sfmt 4700 36023 weighing of the positive and negative impacts and that it would be arbitrary and capricious for NHTSA to ignore the benefits of a regulatory action.167 NHTSA disagrees. As NHTSA noted in the NPRM, the very next provision of the 2015 Act—the other exception to conducting the otherwise required initial catch-up adjustment—depends upon a determination of whether ‘‘the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.’’ 168 Congress could have stated the ‘‘negative economic impact’’ exception using similar phrasing: ‘‘the negative economic impact of increasing the civil monetary penalty by the otherwise required amount outweighs the positive economic impact.’’ But it did not do so, implying that it must mean something different. The commenter asserted that Congress’ use of the term ‘‘negative’’ ‘‘must entail some analysis of what it means to be ‘negative,’ ’’ and ‘‘the only rational way of understanding that term is to look at it in comparison to the benefits.’’ 169 NHTSA did analyze what ‘‘negative’’ means, thoroughly explaining its reasoning in the NPRM and in this final rule. The agency can readily consider the economic harms that would likely be caused by increasing the CAFE civil penalty rate to $14—such as those identified in the EPCA factors—without needing to compare them to any potential benefits. a. EPCA Factors i. Unemployment Some commenters provided data purporting to show that increasing the CAFE civil penalty rate will not increase unemployment.170 These comments omitted the larger employment context: employment across the entire U.S. economy has grown over the period in question as the economy recovered from the recession. Employment in the automobile industry sector had plummeted during the recession, as new 167 IPI Comment, at 11–12; see also id. at 5–10 (arguing that ‘‘NHTSA has caused forgone benefits’’ and its ‘‘failure to address the forgone benefits is arbitrary and capricious’’); cf. Workhorse Comment, at 2–3 (arguing that setting the CAFE civil penalty rate at $5.50 would have a negative economic impact on companies in the electric vehicle industry and that NHTSA must quantify the economic impact on all businesses, including manufacturers that will be selling credits). 168 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 4(c)(1)(B). NHTSA has not invoked this social costs exception, so comments that discussed a social cost-benefit analysis are irrelevant and do not merit a response. See, e.g., CBD Comment, at 20–23; IPI Comment, at 6–10. 169 IPI Comment, at 12. 170 See, e.g., Workhorse Comment, at 1; CBD Comment, at 14; CARB Comment, at 17. E:\FR\FM\26JYR1.SGM 26JYR1 36024 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES vehicle sales dropped. After the economy recovered, automobile sales and industry employment nearly doubled relative to the recession, but are only marginally higher than historical levels.171 The data provided also should be viewed cautiously. For example, the Synapse Energy Economics study cited acknowledges that positive employment impacts it identifies that will result from implementation of federal and state fuel economy standards ‘‘are not large in the context of the national economy’’—‘‘less than 0.2 percent of current U.S. employment levels.’’ 172 But the study only discusses the net employment effect on the United States as a whole; it does not discuss unemployment in every state or every region of a state at all, as NHTSA is required to consider under EPCA.173 As NHTSA explained in the NPRM, job losses resulting from an increase in the CAFE civil penalty rate ‘‘may be concentrated in particular States and regions within those States where automobile manufacturing plants are located [such as those] located in the Midwest and Southeastern U.S.’’ 174 The Synapse study does nothing to disprove this point.175 Another commenter argued that ‘‘the $14 penalty has been in effect since August 2016 . . . , and there is no evidence that this has caused an increase in the national unemployment rate or the unemployment rate in any State or region of a State.’’ 176 The premise is faulty: NHTSA disputes that ‘‘the $14 penalty has been in effect since August 2016,’’ as explained above. 171 Employment and sales data available at https://fred.stlouisfed.org/series/ N4222C0A173NBEA and https://fred.stlouisfed.org/ series/ALTSALES. 172 Synapse Energy Economics, Cleaner Cars and Job Creation: Macroeconomic Impacts of Federal and State Vehicle Standards, at 17 (Mar. 27, 2018), available at http://www.synapseenergy.com/sites/ default/files/Cleaner-Cars-and%20Job-Creation-17072.pdf. The study also acknowledges that its results ‘‘are necessarily uncertain, especially farther out in the modeling period.’’ 173 The EPCA requirement to consider the impact on the economy of states and regions of states also demonstrates why the comment arguing that NHTSA must ‘‘us[e] an economy-wide analysis’’ to measure employment effects is misplaced. IPI Comment, at 17. By statute, NHTSA is prohibited from only considering the impact of raising the CAFE civil penalty rate on national unemployment. Moreover, as noted in the NPRM, NHTSA also believes ‘‘it is appropriate to consider the impact raising the CAFE civil penalty rate would have on individual manufacturers who fall short of fuel economy standards, and those affected, such as dealers’’—an impact that the Synapse study also fails to discuss. 83 FR 13904, 13913 (Apr. 2, 2018). 174 83 FR 13904, 13914 (Apr. 2, 2018). 175 The reports from the Blue Green Alliance cited in a couple of comments suffers from similar shortcomings. 176 CARB Comment, at 17. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 Furthermore, the comment only cited as evidence the national unemployment rate for one month and a single state’s unemployment rate for one month, ‘‘both of which are comparatively low and reflect a robust economy.’’ 177 ‘‘[C]omparatively low’’ compared to what? The comment provided no evidence of what the unemployment rates it cites would be with a different CAFE civil penalty rate in effect. Another commenter offered that ‘‘a recent survey of Tier 1 automotive suppliers conducted by Ricardo concluded that the increased stringency of the CAFE Standards encouraged job growth at their companies.’’ 178 In fact, the survey question did not specifically ask about ‘‘the increased stringency of the CAFE standards.’’ Rather, the survey question asked, ‘‘[i]n general, do US policies that encourage or force the uptake of new technologies also encourage job growth for your company in the US?’’ 179 Only 23 respondents answered out of the 143 potential participants who received the survey, including two that believed ‘‘[a]dapting to such policies does not change the number of jobs at our company.’’ 180 The suppliers were not asked to and did not provide any empirical data supporting their opinions nor were they asked to quantify the level of job growth they believed was encouraged by the increased stringency. Additionally, the geographical breakdown of the respondents was not provided. Without any sense of magnitude or location, there is no way to evaluate the economic impact on the United States, any State, or any region of a State. Note also that economic harms suffered by suppliers may be different from those suffered by OEMs. In fact, a separate survey question did ask specifically about the CAFE standards in connection to the effect on employment nationally: ‘‘Will the current 2025 standards help encourage job growth in the wider US economy?’’ 181 In response to this question, less than half of the respondents agreed that ‘‘such policies tend to encourage job growth in the industry overall.’’ 182 In any event, the data provided conflicts with other available studies, Comment, at 17 n.64. Comment, at 1 (citing Ricardo Energy & Environment, Survey of Tier 1 automotive suppliers with respect to the US 2025 LDV GHG emissions standards (Feb. 21, 2018), available at http://www.calstart.org/Libraries/CALSTART_ Press_Releases/CALSTART_Report_Supplier_ Survey_Final_for_Web.sflb.ashx) (Ricardo Report). 179 Ricardo Report, at 20. 180 Ricardo Report, at 2, 40. 181 Ricardo Report, at 20. 182 Ricardo Report, at 41. PO 00000 177 CARB 178 Workhorse Frm 00048 Fmt 4700 Sfmt 4700 such as the peer-reviewed Indiana University study, which shows the planned vehicle standards will result in short-term macroeconomic losses, including job losses.183 Specifically, the study concludes that ‘‘the vehicle price effects, which increase as standards become more stringent, cause significant losses of employment, GDP, and disposable income through a decline in new vehicle sales and higher vehicle prices for consumers, which in turn curbs spending on other goods and services,’’ potentially for more than a decade.184 The study indicates that the negative economic effects hit Illinois, Indiana, Michigan, Ohio, and Wisconsin particularly hard, with the region taking longer than the national average to recover, and that Arkansas, Louisiana, Oklahoma, and Texas never fully recover.185 Without a clearer picture, NHTSA does not have the evidence needed to make the determination required under EPCA to raise the CAFE civil penalty rate. One commenter quoted EPA as projecting ‘‘job growth in the automotive manufacturing sector and automotive parts manufacturing sector due specifically to the need to increase expenditures for the vehicle technologies needed to meet the standards.’’ 186 EPA’s employment projection came with a number of caveats that the commenter omitted. EPA was unable to ‘‘quantitatively estimate the total effects of the standards on the automobile industry, due to the significant uncertainties underlying any estimate of the impacts of the standards on vehicle sales.’’ 187 EPA also could not ‘‘quantitatively estimate the total effects on employment at the national level, because such effects depend heavily on the state of overall employment in the economy,’’ but noted that, under conditions of full employment, any changes in employment in the regulated sector would primarily be offset by changes in 183 Sanya Carley, Denvil Duncan, John D. Graham, Saba Siddiki & Nikolaos Zirogiannis, A Macroeconomic Study of Federal and State Automotive Regulations (Mar. 2017) (‘‘IU Study’’). Revised/corrected versions of this report that ultimately come to the same conclusions are also available at https://spea.indiana.edu/doc/research/ working-groups/comet-2018.pdf (Jan. 2018), and https://spea.indiana.edu/doc/research/workinggroups/comet-022018.pdf (Feb. 2018). 184 IU Study, at 3. 185 IU Study, at 3, 103. 186 CBD Comment, at 14 (quoting ‘‘Final Determination on the Appropriateness of the Model Year 2022–2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation,’’ available at https://nepis.epa.gov/Exe/ ZyPDF.cgi?Dockey=P100QQ91.pdf (Final Determination), at 26). 187 Final Determination, at 26. E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations employment in other sectors.188 Ultimately, EPA concluded that it would be unable to distinguish the effect of the standards on employment ‘‘from other factors affecting employment, especially macroeconomic conditions and their effect on vehicle sales.’’ 189 Regardless, since that projection, EPA—in reconsidering the emission standards for model year 2022–2025 light-duty vehicles that were ‘‘based on outdated information’’—has concluded that ‘‘a more rigorous analysis of job gains and losses is needed to determine the net effects of alternate levels of the standards on employment and believes this is an important factor to consider in adopting appropriate standards.’’ 190 The same commenter also highlighted that ‘‘industry groups like the Motor and Equipment Manufacturers Association, and the Manufacturers of Emissions Controls have expressed grave concerns about potential rollbacks of federal standards, which would threaten the technological and manufacturing investments they have already made.’’ 191 Notably, neither of these industry groups submitted a comment on the NPRM. Regardless, this rulemaking does not involve ‘‘rollbacks of federal standards.’’ It relates to civil penalties for those who violate the standards. ii. Competition As a threshold matter, one commenter contested NHTSA’s understanding of the competition factor in EPCA: ‘‘EPCA does not inquire into competitive effects among manufacturers. To the contrary, EPCA expressly acknowledges that CAFE standards will treat different manufacturers differently.’’ 192 EPCA does not define ‘‘competition,’’ and Congress gave sole discretion to the Secretary of Transportation to decide whether it is likely that an increase in the CAFE civil penalty rate would adversely affect competition, along with the determinations of the other EPCA factors.193 In applying EPCA, ‘‘NHTSA has consistently evaluated risks to competition, including the potential effects on individual automakers.’’ 194 NHTSA has adopted and followed this 188 Final Determination, at 26. Determination, at 26. 190 83 FR 16077, 16077, 16086 (Apr. 13, 2018). 191 CBD Comment, at 14. 192 CBD Comment, at 15 (citing, as an example, 49 U.S.C. 32903, ‘‘providing for credit trading, and allowing manufacturers who have over-complied with standards to trade credits with manufacturers who have failed to meet fuel economy requirements’’). 193 49 U.S.C. 32912(c)(1)(C)(ii). 194 83 FR 13904, 13914 (Apr. 2, 2018). jbell on DSK3GLQ082PROD with RULES 189 Final VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 approach for decades. Accordingly, NHTSA believes that it is appropriate for it to continue analyzing the potential effect of its regulations on competition in this ‘‘broad manner.’’ 195 In any event, NHTSA also explained in the NPRM how increasing the CAFE civil penalty rate could also adversely affect competition through ‘‘an impact on the market itself by limiting consumer choice involving vehicles and vehicle configurations that would otherwise be produced with penalties at their current values.’’ 196 The same commenter disputed this effect on consumer choice, declaring—without evidence—that having the CAFE civil penalty rate at $5.50 ‘‘disadvantages consumers by reducing the number of more fuel-efficient vehicle choices in the marketplace.’’ 197 NHTSA disagrees. The CAFE standards—and the natural competitive incentive for manufacturers to design vehicles that allow consumers to pay less for fuel—already ensure a significant variety of fuel efficient vehicles in the marketplace, and those manufacturers are unlikely to change a course if that CAFE civil penalty rate is not increased. As NHTSA described in the NPRM, increasing the CAFE civil penalty rate could actually have the opposite effect of that described by the commenter, for example if a manufacturer ‘‘decide[s] that it makes financial sense to shift resources from its planned investments in capital towards payment of possible future penalties,’’ or ‘‘[i]f the possibility of paying penalties looms too large,’’ driving the manufacturer out of business entirely.198 Another commenter argued that ‘‘[a]llowing the penalty to remain indexed to inflation as mandated by Congress does not adversely affect competition, but actively changing the rate to a lower value does,’’ by ‘‘express[ing] a preference for FR 13904, 13914 (Apr. 2, 2018). FR 13904, 13915 (Apr. 2, 2018). 197 CBD Comment, at 23. 198 83 FR 13904, 13915 (Apr. 2, 2018); see also Comment by Jaguar Land Rover North America LLC, NHTSA–2018–0017–0016, at 1 (‘‘A significant increase in the CAFE penalty rate would fundamentally change the dynamics of how companies may make investment decisions, and would force IVM specialist manufacturers to disregard consumer demand by restricting the availability of vehicles that consumers want.’’). The commenter noted that EPA has previously stated that under the standards, ‘‘consumers can continue to have a full range of vehicle choices that meet their needs.’’ CBD Comment, at 16 (quoting Final Determination, at 9). But EPA has since reconsidered the emission standards for model year 2022–2025 light-duty vehicles, which were ‘‘based on outdated information.’’ 83 FR 16077, 16077 (Apr. 13, 2018). Accordingly, EPA cannot be held to its earlier forecast regarding choices available to consumers. PO 00000 195 83 196 83 Frm 00049 Fmt 4700 Sfmt 4700 36025 companies that have failed or will fail to comply with the standards and disrupt[ing] the normal market competition by effectively subsidizing these companies.’’ 199 As explained above, NHTSA is not ‘‘actively changing the rate to a lower value’’; the rate was $5.50 during reconsideration, the rate is currently $5.50, and the rate will continue to be $5.50 as a result of this final rule, rather than increasing to $14 beginning with MY 2019. But NHTSA agrees with the general principle that ‘‘actively changing the rate’’ would ‘‘disrupt[ ] the normal market competition.’’ For the reasons described in the NPRM, NHTSA believes that ‘‘an increase in the CAFE penalty rate could distort the normal market competition that would be expected in a free market by favoring one group of manufacturers over another.’’ 200 Thus, to avoid adversely affecting competition by interfering, NHTSA will not increase the CAFE civil penalty rate. Relatedly, one commenter argued that polling, reinforced by sales data, shows that ‘‘consumers value access to fuelefficient vehicles.’’ 201 If true, then normal market competition will incentivize non-compliant manufacturers to invest in increasingly efficient technology and increasing compliance with the standards. NHTSA would have no need to increase the CAFE civil penalty rate if it would never be applied because market forces would ensure compliance. The same commenter also argued that increasing the CAFE civil penalty rate ‘‘enhances the competitiveness of U.S.made vehicles in domestic and global markets.’’ 202 Specifically, the commenter maintained that ‘‘more U.S. fuel-efficient vehicles means fewer consumer and production shifts when gas prices are volatile, and more efficient fleets have increased chances of competing with the tighter standards set in Europe and Asia, allowing automakers to build global vehicle platforms and significantly reduce their costs.’’ For similar reasons as described above, automakers are already naturally incentivized to ‘‘reduce their costs.’’ If becoming increasingly efficient would 199 CAP Comment, at 4; see also CBD Comment, at 15 (reasoning that keeping the rate ‘‘artificially low’’ would ‘‘create an unfair market environment,’’ in which less established, innovative companies that have invested in technology to meet the standards would find themselves at a competitive disadvantage to more established, larger companies that may be more willing to pay penalties, rather than comply). 200 83 FR 13904, 13914 (Apr. 2, 2018). 201 CBD Comment, at 16. 202 CBD Comment, at 15–16. This argument overlaps to some extent with the imports EPCA factor. E:\FR\FM\26JYR1.SGM 26JYR1 36026 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations allow them to do so—and sell more vehicles in Europe and Asia—they will do so. As explained in more detail below, domestic manufacturers already must overcome hurdles that foreign manufacturers do not face, such as a separate minimum standard for domestically-manufactured passenger automobiles and prohibiting manufacturers from using traded credits to satisfy a shortfall of passenger automobiles manufactured domestically. Another commenter challenged NHTSA’s rationale on the competition factor, arguing that ‘‘if the stringency of the penalty is not maintained over time . . . , then manufacturers increasingly have the incentive merely to pay the penalty and not further invest in greater fuel efficiency.’’ 203 This is a moot point because the stringency of CAFE civil penalties is maintained over time, just not through inflation adjustments. As explained above, Congress chose an alternative mechanism for ensuring that the CAFE stringency retains its salience over time, by requiring the fuel economy standards to be set at the maximum feasible level for each model year, rather than requiring adjustments for inflation of the penalty rate alone. Consequently, increasing the penalty rate would serve to ‘‘adversely impact the affected manufacturers through higher prices for their products (without corresponding benefits to consumers), restricted product offerings, and reduced profitability’’—i.e., adversely affecting competition.204 jbell on DSK3GLQ082PROD with RULES iii. Imports One commenter argued that ‘‘if anything, the proper inflation adjustment would aid domestic manufacturing,’’ rather than cause a significant increase in automobile imports.205 Specifically, the comment noted that ‘‘historically, the only manufacturers to pay fines for noncompliance have been those who import a large fraction (and, in many cases, all) of the vehicles sold in the United States.’’ 206 This misses a key part of the picture. In the NPRM, NHTSA noted that ‘‘[f]inal model year fuel economy performance reports published by NHTSA indicate import passenger car fleets are performing better than domestic passenger car fleets.’’ Since then, the model year 2016 fleet performance report has been made 203 CARB Comment, at 18. FR 13904, 13914 (Apr. 2, 2018). 205 CBD Comment, at 18–19. 206 CBD Comment, at 18 (citing CAFE Public Information Center, available at https:// one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_ LIVE.html). 204 83 VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 available, indicating that the performance of the import passenger car fleet again has an advantage over the domestic passenger car fleet, now almost a full mile per gallon difference.207 Although the magnitude of the advantage has varied, the import passenger car fleet has consistently had a superior fuel economy performance to the domestic passenger car fleet for over ten years. Because of that existing advantage, increasing the CAFE civil penalty rate would likely have a harsher impact on domestic manufacturers, who would need to invest more to reduce fuel economy shortfalls. As those increased investments get translated into higher prices for vehicles, relatively cheaper imported vehicles become more attractive to consumers. The comment seemed to grasp this point in its very next paragraph, describing a situation in which ‘‘a higher fine is going to either push a manufacturer to deploy more technology to comply . . . or ensure that domestic production of more efficient cars is sufficient to offset the shortfall of its domestically produced’’ vehicles—both of which must be paid for somehow.208 Moreover, the comment fails to mention that domestic manufacturers face some heavier statutory burdens. For example, manufacturers are barred by statute from using traded credits to satisfy a shortfall for ‘‘the category of passenger automobiles manufactured domestically.’’ 209 Passenger automobiles manufactured internationally are not subject to the same limitation, affording foreign manufacturers a competitive advantage. Domestically-manufactured passenger automobiles are also subject to a minimum standard, beyond the general average fuel economy standards: 27.5 miles per gallon or ‘‘92 percent of the average fuel economy projected by the Secretary for the combined domestic and non-domestic passenger automobile fleets manufactured for sale in the United States by all manufacturers in the model year,’’ whichever is greater.210 In fact, this statutory domestic passenger vehicle requirement has already resulted in the imposition of 207 Available at https://one.nhtsa.gov/cafe_pic/ CAFE_PIC_fleet_LIVE.html (last accessed May 22, 2018). 208 CBD Comment, at 18. 209 49 U.S.C. 32903(f)(2); see also 49 CFR 536.9(c). 210 49 U.S.C. 32902(b)(4). Since the minimum standard for domestically-produced passenger automobiles was promulgated, the ‘‘92 percent’’ has always been greater than 27.5 mpg. For model year 2016, the most recent year for which data is publicly available, some manufacturers were unable to meet the domestic passenger car fleet standard. CAFE Public Information Center, https:// one.nhtsa.gov/cafe_pic/CAFE_PIC_Mfr_LIVE.html. PO 00000 Frm 00050 Fmt 4700 Sfmt 4700 record penalties for model year 2016. As noted in NHTSA’s MY 2011–2018 Industry CAFE Compliance report, one manufacturer paid over $77 million in civil penalties for failing to meet or exceed the minimum domestic passenger car standard for MY 2016— the single highest civil penalty assessed in the history of the CAFE program. NHTSA anticipates that such penalties will increase as stringency levels continue to rise. These disparities against the domestic passenger automobile industry increase the likelihood that an upward adjustment to the CAFE civil penalty rate will create greater incentives for manufacturers to shift their production of passenger vehicles overseas to avoid such penalties, and that would have a negative economic impact on the United States—one that is likely to hit particularly hard on states and regions of states where domestic passenger automobile manufacturing is concentrated. The comment also cited the ‘‘history of Detroit manufacturing’’ as another illustration for how ‘‘adjusting the fine upward acts to pull manufacture of more efficient vehicles into domestic production as opposed to overseas production and imported.’’ 211 The comment’s portrayal of history, however, omitted that many of the most efficient vehicles already had thin margins and production had been moved, at least in part, to plants in Mexico to reduce costs. Moreover, the strength of the connection between the civil penalty rate and domestic production is tenuous. An alternative explanation is that higher fuel prices allow manufacturers to charge more for fuel efficient vehicles. Consequently, manufacturers can spend more on production domestically without having to shift production abroad for cheaper. b. Other Economic Considerations Even if the EPCA factors do not apply, NHTSA concludes that raising the CAFE civil penalty rate to $14 would have a ‘‘negative economic impact’’ for the reasons explained in the NPRM.212 One comment asserted that NHTSA ‘‘has not identified any facts or analysis that would support its belated invocation of the ‘negative economic impact’ provision.’’ 213 This comment ignores that the NPRM expressly stated that it was relying on ‘‘the estimate provided by industry showing annual costs of at least one billion dollars.’’ 214 211 CBD Comment, at 18–19. FR 13904, 13916 (Apr. 2, 2018). 213 Attorneys General Comment, at 14. 214 83 FR 13904, 13916 (Apr. 2, 2018). 212 83 E:\FR\FM\26JYR1.SGM 26JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations Some commenters challenged NHTSA’s reliance on the Alliance and Global’s estimate of annual costs of at least one billion dollars under NHTSA’s augural standards for MY 2022 to 2025, largely relying on the Union of Concerned Scientists’ (UCS’s) critique of the estimate.215 The Alliance and Global addressed UCS’s criticisms in their comment.216 Specifically, the Alliance and Global observed that ‘‘UCS did not factor in the costs of CAFE penalties in their analysis,’’ as NHTSA has in its analyses of the economic impact of CAFE standards.217 Consistent with NHTSA’s past methodology and in light of the particular question at issue here, NHTSA continues to agree that it was appropriate to incorporate the costs of civil penalties in an analysis to determine whether raising the CAFE civil penalty rate would have a ‘‘negative economic impact.’’ One commenter argued, relying on the July 2016 Draft Technical Assessment Report (TAR), that because ‘‘the model year 2022–25 greenhouse gas/CAFE standards were technologically feasible at reasonable cost for auto manufacturers . . . the industry’s $1 billion penalty estimates are unreasonable since any ‘massive’ increase would be the result of the manufacturers’ deliberate noncompliance rather than any inability to comply.’’ 218 Since the draft TAR, however, the EPA Administrator has reconsidered the emission standards for model year 2022–2025 light-duty vehicles and determined that they ‘‘are based on outdated information, and that more recent information suggests that the current standards may be too stringent.’’ 219 Accordingly, EPA announced that it ‘‘will initiate a notice and comment rulemaking in a forthcoming Federal Register notice to further consider appropriate standards for model year 2022–2025 light-duty vehicles, as appropriate,’’ in partnership with NHTSA.220 In particular, EPA observed that due to a variety of challenges of feasibility and practicability, many companies have already started to rely on banked credits to remain in compliance, which may be increasingly difficult to continue as the stringency standards tighten.221 To the extent that the draft TAR expressed that ‘‘the model year 2022–25 greenhouse gas/CAFE standards were technologically feasible at reasonable cost for auto manufacturers,’’ that conclusion is no longer operative. Another commenter identified purported ‘‘substantial shortcomings’’ with the CAFE model used by the Alliance and Global to formulate generate its cost estimates, which it claimed ‘‘will tend to overestimate fuel economy costs.’’ 222 NHTSA disagrees strongly with that statement. As the comment itself noted, ‘‘the [CAFE] model is one of the best publicly available tools for analyzing the effects of fuel economy regulation and offers substantial transparency and comparability for the analyses.’’ 223 Further, the CAFE model has been used in numerous fuel economy rulemakings. Finally, the commenter did not provide an alternative calculation of what it believes the additional costs associated with increasing the CAFE civil penalty rate would be. As such, NHTSA’s reliance on the CAFE model is eminently reasonable, and the agency continues to believe that ‘‘the estimate provided by the Alliance and Global showing annual costs of at least one billion dollars is a reasonable estimate’’ of what would occur if the CAFE civil penalty rate was increased to $14 under the agency’s augural standards and that this would constitute a ‘‘negative economic impact’’ under the 2015 Act.224 Some commenters argued that even assuming the Alliance and Global’s analysis was accurate, the impact of the additional costs it calculates is minimal when spread across the industry.225 215 See, e.g., CBD Comment, at 19; Attorneys General Comment, at 10; IPI Comment, at 13–14. UCS’s critique of the Alliance and Global’s analysis is available at https://www.regulations.gov/ document?D=NHTSA-2017-0059-0019. 216 Alliance and Global Comment, at 17–18. 217 Alliance and Global Comment, at 17–18 (citing 77 FR 62624, 63047 (Oct. 15, 2012)). Contrary to one comment’s critique, Attorneys General Comment, at 15; cf. IPI Comment, at 16 (‘‘[A]ny negative effects of higher penalties on profits would be experienced only by those firms that, in the absence of the inflation adjustment, would not comply with the standards. . . .’’), the Alliance and Global’s analysis did account for the increased costs to manufacturers that would comply with the fuel economy standards. 218 Attorneys General Comment, at 10. 219 83 FR 16077, 16077 (Apr. 13, 2018). 220 83 FR 16077, 16077 (Apr. 13, 2018). As part of this reconsideration, ‘‘NHTSA is obligated to conduct a de novo rulemaking, with fresh inputs and a fresh consideration and balancing of all relevant factors, to establish final CAFE standards for [MYs 2022–2025].’’ 82 FR 34740, 34741 (July 26, 2017). 221 83 FR 16077, 16079 (Apr. 13, 2018). 222 IPI Comment, at 13–14. 223 IPI Comment, at 13. 224 83 FR 13904, 13916 (Apr. 2, 2018). 225 See, e.g., Comment by Kendl Kobbervig, NHTSA–2018–0017–0009, at 1; Attorneys General Comment, at 14–15; IPI Comment, at 15; cf. IPI Comment, at 16 (arguing that ‘‘the increase in costs should not be thought of as severe’’ because the total additional costs due to an increase in the CAFE civil penalty ‘‘will occur mostly for luxurious and sports cars’’). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 36027 These arguments gloss over the fact that if the Alliance and Global’s analysis is correct, there is a ‘‘negative economic impact.’’ Instead, these comments seem to be directed towards the irrelevant question of how ‘‘negative’’ the ‘‘economic impact’’ would be.226 Other commenters criticized NHTSA for purportedly not conducting a sufficiently thorough analysis of the negative economic impact of the increased penalty rate, asserting that NHTSA must consider factors, such as ‘‘which vehicles would be subject to penalties, how much of the costs would be passed through to consumers, and whether the average per vehicle cost would have any impact at all on consumer demand for vehicles.’’ 227 The 2015 Act does not require such an analysis to determine whether making an otherwise required adjustment would have a ‘‘negative economic impact.’’ As NHTSA explained in the NPRM and above, because the term ‘‘negative economic impact’’ is not defined nor any guidance provided by Congress or OMB, NHTSA has broad discretion to determine how to determine whether a ‘‘negative economic impact’’ would result from such an adjustment.228 Contrast the ‘‘negative economic impact’’ exception in the 2015 Act with the statutory provision describing the relevant factors that Congress requires NHTSA to consider in determining the amount of a civil penalty imposed for a variety of violations of the Safety Act.229 Congress has demonstrated that it can, and will, delineate specific factors agencies should consider in making comparable determinations. It chose not to do so in the 2015 Act, affording agencies the ability to determine what would be most appropriate for each. Imposing an additional billion dollars in costs to the automobile industry— 226 This question is irrelevant for the reasons discussed in footnote 160: once NHTSA determines that increasing the civil penalty to $14 would have a negative economic impact, it has broad discretion to determine how much less than the otherwise required amount the adjustment, if any, should be. 227 Attorneys General Comment, at 13–14; see also CARB Comment, at 19 (commenting that NHTSA did ‘‘not provide an estimate of the increased compliance costs, the number and types of vehicles affected, the average increased costs that consumers would bear, the price sensitivity of consumers of the affected vehicles, or how the cost increase compares to fuel cost savings and other benefits to consumers resulting from increased compliance’’). 228 See 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat’l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214–15 (D.C. Cir. 2013)); Alliance and Global Comment, at 15 & n.63. 229 See 49 U.S.C. 30165(c) (requiring the Secretary to ‘‘consider the nature, circumstances, extent, and gravity of the violation’’ in determining the amount of a civil penalty under that section and detailing specific factors the Secretary must include, as appropriate, in making such determination). E:\FR\FM\26JYR1.SGM 26JYR1 36028 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations every year—would have the type of ‘‘negative economic impact’’ envisioned by Congress when it provided this exception, and this negative economic impact is magnified by the statutory domestic minimum standard for passenger vehicles, whose penalties cannot be avoided with credits. In fact, in other instances when Congress has imposed additional procedural requirements on agencies, it has drawn the line at economic impacts around $100 million.230 It appears reasonable that a projected economic impact ten times the amount required for a rule to be considered ‘‘major’’ under the Congressional Review Act would be more than enough to reach this threshold. Furthermore, as noted above, it is apparent that a significant part of the negative impact would occur within the United States—and specifically within regions of the United States where traditional automobile manufacturing is concentrated—because raising the penalty rate would not only harm manufacturers generally. It would also create a specific incentive for manufacturers to shift domestic production of small, low-profit-margin passenger vehicles either to Mexico (where production costs are lower) or outside of North America (because those vehicles would not be subject to the domestic minimum standard). Another commenter alleged that NHTSA did ‘‘not analyze the obvious alternative available to manufacturers who want to avoid the higher penalty: compliance with the fuel economy standards’’ and ‘‘entirely fail[ed] to address’’ how increasing the CAFE civil penalty rate to $14 would raise the value of credits, ‘‘making violations more expensive for those manufacturers that voluntarily choose not to comply with the CAFE standards.’’ 231 This comment is wrong: In the NPRM, NHTSA expressly acknowledged manufacturers’ option to comply with the applicable fuel economy standards, the resulting effect on the value of credits, and the economic impact.232 Further, the $1 billion estimate was for 230 See, e.g., 5 U.S.C. 804(2)(A). General Comment, at 15–16. 232 See, e.g., 83 FR 13904, 13916 (Apr. 2, 2018) (‘‘[I]ncreasing the penalty rate to $14 would lead to significantly greater costs than the agency had anticipated when it set the CAFE standards because manufacturers who had planned to use penalties as one way to make up their shortfall would now need to pay increased penalty amounts, purchase additional credits at likely higher prices, or make modifications to their vehicles outside of their ordinary redesign cycles. NHTSA believes all of these options would increase manufacturers’ compliance costs, many of which would be passed along to consumers.’’). jbell on DSK3GLQ082PROD with RULES 231 Attorneys VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 total costs, including technology costs, not just increased penalty payments. Therefore, the agency continues to believe that the estimate provided by the Alliance and Global is a reasonable estimate of the economic impact of increasing the penalty rate under the augural standards—perhaps even be understated—and that this impact is sufficient for the agency to conclude that the CAFE civil penalty rate statute falls within the ‘‘negative economic impact’’ exception to the 2015 Act. In addition, two recent NHTSA publications—NHTSA and EPA’s Safer Affordable Fuel-Efficient (SAFE) Vehicles proposed rule as well as the MY 2011–2018 Industry CAFE Compliance Report—provide further confirmation for NHTSA’s conclusion that increasing the CAFE civil penalty rate pursuant to the 2015 Act would have a ‘‘negative economic impact.’’ 233 The SAFE Vehicles rule proposed CAFE and greenhouse gas (GHG) standards for model years 2020 through 2026 and used the most recent version of the CAFE model. As discussed in greater detail in that rulemaking, at a high level, the CAFE model is the tool the agencies use to determine how the industry could respond to potential standards. It includes a wide range of assumptions on the cost, effectiveness, and availability of different technologies, and then a decision-making tool to determine how each manufacturer could apply technologies, while accounting for various considerations that manufacturers typically evaluate when establishing, choosing, and incorporating the technologies. In the case of the CAFE standards, the model also estimates when a manufacturer is likely to use existing credits or pay penalties in lieu of meeting the required standards. Using the same publiclyavailable modeling and underlying data as that relied upon in the SAFE Vehicles NPRM, the negative economic impact of increasing the CAFE civil penalty rate to $14 remains apparent. Analyses 233 83 FR 42986 (Aug. 24, 2018). Although the SAFE Vehicles NPRM and the CAFE Compliance Report were published after the comment period in this rulemaking had closed, ‘‘an agency may use supplementary data, unavailable during the notice and comment period, that expands on and confirms information contained in the proposed rulemaking and addresses alleged deficiencies in the preexisting data, so long as no prejudice is shown.’’ Solite Corp. v. U.S. E.P.A., 952 F.2d 473, 484 (D.C. Cir. 1991) (cleaned up) (citing Cmty. Nutrition Inst. v. Block, 749 F.2d 50, 57–58 (D.C. Cir. 1984)). Moreover, since the SAFE rule was published, NHTSA has not received any additional comments on—or any requests to re-open the comment period for—this CAFE civil penalty rate rulemaking. Pursuant to NHTSA’s regulations, ‘‘[l]ate filed comments will be considered to the extent practicable.’’ 49 CFR 553.23. PO 00000 Frm 00052 Fmt 4700 Sfmt 4700 conducted for the SAFE Vehicles NPRM to determine the effect of other inputs— in this case, the CAFE civil penalty rate—on the sensitivity of results show that, as seen in Table 1 in Appendix A, under the augural standards, manufacturers are projected to face more than $500 million in additional civil penalty liability before accounting for credits every year through at least MY 2026 if the rate is increased to $14 in MY 2019, as compared to retaining the rate at $5.50—with the added burden exceeding $1 billion for some model years.234 Even under the proposed standards,235 which were the least stringent option analyzed in that rule, the additional projected penalty liability before accounting for credits from an increase in the rate to $14 would be substantial: Over $750 million in the first model year for which the increase would be in effect and over $100 million every year through model year 2025, as shown in Table 2 in Appendix A. These additional penalties are on top of any increased costs manufacturers would incur in making technological or design changes to reduce their shortfalls—costs that would likely be passed along to consumers. It is important to note that, as described above, these added potential penalties could be offset through the application 234 A description of the modeling assumptions and parameters for the SAFE NPRM are located at 83 FR 43000- 43188 (Aug. 24, 2018) (‘‘Technical Foundation for NPRM Analysis’’). The data supporting the calculations presented here are available at https://www.nhtsa.gov/corporateaverage-fuel-economy/compliance-and-effectsmodeling-system in the ‘‘Central Analysis’’ and ‘‘Sensitivity Analysis’’ for the ‘‘2018 NPRM for Model Years 2021–2026 Passenger Cars and Light Trucks.’’ The data utilized are the same data presented in the SAFE Vehicles NPRM ‘‘Sensitivity Analysis’’ section (beginning at 83 FR 43352), but tabulated to show the impacts of this particular action. The calculations here specifically compare the total projected fines across all manufacturers and all fleets, both under the augural standards and the proposed standards, in the central analysis that assumes the rate will remain at $5.50 and the sensitivity analysis that, holding all else in the central analysis the same, assumes the rate would be increased to $14. The numbers presented here are based on the ‘‘unconstrained’’ analysis of the CAFE model—which allows for the possibility that credits may be earned, transferred, and applied to CAFE shortfalls—rather than the standard-setting analysis—which assumes that each fleet must comply with the CAFE standard separately in each year because of the statutory limitation in EPCA and EISA that prohibits NHTSA from considering the availability of credits when setting standards— but the magnitudes of the amounts and the trends are similar under both analyses. For additional information about the assumptions underlying this data, please refer to the Preliminary Regulatory Impact Analysis (PRIA) and the NPRM for the SAFE Vehicles rulemaking, both available at https:// www.nhtsa.gov/corporate-average-fuel-economy/ safe. 235 The analysis provided by the Alliance and Global was conducted and submitted before the proposed standards were publicly available. E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations of credits earned, transferred, or traded in ways the model cannot predict— subject to the limitations on domestic fleets described above—but NHTSA expects that if the civil penalty rate was increased, the price of credits would increase as well. Moreover, the MY 2011–2018 Industry CAFE Compliance report recently published by NHTSA shows that the number of fleets with credit shortfalls has substantially increased since 2011, while the number of fleets generating credit surpluses has decreased, leading to the MY 2018 estimate of 28 fleets with projected shortfalls and only 11 with projected surpluses.236 While most manufacturers have so far avoided making civil penalty payments by using earned and traded credits, more manufacturers are expected to need to pay penalties going forward because credit surpluses across the entire fleet are diminishing; 237 manufacturers will no longer be able to use their own credits or purchase credits from other entities to fully satisfy their shortfalls. The shrinking credit surplus is particularly challenging for domestic fleets: The MY 2011–2018 Industry CAFE Compliance report shows that the remaining surplus credits for domestically-produced vehicles were cut nearly in half from MY 2014 to MY 2016.238 In addition, since non-compliance with the domestic passenger car minimum standard required by 49 U.S.C. 32903(g)(3) and 49 CFR 536.9 cannot be covered with credits acquired by another automaker or transferred from another fleet, shortfalls for domestic vehicles must be covered by penalty payments when a manufacturer’s domestic surplus credits run out. Manufacturers are already beginning to realize this impact: As noted above, one manufacturer paid over $77 million in civil penalties for failing to meet the minimum domestic passenger car standard for MY 2016, which is the single highest civil penalty assessed in the history of the CAFE program. These facts show that the estimate provided by the Alliance and Global is supported by the actual behavior of the industry in the face of increasing standards, which bears out the conclusions already reached by NHTSA in this rulemaking. jbell on DSK3GLQ082PROD with RULES 5. $10 Cap Two comments claimed that NHTSA failed to provide a ‘‘reasoned 236 NHTSA, ‘‘MY 2011–2018 Industry CAFE Compliance,’’ https://one.nhtsa.gov/cafe_pic/MY %202011%20-%20MY%202018%20Credit %20Shortfall%20Report.pdf (Dec. 21, 2018). 237 Id. 238 Id. VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 explanation’’ for why it departed from its previous position that the $10 cap for the CAFE civil penalty rate, established by Congress in 1978 in 49 U.S.C. 32912(c)(1)(B), needs to be adjusted pursuant to the 2015 Act.239 As explained above, NHTSA is permitted to change its views. And in doing so here, NHTSA provided a ‘‘reasoned explanation’’ in its NPRM: The $10 cap is not ‘‘assessed or enforced’’ and thus is not a ‘‘civil monetary penalty’’ that requires adjustment under the 2015 Act. Multiple commenters disagreed with NHTSA’s proposed determination in the alternative that any potential adjustment NHTSA makes to the CAFE civil penalty rate be capped by the $10 limit, without adjusting the cap to $25.240 These comments—including those that had argued that NHTSA’s adjustment in 1997 from $5 to $5.50 constitutes evidence that an adjustment is warranted here—almost unanimously ignored that this cap was not adjusted when the previous inflation adjustment was made in 1997. These comments also failed to reconcile the fact the $10 cap was left intact when Congress amended the civil penalty provision by enacting EISA in 2007. Instead, the comments focused largely on the ‘‘maximum amount’’ provision of definition of ‘‘civil monetary penalty’’ in the 2015 Act. One comment observed that the statutory language establishing the $10 cap is ‘‘virtually identical’’ to the statutory language establishing the general EPCA penalty of $10,000, which NHTSA adjusted, only identifying the shared phrase ‘‘not more than’’ to indicate that they are both maximum amounts.241 But NHTSA did not, and still does not, dispute that the $10 cap is a ‘‘maximum amount.’’ Rather, NHTSA tentatively determined, and today finalizes, that the $10 cap is not ‘‘assessed or enforced’’ as required to be a ‘‘civil monetary penalty’’ under the 239 CBD Comment, at 23; Attorneys General Comment, at 17. The Attorneys General comment also claimed that NHTSA adjusted the cap from $10 to $25 in its interim final rule and that this adjustment ‘‘has never been suspended or reversed, and remains in effect.’’ Attorneys General Comment, at 16. As NHTSA noted in its NPRM, however, while NHTSA did announce in the interim final rule that the adjusted maximum civil penalty would be increased from $10 to $25, 81 FR 43524, 43526 (July 5, 2016), ‘‘this change was never formally codified in the Code of Federal Regulations nor adopted by Congress.’’ 83 FR 13904, 13916 n.96 (Apr. 2, 2018). Regardless, NHTSA gave notice that ‘‘[e]ven if the adjustment is considered to have been adopted, however, NHTSA is now reconsidering that decision for the reasons explained’’ in the notice. 83 FR 13904, 13916 n.96 (Apr. 2, 2018). 240 See, e.g., CAP Comment, at 3; CBD Comment, at 23. 241 CARB Comment, 9. PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 36029 2015 Act.242 Other penalties that have a maximum amount, such as the general EPCA penalty, can actually be ‘‘assessed or enforced’’: A violator could theoretically be assessed a civil penalty of the now-adjusted maximum amount. Only two comments provided any argument on this specific point.243 One of those comments conceded that the cap ‘‘is not being assessed or enforced now.’’ 244 Nonetheless, that comment maintained that the cap ‘‘may’’ be assessed or enforced ‘‘in the future if [NHTSA] exercises its discretionary authority to increase the penalty to further energy conservation.’’ 245 Similarly, the other comment asserted that ‘‘the condition of contemporaneous enforceability of the statutory maximum amount is not a condition precedent in order to qualify as a ‘civil monetary penalty.’ . . . [T]he maximum itself does not need to be actively assessed or enforced.’’ 246 Even setting aside the hypothetical circumstances that NHTSA would need to establish to raise the EPCA rate all the way to the cap (discussed above), it is not the cap that is ever ‘‘assessed or enforced’’; it is the ‘‘civil penalty,’’ as defined in 49 U.S.C. 32912(b). The statutory cap merely sets a limit to which the $5.50 multiplier— which is used to calculate the ‘‘civil penalty’’—can be raised. Other commenters discussed how the $10 cap must be adjusted to avoid undermining the purpose of the 2015 Act.247 As discussed above, NHTSA disagrees that retaining the CAFE civil penalty rate runs counter to the purposes of the 2015 Act, even if the 2015 Act applies to the CAFE civil penalty rate. Congress chose means other than inflation adjustments to maintain the deterrent effect of the CAFE civil penalty formula over time (and to incentivize energy conservation under EPCA). Regardless, the purpose of the statute would not justify completing an adjustment unauthorized by Congress. The $10 cap does not satisfy the definition of a ‘‘civil monetary penalty’’ required by Congress to be 242 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 3(2)(B), (C). 243 CARB Comment, at 9; Attorneys General Comment, at 17. 244 Attorneys General Comment, at 17. 245 Attorneys General Comment, at 17. 246 CARB Comment, at 9. 247 See, e.g., CARB Comment, at 19–20 (Not adjusting the $10 cap ‘‘would completely defeat the purpose of the 2015 Act in avoiding the eroded value and deterrence of penalties by inflation.’’); Attorneys General Comment, at 17 (‘‘[T]o read the 2015 Act as not applying to the CAFE standards’ statutory maximum would undermine the purpose of both the 2015 Act and EPCA.’’); IPI Comment, at 4 (‘‘[I]f the $10 maximum were a permanent cap never subject to inflation, that would defeat Congress’s stated purposes for the 2015 Act. . . .’’). E:\FR\FM\26JYR1.SGM 26JYR1 36030 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations adjusted, and therefore, the 2015 Act is not a basis for NHTSA to adjust the $10 cap. One commenter proposed the $10 cap be subject to an inflationary adjustment calculated from 2007.248 Because NHTSA has concluded that the $10 cap should not be adjusted at all under the 2015 Act, it is unnecessary for NHTSA to determine what the appropriate base year would be if such an adjustment were required, and NHTSA declines to do so. jbell on DSK3GLQ082PROD with RULES E. Rulemaking Analyses and Notices 1. Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures NHTSA has considered the impact of this rulemaking action under Executive Order 12866, Executive Order 13563, and the Department of Transportation’s regulatory policies and procedures. This rulemaking document has been considered a ‘‘significant regulatory action’’ under Executive Order 12866. NHTSA believes that this rulemaking is ‘‘economically significant’’ because this rule avoids imposing a future economic impact of $100 million or more annually. Certain commenters criticized the agency’s decision to not include a separate economic analysis. The agency notes first that nothing in either the 2015 Act or EPCA require that NHTSA conduct a cost-benefit analysis when determining issues related to CAFE penalties. Further, the agency’s first argument in this final rule that these penalties are not ‘‘civil monetary penalties’’ under the 2015 Act would not be affected by any cost-benefit analysis, as it relies on purely legal reasoning, not on any economic finding. Similarly, although one could argue that other arguments relied on in this final rule require some degree of analysis, the relevant statutes expressly identify specific factors the agency must consider, and the agency made the appropriate considerations of substantial deleterious harm under EPCA and negative economic impact under the 2015 Act. In addition, since this rule merely maintains the existing penalty rate, it has no economic impact. Certainly, some alternatives, particularly raising it to $14 or even just $10, would have had economic impacts, but analyzing the impacts of alternatives that would have changed the status quo is different than analyzing an actual rule that does so. In some ways, this compares to an agency’s decision to deny a petition rulemaking, where the 248 Workhorse VerDate Sep<11>2014 2. Regulatory Flexibility Act Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), whenever an agency is required to publish a notice of proposed rulemaking or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities (i.e., small businesses, small organizations, and small governmental jurisdictions). No regulatory flexibility analysis is required if the head of an agency certifies the proposal will not have a significant economic impact on a substantial number of small entities. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a proposal will not have a significant economic impact on a substantial number of small entities. NHTSA has considered the impacts of this notice under the Regulatory Flexibility Act and certifies that this rule would not have a significant economic impact on a substantial number of small entities. The following provides the factual basis for this certification under 5 U.S.C. 605(b). The Small Business Administration’s (SBA) regulations define a small business in part as a ‘‘business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or 249 OMB Non-Applicability Letter; OMB Negative Economic Impact Letter. Comment, at 3. 16:08 Jul 25, 2019 denial does not ordinarily include a thorough economic analysis, but any regulatory action in response granting a petition would likely benefit from some an analysis the reflects the impacts of any change. Finally, Executive Order 12866 by its own terms does not, ‘‘does not create any right or benefit, substantive or procedural, enforceable at law or equity by a party against the United States, its agencies or instrumentalities, its officers or employees, or any other person.’’ Therefore, whether the agency complies with the Order is not grounds for legal challenge. To the extent there is any ambiguity as to what analysis is required, OMB not only reviewed both the NPRM and final rule, but also affirmatively concurred with NHTSA’s economic determination and the interpretations of the 2015 Act in this final rule.249 Jkt 247001 PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 use of American products, materials or labor.’’ 13 CFR 121.105(a). SBA’s size standards were previously organized according to Standard Industrial Classification (‘‘SIC’’) Codes. SIC Code 336211 ‘‘Motor Vehicle Body Manufacturing’’ applied a small business size standard of 1,000 employees or fewer. SBA now uses size standards based on the North American Industry Classification System (‘‘NAICS’’), Subsector 336— Transportation Equipment Manufacturing. This action is expected to affect manufacturers of motor vehicles. Specifically, this action affects manufacturers from NAICS codes 336111—Automobile Manufacturing, and 336112—Light Truck and Utility Vehicle Manufacturing, which both have a small business size standard threshold of 1,500 employees. Though civil penalties collected under 49 CFR 578.6(h)(1) and (2) apply to some small manufacturers, low volume manufacturers can petition for an exemption from the Corporate Average Fuel Economy standards under 49 CFR part 525. This would lessen the impacts of this rulemaking on small business by allowing them to avoid liability for penalties under 49 CFR 578.6(h)(2). Small organizations and governmental jurisdictions will not be significantly affected as the price of motor vehicles and equipment ought not change as the result of this rule. 3. Executive Order 13132 (Federalism) Executive Order 13132 requires NHTSA to develop an accountable process to ensure ‘‘meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.’’ ‘‘Policies that have federalism implications’’ is defined in the Executive Order to include regulations that have ‘‘substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.’’ Under Executive Order 13132, the agency may not issue a regulation with federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal Government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, the agency consults with State and local governments, or the agency consults with State and local officials early in the process of developing the proposed regulation. This rule will not have substantial direct effects on the States, on the E:\FR\FM\26JYR1.SGM 26JYR1 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The reason is that this rule will generally apply to motor vehicle manufacturers. Thus, the requirements of Section 6 of the Executive Order do not apply. 4. Unfunded Mandates Reform Act of 1995 The Unfunded Mandates Reform Act of 1995, Public Law 104–4, requires agencies to prepare a written assessment of the cost, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually. Because this rule does not include a Federal mandate, no Unfunded Mandates assessment will be prepared. jbell on DSK3GLQ082PROD with RULES 5. National Environmental Policy Act The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321– 4347) requires Federal agencies to analyze the environmental impacts of proposed major Federal actions significantly affecting the quality of the human environment, as well as the impacts of alternatives to the proposed action.250 When a Federal agency prepares an environmental assessment, the Council on Environmental Quality (CEQ) NEPA implementing regulations (40 CFR parts 1500–1508) require it to ‘‘include brief discussions of the need for the proposal, of alternatives . . ., of the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.’’ 251 Based on the environmental assessment, the agency must ‘‘make its determination whether to prepare an environmental impact statement’’ and ‘‘prepare a finding of no significant impact . . . if the agency determines on the basis of the environmental assessment not to prepare a statement.’’ 252 NHTSA prepared a Draft Environmental Assessment (Draft EA), which was included in the preamble of the NPRM. This section serves as the agency’s Final Environmental Assessment (Final EA) and Finding of No Significant Impact (FONSI). 250 42 U.S.C. 4332(2)(C). CFR 1508.9(b). 252 40 CFR 1501.4(c) & (e). 251 40 VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 i. Purpose and Need This final rule sets forth the purpose of and need for this action. NHTSA considered whether it is appropriate, pursuant to the Inflation Adjustment Act, to make an initial ‘‘catch-up’’ adjustment to the civil monetary penalties it administers for the CAFE program. Further, if the Inflation Adjustment Act does apply, it has considered the appropriate approach to undertake pursuant to the legislation and consistent with the agency’s responsibilities under EPCA (as amended by EISA). NHTSA has considered the findings of this Final EA prior to selecting the $5.50 rate in this final rule. ii. Alternatives NHTSA considered a range of alternatives for this action, including a civil penalty amount of $5.50 per each tenth of a mile per gallon 253 and a civil penalty amount of $14.00 per each tenth of a mile per gallon.254 NHTSA also considered a civil penalty amount of $6.00 per each tenth of a mile per gallon (rounding to the nearest dollar pursuant to the 2015 Act) and whether the civil penalty amount is capped at $10.00 per each tenth of a mile per gallon (pursuant to EPCA). This allowed the agency to consider selecting any value along this range of alternatives, including any civil penalty amount between $5.50 and $14.00. In consideration of the information presented in this Final EA, NHTSA is selecting a civil penalty rate of $5.50 per each tenth of a mile per gallon as its final rule. NHTSA is also increasing the ‘‘general penalty’’ to a maximum penalty of $42,530,255 pursuant to the requirements of the Inflation Adjustment Act. In the Draft EA, NHTSA identified $5.50 as the agency’s No Action Alternative. Two commenters noted that, as a result of the U.S. Court Appeals for the Second Circuit decision, the $14 rate should be considered the 253 As previously noted, the rate was $5.50 during reconsideration, the rate is currently $5.50, and the rate will continue to be $5.50 as a result of this final rule, rather than increasing to $14 beginning with MY 2019. Manufacturers would at no time be responsible for paying a higher civil penalty rate. 254 Absent this final rule, the $14 rate would have gone into effect beginning with model year 2019. 255 NHTSA adjusted this penalty to a maximum of $40,000 in its July 2016 IFR. Applying 1.01636 multiplier for 2017 inflationary adjustments, as specified in OMB’s December 16, 2016 guidance, results in an adjusted maximum penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as specified in OMB’s December 15, 2017, results in an adjusted maximum penalty of $41,484. Applying the multiplier for 2019 of 1.02522, as specified in OMB’s December 14, 2018, results in an adjusted maximum penalty of $42,530. PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 36031 agency’s No Action Alternative.256 NHTSA believes this notice adequately explains the complicated factual and legal circumstances that apply to this rulemaking. This Final EA considers the environmental impacts associated with the $5.50 and $14 rates in comparison with each other, thus allowing a reasoned consideration of the greatest potential environmental impacts regardless of which is appropriately considered the No Action Alternative. iii. Environmental Impacts of the Proposed Action and Alternatives NHTSA considered a range of alternatives from a rate of $5.50 to a rate of $14 as the civil penalty amount for a manufacturer’s failure to meet its fleet’s average fuel economy target (assuming the manufacturer does not have sufficient credits available to cover the shortfall). When deciding whether to add fuel-saving technology to its vehicles, a manufacturer might consider the cost to add the technology, the price and availability of credits, the potential reduction in its civil penalty liability, and the value to the vehicle purchaser of the change in fuel outlays over a specified ‘‘payback period.’’ A higher civil penalty amount could encourage manufacturers to improve the average fuel economy of their passenger car and light truck fleets if the benefits of installing fuel-saving technology (i.e., lower civil penalty liability and increased revenue from vehicle sales) outweigh the costs of installing the technology. However, there are many reasons why this might not occur to the degree anticipated. Apart from the civil penalty rate, as CAFE standards increase in stringency, manufacturers have needed to research and install increasingly less cost-effective technology that may not obtain levels of consumer acceptance necessary to offset the investment. A higher civil penalty amount combined with the value of the potential added fuel economy benefit of new, advanced technology to the vehicle purchaser may not be sufficient to outweigh the added technology costs (including both the financial outlays and the risk that consumers may not value the technology or accept its impact on the driving experience, therefore opting not to purchase those models). This may be especially true when gas prices are low. If the added cost in civil penalty payments is borne by the manufacturer, this may result in reduced investment in fuel saving technology or reduced consumer choice. If the added cost in 256 IPI Comment, at 10; Attorneys General Comment, at 19. E:\FR\FM\26JYR1.SGM 26JYR1 jbell on DSK3GLQ082PROD with RULES 36032 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations civil penalty payments is passed on to the consumer, the consumer would see higher vehicle purchase costs without a corresponding fuel economy benefit or other benefits, resulting in fewer purchases of newer, more fuel-efficient vehicles. Based on the foregoing, NHTSA believes that the levels of compliance with the applicable fuel economy targets for each of the alternatives under consideration in this notice could result, at most, in relatively small differences in levels of compliance with the applicable fuel economy targets. An increase in a motor vehicle’s fuel economy is associated with reductions in fuel consumption and greenhouse gas (GHG) emissions for an equivalent distance of travel. Increased global GHG emissions are associated with climate change, which includes increasing average global temperatures, rising sea levels, changing precipitation patterns, increasing intensity of severe weather events, and increasing impacts on water resources. These, in turn, could affect human health and safety, infrastructure, food and water supplies, and natural ecosystems. Fewer GHG emissions would reduce the likelihood of these impacts. Changes in motor vehicle fuel economy are also associated with impacts on criteria and hazardous air pollutant emissions, safety, life-cycle environmental impacts, and more. As part of recent rulemaking actions establishing CAFE standards, NHTSA evaluated the impacts of increasing fuel economy standards for passenger cars and light trucks on these and other environmental impact areas.257 The analyses assumed a civil monetary penalty of $5.50 per each tenth of a mile per gallon. The agency has considered the information and trends presented in those Final Environmental Impact Statements (Final EISs). For example, the MY 2017–2025 CAFE EIS showed that the large stringency increases in the fuel economy standards as a result of that rulemaking would result in reductions of global mean surface temperature increases of no more than 0.016 °C by 2100. Further, that EIS showed those fuel economy standards resulting in modest nationwide reductions in most criteria pollutant emissions in 2040 (usually in ranges of 10% or less) and small increases or reductions in most toxic pollutant emissions in 2040 (usually in ranges of 3% or less). NHTSA believes the impacts on fuel economy resulting from this action would be very small compared to the impacts on fuel economy resulting from the stringency increases that were reported in those EISs. In fact, one commenter used NHTSA’s CAFE Model from its most recent CAFE stringency rulemaking to approximate the potential impact on compliance.258 That commenter concluded that, compared to a $14 rate, the $5.50 rate would ‘‘cause average passenger car fuel economy to drop almost 5 mpg [in the year 2032], from a baseline scenario of 54.75 mpg to 49.75 mpg. . . . For the total fleet, the expected increased fuel consumption amounts to 54 billion gallons between 2017 and 2032.’’ 259 In the MY 2017– 2025 CAFE EIS, the final rule was associated with reductions in fuel consumption for calendar years 2017 through 2060 ranging from 585 billion gallons to 1,508 billion gallons, depending on the analysis. Thus, the commenter’s analysis confirms that a civil penalty rate of $5.50, as compared to $14, would result in environmental impacts that are a fraction of those shown in the MY 2017–2025 CAFE EIS. Such impacts would mean global mean surface temperature increases even less than 0.016 °C by 2100, and criteria and toxic pollutant emissions changes well less than those reported in that EIS. Therefore, NHTSA anticipates that the environmental impacts resulting from any of the alternatives would be very small and consistent with, but to a much smaller degree than, the trends reported in the Final EISs associated with its stringency rulemakings. As stated in the NPRM, NHTSA believes that the environmental impact trends reported in its recent Final EISs remain adequate and valid for purposes of this Final EA even if the particular values reported are no longer replicable due to updated assumptions and new information obtained since their publication. In fact, since the NPRM, NHTSA prepared a Draft EIS for its proposal for new CAFE standards, called the Safer Affordable FuelEfficient (SAFE) Vehicles Rule.260 The Draft EIS affirms NHTSA’s reliance in this Final EA on its prior Final EISs as it reported similar environmental impact trends and values at a similar scale to those reported in those prior documents. NHTSA received public comments associated with the Draft EIS and is currently reviewing those 258 IPI e.g., NHTSA, Final Environmental Impact Statement, Corporate Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2017–2025, Docket No. NHTSA–2011–0056 (July 2012). VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 comment, at 11. 259 Id. 257 See, 260 The Draft EIS is available on http:// www.regulations.gov, Docket No. NHTSA–2017– 0069–0178 and on NHTSA’s website at http:// www.nhtsa.gov/safe. PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 comments in anticipation of issuing a Final EIS. The agency does not believe the civil penalty rate being finalized in this rulemaking will limit its ability to set ‘‘maximum feasible’’ standards pursuant to 49 U.S.C. 32902(b)(2)(B), nor will it unreasonably constrain the potential environmental outcomes associated with future rulemakings. NHTSA is also finalizing an increase to the ‘‘general penalty’’ pursuant to the Inflation Adjustment Act. This increase is not anticipated to have impacts on the quality of the human environment. The ‘‘general penalty’’ is applicable to other violations, such as a manufacturer’s failure to submit pre-model year and mid-model year reports to NHTSA on whether they will comply with the average fuel economy standards. These violations are not directly related to onroad fuel economy, and therefore the penalties are not anticipated to directly or indirectly affect fuel use or emissions. iv. Agencies and Persons Consulted NHTSA and DOT have consulted with OMB as described earlier in this preamble. NHTSA and DOT have also consulted with the U.S. Department of Justice and provided other Federal agencies with the opportunity to review and provide feedback on this rulemaking. v. Conclusion NHTSA has reviewed the information presented in this Final EA and concludes that the final rule and alternatives would have minimal impacts on the quality of the human environment. Regardless of whether a rate of $5.50 is considered no change, as compared to current law, or a reduction from a rate of $14, the environmental impacts are anticipated to be very small. Further, the change to the ‘‘general penalty’’ is not anticipated to affect onroad emissions. vi. Finding of No Significant Impact I have reviewed this Final EA. In determining whether this action ‘‘significantly’’ affects the quality of the human environment, I have considered 40 CFR 1508.27, in which CEQ explains that ‘‘significantly . . . requires consideration of both context and intensity.’’ In this action, the context for the environmental impacts includes localities for issues such as air pollutant emissions and the world as a whole for issues such as GHG emissions. In terms of intensity, the impacts of this rule would be spread across the entire nation or the entire world, depending on the particular environmental impact. Viewed in light of recent CAFE E:\FR\FM\26JYR1.SGM 26JYR1 36033 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations stringency rulemakings, the potential environmental impacts of this rule are expected to be small. Based on the Final EA, I conclude that implementation of any of the action alternatives (including the final rule) will not have a significant effect on the human environment and that a ‘‘finding of no significant impact’’ (see 40 CFR 1501.4(e)(1) and 1508.13) is appropriate. This statement constitutes the agency’s ‘‘finding of no significant impact,’’ and an environmental impact statement will not be prepared. 6. Executive Order 12778 (Civil Justice Reform) This rule does not have a retroactive or preemptive effect. Even if some MY 2019 vehicles are already being sold, compliance determinations will not be made until 2020 at the earliest, after this rule has gone into effect. Moreover, compliance determinations and penalty calculations are based on the average fuel economy of the fleet, not individual vehicles that have been sold prior to the rule going into effect. Judicial review of this rule may be obtained pursuant to 5 U.S.C. 702. 7. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1980, NHTSA states that there are no requirements for information collection associated with this rulemaking action. 8. Privacy Act Please note that anyone is able to search the electronic form of all submissions received into any of DOT’s dockets by the name of the individual submitting the document (or signing the document, if submitted on behalf of an association, business, labor union, etc.). You may review DOT’s complete Privacy Act Statement in the Federal Register published on April 11, 2000 (Volume 65, Number 70; Pages 19477– 78), or you may visit http://dms.dot.gov. 9. Executive Order 13771 This final rule is a deregulatory action under Executive Order 13771. Potential economic impacts are reported in Appendix A. Appendix A TABLE 1—PROJECTED ADDITIONAL PENALTIES UNDER AUGURAL STANDARDS IF RATE IS INCREASED Model year 2019 2020 2021 2022 2023 2024 2025 2026 Projected penalties under $14 rate, sensitivity analysis (augural standards) Projected penalties under $5.50 rate, central analysis (augural standards) Difference (projected additional penalties if rate is increased) ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... $402,661,295.97 424,626,535.48 296,664,715.42 435,761,242.00 493,426,421.72 806,729,507.15 1,038,128,818.83 674,517,279.88 $979,857,995.69 1,074,571,984.97 858,535,520.00 1,161,920,853.58 1,323,396,714.35 2,108,481,177.18 2,695,259,330.77 1,541,685,503.03 $577,196,699.71 649,945,449.49 561,870,804.58 726,159,611.58 829,970,292.63 1,301,751,670.03 1,657,130,511.93 867,168,223.15 Total ........................................................................................................ 4,572,515,816.46 11,743,709,079.56 7,171,193,263.09 Note: Projected penalties could be offset by the application of credits. TABLE 2—PROJECTED ADDITIONAL PENALTIES UNDER PROPOSED STANDARDS IF RATE IS INCREASED Model year 2019 2020 2021 2022 2023 2024 2025 2026 Projected penalties under $14 rate, sensitivity analysis (proposed standards) Projected penalties under $5.50 rate, central analysis (proposed standards) Difference (projected additional penalties if rate is increased) ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... $505,612,917.19 455,216,572.77 302,262,154.89 257,659,098.79 188,672,069.76 183,904,369.42 165,483,877.30 103,265,737.66 $1,269,742,039.02 1,131,135,706.97 704,833,149.24 575,460,915.48 384,423,537.48 355,182,994.82 312,608,273.21 188,049,420.14 $764,129,121.83 675,919,134.20 402,570,994.35 317,801,816.69 195,751,467.72 171,278,625.40 147,124,395.91 84,783,682.48 Total ........................................................................................................ 2,162,076,797.79 4,921,436,036.37 2,759,359,238.58 Note: Projected penalties could be offset by the application of credits. jbell on DSK3GLQ082PROD with RULES List of Subjects in 49 CFR Part 578 Imports, Motor vehicle safety, Motor vehicles, Penalties, Rubber and rubber products, Tires. In consideration of the foregoing, 49 CFR part 578 is amended as set forth below. PART 578—CIVIL AND CRIMINAL PENALTIES 1. The authority citation for 49 CFR part 578 is revised to read as follows: ■ Authority: Pub. L. 101–410, 104 Stat. 890; Pub. L. 104–134, 110 Stat. 1321; Pub. L. 109– VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 E:\FR\FM\26JYR1.SGM 26JYR1 36034 Federal Register / Vol. 84, No. 144 / Friday, July 26, 2019 / Rules and Regulations 59, 119 Stat. 1144; Pub. L. 114–74, 129 Stat. 584; Pub. L. 114–94, 129 Stat. 1312; 49 U.S.C. 30165, 30170, 30505, 32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115; delegation of authority at 49 CFR 1.81, 1.95. 2. Amend § 578.6 by revising paragraph (h) to read as follows: ■ § 578.6 Civil penalties for violations of specified provisions of Title 49 of the United States Code. * * * * * (h) Automobile fuel economy. (1) A person that violates 49 U.S.C. 32911(a) is liable to the United States Government for a civil penalty of not more than $42,530 for each violation. A separate violation occurs for each day the violation continues. (2) Except as provided in 49 U.S.C. 32912(c), a manufacturer that violates a standard prescribed for a model year under 49 U.S.C. 32902 is liable to the United States Government for a civil penalty of $5.50 multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy— (i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for automobiles to which the standard applies manufactured by the manufacturer during the model year; (ii) Multiplied by the number of those automobiles; and (iii) Reduced by the credits available to the manufacturer under 49 U.S.C. 32903 for the model year. * * * * * Issued in Washington, DC, under authority delegated in 49 CFR 1.81, 1.95, and 501.5. Heidi R. King, Deputy Administrator. [FR Doc. 2019–15259 Filed 7–25–19; 8:45 am] BILLING CODE 4910–59–P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 660 [Docket No. 1511169999493–03] RIN 0648–BF52 jbell on DSK3GLQ082PROD with RULES Fisheries Off West Coast States; Pacific Coast Groundfish Fishery; Electronic Monitoring Program; Correction National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Final rule; correction. AGENCY: VerDate Sep<11>2014 16:08 Jul 25, 2019 Jkt 247001 SUMMARY: NMFS published a final rule on June 28, 2019, to implement an electronic monitoring (EM) program for catcher vessels in the Pacific whiting fishery and fixed gear vessels in the shorebased groundfish Individual Fishing Quota (IFQ) fishery. The final rule established an application process for interested vessel owners; performance standards for EM systems; requirements for vessel operators; a permitting process and standards for EM service providers; and requirements for processors (first receivers) for receiving and disposing of prohibited and protected species from EM trips. This action corrects the numbering of two paragraphs in the Code of Federal Regulations. These corrections are necessary so that the implementing regulations are accurate and implement the action as intended by the Pacific Fishery Management Council (Council). DATES: This correction is effective on July 29, 2019. FOR FURTHER INFORMATION CONTACT: Melissa Hooper, Permits and Monitoring Branch Chief, NMFS West Coast Region, phone: 206–526–4353, fax: 206–526– 4461, or email: Melissa.Hooper@ noaa.gov. SUPPLEMENTARY INFORMATION: NMFS published a final rule on June 28, 2019 (84 FR 31146), that established an EM program for the Pacific Coast groundfish fishery. That final rule is effective July 29, 2019. Need for Correction The June 28, 2019, final rule implemented an EM program in the Pacific Coast groundfish fishery, specifically for catcher vessels in the Pacific whiting fishery and fixed gear vessels in the shorebased groundfish IFQ fishery, and established requirements for service providers, vessel owners, vessel operators, and processors, to apply to and participate in the program. Two paragraphs in the requirements for vessel owners and operators were incorrectly numbered. Section 660.604(h) lays out the effective dates and situations in which an EM Authorization may expire or become invalid, and how a vessel owner may apply for a new Authorization. The subordinate paragraphs should have followed in order (h)(1), (2), and (3). But paragraph (h)(3) was inadvertently numbered (h)(2)(iii). In order to clarify the order of the paragraphs, paragraph (h)(2)(iii) will be renumbered to (h)(3). Section 660.604(p) lists the exceptions to the full retention requirement for Pacific whiting vessels while using EM. Two of the subordinate paragraphs were inadvertently PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 numbered the same (p)(1)(iv). To clarify the order of the paragraphs, the final paragraph will be renumbered to (p)(1)(v). All of these corrections are consistent with the Council action for the regulatory amendment to implement an EM program for the Pacific Coast groundfish fishery and are minor corrections necessary to correctly implement the Council’s intent in their final action from April 2016. Classification Pursuant to 5 U.S.C. 553(b)(B), the Assistant Administrator for Fisheries (AA) finds there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be unnecessary and contrary to the public interest. Notice and comment are unnecessary and contrary to the public interest because this action corrects minor and non-substantive errors in the June 28, 2019, final rule. Immediate notice of the errors and correction is necessary to prevent confusion among participants in the fishery that could result in issues with implementation of the requirements of the EM program. To effectively correct the errors, the changes in this action must be effective on July 29, 2019, which is the effective date of the June 28, 2019, final rule. Thus, there is not sufficient time for notice and comment due to the imminent effective date of the June 28, 2019, final rule. In addition, notice and comment is unnecessary because this document makes only minor changes to correct the final rule and does not change the substance of the rule. These corrections will not affect the results of analyses conducted to support management decisions in the Pacific Coast groundfish fishery. For the same reasons stated above, the AA has determined that good cause exists to waive the 30-day delay in effectiveness pursuant to 5 U.S.C. 553(d). This document makes only minor corrections to the final rule which will be effective July 29, 2019. Delaying effectiveness of these corrections would result in conflicts in the regulations and confusion among fishery participants. Because prior notice and an opportunity for public comment are not required to be provided for this rule by 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are not applicable. Accordingly, no Regulatory Flexibility Analysis is required for this rule and none has been prepared. E:\FR\FM\26JYR1.SGM 26JYR1

Agencies

[Federal Register Volume 84, Number 144 (Friday, July 26, 2019)]
[Rules and Regulations]
[Pages 36007-36034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15259]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA-2018-0017]
RIN 2127-AL94


Civil Penalties

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule confirms the determination NHTSA announced in 
the notice of proposed rulemaking (NPRM) that the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation 
Adjustment Act or 2015 Act) does not apply to the civil penalty rate 
applicable to automobile manufacturers that fail to meet applicable 
corporate average fuel economy (CAFE) standards and are unable to 
offset such a deficit with compliance credits. In addition, this final 
rule is finalizing the agency's determination that even if the 
Inflation Adjustment Act applies, increasing the CAFE civil penalty 
rate would have a negative economic impact, and therefore, in 
accordance with the Energy Policy and Conservation Act of 1975 (EPCA) 
and the Energy Independence and Security Act of 2007 (EISA), the 
current CAFE civil penalty rate of $5.50 should be retained, instead of 
increasing to $14 in model year 2019.

DATES: 
    Effective dates: This rule is effective as of September 24, 2019. 
Upon reconsideration, this rule supersedes the final rule published at 
81 FR 95489, December 28, 2016 (delayed at 82 FR 8694, January 30, 
2017, 82 FR 15302, March 28, 2017, 82 FR 29010, June 27, 2017, and 82 
FR 32139, July 12, 2017), which went into force in accordance with the 
decision of the United States Court of Appeals for the Second Circuit 
in NRDC v. NHTSA, Case No. 17-2780.
    Petitions for reconsideration: Petitions for reconsideration of 
this final rule must be received not later than September 9, 2019.

ADDRESSES: Any petitions for reconsideration should refer to the docket 
number of this document and be submitted to: Deputy Administrator, 
National Highway Traffic Safety Administration, 1200 New Jersey Avenue 
SE, West Building, Fourth Floor, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief

[[Page 36008]]

Counsel, NHTSA, telephone (202) 366-5263, facsimile (202) 366-3820, 
1200 New Jersey Ave. SE, Washington, DC 20590.

SUPPLEMENTARY INFORMATION: 

Table of Contents

A. Executive Summary
B. Background
    1. CAFE Program
    2. Civil Penalties Inflationary Adjustment Act Improvements Act 
of 2015
    3. NHTSA's Actions to Date Regarding CAFE Civil Penalties
    a. Interim Final Rule
    b. Final Rule
    c. Initial Reconsideration and Request for Comments
    d. Notice of Proposed Rulemaking
C. Overview of the Comments
D. Response to the Comments
    1. NHTSA's Reconsideration Authority
    2. Applicability of the 2015 Act
    3. Harmonizing the 2015 Act and EPCA
    4. ``Negative Economic Impact''
    a. EPCA Factors
    b. Other Economic Considerations
    5. $10 Cap
E. Rulemaking Analyses and Notices
    1. Executive Order 12866, Executive Order 13563, and DOT 
Regulatory Policies and Procedures
    2. Regulatory Flexibility Act
    3. Executive Order 13132 (Federalism)
    4. Unfunded Mandates Reform Act of 1995
    5. National Environmental Policy Act
    6. Executive Order 12778 (Civil Justice Reform)
    7. Paperwork Reduction Act
    8. Privacy Act
    9. Executive Order 13771

A. Executive Summary

    As explained in the proposed rule (83 FR 13904 (April 2, 2018)), 
NHTSA has almost forty years of experience in implementing the 
corporate average fuel economy (CAFE) program and its civil penalty 
component. This includes oversight and administration of the program's 
operation, how the automobile manufacturers respond to CAFE standards 
and increases, and the role of civil penalties in achieving the CAFE 
program's objectives. The CAFE civil penalty provisions 49 U.S.C. 
32912(b) and (c), established by EPCA, are complex, containing 
statutory requirements that must be met if the penalty amount is to be 
increased, as well as a statutory cap of $10 on the maximum penalty 
amount, among other provisions, that distinguish it from ordinary civil 
penalty provisions, such as the general penalty for CAFE violations 
found in 49 U.S.C. 32912(a).
    After the new administration took office and upon further 
consideration of the issues, NHTSA determined that it was appropriate 
and necessary to reconsider the applicability of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation 
Adjustment Act or 2015 Act) to the CAFE civil penalty provision found 
in EPCA. In reconsidering the CAFE civil penalty rule and the 
applicability of the 2015 Act to the statutory provision, NHTSA had two 
objectives: First, to determine whether the CAFE civil penalty rate was 
the kind of penalty to which the 2015 Act applied, and second, if it 
did apply, whether increasing the civil penalty rate for the CAFE 
provision will have a negative economic impact. NHTSA has carefully 
considered these objectives and comments received in reconsidering the 
CAFE civil penalty statute that NHTSA administers and the application 
of the 2015 Act to it.\1\
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    \1\ This final rule is promulgated under NHTSA's authority, 
delegated to it by the Secretary (49 CFR 1.95(a)), under 49 U.S.C. 
Chapter 329. Cf. Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17-
2780, at 13, 17 (2d Cir., June 29, 2018) (citing the ``judicial 
review provision of EPCA [49 U.S.C. 32909(a)] as ``the legislative 
authorization to petition for review'' of NHTSA's indefinite delay 
rule; ``Judicial review here is authorized by Section 32909 of 
EPCA.'').
---------------------------------------------------------------------------

    As a result of this review, including consideration of all the 
comments received on its proposed rule, NHTSA has reconsidered its 
earlier decisions that accepted applicability of the 2015 Act and its 
predecessors to the CAFE civil penalty provision in 49 U.S.C. 
32912(b).\2\ Accordingly, NHTSA is finalizing its determination that 
the CAFE civil penalty rate is not a ``civil monetary penalty'' that 
must be adjusted for inflation under the 2015 Act. Prior to the 
proposed rule, NHTSA's Federal Register notifications on its inflation 
adjustments under the 2015 Act did not consider whether the CAFE civil 
penalty rate fit the definition of a ``civil monetary penalty'' subject 
to adjustment under the 2015 Act, instead proceeding--without 
analysis--as if the 2015 Act applied to the CAFE civil penalty rate. 
After taking the opportunity to reconsider this matter and fully 
analyze the issue and consider the comments received on its proposal, 
NHTSA concludes that the CAFE civil penalty rate is not covered by the 
2015 Act.
---------------------------------------------------------------------------

    \2\ NHTSA has the authority to reconsider its prior rules for 
the reasons described in Section D.1.
---------------------------------------------------------------------------

    NHTSA is finalizing its determination that civil penalties assessed 
for CAFE violations under Section 32912(b) are not a ``penalty, fine, 
or other sanction that'' is either ``a maximum amount'' or ``a specific 
monetary amount.'' \3\ As explained in the proposed rule, the civil 
penalties under consideration here are part of a complicated market-
based enforcement mechanism. Any potential civil penalties for failing 
to satisfy fuel economy requirements, unlike other civil penalties, are 
not determined until the conclusion of a complex formula, credit-
earning arrangement, and credit transfer and trading program. In fact, 
after NHTSA determines there is a violation, the ultimate penalty 
assessed is based on the noncompliant manufacturer's decision, not 
NHTSA's, on whether and how to acquire and apply any credits that may 
be available to the manufacturer, and on the decisions of other 
manufacturers to earn and sell credits to a potentially liable 
manufacturer.\4\ Manufacturers can also claim future credits as a means 
of meeting their current liability based upon projected credits to be 
earned within three subsequent model years. The amount that a 
manufacturer might actually pay under the CAFE civil penalty statute is 
dependent upon a fluid, multi-year process, involving credit trading 
with other manufacturers at unknown prices and unverifiable credits to 
be earned in the future. In other words, what the noncompliant 
manufacturer pays is much more the function of market forces, trading 
of credits, and manufacturers' projections of future performance, than 
it is just the application of the CAFE penalty rate.
---------------------------------------------------------------------------

    \3\ As discussed below, this determination reflects a change in 
NHTSA's position on this issue from when NHTSA previously adjusted 
the CAFE civil penalty rate from $5 to $5.50 in 1997 and its earlier 
announcements of adjustments of the rate to $14 in its July 2016 
interim final rule and its December 2016 final rule.
    \4\ See 49 U.S.C. 32903.
---------------------------------------------------------------------------

    Moreover, after consideration of comments, NHTSA concludes that 
Congress did not intend for the 2015 Act to apply to this specialized 
civil penalty rate, which has longstanding, strict procedures 
previously enacted by Congress that limit NHTSA's ability to increase 
the rate. Congress specifically contemplated that increases to the CAFE 
civil penalty rate for manufacturer non-compliance with CAFE standards 
may be appropriate and necessary and included a mechanism in the 
statute for such increases. Critically, this mechanism requires the 
Secretary of Transportation to determine specifically that any such 
increase will not lead to certain specific negative economic effects. 
In addition, Congress explicitly limited any such increase to $10 per 
tenth of a mile per gallon.\5\ These restrictions have been in place 
since the statute was amended in 1978. Though Congress later amended 
the CAFE civil penalty provision in 2007, Congress left in place 
unaltered both the mechanism for increases and the upper limit of an 
increased civil penalty under the

[[Page 36009]]

statute. NHTSA's determination regarding the applicability of the 2015 
Act to the EPCA CAFE civil penalty provision is also confirmed by the 
Office of Management and Budget (OMB), the office directed by Congress 
to issue guidance on the implementation of the 2015 Act. OMB's views 
regarding the applicability of the 2015 Act to the EPCA CAFE civil 
penalty provision are set forth in a comprehensive opinion included in 
the docket for this final rule, in which OMB concurs with NHTSA's 
assessment that the 2015 Act does not apply to the CAFE civil penalty 
rate.\6\ OMB supported its conclusion by noting first, that it was not 
aware of any other penalty scheme with the unique features of the CAFE 
civil penalty scheme, and also ``[i]n light of (1) EPCA's distinction 
between the penalty rate and the penalty itself, (2) the 
incompatibility of the structure of the CAFE penalty scheme and the 
2015 Act, and (3) the inconsistent treatment of the CAFE penalty rate 
under inflation adjustment schemes over time.'' These factors, which 
OMB found supportive of NHTSA's conclusion that the 2015 Act does not 
apply to the CAFE civil penalty rate, are discussed throughout this 
document.
---------------------------------------------------------------------------

    \5\ NHTSA concludes the 2015 Act also does not apply to the $10 
cap.
    \6\ July 12, 2019 Letter from Russell T. Vought, Acting Director 
of the Office of Management and Budget, to Elaine L. Chao, Secretary 
of the United States Department of Transportation, available at 
Docket No. NHTSA-2018-0017-0018 (OMB Non-Applicability Letter).
---------------------------------------------------------------------------

    In addition to reconsidering the application of the 2015 Act to the 
EPCA CAFE civil penalty provision, NHTSA has reconsidered its decisions 
in the July 2016 interim final rule and December 2016 final rule to 
increase the CAFE civil penalty rate and, as a result, is retaining the 
current civil penalty rate applicable to 49 U.S.C. 32912(b) of $5.50 
per tenth of a mile per gallon for automobile manufacturers that do not 
meet applicable CAFE standards and are unable to offset such a deficit 
with compliance credits, rather than increasing the rate to $14 in 
model year 2019.
    Even if the 2015 Act is applied to the CAFE civil penalty rate, 
NHTSA has determined that the rate should remain the same in order to 
comply with EPCA, which must be read harmoniously with the 2015 Act. 
The 2015 Act confers discretion to the head of each agency to adjust 
the amount of a civil monetary penalty by less than the amount 
otherwise required for the initial adjustment, with the concurrence of 
the Director of the Office of Management and Budget, upon determining 
that doing so would have a ``negative economic impact.'' In EPCA, 
Congress previously identified specific factors that NHTSA is required 
to consider before making a determination about the ``impact on the 
economy'' as a prerequisite to increasing the applicable civil penalty 
rate. NHTSA believes that these statutory criteria are appropriate for 
determining whether an increase in the CAFE civil penalty rate would 
have a ``negative economic impact'' for purposes of the 2015 Act. Under 
EPCA, NHTSA faces a heavy burden to demonstrate that increasing the 
civil penalty rate ``will not have a substantial deleterious impact on 
the economy of the United States, a State, or a region of a State.'' 
Specifically, in order to establish that the increase would not have 
that ``substantial deleterious impact,'' NHTSA would need to 
affirmatively determine that it is likely that the increase would not 
cause a significant increase in unemployment in a State or a region of 
a State; adversely affect competition; or cause a significant increase 
in automobile imports. In light of those statutory factors--and the 
absence of persuasive evidence to support making the EPCA findings--
NHTSA concludes that increasing the CAFE civil penalty rate would have 
a negative economic impact. Thus, NHTSA is not adjusting the rate under 
the 2015 Act, even if it applied.
    Even if EPCA's statutory factors for increasing civil penalties are 
not applied, NHTSA has determined, after consideration of comments, 
that the $14 penalty will lead to a negative economic impact that 
merits leaving the CAFE civil penalty rate at $5.50. Based on available 
information, including information provided by commenters, the effect 
of applying the 2015 Act to the CAFE civil penalty would potentially 
drastically increase manufacturers' costs of compliance. OMB has 
concurred with NHTSA's determination that increasing the CAFE civil 
penalty rate by the otherwise required amount will have a negative 
economic impact.\7\
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    \7\ July 12, 2019 Letter from Russell T. Vought, Acting Director 
of the Office of Management and Budget, to Elaine L. Chao, Secretary 
of the United States Department of Transportation, available at 
Docket No. NHTSA-2018-0017-0019 (OMB Negative Economic Impact 
Letter).
---------------------------------------------------------------------------

    In summary, NHTSA concludes that:
     The 2015 Act does not apply to the CAFE civil penalty 
rate, so no rate increase is permitted, except pursuant to the scheme 
established in EPCA;
     Even if the 2015 Act did apply to the CAFE civil penalty 
rate, the 2015 Act must be read in conjunction with EPCA, and 
considering the EPCA factors, increasing the CAFE penalty rate to $14 
would have a ``negative economic impact''; and
     Even if the EPCA factors did not apply, increasing the 
CAFE civil penalty rate to $14 would still have a ``negative economic 
impact.''

The result is the same under all of these scenarios: The CAFE civil 
penalty rate is and will continue to be set at $5.50, rather than 
increasing to $14 in MY 2019.\8\
---------------------------------------------------------------------------

    \8\ Without this rule, the CAFE civil penalty rate would 
increase to $14 beginning with civil penalties assessed for model 
year 2019.
---------------------------------------------------------------------------

    In EPCA, Congress also imposed a cap of $10 on the CAFE civil 
penalty rate. NHTSA has determined that this statutory cap also does 
not meet the definition of a ``civil monetary penalty'' that requires 
adjustment under the 2015 Act. OMB agrees with this assessment.\9\ 
Thus, even if the CAFE civil penalty rate is a ``civil monetary 
penalty'' under the 2015 Act and regardless of whether increasing it 
would have a ``negative economic impact,'' NHTSA has determined that 
any increase would be statutorily capped by EPCA at $10.
---------------------------------------------------------------------------

    \9\ OMB Non-Applicability Letter.
---------------------------------------------------------------------------

    The general penalty in 49 U.S.C. 32912(a) for other violations of 
EPCA, as amended, promulgated in 49 CFR 578.6(h)(1), is subject to 
additional inflationary adjustments for 2017, 2018, and 2019. In this 
rule, NHTSA is finalizing the 2017, 2018, and 2019 inflationary 
adjustments to this general penalty amount.

B. Background

1. CAFE Program

    NHTSA sets \10\ and enforces \11\ corporate average fuel economy 
(CAFE) standards for the United States light-duty vehicle fleet, and in 
doing so, assesses civil penalties against vehicle manufacturers that 
fall short of the standards and are unable to make up the shortfall 
with credits.\12\ The civil penalty amount for CAFE non-compliance was 
originally set by statute in 1975, and since 1997, has included a rate 
of $5.50 per each tenth of a mile per gallon (0.1) that a 
manufacturer's fleet average CAFE level falls short of the applicable 
standard. This shortfall amount is then multiplied by the number of 
vehicles in that manufacturer's fleet.\13\ The basic

[[Page 36010]]

equation for calculating a manufacturer's civil penalty amount before 
accounting for credits, is as follows:
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    \10\ 49 U.S.C. 32902.
    \11\ 49 U.S.C. 32911, 32912.
    \12\ Credits may be either earned (for over-compliance by a 
given manufacturer's fleet, in a given model year), transferred 
(from one fleet to another), or purchased (in which case, another 
manufacturer earned the credits by over-complying and chose to sell 
that surplus). 49 U.S.C. 32903.
    \13\ A manufacturer may have up to three fleets of vehicles, for 
CAFE compliance purposes, in any given model year--a domestic 
passenger car fleet, an import passenger car fleet, and a light 
truck fleet. Each fleet belonging to each manufacturer has its own 
compliance obligation, with the potential for either over-compliance 
or under-compliance. There is no overarching CAFE requirement for a 
manufacturer's total production.

(penalty rate) x (amount of shortfall, in tenths of an mpg) x (number 
---------------------------------------------------------------------------
of vehicles in manufacturer's fleet).

    Automakers have paid more than $890 million in CAFE civil 
penalties, up to and including model year (MY) 2014 vehicles.\14\ On 
top of the costs of paying these civil penalties, manufacturers have 
also spent additional money towards generating overcompliance credits 
and purchasing credits from other manufacturers. Starting with the 
model year 2011, provisions in the CAFE program provided for credit 
transfers among a manufacturer's various fleets. Commencing with that 
model year, the law also provided for trading between vehicle 
manufacturers, which has allowed vehicle manufacturers the opportunity 
to acquire credits from competitors rather than paying civil penalties 
for non-compliance. Manufacturers are required to notify NHTSA of the 
volumes of credits traded or sold, but the agency does not receive any 
information regarding total cost paid or cost per credit. Thus, while 
NHTSA is not aware of the amount of money manufacturers spend on 
generating overcompliance credits or purchasing credits from other 
manufacturers, NHTSA believes it is likely that credit generation and 
credit purchases involve significant expenditures. Moreover, NHTSA 
expects that an increase in the penalty rate, which would apply to all 
manufacturers, would result in an increase in such expenditures.\15\ 
Because of expected shortfalls in CAFE compliance in current and 
upcoming model years, the agency currently anticipates many 
manufacturers will face the possibility of larger expenditures on CAFE 
penalties or increased costs to acquire credits over the next several 
years than at present.\16\
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    \14\ Penalty reporting for MY15 and newer vehicles was not 
reported at the time of this rule. The highest CAFE penalty paid to 
date for a shortfall in a single fleet was $30,257,920, paid by 
DaimlerChrysler for its import passenger car fleet in MY 2006. Since 
MY 2012, only Jaguar Land Rover and Volvo have paid civil penalties. 
See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
    \15\ See 83 FR 13904, 13916 (Apr. 2, 2018) (``[I]ncreasing the 
penalty rate to $14 would lead to significantly greater costs than 
the agency had anticipated when it set the CAFE standards because 
manufacturers who had planned to use penalties as one way to make up 
their shortfall would now need to pay increased penalty amounts, 
purchase additional credits at likely higher prices, or make 
modifications to their vehicles outside of their ordinary redesign 
cycles. NHTSA believes all of these options would increase 
manufacturers' compliance costs, many of which would be passed along 
to consumers.''). NHTSA did not receive any comments providing 
information to the contrary.
    \16\ NHTSA's ``Manufacturer Projected Fuel Economy Performance 
Report'' indicates that the total U.S. fleet projected fuel economy 
value fails to meet the standards for model year 2017 and 
increasingly so for model year 2018. Available at https://one.nhtsa.gov/CAFE_PIC/MY_2017_and_2018_Projected_Fuel_Economy_Performance_Report.pdf (Apr. 
30, 2018).
---------------------------------------------------------------------------

    NHTSA has long had authority under the Energy Policy and 
Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912 
(1975), to raise the amount of the penalty for CAFE shortfalls if it 
makes certain findings,\17\ as well as the authority to compromise and 
remit such penalties under certain circumstances.\18\ Recognizing the 
economic harm that increases in CAFE civil penalties could have on the 
automobile industry and the economy as a whole, Congress capped any 
increase in the original statutory penalty rate at $10 per tenth of a 
mile per gallon. Further--and significantly--Congress has forbidden 
NHTSA from increasing the CAFE civil penalty rate under EPCA unless 
NHTSA concludes through rulemaking that the increase in the penalty 
rate both (1) will result in, or substantially further, substantial 
energy conservation for automobiles in model years in which the 
increased penalty may be imposed, and (2) will not have a substantial 
deleterious impact on the economy of the United States, a State, or a 
region of the State. A finding of ``no substantial deleterious impact'' 
may only be made if NHTSA determines that it is likely that the 
increase in the penalty (A) will not cause a significant increase in 
unemployment in a State or a region of a State, (B) adversely affect 
competition, or (C) cause a significant increase in automobile imports. 
Nowhere does EPCA define ``substantial'' or ``significant'' in the 
context of this provision.
---------------------------------------------------------------------------

    \17\ 49 U.S.C. 32912.
    \18\ 49 U.S.C. 32913.
---------------------------------------------------------------------------

    The authority to compromise and remit penalties is extremely 
limited and must be applied on a case-by-case basis. If NHTSA seeks to 
compromise or remit penalties for a given manufacturer, a rulemaking is 
not necessary, but the amount of a penalty may be compromised or 
remitted only to the extent (1) necessary to prevent a manufacturer's 
insolvency or bankruptcy, (2) the manufacturer shows that the violation 
was caused by an act of God, a strike, or a fire, or (3) the Federal 
Trade Commission certifies that a reduction in the penalty is necessary 
to prevent a substantial lessening of competition. NHTSA has never 
previously attempted to undertake this process. To date, NHTSA has 
never utilized its ability to compromise or remit a CAFE civil penalty. 
These various statutory provisions and requirements, coupled with the 
formula for determining the total potential civil penalty due from a 
manufacturer, demonstrate the unique nature of the CAFE civil penalty 
provision and distinguish it from a typical civil penalty provision 
that merely sets forth an amount to be paid for a regulatory violation.

2. Civil Penalties Inflation Adjustment Act Improvements Act of 2015

    On November 2, 2015, the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act), 
Public Law 114-74, Section 701, was signed into law. The 2015 Act 
required Federal agencies to make an initial ``catch-up'' adjustment to 
the ``civil monetary penalties,'' as defined, they administer through 
an interim final rule and then to make subsequent annual adjustments 
for inflation.\19\ The amount of increase for any ``catch-up'' 
adjustment to a civil monetary penalty pursuant to the 2015 Act was 
limited to 150 percent of the then-current penalty. Unless an exception 
applied, agencies were required to issue an interim final rule for the 
initial ``catch-up'' adjustment--without providing the opportunity for 
public comment ordinarily required under the Administrative Procedure 
Act (APA)--by July 1, 2016.\20\
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    \19\ A `` `civil monetary penalty' means any penalty, fine, or 
other sanction'' that meets three requirements: the ``penalty, fine, 
or other sanction'' must be ``for a specific monetary amount as 
provided by Federal law'' or have ``a maximum amount provided for by 
Federal law''; the ``penalty, fine, or other sanction'' must be 
``assessed or enforced by an agency pursuant to Federal law''; and 
the ``penalty, fine, or other sanction'' must be ``assessed or 
enforced pursuant to an administrative proceeding or a civil action 
in the Federal courts.'' 28 U.S.C. 2461 note, Federal Civil 
Penalties Inflation Adjustment 3(2).
    \20\ The 2015 Act authorized full notice-and-comment rulemaking 
procedures if the head of an agency was adjusting the amount of a 
civil monetary penalty by less than the otherwise required amount 
because she determined either that increasing the civil monetary 
penalty by the otherwise required amount would have a negative 
economic impact or that the social costs of increasing the civil 
monetary penalty by the otherwise required amount outweighed the 
benefits. Such a determination required the concurrence of the 
Director of the Office of Management and Budget. 28 U.S.C. 2461 
note, Federal Civil Penalties Inflation Adjustment 4(c).

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[[Page 36011]]

    The method of calculating inflationary adjustments in the 2015 Act 
differs substantially from the methods used in past inflationary 
adjustment rulemakings conducted pursuant to the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation 
Adjustment Act), Public Law 101-410. Civil penalty adjustments under 
the 1990 Inflation Adjustment Act were conducted under rules that 
sometimes required significant rounding of figures. For example, any 
increase determined under the 1990 Inflation Adjustment Act had to be 
rounded to the nearest multiple of $25,000 in the case of penalties 
greater than $200,000. Under these rules, NHTSA never adjusted the CAFE 
civil penalty rate above $5.50.
    The 2015 Act altered these rounding rules. Now, penalties are 
simply rounded to the nearest $1. Furthermore, the 2015 Act ``resets'' 
the inflation calculations by excluding prior inflationary adjustments 
under the 1990 Inflation Adjustment Act. To do this, the 2015 Act 
requires agencies to identify, for each civil monetary penalty, the 
year and corresponding amount(s) for which the maximum penalty level or 
range of minimum and maximum penalties was established (i.e., 
originally enacted by Congress) or last adjusted other than pursuant to 
the 1990 Inflation Adjustment Act.
    Significantly, Congress also included a provision in the 2015 Act 
that directed the Director of OMB to issue periodic guidance to 
agencies implementing the inflation adjustments required under the 2015 
Act. The Director of OMB provided initial guidance to agencies in a 
February 24, 2016 memorandum.\21\ In that guidance, OMB specifically 
instructed agencies to identify the penalties to which the 2015 Act 
would apply among the penalties that each agency is responsible for 
administering, and noted that:
---------------------------------------------------------------------------

    \21\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 
24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last accessed 
May 22, 2018).

    Agencies with questions on the applicability of the inflation 
adjustment requirement to an individual penalty, should first 
consult with the Office of General Counsel of the agency for the 
applicable statute, and then seek clarifying guidance from OMB if 
necessary.\22\
---------------------------------------------------------------------------

    \22\ Id.

    Subsequent guidance from OMB reiterated agencies' responsibility to 
identify applicable penalties and to consult with the individual 
agency's Office of General Counsel and to seek clarifying guidance from 
OMB with questions regarding the applicability of the 2015 Act to 
particular penalties.\23\
---------------------------------------------------------------------------

    \23\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the 2017 Annual 
Adjustment Pursuant to the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available 
online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (last accessed July 10, 2018); 
Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of Penalty Inflation 
Adjustments for 2018, Pursuant to the Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015 (Dec. 15, 2017), 
available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf (last accessed July 10, 2018); Memorandum from 
the Director of OMB to Heads of Executive Departments and Agencies, 
Implementation of Penalty Inflation Adjustments for 2019, Pursuant 
to the Federal Civil Penalties Inflation Adjustment Act Improvements 
Act of 2015 (Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last 
accessed May 31, 2019).
---------------------------------------------------------------------------

    For those penalties subject to the statute's definition of ``civil 
monetary penalties,'' the memorandum provided guidance on how to 
calculate the initial adjustment required by the 2015 Act. The initial 
catch up adjustment is based on the change between the Consumer Price 
Index for all Urban Consumers (CPI-U) for the month of October in the 
year the penalty amount was established or last adjusted by Congress 
and the October 2015 CPI-U. The February 24, 2016 memorandum contains a 
table with a multiplier for the change in CPI-U from the year the 
penalty was established or last adjusted to 2015. To arrive at the 
adjusted penalty, the agency must multiply the penalty amount when it 
was established or last adjusted by Congress, excluding adjustments 
under the 1990 Inflation Adjustment Act, by the multiplier for the 
increase in CPI-U from the year the penalty was established or adjusted 
as provided in the February 24, 2016 memorandum. The 2015 Act limits 
the initial inflationary increase to 150 percent of the current 
penalty. To determine whether the increase in the adjusted penalty is 
less than 150 percent, the agency must multiply the current penalty by 
250 percent. The adjusted penalty is the lesser of either the adjusted 
penalty based on the multiplier for CPI-U in Table A of the February 
24, 2016 memorandum or an amount equal to 250% of the current penalty.
    Additionally, the 2015 Act gives agencies discretion to adjust the 
amount of a civil monetary penalty by less than otherwise required if 
the agency determines that increasing the civil monetary penalty by the 
otherwise required amount will have either a negative economic impact 
or if the social costs of the increased civil monetary penalty will 
outweigh the benefits.\24\ In either instance, the agency must publish 
a notice, take and consider comments on this finding, and receive 
concurrence on this determination from the Director of OMB prior to 
finalizing a lower civil penalty amount.
---------------------------------------------------------------------------

    \24\ Public Law 114-74, Sec. 701(c).
---------------------------------------------------------------------------

3. NHTSA's Actions to Date Regarding CAFE Civil Penalties

a. Interim Final Rule
    On July 5, 2016, NHTSA published an interim final rule, without 
notice and comment, adopting inflation adjustments for civil penalties 
under its administration, following the procedure and the formula in 
the 2015 Act. NHTSA did not analyze at that time whether the 2015 Act 
applied to all of its civil penalties. One of the adjustments NHTSA 
made at the time was raising the civil penalty rate for CAFE non-
compliance from $5.50 to $14.\25\ NHTSA also indicated in that notice 
that the maximum penalty rate that the Secretary is permitted to 
establish for such violations would increase from $10 to $25, although 
this was not codified in the regulatory text.\26\ NHTSA made these 
adjustments without seeking public comment and without discussing with 
the Department of Transportation Office of General Counsel whether the 
2015 Act applied to these rates, whether the adjustments conflict with 
EPCA's penalty rate increase procedures, or whether making the 
adjustments would have negative economic consequences. NHTSA also 
raised the maximum civil penalty for other violations of EPCA, as 
amended, to $40,000.\27\
---------------------------------------------------------------------------

    \25\ 81 FR 43524 (July 5, 2016). This interim final rule also 
updated the maximum civil penalty amounts for violations of all 
statutes and regulations administered by NHTSA, and was not limited 
solely to penalties administered for CAFE violations.
    \26\ For the reasons described in Section D.5, the maximum 
penalty rate that the Secretary is permitted to establish for such 
violations is $10.
    \27\ 81 FR 43524 (July 5, 2016).
---------------------------------------------------------------------------

    In response to the changes to the CAFE penalty provisions issued in 
the interim final rule, the Alliance of Automobile Manufacturers 
(Alliance) and the Association of Global Automakers (Global) jointly 
petitioned NHTSA for reconsideration (the Industry Petition).\28\ The 
Industry

[[Page 36012]]

Petition raised concerns with the significant impact, which they 
estimated to be at least $1 billion annually, that the increased 
penalty rate would have on CAFE compliance costs. Specifically, the 
Industry Petition raised: The issue of retroactivity (applying the 
penalty increase associated with model years that have already been 
completed or for which a company's compliance plan had already been 
``set''); which ``base year'' (i.e., the year the penalty was 
established or last adjusted) NHTSA should use for calculating the 
adjusted penalty rate; and whether an increase in the penalty rate to 
$14 would cause a ``negative economic impact.''
---------------------------------------------------------------------------

    \28\ Jaguar Land Rover North America, LLC also filed a petition 
for reconsideration in response to the July 5, 2016 interim final 
rule raising the same concerns as those raised in the Industry 
Petition. Both petitions, along with a supplement to the Industry 
Petition, can be found in Docket ID NHTSA-2016-0075 at 
www.regulations.gov.
---------------------------------------------------------------------------

b. Final Rule
    In response to the Industry Petition, NHTSA issued a final rule on 
December 28, 2016.\29\ In that rule, NHTSA agreed that raising the 
penalty rate for model years already fully complete would be 
inappropriate, given how courts generally disfavor the retroactive 
application of statutes. NHTSA also agreed that raising the rate for 
model years for which product changes were infeasible due to lack of 
lead time did not seem consistent with Congress' intent that the CAFE 
program be responsive to consumer demand. NHTSA therefore stated that 
it would not apply the inflation-adjusted penalty rate of $14 until 
model year 2019, as the agency believed that would be the first year in 
which product changes could be made in response to the higher penalty 
rate.
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    \29\ 81 FR 95489 (December 28, 2016). The December 2016 final 
rule did not impact the portions of the July 5, 2016 interim final 
rule not dealing with CAFE, which are expected to be finalized as 
part of NHTSA's 2019 inflationary adjustments.
---------------------------------------------------------------------------

    Beginning in January 2017, NHTSA took action to delay the effective 
date of the December 2016 final rule.\30\ As a result of a recent 
decision of the United States Court of Appeals for the Second Circuit, 
that December 2016 final rule is now in force.\31\ That decision by the 
Second Circuit does not affect NHTSA's authority to reconsider the 
applicability of the 2015 Act to the EPCA CAFE civil penalty provision 
through notice-and-comment rulemaking and to issue this final rule.\32\ 
Absent this final rule determining that the 2015 Act does not apply to 
the CAFE civil penalty rate, the rate would have increased beginning 
with model year 2019 for noncompliances that will likely be determined 
in approximately late 2020.\33\
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    \30\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28, 
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017).
    \31\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d 
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule, 
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is 
now in force.'').
    \32\ NHTSA is permitted to issue this final rule for the reasons 
explained in Section D.1.
    \33\ See 81 FR 95489, 95492 (Dec. 28, 2016). Civil penalties are 
determined after the end of a model year, following NHTSA's receipt 
of final reports from the Environmental Protection Agency (EPA), 
i.e., no earlier than April 2020 for model year 2019 noncompliance. 
See 77 FR 62624, 63126 (Oct. 15, 2012).
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c. Initial Reconsideration and Request for Comments
    In light of CAFE compliance data submitted by manufacturers to 
NHTSA showing that many automakers would begin to fall behind in 
meeting their applicable CAFE standards beginning in model years 2016 
and 2017,\34\ in July 2017, the agency indicated it was reconsidering 
its earlier decision in the July 2016 interim final rule to increase 
the CAFE civil penalty rate. In that reconsideration announcement, the 
agency explained that it was, for the first time, seeking public 
comment on the legal, factual, and policy issues implicated by the 
question of whether the rate should be increased. NHTSA requested 
public comment on whether and, if so, how to amend the CAFE civil 
penalty rate.\35\
---------------------------------------------------------------------------

    \34\ ``MYs 2016 and 2017 Projected Fuel Economy Performance 
Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm.
    \35\ 82 FR 32140 (July 12, 2017). Comments on this document can 
be found at: https://www.regulations.gov/docket?D=NHTSA-2017-0059. 
In the NPRM, NHTSA generally described the comments it received in 
response to its reconsideration notice, including that ``[v]ehicle 
manufacturers, either directly or via their respective representing 
organizations, also expressed support for the reconsideration of the 
2016 final rule.'' 83 FR 13904, 13907 (Apr. 2, 2018). NHTSA did not 
intend to suggest, as one commenter to the NPRM read it, that all 
``the vehicle manufacturers who submitted comments uniformly 
supported reconsideration of the CAFE penalty increase.'' Comment by 
Workhorse Group Inc., NHTSA-2018-0017-0010 (Workhorse Comment), at 2 
n.3. NHTSA acknowledges that one electric vehicle manufacturer, 
Faraday Future, submitted a comment to the reconsideration notice 
requesting that NHTSA consider the economic impact of a change to 
the CAFE civil penalty rate on electric vehicle manufacturers. See 
Docket ID NHTSA-2017-0059-0016. NHTSA discusses this issue below.
---------------------------------------------------------------------------

d. Notice of Proposed Rulemaking
    On April 2, 2018, NHTSA published a notice of proposed rulemaking 
(NPRM) announcing that it had tentatively determined, upon 
reconsideration, that the 2015 Act should not be applied to the CAFE 
civil penalty formula provision found in 49 U.S.C. 32912 and proposed 
to retain the current civil penalty rate of $5.50 per .1 of a mile per 
gallon, rather than to increase it to $14 beginning in model year 
2019.\36\ Through its reconsideration of the applicability of the 2015 
Act to the CAFE civil penalty rate, NHTSA is carrying out its 
responsibility, as OMB instructed in its guidance, to determine whether 
the penalties under its jurisdiction are ``civil monetary penalt[ies]'' 
as defined by the 2015 Act.\37\ The agency's proposal is based on a 
legal determination, after reconsideration, that the CAFE civil penalty 
rate is not a ``civil monetary penalty'' as contemplated by the 2015 
Act and that therefore the 2015 Act does not apply to the NHTSA CAFE 
civil penalty formula. Specifically, NHTSA proposed that the formula is 
not a ``penalty, fine, or other sanction'' that is either ``a specific 
monetary amount'' or ``a maximum amount.'' Instead, as OMB highlights 
in the docketed opinion,\38\ Congress expressly described the rate in 
the CAFE statute as an ``amount . . . to be used in calculating a civil 
penalty,'' not a ``civil penalty'' itself.\39\ The CAFE statute 
outlines a process that NHTSA uses to determine a potential penalty and 
that manufacturers use to determine their specific penalty. In 
particular, the $5.50 per .1 mile is merely a rate that goes into a 
complex, statutory formula used to calculate a potential penalty 
amount, but the actual civil penalty amount ultimately depends on the 
decisions of both the violator and potentially other manufacturers.
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    \36\ NHTSA's reconsideration authority is discussed in Section 
D.1.
    \37\ OMB's February 2016 guidance confirms that each agency is 
``responsible for identifying the civil monetary penalties that fall 
under the statutes and regulations [it] enforce[s].'' Memorandum 
from the Director of OMB to Heads of Executive Departments and 
Agencies, Implementation of the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015, at 2 (Feb. 24, 2016), 
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
    \38\ OMB Non-Applicability Letter, at 4-5.
    \39\ 49 U.S.C. 32912(c)(1)(A).
---------------------------------------------------------------------------

    This proposal reflected a change in NHTSA's position on this issue 
from when NHTSA previously adjusted the CAFE civil penalty rate from $5 
to $5.50. Mindful of the Alliance and Global's comment that ``the 
practical and legal issues implicated by such a reduction may prove to 
be insuperable,'' \40\ at this time, NHTSA is

[[Page 36013]]

exercising its judgment not to revisit its determination from more than 
twenty years ago to increase the rate by fifty cents, even if that 
decision did not take into account the agency's considered 
interpretation of the statute.\41\
---------------------------------------------------------------------------

    \40\ Comment by Alliance of Automobile Manufacturers and 
Association of Global Automakers, NHTSA-2018-0017-0011 (Alliance and 
Global Comment), 18 n.75. Because of these practical and legal 
issues and because the agency is ``reluctant to draw inferences from 
Congress' failure to act,'' Schneidewind v. ANR Pipeline Co., 485 
U.S. 293, 306 (1988), Congress not reinstating the $5 rate--in 2007 
in EISA or otherwise--means little, contrary to the suggestion of 
some commenters. See Comment by California Air Resources Board, 
California Department of Transportation, District of Columbia 
Department of Energy and Environment, and New Jersey Department of 
Environmental Protection, NHTSA-2018-0017-0014 (CARB Comment), at 
20; Comment by Attorneys General of New York, California, Delaware, 
the District of Columbia, Illinois, Iowa, Maryland, Massachusetts, 
New Jersey, Oregon, Vermont, Virginia, and Washington, NHTSA-2018-
0017-0015 (Attorneys General Comment), at 8, 9-10.
    \41\ In light of the conclusions that NHTSA reaches in this 
final rule and the agency's decision to maintain the current $5.50 
civil penalty rate at this time, rather than increase it to $14 
beginning in MY 2019, any modifications to the civil penalty rate, 
as appropriate, would be more properly the subject of future 
rulemakings. As stated in the NPRM, NHTSA is considering a separate 
rulemaking to determine whether the CAFE civil penalty rate should 
be reduced to $5, in light of NHTSA's decision here that the 2015 
Act should not be applied to the CAFE civil penalty rate. In 
addition, some commenters here have contended that the CAFE civil 
penalty rate of $5.50 should be increased under EPCA, even if the 
2015 Act is not applied. See infra at Section D.4.a. NHTSA plans to 
consider these potentially conflicting positions and any further 
changes to the CAFE civil penalty rate that might be appropriate in 
a future rulemaking.
---------------------------------------------------------------------------

    Even if one were to assume that the CAFE penalty rate was subject 
to the 2015 Act, NHTSA proposed in the alternative to maintain the 
current $5.50 civil penalty rate based on a tentative finding that--
either in light of the statutory factors Congress requires NHTSA to 
analyze under EPCA in determining whether an increase in the civil 
penalty rate will have ``a substantial deleterious impact on the 
economy'' or otherwise--increasing the CAFE civil penalty rate would 
result in a ``negative economic impact.'' Pursuant to OMB's guidance, 
NHTSA consulted with OMB before proposing this reduced catch-up 
adjustment determination and submitted its NPRM to the Office of 
Information and Regulatory Affairs (OIRA) for review. In any event, 
NHTSA proposed that any adjustment would be capped by the $10 limit in 
49 U.S.C. 32912(c)(1)(B), which would remain unadjusted.
    NHTSA also proposed to finalize the 2017 and 2018 inflationary 
adjustments for the maximum penalty for general CAFE violations in 49 
U.S.C. 32912(a).\42\
---------------------------------------------------------------------------

    \42\ In this final rule, NHTSA also finalizes the 2019 
inflationary adjustments for the general CAFE maximum penalty.
---------------------------------------------------------------------------

C. Overview of the Comments

    NHTSA received sixteen comments on the NPRM. NHTSA received 
comments from the following entities and individuals: The Alliance of 
Automobile Manufacturers; the Association of Global Automakers; Jaguar 
Land Rover North America LLC; Center for Biological Diversity; Natural 
Resources Defense Council; Sierra Club (and some of its members); the 
Union of Concerned Scientists; Center for American Progress; Attorneys 
General of New York, California, Delaware, the District of Columbia, 
Illinois, Iowa, Maryland, Massachusetts, New Jersey, Oregon, Vermont, 
Virginia, and Washington; the California Air Resources Board; the 
California Department of Transportation; the District of Columbia 
Department of Energy and Environment; the New Jersey Department of 
Environmental Protection; the Institute for Policy Integrity at New 
York University School of Law; Workhorse Group Inc.; and other 
individuals.

D. Response to the Comments

1. NHTSA's Reconsideration Authority

    As a threshold matter, NHTSA must address the various comments 
submitted regarding the agency's ability to reconsider its previous 
rules on this issue and upon reconsideration, change its position 
regarding the applicability of the 2015 Act to the CAFE civil penalty 
rate and the need to invoke the ``negative economic impact'' 
exception.\43\ NHTSA, like all agencies, is permitted to change its 
views based upon its experience and expertise, provided that the 
requirements of the APA and other governing statutes are met. To do so, 
an agency must show that it is aware it is changing its position and 
provide a reasoned explanation for the change.\44\ This holds true even 
if the agency's position has been ``longstanding,'' as some commenters 
characterized here,\45\ because the agency must continually consider 
varying interpretations and reassess their validity.\46\
---------------------------------------------------------------------------

    \43\ See, e.g., Workhorse Comment, at 3; Comment by Center for 
American Progress, NHTSA-2018-0017-0013 (CAP Comment), at 3; 
Attorneys General Comment, at 6; Comment by Institute for Policy 
Integrity at New York University School of Law, NHTSA-2018-0017-0017 
(IPI Comment), at 2-3.
    \44\ Alliance and Global Comment, at 4-5 (citing Encino 
Motorcars LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016); FCC v. Fox 
Television Stations, Inc., 556 U.S. 502, 515-16 (2009)).
    \45\ See, e.g., Workhorse Comment, at 3; Attorneys General 
Comment, at 6; IPI Comment, at 1.
    \46\ Rust v. Sullivan, 500 U.S. 173, 186-87 (1991); see also 
Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126 (2016); FCC 
v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009); Nat'l 
Cable & Telecommunications Ass'n v. Brand X internet Servs., 545 
U.S. 967, 981 (2005); GenOn REMA, LLC v. U.S. E.P.A., 722 F.3d 513, 
525 (3d Cir. 2013) (An agency ``is not forever held to its prior 
interpretations, as the continued validity and appropriateness of 
the agency's rules is an evolving process.''); Strickland v. Comm'r, 
Maine Dep't of Human Servs., 48 F.3d 12, 18 (1st Cir. 1995) (``[A]n 
explained modification, even one that represents a sharp departure 
from a longstanding prior interpretation, ordinarily retains 
whatever deference is due.''). Given that the current penalty rate 
has been in effect since it was set decades ago, however, NHTSA will 
apply its new position on a prospective basis only from the 
effective date of this final rule.
---------------------------------------------------------------------------

    Here, NHTSA expressly acknowledged in the NPRM that its tentative 
determination that the CAFE civil penalty rate is not a ``civil 
monetary penalty'' subject to inflationary adjustment under the 2015 
Act ``reflects a change in NHTSA's position on this issue.'' \47\ As 
NHTSA explained in the NPRM, NHTSA proposed the change because it 
previously ``did not consider'' the issue and had proceeded in the July 
2016 interim final rule ``without analysis'' of the statutory 
interpretation and policy issues considered in this rulemaking and 
without the benefit of public comment.\48\ Accordingly, after providing 
a comprehensive ``reasoned explanation'' in the NPRM,\49\ NHTSA reached 
a tentative determination that a change was appropriate and that its 
proposed change was justified--an analysis upon which it then sought 
comment.\50\
---------------------------------------------------------------------------

    \47\ 83 FR 13904, 13908 (May 2, 2018). As established in OMB's 
opinion and explained further below, NHTSA's changed position 
comports with OMB's interpretation of the 2015 Act--that is, the 
interpretation provided by the office designated by Congress to 
issue guidance to all agencies on how the 2015 Act should be 
implemented. OMB Non-Applicability Letter.
    \48\ 83 FR 13904, 13904-05 (May 2, 2018). Comments noting that 
NHTSA has previously ``acknowledged'' that the 2015 Act applies to 
the CAFE civil penalty rate, Comment by Center for Biological 
Diversity, Natural Resources Defense Council, Sierra Club, and the 
Union of Concerned Scientists, NHTSA-2018-0017-0012 (CBD Comment), 
at 9; see also CARB Comment, at 6; IPI Comment, at 2, miss the 
point: NHTSA expressly recognized its past position in the NPRM, but 
the agency noted that it had adopted that position without analyzing 
the issue. After appropriate examination, NHTSA changed its position 
to comport with the applicable statutes. It is irrelevant that 
``none of the commenters who responded to NHTSA's [previous] request 
for comments offered the legal interpretation that NHTSA is now 
proposing,'' Workhorse Comment, at 3-4, or that the Alliance and 
Global have previously stated that ``NHTSA is not empowered to 
exempt the CAFE program from th[e] directive'' of the 2015 Act, 
Industry Petition, at 1. NHTSA is permitted to--and, in fact, has 
the responsibility to--interpret Federal statutes related to matters 
under its purview, see U.S. ex rel. Hall v. Payne, 254 U.S. 343, 
347-48 (1920) (``[The Secretary of the Interior] could not 
administer or apply the act without construing it.''), and the 
public has now had a full opportunity to comment on the proposed 
interpretation.
    \49\ 83 FR 13904, 13908-11 (May 2, 2018).
    \50\ One commenter noted that ``NHTSA did not consult with the 
Department of Justice or any other agencies besides DOT and OMB in 
crafting its interpretation of the Inflation Adjustment Act 
applicable to the entire federal government,'' as evidence that 
NHTSA's interpretation does not merit deference. Workhorse Comment, 
at 3. As noted above, OMB has provided its views on the 
applicability of the 2015 Act to the CAFE civil penalty rate in a 
comprehensive opinion included in the docket for this rulemaking. 
OMB Non-Applicability Letter. In addition, as part of its review of 
the NPRM before publication in the Federal Register, OIRA within OMB 
managed an interagency review process, in which the Department of 
Justice and other agencies were able to review and provide comments 
on NHTSA's proposal. Moreover, consultation principally with OMB was 
appropriate as the 2015 Act directed OMB to provide guidance to 
agencies on implementing the inflation adjustments required under 
the 2015 Act.

---------------------------------------------------------------------------

[[Page 36014]]

    To the extent that NHTSA's ``prior policy has engendered serious 
reliance interests that must be taken into account,'' NHTSA has 
provided ``a more detailed justification'' than what sufficed to create 
its previous policy.\51\ As explained in the NPRM and further below, 
NHTSA did not previously consider the issue at all and thus any 
explanation is ``more detailed'' than the one it previously provided. 
Regardless, ``reliance does not overwhelm good reasons for a policy 
change,'' even in instances that would ``necessitate systemic, 
significant changes'' to regulated entities' practices.\52\ NHTSA 
believes that correcting an erroneous legal interpretation of a statute 
to align its practice with what Congress required and exercising 
authority conferred by Congress to avoid a ``negative economic impact'' 
both constitute ``good reasons for a policy change.'' Moreover, ``the 
extent to which the Department is obliged to address reliance will be 
affected by the thoroughness of public comments it receives on the 
issue,'' \53\ and only one regulated entity submitted a comment 
containing any argument that its reliance on NHTSA's previous policy 
supports an increase in the CAFE civil penalty rate to $14.\54\ The 
reliance argued in this single comment does not override NHTSA's 
obligation to apply the 2015 Act as enacted or to act in accord with 
the statute--and with OMB's concurrence \55\--to avoid imposing a 
``negative economic impact.''
---------------------------------------------------------------------------

    \51\ Fox, 556 U.S. at 515.
    \52\ Navarro, 136 S. Ct. at 2128 (2016) (Ginsburg, J., 
concurring).
    \53\ Id. at 2128 n.2.
    \54\ See Workhorse Comment, at 3.
    \55\ OMB Negative Economic Impact Letter.
---------------------------------------------------------------------------

    It is of no consequence that the 2015 Act does not expressly state 
that NHTSA may reconsider its previous rules on the initial inflation 
adjustment. For one, the APA defines ``rule making''--the mechanism 
mandated by the 2015 Act for enacting the initial catch-up adjustment 
and for invoking the ``negative economic impact'' exception--to include 
the process of ``amending, or repealing a rule.'' \56\ But in any 
event, no specific statutory or codified regulatory authority is 
required. It is well-established that agencies have various inherent 
powers.\57\ And it has been affirmed repeatedly that, in the absence of 
a Congressional prohibition, agencies have the inherent power to 
reconsider their own decisions.\58\ This inherent authority encompasses 
an agency reconsidering how it previously interpreted a statute and 
amending an

[[Page 36015]]

existing regulation by going through the notice-and-comment rulemaking 
process under the APA, particularly when its updated interpretation 
``closely fits the design of the statute as a whole and its object and 
policy.'' \59\
---------------------------------------------------------------------------

    \56\ 5 U.S.C. 551(5) (`` `[R]ule making' means agency process 
for formulating, amending, or repealing a rule.''). Moreover, 
NHTSA's regulations provide that ``[t]he Administrator may initiate 
any further rulemaking proceedings that he finds necessary or 
desirable.'' 49 CFR 553.25.
    \57\ See, e.g., Vermont Yankee Nuclear Power Corp. v. Nat. Res. 
Def. Council, Inc., 435 U.S. 519, 544 (1978) (noting ``the very 
basic tenet of administrative law that agencies should be free to 
fashion their own rules of procedure''); Morton v. Ruiz, 415 U.S. 
199, 231 (1974) (``The power of an administrative agency to 
administer a congressionally created and funded program necessarily 
requires the formulation of policy and the making of rules to fill 
any gap left, implicitly or explicitly, by Congress.''); Gadda v. 
Ashcroft, 377 F.3d 934, 948 n.8 (9th Cir. 2004) (``Of course, our 
statutory and inherent powers to regulate attorneys admitted to the 
Ninth Circuit bar coexist with the separate, independent powers of 
federal administrative agencies to do the same. . . . In the case of 
agencies, this power, though limited, exists whether or not 
expressly authorized by statute.''); Ober v. Whitman, 243 F.3d 1190, 
1194-95 (9th Cir. 2001) (indicating that agencies have the inherent 
authority to exempt de minimis violations from regulation if not 
prohibited by statute); Tate & Lyle, Inc. v. C.I.R., 87 F.3d 99, 104 
(3d Cir. 1996) (``Inherent in the powers of an administrative agency 
is the authority to formulate policies and to promulgate rules to 
fill any gaps left, either implicitly or explicitly, by Congress.'') 
(citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 
U.S. 837, 843 (1984)); Nat. Res. Def. Council, Inc. v. Sec. & Exch. 
Comm'n, 606 F.2d 1031, 1056 (D.C. Cir. 1979) (``An agency is allowed 
to be master of its own house, lest effective agency decisionmaking 
not occur in [a]ny proceeding.'').
    \58\ See, e.g., Motor Vehicles Mfrs. Ass'n v. State Farm Mut. 
Auto. Ins. Co., 463 U.S. 29, 42 (1983) (``[A]n agency must be given 
ample latitude to `adapt their rules and policies to the demands of 
changing circumstances.' '' (quoting Permian Basin Area Rate Cases, 
390 U.S. 747, 784 (1968))); Am. Trucking Associations v. Atchison, 
T. & S. F. Ry. Co., 387 U.S. 397, 416 (1967) (``We agree that the 
Commission, faced with new developments or in light of 
reconsideration of the relevant facts and its mandate, may alter its 
past interpretation and overturn past administrative rulings and 
practice. . . . This kind of flexibility and adaptability to 
changing needs and patterns of transportation is an essential part 
of the office of a regulatory agency. Regulatory agencies do not 
establish rules of conduct to last forever; they are supposed, 
within the limits of the law and of fair and prudent administration, 
to adapt their rules and practices to the Nation's needs in a 
volatile, changing economy. They are neither required nor supposed 
to regulate the present and the future within the inflexible limits 
of yesterday.'') (cleaned up); Cobra Nat. Res., LLC v. Fed. Mine 
Safety & Health Review Comm'n, 742 F.3d 82, 101 (4th Cir. 2014) 
(``[A]n administrative agency, charged with the protection of the 
public interest, is certainly not precluded from taking appropriate 
action because of a mistaken action on its part in the past.'' 
(quoting NLRB v. Balt. Transit Co., 140 F.2d 51, 55 (4th Cir. 
1944))); Kindred Nursing Centers E., LLC v. N.L.R.B., 727 F.3d 552, 
560 (6th Cir. 2013) (``An agency may depart from its precedents, and 
provided that the departure from precedent is explained, our review 
is limited to whether the rationale is so unreasonable as to be 
arbitrary and capricious. An administrative agency may reexamine its 
prior decisions and may depart from its precedents provided the 
departure is explicitly and rationally justified.'') (cleaned up); 
ConocoPhillips Co. v. U.S. E.P.A., 612 F.3d 822, 832 (5th Cir. 2010) 
(``Embedded in an agency's power to make a decision is its power to 
reconsider that decision.''); Tokyo Kikai Seisakusho, Ltd. v. United 
States, 529 F.3d 1352, 1360-61 (Fed. Cir. 2008) (``[A]dministrative 
agencies possess inherent authority to reconsider their decisions, 
subject to certain limitations, regardless of whether they possess 
explicit statutory authority to do so.''); Friends of Boundary 
Waters Wilderness v. Bosworth, 437 F.3d 815, 823-24 (8th Cir. 2006) 
(``Agencies given the authority to promulgate a quota are presumed 
to have the authority to adjust that quota.''); S. California Edison 
Co. v. F.E.R.C., 415 F.3d 17, 22-23 (D.C. Cir. 2005) (``[O]f course, 
agencies may alter regulations. Agencies may even alter their own 
regulations sua sponte, in the absence of complaints, provided they 
have sufficient reason to do so and follow applicable 
procedures.''); Macktal v. Chao, 286 F.3d 822, 825-26 (5th Cir. 
2002) (``[I]t is generally accepted that in the absence of a 
specific statutory limitation, an administrative agency has the 
inherent authority to reconsider its decisions.''); Harrington v. 
Chao, 280 F.3d 50, 59 (1st Cir. 2002) (``Agencies do have leeway to 
change their interpretations of laws, as well as of their own 
regulations, provided they explain the reasons for such change and 
provided that those reasons meet the applicable standard of 
review.''); Belville Mining Co. v. United States, 999 F.2d 989, 997 
(6th Cir. 1993) (``Even where there is no express reconsideration 
authority for an agency, [ ] the general rule is that an agency has 
inherent authority to reconsider its decision.''); Rainbow Broad. 
Co. v. F.C.C., 949 F.2d 405, 409 (D.C. Cir. 1991) (``Agencies enjoy 
wide latitude when using rulemaking to change their own policies and 
the manner by which their policies are implemented. . . . According 
agencies the power to change their minds about their own policies, 
practices and procedures rests on a sound policy basis. Agencies 
need some flexibility in carrying out their authority.''); Dun & 
Bradstreet Corp. Found. v. United States Postal Serv., 946 F.2d 189, 
193 (2d Cir. 1991) (``It is widely accepted that an agency may, on 
its own initiative, reconsider its interim or even its final 
decisions, regardless of whether the applicable statute and agency 
regulations expressly provide for such review.''); Dawson v. Merit 
Sys. Prot. Bd., 712 F.2d 264, 267 (7th Cir. 1983) (describing ``the 
general rule that administrative agencies have the power to 
reconsider decisions on their own initiative''); Dana Corp. v. ICC, 
703 F.2d 1297, 1305 (D.C. Cir. 1983) (``[T]he agency is entitled to 
have second thoughts, and to sustain action which it considers in 
the public interest upon whatever basis more mature reflection 
suggests.''); Trujillo v. Gen. Elec. Co., 621 F.2d 1084, 1086 (10th 
Cir. 1980) (``Administrative agencies have an inherent authority to 
reconsider their own decisions, since the power to decide in the 
first instance carries with it the power to reconsider.''); 
Mazaleski v. Treusdell, 562 F.2d 701, 720 (D.C. Cir. 1977) (``We 
have many times held that an agency has the inherent power to 
reconsider and change a decision if it does so within a reasonable 
period of time.'') (quoting Gratehouse v. United States, 512 F.2d 
1104, 1109 (Ct. Cl. 1975)); Albertson v. FCC, 182 F.2d 397, 399 
(D.C. Cir. 1950) (``The power to reconsider is inherent in the power 
to decide.'').
    \59\ Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417-18 
(1993) (cleaned up); see also U.S. Telecom Ass'n v. F.C.C., 400 F.3d 
29, 35 (D.C. Cir. 2005) (``[I]f an agency adopts `a new position 
inconsistent with' an existing regulation, or effects `a substantive 
change in the regulation,' notice and comment are required.'') 
(quoting Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995)); 
Nat'l Classification Comm. v. United States, 22 F.3d 1174, 1177 
(D.C. Cir. 1994) (``[A]n agency may depart from its past 
interpretation [of a statute] so long as it provides a reasoned 
basis for the change.'') (citing Motor Vehicles Mfrs. Ass'n v. State 
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); Torrington 
Extend-A-Care Employee Ass'n v. N.L.R.B., 17 F.3d 580, 589 (2d Cir. 
1994) (similar).
---------------------------------------------------------------------------

    It is common practice for agencies--including NHTSA--to exercise 
their inherent reconsideration authority.\60\ That is because 
``reconsideration is often the sole means of correcting errors of 
procedure or substance,'' and ``[t]here may also be instances when 
unmistakable shifts in our basic judgments about law or policy 
necessitate the revision or amendment of previously established rules 
of conduct.'' \61\ In fact, agencies may even have a duty to reconsider 
their rules. As the Supreme Court has noted:
---------------------------------------------------------------------------

    \60\ See, e.g., 82 FR 14671, 14671 (Mar. 22, 2017) (``The EPA 
[in a joint notice with NHTSA] has inherent authority to reconsider 
past decisions and to revise, replace or repeal a decision to the 
extent permitted by law and supported by a reasoned explanation.'' 
(citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009))); 76 FR 22565, 22578 (Apr. 21, 2011) (``An agency generally 
remains free to revise improperly promulgated or otherwise 
unsupportable rules, even in the absence of a remand from a Court. . 
. . Agencies have particularly broad authority to revise their 
regulations to correct their errors. . . . Moreover, an agency may 
reconsider its methodologies and application of its statutory 
requirements and may even completely reverse course, regardless of 
whether a court has determined that its original regulation is 
flawed, so long as the agency explains its bases for doing so.'') 
(citations omitted); 75 FR 6883, 6884 (Feb. 12, 2010) (``The 
Department [of Labor] has inherent authority to change its 
regulations in accordance with the Administrative Procedure Act 
(APA).''); 64 FR 60556, 60580 (Nov. 5, 1999) (NHTSA ``believe[s] 
that nothing in [the statute] derogates our inherent authority to 
make temporary adjustments in the requirements we adopt if, in our 
judgment, such adjustments are necessary or prudent to promote the 
smooth and effective achievement of the goals of the amendments.'').
    \61\ Bookman v. United States, 453 F.2d 1263, 1265 (Ct. Cl. 
1972).

    An initial agency interpretation is not instantly carved in 
stone. On the contrary, the agency, to engage in informed 
rulemaking, must consider varying interpretations and the wisdom of 
its policy on a continuing basis.\62\
---------------------------------------------------------------------------

    \62\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 
U.S. 837, 863-64 (1984) (emphasis added). In a subsequent case, the 
Supreme Court confirmed that such reconsiderations should be done, 
at a minimum, ``in response to changed factual circumstances, or a 
change in administrations.'' Nat'l Cable & Telecommunications Ass'n 
v. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (citing Motor 
Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. 
Automobile Ins. Co., 463 U.S. 29, 59 (1983) (Rehnquist, J., 
concurring in part and dissenting in part)).

At bottom, ``[i]f an agency is to function effectively, however, it 
must have some opportunity to amend its rules and regulations in light 
of its experience.'' \63\
---------------------------------------------------------------------------

    \63\ Fla. Cellular Mobil Commc'ns Corp. v. F.C.C., 28 F.3d 191, 
196 (D.C. Cir. 1994).
---------------------------------------------------------------------------

    OMB's February 2016 guidance on implementing the 2015 Act confirms 
that each agency is ``responsible for identifying the civil monetary 
penalties that fall under the statutes and regulations [it] 
enforce[s].'' \64\ This is an ongoing responsibility for each agency, 
as confirmed in OMB's subsequent guidance in December 2016, December 
2017, and December 2018.\65\ In the docketed opinion regarding NHTSA's 
determination that the 2015 Act does not apply to the CAFE civil 
penalty rate, OMB affirms that it is appropriate for NHTSA to 
reconsider its previous interpretation of the 2015 Act.\66\ NHTSA has 
specific statutory authority to administer the CAFE standards program 
\67\ and retains general authority--beyond its inherent authority--to 
do so efficiently and in the public interest.\68\ In the text of the 
2015 Act, Congress did not prohibit or otherwise restrict agencies from 
reconsidering whether an initial catch-up adjustment is required or, if 
so, the magnitude of such an adjustment.
---------------------------------------------------------------------------

    \64\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 
(Feb. 24, 2016), available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
    \65\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the 2017 annual 
adjustment pursuant to the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015, at 2 (Dec. 16, 2016), 
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (``Agencies are responsible for 
identifying the civil monetary penalties that fall under the 
statutes and regulations they enforce.''); Memorandum from the 
Director of OMB to Heads of Executive Departments and Agencies, 
Implementation of Penalty Inflation Adjustments for 2018, Pursuant 
to the Federal Civil Penalties Inflation Adjustment Act Improvements 
Act of 2015, at 2 (Dec. 15, 2017), available at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf 
(``Agencies are responsible for identifying the civil monetary 
penalties that fall under the statutes and regulations within their 
jurisdiction.''); Memorandum from the Director of OMB to Heads of 
Executive Departments and Agencies, Implementation of Penalty 
Inflation Adjustments for 2019, Pursuant to the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015, at 2 
(Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) 
(``Agencies are responsible for identifying the civil monetary 
penalties that fall under the statutes and regulations within their 
jurisdiction.'').
    \66\ See generally OMB Non-Applicability Letter.
    \67\ See, e.g., 49 U.S.C. 32902, 32912. The Secretary's 
authority under EPCA is delegated to NHTSA. 49 CFR 1.95(a) 
(delegating authority to NHTSA to exercise the authority vested in 
the Secretary under chapter 329 of title 49 of the U.S. Code); see 
also 1.94(c).
    \68\ See 49 U.S.C. 302(a) (stating the Secretary of 
Transportation is governed by the transportation policy described in 
part in 49 U.S.C. 13101(b), which provides that oversight of the 
modes of transportation ``shall be administered and enforced to 
carry out the policy of this section and to promote the public 
interest''); 49 U.S.C. 322(a) (``The Secretary of Transportation may 
prescribe regulations to carry out the duties and powers of the 
Secretary. An officer of the Department of Transportation may 
prescribe regulations to carry out the duties and powers of the 
officer.''); 49 U.S.C. 105(c)(2) (directing the NHTSA Administrator 
to ``carry out . . . additional duties and powers prescribed by the 
Secretary''); 49 CFR 1.81(a)(3) (``Except as prescribed by the 
Secretary of Transportation, each Administrator is authorized to . . 
. [e]xercise the authority vested in the Secretary to prescribe 
regulations under 49 U.S.C. 322(a) with respect to statutory 
provisions for which authority is delegated by other sections in 
this part.'').
---------------------------------------------------------------------------

2. Applicability of the 2015 Act

    Multiple commentators disagreed with NHTSA's proposed determination 
that the $5.50 civil penalty rate used in the formula for manufacturer 
violations of fuel economy standards in 49 U.S.C. 32912(b) is not a 
``civil monetary penalty'' subject to adjustment under the 2015 
Act.\69\ After thorough consideration of all these comments, NHTSA 
adopts its tentative determination. To be a ``civil monetary penalty'' 
that must be adjusted for inflation under the 2015 Act, a ``penalty, 
fine, or other sanction'' must be, among other things, ``for a specific 
monetary amount as provided by Federal law'' or have ``a maximum amount 
provided for by Federal law.'' \70\ The CAFE civil penalty rate is 
neither.
---------------------------------------------------------------------------

    \69\ See, e.g., Workhorse Comment, at 3; CBD Comment, at 7; CAP 
Comment, at 2-3; CARB Comment, at 7-8; Attorneys General Comment, at 
7; IPI Comment, at 1.
    \70\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment 3(2).
---------------------------------------------------------------------------

    For one, the CAFE civil penalty rate is an input in a formula that 
is used to calculate a penalty. And although the CAFE civil penalty 
rate is capped at $10 by statute,\71\ the civil penalty for 
manufacturers that violate an average fuel economy standards, as 
defined in 49 U.S.C. 32912(b), has no maximum amount. The higher the 
shortfall or the higher the number of vehicles in the fleet, the higher 
the potential penalty (before accounting for credits). This formula 
stands in stark contrast to the immediately preceding provision 
specifying the ``general penalty'' for

[[Page 36016]]

EPCA violations: ``A person that violates section 32911(a) of this 
title is liable to the United States Government for a civil penalty of 
not more than $10,000 for each violation.'' \72\ The phrase ``not more 
than'' plainly denotes that the $10,000 civil penalty is a maximum 
amount for each violation, and, as such, this amount (as promulgated in 
49 CFR 578.6(h)(1)) was properly adjusted pursuant to the 2015 Act.\73\
---------------------------------------------------------------------------

    \71\ 49 U.S.C. 32912(c)(1)(B). The $10 cap is addressed further 
in Section D.5.
    \72\ 49 U.S.C. 32912(a); see also 49 U.S.C. 30165(a) 
(establishing that violations of the National Traffic and Motor 
Vehicle Safety Act are generally subject to ``a maximum amount'' of 
``not more than'' $21,000 per violation and a ``maximum penalty'' of 
$105 million for a related series of violations).
    \73\ 81 FR 43524, 43526 (July 5, 2016). The penalty in 49 U.S.C. 
32912(a), promulgated in 49 CFR 578.6(h)(1), is subject to 
additional inflationary adjustments for 2017 and 2018, which were 
proposed in the NPRM, and for 2019, which is being finalized in this 
rule. Applying the multiplier for 2017 of 1.01636, as specified in 
OMB's December 16, 2016 guidance, results in an adjusted maximum 
penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as 
specified in OMB's December 15, 2017 guidance, results in an 
adjusted maximum penalty of $41,484. NHTSA received no comments 
objecting to these proposed adjustments and finalizes those 
inflationary adjustments in this rule. Applying the multiplier for 
2019 of 1.02522, as specified in OMB's December 14, 2018 guidance, 
results in an adjusted maximum penalty of $42,530. In accordance 
with the procedures provided in the 2015 Act, and confirmed by OMB's 
guidance on implementing the 2015 Act, NHTSA finalizes the 2019 
adjustment for the general CAFE penalty through this final rule. 28 
U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment 
4(b)(2); Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of Penalty Inflation 
Adjustments for 2019, Pursuant to the Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015, at 4 (Dec. 14, 
2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) (``In 
accordance with the 2015 Act, agencies shall adjust civil monetary 
penalties notwithstanding Section 553 of the Administrative 
Procedure Act (APA). This means that the public procedure the APA 
generally requires (i.e., notice, an opportunity for comment, and a 
delay in effective date) is not required for agencies to issue 
regulations implementing the annual adjustment.'') (footnote 
omitted).
---------------------------------------------------------------------------

    The $5.50 rate also is not a ``penalty'' for a ``specific monetary 
amount.'' Again, the rate is one factor in a complex formula that is 
used to calculate the penalty. Moreover, the portion of the penalty 
calculated by NHTSA is only the potential penalty. The ultimate penalty 
owed is determined by the manufacturer based on the statutory provision 
authorizing the deduction of ``the credits available to the 
manufacturer.'' \74\ The CAFE civil penalty statute states expressly 
that this credit reduction process is part of the calculation of the 
civil penalty.\75\ It is not, as some commenters suggested,\76\ a 
distinct process that is conducted after the penalty has already been 
calculated.\77\ The inputs to the civil penalty formula, including the 
reduction for available credits, are joined by the conjunctive ``and'' 
in the statute.\78\ And while it is true, as one commenter noted, that 
``a specific penalty amount will still result after manufacturer 
credits are taken into account,'' \79\ that is not ``a specific 
monetary amount as provided by Federal law,'' as required by the 2015 
Act. The amount is determined by a process codified in Federal law, but 
the specific final penalty amount itself is not ``provided by Federal 
law.'' The ``specific monetary amount'' is unknown until the 
manufacturer decides to use any available credits it has, or can 
acquire, to make up for the shortfall identified by NHTSA.\80\ In fact, 
if a manufacturer has enough credits or has a plan to earn sufficient 
credits in the future, the penalty ultimately calculated may be 
zero.\81\ It is the manufacturer who decides this, not the agency.\82\
---------------------------------------------------------------------------

    \74\ 49 U.S.C. 32912(b)(3).
    \75\ 49 U.S.C. 32912(b)(3). Section 32903(h) is not to the 
contrary, as one commenter suggested. See CAP Comment, at 2. That 
provision describes a refund process that is relevant only after ``a 
civil penalty has been collected,'' not before the civil penalty--
including any credit reduction--is fully calculated.
    \76\ See, e.g., CARB Comment, at 11 (``NHTSA knows exactly how 
much a manufacturer owes and must pay in civil penalties for failing 
to meet the CAFE standard--NHTSA calculates that amount. What NHTSA 
may not know is how exactly the manufacturer will satisfy that 
amount (direct payment vs. credits), but the specific amount owed, 
i.e., the civil penalty, is very much known.''); Attorneys General 
Comment, at 7 (``Nor does the availability of a credit mechanism 
that allows a manufacturer an alternate means to fully or partially 
comply with the CAFE standards have any bearing on the nature of the 
penalty. . . .''); IPI Comment, at 3 (``Credit trading and transfers 
allow the manufacturer to reduce its incidence of non-compliance, 
but the penalty per incidence of non-compliance remains fixed and 
specific. . . .'').
    \77\ One commenter stated ``many, if not all, civil monetary 
penalties assessed by any agency depend, on some level, on the 
regulated entity's decisions about whether, and how, to comply with 
a regulatory standard.'' IPI Comment, at 2-3. The comment cited no 
specific examples, but regardless, the unique feature in the CAFE 
civil penalty scheme relevant in this context is that the 
calculation of the civil penalty amount expressly includes a 
reduction for the credits available to the manufacturer. A 
manufacturer could both decide not to meet an applicable CAFE 
standard and not to pay a civil penalty (or to pay a smaller 
penalty). Under other civil penalty schemes, a person who does not 
comply with a regulatory standard does not get to decide whether or 
how much of a penalty to pay.
    \78\ 49 U.S.C. 32912(b).
    \79\ CBD Comment, at 8. The comment further stated that ``[t]his 
is no different from other rate-based penalty systems which allow 
for some reduction of liability,'' but cited no example.
    \80\ NHTSA is able to request supplemental reports and audit a 
manufacturer's compliance plan, see, e.g., 49 CFR 537.8, but 
ultimately, it is the manufacturer's decision on how to use the 
credits available to it.
    \81\ 49 CFR 536.5(d). A manufacturer may propose a plan to earn 
future credits within the subsequent three model years in order to 
comply with its regulatory obligations for the current model year, 
and NHTSA will not even initiate compliance proceedings until the 
time that the manufacturer's approved plan indicates that credits 
will be earned or acquired to achieve compliance. 49 CFR 536.7. 
Although many manufacturers have not met applicable standards, only 
one manufacturer paid civil penalties for MY 2014 and only two paid 
civil penalties for MYs 2012 and 2013. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
    \82\ Manufacturers instruct NHTSA on how they wish to allocate 
their credits or otherwise account for shortfalls. See 49 CFR 
536.5(d)(2), (6).
---------------------------------------------------------------------------

    Credit flexibilities were expressly included in the statute by 
Congressional design to give industry the ability to decide how to 
achieve the required fuel economy improvements efficiently. Notably, as 
mentioned in the NPRM, Congress gave manufacturers the ability to trade 
credits with other manufacturers in 2007 in EISA, introducing an 
additional level of complexity to the calculation process, which is 
different from other civil penalty calculations. This is far from a 
direction to the agency to execute a ``minor mathematic calculation 
used to figure up a total penalty number,'' as one commenter described 
it.\83\
---------------------------------------------------------------------------

    \83\ CARB Comment, at 9-10. Although the introductory language 
of the statutory provision may be ``similar'' to that of the general 
penalty for EPCA violations, as noted by the commenter, the process 
described for calculating the penalty is the material difference, as 
explained above.
---------------------------------------------------------------------------

    As explained in the opinion included in the docket for the rule, 
OMB concurs with NHTSA's interpretation of the 2015 Act: OMB agrees 
that the CAFE civil penalty rate is not a ``penalty, fine, or other 
sanction'' that ``is for a specific monetary amount'' because EPCA 
distinguishes between the rate, the ``amount . . . used in calculating 
a civil penalty,'' and the ``civil penalty'' itself.\84\ Nor does OMB 
believe that the CAFE penalty has a ``maximum amount provided for by 
Federal law'': There is no limit to the level of civil penalty that can 
be imposed under EPCA because the civil penalty rate is merely one 
factor in the formula used to calculate the potential civil penalty 
liability. OMB explains further that the $10 cap does not qualify as 
``maximum amount provided for by Federal law'' because it limits the 
``amount . . . used in calculating a civil penalty,'' not the ``civil 
penalty'' itself. Moreover, the $10 cap cannot be ``assessed or 
enforced'' at the time of the violation as required by the 2015 Act. 
Rather, it serves as a limitation on NHTSA's authority to alter the 
penalty rate.
---------------------------------------------------------------------------

    \84\ OMB Non-Applicability Letter, at 4-5.
---------------------------------------------------------------------------

    Because of the changes that Congress enacted to the CAFE program 
through

[[Page 36017]]

EISA in 2007, Congress was not necessarily ``on notice'' that NHTSA 
would apply the 2015 Act to the CAFE civil penalty rate, as one comment 
stated, merely because it had done so in 1997.\85\ In fact, NHTSA did 
not make any subsequent adjustments to the $5.50 rate, even as it 
repeatedly made adjustments to its other civil penalties--including an 
adjustment to the maximum general penalty under EPCA in 49 U.S.C. 
32912(a).\86\
---------------------------------------------------------------------------

    \85\ Attorneys General Comment, at 9.
    \86\ 64 FR 37876 (July 14, 1999); 66 FR 41149 (Aug. 7, 2001); 69 
FR 57864 (Sept. 28, 2004); 70 FR 53308 (Sept. 8, 2005); 71 FR 28279 
(May 16, 2006); 73 FR 9955 (Feb. 25, 2008) (adjusting maximum 
general penalty under EPCA and another NHTSA penalty); 75 FR 5244 
(Feb. 2, 2010).
---------------------------------------------------------------------------

    Apparently concerned about the ease with which the CAFE civil 
penalties program could damage the economy and the automobile industry 
in particular,\87\ Congress imposed a strict, tailored procedure for 
adjusting the CAFE civil penalty rate, requiring robust substantive 
findings and specific procedures, including providing opportunity for 
the Federal Trade Commission to comment and requiring at least eighteen 
months before an increased rate can go into effect.\88\ This process 
stands in stark contrast to the summary approach delineated in the 2015 
Act, which presumptively requires an interim final rule without notice 
and comment for the initial catch-up adjustment and similarly requires 
subsequent adjustments to be made without the traditional notice-and-
comment process outlined in the APA.\89\
---------------------------------------------------------------------------

    \87\ See, e.g., ``Energy Initiatives of the 95th Congress,'' S. 
Rep. No. 96-10, at 175-76 (1979) (``Representative Dingell (D-
Mich.), concerned that increasing the penalties could lead to 
layoffs in the automobile industry, insisted that raising the 
penalties be contingent upon findings by the Secretary of 
Transportation that increasing the penalties would achieve energy 
savings and would not be harmful to the economy.''); H.R. Rep. No. 
94-340, at 87 (1975) (``The automobile industry has a central role 
in our national economy and that any regulatory program must be 
carefully drafted so as to require of the industry what is 
attainable without either imposing impossible burdens on it or 
unduly limiting consumer choice as to capacity and performance of 
motor vehicles.''); 121 Cong. Rec. 18675 (June 12, 1975) (statement 
of Rep. Sharp) (``[W]e recognize that we have serious unemployment 
in the American auto industry and we want to preserve this important 
segment of the economy.'').
    \88\ See 49 U.S.C. 32912(c).
    \89\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment 4(b).
---------------------------------------------------------------------------

    One comment observed that ``the 2015 Act provides that an agency 
need not make inflation-based adjustments if it has implemented a 
discretionary adjustment . . . greater than the annual inflation 
adjustment.'' \90\ NHTSA agrees with the general notion offered by the 
commenter that this provision suggests Congress intended the inflation 
adjustments required under the 2015 Act to coexist with discretionary 
adjustments provided for under other statutes. But as described in the 
NPRM and below--and recognized by OMB in the opinion included in the 
docket for this rulemaking \91\--the CAFE civil penalty program is 
unique--namely, that the amount in question is a single input in a 
complex market-based penalty program, and not the penalty amount 
itself. And as OMB further explains in its opinion, the statutory 
structure of EPCA itself strongly indicates that Congress did not 
intend the 2015 Act to apply to the CAFE civil penalty rate. Under 
EPCA, there is no automatic increase in the penalty rate, the burden is 
on the Secretary to demonstrate an absence of economic harm before 
increasing the rate, and any increase is capped at $10. In contrast, 
under the 2015 Act, increases are automatic, the Secretary has the 
burden of demonstrating economic harm to stop an initial increase and 
has no power to stop future increases, and the potential penalty 
increases are unlimited. It is highly unlikely that Congress intended 
to shift from the EPCA scheme to the 2015 Act scheme without any 
reference to EPCA. Accordingly, NHTSA determines that Congress did not 
intend for the 2015 Act to apply to the CAFE civil penalty rate.\92\
---------------------------------------------------------------------------

    \90\ Attorneys General Comment, at 9 (citing 28 U.S.C. 2461 
note, Federal Civil Penalties Inflation Adjustment 4(d)).
    \91\ OMB Non-Applicability Letter, at 4-6.
    \92\ To the extent the 2015 Act does apply to the CAFE civil 
penalty rate, EPCA prohibits NHTSA from increasing the CAFE civil 
penalty rate--for an inflation adjustment or otherwise--at this 
time, for the reasons described below.
---------------------------------------------------------------------------

    Some commenters noted that the 2015 Act is designed to keep civil 
monetary penalties at the same levels, in real terms, not increase 
them.\93\ In response, NHTSA notes that the 2015 Act itself repeatedly 
refers to the adjustments as ``increases.'' \94\ Accepting the 
commenters' point, however, would actually provide further support for 
NHTSA's determination that the 2015 Act does not apply to the CAFE 
civil penalty rate. Because of the unique nature of the CAFE civil 
penalty formula, applying the 2015 Act to it would exceed the purpose 
of the 2015 Act noted by those commenters to ``maintain'' the real 
value of civil monetary penalties: Instead, doing so would constitute 
an increase.\95\ Moreover, as OMB noted in the opinion included in the 
docket, the unique features of EPCA also make the 2015 Act inconsistent 
with the CAFE civil penalty rate because, under EPCA, Congress required 
the Secretary of Transportation to regularly establish the maximum 
feasible fuel efficiency standards based on, among other things, 
developing technology, as opposed to applying a rote, formulaic 
increase to the penalty rate.\96\ Rather than ``maintain[ing]'' the 
real value of the CAFE civil penalty formula through inflation 
adjustment procedures, Congress chose other means: The CAFE civil 
penalty formula is based in part on the amount of the manufacturer's 
shortfall, and Congress requires NHTSA to prescribe the maximum 
feasible average fuel economy standards annually.\97\ If a manufacturer 
failed to

[[Page 36018]]

adapt to the increasing standards, its shortfall--and in turn, its 
penalty calculation (before accounting for credits)--increases 
automatically.\98\ Requiring an inflation adjustment on top of that 
would be gratuitous. The fact that Congress deliberately enacted a 
mechanism that would increase the potential CAFE penalty amounts 
without requiring inflation adjustments--fully ``aware that inflation 
would effectively reduce the real value of the [CAFE] civil penalty 
rate over time'' \99\--indicates that Congress did not intend for the 
CAFE civil penalty rate to be subject to inflation adjustments and thus 
that the 2015 Act was not intended to apply to that calculation.\100\
---------------------------------------------------------------------------

    \93\ See, e.g., CBD Comment, at 7; CAP Comment, at 3-4; CARB 
Comment, at 13; IPI Comment, at 19-20. One of these commenters 
claimed that ``Congress especially intended inflationary adjustments 
to apply in areas of heightened regulatory concern, such as health 
and safety, the environment, and consumer protection.'' CBD Comment, 
at 6 (citing James Ming Chen, Inflation-Based Adjustments in Federal 
Civil Monetary Penalties, 34 Yale L. & Pol'y Rev. 1, 3 (2015)). 
There is nothing in the 2015 Act that supports this claim. The 
original source cited by the comment's cited source is not the 
legislative history of the 2015 Act--or even the 1990 Inflation 
Adjustment Act--but a Federal Register notice from 1973, identifying 
various recommendations from the Administrative Conference of the 
United States. 38 FR 19782, 19792 (July 23, 1973). The 
recommendation in question had nothing to do with inflation 
adjustments; the Administrative Conference merely noted that ``[i]n 
many areas of increased concern (e.g., health and safety, the 
environment, consumer protection) availability of civil money 
penalties might significantly enhance an agency's ability to achieve 
its statutory goals.'' 38 FR 19782, 19792 (July 23, 1973).
    \94\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment 4(c), 5(a), 5(b)(2)(C), 6.
    \95\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment 2(b)(2). One commenter noted that ``remedial legislation 
should be construed broadly to effectuate its purposes.'' CARB 
Comment, at 10, 16-17 (quoting Tcherepnin v. Knight, 389 U.S. 332, 
336 (1967)). As one of the cases cited by this commenter expressly 
affirms, ``[t]hat principle, however, `does not give the judiciary 
license, in interpreting a provision, to disregard entirely the 
plain meaning of the words used by Congress.' '' Belland v. Pension 
Ben. Guar. Corp., 726 F.2d 839, 844 (D.C. Cir. 1984) (quoting Symons 
v. Chrysler Corp. Loan Guar. Bd., 670 F.2d 238, 241 (D.C. Cir. 
1981)).
    \96\ OMB Non-Applicability Letter, at 6.
    \97\ 49 U.S.C. 32902(a). One commenter noted that ``[w]hile 
Congress has directed NHTSA to set CAFE standards at the maximum 
feasible level, this does not necessarily amount to `continuous fuel 
standard increases,''' pointing out that ``CAFE standards have once 
decreased and otherwise, until a few years ago, remained the same 
for 20 years.'' CARB Comment, at 13. This is an accurate but 
misleading characterization. What the comment failed to mention was 
that it was Congress' decision to keep the standards flat over this 
period, not the agency's. For a significant portion of this period, 
Congress prohibited NHTSA from using funds ``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.'' Public Law 104-50, Sec. 330; see also 
Public Law 104-205, Sec. 323; Public Law 105-66, Sec. 322; Public 
Law 105-277, Sec. 322; Public Law 106-69, Sec. 321; Public Law 106-
346, Sec. 320. Moreover, from 1985 until EISA was signed into law in 
2007, Congress set the average fuel economy standard for passenger 
automobiles at 27.5 miles per gallon by default and did not require 
any increases--annually or otherwise, or to the maximum feasible 
level or otherwise. See Public Law 94-163, Sec. 301; Public Law 103-
272, Sec. 1(d). Instead, Congress permitted, but did not require, 
that NHTSA establish a higher or lower standard for passenger cars 
if the agency found that the maximum feasible level of fuel economy 
is higher or lower than 27.5 miles per gallon.
    \98\ See, e.g., Workhorse Comment, at 1 (``In effect, increasing 
the civil penalty rate increases the stringency of the CAFE 
Standards.''). This mechanism also counters the argument that a CAFE 
civil penalty rate of $5.50 ``effectively stall[s] fuel economy.'' 
CARB Comment, at 10; see also CAP Comment, at 2 (``[R]educing the 
penalty below the statutorily-mandated rate will likely lead to many 
more manufacturers electing to pay penalties rather than to comply 
with the law.''). The CAFE civil penalty formula enacted by Congress 
already incentivizes automakers to improve fuel economy without the 
need to conduct inflation adjustments--a reality that the same 
commenter that made this argument appeared to recognize just a few 
pages later: ``Increases in the CAFE standards reflect continuing 
improvements in the technological ability of manufacturers to 
increase fuel economy, as reflected in the fact that most 
manufacturers have been meeting or exceeding the CAFE standards in 
recent years even as the standards have been increasing.'' CARB 
Comment, at 13.
    \99\ 83 FR 13904, 13910-11 (May 2, 2018).
    \100\ One commenter argued that ``other agencies have had no 
trouble applying inflation adjustments to the civil penalties 
associated with'' regulatory standards that ``undergo statutorily 
required reviews at regular intervals to increase stringency.'' IPI 
Comment, at 4. The comment only cited one example: An adjustment by 
the Department of Energy to the maximum civil penalties it can 
impose for violations of its energy efficiency standards, among 
other violations. See 83 FR 1289, 1291 (Jan. 11, 2018) (``Any person 
who knowingly violates any provision of Sec.  429.102(a) may be 
subject to assessment of a civil penalty of no more than $449 for 
each violation.''; ``In accordance with sections 333 and 345 of the 
Act, any person who knowingly violates any provision of paragraph 
(a) of this section may be subject to assessment of a civil penalty 
of no more than $449 for each violation.''). This example is wholly 
distinct from the CAFE civil penalty calculation, in which the 
increased stringency is expressly included as a factor.
---------------------------------------------------------------------------

    It is important to keep in mind that the overarching purpose of the 
CAFE program is to conserve petroleum. Thus, although the penalty is 
expressed based on the shortfall from the standard rather than the 
additional amount of fuel that will be consumed as a result of the 
shortfall, the cost of the penalty per increased gallon consumed shows 
how the actual penalty rate for excessive fuel consumption has 
increased as the standards themselves have increased.
    Assume the CAFE civil penalty rate is fixed at $5, and consider two 
cases. In the first case, Manufacturer A has a fuel economy shortfall 
of 1.0 mpg and a production volume of 1 million passenger cars for MY 
1978 in which the applicable CAFE standard is 18.0 mpg. Before 
accounting for credits, the civil penalty for MY 1978 would be $50 
million [= (10 tenths of a mile per gallon shortfall) x ($5.00 per 
tenth of a mile per gallon shortfall) x (1,000,000 vehicles)]. Assuming 
an average lifetime of 130,000 miles for Manufacturer A's vehicles, the 
fuel use over the lifetimes of all of Manufacturer A's vehicles would 
be 7.65 billion gallons [= (130,000 miles)/(17 miles per gallon) x 
(1,000,000 vehicles)]. Had Manufacturer A met the CAFE standard of 18.0 
mpg, the total fuel use would have been 7.22 billion gallons [= 
(130,000 miles)/(18 miles per gallon) x (1,000,000 vehicles)]. Thus, 
the increased fuel use impact on society attributed to the CAFE non-
compliance would be 0.43 billion gallons [= (7.65 billion gallons)-
(7.22 billion gallons)]. This means that the penalty cost per gallon is 
$0.116.
    In the second case, Manufacturer A's MY 2017 vehicle attribute-
based CAFE standard is 36.0 mpg, double the MY 1978 standard. Holding 
everything else identical, Manufacturer A's fuel economy shortfall 
would have to be 3.8 mpg (for a fuel economy of 32.2 mpg) to produce 
the same 0.43 billion gallons of societal impact of increased fuel use: 
Assuming the same average lifetime of 130,000 miles for Manufacturer 
A's vehicles, the fuel use over the lifetimes of all of Manufacturer 
A's vehicles would be 4.04 billion gallons [= (130,000 miles)/(32.2 
miles per gallon) x (1,000,000 vehicles)]. Had Manufacturer A met the 
CAFE standard of 36.0 mpg, the fuel use would have been 3.61 billion 
gallons [= (130,000 miles)/(18 miles per gallon) x (1,000,000 
vehicles)]. The increased fuel use impact on society attributed to the 
CAFE non-compliance would be 0.43 billion gallons [= (4.04 billion 
gallons)-(3.61 billion gallons)]. With this 3.8 mpg shortfall, 
Manufacturer A would incur, before accounting for credits, a civil 
penalty of $190 million [= (38 tenths of a mile per gallon shortfall) x 
($5.00 per tenth of a mile per gallon shortfall) x (1,000,000 
vehicles)]. For the same impact on societal fuel use, Manufacturer A's 
MY 2017 potential civil penalty is 3.8 times higher than the MY 1978 
potential civil penalty, meaning that the penalty cost per gallon is 
$0.442.
    Three comments argued that Congress demonstrated it knew how to 
exempt statutes from the application of the 2015 Act by expressly 
excepting statutes like the Internal Revenue Code of 1986 and the 
Tariff Act of 1930 from the adjustment process.\101\ But the penalties 
under these statutes are not exempted from the definition of ``civil 
monetary penalty''; rather, Congress acknowledged that the penalties 
under these statutes are ``civil monetary penalties'' that would 
otherwise need to be adjusted but for Congress' express exemption. In 
contrast, NHTSA's determination is that the CAFE civil penalty rate 
does not satisfy the definition of ``civil monetary penalty'' given by 
Congress and thus does not need to be exempted from Congress' 
adjustment mandate.
---------------------------------------------------------------------------

    \101\ CBD Comment, at 6; CARB Comment, at 8; Attorneys General 
Comment, at 9.
---------------------------------------------------------------------------

    One comment noted ``on a fundamental level that Congress 
specifically designated the CAFE penalty as `a civil penalty.' '' \102\ 
As NHTSA noted in its NPRM, however, ``EPCA's use of the terminology 
`civil penalty' in 49 U.S.C. 32912(b) is not dispositive. The 2015 Act 
does not apply to all civil penalties, but rather `civil monetary 
penalties,' a defined term.'' \103\ Moreover, as explained above, the 
``civil penalty'' referenced in 32912(b) is not referring to the $5.50 
rate, but the result of the entire complex calculation and credit 
application process.
---------------------------------------------------------------------------

    \102\ CARB Comment, at 9 (quoting 49 U.S.C. 32912(b)); see also 
Attorneys General Comment, at 7 (``Congress expressly designated the 
CAFE penalty, which is monetary, as `a civil penalty.' '').
    \103\ 83 FR 13904, 13908 n.24 (Apr. 2, 2018).
---------------------------------------------------------------------------

    Several commenters pointed out that other agencies adjusted civil 
penalties for inflation under the 2015 Act that involved what the 
commenters characterized as a rate or formula.\104\ In support, these 
commenters provided numerous examples of penalties involving a simple 
multiplier that other agencies adjusted for inflation. The examples 
involve maximum penalties

[[Page 36019]]

per violation and/or per day.\105\ NHTSA did not and does not take the 
position that any penalty involving a multiplier is not a ``civil 
monetary penalty'' subject to inflationary adjustment under the 2015 
Act. Indeed, most of the civil penalties that NHTSA properly adjusted 
for inflation under the 2015 Act in its interim final rule are like the 
examples provided by commenters: Maximum penalties involving a simple 
multiplier.\106\ NHTSA acknowledged in the NPRM that these types of 
maximum penalties are subject to inflationary adjustment.\107\ As NHTSA 
explained in its NPRM: ``One example of a penalty that is for `a 
maximum amount' is the `general penalty' in EPCA for violations of 49 
U.S.C. 32911(a). That `general penalty' is `a civil penalty of not more 
than $10,000 for each violation.' This sets `a maximum amount' of 
$10,000 per violation. . . . Accordingly, this civil penalty level was 
properly adjusted. . . .'' \108\ NHTSA is finalizing its inflationary 
adjustment of that maximum penalty per violation in this final rule. 
NHTSA also adjusted many non-CAFE penalties that are maximum penalties 
that use a simple multiplier of the number of violations or number of 
days.\109\
---------------------------------------------------------------------------

    \104\ CBD Comment, at 8 (citing numerous examples of agencies 
adjusting ``rate-based penalties'' to account for inflation); CAP 
Comment, at 3; CARB Comment, at 8-9; Attorneys General Comment, at 
8.
    \105\ See CBD Comment, at 8; CAP Comment, at 3; CARB Comment, at 
8-9; Attorneys General Comment, at 8.
    \106\ NHTSA is not reconsidering portions of the interim final 
rule (81 FR 43524 (July 5, 2016)) that address non-CAFE penalties. 
Most of the penalties adjusted for inflation are maximum penalties 
that involve a multiplier. For example, NHTSA adjusted the penalties 
for school bus-related violations of the National Traffic and Motor 
Vehicle Safety Act from a maximum of $10,000 per violation, as set 
by statute, to a maximum of $11,940 per violation. Id. at 43525 
(adjusting 49 CFR 578.6(a)(2)) A separate violation occurs for each 
school bus or item of school bus equipment, ``and for each failure 
or refusal to allow or perform a required act.'' 49 CFR 578.6(a)(2).
    \107\ See 83 FR at 13909.
    \108\ 83 FR at 13909 (citations omitted).
    \109\ See 81 FR 43524 (July 5, 2016).
---------------------------------------------------------------------------

    NHTSA agrees with commenters that maximum penalties such as these 
are properly subject to inflationary adjustment. But the penalty for 
violations of CAFE standards is not a maximum penalty that uses a 
simple multiplier. As a threshold matter, the CAFE civil penalty rate 
alone is not a ``civil monetary penalty'' as defined by the 2015 Act. 
The CAFE statute expressly states that the rate is an ``amount . . . to 
be used in calculating a civil penalty,'' not a ``civil penalty'' on 
its own.\110\ In any event, unlike maximum penalties that use a simple 
multiplier, the CAFE civil penalty rate is not subject to inflation as 
a ``maximum amount provided by federal law.'' Other penalties expressly 
include language, such as ``a maximum civil penalty'' or a ``civil 
penalty of not more than'' a specified value per violation, which 
indicate they are for a maximum amount.\111\ No such language is 
included for the CAFE penalty, which instead expressly may not ``be 
compromised or remitted'' except in extremely rare circumstances.\112\ 
This stands in stark contrast to maximum penalties, where the agency 
has authority to determine the appropriate penalty amount.\113\
---------------------------------------------------------------------------

    \110\ 49 U.S.C. 32912(c)(1)(A).
    \111\ See, e.g., 49 U.S.C. 30165(a)(3); 32912(a).
    \112\ See 49 U.S.C. 32913(a). Contrast this constraint with the 
broad, discretionary authority delegated by Congress for NHTSA's 
other civil penalties: ``The Secretary of Transportation may 
compromise the amount of a civil penalty imposed under this 
section.'' 49 U.S.C. 30165(b)(1).
    \113\ See, e.g., 49 U.S.C. 30165(c). Statutory schemes that 
allow for mitigation, as pointed out by commenters, are not 
comparable because those are for maximum penalties, and thus subject 
to inflationary adjustment. Moreover, it is up to the agency to 
determine the appropriate mitigation. Under the CAFE penalty, it is 
the violator who determines how much to pay, based on use of 
credits, not the agency.
---------------------------------------------------------------------------

    Additionally, the penalty for violating a CAFE standard does not 
use a simple multiplier comparable to the examples provided by 
commenters. For the examples provided, as well as the penalties NHTSA 
properly adjusted for inflation, the agency can readily determine the 
penalty inputs by adding up the number of violations and/or the number 
of days as appropriate under the statute. The multiplier for a 
regulated entity that violated a provision of law can only go up (if 
the penalty uses a multiplier of the number of days); it cannot go 
down. Even if there were a set penalty per day (as opposed to a 
maximum), that is a certain penalty: For every day that an entity 
violates the law, it must pay the specific penalty set by law.
    None of this is true of the penalty for violations of CAFE 
standards. Unlike other penalties, the entity that violated the law can 
take unilateral action to decrease or eliminate the penalty.\114\ A 
reduction in the control of the entity that violated the law means the 
penalty is not for ``a specific monetary amount.'' The agency cannot 
readily calculate the penalty inputs: It needs instructions from the 
regulated entity to do so. That makes this a complex formula unlike any 
other. The CAFE penalty is not a fixed penalty based on the number of 
violations and amount of time that has passed. The law allows 
manufacturers to base their penalty on future actions (a carry-back 
plan or acquisition of credits from a competitor), on actions unrelated 
to the specific violation at issue (transfers or trades), or even to 
obtain a refund of a civil penalty previously paid.\115\ The 
multipliers in other penalty schemes relate to how much the entity 
violated the law (how many violations, or for how long). The CAFE 
penalty calculation, on the other hand, includes a reduction unrelated 
to the manufacturer's actions to meet the standard. A manufacturer can 
intentionally design its vehicles to exceed the standard and yet still 
not pay a penalty. But that decision is up to the manufacturer, not the 
agency--which is compelled by law to reduce the penalty if the 
manufacturer elects to use credits available to it. NHTSA is not aware 
of any comparable penalty structure with a similarly complex statutory 
formula that must factor in decisions of the violator and third-party 
actors (i.e., other manufacturers), and no commenter has provided an 
example of one.
---------------------------------------------------------------------------

    \114\ See 49 U.S.C. 32912(b)(3).
    \115\ 49 U.S.C. 32903(f), (g), (h); 32912(b).
---------------------------------------------------------------------------

    The Institute for Policy Integrity critiqued NHTSA for relying on 
the Congressional Budget Office's (CBO's) assessment of the 2015 Act's 
revenue effects across all applicable penalties for ten years.\116\ 
Some courts have relied on CBO cost estimates to determine legislative 
intent.\117\ The Institute for Policy Integrity provided no evidence 
that the CBO's assessment was flawed nor did it provide its own 
calculation of the amount of fines NHTSA should expect to collect to 
compare to the CBO estimate, much less one that would offset the 
significant disparity between the CBO's estimate and the Alliance and 
Global's calculation as described in the NPRM.\118\ OMB has reviewed 
CBO's assessment and, as stated in its opinion, reached the same 
conclusion as NHTSA: The billions of dollars estimated to be paid in 
CAFE civil penalty payments grossly exceeds CBO's projection of 
additional revenue that would be collected across the entire Federal 
Government under the 2015 Act over the same time period--an analysis 
Congress was aware of when it enacted the 2015 Act.\119\ Regardless, 
the CBO estimate is not the sole support NHTSA relied on to make its 
determination that

[[Page 36020]]

the 2015 Act is not applicable to the CAFE civil penalty rate; rather, 
it served as additional evidence--on top of the plain language of the 
statute, the unique complexity of the CAFE civil penalty scheme, the 
legislative history of EPCA, and other indicators--further justifying 
NHTSA's determination.
---------------------------------------------------------------------------

    \116\ IPI Comment, at 5.
    \117\ See, e.g., Nunes-Correia v. Haig, 543 F. Supp. 812, 815 
(D.D.C. 1982) (``[T]he Congressional Budget Office (`CBO') cost 
estimates . . . demonstrate that Congress clearly intended the Act 
to apply retroactively.'')
    \118\ 83 FR 13904, 13911 (Apr. 2, 2018). CARB and the co-
signatories to its comment similarly failed to provide such evidence 
when they asserted that ``the costs estimated by the automakers are 
not just the cost of facing an adjusted penalty but also include 
technology costs and other costs such as insurance, financing, and 
taxes--with the latter two (technology and other costs) making up 
the bulk of the estimated costs.'' CARB Comment, at 11-12.
    \119\ OMB Negative Economic Impact Letter, at 5.
---------------------------------------------------------------------------

    NHTSA also received some comments about the rounding rule in the 
2015 Act, which provides that ``[a]ny increase determined under this 
subsection shall be rounded to the nearest multiple of $1.'' \120\ 
NHTSA observed in the NPRM that this rounding rule suggests the Act was 
not intended to apply to the small dollar value CAFE civil penalty 
rate, since it would not serve a de minimis rounding function. As a 
practical matter, if the rounding rule applied to a small dollar 
penalty rate, it would prevent any annual inflationary increases 
(absent extraordinary inflation).\121\
---------------------------------------------------------------------------

    \120\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment[thinsp]5(a).
    \121\ 83 FR 13904, 13911 (Apr. 2, 2018).
---------------------------------------------------------------------------

    One commenter argued that this interpretation ``ignores basic math 
because applying the [2015] Act results in more than a de minimis 
increase from $5.50.'' \122\ This misconstrues NHTSA's point: NHTSA was 
referring to subsequent annual inflationary increases after the initial 
catch-up adjustment. For example, if the CAFE civil penalty rate was 
adjusted to $14 in the initial catch-up adjustment, the rate would not 
have been adjusted applying either the 2017, 2018, or 2019 multipliers 
(1.01636, 1.02041, and 1.02522, respectively) and rounding to the 
nearest dollar. If the original rate was $6, the last time the 
multiplier would have allowed an inflation adjustment to $7 under the 
rounding rule was 1981, during a time of significant inflation.\123\
---------------------------------------------------------------------------

    \122\ IPI Comment, at 5.
    \123\ Data available at https://data.bls.gov/pdq/SurveyOutputServlet.
---------------------------------------------------------------------------

    Another commenter conceded that ``such rounding may prevent some 
annual inflationary adjustment for small penalties,'' but nonetheless 
observed that ``[i]f Congress had wanted small penalties to be excluded 
. . . , it would have explicitly said so.'' \124\ But statutes must be 
read to avoid rendering provisions ``insignificant, if not wholly 
superfluous.'' \125\ As NHTSA has shown, having to apply the statute's 
rounding rule to such a small rate would violate that principle, 
particularly when the rounding rule is viewed, as NHTSA must, in 
``context'' and in line with the ``overall statutory scheme.'' \126\
---------------------------------------------------------------------------

    \124\ CARB Comment, at 12.
    \125\ Duncan v. Walker, 533 U.S. 167, 174 (2001); see also Green 
v. Bock Laundry Mach. Co., 490 U.S. 504, 509 (1989) (rejecting an 
interpretation that ``would compel an odd result'').
    \126\ Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809 
(1989) (citing United States v. Morton, 467 U.S. 822, 828 (1984)).
---------------------------------------------------------------------------

    The same commenter also asserted that even ``if the rounding rule 
does trap small penalties at their catch-up adjustment level, agencies 
can always adjust them through their own penalty adjustment 
procedures.'' \127\ True enough, but the commenter went on to claim 
that in this specific case, ``this would just be an inflation 
adjustment, [so] NHTSA should not have difficulty with satisfying [the 
EPCA] factors.'' \128\ This heavily underestimates the burden required 
by statute to increase the CAFE civil penalty rate,\129\ discussed in 
more detail in the NPRM and below. And this burden is there for a 
reason: Given that the CAFE civil penalty rate serves as one element in 
a formula that yields an actual potential penalty, rounding the rate to 
the nearest dollar has outsized impacts that must be carefully 
considered. For instance, rounding the current $5.50 rate to $6.00 is 
not merely a $0.50 increase in a penalty, but a 9% increase. An 
automaker who sells 100,000 vehicles of a single model that fails to 
meet its target fuel economy standard by one mile per gallon would face 
a potential penalty of $6,000,000 instead of $5,500,000. This is not a 
minor difference.
---------------------------------------------------------------------------

    \127\ CARB Comment, at 12.
    \128\ CARB Comment, at 13.
    \129\ See 49 U.S.C. 32912(c).
---------------------------------------------------------------------------

    Because NHTSA is not ``increas[ing]'' the CAFE civil penalty rate--
because the 2015 Act does not apply or because doing so would have a 
negative economic impact--the rounding rule is inapplicable.\130\
---------------------------------------------------------------------------

    \130\ See Alliance and Global Comment, at 16-17. If the 2015 Act 
applies to the CAFE civil penalty rate, rounding up to the nearest 
dollar would constitute an increase in the rate that would be 
permissible only if NHTSA made the requisite findings--and followed 
the congressionally-mandated procedure--under EPCA, discussed 
further below.
---------------------------------------------------------------------------

3. Harmonizing the 2015 Act and EPCA

    In the alternative, even if the 2015 Act did apply, the ``negative 
economic impact'' exception of the 2015 Act is best read in harmony 
with EPCA to ensure both statutes are given meaning. A few commenters 
argued that the 2015 Act and EPCA should not be read together because 
they have different purposes.\131\ NHTSA agrees that the overarching 
purposes of the two statutes are different. But that does not obviate 
the need to harmonize the statutes. Indeed, both statutes recognize the 
importance of limiting increases to penalties to avoid damaging the 
economy. Although the statutes may have different ultimate objectives, 
they share that motivating concern and should be read together, as part 
of a unified code of Federal law, with the goal of upholding that 
common principle. NHTSA believes its interpretation achieves that goal.
---------------------------------------------------------------------------

    \131\ See, e.g., CAP Comment, at 4; Attorneys General Comment, 
at 11; IPI Comment, at 4.
---------------------------------------------------------------------------

    Relatedly, NHTSA is mindful of the comments that argued that the in 
pari materia canon of statutory interpretation may not be the perfect 
tool for the interpretive question here.\132\ But as NHTSA noted in the 
NPRM, the ``principles underlying'' this canon--most notably, that the 
statutes enacted by Congress should be read as a whole and interpreted 
harmoniously--provided further support for NHTSA's proposed position, 
which it now adopts.\133\ None of the comments objected to NHTSA's 
point that ``[t]his approach to statutory interpretation is consistent 
with NHTSA's past practice.'' \134\
---------------------------------------------------------------------------

    \132\ See, e.g., CARB Comment, at 15; Attorneys General Comment, 
at 11.
    \133\ 83 FR 13904, 13912 (Apr. 2, 2018).
    \134\ 83 FR 13904, 13912 (Apr. 2, 2018) (citing 80 FR 40137, 
40171 (Aug. 12, 2015) (interpreting a term in EISA by looking to how 
the term is defined in the Motor Vehicle Safety Act, ``[g]iven the 
absence of any apparent contrary intent on the part of Congress in 
EISA'')).
---------------------------------------------------------------------------

    Here, NHTSA is interpreting a statutory provision about whether 
increasing a civil monetary penalty by the otherwise required amount 
will have a negative economic impact. Even statutes that apply broadly 
across agencies must be interpreted and reconciled with other Federal 
laws. NHTSA must presume that Congress knew each agency would have to 
determine what ``negative economic impact'' meant and whether raising 
any of its civil monetary penalties by the otherwise required amount 
would cause one. And NHTSA must also presume that in passing the 2015 
Act, Congress was aware of the longstanding CAFE civil penalty scheme 
it had previously enacted, including the constraints it imposed on 
raising the penalty rate if doing so would have a substantial 
deleterious impact on the economy.\135\ Congress established these 
specific

[[Page 36021]]

constraints for a reason, and without any evidence that Congress 
intended to override those constraints, NHTSA cannot do so 
unilaterally. Most importantly, no commenter provided persuasive 
argument or evidence that NHTSA's interpretation was contrary to the 
plain meaning of the 2015 Act or Congress' intent.
---------------------------------------------------------------------------

    \135\ As NHTSA noted in the NPRM, the CAFE civil penalty 
structure is also constrained by NHTSA's exceptionally--and 
atypically--limited ability to compromise or remit CAFE civil 
penalties. 83 FR 13904, 13912 (Apr. 2, 2018). One commenter sought 
to minimize the effect of this constraint by noting ``the CAFE 
program's numerous built-in compliance flexibility mechanisms which 
soften the sting of the penalties.'' Attorneys General Comment, at 
11-12. But the ``compliance flexibility mechanisms'' described by 
the commenter are all actions taken by the manufacturer, not NHTSA.
---------------------------------------------------------------------------

    One comment challenged NHTSA's position that a broad interpretation 
of the 2015 Act would be ``punitive,'' instead characterizing CAFE 
civil penalties as ``safety valves, because they allow the car 
manufacturers to avoid the requirements imposed by vehicle standards in 
case compliance costs are too high.'' \136\ But whether or not the 
effect is properly understood as punitive, if compliance costs and the 
calculated levels of civil penalties are both ``too high,'' then the 
``safety valve'' is not so ``safe'': Either option would impose a 
``negative economic impact.'' With respect to the CAFE civil penalty 
rate specifically, the statutory civil penalty formula already provides 
for increases over time, as described above. Construing ``negative 
economic impact'' to require a full inflation adjustment to the CAFE 
civil penalty rate--on top of the built-in adjustment to the standards 
themselves--would subject manufacturers to unduly harsh levels of civil 
penalties (before accounting for credits). As discussed in the NPRM, it 
is particularly important to avoid a punitive interpretation here 
because ``the inflation adjustment essentially acts as a `one-way 
ratchet,' where all subsequent annual adjustments will be based off 
this `catch-up' adjustment with no ensuing opportunity to invoke the 
`negative economic impact' exception.'' \137\ EPCA itself imposes a 
similar ``one-way ratchet'' constraint.\138\
---------------------------------------------------------------------------

    \136\ IPI Comment, at 15-16.
    \137\ 83 FR 13904, 13913 (Apr. 2, 2018).
    \138\ H.R. Rep. No. 95-1751, at 113 (1978) (Conf. Rep.) (``No 
provision [in EPCA] is made for lowering the penalty.'').
---------------------------------------------------------------------------

    One comment argued that ``Congress . . . intended the Inflation 
Adjustment Act to apply broadly and uniformly to federal civil monetary 
penalties across all agencies unless specifically exempted, regardless 
of how the subject penalty programs are structured.'' \139\ Even though 
Congress did not ``specifically exempt[ ]'' CAFE by name in the 2015 
Act, Congress unquestionably recognized that some penalty schemes would 
not be covered: For example, it defined ``civil monetary penalty'' to 
exclude some penalties, fines, and other sanctions.\140\ Nonetheless, 
NHTSA agrees that Congress intended the 2015 Act to apply ``broadly''--
and in practice, the 2015 Act has applied broadly, across other 
penalties administered by NHTSA and across a wide swath of Federal 
agencies. But the unique nature of the CAFE program commands a 
different result. Indeed, as NHTSA explained in the NPRM, the ``broad'' 
scope of the 2015 Act reinforces NHTSA's determination that when one of 
the statutes is generalized and passed later--like the Inflation 
Adjustment Act--it cannot be read to implicitly repeal an earlier, more 
specific statute--like EPCA's establishment of the CAFE civil penalties 
structure. This approach to statutory interpretation is consistent with 
NHTSA's past practice.\141\
---------------------------------------------------------------------------

    \139\ Attorneys General Comment, at 11-12.
    \140\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment[thinsp]3(2).
    \141\ 83 FR 13904, 13912 (Apr. 2, 2018).
---------------------------------------------------------------------------

    The same reasoning responds to those commenters that argued the 
2015 Act controls because it was passed more recently than EPCA and 
EISA.\142\ Indeed, the sole case cited by one of the commenters 
purportedly to support its point makes this clear: The more recent act 
can only constitute an implied repeal if the intent of the legislature 
to repeal is ``clear and manifest.'' \143\ No such intention is 
apparent here at all.
---------------------------------------------------------------------------

    \142\ See, e.g., Workhorse Comment, at 1 (``Because the 
Inflation Adjustment Act was enacted more recently than EPCA and 
EISA, the Inflation Adjustment Act controls.''); Attorneys General 
Comment, at 9 (``[B]ecause the penalty adjustments in the 2015 Act 
are both mandatory and were enacted more recently than EPCA, they 
should be given controlling effect.'') (citing Kremer v. Chem. 
Constr. Corp., 456 U.S. 461, 468 (1982)).
    \143\ Kremer v. Chem. Constr. Corp., 456 U.S. 461, 468 (1982) 
(cleaned up).
---------------------------------------------------------------------------

4. ``Negative Economic Impact''

    Some comments noted that NHTSA did not previously invoke the 
``negative economic impact'' exception before the deadline to complete 
the initial catch-up adjustment expressed in the 2015 Act or by the 
date suggested in OMB's initial guidance on the statute.\144\ But the 
passage of that deadline does not deprive an agency of its statutory 
authority to act under the statute, including its authority to 
reconsider its initial decision to issue an interim final rule and to 
seek public comment on complex legal, factual, and policy questions 
related to that action. An agency would not be prohibited from making 
an otherwise required initial catch-up adjustment simply because it did 
not meet the statutory deadline: It would still need to complete the 
process.\145\ And there is no separate statutory deadline for when 
agencies needed to invoke the ``negative economic impact'' exception: 
It is part of making the initial catch-up adjustment. Congress could 
have established a separate deadline for invoking the exception prior 
to the deadline for making the initial catch-up adjustment if it deemed 
it necessary, but it did not. Instead, Congress impliedly linked the 
determination of the initial catch-up adjustment and exercise of the 
``negative economic impact'' exception, and it established a procedure 
through which the OMB Director would be required to concur with NHTSA's 
assessment that adjusting the penalty the otherwise required amount 
would have a negative economic impact before the agency could rely on 
the exception. As the docketed opinion indicates, OMB has concurred 
with NHTSA's assessment here.\146\ Notably, OMB staff indicated to the 
Government Accountability Office that ``[b]ecause of the complex nature 
of the initial catch-up inflation adjustments, . . . its preference was 
for federal agencies to take the necessary time to publish accurate and 
complete initial catch-up inflation adjustments . . . even if agencies 
were not able to meet the Inflation Adjustment Act publication 
deadline.'' \147\
---------------------------------------------------------------------------

    \144\ See, e.g., CARB Comment, at 14; Attorneys General Comment, 
at 10, 14.
    \145\ Multiple agencies were unable to complete their initial 
catch-up adjustments by the deadline identified in the 2015 Act, but 
later completed those adjustments. U.S. Gov. Accountability Office, 
GAO-17-634, ``Certain Federal Agencies Need to Improve Efforts to 
Comply with Inflation Adjustment Requirements, at 6 (2017).
    \146\ OMB Negative Economic Impact Letter. Nothing about OMB's 
concurrence with NHTSA's determination here calls into question 
OMB's guidance that it ``expects determination concurrences to be 
rare.'' Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015, at 3 
(Feb. 24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last 
accessed May 22, 2018). NHTSA is not aware of any other agency that 
even sought such a concurrence determination. Thus, while OMB's 
concurrence here is ``rare,'' it is appropriate given the uniqueness 
of the CAFE civil penalty scheme.
    \147\ U.S. Gov. Accountability Office, GAO-17-634, ``Certain 
Federal Agencies Need to Improve Efforts to Comply with Inflation 
Adjustment Requirements, at 6 (2017).
---------------------------------------------------------------------------

    Moreover, nothing in the 2015 Act prohibits the head of an agency 
from reconsidering its initial decision about the economic impact of 
making the otherwise required initial adjustment to a civil monetary 
penalty. To the contrary, Congress committed the authority to make such 
a determination--with no substantive constraints--to the head of each 
agency, provided that the agency head publishes an NPRM, provides an 
opportunity for comment, and obtains concurrence from

[[Page 36022]]

the OMB Director.\148\ NHTSA has satisfied those procedural steps in 
this rulemaking. As noted in the NPRM, ``[p]ursuant to OMB's guidance, 
NHTSA has consulted with OMB before proposing this reduced catch-up 
adjustment determination and submitted this notice of proposed 
rulemaking (NPRM) to the Office of Information and Regulatory Affairs 
(OIRA) for review.'' \149\ To the extent that NHTSA's interpretation of 
``negative economic impact'' represents a change in position, the 
agency has explained the reasons for that change, and its position in 
this final rule is well-supported by the record and by careful legal 
analysis.\150\
---------------------------------------------------------------------------

    \148\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment[thinsp]4(c).
    \149\ 83 FR 13904, 13908 (Apr. 2, 2018).
    \150\ Alliance and Global Comment, at 5 (citing FCC v. Fox 
Television Stations, 556 U.S. 502, 515-16 (2009); Philip Morris USA 
v. Vilsack, 736 F.3d 284, 290 (4th Cir. 2013)).
---------------------------------------------------------------------------

    The OMB Director's concurrence in NHTSA's determination not only 
resolves the comments about NHTSA not meeting OMB's deadline, but also 
carries considerable weight in establishing that NHTSA acted 
appropriately with regards to the 2015 Act's deadline. Congress not 
only provided the OMB Director with the authority to determine whether 
a negative economic impact exists, but also expressly authorized the 
OMB Director to issue guidance to agencies on implementing the 2015 
Act, both of which establish that Congress conferred significant 
deference to OMB's interpretation of the statute.\151\
---------------------------------------------------------------------------

    \151\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment[thinsp]7(a).
---------------------------------------------------------------------------

    Some comments stated or implied that the $14 rate is currently in 
effect.\152\ That is wrong and misunderstands the effect of prior 
agency actions. As a result of a recent decision by the United States 
Court of Appeals for the Second Circuit, NHTSA's December 28, 2016 
final rule is now in force.\153\ Pursuant to that rule, the current 
CAFE civil penalty rate is $5.50 for model years before model year 2019 
and, but for NHTSA's reconsideration, would not increase to $14 until 
penalties are assessed for MY 2019.\154\ Thus, this final rule--which 
maintains the $5.50 rate through model year 2019 and beyond--does not 
serve as a reduction as applied to any shortfalls for vehicles fleets 
in those model years.\155\ Although NHTSA's December 2016 final rule 
had set a $14 CAFE civil penalty rate that--but for NHTSA's 
reconsideration--would go into effect beginning with MY 2019, that 
announcement had no practical effect before 2020--the earliest that 
CAFE civil penalties could be assessed for noncompliance in MY 
2019.\156\ Nothing in the CAFE statute or the 2015 Act precludes the 
agency from reconsidering its earlier decision before that decision has 
any practical significance. Indeed, NHTSA's earlier reconsideration 
decision in December 2016, which recently took effect, did just 
that.\157\
---------------------------------------------------------------------------

    \152\ See, e.g., CAP Comment, at 2 (describing NHTSA's proposed 
action as ``reducing the penalty below the statutorily-mandated 
rate''); CARB Comment, at 6, 14, 16 (``NHTSA's NPRM, therefore, is 
improperly characterized as `retaining' the $5.50 penalty per tenth 
of a mpg when in fact NHTSA would be decreasing from $14 back to 
$5.50. . . .''; ``NHTSA's adjustment to $14 in its interim final 
rule in July 2016 is already in effect anyway.''; characterizing 
``what NHTSA is attempting to do here'' as ``a CAFE penalty decrease 
. . . to lower the penalty from $14 to $5.50'').
    \153\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d 
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule, 
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is 
now in force.'').
    \154\ 81 FR 95489, 95492 (Dec. 28, 2016).
    \155\ Because this final rule does not prescribe ``a higher 
amount'' for the CAFE civil penalty rate, 49 U.S.C. 32912(c)(1)(D), 
NHTSA does not need to give 18 months' lead time before it becomes 
effective.
    \156\ 82 FR 32139, 32140 (July 12, 2017).
    \157\ 81 FR 95489, 95491 (Dec. 28, 2016).
---------------------------------------------------------------------------

    A few commenters critiqued NHTSA's proposed interpretation of the 
2015 Act in light of EPCA as ``invert[ing] the burden of proof'' 
required by the 2015 Act.\158\ These comments misconstrued NHTSA's 
interpretation. To determine whether increasing the CAFE civil penalty 
rate by the amount calculated under the inflation adjustment formula 
would have a ``negative economic impact,'' NHTSA must first interpret 
the term ``negative economic impact.'' The statute does not define 
``negative economic impact.'' OMB issued a memorandum providing 
guidance to the heads of executive departments and agencies on how to 
implement the Inflation Adjustment Act, but the guidance does not 
define ``negative economic impact'' either.\159\ Instead, Congress 
expressly delegated the authority to determine whether adjusting the 
amount of any given civil monetary penalty by the otherwise required 
amount would have a negative economic impact to the head of each 
agency. Without further guidance about what constitutes a ``negative 
economic impact,'' each agency has to make an independent determination 
of what constitutes a ``negative economic impact'' and whether one 
would result from making each adjustment within its purview.
---------------------------------------------------------------------------

    \158\ CBD Comment, at 12; see also CARB Comment, at 15-16 
(``[T]he statutes build in opposing presumptions and require 
opposite findings. . . .''); Attorneys General Comment, at 12-13 
(``NHTSA impermissibly inverts the presumption Congress built into 
the 2015 Act . . . .'').
    \159\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 
24, 2016), available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
---------------------------------------------------------------------------

    For NHTSA to determine whether increasing the CAFE civil penalty 
rate by the otherwise required amount would have a ``negative economic 
impact,'' it considered what Congress had previously identified for it 
in EPCA--in the context of establishing the statutory standard required 
to raise the CAFE civil penalty rate--as constituting a ``substantial 
deleterious impact on the economy.'' Specifically, Congress had 
decreed--unchanged for decades before the 2015 Act--that (i) a 
significant increase in unemployment in a State or a region of a State, 
(ii) an adverse effect on competition, or (iii) a significant increase 
in automobile imports would represent ``a substantial deleterious 
impact on the economy.''
    Additionally, Congress established in EPCA that, by requiring such 
a substantial showing, the burden to increase the CAFE civil penalty 
rate is heavy. NHTSA determined, as explained in the NPRM, that it is 
reasonable to expect that, taking the EPCA factors into account, 
increasing the CAFE civil penalty rate to $14 would result in a 
``negative economic impact.'' Without sufficient data to the contrary, 
NHTSA's determination remains unchanged: The likely effects raising the 
CAFE civil penalty rate to $14 would have on unemployment, competition, 
and automobile imports lead NHTSA to conclude that increasing the CAFE 
civil penalty rate by the otherwise required amount would have a 
negative economic impact.\160\
---------------------------------------------------------------------------

    \160\ One commenter asserted, without any citations or 
reasoning, that to keep the CAFE civil penalty rate at $5.50, the 
``negative economic impact'' exception of the 2015 Act requires 
NHTSA to show that any upward adjustment to the CAFE civil penalty 
rate will have a negative economic impact and that NHTSA failed to 
meet this burden. CBD Comment, at 23; see also Attorneys General 
Comment, at 16 (arguing that, if necessary, NHTSA should ``reduce 
the catch-up inflation adjustment by as little as possible . . . 
based on an analysis of the relevant factors, including but not 
limited to an estimate of compliance costs, the number and types of 
vehicles affected, the average increased cost to consumers, and how 
that cost compares to fuel cost savings''). No such showing is 
required. The 2015 Act authorizes the head of each agency to 
``adjust the amount of a civil monetary penalty by less than the 
otherwise required amount'' if the ``negative economic impact'' 
exception is satisfied (with the OMB Director's concurrence). But 
neither the statute nor OMB guidance establish any standards that 
the agency must use in determining how much less than the otherwise 
required amount to make the adjustment. As NHTSA stated in the NPRM, 
``[w]ithout any statutory direction or OMB guidance on how much to 
adjust the rate, if at all, it falls to NHTSA to determine the 
appropriate adjustment--and NHTSA has wide discretion in making this 
determination.'' 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat'l 
Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214-15 (D.C. 
Cir. 2013)); see also Alliance and Global Comment, at 15 & n.63. 
Nonetheless, NHTSA believes it has made an adequate showing that any 
increase in the CAFE civil penalty rate would have a ``negative 
economic impact'' for the reasons detailed in the NPRM and 
throughout this final rule. See, e.g., 83 FR 13904, 13916 (Apr. 2, 
2018) (``In light of the regulatory concerns described above, and in 
consideration of the unique regulatory structure with non-
discretionary penalties tied to standards that increase over time, 
NHTSA is proposing to keep the CAFE civil penalty rate at $5.50 
because it tentatively concludes that retaining the $5.50 rate would 
avoid the `negative economic impact' caused by any adjustment 
upwards.'').

---------------------------------------------------------------------------

[[Page 36023]]

    Some commenters contended that NHTSA's interpretation would make it 
``impossible'' for the CAFE civil penalty to ever be increased.\161\ 
NHTSA acknowledges that it may be difficult to meet the high standard 
Congress established in EPCA. In fact, NHTSA has never been able to 
make the findings required to increase the rate before. However, 
nothing in the 2015 Act relieves NHTSA of its statutory obligation to 
make those findings as a prerequisite for increasing the CAFE civil 
penalty rate.
---------------------------------------------------------------------------

    \161\ Workhorse Comment, at 4; see also CARB Comment, at 18.
---------------------------------------------------------------------------

    One commenter argued that EPCA's specific definitions of 
``substantial deleterious impact on the economy'' should not be carried 
over to the 2015 Act's term ``negative economic impact'' because the 
2015 Act is ``is intended for broad application across a range of 
regulatory schemes'' and the EPCA factors ``may simply be irrelevant in 
enforcing compliance with other regulatory systems.'' \162\ The fact 
that the EPCA factors are irrelevant to determinations by other 
agencies (which do not administer the same statutory program) does not 
make them irrelevant to NHTSA's determination, which requires the 
agency to reconcile multiple statutory provisions. And both the 2015 
Act and EPCA address the effect on the economy as part of their 
respective statutory standards for determining the appropriateness of 
an increase in a penalty rate.
---------------------------------------------------------------------------

    \162\ CBD Comment, at 13.
---------------------------------------------------------------------------

    Although the 2015 Act applies across all agencies, it is up to the 
head of agency to determine whether ``increasing the civil monetary 
penalty by the otherwise required amount will have a negative economic 
impact.'' Each agency head must determine how to interpret that 
statutory standard in light of other statutory constraints and any 
other factors that may be appropriate for each agency to consider.\163\
---------------------------------------------------------------------------

    \163\ See Sutton v. United States, 65 Fed. Cl. 800, 806 (2005) 
(deferring to the Army's interpretation of a statute that is 
administered on a shared basis with the other military services 
because ``there is no inconsistency'' between its interpretation and 
that of another military branch and because the statutory language 
``confers plenary discretion on each individual service secretary to 
develop whatever procedures he or she deems appropriate''); Bd. of 
Trade of City of Chicago v. SEC., 187 F.3d 713, 719 (7th Cir. 1999) 
(``[I]t is possible to defer simultaneously to two incompatible 
agency positions.''); see also F.T.C. v. Ken Roberts Co., 276 F.3d 
583, 593 (D.C. Cir. 2001) (``Because we live in `an age of 
overlapping and concurring regulatory jurisdiction,' a court must 
proceed with the utmost caution before concluding that one agency 
may not regulate merely because another may.'' (quoting Thompson 
Med. Co. v. FTC, 791 F.2d 189, 192 (D.C. Cir. 1986))); National 
Ass'n of Cas. & Sur. Agents v. Bd. of Governors of Fed. Reserve 
Sys., 856 F.2d 282, 287 (D.C. Cir. 1988) (upholding different agency 
interpretations of the same phrase because of ``their different 
economic impact''); cf. Citizens Awareness Network, Inc. v. United 
States, 391 F.3d 338, 349 (1st Cir. 2004) (``The APA lays out only 
the most skeletal framework for conducting agency adjudications, 
leaving broad discretion to the affected agencies in formulating 
detailed procedural rules.'') (citation omitted). The Second Circuit 
asserted in its opinion on the indefinite delay rule that NHTSA's 
interpretation of the 2015 Act is entitled to no deference because 
``the [2015] Act applies to all federal agencies, meaning NHTSA has 
no special expertise in interpreting its language.'' Opinion, ECF 
No. 205, NRD.C. v. NHTSA, Case No. 17-2780, at 34 n.10 (2d Cir., 
June 29, 2018) (citations omitted). To support this dictum, the 
Court cited only Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 
Inc., 467 U.S. 837 (1984), which predates all of the cases just 
cited. The issue was not briefed to the Second Circuit, which gave 
no indication that it considered NHTSA's position.
---------------------------------------------------------------------------

    Regardless, the concern about the possibility of inconsistent 
interpretations of ``negative economic impact'' is purely hypothetical: 
As far as NHTSA is aware, no other agency has invoked the ``negative 
economic impact'' exception. Moreover, NHTSA's interpretation has now 
gone through the notice-and-comment process, as required by the 2015 
Act, and comports with the interpretation provided by OMB--the agency 
that Congress vested with the authority to issue guidance on 
implementing the statute.\164\ OMB has also concurred with NHTSA's 
ultimate determination regarding the ``negative economic impact'' of 
increasing the CAFE civil penalty rate for the reasons explained in its 
opinion included in the docket for this rulemaking.\165\
---------------------------------------------------------------------------

    \164\ See generally OMB Negative Economic Impact Letter.
    \165\ Id.
---------------------------------------------------------------------------

    One commenter challenged NHTSA's proposed interpretation that `` 
`negative economic impact,' as used in the Inflation Adjustment Act, 
need not mean `net negative economic impact,' '' \166\ arguing that the 
exception must be read to account for a net weighing of the positive 
and negative impacts and that it would be arbitrary and capricious for 
NHTSA to ignore the benefits of a regulatory action.\167\ NHTSA 
disagrees. As NHTSA noted in the NPRM, the very next provision of the 
2015 Act--the other exception to conducting the otherwise required 
initial catch-up adjustment--depends upon a determination of whether 
``the social costs of increasing the civil monetary penalty by the 
otherwise required amount outweigh the benefits.'' \168\ Congress could 
have stated the ``negative economic impact'' exception using similar 
phrasing: ``the negative economic impact of increasing the civil 
monetary penalty by the otherwise required amount outweighs the 
positive economic impact.'' But it did not do so, implying that it must 
mean something different. The commenter asserted that Congress' use of 
the term ``negative'' ``must entail some analysis of what it means to 
be `negative,' '' and ``the only rational way of understanding that 
term is to look at it in comparison to the benefits.'' \169\ NHTSA did 
analyze what ``negative'' means, thoroughly explaining its reasoning in 
the NPRM and in this final rule. The agency can readily consider the 
economic harms that would likely be caused by increasing the CAFE civil 
penalty rate to $14--such as those identified in the EPCA factors--
without needing to compare them to any potential benefits.
---------------------------------------------------------------------------

    \166\ 83 FR 13904, 13913 (Apr. 2, 2018).
    \167\ IPI Comment, at 11-12; see also id. at 5-10 (arguing that 
``NHTSA has caused forgone benefits'' and its ``failure to address 
the forgone benefits is arbitrary and capricious''); cf. Workhorse 
Comment, at 2-3 (arguing that setting the CAFE civil penalty rate at 
$5.50 would have a negative economic impact on companies in the 
electric vehicle industry and that NHTSA must quantify the economic 
impact on all businesses, including manufacturers that will be 
selling credits).
    \168\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment 4(c)(1)(B). NHTSA has not invoked this social costs 
exception, so comments that discussed a social cost-benefit analysis 
are irrelevant and do not merit a response. See, e.g., CBD Comment, 
at 20-23; IPI Comment, at 6-10.
    \169\ IPI Comment, at 12.
---------------------------------------------------------------------------

a. EPCA Factors
i. Unemployment
    Some commenters provided data purporting to show that increasing 
the CAFE civil penalty rate will not increase unemployment.\170\ These 
comments omitted the larger employment context: employment across the 
entire U.S. economy has grown over the period in question as the 
economy recovered from the recession. Employment in the automobile 
industry sector had plummeted during the recession, as new

[[Page 36024]]

vehicle sales dropped. After the economy recovered, automobile sales 
and industry employment nearly doubled relative to the recession, but 
are only marginally higher than historical levels.\171\
---------------------------------------------------------------------------

    \170\ See, e.g., Workhorse Comment, at 1; CBD Comment, at 14; 
CARB Comment, at 17.
    \171\ Employment and sales data available at https://fred.stlouisfed.org/series/N4222C0A173NBEA and https://fred.stlouisfed.org/series/ALTSALES.
---------------------------------------------------------------------------

    The data provided also should be viewed cautiously. For example, 
the Synapse Energy Economics study cited acknowledges that positive 
employment impacts it identifies that will result from implementation 
of federal and state fuel economy standards ``are not large in the 
context of the national economy''--``less than 0.2 percent of current 
U.S. employment levels.'' \172\ But the study only discusses the net 
employment effect on the United States as a whole; it does not discuss 
unemployment in every state or every region of a state at all, as NHTSA 
is required to consider under EPCA.\173\ As NHTSA explained in the 
NPRM, job losses resulting from an increase in the CAFE civil penalty 
rate ``may be concentrated in particular States and regions within 
those States where automobile manufacturing plants are located [such as 
those] located in the Midwest and Southeastern U.S.'' \174\ The Synapse 
study does nothing to disprove this point.\175\
---------------------------------------------------------------------------

    \172\ Synapse Energy Economics, Cleaner Cars and Job Creation: 
Macroeconomic Impacts of Federal and State Vehicle Standards, at 17 
(Mar. 27, 2018), available at http://www.synapseenergy.com/sites/default/files/Cleaner-Cars-and%20Job-Creation-17-072.pdf. The study 
also acknowledges that its results ``are necessarily uncertain, 
especially farther out in the modeling period.''
    \173\ The EPCA requirement to consider the impact on the economy 
of states and regions of states also demonstrates why the comment 
arguing that NHTSA must ``us[e] an economy-wide analysis'' to 
measure employment effects is misplaced. IPI Comment, at 17. By 
statute, NHTSA is prohibited from only considering the impact of 
raising the CAFE civil penalty rate on national unemployment. 
Moreover, as noted in the NPRM, NHTSA also believes ``it is 
appropriate to consider the impact raising the CAFE civil penalty 
rate would have on individual manufacturers who fall short of fuel 
economy standards, and those affected, such as dealers''--an impact 
that the Synapse study also fails to discuss. 83 FR 13904, 13913 
(Apr. 2, 2018).
    \174\ 83 FR 13904, 13914 (Apr. 2, 2018).
    \175\ The reports from the Blue Green Alliance cited in a couple 
of comments suffers from similar shortcomings.
---------------------------------------------------------------------------

    Another commenter argued that ``the $14 penalty has been in effect 
since August 2016 . . . , and there is no evidence that this has caused 
an increase in the national unemployment rate or the unemployment rate 
in any State or region of a State.'' \176\ The premise is faulty: NHTSA 
disputes that ``the $14 penalty has been in effect since August 2016,'' 
as explained above. Furthermore, the comment only cited as evidence the 
national unemployment rate for one month and a single state's 
unemployment rate for one month, ``both of which are comparatively low 
and reflect a robust economy.'' \177\ ``[C]omparatively low'' compared 
to what? The comment provided no evidence of what the unemployment 
rates it cites would be with a different CAFE civil penalty rate in 
effect.
---------------------------------------------------------------------------

    \176\ CARB Comment, at 17.
    \177\ CARB Comment, at 17 n.64.
---------------------------------------------------------------------------

    Another commenter offered that ``a recent survey of Tier 1 
automotive suppliers conducted by Ricardo concluded that the increased 
stringency of the CAFE Standards encouraged job growth at their 
companies.'' \178\ In fact, the survey question did not specifically 
ask about ``the increased stringency of the CAFE standards.'' Rather, 
the survey question asked, ``[i]n general, do US policies that 
encourage or force the uptake of new technologies also encourage job 
growth for your company in the US?'' \179\ Only 23 respondents answered 
out of the 143 potential participants who received the survey, 
including two that believed ``[a]dapting to such policies does not 
change the number of jobs at our company.'' \180\ The suppliers were 
not asked to and did not provide any empirical data supporting their 
opinions nor were they asked to quantify the level of job growth they 
believed was encouraged by the increased stringency. Additionally, the 
geographical breakdown of the respondents was not provided. Without any 
sense of magnitude or location, there is no way to evaluate the 
economic impact on the United States, any State, or any region of a 
State.
---------------------------------------------------------------------------

    \178\ Workhorse Comment, at 1 (citing Ricardo Energy & 
Environment, Survey of Tier 1 automotive suppliers with respect to 
the US 2025 LDV GHG emissions standards (Feb. 21, 2018), available 
at http://www.calstart.org/Libraries/CALSTART_Press_Releases/CALSTART_Report_Supplier_Survey_Final_for_Web.sflb.ashx) (Ricardo 
Report).
    \179\ Ricardo Report, at 20.
    \180\ Ricardo Report, at 2, 40.
---------------------------------------------------------------------------

    Note also that economic harms suffered by suppliers may be 
different from those suffered by OEMs. In fact, a separate survey 
question did ask specifically about the CAFE standards in connection to 
the effect on employment nationally: ``Will the current 2025 standards 
help encourage job growth in the wider US economy?'' \181\ In response 
to this question, less than half of the respondents agreed that ``such 
policies tend to encourage job growth in the industry overall.'' \182\
---------------------------------------------------------------------------

    \181\ Ricardo Report, at 20.
    \182\ Ricardo Report, at 41.
---------------------------------------------------------------------------

    In any event, the data provided conflicts with other available 
studies, such as the peer-reviewed Indiana University study, which 
shows the planned vehicle standards will result in short-term 
macroeconomic losses, including job losses.\183\ Specifically, the 
study concludes that ``the vehicle price effects, which increase as 
standards become more stringent, cause significant losses of 
employment, GDP, and disposable income through a decline in new vehicle 
sales and higher vehicle prices for consumers, which in turn curbs 
spending on other goods and services,'' potentially for more than a 
decade.\184\ The study indicates that the negative economic effects hit 
Illinois, Indiana, Michigan, Ohio, and Wisconsin particularly hard, 
with the region taking longer than the national average to recover, and 
that Arkansas, Louisiana, Oklahoma, and Texas never fully recover.\185\ 
Without a clearer picture, NHTSA does not have the evidence needed to 
make the determination required under EPCA to raise the CAFE civil 
penalty rate.
---------------------------------------------------------------------------

    \183\ Sanya Carley, Denvil Duncan, John D. Graham, Saba Siddiki 
& Nikolaos Zirogiannis, A Macroeconomic Study of Federal and State 
Automotive Regulations (Mar. 2017) (``IU Study''). Revised/corrected 
versions of this report that ultimately come to the same conclusions 
are also available at https://spea.indiana.edu/doc/research/working-groups/comet-2018.pdf (Jan. 2018), and https://spea.indiana.edu/doc/research/working-groups/comet-022018.pdf (Feb. 2018).
    \184\ IU Study, at 3.
    \185\ IU Study, at 3, 103.
---------------------------------------------------------------------------

    One commenter quoted EPA as projecting ``job growth in the 
automotive manufacturing sector and automotive parts manufacturing 
sector due specifically to the need to increase expenditures for the 
vehicle technologies needed to meet the standards.'' \186\ EPA's 
employment projection came with a number of caveats that the commenter 
omitted. EPA was unable to ``quantitatively estimate the total effects 
of the standards on the automobile industry, due to the significant 
uncertainties underlying any estimate of the impacts of the standards 
on vehicle sales.'' \187\ EPA also could not ``quantitatively estimate 
the total effects on employment at the national level, because such 
effects depend heavily on the state of overall employment in the 
economy,'' but noted that, under conditions of full employment, any 
changes in employment in the regulated sector would primarily be offset 
by changes in

[[Page 36025]]

employment in other sectors.\188\ Ultimately, EPA concluded that it 
would be unable to distinguish the effect of the standards on 
employment ``from other factors affecting employment, especially 
macroeconomic conditions and their effect on vehicle sales.'' \189\
---------------------------------------------------------------------------

    \186\ CBD Comment, at 14 (quoting ``Final Determination on the 
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle 
Greenhouse Gas Emissions Standards under the Midterm Evaluation,'' 
available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100QQ91.pdf 
(Final Determination), at 26).
    \187\ Final Determination, at 26.
    \188\ Final Determination, at 26.
    \189\ Final Determination, at 26.
---------------------------------------------------------------------------

    Regardless, since that projection, EPA--in reconsidering the 
emission standards for model year 2022-2025 light-duty vehicles that 
were ``based on outdated information''--has concluded that ``a more 
rigorous analysis of job gains and losses is needed to determine the 
net effects of alternate levels of the standards on employment and 
believes this is an important factor to consider in adopting 
appropriate standards.'' \190\
---------------------------------------------------------------------------

    \190\ 83 FR 16077, 16077, 16086 (Apr. 13, 2018).
---------------------------------------------------------------------------

    The same commenter also highlighted that ``industry groups like the 
Motor and Equipment Manufacturers Association, and the Manufacturers of 
Emissions Controls have expressed grave concerns about potential 
rollbacks of federal standards, which would threaten the technological 
and manufacturing investments they have already made.'' \191\ Notably, 
neither of these industry groups submitted a comment on the NPRM. 
Regardless, this rulemaking does not involve ``rollbacks of federal 
standards.'' It relates to civil penalties for those who violate the 
standards.
---------------------------------------------------------------------------

    \191\ CBD Comment, at 14.
---------------------------------------------------------------------------

ii. Competition
    As a threshold matter, one commenter contested NHTSA's 
understanding of the competition factor in EPCA: ``EPCA does not 
inquire into competitive effects among manufacturers. To the contrary, 
EPCA expressly acknowledges that CAFE standards will treat different 
manufacturers differently.'' \192\ EPCA does not define 
``competition,'' and Congress gave sole discretion to the Secretary of 
Transportation to decide whether it is likely that an increase in the 
CAFE civil penalty rate would adversely affect competition, along with 
the determinations of the other EPCA factors.\193\ In applying EPCA, 
``NHTSA has consistently evaluated risks to competition, including the 
potential effects on individual automakers.'' \194\ NHTSA has adopted 
and followed this approach for decades. Accordingly, NHTSA believes 
that it is appropriate for it to continue analyzing the potential 
effect of its regulations on competition in this ``broad manner.'' 
\195\
---------------------------------------------------------------------------

    \192\ CBD Comment, at 15 (citing, as an example, 49 U.S.C. 
32903, ``providing for credit trading, and allowing manufacturers 
who have over-complied with standards to trade credits with 
manufacturers who have failed to meet fuel economy requirements'').
    \193\ 49 U.S.C. 32912(c)(1)(C)(ii).
    \194\ 83 FR 13904, 13914 (Apr. 2, 2018).
    \195\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------

    In any event, NHTSA also explained in the NPRM how increasing the 
CAFE civil penalty rate could also adversely affect competition through 
``an impact on the market itself by limiting consumer choice involving 
vehicles and vehicle configurations that would otherwise be produced 
with penalties at their current values.'' \196\ The same commenter 
disputed this effect on consumer choice, declaring--without evidence--
that having the CAFE civil penalty rate at $5.50 ``disadvantages 
consumers by reducing the number of more fuel-efficient vehicle choices 
in the marketplace.'' \197\ NHTSA disagrees. The CAFE standards--and 
the natural competitive incentive for manufacturers to design vehicles 
that allow consumers to pay less for fuel--already ensure a significant 
variety of fuel efficient vehicles in the marketplace, and those 
manufacturers are unlikely to change a course if that CAFE civil 
penalty rate is not increased. As NHTSA described in the NPRM, 
increasing the CAFE civil penalty rate could actually have the opposite 
effect of that described by the commenter, for example if a 
manufacturer ``decide[s] that it makes financial sense to shift 
resources from its planned investments in capital towards payment of 
possible future penalties,'' or ``[i]f the possibility of paying 
penalties looms too large,'' driving the manufacturer out of business 
entirely.\198\
---------------------------------------------------------------------------

    \196\ 83 FR 13904, 13915 (Apr. 2, 2018).
    \197\ CBD Comment, at 23.
    \198\ 83 FR 13904, 13915 (Apr. 2, 2018); see also Comment by 
Jaguar Land Rover North America LLC, NHTSA-2018-0017-0016, at 1 (``A 
significant increase in the CAFE penalty rate would fundamentally 
change the dynamics of how companies may make investment decisions, 
and would force IVM specialist manufacturers to disregard consumer 
demand by restricting the availability of vehicles that consumers 
want.''). The commenter noted that EPA has previously stated that 
under the standards, ``consumers can continue to have a full range 
of vehicle choices that meet their needs.'' CBD Comment, at 16 
(quoting Final Determination, at 9). But EPA has since reconsidered 
the emission standards for model year 2022-2025 light-duty vehicles, 
which were ``based on outdated information.'' 83 FR 16077, 16077 
(Apr. 13, 2018). Accordingly, EPA cannot be held to its earlier 
forecast regarding choices available to consumers.
---------------------------------------------------------------------------

    Another commenter argued that ``[a]llowing the penalty to remain 
indexed to inflation as mandated by Congress does not adversely affect 
competition, but actively changing the rate to a lower value does,'' by 
``express[ing] a preference for companies that have failed or will fail 
to comply with the standards and disrupt[ing] the normal market 
competition by effectively subsidizing these companies.'' \199\ As 
explained above, NHTSA is not ``actively changing the rate to a lower 
value''; the rate was $5.50 during reconsideration, the rate is 
currently $5.50, and the rate will continue to be $5.50 as a result of 
this final rule, rather than increasing to $14 beginning with MY 2019. 
But NHTSA agrees with the general principle that ``actively changing 
the rate'' would ``disrupt[ ] the normal market competition.'' For the 
reasons described in the NPRM, NHTSA believes that ``an increase in the 
CAFE penalty rate could distort the normal market competition that 
would be expected in a free market by favoring one group of 
manufacturers over another.'' \200\ Thus, to avoid adversely affecting 
competition by interfering, NHTSA will not increase the CAFE civil 
penalty rate.
---------------------------------------------------------------------------

    \199\ CAP Comment, at 4; see also CBD Comment, at 15 (reasoning 
that keeping the rate ``artificially low'' would ``create an unfair 
market environment,'' in which less established, innovative 
companies that have invested in technology to meet the standards 
would find themselves at a competitive disadvantage to more 
established, larger companies that may be more willing to pay 
penalties, rather than comply).
    \200\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------

    Relatedly, one commenter argued that polling, reinforced by sales 
data, shows that ``consumers value access to fuel-efficient vehicles.'' 
\201\ If true, then normal market competition will incentivize non-
compliant manufacturers to invest in increasingly efficient technology 
and increasing compliance with the standards. NHTSA would have no need 
to increase the CAFE civil penalty rate if it would never be applied 
because market forces would ensure compliance.
---------------------------------------------------------------------------

    \201\ CBD Comment, at 16.
---------------------------------------------------------------------------

    The same commenter also argued that increasing the CAFE civil 
penalty rate ``enhances the competitiveness of U.S.-made vehicles in 
domestic and global markets.'' \202\ Specifically, the commenter 
maintained that ``more U.S. fuel-efficient vehicles means fewer 
consumer and production shifts when gas prices are volatile, and more 
efficient fleets have increased chances of competing with the tighter 
standards set in Europe and Asia, allowing automakers to build global 
vehicle platforms and significantly reduce their costs.'' For similar 
reasons as described above, automakers are already naturally 
incentivized to ``reduce their costs.'' If becoming increasingly 
efficient would

[[Page 36026]]

allow them to do so--and sell more vehicles in Europe and Asia--they 
will do so. As explained in more detail below, domestic manufacturers 
already must overcome hurdles that foreign manufacturers do not face, 
such as a separate minimum standard for domestically-manufactured 
passenger automobiles and prohibiting manufacturers from using traded 
credits to satisfy a shortfall of passenger automobiles manufactured 
domestically.
---------------------------------------------------------------------------

    \202\ CBD Comment, at 15-16. This argument overlaps to some 
extent with the imports EPCA factor.
---------------------------------------------------------------------------

    Another commenter challenged NHTSA's rationale on the competition 
factor, arguing that ``if the stringency of the penalty is not 
maintained over time . . . , then manufacturers increasingly have the 
incentive merely to pay the penalty and not further invest in greater 
fuel efficiency.'' \203\ This is a moot point because the stringency of 
CAFE civil penalties is maintained over time, just not through 
inflation adjustments. As explained above, Congress chose an 
alternative mechanism for ensuring that the CAFE stringency retains its 
salience over time, by requiring the fuel economy standards to be set 
at the maximum feasible level for each model year, rather than 
requiring adjustments for inflation of the penalty rate alone. 
Consequently, increasing the penalty rate would serve to ``adversely 
impact the affected manufacturers through higher prices for their 
products (without corresponding benefits to consumers), restricted 
product offerings, and reduced profitability''--i.e., adversely 
affecting competition.\204\
---------------------------------------------------------------------------

    \203\ CARB Comment, at 18.
    \204\ 83 FR 13904, 13914 (Apr. 2, 2018).
---------------------------------------------------------------------------

iii. Imports
    One commenter argued that ``if anything, the proper inflation 
adjustment would aid domestic manufacturing,'' rather than cause a 
significant increase in automobile imports.\205\ Specifically, the 
comment noted that ``historically, the only manufacturers to pay fines 
for non-compliance have been those who import a large fraction (and, in 
many cases, all) of the vehicles sold in the United States.'' \206\ 
This misses a key part of the picture. In the NPRM, NHTSA noted that 
``[f]inal model year fuel economy performance reports published by 
NHTSA indicate import passenger car fleets are performing better than 
domestic passenger car fleets.'' Since then, the model year 2016 fleet 
performance report has been made available, indicating that the 
performance of the import passenger car fleet again has an advantage 
over the domestic passenger car fleet, now almost a full mile per 
gallon difference.\207\ Although the magnitude of the advantage has 
varied, the import passenger car fleet has consistently had a superior 
fuel economy performance to the domestic passenger car fleet for over 
ten years. Because of that existing advantage, increasing the CAFE 
civil penalty rate would likely have a harsher impact on domestic 
manufacturers, who would need to invest more to reduce fuel economy 
shortfalls. As those increased investments get translated into higher 
prices for vehicles, relatively cheaper imported vehicles become more 
attractive to consumers. The comment seemed to grasp this point in its 
very next paragraph, describing a situation in which ``a higher fine is 
going to either push a manufacturer to deploy more technology to comply 
. . . or ensure that domestic production of more efficient cars is 
sufficient to offset the shortfall of its domestically produced'' 
vehicles--both of which must be paid for somehow.\208\
---------------------------------------------------------------------------

    \205\ CBD Comment, at 18-19.
    \206\ CBD Comment, at 18 (citing CAFE Public Information Center, 
available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html).
    \207\ Available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_fleet_LIVE.html (last accessed May 22, 2018).
    \208\ CBD Comment, at 18.
---------------------------------------------------------------------------

    Moreover, the comment fails to mention that domestic manufacturers 
face some heavier statutory burdens. For example, manufacturers are 
barred by statute from using traded credits to satisfy a shortfall for 
``the category of passenger automobiles manufactured domestically.'' 
\209\ Passenger automobiles manufactured internationally are not 
subject to the same limitation, affording foreign manufacturers a 
competitive advantage. Domestically-manufactured passenger automobiles 
are also subject to a minimum standard, beyond the general average fuel 
economy standards: 27.5 miles per gallon or ``92 percent of the average 
fuel economy projected by the Secretary for the combined domestic and 
non-domestic passenger automobile fleets manufactured for sale in the 
United States by all manufacturers in the model year,'' whichever is 
greater.\210\ In fact, this statutory domestic passenger vehicle 
requirement has already resulted in the imposition of record penalties 
for model year 2016. As noted in NHTSA's MY 2011-2018 Industry CAFE 
Compliance report, one manufacturer paid over $77 million in civil 
penalties for failing to meet or exceed the minimum domestic passenger 
car standard for MY 2016--the single highest civil penalty assessed in 
the history of the CAFE program. NHTSA anticipates that such penalties 
will increase as stringency levels continue to rise. These disparities 
against the domestic passenger automobile industry increase the 
likelihood that an upward adjustment to the CAFE civil penalty rate 
will create greater incentives for manufacturers to shift their 
production of passenger vehicles overseas to avoid such penalties, and 
that would have a negative economic impact on the United States--one 
that is likely to hit particularly hard on states and regions of states 
where domestic passenger automobile manufacturing is concentrated.
---------------------------------------------------------------------------

    \209\ 49 U.S.C. 32903(f)(2); see also 49 CFR 536.9(c).
    \210\ 49 U.S.C. 32902(b)(4). Since the minimum standard for 
domestically-produced passenger automobiles was promulgated, the 
``92 percent'' has always been greater than 27.5 mpg. For model year 
2016, the most recent year for which data is publicly available, 
some manufacturers were unable to meet the domestic passenger car 
fleet standard. CAFE Public Information Center, https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Mfr_LIVE.html.
---------------------------------------------------------------------------

    The comment also cited the ``history of Detroit manufacturing'' as 
another illustration for how ``adjusting the fine upward acts to pull 
manufacture of more efficient vehicles into domestic production as 
opposed to overseas production and imported.'' \211\ The comment's 
portrayal of history, however, omitted that many of the most efficient 
vehicles already had thin margins and production had been moved, at 
least in part, to plants in Mexico to reduce costs. Moreover, the 
strength of the connection between the civil penalty rate and domestic 
production is tenuous. An alternative explanation is that higher fuel 
prices allow manufacturers to charge more for fuel efficient vehicles. 
Consequently, manufacturers can spend more on production domestically 
without having to shift production abroad for cheaper.
---------------------------------------------------------------------------

    \211\ CBD Comment, at 18-19.
---------------------------------------------------------------------------

b. Other Economic Considerations
    Even if the EPCA factors do not apply, NHTSA concludes that raising 
the CAFE civil penalty rate to $14 would have a ``negative economic 
impact'' for the reasons explained in the NPRM.\212\ One comment 
asserted that NHTSA ``has not identified any facts or analysis that 
would support its belated invocation of the `negative economic impact' 
provision.'' \213\ This comment ignores that the NPRM expressly stated 
that it was relying on ``the estimate provided by industry showing 
annual costs of at least one billion dollars.'' \214\
---------------------------------------------------------------------------

    \212\ 83 FR 13904, 13916 (Apr. 2, 2018).
    \213\ Attorneys General Comment, at 14.
    \214\ 83 FR 13904, 13916 (Apr. 2, 2018).

---------------------------------------------------------------------------

[[Page 36027]]

    Some commenters challenged NHTSA's reliance on the Alliance and 
Global's estimate of annual costs of at least one billion dollars under 
NHTSA's augural standards for MY 2022 to 2025, largely relying on the 
Union of Concerned Scientists' (UCS's) critique of the estimate.\215\ 
The Alliance and Global addressed UCS's criticisms in their 
comment.\216\ Specifically, the Alliance and Global observed that ``UCS 
did not factor in the costs of CAFE penalties in their analysis,'' as 
NHTSA has in its analyses of the economic impact of CAFE 
standards.\217\ Consistent with NHTSA's past methodology and in light 
of the particular question at issue here, NHTSA continues to agree that 
it was appropriate to incorporate the costs of civil penalties in an 
analysis to determine whether raising the CAFE civil penalty rate would 
have a ``negative economic impact.''
---------------------------------------------------------------------------

    \215\ See, e.g., CBD Comment, at 19; Attorneys General Comment, 
at 10; IPI Comment, at 13-14. UCS's critique of the Alliance and 
Global's analysis is available at https://www.regulations.gov/document?D=NHTSA-2017-0059-0019.
    \216\ Alliance and Global Comment, at 17-18.
    \217\ Alliance and Global Comment, at 17-18 (citing 77 FR 62624, 
63047 (Oct. 15, 2012)). Contrary to one comment's critique, 
Attorneys General Comment, at 15; cf. IPI Comment, at 16 (``[A]ny 
negative effects of higher penalties on profits would be experienced 
only by those firms that, in the absence of the inflation 
adjustment, would not comply with the standards. . . .''), the 
Alliance and Global's analysis did account for the increased costs 
to manufacturers that would comply with the fuel economy standards.
---------------------------------------------------------------------------

    One commenter argued, relying on the July 2016 Draft Technical 
Assessment Report (TAR), that because ``the model year 2022-25 
greenhouse gas/CAFE standards were technologically feasible at 
reasonable cost for auto manufacturers . . . the industry's $1 billion 
penalty estimates are unreasonable since any `massive' increase would 
be the result of the manufacturers' deliberate non-compliance rather 
than any inability to comply.'' \218\ Since the draft TAR, however, the 
EPA Administrator has reconsidered the emission standards for model 
year 2022-2025 light-duty vehicles and determined that they ``are based 
on outdated information, and that more recent information suggests that 
the current standards may be too stringent.'' \219\ Accordingly, EPA 
announced that it ``will initiate a notice and comment rulemaking in a 
forthcoming Federal Register notice to further consider appropriate 
standards for model year 2022-2025 light-duty vehicles, as 
appropriate,'' in partnership with NHTSA.\220\ In particular, EPA 
observed that due to a variety of challenges of feasibility and 
practicability, many companies have already started to rely on banked 
credits to remain in compliance, which may be increasingly difficult to 
continue as the stringency standards tighten.\221\ To the extent that 
the draft TAR expressed that ``the model year 2022-25 greenhouse gas/
CAFE standards were technologically feasible at reasonable cost for 
auto manufacturers,'' that conclusion is no longer operative.
---------------------------------------------------------------------------

    \218\ Attorneys General Comment, at 10.
    \219\ 83 FR 16077, 16077 (Apr. 13, 2018).
    \220\ 83 FR 16077, 16077 (Apr. 13, 2018). As part of this 
reconsideration, ``NHTSA is obligated to conduct a de novo 
rulemaking, with fresh inputs and a fresh consideration and 
balancing of all relevant factors, to establish final CAFE standards 
for [MYs 2022-2025].'' 82 FR 34740, 34741 (July 26, 2017).
    \221\ 83 FR 16077, 16079 (Apr. 13, 2018).
---------------------------------------------------------------------------

    Another commenter identified purported ``substantial shortcomings'' 
with the CAFE model used by the Alliance and Global to formulate 
generate its cost estimates, which it claimed ``will tend to 
overestimate fuel economy costs.'' \222\ NHTSA disagrees strongly with 
that statement. As the comment itself noted, ``the [CAFE] model is one 
of the best publicly available tools for analyzing the effects of fuel 
economy regulation and offers substantial transparency and 
comparability for the analyses.'' \223\ Further, the CAFE model has 
been used in numerous fuel economy rulemakings. Finally, the commenter 
did not provide an alternative calculation of what it believes the 
additional costs associated with increasing the CAFE civil penalty rate 
would be. As such, NHTSA's reliance on the CAFE model is eminently 
reasonable, and the agency continues to believe that ``the estimate 
provided by the Alliance and Global showing annual costs of at least 
one billion dollars is a reasonable estimate'' of what would occur if 
the CAFE civil penalty rate was increased to $14 under the agency's 
augural standards and that this would constitute a ``negative economic 
impact'' under the 2015 Act.\224\
---------------------------------------------------------------------------

    \222\ IPI Comment, at 13-14.
    \223\ IPI Comment, at 13.
    \224\ 83 FR 13904, 13916 (Apr. 2, 2018).
---------------------------------------------------------------------------

    Some commenters argued that even assuming the Alliance and Global's 
analysis was accurate, the impact of the additional costs it calculates 
is minimal when spread across the industry.\225\ These arguments gloss 
over the fact that if the Alliance and Global's analysis is correct, 
there is a ``negative economic impact.'' Instead, these comments seem 
to be directed towards the irrelevant question of how ``negative'' the 
``economic impact'' would be.\226\
---------------------------------------------------------------------------

    \225\ See, e.g., Comment by Kendl Kobbervig, NHTSA-2018-0017-
0009, at 1; Attorneys General Comment, at 14-15; IPI Comment, at 15; 
cf. IPI Comment, at 16 (arguing that ``the increase in costs should 
not be thought of as severe'' because the total additional costs due 
to an increase in the CAFE civil penalty ``will occur mostly for 
luxurious and sports cars'').
    \226\ This question is irrelevant for the reasons discussed in 
footnote 160: once NHTSA determines that increasing the civil 
penalty to $14 would have a negative economic impact, it has broad 
discretion to determine how much less than the otherwise required 
amount the adjustment, if any, should be.
---------------------------------------------------------------------------

    Other commenters criticized NHTSA for purportedly not conducting a 
sufficiently thorough analysis of the negative economic impact of the 
increased penalty rate, asserting that NHTSA must consider factors, 
such as ``which vehicles would be subject to penalties, how much of the 
costs would be passed through to consumers, and whether the average per 
vehicle cost would have any impact at all on consumer demand for 
vehicles.'' \227\ The 2015 Act does not require such an analysis to 
determine whether making an otherwise required adjustment would have a 
``negative economic impact.'' As NHTSA explained in the NPRM and above, 
because the term ``negative economic impact'' is not defined nor any 
guidance provided by Congress or OMB, NHTSA has broad discretion to 
determine how to determine whether a ``negative economic impact'' would 
result from such an adjustment.\228\
---------------------------------------------------------------------------

    \227\ Attorneys General Comment, at 13-14; see also CARB 
Comment, at 19 (commenting that NHTSA did ``not provide an estimate 
of the increased compliance costs, the number and types of vehicles 
affected, the average increased costs that consumers would bear, the 
price sensitivity of consumers of the affected vehicles, or how the 
cost increase compares to fuel cost savings and other benefits to 
consumers resulting from increased compliance'').
    \228\ See 83 FR 13904, 13916 (Apr. 2, 2018) (citing Nat'l 
Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214-15 (D.C. 
Cir. 2013)); Alliance and Global Comment, at 15 & n.63.
---------------------------------------------------------------------------

    Contrast the ``negative economic impact'' exception in the 2015 Act 
with the statutory provision describing the relevant factors that 
Congress requires NHTSA to consider in determining the amount of a 
civil penalty imposed for a variety of violations of the Safety 
Act.\229\ Congress has demonstrated that it can, and will, delineate 
specific factors agencies should consider in making comparable 
determinations. It chose not to do so in the 2015 Act, affording 
agencies the ability to determine what would be most appropriate for 
each.
---------------------------------------------------------------------------

    \229\ See 49 U.S.C. 30165(c) (requiring the Secretary to 
``consider the nature, circumstances, extent, and gravity of the 
violation'' in determining the amount of a civil penalty under that 
section and detailing specific factors the Secretary must include, 
as appropriate, in making such determination).
---------------------------------------------------------------------------

    Imposing an additional billion dollars in costs to the automobile 
industry--

[[Page 36028]]

every year--would have the type of ``negative economic impact'' 
envisioned by Congress when it provided this exception, and this 
negative economic impact is magnified by the statutory domestic minimum 
standard for passenger vehicles, whose penalties cannot be avoided with 
credits. In fact, in other instances when Congress has imposed 
additional procedural requirements on agencies, it has drawn the line 
at economic impacts around $100 million.\230\ It appears reasonable 
that a projected economic impact ten times the amount required for a 
rule to be considered ``major'' under the Congressional Review Act 
would be more than enough to reach this threshold. Furthermore, as 
noted above, it is apparent that a significant part of the negative 
impact would occur within the United States--and specifically within 
regions of the United States where traditional automobile manufacturing 
is concentrated--because raising the penalty rate would not only harm 
manufacturers generally. It would also create a specific incentive for 
manufacturers to shift domestic production of small, low-profit-margin 
passenger vehicles either to Mexico (where production costs are lower) 
or outside of North America (because those vehicles would not be 
subject to the domestic minimum standard).
---------------------------------------------------------------------------

    \230\ See, e.g., 5 U.S.C. 804(2)(A).
---------------------------------------------------------------------------

    Another commenter alleged that NHTSA did ``not analyze the obvious 
alternative available to manufacturers who want to avoid the higher 
penalty: compliance with the fuel economy standards'' and ``entirely 
fail[ed] to address'' how increasing the CAFE civil penalty rate to $14 
would raise the value of credits, ``making violations more expensive 
for those manufacturers that voluntarily choose not to comply with the 
CAFE standards.'' \231\ This comment is wrong: In the NPRM, NHTSA 
expressly acknowledged manufacturers' option to comply with the 
applicable fuel economy standards, the resulting effect on the value of 
credits, and the economic impact.\232\ Further, the $1 billion estimate 
was for total costs, including technology costs, not just increased 
penalty payments.
---------------------------------------------------------------------------

    \231\ Attorneys General Comment, at 15-16.
    \232\ See, e.g., 83 FR 13904, 13916 (Apr. 2, 2018) 
(``[I]ncreasing the penalty rate to $14 would lead to significantly 
greater costs than the agency had anticipated when it set the CAFE 
standards because manufacturers who had planned to use penalties as 
one way to make up their shortfall would now need to pay increased 
penalty amounts, purchase additional credits at likely higher 
prices, or make modifications to their vehicles outside of their 
ordinary redesign cycles. NHTSA believes all of these options would 
increase manufacturers' compliance costs, many of which would be 
passed along to consumers.'').
---------------------------------------------------------------------------

    Therefore, the agency continues to believe that the estimate 
provided by the Alliance and Global is a reasonable estimate of the 
economic impact of increasing the penalty rate under the augural 
standards--perhaps even be understated--and that this impact is 
sufficient for the agency to conclude that the CAFE civil penalty rate 
statute falls within the ``negative economic impact'' exception to the 
2015 Act.
    In addition, two recent NHTSA publications--NHTSA and EPA's Safer 
Affordable Fuel-Efficient (SAFE) Vehicles proposed rule as well as the 
MY 2011-2018 Industry CAFE Compliance Report--provide further 
confirmation for NHTSA's conclusion that increasing the CAFE civil 
penalty rate pursuant to the 2015 Act would have a ``negative economic 
impact.'' \233\ The SAFE Vehicles rule proposed CAFE and greenhouse gas 
(GHG) standards for model years 2020 through 2026 and used the most 
recent version of the CAFE model. As discussed in greater detail in 
that rulemaking, at a high level, the CAFE model is the tool the 
agencies use to determine how the industry could respond to potential 
standards. It includes a wide range of assumptions on the cost, 
effectiveness, and availability of different technologies, and then a 
decision-making tool to determine how each manufacturer could apply 
technologies, while accounting for various considerations that 
manufacturers typically evaluate when establishing, choosing, and 
incorporating the technologies. In the case of the CAFE standards, the 
model also estimates when a manufacturer is likely to use existing 
credits or pay penalties in lieu of meeting the required standards. 
Using the same publicly-available modeling and underlying data as that 
relied upon in the SAFE Vehicles NPRM, the negative economic impact of 
increasing the CAFE civil penalty rate to $14 remains apparent. 
Analyses conducted for the SAFE Vehicles NPRM to determine the effect 
of other inputs--in this case, the CAFE civil penalty rate--on the 
sensitivity of results show that, as seen in Table 1 in Appendix A, 
under the augural standards, manufacturers are projected to face more 
than $500 million in additional civil penalty liability before 
accounting for credits every year through at least MY 2026 if the rate 
is increased to $14 in MY 2019, as compared to retaining the rate at 
$5.50--with the added burden exceeding $1 billion for some model 
years.\234\ Even under the proposed standards,\235\ which were the 
least stringent option analyzed in that rule, the additional projected 
penalty liability before accounting for credits from an increase in the 
rate to $14 would be substantial: Over $750 million in the first model 
year for which the increase would be in effect and over $100 million 
every year through model year 2025, as shown in Table 2 in Appendix A. 
These additional penalties are on top of any increased costs 
manufacturers would incur in making technological or design changes to 
reduce their shortfalls--costs that would likely be passed along to 
consumers. It is important to note that, as described above, these 
added potential penalties could be offset through the application

[[Page 36029]]

of credits earned, transferred, or traded in ways the model cannot 
predict--subject to the limitations on domestic fleets described 
above--but NHTSA expects that if the civil penalty rate was increased, 
the price of credits would increase as well.
---------------------------------------------------------------------------

    \233\ 83 FR 42986 (Aug. 24, 2018). Although the SAFE Vehicles 
NPRM and the CAFE Compliance Report were published after the comment 
period in this rulemaking had closed, ``an agency may use 
supplementary data, unavailable during the notice and comment 
period, that expands on and confirms information contained in the 
proposed rulemaking and addresses alleged deficiencies in the pre-
existing data, so long as no prejudice is shown.'' Solite Corp. v. 
U.S. E.P.A., 952 F.2d 473, 484 (D.C. Cir. 1991) (cleaned up) (citing 
Cmty. Nutrition Inst. v. Block, 749 F.2d 50, 57-58 (D.C. Cir. 
1984)). Moreover, since the SAFE rule was published, NHTSA has not 
received any additional comments on--or any requests to re-open the 
comment period for--this CAFE civil penalty rate rulemaking. 
Pursuant to NHTSA's regulations, ``[l]ate filed comments will be 
considered to the extent practicable.'' 49 CFR 553.23.
    \234\ A description of the modeling assumptions and parameters 
for the SAFE NPRM are located at 83 FR 43000- 43188 (Aug. 24, 2018) 
(``Technical Foundation for NPRM Analysis''). The data supporting 
the calculations presented here are available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system in the ``Central Analysis'' and ``Sensitivity 
Analysis'' for the ``2018 NPRM for Model Years 2021-2026 Passenger 
Cars and Light Trucks.'' The data utilized are the same data 
presented in the SAFE Vehicles NPRM ``Sensitivity Analysis'' section 
(beginning at 83 FR 43352), but tabulated to show the impacts of 
this particular action. The calculations here specifically compare 
the total projected fines across all manufacturers and all fleets, 
both under the augural standards and the proposed standards, in the 
central analysis that assumes the rate will remain at $5.50 and the 
sensitivity analysis that, holding all else in the central analysis 
the same, assumes the rate would be increased to $14. The numbers 
presented here are based on the ``unconstrained'' analysis of the 
CAFE model--which allows for the possibility that credits may be 
earned, transferred, and applied to CAFE shortfalls--rather than the 
standard-setting analysis--which assumes that each fleet must comply 
with the CAFE standard separately in each year because of the 
statutory limitation in EPCA and EISA that prohibits NHTSA from 
considering the availability of credits when setting standards--but 
the magnitudes of the amounts and the trends are similar under both 
analyses. For additional information about the assumptions 
underlying this data, please refer to the Preliminary Regulatory 
Impact Analysis (PRIA) and the NPRM for the SAFE Vehicles 
rulemaking, both available at https://www.nhtsa.gov/corporate-average-fuel-economy/safe.
    \235\ The analysis provided by the Alliance and Global was 
conducted and submitted before the proposed standards were publicly 
available.
---------------------------------------------------------------------------

    Moreover, the MY 2011-2018 Industry CAFE Compliance report recently 
published by NHTSA shows that the number of fleets with credit 
shortfalls has substantially increased since 2011, while the number of 
fleets generating credit surpluses has decreased, leading to the MY 
2018 estimate of 28 fleets with projected shortfalls and only 11 with 
projected surpluses.\236\ While most manufacturers have so far avoided 
making civil penalty payments by using earned and traded credits, more 
manufacturers are expected to need to pay penalties going forward 
because credit surpluses across the entire fleet are diminishing; \237\ 
manufacturers will no longer be able to use their own credits or 
purchase credits from other entities to fully satisfy their shortfalls. 
The shrinking credit surplus is particularly challenging for domestic 
fleets: The MY 2011-2018 Industry CAFE Compliance report shows that the 
remaining surplus credits for domestically-produced vehicles were cut 
nearly in half from MY 2014 to MY 2016.\238\ In addition, since non-
compliance with the domestic passenger car minimum standard required by 
49 U.S.C. 32903(g)(3) and 49 CFR 536.9 cannot be covered with credits 
acquired by another automaker or transferred from another fleet, 
shortfalls for domestic vehicles must be covered by penalty payments 
when a manufacturer's domestic surplus credits run out. Manufacturers 
are already beginning to realize this impact: As noted above, one 
manufacturer paid over $77 million in civil penalties for failing to 
meet the minimum domestic passenger car standard for MY 2016, which is 
the single highest civil penalty assessed in the history of the CAFE 
program. These facts show that the estimate provided by the Alliance 
and Global is supported by the actual behavior of the industry in the 
face of increasing standards, which bears out the conclusions already 
reached by NHTSA in this rulemaking.
---------------------------------------------------------------------------

    \236\ NHTSA, ``MY 2011-2018 Industry CAFE Compliance,'' https://one.nhtsa.gov/cafe_pic/MY%202011%20-%20MY%202018%20Credit%20Shortfall%20Report.pdf (Dec. 21, 2018).
    \237\ Id.
    \238\ Id.
---------------------------------------------------------------------------

5. $10 Cap

    Two comments claimed that NHTSA failed to provide a ``reasoned 
explanation'' for why it departed from its previous position that the 
$10 cap for the CAFE civil penalty rate, established by Congress in 
1978 in 49 U.S.C. 32912(c)(1)(B), needs to be adjusted pursuant to the 
2015 Act.\239\ As explained above, NHTSA is permitted to change its 
views. And in doing so here, NHTSA provided a ``reasoned explanation'' 
in its NPRM: The $10 cap is not ``assessed or enforced'' and thus is 
not a ``civil monetary penalty'' that requires adjustment under the 
2015 Act.
---------------------------------------------------------------------------

    \239\ CBD Comment, at 23; Attorneys General Comment, at 17. The 
Attorneys General comment also claimed that NHTSA adjusted the cap 
from $10 to $25 in its interim final rule and that this adjustment 
``has never been suspended or reversed, and remains in effect.'' 
Attorneys General Comment, at 16. As NHTSA noted in its NPRM, 
however, while NHTSA did announce in the interim final rule that the 
adjusted maximum civil penalty would be increased from $10 to $25, 
81 FR 43524, 43526 (July 5, 2016), ``this change was never formally 
codified in the Code of Federal Regulations nor adopted by 
Congress.'' 83 FR 13904, 13916 n.96 (Apr. 2, 2018). Regardless, 
NHTSA gave notice that ``[e]ven if the adjustment is considered to 
have been adopted, however, NHTSA is now reconsidering that decision 
for the reasons explained'' in the notice. 83 FR 13904, 13916 n.96 
(Apr. 2, 2018).
---------------------------------------------------------------------------

    Multiple commenters disagreed with NHTSA's proposed determination 
in the alternative that any potential adjustment NHTSA makes to the 
CAFE civil penalty rate be capped by the $10 limit, without adjusting 
the cap to $25.\240\ These comments--including those that had argued 
that NHTSA's adjustment in 1997 from $5 to $5.50 constitutes evidence 
that an adjustment is warranted here--almost unanimously ignored that 
this cap was not adjusted when the previous inflation adjustment was 
made in 1997. These comments also failed to reconcile the fact the $10 
cap was left intact when Congress amended the civil penalty provision 
by enacting EISA in 2007.
---------------------------------------------------------------------------

    \240\ See, e.g., CAP Comment, at 3; CBD Comment, at 23.
---------------------------------------------------------------------------

    Instead, the comments focused largely on the ``maximum amount'' 
provision of definition of ``civil monetary penalty'' in the 2015 Act. 
One comment observed that the statutory language establishing the $10 
cap is ``virtually identical'' to the statutory language establishing 
the general EPCA penalty of $10,000, which NHTSA adjusted, only 
identifying the shared phrase ``not more than'' to indicate that they 
are both maximum amounts.\241\ But NHTSA did not, and still does not, 
dispute that the $10 cap is a ``maximum amount.'' Rather, NHTSA 
tentatively determined, and today finalizes, that the $10 cap is not 
``assessed or enforced'' as required to be a ``civil monetary penalty'' 
under the 2015 Act.\242\ Other penalties that have a maximum amount, 
such as the general EPCA penalty, can actually be ``assessed or 
enforced'': A violator could theoretically be assessed a civil penalty 
of the now-adjusted maximum amount.
---------------------------------------------------------------------------

    \241\ CARB Comment, 9.
    \242\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment[thinsp]3(2)(B), (C).
---------------------------------------------------------------------------

    Only two comments provided any argument on this specific 
point.\243\ One of those comments conceded that the cap ``is not being 
assessed or enforced now.'' \244\ Nonetheless, that comment maintained 
that the cap ``may'' be assessed or enforced ``in the future if [NHTSA] 
exercises its discretionary authority to increase the penalty to 
further energy conservation.'' \245\ Similarly, the other comment 
asserted that ``the condition of contemporaneous enforceability of the 
statutory maximum amount is not a condition precedent in order to 
qualify as a `civil monetary penalty.' . . . [T]he maximum itself does 
not need to be actively assessed or enforced.'' \246\ Even setting 
aside the hypothetical circumstances that NHTSA would need to establish 
to raise the EPCA rate all the way to the cap (discussed above), it is 
not the cap that is ever ``assessed or enforced''; it is the ``civil 
penalty,'' as defined in 49 U.S.C. 32912(b). The statutory cap merely 
sets a limit to which the $5.50 multiplier--which is used to calculate 
the ``civil penalty''--can be raised.
---------------------------------------------------------------------------

    \243\ CARB Comment, at 9; Attorneys General Comment, at 17.
    \244\ Attorneys General Comment, at 17.
    \245\ Attorneys General Comment, at 17.
    \246\ CARB Comment, at 9.
---------------------------------------------------------------------------

    Other commenters discussed how the $10 cap must be adjusted to 
avoid undermining the purpose of the 2015 Act.\247\ As discussed above, 
NHTSA disagrees that retaining the CAFE civil penalty rate runs counter 
to the purposes of the 2015 Act, even if the 2015 Act applies to the 
CAFE civil penalty rate. Congress chose means other than inflation 
adjustments to maintain the deterrent effect of the CAFE civil penalty 
formula over time (and to incentivize energy conservation under EPCA). 
Regardless, the purpose of the statute would not justify completing an 
adjustment unauthorized by Congress. The $10 cap does not satisfy the 
definition of a ``civil monetary penalty'' required by Congress to be

[[Page 36030]]

adjusted, and therefore, the 2015 Act is not a basis for NHTSA to 
adjust the $10 cap.
---------------------------------------------------------------------------

    \247\ See, e.g., CARB Comment, at 19-20 (Not adjusting the $10 
cap ``would completely defeat the purpose of the 2015 Act in 
avoiding the eroded value and deterrence of penalties by 
inflation.''); Attorneys General Comment, at 17 (``[T]o read the 
2015 Act as not applying to the CAFE standards' statutory maximum 
would undermine the purpose of both the 2015 Act and EPCA.''); IPI 
Comment, at 4 (``[I]f the $10 maximum were a permanent cap never 
subject to inflation, that would defeat Congress's stated purposes 
for the 2015 Act. . . .'').
---------------------------------------------------------------------------

    One commenter proposed the $10 cap be subject to an inflationary 
adjustment calculated from 2007.\248\ Because NHTSA has concluded that 
the $10 cap should not be adjusted at all under the 2015 Act, it is 
unnecessary for NHTSA to determine what the appropriate base year would 
be if such an adjustment were required, and NHTSA declines to do so.
---------------------------------------------------------------------------

    \248\ Workhorse Comment, at 3.
---------------------------------------------------------------------------

E. Rulemaking Analyses and Notices

1. Executive Order 12866, Executive Order 13563, and DOT Regulatory 
Policies and Procedures

    NHTSA has considered the impact of this rulemaking action under 
Executive Order 12866, Executive Order 13563, and the Department of 
Transportation's regulatory policies and procedures. This rulemaking 
document has been considered a ``significant regulatory action'' under 
Executive Order 12866. NHTSA believes that this rulemaking is 
``economically significant'' because this rule avoids imposing a future 
economic impact of $100 million or more annually.
    Certain commenters criticized the agency's decision to not include 
a separate economic analysis. The agency notes first that nothing in 
either the 2015 Act or EPCA require that NHTSA conduct a cost-benefit 
analysis when determining issues related to CAFE penalties. Further, 
the agency's first argument in this final rule that these penalties are 
not ``civil monetary penalties'' under the 2015 Act would not be 
affected by any cost-benefit analysis, as it relies on purely legal 
reasoning, not on any economic finding. Similarly, although one could 
argue that other arguments relied on in this final rule require some 
degree of analysis, the relevant statutes expressly identify specific 
factors the agency must consider, and the agency made the appropriate 
considerations of substantial deleterious harm under EPCA and negative 
economic impact under the 2015 Act. In addition, since this rule merely 
maintains the existing penalty rate, it has no economic impact. 
Certainly, some alternatives, particularly raising it to $14 or even 
just $10, would have had economic impacts, but analyzing the impacts of 
alternatives that would have changed the status quo is different than 
analyzing an actual rule that does so. In some ways, this compares to 
an agency's decision to deny a petition rulemaking, where the denial 
does not ordinarily include a thorough economic analysis, but any 
regulatory action in response granting a petition would likely benefit 
from some an analysis the reflects the impacts of any change. Finally, 
Executive Order 12866 by its own terms does not, ``does not create any 
right or benefit, substantive or procedural, enforceable at law or 
equity by a party against the United States, its agencies or 
instrumentalities, its officers or employees, or any other person.'' 
Therefore, whether the agency complies with the Order is not grounds 
for legal challenge. To the extent there is any ambiguity as to what 
analysis is required, OMB not only reviewed both the NPRM and final 
rule, but also affirmatively concurred with NHTSA's economic 
determination and the interpretations of the 2015 Act in this final 
rule.\249\
---------------------------------------------------------------------------

    \249\ OMB Non-Applicability Letter; OMB Negative Economic Impact 
Letter.
---------------------------------------------------------------------------

2. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act 
(SBREFA) of 1996), whenever an agency is required to publish a notice 
of proposed rulemaking or final rule, it must prepare and make 
available for public comment a regulatory flexibility analysis that 
describes the effect of the rule on small entities (i.e., small 
businesses, small organizations, and small governmental jurisdictions). 
No regulatory flexibility analysis is required if the head of an agency 
certifies the proposal will not have a significant economic impact on a 
substantial number of small entities. SBREFA amended the Regulatory 
Flexibility Act to require Federal agencies to provide a statement of 
the factual basis for certifying that a proposal will not have a 
significant economic impact on a substantial number of small entities.
    NHTSA has considered the impacts of this notice under the 
Regulatory Flexibility Act and certifies that this rule would not have 
a significant economic impact on a substantial number of small 
entities. The following provides the factual basis for this 
certification under 5 U.S.C. 605(b).
    The Small Business Administration's (SBA) regulations define a 
small business in part as a ``business entity organized for profit, 
with a place of business located in the United States, and which 
operates primarily within the United States or which makes a 
significant contribution to the U.S. economy through payment of taxes 
or use of American products, materials or labor.'' 13 CFR 121.105(a). 
SBA's size standards were previously organized according to Standard 
Industrial Classification (``SIC'') Codes. SIC Code 336211 ``Motor 
Vehicle Body Manufacturing'' applied a small business size standard of 
1,000 employees or fewer. SBA now uses size standards based on the 
North American Industry Classification System (``NAICS''), Subsector 
336--Transportation Equipment Manufacturing. This action is expected to 
affect manufacturers of motor vehicles. Specifically, this action 
affects manufacturers from NAICS codes 336111--Automobile 
Manufacturing, and 336112--Light Truck and Utility Vehicle 
Manufacturing, which both have a small business size standard threshold 
of 1,500 employees.
    Though civil penalties collected under 49 CFR 578.6(h)(1) and (2) 
apply to some small manufacturers, low volume manufacturers can 
petition for an exemption from the Corporate Average Fuel Economy 
standards under 49 CFR part 525. This would lessen the impacts of this 
rulemaking on small business by allowing them to avoid liability for 
penalties under 49 CFR 578.6(h)(2). Small organizations and 
governmental jurisdictions will not be significantly affected as the 
price of motor vehicles and equipment ought not change as the result of 
this rule.

3. Executive Order 13132 (Federalism)

    Executive Order 13132 requires NHTSA to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' ``Policies that have federalism 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.'' Under Executive Order 13132, the agency may not issue a 
regulation with federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal Government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, the agency 
consults with State and local governments, or the agency consults with 
State and local officials early in the process of developing the 
proposed regulation.
    This rule will not have substantial direct effects on the States, 
on the

[[Page 36031]]

relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government, as specified in Executive Order 13132.
    The reason is that this rule will generally apply to motor vehicle 
manufacturers. Thus, the requirements of Section 6 of the Executive 
Order do not apply.

4. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, 
requires agencies to prepare a written assessment of the cost, benefits 
and other effects of proposed or final rules that include a Federal 
mandate likely to result in the expenditure by State, local, or tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million annually. Because this rule does not include a Federal 
mandate, no Unfunded Mandates assessment will be prepared.

5. National Environmental Policy Act

    The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 
4321-4347) requires Federal agencies to analyze the environmental 
impacts of proposed major Federal actions significantly affecting the 
quality of the human environment, as well as the impacts of 
alternatives to the proposed action.\250\ When a Federal agency 
prepares an environmental assessment, the Council on Environmental 
Quality (CEQ) NEPA implementing regulations (40 CFR parts 1500-1508) 
require it to ``include brief discussions of the need for the proposal, 
of alternatives . . ., of the environmental impacts of the proposed 
action and alternatives, and a listing of agencies and persons 
consulted.'' \251\ Based on the environmental assessment, the agency 
must ``make its determination whether to prepare an environmental 
impact statement'' and ``prepare a finding of no significant impact . . 
. if the agency determines on the basis of the environmental assessment 
not to prepare a statement.'' \252\ NHTSA prepared a Draft 
Environmental Assessment (Draft EA), which was included in the preamble 
of the NPRM. This section serves as the agency's Final Environmental 
Assessment (Final EA) and Finding of No Significant Impact (FONSI).
---------------------------------------------------------------------------

    \250\ 42 U.S.C. 4332(2)(C).
    \251\ 40 CFR 1508.9(b).
    \252\ 40 CFR 1501.4(c) & (e).
---------------------------------------------------------------------------

i. Purpose and Need
    This final rule sets forth the purpose of and need for this action. 
NHTSA considered whether it is appropriate, pursuant to the Inflation 
Adjustment Act, to make an initial ``catch-up'' adjustment to the civil 
monetary penalties it administers for the CAFE program. Further, if the 
Inflation Adjustment Act does apply, it has considered the appropriate 
approach to undertake pursuant to the legislation and consistent with 
the agency's responsibilities under EPCA (as amended by EISA). NHTSA 
has considered the findings of this Final EA prior to selecting the 
$5.50 rate in this final rule.
ii. Alternatives
    NHTSA considered a range of alternatives for this action, including 
a civil penalty amount of $5.50 per each tenth of a mile per gallon 
\253\ and a civil penalty amount of $14.00 per each tenth of a mile per 
gallon.\254\ NHTSA also considered a civil penalty amount of $6.00 per 
each tenth of a mile per gallon (rounding to the nearest dollar 
pursuant to the 2015 Act) and whether the civil penalty amount is 
capped at $10.00 per each tenth of a mile per gallon (pursuant to 
EPCA). This allowed the agency to consider selecting any value along 
this range of alternatives, including any civil penalty amount between 
$5.50 and $14.00. In consideration of the information presented in this 
Final EA, NHTSA is selecting a civil penalty rate of $5.50 per each 
tenth of a mile per gallon as its final rule. NHTSA is also increasing 
the ``general penalty'' to a maximum penalty of $42,530,\255\ pursuant 
to the requirements of the Inflation Adjustment Act.
---------------------------------------------------------------------------

    \253\ As previously noted, the rate was $5.50 during 
reconsideration, the rate is currently $5.50, and the rate will 
continue to be $5.50 as a result of this final rule, rather than 
increasing to $14 beginning with MY 2019. Manufacturers would at no 
time be responsible for paying a higher civil penalty rate.
    \254\ Absent this final rule, the $14 rate would have gone into 
effect beginning with model year 2019.
    \255\ NHTSA adjusted this penalty to a maximum of $40,000 in its 
July 2016 IFR. Applying 1.01636 multiplier for 2017 inflationary 
adjustments, as specified in OMB's December 16, 2016 guidance, 
results in an adjusted maximum penalty of $40,654. Applying the 
multiplier for 2018 of 1.02041, as specified in OMB's December 15, 
2017, results in an adjusted maximum penalty of $41,484. Applying 
the multiplier for 2019 of 1.02522, as specified in OMB's December 
14, 2018, results in an adjusted maximum penalty of $42,530.
---------------------------------------------------------------------------

    In the Draft EA, NHTSA identified $5.50 as the agency's No Action 
Alternative. Two commenters noted that, as a result of the U.S. Court 
Appeals for the Second Circuit decision, the $14 rate should be 
considered the agency's No Action Alternative.\256\ NHTSA believes this 
notice adequately explains the complicated factual and legal 
circumstances that apply to this rulemaking. This Final EA considers 
the environmental impacts associated with the $5.50 and $14 rates in 
comparison with each other, thus allowing a reasoned consideration of 
the greatest potential environmental impacts regardless of which is 
appropriately considered the No Action Alternative.
---------------------------------------------------------------------------

    \256\ IPI Comment, at 10; Attorneys General Comment, at 19.
---------------------------------------------------------------------------

iii. Environmental Impacts of the Proposed Action and Alternatives
    NHTSA considered a range of alternatives from a rate of $5.50 to a 
rate of $14 as the civil penalty amount for a manufacturer's failure to 
meet its fleet's average fuel economy target (assuming the manufacturer 
does not have sufficient credits available to cover the shortfall). 
When deciding whether to add fuel-saving technology to its vehicles, a 
manufacturer might consider the cost to add the technology, the price 
and availability of credits, the potential reduction in its civil 
penalty liability, and the value to the vehicle purchaser of the change 
in fuel outlays over a specified ``payback period.'' A higher civil 
penalty amount could encourage manufacturers to improve the average 
fuel economy of their passenger car and light truck fleets if the 
benefits of installing fuel-saving technology (i.e., lower civil 
penalty liability and increased revenue from vehicle sales) outweigh 
the costs of installing the technology.
    However, there are many reasons why this might not occur to the 
degree anticipated. Apart from the civil penalty rate, as CAFE 
standards increase in stringency, manufacturers have needed to research 
and install increasingly less cost-effective technology that may not 
obtain levels of consumer acceptance necessary to offset the 
investment. A higher civil penalty amount combined with the value of 
the potential added fuel economy benefit of new, advanced technology to 
the vehicle purchaser may not be sufficient to outweigh the added 
technology costs (including both the financial outlays and the risk 
that consumers may not value the technology or accept its impact on the 
driving experience, therefore opting not to purchase those models). 
This may be especially true when gas prices are low. If the added cost 
in civil penalty payments is borne by the manufacturer, this may result 
in reduced investment in fuel saving technology or reduced consumer 
choice. If the added cost in

[[Page 36032]]

civil penalty payments is passed on to the consumer, the consumer would 
see higher vehicle purchase costs without a corresponding fuel economy 
benefit or other benefits, resulting in fewer purchases of newer, more 
fuel-efficient vehicles. Based on the foregoing, NHTSA believes that 
the levels of compliance with the applicable fuel economy targets for 
each of the alternatives under consideration in this notice could 
result, at most, in relatively small differences in levels of 
compliance with the applicable fuel economy targets.
    An increase in a motor vehicle's fuel economy is associated with 
reductions in fuel consumption and greenhouse gas (GHG) emissions for 
an equivalent distance of travel. Increased global GHG emissions are 
associated with climate change, which includes increasing average 
global temperatures, rising sea levels, changing precipitation 
patterns, increasing intensity of severe weather events, and increasing 
impacts on water resources. These, in turn, could affect human health 
and safety, infrastructure, food and water supplies, and natural 
ecosystems. Fewer GHG emissions would reduce the likelihood of these 
impacts. Changes in motor vehicle fuel economy are also associated with 
impacts on criteria and hazardous air pollutant emissions, safety, 
life-cycle environmental impacts, and more.
    As part of recent rulemaking actions establishing CAFE standards, 
NHTSA evaluated the impacts of increasing fuel economy standards for 
passenger cars and light trucks on these and other environmental impact 
areas.\257\ The analyses assumed a civil monetary penalty of $5.50 per 
each tenth of a mile per gallon. The agency has considered the 
information and trends presented in those Final Environmental Impact 
Statements (Final EISs). For example, the MY 2017-2025 CAFE EIS showed 
that the large stringency increases in the fuel economy standards as a 
result of that rulemaking would result in reductions of global mean 
surface temperature increases of no more than 0.016 [deg]C by 2100. 
Further, that EIS showed those fuel economy standards resulting in 
modest nationwide reductions in most criteria pollutant emissions in 
2040 (usually in ranges of 10% or less) and small increases or 
reductions in most toxic pollutant emissions in 2040 (usually in ranges 
of 3% or less). NHTSA believes the impacts on fuel economy resulting 
from this action would be very small compared to the impacts on fuel 
economy resulting from the stringency increases that were reported in 
those EISs. In fact, one commenter used NHTSA's CAFE Model from its 
most recent CAFE stringency rulemaking to approximate the potential 
impact on compliance.\258\ That commenter concluded that, compared to a 
$14 rate, the $5.50 rate would ``cause average passenger car fuel 
economy to drop almost 5 mpg [in the year 2032], from a baseline 
scenario of 54.75 mpg to 49.75 mpg. . . . For the total fleet, the 
expected increased fuel consumption amounts to 54 billion gallons 
between 2017 and 2032.'' \259\ In the MY 2017-2025 CAFE EIS, the final 
rule was associated with reductions in fuel consumption for calendar 
years 2017 through 2060 ranging from 585 billion gallons to 1,508 
billion gallons, depending on the analysis. Thus, the commenter's 
analysis confirms that a civil penalty rate of $5.50, as compared to 
$14, would result in environmental impacts that are a fraction of those 
shown in the MY 2017-2025 CAFE EIS. Such impacts would mean global mean 
surface temperature increases even less than 0.016 [deg]C by 2100, and 
criteria and toxic pollutant emissions changes well less than those 
reported in that EIS. Therefore, NHTSA anticipates that the 
environmental impacts resulting from any of the alternatives would be 
very small and consistent with, but to a much smaller degree than, the 
trends reported in the Final EISs associated with its stringency 
rulemakings.
---------------------------------------------------------------------------

    \257\ See, e.g., NHTSA, Final Environmental Impact Statement, 
Corporate Average Fuel Economy Standards, Passenger Cars and Light 
Trucks, Model Years 2017-2025, Docket No. NHTSA-2011-0056 (July 
2012).
    \258\ IPI comment, at 11.
    \259\ Id.
---------------------------------------------------------------------------

    As stated in the NPRM, NHTSA believes that the environmental impact 
trends reported in its recent Final EISs remain adequate and valid for 
purposes of this Final EA even if the particular values reported are no 
longer replicable due to updated assumptions and new information 
obtained since their publication. In fact, since the NPRM, NHTSA 
prepared a Draft EIS for its proposal for new CAFE standards, called 
the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule.\260\ The 
Draft EIS affirms NHTSA's reliance in this Final EA on its prior Final 
EISs as it reported similar environmental impact trends and values at a 
similar scale to those reported in those prior documents. NHTSA 
received public comments associated with the Draft EIS and is currently 
reviewing those comments in anticipation of issuing a Final EIS. The 
agency does not believe the civil penalty rate being finalized in this 
rulemaking will limit its ability to set ``maximum feasible'' standards 
pursuant to 49 U.S.C. 32902(b)(2)(B), nor will it unreasonably 
constrain the potential environmental outcomes associated with future 
rulemakings.
---------------------------------------------------------------------------

    \260\ The Draft EIS is available on http://www.regulations.gov, 
Docket No. NHTSA-2017-0069-0178 and on NHTSA's website at http://www.nhtsa.gov/safe.
---------------------------------------------------------------------------

    NHTSA is also finalizing an increase to the ``general penalty'' 
pursuant to the Inflation Adjustment Act. This increase is not 
anticipated to have impacts on the quality of the human environment. 
The ``general penalty'' is applicable to other violations, such as a 
manufacturer's failure to submit pre-model year and mid-model year 
reports to NHTSA on whether they will comply with the average fuel 
economy standards. These violations are not directly related to on-road 
fuel economy, and therefore the penalties are not anticipated to 
directly or indirectly affect fuel use or emissions.
iv. Agencies and Persons Consulted
    NHTSA and DOT have consulted with OMB as described earlier in this 
preamble. NHTSA and DOT have also consulted with the U.S. Department of 
Justice and provided other Federal agencies with the opportunity to 
review and provide feedback on this rulemaking.
v. Conclusion
    NHTSA has reviewed the information presented in this Final EA and 
concludes that the final rule and alternatives would have minimal 
impacts on the quality of the human environment. Regardless of whether 
a rate of $5.50 is considered no change, as compared to current law, or 
a reduction from a rate of $14, the environmental impacts are 
anticipated to be very small. Further, the change to the ``general 
penalty'' is not anticipated to affect on-road emissions.
vi. Finding of No Significant Impact
    I have reviewed this Final EA. In determining whether this action 
``significantly'' affects the quality of the human environment, I have 
considered 40 CFR 1508.27, in which CEQ explains that ``significantly . 
. . requires consideration of both context and intensity.'' In this 
action, the context for the environmental impacts includes localities 
for issues such as air pollutant emissions and the world as a whole for 
issues such as GHG emissions. In terms of intensity, the impacts of 
this rule would be spread across the entire nation or the entire world, 
depending on the particular environmental impact. Viewed in light of 
recent CAFE

[[Page 36033]]

stringency rulemakings, the potential environmental impacts of this 
rule are expected to be small. Based on the Final EA, I conclude that 
implementation of any of the action alternatives (including the final 
rule) will not have a significant effect on the human environment and 
that a ``finding of no significant impact'' (see 40 CFR 1501.4(e)(1) 
and 1508.13) is appropriate. This statement constitutes the agency's 
``finding of no significant impact,'' and an environmental impact 
statement will not be prepared.

6. Executive Order 12778 (Civil Justice Reform)

    This rule does not have a retroactive or preemptive effect. Even if 
some MY 2019 vehicles are already being sold, compliance determinations 
will not be made until 2020 at the earliest, after this rule has gone 
into effect. Moreover, compliance determinations and penalty 
calculations are based on the average fuel economy of the fleet, not 
individual vehicles that have been sold prior to the rule going into 
effect. Judicial review of this rule may be obtained pursuant to 5 
U.S.C. 702.

7. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980, NHTSA 
states that there are no requirements for information collection 
associated with this rulemaking action.

8. Privacy Act

    Please note that anyone is able to search the electronic form of 
all submissions received into any of DOT's dockets by the name of the 
individual submitting the document (or signing the document, if 
submitted on behalf of an association, business, labor union, etc.). 
You may review DOT's complete Privacy Act Statement in the Federal 
Register published on April 11, 2000 (Volume 65, Number 70; Pages 
19477-78), or you may visit http://dms.dot.gov.

9. Executive Order 13771

    This final rule is a deregulatory action under Executive Order 
13771. Potential economic impacts are reported in Appendix A.

Appendix A

              Table 1--Projected Additional Penalties Under Augural Standards if Rate is Increased
----------------------------------------------------------------------------------------------------------------
                                                        Projected            Projected
                                                     penalties under      penalties under         Difference
                                                       $5.50 rate,           $14 rate,            (projected
                    Model year                       central analysis       sensitivity           additional
                                                         (augural        analysis (augural    penalties if rate
                                                        standards)           standards)         is increased)
----------------------------------------------------------------------------------------------------------------
2019.............................................      $402,661,295.97      $979,857,995.69      $577,196,699.71
2020.............................................       424,626,535.48     1,074,571,984.97       649,945,449.49
2021.............................................       296,664,715.42       858,535,520.00       561,870,804.58
2022.............................................       435,761,242.00     1,161,920,853.58       726,159,611.58
2023.............................................       493,426,421.72     1,323,396,714.35       829,970,292.63
2024.............................................       806,729,507.15     2,108,481,177.18     1,301,751,670.03
2025.............................................     1,038,128,818.83     2,695,259,330.77     1,657,130,511.93
2026.............................................       674,517,279.88     1,541,685,503.03       867,168,223.15
                                                  --------------------------------------------------------------
    Total........................................     4,572,515,816.46    11,743,709,079.56     7,171,193,263.09
----------------------------------------------------------------------------------------------------------------
Note: Projected penalties could be offset by the application of credits.


              Table 2--Projected Additional Penalties Under Proposed Standards if Rate is Increased
----------------------------------------------------------------------------------------------------------------
                                                        Projected            Projected
                                                     penalties under      penalties under         Difference
                                                       $5.50 rate,           $14 rate,            (projected
                    Model year                       central analysis       sensitivity           additional
                                                        (proposed        analysis (proposed   penalties if rate
                                                        standards)           standards)         is increased)
----------------------------------------------------------------------------------------------------------------
2019.............................................      $505,612,917.19    $1,269,742,039.02      $764,129,121.83
2020.............................................       455,216,572.77     1,131,135,706.97       675,919,134.20
2021.............................................       302,262,154.89       704,833,149.24       402,570,994.35
2022.............................................       257,659,098.79       575,460,915.48       317,801,816.69
2023.............................................       188,672,069.76       384,423,537.48       195,751,467.72
2024.............................................       183,904,369.42       355,182,994.82       171,278,625.40
2025.............................................       165,483,877.30       312,608,273.21       147,124,395.91
2026.............................................       103,265,737.66       188,049,420.14        84,783,682.48
                                                  --------------------------------------------------------------
    Total........................................     2,162,076,797.79     4,921,436,036.37     2,759,359,238.58
----------------------------------------------------------------------------------------------------------------
Note: Projected penalties could be offset by the application of credits.

List of Subjects in 49 CFR Part 578

    Imports, Motor vehicle safety, Motor vehicles, Penalties, Rubber 
and rubber products, Tires.

    In consideration of the foregoing, 49 CFR part 578 is amended as 
set forth below.

PART 578--CIVIL AND CRIMINAL PENALTIES

0
1. The authority citation for 49 CFR part 578 is revised to read as 
follows:

    Authority:  Pub. L. 101-410, 104 Stat. 890; Pub. L. 104-134, 110 
Stat. 1321; Pub. L. 109-

[[Page 36034]]

59, 119 Stat. 1144; Pub. L. 114-74, 129 Stat. 584; Pub. L. 114-94, 
129 Stat. 1312; 49 U.S.C. 30165, 30170, 30505, 32308, 32309, 32507, 
32709, 32710, 32902, 32912, and 33115; delegation of authority at 49 
CFR 1.81, 1.95.


0
2. Amend Sec.  578.6 by revising paragraph (h) to read as follows:


Sec.  578.6   Civil penalties for violations of specified provisions of 
Title 49 of the United States Code.

* * * * *
    (h) Automobile fuel economy. (1) A person that violates 49 U.S.C. 
32911(a) is liable to the United States Government for a civil penalty 
of not more than $42,530 for each violation. A separate violation 
occurs for each day the violation continues.
    (2) Except as provided in 49 U.S.C. 32912(c), a manufacturer that 
violates a standard prescribed for a model year under 49 U.S.C. 32902 
is liable to the United States Government for a civil penalty of $5.50 
multiplied by each .1 of a mile a gallon by which the applicable 
average fuel economy standard under that section exceeds the average 
fuel economy--
    (i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for 
automobiles to which the standard applies manufactured by the 
manufacturer during the model year;
    (ii) Multiplied by the number of those automobiles; and
    (iii) Reduced by the credits available to the manufacturer under 49 
U.S.C. 32903 for the model year.
* * * * *

    Issued in Washington, DC, under authority delegated in 49 CFR 
1.81, 1.95, and 501.5.
Heidi R. King,
Deputy Administrator.
[FR Doc. 2019-15259 Filed 7-25-19; 8:45 am]
 BILLING CODE 4910-59-P