post-trial brief of plaintiff association …communityrights.org/pdfs/vt cars post trial brief assn...

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VERMONT

GREEN MOUNTAIN CHRYSLER-PLYMOUTH-DODGE JEEP, et al.,

Plaintiffs, Case Nos. 2:05-CV-302 and v. 2:05-CV-304 (Consolidated) GEORGE CROMBIE, in his official capacity as Secretary of the Vermont Agency of Natural Resources, et al.,

Defendants. THE ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS,

Plaintiffs, v. GEORGE CROMBIE, in his official capacity as Secretary of the Vermont Agency of Natural Resources, et al.,

Defendants.

POST-TRIAL BRIEF OF PLAINTIFF ASSOCIATION OF INTERNATIONAL

AUTOMOBILE MANUFACTURERS

RAYMOND B. LUDWISZEWSKI CHARLES H. HAAKE GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Avenue, N.W. Washington, DC 20036-5306 Telephone: (202) 955-8500 Facsimile: (202) 467-0539

Of Counsel

R. JEFFREY BEHM SHEEHEY FURLONG & BEHM P.C. 30 Main Street P.O. Box 66 Burlington, VT 05402-0066 Telephone: (802) 864-9891 Facsimile: (802) 864-6815

Attorneys for Association of International Automobile Manufacturers

Case 2:05-cv-00302-wks Document 478 Filed 06/15/2007 of 84

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TABLE OF CONTENTS

Page

I. INTRODUCTION ............................................................................................................... 1

II. THE AB 1493 REGULATIONS ARE EXPRESSLY PREEMPTED UNDER EPCA ................................................................................................................................... 3

A. EPCA’s Express Preemption Provision Evidences A Broad Preemptive Purpose..................................................................................................................... 4

B. The Evidence Demonstrates That The AB 1493 Regulations Are “Related To Fuel Economy Standards” ................................................................... 7

C. Carbon Dioxide Is Fundamentally Different From Other Motor Vehicle Emissions Because Of Its Direct Relationship To Fuel Economy .................................................................................................................. 16

D. The Credits For Air Conditioning And Alternative Fuels Do Not Defeat Express Preemption...................................................................................... 22

1. The Defendants’ Arguments Fail To Defeat Express Preemption As A Matter of Law.................................................................. 23

2. The Regulations’ Alternative Fuels Provisions Relate To Fuel Economy Because Alternative Fuels Are Regulated Under The Federal Fuel Economy Program .................................................................. 27

3. The Evidence Presented At Trial Established That The Alternative Compliance Options Do Not Provide Feasible Or Cost Effective Pathways To Compliance .................................................... 29

III. THE AB 1493 REGULATIONS ARE IMPLIEDLY PREEMPTED BECAUSE THEY CONFLICT WITH EPCA .................................................................... 36

A. Conflict Occurs Where A State Regulation Upsets The Balance Struck By Congress ............................................................................................................. 36

B. The Evidence Shows That The AB 1493 Regulations Conflict With EPCA’s Goals And Purposes................................................................................... 38

1. The AB 1493 Regulations Conflict With EPCA On Their Face Because They Set More Stringent Fuel Economy Standards And Are Structured Inconsistently............................................................... 39

2. The AB 1493 Regulations Conflict With EPCA With Regard To The State’s Consideration Of EPCA’s Statutory Criteria ...................... 44


Table of Contents (Continued)

Page

ii

IV. THE DEFENDANTS’ LEGAL ARGUMENTS DO NOT DEFEAT EXPRESS OR IMPLIED PREEMPTION........................................................................... 50

A. A Waiver Of Clean Air Act Preemption Under Section 209(b) Does Not “Federalize” The California Emissions Standard. ............................................ 52

1. The Defendants’ Argument Finds No Support In The Plain Language Of The Clean Air Act. ................................................................. 52

2. Legislative History of Section 209(b) Demonstrates That California Only Enjoys An Exception From Clean Air Act Preemption And Not The Power To Enact Federal Law. ............................ 55

3. Federal Precedent Holds That A California Regulation Waived Under Section 209(b) Is A State Regulation And Not Federal Law .............................................................................................................. 57

4. A Delegation of Authority To A State To Enact Federal Law Requires An Express Directive From Congress That Is Lacking Here.............................................................................................................. 58

B. EPA’s Consideration Of The Section 209(b) Criteria Cannot Result In A Waiver Of These Regulations In A Matter That Resolves Conflict With EPCA Even Considering Massachusetts v. EPA And Recent Federal Action On Global Warming........................................................................ 61

1. The Scope Of EPA’s Waiver Authority To Consider Conflicts With EPCA Is Irrelevant To The Issue Of Express Preemption.................. 61

2. The Waiver Standards Under Section 209(b) Of The Clean Air Act Are Entirely Different From The Factors NHTSA Weighs In Setting Fuel Economy Standards............................................................. 62

3. EPA Historically Has Viewed Its Waiver Authority To Be Modest In Scope And Limited To section 209(b) Considerations.............................................................................................. 65

4. Neither Massachusetts v. EPA Nor Executive Order 13432 Can Save These Regulations From Conflict Preemption.................................... 67

C. Section 32902(f) Of EPCA Does Not Have The Effect Of Federalizing A California Regulation........................................................................................... 70

V. CONCLUSION.................................................................................................................... 74


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TABLE OF AUTHORITIES

Page(s)

Cases

Bath Petroleum Storage, Inc. v. Sovas, 309 F. Supp. 2d 357 (N.D.N.Y. 2004)...................................................................................... 60

Cent. Valley Chrysler-Plymouth v. Cal. Air Res. Bd., No. CV-F-02-5017, 2002 U.S. Dist. LEXIS 20403 (E.D. Cal. June 11, 2002)........................ 24

Central Valley Chrysler-Jeep v. Witherspoon, 456 F. Supp. 2d 1160 (E.D. Cal. 2006) .............................................................................. 37, 54

Competitive Enter. Inst. v. Nat’l Highway Traffic Safety Admin., 956 F.2d 321 (D.C. Cir. 1992) .................................................................................................................................. 47

Conservation Law Foundation v. FERC, 216 F.3d 41 (D.C. Cir. 2000).................................................................................................... 71

Dist. of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125 (1992).................................................................................................................... 5

Edgar v. MITE Corp., 457 U.S. 624, 102 S. Ct. 2629, 73 L. Ed.2d 269 (1982)........................................................... 37

Egelhoff v. Egelhoff, 532 U.S. 141 (2001)............................................................................ 5, 6, 61

Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075 (D.C. Cir. 1996).................................................................................................. 56

Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246 (2004).................................................................................................................... 5

First Nat’l Life Ins. Co. v. Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546 (11th Cir. 1992) ................................................................................................ 36

Ford Motor Co. v. EPA, 606 F.2d 1293 (D.C. Cir. 1979)................................................................................................ 66

Gade v. Nat’l Solid Waste Mgmt. Ass’n, 505 U.S. 88 (1992)...................................................................................................................... 6

Geier v. Am. Honda Motor Co., 529 U.S. 861 (2000).................................................................................................................. 37

Gen. Elec. Co. v. N.Y. State Dep’t. of Labor, 936 F.2d 1448 (2d Cir. 1991) ................................................................................................... 24


TABLE OF AUTHORITIES (Continued)

Page(s)

iv

Getty v. Federal Sav. and Loan Ins. Corp., 805 F.2d 1050 (D.C. Cir. 1986)................................................................................................ 71

Hines v. Davidowitz, 312 U.S. 52 (1941)...................................................................................................................... 2

Int’l Harvester Co. v. Ruckleshaus, 478 F.2d 615 (D.C. Cir. 1973)............................................................................................ 62, 63

Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001).................................................................................................................. 24

Mackey v. Lanier Collection Agency & Serv., 486 U.S. 825 (1988).................................................................................................................. 61

Massachusetts v. EPA, No. 05-1120 (U.S. Apr. 2, 2007) .............................................................................................. 17

Michigan Canners & Freezers Ass’n., Inc. v. Agricultural Marketing & Bargaining Bd., 467 U.S. 461, 104 S. Ct. 2518, 81 L. Ed.2d 399 (1984)........................................................... 37

Morales v. Trans Word Airlines, Inc., 504 U.S. 374, 112 S. Ct. 2031, 119 L. Ed. 2d 157 (1992).......................................................... 5

Motor & Equipment Manufacturers Association, Inc. v. EPA, 627 F.2d 1095 (D.C. Cir. 1979)................................................................................................ 65

Motor and Equipment Manufacturers Association v. Nichols, 142 F.3d 449 (D.C. Cir. 1998).................................................................................................. 62

Motor Vehicle Mfrs. Ass’n v. N.Y. State Dep’t of Envtl. Conservation, 17 F.3d 521 (2d Cir. 1994) ................................................................................................. 55, 57

Napier v. Atlantic Coast Line R.R. Co., 272 U.S. 605 (1926).............................................................................................................. 6, 24

New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).............................................................................................................. 5, 27

Palmer v. Liggett Group, Inc., 825 F.2d 620 (1st Cir. 1987)..................................................................................................... 37

Perez v. Campbell, 402 U.S. 637 (1971).................................................................................................................... 6



Page(s)

v

Planned Parenthood Federation of America v. Heckler. 712 F.2d 650 (D.C. Cir. 1983).................................................................................................. 59

Public Citizen v. National Highway Traffic Safety Administration, 848 F.2d 256 (D.C. Cir. 1988).................................................................................................. 64

Strycker's Bay Neighborhood Council, Inc. v. Karlen, 444 U.S. 223 (1980).................................................................................................................. 72

Tyler v. Douglas, 280 F.3d 116 (2d Cir. 2001) ..................................................................................................... 71

U.S. v. Kingdom (U.S.A.), Inc., 157 F.3d 133 (2d Cir. 1998) ..................................................................................................... 71

United States Telecom Association v. FCC. 359 F.3d 544 (D.C. Cir. 2004)............................................................................................ 58, 59

United States v. Chrysler Corp., 591 F.2d 958 (D.C. Cir. 1979)............................................................................................ 53, 57

United States v. Locke, 529 U.S. 89 (2000).................................................................................................................... 25

Virginia v. EPA, 108 F.3d 1397 (D.C. Cir. 1997).......................................................................................... 56, 57

Statutes

29 U.S.C. § 1114........................................................................................................................... 27

33 U.S.C. § 1342 (2000) ............................................................................................................... 60

42 U.S.C. § 7507........................................................................................................................... 54

42 U.S.C. § 7521(a)(2).................................................................................................................. 62

42 U.S.C. § 7543(a) (2000)..................................................................................................... 52, 53

42 U.S.C. § 7543(b)(1) ................................................................................................................. 54

42 U.S.C. § 7543(b)(1)(C) ............................................................................................................ 62

49 U.S.C. § 32901(a)(3).......................................................................................................... 28, 29



Page(s)

vi

49 U.S.C. § 32902......................................................................................................................... 65

49 U.S.C. § 32902(f)..................................................................................................................... 70

49 U.S.C. § 32904(c) .................................................................................................................... 21

49 U.S.C. § 32905(a) .................................................................................................................... 29

49 U.S.C. § 32905(b) .................................................................................................................... 29

49 U.S.C. § 32919....................................................................................................................... 2, 3

49 U.S.C. § 32919(a) ............................................................................................................ 3, 4, 70

49 U.S.C. § 39219(b) .................................................................................................................... 70

49 U.S.C. § 39219(c) .................................................................................................................... 70

Cal. Health & Safety Code § 43018.5........................................................................................... 44

Cal. Health & Safety Code § 43018.5(d)(3) ................................................................................. 48

Pub. L 94-163 § 503(d)(1) ............................................................................................................ 21

Pub. L. 94-163 § 502(a)(1) ........................................................................................................... 72

Pub. L. 94-163 § 502(d)................................................................................................................ 72

Pub. L. 94-163 § 502(d)(3)(D)(i).................................................................................................. 72

Pub. L. 94-163 § 509(a) ................................................................................................................ 73

Pub. L. No. 94-163 § 502(d)(3)(D)(i) ........................................................................................... 72

Other Authorities

H.R. Rep. No. 94-340 (1975).................................................................................................... 4, 64

H.R. Rep. No. 95-294, reprinted in 1977 U.S.C.C.A.N 1077. ............................................... 18, 56

No. 05-1120, slip op. (U.S. Apr. 2, 2007)..................................................................................... 68

S. Rep. No. 90-403 (1967) ............................................................................................................ 55

S. Rep. No. 93-526 66 (1974) ......................................................................................................... 4



Page(s)

vii

S. Rep. No. 94-179 (1975) .................................................................................................. 4, 43, 64

Secondary Sources

Black’s Law Dictionary (5th ed. 1979)........................................................................................... 5

Black’s Law Dictionary 306 (6th ed. 1990).................................................................................. 71

Treatises

Automobile Fuel Economy: Voluntary Fuel Economy Labeling: Program for 1975 Model Automobiles, 39 Fed. Reg. 36890 (Oct. 15, 1974).......................................................................................... 21

Automobile Fuel Economy: Voluntary Labeling Program, 38 Fed. Reg. 22944 (Aug. 27, 1973) ................................................................................................................................... 21

Average Fuel Economy For Light Trucks Model Years 2008-2011, 71 Fed. Reg. 17566 (Apr. 6, 2006).......................................................................................................... passim

California State Motor Vehicle Pollution Control Standards: Waiver of Federal Preemption, 43 Fed. Reg. 25729 (June 14, 1978)............................................................... 63, 66

Control of Emissions from New Highway Vehicles and Engines, 68 Fed. Reg. 52922 (Sept. 8, 2003)........................................................................................................................... 17

Exec. Order No. 13432, 72 Fed. Reg. 27717 (May 14, 2007)...................................................... 68

Fuel Economy Standards--Credits and Fines--Rights and Responsibilities of Manufacturers in the Context of Changes in Corporate Relationships, 69 Fed. Reg. 77663 (Dec. 28, 2004)......................................................................................... 44

Passenger Automobile Average Fuel Economy Standards for Model Years 1987-88, 51 Fed. Reg. 35594 (Oct. 6, 1986)............................................................................................ 47

Passenger Automobile Average Fuel Economy Standards Model Year 1986, 50 Fed. Reg. 40528 (Oct. 4, 1985)............................................................................................ 64

Reforming the Automobile Fuel Economy Standards Program, 68 Fed. Reg. 74908 (Dec. 29, 2003)......................................................................................... 47

Summary of Decision, 47 Fed. Reg. 7306 (Feb. 18, 1982) .......................................................... 64

Waiver of Federal Preemption Notice of Decision, 49 Fed. Reg. 18887 (May 3, 1984) ............. 63



Page(s)

viii

Regulations

40 C.F.R. 600.113-93(f)................................................................................................................ 28

49 C.F.R. § 531.5 .......................................................................................................................... 39

Cal. Code Regs. tit. 13, § 1961 ......................................................................................... 19, 28, 31


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As directed by the Court, Plaintiff in Case No. 2:05-cv-304, the Association of

International Automobile Manufacturers (“AIAM”), hereby submits this post-trial brief.

I. INTRODUCTION

“[T]he greenhouse gas standard includes fuel economy standard[s]…” Testimony of Defendants’ Expert, Daniel Sperling (TR Vol. 12-A, 77:21-22)

“[The greenhouse gas standard] would call for a fuel economy level for light vehicles on the order of 40 miles per gallon or so.” Testimony of Defendants’ Expert, David Greene (TR Vol.

15, 22:22-24)

* * *

The two quotes set forth above come from the trial testimony of two of the Defendants’

experts. In each case, the testimony was elicited on direct or re-direct examination in response to

questions asked by Defendants’ counsel. These statements therefore were not the result of

inadvertent slips of the tongue during unguarded moments in cross-examination, but rather

represented these experts’ candid assessments of the true nature of the AB 1493 Regulations

challenged in this action.1 These quotes are but two examples from the chorus of testimony

from both sides that were in essential agreement on the central issue in the case: The AB 1493

Regulations are functionally indistinguishable from a fuel economy standard.

From the inception of this case, it was clear to AIAM that this fundamental fact was

beyond any reasonable dispute, and AIAM therefore brought a motion for summary judgment. It

also was undisputed that in enacting these regulations the state regulators from both Vermont and

California failed to give due consideration to the goals and purposes of EPCA – conserving

1 Throughout the trial, the regulations adopted by the Vermont Department of Environmental Conservation that are the subject of this action were referred to as the “AB 1493 Regulations” since they were originally enacted by the California Air Resources Board (“CARB”) pursuant to California’s Assembly Bill 1493. For the sake of consistency, the regulations will be referred to as the “AB 1493 Regulations” in this post-trial brief.


2

energy, ensuring consumer choice, avoiding adverse economic impacts to the automobile

industry, protecting employment in the automobile industry, and ensuring vehicle safety – and

therefore set standards that conflict with these goals. The Defendants initially agreed “that there

[were] no material facts in dispute” with respect to AIAM’s motion, see Defendants’ and

Defendant-Intervenors’ Opposition to Plaintiff Association of International Automobile

Manufacturers’ Motion for Summary Judgment (ECF 191) at 2, but reversed course at the last

minute and argued that AIAM’s motion should be denied on account of disputed facts.

This trial put to rest any dispute that may have existed concerning the two core factual

issues addressed at trial: whether the AB 1493 Regulations are “related to fuel economy

standards or average fuel economy standards” under 49 U.S.C. § 32919(a), and whether the AB

1493 Regulations conflict with the goals and purposes of EPCA under the doctrine set forth in

Hines v. Davidowitz, 312 U.S. 52 (1941), and its progeny. The evidence presented at trial also

demonstrated that the Defendants sole factual basis for disputing preemption – the notion that the

regulations’ provisions for air conditioning improvements and alternative fuels renders them

unrelated to fuel economy – is devoid of any factual or legal support. Under well-establish

principles of federal preemption, the AB 1493 Regulations therefore cannot stand.

The only remaining question concerns the Defendants’ argument that these regulations

are effectively “federalized” if EPA grants California’s waiver request under Section 209(b) of

the Clean Air Act and are therefore immune from both express and implied conflict preemption.

Contrary to the Defendants’ argument, an EPA waiver of a California regulation does nothing

more than waive federal preemption under the Clean Air Act, and thus allow a state to regulate in

the field of motor vehicle emissions which would otherwise be entirely occupied by the federal

government. In other words, the waiver simply resets the legal landscape to the condition that


3

would exist in the absence of the express preemption provision in Section 209(a). It does not

signify the express approval or the adoption by the federal government of the state regulation,

and does not waive preemption under any other statute.

This brief will address each of these questions in turn. It will discuss the evidence

presented by both sides at trial that establishes by a preponderance of the evidence that the

AB 1493 Regulations are “related to fuel economy standards” under 49 U.S.C. § 32919(a) and

conflict with the goals and purposes of EPCA. Then, after establishing that these regulations are

invalid under traditional preemption principles, the brief will demonstrate that the Defendants’

“federalization” theory is legally incorrect and does not save these regulations from preemption.

II. THE AB 1493 REGULATIONS ARE EXPRESSLY PREEMPTED UNDER EPCA

Given the evidence presented to this Court over the course of the trial, there can be no

doubt that the AB 1493 Regulations are “related to fuel economy standards” under 49 U.S.C.

§ 32919(a). After all, fuel economy was the central topic throughout the trial. As counsel for

the State of New York, Mr. Wynn, stated during his cross-examination of Mr. Austin, “clearly

the most important thing that we are talking about today and indeed in this entire trial is the fuel

economy of vehicles.” TR Vol. 8-A, 90:21-23. And despite the efforts of the State of California

to avoid any use of “the dreaded two words” in connection with these regulations, even the

Defendants’ own witnesses could not avoid repeatedly describing the regulations as a fuel

economy standard. In addition to the testimony of Mr. Sperling and Mr. Greene cited above, the

entire testimony of the Defendants’ primary expert witness, K.G. Duleep, was couched in terms

of the fuel economy benefits of the regulations. Nevertheless, in case there is any residual doubt

concerning this issue, AIAM will discuss the legal standard for showing that a state regulation is


4

“related to” a preempted field and the evidence adduced at trial showing that the Plaintiffs have

met that standard.

A. EPCA’s Express Preemption Provision Evidences A Broad Preemptive Purpose

The cornerstone of the express preemption case is Section 32919(a) of EPCA, which

provides:

When an average fuel economy standard prescribed under this chapter [49 U.S.C. §§ 32901 et seq.] is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter [49 U.S.C. §§ 32901 et seq.].

49 U.S.C. § 32919(a).

The legislative history of EPCA’s preemption provision confirms that Congress intended

to preempt broadly all regulation in the area of fuel economy. The original Senate bill would

have preempted state laws only if they were “inconsistent” with federal fuel economy standards,

labeling, or advertising. S. Rep. No. 94-179, at 25 (1975). Similarly, the House bill would have

preempted state laws only if they were not “identical to” a federal requirement. H.R. Rep. No.

94-340, at 274 (1975) (§ 507 as introduced, § 509 as reported) . Instead of adopting these more

limited forms of preemption, the final version of the law expressly preempts all state laws that

relate to fuel economy standards. There is no exception for state laws that are consistent with or

identical to federal requirements. Moreover, as the legislative history of an earlier draft of EPCA

makes clear, Congress intended this preemption provision to have a broad application,

irrespective of the metric used to measure fuel economy: “State or local fuel economy standards

would be preempted, regardless of whether they were in terms of miles per gallon or some other

parameter such as horsepower or weight.” S. Rep. No. 93-526, at 66 (1974).


5

The Supreme Court has confirmed the broad nature of the term “related to” as it is used

in express preemption provisions. See Morales v. Trans Word Airlines, Inc., 504 U.S. 374, 383

(1992) (“The ordinary meaning of these words is a broad one – ‘to stand in some relation; to

have bearing or concern; to pertain; refer; to bring into association with or connection with’ –

and the words thus express a broad pre-emptive purpose.”) (emphasis added) (quoting Black’s

Law Dictionary 1158 (5th ed. 1979)); see also Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt.

Dist., 541 U.S. 246 (2004) (certain aspects of fleet rules adopted by the air quality district that

prohibited the purchase or lease by various public and private fleet operators of vehicles that did

not comply with stringent emission requirements were “related to” the control of emissions and

were therefore preempted under the Clean Air Act).

The Defendants likely will cite New York State Conference of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995), for the proposition that the phrase “related

to” is not unbounded because, “[i]f ‘relate to’ were taken to extend to the furthest stretch of its

indeterminacy, then for all practical purposes pre-emption would never run its course, for ‘really,

universally, relations stop nowhere.’” . Travelers, however, does not require a narrow reading of

the “related to” language. Rather, that case merely stands for a common-sense restriction on the

“related to” language – that “pre-emption does not occur . . . if the state law has only a tenuous,

remote, or peripheral connection with” the preempted field. Travelers, 514 U.S. at 661

(emphasis added) (quoting Dist. of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 130

n.1 (1992)). In fact, the Supreme Court subsequently reaffirmed the broad reading of Morales in

Egelhoff v. Egelhoff, 532 U.S. 141 (2001), and described how that case should be read with

Travelers:

ERISA’s pre-emption section, 29 U.S.C. § 1144(a), states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to


6

any employee benefit plan” covered by ERISA. We have observed repeatedly that this broadly worded provision is “clearly expansive.” New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995); see, e.g., Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992) (listing cases in which we have described ERISA pre-emption in broad terms). But at the same time, we have recognized that the term “relate to” cannot be taken “to extend to the furthest stretch of its indeterminacy,” or else “for all practical purposes pre-emption would never run its course.” Travelers, [514 U.S. at 655].

Egelhoff, 523 U.S. at 146 (emphasis added).2

The factual question before this Court, therefore, concerns the nature of the relationship

between a fuel economy standard and the AB 1493 Regulations – in particular the aspect that

places limits on CO2 emissions. Do the regulations have “only a tenuous, remote, or peripheral

connection with” fuel economy standards? Travelers, 514 U.S. at 661. Or is the National

Highway Traffic Safety Administration (“NHTSA”) correct when it states that “a State GHG

standard is [a] fuel economy standard in almost all but name and stated purpose. It would have

virtually the same effects as a fuel economy standard.” Average Fuel Economy Standards For

2 The Defendants presented evidence and argued at trial that because the purpose of the AB 1493 Regulations is to reduce emissions and thereby combat global warming, they cannot be preempted by EPCA which serves a different purpose. Contrary to the Defendants’ argument, however, the intent of the state enacting the law or regulation and the label it applies to the regulation are irrelevant to whether it is preempted by federal law. See Gade v. Nat’l Solid Waste Mgmt. Ass’n, 505 U.S. 88, 107 (1992) (“Whatever the purpose or purposes of the state law, pre-emption analysis cannot ignore the effect of the challenged state action on the pre-empted field.”); Perez v. Campbell, 402 U.S. 637, 651-52 (1971). (“We can no longer adhere to the aberrational doctrine . . . that state law may frustrate the operation of federal law as long as the state legislature in passing its law had some purpose in mind other than one of frustration.”); Napier v. Atl. Coast Line R.R. Co., 272 U.S. 605, 613 (1926) (“We hold that state legislation is precluded, because the Boiler Inspection Act, as we construe it, was intended to occupy the field. The broad scope of the authority conferred upon the Commission leads to that conclusion. Because the standard set by the Commission must prevail, requirements by the States are precluded, however commendable or however different their purpose.”).


7

Light Trucks Model Years 2008-2011, 71 Fed. Reg. 17566, 17657 (Apr. 6, 2006) (the “Light

Truck Standards”). The evidence shows that it is the latter.

B. The Evidence Demonstrates That The AB 1493 Regulations Are “Related To Fuel Economy Standards”

As AIAM discussed in its pre-trial brief, the Court set this matter for trial in part because

the Defendants opposed AIAM’s motion for summary judgment by disputing some of the facts

set forth in AIAM’s statement of undisputed facts. The disputed facts that relate to express

preemption are:

3. The relationship between fuel consumption and CO2 emissions for a given fuel is fixed and depends only on the carbon content of the fuel that is burned.

10. Carbon dioxide emissions from a gasoline-powered motor vehicle are directly and inversely proportional to the vehicle’s fuel economy and there is a mathematical formula whereby one can convert CO2 emissions into a miles-per-gallon fuel economy figure and vice-versa.

18. Witnesses from the California Air Resources Board testified that roughly 89% to 90% of the greenhouse gas emissions reductions required by the AB 1493 Regulations will come from reductions in tailpipe emissions of CO2.

19. One can express the CO2 emission level portion of the [DEC] Regulations in terms of miles per gallon of gasoline consumed through the use of a mathematical formula.

25. Implementation of some combination of the CO2 Reduction Technologies is the most cost-effective means for a manufacturer to reduce tailpipe emissions of carbon dioxide.

26. None of the CO2 Reduction Technologies cause reductions in CO2 emissions by capturing or treating engine-out CO2. Rather, each of these technologies reduce emissions of CO2 by causing the motor vehicle to burn less fuel per mile driven.

27. In fact, approximately 90% of the reductions in greenhouse gas emissions assumed under the AB 1493 Regulations are to come from the use of technologies that improve fuel economy.

See AIAM’s Statement of Undisputed Facts (ECF 156); Defendant and Defendant-Intervenors’

Surreply to Reply of Plaintiff Association of International Automobile Manufacturers in Support


8

of Motion for Summary Judgment (ECF 191) at 2 (disputing Fact Nos. 3, 10, 18-19,23, 25-28,

31, 34-36, and 39-41).

Presumably one purpose of this trial was to determine whether AIAM could establish

these facts by a preponderance of the evidence. Having heard the testimony and reviewed the

exhibits, this Court should find that it has. AIAM will discuss the evidence that supports these

facts in the context of the broader evidence offered at trial showing that the AB 1493 Regulations

are “related to fuel economy standards.” AIAM will also point specifically to that evidence that

establishes the facts that the Defendants have disputed.

First, the evidence was undisputed at trial that there is a direct and mathematical

relationship between the amount of carbon-containing fuel consumed by a motor vehicle and the

amount of carbon dioxide it emits. AIAM’s expert, Harold Haskew, offered unrebutted

testimony establishing this relationship, and explained that CO2 “is the end product of perfect

combustion” in a motor vehicle TR Vol. 5-A, 31:6. He further testified concerning the following

graphic showing “close to perfect correlation between fuel consumed and carbon dioxide

emissions.” TR Vol. 5-A, 36:23-24:


9

PX 970.

Mr. Haskew testified that this one-to-one relationship exists not just for gasoline, but also

for any carbon-containing fossil fuel, such as diesel or ethanol. TR Vol. 5-A, 35:19-24. The

Defendants’ experts substantiated Mr. Haskew’s testimony. In fact, Defendants’ expert, Michael

Jackson displayed a similar graph showing this one-to-one relationship for gasoline, diesel, E85,

compressed natural gas and plug-in hybrids:3

DX 2579.

3 The evidence discussed above establishes Disputed Fact No. 3: “The relationship between fuel consumption and CO2 emissions for a given fuel is fixed and depends only on the carbon content of the fuel that is burned.”


10

Fuel consumption and fuel economy are therefore essentially “the same thing.” TR Vol.

5-A, 36:11-13 (Haskew); one is just the inverse of the other. Id. Because of this direct and

mathematical relationship between fuel economy and CO2 emissions, Mr. Haskew testified

concerning the mathematical conversion of the CO2 emissions limits in the regulations to an

equivalent miles per gallon fuel economy for gasoline-powered vehicles:

PX 981.

Neither Mr. Haskew’s testimony nor this exhibit were rebutted or impeached by the

Defendants. See TR Vol. 11-A, 51:7-52:6 (testimony of Thomas Moye that there are

mathematical relationships between fuel consumption and CO2 emissions for gasoline, diesel,

and E85 powered vehicles). In fact, the Defendants’ expert, Mr. Duleep, displayed a similar

graphic where he also converted the standards set forth in the AB 1493 Regulations to a


11

minimum fuel economy requirement with the only difference being that he takes into account air

conditioning credits:

DX 2688.

Mr. Duleep testified that the last line on his graphic “is the equivalent fuel economy

standard that you would [need to] meet” to comply with the regulations, assuming a fleet of

gasoline-powered motor vehicles. TR Vol. 12-A, 111:10-11. The Defendants’ other experts

agreed. During the direct examination of David Greene, the following exchange took place:

Q Now, Dr. Greene, are you familiar with the fuel economy that will result from the California greenhouse gas regulations?

A Approximately. My understanding is that it would call for a fuel economy level for light vehicles on the order of 40 miles per gallon or so.

TR Vol. 15, 22:19-24.4

4 The evidence discussed above establishes Disputed Fact Nos. 10 and 19: “Carbon dioxide emissions from a gasoline-powered motor vehicle are directly and inversely proportional to

[Footnote continued on next page]


12

The concessions by the Defendants’ experts discussed above also establish that the AB

1493 Regulations effectively require dramatic improvements in fuel economy in order to

comply. Perhaps the best evidence concerning this fact comes from the testimony of the

Defendants’ own expert, Daniel Sperling:

Q Okay. But in your honest opinion, or your opinion as an academic, your integrity, you believed, notwithstanding the instruction of the Air Resources Board, that substantial compliance with AB 1493 probably depends on drastically improving fuel economy over the next nine to ten years; isn’t that true?

A Yes, it’s correct that it’s a big part of it, yes.

Q Well, in fact, you believed that there’s no feasible way any manufacturer can comply with the regulations without substantial improvements in their fuel economy; isn’t that true?

A Yes, that’s true.

TR Vol. 12-A, 73:17-74:3.

AIAM’s expert, Mr. Haskew, agreed: “the only way [to reduce CO2 emissions] is to

reduce the fuel consumed or increase the fuel economy.” TR Vol. 5-A, 31:16-17. There is, for

example, no device that can be added to a car that can chemically reduce CO2 emissions from a

vehicle’s tailpipe. As Mr. Haskew testified:

Carbon dioxide is a very stable molecule. It is the end product of perfect combustion. That’s what you want is carbon dioxide if you’re going to burn a carbon-containing fuel. I’m not aware of any way that we could convert carbon dioxide to some other -- some other molecule.

TR Vol. 5-A, 31:5-10. To further illustrate this point, Mr. Haskew testified about CARB’s

assessment of the technologies available to manufacturers to reduce CO2 emissions, which are

[Footnote continued from previous page]

the vehicle’s fuel economy and there is a mathematical formula whereby one can convert CO2 emissions into a miles-per-gallon fuel economy figure and vice-versa” and “One can express the CO2 emission level portion of the [DEC] Regulations in terms of miles per gallon of gasoline consumed through the use of a mathematical formula.”


13

set forth in Table 5.2-3 of the ISOR. See PX 189 at 59. These technologies are referred to in

Section 5.2.A.1 of the ISOR as the “Carbon Dioxide Reduction Technologies.” Id. at 49. As

Mr. Haskew testified, none of these technologies reduce CO2 by capturing or chemically altering

emissions of that compound. TR Vol. 5-A, 31:24-32:15. Rather, “they all reduce carbon dioxide

emissions by reducing the fuel consumed or increasing the fuel economy.” TR Vol. 5-A, 35:10-

12. The deposition testimony of CARB witnesses agree:

Q. For these technologies on page 59 of the ISOR that ARB recommends may be used to achieve compliance with AB 1493. Any of them achieve the reductions in CO2 emissions through means other than reducing fuel consumed per miles driven?

A. I think that’s accurate.

Q. You think that’s accurate that none of them do. Is that correct?

A. Not that I’m seeing right offhand.

Q. Okay. So in other words, all of them reduced CO2 emissions by improving fuel economy.

Correct?

* * *

THE WITNESS: They reduce fuel use, so - -

BY MR. CLUBOK:

Q. They reduce fuel use per miles driven?

A. Yes.

Q. Which is fuel consumption. Correct?

A. I believe so.

Q. And that’s another way of saying they all do it through improving fuel economy. Correct?

A. Yes. It looks that way to me.


14

Albu Depo. at 434:15-435:3; 435:8-19; see also Light Truck Standards, 71 Fed. Reg. at 17668

(“If the technology does not improve fuel economy, it does not reduce tailpipe CO2 emissions.

The technologies listed in Part 5 of CARB’s Initial Statement of Reasons for its GHG standard

for reducing tailpipe CO2 emissions reduce those emissions by improving fuel economy.”)5

Again, the Defendants never disputed these facts. Nor did they offer any admissible

evidence to refute the deposition testimony of the CARB witnesses who agreed that the practical

effect of the AB 1493 Regulations is to require drastic improvements in fuel economy. As Paul

Hughes testified:

Q. So over 90 percent of the regulation is going to be in ARB’s expectation complied with by reducing CO2 tailpipe emissions; correct?

A. Correct.

Q. And the only way that you are aware of to reduce CO2 tailpipe emissions is by improving fuel economy; correct?

A. It’s by reducing the fuel usage, yes. There is a fuel savings from complying with the greenhouse gas regulations.

Hughes Depo. at 162:2-11; see also Albu Depo. at 437:19-22 (“Q. Fair to say that over 90

percent of the reductions assumed under AB 1493 will come from technologies that improve fuel

economy? A. I think that’s fair.”); Shulock Depo. at 148:9-14 (“Q. Okay. So you -- you

believe that ARB's estimates of the greenhouse gas emissions reduction -- include an estimate

5 The evidence discussed above establishes Disputed Fact No. 26: “None of the CO2 Reduction Technologies cause reductions in CO2 emissions by capturing or treating engine-out CO2. Rather, each of these technologies reduce emissions of CO2 by causing the motor vehicle to burn less fuel per mile driven.”


15

that 89 percent of the reductions will come from CO2 emission reductions; correct? A. That's

my understanding.”) Again, the Defendants did not offer any evidence to dispute these facts.6

It was therefore impossible for the witnesses who testified at trial or by deposition to

refer to the AB 1493 Regulations and the measures necessary to comply with them without

relating them directly to fuel economy. For example, Mike Love, the designated witness of

Toyota Motor Sales (“TMS”) testified in his deposition about Toyota’s compliance with the

regulations in terms of their impact on fuel economy:

Q. But does TMS know for 2011 for cars what levels of, for example, CO2 grams per mile its cars can attain?

A. Well, first to clarify, that in our discussions inside TMS we generally talk in terms of miles per gallon and fuel economy, just because it’s what people are used to dealing with.

There is a straightforward mathematical conversion between miles per gallon and grams CO2. …

Love Depo. at 31:23-32:6. Glen Choe, the designated witness from Nissan, offered similar

testimony in his deposition:

[Q]. Mr. Choe, during portions of the deposition Mr. Poole asked you questions about certain technologies and the greenhouse gas benefits associated with those technologies, and in your response, I believe that you made reference to fuel economy benefits. Is there any reason to respond to the questions you changed the metric from greenhouse gas to fuel economy?

A. We believe all greenhouse gas emissions are related to fuel economy.

Q. Do you view fuel economy as being related to carbon dioxide emissions?

6 The evidence discussed above establishes Disputed Fact Nos. 18 and 27: “Witnesses from the California Air Resources Board testified that roughly 89% to 90% of the greenhouse gas emissions reductions required by the AB 1493 Regulations will come from reductions in tailpipe emissions of CO2” and “In fact, approximately 90% of the reductions in greenhouse gas emissions assumed under the AB 1493 Regulations are to come from the use of technologies that improve fuel economy.”


16

A. Yes.

Q. And how so?

A. They’re just a byproduct.

Choe Depo. at 236:23-237:12. Thus, as Mr. Haskew testified, “by regulating carbon dioxide,

[the Defendants are] in fact regulating fuel economy.” TR Vol. 5-A, 18:23-24.

C. Carbon Dioxide Is Fundamentally Different From Other Motor Vehicle Emissions Because Of Its Direct Relationship To Fuel Economy

The evidence presented at trial also demonstrates that CO2 is unique among motor

vehicle emissions in terms of its direct and inextricable relationship to fuel economy. See, e.g.,

PX 971 and 972 (charts offered by Mr. Haskew showing that emissions of carbon monoxide and

hydrocarbons are not inextricably related to fuel consumption). While it is true that the control

of other emissions like hydrocarbons and oxides of nitrogen may have an indirect impact on a

vehicle’s fuel economy – e.g., control measures may increase or decrease fuel economy – no

other emissions regulation has the impact of setting a minimum level of fuel economy.

For this reason, NHTSA distinguishes between a CO2 regulation which would effectively

set fuel economy standards and the regulation of other emissions which would not:

NHTSA does not interpret EPCA’s express preemption provision as preempting State emissions standards that only incidentally or tangentially affect fuel economy. These standards include, for example, given current and foreseeable technology, the existing emissions standards for CO, HC, NOX, and particulates. They also include the limits on sulfur emissions that become effective in 2007. NHTSA considers such standards under the decisionmaking factors provision of EPCA since, under applicable law, they can be adopted and enforced and therefore can have an effect on fuel economy.

* * *

Preempted standards [on the other hand] include, for example: (1) A fuel economy standard; and (2) A law or regulation that has essentially all of the effects of a fuel economy standard, but is not labeled as one (example: State tailpipe CO2 standard).


17

This reading of EPCA’s express preemption provision allows that provision to function in a consistent way, without irrational limitation, to protect the national CAFE program from interference by any State standard effectively regulating fuel economy. It also simultaneously maximizes the ability of EPCA and the Clean Air Act to achieve their respective purposes.

NHTSA’s judgment is that the agency should distinguish between motor vehicle emission standards for emissions other than CO2 (e.g., HC, CO, NOX and PM) and motor vehicle emission standards for CO2. Those other emissions are not directly and inextricably linked to fuel economy. NHTSA’s current view is that standards for emissions other than CO2 merely affect the level of CAFE that is achievable and thus only incidentally affect fuel economy standards. Accordingly, we believe that regulation of these emissions is not rulemaking inconsistent with the operation of preemption principles under EPCA.

Light Truck Standards, 71 Fed. Reg. at 17669.7

7 The Defendants argue that NHTSA’s conclusions regarding the extent to which state greenhouse gas regulations are “related to fuel economy standards” and conflict with its administration of the CAFE program cannot stand after Massachusetts v. EPA, 127 S. Ct. 1438 (2007) . Defendants and Defendant Intervenors’ Supplemental Memorandum on the Respective Roles of EPA And NHTSA at 20-21. Massachusetts v. EPA, however, never mentions Section 32919(a) of EPCA or preemption under that statute. Rather, the Supreme Court simply held that the Environmental Protection Agency has concurrent federal authority with the Department of Transportation to regulate carbon dioxide emissions from motor vehicles and that EPA failed to provide a sufficient explanation consistent with the Clean Air Act for its decision not to regulate CO2. While it is true that NHTSA referred to EPA’s conclusion regarding EPA’s lack of authority to regulate CO2, see Light Truck Standards, 71 Fed. Reg. at 17658 (citing Control of Emissions from New Highway Vehicles and Engines, 68 Fed. Reg. 52922, 52929 (Sept. 8, 2003)), it is clear that that discussion was a very minor part of EPCA’s entire analysis of the preemption issue, which spans sixteen pages in the Federal Register and includes detailed and technical analyses concerning the relationship between CO2 emissions and fuel economy standards. Id. at 17654-70.

Furthermore, as discussed in greater detail below, see pp 67-70, infra, the Supreme Court’s holding in Massachusetts v. EPA has no bearing on the preemption determinations before this Court. As the Supreme Court noted, EPA possesses broad discretion in determining what standards it should set for CO2 under Section 202 of the Clean Air Act, including coordination with its sister agencies. “EPA no doubt has significant latitude as to the manner, timing, content, and coordination of its regulations with those of other agencies.” 127 S. Ct. at 1462. Here, however, the CARB regulations were enacted entirely by the State of California with no coordination or consultation with the Department of Transportation or any other federal agency.


18

This interpretation is entirely consistent with the legislative history of the Clean Air Act,

in which Congress differentiated between control measures for emissions of traditional pollutants

which may have a tangential and indirect impact on fuel economy and other control measures

which have a direct impact on fuel economy. The Defendants cite the legislative history of the

Clean Air Act Amendments of 1977 for the proposition that that Act envisions that California or

federal emissions standards will require the use of technologies that will simultaneously reduce

emissions and improve fuel economy. Defendants and Defendant Intervenors’ Supplemental

Memorandum on the Respective Roles of EPA And NHTSA (ECF 464) (“Def’t Suppl. EPA &

EPCA Brief”) at 15-16. This is true. Nothing in that legislative history, however, envisions a

state regulation that effectively sets a minimum fuel economy standard.

As the Defendants’ correctly point out, one concern expressed in the legislative history of

the Clean Air Act Amendments of 1977 was whether “the automobile industry can achieve the

[emissions] standards specified in the Committee bill while it simultaneously meets the

mandated fuel economy goals” in EPCA. H.R. Rep. No. 95-294, at 248, reprinted in 1977

U.S.C.C.A.N 1077, 1327.8 Relying in part on a study conducted by the National Academy of

Sciences (“NAS”), the committee concluded that the industry could. Id. at 1324-26.

Significantly, the Committee referred to the NAS’s “finding that fuel economy should occur

independent of emission levels” and that “[a] significant improvement [in fuel economy] can be

achieved by changes that are independent of emissions.” Id. at 1325-26 (emphasis added). The

NAS considered a number of measures that would enhance fuel economy but would not

implicate the emissions standards of the Clean Air Act. These measures included a reduction in

8 At that time the EPCA statute provided for specific fleet-average fuel economy levels for model years 1978 through 1980. Pub. L. No. 94-163 § 502(a)(1).


19

the weight of vehicles, change in the vehicle mix to include a larger proportion of smaller cars,

reduction in the ratio of engine power to vehicle weight, use of more efficient transmissions, use

of radial tires and improved suspensions, and use of aerodynamic configurations that reduce

drag. Id. Thus, the legislative history of the 1977 Clean Air Act Amendments “confirms the

long-held Committee view that the fuel economy effect of any particular emission standard

largely rests with the manufacturer.” Id. at 1323 (emphasis added). Here, the fuel economy

effect of the AB 1493 Regulations does not rest with the manufacturers because the regulations

effectively dictate the fuel economy level that must be achieved.

The significant point for this matter is that pollutants such as carbon monoxide,

hydrocarbons and oxides of nitrogen can be controlled through measures other than reducing the

amount of fossil fuel consumed by a motor vehicle. Consequently, a standard that imposes (for

example) emissions limits of 3.4 grams per mile for carbon monoxide and 0.05 grams per mile

for NOx, see Cal. Code Regs. tit. 13, § 1961, does not effectively impose a minimum level of

fuel economy; vehicles ranging from the smallest most fuel efficient subcompacts to the largest

most powerful and most fuel intensive automobiles succeed in meeting these standards. This is

not true for CO2. The undisputed evidence shows that it is physically impossible for a gasoline-

powered vehicle to emit no more than 205 grams of CO2 per mile without achieving a fuel

economy of at least 43.7 miles per gallon.

This fact leads to a fundamental flaw in the Defendants’ analysis that they never address.

It is true, as they point out, that pursuant to Section 32902(f), NHTSA may adjust the CAFE

standard up or down in its discretion based of the fuel economy impacts other motor vehicle

standards. Def’t Suppl. EPA & EPCA Brief at 13-14. Thus, if a given emissions standard makes

fuel economy standards more difficult to meet, then NHTSA may either relax the CAFE standard


20

or make some other trade-off so that the CAFE standard and the emissions standard can both be

met. Id. But a CO2 regulation does not just affect the fuel economy that is achievable. It sets

the fuel economy standard.

Accordingly, NHTSA cannot merely take California’s regulations into account without

completely succumbing to the fuel economy regime required by those regulations. If the fleet of

passenger cars sold in California in the 2011 model year must emit no more than 267 grams of

CO2 per mile and therefore achieve a fuel economy of 33.5 mpg (see PX 981), then the federal

CAFE standard of 27.5 mpg becomes a dead letter. Therefore, if NHTSA does not raise the

2011 CAFE standard to 33.5 mpg, there would be effectively two separate fuel economy

regimes: the more stringent standard in those states adopting the AB 1493 Regulations, and the

CAFE standards applicable in the rest of the country. EPCA, however, mandates a single

national fuel economy regime. For this reason, NHTSA has concluded that “the State GHG

standard, to the extent that it regulates tailpipe CO2 emissions, would frustrate the objectives of

Congress in establishing the CAFE program and conflict with the efforts of NHTSA to

implement the program in a manner consistent with the commands of EPCA.” Light Truck

Standards, 71 Fed. Reg. at 17667.

Finally, the legislative history of EPCA demonstrates that Congress did not intend a clear

line of demarcation whereby vehicle emissions would be regulated exclusively under the

auspices of the Clean Air Act. Rather, Congress intended that fuel economy be measured by

emissions of carbon-containing compounds – principally CO2 – even though NHTSA sets the

fuel economy standard. EPA first began measuring motor vehicle fuel economy in 1973 under a

voluntary labeling program initiated by the Nixon Administration. See Automobile Fuel

Economy: Voluntary Labeling Program, 38 Fed. Reg. 22944, 22945 (Aug. 27, 1973); Voluntary


21

Fuel Economy Labeling: Program for 1975 Model Automobiles, 39 Fed. Reg. 36890, 36894

(Oct. 15, 1974). Pursuant to this program, EPA measured fuel economy based on the same

carbon balance approach used today. Id.; see also TR Vol. 5-A, 13:19-14:18 (testimony of Mr.

Haskew). When EPCA was enacted, Congress had this program in mind. Accordingly, even

though Congress assigned the Department of Transportation with responsibility for setting the

fuel economy standards, it took the unusual step of assigning another federal agency, EPA, the

responsibility for measuring compliance with the law. Section 503(d)(1) of EPCA, as originally

drafted, provides:

Fuel economy for any model type shall be measured, and average fuel economy of a manufacturer shall be calculated, in accordance with testing and calculation procedures established by the EPA Administrator, by rule. Procedures so established with respect to passenger automobiles (other than for purposes of section 506) shall be the procedures utilized by the EPA Administrator for model year 1975 (weighed 55 percent urban cycle, and 45 percent highway cycle), or procedures which yield comparable results. Procedures under this subsection, to the extent practicable, shall require that fuel economy tests be conducted in conjunction with emissions tests conducted under section 206 of the Clean Air Act. The EPA Administrator shall report any measurements of fuel economy and any calculations of average fuel economy to the Secretary.

Pub. Law. 94-163 § 503(d)(1) (emphasis added). Substantially similar language still appears in

the current form of the statute at 49 U.S.C. § 32904(c). Thus, Congress intended that fuel

economy be measured based on emissions of carbon dioxide.

This regulation, therefore, is unlike any other motor vehicle emission regulation enacted

by the State of California. Its ultimate goal and purpose is to reduce the amount of fossil fuel

consumed by motor vehicles and thereby reduce emissions of carbon dioxide. Energy

conservation, however, falls squarely within the purview of EPCA.


22

D. The Credits For Air Conditioning And Alternative Fuels Do Not Defeat Express Preemption

Despite the overwhelming facts showing the direct and inextricable relationship between

fuel economy and carbon dioxide emissions, the Defendants attempted to argue that the AB 1493

Regulations are nevertheless not “related to fuel economy standards.” But their only expert

witness who offered an opinion on this topic was Mr. Duleep, and all he could say to support this

position was that “the AB 1493 standard is not exactly equivalent to a fuel economy standard”

because “multiple levels of fuel economy, depending on the strategies chosen, would allow

compliance with the standard.” TR Vol. 12-A, 85:12-13; 112:3-5 (emphasis added). In other

words, if a manufacturer sells only gasoline-powered vehicles and does not make any air

conditioning improvements, its MY 2016 PC/LDT1 and LDT2/MDPV fleets would have to

achieve 43.7 and 26.9 miles per gallon, respectively. See PX 981. If it chooses to avail itself of

air conditioning credits, then its MY 2016 fleets would have to achieve (according to Mr.

Duleep) 40.45 and 25.4 miles per gallon. See DX 2688. If it could further avail itself of some of

the alternative fuel credits, then its minimum required fuel economy is some other level.

Mr. Duleep’s “multiple levels of fuel economy” formulation was a succinct summation of

the Defendants’ theory on express preemption. The topic was raised again during closing

arguments when the Court asked Defendants’ counsel “What’s the distinction in effect of this

regulation from a fuel economy standard?” TR Vol. 16-B, 113:19-21. In response, the

Defendants’ counsel broke their position down into three separate points: (1) The regulation

“covers more than simply CO2;” it “covers methane. It covers nitrous oxide,

hydrofluorocarbons, as well as carbon dioxide.” (Id. at 114:2-4); (2) the regulation “also factors

in allowances or credits for air conditioning” which “could be a credit or an allowance up to 15


23

percent …” (Id. at 114:5-8); and (3) the regulations provide for the use of “alternative fuels,

which can provide a pathway for compliance with this regulation.” (Id. at 14:13-15).

There are three separate and independent reasons why the Defendants’ attempts to defeat

express preemption fail. First, the fact that a state regulation contains alternative methods of

compliance that are not related to the preempted field does not defeat express preemption.

Second, the notion that alternative fuels somehow takes the AB 1493 Regulations outside the

realm of fuel economy regulation is belied by the fact that the federal fuel economy program also

allows for compliance through the use of such fuels. Finally, the Defendants’ own evidence

proves that alternative fuels do not, in fact, provide a feasible or cost-effective pathway to

compliance.

1. The Defendants’ Arguments Fail To Defeat Express Preemption As A Matter of Law.

The Supreme Court has already addressed the issue of whether a state’s provision of

compliance options or even the ability to freely opt out of the state law saves the law from

preemption, and in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the Court held that it cannot. In

that case, the Court held that a state statute regarding the effect of a divorce on the distribution of

a decedent’s life insurance and pension proceeds was preempted by ERISA. The respondents

had argued that ordinary ERISA preemption did not apply because the Washington statute

allowed employers to opt out. Id. at 150. The Supreme Court rejected this argument, however,

holding that “the statute is [not] saved from preemption simply because it is, at least in a broad

sense, a default rule.” Id. The Court then asserted that “[t]he statute is not any less of a

regulation of the terms of ERISA plans simply because there are two ways of complying with it.”

Id.


24

The holding in Egelhoff makes logical sense. If states could draft around the terms of an

express preemption provision by taking a regulation that would otherwise be preempted and

peppering it with provisions and compliance options that fall outside of the preempted field, then

preemption would be a dead letter. As the Eastern District of California held in a similar case

challenging a California CO2 regulation under EPCA, “[p]reemption cannot be avoided by

intertwining preempted requirements with nonpreempted requirements.” Cent. Valley Chrysler-

Plymouth v. Cal. Air Res. Bd., No. CV-F-02-5017, 2002 U.S. Dist. LEXIS 20403 at *12 (E.D.

Cal. June 11, 2002) (citing Napier v. Atlantic Coast Line R.R. Co., 272 U.S. 605, 613 (1926) and

Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001)).

Thus, the fact that “multiple levels of fuel economy, depending on the strategies chosen,

would allow compliance with the standard” as Mr. Duleep testified, TR Vol. 12-A, 85:12-13;

112:3-5, cannot defeat express preemption. Consider the outcome if the State of Vermont were

to enact the following hypothetical regulation – each aspect of which is directly analogous to the

regulations being challenged here:

(1) The fleet average fuel economy values for passenger cars that are produced and delivered for sale in Vermont by a manufacturer shall be at least 43.7 miles per gallon by the 2016 model year.9

(2) A manufacturer may adjust the fuel economy values of its vehicles as follows:

(a) Air Conditioning Credits: each vehicle on which a manufacturer (i) installs a “low-leak air conditioning system” and (ii) uses HFC-152a,

9 As discussed above, there was undisputed evidence that the AB 1493 Regulations impose this very requirement with respect to gasoline-powered motor vehicles.


25

CO2 refrigerant, or any refrigerant with a global warming potential of 150 or less, shall receive a credit of 3.25 miles per gallon;10

and

(2) Alternative Fueled Vehicles: For every 10 percent of vehicles in the manufacturer’s fleet that are operated within the state on E85, the manufacturer shall receive a credit of one mile per gallon.11

The Defendants cannot seriously contend that such a regulation would not be “related to fuel

economy standards” under Section 32919(a), simply because “multiple levels of fuel economy,

depending on the strategies chosen, would allow compliance with the standard.” As a functional

matter, this regulation is no different.

Moreover, the Defendants’ argument ignores an entire body of law that allows discrete

preempted portions of a regulation to be severed from the non-preempted portions. See, e.g.,

Gen. Elec. Co. v. N.Y. State Dep’t. of Labor, 936 F.2d 1448, 1460-61 (2d Cir. 1991) (finding that

certain preempted provisions of New York’s prevailing wage law were severable from rest of

statute). Central Valley Chrysler-Plymouth, is on point. That case pertained to one aspect of

California’s 2001 amendment to its Zero Emission Vehicle (ZEV) regulations that provided for

an alternative method of compliance based on fuel consumption and CO2 emissions. The court

there granted a preliminary injunction based on EPCA preemption because the regulations

“clearly have the purpose of regulating the fuel economy performance of” motor vehicles and

10 According to the exhibit offered by Mr. Duleep, DX2688, a manufacturer much achieve a fleet average fuel economy of 40.43 if it makes air conditioning improvements to all of its vehicles, which is 3.25 miles per gallon less stringent that the 43.7 miles per galon that would have to be achieved absent these improvements.

11 According to Mr. Duleep, this credit reflects the fuel economy impact of using E85. See TR Vol. 12-A, 21-24 (“[F]or every 10 percent of vehicles in the car and LDT1 categories that become E85, and actually use the E85, this implied MPG standard would drop by about one mile per gallon.”)


26

“will have the practical effect of regulating fuel economy.” Id. at *9. Even though the

alternative compliance provision of the ZEV regulation was but one small part of a greater

regulatory scheme, the court found that it was preempted and not severable from the rest of the

regulation. Id. at *17-*20.

Here, even though the AB 1493 Regulations include minor discrete aspects that are

unrelated to fuel economy – such as the provisions pertaining to methane, nitrous oxide and air

conditioners – the fuel economy portion is much more significant than was the fuel economy

portion of the 2001 ZEV amendments. As Mr. Sperling testified, Vermont’s “greenhouse gas

standard includes fuel economy standard,” TR Vol. 12-A, 77:21-22, and there is no feasible way

any manufacturer can comply with the regulations without substantial improvements in their fuel

economy. TR Vol. 12-A, 73:17-74:3. See also Albu Depo. at 437:19-22 (“Q. Fair to say that

over 90 percent of the reductions assumed under AB 1493 will come from technologies that

improve fuel economy? A. I think that’s fair.”). Thus, while it is true that California and

Vermont may independently regulate emissions of methane, nitrous oxide and

hydrofluorocarbons without immediately running afoul of EPCA’s express preemption

provision, that certainly does not give the States free rein to regulate fuel economy in the same

regulatory program.12

12 The same is true of the fact that these regulations are “part of a larger … more comprehensive effort at the state level to try to begin to deal with climate change,” as Defendants’ counsel described them during closing arguments. TR Vol. 16-B, 112:22-24. A state cannot defeat express preemption simply by enacting a preempted regulation as one part of a broader regulatory scheme. United States v. Locke, 529 U.S. 89, 94 (2000) (holding that certain aspects of Washington State’s comprehensive tanker regulations governing oil tankers were preempted).


27

Therefore, the fact that the AB 1493 Regulations set minimum levels of required fuel

economy brings them squarely within the scope of EPCA’s express preemption provision. New

York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645

(1995). Although Travelers is often cited as placing limits on the scope of “related to”

preemption, see Travelers, 514 U.S. at 661 (“pre-emption does not occur . . . if the state law has

only a tenuous, remote, or peripheral connection with” the preempted field), the Supreme Court

noted that at the very least ERISA’s analogous preemption provision13 “pre-empt[s] state laws

that mandate[] employee benefit structures or their administration” and that “state laws providing

alternative enforcement mechanisms also relate to ERISA plans, triggering pre-emption.” Here,

the Defendants’ experts candidly admit that the AB 1493 Regulations mandate certain levels of

fuel economy – albeit different levels depending on the specific compliance mechanisms chosen.

Therefore, even under the most restrictive reading of the Supreme Court’s “related to”

preemptions decisions, these regulations fall.

2. The Regulations’ Alternative Fuels Provisions Relate To Fuel Economy Because Alternative Fuels Are Regulated Under The Federal Fuel Economy Program

Another reason why the alternative fuel provisions in the AB 1493 Regulations do not

save the regulations from EPCA preemption lies in the fact that alternative fueled vehicles are

just as much a part of the federal CAFE program as are gasoline-powered vehicles. Accordingly,

13 ERISA preempts all state laws “insofar as they . . . relate to any employee benefit plan ….” 29 U.S.C. § 1114.


28

because the alternative fuel provisions of EPCA are related to the federal fuel economy

standards, then so too are the alternative fuel provisions of the AB 1493 Regulations.14

Similar to the AB 1493 Regulations, the CAFE program does not regulate just gasoline-

powered vehicles. EPCA defines an “automobile” as a “four-wheeled vehicle that is propelled

by fuel, or by alternative fuel, manufactured primarily for use on public streets, roads, and

highways,” with a gross vehicle weight rating up to 10,000 pounds. See 49 U.S.C. § 32901(a)(3)

(emphasis added). An “alternative fueled automobile” means an automobile that either has a

single “dedicated” fuel type (such as natural gas or electricity) or is “dual fueled,” meaning that

it uses regular fuels such as gasoline in addition to an alternative fuel. Id. §§ 32901(a)(2)(A) -

(B).

EPCA also directs how cars running on an “alternative fuel” are to be factored into a

manufacturer’s CAFE rating. For example, the statute requires that if a manufacturer produces

an electric vehicle, that manufacturer’s CAFE calculation will include such vehicle based on the

“equivalent petroleum based fuel economy values determined by the Secretary of Energy for

various classes of electric vehicles.” Id. § 32904(a)(2)(B). This assignment of a petroleum

equivalent fuel economy value is similar to CARB’s assignment of 130 CO2-equivalent grams

per mile for electric vehicles. Cal. Code. Regs. tit. 13, § 1961.1(a)(1)(B)(1)(e).

14 There was considerable testimony at trial concerning the use of diesel fuel. It should be noted, however, that for purposes of this analysis, diesel is no different from gasoline. Diesel-powered vehicles exhibit the same direct and mathematical relationship between CO2 emissions and fuel economy as seen with gasoline powered engines. The only difference is the value for the carbon content of the diesel fuel that is plugged into the numerator of the carbon balance fuel economy equation. TR Vol. 5-A, 23:24-24:11; PX 966; see also 40 C.F.R. 600.113-93(f).


29

Similarly, the federal CAFE program also addresses “flex fuel” or “dual fueled” vehicles

that can run on blends of ethanol up to E85. Similar to the AB 1493 Regulations, the CAFE

program provides a credit for such vehicles, although the eligibility requirements for these

credits vary significantly between the two programs. Under CAFE, “flex fuel” vehicles are

deemed to be operated on E85 fifty percent of the time, and the calculation reduces the E85 half

of the fuel consumed by eighty-five percent, essentially assuming that the ethanol portion of the

E85 was never burned. 49 U.S.C. § 32905(a), (b). This results in a significant increase in the

calculated fuel economy value. This credit to the overall fleet average is currently capped at 1.2

miles per gallon for each category of automobile. Id. § 32906(a)(1)(A).

The Defendants’ argument concerning alternative fuels, therefore, makes no sense. The

federal fuel economy program provides for alternative compliance options through the use of

alternative fuels – albeit in a manner different from the DEC’s Regulations’ treatment of

alternative fuels. It would therefore be incongruous to conclude that the AB 1493 Regulations

are not “related to fuel economy standards” because they allow for compliance through the use

of alternative fuels.

3. The Evidence Presented At Trial Establishes That The Alternative Compliance Options Do Not Provide Feasible Or Cost Effective Pathways To Compliance

Not only are the Defendants’ arguments concerning “multiple levels of fuel economy”

and “alternative pathways to compliance” flawed as a matter of law, but they also fail as a factual

matter because the evidence presented at trial demonstrates that the options referred to by the

Defendants are illusory at best.

With regard to methane and nitrous oxide, there was no testimony presented at trial that

feasible measures exist that can reduce these emission below their current levels. Moreover,

CARB recognized in the ISOR that the emissions of these substances are “extremely low”


30

already, and does not discuss any currently-existing control measures that manufacturers can

implement. PX 189 (ISOR) at 79; see also id. (“catalyst manufacturers are not currently

pursuing strategies to reduce vehicle N2O emissions.”) But even if emissions of methane and

nitrous oxide could be eliminated entirely, the contribution to compliance with the regulations

would be negligible. See TR Vol. 5-A, 44:11-15 (testimony of Harold Haskew) (methane and

nitrous oxide “make a very small fraction related to what you would have to do to meet the

regulation in 2012.”).

Even taking the theoretical maximum of the air conditioning credits – which provide a

more significant pathway to compliance than eliminating methane and nitrous oxide – that still

fails to bring a manufacturer even close to compliance. This was demonstrated by PX 980, a

graphic from Mr. Haskew’s testimony:


31

PX 980. Even with these credits, the Defendants’ own experts agree that there is no feasible way

any manufacturer can comply with the regulations without substantial improvements in the fuel

economy of their vehicle fleets. TR Vol. 12-A, 73:17-74:3 (testimony of Daniel Sperling).

Finally, the provisions in the regulations for alternative fuel vehicles do not provide a

feasible pathway to compliance. The most significant impediment is the fact that the regulations

require proof of actual operation on the alternative fuel within the state in order to be eligible for

the credit, and the burden rests on the manufacturer to show actual use. According to the ISOR:

To demonstrate that bi-fuel, fuel-flexible, dual-fuel, or grid-connected hybrid electric vehicles within a GHG vehicle test group will be operated in use in California on the alternative fuel, the manufacturer shall provide data that shows the previous model year sales of such vehicles to fleets that provide the alternative fuel on-site or, for grid-connected hybrid electric vehicles, to end users with the capability to recharge the vehicle on-site.

PX 189 at 134; see also Cal. Code. Regs. tit. 13, § 1961.1(a)(1)(B)(2)(a)(i). This data must

include not just the number of vehicles sold that can operate on the alternative fuel, but also data

demonstrating the percentage of total vehicles miles traveled using the alternative fuel. Id.

In cases where an automaker is partnering with a fleet, the fleet operator will be responsible for storing and maintaining data records for each vehicle and the fuel used.

* * *

In cases where an automaker will be selling or leasing vehicles eligible for credits directly to consumers, the automaker will be responsible for proposing a data collection plan that will represent the vehicles on the road including the miles traveled and the fuel used.

PX 189 at 135.

Most of the testimony at trial concerning alternative fuel options was directed at E85.

However, the Defendant’ expert witness on alternative fuels, Michael Jackson, testified that there

are currently no E85 stations in Vermont. TR Vol. 11-B, 93:12-14. Manufacturers, therefore,

cannot make use of the credits for E85 unless and until that fuel is made widely available in


32

Vermont on a commercial basis. As Mr. Jackson testified, “[o]ne of the biggest hurdles that you

have with alternative fuels that have to compete with gasoline is … how do you initiate starting

to get that fuel into the infrastructure.” TR Vol. 11-B, 39:15-18. In order to clear this hurdle, a

broad coalition between the automobile manufacturers, the energy industry, and the fuel supply

chain would need to be formed to make E85 available on a widespread basis. TR Vol. 11-B,

93:22-94:13. Doing so would require either voluntary industry-wide agreements or legislation

that would require the availability of high volumes of E85. TR Vol. 11-B, 94:17-23; 99:15-22.

There is, however, nothing in the AB 1493 Regulations or in any of the federal proposals

discussed at trial that mandates a sufficient availability of E85 to allow for use in complying with

the regulations. TR Vol. 11-B, 94:24-95:10.

Both sides at trial agreed, therefore, that the alternative fuel provisions in the AB 1493

Regulations as they are currently drafted present hurdles that are as a practical matter

insurmountable for the foreseeable future. For example, Mr. Haskew testified on cross-

examination as follows:

Q [By Mr. Tripp] Since the California program and the Vermont regulation take into account upstream greenhouse gas emissions associated with production of ethanol, for example, doesn’t the use of a -- such a fuel provide a pathway for compliance with the regulation?

A A very difficult pathway, yes, because of the restrictions that have been put in place that make it very difficult to use that.

Q Okay. And that is an issue that California Air Resources Board is in the process of addressing?

A Well, I certainly hope so, because what they’ve got in the current regulation doesn’t give this any -- doesn’t give the manufacturer a path to use it.

TR Vol. 5-A, 74:6-18. The Defendants’ expert, Michael Jackson agreed that the DEC

Regulation would have to be changed in order for the alternative fuels provisions to provide any

meaningful pathway to compliance:


33

Q Very important point you want to address, sir. A vehicle that is demonstrated to operate on E85, that is based on sugar cane, or cellulosic ethanol, receives the same credit as a vehicle operated on corn-based ethanol; is that right?

A As the regulation is currently written, yes, that is correct. One would need to make a distinction between the feed stocks, such as -- well, most likely be done in the low carbon fuel center.

Q But right now, the way the regulation that’s challenged in this action is written, vehicle manufacturer doesn’t get anymore credit for demonstrating operation on cane-based ethanol or cellulosic-based ethanol compared to corn-based ethanol; is that right?

A No, that -- that is absolutely right.

Q And, in your deposition, you testified, I believe, that some change in the regulation or some type of administrative order in California would be needed to address this issue that you think is important; is that right?

A That is correct. If you look at the regulation, and in fact the precedent is there for the electric drive technologies, where the executive officer can, based on evidence, change the regulation.

Q But that particular footnote, if you will, in the regulation, is not appended to the ethanol section, is it?

A No, sir, it is not.

Q So we’d have to go back and ask the Air Resources Board to make a change in the regulation, correct?

A Yes, sir.

Q And, Mr. Jackson, it’s the obligation of the vehicle manufacturer to demonstrate to the Air Resources Board or -- or Vermont ANR that a vehicle’s actually been operated for a certain amount of time on E85 to get the credit; is that right?

A Especially for the flexible-fuel vehicles, or biofuel vehicles, that was the intent of the regulation; that if you are going to provide that vehicle, it has to use the fuel.

Q And as the regulation currently stands, sir, do you think a prudent vehicle manufacturer would rely on the possibility of that type of a change in the regulation, the one we have been talking about, before planning the compliance strategy based on the E85?


34

A I think you would make sure the -- the manufacturer would make sure that that was acceptable, and that that change occurred prior to moving forward with product line.

Q So step number one would be to change the regulation, this being challenged in this action; is that right?

A Correct. And when you say change the regulation, that might just be an administrative change. I think I -- that was my opinion during the deposition.

Q So your business case for compliance with this regulation based on E85 assumes a change in the regulatory text or some superseding administrative order that changes the effect of the regulatory text; is that right?

A Yes. By the way, I might add, you would also have to do that for plug-in hybrids.

Q And why is that, sir?

A Because they’re not -- the credit is not defined in the regulation.

TR Vol. 11-B, 122:11-125:1.

Because of these significant restrictions on the ability of manufacturers to avail

themselves of the credits for alternative fueled vehicles, neither the California nor the Vermont

regulators viewed them as a viable and cost-effective means of compliance. Steve Albu,

Assistant Division Chief of the Mobile Source Control Division at CARB, testified as follows:

Q. Okay. And is there any other technologies other than the ones listed on page 59 of the ISOR that the ARB believes will be a cost- effective means of complying with AB 1493?

A. Refrigerant changes.

Q. For air conditioners?

A. Yes.

Q. Okay. Other than that?

A. Use of an alternate fuel.

Q. Oh, the use of alternate fuel. You mean like E-85?

A. It’s one possibility.


35

Q. The Air Resources Board is predicting there will be a significant amount of compliance achieved through the use of alternative fuels?

A. Is that a new question or is that a --

Q. Yeah. That’s -- that’s -- my question to you was are there any other technologies that the Air Resources Board is predicting will be a cost- effective means of complying with AB 1493.

I know you mentioned the air conditioning improvements, but you really want to include alternative fuels in that category?

A. Probably not. I didn’t hear the part about cost-effective. I’m sorry.

Albu Depo. at 435:20-436:22. Paul Hughes, another witness from CARB, was asked in

deposition to identify “any modeling, testing or analysis conducted by or on behalf of the Air

Resources Board that demonstrates the feasibility of reducing CO2 tailpipe emissions through

any method other than by adding technologies to the vehicle that improve fuel economy” and he

responded that he was not aware of any. Hughes Depo. at 181:11-18. Finally, Mr. Moye from

the Vermont Agency of Natural Resources agreed that E85 could not be counted upon as a

feasible means of complying with the regulations. TR Vol. 11-A, 55:8-16.15

None of the Defendants’ bases for arguing that the AB 1493 Regulations are not “related

to fuel economy standards” can survive scrutiny. As a legal matter they are insufficient to defeat

preemption, and as a factual matter they do not present manufacturers a viable compliance option

other than to regulate fuel economy. Because the AB 1493 Regulations “include[] fuel economy

standard[s]…” and “would call for a fuel economy level for light vehicles on the order of 40

15 The evidence discussed above establishes Disputed Fact No. 25: “Implementation of some combination of the CO2 Reduction Technologies is the most cost-effective means for a manufacturer to reduce tailpipe emissions of carbon dioxide.”


36

miles per gallon or so,” the regulations fall squarely within EPCA’ express preemption

provision.

III. THE AB 1493 REGULATIONS ARE IMPLIEDLY PREEMPTED BECAUSE THEY CONFLICT WITH EPCA

As an additional and alternative basis for preemption, the Plaintiffs presented evidence at

trial showing that the AB 1493 Regulations conflict with the purposes and goals of EPCA as well

as with NHTSA’s administration of the federal fuel economy program.16 Conflict in this case

also can be shown on the face of the regulations themselves and from the undisputed evidence

showing the failure on the part of the state regulators to consider the factors NHTSA weighs in

setting fuel economy standards.

A. Conflict Occurs Where A State Regulation Upsets The Balance Struck By Congress

Under “conflict pre-emption,” federal law preempts a state law or regulation “that ‘under

the circumstances of the particular case . . . stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress’ —whether that ‘obstacle’ goes by the

name of ‘conflicting; contrary to; . . . repugnance; difference; irreconcilability; inconsistency;

16 It is important to note that implied conflict preemption is a basis for preemption that is separate and independent from express preemption. In other words, if the AB 1493 Regulations are related to fuel economy standards, then they are expressly preempted even if they do not actually conflict with EPCA. See, e.g., Egelhoff, 532 U.S. at 146 (“Petitioner argues that the Washington statute falls within the terms of ERISA’s express pre-emption provision and that it is pre-empted by ERISA under traditional principles of conflict pre-emption. Because we conclude that the statute is expressly pre-empted by ERISA, we address only the first argument.”); see also First Nat’l Life Ins. Co. v. Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546, 1550 (11th Cir. 1992) (“[ERISA’s] preemption provision displaces all state laws that fall within its sphere, even including state laws that are consistent with ERISA’s substantive requirements.”)


37

violation; curtailment; . . . interference,’ or the like.” Geier v. Am. Honda Motor Co., 529 U.S.

861, 873 (2000) (quoting Hines v. Davidowitz, 312 U.S. 52, 67(1941)).

Where Congress or a federal agency has sought to create a balanced relationship between

competing interests through comprehensive statutory or regulatory treatment, state law

disturbing that balance is preempted. See, e.g., Geier, 529 U.S. at 873 (holding that state tort

claims were preempted by federal safety standards where tort rules would upset DOT’s gradual

phase-in of air bags); Mich. Canners & Freezers Ass’n., Inc. v. Agri. Mktg. & Bargaining Bd.,

467 U.S. 461 (1984) (Agricultural Fair Practices Act preempted state marketing statute

undermining balanced relationship that Congress sought to establish between agricultural

producers and “handlers”); Edgar v. MITE Corp., 457 U.S. 624 (1982) (plurality opinion)

(observing that the Williams Act struck a careful balance between the interests of offerors and

target companies such that any state statute that “upset[]” this balance is preempted); Palmer v.

Liggett Group, Inc., 825 F.2d 620, 629 (1st Cir. 1987) (state tort liability preempted when

enforcement would be “seriously disruptive to the congressionally calibrated balance of national

interests”).

“[A]mong the objectives of the CAFE program are maximizing fuel economy, avoiding

economic harm to the automobile industry, maintaining consumer choice, and ensuring vehicle

safety.” Central Valley Chrysler-Jeep v. Witherspoon, 456 F. Supp. 2d 1160, 1169 (E.D. Cal.

2006). As NHTSA states:

Congress did not want improved fuel economy to come at the price of adverse effects on sales, jobs, and consumer choice. Further, in choosing the level of future CAFE standards, NHTSA has traditionally considered the potential impact on safety. In selecting the maximum feasible level, NHTSA strives to set the standards as high as it can without causing significant adverse consequences for the manufacturers or consumers.

Light Truck Standard, 71 Fed. Reg. at 17668.


38

B. The Evidence Shows That The AB 1493 Regulations Conflict With EPCA’s Goals And Purposes

The Defendants’ opposition to AIAM’s motion for summary judgment framed certain

disputed issues of fact that, if proven, demonstrate that the AB 1493 Regulations conflict with

NHTSA’s implementation of the federal fuel economy program under EPCA. These disputed

facts are:

28. The California Air Resources Board based the mid-term and near-term standards in the AB 1493 Regulations on a 4-year phase in period. The phase in period is the period of time within which manufacturers will introduce the new technologies into their entire vehicle fleet.

31. The Light Truck Standards are based on a six-year phase in period to “reduce the economic impact of applying technology by providing greater flexibility as to when fuel economy improvements are expected.”

34. California law did not require the California Air Resources Board to assess the job loss that may result in the automobile industry outside of the State of California as a result of the AB 1493 Regulations, and the rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board that assesses the impact on jobs outside of California in connection with the implementation of the AB 1493 Regulations.

35. The Air Resources Board did not make any determination of the total amount of lost new vehicle sales that might occur nationwide if the AB 1493 Regulations were to be enforced in those states that have adopted the regulations, and has not made any determination concerning any resulting loss of employment.

36. Nobody at the Vermont Agency of Natural Resources conduct any analysis of the potential impact of the DEC Regulations on jobs in the automobile industry.

39. The rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board assessing the relative cost-effectiveness of vehicle down-weighting as a compliance option.

40. The rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board assessing the safety impacts of the AB 1493 Regulations.

41. In response to questioning, the Vermont Agency of Natural Resources’ designated witness, Thomas Moye, could not identify any study or analysis


39

conducted by the Agency of Natural Resources concerning the impacts of the DEC regulations on vehicle safety.

See AIAM’s Statement of Undisputed Facts (ECF 156); Defendant and Defendant-Intervenors’

Surreply to Reply of Plaintiff Association of International Automobile Manufacturers in Support

of Motion for Summary Judgment (ECF 191) at 2 (disputing Fact Nos. 3, 10, 18-19,23, 25-28,

31, 34-36, and 39-41).

Taken together, these facts, combined with the evidence discussed below, demonstrate

that the AB 1493 Regulations conflict with EPCA on their face and that in enacting these

conflicting regulations the state regulators did not give due consideration to the important factors

that NHTSA must balance in setting national fuel economy standards.

1. The AB 1493 Regulations Conflict With EPCA On Their Face Because They Set More Stringent Fuel Economy Standards And Are Structured Inconsistently

On a most fundamental level, the AB 1493 Regulations conflict with the CAFE program

because each program establishes a different level of required fuel economy. The current CAFE

standard for passenger cars is prescribed by statute at 27.5 miles per gallon. 49 U.S.C.

§ 32902(b); 49 C.F.R. § 531.5. The AB 1493 Regulations in contrast would require

manufacturers to produce a fleet of passenger cars and small light-duty trucks with a combined

average fuel economy of 38.4 miles per gallon for the 2012 model year, gradually increasing to

43.7 miles per gallon by the 2016 model year. Thus, by definition, when it drafted these

regulations the State of California came to a radically different conclusion than Congress about

the appropriate level of fuel economy for passenger cars.

The AB 1493 Regulations likewise conflict with the light-duty truck CAFE standards, in

terms of both their different numeric levels and their inconsistent structures. The recently

enacted Light Truck Standards provide for a transitional “Unreformed CAFE” standard that sets


40

fleet-wide CAFE standards at 22.5, 23.1 and 23.5 miles per gallon for the 2008, 2009 and 2010

model years, respectively. Light Truck Standards, 71 Fed. Reg. at 17566. The regulations then

transition to a “Reformed CAFE” system starting in 2011 whereby a fuel economy “target” will

be calculated for each model of light truck based on the model’s “footprint.”17 Id. Pursuant to

the formula, models with a smaller “footprint” will have a higher, more stringent, fuel economy

target, and models with a larger “footprint” will have a lower target. Id. Each manufacturer’s

required fleet-wide CAFE performance for a given model year is the production-weighted mean

fuel economy target of all the light truck models in its fleet. Id. at 17607.18

The transition to an attribute-based approach for CAFE represents a dramatic shift in how

NHTSA sets fuel economy standards for light-duty trucks. NHTSA adopted this approach

because in its view it better promotes EPCA’s competing goals. See, e.g., Light Truck

Standards, 71 Fed. Reg. at 17570 (discussing NHTSA’s conclusions concerning Reformed

CAFE’s consideration of economic conditions and consumer choice); id. at 17568 (discussion

impact of Reformed CAFE on safety considerations).

The AB 1493 Regulations are not based on an attribute approach. Rather, they set a

single uniform average for each fleet – the very approach NHTSA found to be inferior because it

could cause adverse safety consequences and economic hardship. All of the benefits NHTSA

sought to secure by enacting the Reformed CAFE program necessarily will be swept away if

17 The “footprint” is the product of the average track width (the distance between the centerline of the tires) and wheelbase (the distance between the centers of the axles).

18 During a transition period between model years 2008 and 2010, manufacturers may elect to comply with the Reformed CAFE standard or the Unreformed standard.


41

automakers are forced to comply with the more stringent numerical fuel economy levels required

under these state standards.

Another direct conflict between the DEC Regulation and the Light Truck Standards is the

pace at which manufacturers are required to integrate fuel savings technologies across their

fleets. The Light Truck Standards are based on a six-year phase-in period to “reduce the

economic impact of applying technology by providing greater flexibility as to when fuel

economy improvements are expected.” Light Truck Standards, 71 Fed. Reg. at 17590. Indeed,

the aggressiveness of the phase-in period was the subject of numerous comments and received

very careful consideration by NHTSA, as demonstrated by the following discussion in the

Federal Register notice:

The agency recognizes that vehicle manufacturers must have sufficient lead time to incorporate changes and new features into their vehicles. In making its lead time determinations, the agency considered the fact that vehicle manufacturers follow design cycles when introducing or significantly modifying a product. For the final rule, the agency based our lead time assumptions more closely on the findings of the NAS report, typically relying on the mid-point of the NAS range for full market penetration, i.e., 6 years or approximately a 17 percent phase-in rate. As illustrated in Appendix B of this document, and as discussed further below, the agency made numerous adjustments to timing when applying technologies in order to address lead time concerns.

Light Truck Standards, 71 Fed. Reg. at 17626.19

The AB 1493 Regulations, however, would require auto makers to incorporate the very

same fuel reduction technologies, but within a four-year phase-in period. See PX 189 at 2 (“The

phase-in period for both the near term and mid term standards has been extended to four years.”);

19 The evidence discussed above establishes Disputed Fact No. 31: “The Light Truck Standards are based on a six-year phase in period to ‘reduce the economic impact of applying technology by providing greater flexibility as to when fuel economy improvements are expected.’”


42

id. at 137. In fact, CARB considered “proposing more stringent vehicle standards” by

“shortening the phase-in period,” but “concluded that … manufacturers would have a very

difficult time incorporating the needed technologies across their fleet as rapidly as would be

necessary.” PX 189 (ISOR) at 137. CARB staff therefore concluded that “more stringent

standards would not be technically feasible.” Id.20

This substantially shorter lead time compared to NHTSA is a facial conflict between the

regulations. This conflict is particularly significant in light of the admission in the deposition of

Steve Albu, who testified that it will actually take manufacturers up to seven years in order to

bring their fleets into compliance with the 2012 model year standards. Albu Depo. at 272:15-

273:19.

The AB 1493 Regulations also conflict with EPCA in their treatment of alternative fuels.

As this Court recognized during the trial, the provision of alternative fuels and the vehicles that

can run on them presents the proverbial “chicken and egg” problem. During the examination of

Al Weverstad, the following exchange took place::

THE COURT: What comes first? Does the car come first that -- that would permit E85 to be used? Or does the E85 come first and then the cars get adjusted so that they can use that product?

THE WITNESS: It's a traditional argument that we have with our -- our friends in the oil industry. And in -- this is the case where the -- we call that the chicken and the egg concern. And –

THE COURT: I think I've used that analogy before.

20 The evidence discussed above establishes Disputed Fact No. 31: “The California Air Resources Board based the mid-term and near-term standards in the AB 1493 Regulations on a 4-year phase in period. The phase in period is the period of time within which manufacturers will introduce the new technologies into their entire vehicle fleet.”


43

THE WITNESS: Yes. And we actually -- this is one where we have lots of eggs. We're just waiting for some chickens. …

TR Vol. 1-B, 36:3-13. Congress has already addressed this question, and has determined to

place the egg (i.e., alternative fueled vehicles) before the chicken (i.e., the alternative fuel

infrastructure). By drafting the alternative fuel provisions in 49 U.S.C. § 32905(a), (b) so as to

provide a CAFE credit for manufacturing alternative fueled vehicles whether or not they are run

on the alternative fuel, Congress had made this legitimate policy choice to incentivize the

automobile industry to produce alternative fueled vehicles. In contrast, the AB 1493 Regulations

provide manufacturers with no credit for alternative fueled vehicles unless those vehicles

actually run on the fuel – essentially elevating the chicken above the egg. This presents a direct

conflict with EPCA.

Finally, having state greenhouse gas emissions limits – even if they are set at a level

commensurate with the federal CAFE standards – would lead to a balkanization of fuel economy

and thus upset the nationwide fleet averaging approach established by Congress. The reason the

nationwide fleet averaging approach was adopted was to “ensure wide consumer choice by

leaving maximum flexibility to the manufacturer” to produce a “diverse product mix” while

meeting the applicable CAFE standards. S. Rep. No. 94-179, at 6 (1975). Thus, a manufacturer

can balance its sales of larger, more fuel intensive fleets in one part of the country with the sales

of smaller and more fuel economical vehicles in another part. These regulations, however,

would establish separate and independent fuel economy fiefdoms in every state that adopts them,

requiring manufacturers to balance their fleets separately in each one. This problem is

particularly acute in small states where subtle shifts in the fleet mix could have dramatic impacts

on fleet-wide fuel economy.


44

2. The AB 1493 Regulations Conflict With EPCA With Regard To The State’s Consideration Of EPCA’s Statutory Criteria

The AB 1493 Regulations do not strike the same balance as CAFE between fuel economy

and the various other relevant factors because in enacting the regulations neither the State of

California nor the State of Vermont considered the same factors weighed by NHTSA in setting

CAFE standards. For its part, Vermont relied almost entirely upon technical analyses conducted

by or on behalf of CARB, as Thomas Moye testified at trial. TR Vol. 11-A, 65:14-66:2 and

70:8-16 (ANR did not conduct an independent analysis of how manufacturers could comply with

the regulations); 88:25-89:8 (ANR conducted no independent analysis of the impact of the

regulations on the availability of vehicle types in Vermont); 99:9-24 (ANR conducted no

independent analysis of the impact of the regulations on jobs in the automobile industry); 107:4-

22 (ANR conducted no independent analysis of the impact of the regulations on safety should the

regulations result in lighter fleets).

The regulators at the California Air Resources Board likewise failed to give any

consideration to the factors NHTSA considers in setting fuel economy standards. Consider, for

example, the impact of the regulations on employment outside of California. NHTSA pays close

heed to the impact that CAFE standards would have on employment in the domestic automobile

industry. The agency seeks to set fuel economy standards that are “sufficiently rigorous to

promote the development of more fuel efficient vehicles, but not so rigorous as to result in the

loss of employment in the automotive sector, then [at the time of EPCA’s enactment] responsible

for 1 out of every 9 jobs in the U.S. economy.” Fuel Economy Standards--Credits and Fines--

Rights and Responsibilities of Manufacturers in the Context of Changes in Corporate

Relationships, 69 Fed. Reg. 77663, 77667 (Dec. 28, 2004).


45

In contrast, nothing in AB 1493 required CARB to determine the regulations’ impacts on

employment outside of California. See Cal. Health & Safety Code § 43018.5 (setting forth the

statutory criteria for the regulations); see also Shulock Depo. at 235:2-11 (“Q. So the law does

not -- the state law does not require you to assess the job loss that may result in the auto industry

as a result of the AB 1493 regulation? A. Outside of California? Q. (Nodding head) A.

No. Q. Okay. And so you made no analysis of that; correct? A. Correct.”).21

Furthermore, CARB’s own modeling analysis shows that the AB 1493 Regulations will

likely result in a 4.7% decrease in new motor vehicle sales in the State of California by 2020.

See PX 198 (Addendum Presenting and Describing Revisions to: Initial Statement of Reasons for

Proposed Rulemaking, Public Hearing to Consider Adoption of Regulations to Control

Greenhouse Gas Emissions from Motor Vehicles) at 33-34. CARB’s Program Manager for

Motor Vehicle Greenhouse Gas Regulation, Charles Shulock, estimated in his deposition that

this sales loss would amount to roughly 97,000 units in 2020 alone. Shulock Depo. at 238:2-12.

Despite this conclusion, however, it is undisputed that CARB conducted no formal analysis of

the number of jobs that would be lost in the industry should sales in California fall by 4.7%:

Q. Okay. And just to be clear, I’m asking you on behalf of the Air Resources Board now.

Did the Air Resources Board do any kind of study, investigation, data collection, analysis, anything like that, to assess how many jobs, if at all, would be lost as a

21 The evidence discussed above establishes Disputed Fact No. 34: “California law did not require the California Air Resources Board to assess the job loss that may result in the automobile industry outside of the State of California as a result of the AB 1493 Regulations, and the rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board that assesses the impact on jobs outside of California in connection with the implementation of the AB 1493 Regulations.”


46

result of an approximately 5 percent decrease in sales of new motor vehicles in California as a result of the AB 1493 regulations?

A. No.

Shulock Depo. at 233:13-21; see also id. at 241:6-14 (“Q. My question to you is, did the Air

Resources Board think it was important – ‘yes’ or ‘no,’ it was important or was not important, at

the time of the rulemaking to investigate how many jobs might be lost in the United States if it

were true that there would be a hundred thousand fewer new motor vehicle sales as a result of the

regulation? A. Well, I -- cannot say whether we considered it important or not. We did not do

it.”). There was likewise no analysis conducted of the impact on jobs if the AB 1493

Regulations are implemented in the other states that have adopted them under Section 177 of the

Clean Air Act.

Q. And have you made any effort to determine the total amount of lost sales of new motor vehicles that might occur nationwide if California’s regulation is upheld and the other states that have adopted it also are upheld?

A. No.

Q. And have you made any effort at all to consider how many job losses might result from all of those lost new motor vehicle sales if California’s regulation is upheld and the other states that you predict and hope will adopt or have adopted the regulation’s efforts are also upheld?

A. On the national level, you’re saying?

Q. Yeah.

A. No.

Shulock Depo. at 242:7-21. Again, the Defendants offered no admissible testimony at trial

disputing these facts.22

22 The evidence discussed above establishes Disputed Fact No. 35: “The Air Resources Board did not make any determination of the total amount of lost new vehicle sales that might occur

[Footnote continued on next page]


47

Similarly, Thomas Moye testified that nobody at the Vermont Agency of Natural

Resources performed any independent analysis of the impact the regulations may have on jobs at

any automobile manufacturer:

Q All right. You -- neither you nor anybody at the Agency has ever performed any analysis whatsoever, independent of whatever information's publicly available from California, as to the impact -- the potential impact the regulation here in Vermont might have on jobs at DaimlerChrysler Corporation, correct?

A That's correct.

Q And in fact, you've never performed that sort of analysis for the impact of the regulation on Ford, correct?

A That's correct.

Q You've never considered or tried to analyze the potential impact the greenhouse gas regulation might have on jobs at General Motors, right?

A That's correct.

Q Same thing for Toyota?

24 A Yes.

TR Vol. 11-A, 99:9-24.23

Safety is another consideration where CARB’s rulemaking conflicts with NHTSA’s

balancing approach. It is NHTSA’s view that there is a link between fuel economy and vehicle

safety in that “[t]he historical fact is . . . that carmakers respond to CAFE standards by reducing

the size of their fleets.” Competitive Enter. Inst. v. Nat’l Highway Traffic Safety Admin., 956

[Footnote continued from previous page]

nationwide if the AB 1493 Regulations were to be enforced in those states that have adopted the regulations, and has not made any determination concerning any resulting loss of employment.”

23 The evidence discussed above establishes Disputed Fact No. 36: “Nobody at the Vermont Agency of Natural Resources conduct any analysis of the potential impact of the DEC Regulations on jobs in the automobile industry.”


48

F.2d 321, 325 (D.C. Cir. 1992). In light of the relationship between fuel economy and safety,

NHTSA has determined that

it is possible CAFE standards above 27.5 mpg could have a significant effect on safety, even in the longer run, to the extent that they might “force” consumers into significantly smaller and lighter cars. Thus, were NHTSA to consider setting standards above 27.5 mpg in the future, it agrees that the issue of safety would warrant further attention.

Passenger Automobile Average Fuel Economy Standards for Model Years 1987-88, 51 Fed. Reg.

35594, 35613 (Oct. 6, 1986). Consequently, NHTSA is recently on record as saying that any

change in CAFE standards will only be made after careful consideration of its safety impacts.

See Reforming the Automobile Fuel Economy Standards Program, 68 Fed. Reg. 74908-01 at

74913 (Dec. 29, 2003).

CARB’s rulemaking conflicts with NHTSA’s administration of the federal fuel economy

program by not considering any connection between more stringent fuel economy regulations,

vehicle downsizing and any resultant impact on safety. This omission was an artifact of the AB

1493 statute, which provides that the regulations adopted by CARB shall not “require” a

reduction in vehicle weight. Cal. Health & Safety Code § 43018.5(d)(3). CARB staff construed

this provision to mean that they could not even consider whether weight reduction would be a

cost-effective compliance option (even if not explicitly required):

Q. Has there been any analysis, modeling or testing of the cost-effectiveness of down-weighting as opposed to including various technologies for purposes of increasing fuel economy or decreasing greenhouse gas emissions in order to comply with AB-1493?

[Objection interposed]

THE WITNESS: No. We were specifically instructed by AB-1493 not to consider weight reduction so we didn’t examine that arena.


49

Hughes Depo. at 287:9-18.24

Thus, CARB conducted no analysis of whether the regulations would have any impact on

vehicle safety:

Q. Now, sir, has there been any analysis, modeling or testing of the safety impact of AB-1493?

A. I am not aware of any.

Q. Okay. And again, you are speaking now as the designated representative of the Air Resources Board; correct?

A. Yes.

Id. at 286:19-287:3.25

Nor did anybody at the Vermont Agency of Natural Resources conduct any separate

analysis of the potential safety impacts of the AB 1493 Regulations. The only thing Mr. Moye

could say was that they “believed that the regulation would not require vehicles to be lighter.”

TR Vol. 11-A, 107:9-10. Significantly, however, they conducted no analysis of the safety

impacts should the regulations result in a shift in fleet mix to lighter vehicles. Id. at 107:12-22.26

24 The evidence discussed above establishes Disputed Fact No. 39: “The rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board assessing the relative cost-effectiveness of vehicle down-weighting as a compliance option.”

25 The evidence discussed above establishes Disputed Fact No. 40: “The rulemaking record for the AB 1493 Regulations does not contain any modeling, testing or analysis conducted by or on behalf of the Air Resources Board assessing the safety impacts of the AB 1493 Regulations.”

26 The evidence discussed above establishes Disputed Fact No. 41: “In response to questioning, the Vermont Agency of Natural Resources’ designated witness, Thomas Moye, could not identify any study or analysis conducted by the Agency of Natural Resources concerning the impacts of the DEC regulations on vehicle safety.”


50

Moreover, even if the more stringent fuel economy required by the AB 1493 Regulations

had no safety impacts per se, their structure conflicts with NHTSA’s safety-related

considerations in adopting an attribute-based approach for light trucks. That agency concluded

that this new approach optimizes vehicle safety because it eliminates a “regulatory incentive to

downsize vehicles,” which in NHTSA’s view reduces safety. Light Truck Standards, 71 Fed.

Reg. at 17568. By setting a single numeric standard for each fleet instead of enacting an

attribute-based standard, the state regulations necessarily conflict with NHTSA’s approach for

ensuring vehicle safety.

The evidence offered at trial therefore establishes that the mere act of adopting a

regulation that effectively mandates fuel economy greatly in excess of the requirements of the

federal CAFE program creates an inexorable conflict. “In selecting the maximum feasible level,

NHTSA strives to set the standards as high as it can without causing significant adverse

consequences for the manufacturers or consumers.” Light Truck Standards, 71 Fed. Reg. at

17668 (emphasis added). “The process of achieving those goals involves great expertise and

care.” Id. Thus, as NHTSA has determined, “the State GHG standard, to the extent that it

regulates tailpipe CO2 emissions, would frustrate the objectives of Congress in establishing the

CAFE program and conflict with the efforts of NHTSA to implement the program in a manner

consistent with the commands of EPCA.” Light Truck Standards, 71 Fed. Reg. at 17667.

Because the AB 1493 Regulations conflict with the federal CAFE program, they are impliedly

preempted by EPCA.

IV. THE DEFENDANTS’ LEGAL ARGUMENTS DO NOT DEFEAT EXPRESS OR IMPLIED PREEMPTION

The discussion set forth above demonstrates that the AB 1493 Regulations cannot survive

the application of well-established principles of express and implied conflict preemption. The


51

Defendants’ only hope to save the regulations, therefore, is to convince this Court that those

principles do not apply to these regulations. To do this, they have devised a theory that through

the application of Section 209(b) of the Clean Air Act and/or Section 32901(f) of EPCA, the

AB 1493 Regulations will be effectively “federalized” and immune from federal preemption if

California is successful in obtaining a waiver under Section 209(b) of the Clean Air Act. The

crux of the Defendants’ argument is that the waiver provision of Section 209(b) constitutes a

form of “cooperative federalism,” and that a waiver signifies EPA approval of the regulations.

Tr. of Mar. 2, 2007 Motions Hearing & Pretrial Conference at 13:7-9. Once waived, the

regulations then receive “federal status” because “the California standard is a federal standard

under the Clean Air Act,” thus taking “them out of the realm of preemption.” Id. at 13:7-9;

15:23-25; see also Tr. from Apr. 4, 2007 Hearing to Discuss U.S. Supreme Court Decision In

Massachusetts v. EPA & Testimony of Mr. Duleep at 25:18-23 (waived California regulations

“attain a federal status under the Clean Air Act … [and] standards which are waived under

209(b) by EPA are federal standards for the purposes of EPCA. They are not state standards

anymore.”).

The fundamental problem with the Defendants’ argument is that a California emissions

standard that receives a waiver of Clean Air Act preemption remains nothing more than a state

regulation that is saved from preemption that would otherwise apply under Section 209(a) of the

Clean Air Act. There is nothing in the text of the Clean Air Act or EPCA that indicates

congressional intent to delegate to the State of California the authority to enact a federal

regulation. Furthermore, the text of the Clean Air Act, the legislative history of that statute, and

cases construing Section 209(b) confirm that a waived California regulation is a state and not a

federal regulation.


52

In their most recent filing, the Defendants attempt to buttress their already flawed legal

argument by pointing to recent announcements by the Bush Administration requiring

coordinated inter-agency action at the federal level to address greenhouse gas emissions and

global warming. See Def’t Suppl. EPA & NHTSA Brief at 2-8. In light of this activity, the

Defendants imply that EPA will decide California’s pending waiver application after

coordinating with other federal agencies, thus protecting against any potential conflict between

the AB 1493 Regulations and other federal law. This argument, of course, has no bearing on

express preemption under EPCA, as there is no suggestion in the Defendants’ brief that EPA can

deny California’s waiver request because the regulations are “related to fuel economy standards”

and therefore expressly preempted under EPCA. And, as to conflict preemption, the notion that

EPA can deny the waiver request or require modifications to the regulations because they

conflict with NHTSA’s administration of the federal fuel economy program will surely be hotly

contested by the State of California and other waiver proponents. At this point in time however,

two things are certain – first, in crafting these regulations, the State of California did not consult

or coordinate with NHTSA or any other federal agency, and, second, NHTSA is on record as

concluding that the regulations conflict with its administration of EPCA. It is therefore

inconceivable that EPA can grant a waiver for these regulations in a manner that takes into

account their conflict with EPCA.

A. A Waiver Of Clean Air Act Preemption Under Section 209(b) Does Not “Federalize” The California Emissions Standard

1. The Defendants’ Argument Finds No Support In The Plain Language Of The Clean Air Act

It is readily apparent from the plain language of Section 209 that Congress did not intend

to establish California as an author and enforcer of federal emission standards. Rather, the

waiver provision of Section 209(b) under which California ostensibly has enacted the challenged


53

regulations must be read in connection with Section 209(a)’s preemption provision to which it is

an exception.

Section 209(a) provides:

No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part [42 U.S.C. §§ 7521, et seq.] 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 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) (2000). Section 209(b) sets forth an exception to this broad preemption

provision and provides:

(1) The Administrator shall, after notice and opportunity for public hearing, waive application of this section to any State which has adopted standards (other than crankcase emission standards) for the control of emissions from new motor vehicles or new motor vehicle engines prior to March 30, 1966, if the State determines that the State standards will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards. No such waiver shall be granted if the Administrator finds that—

(A) the determination of the State is arbitrary and capricious,

(B) such State does not need such State standards to meet compelling and extraordinary conditions, or

(C) such State standards and accompanying enforcement procedures are not consistent with section 202(a) of this part [42 USCS § 7521(a)].

(2) If each State standard is at least as stringent as the comparable applicable Federal standard, such State standard shall be deemed to be at least as protective of health and welfare as such Federal standards for purposes of paragraph (1)

(3) In the case of any new motor vehicle or new motor vehicle engine to which State standards apply pursuant to a waiver granted under paragraph (1), compliance with such State standards shall be treated as compliance with applicable Federal standards for purposes of this title [42 USCS §§ 7521 et seq.].

Id. § 7543(b).


54

The plain meaning of this provision does not signify a delegation by Congress

empowering the State of California to enact federal law.27 Rather, California is setting the

substantive state standard, not federal law, and Section 209(b)’s waiver provision is merely

allowing operation of state law. See United States v. Chrysler Corp., 591 F.2d 958, 961 (D.C.

Cir. 1979) (“Federal preemption displaces state law. The decision [of the EPA] not to preempt

[under Section 209(b)] simply allows both federal and state authorities to regulate emission

controls.”).

Moreover, in arguing that a waiver under Section 209(b) renders a regulation immune

from preemption under EPCA, the Defendants expand the Clean Air Act waiver provision in a

way that cannot be supported by the text of the statute. On its face, Section 209(b) repeatedly

refers to the standards as “State standards.” See, e.g., 42 U.S.C. § 7543(b)(1) (EPA must deny

waiver if it finds that “such State does not need such State standards to meet compelling and

extraordinary conditions.) (emphasis added). Section 209(b) also provides that a waiver exempts

a California regulation only from express preemption under “this section.” 42 U.S.C.

§ 7543(b)(1) (emphasis added). The statute further provides that “compliance with such State

standards shall be treated as compliance with applicable Federal standards for purposes of this

title [42 U.S.C. §§ 7521 et seq.].” Id. § 7543(b)(3) (emphasis added). The plain negative

implication of these provisions is that a waiver under Section 209(b) does not “federalize” the

27 Moreover, a finding by this Court that the regulations are “federalized” following the grant of a Section 209(b) waiver would raise a number of other constitutional questions, such as whether the waiver provision violates separation of power principles by vesting executive authority in an officer not appointed in the manner prescribed by Article II, and whether authorizing the State of California to promulgate federal regulations without federal oversight prevents the Executive Branch from accomplishing its constitutionally assigned functions.


55

California regulations and does not waive preemption under any other federal law. See Cent.

Valley Chrysler-Jeep v. Witherspoon, 456 F. Supp. 2d 1160, 1173 (E.D. Cal. 2006) (“Section

209(b) does not provide that the regulations, once EPA grants a waiver, become federal law and

are thereby rendered immune from preemption by other federal statutes.”)

The text of Section 177, which allows other states to adopt the California regulations,

also indicates Congress’s intent for the waiver to apply only to Clean Air Act preemption.

Section 177 provides that states may adopt a California emissions standard, “[n]otwithstanding

section 209(a) [42 USCS § 7543(a)].” 42 U.S.C. § 7507. “Section 177 demonstrates that

Congress also gave narrow effect to other states’ adoption of regulations that receive a waiver.

… Hence, the statutory language explicitly disclaims any special status for the California

regulations under other federal statutes.” Cent. Valley Chrysler-Jeep, 456 F. Supp. 2d at 1173.

2. The Legislative History of Section 209(b) Demonstrates That California Only Enjoys An Exception From Clean Air Act Preemption And Not The Power To Enact Federal Law

The legislative history of Section 209(b) is also devoid of any indication that Congress

intended to confer upon the State of California the authority to enact federal law. Rather, the

intent was only to preserve California’s historical prerogative to enact and enforce its own state

regulations in the field of motor vehicle emissions. “Over the adamant objection of the auto

industry, which sought a single national standard to avoid undue economic strain for

manufacturers, California was excepted from preemption as the only state regulating auto

emissions ‘prior to March 30, 1966.’” Motor Vehicle Mfrs. Ass’n v. N.Y. State Dep’t of Envtl.

Conservation, 17 F.3d 521, 525 (2d Cir. 1994) (quoting S. Rep. No. 90-403, at 33 (1967)). The

Senate Committee explained:

On the question of preemption, representatives of the State of California were clearly opposed to displacing the State’s right to set more stringent standards to meet peculiar local conditions. The auto industry conversely was adamant that


56

the nature of their manufacturing mechanism required a single national standard in order to eliminate undue economic strain on the industry.

The committee has taken cognizance of both of these points of view. Senator Murphy convinced the committee that California’s unique problems and pioneering efforts justified a waiver of the preemption section to the State of California.

S. Rep. No. 90-403, at 33 (1967). Indeed, the legislative history of the Clean Air Act repeatedly

refers to Section 209(b) as nothing more than an exception to federal preemption, and not as a

federal standard enacted by California. See H.R. Rep. No. 90-728 at 1985 (statement of Reps.

John E. Moss and Lionel van Deerlin) (“A look at the record should convince anyone of

California’s need for this exemption [from preemption] – and of the State’s proven capabilities in

the fight against smog”); see also Motor Vehicle Mfrs. Ass’n v. New York State Dept. of Envtl.

Conservation, 17 F.3d 521, 526 (2d. Cir. 1994) (“Only California, because its unique Los

Angeles smog problem caused it to begin regulating auto emissions ‘prior to March 30, 1966,’

enjoys a statutory exemption allowing it to promulgate its own emission standards.”); Engine

Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1079 (D.C. Cir. 1996) (“In spite of Congress’ determination to

protect manufacturers from multiple emissions standards … California was granted an

exemption from the § 209(a) preemption.”).

The legislative history of the Clean Air Act Amendments of 1977 further demonstrates

that Congress did not intend for a California standard to have the import of federal law. Rather

than stating that a California regulation constitutes a federal standard, the legislative history

explains that “compliance with the State’s standards is deemed to satisfy the Federal

requirements in California.” H.R. Rep. No. 95-294, at 248, reprinted in 1977 U.S.C.C.A.N

1077, 1381 (emphasis added).


57

3. Federal Precedent Holds That A California Regulation Waived Under Section 209(b) Is A State Regulation And Not Federal Law

The Defendants’ argument that an emissions regulation waived under Section 209(b) is

given the status of federal law is also inconsistent with two decisions from the D.C. Circuit that,

though not directly on point, are indicative of the differentiation between a California state

standard and a federal standard. Virginia v. EPA, 108 F.3d 1397 (D.C. Cir. 1997), for example,

involved a challenge by the Commonwealth of Virginia to a final rule issued by EPA which

declared the ozone reduction implementation plans of twelve individual states in a region

“substantially inadequate” under the Clean Air Act, and required the states to revise their state

implementation plans by enacting California’s Low Emission Vehicle program (LEV). The D.C.

Circuit ruled in favor of Virginia, holding that EPA did not have the legal authority to require the

states to adopt the California LEV program. Part of the rationale for its holding was the fact that

Section 202(b)(3)(C) prevented EPA from prescribing, before the model year 2004, emissions

standards for motor vehicles more restrictive than those already written into the statute. Virginia,

108 F.3d at 1411. Because the EPA rule had the effect of setting emissions standards for new

motor vehicles in the northeastern states stricter than those contained in section 202, the rule was

inconsistent with the statute. Id. at 1411-13. A necessary predicate for this holding is the fact

that the California LEV standard was a state regulation that other states are free to voluntarily

adopt under Section 177, and not a federal regulation that EPA could require states to adopt.

In United States v. Chrysler Corp., 591 F.2d 958, 961 (D.C. Cir. 1979), Chrysler

challenged a ruling by the District Court that it violated the certification requirements of the

Clean Air Act by selling vehicles that did not conform to the design specifications described in

the application its certificate of conformance. Chrysler at the time manufactured both

“California” vehicles and “non-California” vehicles, and (according to Chrysler), the violation


58

resulted when “California” parts were installed in “non-California” vehicles, or vice versa. In

upholding EPA’s authority to impose these sanctions for violating the certification requirements,

the court held that “[f]ederal preemption of state law displaces state authority. The decision not

to preempt simply allows both federal and state authorities to regulate emission controls.” Id. at

961. Under this analysis, the waiver provision allows operation of state law but does not elevate

the California emission standards to federal law. See also Motor Vehicle Mfrs. Ass’n v. New

York State Dep’t of Envtl. Conservation, 17 F.3d 521, 526-27 (2d Cir. 1994) (“The effect of the

Clean Air Act is that motor vehicles manufactured for sale in the United States must be either

‘federal cars’ – certified to meet federal vehicle emission standards as set by the EPA – or

‘California cars’ – certified to meet that state’s standards.”).

The Defendants have not cited this Court to any contrary authority that would support

their novel theory that a California regulation waived under Section 209(b) of the Clean Air Act

has the status of a federal regulation.

4. A Delegation of Authority To A State To Enact Federal Law Requires An Express Directive From Congress That Is Lacking Here

The Defendants’ “federalization” argument suffers from yet another fatal flaw. By

arguing that California emissions “standards which are waived under Section 209(b) by EPA are

federal standards for the purposes of EPCA [and] are not state standards anymore,” Tr. from Apr.

4, 2007, Hearing to Discuss U.S. Supreme Court Decision In Massachusetts v. EPA &

Testimony of Mr. Duleep at 25:18-23, the Defendants are essentially arguing that California has

been subdelegated the responsibility of enacting standards which have the force and effect of

federal law. Not only has EPA never stated that it has subdelegated to the State of California the

authority to enact federal emissions standards, but a subdelegation here would be at odds with


59

well-settled authority concerning the prerequisite for a subdelegation of federal responsibilities

to states.

The issue of subdelegation of authority to a state was addressed most recently in United

States Telecom Association v. FCC. 359 F.3d 544, 565 (D.C. Cir. 2004). That case pertained to

the Federal Communications Commission’s subdelegation to state commissions the authority to

determine whether the failure to provide access to “network elements” belonging to existing

exchange carriers would impair the ability of a new telecommunications carrier seeking access to

provide the services that it seeks to offer – a so-called “impairment finding.” The FCC argued

that agencies presumptively have the power to delegate such responsibilities both to states and

their agencies absent an express statutory provision forbidding it from doing so. Id. The D.C.

Circuit rejected this argument, holding that “while federal agency officials may subdelegate their

decision-making authority to subordinates absent evidence of contrary congressional intent, they

may not subdelegate to outside entities--private or sovereign--absent affirmative evidence of

authority to do so.” Id. at 566. The court’s rationale for its holding is remarkably applicable to

the issues presented in this case:

When an agency delegates authority to its subordinate, responsibility--and thus accountability--clearly remain with the federal agency. But when an agency delegates power to outside parties, lines of accountability may blur, undermining an important democratic check on government decision-making. … Also, delegation to outside entities increases the risk that these parties will not share the agency’s “national vision and perspective,” … and thus may pursue goals inconsistent with those of the agency and the underlying statutory scheme. In short, subdelegation to outside entities aggravates the risk of policy drift inherent in any principal-agent relationship.

Id. at 565-66.

United States Telecom Association is in accord with the D.C. Circuit’s decision in

Planned Parenthood Federation of America v. Heckler. 712 F.2d 650 (D.C. Cir. 1983). In that

case, the Department of Health and Human Services promulgated a regulation that, inter alia,


60

required all providers of family planning services which receive funds under Title X of the

Public Health Service Act to comply with any state law mandating notification or consent of a

parent upon provision of family planning services to a minor. Id. at 653. The court held that

requiring recipients to comply with state law constituted an invalid delegation of authority to the

states. Id. at 663. The court held that “[i]n the absence of Congress’ express authorization of

[the Department of Health and Human Services] to in turn empower the states to set eligibility

criteria, the Secretary has no power to do so.” Id.

These cases illustrate the stark distinction between empowering a state to enact what is

effectively a federal regulation on the one hand, and on the other hand allowing a state to enact a

state regulation that is not preempted by federal law. If Congress intends to empower a state to

enact federal regulation, then it must say so in express and unambiguous terms.28 As discussed

above, there is no such express authorization from Congress. Rather, Section 209(b) merely

provides for a waiver of federal preemption, thus allowing the State of California to enact a state

regulation.

28 One of the authorities cited in the Defendants’ and Defendant-Intervenors’ Sur-Reply to AIAM’s Motion for Summary Judgment (ECF 259) is an example of such a delegation. In Bath Petroleum Storage, Inc. v. Sovas, 309 F. Supp. 2d 357, 366 (N.D.N.Y. 2004), the district court held that the state’s water pollution permitting program authorized under the federal Clean Water Act was not preempted. In that case, the federal statute expressly delegated authority to implement the program to the states. Id. at 369 (“The SPDES permitting program carries out the directives of the Clean Water Act.”). Based on this express delegation to the states in the statute, the court correctly concluded that “[t]he DEC and its SPDES permit program are preempted by the SDWA then only if the CWA is preempted by the SDWA.” Id. at 369. See generally 33 U.S.C. § 1342 (2000) (delegating implementation of the Clean Water Act’s NPDES permit program to the states).


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B. EPA’s Consideration Of The Section 209(b) Criteria Cannot Result In A Waiver Of These Regulations In A Matter That Resolves Conflict With EPCA Even Considering Massachusetts v. EPA And Recent Federal Action On Global Warming

The Defendants argue in their Supplemental Memorandum on the Respective Roles of

EPA and NHTSA that EPA’s consideration of the Section 209(b) criteria, coupled with the

Supreme Court’s decision in Massachusetts v. EPA and President Bush’s May 14, 2007,

Executive Order concerning inter-agency coordination on global warming, will resolve any

conflict between these regulations and NHTSA’s administration of the CAFE program. Def’t

Suppl. EPA & NHTSA Brief at 2-8. According to the Defendants, “the President, like the

Supreme Court, sees no conflict between establishing greenhouse gas emission standards under

the Clean Air Act and the existence of the CAFE regime under EPCA.” Id. at 4. The

Defendants further point out that “the directives establish that there will be coordination between

EPA and other agencies regarding greenhouse emission standards,” thus implying that EPA’s

waiver decision will take into account any potential conflict with EPCA. For the reason’s

discussed below, this argument does not save the AB 1493 Regulations from preemption under

EPCA.

1. The Scope Of EPA’s Waiver Authority To Consider Conflicts With EPCA Is Irrelevant To The Issue Of Express Preemption

First, it should be noted that the Defendants’ arguments on this issue pertain only to the

conflict preemption aspect of this case. Nowhere do they argue that EPA has either the authority

or the obligation to consider whether the AB 1493 Regulations “are related to fuel economy

standards” under Section 32919(a) of EPCA, and to deny the waiver if it finds that the

regulations are expressly preempted by that statute. Therefore, even if EPA’s consideration of

Section 209(b) criteria were to include the EPCA factors, and even if EPA were to base its

decision on a consideration of whether the regulations conflict with NHTSA’s administration of


62

the CAFE program – thus in essence resolving any conflict preemption issues – that would not

save the regulations from express preemption. See, e.g., Egelhoff v. Egelhoff, 532 U.S. 141, 146

(2001) (declining to pass on conflict preemption issue because state regulation was expressly

preempted by ERISA in the first instance); Mackey v. Lanier Collection Agency & Serv., 486

U.S. 825, 829 (1988) (“The pre-emption provision [of § 514(a) of ERIS] . . . displace[s] all state

laws that fall within its sphere, even including state laws that are consistent with ERISA’s

substantive requirements.”)

2. The Waiver Standards Under Section 209(b) Of The Clean Air Act Are Entirely Different From The Factors NHTSA Weighs In Setting Fuel Economy Standards

More fundamentally, however, the Defendants misconstrue EPA’s obligations under

Section 209(b), creating the false impression that EPA’s consideration of consistency with

Section 202(a) of the Clean Air Act is substantially the same as NHTSA’s consideration of

“technological feasibility” and “economic practicability” under Section 32902 of EPCA. They

are, in fact, quite different.

Pursuant to Section 209(b), EPA must deny a waiver if it finds that the California

standard is not consistent with section 202(a) of the Clean Air Act. 42 U.S.C. § 7543(b)(1)(C).

Section 202(a), in turn, provides that vehicle emissions standards enacted by EPA “shall take

effect after such period as the Administrator finds necessary to permit the development and

application of the requisite technology, giving appropriate consideration to the cost of

compliance within such period.” 42 U.S.C. § 7521(a)(2). Putting these two requirements

together, “EPA has explained that it must deny a waiver for California if the state’s regulations

provide ‘inadequate lead time to permit the development of the technology necessary to

implement the new procedures, giving appropriate consideration to the cost of compliance within

the time frame.’” Motor and Equipment Manufacturers Association v. Nichols, 142 F.3d 449,


63

463 n.13 (D.C. Cir. 1998) (quoting Waiver of Federal Preemption, 46 Fed. Reg. 26371, 26372

(May 12, 1981)).

The lead time requirement in the Clean Air Act is significantly different from (and much

narrower than) the “technological feasibility” and “economic practicability” prongs of EPCA.

For example, Section 202(a) would allow for the implementation of an emission standard even if

the standard would have significant consequences on consumer choice and the economic health

of the automobile industry, so long as the technology is available to meet the standards. All that

is required under Section 202(a) is that “basic demand” for new light duty motor vehicles is

satisfied when the standards are implemented. Int’l Harvester Co. v. Ruckleshaus, 478 F.2d 615,

626 (D.C. Cir. 1973). As the International Harvester court held, “as long as feasible technology

permits the demand for new passenger automobiles to be generally met, the basic requirements

of the Act would be satisfied, even if this might occasion fewer models and a more limited

choice of engine types.” Id. at 640. Accordingly, EPA has approved waivers for regulations that

would result in reduced consumer choice for motor vehicles. For example, EPA stated in a 1984

waiver decision regarding a California standard for particulates:

EPA has long held that consistency with section 202(a) does not require that all manufacturers be permitted to sell all motor vehicle models in California. Rather, as discussed below, EPA has found California standards consistent with section 202(a) in cases where certain models were eliminated but the “basic market demand” was satisfied.

* * *

Ultimately, I conclude that Congress left to California the policy choice that its standards might result in some reduction of model availability for its citizens. I cannot lightly overturn California’s judgment that some sacrifice in model availability is worth the benefits of reduced exposure to particulates. If the manufacturers “dislike the substance of the CARB’s regulations … then they are free to challenge the regulations in the state courts of California.” The scope of my review of whether California’s action is consistent with section 202(a) is narrow; it is limited to determining whether those opposed to the waiver have met


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their burden of establishing that California’s standards are technologically infeasible.

California State Motor Vehicle Pollution Control Standards; Waiver of Federal Preemption

Notice of Decision, 49 Fed. Reg. 18887, 18892 (May 3, 1984) (quoting Motor and Equip. Mfrs.

Ass’n, Inc. v. EPA, 627 F.2d 1095, 1105 (D.C. Cir. 1979)); see also California State Motor

Vehicle Pollution Control Standards: Waiver of Federal Preemption, 43 Fed. Reg. 25729 (June

14, 1978) (emissions standards would result in reduced availability of diesel-powered passenger

car models).

In contrast to the consideration under Section 202(a), maintaining wide consumer choice

is a central purpose of EPCA. As the House Report on EPCA explained:

The Committee recognizes that the automobile industry has a central role in our national economy and that any regulatory program must be carefully drafted so as to require of the industry what is attainable without either imposing impossible burdens on it or unduly limiting consumer choice as to capacity and performance of motor vehicles.

H.R. Rep. No. 94-340, at 87 (1975). Consistent with these concerns, Congress specified the

fleet-wide averaging approach to fuel economy to “leave[] maximum flexibility to the

manufacturer to meet the standards” thereby “result[ing] in a more diverse product mix and wide

consumer choice.” S. Rep. No. 94-179 at 6 (1975). In setting fuel economy standards, therefore,

NHTSA considers whether shifts in consumer demand and other economic factors may make a

particular fuel economy standard economically impractical for the industry. For example, in

1985, NHTSA relaxed the 1986 model year passenger car standard because a continuing decline

in gasoline prices caused a shift in consumer demand away from smaller cars, and therefore the

only actions available to manufacturers to improve their fuel economy levels would have

involved product restrictions. Passenger Automobile Average Fuel Economy Standards Model


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Year 1986, 50 Fed. Reg. 40528, (Oct. 4, 1985). This action was upheld in Public Citizen v.

National Highway Traffic Safety Administration, 848 F.2d 256 (D.C. Cir. 1988).

Similarly, there is nothing in the text of either Section 209(b) or Section 202(a) of the

Clean Air Act that requires EPA to consider the safety impacts of the California regulations.

Indeed, the only waiver decision cited by the Defendants concerning safety issues proves just the

opposite. See Defendant and Defendant-Intervenors’ Memorandum on EPA Waiver Authority

(ECF 378) at 6 (citing California State Motor Vehicle Pollution Control Standards; Waiver of

Federal Preemption; Summary of Decision, 47 Fed. Reg. 7306 (Feb. 18, 1982)). In that instance,

although the manufacturers did present evidence concerning the safety risks of the proposed

motorcycle fill-pipe regulations that EPA found unconvincing, EPA granted the waiver because

“[i]n spite of their objections to the regulations, no manufacturer has shown that it is unable to

comply with the regulations.” Id. at 7308; see also id. (“Virtually, no evidence was presented at

the hearing or in supplemental submissions to indicate that the motorcycle industry would be

unable to incorporate designs that would be acceptable to California as complying with the fill-

pipe and fuel tank opening regulations.”) There is no indication from any waiver AIAM is aware

of that EPA has considered the impact the California regulations would have on the

crashworthiness of motor vehicles.

3. EPA Historically Has Viewed Its Waiver Authority To Be Modest In Scope And Limited To section 209(b) Considerations

The discussion above demonstrates that the standards for EPA’s waiver determination

under Section 209(b) of the Clean Air Act are functionally very different from NHTSA’s

determination of the “maximum feasible average fuel economy level” under EPCA. 49 U.S.C.

§ 32902. The question, then, is whether EPA can reach beyond the narrow confines of Section

209(b), and deny a waiver on the grounds that the California regulation would conflict with


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EPCA, or condition the waiver on California’s amending the regulation to avoid conflict with

EPCA. For example, may EPA deny a waiver if it finds that although technologies exist that

would allow compliance with the standard, the regulation would nevertheless result in limiting

consumer choice or have adverse safety impacts?

EPA’s historical practice in deciding California waiver applications would suggest that it

does not. EPA’s historical position is articulated in Motor & Equipment Manufacturers

Association, Inc. v. EPA, 627 F.2d 1095, 1119 (D.C. Cir. 1979) (“MEMA I”), where the D.C.

Circuit noted that “the [EPA] Administrator has consistently held since first vested with the

waiver authority [that] his inquiry under section 209 is modest in scope. He has no ‘broad and

impressive’ authority to modify California regulations.” The agency has therefore felt compelled

to grant waivers for regulations which the agency itself would not have enacted. See California

State Motor Vehicle Pollution Control Standards: Waiver of Federal Preemption, 40 Fed. Reg.

23102, 23104 (May 28, 1975). The discussion in 40 Fed. Reg. 23102 is illustrative of the narrow

role EPA has historically taken in reviewing California waiver requests:

It is worth noting here, however, that even on this issue I would feel constrained to approve a California approach to the problem which I might also feel unable to adopt at the Federal level in my own capacity as a regulator. The whole approach of the Clean Air Act is to force the development of new types of emission control technology where that is needed by compelling the industry to “catch up” to some degree with newly promulgated standards. Such an approach to automotive emission control may be attended with costs, in the shape of a reduced product offering, or price or fuel economy penalties, and by risks that a wider number of vehicle classes may not be able to complete their development work in time.

Id.; see also Ford Motor Co. v. EPA, 606 F.2d 1293, 1297 (D.C. Cir. 1979) (“There is no

indication in either the statute or the legislative history that Congress intended to permit the

Administrator to supplant its emission control regulations with those of California, no matter

how sagacious and beneficial the latter may be. Nor is there any evidence that the Administrator

is supposed to determine whether California’s standards are in fact sagacious and beneficial.”).


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Seizing upon this regulatory history and the caselaw, California argued to EPA in the

pending waiver request for the AB 1493 Regulations that EPA’s review is narrowly confined to

the criteria specifically enumerated in Section 209(b), and may not consider preemption under

any other statute: “U.S. EPA cannot apply any additional criteria – such as potential conflicts

with other law – in evaluating California’s waiver requests.” PX 299 (CARB waiver request for

AB 1493) at 10. CARB elaborated on this point as follows:

CARB anticipates that manufacturers will nevertheless attempt to raise issues in this proceeding concerning preemption under the federal Energy Policy Conservation Act (EPCA). … The CARB notes, however, that such issues are both outside the scope of the Administrator’s review here as discussed in the text, and are irrelevant for the consistency analysis …

Id. at 10 n.11. This argument is consistent with California’s position in past waiver proceedings,

in which CARB similarly claimed:

EPCA is administered not by U.S. EPA but by the National Highway Traffic Safety Administration (NHTSA). Arguments raising constitutional claims and preemption issues not involving the [Clean Air Act] are beyond the scope of the Administrator’s review and a waiver or scope-of-the-waiver proceeding is not the proper forum for such claims.

PX 45 (2002 CARB waiver request) at 15.

Given the State of California’s consistent position regarding the limited scope of EPA’s

waiver authority, neither AIAM nor this Court should presume that EPA will do anything

different with regard to this waiver, such as denying the waiver or requiring modifications to the

California regulation on the ground that the regulations in their current form conflict with

NHTSA’s administration of the federal fuel economy program.

4. Neither Massachusetts v. EPA Nor Executive Order 13432 Can Save These Regulations From Conflict Preemption

The final question is whether the Supreme Court’s decision in Massachusetts v. EPA and

the May 14, 2007, Executive Order concerning the Bush Administration’s approach to global


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warming will have an impact on EPA’s consideration of California’s waiver request, as the

Defendants seem to imply in their most recent filing. See Def’t Suppl. EPA & NHTSA Brief at

3-4. Although it is too soon to tell how EPA will react to these developments, it is patently clear

that EPA cannot waive the California regulations as they currently stand consistent with these

directives.

The decision in Massachusetts v EPA and the Executive Order direct EPA to address the

issues of climate change and greenhouse gas emissions in cooperation with its sister federal

agencies, most notably the Department of Transportation. As the Supreme Court noted, “the two

obligations [of EPA and DOT] may overlap, but there is no reason to think the two agencies

cannot both administer their obligation and yet avoid inconsistency.” Massachusetts, 127 S. Ct.

at 1462. The Court further commented that “EPA no doubt has significant latitude as to the

manner, timing, content, and coordination of its regulations with those of other agencies.” Id.

Similarly, the Executive Order states that “[i]t is the policy of the United States to ensure the

coordinated and effective exercise of the authorities of the President and the heads of the

Department of Transportation, the Department of Energy, and the Environmental Protection

Agency to protect the environment with respect to greenhouse gas emissions from motor

vehicles, nonroad vehicles, and nonroad engines, in a manner consistent with sound science,

analysis of benefits and costs, public safety, and economic growth.” Exec. Order No. 13432, 72

Fed. Reg. 27717 (May 14, 2007).

Significantly, both Massachusetts v EPA and the Executive Order address the manner in

which the federal government should enact motor vehicle emissions standards to address climate

change. If and when EPA sets emissions standards for CO2 under Section 202 of the Clean Air


69

Act, it will coordinate with NHTSA to ensure that those standards do not conflict with the goals

and objectives of EPCA.

In contrast, neither Massachusetts v EPA nor the Executive Order expressly direct EPA

on its approach to the pending waiver request from California. It is therefore unknown whether

EPA will apply the spirit of these authorities to its waiver decision, and consider whether the

AB 1493 Regulations conflict with EPCA. Two things, however, are beyond dispute. First, in

crafting its AB 1493 Regulations, the State of California neither consulted nor coordinated with

NHTSA or any other federal agency as EPA has been directed to by the Supreme Court and the

Executive Order when it sets standards. Second, NHTSA has concluded “that the State GHG

standard, to the extent that it regulates tailpipe CO2 emissions, would frustrate the objectives of

Congress in establishing the CAFE program and conflict with the efforts of NHTSA to

implement the program in a manner consistent with the commands of EPCA.” Light Truck

Standards, 71 Fed. Reg. at 17667.

It is therefore patently clear that EPA cannot grant the waiver for the AB 1493

Regulations as they are now written without offending NHTSA’s administration of the CAFE

program. EPA, then, has two options with regard to the waiver. It can agree with the State of

California’s demand that it not consider whether the AB 1493 Regulations conflict with the

CAFE program, and – assuming the regulations otherwise comport with Section 209(b) – grant

the waiver. Alternatively, EPA can follow the guidance of Massachusetts v. EPA and the

Executive Order and consider whether the regulations conflict with EPCA, in which case it will

have to deny the waiver.

The significant point is that under neither of these scenarios would EPA grant a waiver

for the AB 1493 Regulations in such a way that would render them immune from principles of


70

conflict preemption under EPCA. This Court still will need to decide for its own whether the

regulations are impliedly preempted under EPCA because they frustrate the purposes and goals

of the federal fuel economy program.

C. Section 32902(f) Of EPCA Does Not Have The Effect Of Federalizing A California Regulation

In addition to arguing that a California regulation is effectively federalized by Section

209(b) of the Clean Air Act, the Defendants also argue that the requirement in Section 32902(f)

of EPCA that NHTSA must “consider … other motor vehicles standards of the Government” in

setting fuel economy standards also has the effect of doing so. Thus, according to the

Defendants, a waived California regulation is immune from EPCA’s express preemption

provision – even if that regulation is “related to fuel economy standards” under Section 32919(a)

– and is further immune from the principles of conflict preemption – even if the regulation poses

a direct conflict with the federal fuel economy program. The Defendants’ argument, however,

finds no support in the statute, in the legislative history, or in any caselaw.

Two sections of EPCA are at issue here, the preemption provision of Section 32919(a)

and the standard-setting provision of Section 32902(f). Reading these sections side-by-side

dispels any notion that Section 32902(f) was meant to abrogate 32919(a). Section 32919(a)

provides:

When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.

49 U.S.C. § 32919(a). Section 32902(f) provides:

When deciding maximum feasible average fuel economy under this section, the Secretary of Transportation shall consider technological feasibility, economic practicability, the effect of other motor vehicle standards of the Government on fuel economy, and the need of the United States to conserve energy.


71

49 U.S.C. § 32902(f).

There is no suggestion in Section 32902(f) that when NHTSA “considers” a state

emission standard, that standard is immune from preemption under Section 32919(a). Similarly,

there is no exception in Section 32919(a)’s preemption provision for a state emissions regulation

that is waived under Section 209(b) of the Clean Air Act. In fact, Section 32919 does contain

two narrow exceptions, neither of which would cover the AB 1493 Regulations. Section

32919(b) provides that states “may adopt or enforce a law or regulation on disclosure of fuel

economy or fuel operating costs,” but only if those requirements are “identical” to the federal

requirements. 49 U.S.C. § 39219(b). Section 32919(c) allows a state to “prescribe requirements

for fuel economy for automobiles obtained for its own use.” 49 U.S.C. § 39219(c). The fact that

Congress expressly preserved these narrowly limited areas of state autonomy demonstrates that

there are no other unwritten exceptions to express preemption.

As NHTSA has concluded:

EPCA does not include any exception to its preemption provision that would cover State GHG and CO2 standards [and] . . . EPCA’s decisionmaking factor provision is neither a saving clause nor a waiver provision. Nor does NHTSA interpret it as saving state emissions standards that effectively regulate fuel economy from preemption.

Light Truck Standards, 71 Fed. Reg. at 17669.

The requirement of Section 32902(f) that NHTSA “consider” other motor vehicles

standards likewise fails to support the expansive reading the Defendants attribute to it. In

interpreting a statute, a court must give words their plain meaning. Tyler v. Douglas, 280 F.3d

116, 122 (2d Cir. 2001). Black’s Law Dictionary defines “consider” as “to fix the mind on, with

a view to careful examination; to examine, to inspect. To deliberate about and ponder over. To

entertain or give heed to.” Black’s Law Dictionary 306 (6th ed. 1990). As the Central Valley

court correctly pointed out, “Congress’s use of the term ‘consider’ in a statute requires an actor


72

to merely ‘investigate and analyze’ the specified factor, but not necessarily act upon it.” Central

Valley Chrysler-Jeep, 456 F. Supp. 2d at 1173 (quoting City of Davis v. Coleman, 521 F.2d 661,

679 (9th Cir. 1975)).

This interpretation of the limited impact of the “consider” requirement is supported by

countless cases. See, e.g., Conservation Law Foundation v. FERC, 216 F.3d 41, 47 (D.C. Cir.

2000) (although the Federal Power Act requires the Federal Energy Regulatory Commission to

“consider” the recommendations of the United States Fish and Wildlife Service under 16 U.S.C.

§ 803, it may reject those recommendations if they are inconsistent with the purposes of the Act);

U.S. v. Kingdom (U.S.A.), Inc., 157 F.3d 133, 136 (2d Cir. 1998) (although 18 U.S.C. § 3553(a)

provides that a district court “shall consider … any pertinent policy statement issued by the

Sentencing Commission” the court is not bound by them and may impose a sentence outside of

the ranges set forth in the policy statement); Getty v. Federal Sav. and Loan Ins. Corp., 805 F.2d

1050, 1055 (D.C. Cir. 1986) (“When a statute requires agencies to ‘consider’ particular factors,

‘it imposes upon agencies duties that are essentially procedural.’”) (quoting Strycker’s Bay

Neighborhood Council, Inc. v. Karlen, 444 U.S. 223, 227 (1980)). The Defendants have not

cited a single case that supports their argument that the requirement that an agency “consider” a

state regulation renders that regulation immune from a preemption challenge, or gives the state

free reign to enact regulations that conflict with and usurp a federal program.

The Defendants place considerable weight on the definition of “Federal standards” in

Pub. L. No. 94-163 § 502(d)(3)(D)(i) as support for their federalization theory. See Def’t Suppl.

EPA & NHTSA Brief at 12 (“Reading Section 502(d) and (e) together with Section 509(a) [the

preemption provision], it is plain that a ‘Federal motor vehicle standard’ under the former was

not a ‘state’ standard under the latter.”); id. at 16-18. The Defendants, however, conveniently


73

ignore the fact that the definition of “Federal motor vehicle standards” under section 502(d) is

expressly limited only to that section, and does not apply to the express preemption provision in

former Section 509(a).

When EPCA was originally enacted in 1975, the statute provided for specific fleet-

average fuel economy levels for model years 1978 through 1980. Pub. L. No. 94-163

§ 502(a)(1). EPCA allowed a manufacturer to seek a relaxation of these statutorily mandated

standards if the manufacturer could show that “Federal standards” resulted in a “fuel economy

reduction” (and if certain other conditions were met). Pub. L. No. 94-163 § 502(d). As a

definitional matter, the statute provided that “[f]or the purposes of this subsection” – i.e.,

subsection (d) to Section 502 – the term “Federal standards” includes “emissions standards

applicable by reason of Section 209(b) of [the Clean Air] Act.” Pub. L. No. 94-163

§ 502(d)(3)(D)(i) (emphasis added). The limitation of the definition of “Federal standards” only

“[f]or the purposes of this subsection” necessarily means that it has no impact on the preemption

provision which was set forth in a different subsection of EPCA. Pub. L. No. 94-163 § 509(a);

49 U.S.C 32919(a).

As the Defendants’ point out, various provisions of EPCA were recodified in 1994

“without substantive change.” Def’t Suppl. EPA & NHTSA Brief at 17. “The sum and

substance of these changes is that the meaning of the current term ‘other motor vehicle standards

of the Government’ is identical to the former term ‘other Federal motor vehicle standards’”

under Section 32902(f) Id. If this is true, then it also must be true that the former statute’s

limitation of this definition “[f]or the purposes of this subsection” also must apply to the current

Section 32902(f). In other words, while a California emissions standard may be “other motor


74

vehicle standards of the Government” for the purposes of Section 32902, it is expressly not a

“federal” standard for the purposes of Section 32919(a)’s express preemption provision.

V. CONCLUSION

The evidence presented at trial demonstrates beyond any reasonable doubt that the AB

1493 Regulations are preempted by federal law. EPCA preempts any state regulation “related to

fuel economy standards.” California has promulgated and Vermont has adopted a regulation

limiting vehicular emissions of CO2, which by all accounts is the functional equivalent of a fuel

economy standard. Moreover, the regulations effectively require vehicle manufacturers to

improve the fuel economy of their fleets because doing so is the only practical means of reducing

tailpipe CO2 emissions. Finally, because these regulations require fuel economy levels greatly

in excess of those established by the Federal Government, they create a direct and inexorable

conflict with the CAFE program administered by the National Highway Traffic Safety

Administration. The Defendants have not offered any valid basis in law or in fact why long-

standing principles of federal preemption should not be applied here. This Court should

therefore find that the regulations are preempted.

DATED: June 15, 2006 Respectfully submitted,

RAYMOND B. LUDWISZEWSKI CHARLES H. HAAKE, GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Ave. NW Washington, D.C. 20036 Telephone: (202) 955-8500 Facsimile: (202) 467-0539

Of Counsel

/s/ R. Jeffrey Behm R. JEFFREY BEHM SHEEHEY FURLONG & BEHM P.C. 30 Main Street / P.O. Box 66 Burlington, VT 05402-0066 Telephone: (802) 864-9891 Facsimile: (802) 864-6815

Attorneys for Association of International Automobile Manufacturers


75

CERTIFICATE OF SERVICE

I, R. Jeffrey Behm, counsel for Plaintiff, Association of International Automobile

Manufacturers, hereby certify that on June 15, 2007, I served a copy of the Post-Trial Brief of

Plaintiff Association of International Automobile Manufacturers with the Clerk of Court using

the CM/ECF system which will send notification of such filing to the following:

Robert B. Hemley, Esq.

Matthew B. Byrne, Esq.

Gravel and Shea

76 St. Paul St.

P.O. Box 369

Burlington, VT 05402-0369

Kevin O. Leske, Esq.

Assistant Attorney General

Vermont Attorney General’s Office

109 State Street

Montpelier, VT 05609-1001

Bradford W. Kuster, Esq.

Conservation Law Foundation

15 East State St., Suite 4

Montpelier, VT 05602

Yueh-ru Chu, Esq.

New York State Office of the

Attorney General

120 Broadway, 26th Floor

New York, NY 10271

Benjamin A. Krass, Esq.

Matthew Forte Pawa, Esq.

Law Offices of Matthew F. Pawa, P.C.

1280 Centre St., Suite 230

Newton Centre, MA 02459

Robert C. Cain, Esq.

Nolan C. Burkhouse, Esq.

Paul Frank & Collins P.C.

One Church Street

P.O. Box 1307

Burlington, VT 05402

Stuart A.C. Drake, Esq.

Andrew Clubok, Esq.

Kirkland & Ellis, LLP

655 Fifteenth St., N.W.

Washington, D.C. 20005-5793

David Bookbinder, Esq.

Sierra Club

408 C Street NE

Washington, DC 20002

Dated: June 15, 2007

By: /s/ R. Jeffrey Behm

R. Jeffrey Behm

SHEEHEY FURLONG & BEHM P.C.

30 Main Street

P.O. Box 66

Burlington, VT 05402

(802) 864-9891

Attorneys for Association of International

Automobile Manufacturers


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