Seventeen states, the District of Columbia, and seven of the nation’s top environmental groups petitioned the U.S. Court of Appeals for the D.C. Circuit to review the legality of the Trump EPA’s decision to withdraw the Obama EPA’s January 2017 determination that the Agency’s 2012 greenhouse gas (GHG) emissions standards for model year (MY) 2022–2025 vehicles remained appropriate and replace that Original Determination with a Revised Determination. Six weeks after hearing oral arguments in the case, a three-judge panel found that the Agency’s Revised Determination was not a final action and, therefore, was not reviewable by the court. In other words, the panel would not rule on the merits of the petitioners’ claim that the Revised Determination was arbitrary and capricious.

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Real-world fuel economy

The ruling is just one component of one of the nation’s top environmental battles. Under the Obama administration, the EPA exercised its authority under Section 202(a) of the Clean Air Act (CAA) by establishing GHG emissions standards for MY 2017–2025 vehicles. There are various approaches to understanding the standards, but generally, the Agency required that auto manufacturers improve the real-world fuel economy for their fleets by about 10 miles per gallon (mpg) over the 9-year period from 2016 to 2025 or about 1 mpg per year. Improved fuel economy directly results in reduced tailpipe GHG emissions. The January 2017 Midterm Evaluation affirmed the appropriateness of the requirement for MY 2022–2025. In conjunction with the Original Determination, the EPA issued a 719-page Technical Support Document.

In the Revised Determination, the EPA stated, “Many of the key assumptions EPA relied upon in its January 2017 Determination, including gas prices and the consumer acceptance of advanced technology vehicles, were optimistic or have significantly changed and thus no longer represent realistic assumptions.”

The EPA and the National Highway Traffic Safety Administration (NHTSA) subsequently proposed GHG emissions and fuel economy standards for MY 2021–2026 at the same levels applicable to MY 2020.

Final action test

In their brief, state petitioners argued that the Revised Determination was arbitrary and capricious because the EPA failed to identify and allow public comment on the record on which it purportedly based its determination; failed to base the Revised Determination on the Technical Support Document and the rest of the record; and failed to set forth in detail its assessment of each of the eight enumerated factors the Agency had listed as the basis for an appropriateness determination (e.g., availability and efficacy of new technology, appropriate lead time for its introduction, and costs of new vehicles to producers or consumers).

Importantly for the current case, petitioners also argued that the Revised Determination was an Agency final action subject to review by the D.C. Circuit. Under the CAA, only an EPA final action is judicially reviewable. In a 1997 opinion (Bennett v. Spear) written by Justice Antonin Scalia, the U.S. Supreme Court introduced what became known as the Bennett Test. Specifically, an agency action can be considered final only if two conditions, or prongs, are met:

• First, “the action must mark the consummation of the agency’s decisionmaking process”; in other words, “it must not be of a merely tentative or interlocutory nature.”
• Second, “the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.”

Regulatory uncertainty

The EPA has contended that its Revised Determination is not a final action. The Agency explained that the Original Determination was indeed a final action because it maintained the 2012 standards. However, added the Agency, the Revised Determination could not be a final action because it was simply the initiation of a rulemaking to adopt new standards; those new standards would be the Agency’s final action.  State petitioners disagreed.

“Although EPA claims that the Revised Determination is not a final action because it has triggered a rulemaking to revise the standards, an action need not be the last administrative action contemplated by the statutory scheme to be final,” petitioners stated. “Moreover, should EPA’s forthcoming rule weakening the standards be set aside, the Revised Determination, coupled with the EPA requirement at 40 CFR Section 86.1818–12(h) that the Agency initiate a rulemaking to revise the standards, would continue to generate regulatory uncertainty regarding the existing standards.”

Petitioners added that Revised Determination action meets the first Bennettprong because the EPA stated that the action “mark[s] the consummation” of the Midterm Evaluation.

Petitioners continue: “EPA’s action likewise satisfies the second prong of the Bennettstandard: it ‘alter[ed] the legal regime’ and created ‘direct and appreciable legal consequences.’ Under Section 12(h), EPA’s action has triggered a binding requirement that it ‘shall’ initiate a rulemaking to revise the standards. The Revised Determination therefore created direct legal consequences for the agency.”

Possible change

In considering whether the Revised Determination is a final agency action, the panel addressed only whether the second prong of the Bennett Test was satisfied. Generally, the panel emphasized that the Revised Determination did not itself effect any change in the emissions standards that were established by the 2012 final rule for model year 2022–2025 vehicles. The panel writes:

“EPA has made clear that those ‘standards will remain in effect unless and until EPA changes them by rulemaking.’ Rather, the Revised Determination created only the possibility that there may be a change in the future to the model year 2022–2025 standards as the result of the rulemaking process it initiated. EPA concluded in the Revised Determination that the model year 2022–2025 GHG emission standards are ‘not appropriate’ because they ‘may be too stringent.’ [emphasis added] That reassessment set in motion a rulemaking ‘to further consider appropriate standards for MY 2022–2025 light-duty vehicles.’ But, again, EPA’s Revised Determination itself did not alter the standards in place for those model years.”

The panel also noted that although the Revised Determination stated that the standards currently in place may be too stringent, the finding did not bind the EPA to relax the standards, which, the court adds, counsel for petitioners acknowledged at oral argument.

“In that sense, the Revised Determination is akin to an agency’s grant of a petition for reconsideration of a rule,” wrote the panel. “When an agency grants reconsideration, it creates the possibility (but not the certainty) of an adjustment in the underlying rule, depending on the result of the ensuing proceedings. By itself, EPA’s decision to grant reconsideration, which merely begins a process that could culminate in no change to a rule, is not reviewable final agency action.”

No legal consequences

The panel also did not agree that the Revised Determination:

• Created direct legal consequences for the Agency. “EPA has not bound itself to any changed enforcement approach,” said the panel.
• Was an action from which direct legal consequences will flow. “The Revised Determination did not compel the Petitioner States to act in order to meet their commitments,” said the panel.
• Was a final action because the Original Determination it withdrew was itself a final action. “Such symmetry is not required,” said the panel. “After all, the two contrary determinations put EPA along different paths: the Original Determination ended the rulemaking process while the Revised Determination restarted it. Much like on a petition for reconsideration, whether EPA decides to stay the course or consider changing the 2012 standards leads the court to a different conclusion on whether the action is final.”