Short title

This Act may be cited as the

Fuel Economy Reform Act

Findings

Congress makes the following findings: (1)United States dependence on oil imports imposes tremendous burdens on America’s economy, foreign policy, and military. (2)According to the Energy Information Administration, 60 percent of the crude oil and petroleum products consumed in the United States between April 2005 and March 2006 (12,400,000 barrels per day) was imported. At a cost of $60 per barrel of oil, Americans remit an average of $500,000 per minute to other countries for petroleum, money that could have been spent creating domestic jobs and strengthening our Nation’s economy. (3)A significant percentage of these petroleum imports originate in countries controlled by regimes that are unstable or openly hostile to the interests of the United States. Dependence on production from these countries contributes to the volatility of domestic and global markets and the risk premium paid by American consumers. (4)The Energy Information Administration projects that the total petroleum demand in the United States will increase by 23 percent between 2006 and 2026, while domestic crude production is expected to decrease by 11 percent, resulting in an anticipated 28 percent increase in petroleum imports. Absent significant action, our Nation will become more vulnerable to oil price increases, more dependent upon foreign oil, and less able to pursue our national interests. (5)It is technically feasible to achieve oil savings of more than 2,500,000 barrels of oil per day by 2017 and 7,000,000 barrels of oil per day by 2026. This goal can be achieved by improving the gasoline efficiency of vehicles, replacing oil with cellulosic biofuels, and encouraging the use of public transit and other alternative transportation options. (6)Two-thirds of all domestic oil use occurs in the transportation sector, which is 97 percent reliant upon petroleum-based fuels. Passenger vehicles, including light trucks under 10,000 pounds gross vehicle weight, represent over 60 percent of the oil used in the transportation sector. (7)Corporate average fuel economy of all cars and trucks improved by 70 percent between 1975 and 1987. Between 1987 and 2006, fuel economy improvements have stagnated and are much worse than the vehicle fuel economy in many developed countries and some developing countries, including China. (8)Significant improvements in engine technology occurred between 1986 and 2006. These advances have been used to make vehicles larger and more powerful, rather than to increase fuel economy. Between 1985 and 2005, average vehicle horsepower nearly doubled, average vehicle weight increased by 25 percent, and acceleration times for new vehicles improved by 25 percent. During the same time period, average vehicle fuel economy decreased by 2 percent. (9)According to a 2002 fuel economy report by the National Academies of Science, improvements in automotive technology offer the opportunity to significantly increase fuel economy while maintaining vehicle size and performance and improving safety. The fleet analyzed by the Academies would be able to improve its fuel economy by 10–15 miles per gallon within 10–15 years using technologies that were commercially available in 2002. (10)The 2002 fuel economy study clearly states that fuel economy can be increased without negatively impacting the safety of America’s cars and trucks. Some new technologies can increase both safety and fuel economy (such as high strength materials, unibody design, lower bumpers). Design changes related to fuel economy also present opportunities to reduce the incompatibility of tall, stiff, heavy vehicles with the majority of vehicles on the road. (11)A 2004 report by David Greene of Oak Ridge National Labs entitled, The Effect of Fuel Economy on Automobile Safety: A Reexamination, demonstrates that fuel economy is not linked with increased fatalities. The report notes that, higher mpg is significantly correlated with fewer fatalities. In other words, a thorough analysis of data from 1966 to 2002 indicates that vehicle manufacturers can simultaneously increase fuel economy and improve vehicle safety. (12)A 2002 study entitled, An Analysis of Traffic Deaths by Vehicle Type and Model, by Marc Ross and Tom Wenzel from the University of Michigan, demonstrates that large vehicles do not have lower fatality rates than smaller vehicles. Ross and Wenzel analyzed Federal accident data between 1995 and 1999 and showed that the Honda Civic and Volkswagen Jetta both had lower fatality rates for the driver than the Ford Explorer, the Dodge Ram, or the Toyota 4Runner. Even the largest vehicles, such as the Chevrolet Tahoe and Suburban, had fatality rates that were no better than the Jetta or the Nissan Maxima. In other words, a well-designed compact car can be safer than a sport-utility vehicle or a pickup truck. Design, rather than weight, is the key to vehicle safety. (13)Significant change must occur to strengthen the economic competitiveness of the domestic auto industry. According to a recent study by the University of Michigan, a sustained gasoline price of $2.86 per gallon would lead Detroit’s Big 3 automakers’ profits to shrink by $7,000,000,000 as they absorb 75 percent of the lost vehicle sales. This would put nearly 300,000 Americans out of work.

Definition of automobile

(a)

In general

Section 32901(a)(3) of title 49, United States Code, is amended by striking rated at— and all that follows through the period at the end and inserting rated at not more than 10,000 pounds gross vehicle weight.. (b)

Fuel economy information

Section 32908(a) of title 49, United States Code, is amended, by striking section— and all that follows through (2) and inserting section, the term. (c)

Effective date

The amendments made by this section shall apply to model year 2009 and each subsequent model year.

Average fuel economy standards

(a)

Standards

Section 32902 of title 49, United States Code, is amended— (1)in subsection (a)— (A)in the header, by inserting

manufactured before model year 2012

after

Non-passenger automobiles

; and (B)by adding at the end the following: This subsection shall not apply to automobiles manufactured after model year 2011.; (2)in subsection (b)— (A)in the header, by inserting

manufactured before model year 2012

after

Passenger automobiles

; (B)by inserting and before model year 2009 after 1984; and (C)by adding at the end the following: Such standard shall be increased by 4 percent per year for model years 2009 through 2011 (rounded to the nearest 1/10 mile per gallon); (3)by amending subsection (c) to read as follows:

(c)

Automobiles manufactured after model year 2011

(1)Not later than 18 months before the beginning of each model year after model year 2011, the Secretary of Transportation shall prescribe, by regulation— (A)an average fuel economy standard for automobiles manufactured by a manufacturer in that model year that is the same for each manufacturer; or (B)based on 1 or more vehicle attributes that relate to fuel economy— (i)separate standards for different classes of automobiles; or (ii)standards expressed in the form of a mathematical function.

Any standards prescribed under subparagraph (B) shall apply equally to all manufacturers.

(2)(A)Except as provided under paragraph (3) and subsection (d), standards under paragraph (1) shall attain— (i)a projected level of average fuel economy of at least 27.5 miles per gallon for automobiles manufactured by a manufacturer for model year 2012; and (ii)a projected level of average fuel economy of at least 35 miles per gallon for automobiles manufactured by a manufacturer for model year 2018. (B)(i)The projected level of average fuel economy for automobiles manufactured by a manufacturer for model year 2013 and each succeeding model year shall be increased by not less than 4 percent from the level for the prior model year (rounded to the nearest 1/10 mile per gallon). (ii)(I)Notwithstanding clause (i), the Secretary of Transportation may increase the projected level of average fuel economy for automobiles manufactured by a manufacturer by less than 4 percent from the level for the prior model year for 1 or more model years if the Secretary of Transportation, in consultation with the Secretary of Energy, determines that— (aa)the minimum increase required under clause (i) for each model year— (AA)is technologically unachievable; or (BB)is shown, by clear and convincing evidence, not to be cost effective (as determined under paragraph (4)); and (bb)an increase of less than the minimum increase required under clause (i) for a model year will not result in a failure to attain the projected levels of average fuel economy required under subparagraph (A). (II)If a lower increase is prescribed for a model year under subclause (I), such increase shall be the maximum increase that— (aa)is technologically achievable; and (bb)is cost effective. (C)Notwithstanding subparagraphs (A) and (B), the fleetwide average fuel economy standard for automobiles manufactured by a manufacturer in a model year for that manufacturer’s domestic fleet and for its foreign fleet as calculated under section 32904 as in effect before the date of enactment of the Fuel Economy Reform Act shall not be less than 92 percent of the average fuel economy projected by the Secretary for the combined domestic and foreign fleets manufactured by that manufacturer in that model year. (3)(A)In determining cost effectiveness under paragraph (2)(B)(ii), the Secretary of Transportation shall take into account the total value to the Nation of reduced petroleum use, including the value of reducing external costs of petroleum use, using— (i)a value for such external costs equal to 50 percent of the value of a gallon of gasoline saved; or (ii)the amount determined in an analysis of the external costs of petroleum use that considers— (I)value to consumers; (II)economic security; (III)national security; (IV)foreign policy; (V)the impact of oil use— (aa)on sustained cartel rents paid to foreign suppliers; (bb)on long-run potential gross domestic product due to higher normal-market oil price levels, including inflationary impacts; (cc)on import costs, wealth transfers, and potential gross domestic product due to increased trade imbalances; (dd)on import costs and wealth transfers during oil shocks; (ee)on macroeconomic dislocation and adjustment costs during oil shocks; (ff)on the cost of existing energy security policies, including the management of the Strategic Petroleum Reserve; (gg)on the timing and severity of the oil peaking problem; (hh)on the risk, probability, size, and duration of oil supply disruptions; (ii)on OPEC strategic behavior and long-run oil pricing; (jj)on the short term elasticity of energy demand and the magnitude of price increases resulting from a supply shock; (kk)on oil imports, military costs, and related security costs, including intelligence, homeland security, sea lane security and infrastructure, and other military activities; (ll)on oil imports, diplomatic and foreign policy flexibility, and connections to geopolitical strife, terrorism, and international development activities; (mm)all relevant environmental hazards under the jurisdiction of the Environmental Protection Agency; and (nn)on well-to-wheels urban and local air emissions of pollutants and their uninternalized costs; (VI)the impact of the oil or energy intensity of the United States economy on the sensitivity of the economy to oil price changes, including the magnitude of gross domestic product losses in response to short term price shocks or long term price increases; (VII)the impact of United States payments for oil imports on political, economic, and military developments in unstable or unfriendly oil exporting countries; (VIII)the uninternalized costs of pipeline and storage oil seepage, and for risk of oil spills from production, handling, and transport, and related landscape damage; and (IX)additional relevant factors, as determined by the Secretary. (B)When considering the value to consumers of a gallon of gasoline saved, the Secretary of Transportation may not use a value less than the greatest of— (i)the average national cost of a gallon of gasoline sold in the United States during the 12-month period ending on the date on which the new fuel economy standard is proposed; (ii)the most recent weekly estimate by the Energy Information Administration of the Department of Energy of the average national cost of a gallon of gasoline (all grades) sold in the United States; or (iii)the gasoline prices projected by the Energy Information Administration for the 20-year period beginning in the year following the year in which the standards are established. (4)In prescribing standards under this subsection, the Secretary may prescribe standards for 1 or more model years. (5)(A)Not later than December 31, 2009, the Secretary of Transportation, the Secretary of Energy, and the Administrator of the Environmental Protection Agency shall submit a joint report to Congress on the state of global automotive efficiency technology development, and on the accuracy of tests used to measure fuel economy of automobiles under section 32904(c), utilizing the study and assessment of the National Academy of Sciences referred to in subparagraph (B). (B)The Secretary shall enter into appropriate arrangements with the National Academy of Sciences to conduct a comprehensive study of the technological opportunities to enhance fuel economy and an analysis and assessment of the accuracy of fuel economy tests used by the Administrator of the Environmental Protection Agency to measure fuel economy for each model under section 32904(c). Such analysis and assessment shall identify any additional factors or methods that should be included in tests to measure fuel economy for each model to more accurately reflect actual fuel economy of automobiles. The Secretary and the Administrator of the Environmental Protection Agency shall furnish, at the request of the Academy, any information which the Academy determines to be necessary to conduct the study, analysis, and assessment under this subparagraph. (C)The report submitted under subparagraph (A) shall include— (i)the study of the National Academy of Sciences referred to in subparagraph (B); and (ii)an assessment by the Secretary of technological opportunities to enhance fuel economy and opportunities to increase overall fleet safety. (D)The report submitted under subparagraph (A) shall identify and examine additional opportunities to reform the regulatory structure under this chapter, including approaches that seek to merge vehicle and fuel requirements into a single system that achieves equal or greater reduction in petroleum use and environmental benefits. (E)The report submitted under subparagraph (A) shall— (i)include conclusions reached by the Administrator of the Environmental Protection Agency, as a result of detailed analysis and public comment, on the accuracy of current fuel economy tests; (ii)identify any additional factors that the Administrator determines should be included in tests to measure fuel economy for each model to more accurately reflect actual fuel economy of automobiles; and (iii)include a description of options, formulated by the Secretary and the Administrator, to incorporate such additional factors in fuel economy tests in a manner that will not effectively increase or decrease average fuel economy for any automobile manufacturer. (F)There is authorized to be appropriated to the Secretary such amounts as are required to carry out the study, analysis, and assessment required by subparagraph (B).

; and

(4)in subsection (g)(2), by striking (and submit the amendment to Congress when required under subsection (c)(2) of this section). (b)

Conforming amendments

(1)

In general

Chapter 329 of title 49, United States Code, is amended— (A)in section 32903— (i)by striking passenger each place it appears; (ii)by striking section 32902(b)–(d) of this title each place it appears and inserting subsection (c) or (d) of section 32902; (iii)by striking subsection (e); and (iv)by redesignating subsection (f) as subsection (e); and (B)in section 32904(a)— (i)by striking passenger each place it appears; and (ii)in paragraph (1), by striking subject to and all that follows through section 32902(b)–(d) of this title and inserting subsection (c) or (d) of section 32902. (2)

Effective date

The amendments made by paragraph (1) shall apply to automobiles manufactured after model year 2011.

Automobile safety

Nothing in this Act shall be construed to limit, constrain, supercede, or expand the authority of the Secretary of Transportation to prescribe motor vehicle safety standards to reduce traffic accidents and deaths and injuries resulting from traffic accidents conferred by chapter 301 of title 49, United States Code.