Zero Zone, Inc. v. U.S. Dep't of Energy

• Decision Date: 08 August 2016
• Docket Number: Nos. 14-2147,14-2334,14-2159 &amp,s. 14-2147
• Citation: 832 F.3d 654
• Parties: Zero Zone, Inc., et al., Petitioners, v. United States Department of Energy, et al., Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

832 F.3d 654

Zero Zone, Inc., et al., Petitioners,
v.
United States Department of Energy, et al., Respondents.

Nos. 14-2147
14-2159 &
14-2334

United States Court of Appeals, Seventh Circuit.

Argued September 30, 2015
Decided August 8, 2016

Jeffrey Stewart Longsworth, Attorney, Barnes & Thornburg LLP, Jeffrey Bossert Clark, Sr., Attorney, Kirkland & Ellis LLP, Washington, DC, for Petitioners.

Lindsey Powell, Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Respondents.

Denise Antonia Grab, Attorney, Institute for Policy Integrity, New York University School of Law, New York, NY, for Amicus Curiae Institute for Policy Integrity.

Before Bauer, Ripple, and Rovner, Circuit Judges.

Ripple, Circuit Judge.

TABLE OF CONTENTS

I. Background...––––

A. Statutory and Regulatory Context...––––

1. Energy Policy and Conservation Act...––––

2. Energy Policy Act of 2005...––––

3. 2009 Final Rule...––––

4. American Energy Manufacturing Technical Corrections Act...––––

B. The New Standards Rule...––––

C. The 2014 Test Procedure Rule...––––

D. Petitions for Review...––––

II. Discussion...––––

A. Engineering Analysis...––––

1. Notice and Comment...––––

2. Compressors...––––

3. Insulation Foam Thickness...––––

4. Validation...––––

B. Economic Analysis...––––

1. Elasticity...––––

2. Environmental Benefits...––––

3. Cost-Benefit Analysis...––––

4. Anticompetitive Effects...––––

C. Regulatory Flexibility Analysis...––––

D. Cumulative Regulatory Burden...––––

1. EPA Significant New Alternatives Policy Program...––––

2. ENERGY STAR Program...––––

E. 2014 Test Procedure Rule...––––

1. Conformity to Industry Standards...––––

2. Operation of the Rule...––––

3. Procedural Challenges...––––

Conclusion...––––

The United States Department of Energy (“DOE”) published two final rules aimed at improving the energy efficiency of commercial refrigeration equipment (“CRE”).¹ The first rule adopted new energy

832 F.3d 661

efficiency standards for CRE. 79 Fed. Reg. 17,726 (Mar. 28, 2014) (the “New Standards Rule”). The second rule, issued a month later, clarified the test procedures that DOE uses to implement those standards. 79 Fed. Reg. 22,278 (Apr. 21, 2014) (the “2014 Test Procedure Rule”).

Petitioners Zero Zone, Inc. (“Zero Zone”), a small business specializing in CRE, and Air-Conditioning, Heating and Refrigeration Institute (“AHRI”), a trade association of CRE manufacturers, petitioned for review of both rules. Petitioner North American Association of Food Equipment Manufacturers (“NAFEM”), another trade association of CRE manufacturers, petitioned for review of the first rule. AHRI and Zero Zone moved to consolidate the cases, and we granted the motion.²

Petitioners challenge both the decisionmaking process and the substance of the final rules. Upon review of those challenges, we conclude that DOE acted in a manner worthy of our deference. The New Standards Rule is premised on an analytical model that is supported by substantial evidence and is neither arbitrary nor capricious. DOE conducted a cost-benefit analysis that is within its statutory authority and is supported by substantial evidence. Its methodology and conclusions were not arbitrary or capricious. It also gave appropriate consideration to the rule's effect on small businesses and the role of other agency regulations. DOE similarly acted within its authority, and within reason, when it promulgated the 2014 Test Procedure Rule. For these reasons, we deny the petitions in their entirety.

I

BACKGROUND

A. Statutory and Regulatory Context

1. Energy Policy and Conservation Act

The Energy Policy and Conservation Act (“EPCA”), Pub. L. No. 94–163, §§ 321–339, 89 Stat. 871, 917–32 (1975) (codified as amended at 42 U.S.C. §§ 6201 –6422 ) was enacted in part to improve the energy efficiency of specific types of equipment and appliances. § 2(5), 89 Stat. at 874. Congress enacted the

832 F.3d 662

EPCA in the wake of the 1973–1974 embargo of petroleum exports to the United States by the Organization of Arab Petroleum Exporting Countries. S. Rep. No. 94-26, at 26 (1975). It viewed the embargo as presenting a need for “legislation which would facilitate the reduction of the nation's petroleum consumption through energy conservation.” Id. at 27; see also H.R. Rep. No. 94-340, at 1 (1975) (“This legislation is directed to the attainment of the collective goals of increasing domestic supply, conserving and managing energy demand , and establishing standby programs for minimizing this nation's vulnerability to major interruptions in the supply of petroleum imports.” (emphasis added)).

As originally enacted, the EPCA authorized the Federal Energy Administration (“FEA”)—the predecessor to DOE³ —to implement voluntary “energy efficiency improvement target[s]” that would encourage manufacturers to decrease the energy consumption of their equipment. Pub. L. No. 94–163, § 325, 89 Stat. 923 –26. However, Congress determined shortly thereafter that, “[u]nder the target approach, there would be little incentive by a manufacturer to exceed a target, and to do so might place a given manufacturer at a competitive disadvantage.” H.R. Rep. No. 95-496, at 45 (1977). It therefore amended the EPCA to impose mandatory energy conservation standards. National Energy Conservation Policy Act, Pub. L. No. 95–619, § 422, 92 Stat. 3206, 3259 (1978). As amended, the EPCA directs DOE to review these standards and implement new ones when appropriate. 42 U.S.C. §§ 6313(c), 6316(e), 6295(m).

When establishing new energy conservation standards, DOE must follow certain statutory requirements. First, standards may not “increase[ ] the maximum allowable energy use” of any individual unit. Id. § 6295(o)(1). Second, standards must be “designed to achieve the maximum improvement in energy efficiency” and be “technologically feasible and economically justified.” Id. § 6295(o)(2)(A). The EPCA explains that:

In determining whether a standard is economically justified, the Secretary shall, after receiving views and comments furnished with respect to the proposed standard, determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering—

(I) the economic impact of the standard on the manufacturers and on the consumers of the products subject to such standard;

(II) the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered products which are likely to result from the imposition of the standard;

(III) the total projected amount of energy, or as applicable, water, savings likely to result directly from the imposition of the standard;

(IV) any lessening of the utility or the performance of the covered products likely to result from the imposition of the standard;

(V) the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;

(VI) the need for national energy and water conservation; and

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(VII) other factors the Secretary considers relevant.

Id. § 6295(o)(2)(B)(I). The EPCA further explains that, for the purposes of determining anticompetitive effects, the Attorney General must submit his or her opinion in writing “not later than 60 days after the publication of a proposed rule” and that “[a]ny such determination and analysis shall be published by the Secretary in the Federal Register.” Id. § 6295(o)(2)(B)(ii).

The EPCA also charges DOE with establishing test procedures for measuring the energy use of covered equipment. Id. § 6314. Manufacturers must use these test procedures when determining whether their equipment complies with the applicable energy conservation standards. Id. §§ 6295(s), 6316(e)(1). According to the EPCA:

(1) The Secretary shall, not later than 3 years after the date of prescribing a test procedure under this section (and from time to time thereafter), conduct a reevaluation of such procedure and, on the basis of such reevaluation, shall determine if such test procedure should be amended. In conducting such reevaluation, the Secretary shall take into account such information as he deems relevant, including technological developments relating to the energy efficiency of the type (or class) of covered equipment involved.

(2) If the Secretary determines under paragraph (1) that a test procedure should be amended, he shall promptly publish in the Federal Register proposed test procedures incorporating such amendments and afford interested persons an opportunity to present oral and written data, views, and arguments. Such comment period shall not be less than 45 days' duration.

Id. § 6314(c).

2. Energy Policy Act of 2005...