Gas Appliance Mfrs. Ass'n v. Secretary of Energy, Civ. A. No. 89-1315.

• Decision Date: 06 October 1989
• Docket Number: Civ. A. No. 89-1315.
• Citation: 722 F. Supp. 792
• Parties: GAS APPLIANCE MANUFACTURERS ASSOCIATION, INC., et al., Plaintiffs, v. SECRETARY OF ENERGY, Defendant.
• Court: U.S. District Court — District of Columbia

722 F. Supp. 792

GAS APPLIANCE MANUFACTURERS ASSOCIATION, INC., et al., Plaintiffs, v. SECRETARY OF ENERGY, Defendant.

Civ. A. No. 89-1315.

United States District Court, District of Columbia.

October 6, 1989.

COPYRIGHT MATERIAL OMITTED

Robert A. Burka, David W. Brown, Washington, D.C., Joseph M. Mattingly, Arlington, Va., for plaintiffs.

Nathan Dodell, Asst. U.S. Atty., Washington, D.C., for defendant.

MEMORANDUM

GESELL, District Judge.

Plaintiffs Gas Appliance Manufacturers Association ("GAMA"), a trade association representing almost 100 percent of U.S. manufacturers of water heaters, and six individual manufacturers attack an Interim Rule issued by the Secretary of Energy. The rule establishes efficiency standards for water heaters to be used in new federal government construction. These requirements are a minuscule part of a comprehensive regulation setting efficiency standards for numerous components of federal buildings. GAMA contends that the water heater regulations mandate a small increase in energy efficiency that is not cost-effective because excessive capital expenses would be required to develop water heaters that comply. In support of this position, GAMA notes that the Secretary wholly failed to address its objections in the rulemaking proceeding and relied on outside studies without stating any reasons for adopting the conclusions of those studies in the face of factual, informed objections. The Secretary disputes GAMA's claims.

The issues are before the Court on the relevant administrative rulemaking record and cross-motions for summary judgment which have been fully briefed and argued.

I

The challenged portion of the Interim Rule, which was published January 30, 1989 at 54 Fed.Reg. 4538, is found in Section 9.3.2 and part of Table 9.3-1. Under this DOE Interim Rule, within 180 days of the July 31, 1989, effective date, federal agencies must design all future federal commercial and multi-family high rise residential buildings in accordance with the standards. The standards are mandatory only for federal buildings, but the Secretary is recommending that states and manufacturers follow suit, and GAMA argues that these other sectors will respond to this recommendation. The potential injury to GAMA's member firms is substantial if the challenged rule is upheld.

The Court has jurisdiction pursuant to the Administrative Procedure Act, 5 U.S.C. sections 553, 701 et seq. Under the APA, the Court must set aside agency action that is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.¹ The scope of review under this standard is narrow and a court should not substitute its judgment for the agency's; nevertheless, the agency must demonstrate a rational connection between the facts found and the decision made. Motor Vehicle Manufacturers Association v. State Farm Mutual Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983).

II

The relevant material facts are not in dispute.

The DOE Interim Rule carried out a statutory mandate to set minimum performance criteria for most aspects of energy use in federal buildings found in the Energy Conservation Standards For New Buildings Act of 1976, 42 U.S.C. § 6833. After some delays and amendments to the Act, DOE moved forward with an effort that culminated in the 1989 Interim Rule.

The portion of the regulations at issue here set "standby loss requirements" for gas, oil and electric commercial storage water heaters, i.e. efficiency standards for the loss of heat experienced by a water heater while holding heated water not immediately being drawn down.

Since 1983, the Secretary has relied heavily on standards developed under the auspices of the American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. ("ASHRAE"). The standby loss requirements at issue here were first published in a 1987 Proposed Interim Rule. They were explicitly based on new energy performance standards developed and proposed by the ASHRAE Standing Standard Project Committee ("the ASHRAE committee"), which since 1984 had been conducting research on energy performance standards on a parallel track and in close cooperation with DOE. The new standards under attack in this case are more stringent than previous standards proposed by either DOE or ASHRAE.

GAMA filed written comments with DOE criticizing the standby loss criteria of the Proposed Interim Rule and testified at one of the three public hearings DOE held on the rule. In its written comments, GAMA stated:

The standby loss requirements proposed in Table 9.3-1 for commercial water heaters are far too stringent. Neither DOE nor ASHRAE has analyzed the practical or economic impact of these proposed standards. GAMA knows of no currently available commercial water heaters that would comply with these requirements.

The comments went on to discuss briefly the difficulties in meeting the new requirements for electric, gas and oil commercial storage water heaters. GAMA was the only group or individual to submit comments on the proposed water heater standby loss standards.²

Apparently, DOE never contacted GAMA to discuss GAMA's objections. The 1989 Interim Rule adopted the standby loss standards of the Proposed Interim Rule without change.

III

GAMA never provided DOE with a detailed critique of the new standby loss standards or with a detailed argument for adopting an alternative standard, but that fact does not relieve DOE of its specific statutory duties with respect to justifying the new standards. Congress mandated, at section 501(b)(1) of the Department of Energy Organization Act, 42 U.S.C. § 7191, that the Secretary of Energy, in promulgating energy standards, must include a statement of "the research, analysis and other available information in support of, the need for, and the probable effect of any such proposed rule, regulation or order" and to include "an explanation responding to the major comments, criticisms, and alternatives offered during the comment period." Section 310 of the Act, 42 U.S.C. § 6839, specifically provides that such standards must be "adequately analyzed in terms of energy efficiency, ... economic cost and benefit, and impact on affected groups." In addition, section 302(b)(2), 42 U.S.C. § 6831(b)(2), requires DOE "to achieve the maximum practicable improvements in energy efficiency." With respect to the disputed standby loss criteria, DOE paid insufficient attention to these statutory mandates. The word "practicable" in section 302(b)(2) reinforces the requirement of section 310 that DOE take into account cost-benefit and constituency concerns and not simply sacrifice all other concerns to any reductions in energy use. Increased energy efficiency must be weighed against potential increases in overall dollar costs arising from new standards under some articulated formula.

The Interim Rule, commenting on all of the many standards contained therein, not specifically on the standby loss criteria, parrots the statutory language in stating that the standards are "designed to achieve maximum practicable improvements in energy efficiency." 54 Fed.Reg. at 4540. The Interim Rule also states that the various standards will "produce more energy efficient and cost-effective ... buildings."

However, there is only one brief paragraph in the 183-page Interim Rule and accompanying comments that addresses the water heater standby loss issue and GAMA's comments:

DOE received a comment that the standby loss requirements in Table 9.3-1 for residential oil water heaters are far too stringent.

DOE Response: Current research results indicate that the levels of stringency are well below the current state-of-the-art, that substantial improvement in efficiency can be made, and that the efficiency requirements of the interim standards are defensible.

DOE states that this provision is meant to address GAMA's concerns about commercial as well as residential water heaters and asserts that the inclusion of the word "residential" was inadvertent. DOE's explanation, if accepted, reveals its lack of focus on the standby loss requirements and lack of compliance with the Administrative Procedure Act. The sentence is conclusory and vague and therefore insufficient to justify the rule. The origin of the sentence appears to have been an August 1987 reply from a member of the ASHRAE committee responding to GAMA's critique of the ASHRAE committee standby loss standards; that reply stated in part:

Current research results show that the proposed levels of stringency are well below the state of the art of what can be produced in commercial water heaters given sufficient lead time 1992 sic.... In general, the Committee believes that substantial improvement can be made, and that the proposed efficiency requirements are defensible.

DOE now belatedly asserts that studies not in the formal rulemaking record were influential in the development of the standby loss standards. Although a court, in reviewing an agency decision, may consider extra-record materials if they were before the decisionmaker at the time of the decision, see, e.g., Walter O. Boswell Hospital v. Heckler, 749 F.2d 788, 793 (D.C. Cir.1984), there is a dispute as to whether these documents were before the Secretary when he approved the standby loss criteria. However, this dispute need not be settled for summary judgment purposes, because, in any event, it is clear that DOE's failure to put these studies in the public record denied GAMA any opportunity to comment on DOE's reliance on them. Moreover, at oral argument, DOE was unable to point to a specific study — either in the formal rulemaking record or in the...