768 F.2d 1355 (D.C. Cir. 1985), 83-1195, Natural Resources Defense Council, Inc. v. Herrington

Docket Nº:83-1195, 83-2117, 83-2128, 83-2318, 83-2319 and 84-1055.
Citation:768 F.2d 1355
Party Name:NATURAL RESOURCES DEFENSE COUNCIL, INC., Petitioner, v. John S. HERRINGTON, Secretary, U.S. Department of Energy, Respondent, Hydronics Institute, et al., Florida Department of Community Affairs, Intervenors. CALIFORNIA STATE ENERGY RESOURCES CONSERVATION AND DEVELOPMENT COMMISSION, Petitioner, v. DEPARTMENT OF ENERGY, and John S. Herrington, Secre
Case Date:July 16, 1985
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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Page 1355

768 F.2d 1355 (D.C. Cir. 1985)

NATURAL RESOURCES DEFENSE COUNCIL, INC., Petitioner,

v.

John S. HERRINGTON, Secretary, U.S. Department of Energy, Respondent,

Hydronics Institute, et al., Florida Department of Community

Affairs, Intervenors.

CALIFORNIA STATE ENERGY RESOURCES CONSERVATION AND

DEVELOPMENT COMMISSION, Petitioner,

v.

DEPARTMENT OF ENERGY, and John S. Herrington, Secretary of

the Department of Energy, Respondents,

Hydronics Institute, et al., Florida Department of Community

Affairs, Intervenors.

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al., Petitioners,

v.

John S. HERRINGTON, Secretary, U.S. Department of Energy, Respondent,

State of Texas, Association of Home Appliance Manufacturers,

Whirlpool Corporation, et al., Air Conditioning and

Refrigeration Institute, Gas Appliance Manufacturers Assoc.,

Hydronics Institute, et al., Florida Department of Community

Affairs, Intervenors.

CALIFORNIA STATE ENERGY RESOURCES CONSERVATION AND

DEVELOPMENT COMMISSION, Petitioners,

v.

DEPARTMENT OF ENERGY, and John S. Herrington, Secretary of

the Department of Energy, Respondents,

Association of Home Appliance Manufacturers, Whirlpool

Corporation, Gas Appliance Manufacturers Assoc.,

Air-Conditioning and Refrigeration

Institute, Intervenors.

The STATE OF MINNESOTA, by its Attorney General, Hubert H.

HUMPHREY III, Petitioner,

v.

The UNITED STATES DEPARTMENT OF ENERGY, John S. Herrington,

Secretary, Respondent.

STATE OF NEW YORK, Petitioner,

v.

UNITED STATES DEPARTMENT OF ENERGY, Respondent,

Whirlpool Corporation & Heil-Quaker Corporation,

Air-Conditioning and Refrigeration Institute, Gas

Appliance Manufacturing Assoc.,

Association of Home Appliance

Manufacturers, Intervenors.

Nos. 83-1195, 83-2117, 83-2128, 83-2318, 83-2319 and 84-1055.

United States Court of Appeals, District of Columbia Circuit

July 16, 1985

Argued Jan. 14, 1985.

As Amended .

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Petitions for Review of Final Rules of the Department of energy.

Alan S. Miller, Washington, D.C., with whom David B. Edelson, San Francisco, Cal., and William B. Churchill, Austin, Tex., were on brief, for petitioners Natural Resources Defense Council, et al.

Jonathan Blees, Sacramento, Cal., with whom William M. Chamberlain, Gregory Wheatland, Sacramento, Cal., Thomas Barrett, Robert Abrams, Peter Bienstock and Samuel A. Cherniak, New York City, were on brief, for petitioners Cal. State Energy Resources Conservation and Development Com'n.

Susan V. Cook, Atty., Dept. of Justice, Washington, D.C., for respondent John S. Herrington, Secretary, Dept. of Energy.

Paul M. Laurenza and John A. Hodges, Washington, D.C., with whom William C. Brashares, Charles A. Samuels, Washington, D.C., Louis R. Paulick, Pittsburgh, Pa., Patricia J. Beneke, Washington, D.C., and Theodore F.T. Corlius, were on brief, for intervenors Ass'n of Home Appliance Mfrs., et al. Edward W. Hengerer, John H. Korns, Stephen O. Houck and W. DeVier Pierson, Washington, D.C., entered appearances for intervenors Ass'n of Home Appliance Mfrs., et al.

Paul Sexton, Tallahassee, Fla., was on brief and Bruce W. Renard, Tallahassee,

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Fla., entered an appearance for intervenor Fla. Dept. of Community Affairs.

Douglas E. Kliever, Washington, D.C., entered an appearance for intervenors Hydronics Institute, et al., in Nos. 83-1195 and 83-2117.

David R. Richards and William B. Churchill, Austin, Tex., entered appearances for intervenor State of Texas.

William F. Gary, Salem, Or., was on brief for amicus curiae State of Or. urging reversal in Nos. 83-1195, 83-1195, 83-2117, 83-2128, 83-2318 and 83-2319.

Frank W. Ostrander, Portland, Or., William R. Cook, Bernard Nash and Edward G. Modell, Washington, D.C., were on brief for amicus curiae Northwest Power Planning Council urging reversal in Nos. 83-1195, 83-2117, 83-2128 and 83-2319.

Diane L. McIntire, Washington, D.C., entered an appearance for amicus curiae Iowa State Commerce Com'n urging reversal in Nos. 83-1195, 83-2117, 83-2128, 83-2318 and 83-2319.

Before WALD and BORK, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge WALD.

CONTENTS Page I. BACKGROUND ............................................................ 1364 II. DOE'S DEFINITION OF "SIGNIFICANT CONSERVATION OF ENERGY" .............. 1369 A. The Development of DOE's Definition ................................ 1369 B. The Validity of DOE's Definition ................................... 1372 C. DOE's Rationale for its Definition ................................. 1377 III. DOE'S METHOD OF DETERMINING SAVINGS THAT WOULD RESULT FROM STANDARDS ............................................................. 1383 A. Statutory Authority for Subtracting "Base-Case" Savings From "Standards" Savings ................................................ 1384 B. The ORNL Model ..................................................... 1385 IV. MAXIMUM TECHNOLOGICAL FEASIBILITY ..................................... 1391 A. The Statute ........................................................ 1391 B. DOE's Treatment of Maximum Technologically Feasible Levels.......... 1392 C. DOE's Compliance with EPCA ......................................... 1394 1. DOE's Failure to Determine Maximum Technologically Feasible Levels .......................................................... 1394 2. DOE's Refusal to Consider Standards Based on All Technologically Feasible Design Options ......................................... 1396 a. Prototypes ................................................... 1396 b. Foreign Market Design Options ................................ 1403 c. The Five-Year Payback Period ................................. 1404 d. Lead Times ................................................... 1407 e. Specific Design Options ...................................... 1408 3. DOE's Reliance on 1980 Data ..................................... 1408 V. ECONOMIC JUSTIFICATION .................................................. 1410 A. DOE's Analysis of Benefits ........................................... 1410 1. DOE's Discussion of the Nation's Need to Save Electricity and Energy Savings .................................................... 1410 2. DOE's Use of a 10 Percent Real Discount Rate ...................... 1412

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3. DOE's Calculation of Benefits from Central Air Conditioner Standards ......................................................... 1414 a. Possible Reduction of Peak Load Electrical Demand .............. 1414 b. Failure to Consider High-Efficiency Models ..................... 1417 c. Flaws in Cost Efficiency Curve ................................. 1418 d. Hours of Operation ............................................. 1418 B. DOE's Analysis of Burdens ............................................ 1419 1. The Financial Impacts Model ....................................... 1419 2. The FIM Results for Central Air Conditioner Standards ............. 1422 3. Forgone Investment and Reductions in Performance or Utility........ 1424 C. DOE's Weighing of Burdens Against Benefits ........................... 1425 VI. DOE's REFUSAL TO ALLOW CROSS-EXAMINATION .............................. 1425 VII. DOE's FAILURE TO PREPARE AN ENVIRONMENTAL ASSESSMENT OR ENVIRONMENTAL IMPACT STATEMENT ...................................................... 1429 WALD, Circuit Judge.

The petitions in these consolidated cases require us to interpret section 325 of the Energy Policy and Conservation Act (EPCA or the Act), 42 U.S.C. Sec. 6295, which was enacted in 1975 as part of a "comprehensive national energy policy." S.Rep. No. 516, 95th Cong., 1st Sess. 116 (1975), U.S.Code Cong. & Admin.News 1975, p. 1762 (conference report). In its initial version, section 325 required the Federal Energy Administrator to prescribe energy efficiency improvement targets for thirteen named household appliances, called "covered products." See EPCA Sec. 325(a)(1)-(2), Pub.L. No. 94-163, 89 Stat. 871, 923-24 (1975). 1 If the Administrator determined that manufacturers of any of the covered products were not likely to achieve the aggregate gain in efficiency specified in the target by 1980, he was directed to begin a proceeding to prescribe a mandatory "energy efficiency standard" for that appliance. See id. Sec. 325(a)(4)(A)-(B), 89 Stat. at 924.

In 1978, however, Congress amended EPCA to "eliminate[ ] the target approach and improve[ ] the procedures for establishing standards to ensure that efficiency improvements will be made expeditiously." H.R.Rep. No. 496, Pt. 4, 95th Cong., 1st Sess. 46 (1977), U.S.Code Cong. & Admin.News 1978, pp. 7659, 8493; see National Energy Conservation Policy Act (NECPA) Sec. 422, Pub.L. No. 95-619, 92 Stat. 3206, 3259 (1978). The amended version of section 325(a) orders the Secretary of Energy to prescribe energy efficiency standards for the thirteen covered products without first establishing industry targets. Under the Act, "[e]nergy efficiency standards for each type (or class) of covered products ... shall be designed to achieve the maximum improvement in energy efficiency which the Secretary determines is technologically feasible and economically justified." EPCA Sec. 325(c). If the Secretary prescribes a standard at a level lower than the maximum technologically feasible level, the Secretary must explain why that lower level was chosen. Id. Sec. 325(i)(3). The Act also declares that if, for any type or class of covered product, 2 a standard would not

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