Center for Biolog. Div. V. Nat'L Highway Traffic

• Citation: 508 F.3d 508
• Decision Date: 15 November 2007
• Docket Number: No. 06-72694.,No. 06-71891.,No. 06-72317.,No. 06-73826.,No. 06-72641.,No. 06-73807.,06-71891.,06-72317.,06-72641.,06-72694.,06-73807.,06-73826.
• Parties: CENTER FOR BIOLOGICAL DIVERSITY, Petitioner, v. NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, Respondent. People of the State of California Ex Rel. Bill Lockyer, Attorney General; State of Connecticut; State of Maine; Commonwealth of Massachusetts; State of New Jersey; State of New Mexico; State of New York; State of Oregon; State of Rhode Island; State of Vermont; District of Columbia; City of New York, Petitioners, v. National Highway Traffic Safety Administration, an agency within the United States Department of Transportation, Respondents. State of Minnesota, Petitioner, v. National Highway Traffic Safety Administration, an agency within the United States Department of Transportation, Respondent. Sierra Club; Public Citizen, Inc., Petitioners, v. Department of Transportation, Respondent. Environmental Defense, Petitioner, v. Department of Transportation, Respondent. Natural Resources Defense Council, Inc., Petitioner, v. Department of Transportation, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

508 F.3d 508

CENTER FOR BIOLOGICAL DIVERSITY, Petitioner, v. NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, Respondent.

People of the State of California Ex Rel. Bill Lockyer, Attorney General; State of Connecticut; State of Maine; Commonwealth of Massachusetts; State of New Jersey; State of New Mexico; State of New York; State of Oregon; State of Rhode Island; State of Vermont; District of Columbia; City of New York, Petitioners, v. National Highway Traffic Safety Administration, an agency within the United States Department of Transportation, Respondents.

State of Minnesota, Petitioner, v. National Highway Traffic Safety Administration, an agency within the United States Department of Transportation, Respondent.

Sierra Club; Public Citizen, Inc., Petitioners, v. Department of Transportation, Respondent.

Environmental Defense, Petitioner, v. Department of Transportation, Respondent.

Natural Resources Defense Council, Inc., Petitioner, v. Department of Transportation, Respondent.

No. 06-71891.

No. 06-72317.

No. 06-72641.

No. 06-72694.

No. 06-73807.

No. 06-73826.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 14, 2007.

Filed November 15, 2007.

Patrick Gallagher, Sierra Club; Sean H. Donahue (argued), Environmental Defense; Aaron Colangelo, David Doniger, Margaret Renner, Natural Resources Defense Council for Public Interest petitioner-appellants on Energy Policy Conservation Act Issues.

Deborah A. Sivas, Holly D. Gordon, Stanford Law School Environmental Law Clinic; Kassia R. Siegel, Brendan R. Cummings, Center for Biological Diversity for Public Interest petitioner-appellants on National Environmental Policy Act Issues.

Edmund Brown, Jr., Thomas Greene, Theodora Berger, Ken Alex, Susan S. Fiering (argued), Office of the Attorney General of California; Richard Blumenthal, Kimberly Massicotte, Jose Suarez, Office of the Attorney General of Connecticut; G. Steven Rowe, Gerald D. Reid, Office of the Attorney General of Maine; Thomas F. Reilly, William L. Pardee, Matthew Brock, Office of the Attorney General of Massachusetts; Stuart Rabner, Howard Geduldig, Lisa J. Morelli, Office of the Attorney General of New Jersey; Patricia A. Madrid, Stephen R. Farris, Office of the Attorney General of New Mexico; Eliot Spitzer, Caitlin Halligan, Jared Snyder, Office of the Attorney General of New York; Hardy Myers, Philip Schradle, Richard M. Whitman, Office of the Attorney General of Oregon; Patrick C. Lynch, Tricia K. Jedele, Office of the Attorney General of Rhode Island; William H. Sorrell, Kevin O. Leske, Office of the Attorney General of Vermont; Eugene A. Adams, Todd S. Kim, Donna M. Murasky, Office of the Attorney General for the District of Columbia; Michael A. Cardozo, Susan M. Kath, Scott Pasternack, Tracy Triplett, Corporation Counsel for the City of New York; Mike Hatch, Ronald Gitek, Office of the Attorney General of Minnesota for petitioner-appellants in Consolidated Cases Nos. 06-72317 and 06-72641.

Rosalind A. Knapp, Paul M. Geier, Peter J. Plocki, Anthony M. Cooke, Lloyd S. Guerci, Katherine C. Gehringer, Timothy H. Goodman, David W. Case, National Highway Traffic Safety Administration, Department of Transportation; Peter D. Keisler, Matthew J. McKeown, Office of the U.S. Attorney General; Ronald M. Spritzer, Environment and Natural Resources Division; Douglas N. Letter, H. Thomas Byron (argued), U.S. Department of Justice, Civil Division for the respondent-appellees.

On Petition for Review of an Order of the Dept. of Transportation, NTSB.

Before: B. FLETCHER, EUGENE E. SILER, JR.,^* and HAWKINS, Circuit Judges.

BETTY B. FLETCHER, Circuit Judge:

Eleven states, the District of Columbia, the City of New York, and four public interest organizations petition for review of a rule issued by the National Highway Traffic Safety Administration (NHTSA) entitled "Average Fuel Economy Standards for Light Trucks, Model Years 2008-2011," 71 Fed.Reg. 17,566 (Apr. 6, 2006) ("Final Rule") (codified at 49 C.F.R. pt. 533). Pursuant to the Energy Policy and Conservation Act of 1975 (EPCA), 49 U.S.C. §§ 32901-32919 (2007), the Final Rule sets corporate average fuel economy (CAFE) standards for light trucks, defined by NHTSA to include many Sport Utility Vehicles (SUVs), minivans, and pickup trucks, for Model Years (MYs) 2008-2011. For MYs 2008-2010, the Final Rule sets new CAFE standards using its traditional method, fleet-wide average (Unreformed CAFE). For MY 2011 and beyond, the Final Rule creates a new CAFE structure that sets varying fuel economy targets depending on vehicle size and requires manufacturers to meet different fuel economy levels depending on their vehicle fleet mix (Reformed CAFE).

Petitioners challenge the Final Rule under the EPCA and the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. §§ 4321-4347 (2007).¹ First, they argue that the Final Rule is arbitrary, capricious, and contrary to the EPCA because (a) the agency's cost-benefit analysis does not set the CAFE standard at the "maximum feasible" level and fails to give due consideration to the need of the nation to conserve energy; (b) its calculation of the costs and benefits of alternative fuel economy standards assigns zero value to the benefit of carbon dioxide (CO2) emissions reduction; (c) its calculation of costs and benefits of alternative fuel economy standards fails to evaluate properly the benefit of vehicle weight reduction; (d) Reformed CAFE standards will depend on manufacturer fleet mix and not guarantee a minimum average fuel economy or "backstop"; (e) the transition period during which manufacturers may choose to comply with either Unreformed or Reformed CAFE is contrary to the "maximum feasible" requirement and unnecessary; (f) it perpetuates the "SUV loophole," which allows SUVs, minivans and pickup trucks to satisfy a lower fuel economy standard than cars; and (g) it excludes most vehicles rated between 8,500 and 10,000 pounds gross vehicle weight (comprised mostly of large pickup trucks) from any fuel economy regulation, even though these vehicles satisfy the statutory criteria for regulation.

Second, Petitioners argue that NHTSA's Environmental Assessment is inadequate under NEPA because it fails to take a "hard look" at the greenhouse gas implications of its rulemaking and fails to analyze a reasonable range of alternatives or examine the rule's cumulative impact. Petitioners also argue that NEPA requires NHTSA to prepare an Environmental Impact Statement.

NHTSA argues that the Final Rule is not arbitrary and capricious or contrary to the EPCA, the Environmental Assessment's evaluation of the environmental consequences of its action is adequate, and an Environmental Impact Statement is not required.

We have jurisdiction under 49 U.S.C. § 32909(a) to review the Final Rule issued by NHTSA. We hold that the Final Rule is arbitrary and capricious, contrary to the EPCA in its failure to monetize the value of carbon emissions, failure to set a backstop, failure to close the SUV loophole, and failure to set fuel economy standards for all vehicles in the 8,500 to 10,000 gross vehicle weight rating ("GVWR") class. We also hold that the Environmental Assessment was inadequate and that Petitioners have raised a substantial question as to whether the Final Rule may have a significant impact on the environment. Therefore, we remand to NHTSA to promulgate new standards as expeditiously as possible and to prepare a full Environmental Impact Statement.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. CAFE Regulation Under the Energy Policy and Conservation Act

In the aftermath of the energy crisis created by the 1973 Mideast oil embargo, Congress enacted the Energy Policy and Conservation Act of 1975, Pub.L. No. 94-163, 89 Stat. 871, 901-16. See H.R.Rep. No. 94-340 at 1-3 (1975), as reprinted in 1975 U.S.C.C.A.N. 1762, 1763-65. Congress observed that "[t]he fundamental reality is that this nation has entered a new era in which energy resources previously abundant, will remain in short supply, retarding our economic growth and necessitating an alteration in our life's habits and expectations." Id. at 1763. The goals of the EPCA are to "decrease dependence on foreign imports, enhance national security, achieve the efficient utilization of scarce resources, and guarantee the availability of domestic energy supplies at prices consumers can afford." S.Rep. No. 94-516 (1975) (Conf. Rep.), as reprinted in 1975 U.S.C.C.A.N. 1956, 1957. These goals are more pressing today than they were thirty years ago: since 1975, American consumption of oil has risen from 16.3 million barrels per day to over 20 million barrels per day, and the percentage of U.S. oil that is imported has risen from 35.8 to 56 percent. NRDC Cmt. at 11;² see also 71 Fed.Reg. at 17,644.

In furtherance of the goal of energy conservation, Title V of the EPCA establishes automobile fuel economy standards. An "average fuel economy standard" (often referred to as a CAFE standard) is "a performance standard specifying a minimum level of average fuel economy applicable to a manufacturer in a model year." 49 U.S.C. § 32901(a)(6) (2007). Only "automobiles" are subject to fuel economy regulation, and passenger automobiles must meet a statutory standard of 27.5 mpg, 49 U.S.C. § 32902(b),³ whereas nonpassenger automobiles must meet standards set by the Secretary of Transportation, id. § 32902(a). Congress directs the Secretary to set fuel economy standards at "the maximum feasible average fuel economy level that the Secretary decides the manufacturers can achieve in that model year." Id. § 32902(a).⁴ Under this subsection, the Secretary is authorized to "prescribe separate standards for different classes of automobiles." Id. Congress also provides that "[w]hen deciding maximum feasible average fuel economy under this section, the Secretary of Transportation⁵ shall consider technological feasibility, economic practicability, the effect of other motor...