Amicus Curiae Brief — Engine Mfrs. Assn. v. South Coast Air Quality Management Dist.

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ESTES

Supreme Court, U.S,

iy FILED

, AUG 29 2003

No. 02-1343

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

ENGINE MANUFACTURERS ASSOCIATION AND

WESTERN STATES PETROLEUM ASSOCIATION,

Petitioners,

Vv.

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT, ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF ALLIANCE OF AUTOMOBILE MANUFACTURERS,

AMERICAN PETROLEUM INSTITUTE, ASSOCIATION OF

INTERNATIONAL AUTOMOBILE MANUFACTURERS, CALIFORNIA

MOTOR CAR DEALERS ASSOCIATION, NATIONAL ASSOCIATION

OF MANUFACTURERS, NATIONAL AUTOMOBILE DEALERS

ASSOCIATION, NATIONAL PETROCHEMICAL AND REFINERS

ASSOCIATION, AND TRUCK MANUFACTURERS ASSOCIATION AS

AMICI CURIAE IN SUPPORT OF PETITIONERS

PROF. ARNOLD W. REITZE, JR. STUART A. C. DRAKE

COUNSEL OF RECORD Eric B. WOLFF

MCGLINCHEY STAFFORD, PLLC KIRKLAND & ELLis LLP

6022 Munson Hill Road 655 Fifteenth Street, N.W.

Falls Church, VA 22041 Washington, D.C. 20005

(202) 994-6908 (202) 879-5000

August 29, 2003 (Additional Counsel Listed on

Following Page)

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

JULIE C. BECKER

ALLIANCE OF AUTOMOBILE

MANUFACTURERS

1401 H Street, N.W., Suite 900

Washington, D.C. 20005

(202) 326-5511

Counsel for the Alliance of

Automobile Manufacturers

CHARLES H. LOCKWoop, II

ASSOCIATION OF INTERNATIONAL

AUTOMOBILE MANUFACTURERS

1001 19th Street North, Ste. 1200

Arlington, VA 22209

(703) 525-7788

Counsel for Association of

International Automobile

Manufacturers

JAN S. AMUNDSON

QUENTIN RIEGEL

NATIONAL ASSOCIATION OF

MANUFACTURERS

1331 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

(202) 637-3000

Counsel for National Association of

Manufacturers

ROBERT G. SLAUGHTER

NATIONAL PETROCHEMICAL &

REFINERS ASSOCI4 i 1ON

1899 L Street, N.W., Suite 1000

Washington, D.C. 20036

(202) 457-0480

Counsel for National Petrochemical

& Refiners Association

G. WILLIAM FRICK

RALPH COLLELI, JR.

JANICE K. RABURN

AMERICAN PETROLEUM INSTITUTE

1220 L Street, N.W.

Washington, D.C. 20005

(202) 682-8000

Counsel for American Petroleum

Institute

DOUGLAS I. GREENHAUS

NATIONAL AUTOMOBILE DEALERS

ASSOCIATION

8400 West Park Drive

McLean, VA 22102

(703) 821-7000

Counsel for National Automobile

Dealers Association

PETER K. WELCH

CALIFORNIA MOTOR CAR DEALERS

ASSOCIATION

915 L Street, Suite 1480

Sacramento,CA 95814

(916) 441-2599

Counsel for California Motor Car

Dealers Association

QUESTION PRESENTED

Whether local government regulations prohibiting the

purchase of new motor vehicles with specified emission

characteristics—which are otherwise approved for sale by

state and federal regulators—are preempted by the Clean Air

Act, which expressly preempts any state or local “standard

relating to the control of emissions from new motor

vehicles.” 42 U.S.C. § 7543(a).

iii

TABLE OF CONTENTS

Page

i icriecisiitenisnininripeniaiinieininniiitel i

a icinittriientiitinsnininiiniiiied v

INTERESTS OF AMICI CURIAE .........0-.0-0csssees+sesseeseeseesneeneee 1

SUMMARY OF ARGUMENT ...........:.:cc0ssecsesseseeseesvesseseeeneeevee 4

( SERTRESNERSecever soe oes eee oem eT 6

L. THE FLEET RULES CONFLICT WITH THE

STRUCTURE OF THE CLEAN AIR ACT AND

THE REQUIREMENT OF EPA REVIEW. ................... 6

A. From the Beginning of Federal Control of New

Vehicle Emissions, Congress Has Conditioned

California’s Regulations Upon Review and

Approval by the Federal Government....................... 7

B. The Fleet Rules Are Preempted. ......................0000+ 14

1. The Fleet Rules Are “Standards” and

“Conditions Precedent” on Sale. ....................... 14

2. The Fleet Rules Would Impermissibly

Circumvent EPA Approval. .................c.0000000000 18

3. The Fleet Rules Frustrate Federal

RED UI cxrensessenssncsesemesensssssnsessssussosans 21

Il. THE FLEET RULES ARE NOT SAVED BY ANY

EXPRESS OR IMPLIED RESERVATION OF

AUTHORITY TO LOCAL REGULATION ................ 24

TABLE OF AUTHORITIES

Page(s)

Cases

Adamo Wrecking Co. v. United States,

Ge es Pe Oren 16

Allway Taxi, Inc. v. City of New York,

340 F. Supp. 1120 (S.D.N.Y.),

aff d, 468 F.2d 624 (2d Cir. 1972) ..........cccccc000 25

Am. Auto. Mfrs. Ass'n v. Cahill,

152 F.3d 196 (2d Cir. 1998) 0.0000. eceeeeees 15

Am. Auto. Mfrs. Ass'n v. Mass. Dep't

of Envtl. Protection,

IGS F.36 74 Chat Cis. 1DGG) ....0cccccceccceccseccsecsseees 15

Buckman Co. v. Plaintiffs’ Legal Committee,

OEE 19, 27, 28

City of Burbank v. Lockheed Air

Terminal, Inc.,

ee 19

City of Columbus v. Ours Garage

& Wrecker Serv., Inc.,

Eee 19

CSX Transp., Inc. v. Easterwood,

Fe Gr cr ercscertanesncscennsessinnsncmersesnes 14

Duncan v. Walker,

es UIs issaincineaasenrntatiintininramaienniadl 25

Engine Mfrs. Ass'n v. EPA,

88 F.3d 1075 (D.C. Cir. 1996) 200.0... ccccceeeeeeeee 25

Engine Mfrs. Ass'n v. South Coast

Air Quality Mgmt. Dist.,

158 F. Supp. 2d 1107 (C.D. Cal. 2001)............. 14

English v. Gen. Elec. Co.,

GBB US. T2 (1DBO) ..ccccccccccccccsccccccccsccccsessccoccess 14

Gade v. Nat'l Solid Wastes Mgmt. Ass'n,

505 U.S. 88 (1992) 00... cccceeseceeeeeeeeee 6, 18, 20, 25

Geier v. Am. Honda Motor Co.,

529 U.S. 861 (2000) 000.00... ccecceeeeeeeeee 6, 18, 25, 28

Hines v. Davidowitz,

BID UD. FB (IDEAL) ncccccccccescscescccrscccccescssoscssoessssced 6

Montclair v. Ramsdell,

BOF UD. B47 CIGBB) nccccccccccccccscccecssccccsccsecesooseses 25

Motor & Equip. Mfrs. Ass'n, Inc. v. EPA,

627 F.2d 1095 (D.C. Cir. 1979) .........:cccec0- 13, 16

Motor Vehicle Mfrs. Ass'n v. New York

State Dep’t of Envtl. Conservation,

17 F.3d 521 (2d Cir. 1994) oo... ccccccccecceeeeeeeees 21

Sims v. Fla. Dep’t of Highway

Safety & Motor Vehicles,

862 F.2d 1149 (Lith Cir. 1989)... eeeeees 13

United States v. Locke,

529 U.S. 89 (2000) .0.....cceeecsceeeeeeseeerererenenes 27, 28

United States v. Menasche,

34 U.S. $284 1955) ..0ccccccccescrccccccccccccccccssscssssees 25

Virginia v. EPA,

108 F.3d 1397 (D.C. Cir. 1997) .0....:cccccecceeeeeees 10

Vii

Wis. Pub. Intervenor v. Mortier,

8 Erne. 19

Statutes

Air Quality Act of 1967, Pub. L. No. 90-148,

I 7,8,9

Cal. Health & Safety Code § 39012 .00.0........cccccccccccceeseeees 9

Cal. Health & Safety Code § 40447.5,

I 19

Clean Air Act § 176(c),

| 26

Clean Air Act § 177,

I aa 10

Clean Air Act § 182(b)(3),

42 U.S.C. § TS LAID) ..cccccccccccccccccsccccsecccoceeees 26

Clean Air Act § 182(b)(4),

ae Cire OF Pee i ccccccccccescncsscnsnsnnesnensnnts 26

Clean Air Act § 182(c)(1),

OR ars iP I i crrcreeencclecmteeeal 26

Clean Air Act § 182(c)(5),

G2 UBC. § TSE LAE MS) ccccccecccccccccesoscovcsoccececses 26

Clean Air Act § 182(d)(1),

Re irs OF PIR cccnccianininensnninnenicatinnnes 26

Clean Air Act § 187(a)(6),

42 USC. § TSUDA ENG) ...00.cccccccrccccrcccocecccccscsees 26

Vili

Clean Air Act § 202(a),

TL ET dy 10, 12, 17

Clean Air Act § 202(g)(1),

42 U.S.C. § TSZ1(gM1).....0.ccccccccsrcreersveeeccresesees 16

Clean Air Act § 202(g)(2),

42 U.S.C. § TSZIGNZ)....cvcccrscccescvescccssesvessssers 16

Clean Air Act § 202(h),

REF ody ar 16

Clean Air Act § 209(b)(1), >

gi h toe), | | 11

Clean Air Act § 209(b),

is Oe FD ectevernevensscssenccsansnnmitagsinmnansl 4

Clean Air Act § 209(d),

gp 8S dy. ee 5, 13, 25

Clean Air Act § 216(3),

fil). « i3

Lewis-Presley Air Quality Management Act,

Ce SR, FEF U ccccccsccncccsovnsdensnensnncsnssscscnncnemanets 20

Regulations

36 Fed. Reg. 17,458 (Aug. 31, 1971).......:ccceseseenseneees 12

36 Fed. Reg. 8,172 (Apr. 30, 1971) ........:ecceeeeeeerereeeeees 12

37 Fed. Reg. 8,128 (Apr. 25, 1972) ......::cccceeeseeeereeeeees 12

38 Fed. Reg. 10,317 (Apr. 26, 1973) .......::ccceeeeeeeeeeees 12

40 Fed. Reg. 23,102 (May 28, 1975) ....-..ssssessssessenereers 12

40 Fed. Reg. 30,311 (July 18, 1975) ......cccceceeeeeeeeeees 12

42 Fed. Reg. 2,337 Gam. 11, 1977) .......0.0cecccescscssescesseee 12

42 Fed. Reg. 31,639 (June 22, 1977) oo.ccceccecccccceceeeceeee 12

43 Fed. Reg. 15,490 (Apr. 13, 1978) .......ccccceeeeeeeeeee 13

44 Fed. Reg. 61,096 (Oct. 23, 1979)... cceccecceeeceeees 11

46 Fed. Reg. 36,742 (July 15, 1981) ........ccceceeeeeeeeeee 10

53 Fed. Reg. 41,236 (Oct. 20, 1998) .........ccccceseeseeeeeeee 11

54 Fed. Reg. 13,427 (Apr. 3, 1989) 00... .cccceceeeeeceeeee 11

55 Fed. Reg. 28,823 (July 13, 1990) ..........cccceceeseseeeeeee 11

55 Fed. Reg. 28,824 (July 13, 1990) .0......ccccccceeeeeeeeeeee 11

57 Fed. Reg. 24,788 (June 11, 1992) .........cccccceccesseeees 11

57 Fed. Reg. 38,503 (Aug. 25, 1992).........c:ccccccesseseesees 11

D7 Fed, Reg. 90D (Jam. 9, 1992) .......cccecccoccoccccrcecssesseeees 12

59 Fed. Reg. 46,978 (Sept. 13, 1994)..........ccccccccceseeees 11

59 Fed. Reg. 48,625 (Sept. 22, 1994)...........cccccccceseeeeees 11

60 Fed. Reg. 41,066 (Aug. 11, 1995)... cece 12

61 Fed. Reg. 53,371 (Oct. 11, 1996)...........ccccccseeseeeees 11

63 Fed. Reg. 6,173 (Feb. 6, 1998)...............00cccccsssssseeees 11

65 Fed. Reg. 6,698 (Feb. 10, 2000)..............:ccccccceseeseeeees 2

66 Fed. Reg. 5,002 (Jan. 18, 2001) ..........cccccece ee eeeeeeeee 3

67 Fed. Reg. 60,680 (Sept. 26, 2002)............::ssceeceeeees 11

Cal. Code Regs. 13 § 1956.2(a) (2001)...........cccseeeeeees 22

Cal. Code Regs. 13 § 1962 (2002) .........:cccccsseeeeeseeeeeees 15

Legislative History |

H.R. Rep. No. 90-728 (1967)........-ccescsseeseeeeseeeeneeennennens 8

S. Rep. No. 89-192 (1965) ..........ccescsresresreerseeceeseeseenees 7

S. Rep. No. 90-403 (1967) ........sscsscssercsreeresesrenssesseseenes 8

Miscellaneous

Air Pollution—1967 (Automotive Air Pollution),

HEARINGS BEFORE THE SUBCOMMITTEE ON AIR

AND WATER POLLUTION OF THE COMMITTEE

ON PUBLIC WORKS,

UNITED STATES SENATE

(90th Cong., Ist Sess.) ...............cccerssererersseneeeess 9

Ball, Jeffrey, Fuel for Debate: California's Clean-Air

Czar’s Shift is New Boost for Diesel,

Wall Bt. 5... Det. BE, FD ncccccccesescsesceccccescssesesees 23

Bologna, Michael, Chicago Announces Plan to Convert

Buses to Low-Sulfur Diesel Fuel Prior to Deadline,

Daily Environment Rep., Feb. 7, 2003.............. 22

California Air Resources Board, “LEV II” and “CAP 2000”

Amendments to the California Exhaust and

Evaporative Emission Standards and Test

Procedures for Passenger Cars, Light-Duty Trucks

and Medium-Duty Vehicles, and to the Evaporative

Emission Requirements for Heavy-Duty Vehicles --

Final Statement of Reasons (1999) ...........:0000+++ 22

California Air Resources Board, Heavy-Duty

Emissions Laboratory,

Report No. 01-01 (2001) ..0.......ccceeeescesseeeeeeees 22

Expert Panel Report to the Massachusetts

Bay Transport Authority, FY 2003

Two Hundred Bus Procurement

Kennedy, Harold W. & Weekes, Martin E., Control of

Automobile Emissions—California Experience and

the Federal Legislation,

33 LAW & CONTEMP. PROBS. 297 (1968)....... 8,9

Kennedy, Harold W., The Legal Aspects of Air Pollution

Control with Particular Reference to the County of

Los Angeles,

27S. CAL. L. REV. 373 (1954)........ccecoccscccccessesee 8

Krier, James E. & Ursin, Edmund, POLLUTION AND POLICY:

A CASE ESSAY ON CALIFORNIA AND

FEDERAL EXPERIENCE WITH MOTOR

VEHICLE AIR POLLUTION, 1940-1975 (1977)......8

Letter from G. Guzy and R. Perciaseppe, EPA,

to T. Reilly,

te NN I Ricaiiaieiltdiaad ineaidladacancmairaidibdiaialeaiaaes 15

Mondt, J. Robert, CLEANER CARS: THE HISTORY AND

TECHNOLOGY OF EMISSION CONTROL SINCE THE

REA SMM na EO 21

Reitze, Jr., Arnold W., Transportation-Related

Pollution and the Clean Air Act's

Conformity Requirements,

13 NAT. RESOURCES & ENV’T 406 (1998)........ 26

xii

Reitze, Jr., Arnold W.,

AIR POLLUTION CONTROL LAW: COMPLIANCE AND

ENFORCEMENT (2001) ..........cccccccceeeeeeeeeeeeeeeeeees 15

Reitze, Jr., Arnold W., Federalism and the

Inspection and Maintenance Program

Under the Clean Air Act,

27 PAC. L.J. 1461 (1996) .........ccccceeeeeseeeeeeeeeeees 26

Transcript of Public Meeting, California Air

Resources Board (March 21, 2002) ................+. 24

INTERESTS OF AMICI CURIAE

The Alliance of Automobile Manufacturers, the

American Petroleum Institute, the Association of

International Automobile Manufacturers, the California

Motor Car Dealers Association, the National Association of

Manufacturers, the National Automobile Dealers

Association, the National Petrochemical and Refiners

Association, and the Truck Manufacturers Association

respectfully submit this joint brief as amici curiae in

accordance with Supreme Court Rule 37.3.!

Amici represent the automobile manufacturers and

dealers that manufacture and distribute virtually every

vehicle sold in the United States, as well as the energy

companies that produce and market the petroleum products

used in most of those vehicles. Vehicles and fuels sold in

this country are subject to comprehensive emission control

regulation by the U.S. Environmental Protection Agency

(“EPA” or “the Agency”) under title II of the Clean Air Act,

! The parties consented to the filing of this brief, and copies of the

parties’ written consents have been filed with the Clerk of the Court.

This brief was not authored in any part by counsel for any party, and no

persons or entities other than amici curiae, its members, and counsel

made a monetary contribution toward the preparation or submission of

this brief.

2 The Alliance of Automobile Manufacturers, the Association of

International Automobile Manufacturers, and the Truck Manufacturers

Association represent manufacturers and distributors of new passenger

cars and trucks located in the United States and overseas. The California

Motor Car Dealers Association and the National Automobile Dealers

Association represent new vehicle dealers in California and other parts of

the United States. The American Petroleum Institute and the National

Petrochemical and Refiners Association represent companies engaged in

all segments of the U.S. petroleum industry, and the National Association

of Manufacturers represents a broad group of industrial companies and

member organizations serving U.S. manufacturers.

as amended, 42 U.S.C. §§ 7521-7590. EPA sets

performance standards for vehicles and fuels that leave to

industry engineers the choice of specific engine designs and

fuel specifications needed to reduce emissions.

EPA’s technology-neutral regulations flow from the

Clean Air Act, which requires stringent emissions control

while considering costs and other factors. The Agency’s

rules thus reward innovation while also protecting the

environment. Its rules over three decades have required

increasing reductions in smog-forming emissions from new

gasoline vehicles, including light-duty trucks and sport-

utility vehicles, so that today’s emissions are a small

percentage of the emissions from uncontrolled vehicles.’

EPA’s regulations for gasoline-powered vehicles in the

coming years are so stringent that there is no longer any

significant difference between the federal rules and those in

California, even though California has in the past led the

nation’s effort to lower automotive emission levels. For over

35 years manufacturers have met these ever-tightening

performance standards from EPA and California, and

manufacturers have relied upon the Clean Air Act and the

well-settled national policy that only EPA and California

may set such standards.

Many heavy-duty trucks operate on diesel fuel, rather

than gasoline. EPA has adopted rules that regulate new

heavy-duty vehicles, along with their fuel, as a system. As

with its other automotive air pollution rules, EPA’s heavy-

duty vehicle standards leave the choice of specific

technologies to the engineers employed or sponsored by the

members of amici. The targets are ambitious. The heavy-

duty new-vehicle regulations adopted by EPA in December

2000 are expected to reduce emissions from diesel-powered

3 See 65 Fed. Reg. 6,698 (Feb. 10, 2000) (final rule for model year 2004

and later new passenger cars and light-duty trucks).

trucks and buses by 95 percent. When combined with the

upcoming rules for other new vehicles, the requirements for

new heavy-duty trucks sold outside California are virtually

the same as the rules for new trucks sold inside California.

This case involves a set of regulations that are

inconsistent with the coordinated national and California

Strategy to reduce automotive air pollution through

performance-based rules. The regulations at issue, the Fleet

Rules adopted by the South Coast Air Quality Management

District (““SCAQMD”), ban some of the nation’s cleanest

advanced technology vehicles from several important

markets in southern California. Those markets involve

specified public and private fleets of 15 or more vehicles.‘

SCAQMD’s rules were apparently premised on a belief

that vehicles designed to use natural-gas and other

alternative fuels would be inherently cleaner than gasoline-

or diesel-powered vehicles.- That technological assumption

is already obsolete. Gasoline- and diesel-powered vehicles

produced by amici’s members can achieve the same

emission levels as natural-gas vehicles. But they are shut out

of the fleet markets governed by SCAQMD’s rule, and

competition between different fuels and technologies has

been stifled.

The interests of amici extend well beyond the immediate

impact of the Fleet Rules. For more than 35 years, section

209 of the Clean Air Act has prohibited local emissions

control of the new-vehicle market. Congress has assigned

environmental regulation of new motor vehicles to EPA,

with an exception for the State of California, which is

allowed to enforce its own rules if those rules have been

reviewed and approved by EPA. EPA’s coordination and

4 See 66 Fed. Reg. 5,002, 5,005 (Jan. L8, 2001).

5 See Petitioners’ Opening Brief at 14-17 (description of Fleet Rules).

supervision is critical if the nation is to reduce automotive air

pollution in a cost-effective manner and with minimum

disruption of an international industry.

The Fleet Rules thus violate basic principles of

technological innovation and fuel neutrality. Putting aside

the merits of the Fleet Rules, however, the process initiated

by SCAQMD has serious national consequences. If other

localities also try to establish their own rules by picking and

choosing the technologies and fuels that may be purchased,

the rules that govern the members of amici would no longer

be a coordinated national program. Those requirements

instead would be the end product of disconnected technology

and fuel choices made by local authorities.

As SCAQMD would interpret federal law, there is no

federal impediment to the City of Santa Monica, the

Berkeley City Council, or any other city, dictating which

new vehicles may be purchased in those jurisdictions. That

outcome would be directly contrary to what Congress

envisioned when it enacted title II of the Clean Air Act and

is specifically prohibited by section 209. A similar adverse

impact could occur to diesel fuel providers, who, after

investing heavily in the technology to produce clean fuel

,may see their potential markets lost because of local bans on

the purchase of diesel-powered vehicles.

SUMMARY OF ARGUMENT

Section 209(a) of the Clean Air Act prohibits the

regulation of emissions from new motor vehicles by state

and local governments. Only the State of California is

allowed to adopt emissions control rules for new vehicles

that differ from those of EPA. Before California can enforce

its own rules, however, it must obtain EPA’s concurrence

that its rules meet criteria specified in section 209(b) of the

Act, 42 U.S.C. § 7543(b), which include considerations of

cost and lead-time.

The state agency in California charged with adopting

rules is the California Air Resources Board (or “CARB”).

Rules adopted by CARB acquire their exemption from

federal preemption only by virtue of EPA’s review and

approval under section 209(b). The Clean Air Act does not

permit state or local emissions control requirements for new

vehicles that EPA has not considered and approved. 42

U.S.C. § 7543(a). Instead, states and localities are permitted

to regulate the “use, operation, or movement” of registered

or licensed vehicles. Id. § 7543(d).

Within the last five years, the standards for new vehicles

adopted by CARB for the State of California and by EPA for

the nation as a whole have converged. Both EPA and CARB

regulations permit manufacturers to use a variety of designs

to meet the same or similar performance standards. To

ensure that the vehicles will achieve low pollution levels,

EPA and CARB also strictly control the composition of

gasoline and diesel fuel. Vehicles and fuels are thus

regulated comprehensively by EPA and CARB as a system.

The Fleet Rules differ from the rules adopted by CARB

and EPA, primarily because they ban gasoline- and diesel-

powered vehicles from several important markets for new

vehicles, without regard to whether such vehicles can in fact

meet the same emission levels as “alternative” vehicles.

Most important from a statutory perspective, no officer or

entity representing the State of California has submitted the

Fleet Rules to EPA for review, and the Fleet Rules have not

received a waiver of federal preemption under section

20% b).

The Fleet Rules are therefore expressly preempted from

enforcement by section 209 of the Clean Air Act. In

addition, the Fleet Rules grate against the basic strategy of

technology- and fuel-neutral emissions regulation developed

by EPA, and upset the balance between stringency and cost

control required by the Clean Air Act. Because they are also

not consistent with the Clean Air Act, with federal

regulations and with the CARB rules approved by EPA for

the State of California, the Fleet Rules accordingly are

subject to conflict preemption under the principles of Geier

v. American Honda Motor Co., 529 U.S. 861 (2000), Gade v.

Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88 (1992) , and

Hines v. Davidowitz, 312 U.S. 52 (1941).

ARGUMENT

Petitioners have fully explained the application of section

209(a) to the Fleet Rules. Amici believe it is also important

to examine the Fleet Rules in light of the overall structure of

title Il, and how the decisions of the courts below would

adversely affect the nation’s ability to meet the objectives of

Congress in providing for federal control of new vehicle

emissions regulation under the Clean Air Act.

I. THE FLEET RULES CONFLICT WITH THE

STRUCTURE OF THE CLEAN AIR ACT AND

THE REQUIREMENT OF EPA REVIEW.

For more than 35 years, Congress has given the federal

government the primary role in regulating new motor vehicle

emissions. The Clean Air Act includes a carefully defined

role for the State of California to establish a separate

emissions control program. However, California may

proceed only after EPA’s review and approval. No official

or entity representing the State of California has submitted

the Fleet Rules to EPA for review and approval, and insofar

as the Fleet Rules apply to new-vehicle purchases by fleets

not owned by municipalities or other public agencies they

have no historical regulatory foundation. The Fleet Rules

are an attempted end-run around the plain language and

structure of the Clean Air Act and the roles it assigns to

California and the EPA.

A. From the Beginning of Federal Control of New

Vehicle Emissions, Congress Has Conditioned

California’s Regulations Upon Review and

Approval by the Federal Government.

The critical text in this case is found in section 209(a) of

the Clean Air Act. This section broadly preempts virtually

all state and local regulation of new motor vehicle emissions:

No State ... shall adopt or attempt to enforce any

standard relating to the control of emissions from

new motor vehicles.... No State shall require

certification, inspection, or any other approval

relating to the control of emissions from any new

motor vehicle ... as condition precedent to the initial

retail sale, titling (if any), or registration of such

motor vehicle....

42 U.S.C. § 7543(a). This broad, express preemption has

been the clear federal policy since 1967, when Congress first

expressly preempted States from adopting or enforcing

emissions-related requirements for new motor vehicles. See

Air Quality Act of 1967, Pub. L. No. 90-148, § 208, 81 Stat.

485, 501.

Motor vehicle production is a capital-intensive business.

A specific model of a motor vehicle is generally

manufactured at only one or two plants. When it leaves the

factory, the new vehicle enters a complex and highly

competitive distribution system that often extends around the

globe. Congress long ago recognized those aspects of the

automobile industry. In 1965, when automotive air pollution

regulation was first gaining wide attention, a Senate

committee expressed concern not only about the need to

control harmful emissions from vehicles, but that poorly

coordinated regulation of new vehicle emissions could

“result in chaos insofar as manufacturers, dealers, and users

are concerned.” S. Rep. No. 89-192, at 6 (1965).

By 1967, various States had either adopted or were close

to adopting new vehicle emissions standards. To avoid the

“chaos” foretold by the Senate committee in 1965, Congress

added an express preemption provision to the Clean Air Act

amendments adopted in 1967. See Pub. L. No. 90-148 § 2,

81 Stat. at 501; H.R. Rep. No. 90-728, at 21 (1967)

(preemption was “necessary in order to prevent a chaotic

situation from developing in interstate commerce in new

motor vehicles.”); S. Rep. No. 90-403, at 33 (1967) (multiple

standards would result in “economic disruption” and

increased costs to consumers).

Prior to 1967, California had adopted requirements for

the installation of emission control devices on certain classes

of riew and used vehicles.® At hearings held in Los Angeles

in February 1967, federal officials testified that it was

possible that federal regulations pertaining to new vehicle

emissions at a national level would preempt the California

6 California’s regulations had been adopted by the California Department

of Public Health under authority of the California Motor Vehicle Control

Act of 1960. See James E. Krier & Edmund Ursin, POLLUTION AND

Pouicy: A CASE ESSAY ON CALIFORNIA AND FEDERAL EXPERIENCE

WITH MOTOR VEHICLE AIR POLLUTION, 1940-1975, 117-18, 147 (1977).

During the 1950s local authorities in southern California had debated

adoption of rules requiring pollution control devices on new and used

vehicles, but decided not to do so until technology improved. See Harold

W. Kennedy, The Legal Aspects of Air Pollution Control with Particular

Reference to the County of Los Angeles, 27 S. CAL. L. REV. 373, 391-94

(1954). Officials of the Los Angeles County Air Pollution Control

District advocated Statewide automotive emissions controls. See J. Krier

& E. Ursin, supra at 177. The only local efforts to control automotive air

pollution consisted of directives by municipalities that their own fleets

purchase vehicles equipped with pollution controls. See Harold Ww.

Kennedy & Martin E. Weekes, Control of Automobile Emissions—

California Experience and the Federal Legislation, 33 LAW & CONTEMP.

PROBS. 297, 308 (1968).

rules.’ Persuaded that California should be able to maintain

a separate program notwithstanding the prospect of new

federal regulations, Congress exempted California from the

general rule of preemption. Under some circumstances—

described below—Congress created an exception to the

general rule on preemption for “any State which has adopted

standards ... for the control of emissions from new motor

vehicles ... prior to March 30, 1966,” a category that

included only California. See 81 Stat. at 501. At about the

same time, in California, the California legislature created a

new agency, the State Air Resources Board (now the

California Air Resources Board, or “CARB”). In its

chartering legislation CARB was given exclusive authority

to adopt vehicle emission control rules in the State.’

Congress provided that CARB was not free to adopt any

rules for new motor vehicles in California that it wanted.

Instead, Congress required California to seek a waiver of

federal preemption from the federal government. Review of

California’s waiver applications later was assigned to the

new, federal Environmental Protection Agency in the Clean

Air Act Amendments of 1970.9 As amended in 1970, the

7 See Air Pollution—1967 (Automotive Air Pollution), HEARINGS BEFORE

THE SUBCOMMITTEE ON AIR AND WATER POLLUTION OF THE COMMITTEE

ON PUBLIC WORKS, UNITED STATES SENATE (90th Cong., Ist Sess.) 108-

109, 115 (testimony of Dean Coston, Deputy Undersecretary of Health,

Education and Welfare, and Sidney Edelman, of the Office of General

Counsel, Department of Health, Education and Welfare).

8 The 1967 Mulford-Carrell Act creating the State Air Resources Board

provided that “[Ijocal and regional authorities have the primary

responsibility for the control of air pollution except for the emissions

from motor vehicles. These authorities may control emissions from

nonvehicular sources.” Cal. Health & Safety Code § 39012 (West Supp.

1973) (emphasis added); see also Kennedy & Weekes, supra, at 307-08

(Mulford-Carrell Act generally preempted local regulation of automobile

emissions.)

9 Pub. L. No. 91-604, 84 Stat. 1676.

California waiver provision in section 209 allowed the State

to avoid federal preemption if its standards: (a) would be “in

the aggregate, at least as protective of public health ... as

applicable federal standards”; (b) were needed “to meet

compelling and extraordinary conditions”, and (c) were

consistent with the technological and economic feasibility

requirements of section 202(a).

CARB must seek a waiver for any new set of standards it

adopts.'!° In 1977, Congress amended the Clean Air Act to

permit other, qualifying States to piggyback on the

California waiver by adopting and enforcing vehicle

emission regulations that are “identical” to “the California

standards for which a waiver has been granted” for the same

model year. 42 U.S.C. § 7507; see Petitioners’ Opening

Brief at 7-8.

This ensures that the nation’s vehicles have to comply

with either the federal vehicle emission control standards

promulgated by EPA, or the California standards that have

been reviewed and approved by EPA. Thus, “there are two,

and only two, permissible sets of regulations limiting

emissions from new cars sold in the United States”—the

federal rules and the EPA-approved California rules.

Virginia v. EPA, 108 F.3d 1397, 1401 (D.C. Cir. 1997).

10 When California modifies an existing requirement that has already

received a waiver, as opposed to adopting a new standard, it often finds

that the amendments are “within the scope” of its previous waiver. EPA

has defined specific criteria that must be met before an amended

regulation can be found to be within the scope of a previous waiver. The

required findings are that the California amendments: (1) “do not cause

the California standards, in the aggregate, to be less protective than

applicable Federal standards”; (2) “do not cause Califordia’s

requirements to be inconsistent with section 202(a) of the Act”; and (3)

“present no new issues” affecting EPA’s previous waiver determinations.

46 Fed. Reg. 36,742, 36,743 (July 15, 1981).

Section 209(b) has been administered by EPA to allow

CARB, acting on behalf of the State of California,

considerable discretion to adopt rules that differ from federal

requirements—but only after EPA has carefully examined

the California rules. Typically, EPA schedules a public

hearing or requests public comment on whether to conduct

such a hearing before deciding what action to take on a

request from CARB for approval of new standards. See 42

U.S.C. § 7543(b)(1). CARB makes a practice of seeking

EPA review for a variety of measures, ranging from new

limits on exhaust emissions, to compulsory warranties,

maintenance instructions, quotas for the sale of vehicles

meeting particular standards, and manufacturer reporting

requirements. !!

A request for review of a new rule from California

frequently triggers an extended technical review by EPA

engineering staff and counsel.'2 In complex situations,

CARB sometimes makes major changes in its proposed rules

before EPA takes final action, occasionally withdrawing

them from consideration by EPA or supplementing the

\l See, e.g., 57 Fed. Reg. 24,788 (June 11, 1992) (new standards for

alternative fueled vehicles); 59 Fed. Reg. 46,978 (Sept. 13, 1994) (new

test procedures to enforce standards); 55 Fed. Reg. 28,823 (July 13,

1990) (reporting requirements); 63 Fed. Reg. 6,173 (Feb. 6, 1998)

(warranties); 67 Fed. Reg. 60,680 (Sept. 26, 2002) (waiver application

for new standards for zero-emission vehicles withdrawn by CARB); 44

Fed. Reg. 61,096, 61,100 (Oct. 23, 1979) (maintenance instructions); see

also Motor & Equip. Mfrs. Assn. v. EPA, 627 F.2d 1095, 1103-05 (D.C.

Cir. 1979) (related maintenance regulations).

12 See, e.g., 61 Fed. Reg. 53,371 (Oct. 11, 1996) (concluding 14-month

review of onboard diagnostic testing rules); 57 Fed. Reg. 38,503 (Aug.

25, 1992) (concluding two-year consideration of rules for methanol-

fueled vehicles); 59 Fed. Reg. 46,978 (Sept. 13, 1994) (concluding 16-

month review for new test procedures); 59 Fed. Reg. 48,625 (Sept. 22,

1994) (concluding 35-month review for new standards for medium-duty

vehicles).

record in order to establish compliance with the criteria in

section 209(b) of the Clean Air Act.'? EPA can approve or

deny CARB’s request for a waiver of federal preemption in

whole or in part, or condition its approval on certain

modifications in the California program needed to comply

with section 209(b).!4

EPA traditionally has interpreted section 209(b) to

require it to make various findings with respect to the section

202(a) requirements before it can grant a waiver for a

California standard. These include findings that “adequate

technology exists with which to meet them [the California

standards]” and that “adequate lead time is available in

which to implement that technology.”'!5 Adequate lead-time

must be available for “both translating the available

technology into a form satisfactory for mass-production, and

tooling and setting up the facilities to actually produce the

vehicles.”'6 In deciding whether to grant a waiver, EPA

13 See, e.g., 59 Fed. Reg. 46,978, n.1 (Sept. 13, 1994) (CARB limited

initial waiver request and expected to submit new request “in order to

produce a more closely aligned test procedure” with new federal test

procedure); 57 Fed. Reg. 909, 911 n9 (Jan. 9, 1992) (CARB

supplemented prior submissions to take account of changes in federal

standards that could affect its “protectiveness” determination), 60 Fed.

Reg. 41,066 (Aug. 11, 1995) (CARB withdrew section 209 submission in

order to engage in additional rulemaking).

14 See, e.g., 36 Fed. Reg. 8,172 (Apr. 30, 1971) (granting in part and

denying in part waiver of preemption); 37 Fed. Reg. 8,128 (Apr. 25,

1972) (same); 40 Fed. Reg. 30,311 (July 18, 1975) (same); 42 Fed. Reg.

31,639, 31,641 (June 22, 1977) (noting waiver had been granted on

condition that CARB rule would be modified). The early decisions noted

supra established the basic parameters for obtaining a waiver, and since

the early 1970s, CARB has learned how to limit and shape its rules in

order to obtain waivers.

1S See 40 Fed. Reg. 23,102 (May 28, 1975); 42 Fed. Reg. 2,337, 2,340

(Jan. 11, 1977).

16 See 40 Fed. Reg. 30,311, 30,314 (July 18, 1975).

must also consider whether the costs of compliance would be

“excessive” and consider the position of all companies

competing in the California market.'? See Motor & Equip.

Mfrs. Ass'n, Inc. v. EPA, 627 F.2d 1095, 1118 (D.C. Cir.

1979) (EPA properly considered “the economic costs of

motor vehicle emission standards and accompanying

enforcement procedures” in its review of California rules

under section 209).

There is thus more than 35 years of established state and

federal administrative practice devoted to the Congressional

design of 1967: broad, express preemption of any non-

federal new vehicle emission controls, and permission for

California to adopt its own controls and request approval of

those controls from EPA. Since 1967, Congress has not

lifted the broad preemption of section 209(a), nor has it lifted

the requirement that non-federal regulations must receive

federal approval before they may be imposed.

The role assigned to local jurisdictions under title II is

also contained in section 209. The statute, in section 209(d),

reserves to local governments and States the ability to

“control, regulate, or restrict the use, operation, or movement

of registered or licensed motor vehicles.” 42 U.S.C.

§ 7543(d); see section Il, infra. Preemption is complete,

however, for any “new” motor vehicle, which the Clean Air

Act defines as “a motor vehicle the equitable or legal

equitable title to which has never been transferred to an

ultimate purchaser.” 42 U.S.C. § 7550(3); see Sims v. Fla.

Dep't of Highway Safety & Motor Vehicles, 862 F.2d 1449,

1454-1455 (11th Cir. 1989) (en banc) (state cannot attempt

to enforce any standard prior to initial vehicle sale).

'7 See, e.g., 43 Fed. Reg. 15,490, 15,492 (Apr. 13, 1978); 40 Fed. Reg.

30,311 (July 18, 1975).

B. The Fleet Rules Are Preempted.

The main categories of federal preemption -- ie.,

express, conflict and field preemption -- are not “rigidly

distinct.” English v. Gen. Elec. Co., 496 U.S. 72, 79 n.5

(1990). In the presence of an express preemption clause,

“the task of statutory construction must in the first instance

focus on the plain wording of the [preemption] clause, which

necessarily contains the best evidence of Congress’ pre-

emptive intent.” CSX Transp., Inc. v. Easterwood, 507 U.S.

658, 664 (1993). Starting with the text of section 209(a), and

then proceeding through the structure and legislative history

of the statute, there can be no question that the Fleet Rules

contravene both the express and implied intent of Congress.

1. The Fleet Rules Are “Standards” and

“Conditions Precedent” on Sale.

Applying the statutory text, the Fleet Rules are expressly

preempted because (1) they are “standard[s] relating to the

control of emissions from new motor vehicles or new motor

vehicle engines,” and (2) they are a “condition precedent to

the initial retail sale” of new vehicles “relating to the control

of emissions.” 42 U.S.C. § 7543(a).

Controlling emissions is the entire purpose and effect of

the Fleet Rules. See Engine Mfrs. Ass’n v. South Coast Air

Quality Mgmt. Dist., 158 F. Supp. 2d 1107, 1114 (C.D. Cal.

2001) (“EMA”) (noting that Fleet Rules are “an effort to

reduce public exposure to motor vehicle pollution”). The

Fleet Rules mandate particular vehicle designs (namely,

engines that run on natural gas). If local design standards

related to emissions control are not preempted “standards”

under the Clean Air Act, then nothing is.

The Second Circuit has offered a reasonable

interpretation of “standard” under section 209(a) that gives

the preemption clause discernible meaning and clearly

covers the Fleet Rules: “We view ‘standards relating to the

control of emissions’ as describing regulatory measures

intended to lower the level of auto emissions.” Am. Auto.

Mfrs. Ass'n v. Cahill, 152 F.3d 196, 200 (2d Cir. 1998). In

the Cahill case, the State of New York had attempted to

enforce a quota for the sale of vehicles that met California’s

zero-emission vehicle standards.'® There was no question

that the numerical emission limit that New York sought was

a valid and fully-waived California standard—just as in this

case, SCAQMD will surely note that the vehicles it is

requiring are classified as meeting one or more emissions

limits set by CARB. As Chief Judge Winter held, however,

a rule specifying how many vehicles meeting a given

emission limit must be sold is a “standard,” because it “has

no purpose other than to effect a general reduction in

emissions,” and is “in the nature of a command having a

direct effect on the level of emissions.” 152 F.2d at 200.!9

There can be no doubt that the Fleet Rules are intended

to control and lower vehicle emissions—even if the

technological assumptions underlying the Fleet Ruies are

now obsolete. Moreover, the Fleet Rules expressly

control emissions given that they incorporate a subset of

vehicles approved by the CARB for purposes of emissions

control. The fact that the Fleet Rules expressly limit the

purchase of vehicles to a subset of California certified

vehicles, while prohibiting the purchase of other vehicles

that comply with California and federal emission limits,

18 See Cal. Code Regs. 13 § 1962 (2002). For the history of the Cahill

litigation and related matters, see Arnold W. Reitze, Jr., AIR POLLUTION

CONTROL LAW: COMPLIANCE AND ENFORCEMENT 307-312 (2001).

'9 Accord Am. Auto. Mfrs. Ass'n v. Mass. Dep't of Envtl. Protection, 163

F.3d 74, 76-77, 83-84 (ist Cir. 1998); see also Letter from G. Guzy,

EPA General Counsel, to T. Reilly, Att'y Gen. of Mass., Sept. 15, 1999,

at 9 (“A numerical emission limit, by itself, has no real meaning absent a

tie to the kind and number of motor vehicles to which the limit applies”)

attached in Amicus Br. App. 17a - 19a.

necessarily means that the Rules are “standards” relating to

control of vehicle emissions.

Other parts of title II make it clear that “standards”

include not only numerical emission limits, but also rules

that govern vehicle transactions. For example, section 202

specifies that in the 1994 model year, 40 percent of

passenger cars must meet specific emissions levels. 42

U.S.C. § 7521(g)(1). The text of section 202 is clear that

such “standards” include both the emission level and the

percentage of vehicles that must meet that emission level.

See id. (requiring “standards which provide that emissions

from a percentage of each manufacturer’s sales volume ...

shall comply with the levels specified”) (emphasis added).?°

Just as those federal requirements are expressly “standards,”

the Fleet Rules—which also regulate what the new-vehicle

market must absorb—are likewise “standards.”?!

20 See also 42 U.S.C. § 7521(g)(2) (requiring “standards which provide

that such emissions from a percentage of each manufacturer’s sales

volume of such vehicles and trucks shall not exceed the levels specified”)

(emphasis added); 42 U.S.C. § 7521(h) (same).

21 In Motor & Equipment Manufacturers Ass'n v. EPA, 627 F.2d 1095,

1125-28 (D.C. Cir. 1979), the District of Columbia Circuit reviewed

EPA’s decision to waive preemption for various enforcement procedures

for new motor vehicles adopted by CARB. It accepted a definition of

“standard” derived from Adamo Wrecking Co. v. United States, 434 U.S.

275 (1978), that a work practice standard was not an “emission standard”

under section 112 of the Clean Air Act. Adamo Wrecking defined an

“emission standard” in that context as a “quantitative level” to be attained

by use of “techniques,” “controls,” and “technology.” /d. at 286. Insofar

as SCAQMD’s Fleet Rules incorporate both quantitative emissions limits

(i.e., those set by CARB) and their own percentage requirements, they

would be “standards” under the D.C. Circuit’s adaptation of Adamo

Wrecking, as well as under Adamo Wrecking itself. See, e.g., JA 60-63

(Fleet Rule 1194 mandating the purchase of vehicles meeting specifically

defined emissions limits by operators of airport ground access fleets, in

absence of waiver) and Petitioners’ Opening Brief at 16-17. Since the

1977 CAA Amendments, work practice standards are emission standards.

(Continued...)

————— or a

Turning next to the second sentence of section 209(a),

there is likewise little doubt that SCAQMD has imposed a

“condition precedent” relating to emissions control on the

“initial retail sale” of the regulated vehicles.2? Simply put,

for certain purchasers, an otherwise legal vehicle may only

be purchased or sold if, as a condition precedent to the sale,

it has been certified as utilizing a type of “alternative fuel”

engine SCAQMD has mandated.?3

Attempting to circumvent section 209(a)’s express

preemption and to distinguish the First and Second Circuit

decisions, the district court reasoned that the plain statutory

prohibition of any “standard,” and the more precise

prohibition of restrictions on “sale,” do not cover a

restriction on “purchase.” Both the First and Second Circuits

have held that “sales” restrictions related to emissions

control are preempted “standards” under section 209(a).

The analysis by the district court to which the Ninth

Circuit acceded would allow any preempted sales

requirement to be re-written as a ban on the “purchase” of

the very same vehicles. Such a distinction would make the

express preemption provision in the statute pointless. Every

new vehicle transaction involves the purchase of the vehicle

See 42 U.S.C. § 7602(k). Whatever the scope of “standard” in the

context of sections 112, 202(a) or 209(b), the scope of “standard” in

section 209(a) is plainly broader given the accompanying terms. The

express preemption of section 209(a) reaches “any standard relating to

the control of emissions” (emphasis added).

22 The second sentence of section 209(a) states, “No State shall require

certification, inspection, or any other approval relating to the control of

emissions from any new motor vehicle or new motor vehicle engine as a

condition precedent to the initial retail sale, titling (if any), or registration

of such motor vehicle, motor vehicle engine, or equipment.” 42 U.S.C.

§ 7543(a).

23 See Petitioners’ Opening Br. at 14-17.

by the purchaser and the sale of the vehicle by the seller. In

particular, from the standpoint of manufacturers and dealers,

there is no relevant difference between a prohibition on

purchases and a prohibition on sales. When Congress

preempts emissions-related restrictions on the “sale” of new

motor vehicles, it necessarily preempts emissions-related

restrictions on the purchase of new motor vehicles.

2. The Fleet Rules Would impermissibly

Circumvent EPA Approval.

Moving beyond section 209(a), there is not an iota of

textual support for “purchase” restrictions related to

emissions control being permissible absent federal approval

by EPA. As discussed above, CARB seeks EPA approval of

everything from new limits on exhaust emissions, to fees

charged to manufacturers, compulsory warranties,

maintenance instructions, reporting requirements, and

underhood labels that present emission information.

SCAQMD has no authority to circumvent the federal

approval process of section 209(b).

The Clean Air Act does not permit SCAQMD to disagree

with CARB’s emission standards or EPA’s emission

standards and strike out on its own, outside of the section

209(b) EPA approval process. Such circumvention presents

a clear conflict with the regime established by Congress.

Even in the absence of express preemption, SCAQMD’s

end-run around section 209(b) is impliedly preempted

because it obviously frustrates the Congressional design. See

Geier v. American Honda Motor Co., 529 U.S. 861, 874

(2000); Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S.

88, 100-02 (1992) (plurality opinion); id. at 112-113

(Kennedy, J., concurring in judgment) (finding express

rather than implied preemption).

If SCAQMD’s non-EPA-approved gambit is permissible,

then any local government may pick and choose the new

vehicles it prefers for sale (or “purchase”) in its jurisdiction.

Some jurisdictions might choose natural-gas-powered

vehicles, others might select battery-powered electric

vehicles, and others might limit part of the market to

hydrogen fuel-cell vehicles. There is no principled reason

why any other political subdivision in America may not do

so as well. Cf. Buckman Co. v. Plaintiffs’ Legal Committee,

531 U.S. 341, 350 (2001) (measuring frustration of federal

objectives “in the shadow of 50 State’s tort regimes” in

conflict preemption analysis); City of Burbank v. Lockheed

Air Terminal, Inc., 411 U.S. 624, 626 (1973) (in a field

preemption case, interference with a single weekly flight was

sufficient to warrant invalidation of curfew on aircraft

operations). Here, the potential for localized requirements

would include not only any of California’s own 35 air

quality districts,44 but any similar body anywhere in the

country.

SCAQMD’s claimed autonomy from EPA approval

defies the “well settled” doctrine that “local governmental

units are created as convenient agencies for exercising such

of the governmental powers of the State as may be entrusted

to them in its absolute discretion.” City of Columbus v. Ours

Garage & Wrecker Serv., Inc., 536 U.S. 430, 433 (2002)

(quoting Wis. Pub. Intervenor v. Mortier, 501 U.S. 597, 607-

08 (1991)). A corollary of that principle has to be that if

California is preempted unless it receives EPA approval, so

is SCAQMD.?5 To the extent that SCAQMD is a creature of

24 See http://www.arb.ca.gov/emisinv/maps/statemap/dismap.htm.

25 For this same reason, SCAQMD cannot rely upon any grant of

authority from the State of California because, as an agent of the State of

California, any exercise of such delegated authority would merely bring

SCAQMD within the ambit of preemption provisions referring to the

“State” itself. The 1987 amendment to the California Health & Safety

Code cited by the district court as a statutory basis for the Fleet Rules

post-dated the creation of SCAQMD by more than a decade, Cal. Health

& Safety Code § 40447.5, Cal. Stats. 1987, c. 1301, § 10, and more

(Continued...)

the California legislature and tries to act as the agent of the

State, it must (like its principal) obtain the required review

approval from EPA. That is the regulatory scheme crafted by

Congress in sections 209(a) and (b). Even if the substance of

the Fleet Rules were consistent with the substance of federal

emissions policy (which as discussed below is not the case),

such local regulation is nevertheless pre-empted “if it

interferes with the methods by which the federal statute was

designed to reach [its] goal.” Gade, 505 U.S. at 103

(plurality opinion) (emphasis added) (quoting Int'l Paper

Co. v. Ouellette, 479 U.S. 481, 494 (1987)).

Here, SCAQMD has transgressed the clear structure of

the Clean Air Act’s approval process, and the Fleet Rules

therefore are preempted. /d. at 100-03 (plurality op.); id. at

112-113 (Kennedy, J., concurring in judgment) (“The statute

is clear: When a State desires to assume responsibility for an

occupational safety and health issue already addressed by the

Federal Government, it must submit a state plan. The most

reasonable inference from this language is that when a State

does not submit and secure approval of a state plan, it may

not enforce occupational safety and health standards in that

area.”’).

SCAQMD’s defense of the Fleet Rules has no logical

boundary under federal law. If SCAQMD can compel fleet

owners to select vehicles that use a particular type of fuel, or

that meet a particular subset of duly-adopted CARB

standards approved by EPA, there is no reason why, as a

matter of federal law, it could not compel that every car

purchased in the region use alternative fuels, operate on

electricity or fuel cells, or any number of en vogue potential

importantly, SCAQMD itself was not created until 1976 when the

California legislature passed the Lewis-Presley Air Quality Management

Act, Cal. Stats. 1976, c. 324, p. 893, § 5, which was well after Congress

had added section 209 to the Clean Air Act.

technologies, such as biomass or solar-powered vehicles.

The artifice of regulating purchase rather than sale would

make the text of section 209(a) irrelevant and unenforceable,

and it would almost certainly invite crusades for automobile

design standards to be imposed at the local level

3. The Fleet Rules Frustrate Federal Emissions

Policy.

The circumvention of section 209(b) in this case has

more than merely procedural importance. Environmental

regulation of the automobile is now in its second generation.

As standards have been more stringent, emissions reductions

have become more costly, because all lower-cost control

systems already have been incorporated into new vehicle

designs. See J. Robert Mondt, CLEANER CARS: THE HISTORY

AND TECHNOLOGY OF EMISSION CONTROL SINCE THE 1960s

(2000) (nearly ten-fold increase in cost of automotive

emission control hardware from 1975 to 1997).

To permit the industry to reduce emissions as cost-

effectively as possible, CARB and EPA have used “fleet

averaging” regulations. These rules generally allow a

manufacturer to reduce emissions on different models to

different levels, so long as the average emissions from the

manufacturer’s fleet as a whole meet a specified performance

level, on a sales-weighted basis. See Motor Vehicle Mfrs.

Ass'n v. New York State Dep't of Envtl. Conservation, 17

F.3d 521, 535 (2d Cir. 1994) (“The crux of the LEV plan is

the fleet averaging concept. Fleet averaging is designed to

give manufacturers sufficient flexibility to develop varying

emissions within their entire fleet to meet the overall goal.”).

This allows a manufacturer to obtain the greatest reductions

from vehicles for which control is relatively less costly, and

to avoid having to control other models to the same level.

To ensure that there is no environmental degradation, the

rules also usually include “caps,” which no model in the fleet

may exceed.

The hallmark of the fleet averaging rules is flexibility,

within the “caps” set by the regulation and subject to

meeting the fleetwide performance standard. This is

particularly true of the CARB rules that, but for the Fleet

Rules, would apply in southern California to the covered

fleets. See, e.g., Cal. Code Regs. 13 § 1956.2(a) (2001) (goal

of CARB’s “Fleet Rule for Transit Agencies” is to require

emissions reductions “while also providing flexibility to ...

fleet operators to determine their optimal fleet mix.”).2° The

wisdom of this approach is borne out by technological

advances~- by manufacturers in recent years—in some

instances after SCAQMD adopted the fleet rules—that have

demonstrated that buses and other vehicles operating on

diesel fuel can achieve very low emission levels, comparable

to “alternative fuel” vehicles.2’? According to one transit

official, diesel transport vehicles operating on advanced

diesel fuel “is the most cost-effective way to reduce

emissions.”’28

26 See also California Air Resources Board, “LEV II” and “CAP 2000”

Amendments to the California Exhaust and Evaporative Emission

Standards and Test Procedures for Passenger Cars, Light-Duty Trucks

and Medium-Duty Vehicles, and to the Evaporative Emission

Requirements for Heavy-Duty Vehicles -- Final Statement of Reasons, at

36 (1999) (Rules for passenger cars and trucks provide “([cjompliance

flexibility is provided by the ... fleet average requirement in that

manufacturers may choose the mix of vehicle categories that best fits

their production capabilities.”), posted at http://www.arb.ca.gov/reqact/

levii/to_oal/leviifso.pdf (last visited Aug. 27, 2003).

27 See, e.g., California Air Resources Board, Heavy-Duty Emissions

Laboratory, Report No. 01-01, at 9 (2001) (“Limited testing at ARB has

demonstrated that ... equally sized [diesel] hybrid and [natural gas] offer

similar emission level([s]’’).

28 See Michael Bologna, Chicago Announces Plan to Convert Buses to

Low-Sulfur Diesel Fuel Prior to Deadline, Daily Environment Rep., Feb.

7, 2003, at A-7 (quoting Frank Kruesi, President of the Chicago Transit

Authority).

The Fleet Rules, however, prevent the use of the most

cost-effective alternatives, and foreclose the incentive for

technological advance, by limiting several important fleet

markets to vehicles that operate on natural gas. If the goal is

to achieve emissions reductions, this is not the vehicle mix

that the market would produce. As a panel of experts

studying the trade-offs between vehicles using diesel and

natural gas (or “compressed natural gas,” abbreviated to

“CNG” ) recently explained:

Both diesel and CNG are considered robust

technologies with reasonably quantified operation

and maintenance costs. However, the costs for CNG

engine technology are higher. Second, the

infrastructure requirements are different. ... CNG

infrastructure will require an overhaul after 20-30

years. ... [Diesel] infrastructure can be expected to

last decades longer.

FY 2003 Two Hundred Bus Procurement, Expert Panel

Report to the Massachusetts Bay Transport Authority, at 10-

11 (Oct. 2, 2002), http://www.dieselforum.org/resources/

MBTA.pdf (last visited Aug. 27, 2003); see also Jeffrey Ball,

Fuel for Debate: California’s Clean-Air Czar's Shift is New

Boost for Diesel, Wall St. J., Oct. 24, 2002 (Chairman of

CARB discussing the advantages of new diesel technology).

The Fleet Rules are a throw-back to earlier times, when

regulation was premised on slower technological progress

and assumed that “alternative fuels” were inherently cleaner,

along with the vehicles that operated on those fuels. The

rulemaking record in California even suggests that the Fleet

Rules were animated at least in part by an aversion to diesel

technology and have been supported by SCAQMD’s

dissatisfaction with the flexibility allowed in the CARB bus

regulations.2? The Fleet Rules do not give the covered transit

vehicle operators the option to purchase clean diesels.

Likewise, even when they do allow some conventionally-

fueled vehicle purchases, the Fleet Rules permit the purchase

of only a subset of the many different types of vehicles

allowed by the CARB rules, that are subject to EPA review.

In short, many vehicles certified by CARB as meeting all of

California’s emission requirements are unable to be

purchased by fleet operators, because of SCAQMD’s Fleet

Rules.

II. THE FLEET RULES ARE NOT SAVED BY ANY

EXPRESS OR IMPLIED RESERVATION OF

AUTHORITY TO LOCAL REGULATION.

The Fleet Rules regulate the purchase (and

concomitantly, if the English language is to have any

meaning, the “sale”) of new motor vehicles for purposes of

emissions control. For this reason, the Fleet Rules are

preempted by section 209(a), which covers “new motor

vehicles” and preempts any such condition precedent on

their “sale.” Moreover, for this same reason, SCAQMD has

no resort to the savings clause of the Clean Air Act or any

implied reservation of authority to local governments that

might be presumed.

The Clean Air Act expressly reserves certain local

authority over emission control with respect to motor vehicle

“use, operation, or movement” in section 209(d):

Nothing in this part shall preclude or deny to any

State or political subdivision thereof the right

29 See Transcript of Public Meeting, California Air Resources Board,

March 21, 2002, at 104 (test. of Henry Hogo, SCAQMD Assistant

Deputy Executive Officer) (“We are urging [CARB] to eliminate the

diesel path from the [CARB] transit bus rule.”), transcript at

www.arb.ca.gov/board/mt/mt032 102.txt (last visited Aug. 27, 2003).

otherwise to control, regulate, or restrict the use,

operation, or movement of registered or licensed

motor vehicles.

42 U.S.C. § 7543(d). The “natural implication” of such a

savings Clause is that state actions not covered by the savings

clause “are not saved.” Gade, 505 U.S. at 100 (plurality

opinion); cf. Geier, 529 U.S. at 868 (interpreting an express

preemption clause so that the savings clause would have

content). It is a court’s “duty ‘to give effect, if possible, to

every clause and word of a statute.’”” Duncan v. Walker, 533

U.S. 167, 174 (2001) (quoting United States v. Menasche,

348 U.S. 528, 538-539 (1955) (quoting Montclair v.

Ramsdell, 107 U.S. 147, 152 (1883)).

Construing this savings clause in tandem with the

preemption clause of section 209(a), the clear line drawn by

Congress is easy to discern: the federal government

regulates the emissions control requirements for new motor

vehicles until they are sold; following sale, the States and

their political subdivisions may regulate a vehicle’s “use,

operation, or movement.” Indeed, as EPA has explained and

courts have recognized, “the longstanding scheme of motor

vehicle emissions control has always permitted the states to

adopt in-use regulations—such as carpool lanes, restrictions

on car use in downtown areas, and programs to control

extended idling of vehicles—that are expressly intended to

control emissions.” Engine Mfrs. Ass'n v. EPA, 88 F.3d

1075, 1094 (D.C. Cir. 1996).3°

30 Even within the ambit of section 209(d), however, states and localities

must give a wide berth to the preemption provision in section 209(a).

For example, rules cannot be imposed after the sale of vehicles that

would have the effect of “circumvent[ing] ... the Clean Air Act and ...

defeat[ing] the Congressional purpose” of section 209(a). Allway Taxi,

Inc. v. City of New York, 340 F. Supp. 1120, 1124 (S.D.N.Y.), aff'd, 468

F.2d 624 (2d Cir. 1972).

Such in-use vehicle regulations are common to most

metropolitan vehicle owners and their use has in some

instances been codified and mandated in various parts of the

Clean Air Act. The most important example of the

regulation of in-use vehicles is the inspection and

maintenance program (I/M) required in ozone nonattainment

areas by section 182(b)(4), 42 U.S.C. § 751 la(b)(4).*!

Similar coverage of registered vehicles is found in the

gasoline vapor recovery requirements of section 182(b)(3),

42 U.S.C. § 751 1a(b)(3), transportation controls imposed by

section 182(c)(5), 42 U.S.C. § 75lla(c)(5) and the vehicle

mile reduction requirements of section 182(d)(1), 42 U.S.C.

§ 751 la(d)(1). The conformity provisions of section 176(c),

42 U.S.C. §7506(c), require transportation plans and

programs to be consistent with a transportation emissions

budget for the aggregate emissions from motor vehicles in

the area covered by the state implementation plan. These

programs have characteristics common to all programs used

by states to control emissions from in-use vehicles. They

apply to all covered vehicles regardless of the emissions

measured as part of the engines original certification, and

they apply only to vehicles that have been purchased and

registered to consumers.3?

By contrast, the Fleet Rules regulate the sale of new

vehicles to privately-owned and privately-operated fleets,

—3! A more stringent enhanced I/M program is required in serious or

worse ozone nonattainment areas by section 182(c)(1), 42 U.S.C.

§ 751 la(c)(1), and in moderate or worse carbon monoxide nonattainment

areas with a design value greater than 12.7 parts per million by section

187(a)(6), 42 U.S.C. § 7512a(a)(6). See generally Arnold W. Reitze, Jr.,

Federalism and the Inspection and Maintenance Program Under the

Clean Air Act, 27 PAC. L.J. 1461 (1996).

32 See generally Arnold W. Reitze, Jr., Transportation-Related Pollution

and the Clean Air Act's Conformity Requirements, 13 NAT. RESOURCES

& ENv’T 406 (1998).

and therefore are unlike any traditional local regulation of

motor vehicles. SCAQMD can point to no in-use motor

vehicle control programs regulating the private purchase or

sale of any classes of vehicles based on their potential

emissions. A local government prohibition on purchasing

certified vehicles is wholly inconsistent with existing or

traditional in-use programs.

For this reason, the district court and the Ninth Circuit

made a fundamental error by invoking a “presumption

against preemption” in support of the Fleet Rules. While

there is a tradition of the States regulating the use, operation

and movement of motor vehicles, there is mo such tradition

of States, much less local governments, regulating the

performance and design of mew motor vehicles for purposes

of emissions control. There is, however, over 35 years of

extensive federal regulation of new vehicle emissions.

Because the Fleet Rules, which are far from a traditional

exercise of local police power, reach into “an area where

there has been a history of significant federal presence,” an

“{a]jssumption of nonpreemption is not triggered.” See

United States v. Locke, 529 U.S. 89, 108 (2000) (internal

quotation and citation omitted; see also Buckman Co. v.

Plaintiffs’ Legal Comm., 531 U.S. 341, 347 (2001) (rejecting

presumption against preemption).

The district court and Ninth Circuit framed SCAQMD’s

police power at a level of generality so high as to be

unrebuttable—i.e., protecting health and safety. As the

Ninth Circuit would have it, there is a presumption against

preemption so long as California, or merely a locality within

California, can assert that its regulations are protecting

public health and safety. Such a non-textual presumption is

virtually limitless. It is also irreconcilable with this Court’s

precedent.

At such a level of generality, the presumption against

preemption surely would have applied in Locke, where the

State of Washington was protecting the safety of Puget

Sound. The presumption should also have been applied in

Buckman, where fraud on the Food and Drug Administration

would affect health and safety. Yet in both Locke and

Buckman, this Court squarely rejected construing the

presumption against preemption so_ broadly. More

significantly, this Court applied no presumption against

preemption in Geier v. American Honda in holding that state

regulation of the safety features of new motor vehicles, in

effect a state tort law requirement mandating air bags, was

preempted.

The district court and the Ninth Circuit failed to

recognize that traditional, local regulation of motor vehicles

for purposes of emissions control has been limited to

regulation after vehicles have been sold. The regulation of

the performance and design of new motor vehicle emissions

control has for more than three decades been a federal

program, and until SCAQMD’s Fleet Rules, it has never

been a local program. There is no textual support in the

Clean Air Act for the Fleet Rules, and there is likewise no

basis for a non-textual presumption in their favor.

CONCLUSION

Because the Fleet Rules violate the plain text and

structure of section 209 of the Clean Air Act, including the

Clean Air Act’s express preemption clause, and frustrate

over 35 years of federal regulatory history, the Fleet Rules

are preempted and the decision of the Ninth Circuit should

be reversed.

Respectfully submitted,

PROF. ARNOLD W. REITZE, JR.

Counsel of Record

MCGLINCHEY STAFFORD, PLLC

6022 Munson Hill Road

Falls Church, VA 22041

(202) 994-6908

Counsel for Amici Curiae

JULIE C. BECKER

ALLIANCE OF AUTOMOBILE

MANUFACTURERS

1401 H Street, N.W., Suite 900

Washington, D.C. 20005

(202) 326-5511

Counsel for the Alliance of

Automobile Manufacturers

G. WILLIAM FRICK

RALPH COLLELI, JR.

JANICE K. RABURN

AMERICAN PETROLEUM INSTITUTE

1220 L Street, N.W.

Washington, D.C. 20005

(202) 682-8000

Counsel for American Petroleum

Institute

STUART A. C. DRAKE

Eric B. WOLFF

KIRKLAND & ELLis LLP

655 Fifteenth Street, N.W.

Suite 1200

Washington, D.C. 20005

(202) 879-5000

Counsel for Amici Curiae

CHARLES H. LOCKWOOD, II

ASSOCIATION OF INTERNATIONAL

AUTOMOBILE MANUFACTURERS

1001 19th Street North, Ste. 1200

Arlington, VA 22209

(703) 525-7788

Counsel for Association of

International Automobile

Manufacturers

PETER K. WELCH

CALIFORNIA MOTOR CAR DEALERS

ASSOCIATION

915 L Street, Suite 1480

Sacramento,CA 95814

(916) 441-2599

Counsel for California Motor Car

Dealers Association

30 la

JAN S. AMUNDSON DOUGLAS I. GREENHAUS

QUENTIN RIEGEL NATIONAL AUTOMOBILE DEALERS |

NATIONAL ASSOCIATION OF ASSOCIATION

MANUFACTURERS 8400 West Park Drive

1331 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

(202) 637-3000

Counsel for National Association of

Manufacturers

ROBERT G. SLAUGHTER

NATIONAL PETROCHEMICAL &

REFINERS ASSOCIATION

1899 L Street, N.W., Suite 1000

Washington, D.C. 20036

(202) 457-0480

Counsel for National Petrochemical

& Refiners Association

August 29, 2003

McLean, VA 22102

(703) 821-7000

Counsel for National Automobile

Dealers Association

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY WASHINGTON, D.C. 20460

OFFICE OF

GENERAL COUNSEL

SEPT. 15 1999

Honorable Thomas F. Reilly

Attorney General

Commonwealth of Massachusetts

200 Portland Street

Boston, MA 02114

Dear Attorney General Reilly:

Thank you for your letter dated January 28, 1999,

requesting the Agency’s opinion regarding questions raised

by the court in American Automobile Manufacturers

Association, et al. v. Massachusetts Department of

Environmental Protection, 163 F.3d 74 (1st Cir. 1998). EPA

has reviewed this matter with particular concern for ensuring

that states are provided continued flexibility in reducing

emissions from automobiles and encouraging innovation in

automobile design

As explained more thoroughly in the accompanying

document, given the unique facts of this case and the

language and intent of the Clean Air Act (the Act), EPA

believes that Massachusetts’s regulations requiring delivery

of Zero Emission Vehicles (ZEVs) in Massachusetts from

1998-2000 are not preempted under the Act. Congress

sought to ensure that other states may benefit from steps

taken by California to achieve cleaner cars. First, we believe

that Massachusetts’s ZEV mandate is a standard subject to

the identicality restrictions of the Act. That said, given the

unique factual circumstances surrounding these MOAs, EPA

believes that the provisions of the MOAs requiring the

placement of ZEVs in California should as well be

considered standards adopted by California for purposes of

section 177 and 209(a). Though the MOAs on their face are

non-regulatory contractual agreements, the background for

the MOAs indicate that they grew directly out of the ZEV

regulatory requirements that were in place for the 1998-2002

model years prior to California removing them and were

intended to stand in the place of and perform the function of

these regulatory requirements, albeit with certain changes

(e.g., the number of vehicles affected). Given these facts,

EPA believes that state attempts to duplicate the MOAs in

regulations should not be preempted by the Act.

EPA does not believe that voluntary agreements between

states and manufacturers are generally preempted under

section 209. EPA believes that California plays a very

important role in promoting the development and sale of

clean automotive technology, and that voluntary

nonregulatory agreements are a valid tool to implement this

role. Such agreements would not [2]normally be treated as

standards for purposes of sections 209 and 177. However,

under the unique factual circumstances of this case, EPA

believes it is appropriate to consider these specific MOAs as

standards adopted by California, which Massachusetts may

then adopt under section 177.

Thank you again for your letter. If you have any

questions regarding the enclosed response, please call me at

(202) 260-8040.

Sincerely,

. ——s + ama ae

Gary S. Guzy

General Counsel

Robert Perciasepe

Assistant Administrator

Office of Air and Radiation

cc: Julie Becker, Alliance of Automobile Manufacturers

Kathleen C. Walsh, California Air Resources Board

[1 | OPINION ON ISSUES RAISED BY AAMA vy.

MASSACHUSETTS DEP

By letter dated January 28, 1999, Mr. Thomas F. Reilly,

the Attorney General of Massachusetts, requested the

Agency’s opinion regarding questions raised by the U.S.

Court of Appeals for the First Circuit in the case American

Automobile Manufacturers Assn v. Massachusetts Dept of

Environmental Protection, 163 F.3d 74 (1st Cir. 1998). That

case involves a challenge by automobile manufacturers to

Massachusetts’s zero emission vehicle (ZEV) production

requirement for calendar years 1998-2000. Massachusetts’s

ZEV mandate for model year 2003 and beyond is not at

issue. The Court’s opinion, dated December 29, 1998,

specifically directed Massachusetts to seek the Agency’s

opinion on these questions. The Court stayed proceedings in

the case for 180 days to allow time for the Agency to provide

its opinion. On July 7, 1999, the court, pursuant to a request

from EPA, stayed further proceedings until September 15,

1999. If EPA does not issue any opinion by that date, the

Court said it would decide the issues without EPA guidance.

The letter requests EPA’s opinion regarding whether

Massachusetts’s ZEV production requirement is preempted

under the Clean Air Act. The ZEV requirement mandates

that the seven largest automobile manufacturers produce for

sale specific numbers of ZEVs in the 1998-2000 calendar

years. The Court ruled that EPA has primary jurisdiction

over the issues,' which arise under sections 209 and 177 of

' Primary jurisdiction is “a doctrine specifically applicable to claims

properly cognizable in court that contain some issue within the

special competence of an administrative agency. It requires the court

to enabie a ‘referral’ to the agency, staying further proceedings so as

to give the parties reasonable opportunity to seek an administrative

ruling.” /d. at 81, quoting Reiter v Cooper, 507 U.S. 258, 268 113 S.

Ct. 1213 (1993).

the Clean Air Act. The Court also indicated that it expected

to give deference to EPA’s view on these issues.

EPA believes that, given the text and the underlying

goals of the statute and in light of the unique facts of the

case, Massachusetts’s ZEV requirement should not be

preempted. EPA believes that this interpretation ensures that,

under similar circumstances, states will be able to implement

the emission control standards in effect in California, as

contemplated by section 177 of the Act.

I. Background -

A. tutory Provisions

The Clean Air Act generally prevents states from

enacting their own emission control programs for new motor

vehicles. Section 209(a) of the Clean Air Act (CAA or the

Act), 42 U.S.C. § 7543(a), prohibits states from “adopt[ing]

or attempt[ing] to enforce any standard relating to the control

of emissions from new motor vehicles...” Also, “[njo State

shall require certification, inspection, or any approval related

to the control of emissions from any new motor [2] vehicle ...

as conditions precedent to the initial sale, titling ... or

registration of such motor vehicle...”

There are, however, two exceptions to this general rule.

First, when Congress enacted the section 209(a) prohibition

in 1967, it recognized that California has special air quality

needs justifying a new motor vehicle emission control

program more stringent than the federal program, and that

California has been the trailblazer in requiring stringent

emission controls for motor vehicles. S. Rep. No. 403, 90th

Cong., Ist Sess. 33 (1967). Therefore, Congress at the same

time enacted section 209(b), which allows California,

pursuant to a waiver granted by EPA, to enact its own motor

vehicle program, as long as it is at least as stringent, in the

aggregate, as the federal program and is technologically

feasible given leadtime and cost.

Second, in 1977, Congress enacted CAA section 177, 42

U.S.C. § 7507, which allows other states to enact regulations

controlling emissions from new motor vehicles, but only if

the state standards are identical to California’s standards

controlling motor vehicle emissions. This provision allows

other states to control emissions from new motor vehicles

without requiring motor vehicle manufacturers to comply

with a patchwork of different state standards. See Motor

Vehicle Manufacturers Ass'n v. New York; 17 F. 3d 521, 527-

28 (2nd Cir. 1994). Under section 177, as amended in 1990:

Notwithstanding section 209(a), any State which has plan

provisions approved under this part may adopt and enforce

for any model year standards relating to control of emissions

from nf@wsmotor-vehicles ... if

(1) such standards are identical to the California

standards for which a waiver has been granted for such

model year, and

(2) California and such State adopt such standards at least

two years before commencement of such model year ....

Nothing in this section or in title II of this Act shall be

construed as authorizing any such State to prohibit or limit,

directly or indirectly, the manufacture or sale of a new motor

vehicle. . . that is certified in California as meeting California

standards, or to take any action of any kind to create, or have

the effect of creating, a motor vehicle . . . different than a

motor vehicle . . . certified in California under California

standards (a “third vehicle”) or otherwise create such a “third

vehicle.”

B. Regulatory Back d

In 1990, California adopted regulations establishing a

Low Emission Vehicle (LEV) program, which requires

automobile manufacturers (“manufacturers”) to meet

progressively more stringent automobile standards beginning

in model year 1994. The LEV program provides that

manufacturers must build vehicles that meet one of several

sets of standards (i.e. “Tier | vehicles,” Transitional Low

Emission Vehicles (TLEVs), Low Emission Vehicles

(LEVs), Ultra Low Emission Vehicles (ULEVs) and Zero

Emission Vehicles (ZEVs)) and that manufacturers’ fleets for

each model year must meet a fleetwide non-methane organic

gases (NMOG) emission [3] average, which becomes

progressively more stringent each year. The LEV program

also initially included a provision requiring that, beginning in

model year 1998, two percent of all automobiles offered for

sale by manufacturers in any model year must be ZEVs. This

percentage increased to five percent in model year 2001 and

to ten percent in model year 2003. The only vehicles that can

meet this requirement using current technology are electric

vehicles. In January, 1993, EPA granted California’s request

for a waiver of preemption under CAA section 209(b) for its

LEV program, including the ZEV provisions,

Following California’s adoption of its LEV program,

New York and Massachusetts adopted state motor vehicle

requirements that mirrored the California LEV program,

including the ZEV provisions, under CAA section 177.

Manufacturers sought judicial review of the New York and

Massachusetts requirements, claiming the regulations were

preempted under the Clean Air Act. Manufacturers argued,

among other things, that the states’ adoption of California’s

ZEV mandate violated: 1) section 177’s requirement that

state regulations not limit the sale of California vehicles; and

2) section 177’s “third vehicle prohibition.” In both cases,

the courts found that the state programs were not preempted.

American Automobile Manufacturers Assn v. Greenbaum,

No. 93-10799-MA (D. Mass. Oct. 27, 1993),? aff'd 31 F. 2d

2 The court in the Massachusetts case did not make a final ruling, but

denied manufacturers’ motion for a preliminary injunction on Counts

1 through 4 of their complaint, which are not directly related to

(Continued...)

18 (Ist Cir. 1994); Motor Vehicle Manufacturers Assn v. New

York, 17 F. 3d 521 (2nd Cir. 1994); Motor Vehicle

Manufacturers Assn v. New York, 79 F. 3d 1298 (2nd Cir.

1996). The Court in the New York case dealt specifically

with the manufacturers’ claims against New York’s ZEV

mandate, and found that the New York’s ZEV production

requirement did not violate the “sales limitation” or “third

vehicle” prohibitions of section 177 because New York’s

ZEV requirement was identical to California’s ZEV

requirement. Motor Vehicle Manufacturers Ass'n v New

York, 17 F. 3d at 536-538. EPA filed amicus briefs

defending the New York and Massachusetts programs in

these cases.

However, in 1997, California deleted the ZEV sales

requirement from its regulations for all model years prior to

2003. At approximately tie same time, California signed

seven Memoranda of Agreement (MOAs) with the largest

manufacturers: In the MOAs, the manufacturers agreed to a

demonstration program under which manufacturers would

place in California substantially fewer numbers of ZEVs

from calendar years 1998 to 2000 than were required under

the initial regulations. The manufacturers agreed to place a

combined total of 750 ZEVs in California in 1998 and a

combined total of 1500 ZEVs in California in both 1999 and

2000. No ZEVs were required in calendar years 2001 and

2002. California agreed in the MOAs to provide a certain

amount of infrastructure and support to facilitate the use of

ZEVs. Manufacturers also agreed to provide LEVs

nationwide under the National Low Emission Vehicle

(NLEV) program. Manufacturers are subject to potentially

severe penalties, through liquidated damages, if they fail to

manufacturers’ issues regarding the ZEV mandate, based on the

“strong showing on the merits” by Massachusetts. /d, slip op. at 26.

comply with the MOA. For example, a complete failure to

implement the [4] MOA could lead to a penalty equal to a

manufacturer’s pro-rata share of $100,000,000° The

determination of whether a breach has occurred is determined

initially by the Executive Officer for California’s Air

Resources Board (CARE), with de novo review by the Board,

and then de novo review in state court. There are no similar

provisions for a breach by California. These MOAs were not

codified into California’s regulations and were not submitted

to EPA fora waiver. —

Following California’s deletion of its ZEV mandate

between 1998 and 2002, Massachusetts revised its own ZEV

requirements for those years to require that manufacturers

deliver in Massachusetts the number of ZEVs each

manufacturer agreed to “place” in California under the seven

MOAs. Massachusetts also enacted certain reporting

requirements related to placement of ZEVs_ in

Massachusetts.4

sd Litigation

AAMA sued Massachusetts in the Federal District Court

in Massachusetts, claiming that Massachusetts’s ZEV

requirement is an emission standard prohibited by CAA

3 Bach manufacturer’s pro-rata share, based on historical share of the

California market, is defined in the MOAs.

4 New York, on the other hand, did not revise its ZEV mandate,

continuing to require two percent of manufacturers’ vehicles to be

ZEVs in the 1998-2000 model years. Manufacturers brought a new

challenge to New York’s ZEV requirement based on the fact that it

was no longer identical to California's requirement and therefore

violated section 177. The Second Circuit found that the New York

ZEV mandate was preempted. American Automobile Manufacturers

Ass'n v. Cahill, 152 F. 3d 196 (2nd Cir. 1998) (“Cahill’).

10a

section 209(a) and is not permitted by CAA section 177.

AAMA claims that the California MOAs are not “standards”

as that term is used in sections 177 and 209 of the CAA, but

rather contractual agreements. AAMA claims that since

Massachusetts’s ZEV production requirement is a state

standard prohibited under section 209(a) and since it is not

identical to any California standard, it is not authorized by,

section 177. AAMA also claims that even if the MOAs are

standards, California has never asked for or received a waiver

for them, so Massachusetts’s ZEV mandate is not identical to

any California standard for which a waiver had been granted.

Finally, AAMA claims that the Massachusetts sales

requirement is not identical to the MOAs because it did not

contain the reciprocal obligations that California had obliged

itself to meet under the MOAs, and Massachusetts had not

changed the sales requirements in the MOAs to take account

of the smaller number of vehicles sold in Massachusetts

compared to California.

Massachusetts claims that its ZEV mandate is not

preempted because it is not a “standard” under section 177

but is instead an “enforcement mechanism” related to the

LEV standards, which, Massachusetts claims, need not be

identical to California standards under section 177.

Alternately, Massachusetts claims that if a ZEV mandate is a

standard, it is a standard whether it is in regulations, as in

Massachusetts, or in MOAs, as in California. Thus,

California’s ZEV [5] requirements would also be standards

and Massachusetts’s ZEV regulations would be identical to

them. Massachusetts claims that its failure to incorporate

California’s obligations do not render its standards non-

identical because the automobile manufacturers’ obligations

under the MOAs are not dependent on California’s

obligations. Moreover, Massachusetts claims that California

does not need to receive a separate waiver from EPA for the

MOAs because they are within the scope of the previous

waiver granted to California for its LEV program.

}

lla

l. The Decision of the District Court

The District Court found that Massachusetts’s ZEV

mandate was preempted by the CAA, because it “does not

adopt a standard identical to California law, or enforce such a

standard.” American Automobile Manufacturers Ass 'n Vv.

Massachusetts Dept of Environmental Protection, 998 F.

Supp. 10, 18 (D. Mass. 1997) (“AAMA I’). The Court found

that California’s MOAs were not standards because they

were voluntary agreements. The Court stated that

Massachusetts’s mandate violates the “identicality” provision

because it “adopts or enforces” a standard in 1998 (i.e. the

production of ZEVs) that California does not require until

2003. Though the Court did not specifically decide whether

the ZEV mandate is itself a standard, the court found that the

Massachusetts ZEV mandate was preempted. Massachusetts

appealed.

2. The Decision of the Court of Appeals

The Court of Appeals for the First Circuit found that

many of the issues raised by the case, including the issue of

whether the ZEV mandate and the MOAs are “standards,”

are within EPA’s primary jurisdiction and would benefit

from EPA’s “deep familiarity with the CAA and the public

policy considerations that underlie these statutory

provisions.” American Automobile Manufacturers Ass'n v.

Massachusetts Dept of Environmental Protection, 163 F. 3d

74, 83 (1st Cir. 1998) (“AAMA IT’).

The court further determined that the statutory

interpretations of these provisions “lend themselves to

competing interpretations ... and that both are sufficiently

reasonable that we would be bound by Chevron to defer to

the EPA’s choice of either one.” /d., at 83.

The court gave Massachusetts 180 days to obtain a ruling

from the EPA on these issues, providing a deadline of June

27, 1999. The court said it would decide the issues without

12a

EPA’s guidance if EPA did not provide its opinion by that

date.°

D. Administrative Proceedings

On March 26, 1999, EPA published a notice in the

Federal Register requesting comment from the public on the

letter from the Massachusetts Attorney General. The period

for comment [6] ended on April 26, 1999. EPA received

detailed comments from Massachusetts and New York

supporting Massachusetts’s ZEV requirements and detailed

comments from California and the Alliance of Automobile

Manufacturers/Association of International Automobile

Manufacturers against the ZEV requirements. EPA also

received several more summary comments from other parties

either supporting Massachusetts or the automobile

manufacturers.

On June 24, 1999, in a letter from Robert Perciasepe,

Assistant Administrator for Air and Radiation to Attorney

General Thomas F. Reilly, EPA notified Massachusetts that

it was having difficulty meeting the deadline of June 27,

1999 set by the court and anticipated issuing its response by

early September. EPA requested that Massachusetts inform

the court and inquire whether answering the court’s questions

in this time frame is acceptable. Massachusetts provided this

letter to the court. On July 7. 1999, the court granted the

request for additional time, providing EPA until September

15, 1999 to respond to the court’s questions.

Il. Analysis

There is a two-step analysis to determine whether the

Massachusetts ZEV mandate is preempted by the Clean Air

5 As earlier noted, pursuant to EPA request, the court has now

extended the deadline to September 15, 1999.

l3a

Act. The first issue is whether the regulation is, as a

preliminary matter, prohibited under section 209(a) of the

Act. If the regulation would be so prohibited, the next issue

is whether the provisions of section 177 nonetheless permit

the regulation. With regard to Massachusetts’s ZEV

mandate, the court answered the first issue and therefore did

not refer it to EPA. Thus this document focuses principally

on the second issue.

A. Does Section 209(a) Preempt the

Massachusetts ZEV Mandate?

The First Circuit ruled that whether the ZEV sales

requirement is a standard or an enforcement procedure, it is

preempted by section 209(a). This is based on the clear

language of section 209(a), which forbids states from

“adopt[ing] or attempt[ing] to enforce any standard.” Thus,

whether the ZEV mandate is itself a standard, as

manufacturers claim, or is merely a mechanism for enforcing

the other LEV standards, as Massachusetts claims, it is

subject to the preemption provisions of section 209(a).

AAMA II at 83. EPA agrees with the court’s reasoning on

this issue.

B. Does Section 177 Override Section 209’s

Preemption as to the Massachusetts ZEV

Mandate?

State measures that would otherwise be preempted under

section 209 are nevertheless permitted under section 177 if

state standards for a particular model year are identical to

“California standards for which a waiver has been granted for

such model year” and if the standards were adopted at least

two years before the model year begins. However, state

regulations cannot “limit ... the manufacture or sale of a new

motor vehicle ... that is certified in California” or “have the

effect of creating, a motor vehicle ... different than a motor

vehicle ... certified in California under California standards (a

14a

‘third vehicle’) or otherwise create such a [7] third vehicle.”

For purposes of this analysis, the key issue regarding

Massachusetts’s ZEV mandate is whether the mandate is

subject to the “identicality” criterion and, if so, whether it

meets that criterion.®

l. Is the ZEV mandate subject to the

identicality provision?

The first question is whether Massachusetts’s mandate is

subject to the identicality requirements of section 177.

Massachusetts argues that the ZEV mandate is not subject to

the identicality requirement because the identicality

requirement applies only to standards and the ZEV mandate

is not a standard, but an enforcement procedure. The

manufacturers, on the other hand, argue that the ZEV

mandate is a standard, and thus is covered by the identicality

requirement. They also argue that the identicality

requirement applies in any case to enforcement procedures,

but they claim in their comments that EPA need not resolve

that issue in this proceeding.

Is the Massachusetts ZEV Mandate a Standard?

i. Comments

Massachusetts argues in its comments that the ZEV

mandate is not a standard relating to the control of emissions

from new motor vehicles. It claims that the ZEV mandate

has only a negligible impact on emissions. The purpose of

the mandate is not to reduce emissions directly, but to create

the conditions necessary for the implementation of the ZEV

mandate in 2003. Massachusetts also states that the ZEV

mandate is not a “quantitative standard” and should not be

a ae oo

15a

considered an emissions standard, citing Adamo Wrecking

Co. v. U.S., 434 U.S. 275, 285-89 (1978).’? Massachusetts’s

comments are echoed by New York. New York claims that

the ZEV mandate does not rise to the level of a standard but

instead helps enforce compliance with the other standards in

the LEV program. New York cites Motor and Equipment

Manufacturers Association v. EPA, 627 F. 2d 1095 (D.C. Cir.

1979) (“MEMA”). In that case, the D.C. Circuit describes

standards as regulations involving “quantitative levels of

emissions” and measures that directly address air quality.

Id., at 1112-1113. New York claims that the ZEV

requirement does not directly address air quality.

Automobile manufacturers argue that the ZEV mandate is

a standard. They note that the 2nd Circuit has already found

New York's ZEV mandate to be a standard. Further, they

claim that the MEMA decision supports their argument

because the ZEV mandate does affect emissions, in that it

reduces levels of nitrogen oxides (NOx), carbon monoxide

(CO), and evaporative [8] hydrocarbons (HCs). The

manufacturers state that EPA has previously recognized that

the ZEV mandate imposes direct air quality controls that are

separate and distinct from the NMOG fleet average. 59 Fed.

Reg. at 48,592 (Sept. 22, 1994) (Supplemental Notice of

Proposed Rulemaking, Ozone Transport Commission LEV

Program).

The manufacturers argue that the most simple standard

requires 100% compliance, but a standard is no less a

standard merely because it requires only a portion of the fleet

to comply. They note that section 202(g) of the Act clearly

7 The court in that case found that the term “emission standard” under

section 112 of the Clean Air Act, as in effect prior to 1977, was

distinguishable from “design, equipment, work practice or

operational standard(s)." /d.

16a

states that the Tier I “standards” include both the emission

levels and the phase-in associated with those levels.

Further, the manufacturers claim that as a practical

matter, if state sales requirements need not be identical to

California sales requirements, EPA will be giving other states

more power than California, because they could then freely

decide the number of clean vehicles sold in the state without

having to get any approval from EPA regarding stringency or

consistency with section 202(a), which are criteria that

California must meet under section 209(b). According to the

manufacturers, this is contrary to the intent of Congress in

enacting section 177, which was to allow states to get needed

emission reductions while not causing undue burden on

manufacturers, which would occur if each state were allowed

to pick its own production requirements. Manufacturers

claim that allowing states to adopt their own ZEV mandates

could create the “anarchic patchwork” that concerned

Congress and the court in MEMA. Id., at 1109.

On this issue, the state of California provided comments

similar to those of the manufacturers.

ii. Analysis

EPA believes that the most appropriate interpretation of

the language and policy goals of the statute is that

Massachusetts’s ZEV mandate is a standard for purposes of

sections 171 and 209.

The language of the Act contemplates that a standard, for

the purposes of sections 177 and 209, would include the

requirement to produce a certain number or percentage of

vehicles (“production requirement”) to meet a numerical

emissions limitation. The Clean Air Act does not define the

term “standard relating to the control of emissions from new

motor vehicles,” as found in sections 177 and 209. However,

in CAA section 202, which provides EPA’s authority for

promulgating standards applicable to emissions from motor

eee ee

17a

vehicles, the terms “standard” clearly encompasses both a

numerical emission limitation and the number of vehicles

that are subject to that limitation. For example, section

202(g), 42 U.S.C. § 7521(g), specifically requires EPA to

promulgate “standards” that “provide that emissions from a

percentage of each manufacturer’s sales volume ... shall

comply with the levels specified.” Similarly, many current

EPA motor vehicle regulations contain phase-in requirements

or fleet averages, which EPA has promulgated [9] under its

authority to issue standards under CAA section 202.° Part

and parcel of the standard-setting authority is the authority to

specify the number of vehicles produced by a manufacturer

that are subject to particular emission limits. The flexibility

to promulgate phase-ins, fleet standards, or a particular “mix”

of standards in a particular year is an important aspect of

EPA’s standard-setting authority. There is little reason to

believe that Congress intended a substantially different

interpretation of “standard” under section 209 than that under

section 202.

A numerical emission limit, by itself has no real meaning

absent a tie to the kind and number of motor vehicles to

which the limit applies. Setting the link between the

emission limit and the applicability of the limit to a particular

8 Percentage production requirements are similar to fleet average

emission standards. Such fleetwide standards can easily be

converted into percentage requirements, and vice versa. For

example, regulations that require 40% of vehicles to meet a | gram

standard and the rest to meet a 2 gram standard could easily be

rewritten as a fleetwide average of 1.6 grams, with two sets of

certification standards. EPA has already found that fleetwide

average emission standards are “standards.” See 62 Fed Reg. 31192,

31222 (June 6, 1997) (“the Agency may promulgate standards, such

as fleet averages [and] phase-ins, that are fulfilled through

compliance over an entire fleet, or a portion thereof, rather than

through compliance by individual vehicles.”)

18a

number of vehicles is an inherent part of the standard setting

process. This process specifies the level of emissions or

emissions reductions that is expected from a manufacturer

and establishes the amount of emissions reductions expected

from the standard setting process. If a production

requirement, sucn as the ZEV mandate, is not considered part

of the standard itself, then compliance with a standard (i.e.,

the numerical emission limitation) would be disconnected

from the obligation to build cars to meet the standard. This

could lead to emission standards that have no air quality

benefit at all.

This combination of an emissions limit and a requirement

to produce vehicles meeting that limit is key to evaluating

certain central issues in standard setting. For example,

consideration of cost, availability of technology, and

resulting emissions reductions all require that both the

numerical limit and the applicability of the limit be

considered. EPA’s obligation to consider these factors in

setting emissions standards, and in considering California’s

requests for waivers from preemption under section 209(b),

indicates that the requirement to produce vehicles is in fact

part of the emission standard. See sections 202(a), 209(b),

213(a)(3), (4) and (5). For example, under section 209(b),

EPA must determine whether California is arbitrary in its

determination that its standards are “in the aggregate, at least

as protective of public health ‘and welfare as applicable

Federal standards.” It would be difficult for EPA to make

such a determination if it did not review the obligation of

manufacturers to build their vehicles, or a portion of their

vehicles, to meet California’s standards.

Enforcement provisions, by contrast, are designed not to

provide a certain level of emission reductions directly, but

instead to ensure that the level of emissions reductions

expected from the standards actually occur. See Cahill, 152

F. 3d at 200. If all requirements considered to be

enforcement measures were deleted, and the manufacturers

19a

still complied with the [10] requirements considered to be

standards, emissions would still be reduced to the levels

expected when the standard was set. Since production

requirements directly affect the emission reductions from a

regulation, rather than ensuring that such reductions occur,

they should be seen as an inherent part of motor vehicle

emission standards, not enforcement provisions.

The policies underlying section 177 also indicate that the —

ZEV mandate should be considered a standard, because if

production requirements are not standards, then other states

could enact production requirements that were different from

California’s requirements substantially undercutting

Congress’s intent under section 177 to prevent manufacturers

from being required to build different vehicles for various

state programs. Section 177 was enacted to allow states to

require emission reductions from new moior vehicles without

causing vehicle manufacturers the undue burden of having to

meet different standards in different states.? California was

to be the model for all other states to follow. EPA could be

assured that state regulations were technologically feasible

and at least as stringent as federal regulations because EPA

would have already found California’s regulations to meet

those requirements under section 209(b).

However, if other states are not limited to the production

mandates in California’s regulations, this attachment to

California’s program would be diminished. California would

no longer be the model for state programs. Further, EPA’s

evaluation of California’s program under section 209(b)

9 See, e.g., 123 Cong. Rec. 17,765, 17,766 (June 7, 1977) (Statement

of Sen. Anderson regarding section later adopted) (“The language in

my amendment... would allow only the present two-car strategy to

extend to other States. .. No additional certification of different

kinds of cars will be required and no new standards will be created.”)

20a

might no longer be relevant for programs enacted by other

states. Since such states are not subject to EPA review under

section 177 or 209, states would be free, to create their own

programs without any oversight from EPA. Such states

would therefore have substantially more freedom than even

California to design their own motor vehicle programs.

Manufacturers could be forced to build different numbers or

percentages of vehicles to meet the requirements of different

states. For example, a state could turn a relatively slow

phase-in of a new standard under California’s requirements

into an immediate requirement for 100% compliance.

Because EPA’s review of California’s motor vehicle program

under section 209(b) presumed California’s slow phase-in,

the other state’s revised program with an immediate 100%

requirement would have escaped all EPA review, which may

lead to the enactment of an infeasible requirement in the

other state.

Massachusetts’s argument regarding the negligible

emissions impact of the ZEV mandate is unpersuasive. The

small effect on emissions is related only to the number of

ZEVs being required not to the issue of whether the mandate

is a standard. If a mandate requiring production of a small

number of ZEVs is not a standard, it is difficult to see why a

mandate for a larger number would be a standard. They are

the same type of regulation. In any case, the ZEV mandate

would clearly have an impact, however small, on emissions.

In particular, emissions [11] from those vehicles specifically

subject to the mandate would be substantially affected by the

mandate.

In fact, Massachusetts’s argument would allow a state to

impose the burden on industry that section 177 seeks to

avoid, while achieving little or none of the emissions benefits

contemplated by section 177. Massachusetts’s ZEV mandate

requires ZEVs to be delivered for sale in Massachusetts. But

for that mandate, manufacturers would not have to produce

any ZEV; for sale in Massachusetts from 1998-2000. If the

“Sas

2la

Massachusetts ZEV requirement is different from

California’s requirement, manufacturers would indeed be

subject to different production requirements in different

states. This could impose the kind of burden on industry that

section 177 was designed to prevent. However,

Massachusetts claims that the negligible emissions benefits

of the mandate should excuse Massachusetts from the

identicality requirement. Yet the purpose of section 177 is to

allow states other than California to obtain needed emission

reductions from vehicles.

Finding that the Massachusetts ZEV mandate is a

standard is also consistent with the view of the Second

Circuit, which reviewed virtually the same issue in Cahill. In

that case, the court ruled that New York’s ZEV mandate was

an emission standard. The court ruled that standards are

“regulatory measures intended to lower the level of auto

emissions, while ‘enforcement mechanisms’ describe

regulatory devices intended to ensure standards are effective.

... [T]he ZEV sales requirement must be considered a

standard ‘relating to the control of emissions.’ ZEV, after all,

stands for ‘zero-emission vehicle,” and a requirement that a

particular percentage of vehicle sales be ZEVs has no

purpose other than to effect a general reduction in

emissions.” /d. at 200.'°

10 The two cases cited by Massachusetts and New York are not helpful

to them. The MEMA case concerned an in-use compliance provision

that clearly was an enforcement treasure. The opinion contains dicta

that are helpful to either argument. Even assuming the Adamo case

was ever relevant to the determination of standard under Title II (as

the MEMA court suggests, 627 F.2d at 1112 n.35, the word

“standard” as used in Title II is distinguishable from its use in the

rest of the Act), it is no longer because Congress has legislatively

overruled Adamo twice, increasing the scope of the term “emission

standard” under section 112, and the rest of the Act, to include the

work practice requirements disallowed in Adamo. Compare section

(Continued...)

22a

EPA therefore believes that the Massachusetts ZEV

mandate is a standard for purposes of sections 177 and 209

and is subject to the “identicality provision” in section 177.!!

[12]

302(k), 42 U.S.C. §7602(k) as revised in 1990, to the same section

prior to 1990. See also CAA section 112(e)(5), 42 U.S.C. §

7412(e)(5), as in effect prior to 1990, which was enacted in 1979 as a

direct response to Adamo, 92 Stat. 3443, 3457.

'! The manufacturers also argue that even if the ZEV mandate is not a

standard, regulations other than standards are subject to the

identicality requirement under section 177. This issue is relevant not

only for evaluation of the ZEV production mandate, but for

evaluation of Massachusetts’s ZEV reporting requirements. In the

context of EPA’s conclusion with regard to the proper scope of

“standards” under sections 177 and 209, EPA disagrees with

manufacturers’ argument that requirements other than standards are

subject to the identicality requirement. In enacting sections 209 and

177, Congress was careful in its use of the terms “standards” and

“accompanying enforcement procedures.” See MEMA, 627 F. 2d at

1113. Within section 209, subsections (a), (b)(1)(C) and (e)(2)(B) all

specifically differentiate between standards and other types of

requirements, which would be unnecessary if standards were meant

to include other types of requirements. It is clear that Congress

understood the difference between these terms when it promulgated

section 177. Therefore, the fact that the identicality provision applies

on its face only to standards is strong evidence that requirements

other than standards are not covered by that requirement. The

Second Circuit reached this conclusion in Motor Vehicle

Manufacturers As,'n v. New York; 79 F. 3d 1298, 1305-06 (2nd Cir.

1996). The history of section 177 also supports this analysis. In

1990, Congress revised section 177 to prevent states from taking any

action to create a “third vehicle.” As the Second Circuit recognized

in Motor Vehicle Manufacturers Ass'n v New York, 17 F. 3d 521, 537

(2nd Cir. 1994), a clear purpose of this “third vehicle” prohibition

was to prevent states from administering and enforcing standards in

such a manner as to effectively require a third vehicle. If the

identicality requirement applied to enforcement procedures, the

“third vehicle prohibition” would be unnecessary, as identical

(Continued...)

ee —

i gre

23a

2. Is the ZEV mandate identical to a

California stan that has received a

waiver for the same model years?

(a) Are California’s MOAs

standards under sections 209

and 177?

i. Comments

Massachusetts argues that California’s MOAs are

regulations in all but name, and thus are standards under

section 209(a) regardless of form. According to

Massachusetts, the term “standards” can mean regulatory

standards or contractual standards. Massachusetts states that

the MOAs are one-sided and manufacturers pay a heavy

penalty (enforceable liquidated damages) for failure to

deliver, which indicates their similarity to regulatory

standards. Massachusetts claims that the MOAs are an

attempt by auto manufacturers to avoid regulation by states

other than California. Massachusetts claims that allowing

this type of contractual arrangement would [13] give

California unreviewable discretion to decide the scope of

enforcement procedures could never create a third vehicle.

Moreover, the legislative history of this 1990 amendment makes

clear that Congress intended states to retain their ability to enforce

California’s standards through regulations that need not meet the

identicality requirements of section 177. Statement of Sen. Baucus,

136 Cong. Rec. $16976 (Oct. 27, 1990) (noting that Congress

reaffirmed the pre-existing EPA position that state enforcement

procedures need not be identical to California’s). Moreover, as noted

by the Second Circuit, “it is understandable that Congress did not

limit states in this way -- enforcement techniques will necessarily

vary from state to state.” Motor Vehicle Manufacturers Assn v. New

York, 79 F. 3d at 1306.

24a

other states’ programs and urges EPA to close the door on

this device to prevent attacks on section 177.

New York echoes Massachusetts’s arguments, saying that

the MOAs undercut Congress’s framework under section 177

and saying that California has grossly abused its powers. -

California and the automobile manufacturers argue that

the MOAs are not standards and should not be subject to

preemption under section 209. They argue that Clean Air

Act section 302(k) defines an emission standard as a

“requirement established” by EPA or a state, thus implying

unilateral regulatory action, not contractual action. Section

209 speaks of “adopting” a standard, which also implies

regulatory action, not contractual action.

California and the manufacturers note that the MOAs are

contracts and were not adopted by regulation. They argue

that federal preemption of state action generally, and the

provisions of section 209 in particular, apply only to

regulations, and do not preempt a state’s ability to contract.

See Building and Construction Trades Council v. Associated

Builders and Contractors of Massachusetts, 507 U. S. 218,

226-27 (1993) and American Airlines Inc. v. Wolens, 513

U.S. 219, 229 (1995). These eommenters claim that the case

cited by the Ist Circuit, Wisconsin Dep't of Industry v.

Gould, 475 U.S. 282 (1986) is not on point because the

Supreme Court in that case invalidated a state statute, not a

contract

California and the manufacturers further argue that

Congress never contemplated that a voluntary agreement

between California and a manufacturer could be transformed

into a binding commitment unilaterally imposed by another

state. Section 209(a) was, they argue, designed to protect

manufacturers from being forced into a patchwork of

regulations, not to prevent voluntary actions. California and

other states have previously entered into settlement

agreements and other voluntary agreements similar to the

oS" o

25a

MOAs. According to California and the manufacturers, a

decision that California’s MOAs are covered by section 209

would preempt such voluntary agreements by all states.

California notes that EPA is not precluded from

reviewing California’s MOAs under the criteria of section

209(b) if the existence o f the MOAs calls California's

protectiveness finding into question. California also notes

that Congress specifically gave it extra powers because of its

unique air quality problems and its trailblazing in the

automobile emission control arena. California claims that the

spurring of technological development is one of its most

important functions in the Congressional scheme and will

ultimately help the whole country. According to California,

the MOAs, which create demonstration programs for

advanced technology ZEVs, are consistent with Congress’s

intent. The limited MOAs are, in California’s view, the best

way to introduce these ZEVs. The automobile manufacturers

claim that they need to focus their development efforts on

California projects without having to meet widespread

requirements in other states before they are ready for

commercial distribution. [14]

ii. Analysis

Given the unique factual circumstances surrounding these

MOAs, EPA believes that the provisions of the MOAs

requiring the placement of ZEVs in California should be

considered standards adopted by California for purposes of

section 177 and 209(a). Though the MOAs on their face are

non-regulatory contractual agreements, the background for

the MOAs indicate that they grew directly out of the ZEV

regulatory requirements that were in place for the 1998-2002

model years prior to California removing them and were

intended to stand in the place of and perform the function of

these regulatory requirements, albeit with certain changes

(e.g., the number of vehicles affected). Moreover, it appears

from the record that the MOAs were developed as

26a

contractual agreements, rather than regulatory standards, with

an intention from the manufacturers’ standpoint to limit the

ability of other states to adopt the new provisions, thus

effectively negating the will of Congress in enacting section

177.

EPA believes that in general, provisions in voluntary

agreements ordinarily should not be considered “standards”

subject to section 209(a). The language of the statute appears

to indicate that provisions in voluntary agreements should

not generally be considered standards under section 209. The

legislative history of section 209 also appears to indicate that

the prohibition in~section 209 is meant to apply to state

mandates (regulations and laws), not voluntary agreements.

See discussion, id. at 23.

Moreover, if production requirements in voluntary

agreements were generally preempted, then every such

requirement in agreements in every state would be

preempted. For example, any contractual agreement between

a state and manufacturers to sell low emission vehicles in the

state would be preempted. Since only California could

overcome preemption through section 209(b), such

agreements by all other states would violate the Clean Air

Act, unless the relevant provisions were identical to those

made by California. EPA believes it would be an

inappropriate interpretation of section 209(a) to treat all such

agreements as prohibited. Today’s decision is limited to the

unique circumstances of this case, and is not intended in any

way to extend the scope of section 209 beyond regulatory

requirements and the specific kind of circumstances

considered here.

Massachusetts, however, does not assert that all types of

agreements are per se preempted under section 209.

Massachusetts instead argues that the California MOAs are

really regulations in substance, and therefore are subject to

section 209 and contain standards that can be copied by other

27a

states. California, on the other hand, emphasizes the

“demonstration” aspects of the MOAs, and the fact that many

provisions in the MOAs, like California’s agreement to

facilitate infrastructure, are not elements that would normally

appear in state regulations.

EPA believes that the MOAs should be treated as

standards adopted by California, based on the circumstances

presented in this case. A binding regulatory requirement has

in effect been replaced by a binding contractual arrangement.

The contractual provisions address the same central issue of

ZEV production requirements. In this case, the record

indicates that the parties [15] intended these provisions to

perform the function and take the place of regulatory

revisions, with the attendant benefits to the parties of such

revisions. Absent the more stringent regulatory requirements

they replaced, the agreements arguably would not have been

entered into. Moreover, just as the mere fact that the

Massachusetts program involves only a small number of

vehicles is not relevant” to a determination whether that

program is a “standard” under the Act, the fact that

California asserts that it has created only a technology

demonstration program is not relevant to a determination

under section 209(a) regarding whether the program creates a

standard.

The potentially severe liquidated damages resulting from

a manufacturer’s failure to comply with the MOAs, the

manner in which such liquidated damages are decided (initial

determination from the CARB Executive Officer, and de

novo review by the Board, followed by de novo court review)

and the lack of similar provisions in case of breach by

California, perform the function of assessment of civil

penalties for breach of a regulatory requirement. These

contractual enforcement provisions provide an assurance to

California comparable to the preexisting regulatory

requirements. In addition, the MOAs were also entered into

with an intention by the manufacturers to limit the ability of

28a

other states to adopt the new provisions under section 177.

AAMA II, Brief for the Appellant, pp. 30-32; Letter from

Kathleen Walsh, General Counsel, California Air Resources

Board, to Jane Armstrong, Director, EPA Vehicle Programs

and Compliance Division, dated May 16, 1997 (Docket No.

A-99-08, Document No. II-D-04). These specific MOAs

function as, and should be treated for the purposes of sections

209 and 177 as, standards in the nature of revisions to the

preexisting regulatory ZEV mandate for the 1998-2002 time

frame.

EPA is also concerned that not treating these MOAs as

standards could encourage California and manufacturers to

implement many regulatory measures using this approach,

thereby both preventing other states from implementing such

measures and escaping EPA review under section 209. EPA

agrees with California that the latter concern is tempered

because California will ultimately need to show that its motor

vehicle regulatory program (i.e., those measures that are in

California’s regulations) is in the aggregate as stringent as

federal measures; however, even within that framework,

California and manufacturers would have considerable ability

to avoid the prescriptions of sections 209 and 177 through

voluntary agreements.

Many of the arguments raised by California and the

automobile manufacturers relate to the argument that

voluntary arrangements are generally not covered by sections

209 and 177. As indicated above, EPA agrees with

California and the manufacturers that generally such

arrangements would not be covered by those sections.

However, the unique circumstances of these MOAs clearly

indicate that despite the “form” of the documents as

contracts, the measures should be treated as standards

adopted by California for the purposes of sections 177 and

209. Moreover, the argument that this result is contrary to

the intent of Congress is not persuasive, given that Congress

clearly intended that other states should have the right to

29a

copy California’s motor vehicle standards, which is what

Massachusetts intended.

[16] Thus, given the facts of this case, for purposes of

CAA sections 209 and 177, the MOAs should be considered

standards adopted by California. Thus, Massachusetts may

use their existence to justify their ZEV standards under

section 177.

(b) Are Massachusetts Standards

Identical to California’s

i. Comments

Manufacturers claim that California bound itself to

infrastructure changes that are important for introduction of

ZEVs. These obligations are not in Massachusetts’s

regulations. Thus, the manufacturers claim _ that

Massachusetts’s regulations are in any case not identical to

the MOAs.

Massachusetts states in its brief that the obligations of

California are not “reciprocal” to manufacturers’

requirements because the obligations are not dependent upon

one another. Also, Massachusetts claims that CARB’s

obligations are not standards under sections 177 and 209.

ii. Analysis

EPA believes that Massachusetts’s standards are identical

to California’s standards. California’s commitments under

the MOAs are clearly not “standards relating to the control of

emissions from new motor vehicles” as that term is used

under sections 177 and 209. Nor are they pre-conditions

upon which the manufacturers’ obligations are dependent.

They are merely obligations regarding infrastructure that

apply to California, not the manufacturers.

By a Waiver?

i. Comments

Manufacturers argued in their brief that Massachusetts’

ZEV mandate is preempted because California has not

received, or even requested, a waiver for the ZEV mandate in

the MOAs. Manufacturers claim that Massachusetts may not

rely on the waiver for California’s pre-existing ZEV mandate

because California’s ZEV mandate for 1998-2002 has been

repealed and because Massachusetts’ ZEV mandate is “very

different” from the original mandate.

Massachusetts argued in its brief that the ZEV mandate in

the California MOAs is within the scope of the original

waiver granted for California’s ZEV mandate.

Massachusetts notes that California need not seek a new

waiver with respect to modification of standards for which

EPA has already granted a waiver if the modifications do not

undermine the initia] decision of the Agency. Massachusetts

claims that the relaxation of the ZEV mandate from the initial

waiver to the MOAs does not undermine the finding from the

initial waiver that California’s programs is “in [17] the

aggregate, at least as protective of public health and welfare

as applicable Federal standards’ because the vast majority of

the emissions reductions in the LEV program are accounted

for by the NMOG fleet average standards and the bin

structure of the regulations, not the ZEV mandate.

Massachusetts also notes that the relaxation of the ZEV

requirements make compliance easier, thus not implicating

the requirement of section 209(b) that California standards be

“consistent with section 202(a).” California states, without

analysis, its belief that if the ZEV provisions of the MOAs

were adopted as standards, they would be within the scope of

the previous waiver.

3la

ii. Analysis

EPA believes that the ZEV requirements in the MOAs

are within the scope of the original waiver granted for

California’s LEV program in 1993. EPA has long

recognized that once the Agency has granted a waiver of

preemption for a California regulation, revisions to that

regulation may be considered within-the-scope of the initial

waiver, and thus not require a new waiver, if the revisions 1)

do not undermine California’s determination that its

standards, in the aggregate, are as protective of human health

and welfare as comparable Federal standards; 2) are not

inconsistent with section 202(a) of the Act; and 3) raise no

new issues affecting the initial waiver.

Massachusetts is correct that the reduction in size of the

ZEV mandate from 1998-2002 does not undermine

California’s “in-the-aggregate” determination. The ZEV

mandate was responsible for only a small portion of the

emission reductions in the LEV program. The NMOG fleet

average, which remains in place, is responsible for the vast

majority of emission reductions from the LEV program.

EPA has received no information to indicate that the MOA

ZEV requirements would violate section 202(a) of the Act,

which deal with technological feasibility and lead time. As

Massachusetts notes, the fact that the MOA requirement

actually reduce significantly the requirement to produce

ZEVs in the 1998-2002 time frame, compared to the

requirements for which EPA has granted a waiver, indicates

that the requirements of section 202(a) have been met. Nor

does the new ZEV requirement raise any new issues affecting

the initial waiver, beyond the issues discussed above. EPA

will be providing a more detailed discussion of these issues

shortly in the context of its response to California’s request

for a within-the-scope determination of its revisions to its

LEV regulations. [18]

Ill. Conclusion

32a

For the reasons provided above, EPA believes that under

these unique circumstances, ‘‘Massachusetts’s ZEV mandate

is identical to a standard that California has adopted for

model years 1998-2000. It is therefore permitted under CAA

sections 209 and 177.!2

'2 On August 4, 1999, President Clinton signed Executive Order 13132

on federalism (“EO 13132”). 64 Fed. Reg. 43255 (Aug. 10, 1999).

EO 13132 is not effective until November 2, 1999; however, the

previous Executive Order on federalism, EO 12612, which is

revoked by EO 13132, remains in effect until that date. It is unclear

whether this document would be subject to EO 13132 or EO 12612

as a “policy that has federal implications” or an “action limiting the

policy discretion of the States.” See sections I(a) and 3(b) of both

orders. In any case, EPA has, consistent with section 3(a) of both

orders, closely examined the basis for the opinions contained in this

document, as provided above. The problems that led Congress to

enact sections 209 and 177, in particular, the need to protect

interstate commerce by preventing a patchwork of differing state

standards while ensuring the ability of states to enact motor vehicle

standards more stringent than federal standards, are clearly problems

of national significance, appropriate for national activity under

section 3(b) of both orders. EPA has also consulted with states, and

received comments from several states in the process of issuing this

document Section 4(c) of the orders indicates that executive

departments and agencies should restrict regulatory preemption of

state law to the minimum level necessary to achieve the objectives of

the statute. Consistent with section 4(c), the interpretations provided

in this document were developed with particular concern for ensuring

that preemption of state actions are minimized to the extent possible

to achieve the goals of the Clean Air Act.

=9(1640)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.