[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Rules and Regulations]
[Pages 4776-4817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28956]



[[Page 4775]]

Vol. 86

Friday,

No. 10

January 15, 2021

Part X





Department of Energy





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10 CFR Parts 430 and 431





Energy Conservation Program for Appliance Standards: Energy 
Conservation Standards for Residential Furnaces and Commercial Water 
Heaters; Final Rule

  Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules 
and Regulations  

[[Page 4776]]


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DEPARTMENT OF ENERGY

10 CFR Parts 430 and 431

RIN 1904-AE39


Energy Conservation Program for Appliance Standards: Energy 
Conservation Standards for Residential Furnaces and Commercial Water 
Heaters

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notification of final interpretive rule.

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SUMMARY: In response to a petition for rulemaking submitted on October 
18, 2018 (Gas Industry Petition), the Department of Energy (DOE or the 
Department) published that petition in the Federal Register on November 
1, 2018, for public review and input. DOE subsequently published in the 
Federal Register a proposed interpretive rule on July 11, 2019, and a 
supplemental notice of proposed interpretive rule on September 24, 
2020. After carefully considering the public comments on its proposals, 
DOE has decided to issue a final interpretive rule determining that, in 
the context of residential furnaces, commercial water heaters, and 
similarly-situated products/equipment, use of non-condensing technology 
(and associated venting) constitute a performance-related ``feature'' 
under the Energy Policy and Conservation Act (EPCA) that cannot be 
eliminated through adoption of an energy conservation standard. In 
light of this final interpretation, published elsewhere in this issue 
of the Federal Register, DOE withdraws its March 12, 2015 proposed rule 
and September 23, 2016 supplemental proposed rule for energy 
conservation standards for non-weatherized gas furnace and mobile home 
gas furnaces, as well as its May 31, 2016 proposed rule for energy 
conservation standards for commercial water heating equipment.

DATES: This final interpretive rule is effective January 15, 2021.

ADDRESSES: The docket, which includes Federal Register notices, public 
comments, and other supporting documents/materials, is available for 
review at http://www.regulations.gov. All documents in the docket are 
listed in the http://www.regulations.gov index. However, not all 
documents listed in the index may be publicly available, such as 
information that is exempt from public disclosure.
    The docket web page can be found at http://www.regulations.gov/docket?D=EERE-2018-BT-STD-0018. The docket web page contains 
instructions on how to access all documents, including public comments, 
in the docket.
    For further information on how to review the docket, contact the 
Appliance and Equipment Standards Program staff at (202) 586-6636 or by 
email: [email protected].

FOR FURTHER INFORMATION CONTACT: 
    Ms. Lysia Bowling, Senior Advisor, U.S. Department of Energy, 
Office of Energy Efficiency and Renewable Energy, 1000 Independence 
Avenue SW, Washington, DC 20585. Telephone: (202) 430-1257. Email: 
[email protected].
    Mr. Eris Stas, U.S. Department of Energy, Office of the General 
Counsel, 1000 Independence Avenue SW, Washington, DC 20585. Telephone: 
(202) 586-5827. Email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Summary Description
    A. Relevant Statutory Provisions
    B. DOE's Historical Interpretation
    C. The Gas Industry Petition
    D. DOE's Proposed Interpretive Rule
    E. DOE's Supplemental Proposed Interpretive Rule
III. Response to Comments
    A. Legal Authority
    1. Legal Authority To Set Separate Product/Equipment Classes 
Based Upon Condensing and Non-Condensing Technologies
    a. Comments Supporting the Proposed Interpretation
    b. Comments Opposing the Proposed Interpretation
    i. Support for DOE's Prior Interpretation
    ii. Violation of Legal Standards
    iii. Aesthetics
    iv. Delay
    v. Regulatory Burden/Litigation/Uncertainty/Preemption
    vi. Other Negative Effects of a Change in Interpretation
    1. Legal Authority To Set ``Small'' Furnace Product Classes
    2. Market Trends
    3. Requests for Clarification
    B. Comments Regarding Economics-Related Issues
    1. Consumer Impacts
    a. Legal Arguments
    b. Factual Arguments
    2. Fuel Switching
    3. Other Economic Issues
    C. Analytical Issues
    D. Other Issues
    1. AFUE2
    2. Environmental and Climate Policy Issues
    3. Other Requested Relief
    4. Final Agency Action
IV. DOE's Final Interpretation
V. Conclusion
VI. Approval of the Office of the Secretary

I. Background

    On October 18, 2018, the Department received a petition for 
rulemaking submitted by the American Public Gas Association (APGA), 
Spire, Inc., the Natural Gas Supply Association (NGSA), the American 
Gas Association (AGA), and the National Propane Gas Association (NPGA), 
collectively referred to as the ``Gas Industry Petitioners,'' asking 
DOE to: (1) Issue an interpretive rule stating that DOE's proposed 
energy conservation standards for residential furnaces \1\ and 
commercial water heaters \2\ would result in the unavailability of 
``performance characteristics'' within the meaning of the Energy Policy 
and Conservation Act \3\ (EPCA; 42 U.S.C. 6291 et seq.), as amended 
(i.e., by setting standards which can only be met by products/equipment 
using condensing combustion technology and thereby precluding the 
distribution in commerce of products/equipment using non-condensing 
combustion technology) and (2) withdraw the proposed energy 
conservation standards for residential furnaces \4\ and commercial 
water heaters \5\ based upon such findings. DOE published the petition 
in the Federal Register on November 1, 2018 (83 FR 54883) and requested 
public comment, with a comment period scheduled to close on January 30, 
2019. DOE received two requests from interested parties seeking an 
extension of the comment period in order to develop additional data 
relevant to the petition. DOE

[[Page 4777]]

granted those requests through publication in the Federal Register of a 
notice extending the comment period on the notice of petition for 
rulemaking until March 1, 2019. 84 FR 449 (Jan. 29, 2019).
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    \1\ The Gas Industry Petitioners refer to a notice of proposed 
rulemaking for residential non-weatherized gas furnaces and mobile 
home furnaces published in the Federal Register on March 12, 2015 
(80 FR 13120), as well as a supplemental notice of proposed 
rulemaking published in the Federal Register on September 23, 2016 
(81 FR 65720). These DOE proposals may be found in the docket at 
Docket No. EERE-2014-BT-STD-0031-0032 and Docket No. EERE-2014-BT-
STD-0031-0230, respectively.
    \2\ The Gas Industry Petitioners refer to a notice of proposed 
rulemaking for commercial water heating equipment published in the 
Federal Register on May 31, 2016 (81 FR 34440). This DOE proposal 
may be found in the docket at Docket No. EERE-2014-BT-STD-0042-0018.
    \3\ All references to EPCA in this document refer to the statute 
as amended through America's Water Infrastructure Act of 2018, 
Public Law 115-270 (Oct. 23, 2018).
    \4\ Standards for non-weatherized residential furnaces were 
published in a notice of proposed rulemaking at 80 FR 13120 (March 
12, 2015) (Docket No. EERE-2014-BT-STD-0031-0032) and in a 
supplemental notice of proposed rulemaking at 81 FR 65720 (Sept. 23, 
2016) (Docket No. EERE-2014-BT-STD-0031-0230).
    \5\ Standards for commercial water heating equipment were 
published in a notice of proposed rulemaking at 81 FR 34440 (May 31, 
2016) (Docket No. EERE-2014-BT-STD-0042).
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    The 90-day public comment period, including the 30-day extension to 
submit comments, invited public input in order to better understand 
stakeholder perspectives and increase transparency around a complex 
issue involving DOE's legal authority. DOE received comments from a 
variety of stakeholders, including representatives from gas industry 
associations, appliance manufacturers, the manufactured housing 
industry, efficiency advocates, consumer advocates, State organizations 
and Attorneys General, and individuals (mostly form letter comments). 
In general, the gas industry associations and the manufactured housing 
industry supported the petition, and the advocates and State officials 
opposed it. Furnace and water heater manufacturer reactions to the 
petition were generally mixed.
    After carefully considering the comments on the petition, DOE 
published a notice of proposed interpretive rule in the Federal 
Register on July 11, 2019, to provide the public additional information 
about DOE's tentative interpretation of EPCA's ``features'' provision 
\6\ in the context of condensing vs. non-condensing furnaces and water 
heaters, as informed by public comments. 84 FR 22011. The proposed 
interpretive rule tentatively determined that, in the context of 
residential furnaces, commercial water heaters, and similarly-situated 
products/equipment, use of non-condensing technology (and associated 
venting) may constitute a performance-related ``feature'' under EPCA 
that cannot be eliminated through adoption of an energy conservation 
standard. If such interpretation were to be finalized, DOE anticipated 
that in future rulemakings for affected products/equipment, it would 
suffice to consider setting product/equipment classes based upon the 
key distinction of the appliance's utilization of condensing or non-
condensing technology. (The proposed interpretive rule, in which DOE 
responded to comments on the notice of petition for rulemaking, is 
discussed in further detail in section II.D of this document.) Once 
again, DOE received comments from a variety of stakeholders, including 
representatives from gas industry associations, the housing industry, 
appliance manufacturers, utilities, environmental and efficiency 
advocates, consumer advocates, State organizations and Attorneys 
General, and individuals. Consistent with the opinions expressed in 
response to the petition, in general, the gas industry associations, 
the housing industry, and most manufacturers supported the proposed 
interpretive rule, and the advocates and State officials opposed it. 
Specifically, DOE received comments on the proposed interpretive rule 
from:
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    \6\ See 42 U.S.C. 6295(o)(4); 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa); and as applicable in certain cases 
through 42 U.S.C. 6316(a)).

     Table I.1--Entities Submitting Written Comment on the Proposed
                            Interpretive Rule
------------------------------------------------------------------------
                     Commenter                           Affiliation
------------------------------------------------------------------------
Advocates Joint Comment:                            Energy Efficiency
                                                     and Consumer
                                                     Advocates.
    [ssquf] Appliance Standards Awareness Project
     (ASAP).
    [ssquf] Alliance to Save Energy (ASE).
    [ssquf] American Council for an Energy-
     Efficient Economy (ACEEE).
    [ssquf] Consumer Federation of America (CFA).
    [ssquf] National Consumer Law Center (NCLC).
Air-Conditioning, Heating & Refrigeration           Trade Association.
 Institute (AHRI).
A.O. Smith Corporation (A.O. Smith).                Industry.
Attorneys General Joint Comment (AGs Joint          State/Local
 Comment):                                           Governments.
    [ssquf] State of New York.
    [ssquf] State of California.
    [ssquf] State of Colorado.
    [ssquf] District of Columbia.
    [ssquf] State of Illinois.
    [ssquf] State of Maine.
    [ssquf] State of Maryland.
    [ssquf] Commonwealth of Massachusetts.
    [ssquf] State of Minnesota.
    [ssquf] State of New Jersey.
    [ssquf] State of Oregon.
    [ssquf] State of Vermont.
    [ssquf] State of Washington.
    [ssquf] Corporation Counsel of the City of New
     York.
Bradford White Corporation (BWC).                   Industry.
Burnham Holdings, Inc. (BHI).                       Industry.
California Energy Commission (CEC).                 State Government.
California Investor-Owned Utilities (CA IOUs):      Utilities.
    [ssquf] Pacific Gas and Electric Co. (PG&E).
    [ssquf] San Diego Gas and Electric (SDG&E.
    [ssquf] Southern California Edison (SCE).
Carrier Corporation (Carrier).                      Industry.
Ceres BICEP Network (Ceres).                        Business Coalition.
Consumer Federation of America and National         Consumer Advocates.
 Consumer Law Center (CFA/NCLC).
Crown Boiler Company (Crown Boiler).                Industry.
Environmentalists Joint Comment:                    Environmental
                                                     Advocates.
    [ssquf] Natural Resources Defense Council
     (NRDC).
    [ssquf] Sierra Club.
    [ssquf] Earthjustice.

[[Page 4778]]

 
Lennox International, Inc. (Lennox).                Industry.
Weil-McLain.                                        Industry.
Anonymous.                                          Unaffiliated.
Anonymous.                                          Unaffiliated.
Sarah G.                                            Unaffiliated.
Kathy McCardwell.                                   Unaffiliated.
Elizabeth Reed.                                     Unaffiliated.
Suzanne Sorkin.                                     Unaffiliated.
Laura Woods.                                        Unaffiliated.
------------------------------------------------------------------------

    In the course of considering the public comments on its proposed 
interpretation, comments from U.S. Boiler, BHI, and Crown Boiler 
presented DOE with an alternative approach that did not focus on ``non-
condensing'' technology as the performance-related feature. While the 
commenters suggesting this alternative were generally supportive of the 
proposed interpretation, they expressed concern that unless subsequent 
DOE rulemakings implement the interpretation through product/equipment 
classes focused on venting compatibility (particularly preservation of 
Category I venting), many of the same problems identified in the Gas 
Industry Petition may still arise. In order to gather further 
information and comment on this specific issue, DOE published a 
supplemental notice of proposed interpretation in the Federal Register 
on September 24, 2020 (the September 2020 SNOPIR), which proposed 
alternative approaches to product/equipment class setting in this 
context. 85 FR 60090. (The supplemental proposed interpretive rule is 
discussed in further detail in section II.E of this document.)
    In response to its supplemental proposed interpretive rule, DOE 
received comments from:

   Table I.2--Entities Submitting Written Comment on the Supplemental
                       Proposed Interpretive Rule
------------------------------------------------------------------------
                     Commenter                           Affiliation
------------------------------------------------------------------------
Advocates Joint Comment II                          Energy Efficiency
                                                     and Consumer
                                                     Advocates.
    [ssquf] Appliance Standards Awareness Project
     (ASAP)
    [ssquf] American Council for an Energy-
     Efficient Economy (ACEEE)
    [ssquf] Consumer Federation of America (CFA)
    [ssquf] National Consumer Law Center (NCLC)
Air-Conditioning, Heating & Refrigeration           Trade Association.
 Institute (AHRI)
A.O. Smith Corporation (A.O. Smith)                 Industry.
Attorneys General Joint Comment (AGs Joint Comment  State/Local
 II)                                                 Governments.
    [ssquf] State of New York
    [ssquf] State of California
    [ssquf] State of Colorado
    [ssquf] District of Columbia
    [ssquf] State of Illinois
    [ssquf] State of Maine
    [ssquf] State of Maryland
    [ssquf] Commonwealth of Massachusetts
    [ssquf] State of Minnesota
    [ssquf] State of Nevada
    [ssquf] State of Oregon
    [ssquf] State of Vermont
    [ssquf] State of Washington
    [ssquf] Corporation Counsel of the City of New
     York
Bradford White Corporation (BWC)                    Industry.
California Investor-Owned Utilities (CA IOUs)       Utilities.
    [ssquf] Pacific Gas and Electric Co. (PG&E)
    [ssquf] San Diego Gas and Electric (SDG&E)
    [ssquf] Southern California Edison (SCE)
Carrier Corporation (Carrier)                       Industry.
Crown Boiler Company (Crown Boiler)                 Industry.
Electrify Now                                       Energy Efficiency
                                                     and Environmental
                                                     Advocates.
Lennox International, Inc. (Lennox)                 Industry.
Mortex Products, Inc. (Mortex)                      Industry.

[[Page 4779]]

 
Natural Resources Defense Council (NRDC)            Environmental
                                                     Advocate.
Nortek Global HVAC (Nortek)                         Industry.
Northwest Energy Efficiency Alliance (NEEA)         Energy Efficiency
                                                     Advocates.
Petitioners et al. Joint Comment II                 Utilities, Trade
                                                     Associations.
    [ssquf] Spire, Inc.
    [ssquf] Spire Missouri, Inc.
    [ssquf] American Public Gas Association (APGA)
    [ssquf] American Gas Association (AGA)
    [ssquf] National Propane Gas Association
     (NPGA)
    [ssquf] National Gas Supply Association (NGSA)
    [ssquf] National Association of Home Builders
     (NAHB)
    [ssquf] Plumbing-Heating-Cooling Contractors
     National Association
U.S. Boiler Company (USB)                           Industry.
Anonymous                                           Unaffiliated.
Lee Hannah                                          Unaffiliated.
------------------------------------------------------------------------

    All comments--on both the proposed interpretive rule and the 
supplemental proposed interpretive rule--were carefully and fully 
considered by DOE. Informed by these comments and reconsideration of 
the substantial evidence in the relevant rulemaking dockets, the 
Department is issuing this final interpretive rule to state DOE's 
interpretation of EPCA's ``features'' provision in the context of 
condensing vs. non-condensing furnaces, water heaters, and similarly-
situated covered products/equipment (and associated venting). The 
following sections of this final interpretive rule set forth the 
relevant legal authority, describe the Department's historical 
interpretation of EPCA's ``features'' provision as applied to 
condensing vs. non-condensing products/equipment, provide summary of 
and responses to comments received on both the proposed interpretive 
rule and supplemental proposed interpretive rule, and recite DOE's 
revised interpretation of the relevant statutory provision.
    Through this final interpretive rule, DOE is not making any changes 
to its existing regulations in the Code of Federal Regulations (CFR) or 
policies regarding individual appliance standards rulemakings, and it 
cannot and will not take any enforcement action pursuant to its revised 
interpretation until after the effective date of a final legislative 
rule, published in the Federal Register, amending the applicable 
product/equipment classes and energy conservation standards, as 
necessary. Consequently, this final interpretive rule does not change 
or revise any current policies or legal requirements with respect to 
residential furnaces, commercial water heaters, or similarly-situated 
covered products/equipment. Decisions about how this interpretation 
will apply to existing products/equipment utilizing condensing/non-
condensing technologies will be the subject of subsequent actions.

II. Summary Description

A. Relevant Statutory Provisions

    In this final interpretive rule, DOE explains its historical 
interpretation regarding the evaluation of what constitutes a product 
``feature'' which cannot be eliminated under EPCA, specifically in the 
context of residential furnaces and commercial water heaters. For 
covered consumer products, the key statutory provision at issue can be 
found at 42 U.S.C. 6295(o)(4), which provides that the Secretary may 
not prescribe an amended or new standard under this section if the 
Secretary finds (and publishes such finding) that interested persons 
have established by a preponderance of the evidence that the standard 
is likely to result in the unavailability in the United States in any 
covered product type (or class) of performance characteristics 
(including reliability), features, sizes, capacities, and volumes that 
are substantially the same as those generally available in the United 
States at the time of the Secretary's finding.
    Where the Secretary finds such ``performance characteristics 
(including reliability), features, sizes, capacities, and volumes'' 
(collectively referred to hereafter as ``features'') to exist, the 
statute provides a remedy at 42 U.S.C. 6295(q)(1), which states that a 
rule prescribing an energy conservation standard for a type (or class) 
of covered products shall specify a level of energy use or efficiency 
higher or lower than that which applies (or would apply) for such type 
(or class) for any group of covered products which have the same 
function or intended use, if the Secretary determines that covered 
products within such group--(A) consume a different kind of energy from 
that consumed by other covered products within such group (or class); 
or (B) have a capacity or other performance-related feature which other 
products within such type (or class) do not have and such feature 
justifies a higher or lower standard from that which applies (or will 
apply) to other products within such type (or class). In making a 
determination under 42 U.S.C. 6295(q)(1) concerning whether a 
performance-related feature justifies the establishment of a higher or 
lower standard, the Secretary shall consider such factors as the 
utility to the consumer of such a feature, and such other factors as 
the Secretary deems appropriate.
    These provisions also apply to covered non-ASHRAE \7\ commercial 
and industrial equipment through the crosswalk provision at 42 U.S.C.

[[Page 4780]]

6316(a). (Under the statute, ``ASHRAE equipment'' refers to small 
commercial package air conditioning and heating equipment, large 
commercial package air conditioning and heating equipment, very large 
commercial package air conditioning and heating equipment, packaged 
terminal air conditioners (PTACs), packaged terminal heat pumps 
(PTHPs), warm-air furnaces, packaged boilers, storage water heaters, 
instantaneous water heaters, or unfired hot water storage tanks, which 
are addressed by ASHRAE in ASHRAE Standard 90.1, Energy Standard for 
Buildings Except Low-Rise Residential Buildings.)
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    \7\ ``ASHRAE'' refers to the American Society of Heating, 
Refrigerating and Air-Conditioning Engineers.
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    ASHRAE equipment has its own separate statutory scheme under EPCA, 
with the default situation being that DOE must adopt the level set 
forth in ASHRAE Standard 90.1 unless the Department has clear and 
convincing evidence to adopt a more-stringent standard (see 42 U.S.C. 
6313(a)(6)). Under 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa), there is a 
similar ``features'' provision which states, ``The Secretary may not 
prescribe an amended standard under this subparagraph if the Secretary 
finds (and publishes the finding) that interested persons have 
established by a preponderance of the evidence that a standard is 
likely to result in the unavailability in the United States in any 
product type (or class) of performance characteristics (including 
reliability, features, sizes, capacities, and volumes) that are 
substantially the same as those generally available in the United 
States at the time of the finding of the Secretary.'' However, it is 
noted that this provision contains the specific limitation that it 
applies to an amended standard prescribed under this subparagraph 
(i.e., when DOE is acting under its authority to set a more-stringent 
standard). There is no companion ``features'' provision under 42 U.S.C. 
6313(a)(6)(A), which is the provision that would apply when DOE is 
adopting the levels set by ASHRAE. Congress was clearly aware of the 
features issue, and it chose to act in the context of DOE standard 
setting, but not ASHRAE standard setting. There is likewise no 
companion provision to 42 U.S.C. 6295(q)(1) for ASHRAE equipment.

B. DOE's Historical Interpretation

    With this statutory background in mind, in the March 12, 2015 
notice of proposed rulemaking (NOPR) for energy conservation standards 
for residential furnaces, DOE set forth in detail its rationale for why 
it did not considering the venting of non-condensing furnaces to 
constitute a product ``feature'' under 42 U.S.C. 6295(o)(4). 80 FR 
13120, 13137-13138.
    As discussed previously, when evaluating and establishing energy 
conservation standards, the statute requires DOE to divide covered 
products into product classes by the type of energy used, by capacity, 
or by other performance-related features that justify a different 
standard. In making a determination regarding whether a performance-
related feature justifies a different standard, DOE must consider 
factors such as the utility to the consumer of the feature and other 
factors DOE determines are appropriate. (42 U.S.C. 6295(q)) 
Historically, DOE has viewed utility as an aspect of the product that 
is accessible to the layperson and is based on user operation, rather 
than performing a theoretical function. This interpretation has been 
implemented consistently in DOE's previous rulemakings by determining 
utility through the value the item brings to the consumer, rather than 
through analyzing more complicated design features, or costs that 
anyone, including the consumer, manufacturer, installer, or utility 
companies may bear. DOE reasoned that this approach is consistent with 
EPCA's requirement for a separate and extensive analysis of economic 
justification for the adoption of any new or amended energy 
conservation standard (see 42 U.S.C. 6295(o)(2)(A)-(B) and (3)).
    Under EPCA, DOE has typically addressed consumer utility by 
establishing separate product classes or otherwise taken action when a 
consumer may value a product feature based on the consumer's everyday 
needs. For instance, DOE determined that it would be impermissible in 
light of 42 U.S.C. 6295(o)(4) to include elimination of oven door 
windows as a technology option to improve the energy efficiency of 
cooking products.\8\ DOE reached this conclusion based upon how 
consumers typically use the product: Peering through the oven window to 
judge if an item is finished cooking, as opposed to checking the timer 
and/or indicator light or simply opening the oven door (which could 
waste more energy) to see if the item is finished cooking. DOE has also 
determined that consumers may value other qualities such as ability to 
self-clean,\9\ size,\10\ and configuration.\11\ This determination, 
however, can change depending on technological developments and shifts 
in consumer behavior/preferences, and it is conceivable that certain 
products may disappear from the market entirely due to shifting 
consumer demand. DOE stated that it has determined such value on a 
case-by-case basis through its own research, as well as public comments 
received.
---------------------------------------------------------------------------

    \8\ 63 FR 48038, 48041 (Sept. 8, 1998).
    \9\ 73 FR 62034, 62048 (Oct. 17, 2008) (separating standard 
ovens and self-cleaning ovens into different product classes).
    \10\ 77 FR 32307, 32319 (May 31, 2012) (creating a separate 
product class for compact front-loading residential clothes 
washers).
    \11\ 75 FR 59469, 59487 (Sept. 27, 2010) (creating a separate 
product class for refrigerators with bottom-mounted freezers).
---------------------------------------------------------------------------

    DOE offered a cautionary note that disparate products may have very 
different consumer utilities, thereby making direct comparisons 
difficult and potentially misleading. For instance, in a 2011 
rulemaking, DOE created separate product classes for vented and 
ventless residential clothes dryers based on DOE's recognition of the 
``unique utility'' that ventless clothes dryers offer to consumers. 76 
FR 22454, 22485 (April 21, 2011). This utility could be characterized 
as the ability to have a clothes dryer in a living area where vents are 
impossible to install (e.g., an apartment in a high-rise building). As 
explained in that April 2011 direct final rule technical support 
document, ventless dryers can be installed in locations where venting 
dryers would be precluded due to venting restrictions.
    But in another rulemaking regarding water heaters, DOE found that 
water heaters that utilize heat pump technology did not need to be put 
in a separate product class from conventional types of hot water 
heaters that utilize electric resistance technology, even though water 
heaters utilizing heat pumps require the additional installation of a 
condensate drain that a hot water heater utilizing electric resistance 
technology does not require. 74 FR 65852, 65871 (Dec. 11, 2009). DOE 
found that regardless of these installation factors, the heat pump 
water heater and the conventional water heater still had the same 
utility to the consumer: Providing hot water. Id. In both cases, DOE 
made its finding based on consumer type and utility type, rather than 
technology utilized that impacts product efficiency.
    In its March 2015 energy conservation standards rulemaking proposal 
for residential furnaces, DOE expressed concern that tying the concept 
of ``feature'' to a specific technology would

[[Page 4781]]

effectively lock-in the currently existing technology as the ceiling 
for product efficiency and eliminate DOE's ability to address 
technological advances that could yield significant consumer benefits 
in the form of lower energy costs while providing the same 
functionality for the consumer. DOE stated that it was very concerned 
that determining features solely on product technology could undermine 
the Department's Appliance Standards Program. DOE reasoned that if it 
is required to maintain separate product classes to preserve less-
efficient technologies, future advancements in the energy efficiency of 
covered products would become largely voluntary, an outcome which seems 
inimical to Congress's purposes and goals in enacting EPCA. 80 FR 
13120, 13138 (Mar. 12, 2015).
    Turning to the product at issue in that 2015 furnaces rulemaking, 
DOE noted that residential furnaces are currently divided into several 
product classes. For example, furnaces are separated into product 
classes based on their fuel source (gas, oil, or electricity), which is 
required by statute. In the most recent rulemaking for that covered 
product, DOE analyzed only two product classes for residential 
furnaces: (1) Non-weatherized gas-fired furnaces (NWGFs) and (2) mobile 
home gas-fired furnaces (MHGFs). DOE did not additionally separate 
NWGFs and MHGFs into condensing and noncondensing product classes. Id.
    In that 2015 furnaces rulemaking, DOE tentatively concluded that 
the methods by which a furnace is vented did not provide any separate 
performance-related impacts, and, therefore, that DOE had no statutory 
basis for defining a separate class based on venting and drainage 
characteristics. DOE reasoned that NWGF and MHGF venting methods did 
not provide unique utility to consumers beyond the basic function of 
providing heat, which all furnaces perform. Using this logic, the 
possibility that installing a non-condensing furnace may be less costly 
than a condensing furnace due to the difference in venting methods did 
not justify separating the two types of NWGFs into different product 
classes. Unlike the consumers of ventless dryers, which DOE had 
determined to be a performance-related feature based on the 
impossibility of venting in certain circumstances (e.g., high-rise 
apartments), DOE reasoned that consumers of condensing NWGFs are 
homeowners that may either use their existing venting or have a 
feasible alternative to obtain heat. In other words, homeowners would 
still be able to obtain heat regardless of the venting. In contrast, 
DOE reasoned that a resident of a high-rise apartment or condominium 
building that is not architecturally designed to accommodate vented 
clothes dryers would have no option in terms of installing and enjoying 
the utility of a dryer in their home unless he or she used a ventless 
dryer. Id.
    As explained previously, DOE's conclusion in the March 12, 2015 
NOPR was that the utility of a furnace involves providing heat to a 
consumer. DOE reasoned that such utility is provided by any type of 
furnace, but to the extent that a consumer has a preference for a 
particular fuel type (e.g., gas), improvements in venting technology 
may eventually allow a consumer to obtain the efficiency of a 
condensing furnace using the existing venting in a residence by sharing 
venting space with water heaters. DOE postulated that this update in 
technology would significantly reduce the cost burden associated with 
installing condensing furnaces and reduce potential instances of 
``orphaned'' water heaters, where the furnace and water heater can no 
longer share the same venting (due to the furnace being a Category IV, 
condensing product and the water heater being a Category I, 
noncondensing product). In other words, when mature, this technology 
could allow consumers to switch from a non-condensing furnace to a 
condensing furnace in a greater variety of applications, such as urban 
row houses. For more information, interested parties were asked to 
consult appendix 8L of the NOPR TSD. Id.

C. The Gas Industry Petition

    As noted previously, on October 18, 2018, DOE received a petition 
from the Gas Industry Petitioners asking DOE to: (1) Issue an 
interpretive rule stating that DOE's proposed energy conservation 
standards for residential furnaces and commercial water heaters would 
result in the unavailability of ``performance characteristics'' within 
the meaning of the Energy Policy and Conservation Act, as amended 
(i.e., by setting standards which can only be met by products/equipment 
using condensing combustion technology) and (2) withdraw the proposed 
energy conservation standards for residential furnaces and commercial 
water heaters based upon such findings. In their petition, the Gas 
Industry Petitioners argue that DOE misinterpreted its mandate under 
section 325(o)(4) of EPCA by failing to consider as a ``feature'' of 
the subject residential furnaces and commercial water heating equipment 
the compatibility of a product/equipment with conventional atmospheric 
venting systems, the ability to operate without generating liquid 
condensate requiring disposal via a plumbing connection, and the 
ability to operate with other commonly vented appliances. Consequently, 
the Gas Industry Petitioners assert that DOE's proposals would make 
unavailable non-condensing products/equipment with such features, which 
currently exist in the marketplace, in contravention of the statute. 
The petition makes a number of technical, legal, and economic arguments 
in favor of its suggested interpretation, and it points to DOE's past 
precedent related to space constraints and differences in available 
electrical power supply (and associated installation costs) as 
supporting its call to find that non-condensing technology amounts to a 
performance-related ``feature.'' Based upon these arguments, the Gas 
Industry Petitioners concluded that DOE should issue an interpretive 
rule treating non-condensing technology as a ``feature'' under EPCA, 
withdraw its rulemaking proposals for both residential furnaces and 
commercial water heaters, and proceed on the basis of this revised 
interpretation.

D. DOE's Proposed Interpretive Rule

    As discussed in section I of this document, DOE published a notice 
of proposed interpretive rule in the Federal Register on July 11, 2019. 
84 FR 33011. The substance of that proposed interpretation (summarized 
in the following paragraphs) was presented in that document. 84 FR 
33011, 33020-33021 (July 11, 2019).
    In its proposed interpretive rule, the Department noted that in 
consideration of public comments and other information received on the 
Gas Industry Petition, DOE proposed to revise its interpretation of 
EPCA's ``features'' provision in the context of condensing and non-
condensing technology used in furnaces, water heating equipment, and 
similarly-situated appliances (where permitted by EPCA). Based on those 
comments and for the reasons set forth fully in that document, DOE 
proposed to interpret prospectively the statute to provide that 
adoption of energy conservation standards that would limit the market 
to natural gas, propane gas and/or oil-fired furnaces, water heaters, 
or similarly-situated products/equipment (where permitted by EPCA) that 
use condensing combustion technology would result in the unavailability 
of a performance related feature within the meaning of 42 U.S.C. 
6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and as

[[Page 4782]]

applicable in certain cases through 42 U.S.C. 6316(a)).
    As explained in the proposed interpretive rule, the statute accords 
the Secretary of Energy considerable discretion in terms of determining 
whether a performance characteristic of a covered product/equipment 
amounts to a performance-related feature which cannot be eliminated 
through adoption of an energy conservation standard. DOE stated that it 
has taken the opportunity presented by the Gas Industry Petition to 
reconsider its historical interpretation of EPCA's ``features'' 
provision in the context of condensing and non-condensing technologies 
used by certain gas appliances. A number of factors convinced DOE to 
propose a revision to its interpretation.
    First, DOE acknowledged that it has, in the past, taken space 
constraints and similar limitations into account when setting product 
classes (e.g., PTACs, ventless clothes dryers). For example, DOE was 
sensitive to the costs associated with requiring expensive building 
modifications when it decided to set separate equipment classes for 
standard size PTACs and non-standard size PTACs. 73 FR 58772, 58782 
(Oct. 7, 2008). DOE stated that it expects that similar expenses would 
occur here, if DOE were to hold to its historical interpretation, at 
least for some subset of installations. Although limited data were 
provided to address the actual costs that consumers and commercial 
customers would face to modify their existing category I venting, there 
is little doubt that some number of such installations would be quite 
costly. These more complicated/costly installations are documented as 
part of DOE's analysis of the venting costs for residential furnaces, 
which considered potential venting modifications that could be required 
when replacing an existing category I furnace with a condensing 
(category IV) furnace (see appendix 8D of the 2016 SNOPR TSD for 
further details).
    Second, DOE stated that it has in the past focused on the 
consumer's interaction with the product/equipment in deciding whether a 
performance feature is at issue. In the context of residential furnaces 
and commercial water heaters, DOE has focused on the primary function 
of the appliance (e.g., providing heat to a home or potable hot water) 
in establishing the nexus to the consumer. In the past, DOE opined that 
consumers were only interested in obtaining heat or hot water from the 
appliance, so they would not care about the mechanism for generating 
that end product. However, commenters have made clear that in at least 
some cases, the physical changes associated with a condensing appliance 
may change a home's aesthetics (e.g., by adding new venting into the 
living space or decreasing closet or other storage space), thereby 
impacting consumer utility even under DOE's prior approach.
    Third, DOE noted that it has been the Department's policy to remain 
neutral regarding competing energy sources in the marketplace. As 
certain commenters have pointed out, and as DOE's own analyses have 
shown, some enhanced level of fuel switching is likely to accompany 
standard setting using DOE's prior interpretation. Many consumers who 
are currently gas customers may show a preference for that fuel type 
and would be negatively impacted by a standard that requires the 
purchase of a condensing unit to the extent they feel compelled to 
change to a different fuel type. DOE explained that it seeks neither to 
determine winners and losers in the marketplace nor to limit consumer 
choice.
    Finally, DOE stated that it is very concerned about ensuring energy 
affordability, particularly for persons with low incomes. Although 
energy efficiency improvements may pay for themselves over time, there 
is typically a significant increase in upfront costs associated with 
furnaces and water heaters using condensing technology. For consumers 
with difficult installation situations (e.g., inner-city row houses), 
there would be the added cost of potentially extensive venting 
modifications. In certain cases, commenters have argued that 
accommodating condensing products may not even be possible. Although 
DOE continues to believe that costs are properly addressed in the 
economic analysis portion of its rulemakings, it stated that it remains 
cognizant of such issues. DOE stated that it has tentatively concluded 
that the other reasons discussed immediately above are sufficient in 
and of themselves to justify the Department's proposed change in 
interpretation, but it acknowledged these cost impacts in order to be 
fully transparent in terms of the agency's thinking.
    The agency reasoned that creating separate product classes for 
condensing and non-condensing furnaces, water heaters, and similarly-
situated products/equipment (where permitted by EPCA) would prevent 
many of these potential problems. Although DOE's proposed revised 
approach may have some impact on overall energy saving potential as a 
result of establishing separate product/equipment classes, the 
Department noted that that is not the touchstone of EPCA's ``features'' 
provision; through that provision, Congress expressed its will that 
certain product utilities will take priority over additional energy-
saving measures. (For example, DOE did not eliminate the oven window 
which consumers found useful.) With that said, DOE expressed its belief 
that any potentially negative programmatic impacts of its revised 
interpretation are likely to be limited. DOE reasoned that the proposed 
interpretation would be likely to impact only a limited set of 
appliances, and DOE noted that market trends have favored the growing 
reach of condensing furnaces, even as non-condensing alternatives have 
remained available. DOE stated that it has every reason to believe that 
such trends will continue.
    DOE sought to clarify the limitations of its proposed revised 
interpretation, based upon the existing statutory provisions. As noted, 
additional, subsequent DOE action would be required before the 
interpretation in the proposed interpretive rule could be implemented. 
The proposed interpretive rule, even once finalized, would not alter 
the Department's current regulations. DOE anticipates continued 
engagement and productive involvement of members of the public and the 
regulated community in subsequent activities that may follow this 
interpretation.
    As discussed in the proposed interpretive rule, DOE decided to 
grant the Gas Industry Petition to the extent that it proposed to 
prospectively interpret the statute to provide that adoption of energy 
conservation standards that would limit the market of natural gas and/
or propane gas furnaces, water heaters, or similarly-situated products/
equipment (where permitted by EPCA) to appliances that use condensing 
combustion technology would result in the unavailability of a 
performance related feature within the meaning of 42 U.S.C. 6295(o)(4) 
and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain 
cases through 42 U.S.C. 6316(a)). The proposal clarified that such 
interpretation would apply to all applicable residential products, non-
ASHRAE commercial equipment, and ASHRAE equipment where DOE adopts a 
level more stringent than the ASHRAE level.
    DOE stated in the 2019 proposed interpretive rule that it is 
denying the Gas Industry Petition as it pertains to those rulemakings 
where ASHRAE sets standard levels that trigger DOE to consider and 
adopt those level (unless DOE finds clear and convincing evidence to 
adopt more-stringent levels), due to lack of authority. DOE

[[Page 4783]]

also denied the Gas Industry Petition's request for DOE to withdraw the 
proposed rules for residential furnaces and commercial water heaters as 
unnecessary. DOE stated that if the interpretive rule were to be 
finalized, it would anticipate developing supplemental notices of 
proposed rulemaking (SNOPRs) that would implement the new legal 
interpretation for those two rulemakings that were the subject of the 
petition for rulemaking.

E. DOE's Supplemental Proposed Interpretive Rule

    As noted in section I of this document, DOE published a notice of 
supplemental proposed interpretive rule in the Federal Register on 
September 24, 2020. 85 FR 60090. DOE's supplemental proposal was 
designed to gather further information in response to comments from 
U.S. Boiler, BHI, and Crown Boiler, suggesting an alternative approach 
that did not focus on ``non-condensing'' technology as the performance-
related feature. While the commenters suggesting this alternative were 
generally supportive of the proposed revised interpretation, they 
expressed concern that unless subsequent DOE rulemakings implement the 
interpretation through product/equipment classes focused on venting 
compatibility (particularly preservation of Category I venting), many 
of the same problems identified in the Gas Industry Petition may still 
arise. (USB, No. 78 at pp. 1-2; BHI, No. 83 at pp. 1-2; Crown Boiler, 
No. 79 at pp. 1-2) In order to gather further information and comment 
on this issue, DOE proposed alternative approaches to product/equipment 
class setting in this context, as explained in the September 24, 2020 
notice of supplemental proposed interpretation at 85 FR 60090, 60094-
60095, and as summarized in the following paragraphs.
    In the supplemental proposed interpretive rule, DOE initially 
responded to these comments from USB, BHI, and Crown Boiler by noting 
that, while separate from the product/equipment, the venting system is 
inextricably linked to the design of the appliance. Because the venting 
system is a separate component from the product, DOE initially sought 
to focus on non-condensing operation as the performance-related 
characteristic of the appliance itself. However, after further 
considering these commenters' concerns, DOE stated its intention to 
explore whether interpreting non-condensing operation to be a feature 
might still result in a reduction of utility for certain consumers, 
because some non-condensing appliances require connection to venting 
systems other than Category I and may result in many of the 
installation issues that DOE seeks to address through this interpretive 
rulemaking.
    As a result, in the supplemental proposed interpretation, DOE 
further considered what constitutes a ``feature'' or ``performance-
related characteristic'' under EPCA, and in particular, whether such 
feature might be based on venting system compatibility of the 
appliance. Because the most significant concerns regarding venting 
system compatibility involve use of gas appliances that are not 
compatible with Category I venting in place of gas appliances that are 
compatible with Category I venting, DOE considered whether 
compatibility with Category I venting should be a protected feature 
under EPCA. Moreover, DOE also considered whether any impact to venting 
system compatibility resulting from increasing product or equipment 
efficiency standards would cause the aforementioned issues. For 
example, it is conceivable that if a more-stringent standard results in 
an appliance compatible with Category III venting systems being 
replaced with an appliance that is only compatible with Category IV 
venting systems, many of the same issues might arise as have been 
identified for the replacement of appliances compatible with Category I 
venting systems. Thus, compatibility with venting systems of any type 
could conceivably be a feature that consumers desire and which DOE must 
consider when evaluating more-stringent standards. Under such an 
interpretation, compatibility with each existing venting technology 
would be a feature under EPCA that could require separate classes based 
on compatibility with venting systems for each venting category, and 
uncategorized venting systems could also require separate classes.
    DOE noted that the first approach (i.e., considering only Category 
I venting compatibility as a performance-related feature) has the 
benefit of potentially simplifying the regulatory scheme in comparison 
to the latter approach, which could require classification of 
appliances in each venting category separately. The first approach 
would result in more streamlined regulations and product/equipment 
classes for gas appliances, as compared to the latter approach, while 
resolving the most significant issues involved with venting system 
compatibility. The latter approach potentially would address more 
comprehensively possible issues related to the compatibility of an 
appliance with venting systems, but it would make the regulatory scheme 
more complex and could result in elevated compliance burdens, as the 
number of product/equipment classes for vented appliances could 
increase greatly (e.g., each current class of gas appliance could 
require further segmentation by each of the four categories of venting 
and also could need to account for gas appliances that are compatible 
with uncategorized venting systems). DOE stated that both approaches 
would have the benefit of not limiting the Department to consideration 
of the combustion technology that provides the function of the 
appliance (e.g., condensing, non-condensing), about which some 
commenters have expressed concerns. Instead, DOE's focus would be to 
ensure compatibility with existing venting, thereby allowing DOE to be 
responsive to potential future technological advances in venting system 
compatibility.
    Based on these considerations, DOE stated that it was considering 
an alternative interpretation (with two potential variations), in 
addition to the interpretation proposed in the July 2019 notice of 
proposed interpretive rule. As discussed previously, the July 2019 
notice of proposed interpretive rule proposed that adoption of energy 
conservation standards that would limit the market to natural gas and/
or propane gas furnaces, water heaters, or similarly-situated products/
equipment (where permitted by EPCA) that use condensing combustion 
technology would result in the unavailability of a performance-related 
feature within the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through 
42 U.S.C. 6316(a)). In the notice of supplemental proposed 
interpretation, DOE also proposed an interpretation that an appliance's 
compatibility with a venting system is a performance-related 
characteristic of that appliance under EPCA. Specifically, DOE stated 
that it is also considering an interpretation that, based on current 
appliance/venting system compatibility limitations, the adoption of 
energy conservation standards that would limit the market to natural 
gas and/or propane gas furnaces, water heaters, or similarly-situated 
products/equipment (where permitted by EPCA) that are incompatible with 
any existing venting systems available on the market would result in 
the unavailability of a performance related feature within the meaning 
of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and 
as applicable in certain cases through 42 U.S.C. 6316(a)). DOE stated 
that it considered limiting its proposal to

[[Page 4784]]

include only that compatibility with Category I venting systems is a 
feature, as suggested by the commenters, and seeks comment on doing so. 
In addition, DOE indicated that it is considering a broader approach 
taking into consideration all venting categories since concerns similar 
to those that gave rise to the petition could conceivably occur for 
appliances that are compatible with venting systems other than Category 
I. The Department noted that after examining the totality of public 
comments on this issue and the potential approaches, it will consider 
adopting either of these alternative or the original proposed approach, 
as appropriate, in its final interpretation.
    The comment period on the September 24, 2020 supplemental proposed 
interpretive rule was originally scheduled to end on October 26, 2020. 
However, on September 25, 2020 and October 6, 2020, DOE received two 
requests for extension of the comment period (from A.O. Smith and 
Lennox, respectively), asserting that additional time is needed because 
the supplemental proposed interpretive rule addresses multiple product 
types and raises complex issues. On September 29, 2020, DOE received a 
comment from the submitters of the Gas Industry Petition seeking prompt 
action on their petition. Balancing these competing requests, DOE 
determined it appropriate to extend the public comment period on the 
supplemental proposed interpretive rule until November 9, 2020. 
Notification of the extension of the public comment period was 
published in the Federal Register on October 22, 2020. 85 FR 67312.

III. Response to Comments

    DOE received a number of comments with divergent views on the 
Department's proposed interpretive rule and supplemental proposed 
interpretive rule related to the Gas Industry Petition, with some 
supporting the proposal and others in opposition.\12\ Comments from gas 
industry associations, certain trade associations, and some individual 
manufacturers generally expressed support for the proposed interpretive 
rule. Comments from environmental and efficiency advocacy 
organizations, consumer advocacy organizations, other manufacturers, 
certain States and Attorneys General, and a few members of the public 
generally opposed it. The following sections of this final interpretive 
rule summarize the comments received on the proposed interpretive rule 
and supplemental proposed interpretive rule and provide DOE's responses 
to those comments. Then, consistent with its statutory authority and 
after considering the comments received along with all other available 
information, DOE sets forth its final interpretation. To aid in 
organizing the comments, this section categorizes public comments on 
the proposed interpretive rule and supplemental proposed interpretive 
rule in terms of legal authority, economic issues, analytical matters, 
and other related issues.
---------------------------------------------------------------------------

    \12\ DOE notes that it received two comments which appear to 
relate to a separate DOE rulemaking for revisions to the 
Department's waiver/interim waiver process for test procedures 
(Docket No. EERE-2019-BT-NOA-0011). Apparently, these comments were 
either submitted or posted to the wrong docket. DOE has referred 
these comments to staff of the Appliance Standards Program for 
placement in the correct docket.
---------------------------------------------------------------------------

A. Legal Authority

    As DOE explained in section II.B of this document, for the purposes 
of EPCA, DOE has in prior instances considered product/equipment 
``features'' in the context of a consumer's interaction with the 
appliance in question. With the submission of the Gas Industry 
Petition, DOE had the opportunity to re-evaluate its prior 
interpretation and to seek public input to further inform the agency's 
consideration, particularly in regards to its technical implications, 
as well as the needs of consumers (including those with low incomes). 
While DOE continues to embrace the concept of a ``feature'' being tied 
to a consumer's interaction with an appliance, the Department has come 
to see that it has been too narrow in its focus on what constitutes 
such consumer interaction with residential furnaces, commercial water 
heaters, and similarly-situated products/equipment that utilize non-
condensing technology (and associated Category I venting). For the 
reasons explained subsequently, in future rulemakings, DOE will 
carefully examine the range of consumer impacts (based upon the record 
evidence in a given rulemaking) and may establish separate product/
equipment classes for appliances using non-condensing technology (and 
associated venting), consistent with this final interpretive rule.
    DOE is issuing this interpretation as an interpretive rule within 
the meaning of the Administrative Procedure Act. 5 U.S.C. 551(4); 5 
U.S.C. 553(b)(A). In issuing its proposed interpretation, DOE solicited 
public comment regarding the Department's views on a specific legal 
question: Whether non-condensing technology (and associated venting) 
constitutes a performance-related ``feature'' under 42 U.S.C. 
6295(o)(4),\13\ as could support a separate product/equipment class 
under 42 U.S.C. 6295(q)(1),\14\ including the authority that Congress 
conferred on DOE through those provisions.
---------------------------------------------------------------------------

    \13\ For non-ASHRAE equipment, the ``features'' provision at 42 
U.S.C. 6295(o)(4) is applicable through 42 U.S.C. 6316(a); for 
ASHRAE equipment where DOE is setting more-stringent standards, the 
``features'' provision at 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) 
applies.
    \14\ For non-ASHRAE equipment, the class provision at 42 U.S.C. 
6295(q)(1) is applicable through 42 U.S.C. 6316(a).
---------------------------------------------------------------------------

1. Legal Authority To Set Separate Product/Equipment Classes Based Upon 
Condensing and Non-Condensing Technologies
    As discussed, the Gas Industry Petition raised the issue of whether 
non-condensing technology, including associated venting, constitutes a 
``performance characteristic'' or ``feature'' under 42 U.S.C. 
6295(o)(4), and if it is, whether it justifies a separate product/
equipment class under 42 U.S.C. 6295(q)(1). Not unlike the submissions 
on the notice of petition, commenters on the proposed interpretive rule 
expressed strongly held but conflicting views regarding DOE's legal 
authority to determine non-condensing technology used in furnaces and 
water heaters, including the associated venting, to be a ``performance 
characteristic'' or ``feature'' within the meaning of the statute, and 
whether as a ``performance characteristic'' or ``feature'' it would 
justify a separate product/equipment class and energy conservation 
standard.
a. Comments Supporting the Proposed Interpretation
    A number of commenters expressed support for DOE's proposed 
interpretive rule and recommended that the Department take action to 
finalize its interpretation along the lines proposed. (Petitioners et 
al. Joint Comment, No. 80 at p. 2; Weil-McLain, No. 86 at p. 1; AHRI, 
No. 91 at p. 1; Carrier, No. 92 at p. 1; BHI, No. 83 at pp. 1-2; USB, 
No. 78 at p. 1; BWC, No. 77 at pp. 1-2; Nortek, No. 71 at p. 1; Mortex, 
No. 72 at p. 1) Crown Boiler and USB stated that adoption of an energy 
conservation standard at levels requiring the use of condensing 
technology would result in the unavailability of a performance-related 
feature under EPCA. (Crown Boiler, No. 79 at p. 1; USB, No. 78 at p. 1)
    Several commenters argued that DOE's proposed interpretive rule 
would enhance consumer choice. (Mortex, No. 72 at p. 1; Carrier, No. 92 
at p. 1; Nortek,

[[Page 4785]]

No. 71 at p. 1) Other commenters found that DOE's proposed 
interpretation offers greater consumer utility, particularly in those 
applications where venting represents a significant challenge. (AHRI, 
No. 91 at p. 1) Regarding residential furnaces, AHRI argued that in 
some applications, conversion to use of venting compatible with 
condensing systems would create problems that cannot be 
``simplistically rolled into an economic analysis.'' More specifically, 
the trade association argued that a separate product class would assist 
consumers who require like-for-like replacement of their existing 
furnace due to size or drainage constraints or water heater co-venting 
(a point echoed by Nortek, No. 71 at pp. 1-2, and Carrier, No. 92 at p. 
1). According to AHRI, ``EPCA prohibits eliminating product utility 
precisely to prevent the disproportionate harm to a subset of unlucky 
consumers.'' (AHRI, No. 91 at p. 2) Making the same point, Nortek 
reasoned that because consumers are already moving in the direction of 
condensing furnaces, banning non-condensing furnaces is not necessary 
and would only serve to disproportionately harm those consumers for 
whom venting changes would be difficult or impossible. (Nortek, No. 71 
at pp. 1-2)
    Regarding commercial water heaters, AHRI argued that Commercial 
Buildings Energy Consumption Survey (CBECS) data suggest that over half 
of commercial buildings were constructed prior to the introduction of 
condensing venting requirements, which means that many of these 
commercial buildings face the same venting challenges as some 
residences. AHRI pointed to examples where mechanical rooms are built 
into the core of the building (thereby preventing the side-wall venting 
sometimes required by condensing equipment), so such building owners 
would be forced to either switch fuels or to use up valuable retail, 
restaurant, or office space for an enlarged or relocated mechanical 
room to accommodate new drainage or different venting configurations. 
Especially since there is already a market trend toward condensing 
commercial water heaters, AHRI argued that it is neither necessary nor 
advisable to require condensing equipment in all applications. Instead, 
the commenter stated that establishment of a separate class for non-
condensing equipment would preserve the ability of commercial consumers 
facing difficult installation situations to make like-for-like 
replacements and to avert the need to reconstruct a mechanical room, 
add unsightly piping, or switch to an electric water heater, all 
without impacting the overall trend toward installation of more-
efficient condensing water heaters. (AHRI, No. 91 at p. 3)
    Regarding residential and commercial boilers, AHRI noted that DOE's 
proposed interpretation provides an important safety measure for gas-
fired products/equipment that assures safer use and installation. More 
specifically, AHRI commented that gas-fired boilers are not simply 
divided into condensing and non-condensing models but are split into 
four different categories based on venting type (Category I-IV). AHRI 
stated that Category I venting is at the crux of DOE's proposed 
interpretation, because that is the type of venting which is difficult 
to substitute for another type once installed. The commenter added that 
a minimum energy conservation standard that ``pushes the efficiency 
envelope'' may cause nominally non-condensing equipment to become 
incompatible with Category I venting and could result in the unsafe 
installation or use of misapplied equipment. AHRI stressed that safety 
of venting is unquestionably a performance-related feature. Once again, 
AHRI stated that the boilers market in new construction is trending 
toward condensing equipment and venting, so the performance feature of 
Category I venting is most necessary for the replacement market. The 
commenter also suggested that further increases in the minimum energy 
conservation standards for boilers should be examined carefully, 
because those standards are already near the level where venting 
challenges similar to those for condensing equipment could arise. 
(AHRI, No. 91 at pp. 4-5) Mortex made similar arguments in the context 
of furnaces, suggesting that DOE's proposed interpretation would 
promote flexibility and safety by not forcing an upgrade to a 
condensing furnaces in some applications where non-condensing venting 
remains the best choice. (Mortex, No. 72 at p. 1)
    The Petitioners et al. Joint Comment asserted that energy 
conservation standards that would make atmospherically-vented products 
unavailable to consumers would do more to promote electrification 
(i.e., a shift to electric appliances) than to promote the efficiency 
of gas products, because many consumers would feel that they have no 
choice but to give up their gas appliances in favor of electric 
alternatives. These commenters characterized the situation as one where 
the imposition of a standard that effectively bans atmospherically-
vented gas appliances would result not in the sale of an increased 
number of more efficient gas products, but in the sale of fewer gas 
products overall. The Gas Industry Petitioners argued that they are not 
opposed to condensing technology generally or market trends favoring 
such technology, nor are they seeking to create missed opportunities 
for consumers, businesses, and governments, as some of their opponents 
have claimed. Instead, these commenters stated that they are simply 
making the case that condensing products are not suitable for all 
installations and that it is the opponents of the petition who are the 
ones seeking to deny consumers the products which best serve their 
needs. (Petitioners et al. Joint Comment, No. 80 at pp. 3-4)
    Regarding the consumer utility of atmospherically-vented 
appliances, the Petitioners et al. Joint Comment stated that for some 
consumers, the consumer utility provided by the proposed interpretive 
rule would be the same utility as DOE found with ventless clothes 
dryers (i.e., the ability to have the product installed at all). The 
comment argued that for other consumers, the utility may be similar to 
that found for ``space-constrained'' appliances (i.e., the ability to 
have the product fit without the need for building modifications). For 
yet other consumers, the comment stated that the utility may be 
preventing the need to scrap another perfectly good appliance (e.g., an 
orphaned water heater). The Petitioners et al. Joint Comment added that 
other consumers may find utility in an appliance which obviates the 
need for undesirable building modifications (e.g., sacrifice of an 
existing interior living space, balcony, or window--concerns which can 
also arise in the context of new construction.\15\) These commenters 
concluded that there is no basis for characterizing these losses of 
utility as a mere matter of cost, rather than performance-related 
characteristics under EPCA's ``features'' provision. (Petitioners et 
al. Joint Comment, No. 80 at pp. 10-11)
---------------------------------------------------------------------------

    \15\ The Petitioners et al. Joint Comment provided a figure 
depicting multi-family housing and stated that a building design 
using atmospherically-vented products eliminates the need for vent-
studded columns of vertically-stacked utility spaces along the 
outside wall of the building, as well as the resulting loss of 
available window or balcony space.
---------------------------------------------------------------------------

    Pointing to EPCA's statutory standards for direct heating equipment 
which are differentiated ``principally in their manner of 
installation,'' the Petitioners et al. Joint Comment argued that ``it 
is absurd to suggest that Congress intended to ensure the continued 
availability of products with sizes--but not products with venting or

[[Page 4786]]

other performance characteristics--needed to `fit in standard building 
spaces' without the need for building modifications.'' (Petitioners et 
al. Joint Comment, No. 80 at p. 12) Applying this principle in the 
present context, the Petitioners et al. Joint Comment stated that 
condensing products are at least typically larger than comparable 
atmospherically-vented products, and that even small differences can 
have significant practical impacts, such as cases where a furnace and 
air handler must fit inside a confined space with required clearance on 
all sides. (Petitioners et al. Joint Comment, No. 80 at p. 13) Along 
these same lines, BWC opined that because condensing technology 
generally requires greater surface area, the size of the product/
equipment is likely to increase, and this can cause issues related to 
size and aesthetics within the home or business. The commenter 
suggested that this could pose real world problems, such as with 
mechanical rooms that are no longer large enough to house an appliance 
using condensing technology. BWC added that the issue of aesthetic 
impacts also extends to commercial applications, not just residential 
ones, with the commenter arguing that venting running through the 
finished space of a school, office building, or hospital could likewise 
be a significant detriment to their usable space. (BWC, No. 77 at pp. 
1-2)
    Although USB generally agreed with DOE's revised interpretation, 
the commenter argued that DOE has erred in focusing on ``non-
condensing'' technology as the performance-related feature, suggesting 
that the agency should instead focus on Category I venting. According 
to USB, Category II, III, and IV (as well as non-categorized direct 
vent furnaces and boilers) are currently available using non-condensing 
technology, but many of the same problems may arise. USB stated that 
non-condensing Category II, III, and IV appliances generally share the 
same venting consumer utility issues as condensing appliances and 
equipment, and that they can theoretically operate at higher 
efficiencies than Category I. However, the commenter argued that 
elimination of models using Category I venting (under a standard level 
that could only be met by products/equipment using Category II, III, or 
IV venting) would create the same problems which DOE has sought to 
address through its revised interpretation. USB commented that vent 
categorization has been recognized for over 20 years by manufacturers, 
utilities, and code enforcement officials as the best way to determine 
how to safely vent appliances. (USB, No. 78 at pp. 1-2) BHI made 
essentially identical arguments to those raised by USB, and Crown 
Boiler offered a similar comment that DOE should focus product classes 
based upon type of venting used, rather than the use of condensing or 
non-condensing technology. (BHI, No. 83 at pp. 1-2; Crown Boiler, No. 
79 at pp. 1-2)
    AHRI also made the point that DOE has already established product 
classes which are differentiated based upon the features of condensing 
and non-condensing products--specifically in the context of furnace fan 
standards (i.e., fan efficiency rating (FER); see 10 CFR 430.32(y)). 
The furnace fan product classes are distinguished by: (1) Fuel type; 
(2) whether the furnace is weatherized, and (3) whether its heat 
exchanger condenses the flue gases to water (i.e., condensing/non-
condensing). (AHRI, No. 91 at p. 2; similar point made by Carrier, No. 
92 at p. 2 and Nortek, No. 71 at p. 2)
    In response, DOE would start by reiterating that it is the 
Department's position to remain neutral in terms of the available fuel 
sources. Obviously, whenever the agency takes regulatory action, there 
is the potential for market shifts based upon consumer reaction, but 
DOE acts in keeping with the statute, which is at the core of this 
market neutrality principle. In other words, following the statute 
where it leads is not only the proper approach from a legal standpoint, 
but it helps ensure fair and unbiased treatment to all market 
participants, with impacts deemed as favorable or unfavorable arguably 
balancing out over time. Thus, in line with this principle, DOE rejects 
the arguments of certain commenters (e.g., Lennox, No. 87 at p. 1; 
Ceres, No. 69 at p. 2 (discussed respectively at sections III.A.1.b.v 
and III.B.1.b of this document)) that the Department is favoring the 
gas industry through its revised interpretation. DOE is making an 
informed determination applying the law to the facts presented and in 
light of the competing, well-argued comments from interested parties.
    As stated previously, DOE has decided to revise its prior 
interpretation of whether non-condensing technology (and associated 
venting) constitutes a ``feature'' under EPCA, concluding that 
products/equipment with such characteristics can be deemed as having a 
protected feature where supported by available evidence in the context 
of individual standards rulemakings. The reasons for the Department's 
change in position largely arise from a reevaluation of the arguments 
made in these comments and new information presented by the 
Petitioners, as well as evidence already contained in existing 
rulemaking dockets (e.g., residential furnaces, commercial water 
heaters). As explained in the paragraphs that follow, DOE has come to 
understand that such models offer distinct consumer utility beyond 
their primary function of providing warm air or hot water, particularly 
in difficult installation situations. Their continued availability 
would also be expected to maintain a robust level of consumer choice. 
DOE will touch upon each of these topics in turn.
    First, DOE has come to see that a consumer's interaction with a 
furnace or water heaters can go beyond the appliance's primary function 
of providing warm air or water. If the replacement of an appliance 
necessitates additional piping or venting in the usable space of a home 
or business, major modifications to a utility room, or encroachment 
upon an existing window or patio, the consumer will assuredly be aware 
of such interaction with the appliance. Even in new construction, if a 
builder has to modify designs to accommodate a condensing furnace, 
thereby losing usable space, that builder and potential customers will 
perceive this difference. Thus, a consumer may reasonably prefer to 
retain this residential or commercial space and pay the costs 
associated with a less-efficient, non-condensing appliance. DOE 
similarly acknowledges the difficulties faced by consumers who require 
like-for-like replacement of their existing furnace due to size or 
drainage constraints or water heater co-venting. The Department also 
takes AHRI's point (focused on commercial water heaters), that based 
upon CBECS data, over half of commercial buildings were constructed 
prior to the introduction of condensing venting requirements, which 
means that many of these commercial buildings face the same venting 
challenges as some residences. DOE further takes note of AHRI's 
examples where mechanical rooms are built into the core of the building 
(thereby preventing the side-wall venting sometimes required by 
condensing equipment), so such building owners could be forced to use 
up valuable retail, restaurant, or office space for an enlarged or 
relocated mechanical room to accommodate new drainage or different 
venting configurations.
    Although DOE does not have precise numbers in terms of the 
frequency of these difficult installation situations, commenters have 
previously provided examples of older, inner-city row

[[Page 4787]]

houses presenting significant re-venting issues, such as those in 
Philadelphia, Newark and Baltimore, of which there are many. DOE also 
has data in its existing rulemaking dockets related to fuel switching 
that may result from adoption of a standard that can only be met 
through use of condensing technology; DOE reasons that such estimates 
could serve as a proxy for those difficult installations, although 
other explanations are also expected to be included in that total 
(e.g., decisions made for purely economic reasons). For example, as the 
CEC pointed out, the September 2016 residential furnaces SNOPR reported 
that at the proposed level, 7.9 percent of consumers would switch from 
gas furnaces to heat pumps or electric furnaces under a condensing 
standard (a number which could reach 16 percent at the max-tech level). 
81 FR 65720, 65813 (Sept. 23, 2016). The precise number of difficult 
installation situations is not required for DOE to reasonably conclude 
that the magnitude of such occurrences would not be de minimis. DOE 
agrees with AHRI's comment that in some applications, conversion to use 
of venting compatible with condensing systems would create problems 
that cannot be ``simplistically rolled into an economic analysis'' and 
that ``EPCA prohibits eliminating product utility precisely to prevent 
the disproportionate harm to a subset of unlucky consumers.'' (AHRI, 
No. 91 at pp. 1-2)
    DOE acknowledges that some portion of difficult installations 
referenced in the Petitioners et al. Joint Comment may involve size 
constraints, because as the commenters point out, condensing technology 
generally requires greater surface area, so the size of the product/
equipment in some cases could increase. Data referenced by the 
Petitioners et al. Joint comment demonstrate that such constraints 
could negatively impact a home or business, such as where a mechanical 
room is no longer large enough to house an appliance using condensing 
technology, or where the running of venting lines through the finished 
space of a school, office building, or hospital could detrimentally 
impact their usable space. In this regard, this situation is analogous 
to that which DOE faced when setting separate classes and standards for 
space-constrained air conditioners and heat pumps (see 10 CFR 
430.32(c)) and standard-size packaged terminal air conditioners and 
heat pumps (see 10 CFR 431.97(c)). A consumer's expectation to be able 
to obtain a replacement appliance that is compatible with existing 
venting is to some extent an issue of size as well. ``Size'' is also 
one of the bases for making a ``features'' determination under 42 
U.S.C. 6295(o)(4).
    As to AHRI's point that the proposed interpretation would further 
safety in the context of installing gas-fired residential and 
commercial boilers, DOE presumes that boilers (and other types of 
products/equipment for which both condensing and non-condensing 
technologies are available) can be and are being installed safely in 
the field by contractors and other service professionals. DOE 
acknowledges the safety concerns that AHRI points out, namely that 
boilers are generally split into four different categories based on 
venting type (Category I-IV), and a minimum energy conservation 
standard that ``pushes the efficiency envelope'' may cause nominally 
non-condensing equipment to become incompatible with Category I venting 
and could result in the unsafe installation or use of misapplied 
equipment. Deterioration of venting due to corrosive condensate could 
allow carbon monoxide to enter the inhabited space, thereby presenting 
a safety risk. However, the Department is aware of no substantial 
evidence to suggest that installers are improperly installing 
condensing appliances and thereby triggering associated safety 
concerns. However, DOE agrees with AHRI and Mortex that DOE's proposed 
interpretation might prevent rare cases of contractor error.
    In response to AHRI, DOE acknowledges that existing furnace fan 
standards already establish product classes which are differentiated 
based, in part, upon the use of condensing or non-condensing technology 
(i.e., fan efficiency rating (FER); see 10 CFR 430.32(y)). 
Specifically, the furnace fan product classes are distinguished by: (1) 
Fuel type; (2) whether the furnace is weatherized, and (3) whether its 
heat exchanger condenses the flue gases to water (i.e., condensing/non-
condensing). There was no objection among public commenters about the 
inclusion of a condensing/non-condensing criteria in the furnace fans 
class designations at the time of the furnace fans final rule.\16\
---------------------------------------------------------------------------

    \16\ As DOE explained in the final rule, ``DOE did not receive 
comment or additional information on the proposed product classes, 
[and] thus, DOE is not making changes to the product classes in this 
Final Rule.'' 79 FR 38130, 38150 (July 3, 2014).
---------------------------------------------------------------------------

    As discussed previously, the comments submitted by USB, BHI, and 
Crown Boiler on the July 2019 proposed interpretive rule, while 
generally supportive, raised questions as to whether DOE's proposed 
approach could be successfully implemented as initially drafted. These 
commenters argued that because DOE's proposed interpretation focused on 
the distinction between an appliance's use of condensing versus non-
condensing technology, the same installation challenges may still arise 
unless DOE took steps to maintain compatibility with a product's 
intended venting (particularly Category I venting). DOE was interested 
in the views of other interested parties on the thoughts expressed by 
USB, BHI, and Crown Boiler, because the Department does not wish to 
adopt an interpretation that would not be workable in practice and that 
would ultimately leave the problem raised in the Gas Industry Petition 
unresolved. Consequently, DOE proceeded to issue the September 2020 
SNOPIR, which is more fully discussed in section II.E of this document, 
in order to receive public input on this topic. In short, in the 
September 2020 SNOPIR, DOE presented two alternative approaches to 
implementing its proposed interpretation (i.e., regarding how to set 
product/equipment classes for the appliances impacted by this 
interpretation). One alternative was to maintain compatibility with all 
existing venting types intended for the covered appliance. The other 
alternative was to ensure compatibility with Category I venting, the 
type most commonly associated with non-condensing products/equipment. 
DOE also noted that, depending upon the input received, the Department 
might also move to adopt the approach originally presented in its July 
2019 proposed interpretive rule.
    DOE received 18 sets of comments in response to the September 2020 
SNOPIR (see section I, Table I.2 of this document for a complete list 
of commenters on the September 2020 SNOPIR). Stakeholders that opposed 
DOE's July 2019 proposal tended to object to the September 2020 SNOPIR 
for many of the same reasons recited in their earlier comments, and any 
such broader, overarching objections are addressed elsewhere in this 
final interpretive rule. The balance of the arguments raised in 
comments directly addressed the issues presented in the September 2020 
SNOPIR and are set forth in the paragraphs that follow. DOE appreciates 
the valuable insights provided by all commenters on the matter of 
venting compatibility initially raised by USB, BHI, and Crown Boiler.
    In broad overview of the comments received on the SNOPIR, there was 
virtually no support for the proposed approach to maintain 
compatibility with all existing venting types (although one commenter 
did express some support as a secondary preference). There was

[[Page 4788]]

limited support for the proposed approach to maintain compatibility 
with Category I venting, with two commenters favoring that approach and 
another naming it a secondary preference. DOE's initial proposal to 
establish product/equipment classes based upon the use of condensing or 
non-condensing technology had the broadest support of the three 
alternatives presented, with five commenters preferring that approach. 
One group of commenters (which included many of the entities filing the 
original Gas Industry Petition) did not express a preference for any of 
the three approaches presented, arguing that a proper course should be 
determined in the context of individual product/equipment rulemakings. 
Finally, as noted, there were also ten commenters who opposed DOE's 
July 2019 proposed interpretive rule, and that opposition extended to 
the September 2020 SNOPIR as well.
    DOE will first address the proposed approach of establishing 
product/equipment classes so as to maintain appliance compatibility 
with all existing venting types intended for that appliance.
    Crown Boiler and USB explained their rationale for why they do not 
support a class structure based upon ensuring compatibility with all 
existing venting categories (e.g., Categories II and III). The 
commenters stated that Category II venting systems are extremely rare, 
mostly because of the problems associated with relying on the buoyancy 
of low-temperature flue gases and/or a draft inducer located at the 
vent system terminal for proper venting. Crown Boiler and USB added 
that because there is no upper efficiency limit for Category II 
venting, any effort to protect a class of Category II vented appliances 
would create a problem for DOE in determining whether a proposed 
standard would preclude the use of this vent system. As to Category III 
venting systems, Crown Boiler and USB questioned the need to explicitly 
act to preserve this venting option, despite its more widespread use. 
More specifically, the commenters argued that Category III venting 
systems can, in some cases, utilize Category IV venting. Also, because 
most Category III venting is used to vent an appliance through a side 
wall, Crown Boiler and USB asserted that the most problematic 
installation situations would not arise. Furthermore, Crown Boiler and 
USB argued that because Category III vent systems operate with positive 
pressure, they are rarely, if ever, used to vent multiple appliances 
(due to the risk of flue products entering the interior space from the 
pressurized vent system through an off-cycle appliance), so the issue 
of ``orphaned'' appliances should not be applicable to Category III 
appliances. Crown Boiler and USB acknowledged that their comments about 
Category III appliances are generalizations and that there may be a few 
instances where such appliances are difficult or impossible to reuse or 
replace, but they reasoned that those rare instances would not merit 
the additional regulatory complexity associated with guaranteeing 
Category III venting compatibility. (Crown Boiler, No. 103 at pp. 2-3; 
USB, No. 105 at pp. 1-2)
    Crown Boiler and USB further argued that addressing appliances with 
uncategorized venting would be even more problematic. Examples include 
direct vent appliances and uncertified gas appliances (such as a boiler 
designed primarily to use fuel oil which is installed with a gas 
conversion burner). Crown Boiler and USB argued that because these 
unusual vent systems are generally replaced along with the appliance, 
there would be no need to preserve or reuse them, thereby making it 
preferable to leave them unaddressed in favor of regulatory simplicity. 
(Crown Boiler, No. 103 at p. 3; USB, No. 105 at p. 2)
    For these reasons, Crown Boiler and USB concluded that DOE should 
not pursue further the proposed approach of establishing product/
equipment classes so as to maintain appliance compatibility with all 
existing venting types intended for that appliance. (DOE notes that 
other commenters also provided input as to why this alternative 
approach should be abandoned, but their reasoning likewise extended to 
DOE's other alternative proposal to establish product/equipment classes 
so as to maintain appliance compatibility with Category I venting. 
Those arguments will be presented following discussion of Crown 
Boiler's and USB's arguments in favor of an approach to maintain 
Category I venting compatibility.)
    Crown Boiler and USB then went on to explain why they support the 
proposed approach of establishing product/equipment classes to maintain 
appliance compatibility with Category I venting as the performance-
related feature, for the reasons (largely identical) that follow.\17\ 
These commenters stated that this approach would address their 
previously raised concerns regarding the matter of venting 
compatibility, while simplifying the interpretive rule by not advancing 
the more complex option of trying to ensure compatibility with all 
existing venting category applications. (Crown Boiler, No. 103 at p. 1; 
USB, No. 105 at p. 1) Crown Boiler reasoned that because American 
National Standards Institute (ANSI) safety standards provide a test 
method to ascertain the appropriate type of venting so as to ensure 
that the appliance in question can be vented safely, the vent category 
is both an essential design requirement and ``an objective performance 
characteristic of the above appliance and not just of the vent system 
to which it is connected.'' The commenter further noted that the vent 
category is found on the appliance's rating plate and in the third-
party certification report. (Crown Boiler, No. 103 at p. 2 (emphasis in 
original))
---------------------------------------------------------------------------

    \17\ As discussed further in section III.A.4 of this document, 
DOE notes that in seeking clarification on the July 2019 proposed 
interpretive rule, Weil-McLain also suggested that the Department 
should make class distinctions based on an appliance's venting 
category (as defined in the National Fuel Gas Code NFPA 54), rather 
than using the terms ``condensing'' and ``non-condensing.'' The 
commenter pointed to what the National Fuel Gas Code refers to as 
Category I vented appliances, which operate with a non-positive vent 
static pressure and with a vent temperature which avoids excessive 
condensate production in the vent. Thus, Weil-McLain suggested that 
going forward, DOE should tie the performance-related feature to the 
term ``Category I Vented Appliance'' in its interpretation. (Weil-
McLain, No. 86 at pp. 1-2) However, DOE points out that although 
Weil-McLain expressed this opinion in response to the July 2019 
proposed interpretive rule, the company did not comment on the 
September 2020 SNOPIR where this matter was discussed in further 
detail. Consequently, DOE can only presume that Weil-McLain 
continues to maintain this position.
---------------------------------------------------------------------------

    Crown Boiler and USB added that DOE should define any gas appliance 
venting performance characteristics in terms of the test procedure in 
the appropriate ANSI safety standard, rather than the definitions in 
the National Fuel Gas Code, because the latter source uses vague terms 
such as ``excessive condensate'' and vague conditions under which such 
condensation might occur. Thus, as an example, Crown Boiler and USB 
recommended defining a Category I class of residential boilers as `` 
`those boilers which have been determined to be Category I using the 
test method in ANSI Z21.13.' '' (Crown Boiler, No. 103 at p. 3; USB, 
No. 105 at p. 2)
    Other commenters (who also support DOE's revised interpretation as 
a general matter) disagreed with Crown Boiler's and USB's position, 
arguing that even an approach limiting venting compatibility to 
Category I is too complicated and fraught with potential problems. 
Consequently, the commenters expressed support for DOE to adopt the 
approach in its original proposal, which would define the

[[Page 4789]]

performance-related feature (and subsequent class setting) in terms of 
condensing or non-condensing operation of the subject appliance. This 
viewpoint was expressed by Nortek, BWC, AHRI, Mortex,\18\ and Carrier. 
(Nortek, No. 107 at p. 1; BWC, No. 108 at p. 2; AHRI, No. 109 at pp. 1, 
5; Mortex, No. 111 at p. 2; Carrier, No. 110 at p. 1) The following 
discussion explains these commenters' rationale for opposing a venting 
compatibility-based approach to defining a performance-related feature 
under EPCA, as well as their rationale for supporting DOE's original 
proposal. Commenters who generally oppose DOE's revised interpretation 
(e.g., NRDC, A.O. Smith, Lennox, CA IOUs, Advocates Joint Comment II, 
and NEEA) also provided reasoning as to why it would be inadvisable to 
adopt the alternative approaches presented in the September 2020 
SNOPIR, and these comments are summarized in the paragraphs that follow 
as well.
---------------------------------------------------------------------------

    \18\ If DOE's original proposed interpretation is not adopted, 
Mortex then expressed support for either of the two alternative 
interpretations presented in the September 2020 SNOPIR based on 
venting compatibility. Mortex stated that any of these approaches 
would preserve the performance-related features of its mobile home 
gas furnaces, which are designed for use with Category I venting 
systems. (Mortex, No. 111 at p. 2)
---------------------------------------------------------------------------

    One line of argument surrounded the complexity of a regulatory 
framework based upon venting compatibility. Nortek, AHRI, and Lennox 
argued that categorization of appliances by venting system is a complex 
matter, and in application, it can vary for different product/equipment 
types, as determined according to the applicable ANSI safety standards. 
According to these three commenters, venting, condensate generation, 
and efficiency are among several factors that determine how a boiler, 
water heater, or furnace is designed, safety-certified, and installed. 
Thus, Nortek, AHRI, and Lennox stated that they do not find venting to 
be an inherent product feature, but rather an installation requirement 
that may vary depending upon the design and application of the product. 
(Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2; Lennox, No. 114 at p. 
5)
    Another line of argument involved the potential for appliances to 
be certified for use with multiple venting categories or ones that do 
not have a designated venting category. Relatedly, BWC argued that if 
DOE were to adopt a highly segmented class structure based upon venting 
compatibility, further complications would be likely to arise in terms 
of setting efficiency regulations for gas-fired products. For example, 
the commenter pointed to certain water heaters that are listed with 
multiple venting categories, which leaves it to a plumbing contractor's 
discretion to determine the most appropriate venting for a given 
installation situation. Because more than one efficiency requirement 
could apply in such cases, BWC stated that the alternative approaches 
presented in the September 2020 SNOPIR would not be practical, either 
generally or from a technical perspective. Similarly, BWC added that 
operational conditions for a type of appliance may affect the selection 
of venting category, so the installing contractor will need to be aware 
of and take appropriate action regarding the sizing and selection of 
proper vent materials. BWC also stated that the alternative approaches 
presented in the September 2020 SNOPIR failed to address products that 
do not have a venting category (i.e., non-categorized products), such 
as ones that are direct vent or installed outdoors. (BWC, No. 108 at p. 
1)
    A.O. Smith stated that venting category definitions vary by 
appliance type, and it commented that some models can carry 
certification with multiple venting categories. A.O. Smith also stated 
that the non-condensing characterization is broader than the Category I 
venting certification. (A.O. Smith, No. 113 at p. 4) The CA IOUs made a 
similar point about gas appliances capable of being configured to work 
with more than one category of venting system, and they reasoned that 
this would make it impossible for compatibility of a product category 
with a specific venting system to be designated as a protected feature 
under EPCA. (CA IOUs, No. 117 at p. 5)
    Similar to the points raised by Crown Boiler and USB, AHRI also 
noted that complexities that could arise from seeking to maintain 
venting compatibility for water heaters using Category II or Category 
III venting, and similar to BWC, AHRI commented as to the difficulty in 
classifying water heater models that can have multiple categorizations 
depending upon design. AHRI added that similar to water heaters, 
boilers may be subject to more than one venting characterization, 
depending upon how they are installed in the field. According to the 
commenter, some non-condensing boilers operate at positive vent 
pressure, which requires Category III venting. The trade association 
suggested that these concerns could lead to a regulatory structure that 
is not easy to understand and implement at the point of manufacture. 
(AHRI, No. 109 at p. 4) Carrier also stated that some boilers and water 
heaters can use multiple vent categories, although it noted that this 
is a small subset of products. (Carrier, No. 110 at p. 2)
    For the reasons stated, Nortek and AHRI concluded that dividing 
product/equipment classes by venting categories would unnecessarily 
complicate the approach to class setting, and AHRI expressed concern 
that such an approach could have unintended consequences. (Nortek, No. 
107 at p. 2; AHRI, No. 109 at pp. 2, 5) Other commenters also remarked 
as to the complexity surrounding a regulatory structure based on 
venting categories. (Carrier, No. 110 at p. 2; Lennox, No. 114 at p. 5) 
Carrier added that such an approach may not achieve a result different 
from DOE's original proposal. (Carrier, No. 110 at p. 2) Consequently, 
Nortek and AHRI opined that a blanket rule encompassing all gas 
appliances that turns on venting categories may not capture detailed 
technical nuances, or it may overly complicate the product classes, 
thereby resulting in unintended regulatory burden or market impacts. 
(Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2) Lennox also argued 
that such an approach would further segment the already unduly 
complicated residential furnaces product class structure in DOE's 
original proposal, thereby compounding the problem, and significantly 
increase regulatory burden without any apparent benefit to consumers or 
manufacturers. (Lennox, No. 114 at pp. 1, 5)
    BWC advised that if DOE ultimately decides to pursue one of the 
alternate paths to defining the performance-related feature, as set 
forth in its September 2020 SNOPIR, the Department should convene a 
stakeholder meeting to parse out the implementation issues that may 
arise in the context of different types of products and to discuss how 
to proceed. (Nortek, No. 108 at p. 2)
    A.O. Smith disagreed with the alternate approaches to the feature 
determination focused on venting compatibility as presented in the 
September 2020 SNOPIR, because venting is not applied at the point of 
manufacture, nor is it known what the installation circumstances may be 
for a given residence or commercial building. The commenter argued that 
EPCA grants DOE authority to regulate covered products and equipment at 
the point of manufacture, which does not extend to the point of 
installation. Thus, A.O. Smith questioned whether DOE has authority to 
differentiate product/equipment classes based upon categories of 
venting materials. (A.O. Smith, No. 113 at p. 4)

[[Page 4790]]

    Another line of arguments suggested that the alternative approaches 
based upon venting compatibility set forth in the September 2020 SNOPIR 
may encounter problems with changing building safety codes. NRDC argued 
that such approaches are not feasible, practical, or necessary, stating 
that even current standards are not universally consistent with every 
type of ventilation system found in every building because of different 
codes and standards put in place over time. (NRDC, No. 112 at pp. 2-3) 
To this point, the CA IOUs argued that in many cases, safety codes may 
have changed by the time a gas-fired appliance needs to be replaced, so 
the existing venting would need to be changed, regardless of the type 
of venting with which the appliance may be compatible. (CA IOUs, No. 
117 at p. 4)
    The Advocates Joint Comment II also argued that DOE's professed 
intent in the September 2020 SNOPIR about maintaining venting 
compatibility is not achievable. These commenters stated that there are 
currently many situations where there are no products on the market 
compatible with the existing venting system due to current safety 
requirements. For example, the Advocates Joint Comment II pointed to 
DOE's own past rulemakings in explaining that the National Fuel Gas 
Code has lining requirements that effectively require all chimneys to 
be lined in order to install a new gas furnace or boiler; however, 
prior to 1995, building codes did not require such lining of chimneys, 
so homes built before 1995 would need to have their chimneys lined in 
order to install a new non-condensing furnace that is compatible with 
Category I venting. Similarly, the Advocates Joint Comment II stated 
that DOE's past rulemakings have found that with Type B vents, when a 
new non-condensing furnace or boiler that is compatible with Category I 
venting replaces an existing natural draft non-condensing product, in 
almost all cases, the vent connectors need to be replaced or the entire 
venting system needs to be resized. These commenters noted that DOE has 
traditionally accounted for such changes in its analysis of 
installation costs and suggested that that was the correct approach. 
However, the Advocates Joint Comment II argued that even if venting 
compatibility were to be considered a performance-related feature, the 
availability of products compatible with Category I venting would not 
necessarily ensure compatibility with existing venting systems, for the 
reasons explained above. (Advocates Joint Comment II, No. 118 at pp. 3-
4)
    Furthermore, the CA IOUs added that the concept of discrete classes 
of gas appliances which can be defined by compatibility with specific 
venting systems does not match what is occurring in the field. The CA 
IOUs explained that in the commercial sector, there are already venting 
systems that are compatible with gas-fired appliances designed for 
Category I-IV venting systems, and there is an ongoing trend to upgrade 
all commercial venting systems to those that comply with Underwriters 
Laboratory (UL) 1738, Special Gas Vents, for condensing appliances. 
Accordingly, the CA IOUs opined that as universal venting systems 
become more widespread, concerns about the compatibility of gas 
appliances with different venting systems will continue to become less 
relevant. (CA IOUs, No. 117 at p. 4)
    NRDC stated that instead of pursuing the proposed approaches, DOE 
should consider and evaluate alternative venting technologies to solve 
difficult installation scenarios, both those on the market and under 
development. (NRDC, No. 112 at pp. 2-3) NRDC and NEEA criticized the 
approach in the September 2020 SNOPIR as potentially freezing venting 
technologies in place and limiting innovation in both venting 
strategies and equipment design, thereby harming consumers through 
higher energy costs and reduced product features. (NRDC, No. 112 at p. 
3; NEEA, No. 119 at p. 3)
    Beyond these technical comments focused on the merits of DOE's 
alternative proposals tying the performance-related feature to 
maintaining venting compatibility, the commenters essentially fell into 
three camps in terms of their recommendations for how DOE should move 
forward. Several commenters recommended that DOE adopt its original 
proposal to establish product/equipment classes on the basis of the 
subject gas appliance's utilization of condensing/non-condensing 
technology for purposes of 42 U.S.C. 6295(o)(4). This approach was 
favored by Nortek, BWC, AHRI, Carrier, and Mortex. (Nortek, No. 107 at 
p. 1; BWC, No. 108 at p. 2; AHRI, No. 109 at pp. 1, 5; Carrier, No. 110 
at p. 1; Mortex, No. 111 at p. 2) Another group recommended that DOE 
abandon not only the approaches presented in the September 2020 SNOPIR, 
but the approach in the July 2019 proposed interpretive rule as well, 
largely based upon the legal, technical, and policy arguments raised in 
their earlier comments. This pathway was favored by NRDC, A.O. Smith, 
Lennox, the AGs Joint Comment, the CA IOUs, the Advocates Joint Comment 
II, and NEEA. (NRDC, No. 112 at p. 2; A.O. Smith, No. 113 at p. 2; 
Lennox, No. 114 at p. 1; AGs Joint Comment II, No. 115 at p. 1; CA 
IOUs, No. 117 at p. 1; Advocates Joint Comment II, No. 118 at p. 1; 
NEEA, No. 119 at p. 1) Finally, the organizations submitting the 
Petitioners et al. Joint Comment II argued that the issues of venting 
compatibility raised in the September 2020 SNOPIR do not need to be 
addressed at the present time in order to resolve the core issue of 
applying the ``unavailability'' provision of EPCA to the specific 
proposed standards for residential furnaces and commercial water 
heaters, as requested by the Gas Industry Petition. Instead, these 
commenters argued that these important issues are more appropriately 
addressed in the context of the development of new standards for 
residential furnaces, commercial water heaters, and other gas or 
propane-fueled products/equipment. (Petitioners et al. Joint Comment 
II, No. 116 at pp. 4, 6) The residual comments of these three groups 
are summarized in the paragraphs that follow.
    Commenters supporting adoption of DOE's original proposal to 
establish product/equipment classes on the basis of the subject gas 
appliance's utilization of condensing/non-condensing technology made 
the following additional points. For furnaces currently on the market, 
Nortek, AHRI, and Carrier stated that they are all already divided into 
non-condensing/Category I and condensing/Category IV, so there is no 
substantive distinction between the two. Of the two, these commenters 
prefer categorization based upon a ``condensing/non-condensing'' 
distinction, because furnaces are already divided in that manner for 
purposes of DOE's energy conservation standards for furnace fans. 
(Nortek, No. 107 at pp. 2-3; AHRI, No. 109 at p. 3; Carrier, No. 110 at 
p. 2) Carrier also stated that it continues to believe that non-
condensing operation is the key performance-related feature at issue. 
(Carrier, No. 110 at p. 2) AHRI opined that a ``non-condensing'' 
product class should be sufficient to capture all boilers requiring 
Category I venting, but it nonetheless encouraged DOE to explicitly 
incorporate the ability to use existing venting categories associated 
with atmospheric venting. (AHRI, No. 109 at p. 5)
    Nortek and AHRI added that finalizing DOE's interpretation based 
upon a ``condensing/non-condensing'' distinction, as originally 
proposed, would not preclude the Department from considering and 
analyzing venting

[[Page 4791]]

applications when creating product/equipment classes during the course 
of individual energy conservation standards rulemakings, as necessary. 
These commenters argued that a thorough, product-specific definition 
and technology-focused characteristics should be evaluated to create 
functional product/equipment classes that might vary for different 
types of appliances. (Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2) 
Finally, AHRI stated that tolerances and operational characteristics of 
the product-specific test procedure must be considered in future 
rulemakings to ensure that any energy conservation standards are safe, 
functional, and cost-effective. (AHRI, No. 109 at p. 2)
    Mortex cautioned that in moving forward with standard setting for 
revised energy conservation standards for residential gas furnaces, 
including mobile home gas furnaces, DOE must take into account the 
product class structure established for residential furnace fans 
manufactured on or after July 3, 2019 (codified at 10 CFR 430.32(y)). 
Mortex argued that pursuant to 42 U.S.C. 6295(m)(4)(B), any revised 
energy conservation standards for non-condensing, non-weatherized 
mobile home gas furnaces must not preclude the continued sale of mobile 
home gas furnaces containing furnace fans that comply with the new 
furnace fan standards, because under that provision, EPCA prohibits DOE 
from subjecting manufacturers to a new standard for a product with 
respect to which other new standards have been required during the 
prior 6-year period. The commenter argued that this requirement can 
only be met by ensuring that any revised energy conservation standards 
applicable to non-weatherized mobile home gas furnaces permit the 
continued sale of non-condensing mobile home gas furnaces. (Mortex, No. 
111 at p. 2)
    Commenters supporting withdrawal of DOE's July 2019 proposed 
interpretive rule and September 2020 SNOPIR made the following 
additional points. NRDC opposes and urged DOE to withdraw both the July 
2019 proposed interpretive rule and the September 2020 SNOPIR, because 
the commenter argued that both suffer from technical and legal issues 
which the Department has failed to address. NRDC and Lennox renewed and 
reiterated many of the arguments raised in their earlier comments to 
this docket, because the commenters stated that those same objections 
apply regardless of whether the performance characteristics at issue 
involve the use of condensing technologies or venting compatibility. 
(NRDC, No. 112 at p. 2; Lennox, No. 114 at pp. 7-8) Other commenters 
did the same, and as mentioned previously, such arguments are addressed 
elsewhere in this document.
    Lennox criticized DOE's September 2020 SNOPIR as being ``overtly 
vague and unsupported,'' and in particular, the commenter faulted the 
alternate approach which would consider the creation of separate 
product classes for any existing venting system available on the market 
as ambiguous and ill-defined, such that it deprives stakeholders the 
opportunity to comment. For example, Lennox questioned whether DOE's 
proposal would include specialty or unique ventilation types. (Lennox, 
No. 114 at pp. 1, 3, 6) Lennox also faulted DOE's proposals for making 
what it calls ``speculative and unsupported statements,'' such as the 
number and cost of problematic installations and DOE's expectation 
regarding limited negative programmatic impacts resulting from its 
proposed interpretation. Accordingly, the commenter argued that DOE's 
lack of analysis and supporting data once again deny stakeholders the 
opportunity to comment on the September 2020 SNOPIR. (Lennox, No. 114 
at p. 3) Lennox added that the September 2020 SNOPIR offers no 
meaningful cost analysis or quantification of installation issues, so 
it argued that DOE has no record basis to move forward with its 
proposed interpretive rule. (Lennox, No. 114 at p. 4) Similarly, the CA 
IOUs requested that DOE quantify the potential negative impacts of its 
proposal in the September 2020 SNOPIR for residential furnaces, 
commercial water heaters, and other similarly-situated products/
equipment. (CA IOUs, No. 117 at p. 4)
    In addition, A.O. Smith alleged that DOE is improperly attempting 
to use venting categorization in the features provision as a proxy for 
how to consider increased installation cost in its rulemakings. 
Instead, the commenter argued that such installation cost 
considerations belong in DOE's economic analysis. (A.O. Smith, No. 113 
at p. 3) Furthermore, A.O. Smith argued that DOE's proposed 
interpretation, if applied to maintain Category I venting, would 
eliminate more-efficient non-condensing products from the market, which 
would restrict the opportunity for incremental gains in efficiency for 
non-condensing appliances through Federal regulation. (A.O. Smith, No. 
113 at pp. 4-5)
    Commenters supporting finalization of the core ``features'' 
determination under EPCA and deferral of implementation issues (e.g., 
class setting) to individual product/equipment rulemakings made the 
following additional points. The Petitioners et al. Joint Comment II 
argued that the issues of venting compatibility raised in the September 
2020 SNOPIR do not need to be addressed at the present time in order to 
resolve the core issue of applying the ``unavailability'' provision of 
EPCA to the specific proposed standards, as requested by the Gas 
Industry Petition. Instead, these commenters argued that these 
important issues are more appropriately addressed in the context of the 
development of new standards for residential furnaces, commercial water 
heaters, and other gas or propane-fueled products/equipment. 
(Petitioners et al. Joint Comment II, No. 116 at pp. 4, 6) The 
Advocates Joint Comment II also stated that venting considerations for 
each product potentially covered by DOE's interpretation are different, 
so such impacts must be considered in the context of individual 
rulemakings, which can consider the specific circumstances of each 
product (although the advocates still consider venting to be a matter 
for DOE's economic analysis). (Advocates Joint Comment II, No. 118 at 
p. 5)
    In conducting inquiries in these individual rulemakings, the 
Petitioners et al. Joint Comment II stated that the Department should 
consider product class definitions for residential products which 
reflect venting requirements that are established and codified under 
national consensus standards, and then DOE should assess the need for 
separate minimum efficiency standards for these classes. These 
commenters stated that for the subject residential furnaces and 
commercial water heaters, these appliances are design-certified for 
safety based on the venting characteristics. According to these 
commenters, there are four venting criteria specified in the applicable 
industry consensus standards for residential furnaces and commercial 
water heaters, as identified in ANSI Z21.47, Gas-Fired Central 
Furnaces, and ANSI Z21.10.3, Gas-Fired Water Heaters, respectively. The 
Petitioners et al. Joint Comment II added that the installation codes 
for gas furnaces--ANSI Z223.1/NFPA 54, National Fuel Gas Code, and the 
International Fuel Gas Code--include requirements for proper 
installation (e.g., vent sizing, termination, and clearance 
requirements). The commenters surmised that these product categories 
would provide an appropriate starting point for DOE's technical and 
economic analysis to determine whether separate minimum efficiency 
standards are

[[Page 4792]]

appropriate for each equipment class. The Petitioners et al. Joint 
Comment II recommended that these issues should be addressed in 
individual product rulemakings under DOE's Process Rule \19\ and using 
the most current information available. (Petitioners et al. Joint 
Comment II, No. 116 at pp. 7-8)
---------------------------------------------------------------------------

    \19\ See 10 CFR part 430, subpart C, appendix A, Procedures, 
Interpretations, and Policies for Consideration of New or Revised 
Energy Conservation Standards and Test Procedures for Consumer 
Products and Certain Commercial/Industrial Equipment.
---------------------------------------------------------------------------

    The Petitioners et al. Joint Comment II stressed that action on the 
Gas Industry Petition is a matter of some urgency, because litigation 
has been filed seeking to compel final action in a number of energy 
conservation standards rulemaking proceedings, including the 
proceedings in which proposals were issued that are the subject of the 
Gas Industry Petition. As a result, the Petitioners et al. Joint 
Comment II argued that DOE should clarify the situation by withdrawing 
its prior rulemaking proposals for residential furnace and commercial 
water heater energy conservation standards, because those proposals 
cannot not be legally finalized as proposed if the Department 
promulgates a final interpretive rule along the lines of that set forth 
in the July 2019 proposed interpretive rule. (Petitioners et al. Joint 
Comment II, No. 116 at p. 5)
    In light of the above arguments, it has become apparent to DOE that 
its alternative proposals to establish product/equipment classes based 
upon maintaining venting compatibility drew little public support, and 
problems may arise from adopting them as an overarching approach. 
Support for maintaining compatibility with Category I venting was 
limited to only Crown Boiler and USB, and no commenter spoke in favor 
of an approach to maintain compatibility with all existing venting 
types. However, a broad cross-section of industry stakeholders with 
considerable technical expertise confirmed their understanding that 
DOE's original proposal to define the subject performance-related 
feature as the appliance's condensing or non-condensing operation would 
represent a workable approach to implementing DOE's revised 
interpretation.
    Based upon DOE's careful review of the comments received, the 
Department has decided it is not appropriate to move forward with 
either of the two alternative approaches based upon venting 
compatibility presented in the September 2020 SNOPIR, but to instead 
adopt its original proposal presented in the July 2019 proposed 
interpretive rule, which focused on an appliance's condensing or non-
condensing operation. Comments on the September 2020 SNOPIR have 
convinced the agency that its alternative proposals would have 
increased the complexity and regulatory burden of its regulatory 
framework with little benefit. Because DOE is no longer pursuing these 
alternative approaches, the Department finds it unnecessary to address 
all of the technical arguments and other contentions against making 
maintenance of venting compatibility a touchstone of its ``features'' 
determination. DOE is also persuaded by the stakeholder comments that 
have positively assessed the implementation potential of DOE's revised 
interpretation along the lines of its original proposal.
    DOE agrees with the commenters who suggested that DOE should move 
to resolve the ``core issue'' at the heart of the Gas Industry Petition 
in this final interpretive rule, while reserving appliance-specific 
implementation issues (including class setting) for review and analysis 
in the context of individual product rulemakings. DOE has concluded 
that such an approach would best serve all parties, including 
manufacturers and consumers. Individual product rulemakings will have 
the requisite mix of interested stakeholders, technical experts, a 
comprehensive record with product-specific data (including a review of 
relevant industry consensus standards), and the full suite of analyses 
for class and standard setting. In that venue, DOE and interested 
stakeholders will be better able to address any relevant technical 
matters or product-specific nuances, including the tolerances and 
operational characteristics of test procedures mentioned by AHRI, and 
any lingering concerns related to the issue initially raised by USB, 
BHI, and Crown Boiler.
    Because the approach in DOE's earlier proposals for residential 
furnaces and commercial water heaters are inconsistent with this final 
interpretation and, therefore, will require revision, DOE has decided 
to grant the request in the Petitioners et al. Joint Comment II for the 
withdrawal of those proposals. Published elsewhere in this issue of the 
Federal Register, DOE withdraws its March 12, 2015 proposed rule and 
September 23, 2016 supplemental proposed rule for energy conservation 
standards for non-weatherized gas furnace and mobile home gas furnaces, 
as well as its May 31, 2016 proposed rule for energy conservation 
standards for commercial water heating equipment. DOE's decision to 
withdraw its earlier proposals is discussed in further detail in 
section III.D.3 of this document.
    Regarding arguments challenging the technical/legal/policy bases 
for the September 2020 SNOPIR, DOE found many of these comments to 
essentially be re-statements of their comments submitted in response to 
the July 2019 proposed interpretive rule, rather than specifically 
focused on the particulars of DOE's supplemental proposed 
interpretation. Accordingly, those concerns are cited and addressed 
elsewhere in this document.
    As to Mortex's concern about the statutory prohibition on applying 
new standards to a covered product for which other new standards have 
been required within the prior six-year period (42 U.S.C. 
6295(m)(4)(B)), DOE would point out that, given that requirements for 
furnace fans came into effect on July 3, 2019, and given the 
anticipated five-year lead time for amended standards for residential 
furnaces (including mobile home gas furnaces), it is anticipated that 
more than six years will have passed by the time any new furnaces 
standards would come into effect.
b. Comments Opposing the Proposed Interpretation
    Other commenters strongly opposed and urged withdrawal of DOE's 
proposed revised interpretation regarding whether non-condensing 
technology and associated venting constitutes a ``feature'' under EPCA. 
(CA IOUs, No. 85 at p. 1; CFA/NCLC, No. 93 at p. 1; AGs Joint Comment, 
No. 82 at p. 2; NRDC, No. 94 at p. 1; Advocates Joint Comment, No. 95 
at p. 1; Environmentalists Joint Comment, No. 90 at p.1: AGs Joint 
Comment II, No. 115 at p. 2) These commenters raised a number of 
arguments which are set forth and addressed in the paragraphs that 
follow.
i. Support for DOE's Prior Interpretation
    Several commenters expressed support for DOE's prior position, as 
presented in past rulemaking documents published in the Federal 
Register, which concluded that non-condensing technology (and 
associated venting capabilities) do not merit a ``feature'' designation 
and the establishment of a separate product class with a different 
energy conservation standard. (Ceres, No. 69 at p. 3; Lennox, No. 87 at 
p. 4; A.O. Smith, No. 88 at p. 2; NRDC, No. 94 at pp. 4-5; CA IOUs, No. 
85 at p. 3; A.O. Smith, No. 113 at p. 2; Lennox, No. 114 at pp. 6-7; 
AGs Joint Comment II, No. 115 at p. 2; CA IOUs, No. 117 at p. 1; NEEA, 
No. 119 at p. 1) In making that point, the

[[Page 4793]]

AGs Joint Comment argued that DOE's proposed interpretive rule would 
effectively grandfather inefficient designs. (AGs Joint Comment, No. 82 
at p. 3) The AGs Joint Comment pointed to and even quoted from a number 
of DOE's past rulemakings which articulated the rationale for finding 
that venting capabilities (and any related costs) are not a 
performance-related feature under EPCA. Specifically, these commenters 
cited to language contained in the [March 12,] 2015 NOPR and [September 
23,] 2016 SNOPR for residential furnaces, the 2009 final rule for 
residential water heaters,\20\ and the 2015 final rule for residential 
clothes dryers.\21\ In short, the AGs Joint Comment (and other 
commenters) agreed with DOE's historic view that a furnace's or water 
heater's manner of venting does not provide consumers unique utility 
separate and apart from its basic function of providing heat or hot 
water. (AGs Joint Comment, No. 82 at pp. 3, 8-10; A.O. Smith, No. 88 at 
pp. 2, 4; NRDC, No. 94 at pp. 4-5; CA IOUs, No. 85 at pp. 2-3; NRDC, 
No. 112 at p. 2) NRDC added that when DOE acts to reverse a long-held 
interpretation, as it seeks to do with the proposed interpretation for 
condensing/non-condensing products/equipment, DOE has the burden of 
proof to clearly explain and justify its rationale. (NRDC, No. 94 at p. 
3)
---------------------------------------------------------------------------

    \20\ DOE notes that this final rule was actually published in 
the Federal Register on April 16, 2010.
    \21\ DOE notes that this final rule was actually published in 
the Federal Register on April 21, 2011.
---------------------------------------------------------------------------

    In response, DOE disagrees with these commenters' view that the 
Department's revised interpretation is inappropriate or lacking in 
evidentiary basis, and DOE notes that numerous other commenters on the 
proposed interpretive rule held a contrary opinion. As explained 
elsewhere in this document, the Gas Industry Petition gave DOE the 
opportunity to revisit its prior interpretation, and the information 
provided in that petition and in subsequent comments thereon caused DOE 
to reevaluate prior data and, ultimately, its position. These 
commenters cannot reasonably claim that the rulemaking dockets for 
residential furnaces, commercial water heaters, and other similarly-
situated products/equipment are lacking in data. Because data is always 
subject to interpretation, it is not reasonable for these commenters to 
demand that a revised interpretation must rely solely upon new data. 
Here, the petitioners did present the Department with new arguments, 
perspectives, and information that were useful to DOE in reexamining 
its position. More specifically, the petitioners explained how the 
shift to energy conservation standards set at a condensing level could 
necessitate significant modifications to both new and existing 
buildings, such that interior residential or commercial space may need 
to be sacrificed, additional unattractive venting would need to be 
added, or desirable window or patio space could be lost. These new 
arguments demonstrate ongoing impacts that would be noticed and likely 
perceived negatively by consumers, and this reasoning is in addition to 
the other arguments and data previously submitted by the petitioners 
and considered by DOE during the course of various rulemakings. As 
noted, DOE also relied upon the significant data already in these 
rulemaking dockets to assess its prior interpretation as to whether 
non-condensing technology (and associated venting) constitutes a 
performance-related ``feature'' for purposes of EPCA. Based upon the 
totality of the information, DOE has determined that the change in 
interpretation reflected in this final interpretive rule is appropriate 
under the statute.
    Regarding the assertion in the AGs Joint Comment that the revised 
interpretation would grandfather inefficient designs, that same 
argument could be ventured virtually every time a determination is made 
under EPCA's ``features'' provision. An oven without a window in the 
door would be more efficient than one that retains that feature.\22\ 
However, the statute, by the very nature of its ``features'' provision, 
makes clear that efficiency will not be paramount in all situations. In 
fact, the words of the statute make clear that is the precise purpose 
of the ``features'' provision. In that provision, EPCA prohibits the 
Secretary from prescribing a new or amended standard (i.e., imposing a 
standard for a product where a standard did not previously exist or 
increasing the stringency of an existing standard) if doing so is 
likely to result in the unavailability of a performance characteristic, 
feature, etc. substantially the same as those generally available in 
the absence of the Secretary prescribing a new or amended standard. See 
42 U.S.C. 6295(o)(4). Thus, DOE finds this argument in the AGs Joint 
Comment to be contrary to the statute.
---------------------------------------------------------------------------

    \22\ In its energy conservation standards rulemaking for cooking 
products that culminated in the September 8, 1998 final rule (63 FR 
48038), DOE explained its rationale for initially considering a 
design option to eliminate oven door windows as a means to improve 
energy efficiency in the technical support document (TSD) for that 
rulemaking. (See Volume E, Chapter 1, Engineering Analysis, section 
1.4.1, Design Options for Ovens, pp. I-22 to I-23. (Available at: 
https://beta.regulations.gov/document/EERE-2006-STD-0048-0027; 
(select EE-RM-90-201 COMMENT OOA2-4).
---------------------------------------------------------------------------

ii. Violations of Legal Standards
    Related to their support of DOE's prior interpretation, a number of 
commenters challenged DOE's proposed interpretation on a variety of 
legal grounds. For example, these commenters faulted the Department's 
proposal as being arbitrary and capricious; contrary to law; and 
contrary to precedent and factually unsupported. DOE recognizes that 
such topics are often intertwined. However, given the rather voluminous 
nature of these submitted arguments, DOE has segmented the discussion 
into these broad categories for response in the subsections that 
follow.
Arbitrary & Capricious
    A number of commenters characterized DOE's proposed reversal of its 
prior interpretation and dismissal of its prior concerns as arbitrary 
and capricious and an abuse of discretion, despite DOE's stated 
expectation that the programmatic impacts of its revised interpretation 
are likely to be limited (which was characterized as a claim alleged to 
be lacking in data and analysis). (AGs Joint Comment, No. 82 at pp. 2, 
7-10; CEC, No. 89 at p. 3; AGs Joint Comment II, No. 115 at p. 2; CA 
IOUs, No. 117 at p. 3) The CEC predicted that without sufficient record 
evidence to support its decision (i.e., changed interpretation), a 
court would overturn such agency action as arbitrary and capricious. 
Overall, the commenter expressed its belief that DOE's proposed 
interpretation is contrary to the preponderance of evidence in the 
record, particularly since DOE improperly conflates economic and 
performance characteristics. Accordingly, the CEC concluded that DOE's 
historical interpretation on this matter is both consistent with the 
evidence and reflects congressional intent to improve energy efficiency 
and protect human health. (CEC, No. 89 at p. 7)
    DOE disagrees with these commenters' notion that the Department 
lacks sufficient evidence to support a revised interpretation, thereby 
rendering the agency vulnerable to a legal challenge claiming arbitrary 
and capricious action. As noted previously, the petitioners presented 
new information and arguments explaining how the shift to energy 
conservation standards set at a condensing level

[[Page 4794]]

could necessitate significant modifications to both new and existing 
buildings, such that interior residential or commercial space may need 
to be sacrificed, additional unattractive venting would need to be 
added, or desirable window or patio space could be lost. These new 
arguments demonstrate ongoing impacts that would be noticed and likely 
perceived negatively by consumers, and this reasoning is in addition to 
the other arguments and data previously submitted by the petitioners 
and considered by DOE during the course of various rulemakings. In sum, 
DOE's existing rulemaking dockets are replete with evidence bearing on 
this matter. DOE appropriately reassessed that information in response 
to the submitted petition for rulemaking and, based upon the totality 
of the available information, came to the reasoned conclusion that its 
revised interpretation better comports with the statute, as explained 
in this document.
Contrary to Law
    Other commenters characterized DOE's proposed interpretation as 
contrary to law. (Lennox, No. 87 at p. 4; AGs Joint Comment, No. 82 at 
pp. 2-3; A.O. Smith, No. 88 at p. 2; CEC, No. 89 at p. 3; NRDC, No. 94 
at p. 4; A.O. Smith, No. 113 at p. 2; AGs Joint Comment II, No. 115 at 
p. 1) The AGs Joint Comment asserted that DOE's proposed interpretation 
is contrary to law under 5 U.S.C. 706(2), and that a plain reading of 
EPCA and review of public comments make clear that venting technology 
is not a performance-related feature under the statute. Consequently, 
these commenters reasoned that DOE cannot create a separate product 
class for non-condensing products on that basis which would be subject 
to lower efficiency requirements. (AGs Joint Comment, No. 82 at p. 7; 
AGs Joint Comment II, No. 115 at p. 2) Lennox added that Congress set 
initial energy conservation standards for residential furnaces with 
product classes based on capacity and fuel source, but it did not 
segment classes by condensing and non-condensing technology, so the 
commenter argued that DOE should not do so now. (Lennox, No. 87 at p. 
3)
    In response, DOE's proposed interpretive rule is in accordance with 
the pertinent statutory provisions of EPCA. As commenters acknowledged, 
the statute does not define the terms ``feature'' or ``performance-
related feature,'' so resolution of this ambiguity is left to the 
agency's discretion as a matter of statutory interpretation. Over the 
more than 30-year life of the Appliance Standards Program, DOE has made 
numerous ``features'' determinations, so the Department has expertise 
in weighing issues of consumer utility. Size constraints and building 
modifications to a dwelling or business seem clearly within the bounds 
of product characteristics that would matter to an average consumer, 
and have mattered in the past to DOE without objection (see e.g., 76 FR 
22454, 22485 (April 21, 2011) (discussing ventless and compact clothes 
dryers); 76 FR 37408, 37446 (June 27, 2011) (discussing space-
constrained residential central air conditioners and heat pumps)). DOE 
also rejects Lennox's argument that just because Congress based initial 
furnace standards on capacity and fuel source that modifications to 
that existing class structure would be forever off limits. Such 
argument would render the ``features'' provisions at 42 U.S.C. 
6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) superfluous, so DOE 
declines to adopt Lennox's suggested approach. Although DOE has found 
the Gas Industry Petition to encompass a number of complex issues, DOE 
has concluded that its revised interpretation set forth in this final 
interpretive rule is well grounded in current law.
    Lennox opined that DOE would be violating the legal standard 
pronounced by the Supreme Court that for an agency to change a 
regulatory interpretation, it must articulate a `` `rational connection 
between the facts found and the choices made' '' (citing Motor Vehicle 
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983)). 
(Lennox, No. 87 at p. 4) Similarly, A.O. Smith's comments claim that 
DOE's proposed interpretation deviates from the Department's past 
precedent without sufficient justification, administrative record 
support, or reasoned explanation. The commenter stated that DOE must 
provide a reasonable basis for its new interpretation, but it concluded 
that none of the Department's justifications are reasonable. (A.O. 
Smith, No. 88 at p. 6) First, A.O. Smith challenged the Department's 
tentative findings in the proposed interpretation related to space 
constraints, distinguishing DOE's past regulatory actions related to 
PTACs and ventless clothes dryers. The commenter acknowledged that the 
statute does expressly recognize ``size'' as a relevant factor under 
EPCA's ``features'' provision (see 42 U.S.C. 6295(o)(4); 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa)), but it argued that DOE's proposed 
interpretation, as it relates to commercial water heaters and similarly 
situated products, does not turn on size (given the wide availability 
of water heaters in a wide variety of diameters, heights, and 
footprints), but rather on condensing technology itself. (A.O. Smith, 
No. 88 at pp. 6-7) A.O. Smith also distinguished DOE's creation of 
distinct product classes for vented and ventless clothes dryers, noting 
that the presence or absence of vents in the residential space was a 
proxy for moisture removal designs (necessary to prevent mold growth 
and other health concerns). The commenter argued that without adequate 
venting or a ventless dryer option, some consumers would be unable to 
have a dryer at all (e.g., high-rise condo residents), but that 
situation would not apply to commercial water heaters, because 
commercial settings can accommodate condensing technology. Furthermore, 
A.O. Smith argued that DOE has proffered no new facts or changed 
circumstances to support its new conclusion, but instead, the company 
asserted that the Department has failed to acknowledge the wide variety 
of vent and intake air pipes that exist and that may accommodate 
differing condensing water heater installations, all of which should be 
properly considered in DOE's economic analyses. (A.O. Smith, No. 88 at 
pp. 7-8, 10)
    In response, DOE has articulated a rational and reasonable basis 
for its proposed change of interpretation. As mentioned previously, 
DOE's prior interpretation did not adequately account for the consumer 
utility of non-condensing appliances (and associated venting) in 
difficult installation situations. Commenters have also identified 
benefits related to expanded consumer choice. DOE disputes A.O. Smith's 
statements that the difficult installation situations examined do not 
pertain to size constraints, as well as its attempt to imply that 
alternate venting and piping would offer a panacea for the larger 
problem identified. Gas industry commenters provided considerable 
information in these regards to the residential furnaces, commercial 
water heaters, and other dockets, and DOE's own analyses showed that 
difficult installation situations exist, with many cases reflected in 
the Department's investigation of fuel switching. The Gas Industry 
Petition provided occasion for DOE to revisit its prior interpretation, 
and the agency has concluded that it erred in failing to consider 
consumer utility more broadly in this context. The Department would 
argue that there already was and is extensive evidence in the record 
bearing on this issue as would support DOE's change of course.

[[Page 4795]]

While DOE outlines the general factual basis and legal principles in 
this final interpretive rule, the Department will make a more explicit 
statement of the evidentiary basis for separate product/equipment 
classes and standards for non-condensing products/equipment in the 
context of a specific energy conservation standards rulemaking for each 
appliance impacted by this revised interpretation. Such detailed 
information resides in those individual rulemaking dockets and cannot 
be comprehensively addressed here. However, an expanded statement of 
the basis for regulatory action is appropriate before such rulemakings 
alter existing regulatory requirements.
    According to A.O. Smith, DOE's proposed interpretation conflicts 
with the Department's statutory obligations pursuant to EPCA and would 
undermine the Appliance Standards Program. It argued that although EPCA 
does not define the term ``feature,'' DOE cannot adopt a definition 
that conflicts with its statutory obligations to improve energy 
efficiency and the statutorily-mandated process for setting new and 
amended standards. A.O. Smith alleged that such reinterpretation would 
have profound negative consequences for energy efficiency and consumer 
choice. More specifically, the commenter asserted that it would impose 
an artificial ceiling on efficiency and create a loophole by locking in 
an outdated and inefficient technology with no consumer benefit. 
According to A.O. Smith, the logical consequence of DOE's 
reinterpretation would be the establishment of separate standards, but 
because non-condensing commercial water heaters can only be made 
minimally more efficient than the levels in the current energy 
conservation standards, the commenter concluded that no further 
standard would likely be cost-effective, thereby leaving these products 
``effectively unregulated.'' The commenter predicted that in its next 
commercial water heaters rulemaking, DOE would set a condensing 
standard of no less than 95 percent thermal efficiency, and as a 
result, manufacturers who are unable to meet the more-stringent 
standards for condensing commercial water heaters would revert to 
producing non-condensing models which enjoy a lower standard, all of 
which would have the effect of increasing condensing appliance costs 
and shrinking the market for high-efficiency products. (A.O. Smith, No. 
88 at pp. 10-11; A.O. Smith, No. 113 at p. 5)
    DOE cannot agree with the interpretation of EPCA that A.O. Smith 
seeks to advance, because it is inconsistent with the legal obligations 
set forth under the statute's ``features'' provision. The ``features'' 
provision was enacted by Congress to maintain important aspects of 
appliances' utility to consumers even if some measure of energy savings 
would be lost. To apply a litmus test of ``no lost energy savings'' or 
some vague ``fidelity to the statute'' standard would render EPCA's 
``features'' provision rarely used, if not impossible to use--the very 
definition of ``superfluous.'' Whereas A.O. Smith accuses DOE's 
proposed interpretive rule of undermining the Appliance Standards 
Program, the commenter's suggested approach would undermine the statute 
by giving DOE unlimited authority to override one of the checks-and-
balances Congress explicitly enacted. A.O. Smith mischaracterizes 
Congress's judgment to put elimination of ``performance-related 
features'' beyond the Department's regulatory reach as DOE's effort to 
create an artificial ceiling on standards or to create a loophole for 
inefficient technology. That is simply not the case; rather, DOE is 
following clear statutory direction to protect consumer utility, even 
if that means foregoing the potential opportunity for increased energy 
efficiency, and is applying facts to those words in a specific 
circumstance. Also, contrary to what A.O. Smith suggests, DOE's 
proposal would enhance consumer choice by maintaining a greater variety 
of appliances on the market. Nothing about creating separate product 
classes for condensing and non-condensing products in any way requires 
a consumer to purchase any particular product. As A.O. Smith 
recognizes, the market today consists of both condensing and non-
condensing products, and consumers are perfectly free to make the 
choice to purchase the more efficient product when doing so fits their 
needs. This interpretation does nothing to change that purchasing 
decision.
    DOE also takes issue with other of A.O. Smith's assertions. First, 
A.O. Smith argues that because non-condensing commercial water heaters 
are near the limits of their energy efficiency, they would be 
``effectively unregulated.'' This is untrue both factually and in terms 
of what the statute requires. Non-condensing water heaters would still 
be subject to standards at the current levels (or higher if a 
subsequent rulemaking periodically reviewing existing standards 
determines that further technical improvements can be made to non-
condensing technology as would justify an amended standard). In 
addition, nowhere does the statute require or establish an expectation 
that there shall be a never-ending cycle of increasingly more-stringent 
standards. Such a reading of the statute is belied by the fact that the 
statute expressly provides for notices of determination that standards 
for a product do not need to be amended where such standards would not 
result in significant energy savings, would not be technologically 
feasible, and/or would not be cost-effective. (42 U.S.C. 6295(m)(1)(A))
    In addition, DOE does not agree with A.O. Smith's prediction that 
manufacturers who are unable to meet a more-stringent standard for 
condensing commercial water heaters would revert to producing non-
condensing models which are subject to a lower standard, thereby 
shrinking the market for high-efficiency products. As discussed in 
greater detail in section III.A.3 of this document, current market 
trends show consumers moving strongly towards condensing products based 
upon their substantial demonstrated energy savings. Manufacturers have 
every incentive to adjust their product lines and processes in response 
to this market demand, even if the condensing appliances come to have 
their own higher standard. In the current market, consumers are already 
choosing to pay a premium for condensing appliances to achieve greater 
energy savings, and A.O. Smith has offered no rational basis supported 
by evidence to show this trend would reverse or that other 
manufacturers would rush to forego prior investment in condensing 
products to chase a declining market for non-condensing products. For 
those same reasons, A.O. Smith has failed to provide evidence 
demonstrating that any price increases for condensing appliances under 
a separate energy conservation standard would appreciably differ from 
price increases under a unified energy conservation standard set at a 
condensing level.
    The Environmentalists Joint Comment argued that the Department has 
failed to demonstrate that a violation of EPCA would occur by adoption 
of an energy conservation standard that can only be met by use of 
condensing technology. (Environmentalists Joint Comment, No. 90 at p. 
1) Along these lines, the Environmentalists Joint Comment stated that 
energy conservation standards that can only be met by use of condensing 
technology would not lead to minimal demand for gas appliances, which 
they assert is the legal test for DOE to take action under EPCA's 
``features'' provisions at 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II). These commenters asserted that in order for

[[Page 4796]]

the features provision to come into play, a DOE standard would need to 
leave the market with no alternative performance characteristics, 
features, sizes, capacities, or volumes that are ``substantially the 
same'' as those that would be eliminated from the market. They opined 
that Congress intended DOE to balance the preservation of product 
utility with the energy-saving objectives of the statute. In explaining 
their position, the Environmentalists Joint Comment quoted from the 
legislative history accompanying those statutory provisions: `` `A 
valid standard may entail some minor loss of characteristics, features, 
sizes, etc.; for this reason, the Act requires that `substantially the 
same,' though not necessarily identical, characteristics or features 
should continue to be available.' H. Rep. 100-11 at 23 (1987).'' 
``[T]he Senate Energy and Natural Resources Committee explained that, 
in the context of residential gas furnaces, section 325(o)(4) [42 
U.S.C. 6295(o)(4)] would forbid a standard from `being set at a level 
that would increase the price to the point that the product would be 
noncompetitive and that would result in minimal demand for the 
product.' S. Rpt. 100-6 at 8-9 (Jan. 30, 1987), reprinted in 1987 
U.S.C.C.A.N. 52, 59.'' Relying on this language, the Environmentalists 
Joint Comment concluded that DOE's proposed interpretation is 
impermissible because it does not meet this test, arguing not only that 
the Department has failed to demonstrate that condensing standards for 
both residential furnaces and commercial water heaters would result in 
minimal demand for these types of gas appliances, but also that the 
record in those rulemakings establish that fuel switching would be less 
than 10 percent. (Environmentalists Joint Comment, No. 90 at p. 2)
    The Petitioners et al. Joint Comment sought to refute comments 
suggesting that EPCA's ``features'' provision would only apply if the 
unavailability of the performance characteristic or feature at issue 
would completely destroy the market for the covered product/equipment. 
The Petitioners et al. Joint Comment argued that opponents of the Gas 
Industry Petition have misinterpreted the legislative history and that 
standards for residential furnaces which result in the unavailability 
of a performance characteristic would still be precluded under the 
statute, even if it would not fully eliminate the market for gas 
furnaces. (Petitioners et al. Joint Comment, No. 80 at pp. 18-19) 
Likewise, the Petitioners et al. Joint Comment disputed the arguments 
of NRDC and Earthjustice that the placement of parentheses marks in 
EPCA's two ``features'' provisions (42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)) indicate a substantive or material difference 
between those two provisions. These commenters argued that those 
opponents of the petition--lacking any explicit language or legislative 
history to show a difference between these two provisions--rely on 
improper, extra-statutory qualifications in an attempt to exclude 
atmospherically vented products from the ``features'' provisions' 
applicability. (Petitioners et al. Joint Comment, No. 80 at p. 19)
    In response, DOE agrees with the Petitioners et al. Joint Comment 
that these commenters have misconstrued the application of EPCA's 
``features'' provision and the relevant legislative history. While DOE 
agrees that adoption of an energy conservation standard may compel 
minor changes and modifications to an appliance without triggering the 
protections of the statute's ``features'' provisions, it does not seem 
to be a reasonable reading to bar application of the ``features'' 
provision and its protections, except in an extreme case where a 
regulation would vitiate demand for a gas-fired appliance entirely. 
Here, the loss of feature would not be minor, because elimination of 
non-condensing appliances (and the introduction of associated venting 
requirements) would have the significant negative consequences 
previously discussed for those consumers facing difficult installation 
situations, a subgroup which could be upwards of 10 percent of 
households with gas-fired furnaces (based upon fuel switching data), as 
one example. (81 FR 65720; Sept. 23, 2016) Furthermore, a Draconian 
reading requiring the potential elimination of all gas-fired appliances 
would once again threaten to read the ``features'' provision out of 
existence, as a practical matter. This cannot be what Congress 
intended, so DOE declines to follow this path.
    The Environmentalists Joint Comment echoed the rationale in past 
DOE rulemakings that the consumer utility of a residential furnace is 
to provide heat to a dwelling and that the consumer utility of a 
commercial water heater is to provide hot water, functional outputs 
which do not change with type of venting. Along these lines, they 
sought to link the function of these appliances to the statutory 
definitions of ``furnace'' at 42 U.S.C. 6291(23) and ``storage water 
heater'' at 42 U.S.C. 6311(12)(A). According to the Environmentalists 
Joint Comment, properly installed condensing gas appliances exhibit the 
same or substantially the same attributes as non-condensing appliances. 
(Environmentalists Joint Comment, No. 90 at p. 3) Consequently, the 
Environmentalists Joint Comment concluded that DOE's proposed 
determination failed to demonstrate any performance-related features of 
non-condensing gas appliances that require protection from standards. 
(Environmentalists Joint Comment, No. 90 at p. 2)
    As discussed in section III.A.1.a of this document, DOE has 
determined that a consumer's interaction with and utility from a non-
condensing appliance can go beyond such unit's ability to provide hot 
air or water, particularly in difficult installation situations where 
eventual replacement of the appliance would necessitate structural 
modifications to a dwelling or business (e.g., loss of usable living/
retail/storage space, addition of unsightly piping or venting to the 
finished space, or loss of a window(s)). The Environmentalists Joint 
Comment seeks to tie the statutory ``features'' determination to the 
appliance's primary function by focusing on the statutory definitions 
at 42 U.S.C. 6291 and 42 U.S.C. 6311. However, DOE finds that to be an 
improper reading of statute. The commenters' theory ignores the fact 
that pursuant to 42 U.S.C. 6295(q), DOE is bound to focus on the 
performance-related feature, rather than the overall function of the 
appliance. For example, DOE has determined an oven window to be a 
feature, although it does nothing to actually bake the cake placed 
inside the oven. Similarly, DOE has determined the angle of access of a 
residential clothes washer to be a feature, although it does nothing to 
make one's clothes cleaner. Under the Environmentalists Joint Comment's 
theory, such features offering distinct utility to consumers would no 
longer deserve protection because they are not directly mentioned in a 
statutory definition. Such reading would render EPCA's ``features'' and 
class-setting provisions significantly and improperly diminished, 
because a feature is unlikely to ever be mentioned in such definition. 
If the performance-related characteristic were so uniform and 
ubiquitous as to be part of the general product definition, it would 
arguably come ``standard'' rather than being a ``feature.'' 
Accordingly, DOE declines to adopt this suggested reading of the 
statute.
Contrary to Precedent & Factually Unsupported
    A number of commenters stated that DOE's proposed interpretation is

[[Page 4797]]

contrary to DOE precedent and factually unsupported. (Lennox, No. 87 at 
p. 4; AGs Joint Comment, No. 82 at p. 3; CEC, No. 89 at p. 3) NRDC 
asserted that DOE's justification in its proposed interpretive rule is 
insufficient and not supported by data or research, arguing that 
neither the Gas Industry Petitioners nor any other commenter provided 
new arguments, data, or evidence sufficient to justify a reversal of 
DOE's existing policy. (NRDC, No. 94 at pp. 3, 5) The AGs Joint Comment 
characterized DOE's proposed interpretive rule as a radical departure 
from DOE's historical interpretation of EPCA's ``features'' provision. 
They stated that DOE has already specifically addressed and rejected 
the arguments raised in the Gas Industry Petition in a number of 
rulemakings, and they added that the Department has failed to identify 
any valid reasons for it proposed change of position (e.g., dismissing 
as insufficient DOE's rationales related to aesthetics, compatibility 
of co-vented appliances, and economic factors). (AGs Joint Comment, No. 
82 at p. 7) The CEC faulted DOE for not offering any new relevant 
evidence, reasoning, or facts to support its proposed change of 
interpretation. (CEC, No. 89 at p. 5) Lennox added that DOE's proposal 
is not factually supported and relies on speculation, particularly with 
regards to the Department's tentative conclusions that new venting may 
change a home's aesthetics or that some consumers may have a preference 
for gas heating. The commenter similarly faulted DOE's cost analysis as 
lacking in data and speculative, even as it attacked costs as an 
inappropriate consideration for product class setting. (Lennox, No. 87 
at p. 4; Lennox, No. 114 at p. 3)
    As stated previously, DOE disagrees with these commenters' view 
that the Department's revised interpretation is inappropriate because 
it diverges from past precedent or that it is lacking in evidentiary 
basis. The Gas Industry Petition gave DOE the opportunity to revisit 
its prior interpretation, and the information provided in that petition 
and in subsequent comments thereon caused DOE to reevaluate prior data 
and, ultimately, its position. These commenters cannot reasonably claim 
that the rulemaking dockets for residential furnaces, commercial water 
heaters, and other similarly-situated products/equipment are lacking in 
data. Here, however, the petitioners presented the Department with new 
arguments, perspectives, and information that were useful to DOE in 
reexamining its position. However, DOE also relied upon the significant 
data already in these rulemaking dockets to assess its prior 
interpretation as to whether non-condensing technology (and associated 
venting) constitutes a performance-related ``feature'' for purposes of 
EPCA. Based upon the totality of the information, DOE has determined 
that the change in interpretation reflected in this final interpretive 
rule is appropriate under the statute.
    The CA IOUs commented that product classification and performance 
standards should never be inoperative or superfluous, but argued that 
that is precisely what DOE's proposed classifications for residential 
furnaces and commercial water heaters would do, because a performance 
standard with separate levels for both condensing and non-condensing 
products would represent no new standards or savings, but would instead 
simply codify the status quo. (CA IOUs, No. 85 at p. 5) Reciting the 
statutory objectives of EPCA, the CA IOUs stated that DOE's performance 
standards should promote innovation and embrace new technologies and 
opportunities as they become cost-effective for consumers. In order to 
ensure that DOE does not set a precedent here regarding ``features'' 
that weakens the Department's ability to set effective efficiency 
standards, the CA IOUs urged DOE to clearly distinguish between 
differences that are aspects of inherent technical product design and 
differences that materially impact the way users interact with the 
products. To this end, the commenters urged DOE to establish a 
consistent definition of ``performance-related feature'' to guide 
future inquiries as to whether a given aspect of a product is a 
performance-related feature under EPCA. The CA IOUs supported DOE's 
prior interpretation that such feature would be ``accessible to the 
layperson and is based on user operation,'' and they further argued 
that the agency should limit itself to consideration of product classes 
currently available on the market, based upon input from industry and 
other stakeholders. These commenters stated that DOE should not 
establish new product classes based upon its own original 
interpretations or a determination that certain product classes should 
theoretically exist. (CA IOUs, No. 85 at p. 3)
    In response, DOE agrees with the CA IOUs that statutory provisions 
should never be made inoperative or superfluous, yet that is precisely 
the action the CA IOUs would ask the agency to take vis-[agrave]-vis 
EPCA's ``features'' provision. Where DOE has determined the existence 
of a performance-related feature under EPCA, setting a separate 
product/equipment class and standard to protect such feature is 
precisely what the statute envisions. Such action is only ``codifying 
the status quo'' in the sense that it is protecting the feature from 
elimination as the statute directs. As noted elsewhere in this 
document, although EPCA seeks to promote energy savings, energy 
efficiency, and related product innovation, Congress also made a 
decision to protect important ``features'' by enacting the ``features'' 
provision, even at the expense of potential energy savings.
    Regarding the CA IOUs' suggestion that DOE develop a definition for 
``performance-related feature,'' DOE has concluded that it would not be 
feasible to do so. Given the multitude of covered products and 
equipment for which DOE is responsible, the Department has found the 
concept of ``feature'' to be very case-specific. No single definition 
could effectively capture the potential for features across such a 
broad array of consumer products and commercial equipment. That is why 
when assessing ``features,'' DOE developed the concept of consumer 
utility and how the consumer interacts with the product/equipment. DOE 
continues to apply that approach here in the context of non-condensing 
appliances (and associated venting), having determined that in cases of 
difficult installation requiring reconfiguration and/or loss of usable 
living space of a home or retail space of a business, the consumer 
would become very conscious of and appreciate the ability to purchase 
appliances with non-condensing operation. This determination is akin to 
DOE's prior determinations with regard to finding as features windows 
in oven doors and top-loading access to clothes washers. DOE has found 
that expanded choice would be important to such consumers, and 
accordingly, the Department has determined this to be a ``feature'' 
under the statute which may not be eliminated.
    A.O. Smith opined that condensing water heaters could replace non-
condensing ones in every commercial setting (i.e., technically 
feasible); however, A.O. Smith does admit that ``there are certain 
circumstances where installing a condensing model may be cost-
prohibitive due to significant installation costs.'' Rather than making 
an overly broad features determination, the commenter suggested that 
such costs should be addressed by ``examining subgroups of 
installations in DOE's economic models'' and that DOE might ``decline 
to set a standard for a particular subclass [of consumers], where 
supported by the facts and

[[Page 4798]]

economic analysis.'' (A.O. Smith, No. 88 at p. 3; A.O. Smith, No. 113 
at p. 3)
    Although DOE appreciates A.O. Smith's acknowledgment of the 
difficult installation situations at issue, the commenter offered no 
data to support its assertion that it would be technically feasible to 
substitute a condensing commercial water heater in all commercial 
applications, nor would that conclusion, if found to be true, 
necessarily resolve other concerns raised in the Gas Industry Petition 
about undesired modifications to the residential or commercial space. 
Moreover, the Department does not find the commenter's suggested 
solution to be a workable one. As those familiar with the Appliance 
Standards Program are aware, DOE has authority to set energy 
conservation standards for covered products and equipment which must be 
met by manufacturers before an appliance may be distributed in 
commerce. The Department does not regulate product use, absent specific 
congressional direction (e.g., grid-enabled water heaters). Thus, while 
DOE may have the ability to analyze impacts of standards on subclasses 
of consumers, and may use disproportionate impacts on a subclass of 
individuals as a basis for determining a standard is not economically 
justified, DOE has no authority to set standards by subclasses of 
consumers. Moreover, A.O. Smith's suggestion is a false choice because 
DOE has no ability to ensure that products of a certain standard level 
are purchased by only those consumers in an intended subgroup.
    The CEC stated that DOE discussed its analysis of venting costs for 
residential furnaces, but it ignored the significant data provided by 
energy efficiency advocates and others supporting DOE's prior 
interpretation related to features. Specifically, the CEC pointed to 
what it described as multiple data points demonstrating that only 1% to 
5% of homes would present difficult or costly installation issues. 
Consequently, the CEC concluded that DOE has insufficient information 
to outweigh the data provided by proponents of DOE's historical 
interpretation. (CEC, No. 89 at p. 3)
    Once again, the Petitioners et al. Joint Comment sought to respond 
to certain criticisms of opponents of the proposed interpretation. In 
this area, the Petitioners et al. Joint Comment argued that opponents 
of the petition seek to dismiss the substantial difference in 
performance characteristics offered by atmospherically vented products 
by making the assertion that such differences amount to nothing more 
than installation characteristics, a distinction which the joint 
comment stated is without basis. Instead, the Petitioners et al. Joint 
Comment charged that it is the opponents of the petition who are 
ignoring the data, adding that a study commissioned by opponents of the 
petition repeatedly acknowledged that installation of condensing 
appliances frequently presents non-economic problems for purchasers, 
although the report seeks to characterize them as only aesthetic 
concerns. Instead, the Petitioners et al. Joint Comment countered that 
a condensing standard would leave many consumers facing the need to 
sacrifice interior living space, a balcony, or a window simply to 
replace an existing gas appliance. The Petitioners et al. Joint Comment 
also faulted opponents' study for only classifying a building 
modification as ``significant'' if it more than doubles the total 
system cost of a retrofit, an unreasonable approach which masks the 
extent of the disruptive impacts which the Gas Industry Petition seeks 
to prevent. (Petitioners et al. Joint Comment, No. 80 at pp. 20-21)
    The Petitioners et al. Joint Comment challenged DOE's prior 
rationale (to which other commenters continue to adhere) suggesting 
that it is possible to install condensing systems in virtually all 
cases, arguing that such assertions may only be true in a significant 
number of cases from a technical or theoretical standpoint. However, 
these commenters stressed that in many cases (as discussed in the 
petitioners' own competing experts study), such installations may not 
be possible from a practical perspective, raising the example where the 
owner of a condominium unit could not install a condensing unit without 
violating applicable restrictive covenants or compromising a common 
venting system serving other units. In other cases, the Petitioners et 
al. Joint Comment stated that a condensing standard would leave 
consumers with no practical gas appliance replacement option without 
having to accept substantial and often undesirable building 
modifications. According to the Petitioners et al. Joint Comment, this 
is the same logic and meaning of ``impossibility'' that DOE used in its 
final rule for ventless clothes dryers, so they argued that the 
Department should make clear a similar understanding in the context of 
condensing technology. (Petitioners et al. Joint Comment, No. 80 at pp. 
21-23)
    According to the Petitioners et al. Joint Comment, nearly half of 
all residential furnaces in the northern part of the country are 
located in finished basements; over ten percent nationwide are in 
apartments; many more are in townhomes, and all such installations are 
ones where replacement of atmospherically vented products would 
routinely require significant building modifications. (Petitioners et 
al. Joint Comment, No. 80 at p. 23) The Petitioners et al. Joint 
Comment reasoned that EPCA's ``features'' provisions were intended, 
among other things, to preserve availability of product characteristics 
which consumers need in order to be able to use those products without 
having to make significant building modifications. These commenters 
argued that when Congress acted through the ``features'' provisions to 
protect ``sizes,'' as exemplified by statutory standards set for 
different type of installation of direct heating equipment, it sought 
to ensure that products fit within `` `standard building spaces' '' 
(quoting H.R. Rep. No. 100-11 at p. 23 (1987)). According to the 
Petitioners et al. Joint Comment, changes to existing venting to 
replace an atmospherically vented furnace with a condensing one would 
require much more significant building modifications than most other 
appliances, so they stated that there is no reason to believe that 
Congress intended to spare purchasers from the lesser types of 
modifications but not the greater. Based upon this overall statutory 
logic, the Petitioners et al. Joint Comment concluded that there is no 
basis to conclude that Congress, through inadvertent drafting or 
otherwise, intended to reach a contrary result. The Petitioners et al. 
Joint Comment strongly stated that arguments to the contrary are based 
upon abstract qualifications that are without statutory basis, have not 
been consistently applied, and serve only to confound an otherwise 
straight-forward issue of statutory interpretation. (Petitioners et al. 
Joint Comment, No. 80 at p. 24)
    In response, DOE notes that the CEC points to 1% to 5% of dwellings 
facing difficult furnace installation situations. However, DOE differs 
with the commenter in terms of its assessment of the magnitude and 
importance of such impacts. While the CEC may regard such percentages 
to be de minimis, DOE would point out that housing units that could be 
potentially impacted may number in the millions.\23\ Thus, DOE has 
found the potential for a significant loss of consumer utility were 
non-

[[Page 4799]]

condensing appliances (and associated venting) to be eliminated. The 
parties submitting the Petitioners et al. Joint Comment also provided 
their own study, and the dockets for the residential furnaces, 
commercial water heaters, and other rulemakings with similarly-situated 
products/equipment contain a large amount of relevant data. DOE also 
acknowledges the arguments made by the Petitioners et al. Joint Comment 
in the preceding three paragraphs. In short, DOE reviewed all of the 
arguments and available information. That the agency adopted the 
recommendations of one set of proponents on this issue does not mean 
that the Department failed to consider the viewpoints and data 
presented in opposition to that view. Rather, in response to the 
petition re-raising the issue, the Department reviewed all the 
available data it had previously considered, assessed the new data 
submitted with the petition, read carefully the arguments made by all 
parties, and made a decision. Consequently, DOE has concluded that it 
has more than adequate evidentiary basis to support its changed 
understanding as to the consumer utility of non-condensing appliances 
(and associated venting).
---------------------------------------------------------------------------

    \23\ According to the U.S. Census Bureau, housing units in the 
U.S. as of July 1, 2018 numbered 138,537,078. (Available at: https://www.census.gov/quickfacts/fact/table/US/VET605218) (Last accessed 
May 6, 2020).
---------------------------------------------------------------------------

iii. Aesthetics
    A number of commenters objected to DOE's recitation of aesthetic 
impacts as a factor that impacts consumer utility and that supports its 
proposed interpretive rule. (AGs Joint Comment, No. 82 at p. 10; A.O. 
Smith, No. 88 at p. 9; CEC, No. 89 at p. 4; Environmentalists Joint 
Comment, No. 90 at p. 4; NRDC, No. 94 at pp. 7-8; Advocates Joint 
Comment, No. 95 at pp. 3-5) Several commenters suggested that such 
aesthetic concerns are theoretical, anecdotal, and unsubstantiated. 
(CEC, No. 89 at p. 4; A.O. Smith, No. 88 at p. 9; Environmentalists 
Joint Comment, No. 90 at p. 4; NRDC, No. 94 at p. 7) For example, A.O. 
Smith argued that there is no evidence in the record to suggest that 
condensing water heaters are less aesthetically pleasing or that 
consumers would value such consideration over the energy and cost 
savings associated with more-efficient products/equipment, so the 
commenter concluded that DOE lacks the rational basis and supporting 
data for such a change. (A.O. Smith, No. 88 at p. 9)
    One argument presented was that Congress did not intend aesthetics 
to be a consideration under EPCA's ``features'' provision. The CEC 
argued that aesthetics are beyond DOE's statutory authority, which 
refers to ``performance,'' ``performance characteristics,'' or 
``performance-related features.'' According to the commenter, there is 
no evidence that Congress deemed subjective aesthetic concerns to be 
relevant to product utility or that limited, vague, and unsubstantiated 
anecdotal evidence and theoretical concerns should be allowed to 
overcome DOE's well-documented evidence in the record supporting its 
longstanding interpretation of performance characteristics. (CEC, No. 
89 at p. 4) Furthermore, the Environmentalists Joint Comment asserted 
that such limited aesthetic concerns would not have the broad adverse 
impacts on consumer utility that Congress envisioned and intended to 
address by drafting the ``features'' provisions at 42 U.S.C. 6295(o)(4) 
and 42 U.S.C. 6313(a)(6)(B)(iii)(II). (Environmentalists Joint Comment, 
No. 90 at p. 4)
    Other commenters stated that aesthetics are a highly subjective 
matter and, therefore, ill-suited to serve as the basis for regulatory 
decision making. (CEC, No. 89 at p. 4; AGs Joint Comment, No. 82 at p. 
10; A.O. Smith, No. 88 at p. 9; NRDC, No. 94 at p. 8) NRDC argued that 
many modern appliances can and do impact how a building looks, although 
that does not mean they have different performance-related features. To 
proceed otherwise, the commenter reasoned, would cause the Appliance 
Standards Program to implode under a proliferation of ``features'' and 
separate classes. NRDC suggested that changes in aesthetics are 
sometimes a necessary trade-off for the benefits of new technology, as 
reflected in DOE's historical approach which limited the focus to the 
appliance's primary function when considering ``utility to the 
consumer,'' thereby providing an appropriate bound. (NRDC, No. 94 at 
pp. 7-8) A.O. Smith made a similar point, arguing that DOE's proposed 
aesthetic considerations are well beyond past precedent, which focused 
on the consumer's interaction with the appliance, and the commenter 
expressed the view that basing a decision on an expansive view of 
consumer utility related to aesthetics would have no bounds. (A.O. 
Smith, No. 88 at p. 9)
    The CEC expressed concern that relying on subjective aesthetic 
concerns would weaken DOE's ability to improve energy efficiency 
through standards that are technologically feasible and economically 
justified. (CEC, No. 89 at p. 4) The AGs Joint Comment argued that 
DOE's consideration of aesthetics as a matter of consumer utility 
threatens to undermine the statutory goal of maximizing energy 
efficiency by creating the potential for unlimited product classes 
subject to lower efficiency limits in violation of EPCA. These 
commenters charged that DOE's proposed interpretation would effectively 
prioritize consumer aesthetics and the gas industry's financial 
interests in selling more gas over Congress's desire for national 
energy savings. (AGs Joint Comment, No. 82 at p. 10)
    Finally, some commenters urged DOE to consider the potential for 
use of alternative technologies or other types of products to resolve 
aesthetic concerns, rather than resorting to creation of separate 
product/equipment classes under EPCA's ``features'' provision. The 
Advocates Joint Comment argued that DOE's concerns expressed in the 
proposed interpretation about space constraints of installing a 
condensing appliance (e.g., by adding new venting into the living space 
or decreasing closet or other storage space and other limitations 
related to installation), aesthetics, and consumer preference for gas 
heating are all, at their core, economic rationales. These commenters 
argued that solutions exist for difficult venting situations, and that 
DOE has accounted for them in past rulemaking documents in the course 
of analyzing potential standards levels. The Advocates Joint Comment 
further argued that homeowners could avoid unwanted aesthetic impacts 
by purchasing a different (although perhaps more expensive) type of 
venting, using new common venting technology (e.g., FasNSeal 80/90), or 
switching to an electric product (e.g., ones using heat pump 
technology) which does not raise aesthetic concerns. (The commenters 
added that unbounded consideration of aesthetics could render standard-
setting all but impossible.) (Advocates Joint Comment, No. 95 at pp. 3-
4) The Environmentalists Joint Comment raised similar points. 
(Environmentalists Joint Comment, No. 90 at p. 4)
    In response, DOE would start by clarifying that in using the term 
``aesthetics'' in the proposed interpretive rule, it did not intend to 
imply that purely subjective considerations (e.g., even the slightest 
change in color or shape) would justify the establishment of separate 
product/equipment classes. The creation of a proliferation of classes 
is neither desired nor expected. Instead, DOE used the term in the 
context of describing physical modifications to a dwelling or business 
that would result to a substantial degree from prescription by a 
standard and that physical modification would be appreciably

[[Page 4800]]

noticed by the consumer and impact the use of living or commercial 
space. For example, the Petitioners et al. Joint Comment provided 
evidence that a performance standard that can only be met by a 
condensing appliance could require, particularly in older row-houses, 
the sacrifice of a window or balcony space. The Petitioners et al. 
Joint Comment provided evidence that these design implications can 
arise in both replacement applications as well as new construction 
design. (Petitioners et al. Joint Comment, No. 80 at pp. 10-11) That 
comment also pointed to a June 2015 experts study by Shorey Consulting, 
Inc. (included as part of the AHRI comment to the residential furnaces 
docket at Docket No. EERE-2014-BT-STD-0031-0159) which provided further 
evidence that there are applications where it is not possible to 
install a condensing furnace due to existing building constraints and 
code limitations. Only after reviewing the Gas Industry Petition and 
related comments did DOE come to fully appreciate the extent of these 
consumer impacts and how they can transcend cost. Consequently, a 
reconsideration of the available evidence caused DOE to act to change 
its long-standing interpretation.
    Contrary to the views expressed in the CEC's and environmentalists' 
comments, Congress included the ``features'' provision in EPCA to 
protect consumer utility, even at the expense of some measure of energy 
savings. To the extent that ``aesthetics'' equate to a substantial 
degree in significant alteration of a dwelling's or business's 
structure and that physical modification would be appreciably noticed 
by the consumer and impact the use of living or commercial space, DOE's 
review of the available evidence and information has led it to conclude 
that a standard level requiring such changes could eliminate a 
``feature'' under EPCA. Based upon that understanding, DOE has 
determined that non-condensing technology (and associated venting) are 
one such feature, and by keeping the focus on what the agency 
determines to be significant potential building modifications, it would 
expect to keep such ``aesthetic'' considerations within appropriate 
bounds. DOE also reasons that this final interpretation will have the 
added benefit of promoting consumer choice, rather than requiring fuel 
switching or extensive retrofits to resolve difficult installation 
situations.
iv. Delay
    The AGs Joint Comment \24\ argued that DOE's proposed interpretive 
rule would unlawfully delay the adoption of efficiency standards 
required by EPCA, as well as delay the benefits of such mandatory 
energy conservation standards. (AGs Joint Comment, No. 82 at pp. 2-3; 
AGs Joint Comment II, No. 115 at p. 2) A.O. Smith similarly asserted 
that DOE's proposed interpretation would result in delay in setting 
standards (including for products subject to statutory deadlines). 
(A.O. Smith, No. 88 at p. 12) More specifically, the AGs Joint Comment 
argued that DOE action on the Gas Industry Petition impermissibly 
delays DOE's publication of final rules as required under 42 U.S.C. 
6295(m)(3)(A) and 42 U.S.C. 6313(a)(6)(C)(iii)(I). The AGs commented 
that DOE's statutory deadlines for promulgating final residential 
furnace and commercial water heater standards expired in March 2017 and 
May 2018, respectively. According to the AGs Joint Comment, DOE's 
proposed interpretive rule impermissibly compounds that delay, and 
since those dates have already passed and the comment periods for those 
rulemakings have already closed, these commenters opined that DOE 
should have rejected the Gas Industry Petition as duplicative or 
untimely. The AGs Joint Comment stated that DOE cannot further delay 
its statutory obligations by revisiting previously rejected arguments, 
issuing arbitrary and capricious interpretive rulings, and engaging in 
supplemental rulemaking to implement an unfounded interpretation of 
EPCA. (AGs Joint Comment, No. 82 at pp. 5-7)
---------------------------------------------------------------------------

    \24\ The AGs Joint Comment renewed all of the objections raised 
in their March 1, 2019 comments on the Gas Industry Petition. DOE 
notes that these comments were fully addressed in the proposed 
interpretive rule published in the Federal Register on July 11, 
2019. 84 FR 33011. DOE commends the reader to consult that document 
for further details on both those comments and the Department's 
responses.
---------------------------------------------------------------------------

    The Petitioners et al. Joint Comment offered several responses to 
the arguments of opponents of the Gas Industry Petition. On this 
particular point, these commenters argued that neither DOE's 
proceedings for residential furnaces and commercial water heaters, nor 
the issues presented therein, can be lawfully concluded without 
consideration of and response to the considerable adverse comment 
raised in those rulemakings. The Petitioners et al. Joint Comment also 
made the point that DOE's obligation to comply with statutory deadlines 
does not obviate its responsibility to consider comments and to make 
sure that any new standards are lawful on the merits. (Petitioners et 
al. Joint Comment, No. 80 at p. 18)
    In response, DOE recognizes the statutory deadlines associated with 
residential furnaces, commercial water heaters, and other energy 
conservation standards rulemakings. Given the complex issues at play, 
as evidenced by the public comments in this proceeding, DOE is working 
diligently to bring those rulemakings to a conclusion. However, DOE 
agrees with the Petitioners et al. Joint Comment that the agency also 
has a legal obligation to address public comments filed in those 
rulemakings, as well as to consider the petition for rulemaking 
properly filed under 5 U.S.C. 553(e). DOE is not at liberty to pick and 
choose among these legal obligations. (DOE addresses elsewhere in this 
document the allegations in the AGs Joint Comment that the Department's 
proposed interpretive rule is arbitrary and capricious and based upon 
an improper reading of EPCA.)
v. Regulatory Burdens/Litigation/Uncertainty/Preemption
    Some commenters argued that DOE's proposed interpretation would 
increase regulatory burdens on manufacturers. (Lennox, No. 87 at p. 1; 
A.O. Smith, No. 88 at pp. 11-12) Along these lines, Lennox argued that 
creation of separate product classes for condensing and non-condensing 
products would increase the regulatory burden for manufacturers, 
distributors, contractors, and their customers, all to appease a narrow 
group of gas industry interests. (Lennox, No. 87 at p. 1; Lennox, No. 
114 at p. 1, 4, 7) Doing so, Lennox asserted, would add yet another 
rulemaking process, and it suggested that the timing of condensing and 
non-condensing product rulemakings could become ``split into untenably 
mis-aligned rulemaking cycles.'' The commenter argued that furnace 
regulation is already overly complicated, with separate metrics for 
annual fuel utilization efficiency (AFUE), standby mode and off mode 
power, and furnace fan efficiency. Lennox argued that the additional 
regulatory costs associated with a condensing/non-condensing class 
split would ultimately be pushed through the supply chain to the 
consumer, and that such action would also increase consumers' confusion 
as they seek to purchase an appropriate furnace product. (Lennox, No. 
87 at p. 3; Lennox, No. 114 at pp. 6-7) Similarly, A.O. Smith stated 
that manufacturers will bear the burden of complying with multiple 
standards for a single covered product, thereby increasing compliance

[[Page 4801]]

costs and regulatory burden on the industry. (A.O. Smith, No. 88 at p. 
11)
    A few commenters predicted that adoption of DOE's proposed 
interpretation would have additional negative consequences. For 
example, Lennox argued that DOE's proposed interpretive rule, if 
finalized, would trigger additional litigation, thereby creating more 
uncertainty for industry. (Lennox, No. 87 at p. 2; Lennox, No. 114 at 
p. 7) A.O. Smith also asserted that DOE's proposed interpretation would 
result in regulatory uncertainty for manufacturers. (A.O. Smith, No. 88 
at p. 12) The CA IOUs also expressed concern about the potential for 
DOE's proposed interpretations to create market uncertainty for the 
subject appliances. (CA IOUs, No. 117 at p. 3)
    A.O. Smith speculated that the proposed interpretation would result 
in DOE's failure to adopt energy conservation standards that 
appropriately reflect the maximum improvement in energy efficiency 
called for under the statute, and that in turn would jeopardize the 
preemptive effect of those standards by encouraging States to seek 
waivers of preemption under 42 U.S.C. 6297(d). The commenter expressed 
concern that manufacturers could face a burdensome and costly patchwork 
of State regulations, if such petitions were to be granted. (A.O. 
Smith, No. 88 at p. 13) In contrast, the AGs Joint Comment also 
expressed concern about the potential preemptive effects under 42 
U.S.C. 6297, if DOE does not fulfill its statutory duty when developing 
and adopting energy conservation standards, particularly as regards 
States' renewable energy and climate policy goals. (AGs Joint Comment, 
No. 82 at p. 13)
    After considering these comments, DOE would point out that any 
regulatory proceeding entails the potential for litigation and, 
therefore, some degree of regulatory uncertainty. If the potential for 
litigation (and related uncertainty) were to be a basis for DOE to not 
undertake regulatory action (including relevant statutory 
interpretations), it could completely stall the Department's rulemaking 
process, because cross-cutting stakeholder interests render most agency 
actions subject to potential legal challenge. On the other hand, 
failure to take regulatory action for fear of litigation would itself 
lead to litigation for not having completed legally required regulatory 
actions. At bottom, the potential for litigation is inherently part of 
the regulatory process.
    Lennox mischaracterizes DOE's interpretive rulemaking as an effort 
to ``appease'' members of the gas industry. The agency is obligated to 
consider the merits of petitions for rulemaking properly brought before 
it under the statute and to take appropriate action. Further, the 
issues addressed in this petition for rulemaking have been presented in 
numerous regulatory actions DOE has conducted and continues to conduct. 
DOE suspects that if Lennox were to submit its own petition for 
rulemaking, it would view the matter very differently, and that the 
company would expect DOE to give the substance of its petition due 
consideration under the statute. The Department has acted responsibly 
to present the issue for public comment and to consider that comment in 
determining how to proceed.
    DOE likewise finds Lennox's and A.O. Smith's claims of regulatory 
burden to be overstated. To start, this final interpretive rule does 
nothing to change the current regulatory landscape, even though 
subsequent rulemakings may establish separate product/equipment classes 
and energy conservation standards for non-condensing technology (and 
associated venting) in appropriate cases. Appliance manufacturers 
routinely encounter multiple performance, capacity and other technical 
distinctions between appliance models that could impact energy 
efficiency, thereby justifying different classes and standards. For 
example, there are currently 7 product classes for consumer furnaces 
(see 10 CFR 430.32(e)), 21 equipment classes for commercial water 
heaters (see 10 CFR 431.110), and 36 product classes for consumer water 
heaters (see 10 CFR 430.32(d)). Accounting for a limited number of 
additional product/equipment classes associated with condensing and 
non-condensing technology represents a reasonable regulatory burden. 
The statute does not foreclose all regulatory burden, but instead it 
requires the agency to properly analyze whether a given test procedure 
or energy conservation standards would be unduly burdensome. DOE 
further notes that neither AHRI nor any of the other manufacturer 
commenters cited regulatory burden as a significant concern in response 
to the proposed interpretive rule.
    In response to Lennox's specific concern about regulatory burdens 
associated with split rulemaking cycles for the same product type, DOE 
notes that in its energy conservation standards rulemakings, the 
Department typically addresses product types in a holistic fashion for 
a given covered product. Having splintered rulemakings which deal with 
only certain product classes would likewise increase burdens on the 
agency, so DOE agrees that such scenarios should be avoided to the 
maximum extent possible. Lennox has not explained in any detail why it 
believes that DOE's proposed interpretation would lead to misaligned 
rulemaking cycles, so DOE does not find this to be a reason to alter 
its proposed interpretation. DOE would add here that if the Department 
decides to grant AHRI's October 2018 AFUE2 petition, that could 
potentially consolidate furnace and furnace fans rulemakings, thereby 
reducing regulatory burdens and the ``overcomplicated'' regulatory 
structure for these products mentioned by Lennox (see section III.D.1 
of this document for further discussion).
    Finally, DOE does not agree with A.O. Smith's speculation that 
adoption of the Department's proposed interpretation would impact the 
normal preemptive effects of the statute or lead to favorable 
consideration of a significant number of petitions for waiver of 
preemption under 42 U.S.C. 6297(d), potentially resulting in a 
patchwork of State regulations. Similarly, DOE does not agree with the 
AGs Joint Comment's objections to the preemptive effects of subsequent 
final rules adopted pursuant to a final interpretive rule. DOE will 
conduct future energy conservation standards rulemakings in conformity 
with this final interpretation and all other statutory requirements, 
and as such, standards resulting from those rulemakings will be 
entitled to their full preemptive effect under the law. EPCA does 
permit States to seek a waiver of Federal preemption under 42 U.S.C. 
6297(d), but to obtain such a waiver, a State must show by a 
preponderance of the evidence that a separate State regulation is 
needed to meet unusual and compelling State or local energy and water 
interests (which must be substantially different in nature or magnitude 
than those prevailing in the United States generally). (42 U.S.C. 
6297(d)(1)) Moreover, the statute explicitly provides that DOE may not 
prescribe a waiver of preemption if the Secretary finds (and publishes 
such finding) that interested parties have established by a 
preponderance of the evidence, that the State regulation is likely to 
result in the unavailability in the State of any covered product type 
(or class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the State at the time of the 
Secretary's finding. (42 U.S.C. 6297(d)(4)) While DOE is not prejudging 
the outcome of a request not yet before

[[Page 4802]]

it, because this final interpretive rule is in essence a ``features'' 
determination under the statute, it is difficult to see how such 
waivers of preemption to which A.O. Smith alludes could be granted, so 
the threat of a related patchwork of State regulations seems remote, at 
best.
vi. Other Negative Effects of a Change in Interpretation
    Several commenters raised concerns about deleterious effects that 
they envision would arise from DOE's proposed interpretation. For 
example, Ceres stated that reversing DOE's long-held position now would 
``create confusion to the furnace and water heater markets, increase 
energy use and decrease efficiency, negate significant financial 
savings opportunities for consumers, and slow the transition to a more 
energy efficient future.'' (Ceres, No. 69 at p. 3) A.O. Smith objected 
to and urged rejection of DOE's proposed interpretation as contrary to 
sound public policy, arguing that taking a contrary position would 
deter innovation, limit choice in the marketplace, and deprive 
consumers of the benefits of reduced energy consumption and lower 
utility bills. (A.O. Smith, No. 88 at p. 2; A.O. Smith, No. 113 at p. 
2) In comments on the September 2020 SNOPIR, the CA IOUs argued that if 
DOE continues to advance its current approach, it would lock in 
inefficient technologies that waste energy, increase consumer costs, 
and inhibit energy efficiency innovation. (CA IOUs, No. 117 at p. 2)
    NRDC's comments \25\ faulted DOE's proposed revised interpretation 
as unnecessary and damaging to the effectiveness of the Appliance 
Standards Program, arguing that it would set the stage for weaker 
standards that would harm consumers; similar comments were made by the 
CA IOUs and the Advocates Joint Comment II. (NRDC, No. 94 at p. 4; CA 
IOUs, No. 117 at p. 3; Advocates Joint Comment II, No. 118 at pp. 1, 2) 
Along these lines, the CEC argued that because the proposed 
interpretive rule would put a cap on energy efficiency, it would lock 
in additional energy costs that would disproportionately affect low-
income populations. The CEC argued that these outcomes would be 
inconsistent with DOE's statutory mandate and the purposes of the 
Energy Conservation Program. (CEC, No. 89 at pp. 1-2) The AGs Joint 
Comment added that DOE's proposed interpretation would also undermine 
State and local energy policy and conservation goals. (AGs Joint 
Comment, No. 82 at pp. 2-3) In commenting on the September 24, 2020 
supplemental proposed interpretive rule, Lee Hannah suggested generally 
that DOE's energy conservation standards activities have not done 
enough to promote energy and economic savings. (Lee Hannah, No. 99 at 
p. 1)
---------------------------------------------------------------------------

    \25\ NRDC renewed all of the objections raised in its March 1, 
2019 comments on the Notice of the Gas Industry Petition, as well as 
all of the objections raised by the joint NRDC and Earthjustice 
comments filed on that same date. DOE notes that these comments were 
fully addressed in the proposed interpretive rule published in the 
Federal Register on July 11, 2019. 84 FR 33011. DOE commends the 
reader to consult that document for further details on both those 
comments and the Department's responses.
---------------------------------------------------------------------------

    Commenters such as A.O. Smith and the Advocates Joint Comment 
sought to refute DOE's suggestion that its proposed interpretation 
would only have a limited impact and its focus on a subset of consumers 
(i.e., low-income residential consumers), instead arguing that it would 
have broad and lasting effect. (A.O. Smith, No. 88 at p. 12; Advocates 
Joint Comment, No. 95 at p. 6) A.O. Smith emphasized that the proposal 
was not limited to just residential furnaces and commercial water 
heaters but was instead deemed applicable to ``similarly situated 
products/equipment.'' (A.O. Smith, No. 88 at p. 12) The Advocates Joint 
Comment II argued that DOE has not clearly defined the products to 
which the interpretive rule would apply, specifically faulting the 
language about ``similarly-situated products/equipment'' in DOE's 
proposals. The Advocates Joint Comment II stated that DOE's proposed 
interpretations have not explained whether such interpretations would 
apply to both residential and commercial gas furnaces and gas water 
heaters, or whether the interpretation would apply to both weatherized 
and non-weatherized furnaces. Therefore, these commenters claimed that 
it is not possible to fully evaluate the potential impacts of DOE's 
proposal. (Advocates Joint Comment II, No. 118 at p. 2) However, these 
same commenters correctly pointed out that condensing technology is 
available for (and thereby suggesting that DOE's interpretation would 
be potentially applicable to) eight categories of products/equipment 
regulated by DOE: Residential furnaces, commercial furnaces, 
residential boilers, commercial boilers, residential water heaters, 
commercial water heaters, direct heating equipment, and unit heaters. 
(Advocates Joint Comment, No. 95 at p. 6)
    The Advocates Joint Comment went on to analyze what they perceived 
to be the potential impacts of DOE's proposed interpretation and 
stressed that the number of impacted products is not as important as 
the total potential energy savings at issue, citing the evidence of 
DOE's own analyses which have shown, even when accounting for market 
trends, that energy conservation standards set at condensing levels 
could save about 13 quads of energy over a 30-year analysis period and 
lower utility bills by more than $100 billion over the same period. 
(Advocates Joint Comment, No. 95 at p. 6) The Advocates Joint Comment 
and A.O. Smith argued that DOE's proposed interpretive rule would 
improperly eliminate DOE's ability to even consider future standards 
based upon condensing technology that would have the potential for very 
large energy and cost savings, thereby allowing non-condensing 
products/equipment to remain on the market in perpetuity. (Advocates 
Joint Comment, No. 95 at p. 6; A.O. Smith, No. 88 at p. 12) The 
Advocates Joint Comment II argued that the factors discussed in DOE's 
proposed interpretations appear to relate specifically to residential 
furnaces, and these commenters alleged that the Department has not even 
attempted to provide a rationale for its proposed interpretation with 
respect to other products, in particular commercial equipment. The 
Advocates Joint Comment II contended that DOE's arguments about changes 
to a home's aesthetics, a preference for gas appliances, and concerns 
about energy affordability are ``irrelevant for any commercial 
equipment.'' (Advocates Joint Comment II, No. 118 at pp. 2-3)
    DOE must act within its statutory authority (as discussed in 
further detail in section II.A of this document), and DOE recognizes 
that Congress was mindful of achieving energy conservation while also 
protecting consumer utility when enacting EPCA, as evidenced by the 
statute's ``features'' provisions. Congress is the ultimate arbiter of 
sound public policy, and through EPCA's ``features'' provision, it made 
clear that the goal of energy savings should not trump all competing 
concerns. If the statute which Congress has drafted takes some 
potential actions off the table, DOE must operate within the parameters 
that Congress established, even if significant additional energy and 
cost savings, as suggested by the Advocates Joint Comment, could arise 
from ignoring those parameters. For the reasons articulated in this 
document, DOE's final interpretive rule has determined non-condensing 
technology (and associated venting) to be a ``feature'' under the 
statute which cannot be eliminated through adoption of energy

[[Page 4803]]

conservation standards. Even so, DOE has concluded that such action 
would not have any major detrimental effect on the Appliance Standards 
Program, stakeholders, or the public. With that said, DOE does not 
agree with the litany of negative consequences about which these 
commenters speculate.
    As discussed in section III.A.3 of this document, market trends are 
moving increasingly in the direction of condensing technology, despite 
the fact that non-condensing appliances remain available on the market. 
With the potential for substantial savings on utility bills, consumers 
have been availing themselves of more-efficient options when doing so 
makes sense for them, and DOE has every reason to believe that such 
trends will continue. However, for difficult installation situations, 
consumers can make the choice for a like-for-like replacement using 
non-condensing technology. Since the same issues would arise for the 
similarly-situated appliance recited by the Advocates Joint Comment, it 
only makes sense for the Department to also address them at this time. 
Although DOE arguably could have been more explicit in reciting the 
types of covered products and equipment subject to its interpretation, 
the Department notes that submitters of the Advocates Joint Comment and 
others did not have difficulty in practice in homing in on the impacted 
appliances in framing their arguments. Furthermore, DOE finds that its 
interpretation (as explained more fully in the balance of this 
document) adequately provides a rationale for applying its 
interpretation to both covered consumer products and commercial 
equipment, although the specifics of the impacts justifying the 
interpretation may vary depending upon the appliance in question. 
Contrary to A.O. Smith, DOE views this final interpretation as 
maintaining consumer choice, rather than diminishing it. DOE fully 
expects market trends towards higher-efficiency products will continue 
as consumers are able to take full advantage of the range of choices 
available to them.
    DOE does not agree with Ceres's contention that DOE's revised 
interpretation would create confusion in the marketplace, given that 
the DOE's statement is clear and that this is a mature market with 
sophisticated and knowledgeable actors. Furthermore, since non-
condensing and condensing appliances are currently sold side-by-side on 
the existing market, DOE fails to see how such confusion would arise, 
presuming that it does not already exist. Likewise, DOE does not find 
credible A.O. Smith's conjecture that DOE's revised interpretation 
would decrease innovation. Manufacturers have every incentive to 
continue to innovate in this competitive market, especially given the 
market trend toward purchase of more-efficient appliances. Finally, DOE 
would note that, as always, State and local governments are welcome to 
pursue their own initiatives that fill any regulatory and policy space 
that is not preempted by Federal law.
1. Legal Authority to Set ``Small'' Furnace Product Classes
    Some commenters continued to advocate for the approach proposed in 
DOE's September 2016 SNOPR for residential furnaces as a preferable way 
to resolve the concerns raised in the proposed interpretive rule (i.e., 
by setting a differentiated standard based on capacity). Lennox argued 
that DOE should not move forward on its current path, but instead, the 
commenter stated that the Department should achieve its energy 
conservation goals through more tailored, alternative regulatory 
approaches, such as capacity-based standards to preserve non-condensing 
furnaces for smaller residential furnaces. (Lennox, No. 87 at pp. 1, 3, 
6-7; Lennox, No. 114 at pp. 2-3, 5) Lennox recommended that DOE adopt 
the approach previously supported by industry to preserve non-
condensing furnaces below certain kBtu/h thresholds, which would 
address smaller applications, including mobile homes, impacting middle- 
and low-income consumers. (However, the commenter clarified that the 
level of 55 kBtu/h specified in the September 23, 2016 SNOPR would need 
to be raised so as to be sufficient to preserve non-condensing furnaces 
in mobile home applications and other difficult installation 
situations.) (Lennox, No. 87 at p. 6) The CA IOUs also urged DOE to 
finalize the September 2016 SNOPR for residential furnaces. (CA IOUs, 
No. 117 at p. 2) According to the CFA/NCLC, if DOE were to adopt a two-
tiered standard of 80 percent AFUE for smaller furnaces (used in 
smaller dwellings and warmer climates) and 92 percent AFUE for larger 
furnaces (used in colder climates), 89 percent of low-income consumers 
would benefit. Conversely, CFA/NCLC stated that millions of low-income 
households would face significantly higher energy bills for the useful 
life of the furnace if DOE were to move forward with its proposed 
revised interpretation. (CFA/NCLC, No. 93 at p. 2)
    The AGs Joint Comment stated that DOE's recent concerns about costs 
are unwarranted, and in the context of the residential furnaces 
rulemaking, these commenters appeared to support DOE's prior efforts to 
establish a separate, small furnace product class and mentioned AHRI's 
past statement that that would be a ``reasonable solution.'' (AGs Joint 
Comment, No. 82 at pp. 10-11) Electrify Now also supported that prior 
rulemaking approach for the subject residential furnaces, as previously 
proposed by DOE. (Electrify Now, No. 106 at p. 1)
    In response, DOE acknowledges that it has authority to create 
product classes for consumer products based upon capacity under 42 
U.S.C. 6295(q)(1)(B), and this authority extends to non-ASHRAE 
commercial equipment through application of 42 U.S.C. 6316(a). DOE 
further recognizes that it previously proposed capacity-based standards 
in the September 2016 furnaces SNOPR, an approach which garnered some 
measure of public support. However, that proposal was opposed by the 
gas industry, because those commenters argued that it failed to fully 
and adequately resolve the problems that they had identified. After 
careful consideration of the Gas Industry Petition and comments 
thereon, DOE has come to the conclusion that a capacity-based approach 
is not the proper tool to address the issues raised in the petition 
because they would not provide a comprehensive solution in all 
instances where consumer utility may be impacted due to difficult 
installation situations. The following explains how the Department's 
understanding has evolved in this area.
    In essence, the problem identified in the Gas Industry Petition is 
not one of capacity. Difficult installation situations with the 
potential to impact consumer utility are not cleanly separated by 
capacity, so seeking to advance a proposed solution based upon capacity 
as the distinguishing factor would be at best an indirect and imperfect 
way to address the problem. In that sense, the gas industry's continued 
opposition would be expected and understandable. Furthermore, DOE does 
not believe that commenters currently expressing support would likely 
remain in agreement were the Department to move forward with a 
capacity-based approach. Illustrative of this point, Lennox's comment 
supported DOE's previously proposed capacity-based approach for 
residential furnaces but also suggested that the capacity threshold of 
55 kBtu/h proposed in the September 2016 SNOPR would need to be raised, 
an opinion expressed by other industry commenters on that SNOPR. 81 FR 
65720, 65754 (Sept. 23, 2016). In contrast, environmental and advocacy

[[Page 4804]]

groups likewise supported the capacity-based approach but pushed for a 
lower threshold. Id. DOE would also note that these commenters 
supporting a capacity-based approach would simply be recreating the 
same protections for non-condensing appliances at the lower end of the 
capacity range to which they so strenuously objected for the reasons 
stated in response to the proposed interpretation (e.g., locking in 
less-efficient technology, depriving savings to renters). Moreover, 
DOE's prior capacity-based proposal assumed (without explicitly 
stating) that small capacity furnaces would be non-condensing and large 
capacity furnaces would be condensing. As such, the capacity-based 
proposal these comments support made in the past the very distinction 
these same commenters so vehemently oppose now. Consequently, DOE no 
longer views a capacity-based approach to standards for the products/
equipment at issue in this proceeding to be a viable alternative to the 
``features'' determination being made in this final interpretive rule.
2. Market Trends
    A number of commenters speculated as to the effect that DOE's 
revised interpretive rule would have on the market for residential 
furnaces, commercial water heaters, and similarly situated equipment. 
One group of commenters predicted that DOE's proposed interpretive rule 
would lead to significant market-related impacts with negative 
consequences. For example, Lennox alleged that DOE's proposed 
interpretation would disrupt market trends towards more-efficient 
condensing furnaces by creating a separate product class for non-
condensing furnaces. (Lennox, No. 87 at p. 3; Lennox, No. 114 at pp. 4, 
5) A.O. Smith challenged the proposed interpretation's suggestion that 
it would adhere to the principle of market neutrality vis-[agrave]-vis 
competing energy sources, arguing that by insulating non-condensing 
water heaters from more-stringent standards, the Department is picking 
winners and losers in the water heaters market at the expense of 
consumer benefits and savings from higher-efficiency appliances. (A.O. 
Smith, No. 88 at p. 9) Ceres likewise argued that by encouraging a 
market for non-condensing equipment, DOE's proposed interpretive rule 
would waste energy and resources, a result which Ceres characterized as 
inefficient and costly. (Ceres, No. 69 at p. 2) Lennox and A.O. Smith 
characterized the Gas Industry Petition (and any separate product/
equipment classes arising therefrom) as a mechanism that would disrupt 
the market for more-efficient condensing furnaces, drive up the cost of 
condensing products, and potentially push many consumers out of the 
market for more-efficient products. (Lennox, No. 87 at p. 2; A.O. 
Smith, No. 88 at p. 11; Lennox, No. 114 at pp. 4, 5) More specifically, 
Lennox reasoned that if condensing furnaces were placed in a separate 
product class, ``EPCA would almost certainly mandate maximizing 
condensing furnace energy conservation standards to even higher levels, 
thereby pricing many consumers out of a more energy efficient 
furnace.'' (Lennox, No. 87 at p. 3; Lennox, No. 114 at p. 5)
    Other commenters opined that DOE's proposed interpretive rule would 
have negligible impacts upon existing market trends for the appliances 
at issue. For example, AHRI pointed out that the market is already 
trending towards condensing furnaces in applications where such 
venting/installation constraints do not exist. According to AHRI, even 
with non-condensing furnaces on the market right now, this trend toward 
condensing furnaces currently exists, and there is no reason to think 
that establishment of a separate product class would hinder the 
existing movement of this well-functioning market. (AHRI, No. 91 at p. 
2; similar points were made by Nortek, No. 71 at pp. 1-2, and Mortex, 
No. 72 at p. 1) Likewise, especially since there is already a market 
trend toward condensing commercial water heaters, AHRI argued that it 
is neither necessary nor advisable to require condensing equipment in 
all applications. Instead, the commenter stated that establishment of a 
separate product class for non-condensing equipment would preserve the 
ability of commercial consumers facing difficult installation 
situations to make like-for-like replacements and to avoid the need to 
reconstruct a mechanical room, add unsightly piping, or switch to an 
electric water heater, all without impacting the overall trend toward 
installation of more-efficient condensing water heaters. (AHRI, No. 91 
at p. 3) Similarly, Carrier and Nortek reasoned that because consumers 
are already moving in the direction of condensing furnaces, regulatory 
intervention banning non-condensing furnaces is not necessary and would 
only serve to disproportionately harm those consumers for whom venting 
changes would be difficult or impossible. (Carrier, No. 92 at p. 1; 
Nortek, No. 71 at pp. 1-2)
    BWC sought to allay DOE's concerns about the potential for locking 
in a less-efficient technology which could act as a ceiling on product 
efficiency. In BWC's experience, especially in commercial applications, 
it stated that the market will choose higher-efficiency products/
equipment where it makes sense (i.e., taking into account not only 
economics but other factors, such as change in utility, loss of usable 
space, etc.). (BWC, No. 77 at p. 2) Carrier largely echoed these 
comments that creation of separate product classes for condensing and 
non-condensing equipment would not hinder the market trend toward 
condensing products, arguing that consumers and residential new 
construction home builders continue to move in the direction of 
condensing technology, despite the availability of non-condensing 
appliances in the current market. (Carrier, No. 92 at p. 1)
    As a third perspective, the Petitioners et al. Joint Comment 
asserted that energy conservation standards that would make 
atmospherically vented products unavailable to consumers would alter 
the market by promoting electrification (i.e., a shift to electric 
appliances), rather than by promoting the efficiency of gas products, 
because it would force many consumers to feel that they have no choice 
but to give up their gas appliances in favor of electric alternatives. 
These commenters characterized the situation as one where the 
imposition of a standard that effectively bans atmospherically vented 
gas appliances would result not in the sale of an increased number of 
more efficient gas products, but in the sale of fewer gas products 
overall. The Gas Industry Petitioners argued that they are not opposed 
to condensing technology generally or market trends favoring such 
technology. Instead, these commenters stated that they are simply 
making the case that condensing products are not suitable for all 
installations and that it is the opponents of the petition who are the 
ones seeking to deny consumers the products which best serve their 
needs. (Petitioners et al. Joint Comment, No. 80 at pp. 3-4)
    In response, DOE would first note that EPCA directs DOE to consider 
the potential unavailability of a ``performance characteristic'' or 
``feature'' as a matter separate and apart from economic impacts or 
market trends. Stated simply, EPCA's ``features'' provisions make clear 
that while improved energy efficiency may be the overarching goal, it 
is not the only decisional factor in standard-setting. It is often the 
case that elimination of a feature would allow for a more energy-
efficient product (e.g., an oven window), but in drafting the statute, 
Congress made clear its intention to preserve consumer utility, which 
in some cases may necessitate the

[[Page 4805]]

sacrifice of potential additional energy savings. Through this final 
interpretation, DOE has determined that in certain cases, non-
condensing technology (and associated venting) is one such feature. 
A.O. Smith mischaracterizes this decision as abandonment of the 
principle of market neutrality, when in fact it simply reflects 
implementation of the statutory provisions enacted by Congress.
    Setting these matters aside, DOE still does not find the market 
trend impact envisioned by Lennox, Ceres, and A.O. Smith to be 
credible, but instead, the Department agrees with the assessment of 
AHRI, BWC, Nortek, Mortex, and Carrier as to the likely market impacts 
of DOE's proposed interpretive rule. While Lennox, Ceres, and A.O. 
Smith posit what they think might happen in the market, AHRI, BWC, 
Nortek, Mortex, and Carrier are pointing out what is actually happening 
in the market. That is, non-condensing and condensing products are 
competing in the market currently under DOE's existing regulations, yet 
the market trend towards condensing products/equipment exists 
nonetheless. As establishment of separate product/equipment classes for 
non-condensing appliances would in general reflect the status quo, DOE 
fails to see how the deleterious market trends of which Lennox, Ceres, 
and A.O. Smith complain would manifest, given that they have not arisen 
already. Instead, as AHRI, BWC, Nortek, Mortex, and Carrier suggest, 
consumers (both residential and commercial) make decisions based upon 
their own weighing of economics and other relevant factors (e.g., space 
constraints, loss of utility). Thus, the trend toward higher-efficiency 
condensing appliances (even where non-condensing ones are available) 
suggests that the markets are working efficiently, and DOE can discern 
no reason why that current market trends towards condensing appliances 
would not continue, regardless of DOE's final interpretation. Thus, DOE 
expects further energy savings gains over time as the market share of 
condensing appliance continues to increase.
    Although Lennox and A.O. Smith speculate as to the outcomes of the 
ongoing DOE residential furnaces rulemaking under the Department's 
proposed interpretation, such outcomes cannot be predicted now; the 
outcomes can be properly determined only after completion of the full 
suite of the agency's rulemaking analyses, as applied in each 
individual rulemaking. However, even in the abstract, DOE does not 
agree with the logic of Lennox and A.O. Smith. Specifically, Lennox 
alleges that if DOE were to establish separate product/equipment 
classes for condensing and non-condensing appliances, the levels for 
condensing models would be higher than they otherwise might be if there 
were to be single product/equipment class. However, amended energy 
conservation standards would ultimately be set at a level that results 
in significant conservation of energy, is technologically feasible, and 
is economically justified. Any determination of those future standards 
would be based on sound economic and technical analyses.
3. Requests for Clarification
    Among the commenters supporting DOE's proposed interpretive rule, a 
few requested clarification (sometimes with recommendations) on 
specific points. For example, Weil-McLain argued that DOE would be more 
technically accurate to make class distinctions based on the 
appliance's venting category (as defined in the National Fuel Gas Code 
NFPA 54), rather than using the terms ``condensing'' and ``non-
condensing.'' The commenter pointed to what the National Fuel Gas Code 
refers to as Category I vented appliances, which operate with a non-
positive vent static pressure and with a vent temperature which avoids 
excessive condensate production in the vent. Weil-McLain argued that 
such venting is the type used by non-condensing appliances. Thus, Weil-
McLain suggested that going forward, DOE should use the term ``Category 
I Vented Appliance'' in its interpretation. (Weil-McLain, No. 86 at pp. 
1-2)
    In response, DOE notes that this comment is similar to ones by USB, 
BHI, and Crown Boiler, which prompted the Department to issue its 
September 2020 SNOPIR to consider two alternative approaches that would 
have defined a performance-related feature for the subject gas 
appliances based upon venting compatibility (see section II.E of this 
document for further details). However, after reviewing public comments 
in response to its supplemental proposal, DOE ultimately decided not to 
adopt those alternative proposals and to instead proceed with its 
original proposal to define the performance-related feature as the 
subject appliances' condensing or non-condensing operation, for the 
reasons explained in section III.A.1.a of this document. Consequently, 
DOE declines to adopt the clarification suggested by Weil-McLain for 
the reasons previously discussed.
    The Petitioners et al. Joint Comment requested that DOE clarify the 
language used in its proposed interpretation by concluding that 
standards limiting the market to products that use condensing 
combustion technology ``would result in the unavailability of a 
performance characteristic or feature,'' language which they argued 
would more closely track that of the statute. The Petitioners et al. 
Joint Comment also asked DOE to clarify the proposed interpretation's 
parenthetical ``(where permitted by EPCA)'' and its reference to 42 
U.S.C. 6316(a) to make clear that it relates to the situations to which 
the ``features'' provisions apply under the statute, rather than being 
a ``features'' provision itself. (Petitioners et al. Joint Comment, No. 
80 at p. 7)
    In response, although DOE does not perceive the language in 
question to be unclear, the Department is restating its position so as 
to dispel any confusion. Through this final interpretation, DOE has 
concluded that a careful examination of anticipated consumer impacts 
and a preponderance of the record evidence show that a standard 
limiting the market to products/equipment that use condensing 
combustion technology (and associated venting) would impermissibly 
result in the unavailability in the United States of a performance 
characteristic or feature under EPCA. In future rulemakings to consider 
energy conservation standards regarding products/equipment for which 
this determination is relevant, DOE will consider establishing separate 
product/equipment classes for condensing and non-condensing product 
types and may set different standards for such classes.
    Regarding the language in the proposed interpretive rule about 
``(where permitted by EPCA),'' DOE was referring to the situation where 
DOE is triggered by ASHRAE action in amending ASHRAE Standard 90.1 and 
where DOE does not have clear and convincing evidence to adopt standard 
levels more stringent than those set by ASHRAE. Regarding DOE's 
reference to 42 U.S.C. 6316(a), the Petitioners et al. Joint Comment is 
correct that that is not a ``features'' provision itself, but it is 
instead the statutory crosswalk provision which makes the ``features'' 
provision at 42 U.S.C. 6295(o)(4) applicable to covered non-ASHRAE 
equipment.
    BWC expressed concern about how ASHRAE equipment would be affected 
by DOE's proposed interpretation impacting EPCA's ``features'' 
provision. Specifically, BWC stated that DOE has not addressed the 
situations where DOE does not act to adopt a level more stringent than 
the level adopted by ASHRAE or where DOE cannot adopt

[[Page 4806]]

the ASHRAE level (e.g., if such standards were differentiated based on 
new construction versus replacement installations; or if the levels 
were set based on the system's efficiency, rather than a single product 
within the system). In those cases, BWC recommended adopting a similar 
interpretation of the ``features'' provision as if the product were not 
covered by ASHRAE. (BWC, No. 77 at p. 1) Similarly, AHRI requested 
further clarification on how DOE's proposed interpretive rule applies 
to commercial equipment, particularly ASHRAE equipment rulemakings 
conducted pursuant to EPCA's 6-year-lookback review requirements that 
are not prompted by amendments to ASHRAE Standards 90.1. (AHRI, No. 91 
at pp. 3-4) For water heaters, AHRI agreed with DOE that its 
condensing/non-condensing interpretation would not apply in situations 
where the Department, after being triggered by ASHRAE action amending 
ASHRAE Standard 90.1, adopts the same standard level set by ASHRAE. 
(AHRI, No. 109 at p. 3)
    EPCA includes a ``features'' provision applicable to ASHRAE 
equipment at 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa), but that provision 
applies only to instances where DOE is adopting more-stringent 
standards either under the statute's trigger provision or 6-year-
lookback provision. In those cases where DOE adopts the ASHRAE Standard 
90.1 levels under 42 U.S.C. 6313(a)(6)(A)(ii)(I), there is no 
applicable ``features'' provision, so DOE's authority limits it to 
adopting the levels and classes set by ASHRAE.

B. Comments Regarding Economics-Related Issues

    A number of commenters disagreed with DOE's proposed interpretive 
rule, because they argued that it improperly injects economic 
considerations into the concept of consumer utility used in the 
``features'' determination. These commenters, such as A.O. Smith, 
argued instead that installation and other costs are to be considered 
as part of the economic analysis required by the statute. (A.O. Smith, 
No. 88 at p. 4) In responses to the September 2020 SNOPIR, NRDC and 
A.O. Smith added that any issues related to venting are likewise an 
issue of cost, not a performance-related feature, and any costs 
associated with upgrading venting can and should be addressed when DOE 
analyzes installation costs in its economic analysis. (NRDC, No. 112 at 
pp. 2-3; A.O. Smith, No. 113 at p. 3) The CA IOUs stated that DOE 
should not inappropriately conflate rulemaking analyses (e.g., economic 
justification analyses) with a petition to create a new class of 
products, arguing that such approach would undermine the rulemaking 
process and inappropriately define economic impacts or incremental 
costs as performance-related features. (CA IOUs, No. 85 at pp. 3-4) 
However, while maintaining the position that economic considerations 
are inappropriate in a ``features'' determination, such commenters also 
sought to refute, arguendo, DOE's economic concerns and to show that 
even under the agency's proposed approach, declaring non-condensing 
technology (and associated venting) to be a ``feature'' is neither 
necessary nor justified. The following discussion first summarizes and 
addresses the relevant statutory arguments, followed by the specific 
economic arguments, along with DOE's responses.
1. Consumer Impacts
a. Legal Arguments
    Several commenters objected to DOE's proposed interpretation, 
arguing that the Department violated the statute by improperly 
considering economic factors in making its ``features'' determination. 
For example, A.O. Smith argued that DOE's ``unprecedented'' 
interpretation that would tie the concept of a ``feature'' to 
condensing technology largely turns on installation costs. (A.O. Smith, 
No. 88 at p. 6) Lennox (and other commenters) stated that DOE's cost 
analysis is unsupported and inconsistent with EPCA's statutory mandate, 
because the ``features'' provision at 42 U.S.C. 6295(o)(4) focuses on 
unavailability and does not mention costs as an appropriate 
consideration. (Lennox, No. 87 at pp. 5-6; CEC, No. 89 at p. 3; 
Advocates Joint Comment, No. 95 at pp. 1-3; Lennox, No. 114 at p. 4) 
The CEC made a similar comment and also pointed out that costs are 
likewise not relevant under 42 U.S.C. 6295(q)(1) (the product class 
provision). (CEC, No. 89 at p. 3) The AGs Joint Comment (and other 
commenters) stated that under 42 U.S.C. 6295(o)(2)(B), the statute 
directs DOE to consider costs as part of its analysis of economic 
justification. (AGs Joint Comment, No. 82 at pp. 10-12; A.O. Smith, No. 
88 at p. 12; CEC, No. 89 at p. 3; Environmentalists Joint Comment, No. 
90 at p. 3; Advocates Joint Comment, No. 95 at p. 3)
    A.O. Smith also asserted that consideration of costs under the 
statute's ``features'' provision would predetermine the outcome of 
economic justification without performing that full analysis as 
required by the statute. (A.O. Smith, No. 88 at p. 12) A similar 
argument was made in the Advocates Joint Comment II. (Advocates Joint 
Comment II, No. 118 at pp. 1, 2, 5) The Environmentalists Joint Comment 
reasoned that if installed cost concerns could block consideration of a 
standard level, it would result in an ``end-run'' around the other 
statutory factors which DOE must consider in assessing economic 
justification. (Environmentalists Joint Comment, No. 90 at p. 3) The 
Advocates Joint Comment added that delineating product classes based 
upon cost considerations would subvert the statute's central purpose of 
energy conservation. (Advocates Joint Comment, No. 95 at pp. 1-2)
    Commenters identified specific, economics-related concerns raised 
in the proposed interpretive rule which they believe should only be 
considered in DOE's economic analyses. For example, the 
Environmentalists Joint Comment argued that low-income consumers' 
ability to absorb the first-cost impacts of installing a condensing gas 
appliance should properly be addressed in the economic justification of 
a standards rulemaking. (Environmentalists Joint Comment, No. 90 at p. 
5) The Advocates Joint Comment argued that affordability and other cost 
impacts should also be addressed as part of the economic analysis, 
rather than by establishing unjustified product classes which would 
preclude such analysis. Furthermore, the Advocates Joint Comment stated 
that topics such as housing affordability, higher up-front costs 
crowding out consumer spending on other necessities, and long payback 
periods that do little to ameliorate short-term up-front costs are 
economic matters relevant to whether a potential standard level is 
appropriate, after conducting the requisite economic and financial 
analysis called for under the statute; they argued that DOE has not 
shown that the difference between condensing and non-condensing 
products is more than a matter of cost. (Advocates Joint Comment, No. 
95 at pp. 1-3)
    The Advocates Joint Comment asserted that since each of DOE's 
attempted rationales for characterizing non-condensing products as a 
``performance-related feature'' (i.e., space constraints (and other 
limitations related to installation), aesthetics, and consumer 
preference for gas heating) are fundamentally cost considerations, the 
Department has failed to provide justification for establishing 
separate product classes along those lines. (Advocates Joint Comment, 
No. 95 at pp. 1-2, 3-5) Similarly, the CEC stated

[[Page 4807]]

that three out of four of DOE's justifications in its proposed 
interpretation rely on economic considerations and are, therefore, 
inappropriate for purposes of setting product classes. (CEC, No. 89 at 
p. 3) The Advocates Joint Comment expressed the view that DOE is 
seeking to solve ``hypothesized'' harmful economic impacts by 
establishing product classes, but that the statute allows for the 
mitigation of any such harms by setting an appropriate standard level 
or leaving the existing standard unchanged. (Advocates Joint Comment, 
No. 95 at p. 3) According to the Advocates Joint Comment, cost impacts, 
including those with respect to low-income consumers, are a central 
concern for DOE's standard level selection process, and the Department 
routinely performs consumer subgroup analyses, which examine impacts on 
subsets of consumers such as those with low incomes. (Advocates Joint 
Comment, No. 95 at pp. 1-2)
    In contrast, several commenters supported DOE's tentative decision 
to interpret the use of non-condensing technology (and associated 
venting) to be a ``feature'' under the statute based upon the findings 
related to consumer utility. The Petitioners et al. Joint Comment 
responded to other commenters' suggestions that the difference in 
characteristics between condensing products and atmospherically vented 
product being simply a matter of cost as factually incorrect; instead, 
these commenters stated that an energy conservation standard set at a 
condensing level would leave consumers with no residential gas furnaces 
capable of operating with existing atmospheric venting systems, with 
other commonly-vented appliances, or without a condensate disposal 
system. The Petitioners et al. Joint Comment argued that critics of 
DOE's proposed interpretive rule mischaracterize these material 
differences which have significant utility to consumers, separate and 
apart from the substantial costs that a ban of such systems would 
generate. (Petitioners et al. Joint Comment, No. 80 at p. 10)
    DOE agrees with commenters that costs are to be properly addressed 
in a rulemaking's economic analysis, and it said as much in the 
proposed interpretive rule. 84 FR 33011, 33020 (July 11, 2019). On this 
topic, the Department clearly stated, ``DOE has tentatively concluded 
that the other [i.e., non-economic] reasons discussed immediately above 
are sufficient in and of themselves to justify the Department's 
proposed change in interpretation, but it acknowledges these cost 
impacts to be fully transparent in terms of the agency's thinking.'' 
Id. (DOE does not concur with certain commenters' attempts to classify 
all of the agency's stated reasons as economic, thereby better suiting 
their own arguments.) Even though economics is not an appropriate 
consideration in making a ``features'' determination under the statute, 
there is no question that economic effects will need to be considered 
in whatever decision is made with regard to establishing or revising 
standards. Discussing the potential economic effects of a decision is 
not equivalent to making them the basis for the ``features'' decision 
itself. This is no different than stakeholder comments on the proposed 
interpretation which raised the economic implications of an affirmative 
``features'' determination and its impact on the energy conservation 
standards which could subsequently be set for products/equipment where 
both condensing and non-condensing models exist. Those economic 
concerns are similarly unsuitable for consideration in making a 
``features'' determination under the statute. Accordingly, DOE would 
reiterate that it based neither its proposed interpretive rule nor this 
final interpretive rule upon economic considerations.
    DOE notes that many of the environmental and efficiency advocacy 
groups raised no similar objections to DOE's September 2016 furnaces 
SNOPR, in which the agency proposed to set a separate product class and 
energy conservation standard at a non-condensing level for furnaces 
with a capacity less than 55 kBtu/h.\26\ Essentially, this would have 
created a non-condensing standard to address, in large part, the 
economic concerns of many low-income consumers. 81 FR 65720, 65795, 
65852 (Sept. 23, 2016). Arguably, this product class distinction was 
not required to protect the capacity from elimination, pursuant to 42 
U.S.C. 6295(o)(4). Since the effect would have been comparable, it is 
difficult to reconcile these groups' differing positions regarding the 
propriety of taking economic considerations into account.
---------------------------------------------------------------------------

    \26\ See e.g. the joint comment of the Appliance Standards 
Awareness Project, the Alliance to Save Energy, the Natural 
Resources Defense Council, the Northeast Energy Efficiency 
Partnerships, and Northwest Energy Efficiency Alliance. (EERE-2014-
BT-STD-0031-0285) In relevant part, the joint comment states at page 
3, ``The DOE proposal is based on a breakpoint of 55,000 Btu/hour 
and not the 50,000 Btu/hour we had recommended in our NOPR comments. 
While we can live with 55,000 for now, we recommend that prior to 
the next rulemaking that DOE conduct additional analysis on the 
heating loads of homes in the south and in new construction so that 
the next rulemaking can consider whether 55,000 Btu/hour remains a 
reasonable breakpoint, or whether another value is more 
appropriate.''
---------------------------------------------------------------------------

b. Factual Arguments
    While maintaining their legal arguments in opposition, a number of 
commenters also directly challenged what they characterized as economic 
aspects of the proposed interpretive rule (i.e., installation costs, 
changes impacting aesthetics, fuel switching, and energy 
affordability). For example, the AGs Joint Comment argued that while 
DOE's proposed interpretive rule expressly endorsed the approach that 
economic considerations should be addressed as part of a rulemaking's 
economic justification analyses, the agency nevertheless used and gave 
undue weight to economic considerations in its ``features'' analysis. 
Furthermore, the AGs Joint Comment emphasized that DOE's own rulemaking 
record found the Gas Industry Petitioners' claims regarding increased 
consumer costs and challenging installation scenarios to be overstated, 
and they further argued that the Gas Industry Petitioners had proffered 
no new evidence to support their claims, including ones about excessive 
installation costs and consumer preference for gas as a fuel type. (AGs 
Joint Comment, No 82 at pp. 10-12; similar comment from NRDC, No. 94 at 
pp. 6-7) The CA IOUs and NRDC stated that DOE has already shown the 
technological feasibility and economic justification for condensing 
furnaces and water heaters through analyses supporting the relevant 
rulemakings and that such findings should not be allowed to be 
undermined in a separate action to assess new product classifications. 
(CA IOUs, No. 85 at pp. 3-4; NRDC, No. 94 at pp. 2, 6-7) The Joint 
Advocates Comment added that solutions exist for difficult venting 
situations (a point echoed by Electrify Now), and that DOE has 
accounted for them in past rulemaking documents analyzing potential 
standards levels. (Advocates Joint Comment, No. 95 at pp. 3-5; 
Electrify Now, No. 106 at p. 1) Lennox commented that DOE has not 
explained when cost issues may become so extreme as to render certain 
furnace installations impossible or impracticable, and it argued that 
the lack of data in this regard causes the proposed interpretation to 
fail the preponderance of the evidence standard for designating a 
product ``feature.'' (Lennox, No. 87 at p. 6)
    Lennox alleged that DOE has failed to consider various studies, 
analysis, and other work to address the extent of, and

[[Page 4808]]

solutions to, difficult installation issues (e.g., a May 2019 study 
conducted by Oak Ridge National Laboratory (ORNL) and UT-Battelle, a 
document prepared by Pacific Gas and Electric (PGE)/NEEA). (Lennox, No. 
114 at p. 4) Along a similar vein, the Advocates Joint Comment II 
recited numerous technological solutions which they suggest are 
available to address installation barriers related to venting systems 
for gas-fired products, such as DuraVent's FasNSeal product. These 
commenters also claim that additional venting solutions are under 
development, such as the ORNL EntrainVent and DuraVent's vent retrofit 
design, although they acknowledge that neither of these products is 
commercially available today. (Advocates Joint Comment II, No. 118 at 
pp. 4-5) NEEA also cited DuraVent products as a potential solution to 
the problems DOE seeks to address. (NEEA, No. 119 at pp. 2-3)
    The CA IOUs stated that DOE's proposal put the U.S. ``out-of-sync'' 
with other jurisdictions, such as Canada, which regulate the energy 
efficiency of similar products. These commenters pointed out that 
Canada has regulations in place resulting in 98 percent of its annual 
furnace shipments being condensing models (in 2017), and of these, 85 
percent had an AFUE rating of at least 95 percent. According to the CA 
IOUs, Canada expanded on these regulations in 2019 to require all 
residential housing units (with a few relatively narrow exceptions) 
sold in Canada with input rates less than or equal to 65.92 kilowatts 
(or 225,000 Btu/h) that use single-phase electricity to achieve an AFUE 
of 95 percent. The CA IOUs added that the European Union's Ecodesign 
minimums for gas instantaneous and gas storage water heaters with 
higher draw patters (XL, XXL, and above) also require condensing 
technology levels of performance. (CA IOUs, No. 117 at pp. 2, 3-4) 
Lennox also commented as to DOE's failure to address the widespread 
installation of condensing furnaces in Canada. (Lennox, No. 114 at p. 
4)
    Commenters opposing DOE's proposed interpretation sought to 
highlight data suggesting that cost impacts associated with 
installation of condensing appliances, in most cases, would not have an 
excessively negative impact on consumers. For example, the AGs Joint 
Comment stated that recent market research (submitted to the present 
rulemaking docket) contradicts petitioners' claims regarding the 
impracticality or impossibility of condensing appliance retrofit 
installations. According to the AGs Joint Comment, a report by 2050 
Partners, Inc. was based upon in-depth interviews with installers, 
distributors, and subject matter experts from around the U.S. in both 
residential and commercial settings, and it found that less than 5 
percent of retrofit installations required significant modifications 
(i.e., building or site modifications where installation costs would be 
more than double the total system cost of a typical retrofit). 
According to the AGs Joint Comment, that report indicates that 
condensing equipment can typically be incorporated with only minor 
changes into venting and plumbing infrastructure, and that condensate 
management, orphaned water heaters, and chimney relining were not 
identified as significant concerns, and that even in difficult cases, 
technical solutions were always available. The AGs Joint Comment also 
cited the earlier comment of Mitsubishi Electric on the petition, which 
stated that the percentage of homes with challenging retrofit 
situations is probably less than 1 percent of the total housing stock. 
(AGs Joint Comment, No. 82 at pp. 10-12) In its comments on the 
September 2020, NEEA pointed to the same study and made similar 
arguments. (NEEA, No. 119 at p. 2)
    Along similar lines, the CA IOUs argued that their research has 
shown that installing a condensate drain is not a barrier to 
installation of condensing appliances. These commenters added that they 
only found approximately five percent of retrofit installations (going 
from atmospheric combustion natural gas appliances to condensing 
equivalents) to be `` `challenging,' '' and even these always had 
technical solutions that allowed installation of the condensing 
appliance. The CA IOUs concluded that these technical solutions have 
associated costs, but cost is not a product feature. (CA IOUs, No. 117 
at pp. 2-3)
    The AGs Joint Comment also challenged DOE's concern expressed in 
the proposed interpretation that energy conservation standards set at a 
condensing level could price some low-income consumers out of the 
manufactured housing market or create other financial hardship, such 
that these concerns could sufficiently raise non-condensing appliances 
(and associated venting) in the consciousness of the consumer so as to 
be deemed a ``feature'' under EPCA. These commenters argued that DOE's 
rulemaking record shows that the costs for condensing and non-
condensing mobile home furnaces are comparable due to lower 
installation costs for condensing furnaces in most of those 
installations, so these commenters reasoned that a condensing furnace 
standard would not have any effect on the affordability of single-
section mobile homes. (AGs Joint Comment, No. 82 at p. 12)
    The CEC stated that monthly savings from more-stringent standards 
would benefit low-income consumers more than the average consumer 
because, the commenter argued, they spend more than twice as much (as a 
percentage of income) on energy than median income consumers. The CEC 
did not directly respond to the first-cost concerns raised in DOE's 
proposed interpretation, but instead quoted from an ACEEE paper which 
linked high energy costs to the cycle of poverty. The commenter added 
that at least in California, a substantial number of low-income 
consumers are tenants, so they have no control over the appliance 
choice, but they pay the utility bills, a situation which runs counter 
to DOE's energy affordability concerns. (CEC, No. 89 at pp. 6-7)
    Other commenters also raised the same issue about split incentives 
between landlords and renters. The CFA/NCLC argued that it is owners, 
rather than renters, who purchase central heating furnaces, and that 
most owners (particularly those who rent apartments to lower-income 
tenants) will choose less expensive, less efficient non-condensing 
furnaces that will result in tenants paying significantly more to heat 
their homes. According to these commenters, depending upon the non-
condensing and condensing units under consideration, low-income tenants 
would pay at least 10 percent more and a much as 20 percent more for 
their heat. (CFA/NCLC, No. 93 at p. 2) The CFA/NCLC argued that DOE's 
proposed interpretation would harm many more low-income and moderate-
income households than it would help, particularly since these 
households are disproportionately renters (not homeowners) and, 
therefore, must pay the associated energy bills. (CFA/NCLC, No. 93 at 
pp. 1-2) These commenters offered the following evidence to support 
their position. Citing U.S. Census Bureau data from 2017 through the 
second quarter of 2019, the CFA/NCLC stated that 78 percent of 
households with income greater than the median family income were 
homeowners, as compared to 50 percent homeownership for households 
below the median family income. Because the poverty line is 
significantly below the median and because homeownership rates decline 
as income declines, these commenting organizations reasoned that such 
low-income households would have homeownership rates well below 50 
percent. The CFA/NCLC added that

[[Page 4809]]

homeownership rates are significantly lower for non-white families, in 
large part because they are also lower-income families; in the past two 
years, the commenters noted that homeownership rates for ``Black 
alone'' households were approximately 42 percent, and approximately 47 
percent for ``Hispanic (of any race)'' households. (CFA/NCLC, No. 93 at 
p. 2)
    CFA/NCLC challenged DOE's reasoning that an energy conservation 
standard that would require a condensing furnace would lead to higher 
rents to cover the landlord/owner's first cost of the more expensive 
appliance, arguing that it is both unsubstantiated and unlikely to 
occur. According to these commenters, the incremental cost (including 
equipment and installation) for a condensing furnace (beyond the cost 
of a non-condensing furnace) is likely to be in the range of several 
hundred dollars, but given a useful furnace lifetime of over 20 years, 
they estimate that a landlord would only need to raise rent by $3 per 
month to recoup these incremental costs over that period. The 
commenters noted that in an earlier filing with DOE, NCLC submitted an 
affidavit from a non-profit housing developer who stated that: (1) The 
incremental costs of a more-efficient furnace are so small compared to 
the owner's overall operating costs so as to not be directly and 
immediately reflected in rent, and (2) rents are generally set in 
accordance with governing regulations (in rent-regulated, low-income 
housing) or by external market conditions (for unregulated properties). 
Accordingly, CFA/NCLC concluded that small changes in the cost of one 
appliance would not lead to a rent increase. (CFA/NCLC, No. 93 at p. 3)
    CFA/NCLC acknowledged that there are many low-income homeowners who 
directly bear the cost of a replacement furnace, but they did not 
address the issue of first-cost for these homeowners, instead focusing 
on the fact that such increased costs would be paid back in terms of 
lower energy operating costs over the more than 20-year lifetime of the 
furnace (citing section 8.2.2.5 of the technical support document for 
DOE's residential furnaces rulemaking (August 30, 2016)). These 
commenters added that low-income homeowners frequently face termination 
of utility services due to non-payment, a risk that could increase with 
inefficient, non-condensing furnaces. (CFA/NCLC, No. 93 at p. 3)
    CFA/NCLC and Electrify Now faulted DOE's proposed interpretation 
for focusing on unquantified burdens that might fall on a very small 
percentage of residential households that would be required to install 
condensing furnaces, while ignoring the vast majority of households 
that would benefit--as clearly demonstrated under the Department's own 
earlier analysis--from adoption of a condensing furnace standard. (CFA/
NCLC, No. 93 at p. 4; Electrify Now, No. 106 at p. 2) According to CFA/
NCLC, the upshot of DOE's proposed interpretation would be that the 
agency would fail to carry out congressional intent, saddle consumers 
with potentially billions of dollars of excess energy costs, and impede 
efforts to help consumers use less energy. (CFA/NCLC, No. 93 at p. 4)
    Lennox argued that DOE did not provide any support to show that 
failure to separate condensing and non-condensing product/equipment 
classes would lead to ``widespread, long-term homelessness,'' further 
arguing that furnace costs are a comparatively small fraction of 
overall housing costs. The commenter countered that a more factual 
analysis would show that overly-stringent efficiency standards would 
price some consumers out of a new furnace and would cause them to 
either continue to repair older, less-efficient units or purchase 
other, less-efficient heating options (e.g., kerosene heaters, electric 
space heaters, using a stove or oven). Lennox stated that the lack of 
data and support deprives commenters of the ability to fully comment on 
DOE's proposal. (Lennox, No. 87 at p. 5)
    Contrary to the concerns about energy affordability raised in DOE's 
proposed interpretive rule, certain commenters stated that such 
approach would harm the very groups most affected by high energy bills 
by allowing less-efficient equipment to remain on the market and 
locking in higher energy costs. NRDC pointed to research showing that 
space heating represents the largest energy expense for the average 
U.S. home at 45 percent of energy bills, and it similarly stated that 
about 50 percent of U.S. commercial building floor space gets hot water 
from gas-fired or propane-fired equipment. (NRDC, No. 94 at p. 2) NRDC 
agreed with DOE that energy affordability is a critical issue, stating 
that nearly one-third of U.S. households face challenges (often because 
their energy bills are unaffordable) and that energy burden is 
significantly higher for low-income households (3.5% for median income 
households but 7.2% for low-income households). The organization added 
that low-income households, renters, African-American households, and 
Latino households all have a higher than average energy burden (i.e., 
paying more for utilities per square foot than the average household), 
which indicates that their homes are less efficient. NRDC stated that 
heating and cooling are the largest contributors to household energy 
use and that inefficient heating systems are one of the biggest drivers 
of household energy burden. The commenter argued that improving the 
efficiency of heating appliances offers a great opportunity to reduce 
energy burdens, but that DOE's proposed interpretation would move 
things in the wrong direction. Under DOE's proposed interpretation, 
NRDC argued, energy burdens would be perpetuated because lower-income 
customers and landlords may be inclined to purchase lower-first-cost 
appliances, even if those products have net higher operational costs 
over the product's lifetime. Citing an ACEEE study, NRDC made the case 
that strong energy efficiency standards help transform the market by 
making high-efficiency products readily available to all customers, 
with products becoming less expensive over time as installation costs 
drop and as manufacturers innovate. NRDC concluded that cost-effective 
condensing products have the potential to lower both energy bills and 
energy burden. (NRDC, No. 94 at pp. 9-10)
    Furthermore, the Advocates Joint Comment argued that the proposed 
interpretation's recitation of harmful economic effects, at least in 
the case of mobile home furnaces, is specious. These commenters cited 
DOE's 2016 furnaces SNOPR (81 FR 65720 (Sept. 23, 2016)), which 
proposed a 92-percent AFUE standard for mobile home furnaces and was 
estimated to increase installed costs by $152. Using this example, the 
Advocates Joint Comment disputed DOE's claim that the resulting 
increased cost in a mobile home resulting from the required 
installation of a condensing furnace could price some consumers out of 
the housing market. These commenters countered that this cost 
differential would amount to less than a dollar a month on the monthly 
mortgage payment and that mortgage lending decisions do not turn on 
such small margins. The Advocates Joint Comment argued that a 
condensing furnace could actually make a home more affordable for such 
consumers by lowering energy bills, thereby freeing up money for other 
necessities such as food and medicine (seeking to refute DOE's argument 
on this point). The commenters also used this example to challenge 
DOE's concerns about energy savings being spread out over long payback 
periods, again citing the 2016 furnaces SNOPR for the proposition that 
under a 92-percent AFUE standard, a

[[Page 4810]]

mobile home furnace with a 21.5 year lifetime would have a payback 
period of just 1.7 years. (Advocates Joint Comment, No. 95 at p. 3)
    Regarding energy affordability, the Advocates Joint Comment argued 
that rental housing markets have been thoroughly studied in the 
economic literature, and on the topic of whether increased appliance 
costs are passed on to consumers in the form of higher rent, it quoted 
Dr. Larry Dale, an economist for DOE who stated the following at an 
April 13, 2015 public meeting: ``The implications from these findings 
are: tenants benefit from lower energy bills; rent increases may not, 
and I would say almost certainly do not, cover the higher equipment 
costs. So overall, tenants (meaning largely low-income households in 
this case, or rather the other way around, low-income households that 
are largely tenants) are probably better off than suggested by our LCC 
[life-cycle cost] analysis.'' \27\ The Advocates Joint Comment 
concluded that the best way for DOE to make decisions about future 
standards is to fully evaluate the costs and benefits of such potential 
standards, including through a consumer subgroup analysis which 
accounts for effects on renters, as opposed to setting separate product 
classes for condensing and non-condensing appliances, where such costs 
and benefits would not even get considered. (Advocates Joint Comment, 
No. 95 at pp. 5-6)
---------------------------------------------------------------------------

    \27\ U.S. Department of Energy Public Meeting Transcript on the 
Energy Conservation Standards for Residential Furnaces (April 13, 
2015), p. 12, lines 3-10 (Available at: https://www.regulations.gov/document?D=EERE-2014-BT-STD-0031-0050).
---------------------------------------------------------------------------

    According to the NRDC, if implemented, the revised interpretation 
would have an extremely detrimental impact on the potential for natural 
gas savings from future appliance energy conservation standards, 
thereby resulting in higher energy bills for customers using gas 
appliances, especially low-income households. (NRDC, No. 94 at p. 1) 
Focusing on commercial consumers, Ceres raised similar concerns that if 
DOE were to establish separate product/equipment classes for 
residential furnaces and commercial water heaters based upon the use of 
condensing vs. non-condensing technology, such action would increase 
costs for ordinary businesses and their customers, who own and operate 
such appliances. (Ceres, No. 69 at p. 1) Ceres argued that granting the 
Gas Industry Petition would essentially result in a subsidy to those 
special interest groups, rather than benefit the American people or 
economy. (Ceres, No. 69 at p. 2) To overcome these concerns, NRDC 
reasoned that there are solutions to the problems which the proposed 
interpretive rule seeks to address, none of which would require 
reinterpretation of EPCA's ``features'' provision. More specifically, 
NRDC stated that if a consumer decides that the installation cost and/
or aesthetic implications of a condensing appliance are too high, one 
could switch from a gas-fired appliance to an electric one; a similar 
comment was made by the Advocates Joint Comment II. (NRDC, No. 94 at 
pp. 6-7; Advocates Joint Comment II, No. 118 at pp. 4-5)
    Other commenters acknowledged and agreed with the Department's 
separate discussion of likely consumer cost impacts (particularly for 
low-income consumers) that would be associated with energy conservation 
standards set at a level which can only be met through the use of 
condensing technology. For example, Weil-McLain expressed appreciation 
for DOE's acknowledgment of the cost impact that requiring a condensing 
appliance would have on low-income segments of the population, and it 
argued that the same concerns exist in the commercial market, because 
small businesses could face increased costs and job losses if they 
could no longer purchase Category I Vented Appliances. (Weil-McLain, 
No. 86 at p. 2) Carrier also cited continued affordability for low-
income consumers as an important issue. (Carrier, No. 92 at p. 1)
    The Petitioners et al. Joint Comment argued that suggestions that 
favorable action on the petition would harm the economic interests of 
consumers, especially low-income consumers, are based upon the flawed 
premise that a condensing standard for residential furnaces would give 
low-income renters the benefits of lower utility bills because a 
condensing furnace would then be installed in such cases. However, the 
Petitioners et al. Joint Comment suggested that existing multi-family 
properties, which provide much of the country's affordable housing 
stock, face some of the most serious technical impediments to 
installation of condensing gas furnaces. Consequently, the Petitioners 
et al. Joint Comment argued that a condensing furnaces standard would, 
in fact, force many property owners to switch to alternatives such as 
electric resistance heating as their only practical option, which could 
actually burden low-income renters with substantially higher utility 
bills. (Petitioners et al. Joint Comment, No. 80 at p. 4)
    In response, DOE reiterates that, despite discussing potential 
ancillary economic effects, the Department based its ``features'' 
determination in the proposed interpretive rule upon non-economic 
grounds. Because DOE did not rely on economic factors in reaching its 
decision, commenters' allegations that the agency gave undue weight to 
economic considerations are incorrect. Similarly, arguments as to the 
economic justification of proposed standards for residential furnaces, 
commercial water heaters, or other similarly situated products are not 
relevant to DOE's ``features'' determination under EPCA. As discussed 
elsewhere in this document, DOE reexamined new and existing information 
(including the substantial evidence contained in existing rulemaking 
dockets) in light of the arguments raised in the Gas Industry Petition, 
and the agency determined that a revised interpretation would better 
comport with the requirements of the statute. DOE has come to see that 
in the substantial number of difficult installation situations, the 
practical differences between condensing and non-condensing appliance 
operation would be a distinction that many consumers may recognize and 
value, such that maintaining a non-condensing option would constitute 
an important consumer utility. DOE's decision to find non-condensing 
technology (and associated venting) to be a ``feature'' under EPCA 
preserves this consumer utility and consumer choice.
    DOE acknowledges that the economic impacts of its energy 
conservation standards rulemakings are both complex and of great 
importance. That is why the Department conducts a comprehensive 
economic analysis as part of those rulemakings, including consumer and 
manufacturer subgroup analyses, as appropriate. However, as the 
commenters stress, these economic considerations are beyond the scope 
of the ``features'' determination at issue in this final interpretive 
rule.
    In response to the CA IOUs' and Lennox's comments about Canadian 
and European experiences with condensing furnaces and water heaters, 
DOE does not find them directly opposite to the present case. First, 
such nations are situated significantly northward of large portion of 
the United States, so consequently, their climatic profile is different 
than that of the U.S., and that would be expected to impact their 
determinations of economic justification for standard-setting purposes. 
More importantly, however, it must be recognized that these foreign 
nations operate under an entirely different legal and regulatory 
structure, and

[[Page 4811]]

consequently, they are not subject to and have no duty to follow the 
statutory requirements of EPCA, including the ``features'' provision.
2. Fuel Switching
    Commenters on DOE's proposed interpretive rule expressed 
conflicting views on the topic of fuel switching. The Petitioners et 
al. Joint Comment urged DOE to reconsider its analysis concerning the 
significance of fuel switching in the context of efficiency regulation. 
These commenters argued that fuel switching could occur because of the 
unavailability of important product characteristics, such as instances 
where it would be impractical to install condensing products or where 
such products could not be installed without the need for undesirable 
building modifications that consumers would be unwilling to accept. 
They added that driving gas products out of the market is not a 
legitimate regulatory objective under a statute designed to promote the 
efficiency of regulated products. Thus, the Petitioners et al. Joint 
Comment reasoned that in conducting its standards rulemakings, DOE must 
justify its standards on the basis of the economics of required 
efficiency improvements (i.e., by accounting for those cases where poor 
economic outcomes drive consumers to alternative products), rather than 
by excluding such outcomes from the analysis and substituting more 
favorable economic outcomes based upon assumed product substitution. 
They asserted that using the logic of DOE's historic approach to 
economic analyses, standards could be determined to be economically 
justified on the grounds that they are so economically unjustified that 
consumers would no longer purchase the regulated products at all. These 
commenters argued that DOE's life-cycle cost analysis and payback 
analysis must reflect these real economic costs, rather than simply 
reducing the number of products sold.\28\ (Petitioners et al. Joint 
Comment, No. 80 at pp. 13-15)
---------------------------------------------------------------------------

    \28\ The Petitioners et al. Joint Comment argued that while the 
adverse impact of a standard on product sales should be ignored for 
purposes of the payback period and LCC analyses, it should not be 
ignored for purposes of other analyses, such as the manufacturer 
impact analysis, utility impact analysis, and national energy 
savings analysis.
---------------------------------------------------------------------------

    The CEC challenged DOE's statement that through its proposed 
interpretation it was seeking neither to determine winners and losers 
nor to limit consumer choice. The commenter pointed to DOE's September 
2016 residential furnaces SNOPR, in which the Department determined 
that fewer than 8 percent of consumers would switch from gas furnaces 
to heat pumps or electric furnaces, and which did not find any 
consumers compelled to switch (although some might do so for a variety 
of reasons, including economic savings) (citing 81 FR 65720, 65813 
(Sept. 23, 2016)). The CEC argued that by following its statutory 
mandate, DOE would be ensuring that consumers can make free and 
informed decisions about the cost of products they are purchasing. The 
CEC added that DOE did not offer any facts, data, or reasoning to 
suggest that a significant subset of consumers would resist switching 
to a more-efficient product because of fuel type or why such concerns 
would outweigh the energy consumption data or the risk of undermining 
the entire appliance efficiency program. The commenter concluded that 
these are economic concerns more properly addressed by the stringency 
of standards, rather than the creation of new product classes. (CEC, 
No. 89 at p. 5)
    Regarding fuel switching, the Environmentalists Joint Comment 
stated that such concerns are unsupported. These commenters argued that 
EPCA poses no barriers to adoption of an energy conservation standard 
based upon fuel switching, recognizing that appliances using different 
fuel types compete against each other in the marketplace. The 
Environmentalists Joint Comment pointed out that in 1987, Congress 
amended EPCA (at 42 U.S.C. 6295(f)(1)(B)(iii)) to require that DOE 
prescribe energy conservation standards for small gas furnaces at a 
level ``which the Secretary determines is not likely to result in a 
significant shift from gas heating to electric resistance heating with 
respect to either residential construction on furnace replacement.'' 
\29\ In light of that provision, these commenters argued that Congress 
could have easily extended this consideration to subsequent rulemakings 
to amend the standards for residential furnaces and commercial water 
heaters, but it did not. The Environmentalists Joint Comment stated 
that if fuel switching concerns were to be addressed by the statute's 
``features'' provisions, such outcome would render the statutory 
language regarding fuel switching limitations for small furnaces 
superfluous. (Environmentalists Joint Comment, No. 90 at pp. 4-5)
---------------------------------------------------------------------------

    \29\ The Environmentalists Joint Comment pointed to legislative 
history in H. Rpt. 100-11 at 35 and in S. Rpt. 100-6 at 6, 1987 
U.S.C.C.A.N. at 56, which suggest that Congress's concerns were 
about switching to electric resistance heating, not heat pumps.
---------------------------------------------------------------------------

    The Advocates Joint Comment largely dismissed any concerns about 
fuel switching and sought to offer alternative solutions that would not 
require the establishment of separate product classes under EPCA's 
``features'' provision. These commenters argued that consumers with a 
preference for gas heat would still have that option, albeit with 
higher installation costs, and that DOE can account for any such subset 
of consumer behavior through its modeling of fuel switching. (Advocates 
Joint Comment, No. 95 at pp. 3-5)
    In response, DOE acknowledges that fuel switching is a more nuanced 
matter when viewed beyond a purely economic lens. As an economic 
matter, a fuel-switching analysis shows how many consumers could change 
from one type of appliance to another as a result of amended energy 
conservation standards, occurrences that would have repercussions for 
down-steam analyses related to costs and benefits. As commenters point 
out, there is considerable evidence of the potential for fuel switching 
in the residential furnaces, commercial water heaters, and other 
relevant rulemaking dockets. As the CEC noted, DOE's September 2016 
residential furnaces SNOPR found that up to 8 percent of consumers 
would switch from gas furnaces to heat pumps or electric furnaces under 
that proposal. However, DOE had not previously focused on the 
motivation behind such consumer fuel switching. In past rulemakings, 
DOE viewed fuel switching as just an economic decision, devoid of any 
consumer utility impacts. However, as more fully explained in section 
III.A.1.a of this document, after careful review of the Gas Industry 
Petition and public comments, DOE has come to see that a non-condensing 
gas appliance (and related venting) offers the ability for consumers 
with difficult installation situations to make like-for-like appliance 
replacements without the need for major modifications to their dwelling 
or commercial business. Such modifications could potentially result in 
the loss of patio or storage space, the installation of unsightly 
piping, or the loss of windows. These are interactions with the 
appliance which the consumer would notice, concerns beyond the 
appliance's primary function of providing warm air (for furnaces) or 
hot water (for water heaters). Under DOE's revised interpretation, 
these utilities are to be regarded as performance-related 
characteristics to be protected under EPCA's ``features'' provision, 
rather than simply an economic matter to be resolved through higher 
standards and unwelcome fuel switching, as the Advocates Joint Comment 
and CEC recommend. The Gas Industry

[[Page 4812]]

Petitioners have provided information related to such installations in 
the context of various appliance rulemakings, in addition to the 
current docket. Additional benefits of DOE's revised interpretation 
include expanded consumer choice, in terms of both product selection 
and fuel type.
    In light of this final interpretive rule, DOE reasons that the 
Petitioners et al. Joint Comment's primary concerns vis-[agrave]-vis 
fuel switching have been addressed. However, these commenters' more 
technical arguments about the fuel switching analysis embedded within 
DOE's analytical methodology are more properly a matter to be addressed 
after the conclusion of the ongoing peer review of DOE's analytical 
processes being conducted by the National Academies of Sciences, 
Engineering, and Medicine (see more detailed discussion at section 
III.C of this document).
    While DOE appreciates the Environmentalists Joint Comment's 
argument about the statutory directive to prevent a significant shift 
from gas heating to electric resistance heating when prescribing energy 
conservation standards for ``small'' gas furnaces under 42 U.S.C. 
6295(f)(1)(B)(iii), the Department finds the commenters' legal theory 
to be a bit off point. First, DOE's goal is not to prevent fuel 
switching, but rather to prevent the loss of consumer utility. Having 
an appliance that fits in a limited/confined space is something very 
useful to the average consumer, and the statute expressly lists sizes 
as one of the protected aspects under 42 U.S.C. 6295(o)(4). 
Furthermore, DOE would argue in the alternative that the ``small'' 
furnaces provision to which the commenters point does not address the 
matter of fuel switching generally, but instead it articulates a 
particular concern to not encourage a shift to a certain type of 
electric appliance--i.e., electric resistance heating. Notably, the 
statute does not mention heat pumps, another electric heating option. 
Thus, DOE concludes that the Environmentalists Joint Comment paints 
with too broad a brush in making its argument to prohibit consideration 
of fuel switching effects.
3. Other Economic Issues
    Commenters also raised a few additional economic matters that did 
not fit squarely within any of the previous categories. The CA IOUs 
recommended that DOE should perform a cost-benefit analysis on the 
proposed new product class(es) that would arise from its proposed 
interpretation, as well as evaluating the potential costs to all 
consumers, manufacturers, and the environment resulting from such a 
change. The commenters argued that even if economic impacts were an 
appropriate rationale for a new product class, DOE's analysis of such 
impacts is incomplete. (CA IOUs, No. 85 at p. 5) The CA IOUs' analysis 
suggests that the potential impact of the new product classifications 
could be both significant and widespread, with the impacts related to 
residential furnaces alone potentially resulting in $1.8 billion/year 
in lost utility bill savings by 2050 and a 78 percent reduction in 
energy savings compared to the SNOPR published in 2016. Given the 
tremendous negative impacts for consumers, manufacturers, and the 
environment that are likely to result from DOE's proposed 
interpretation, the CA IOUs urged the Department not to move forward 
without weighing these impacts against the economic impacts used to 
justify the new product/equipment classes. (CA IOUs, No. 85 at p. 6)
    A.O. Smith asserted that DOE's proposed interpretation would 
increase business uncertainty and impose unnecessary burdens upon 
manufacturers who would need to align their stock keeping units (SKUs) 
and divert resources that would otherwise be invested in more 
innovative technologies. A.O. Smith further alleged that DOE's proposed 
interpretation would favor low-cost and subsidized imported products, 
thereby creating an ``un-level'' playing field for domestic 
manufacturers. (A.O. Smith, No. 88 at p. 6)
    In response, DOE has explained at length elsewhere in this document 
that a ``feature'' determination pursuant to EPCA does not turn on 
economic impacts, whatever the outcome of that decision. Although DOE 
explored some of these impacts in its proposed interpretive rule to 
examine the Gas Industry Petition in the broader context, the agency 
has not relied upon those economic impacts as the basis for either its 
proposal or this final interpretive rule determining non-condensing 
technology (and associated venting) to be a ``feature'' within the 
meaning of the statute. Consequently, the Department has concluded that 
it is not necessary to conduct the type of cost-benefit analysis 
suggested by the CA IOUs, because ultimately, it would not change the 
results of DOE's ``features'' determination.
    As to A.O. Smith's unsubstantiated arguments about business 
uncertainty and burden associated with the proposed interpretive rule, 
DOE finds such arguments to be without merit. DOE has been clear in 
both its earlier proposal and in this final interpretive rule regarding 
its revised interpretation. Furthermore, if the potential for 
litigation (and related uncertainty) were to be a basis for DOE to 
withhold regulatory action (including relevant statutory 
interpretations), it could completely ossify the administrative law 
process, because cross-cutting stakeholder interests render most agency 
actions subject to potential legal challenge. DOE finds A.O. Smith's 
statements about burden and resource diversion to be without merit, 
given that the revised interpretation would essentially maintain the 
status quo. If A.O. Smith is operating effectively in the current 
market where both condensing and non-condensing appliances are 
available, it is difficult to see how its operational landscape would 
shift as a result of DOE's interpretation. Similarly, A.O. Smith's 
arguments about favoring low-cost/subsidized imported products and 
creating an un-level playing field for domestic manufacturers fail for 
the same reason. Because DOE's final interpretation does not alter the 
current standard levels or market, the Department is satisfied that the 
field remains appropriately level and fair for all market participants.

C. Analytical Issues

    In seeking to justify the need for a determination that non-
condensing technology (and associated venting) are a performance-
related feature, the Petitioners et al. Joint Comment raised what it 
perceived to be flaws in the analytical methodology underlying DOE 
rulemakings. First, the Petitioners et al. Joint Comment urged DOE to 
reconsider its analysis concerning the significance of fuel switching 
in the context of efficiency regulation. These commenters argued that 
fuel switching could occur because of the unavailability of important 
product characteristics, such as instances where it would be 
impractical to install condensing products or where such products could 
not be installed without the need for undesirable building 
modifications that consumers would be unwilling to accept. They added 
that driving gas products out of the market is not a legitimate 
regulatory objective under a statute designed to promote the efficiency 
of regulated products. Thus, the Petitioners et al. Joint Comment 
reasoned that in conducting its standards rulemakings, DOE must justify 
its standards on the basis of the economics of required efficiency 
improvements (i.e., by accounting for those cases where poor economic 
outcomes drive consumers to alternative products), rather than by 
excluding such

[[Page 4813]]

outcomes from the analysis and substituting more favorable economic 
outcomes based upon assumed product substitution. They asserted that 
using the logic of DOE's historic approach to economic analyses, 
standards could be determined to be economically justified on the 
ground that they are so economically unjustified that consumers would 
no longer purchase the regulated products at all. These commenters 
argued that DOE's life-cycle cost analysis and payback analysis must 
reflect these real economic costs, rather than simply reducing the 
number of products sold.\30\ (Petitioners et al. Joint Comment, No. 80 
at pp. 13-15)
---------------------------------------------------------------------------

    \30\ The Petitioners et al. Joint Comment argued that while the 
adverse impact of a standard on product sales should be ignored for 
purposes of the payback period and LCC analyses, it should not be 
ignored for purposes of other analyses, such as the manufacturer 
impact analysis, utility impact analysis, and national energy 
savings analysis.
---------------------------------------------------------------------------

    Second, the Petitioners et al. Joint Comment urged DOE to 
acknowledge that there is a systemic error in its base-case efficiency 
assignment (due to the random nature of that assignment) which these 
commenters argue invalidates the entire economic analysis underlying 
the agency's pending proposals. Their argument was that, even if the 
overall number of efficiency investments is correct, DOE's analysis is 
based upon the wrong efficiency investments because it uses a random 
selection of investments rather than a selection reflecting outcomes 
that those purchasers would decline to make in the absence of 
regulatory compulsion. According to these commenters, this defect in 
DOE's economic analysis provides a separate and independent basis for 
DOE to withdraw its pending proposed rules for residential furnaces and 
commercial water heaters. (Petitioners et al. Joint Comment, No. 80 at 
pp. 15-16) Lennox made a similar argument about what it described as 
the ``random nature'' of DOE's consumer analysis, which it argues 
fundamentally (and incorrectly) assumes that consumers act 
irrationally. (Lennox, No. 114 at p. 4)
    In further critique of DOE's analytical methodology, the 
Petitioners et al. Joint Comment argued that because DOE's analysis is 
based on the wrong installations, it does not provide a valid 
assessment of a rule's impacts, and it produces a systematic 
overstatement of regulatory benefits and understatement of costs. These 
commenters asserted that this problem with DOE's modeling approach 
fatally undermines a rulemaking's economic analysis, so they argued 
that there is no reasonable basis to conclude that standards based on 
that analysis are economically justified. For this reason alone, the 
Petitioners et al. Joint Comment concluded that withdrawal of the 
Department's pending proposals is warranted. (Petitioners et al. Joint 
Comment, No. 80 at p. 17)
    In response, DOE notes that National Academies of Sciences, 
Engineering, and Medicine (collectively, ``the NAS'') are currently 
conducting a peer review of the analytical methods employed by DOE in 
setting energy conservation standards regulations for the energy 
performance of consumer products and commercial equipment. See https://www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards. At the time of the 
drafting of this final interpretive rule, the NAS committee responsible 
for this task has held public meetings on November 19-20, 2019, on 
March 2-3, 2020, and on May 5, 2020, to discuss various aspects related 
to DOE's analytical methodology when developing standards for those 
consumer products and industrial equipment that DOE regulates. DOE 
understands that at least some of the authors of the Petitioners et al. 
Joint Comment have participated in the NAS proceeding, raising issues 
regarding DOE's analytical methodologies similar to those submitted in 
the comments on DOE's proposed interpretation. At the conclusion of the 
study, the NAS will issue a consensus report with findings and 
recommendations on how DOE can improve its regulatory analyses to align 
with best practices for cost-benefit analysis. Once completed, DOE will 
review the NAS report and modify or adjust its own analytical methods 
consistent with those recommendations and DOE's statutory obligations. 
Until DOE has had the opportunity to assess the conclusions of these 
independent experts, the Department has concluded that it would be 
premature to make changes to its current analytical methodology. 
Although DOE has ultimately decided to withdraw its pending rulemaking 
proposal for residential non-weatherized gas furnaces, residential 
mobile home gas furnaces, and commercial water heating equipment (for 
the reasons explained in section III.D.3 of this document), the 
Department makes clear that it is not doing so on the basis of the 
analytical arguments raised by the Gas Industry Petitioners and 
discussed in this section. Thus, DOE's decision to grant the withdrawal 
request should not be viewed as in any way prejudging or preempting the 
outcomes of the NAS peer review process.

D. Other Issues

    Finally, commenters on DOE's proposed interpretive rule raised a 
handful of other issues which did not fall neatly within the other 
sections of this comment summary, so they are addressed here in the 
balance of this comment discussion.
1. AFUE2
    Regarding residential furnaces, AHRI stated that one reason it 
supports DOE's proposed interpretation is that it would help facilitate 
adoption of a unified energy efficiency metric for those products. 
(AHRI, No. 91 at pp. 1-2; similar comment by Nortek, No. 71 at pp. 1-2; 
Nortek, No. 107 at p. 3) More specifically, AHRI explained that in 
October 2018, it submitted a petition for rulemaking to DOE seeking to 
establish a combined energy efficiency metric (referred to as 
``AFUE2'') for residential furnaces (currently rated using annual fuel 
utilization efficiency (AFUE)), furnace fans (currently rated using fan 
efficiency ratio (FER)), and standby mode/off mode energy consumption 
(currently rated in watts). AHRI suggested that furnace product classes 
split into condensing and non-condensing product classes (similar to 
what is currently done for furnace fans) would facilitate this 
transition by ensuring that the new, combined AFUE2 metric does not 
violate EPCA's ``anti-backsliding'' provision at 42 U.S.C. 
6295(o)(1).\31\ (AHRI, No. 91 at pp. 2-3) In response to the September 
2020 SNOPIR, AHRI stated that if DOE decides not to adopt condensing/
non-condensing product classes or its recommended AFUE2 approach for 
residential furnaces, then the trade association expressed support for 
the Department to pursue more tailored approaches such as capacity-
based standards for smaller residential furnaces, which could also 
preserve non-condensing products for many difficult replacement 
installations. (AHRI, No. 109 at p. 3)
---------------------------------------------------------------------------

    \31\ 42 U.S.C. 6295(o)(1) provides: ``The Secretary [of Energy] 
may not prescribe any amended standard which increases the maximum 
allowable energy use, or, in the case of showerheads, faucets, water 
closets, or urinals, water use, or decreases the minimum required 
energy efficiency, of a covered product.''
---------------------------------------------------------------------------

    A number of other commenters also expressed support for AHRI's 
AFUE2 petition for rulemaking. (Nortek, No. 71 at pp. 2-3; Mortex, No. 
72 at p. 1; Carrier, No. 92 at p. 2; Nortek, No. 107 at p. 3) Nortek 
suggested that there are synergies and burden reduction that would be 
associated with granting AHRI's AFUE2 petition. Nortek reasoned that 
efforts to come up with a

[[Page 4814]]

unified test procedure would be greatly simplified if the furnace and 
furnace fan product classes were aligned to differentiate condensing 
and non-condensing products. (Nortek, No. 71 at pp. 2-3; Nortek, No. 
107 at p. 3) Mortex added that an AFUE2 metric would make it easier for 
consumers to use one number to compare different furnace models 
(similar point made by Nortek), and to this end, Mortex recommended 
using the same product classes set forth for furnace fans when 
developing the unified AFUE2 metric and associated energy conservation 
standards. (Mortex, No. 72 at p. 1; Nortek, No. 107 at p. 3) Carrier 
also suggested that a consolidated AFUE2 metric would reduce both the 
number of required rulemakings and unnecessary burdens/costs for 
manufacturers. (Carrier, No. 92 at p. 2) Several commenters on the 
September 2020 SNOPIR reiterated these arguments in support of 
transition to an AFUE2 metric. (Nortek, No. 107 at p. 3; AHRI, No. 109 
at p. 3; Carrier, No. 110 at p. 2)
    In response, DOE notes that the Department is currently considering 
the merits of AHRI's AFUE2 petition for rulemaking, including the 
reasoning recited in these comments, in a separate proceeding. DOE 
acknowledges that an interpretation finding non-condensing technology 
(and associated venting) to be a ``feature'' could potentially 
facilitate implementation of an AFUE2 metric, if the agency decides to 
grant the AHRI petition. However, such considerations pertaining to 
that distinct regulatory matter did not factor into the Department's 
decision-making process underpinning this final interpretive rule. 
Instead, this final interpretive rule is grounded in the law and facts 
particular to the matter raised in the Gas Industry Petition and 
discussed in this document.
2. Environmental and Climate Policy Issues
    The AGs Joint Comment faulted DOE's proposed interpretive rule for 
its potential to create missed opportunities for consumers, businesses, 
and governments to conserve energy and to reduce economic and 
environmental costs of energy production and use (similar comment made 
by Electrify Now). These commenters argued that DOE's actions on the 
Gas Industry Petition have delayed promulgation of energy conservation 
standards, which in turn has hampered State and municipal energy 
efficiency, clean energy, and climate goals. Finally, the AGs Joint 
Comment cited the International Energy Agency (IEA) Energy Efficiency 
2018 market report which highlights the potential for energy efficiency 
savings to help achieve global energy sustainability; these commenters 
stated that according to the IEA report, increased energy efficiency 
could account for half of the reductions in carbon dioxide emissions 
needed to attain a sustainable development scenario in 2040, and U.S. 
leadership would help drive deployment of more-efficient appliances and 
equipment worldwide. (AGs Joint Comment, No. 82 at p. 13; Electrify 
Now, No. 106 at p. 2) The CEC argued that the proposed interpretive 
rule would weaken human health and environmental health through 
increased avoidable air pollution. (CEC, No. 89 at pp. 1-2) Along these 
same lines, an anonymous commenter (and a number of other individuals) 
expressed opposition to DOE's proposed interpretation and urged its 
withdrawal, alleging that it would weaken energy conservation standards 
and harm public health by increasing the amount of greenhouse gas 
emissions. (Anonymous, No. 68 at p. 1; Sorkin, No. 73 at p. 1; Reed, 
No. 74; Woods, No. 76 at p. 1; Anonymous, No. 98 at p. 1; A.O. Smith, 
No. 113 at p. 5)
    In response, DOE agrees that there may be costs and benefits 
resulting from energy conservation standards beyond those to be 
considered by Department when setting energy conservation standards 
under the Energy Policy and Conservation Act. Those impacts are not 
relevant to the current determination. Rather, the Department is 
constrained to act within its statutory authority--both in terms of 
standard setting and when making ``features'' determinations--and the 
provisions of EPCA make clear that while important, energy and cost 
savings are not the only relevant statutory considerations. As a prime 
example, EPCA's ``features'' provisions demonstrate that Congress 
intended certain aspects of covered products/equipment with consumer 
utility to be preserved, even if that means forgoing the energy savings 
or other benefits that might result from their elimination. (42 U.S.C. 
6295(o)(4); 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa); and as applicable in 
certain cases through 42 U.S.C. 6316(a)). Under its revised 
interpretation, DOE has determined non-condensing technology (and 
associated venting) to be a ``feature'' within the meaning of the 
statute, as would justify a separate product/equipment class and energy 
conservation standard in appropriate cases. Such decision, where 
justified under the statute, does not turn on other externalities that 
may exist in the context of energy conservation standards.
3. Other Requested Relief
    Beyond finalizing the interpretive rule along the lines proposed, 
the Petitioners et al. Joint Comment urged DOE to take further action, 
including issuing written findings consistent with its revised 
interpretation in the context of its pending residential furnaces and 
commercial water heaters rulemakings pursuant to EPCA's ``features'' 
provisions at 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa), respectively. These commenters also urged 
DOE to withdraw the pending proposed rules in those same rulemakings 
based upon those written findings. According to the Petitioners et al. 
Joint Comment, such actions are justified by the evidence, warranted by 
DOE's proposed interpretive rule, and sufficient to establish that 
adoption of the pending proposals would be contrary to law.\32\ 
(Petitioners et al. Joint Comment, No. 80 at p. 4)
---------------------------------------------------------------------------

    \32\ The Gas Industry Petitioners again raised the issue of 
withdrawal of the rulemaking proposals for the subject residential 
furnaces and commercial water heating equipment in the September 29, 
2020 letter urging prompt action on the petition. (Docket No. EERE-
2018-BT-STD-0018-0101) In reiterating the arguments raised in its 
earlier public comments, the Gas Industry Petitioners noted that 
because these appliances are now the subject of litigation, it would 
be beneficial to clarify the administrative record for these 
rulemakings so as to be consistent with DOE's final interpretation.
---------------------------------------------------------------------------

    The Petitioners et al. Joint Comment stated that if DOE adopts its 
interpretive rule as proposed, then the proposals in the residential 
furnaces and commercial water heaters rulemakings are legally defective 
and cannot be adopted as proposed, so they reasoned that withdrawal is 
appropriate and that it would show the public DOE is making 
constructive progress on these rulemakings. These commenters suggested 
that the withdrawal document could also serve as a vehicle to give the 
public notice that new proposals will be required and to request 
comment informing the development of those proposals. The Petitioners 
et al. Joint Comment also argued that withdrawal of the pending 
proposals is warranted to correct the public record, because both were 
subject to substantial adverse comment to which DOE has never 
responded. These commenters also argued that transparency dictates 
that, if the Department's interpretation has changed, DOE should not 
leave these documents as the latest statement of its views until such 
time as new proposals can be crafted. The Petitioners et al. Joint 
Comment reasoned that failure to act quickly would ``undermine the

[[Page 4815]]

significance of DOE's response to the Petition,'' and it urged DOE to 
move forward in the manner it suggests, even if that were to accelerate 
the timing of potential litigation. (Petitioners et al. Joint Comment, 
No. 80 at pp. 5-6)
    The Petitioners et al. Joint Comment also urged DOE to formally 
renounce its prior asserted legal basis for its historic position that 
type of venting is not a ``feature,'' a position which rendered a ban 
of atmospherically vented gas products permissible. According to these 
commenters, DOE's previous interpretation that there is no difference 
in consumer utility between atmospherically vented products and 
condensing products was factually unsupported, despite the fact that 
DOE had acknowledged such differences. The Petitioners et al. Joint 
Comment asserted that the applicability of the statute's ``features'' 
provision was clear and that DOE ignored this fact and ``simply read 
unqualified statutory language to include qualifications of DOE's own 
creation.'' The comment stated that DOE's previous analysis was too 
narrow in focus and that questions as to whether ``a consumer's 
interaction with and perception of a furnace or water heater may go 
beyond its primary function'' are legally irrelevant. (Petitioners et 
al. Joint Comment, No. 80 at pp. 8-9)
    After careful consideration, DOE has decided to address these 
supplemental actions requested by the Petitioners et al. Joint Comment 
as follows. The Department is quite certain that stakeholders and the 
interested public will become aware very rapidly of this final 
interpretive rule once it is published in the Federal Register, thereby 
making arguments about the need for greater transparency specious. 
After reading this final interpretive rule, its meaning should be 
clear, so ``renunciation'' of DOE's past position is not necessary to, 
in effect, deliver the final interpretation's message a second time. It 
should also be readily apparent that the pending rulemakings for 
residential furnaces, commercial water heaters, and any other 
similarly-situated products/equipment will require further rulemaking 
action to ensure that they are consistent with this revised 
interpretation. DOE has plainly stated as much in both its proposed 
interpretive rule, as well as this document. For these reasons, DOE had 
previously tentatively determined that withdrawal of its existing 
rulemaking proposals for residential non-weatherized gas furnaces, 
residential mobile home gas furnaces, and commercial water heating 
equipment would be unnecessary. However, given DOE's own statements as 
to the need for further rulemaking, DOE has reconsidered this matter 
raised by commenters and has decided to withdraw these rulemaking 
proposals, as requested by the Petitioners et al. Joint Comment. As 
they currently stand, the existing proposals are inconsistent with this 
final interpretation and, accordingly, cannot be adopted without 
modification, so DOE has determined that their withdrawal may have some 
additional benefit in terms of promoting clarity and eliminating any 
potential for confusion. As noted previously in the preamble of this 
final interpretive rule, elsewhere in this issue of the Federal 
Register, DOE withdraws its March 12, 2015 proposed rule and September 
23, 2016 supplemental proposed rule for energy conservation standards 
for non-weatherized gas furnace and mobile home gas furnaces, as well 
as its May 31, 2016 proposed rule for energy conservation standards for 
commercial water heating equipment.
4. Final Agency Action
    A.O. Smith asserted that DOE is seeking to shield its features 
provision determination from judicial review by claiming that it does 
not constitute ``agency action.'' Instead, A.O. Smith commented that 
the determination, once finalized, would be subject to review under the 
Administrative Procedure Act. The commenter argued that rather than 
being merely interpretive, the interpretation would have a definitive 
and direct effect by requiring/binding the Department to maintain non-
condensing products/equipment in the marketplace, despite the fact that 
further implementing rulemaking may be necessary. According to A.O. 
Smith, a final interpretation would constitute final agency action 
because it would: (1) Consummate DOE's features determination with 
respect to condensing technology and (2) affect legal rights and 
obligations. The commenter argued that such results are final and not 
subject to further DOE discretion, and consequently, the company 
reasoned that the final interpretation would have a direct and certain 
substantive effect by ensuring that manufacturers would continue to be 
able to produce and distribute in commerce non-condensing products/
equipment, independent of the outcomes of the related energy 
conservation standards rulemakings. (A.O. Smith, No. 88 at pp. 13-15)
    DOE disputes A.O. Smith's allegation that the Department is 
attempting to shield its final interpretive rule from judicial review. 
Moreover, while DOE acknowledges that the courts ultimately determine 
what constitutes a final agency action, A.O. Smith's attempt to 
characterize DOE's final interpretive rule as ``final agency action'' 
under the APA is based upon a flawed reading of the statute and 
relevant legal precedent. This final interpretive rule is a type of 
rule or regulation within the meaning of 5 U.S.C. 551(4).\33\ It is 
well established under the APA that agencies have the authority to 
issue interpretive rules, and that these rules are a valuable tool for 
an agency to use to advise the public prospectively and in a clear and 
transparent manner of the agency's construction of a statute it 
administers. Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99 
(1995); compare Chrysler Corp. v. Brown, 441 U.S. 281, 302-303 (1979) 
(whereas ``legislative rules'' have the ``force and effect of the 
law''). An interpretive rule does not have substantive force and effect 
on its own. It is not until the agency takes an action in which the 
interpretation is applied and becomes enforceable that the 
interpretation can have an effect and, even then, only through that 
subsequent action. Cf. Bennett v. Spear, 520 U.S. 154, 177-78, 117 S. 
Ct. 1154, 137 L. Ed. 2d 281 (1997); Am. Tort Reform Ass'n v. 
Occupational Safety & Health Admin., 738 F.3d 387, 395 (D.C. Cir. 2013) 
(interpretive rules or statements of policy generally do not qualify as 
final agency action because they are not finally determinative of the 
issues or rights to which they are addressed); see also Am. Mining 
Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C. Cir. 
1993) (holding that whether a rule is interpretive turns on whether it 
has independent ``legal effect''); Sec. Indus. & Fin. Mkts. Ass'n v. 
United States CFTC, 67 F. Supp. 3d 373, 416, 425 (D.D.C. 2014). This 
rule does not determine rights or obligations, or produce ``legal 
consequences,'' see Bennett v. Spear, 520 U.S. at 177-78, or carry the 
force and effect of law, see Ass'n of Flight Attendants-CWA, AFL-CIO v. 
Huerta, 785 F.3d 710, 713 (D.C. Cir. 2015). This particular 
interpretive rule will have no direct impact on regulated parties.
---------------------------------------------------------------------------

    \33\ Under 5 U.S.C. 551(4), ``rule'' means the whole or part of 
an agency statement of general or particular applicability and 
future effect designed to implement, interpret, or prescribe law or 
policy or describing the organization, procedure, or practice 
requirements of an agency and includes the approval or prescription 
for the future of rates, wages, corporate or financial structures or 
reorganizations thereof, prices, facilities, appliances, services or 
allowances therefor or of valuations, costs, or accounting, or 
practices bearing on any of the foregoing.
---------------------------------------------------------------------------

    Moreover, through this final interpretive rule, DOE is not making 
any changes to its existing regulations in the

[[Page 4816]]

Code of Federal Regulations or policies regarding individual appliance 
standards rulemakings, and it cannot and will not take any enforcement 
action pursuant to its revised interpretation until after the effective 
date of a legislative final rule, published in the Federal Register, 
amending the applicable product/equipment classes and energy 
conservation standards, as necessary.
    In this final interpretation, DOE sets forth its understanding of 
EPCA's ``features'' provisions as it relates to condensing and non-
condensing technology (and associated venting), but this understanding 
must then be applied to the facts and data underlying any given 
rulemaking. Given the potential for technological advances, the outcome 
of a future rulemaking cannot be adjudged with certainty until such 
time as a standards rulemaking is commenced. Thus, until such 
interpretation is implemented through a final rule for energy 
conservation standards, no party can validly claim any demonstrable and 
definite harm. At the present time, current product/equipment classes 
and standard levels remain unchanged by the final interpretive rule. 
The market status quo is left unaltered by the final interpretive rule, 
and there is no change in the products/equipment that can be sold in 
the marketplace as a result.

IV. DOE's Final Interpretation

    In consideration of public comments and other information received 
on the proposed interpretive rule, DOE is revising its interpretation 
of EPCA's ``features'' provision in the context of condensing and non-
condensing technology (and associated venting) used in furnaces, water 
heating equipment, and similarly-situated appliances (where permitted 
by EPCA). Based on those comments, DOE interprets the statute to 
preclude the adoption of energy conservation standards that would limit 
the market to natural gas, propane gas, and/or oil-fired furnaces, 
water heaters, or similarly-situated covered products/equipment (where 
permitted by EPCA) that use condensing combustion technology, as that 
would result in the unavailability of a performance related feature 
within the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through 
42 U.S.C. 6316(a)). Stated differently, DOE has determined that non-
condensing technology (and associated venting) constitutes a 
performance-related ``feature'' for such appliances covered under EPCA.
    The statute accords the Secretary of Energy considerable discretion 
in terms of determining whether a performance characteristic of a 
covered product/equipment amounts to a performance-related feature 
which cannot be eliminated through adoption of an energy conservation 
standard. DOE has taken the opportunity presented by the Gas Industry 
Petition to reconsider its historical interpretation of EPCA's 
``features'' provision in the context of condensing and non-condensing 
technologies used by certain gas appliances. A number of factors have 
convinced DOE to revise its interpretation, as explained in the reasons 
that follow.
    First, DOE acknowledges that it has, in the past, taken space 
constraints and similar limitations into account when setting product 
classes (e.g., PTACs, ventless clothes dryers). For example, DOE was 
sensitive to the need for extensive building modifications when it 
decided to set separate equipment classes for standard size PTACs and 
non-standard size PTACs. 73 FR 58772 (Oct. 7, 2008). DOE expects that a 
small but substantial number of installations would require similar 
building modifications here, if DOE were to hold to its historical 
interpretation. For example, these more complicated installations are 
documented as part of DOE's analysis of the venting costs for 
residential furnaces, which considered potential venting modifications 
that could be required when replacing an existing category I furnace 
with a condensing (category IV) furnace (see appendix 8D of the 2016 
SNOPR TSD for further details). In certain situations, commenters have 
made the case that accommodating condensing products may not even be 
possible.
    Second, DOE has focused on the consumer's interaction with the 
product/equipment in deciding whether a performance feature is at 
issue. In the context of residential furnaces and commercial water 
heaters, DOE had previously tied consumer utility to the primary 
function of the appliance (e.g., providing heat to a home or potable 
hot water) in establishing the nexus to the consumer. In the past, DOE 
opined that consumers were interested only in obtaining heat or hot 
water from the appliance, such that they would not care about the 
mechanism for generating that output. However, commenters have made 
clear that in at least some cases, a condensing appliance may 
necessitate significant and unwelcome physical modifications to a home 
or business (e.g., by adding new venting into the living/commercial 
space or decreasing closet or other storage/retail space), thereby 
impacting consumer utility even under DOE's prior approach. Thus, DOE 
is not changing the test for consumer utility (i.e., a consumer's 
interaction with the subject product/equipment), but it is refining how 
that test is to be applied in the context of condensing and non-
condensing appliances (and associated venting), after further 
consideration of the facts regarding consumer preferences that relate 
to application of the test.
    Third, DOE notes that it has been its policy to remain neutral 
regarding competing energy sources in the marketplace. As certain 
commenters have pointed out and as DOE's own analyses have shown, some 
enhanced level of fuel switching would be likely to accompany standard 
setting using DOE's prior interpretation. Given that DOE's revised 
interpretation essentially would support maintaining the market status 
quo, the interpretation would support and be consistent with 
maintaining a broader range of consumer choice across fuel types.
    Creating separate product classes for condensing and non-condensing 
furnaces, water heaters, and similarly-situated products/equipment 
(where permitted by EPCA) would prevent many of these potential 
problems. Although an approach consistent with DOE's interpretation may 
have some impact on overall energy saving potential as a result of 
establishing separate product/equipment classes, that is not the 
touchstone of EPCA's ``features'' provision. Through that provision, 
Congress expressed its will that certain product utilities will take 
precedence over additional energy savings measures. DOE has applied 
this provision on several occasions without major controversy. (For 
example, DOE did not eliminate the oven window, which consumers found 
useful, despite the potential for further energy savings that 
elimination of the window would have created.) That said, DOE believes 
that any potentially negative programmatic impacts of future actions 
consistent with its revised interpretation are likely to be limited. 
This interpretation is likely to be relevant to only a subset of 
appliances, and DOE notes that market trends have favored the growing 
reach of condensing furnaces, even as non-condensing alternatives have 
remained available. DOE has every reason to believe that such trends 
will continue.
    DOE would clarify the limitations of its revised interpretation, 
based upon the existing statutory provisions. As discussed previously, 
DOE can adopt this interpretation for all relevant consumer products, 
all non-ASHRAE

[[Page 4817]]

commercial and industrial equipment, and ASHRAE equipment in those 
instances where DOE has clear and convincing evidence to adopt levels 
higher than the levels in ASHRAE Standard 90.1. However, additional 
rulemaking action by the Department will be required consistent with 
the interpretation contained in this final interpretive rule. More 
specifically, DOE is reserving appliance-specific implementation issues 
(including class setting, associated venting, etc.) for review and 
analysis in the context of individual product rulemakings. DOE has 
concluded that such an approach would best serve all parties, including 
manufacturers and consumers. Individual product rulemakings will have 
the requisite mix of interested stakeholders, technical experts, a 
comprehensive record with product-specific data (including a review of 
relevant industry consensus standards), and the full suite of analyses 
for class and standard setting. In that venue, DOE and interested 
stakeholders will be better able to address any relevant technical 
matters or product-specific nuances. Consequently, DOE anticipates 
continued engagement and productive involvement by members of the 
public and the regulated community in subsequent activities that may 
follow this revised interpretation.

V. Conclusion

    In summary, DOE has granted the Gas Industry Petition to the extent 
that DOE interprets the statute to preclude the adoption of energy 
conservation standards that would limit the market of natural gas, 
propane gas and/or oil-fired furnaces, water heaters, or similarly-
situated covered products/equipment (where permitted by EPCA) to 
appliances that use condensing combustion technology, as that would 
result in the unavailability of a performance related feature within 
the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through 
42 U.S.C. 6316(a)). Stated differently, DOE has determined that non-
condensing technology (and associated venting) constitutes a 
performance-related ``feature'' for such appliances covered under EPCA. 
Such interpretation would extend to all relevant/applicable cases 
involving consumer products, non-ASHRAE commercial equipment, and 
ASHRAE equipment where DOE adopts a level more stringent than the 
ASHRAE level. Through this final interpretive rule, DOE states its 
understanding of the proper interpretation of the statutory text in 
light of the language and purposes of EPCA, so as to be consistent with 
Congress's direction. Upon further consideration and after careful 
review of the information presented with and in response to the Gas 
Industry Petition, DOE has concluded that this revised interpretation 
offers the best reading of EPCA's ``features'' provision.
    DOE has denied the Gas Industry Petition as it pertains to those 
rulemakings where ASHRAE sets standard levels that trigger DOE to 
consider and adopt those level (unless DOE finds clear and convincing 
evidence to adopt more-stringent levels), due to lack of authority. 
(See section II.D. of this document.)
    DOE has granted the Gas Industry Petition's request for DOE to 
withdraw the existing proposed rules for residential furnaces and 
commercial water heaters. The existing proposals are inconsistent with 
this final interpretation and, accordingly, should not be adopted. 
Consequently, DOE has determined that their withdrawal may have some 
additional benefit in terms of promoting clarity and eliminating any 
potential for confusion. DOE anticipates developing new notices of 
proposed rulemaking for the subject residential furnaces and commercial 
water heaters that would be consistent with this revised legal 
interpretation. As noted previously in the preamble of this final 
interpretive rule, elsewhere in this issue of the Federal Register, DOE 
withdraws its March 12, 2015 proposed rule and September 23, 2016 
supplemental proposed rule for energy conservation standards for non-
weatherized gas furnace and mobile home gas furnaces, as well as its 
May 31, 2016 proposed rule for energy conservation standards for 
commercial water heating equipment.
    DOE wishes to make clear that an interpretive rule is a type of 
rule or regulation within the meaning of those terms in the 
Administrative Procedure Act, 5 U.S.C. 551(4). It is well established 
under the APA that agencies have the authority to issue interpretive 
rules, and that these rules are a valuable tool for an agency to use to 
advise the public prospectively and in a clear and transparent manner 
of the agency's construction of a statute it administers. As explained 
above, DOE's legal interpretations do not themselves constitute final 
agency action, and DOE does not believe that this rule reflects final 
agency action.
    Implementation of this interpretation in the context of energy 
conservation standards for particular covered products or equipment, 
and any changes to existing policies that may be appropriate in light 
of this interpretation, will be the subject of subsequent actions. As 
appropriate, the public will be notified and have an opportunity to 
comment on any such proposals implementing the interpretation. 
Furthermore, the many substantive comments received, including comments 
that led to revisions of DOE's interpretation of the ``features'' 
provision,'' as reflected in this final interpretive rule, indicate 
that the public had a meaningful opportunity to comment on DOE's 
general interpretation. As DOE has indicated, there will be additional 
processes after this interpretation has been issued but before any 
rulemaking decisions are implemented that would have impacts on 
regulated parties or any other stakeholders.
    Review Under Executive Order 12866. This final interpretive rule 
was determined by the Office of Management and Budget (OMB) Office of 
Information and Regulatory Affairs (OIRA) to be a ``significant 
regulatory action'' under section 3(f) of Executive Order 12866, 
``Regulatory Planning and Review.'' 58 FR 51735 (Oct. 4, 1993). 
Accordingly, this final interpretive rule was subject to review under 
the Executive Order by OIRA.

VI. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
final interpretive rule.

Signing Authority

    This document of the Department of Energy was signed on December 
23, 2020, by Daniel R Simmons, Assistant Secretary for Energy 
Efficiency and Renewable Energy, pursuant to delegated authority from 
the Secretary of Energy. That document with the original signature and 
date is maintained by DOE. For administrative purposes only, and in 
compliance with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register Liaison Officer has been authorized to 
sign and submit the document in electronic format for publication, as 
an official document of the Department of Energy. This administrative 
process in no way alters the legal effect of this document upon 
publication in the Federal Register.

    Signed in Washington, DC on December 28, 2020.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2020-28956 Filed 1-14-21; 8:45 am]
BILLING CODE 6450-01-P