Michael A. Klass

November 31, 2007

In another blow to both the Bush Administration and the automobile industry, the Ninth Circuit Court of Appeals recently voided fuel-economy standards promulgated by the National Highway Traffic Safety Administration (NHTSA or Agency).

Wielding the Energy Policy and Conservation Act of 1975 and the National Environmental Policy Act (NEPA), Petitioners—including eleven states, the District of Columbia, New York City, and four environmental groups—argued successfully that the Agency failed to adequately consider global warming in their rulemaking process. Petitioners also alleged that NEPA required the Agency to prepare an Environmental Impact Statement (as opposed to a less thorough Environmental Assessment).

The Court accepted NHTSA's use of a cost-benefit analysis to set fuel standards, but noted that the Agency "cannot put a thumb on the scale by undervaluing the benefits and overvaluing the costs of more stringent standards." The Court then found the Agency's conduct arbitrary and capricious in that it: (1) undervalued carbon emissions; (2) supplied no rationale for their wide range of carbon values; (3) failed to include CO2 dollar values while monetizing other uncertain benefits; (4) dismissed comments that monetizing carbon would not affect fuel standards; and (5) claimed without foundation that "downweighting" would cancel out any benefits gained from carbon reductions. In her conclusion, Judge Fletcher not only remanded the fuel-economy standards back to the Agency with an order to issue new standards, but the Court also found the underlying Environmental Assessment inadequate and ordered NHTSA to prepare a full Environmental Impact Statement.

Environmental advocates laud this decision as a rebuke of the current administration. However, it is noteworthy that the Department of Justice is currently considering appealing the case to the United States Supreme Court.

Even so, this decision, coupled with the recent string of judicial opinions, all of which include substantive discussion on global climate change, could indicate a shift in thinking among the judiciary. Judge Fletcher hinted at this when she wrote: "What was a reasonable balancing of competing statutory priorities twenty years ago may not be a reasonable balancing of those priorities today."

Sources:

Center for Biological Diversity v. National Highway Traffic Safety Admin., No. 06-71891, ___ F.3d ___, 2007 WL 3378240 (9th Cir. Nov. 15, 2007), available at http://graphics8.nytimes.com/packages/pdf/business/20071116_fuel_decision.pdf (last visited Nov. 25, 2007).

Felicity Barringer, Court Rejects Fuel-Economy Standards, N.Y. Times, Nov. 15, 2007, available at http://nytimes.com/2007/11/15/business/16fuel-web.html (last visited Nov. 25, 2007).

Matthew Yi, Truck, SUV Mileage Standards Thrown Out By U.S. Appeals Court, S. F. Chron., Nov. 16, 2007, at A1, available at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/11/16/MNHMTD7IA.DTL (last visited Nov. 25, 2007).