BNUMBER:  B-271810.2 
DATE:  May 7, 1996
TITLE: Light Truck Average Fuel Economy Standard, Model Year 1988, B
-271810.2, May 7, 1996
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B-271810.2

May 7, 1996

The Honorable Larry Pressler
Chairman
The Honorable Ernest F. Hollings
Ranking Minority Member
Committee on Commerce, Science, and Transportation
United States Senate

The Honorable Thomas J. Bliley, Jr.
Chairman
The Honorable John D. Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

Subject:Light Truck Average Fuel Economy Standard, Model Year 1988

Pursuant to section 801(a)(2)(A) of title 5 United States Code, this 
is our report on a major rule promulgated by the National Highway 
Traffic Safety Administration (NHTSA), Department of Transportation, 
entitled "Light Truck Average Fuel Economy Standard, Model Year 1998" 
(RIN 2127-AF16).  We received the rule on April 22, 1996.  It was 
published in the Federal Register as a final rule on April 3, 1996.  
61 Fed. Reg. 14680.

Section 32902(a) of title 49, United States Code, requires the 
Secretary of Transportation to prescribe by regulation, at least 18 
months in advance of each model year, average fuel economy standards 
(known as "Corporate Average Fuel Economy" or "CAFE" standards) for 
non-passenger automobiles manufactured in that model year.  Under 
subsections 32902(a) and (f), the standard is to be the maximum 
feasible average fuel economy level that the Secretary decides 
manufacturers can achieve in that model year taking into consideration 
technological feasibility, economic practicability, the effect of 
other Government motor vehicle standards on fuel economy, and the need 
of the United States to conserve energy.[1]

The light truck CAFE standard for model year 1997 was established at 
20.7 miles per gallon (mpg).  During the development of the CAFE 
standard for model year 1998, the Department of Transportation and 
Related Agencies Appropriations Act, 1996, Pub. L. No. 104-50 (Nov. 
15, 1995), 109 Stat. 436, was enacted.  Section 330 of the 
Appropriations Act, 109 Stat. 457, provides:

        "None of the funds in this Act shall be available to prepare, 
     propose, or promulgate any regulations pursuant to title V of the 
     Motor Vehicle Information and Cost Savings Act (49 U.S.C. 32901, 
     et seq.) prescribing corporate average fuel economy standards for 
     automobiles, as defined in such title, in any model year that 
     differs from standards promulgated for such automobiles prior to 
     the enactment of this section."

NHTSA interprets section 330 of the Appropriations Act as requiring it 
to prescribe the same light truck CAFE standard for model year 1998 
that applies to model year 1997.  Accordingly, the rule continues the 
20.7 mpg standard for 1998.

Enclosed is our assessment of NHTSA's compliance with the procedural 
steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with 
respect to the rule.  As discussed in the enclosure, NHTSA did not 
follow many of the steps that ordinarily would apply to the rule, 
based in part on its interpretation that section 330 of the 
Appropriations Act required it to fix the 1998 standard at 20.7 mpg 
and thereby deprived the agency of any discretion over the standard.  
NHTSA's interpretation of section 330, while not necessarily the only 
plausible approach, is supported by the language and legislative 
history of this provision.  Nevertheless, we do not view section 330 
as exempting the rulemaking from the requirements referred to in 5 
U.S.C.  sec.   801(a)(B)(i) through (iv), particularly the analysis called 
for by 49 U.S.C.  sec.   32902.

If you have any questions about this report, please contact Henry R. 
Wray, Senior Associate General Counsel, at (202) 512-8581.  The 
official responsible for GAO's evaluation work relating to the 
Department of Transportation is John H. Anderson, Director of 
Transportation and Telecommunications Issues.  Mr. Anderson can be 
reached at (202) 512-2834.

Sincerely yours,

Robert P. Murphy
General Counsel

Enclosure

cc:  Ms. Nancy E. McFadden
     General Counsel
     Department of Transportation

                                                      ENCLOSURE

   ANALYSIS OF NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION
               1998 LIGHT TRUCK CAFE STANDARD RULE
             UNDER 5 U.S.C.  sec.   801(a)(1)(B)(i)-(iv)

(i)Cost-benefit analysis

On January 3, 1996, NHTSA published a notice of proposed rulemaking 
which proposed a 1998 standard of 20.7 mpg.  See 61 Fed. Reg. 145.  
The Supplementary Information accompanying the proposed rule contains 
a discussion and assessment of the economic impacts of the proposed 
standard, including its potential costs, benefits, and alternatives.  
In addition, NHTSA prepared a Preliminary Regulatory Evaluation of the 
proposed standard, which was included in the docket for the rulemaking 
and contained more detailed analyses of these and other affects of the 
proposed standard.  The agency did not prepare a Final Regulatory 
Impact Analysis in connection with the final rule "because of the 
restrictions imposed by Section 330 of the FY 1996 DOT Appropriations 
Act."  61 Fed. Reg. at 14682.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 
U.S.C.  sec.   603-605, 607 and 609

Section 603:  Initial regulatory flexibility analysis

The Supplementary Information accompanying the proposed rulemaking 
includes a certification, pursuant to section 605(b) of title 5, that 
the proposal would not have a significant impact on a substantial 
number of small entities, thereby exempting the proposed rule from the 
requirement for an initial regulatory flexibility analysis.  The 
certification was accompanied by a statement that few, if any, light 
truck manufacturers subject to the proposed rule would be classified 
as small businesses.  See 61 Fed. Reg. at 155.

Section 605(b) states that the certification and statement shall be 
provided to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA).  According to Department of Transportation 
officials, the certification and statement were not separately 
provided to the SBA Chief Counsel for Advocacy.  They stated that, in 
accordance with the Department's practice, publication of section 
605(b) certifications in the Federal Register is treated as providing 
notice to SBA.  An SBA official confirmed that some agencies follow 
this practice, and that SBA has not objected to it.  The official 
indicated, however, that SBA's policy may change since future 
certifications will need to be justified more specifically and will be 
subject to judicial review.

Section 604:  Final regulatory flexibility analysis

NHTSA did not conduct a final regulatory flexibility analysis under 
section 604, nor did it make a section 605(b) certification, in 
connection with the final rule.  The agency viewed such an analysis as 
"unnecessary" in light of its lack of discretion with respect to the 
rule, but stated that past evaluations indicated few if any small 
businesses would be affected.  See 61 Fed. Reg. at 14682.

Section 605:  Avoidance of duplicative or unnecessary analysis

As noted above, NHTSA invoked the exemption from the initial 
regulatory flexibility analysis requirement with respect to the 
proposed rule.

Section 607:  Preparation of analysis

As noted above, NHTSA did not prepare an initial or final regulatory 
flexibility analysis.

Section 609:  Participation by small entities

The requirements of section 609 are inapplicable to this rule since 
NHTSA did not determine that it would have a significant impact on a 
substantial number of small entities.

(iii) Agency actions relevant to sections 202-205 of the Unfunded 
Mandates Reform Act of 1995, 2 U.S.C.  sec.   1532-1535

Since the standard appears to constitute a federal mandate resulting 
in aggregate annual private sector expenditures of $100 million or 
more, it would be subject to the requirements of section 202 of the 
Act (Statements to Accompany Significant Regulatory Actions).  Neither 
the proposed nor the final rulemaking expressly refers to the Unfunded 
Mandates Reform Act or includes the statements required by section 
202.  The Supplementary Information accompanying the proposed rule 
does include some of the information covered by section 202.

The rule also appears subject to section 205 of the Act, relating to 
consideration of regulatory alternatives.  While NHTSA did not 
explicitly address section 205, it complied in substance with the 
requirements of this section.  Potential alternatives were considered 
and discussed at the proposed rulemaking stage, and the final 
rulemaking describes NHTSA's determination that there was no 
alternative to the standard adopted.

The requirements of section 203 (Small Government Agency Plan) and 
section 204 (State, Local, and Tribal Government Input) appear to be 
inapplicable to the rule.

(iv) Other relevant information or requirements under Acts and 
Executive orders

Administrative Procedure Act, 5 U.S.C.  sec.   3501-3520

The rule was promulgated through the general notice of proposed 
rulemaking procedures of the Act, 5 U.S.C.  sec.   553.  NHTSA afforded 
interested persons the opportunity to comment on the proposed rule.  
The final rulemaking, however, does not address comments.

Paperwork Reduction Act, 44 U.S.C.  sec.   3501-3520

The rule does not refer to information collection requirements subject 
to the Act, and, according to NHTSA, the rule imposes no such 
requirements.

National Environmental Policy Act, 42 U.S.C.  sec.   4321 et seq.

NHTSA did not conduct an evaluation of the impacts of the rule under 
the National Environmental Policy Act.  The Supplementary Information 
accompanying the final rule states in this regard:

     "There is no requirement for such an evaluation where Congress 
     has eliminated the agency's discretion by precluding any action 
     other than the one announced in this notice."  61 Fed. Reg. at 
     14682.

Statutory authorization for the rule

The Supplementary Information accompanying the final rule discusses at 
length its legal basis.  Section 32902(a) of title 49, United States 
Code, requires that light truck CAFE standards be prescribed for each 
model year in accordance with the "Maximum feasible" criteria 
specified in that subsection and subsection 32902(f).  However, 
section 330 of the Appropriations Act effectively prohibited issuance 
of any CAFE standard "that differs from standards promulgated . . . 
prior to the enactment of this section."  According to NHTSA's legal 
analysis detailed in the Supplementary Information, section 330 of the 
Appropriations Act precluded the agency from prescribing any CAFE 
standard different from the most recent standards prescribed at the 
time of its enactment--those applicable to model year 1997.  Thus, 
according to NHTSA, section 330 deprived the agency of the discretion 
it otherwise would have under section 32902 to determine the 
applicable standard under the criteria set forth therein.  NHTSA 
concluded that while section 330 superseded the section 32902 
criteria, it did not supersede the section 32902 mandate that there be 
CAFE standards for model year 1998.

NHTSA noted that the only other possible interpretation of section 330 
was to treat the phrase "standards promulgated . . . prior to the 
enactment of this section" as encompassing any standard prescribed for 
any prior model year.  In addition to the 20.7 mpg standard, none 
other light truck standards--ranging from 17.5 to 21.0   mpg--were 
promulgated for prior model years.[1]  However, NHTSA rejected this 
interpretation on the basis that it could also conflict with the 
"maximum feasible" criteria under 49 U.S.C.  sec.   32902, and that it 
would be illogical to assume that Congress intended to arbitrarily 
limit the 1998 standard to one of these prior year levels even if some 
other level was determined to be the "maximum feasible" for model year 
1998.

Accordingly, NHTSA concluded that the only legally permissible 
alternative was to establish the model year 1998 standard at 20.7 mpg.  
As a result, the agency did not complete its analysis to determine 
what the "maximum feasible" level actually would be for model year 
1998 under the 49 U.S.C.  sec.   32902 criteria.

NHTSA's legal interpretation is supported by the language and 
legislative history of section 330.  As the analysis points out, the 
House Appropriations Committee report and a floor statement by the 
principal sponsor of section 330--Representative   DeLay--describe 
section 330 as permitting NHTSA to establish a 1998 standard 
"identical to" the model year 1997 standard.  The conference report 
describes section 330 as prohibiting the use of funds for "regulations 
that prescribe changes in" the CAFE standards.

On the other hand, we question whether NHTSA was compelled by section 
330 to forego completion of the analysis otherwise mandated by 49 
U.S.C.  sec.   32902 to determine the "maximum feasible" level for model 
year 1998.  The legislative history of section 330, taken as a whole, 
suggests that the fundamental purpose of this provision was to prevent 
an anticipated increase in the CAFE standards.  Representative DeLay 
observed in his floor statement that NHTSA was engaged in a rulemaking 
"which could result in a sharp increase in the standards for light 
trucks and vans" and that "this action would be devastating to the 
Nation's economy."    141 Cong. Rec. H7605 (daily ed., July 25, 1995).  
He also stated that section 330 "imposes a 1-year freeze on the 
ability of NHTSA to increase the CAFE standards" and that "it was my 
intent that NHTSA would withhold any further action directed toward 
increasing CAFE standards . . .."  Id.  In this context, the 
references in the history to requiring an identical standard or 
precluding any changes for 1998 may have been based on the assumption 
that the outcome of any change would be an increase in the standard.

Completing the analysis under 49 U.S.C.  sec.   32902 would have provided 
NHTSA more information on which to assess the relationship between 
that section and section 330.  For example, if the analysis indicated 
that the "maximum feasible" level for 1998 was at or closer to one of 
the lower prior year standards than it was to the 1997 standard, 
prescribing that lower standard would not necessarily be 
impermissible.  Such an action would give greater effect to 49 U.S.C.  sec.   
32902 than using the 20.7 mpg standard and would satisfy the plain 
terms of section 330.  Nor is it clear that such action would conflict 
with the purpose underlying section 330.  The history does not 
explicitly address the possibility that the 20.7 mpg standard might 
exceed the "maximum feasible" level for 1998 indicated under 49 U.S.C.        sec.   
32902.

Executive Order No. 12866

Based on its economic impact, the rule was determined to be a 
"significant regulatory action" within the meaning of Executive Order 
No. 12866.  Consistent with the Executive order, the rule was 
initiated through an advance notice of proposed rulemaking published 
on April 6, 1994.  59 Fed. Reg. 16324.  As noted previously, the 
proposed rulemaking published on January 3, 1996, includes a 
Preliminary Regulatory Evaluation.  The final rule, however, does not 
include a Final Regulatory Impact Analysis.  According to NHTSA, the 
Office of Information and Regulatory Affairs reviewed the rule at the 
proposed and final stages and suggested no changes.

Executive Order 12612

The Supplementary Information accompanying the proposed rule states 
that, based on an analysis of the principles and criteria contained in 
Executive Order No. 12612, NHTSA determined that the proposed rule 
would not have sufficient federalism implications to warrant 
preparation of a Federalism Assessment.  61 Fed. Reg. at 155.  The 
Supplementary Information accompanying the final rule states that the 
final rule was not analyzed under Executive Order No. 12612 because of 
the NHTSA's lack of discretion with respect to the rule.  It adds that 
prior light truck standards have not been viewed as having federalism 
implications warranting preparation of a Federalism Analysis.  61 Fed. 
Reg. at 14682.

NHTSA did not identify any other statutes or Executive orders imposing 
requirements relevant to the rule.

1. Authority to prescribe fuel economy standards under section 32902 
has been delegated by the Secretary to the Administrator of NHTSA.

1. These standards are listed in a table included in the final rule.  
The 21 mpg standard was initially prescribed for model year 1985, but 
was amended to 19.5 mpg before the start of that model year