II 110th CONGRESS 1st Session S. 767 IN THE SENATE OF THE UNITED STATES March 6, 2007 Mr. Obama (for himself, Mr. Lugar, Mr. Biden, Mr. Smith, Mr. Bingaman, Mr. Coleman, and Mr. Specter) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation A BILL To increase fuel economy standards for automobiles and for other purposes.

1.

Short title

This Act may be cited as the Fuel Economy Reform Act.

2.

Findings

Congress makes the following findings: (1)United States dependence on oil imports imposes tremendous burdens on the economy, foreign policy, and military of the United States. (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) were imported. At a cost of $75 per barrel of oil, people in the United States remit more than $600,000 per minute to other countries for petroleum. (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 consumers in the United States. (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, the United States will become more vulnerable to oil price increases, more dependent upon foreign oil, and less able to pursue national interests. (5)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. (6)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 the fuel economy of the United States is lower than many developed countries and some developing countries. (7)Significant improvements in engine technology occurred between 1986 and 2006. These advances have been used to make vehicles larger and more powerful, and have not focused solely on increasing fuel economy. (8)According to a 2002 fuel economy report by the National Academy of Sciences, fuel economy can be increased without negatively impacting the safety of cars and trucks in the United States. 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. (9)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 people in the United States out of work. (10)Opportunities exist to strengthen the domestic vehicle industry while improving fuel economy. A 2004 study performed by the University of Michigan concludes that providing $1,500,000,000 in tax incentives over a 10-year period to encourage domestic manufacturers and parts facilities to produce clean cars will lead to a gain of nearly 60,000 domestic jobs and pay for itself through the resulting increase in domestic tax receipts.

3.

Definition of automobile and passenger automobile

(a)

Definition of automobile

(1)

In general

Paragraph (3) of section 32901(a) 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.. (2)

Fuel economy information

Section 32908(a) of such title is amended, by striking section— and all that follows through (2) and inserting section, the term. (3)

Effective date

The amendments made by paragraphs (1) and (2) shall apply to model year 2010 and each subsequent model year. (b)

Definition of passenger automobile

(1)

In general

Paragraph (16) of section 32901(a) of such title is amended by striking , but does not include and all that follows through the end and inserting a period. (2)

Effective date

The amendment made by paragraph (1) shall apply to model year 2012 and each subsequent model year.

4.

Average fuel economy standards

(a)

Standards

Section 32902 of title 49, United States Code, is amended— (1)in subsection (a)— (A)in the heading, by inserting manufactured before model year 2013 after Non-passenger automobiles; and (B)by adding at the end the following: This subsection shall not apply to automobiles manufactured after model year 2012.; (2)in subsection (b)— (A)in the heading, by inserting manufactured before model year 2013 after Passenger automobiles; (B)by inserting and before model year 2010 after 1984; and (C)by adding at the end the following: Such standard shall be increased by 4 percent per year for model years 2010 through 2012 (rounded to the nearest 1/10 mile per gallon); (3)by amending subsection (c) to read as follows: (c)

Automobiles manufactured after model year 2012

(1)(A)Not later than 18 months before the beginning of each model year after model year 2012, the Secretary of Transportation shall prescribe, by regulation— (i)an average fuel economy standard for automobiles manufactured by a manufacturer in that model year; or (ii)based on 1 or more vehicle attributes that relate to fuel economy— (I)separate average fuel economy standards for different classes of automobiles; or (II)average fuel economy standards expressed in the form of a mathematical function. (B)(i)Except as provided under paragraphs (3) and (4) and subsection (d), average fuel economy standards under subparagraph (A) shall attain a projected aggregate level of average fuel economy of 27.5 miles per gallon for all automobiles manufactured by all manufacturers for model year 2013. (ii)The projected aggregate level of average fuel economy for model year 2014 and each model year thereafter shall be increased by 4 percent over the level of the prior model year (rounded to the nearest 1/10 mile per gallon). (2)In addition to the average fuel economy standards under paragraph (1), each manufacturer of passenger automobiles shall be subject to an average fuel economy standard for passenger automobiles manufactured by a manufacturer in a model year that shall be equal to 92 percent of the average fuel economy projected by the Secretary for all passenger automobiles manufactured by all manufacturers in that model year. An average fuel economy standard under this subparagraph for a model year shall be promulgated at the same time as the standard under paragraph (1) for such model year. (3)If the actual aggregate level of average fuel economy achieved by manufacturers for each of 3 consecutive model years is 5 percent or more less than the projected aggregate level of average fuel economy for such model year, the Secretary may make appropriate adjustments to the standards prescribed under this subsection. (4)(A)Notwithstanding paragraphs (1) through (3) and subsection (b), the Secretary of Transportation may prescribe a lower average fuel economy standard for 1 or more model years if the Secretary of Transportation, in consultation with the Secretary of Energy, finds, by clear and convincing evidence, that the minimum standards prescribed under paragraph (1)(B) or (3) or subsection (b) for each model year— (i)are technologically not achievable; (ii)cannot be achieved without materially reducing the overall safety of automobiles manufactured or sold in the United States and no offsetting safety improvements can be practicably implemented for that model year; or (iii)is shown not to be cost effective. (B)If a lower standard is prescribed for a model year under subparagraph (A), such standard shall be the maximum standard that— (i)is technologically achievable; (ii)can be achieved without materially reducing the overall safety of automobiles manufactured or sold in the United States; and (iii)is cost effective. (5)In determining cost effectiveness under paragraph (4)(A)(iii), the Secretary of Transportation shall take into account the total value to the United States of reduced petroleum use, including the value of reducing external costs of petroleum use, using a value for such costs equal to 50 percent of the value of a gallon of gasoline saved or the amount determined in an analysis of the external costs of petroleum use that considers— (A)value to consumers; (B)economic security; (C)national security; (D)foreign policy; (E)the impact of oil use— (i)on sustained cartel rents paid to foreign suppliers; (ii)on long-run potential gross domestic product due to higher normal-market oil price levels, including inflationary impacts; (iii)on import costs, wealth transfers, and potential gross domestic product due to increased trade imbalances; (iv)on import costs and wealth transfers during oil shocks; (v)on macroeconomic dislocation and adjustment costs during oil shocks; (vi)on the cost of existing energy security policies, including the management of the Strategic Petroleum Reserve; (vii)on the timing and severity of the oil peaking problem; (viii)on the risk, probability, size, and duration of oil supply disruptions; (ix)on OPEC strategic behavior and long-run oil pricing; (x)on the short term elasticity of energy demand and the magnitude of price increases resulting from a supply shock; (xi)on oil imports, military costs, and related security costs, including intelligence, homeland security, sea lane security and infrastructure, and other military activities; (xii)on oil imports, diplomatic and foreign policy flexibility, and connections to geopolitical strife, terrorism, and international development activities; (xiii)on all relevant environmental hazards under the jurisdiction of the Environmental Protection Agency; and (xiv)on well-to-wheels urban and local air emissions of pollutants and their uninternalized costs; (F)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; (G)the impact of United States payments for oil imports on political, economic, and military developments in unstable or unfriendly oil exporting countries; (H)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 (I)additional relevant factors, as determined by the Secretary. (6)When considering the value to consumers of a gallon of gasoline saved, the Secretary of Transportation may not use a value that is less than the greatest of— (A)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; (B)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 (C)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. (7)In prescribing standards under this subsection, the Secretary may prescribe standards for 1 or more model years. (8)(A)Not later than December 31, 2016, 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 of Transportation 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 of Transportation and the Administrator of the Environmental Protection Agency shall furnish, at the request of the Academy, any information that 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 Transportation 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 than the amount of petroleum use and environmental benefits that have been achieved as of the date of the enactment of this Act. (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 fuel economy tests as in use during the period beginning on the date that is 5 years before the completion of the report and ends on the date of such completion; (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 of Transportation 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. ; 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— (i)in subsection (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 subject to subsection (c) or (d) of section 32902; and (ii)in subsection (b)(1)(B), by striking under this chapter and inserting under section 32902(c)(2). (2)

Effective date

The amendments made by this section shall apply to automobiles manufactured after model year 2012.

5.

Credit trading, compliance, and judicial review

(a)

Credit trading

Section 32903(a) of title 49, United States Code, is amended— (1)by inserting Credits earned by a manufacturer under this section may be sold to any other manufacturer and used as if earned by that manufacturer, except that credits earned by a manufacturer described in clause (i) of section 32904(b)(1)(A) may only be sold to a manufacturer described such clause (i) and credits earned by a manufacturer described in clause (ii) of such section may only be sold to a manufacturer described in such clause (ii). after earns credits.; (2)by striking 3 consecutive model years immediately each place it appears and inserting model years; and (3)effective for model years after 2012, the sentence added by paragraph (1) of this subsection is amended by inserting for purposes of compliance with section 32902(c)(2) after except that. (b)

Multi-year compliance period

Section 32904(c) of such title is amended— (1)by inserting (1) before The Administrator; and (2)by adding at the end the following: (2)The Secretary, by rule, may allow a manufacturer to elect a multi-year compliance period of not more than 4 consecutive model years in lieu of the single model year compliance period otherwise applicable under this chapter. . (c)

Judicial review of regulations

Section 32909(a)(1) of such title is amended by striking out adversely affected by and inserting aggrieved or adversely affected by, or suffering a legal wrong because of,.