The crafting of the National Low-Emission Vehicle program: a private contract theory of public rulemaking.

• Author: Fern, Danielle F.

I.

INTRODUCTION

Under the Clean Air Act Amendments of 1990 ("CAA"),(1) the United States Environmental Protection Agency ("U.S. EPA" or "EPA") is expressly prohibited from enforcing more stringent motor vehicle emissions standards until the year 2004.(2) However, Congress granted the State of California a preemption waiver permitting that state alone to adopt stricter standards.(3) Congress further granted other states the authority under the CAA to adopt any emissions standards adopted by California.(4) Thus, while states other than California cannot choose to implement their own vehicle emissions standards, they do have the power to adopt the California standards in place of the applicable federal standards.

In 1990, California adopted the Low-Emission Vehicle ("CAL LEV") program.(5) Following its adoption, a number of states in the Northeast, as well as Texas, Michigan, Illinois, and Wisconsin, began to consider adopting California's standards. The Northeast states, empowered to act together under the CAA as the Ozone Transport Commission ("OTC"), adopted a Memorandum of Understanding agreeing to adopt the CAL LEV program.(6) Of these states, only Massachusetts and New York actually succeeded in implementing the program. Auto manufacturers (both U.S. and foreign industry groups) protested the OTC's actions and, in response, proposed an alternative to regional adoption of the California LEV program. The U.S. EPA reacted by supporting compromise negotiations between the states and the auto industry. These negotiations resulted in the creation of the National Low-Emission Vehicle ("NLEV") program.(7)

The NLEV program, if implemented, would apply in all 49 states other than California. Since the program incorporates requirements for more stringent auto emissions standards prior to 2004 (contrary to the CAA ban), the U.S. EPA seems to lack authority under the CAA to enforce the NLEV program. Provisions of the NLEV program purport, however, to create independent contract mechanisms, outside the realm of the CAA, that would permit the U.S. EPA to enforce the more stringent emissions standards. The U.S. EPA, in sum, has collaborated with state governments and auto manufacturers to negotiate a rule that neither was contemplated by Congress nor is suggested in the language of the CAA.

Adoption of the NLEV program raises several fundamental legal issues. First, does the U.S. EPA have the authority to implement and enforce a regulation that appears, on its face, unauthorized under federal statute? Second, does the EPA have the authority to utilize a rulemaking procedure that is inconsistent with statutory guidelines, such as those established in the Negotiated Rulemaking Act. Third, if the EPA does have the authority to use novel rulemaking procedures, do the U.S. EPA and the states have the legal authority to reach an agreement on a national regulation through informal negotiations between select states and auto manufacturers? Fourth, what is the efficacy of substituting private negotiation in place of public rulemaking?

A discussion of these legal questions begins with a survey of the path that the EPA, the states, and the auto manufacturers have traveled to arrive at the novel NLEV plan. To understand the negotiating stances of all parties involved in the NLEV rulemaking, it is important first to have a sense of the legislative, regulatory, and general political history that laid the groundwork for the NLEV negotiations. After describing the negotiating backdrop, this comment summarizes the substance of the NLEV program, followed by a discussion of the unorthodox rulemaking procedure that the EPA has used in crafting the rule. Finally, this comment considers the link between the EPA's unorthodox negotiating procedure and the unconventional NLEV rule. This comment concludes that the 1990 CAA excessively restricts the EPA's ability to react to changing air pollution control needs and technological advances. In the case of the NLEV rule, the EPA and state governments incorporated private contract theory into public rulemaking as a way to add needed flexibility to regulatory content. By resorting to a nontraditional administrative procedure, the EPA may have succeeded in circumventing the CAA's excessive statutory restrictions. But the EPA's method of creating flexibility may also come with the significant cost of constraining its ability to balance all public and private interests.

II.

FEDERAL LEGISLATIVE AND REGULATORY BACKDROP

1. Framework of the Clean Air Act

   The Clean Air Act ("CAA"), first promulgated in its current form in 1970 and most recently amended in 1990, created an overarching scheme of "cooperative federalism."(8) Under this scheme, the U.S. EPA initially must identify criteria air pollutants(9) and establish national ambient air quality standards ("NAAQS").(10) Section 108 of the CAA instructs the Administrator of the EPA to develop NAAQS for pollutants the Administrator determines "cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare."(11) The CAA then vests each state with the primary responsibility for formulating a plan to attain or maintain the NAAQS for each criteria air pollutant.(12) Section 110(a) of the CAA directs the individual states to submit to the EPA for approval a State Implementation Plan ("SIP") that specifies how the state intends to control emissions of the criteria air pollutants to meet the NAAQS.(13) Areas not meeting the NAAQS are classified as "nonattainment areas" under Section 107 of the CAA.(14)

   In formulating its SIP, each state must establish emissions standards or other pollution control measures to regulate the sources of criteria pollutants in the state.(15) The CAA divides sources of pollution into two primary categories: stationary sources, such as industrial stacks and vents; and mobile sources, comprised primarily of automobiles and trucks. The CAA grants the states relatively broad discretion to formulate standards and programs to regulate stationary sources. However, in order to avoid the possibility of manufacturers of mobile sources being unduly burdened by different standards and regulations in each state, Congress set standards for these sources at the federal level.(16) In deciding to establish federal motor vehicle emission standards, the Senate Committee on Public Works noted that permitting each state to set different standards "could result in chaos insofar as manufacturers, dealers, and users are concerned."(17)

   Title II of the CAA governs the regulation of mobile sources. In Section 202, Congress specifies detailed, national standards and regulations for new motor vehicles sold in the U.S.(18) This legislation scheduled Tier I standards for motor vehicle tailpipe emissions of CO, NOx, FIC, and PM to go into effect beginning in 1994, and required all light-duty vehicles and light-duty trucks sold in the U.S. to meet the federal Tier I emission standards by 1996.19 Section 202 further instructs EPA to conduct a study of "the need for further reductions in emissions in order to attain or maintain the national ambient air quality standards," taking into account the availability of technology for meeting more stringent standards and alternative means of meeting the NAAQS.(20) Based on this study, the EPA must then determine by December 31, 1999, whether it needs to institute Tier II standards, whether the technology necessary for meeting more stringent standards will be available, and whether further emissions reductions would be cost-effective.(21) Section 202 emphasizes that "[i]t is the intent of Congress that the numerical emission standards specified in ... this section shall not be modified by the Administrator after the enactment of the Clean Air Act Amendments of 1990 for any model year before the model year 2004."(22) Section 202(b)(1)(C) thus bars the EPA from altering the Tier I standards before model year 2004.(23) Legislative history of the 1990 Amendments to the CAA illustrates that this proviso was a compromise measure to resolve a debate in the Senate about whether there should be a future round of more stringent emission standards.(24)

2. The California Exemption to Federal Preemption

   Section 209(a) of the CAA prohibits any state from adopting and enforcing its own motor vehicle emission standards.(25) Section 209(b) of the CAA then exempts from federal preemption any state that began regulating motor vehicle emissions before March 30, 1966.(26) When Congress incorporated section 209(b) into the 1970 CAA Amendments, Congress clearly was targeting the proviso specifically for California, which was the only state that could qualify as a pre-1966 regulator.(27) Recognizing that California's "unique problems and pioneering efforts" warranted a waiver from preemption, Congress exempted the state from federal preemption over the adamant objection of the auto industry, which sought a uniform national standard to avoid excessive economic burden.(28)

   In the 1977 Amendments to the CAA, Congress amended section 209(b) to require that EPA grant California a waiver from federal preemption only if the State's standards, in the aggregate, protected public health at least as well as the federal standards.(29) Moving slightly away from the initial purpose of preserving California's pioneering role, the 1977 Amendments further added Section 177, which permits other states to opt into the California standards once the EPA has granted California a waiver from federal preemption.(30) In granting states this new opt-in authority, Congress recognized the extreme difficulty many states with "serious" nonattainment areas face in trying to formulate SIPs that could achieve the NAAQS.

   Intending to minimize the burden placed on manufacturers of motor vehicles, however, Congress carefully circumscribed the section 177 opt-in authority by requiring that a state's standards be identical to...