Gas Appliance Mfrs. Ass'n, Inc. v. Department of Energy

• Decision Date: 27 July 1993
• Docket Number: No. 91-5393,91-5393
• Citation: 998 F.2d 1041
• Parties: GAS APPLIANCE MANUFACTURERS ASSOCIATION, INC., et al., Appellants, v. DEPARTMENT OF ENERGY.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1041

998 F.2d 1041

302 U.S.App.D.C. 406

GAS APPLIANCE MANUFACTURERS ASSOCIATION, INC., et al., Appellants, v. DEPARTMENT OF ENERGY.

No. 91-5393.

United States Court of Appeals, District of Columbia Circuit.

Argued May 21, 1993.

Decided July 27, 1993.

David W. Brown, Washington, DC, argued the cause, for appellants.

Thomas S. Rees, Asst. U.S. Atty., Washington, DC, argued the cause, for appellee. With him on the brief were J. Ramsey Johnson, U.S. Atty., John D. Bates and R. Craig Lawrence, Asst. U.S. Attys., Washington, DC.

Before: RUTH BADER GINSBURG, WILLIAMS and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.

Concurring opinion filed by Circuit Judge RUTH BADER GINSBURG.

STEPHEN F. WILLIAMS, Circuit Judge:

When heated water sits in a water heater in a cooler environment, it loses heat, i.e., energy, thus exemplifying the second law of thermodynamics. Under authority granted by the Energy Conservation Standards for New Buildings Act of 1976 ("Buildings Act"),42 U.S.C. §§ 6831-40 (1988), the Department of Energy promulgated "standby loss" rules to limit these losses in water heaters installed in new federal construction projects. The Gas Appliance Manufacturers Association ("GAMA") and five of its members challenge the Department's 1990 version of the rule, claiming its requirements are not in accord with the statutory authority and are arbitrary and capricious. Applying a concept developed from different statutory language in the context of occupational health regulation, the district court held that the rule conformed to the statutory mandate because it did not "threaten massive dislocation to, or imperil the existence of, the industry". Gas Appliance Manufacturers Ass'n v. Department of Energy, 773 F.Supp. 461, 466 (D.D.C.1991) (" GAMA II ") (internal quotations and citations omitted). Because the district court arrived at an incorrect statutory interpretation and DOE failed to apply the correct interpretation adequately, we reverse and remand to the district court with instructions to remand to DOE.

Background

The Buildings Act requires the Secretary of Energy to develop interim energy efficiency standards that are to be binding for new federal government construction projects but merely guidelines for others (though the others include state and local regulators). See 42 U.S.C. §§ 6833(a), 6835, 6839. DOE is to assure that the standards "are adequately analyzed in terms of energy efficiency, stimulation of use of nondepletable sources of energy, institutional resources, habitability, economic cost and benefit, and impact upon affected groups." 42 U.S.C. § 6839.

In 1987 DOE proposed revisions to its standby loss standards for commercial storage ¹ water heaters, cutting the maximum allowable standby loss to 1.9 W/sq ft (watts per square foot of tank surface area) for electric water heaters and to 1.3 + 38/V percent per hour for oil and gas water heaters. ² See 52 Fed.Reg. 17,175 (1987). In addition, DOE proposed to restrict the definition of non-storage water heaters so that some heaters formerly considered non-storage would become subject to the standards. These revisions followed a proposal by the American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. ("ASHRAE") to make its pre-existing standard, ASHRAE Standard 90.1-1980, more stringent. See ASHRAE Standard 90.1-1989 (1989). (The ASHRAE standards are developed by industry experts; the nature of their enforcement is not revealed by this record.) Although GAMA argued that the stricter 1987 proposal could not satisfy cost/benefit standards, DOE adopted it as final in 1989.

GAMA then filed the first of two suits against DOE in the United States district court. In Gas Appliance Manufacturers Ass'n, Inc. v. Secretary of Energy, 722 F.Supp. 792, 798 (D.D.C.1989) ("GAMA I "), the court set the standards aside, ruling that neither ASHRAE nor DOE had considered the Buildings Act's requirement that the regulations be " 'practicable' and justifiable in terms of economic cost and benefit and impact on affected groups." Id. at 797 (quoting 42 U.S.C. § 6831(b)(2) (1988) and drawing on § 6839). It enjoined enforcement of the rules and remanded the case for DOE to develop a statement of reasons, to allow for comment by interested parties, and then to issue its final rule and response to comments. Id. at 798.

On remand, DOE published a "Preliminary Statement of Reasons for Adoption of Standby Loss Criteria" ("Preliminary Statement"), 54 Fed.Reg. 49,724 (1989), as corrected, 54 Fed.Reg. 50,341 (1989), which attempted to defend the standards enjoined. GAMA criticized the Preliminary Statement as inadequate and proposed alternatives. Although DOE rejected appellants' proposal and kept the initial standard for oil and gas heaters, it relaxed the requirements for electric heaters from 1.9 W/sq ft to 3.0 W/sq ft. See 55 Fed.Reg. 23,842 (1990) ("Revised Rule").

GAMA responded with the present lawsuit, GAMA II. Rather than reviewing the decision in light of the statutory reference to economic costs and benefits, the court applied the two-step standard of United Steelworkers of America, AFL-CIO-CLC v. Marshall, 647 F.2d 1189, 1272 (D.C.Cir.1980), determining first that the standards were technologically feasible, and second that, because the federal water heater market was so small, the standard could not adversely affect a substantial part of the industry. GAMA II, 773 F.Supp. at 465-66. The court upheld the rule as within DOE's statutory authority and adequately explained. GAMA appealed.

During the pendency of the appeal, two relevant events occurred. First, ASHRAE agreed, in settlement of a case brought by GAMA, Gas Appliance Manufacturers Ass'n, Inc. v. American Soc'y of Heating, Refrigerating and Air-Conditioning Eng'rs, Inc., No. 89 Civ. 3319 (D.D.C. Dec. 11, 1989), to revise ASHRAE Standard 90.1-1989, adopting a new and relaxed standby loss standard for all commercial water heaters, ASHRAE Standard 90.1b-1992 (1992). Second, Congress adopted the new ASHRAE standard for all such equipment manufactured after January 1, 1994. Energy Policy Act of 1992, Pub.L. No. 102-486, § 122(d), 106 Stat. 2776, 2812 (1992) (42 U.S.C.A. § 6313(a)(5) (West Supp.1993)). For future federal construction projects, the 1992 Act directed DOE, within two years after enactment (on October 24, 1992), to adopt standards that "meet or exceed" those of ASHRAE Standard 90.1-1989, the new standards to take effect no less than a year after issuance. Id., § 101, 106 Stat. 2784-85 (1992) (42 U.S.C.A. § 6834(a)(1)-(2) (West Supp.1993)). The statute leaves the prior rules undisturbed until they are supplanted by the new ones (presumably about October 1995). 106 Stat. 2785 (42 U.S.C.A. § 6834(d)). Thus the issue is not moot.

Statutory Interpretation

The substantive criteria expressed in Steelworkers emerged as a construction of § 6(b)(5) of the Occupational Safety and Health Act, 29 U.S.C. § 655(b)(5), and are inapplicable to the standards to be issued under the Buildings Act. Whereas § 6(b)(5) concerns protection of human health and involves risks difficult to quantify, the Buildings Act concerns protection of energy resources and consumers, involves costs and benefits that are relatively easy to quantify, and explicitly asks that they be computed. Thus, while the OSH Act calls for standards stringent enough to safeguard workers from health risks in the workplace to the "extent feasible", id., the Buildings Act instead requires that standards be set to "achieve the maximum practicable improvements in energy efficiency", 42 U.S.C. § 6831 (emphasis added).

Both explicitly and implicitly, Congress made clear that the practicability of rules promulgated under the Buildings Act entails cost-benefit analysis. Congress declared explicitly that such standards must be "adequately analyzed in terms of ... economic cost and benefit, and impact upon affected groups." 42 U.S.C. § 6839. The Act's preamble emphasizes economic efficiency and makes clear that Congress was concerned with the economic impact of energy waste on consumers' pocketbooks--and on those of taxpayers as the ultimate suppliers of funds loaned by the government. "[T]he failure to provide adequate energy conservation measures in newly constructed buildings increases long-term operating costs that may affect adversely the repayment of, and security for, loans made, insured, or guaranteed by Federal agencies or ... regulated instrumentalities...." 42 U.S.C. § 6831(a)(3). Congress was thus concerned that the costs of energy waste were reducing the ability of mortgagors to meet their mortgage payments. This financial concern would hardly be well served by a standard that saved mortgagors $100 in annual energy bills at a capital cost that raised their mortgage payments by $120 a year.

Of course 42 U.S.C. § 6839 refers to factors other than "economic cost and benefit"; these include "energy efficiency, stimulation of use of nondepletable sources of energy, institutional resources, habitability, ... and impact on affected groups." There might be cases where the statute would allow one or several of the other factors to trump the cost/benefit analysis, justifying adoption of a standard with costs exceeding benefits. But perhaps not: "impact on affected groups" sounds like a constraint on stringency, at least if, as DOE and the district court supposed, Congress aimed to prevent undue disruption of the industry. See Appellee's Brief at 19 n. 9; GAMA II, 773 F.Supp. at 466 & n. 4. Three other factors, "stimulation of use of nondepletable sources of energy," "institutional resources," and "habitability," are subject to vague, speculative analysis at best (and "habitability" would seem to be captured in the costs and benefits). Only "energy efficiency" and "economic cost and benefit" are susceptible to comparatively precise analysis. Of these two, "energy efficiency"...