California Energy Com'n v. Department of Energy

• Decision Date: 28 October 2009
• Docket Number: No. 07-71576.,07-71576.
• Citation: 585 F.3d 1143
• Parties: CALIFORNIA ENERGY COMMISSION, Petitioner, v. DEPARTMENT OF ENERGY, Respondent, The Association of Home Appliance Manufacturers, Respondent-Intervenor.
• Court: U.S. Court of Appeals — Ninth Circuit

585 F.3d 1143

CALIFORNIA ENERGY COMMISSION, Petitioner, v. DEPARTMENT OF ENERGY, Respondent The Association of Home Appliance Manufacturers, Respondent-Intervenor.

No. 07-71576.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 17, 2008.

October 28, 2009.

Jonathan Blees, Assistant Chief Counsel, Sacramento, CA, for the petitioner.

H. Thomas Byron, III, Civil Division, United States Department of Justice, Washington, D.C., for the respondent.

Charles A. Samuels, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, Washington, D.C., for the intervenor-respondent.

S. David Hotchkiss, Assistant City Attorney, Los Angeles, CA, for amicus curiae City of Los Angeles; Kristin Grenfell, San Francisco, CA, for amicus curiae Natural Resources Defense Council; Arlen Orchard, Sacramento, CA, for amici curiae Sacramento Municipal Utility District and California Municipal Utilities Association; Jose E. Guzman, Jr., Nossaman, Gunthner, Knox & Elliott, LLP, San Francisco, CA, for amicus curiae California Water Association; Joseph M. Mattingly, Stephen R. Yurek, Arlington, VA, for amici curiae Gas Appliance Manufacturers Association, Inc, and Air-Conditioning and Refrigeration Institute, Inc.; and Karen L. Tachiki, Los Angeles, CA, for amicus curiae Metropolitan Water District of Southern California.

On Petition for Review of an Order of the Department of Energy. DOE No. EE-RM-PET-100.

Before: WILLIAM C. CANBY, JR. and KIM McLANE WARDLAW, Circuit Judges, and DAVID G. TRAGER,^* District Judge.

CANBY, Circuit Judge:

The California Energy Commission ("CEC") petitions for review of an order of the U.S. Department of Energy ("DOE") denying CEC's request for a waiver of preemption under the Energy Policy and Conservation Act ("EPCA"), 42 U.S.C. § 6297. The CEC sought this waiver in order to establish water efficiency standards for residential clothes washers, as set forth in its state regulations, Cal.Code Regs. tit. 20, § 1605.2(p)(1). To obtain such a waiver, CEC was required to show by a preponderance of the evidence that the state regulation was "needed to meet unusual and compelling State or local . . . water interests." 42 U.S.C. § 6297(d)(1)(B). The DOE rejected the CEC's petition for three separate reasons, but asserts that "each [of these reasons] flowed from CEC's failure to provide adequate information to DOE to allow the federal agency to make an informed decision." The DOE also challenges this court's jurisdiction under the EPCA to review the denial of the waiver, raising an issue of first impression in this circuit. We hold that this court has jurisdiction under the EPCA. Because the DOE's stated justifications demonstrate an arbitrary and capricious failure meaningfully to address the CEC's application for a waiver, we reverse the DOE's ruling and remand for further proceedings.

Factual Background

California is experiencing a severe water crisis, and that crisis is worsening. The need for water continues to grow, as the state's population is expected to increase greatly in the next three decades. At the same time, current water supplies are decreasing. California's surface water sources are significantly over-appropriated, and its groundwater aquifers are severely overdrafted. A variety of problems have exacerbated the water shortage, including salt water contamination and environmental degradation. California has no new significant conventional supplies available to increase the amount of water available to its citizens. It thus must pursue alternative solutions to the crisis, including efforts at water recycling, desalination, and increased water efficiency. California views improved water use efficiency as the most promising means of alleviating its water crisis.

As part of this effort, the California Legislature in 2002 required the CEC to establish water efficiency standards for residential clothes washers, which were said to account for 22 percent of the water use in a typical household. Cal. Assemb. B. 1561 (Kelley), 2002 Cal. Stat. ch. 421, § 1(b) (enacting Cal. Pub. Res.Code § 25,402(e)(1)). In response, the CEC adopted the proposed standards at issue in this case. Cal.Code Regs. tit. 20, § 1605.2(p)(1). These standards are expressed in terms of a "water factor" ("WF"), which is the ratio of the gallons of water used per load to the capacity, in cubic feet, of the washtub. Id. Thus a clothes washer that has 5 cubic feet of capacity and uses 50 gallons of water per load would have a WF of 10.0, while a machine of the same capacity that uses only 25 gallons per load would have a WF of 5.0. These standards would apply to both top-loading and front-loading clothes washers, and were divided into two tiers with differing times at which they were scheduled to take effect. Tier 1, initially scheduled to take effect on January 1, 2007, would require all washers (top-loading and front-loading) to perform with a WF of no greater than 8.5. Tier 2, initially scheduled to take effect on January 1, 2010, would require all washers to perform with a WF of no greater than 6.0. The CEC asserts that these standards, if implemented, would result in annual water savings equal to the City of San Diego's current water usage.

The EPCA expressly preempts state regulation of energy efficiency, energy use, or water use of any product covered by federal energy efficiency standards. 42 U.S.C. § 6297(b)-(d). In 2001, the DOE adopted federal energy efficiency standards for residential clothes washers, pursuant to 42 U.S.C. § 6295. 10 C.F.R. § 430.32(g). The DOE decided, however, that it did not have the authority to prescribe water efficiency standards for residential clothes washers. 66 Fed.Reg. 3314 (Jan. 12, 2001). Nevertheless, because the DOE regulates energy efficiency standards for residential clothes washers, the EPCA expressly preempted state agencies from regulating the energy or water efficiency of that appliance. In 2002, the CEC adopted both energy and water efficiency standards for commercial clothes washers; this step was permissible because commercial clothes washers were not covered by any federal regulation. Cal.Code Regs. tit. 20, § 1605.3(p)(1). The California Legislature, however, also directed the CEC to adopt water efficiency standards for residential clothes washers. Recognizing that such regulation was expressly preempted by the EPCA because of the DOE's regulation of energy efficiency standards for residential clothes washers, the California Legislature required the CEC to petition the DOE for a rule waiving preemption. 2002 Cal. Stat. ch. 421 (enacting Cal. Pub. Res.Code § 25,402(e)(1)).

The CEC filed a petition for a waiver with the DOE, which was accepted as complete on December 23, 2005. The DOE denied this petition one year later, citing three reasons:

First, CEC's proposed regulations purported to take effect on January 1, 2007, far less than the statutory three-year minimum, and CEC did not provide any information necessary to support a different effective date. Second, CEC did not meet the statutory standard, which requires a state to show unusual and compelling water interests. CEC contended that a cost-benefit analysis showed that its regulation would be preferable to non-regulatory alternatives, but CEC's petition did not support its conclusions with the underlying data that would have allowed DOE to determine whether the statutory standard was satisfied. Third, the record demonstrated that CEC's proposed regulation would make a class of washers unavailable in California, requiring denial of the waiver petition.

The CEC requested reconsideration. Following DOE's inaction for 30 days, the request was denied by operation of law on February 28, 2007. The CEC then filed its Petition for Review with this court.

Discussion

We must resolve two primary issues in this appeal. First, the DOE has contested our jurisdiction, arguing that the EPCA provides for direct review in the courts of appeals only of "rule[s] prescribed under section 6293, 6294, or 6295" of Title 42, whereas the action challenged here is an order issued pursuant to 42 U.S.C. § 6297(d). See 42 U.S.C. § 6306(b)(1). Second, if jurisdiction properly lies in this court, we must determine whether any of the DOE's three stated reasons for rejecting the CEC's petition can support that action under the relevant standard of review.

1. This Court Properly Has Jurisdiction Under the EPCA

The DOE contends that the EPCA does not grant this court jurisdiction to review the denial of a preemption waiver, and that the CEC should have sought judicial review in federal district court under the Administrative Procedure Act ("APA"). Its argument is based on the following provision of the EPCA governing judicial review:

Any person who will be adversely affected by a rule prescribed under section 6293, 6294, or 6295 of this title, may . . . file a petition with the United States court of appeals . . . for judicial review of such rule.

42 U.S.C. § 6306(b)(1). The DOE contends that the CEC is not challenging a rule adopted pursuant to §§ 6293, 6294, or 6295 but instead is challenging the denial of a waiver that was sought pursuant to § 6297(d). Accordingly, argues the DOE, we lack jurisdiction to proceed.

Despite the surface plausibility of DOE's argument, we conclude that it does not effectuate the intent of Congress for the review scheme of the EPCA. It is true that review of agency action is typically located in the district courts under the APA absent a specific statutory provision to the contrary. Owner-Operators Indep. Drivers Ass'n v. Skinner, 931 F.2d 582, 585 (9th Cir.1991) ("[U]nless Congress specifically maps a judicial review path for an agency, review may be had in federal district court under its general federal question jurisdiction."). The provisions of § 6306, taken as a whole, are not consistent, however, with a view that Congress intended default jurisdiction to lie in the district courts for all...