[00:00:01] Speaker 02:
Case number 22-1031 et al.

[00:00:04] Speaker 02:
State of Texas et al.

[00:00:06] Speaker 02:
Petitioners versus Environmental Protection Agency.

[00:00:09] Speaker 02:
And Michael S. Regan, Administrator, United States Environmental Protection Agency.

[00:00:15] Speaker 02:
And case number 22-1080 et al.

[00:00:18] Speaker 02:
Natural Resources Defense Council Petitioner versus National Highway Traffic Safety Administration et al.

[00:00:27] Speaker 11:
Good morning, Council.

[00:00:29] Speaker 11:
Mr. Wall.

[00:00:30] Speaker 00:
Please proceed when you are ready.

[00:00:45] Speaker 00:
set standards so stringent that manufacturers are effectively forced to electrify their fleets.

[00:00:51] Speaker 00:
Now, to be sure, EPA hasn't required full electrification in one fell swoop, although it is clear that day is coming.

[00:00:59] Speaker 00:
But West Virginia was just the opening salvo to it.

[00:01:02] Speaker 00:
The point is that the power the EPA asserts here is hugely significant.

[00:01:07] Speaker 00:
It is the power to do away with the internal combustion engine, which would affect millions of jobs,

[00:01:13] Speaker 00:
restructure entire industries, and affect our relationships with hostile powers.

[00:01:18] Speaker 00:
Questions don't get any more major.

[00:01:20] Speaker 00:
EPA has nothing close to clear congressional authorization.

[00:01:24] Speaker 00:
The Clean Air Act doesn't even authorize EPA to set standards based on fleet-wide averaging.

[00:01:29] Speaker 00:
At the very least, the statute doesn't authorize EPA to set standards.

[00:01:33] Speaker 00:
It can be satisfied only by averaging a whole bunch of zeros for electric vehicles.

[00:01:38] Speaker 00:
And even if EPA's maneuver were somehow authorized by the statute,

[00:01:42] Speaker 00:
it would still violate the APA because the agency improperly calculated EV emissions and erred in assessing the costs and benefits of the rule.

[00:01:50] Speaker 00:
I welcome the court's question.

[00:01:54] Speaker 09:
How are they using the power in a new way?

[00:01:58] Speaker 09:
I mean, the bottom line or where they're going seems quite dramatic, but one difference

[00:02:07] Speaker 09:
with West Virginia is in West Virginia, they sort of redesigned how the scheme was operating.

[00:02:13] Speaker 09:
Whereas here, the credits and the trading and the averaging are long established as was inclusion of electric vehicles in the class.

[00:02:25] Speaker 09:
And then there's just a question of stringency and they're turning the knob up from a four to an eight.

[00:02:33] Speaker 09:
That's very costly, but it's not a difference.

[00:02:37] Speaker 09:
It's not a sharp difference in kind.

[00:02:39] Speaker 00:
So I think the situations are parallel, and it is a different kind.

[00:02:42] Speaker 00:
I think the knob goes from zero to eight, because before it was a compliance flexibility.

[00:02:46] Speaker 00:
And what I mean by that was the EPA set a standard, and manufacturers could meet it in different ways.

[00:02:52] Speaker 00:
They could meet it by enhancing the technologies on internal combustion engines, or they had the option if they wanted to manufacture more electric vehicles and meet the standard that way.

[00:03:03] Speaker 00:
What the agency's done here for the first time, Judge Katz, is set the standards so high that even they don't dispute, the only way to meet it is to do in effect what the factories had to do in West Virginia.

[00:03:14] Speaker 00:
You've either got to switch your power source and manufacture more electric vehicles, or you've got to buy credits from Tesla.

[00:03:19] Speaker 11:
Why do you say they don't dispute that?

[00:03:20] Speaker 11:
I thought that is a source of dispute.

[00:03:23] Speaker 11:
It seems like this framing question is pretty important.

[00:03:26] Speaker 11:
whether what they've done now is a difference in kind or a difference in degree, because your major questions argument is predicated on an assumption that it's a difference in kind, understandably.

[00:03:36] Speaker 11:
And if I'm understanding it correctly, the nub of your argument that it's a difference in kind is that for the first time, EPA is setting a target that's only achievable by use of the alternate technology.

[00:03:51] Speaker 11:
But where do they say that, where do they join issue with you in that characterization?

[00:03:56] Speaker 00:
So at pages 55 and 56 of the brief chief judge, they say, look, we don't mandate the technology that the automakers have to employ.

[00:04:04] Speaker 00:
And that's true in a sort of misleading sense.

[00:04:07] Speaker 00:
If you look at the rule, the rule says pages 5 and 52

[00:04:10] Speaker 00:
They're driving electrification.

[00:04:12] Speaker 00:
What I mean by that, the best place to look is if you look at page 908 of the Joint Appendix, there are two charts, two tables, 4-27 and 4-28.

[00:04:22] Speaker 00:
One shows what they believe the market penetration rate for EVs will be absent the standards, and that's 7% by the last model year.

[00:04:30] Speaker 00:
And the other chart shows what they believe manufacturers will have to do in order to buy their new standards.

[00:04:36] Speaker 11:
No, no, but there's a difference between what they have to do and what they will do.

[00:04:40] Speaker 11:
And that's what I'm wondering is, it's one thing to say that the only way to comply with the standard is by use of EVs.

[00:04:51] Speaker 11:
is another thing to say that you could comply in other ways too, but manufacturers are going to choose to do it by use of EVs.

[00:04:59] Speaker 11:
So Chief Judge, can I just ask, do you think that there's no, that's not a distinction or do you think that that is a distinction and where they are is acknowledging that the only way to comply is by use of EVs?

[00:05:12] Speaker 00:
I think that can't be a distinction that matters.

[00:05:16] Speaker 00:
Because I can't believe that West Virginia would have come out differently if the EPA had promulgated a rule that everybody acknowledged forced the factories to switch from coal and natural gas to renewables.

[00:05:29] Speaker 00:
And that was the only way to comply.

[00:05:32] Speaker 00:
But then they said, well, on its face, it doesn't actually make you do that, even though we acknowledge that you have to do it in order to comply.

[00:05:38] Speaker 00:
It would still have been a major question, and they still would have lacked statutory authority.

[00:05:42] Speaker 00:
So I don't think the distinction can matter to either of the relevant legal questions.

[00:05:46] Speaker 03:
So Council, what about the example of Subaru?

[00:05:50] Speaker 03:
Because the record indicates that Subaru has no electrical vehicles, but can comply with these standards through 2025.

[00:05:57] Speaker 03:
So that seems to indicate that you don't have to go to electrification in order to comply with these standards.

[00:06:03] Speaker 00:
I can't speak to Subaru in particular because it hasn't joined the litigation.

[00:06:07] Speaker 00:
What I can tell you is we have made it a point throughout the briefing to say that manufacturers generally will have to make more EVs to comply.

[00:06:17] Speaker 00:
And as I say at page 908 of the JA and in the rule itself at pages 5 and 52, their words are, this drives electrification.

[00:06:25] Speaker 00:
two and a half times what the market rate would otherwise be.

[00:06:28] Speaker 00:
So even if there may be some manufacturer that could comply, just like maybe one energy company in West Virginia could have complied, I don't think they're disputing that the major questions doctrine is applied on an industry-wide basis.

[00:06:41] Speaker 00:
And here the industry as a whole will have to transition to electric vehicles in order to satisfy these standards.

[00:06:47] Speaker 00:
And that will be even more true down the road because they've already announced that they want the penetration rate to be 67% by the early 2030s.

[00:06:55] Speaker 00:
And obviously there's a parallel case this court will hear tomorrow where California said it's going to 100%.

[00:07:00] Speaker 00:
So it's not like we have to sort of speculate about where this road leads.

[00:07:04] Speaker 03:
So the premise of your argument, though, is that this rule forces electrification.

[00:07:09] Speaker 03:
That is the major question that you posit.

[00:07:12] Speaker 03:
But isn't Subaru evidence of the fact that this standard does no such thing?

[00:07:17] Speaker 03:
It just sets an emission standard.

[00:07:19] Speaker 03:
And there's flexibility in how you comply with it.

[00:07:21] Speaker 03:
And there's evidence that you can comply with it without electrification.

[00:07:25] Speaker 00:
So Judge Penn, it's the same answer I gave earlier.

[00:07:28] Speaker 00:
I can't go automaker by automaker.

[00:07:30] Speaker 00:
and tell you exactly how each one will have to comply.

[00:07:33] Speaker 03:
I'm not saying you need to do that.

[00:07:34] Speaker 03:
I'm just saying, isn't this evidence that your premise is faulty?

[00:07:38] Speaker 00:
I don't think, and we'll see this morning, but I don't think that the government disputes.

[00:07:42] Speaker 00:
I don't take the rule to dispute.

[00:07:44] Speaker 00:
That automakers generally, not sure about Subaru in particular, automakers generally

[00:07:48] Speaker 00:
will have to manufacture electric vehicles at two and a half times the rate that the market would otherwise support.

[00:07:55] Speaker 00:
Absent the rule, you'd have 7% of the overall fleet, and their rule says we're driving that to 17%.

[00:08:01] Speaker 00:
So that's a 10% increase.

[00:08:03] Speaker 00:
Just like in the Clean Power Plant case, it was an 11% increase.

[00:08:07] Speaker 00:
I mean, it is the exact same thing.

[00:08:09] Speaker 11:
So suppose the reason that you keep saying have to, and I think what you mean is choose to, but there's no difference between choose to and have to.

[00:08:18] Speaker 11:
Is that a fair characterization, Elise?

[00:08:20] Speaker 00:
I think that's fair.

[00:08:21] Speaker 11:
OK.

[00:08:22] Speaker 11:
So suppose the reason that manufacturers choose to now, whereas they wouldn't have before, is because battery costs have gone way down for EVs.

[00:08:34] Speaker 11:
Then for your purposes, that still doesn't matter.

[00:08:36] Speaker 00:
It still doesn't matter because it's like saying that if some of the industry had chosen to voluntarily comply in West Virginia, that the major question would have been different or the statutory question would have been different.

[00:08:48] Speaker 00:
The question isn't how much power the agency has exercised in a particular instance or exactly how much pain that imposes on regulated parties.

[00:08:56] Speaker 00:
For purposes of the doctrine, the question is, what is the scope of the power that the agency is asserting?

[00:09:02] Speaker 00:
And the power they assert

[00:09:03] Speaker 00:
is

[00:09:21] Speaker 00:
just like at the cap-and-trade system in West Virginia.

[00:09:24] Speaker 00:
It's not like Congress has missed this.

[00:09:26] Speaker 00:
It's looked at EVs repeatedly.

[00:09:28] Speaker 00:
It said we'll study them.

[00:09:29] Speaker 00:
It's rejected mandates.

[00:09:31] Speaker 00:
It's cleaned up liquid fuel.

[00:09:32] Speaker 00:
And in 2021 in the Infrastructure Act, right before the EPA's administrative fiat, it ordered a new round of fact-finding by multiple agencies.

[00:09:40] Speaker 00:
It said we want more facts in front of us before we make a decision.

[00:09:43] Speaker 00:
And so from all of that, we think it's clear

[00:09:47] Speaker 00:
that Congress hasn't given the power to the agency to affect this kind of a transition.

[00:09:52] Speaker 11:
Can I just, I don't want to derail, because I know we're going to have lots of questions on this axis, but I just want to at least address the questions of whether we should even be looking at this.

[00:10:01] Speaker 11:
And so there's two things in particular that I'll just tee up for you.

[00:10:04] Speaker 11:
One is timeliness, because of the cases that we have that you're well aware of.

[00:10:09] Speaker 11:
to the effect that if there's something that the rule is doing that is just repeating what a rule in the same area has done before, then that's something that needed to have been raised at the time that the initial rule was promulgated.

[00:10:23] Speaker 11:
You're aware of that.

[00:10:24] Speaker 11:
And that applies both to the electrification piece and to the averaging piece.

[00:10:30] Speaker 11:
And then the other thing I'd like to get to is preservation and especially on major questions.

[00:10:37] Speaker 11:
Why isn't it the case that

[00:10:39] Speaker 11:
Nobody said anything about major questions.

[00:10:41] Speaker 11:
And we can have a debate about exactly when that term became a term that really became part of the lexicon enough that somebody should have used the term.

[00:10:49] Speaker 11:
But the concept wasn't new.

[00:10:51] Speaker 11:
And that was never raised before the agency to give the agency a chance to address it in the rulemaking process.

[00:10:56] Speaker 11:
So you maybe take them in that order.

[00:10:59] Speaker 11:
Timeliness and then preservation.

[00:11:00] Speaker 00:
So I thought you might have some threshold questions.

[00:11:02] Speaker 00:
And I have three quick points on timeliness, two on preservation, and hopefully we'll get to them all at some point.

[00:11:09] Speaker 00:
On timeliness, what I would say is this court said if it's the same approach, here they didn't just use averaging.

[00:11:15] Speaker 00:
They used averaging to force electrification, which is a new thing.

[00:11:18] Speaker 00:
Even if you disagree with me on that, my second point is I don't think that anybody could challenge it.

[00:11:23] Speaker 00:
Because NHTSA has the power to fleet wide average.

[00:11:26] Speaker 00:
Now, it doesn't have the power to fold in EVs, but it can fleet wide average.

[00:11:29] Speaker 00:
And these rule makings had always been done in tandem.

[00:11:32] Speaker 00:
And this court said in 2011 in the Chamber of Commerce case, if you have two sets of standards and they independently require the same thing, you can't challenge the one if you're not challenging the other.

[00:11:42] Speaker 00:
And we couldn't have challenged NHTSA's ability to fleet wide average.

[00:11:45] Speaker 00:
And even if you disagree with me on both of those things, Chief Judge Srinivasan, I'd say the court's been clear about the constructive reopening doctrine.

[00:11:53] Speaker 00:
If you really change the stakes of judicial review, you constructively reopen.

[00:11:57] Speaker 00:
That makes a ton of sense.

[00:11:58] Speaker 00:
Agencies can do things all the time in small ways that don't hurt people and don't give them any incentive to sue.

[00:12:03] Speaker 00:
And then they can use the same power in a really major way that does change the stakes

[00:12:07] Speaker 00:
And obviously then parties should be able to come in and sue.

[00:12:10] Speaker 11:
Where have we construed constructive reopening in that way?

[00:12:17] Speaker 11:
We just had a decision pretty recently in this peer case that talks about the scope of the constructive

[00:12:23] Speaker 11:
reopening doctrine in pretty narrow terms.

[00:12:25] Speaker 11:
I mean, it has to be within some pretty narrow parameters.

[00:12:29] Speaker 00:
So I sort of think peer is not a very good case because in peer, the sort of regulations have been promulgated decades ago and then never touched.

[00:12:38] Speaker 00:
And so I don't think there was really a very good or serious argument for reopening.

[00:12:42] Speaker 00:
The Kennecott-Copper case that we've got in our reply at page 9, I think, is one where the court said, look, if you really alter the stakes of judicial review.

[00:12:51] Speaker 00:
And again, that makes a lot of sense.

[00:12:53] Speaker 00:
We don't want agencies to rush in and challenge every time an agency does some little thing wrong.

[00:12:58] Speaker 00:
if they don't really have skin in the game.

[00:12:59] Speaker 00:
But if you really change the stakes of what you're doing, then you should be able to come in and sue.

[00:13:04] Speaker 00:
And that's what happened here.

[00:13:05] Speaker 00:
Yes, they've been averaging for a long time, but that was a sort of deregulatory or industry favorable shield to allow a compliance flexibility.

[00:13:15] Speaker 00:
And then they took that shield and they turned it into a sword to make everybody convert from one kind of vehicle to another by putting a lot of euros into the equation for EVs.

[00:13:24] Speaker 00:
And that seems to me to fundamentally change the stakes of judicial review.

[00:13:29] Speaker 00:
On preservation, Your Honor,

[00:13:32] Speaker 00:
These arguments have been around since Thomas in the mid-1980s.

[00:13:34] Speaker 00:
So it seems a little rich for me to the agency to come in and say like, hey, we didn't have any idea that our statutory authority was in play.

[00:13:41] Speaker 00:
But I still think we did enough in the comments to say, you don't have the statutory authority for a trading program or a subsidy program.

[00:13:47] Speaker 11:
But again, if you did- Then all you need to say, I mean, yes, there's lines in there that talk about statutory authority, but is it really as simple as, the whole point of it is you're supposed to put the agency on notice of the particular thing that's being raised so that they have an opportunity to address it.

[00:14:00] Speaker 11:
I mean, it's sort of like having a line at the beginning that says, we think this is generally unlawful.

[00:14:04] Speaker 11:
There, you're on notice of all the ways in which it's unlawful.

[00:14:06] Speaker 11:
It doesn't really help the agency very much.

[00:14:08] Speaker 00:
I would take that point and concede it in other contexts here, where the ability to do averaging has been on the table for decades, but nobody has since challenged it because it was favorable to the industry.

[00:14:17] Speaker 00:
It seems to me the agency's been on notice for a long time, that its authority was at play.

[00:14:22] Speaker 11:
But again, I don't need the court to- I don't understand that.

[00:14:25] Speaker 11:
What's the point?

[00:14:27] Speaker 11:
There at no point in the rulemaking process does somebody specifically say, hey, here's the issue we have with your rule.

[00:14:34] Speaker 00:
So I think they did say you lack statutory authority.

[00:14:39] Speaker 00:
I think to your earlier question, they didn't come in and say major questions.

[00:14:43] Speaker 00:
Now, it was the major questions doctrine fully formed at the time, but I take the point that the idea and the concept were

[00:14:49] Speaker 00:
sort of out there in the law.

[00:14:51] Speaker 00:
I don't think that you have to put agencies on notice of the law.

[00:14:54] Speaker 00:
You don't have to come in and say, hey, Chevron's the standard of review or clear error for facts.

[00:14:59] Speaker 00:
The major questions doctrine is the law, the governing law that this court applies.

[00:15:04] Speaker 00:
I do think we needed to put them on notice of our objection to their statutory authority under that governing law.

[00:15:11] Speaker 00:
I think we did that, but I don't need the court to agree with me on that because the court's been clear that quite independent of the exhaustion requirement, which deals with whether we are entitled to raise and have something heard on judicial review, the agencies have a burden

[00:15:24] Speaker 00:
to come forward and put forward a non-arbitrary rule.

[00:15:27] Speaker 00:
And to do that, they've got to be willing to examine the fundamental assumptions that underlie the rule.

[00:15:32] Speaker 00:
And the court said multiple times, your statutory authority is one of those.

[00:15:36] Speaker 00:
And I don't see any reasonable argument on the other side that they're going to be able to get out of what this court has called the key assumption doctrine.

[00:15:42] Speaker 00:
I mean, the whole point of the rule

[00:15:45] Speaker 00:
We're going to force electrification by making you fold in more electric vehicles.

[00:15:49] Speaker 00:
And I don't see how the agency can come to this court and say, you know, we didn't consider that.

[00:15:54] Speaker 00:
We didn't have a burden to consider it.

[00:15:55] Speaker 00:
And nobody raised it during the rulemaking.

[00:15:57] Speaker 00:
So you court can consider it.

[00:15:59] Speaker 00:
It seems to me this court has correctly said, no, no, independent of what comments somebody makes in front of the agency.

[00:16:05] Speaker 00:
The agency has to examine its fundamental assumptions when it puts forward a rule for it to be not arbitrary.

[00:16:11] Speaker 00:
And we court always have the authority to review that, independent of whether a party has a right to insist that we do it.

[00:16:18] Speaker 09:
The problem with that argument is it seemed to suggest that no statutory authority or no statutory

[00:16:33] Speaker 09:
argument is ever subject to an exhaustion requirement.

[00:16:37] Speaker 09:
It really can't be right.

[00:16:39] Speaker 00:
So I don't I wouldn't go that far Judge Katz.

[00:16:41] Speaker 09:
I think there are lots of statutory no statutory authority.

[00:16:44] Speaker 09:
It's an essential element of their burden to it's an essential element of their burden to explain their authority to

[00:16:52] Speaker 00:
I think for the core stuff, yes, I see daylight between those two things.

[00:16:57] Speaker 00:
I think there may be statutory questions that come up in a rulemaking that don't go to the core of the rule and that the court might be prepared to say are not foundational in a way that triggers the key assumption doctrine.

[00:17:07] Speaker 00:
This just wouldn't be the case because the whole core of the rule is can we take our averaging approach, which granted they've used since the 80s, but can we take that now and not set the standards so that you could comply with your

[00:17:20] Speaker 00:
improving the way that you burn fuel in an internal combustion engine.

[00:17:23] Speaker 00:
Can we force, mandate, a transfer to electric vehicles?

[00:17:28] Speaker 00:
And that's the core of what this rule does.

[00:17:30] Speaker 00:
And so whatever you think that the key assumption doctrine covers, I think it has to cover this.

[00:17:37] Speaker 11:
Does it mean then for the premise of the key assumption doctrine is that the agency kind of is always on notice that it has to discuss these things?

[00:17:46] Speaker 11:
Because that's just general background stuff that the agency should always wrestle with.

[00:17:50] Speaker 11:
If it's always going to be the case that somebody can make an argument that a difference in degree, that something that one side might characterize as a difference in degree is actually a difference in kind, such that major questions applies, does that mean that every time an agency promulgates anything, they got to deal with the possibility of a major questions argument?

[00:18:07] Speaker 00:
So, again, I don't think so, but for a closely related answer to the one I gave to Judge Katz, which is,

[00:18:15] Speaker 00:
I mean, we've all seen a bunch of rulemakings, and there are lots of statutory questions that come up.

[00:18:19] Speaker 00:
And I just don't think it would be persuasive to say that all of them are foundational to what the rule does or that all of them trigger a major question.

[00:18:27] Speaker 00:
But I do think that here you have what is a fairly unique case.

[00:18:30] Speaker 00:
where the agency didn't examine the core of what the rule does in the face of some Supreme Court cases that to me sure seem to say this is a major question.

[00:18:40] Speaker 00:
I mean, if it is a major question in the vaccine mandate case or the student loan case to take an accepted power and use it in a new way, I've got to think it's a major question to take an invented power and use it in a new way.

[00:18:53] Speaker 00:
I mean, whatever they think about averaging, they can't say the statute addresses it.

[00:18:57] Speaker 00:
The best the government can bring themselves to say is, it's silent, and hence we read that as a delegation to be able to do this program.

[00:19:03] Speaker 00:
And whatever that is, it's not clear congressional authorization.

[00:19:07] Speaker 00:
That doesn't mean you need to touch averaging.

[00:19:09] Speaker 00:
But I do think it means that the court should say major question, can't force electrification in the way that you're doing with the averaging, full stop, and that takes care of the case.

[00:19:19] Speaker 11:
You're also making an argument that even aside from major questions,

[00:19:23] Speaker 11:
that there's no authority to average, and there's no authority to take account of EVs.

[00:19:27] Speaker 00:
That's right.

[00:19:27] Speaker 00:
But the easiest way to resolve the case, Chief Judge Srinivasan, is not to go straight to the statutory arguments de novo, but to say it's a major question as the Supreme Court's understood it.

[00:19:36] Speaker 11:
Right.

[00:19:36] Speaker 11:
I understand the reason you've sequenced it in the way that you have in your presentation, both this morning and in the papers.

[00:19:41] Speaker 11:
But in terms of preservation,

[00:19:43] Speaker 11:
and timeliness and those things.

[00:19:45] Speaker 11:
You also have these other arguments that stand alone.

[00:19:47] Speaker 00:
That's right.

[00:19:48] Speaker 00:
We think it's a major question and that makes it easy.

[00:19:50] Speaker 00:
You can just say no folding in the EVs and that takes care of this case.

[00:19:54] Speaker 00:
But yes, if you disagree with us on that, we are saying straight up the statute does not allow averaging and it does not allow you to fold electric vehicles into the class because the class in 202A is the class of vehicles and engines that emit the relevant pollutant.

[00:20:08] Speaker 11:
As to those arguments, if you just strip away major questions for now, just indulge me for a second with the assumption.

[00:20:13] Speaker 11:
So we strip away major questions for now, and we're just dealing with the core statutory arguments.

[00:20:18] Speaker 11:
As to those, what about timeliness and preservation?

[00:20:21] Speaker 00:
So it's the same answer I gave earlier, which is I think that they took a fundamentally different approach here, which both changes the timeliness rule and constructively reopens.

[00:20:31] Speaker 00:
And I don't know that we could have challenged the use of averaging at all, as I say, because they'd always done it

[00:20:36] Speaker 00:
side by side with NHTSA.

[00:20:37] Speaker 00:
So I don't think it changes the answer on timeliness at all.

[00:20:40] Speaker 00:
And I'd say the same thing on preservation.

[00:20:42] Speaker 00:
We raise the statutory authority arguments, but if you disagree with us, it's still a fundamental assumption.

[00:20:47] Speaker 00:
Even if you don't think it's a major question, just straight up on the statute, it's still the core of the rule.

[00:20:51] Speaker 00:
It's still a fundamental assumption that they're able to do this under whatever you think the right statutory interpretation rule is.

[00:20:59] Speaker 00:
They've done something.

[00:21:01] Speaker 00:
they've commanded the industry that what used to be an option is now.

[00:21:04] Speaker 11:
So every single time it doesn't, we can, we could do this for the next 25 cycles and, and it's, they keep doing the same thing every single time.

[00:21:12] Speaker 11:
And then on the 25th cycle, which is in 2164, um, still got to do the same thing.

[00:21:19] Speaker 00:
Well, Your Honor, from here on out, I'm pretty sure that the comment records will reflect every single one of the things we're talking about today.

[00:21:25] Speaker 00:
But I sort of take the point.

[00:21:27] Speaker 00:
But again, I think that this is a fairly rare case.

[00:21:31] Speaker 00:
It's not like the key assumptions doctrine gets triggered every day.

[00:21:33] Speaker 00:
The court doesn't apply it all that often.

[00:21:36] Speaker 00:
But it's sort of said, look, if you didn't examine your statutory authority to do the core of the thing you did,

[00:21:43] Speaker 00:
Yes, that's something that we as a court have the power to consider not withstanding the exhaustion requirement.

[00:21:48] Speaker 00:
That seems to me entirely right.

[00:21:50] Speaker 00:
And so the question is, is 202A clear that when you have a class of vehicles that you want to set a standard for, that only some vehicles in the class need to emit the relevant pollutant?

[00:22:01] Speaker 00:
And as long as that's true, you can dump other stuff into the class that doesn't.

[00:22:04] Speaker 00:
I don't think it's close to clear, and I don't even think it's the most natural reading of the provision.

[00:22:09] Speaker 00:
When I refer to a class and I define it by a characteristic, I'm saying that you have to have the characteristic to be in the class.

[00:22:17] Speaker 00:
If I say the class of drugs that produces drowsiness in the FDA's judgment, and then I told you that class includes drugs that are stimulants, you'd think I was nuts.

[00:22:26] Speaker 03:
So let me ask you this.

[00:22:28] Speaker 03:
It seems to me

[00:22:30] Speaker 03:
The EPA has been tasked with setting these standards, and they've done so four times since 2010 using the same framework that they applied in this case.

[00:22:40] Speaker 03:
And really, your complaint is with the level that they set.

[00:22:45] Speaker 03:
And what would you have them do?

[00:22:47] Speaker 03:
They are required to set some level.

[00:22:52] Speaker 03:
Are you saying that they need to, when they set their level, try to hold back and set a lower level if it's going to encourage electrification?

[00:23:00] Speaker 03:
Because what are they supposed to do in executing their mandate to set these standards?

[00:23:05] Speaker 00:
So Judge Pan, I want to fight the premise just a little bit.

[00:23:09] Speaker 00:
I don't think we're just coming in and complaining about stringency.

[00:23:12] Speaker 00:
If they had done what they had always done before and set the standard in a way that it could have been complied with without electrification,

[00:23:19] Speaker 00:
just enhanced gasoline technologies.

[00:23:22] Speaker 00:
We could have come in and made a complaint like yours.

[00:23:23] Speaker 00:
I think it would have been less powerful.

[00:23:25] Speaker 00:
But like, look, we might be able to clean up fuel in this way, but it'd be really hard.

[00:23:28] Speaker 03:
But they don't have a requirement to set it in a way that avoids electric vehicles, unlike maybe NHTSA does.

[00:23:35] Speaker 03:
But EPA doesn't have that.

[00:23:36] Speaker 03:
They can consider electrification.

[00:23:38] Speaker 00:
But that's the oddity, Judge Pan, of that's why I think the major questions doctrine here has so much force.

[00:23:43] Speaker 00:
They don't have clear congressional authorization to mandate the transition.

[00:23:47] Speaker 03:
And the oddity of what the- I'm sorry, but you are wedded to this premise that the core function of the statute is to encourage electrification.

[00:23:57] Speaker 03:
My question is, they have to set a standard.

[00:24:00] Speaker 03:
And they're supposed to set a standard that protects public health.

[00:24:03] Speaker 03:
And there's no requirement that they not consider electrification as one of the factors in setting their standard.

[00:24:09] Speaker 03:
So what are they supposed to do?

[00:24:10] Speaker 03:
Are you saying that they need to decide what the ultimate standard is and then scale it back to avoid encouraging electrification?

[00:24:18] Speaker 00:
No, I'm saying they've always set the standard in a way that you didn't have to transition power sources.

[00:24:24] Speaker 00:
You could satisfy it.

[00:24:26] Speaker 03:
In a way, you're saying stringency.

[00:24:27] Speaker 00:
Well, it's a difference in kind, right?

[00:24:30] Speaker 00:
It's just like in the Clean Power Plan case.

[00:24:32] Speaker 00:
It's just like asking, wait a minute.

[00:24:34] Speaker 03:
Well, in the Clean Power Plan case, they had to do a completely different thing.

[00:24:37] Speaker 03:
They had to go to different sources.

[00:24:39] Speaker 03:
This agency is doing what it has always done before.

[00:24:43] Speaker 03:
It's just setting a level, a more stringent level, that you say forces electrification.

[00:24:48] Speaker 03:
And I don't think that's clear at all based on the fact that we have at least one automaker in the record who can comply with these standards without electrification.

[00:24:56] Speaker 03:
And there's no mandate that they not consider electrification when they set this standard.

[00:25:01] Speaker 00:
So all respect, Judge Pan, that's exactly the argument the government made in West Virginia.

[00:25:05] Speaker 00:
It said we're just setting a best system of emission reduction for stationary sources and factories.

[00:25:11] Speaker 00:
And yes, maybe they're going to have to transition from one to the other.

[00:25:13] Speaker 00:
That's traditionally what we've done.

[00:25:15] Speaker 00:
And we're just cleaning up factories.

[00:25:16] Speaker 00:
And we found a way to make them even cleaner.

[00:25:18] Speaker 03:
But there's no mandate here that you must go to electrification.

[00:25:21] Speaker 03:
They're just setting a standard and saying, meet these standards however you can.

[00:25:26] Speaker 03:
It can be electrification.

[00:25:28] Speaker 03:
It can be not electrification, as Subaru demonstrates.

[00:25:31] Speaker 00:
Sure, just like in the cap and trade case in West Virginia, you can meet it in lots of different ways.

[00:25:35] Speaker 00:
You can change your power system.

[00:25:37] Speaker 00:
You can buy credits.

[00:25:38] Speaker 00:
It's up to you.

[00:25:39] Speaker 00:
You can do whatever you want.

[00:25:40] Speaker 00:
And the court said, no, no, no.

[00:25:42] Speaker 11:
So is there a difference between we want the switch and maybe the switch is going to come about?

[00:25:51] Speaker 11:
So in West Virginia, the premise was that the switch was something that the agency wanted.

[00:25:57] Speaker 11:
Here, I still don't see where the agency is saying they want the switch.

[00:26:03] Speaker 11:
I mean, I know that there were some things that were said by elected officials.

[00:26:07] Speaker 11:
But in terms of the rule itself, if you can point me to something great, please do.

[00:26:12] Speaker 11:
But there seems to me to be potentially a difference between we're trying to impose, we're trying to bring about this shift.

[00:26:19] Speaker 11:
And here's how we're trying to bring about the shift.

[00:26:21] Speaker 11:
Or, yeah, you might choose to do it this way, because battery costs have gone way down.

[00:26:25] Speaker 11:
I get that.

[00:26:26] Speaker 11:
But we're not going to ignore that reality.

[00:26:27] Speaker 11:
That's just the reality of the world.

[00:26:29] Speaker 11:
And so this is the new percentage figures that are going to result.

[00:26:32] Speaker 11:
But you don't have to do that.

[00:26:33] Speaker 11:
You can do it some other way.

[00:26:34] Speaker 11:
We think it's totally within your availability to do it another way.

[00:26:38] Speaker 11:
You might well choose to do it this way, but we're agnostic as to that.

[00:26:41] Speaker 00:
Just like in West Virginia, there is no other practical way to comply, Your Honor.

[00:26:46] Speaker 00:
They said in the rule, and they're right, that they're driving electrification.

[00:26:50] Speaker 00:
I don't think, I mean, we'll see what the government says this morning, but they didn't say in their... Where did they say that?

[00:26:54] Speaker 11:
I saw the word driven.

[00:26:55] Speaker 00:
Did they say... It's in the rule, I believe it's at page five, and then they recognize it again at pages 51 and 52.

[00:27:02] Speaker 11:
Is that...

[00:27:04] Speaker 11:
I'm very curious about the best statements in the rule.

[00:27:08] Speaker 11:
And if those are the ones, I'll take a closer look.

[00:27:11] Speaker 00:
So look, I really think the best evidence is at page 908 of the JA, because there they give you the actual numbers.

[00:27:18] Speaker 11:
Those are the tables, right?

[00:27:19] Speaker 00:
Those are the tables.

[00:27:20] Speaker 00:
And they say market rate's going to be at 7 by the end.

[00:27:23] Speaker 00:
We're pushing it to 17.

[00:27:25] Speaker 11:
But that's different from wanting that to come about.

[00:27:28] Speaker 11:
That absolutely shows, I don't think anybody disputes, and EPA is not gonna dispute, that there's a difference between 7% and 17%.

[00:27:36] Speaker 11:
And those tables bear that out, as I understand it, right?

[00:27:40] Speaker 11:
I've looked at those tables, and that's what they do, is they show that actually the incidence of EVs is gonna go up as a consequence of the rule.

[00:27:47] Speaker 11:
But in terms of the agency,

[00:27:51] Speaker 11:
wanting to bring about that change by the rule as opposed to saying that's what's going to happen based on a number of factors.

[00:27:57] Speaker 11:
Is there, you may think that doesn't matter, but for someone who might think that it does matter or it could matter.

[00:28:04] Speaker 00:
I guess the reason I find the question a little confusing, Your Honor, is the first table on 908 and what they're talking about on the top of the right-hand column on page five of the JA is what the market rate would be absent the standards.

[00:28:19] Speaker 00:
So that's what manufacturers and consumers would do absent the standard.

[00:28:23] Speaker 00:
And then they say, with the standard, we're going to drive that number up to 17%.

[00:28:26] Speaker 00:
We're going to achieve an additional 10% that would not happen absent the standard forcing us to make more EVs in order to be able to comply with the more stringent standard.

[00:28:37] Speaker 00:
So I understand that as a have to, not a want to.

[00:28:40] Speaker 00:
If it were a want to, the 7% would be higher.

[00:28:43] Speaker 00:
That's what auto manufacturers would otherwise want to do absent the standard.

[00:28:49] Speaker 00:
So I don't see them sort of based.

[00:28:53] Speaker 00:
I mean, they can debate whether it's 7% or 8% or whether it's two and a half times or all the rest.

[00:28:58] Speaker 00:
But it is notable that the government does not, in the voluminous briefing in this case, say anywhere, no, no, you can comply with this just by enhancing your technologies on internal combustion engines.

[00:29:10] Speaker 00:
I don't think it can be done.

[00:29:13] Speaker 09:
So it's not just

[00:29:16] Speaker 09:
the shift from seven to 17, right, that might happen just from a change of incentives.

[00:29:26] Speaker 09:
You need to show more, which is you need to show that you can't, there is no feasible alternative to comply with the standards, right, bracket, which they say will produce 17,

[00:29:41] Speaker 09:
No feasible way to comply with the standards other than electrifying part of the fleet.

[00:29:46] Speaker 00:
I don't see any evidence in the record, and the government hasn't pointed any in its briefs, that you can comply with this standard other than by some measure of electrification, and we can debate what that percentage is.

[00:29:58] Speaker 00:
And for major questions purposes, Your Honor, again, it's not just how much of a shift are they affecting here.

[00:30:04] Speaker 00:
Is it 10%?

[00:30:05] Speaker 00:
Is it a smaller number?

[00:30:06] Speaker 00:
Do we think that actually the momentum in the EV market moves as close to 17%?

[00:30:10] Speaker 00:
The power that they're claiming is the power to put zeros in the standards for all the EVs that they want to see on the roads, which is why they have now issued an NPRM and are moving toward finalizing a rule that says 67%.

[00:30:23] Speaker 00:
Nobody's gonna say that by 2032 the market would otherwise be at 67%.

[00:30:28] Speaker 00:
The power that they're claiming is the power to mandate a transition.

[00:30:33] Speaker 00:
Now this rule does that, at least in some measure, but if there were any doubt about the power that they're claiming,

[00:30:40] Speaker 00:
They've now sort of said the quiet part out loud.

[00:30:42] Speaker 11:
The location mandated transition, there's a difference between mandating that you comply by use of EVs and predicting that that's the way you'll comply, even though you could comply in other ways.

[00:30:55] Speaker 11:
There's at least a real world difference between those two.

[00:30:59] Speaker 11:
You may think there's not a legal difference for our purposes, but there's actually a difference between those two.

[00:31:04] Speaker 00:
Totally, they had always treated this as a compliance flexibility.

[00:31:08] Speaker 00:
It was something you could do but didn't have to do.

[00:31:10] Speaker 00:
And it was totally open to the government to do that here.

[00:31:12] Speaker 00:
And they could have defended in this court on the factual ground if they'd wanted to try.

[00:31:17] Speaker 00:
Look, this is just still a compliance flexibility.

[00:31:20] Speaker 00:
You don't have to have EVs to meet that.

[00:31:22] Speaker 00:
And we've got a lot of briefs in the case.

[00:31:24] Speaker 00:
And what none of them say is what I just said.

[00:31:27] Speaker 09:
When we're considering, is it a must or is it a may?

[00:31:34] Speaker 09:
Can we look outside the formal rulemaking record to other statements by government officials?

[00:31:44] Speaker 09:
I mean, as you know, there's cases about, you know, statements by a president before he became president, right?

[00:31:51] Speaker 09:
Those don't count.

[00:31:53] Speaker 09:
Can we look to statements, you know, orders by the president in an executive order and or

[00:32:02] Speaker 09:
statements by the agency head in connection with the rules promulgation, or are those just like Trump versus why?

[00:32:10] Speaker 00:
Oh, no, no.

[00:32:11] Speaker 00:
I think statements made before somebody got to the agency are different.

[00:32:15] Speaker 00:
But can you look at what the agency is doing?

[00:32:18] Speaker 00:
Yes.

[00:32:18] Speaker 00:
I mean, as the Chief Justice sort of famously remarked, courts are not required to exhibit the kind of naivete that even ordinary citizens lack.

[00:32:26] Speaker 00:
Like, if you want to know what power the agency possesses,

[00:32:30] Speaker 00:
Can you look at what the agency is doing with the power in the real world?

[00:32:34] Speaker 00:
Yes.

[00:32:35] Speaker 00:
I think it would be naive not to.

[00:32:36] Speaker 00:
I don't need that here, because this rule forces electrification.

[00:32:40] Speaker 00:
But I don't think the court should stick its head in the sand for the power that the agency is claiming.

[00:32:45] Speaker 09:
I guess I'm trying to tie down whether it really does force electrification, because the mere fact of a shift from 7 to 17, it's probative, but it doesn't conclusively

[00:33:00] Speaker 09:
tie that down for me.

[00:33:01] Speaker 00:
So, I mean, they said in the rule, Judge Katz, is they're driving electrification, and they're going beyond what the market would otherwise achieve.

[00:33:09] Speaker 09:
Driving is at JA5?

[00:33:12] Speaker 00:
I believe.

[00:33:12] Speaker 00:
I'll have the exact same on rebuttal.

[00:33:13] Speaker 00:
I'll check it.

[00:33:14] Speaker 00:
It's either 5 or 51, but I'll have it on rebuttal.

[00:33:18] Speaker 00:
And, you know, once you say, here's what the market would otherwise do, here's what we are requiring, and the one is higher than the other.

[00:33:28] Speaker 00:
That's a mandate.

[00:33:29] Speaker 00:
We can call it whatever we want, but it is no longer an option.

[00:33:32] Speaker 00:
It is something that you have to do that you would not have otherwise done.

[00:33:35] Speaker 00:
And that's what makes this rule different.

[00:33:37] Speaker 00:
And it's why it changes everything, for timeliness, for preservation, for major questions.

[00:33:42] Speaker 00:
It's different from what the agency has always done.

[00:33:46] Speaker 03:
But do you agree that the agency could encourage electrification?

[00:33:49] Speaker 03:
What they can't do is mandate it?

[00:33:52] Speaker 00:
I think I wouldn't, Judge Van, because I read 202A.

[00:33:57] Speaker 00:
To say you set the standard for the class of vehicles that emit the relevant pollutant.

[00:34:02] Speaker 00:
Right.

[00:34:02] Speaker 03:
And if the standard happens to encourage electrification, that would be okay.

[00:34:07] Speaker 00:
That is an option they've given to manufacturers before.

[00:34:09] Speaker 00:
I would say the statutory text says, look at the class of vehicles that emit the relevant pollutant.

[00:34:15] Speaker 00:
Here you say that's not EVs.

[00:34:17] Speaker 00:
You say that's internal combustion engines.

[00:34:19] Speaker 00:
set the standard for that class.

[00:34:21] Speaker 00:
Now, we would say at that point, you can't average, right?

[00:34:24] Speaker 00:
It's got to be individualized vehicle.

[00:34:26] Speaker 00:
But if you disagree with me on the averaging, then we could sort of, once they've made up the power to average, we could talk about, can you use EVs as a compliance flexibility or not?

[00:34:37] Speaker 03:
My question is just, does your argument hinge on a conclusion by us that these standards force electrification?

[00:34:47] Speaker 03:
Encouraging electrification would be OK.

[00:34:50] Speaker 03:
You say they've done that before.

[00:34:52] Speaker 03:
And it's only a major question if they're forcing electrification, because that's your premise.

[00:34:57] Speaker 03:
To force electrification would be a major question that Congress did not clearly authorize.

[00:35:03] Speaker 03:
But encouraging electrification, that would be OK.

[00:35:06] Speaker 00:
So it hinges on a lesser version of Judge Pan, which is it is a major question, and they don't have clear congressional authorization to force a transition to EVs.

[00:35:16] Speaker 07:
Right.

[00:35:16] Speaker 00:
Right.

[00:35:17] Speaker 00:
Now, I don't need you to conclude that they don't, right?

[00:35:20] Speaker 00:
I just need you to say the standard is clear congressional authorization, and whatever the best reading of the statute, it is not clear that the agency can do this.

[00:35:28] Speaker 03:
Right.

[00:35:29] Speaker 03:
But if they're not doing that, they're not forcing, then there's no major question.

[00:35:32] Speaker 00:
If it's just a sort of compliance flexibility in the way that it was,

[00:35:36] Speaker 00:
in the past, we still have all of our arguments about averaging, and we still have all of our textual arguments on 202A.

[00:35:42] Speaker 00:
But I'll grant, if we're not forcing the transition, the major questions argument is a lot weaker.

[00:35:47] Speaker 11:
I'm still not getting the, now that we've distilled it in this helpful way between force and encourage, we keep coming back to the same thing where we are on this spectrum.

[00:35:55] Speaker 11:
If the agency sets a standard, and what they say is, once we put this standard in,

[00:36:04] Speaker 11:
The way that people are going to comply with the standard is by choosing the electrification route because it turns out to be $1 cheaper to do that.

[00:36:13] Speaker 11:
They could do the other.

[00:36:14] Speaker 11:
They could do the other.

[00:36:15] Speaker 11:
They definitely could.

[00:36:16] Speaker 11:
But if we're going to predict what's going to happen, they're going to shift towards electrification because it's $1 cheaper.

[00:36:21] Speaker 11:
Is that forcing or encouraging?

[00:36:26] Speaker 00:
If it is just an option for manufacturers as one among many, but they don't need to do anything with electrification,

[00:36:32] Speaker 11:
And what I mean by don't need to do is they're not legally mandated to do anything by electrification or practically made.

[00:36:38] Speaker 11:
Okay, well, that's what I'm asking you then if it's $1 cheaper to do it by electrification.

[00:36:44] Speaker 11:
Does that mean they're practically mandated to do it by electrification.

[00:36:49] Speaker 00:
Here, because there isn't any way to comply other than by going to EVs, I don't think the court has to get into that hypothetical.

[00:36:57] Speaker 00:
Whether that's a practical mandate or not, I think the argument would not be nearly as strong, Your Honor.

[00:37:01] Speaker 11:
Then what's the difference between mandated and encouraged if a dollar doesn't fit on the encouragement line?

[00:37:08] Speaker 00:
Because it's the same as West Virginia in the sense that the only- Well, then there is no difference between mandating and encouraging.

[00:37:12] Speaker 11:
I think there is.

[00:37:13] Speaker 11:
What is it?

[00:37:14] Speaker 11:
Give me the hypo that's encouraging but not encouraging.

[00:37:17] Speaker 00:
Oh, if you offer it as a compliance flexibility, it may turn out that it's cheaper for manufacturers to move to EVs than it is to adopt some enhanced gasoline technology.

[00:37:24] Speaker 11:
That's what I'm just saying.

[00:37:25] Speaker 11:
It turns out that it is cheaper by a dollar.

[00:37:28] Speaker 00:
It may be, but... Maybe what?

[00:37:32] Speaker 11:
That may be encouraging?

[00:37:33] Speaker 00:
I think you could try to call that encouragement.

[00:37:36] Speaker 00:
Sure.

[00:37:36] Speaker 11:
If that's not, then what is encouragement as opposed to manufacturing?

[00:37:40] Speaker 00:
So I think there are lots of different ways that they have encouraged EVs.

[00:37:43] Speaker 00:
Congress has done it in lots of different ways, right?

[00:37:45] Speaker 00:
It's built charging stations.

[00:37:46] Speaker 00:
It's given tax credits to adopt EVs.

[00:37:49] Speaker 00:
There's a lot that Congress and the agency have done, both as a matter of sort of administrative fiat and statute to get people to move.

[00:37:56] Speaker 00:
I think what's new about the rule is it's requiring a transition.

[00:38:00] Speaker 00:
And to me, that looks just like West Virginia.

[00:38:01] Speaker 11:
I mean, you keep using the word requiring.

[00:38:03] Speaker 00:
Not because on its face, it legally says you have to.

[00:38:07] Speaker 00:
They're right in a sort of technical sense at page 55 of their brief.

[00:38:12] Speaker 00:
They did not say, you have to do this.

[00:38:14] Speaker 00:
What they did was they put a lot of zeros in the standard, such that the only way to meet the standard is to manufacture vehicles that they consider to have zero GHG emissions.

[00:38:23] Speaker 11:
But it's not the only way to meet the standard.

[00:38:25] Speaker 11:
If you can meet the standard otherwise, but it's a lot more costly to meet the standard otherwise,

[00:38:31] Speaker 11:
And you would still say that that's mandating.

[00:38:33] Speaker 00:
I think that you could still say it's mandated.

[00:38:35] Speaker 00:
I think it's a harder case than this one, where as a practical matter, it isn't possible to comply without moving to electric vehicles.

[00:38:42] Speaker 00:
Now, none of that, Chief Judge Srinivasan, is how the statute is supposed to work.

[00:38:47] Speaker 00:
Just to be clear before I sit down, the way the statute is supposed to work is you look at the class of vehicles emitting the relevant pollutant,

[00:38:55] Speaker 00:
You set a standard that's technologically feasible for that class, and then you determine compliance on an individualized basis.

[00:39:01] Speaker 00:
All of this only comes up for two reasons.

[00:39:04] Speaker 00:
One, they have folded vehicles into the class that shouldn't be there under 202A because they do not, in the administrator's view, emit the relevant pollutant.

[00:39:11] Speaker 00:
And then they have started averaging across the class.

[00:39:15] Speaker 00:
in order to be able to say, well, some vehicles don't meet and others do.

[00:39:18] Speaker 11:
So that I get on the underlying arguments on the major questions overlay, which is an essential piece of your, not essential in the strict sense, but a very pronounced feature of your argument.

[00:39:31] Speaker 11:
Is there a difference for your purposes between a dollar cheaper to do it by EVs?

[00:39:38] Speaker 11:
And actually, there's no way to comply except by going

[00:39:43] Speaker 00:
I think there is a difference for the major questions doctrine between setting the standard in a way that the only way you can comply is by moving to electric vehicles more than you in the market otherwise would and setting the standard in a way where some manufacturers might, as a compliance option, choose to adopt more electrification.

[00:40:03] Speaker 11:
But that means, we keep coming back to the same thing, that means that some manufacturers are going to choose to do it even though they could do it for a dollar cheaper?

[00:40:13] Speaker 11:
Is that necessary?

[00:40:15] Speaker 00:
Again, not on this record and not in this case, but what I was trying to say was, in this case, it's an obvious mandate because they've outstripped the means of compliance with advanced gasoline technologies.

[00:40:27] Speaker 00:
If they were setting the standard in a way that you really could comply with advanced gasoline technologies,

[00:40:33] Speaker 00:
But you could also comply with electrification.

[00:40:35] Speaker 00:
And maybe electrification was preferable for some reason.

[00:40:38] Speaker 11:
Including cost.

[00:40:39] Speaker 00:
Including cost.

[00:40:40] Speaker 00:
I think the major questions argument would be not as strong as it is here.

[00:40:43] Speaker 00:
I think it would still be on the table.

[00:40:45] Speaker 00:
But I think this is the stronger version of it.

[00:40:47] Speaker 09:
OK, so that's how I'm sorry.

[00:40:49] Speaker 09:
You're saying the strongest form of your argument for compulsion is, I think, it is not technologically feasible.

[00:41:01] Speaker 09:
to comply with these standards without some degree of electrification.

[00:41:05] Speaker 00:
That's right.

[00:41:06] Speaker 00:
You cannot do it with gasoline powered vehicles.

[00:41:08] Speaker 09:
But cannot is a technological issue.

[00:41:12] Speaker 09:
That's right.

[00:41:13] Speaker 09:
It's not effectively prohibitive because the economics.

[00:41:18] Speaker 00:
You cannot squeeze enough improvement out of the internal combustion engine in the next three model years to meet that standard.

[00:41:24] Speaker 00:
You have to do one of two things.

[00:41:27] Speaker 00:
manufacture more electric vehicles, or buy credits from someone like Tesla who manufactures them.

[00:41:32] Speaker 11:
And you understand that to be the upshot of this rule?

[00:41:36] Speaker 00:
That is the upshot of this rule.

[00:41:38] Speaker 00:
In practical effect.

[00:41:41] Speaker 00:
That is what manufacturers will have to do.

[00:41:44] Speaker 11:
When you say in practical effect, that is a practical point, is that you practically cannot comply.

[00:41:50] Speaker 00:
That's right.

[00:41:50] Speaker 00:
I just mean to the extent that what the government says is,

[00:41:53] Speaker 00:
On the rule on its face, we didn't tell you what you had to do to comply.

[00:41:57] Speaker 11:
Yes, I take that point.

[00:41:58] Speaker 11:
Yeah, and it's not a legal mandate.

[00:41:59] Speaker 00:
That's right.

[00:42:00] Speaker 00:
That's right.

[00:42:01] Speaker 00:
They did not say on the face of the rule, thou shalt build more EVs.

[00:42:06] Speaker 00:
They set the standard in a way that you can only comply by doing that.

[00:42:09] Speaker 11:
Technologically, you can only comply.

[00:42:11] Speaker 11:
Not most cost-efficiently, you can comply, but technologically, you cannot meet it unless you go to electric.

[00:42:20] Speaker 09:
Suppose they had, suppose EPA had found that electric vehicles emit greenhouse gases in tiny amounts, because I forgot what, the air conditioners leak or something, and put them in the class on that basis, and then encourage slash force electrification.

[00:42:48] Speaker 09:
What happened, how would you analyze that?

[00:42:50] Speaker 00:
So one sort of factual quibble, Judge Katzis, and one legal answer, the sort of factual quibble is the substance in the air conditioning units are hydrofluorocarbons.

[00:43:00] Speaker 00:
They can have a hydrofluorocarbon rule, and they could sweep in all cars with air conditioners that use that, electric or non-electric.

[00:43:07] Speaker 00:
But it would just be a rule for the air conditioning units.

[00:43:09] Speaker 00:
It wouldn't drive electrification in terms of tailpipe emissions.

[00:43:12] Speaker 00:
To your legal question, no.

[00:43:14] Speaker 00:
If they tried to say, look, we think EVs emit greenhouse gases in some way out of the air conditioning unit or what have you,

[00:43:20] Speaker 00:
and we're just gonna dump them into sort of a suite of rules, including the tailpipe rule, even though we think they don't emit anything out of the tailpipe, then I think they'd have a real problem.

[00:43:30] Speaker 00:
Now, if they wanna start saying that electric vehicles do have emissions, because they wanna look at the whole life cycle, then I think that'd be a very different rule, totally different factual record and all the rest.

[00:43:39] Speaker 00:
The problem they have here is, they've got a problem either coming or going.

[00:43:43] Speaker 00:
If they say they don't emit the relevant pollutant as they have, they're not covered by 202A, they're not in the class,

[00:43:48] Speaker 00:
And as soon as they say, well, they do admit the relevant pollutant.

[00:43:52] Speaker 00:
Well, then the rule just doesn't look anything like this one.

[00:43:54] Speaker 00:
The rule treats them as not doing that.

[00:43:57] Speaker 00:
So I don't think they can defend it on the ground that, in fact, they do and therefore come within the class.

[00:44:01] Speaker 00:
The rule says they doesn't.

[00:44:02] Speaker 00:
They'd be arbitrary and capricious for them to now say, oh, in fact, they do.

[00:44:06] Speaker 00:
They've got to make a choice one way or the other.

[00:44:07] Speaker 00:
And their choice was to say,

[00:44:09] Speaker 00:
They have no emissions, we're not looking at the upstream stuff.

[00:44:12] Speaker 00:
As soon as they do that, they're outside the scope 202A.

[00:44:15] Speaker 00:
And that, by the way, you touched on it last night, is all the court needs to say to resolve the case.

[00:44:19] Speaker 00:
This is a major question under West Virginia and student loans.

[00:44:22] Speaker 00:
This is an old power, but in a new, very consequential way.

[00:44:26] Speaker 00:
And 202 is not clear, but you can use averaging in that way.

[00:44:30] Speaker 00:
That is the most straightforward way to resolve the case.

[00:44:32] Speaker 03:
Could I ask you about the zone of interest issue, because I think

[00:44:36] Speaker 03:
there's a pretty substantial argument that none of the petitioners have statutory standing because they're not within the zone of interests protected by the Clean Air Act, and in particular the fuel petitioners.

[00:44:48] Speaker 03:
We have a precedent, Delta construction, that suggests that they don't have statutory standing.

[00:44:55] Speaker 00:
So, Judge Pan, I want to convince you the argument's not substantial.

[00:44:58] Speaker 00:
In Delta construction,

[00:44:59] Speaker 00:
you were trying to increase the regulatory burden on someone else.

[00:45:03] Speaker 00:
In the two cases where fuel manufacturers, one a biofuel manufacturer in Energy Future Coalition, the other a traditional fuel manufacturer in Ethel, where they walked in and as here were contesting the regulatory burden on themselves, in both cases this court said,

[00:45:17] Speaker 00:
they were within the zone of interest and they could challenge emission standards in Title II, I don't see any reason to treat this case differently.

[00:45:24] Speaker 00:
I mean, then Judge Kavanaugh's reasoning in Energy Future Coalition seems to me exactly on point.

[00:45:29] Speaker 00:
He said Title II draws a balance between air quality improvement and productive economic activity because it asks you to measure technological feasibility and compliance costs, and we police that balance.

[00:45:41] Speaker 03:
So it seems to me that there is a bit of a tension between Energy Future Coalition and Delta Construction.

[00:45:47] Speaker 03:
But Delta construction is the earlier decided case.

[00:45:50] Speaker 03:
So to the extent that they would conflict, we would apply Delta construction.

[00:45:54] Speaker 03:
And in both Delta construction and Energy Future Coalition, we had fuel companies who, like this one, has an interest.

[00:46:06] Speaker 03:
Your fuel petitioners, their interest is always favoring fuel energy over electrical.

[00:46:14] Speaker 03:
And so for them, their interest really is one-sided and not aligned with the interests of a Clean Air Act.

[00:46:22] Speaker 03:
So the Clean Air Act, like the interest of Clean Air Act is to make the air more clean and preserve economically feasible options for the regulated entities, the automakers.

[00:46:34] Speaker 03:
The automakers in this case have intervened on behalf of the EPA.

[00:46:37] Speaker 03:
So it's not clear to me that the fuel petitioner's interests are aligned with the interests of the statute.

[00:46:44] Speaker 03:
And I think that this Delta construction precedent seems to dictate that they do not have statutory standing, and it controls over Energy Future Coalition, which I think does support you.

[00:46:54] Speaker 00:
So three quick points, Judge Pan.

[00:46:56] Speaker 00:
First, some automakers have intervened on the other side, as they say in their brief, because they've made investments in electrification, and they don't want to be at a competitive disadvantage.

[00:47:04] Speaker 00:
There are automakers like Toyota, Subaru that are not on the other side of this case.

[00:47:08] Speaker 03:
Second, I don't see- But they haven't intervened on behalf of your client.

[00:47:11] Speaker 00:
That's right.

[00:47:11] Speaker 00:
They're just not in the litigation one way or the other.

[00:47:14] Speaker 00:
I just wanted to say the automakers are not a monolith.

[00:47:16] Speaker 03:
In terms of just deciding whether the interests are aligned, there's no automaker on your side.

[00:47:22] Speaker 00:
Well, that's right.

[00:47:23] Speaker 00:
But the question is whether we fall within the zone of interest.

[00:47:26] Speaker 00:
So my second point was, I don't see a conflict between those cases on their reasoning.

[00:47:30] Speaker 00:
Because what Delta says is, you can't walk in if you're not challenging your own burden and just complain that there's a lesser burden on somebody else.

[00:47:37] Speaker 00:
but what Energy Future and Ethel Corp.

[00:47:39] Speaker 00:
say is, but if you're walking in as here to say the agency is imposing a regulatory impediment to the use of your product, well, you do get to sue.

[00:47:47] Speaker 00:
And then the third point is Judge Kavanaugh's reasoning for that.

[00:47:50] Speaker 00:
He did not construe the Clean Air Act as narrowly as I think the question suggests.

[00:47:55] Speaker 00:
He did not say, oh, this is really just about as much air quality improvement as you can squeeze out technologically.

[00:48:02] Speaker 00:
He said, if you look at Title II as a whole, it balances improving emissions,

[00:48:07] Speaker 00:
with encouraging and allowing productive economic activity.

[00:48:11] Speaker 00:
And it asked the agency to balance between those two.

[00:48:14] Speaker 00:
If we didn't fall within the zone of interest, one side of that balance would go unprotected, excuse me, because you couldn't challenge the standards as being too strict.

[00:48:24] Speaker 00:
You could only, as the government says, challenge them for being too lax.

[00:48:27] Speaker 00:
And that, I think, would sort of turn the zone of interest into a one-way ratchet.

[00:48:31] Speaker 00:
And the Supreme Court's been very clear.

[00:48:32] Speaker 03:
Well, if you were an automaker, you could challenge it, because they are people who are

[00:48:37] Speaker 03:
their interests are addressed by the statute.

[00:48:39] Speaker 03:
It seems to me, and I'd like you to address this, that Ethel was a different case.

[00:48:44] Speaker 03:
And Delta Construction even explicitly distinguished it by saying that's a case in which the interest being asserted was compliance with the statute.

[00:48:54] Speaker 03:
So if you are a company like a fuel company that wants to challenge this,

[00:49:01] Speaker 03:
If your interest being asserted is complying with the regulation, that's aligned with the interest of the statute.

[00:49:06] Speaker 03:
So that's a special case for a fuel company in the Clean Air Act context.

[00:49:12] Speaker 03:
In Energy Future Coalition, that case relied on Apple without explaining why, but it didn't raise the same type of claim.

[00:49:21] Speaker 03:
So the way this all shakes out from my reading of the cases is that Delta Construction is the one that seems to directly address what your clients are trying to do here

[00:49:31] Speaker 03:
and Delta construction precludes statutory standing.

[00:49:35] Speaker 00:
So I guess I'd say one broad and one specific.

[00:49:38] Speaker 00:
Broad thing, Judge Pan, is at least as I read the cases from the Supreme Court and this court over the last 20 years, they've gotten progressively softer about what we used to call prudential standing or zone of interest.

[00:49:49] Speaker 00:
And the language has been ratcheted down pretty consistently to say you just have to be arguably within the zone of interest.

[00:49:57] Speaker 00:
It's not a demanding requirement.

[00:50:00] Speaker 00:
And so we're going to look at sort of the statute broadly understood, and that's what Energy Future did.

[00:50:05] Speaker 00:
And the second is, I don't think the court should sort of say, ah, well, you're outside, but the automakers would be inside.

[00:50:10] Speaker 00:
I think all the government's arguments would apply equally to the automakers.

[00:50:13] Speaker 00:
If they were here saying, this is too hard, this is too expensive, the government would say, those are pecuniary interests.

[00:50:19] Speaker 00:
They're not in line with the statute.

[00:50:21] Speaker 00:
The statute just asks what's technologically feasible.

[00:50:24] Speaker 03:
But the statute regulates automakers, so automakers

[00:50:26] Speaker 03:
are they automatically are in so but you are sort of a component of combustion driven engines so can any manufacturer of a component of a combustion driven engine have statutory standing from your view.

[00:50:41] Speaker 00:
If they have Article III injury here, yes, the agency wants to- We're not talking about Article III standing.

[00:50:46] Speaker 03:
I'm just talking zone of interest.

[00:50:48] Speaker 03:
Yes.

[00:50:48] Speaker 03:
Would any manufacturer, producer, anybody who manufactures a part for a combustion engine have statutory standing in your view?

[00:50:57] Speaker 00:
I just want to say, as long as they're independently harmed, yes, they would.

[00:51:01] Speaker 03:
Because what the agency- How are their interests aligned with the zone of interest of the Clean Air Act?

[00:51:06] Speaker 00:
Because the Clean Air Act draws a balance.

[00:51:08] Speaker 00:
As the Supreme Court said, no statute pursues its end at all costs.

[00:51:12] Speaker 00:
And it says we do want to improve emissions.

[00:51:14] Speaker 00:
No question about that.

[00:51:15] Speaker 00:
But we want to do it in a way that's technologically feasible and that the industry is able to comply with.

[00:51:20] Speaker 03:
Feasible for the automakers.

[00:51:22] Speaker 03:
Are they thinking about all the manufacturers of parts for combustion engines?

[00:51:26] Speaker 00:
I don't know if Congress specifically had that in mind, but the point of the zone of interest test is, do you have an interest that's arguably protected by the statute?

[00:51:35] Speaker 00:
The agency wants to transition from one kind of vehicle to another.

[00:51:39] Speaker 00:
That may or may not hurt auto manufacturers.

[00:51:41] Speaker 00:
I think it will hurt some of them more than others.

[00:51:44] Speaker 00:
It clearly hurts the fuel manufacturers.

[00:51:46] Speaker 03:
I understand, but the auto manufacturers are definitely in.

[00:51:49] Speaker 03:
I'm just trying to understand, what is the scope in your view of the zone of interests?

[00:51:53] Speaker 03:
Does it extend to any manufacturer, anybody who has any kind of an interest in a combustion engine or fuel or, you know, gas fuel?

[00:52:02] Speaker 00:
I think it extends to the entities that have an interest in the productive economic activity that this court has squarely said is one half of the balance that the Clean Air Act achieves.

[00:52:13] Speaker 03:
So you think the Clean Air Act, the zone of interest, includes any kind of economic activity that is

[00:52:19] Speaker 03:
addressed by this act or is affected by this act?

[00:52:22] Speaker 00:
It has anyone who has an interest in the productive economic activity that the act balances against improvements in air quality.

[00:52:30] Speaker 03:
So that would be, though, anybody who has any kind of an economic farm or interest as a result of this act.

[00:52:36] Speaker 00:
Well, I want to be careful to explain.

[00:52:37] Speaker 00:
Your earlier questions asked about anybody who's manufacturing components and cars.

[00:52:42] Speaker 00:
Yes, I think those manufacturers likely would be included.

[00:52:45] Speaker 00:
I think fuel producers are included.

[00:52:47] Speaker 00:
I don't want to say how far beyond that the zone of interest would go, because I don't want to sort of speculate in the absence of knowing what the industry is.

[00:52:54] Speaker 00:
But those industries clearly police the balance between productive economic activity and air quality that this court squarely set an energy future the Act protects.

[00:53:06] Speaker 03:
You say it's clear.

[00:53:07] Speaker 03:
I don't know if that's so clear because the Clean Air Act, it wants to clean the air, but they want to make sure that automakers can still get business and be able to economically function.

[00:53:17] Speaker 03:
I don't think it's clear that they were thinking about all the other

[00:53:21] Speaker 00:
potentially affected industries that might go along with this and Delta construction suggests that they were not just pan that's not the way the court read it in energy coalition the court there didn't perceive any conflict with Delta

[00:53:33] Speaker 00:
I don't perceive any conflict on the reasoning of Delta.

[00:53:36] Speaker 00:
And I think more generally, in terms of methodology, the court's been clear that when it runs the zone of interest test, it doesn't take sort of too stingy a view of what the zone of interest is.

[00:53:48] Speaker 03:
The Supreme Court has said- I do wonder about that, because that's the APA standard versus the other type, which is that we're not in the APA here.

[00:53:54] Speaker 00:
I think the Supreme Court's been clear.

[00:53:56] Speaker 00:
When you look at the zone of interest, you have to look at all of the provisions in a given statute, how they interact,

[00:54:02] Speaker 00:
And you have to take a fairly broad bird's eye view to what the zone of interest is.

[00:54:06] Speaker 00:
And then you've just got to ask, are you arguably protected by it?

[00:54:09] Speaker 00:
Keeping in mind, this is not a demanding standard.

[00:54:12] Speaker 00:
It is not difficult to meet.

[00:54:13] Speaker 00:
It is rarely satisfied.

[00:54:15] Speaker 00:
I think it would be given that this court has already said that a biofuel and a traditional fuel manufacturer all within the zone of interest

[00:54:23] Speaker 00:
to challenge emission standards in this same statute, Title II of the Clean Air Act, I think it would be a really marked departure if this court kicked this case on sort of prudential standing or zone of interest grounds.

[00:54:38] Speaker 03:
It wouldn't be a market departure from Delta construction.

[00:54:40] Speaker 00:
But again, I think I just read Delta construction differently.

[00:54:43] Speaker 00:
Delta construction said, not if you're trying to increase the burden on somebody else.

[00:54:46] Speaker 00:
What it did not say was, oh, you're here challenging the burden on you.

[00:54:51] Speaker 00:
That still doesn't fall within the zone of interest.

[00:54:53] Speaker 00:
Now, if it had said that, I agree.

[00:54:54] Speaker 00:
You'd have a conflict within industry future, but Delta doesn't say that.

[00:54:58] Speaker 11:
So you haven't mentioned consumers in the exchanges you've had.

[00:55:02] Speaker 11:
And I just, do you think that the consumers rise and fall with the manufacturers?

[00:55:08] Speaker 00:
I think it's just as easy under the zone of interest.

[00:55:10] Speaker 00:
I mean, when you start looking at compliance costs, that's obviously manufacturers, but it's also consumers, right?

[00:55:15] Speaker 00:
So if the consumers think that the standard that the agency has set will drive the price upon cars too high, here they say it'll be $1,000 per car.

[00:55:25] Speaker 00:
That's a pretty significant amount more for an average American to pay for an automobile.

[00:55:29] Speaker 00:
It seems to me they're arguably protected by the way that the statute says you got to balance what's possible with what's sort of economically or in terms of compliance costs a good idea.

[00:55:39] Speaker 00:
The consumers can police that balance, so can the fuel manufacturers.

[00:55:43] Speaker 03:
What about the Ruckelshaus case that we decided?

[00:55:46] Speaker 03:
We said there that the Clean Air Act is not concerned with whether regulations post costs the consumer should rightly bear if ecological damage is to be minimized.

[00:55:55] Speaker 03:
So we're not concerned with costs to the consumer.

[00:55:57] Speaker 03:
It's not in the zone of interest of the Clean Air Act.

[00:56:00] Speaker 00:
So, Judge Payne, it's been a long time since I looked at Ruckelshaus.

[00:56:03] Speaker 00:
If memory serves, I think it was quite some time ago, before the more modern zone of interest cases, before Energy Future

[00:56:10] Speaker 00:
before the court's decision in Lexmark.

[00:56:12] Speaker 00:
So I'll have to go back and look at it.

[00:56:15] Speaker 00:
Maybe it does have language that suggests that the Clean Air Act pursues only environmental quality and isn't concerned with anything else, but that's not right on the face of the act.

[00:56:23] Speaker 03:
It's just I think within the environmental, the economical impacts that are addressed by the Clean Air Act, it's not any economic impacts.

[00:56:34] Speaker 03:
It's very targeted to

[00:56:36] Speaker 03:
things that are aligned with the interests of the statute, and consumer protection is not part of the Clean Air Act.

[00:56:41] Speaker 00:
Mr. Spana, I guess I react very differently to that.

[00:56:45] Speaker 00:
I think that would be a sort of remarkable holding.

[00:56:47] Speaker 00:
If the agency said we're going to drive, like here they say it's $1,000, but imagine if we're five, six, or 7,000.

[00:56:53] Speaker 00:
And if we're going to make a price of an automobile out of reach of the average American, it would seem to me fairly remarkable to say that consumers couldn't walk in and say that the agency had acted arbitrarily and capriciously in where they had set the standard, because they simply fall outside the protection of the Act.

[00:57:09] Speaker 03:
The Act says compliance costs, and it has to have- A different cause of action, arbitrary and capricious under the APA, is different from what we're doing.

[00:57:17] Speaker 00:
or walk in and say they lack statutory authority to set the number that high, whatever the claim is, for zone of interest purposes, it seems to me, if the act says you have to balance improving air quality.

[00:57:27] Speaker 00:
with how much it's going to cost in order to do that.

[00:57:30] Speaker 00:
And that cost is borne by manufacturers and consumers.

[00:57:34] Speaker 00:
I don't understand why only the automaker manufacturers and not the consumers who will bear at least most if not all of that ultimate cost wouldn't also fall within the zone of interest.

[00:57:43] Speaker 00:
That turns it into almost like an Illinois brick.

[00:57:45] Speaker 00:
Sort of the first injured party cuts off standing and zone of interest has gone exactly the opposite way over the last

[00:57:54] Speaker 03:
I just hear you saying that the magnitude of the cost is going to determine whether it's in the zone of interest.

[00:57:59] Speaker 03:
And I think the analysis is different.

[00:58:01] Speaker 03:
You look at the statute, what was the statute trying to do?

[00:58:04] Speaker 03:
And is this within the zone of interest?

[00:58:06] Speaker 03:
Even if the cost is really high, that doesn't put something into the zone of interest if the statute doesn't address that.

[00:58:11] Speaker 00:
So I was just using the hypothetical to say, I think there are circumstances where it would get clearer and clearer that they would be within the zone of interest that Congress is trying to protect.

[00:58:21] Speaker 00:
And if I'm right about that, as one goes to the hypotheticals, then I think I'm right here.

[00:58:26] Speaker 00:
Once you're in the zone, you're not in the zone for only some purposes.

[00:58:30] Speaker 11:
Let me make sure my colleagues don't have additional questions at this time.

[00:58:33] Speaker 11:
We'll give a little bit of time for rebuttal.

[00:58:34] Speaker 11:
Thank you, Mr. Wall.

[00:58:48] Speaker 04:
Thank you Chief Judge Srinivasan and may it please the court.

[00:58:53] Speaker 04:
I've heard a lot of questions today about whether the EPA was merely predicting whether this would increase electric vehicles or actually mandating it.

[00:59:01] Speaker 04:
To use the words of the EPA itself on page 60 of the Joint Appendix, page 60 on the right hand column halfway down.

[00:59:13] Speaker 04:
Compliance with the final standards will necessitate greater implementation and pace of technology penetration, including skipping down further deployment of BEV and PHEV technologies.

[00:59:25] Speaker 11:
But it says including.

[00:59:26] Speaker 11:
And so I don't read that necessarily to me.

[00:59:30] Speaker 11:
And we can certainly ask EPA about that.

[00:59:32] Speaker 11:
I don't read that to mean that one of the things that has to happen is BEV and PHEV.

[00:59:38] Speaker 11:
It could mean that there has to be changes.

[00:59:42] Speaker 11:
And one of the potential changes would be PHEV and PHEV.

[00:59:46] Speaker 11:
Sorry, I'm getting the letters wrong.

[00:59:49] Speaker 04:
Yes, Your Honor.

[00:59:49] Speaker 04:
If this were the only sentence that was to that effect, I would agree.

[00:59:53] Speaker 04:
But I would point to look for a prediction about what is going to happen is on page five.

[00:59:57] Speaker 04:
And I'm afraid I didn't bring that page up with me, so I can't point you exactly where the page is.

[01:00:02] Speaker 04:
But it's talking about how it's anticipating, at that point, the increase to be electric vehicles, and that it's driving electric vehicles on page 50.

[01:00:11] Speaker 04:
So the EPA has said on a number of occasions, this rule will lead to, or will necessitate again, this transition.

[01:00:19] Speaker 11:
So do you read those to mean that they will, yes, they've made the prediction, there's no doubt, because I think the gap between 17 and seven is proof positive that the prediction is there.

[01:00:29] Speaker 11:
There's no doubt about that.

[01:00:30] Speaker 11:
Yes, you're right.

[01:00:31] Speaker 11:
Do your statements mean that the only way, what the agency is saying is the only way

[01:00:38] Speaker 11:
that manufacturers can come into compliance with the new standards is by shifting to EVs.

[01:00:45] Speaker 04:
Red in context, yes, Your Honor.

[01:00:47] Speaker 04:
And the EPA really can't deny that either.

[01:00:50] Speaker 04:
It cannot deny that it's part of the administration's larger policy to force the electrification of the fleet, because not only was it announced on the same day as Executive Order 14037, that order is referenced on JA4 of the Joint Appendix.

[01:01:06] Speaker 04:
So red in context, this is a

[01:01:09] Speaker 04:
Now, whatever the merits of that policy, it is not a permissible policy end under Section 202 of the Clean Air Act, and the EPA has pursued it through impermissible means for among the reasons, I'm sorry, in addition to the reasons you were just discussing with my colleague, that they relied on a cost and benefit analysis that picked and choose between facts and assumptions that maximize the punitive benefits while ignoring the very real costs.

[01:01:38] Speaker 03:
So under under your argument, does it have to be the policy end?

[01:01:41] Speaker 03:
What if it's just incidental to what they're doing?

[01:01:44] Speaker 03:
What if incidentally, like it requires some electrification, but they're just setting the standard, which is what they have to do under the Clean Air Act.

[01:01:53] Speaker 04:
Under our argument, it doesn't matter.

[01:01:54] Speaker 04:
Because whether they did it by accident or on purpose, they have mandated the transition and the fundamental rewrite of major industry, which since Brown and Williamson and reaffirmed a couple of years ago in West Virginia against EPA is a major question reserved for Congress.

[01:02:11] Speaker 03:
What if it requires 1% electrification?

[01:02:15] Speaker 03:
Does it matter the degree of electrification to make it a major question?

[01:02:19] Speaker 04:
So if it's just 1% electrification, it would be difficult to assert that that is a true mandate.

[01:02:25] Speaker 04:
OK.

[01:02:26] Speaker 04:
So for 5%, would that be?

[01:02:28] Speaker 04:
So it's hard to say.

[01:02:29] Speaker 04:
If there were a, and perhaps to clarify my prior answer, if the EPA were to say, you are required.

[01:02:37] Speaker 03:
No, no.

[01:02:37] Speaker 03:
I'm working within the framework that we have under the Clean Air Act.

[01:02:41] Speaker 03:
They're setting emission standards.

[01:02:42] Speaker 03:
It incidentally requires electrification, because that's a real world factor.

[01:02:48] Speaker 03:
And it just requires 1% or 2% electrification.

[01:02:52] Speaker 03:
Would that be a major question in your view?

[01:02:54] Speaker 04:
If there were no other functional way to do it, then probably.

[01:02:57] Speaker 04:
Because again, the Congress has considered- I'm sorry, no functional way to do what?

[01:03:01] Speaker 04:
If there were no functional way to- that is a hypothetical and it's difficult to imagine the way you would write that regulation.

[01:03:07] Speaker 03:
But if it were possible- The regulation is I'm setting this standard.

[01:03:11] Speaker 03:
It's a standard to comply with it.

[01:03:14] Speaker 03:
Incidentally, we contemplate that there will be some electrification, one or 2%.

[01:03:18] Speaker 03:
Is that a major question?

[01:03:19] Speaker 04:
At the present time, it's not a major question, because that already exists in the marketplace.

[01:03:24] Speaker 04:
And what is driving it is the push past the target.

[01:03:27] Speaker 03:
OK, so you agree that setting a standard that requires some electrification, as it has in the past, would not be a major question.

[01:03:35] Speaker 03:
It's only if there's a lot of electrification.

[01:03:38] Speaker 04:
Setting the standard in a way that can be complied with with existing technologies is not a major question.

[01:03:45] Speaker 04:
That's not what I was asking you.

[01:03:47] Speaker 04:
So I'm not sure I understand if you could rephrase the question.

[01:03:50] Speaker 03:
Sure.

[01:03:51] Speaker 03:
My question is, all the EPA does under this provision of the Clean Air Act is set a standard.

[01:03:58] Speaker 03:
And we're talking about the stringency of the standard.

[01:04:01] Speaker 03:
And I understand your argument to be, if you set it at a very stringent level,

[01:04:06] Speaker 03:
which requires automakers to electrify, that would be a major question because you don't have the authority, EPA, to require electrification.

[01:04:15] Speaker 03:
But I understood your prior answer to me to be that if I'm the EPA and I set the standard and it happens to contemplate a little bit of electrification, one or 2%, that wouldn't necessarily be a major question.

[01:04:27] Speaker 04:
If it happens to contemplate that, no, it's taking into account reality.

[01:04:31] Speaker 04:
If it is forcing that,

[01:04:32] Speaker 04:
That's when it becomes a problem, because Congress has considered an electrification mandate at a below 100% level four times in the last.

[01:04:41] Speaker 03:
At what percentage does it become a major question?

[01:04:42] Speaker 03:
If at 1% or 2% it does not, and at 17% it does, where's the line for a major question?

[01:04:49] Speaker 04:
The line is where it becomes a mandate, because Congress has considered a mandate four times in the last five years.

[01:04:55] Speaker 04:
So the question.

[01:04:56] Speaker 04:
But if it mandates 1% or 2%, you said that wouldn't be a major question.

[01:05:01] Speaker 04:
I believe I clarified my answer to the, if it mandates, if the standard, you've asked the question a couple of different ways.

[01:05:08] Speaker 04:
If the standard contemplates, it's not a mandate, it's not a major question.

[01:05:13] Speaker 04:
If the man, if the.

[01:05:16] Speaker 03:
Okay, let me clarify, I'm sorry.

[01:05:19] Speaker 03:
So if the standard set requires one to 2% electrification, is that a major question?

[01:05:26] Speaker 04:
under the way that the court has interpreted that question, yes.

[01:05:30] Speaker 04:
It would be.

[01:05:31] Speaker 03:
That's huge and extraordinary power by the agency in our current world where there's electrification happening anyway.

[01:05:37] Speaker 04:
Yes, Your Honor.

[01:05:38] Speaker 04:
Because the frame of the doctrine is not how the power is, and this is going to the Nebraska case is probably the best example of this.

[01:05:48] Speaker 04:
It is not the way the power is wielded.

[01:05:51] Speaker 04:
Doctrine is a guard for fundamental constitutional concerns about the separation of powers.

[01:05:55] Speaker 04:
It is the nature of the power claims.

[01:05:57] Speaker 04:
And whether they are claiming an ability to mandate 1% or 100%, that is a power that is a fundamental legislative choice reserved to Congress.

[01:06:07] Speaker 03:
So I asked your friend the same question.

[01:06:10] Speaker 03:
So what do you think that agencies should do?

[01:06:12] Speaker 03:
They should decide what the standard is that would protect public health, and they should ratchet it down to make sure that they're not relying on electric vehicles?

[01:06:19] Speaker 03:
What are they supposed to do?

[01:06:20] Speaker 04:
I would point your honor to Section 202A3A, Little Romanette 1.

[01:06:26] Speaker 04:
where the EPA considers, is given a variety of different factors that it has to balance in the energy coalition, that's the term of that phrase.

[01:06:36] Speaker 04:
And so this is not an instance or a public health law entirely.

[01:06:40] Speaker 04:
They are not entitled to set, well, we think it would be ideal to have X number of tons of carbon dioxide.

[01:06:47] Speaker 04:
They can set the standard based on technological feasibility and upon other considerations set out by the standard.

[01:06:53] Speaker 03:
But it's all feasible.

[01:06:55] Speaker 03:
This is not one of the factors.

[01:06:57] Speaker 03:
That's in the statute, avoiding electrification, because it's a major question.

[01:07:02] Speaker 03:
So I'm just wondering how in practical effect you think the agency is supposed to do its job while taking into account this issue.

[01:07:11] Speaker 04:
So the agency is supposed to do its job by taking into account those statutory factors.

[01:07:16] Speaker 04:
And I think that perhaps the better way to answer your honor's question is to point you to pages 2609 and 2610 of the West Virginia case in which the court said

[01:07:26] Speaker 04:
that federal agencies are not entitled to short circuit the political process by using broadly worded, I apologize, broadly worded general delegations of power, even where there is a plausible textual basis.

[01:07:41] Speaker 04:
So I don't dispute your honor that they could, that under the strict construction of the statute, they technically could do this.

[01:07:48] Speaker 04:
But that is not the common sense understanding of how Congress is understood to delegate matters of significant economic and political concerns in the words of Justice Barrett's separate opinion in the Nebraska case.

[01:08:02] Speaker 04:
So they are to set the standard based on the overall context of the statute, which was written at a time and written, frankly, in terms that contemplate an internal combustion engine.

[01:08:13] Speaker 03:
It also contemplates electrification.

[01:08:15] Speaker 04:
the statute does not contemplate the written I'm speaking to section 202 a doesn't it doesn't require you to ignore electrification it does not speak to electrification one way or the other but that is the problem with the major questions doctrine for the EPA because the staff this is a very complicated issue that requires balancing a lot of different issues interests

[01:08:35] Speaker 04:
which is why in the Infrastructure Act that my colleague referenced, the Congress commissioned a report about 16 different topics, because Congress recognized that this impacts not just cars, and it also impacts the grid, and it impacts oil companies, as well as many other factors.

[01:08:54] Speaker 04:
And balancing that is a fundamentally legislative

[01:08:57] Speaker 04:
Congress hasn't done yet.

[01:08:59] Speaker 04:
And so as a major, from a major questions perspective, the EPA cannot short circuit that process using this old broadly worded division.

[01:09:07] Speaker 11:
Can I just ask one clarification?

[01:09:10] Speaker 11:
For the 1% hypo, I take it that your argument is not that 1% every time, a mandate of 1% just to be clear, a standard that's going to require a 1% shift in favor of electrification.

[01:09:28] Speaker 11:
Your argument isn't necessarily that any time there's any iota of a mandatory shift, that's enough.

[01:09:37] Speaker 11:
I assume your argument is that any time there's a mandatory shift of any iota, if there's no distinction, there's no stopping point to that.

[01:09:47] Speaker 11:
In other words, the agency is saying, yeah, this time we're doing a half percent.

[01:09:51] Speaker 11:
But the logic of what we're saying would take us all the way up to 99.

[01:09:55] Speaker 04:
Precisely.

[01:09:56] Speaker 11:
That would be.

[01:09:56] Speaker 11:
But if there were another world in which

[01:09:59] Speaker 11:
there was some other consideration that would cap it at 1%.

[01:10:02] Speaker 11:
Then it might not be a major question, even under your view, I take it.

[01:10:05] Speaker 04:
Yes, you're right.

[01:10:06] Speaker 04:
But it's the nature of their power.

[01:10:08] Speaker 04:
And the power that they are claiming here is the power to force 100% transfer, and Congress has not given it to them.

[01:10:14] Speaker 09:
Which is why I think your case depends on this question of, can you include electric vehicles in the class?

[01:10:27] Speaker 09:
Because otherwise, if we're just talking about 1% versus 17% versus 7%, it just feels like the question of degree and how many notches can they turn up the knob, that doesn't feel major.

[01:10:43] Speaker 09:
That feels like arbitrary and capricious review.

[01:10:47] Speaker 09:
So it just has to be that there's just a conceptual difference in kind.

[01:10:53] Speaker 09:
when you put into the class this non-emitting different kind of thing, which is the electric car.

[01:11:01] Speaker 04:
And what I would point, Your Honor, that might help with that question is I believe it is subsection C. You agree?

[01:11:07] Speaker 09:
I mean, that wasn't entirely a friendly question, right?

[01:11:12] Speaker 09:
You need the piece about electric cars being in the class.

[01:11:17] Speaker 04:
I think that

[01:11:18] Speaker 04:
it has to, the electric cars have to not be, have been contemplated by 202, is how I understood the honor question.

[01:11:26] Speaker 04:
And if, and we don't think that it is, and we don't think that Congress has clearly spoken to it, precisely because as I was discussing with your colleagues, it doesn't mention electric cars at all.

[01:11:36] Speaker 04:
And by contrast, and I would point this court to the language in Brown and Williamson, where the Food and Drug and Cosmetics Act theoretically,

[01:11:47] Speaker 04:
in general terms included it, but Congress spoke about tobacco in a much more specific way.

[01:11:51] Speaker 04:
And this is very analogous to that, because the Clean Air Act has, can be interpreted to include electric cars, but it shouldn't be in light of, for example, 26 USC 30D, 42 USC- Well, let's see, before we get to the FDA versus Brown and Williamson,

[01:12:13] Speaker 09:
point about other statutes.

[01:12:15] Speaker 09:
Let's just talk about this one for a second.

[01:12:18] Speaker 09:
And one feature of this one that may cut against you on this point is a combination of two things.

[01:12:28] Speaker 09:
One is this scheme is all about motor vehicles.

[01:12:34] Speaker 09:
Motor vehicles is a defined term, and the definition includes electric no less than combustion engines, right?

[01:12:42] Speaker 09:
Yes.

[01:12:43] Speaker 09:
And then the other is right in the provision we're talking about, EPA gets the authority to define the relevant classes within that definitional category.

[01:12:57] Speaker 04:
So what I would point your honor to about that is actually subsection E, not C as I said earlier, where it's talking about new power or propulsion systems.

[01:13:05] Speaker 09:
I'm sorry, where are you, Eve?

[01:13:07] Speaker 04:
Section 202.

[01:13:09] Speaker 04:
or 7521 to USC, where Congress seems to be contemplating how- I'm sorry, this is new power sources?

[01:13:17] Speaker 04:
New power sources or propulsion systems.

[01:13:20] Speaker 04:
So Congress in this section does not seem to contemplate that the EPA is just going to squish together all forms of motor vehicles.

[01:13:30] Speaker 04:
The Congress seems to be saying in this section that the administrator is to consider them separately.

[01:13:36] Speaker 04:
And that is how I would respond to your honor.

[01:13:39] Speaker 03:
How does it say that in this provision?

[01:13:40] Speaker 03:
It says any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment, cause or contribute to air pollution, which may reasonably be anticipated to endanger public health or welfare.

[01:13:52] Speaker 04:
I was looking at section E, Your Honor, which says that in the event of a new power source or propulsion system for a new motor vehicle or new motor vehicle engines is submitted for certification, skipping some parts, the administrator must postpone certification until he has prescribed standards.

[01:14:09] Speaker 04:
So this seems to contemplate different standards for different new propulsion systems.

[01:14:14] Speaker 04:
And electric vehicles are a propulsion system that may have been in extency when the law was passed, but it is certainly not in the form that they currently are.

[01:14:24] Speaker 04:
That was certification.

[01:14:25] Speaker 03:
Is that the ability to regulate such vehicles?

[01:14:27] Speaker 04:
So certification is the way that the standards are enforced.

[01:14:31] Speaker 04:
The standards are set, and then new vehicles have to be certified that they meet those standards.

[01:14:37] Speaker 04:
So this allows the administrator to postpone that certification process to set standards when there's a new propulsion system, which seems to suggest it should be in a different class.

[01:14:48] Speaker 04:
But the court doesn't need to necessarily get to that point, because I think that it can resolve on the major questions doctrine, as my colleague suggested.

[01:14:56] Speaker 11:
So.

[01:14:57] Speaker 11:
They could still be in the same class, I guess, right?

[01:14:59] Speaker 11:
Because it could be that when you have a new propulsion system, there is the authority to postpone certification.

[01:15:07] Speaker 04:
but that doesn't mean that it's not also part of the equation under A. So I would ask, make sure that your honor, I ask your honor to pose that question to my colleague whose brief covers that topic in much more detail.

[01:15:21] Speaker 04:
But the problem that I see with that is the way that returning back to A1 that Judge Pan was just asking me about, the way that it's written is in terms of standards applicable to the emission of any air pollutant.

[01:15:35] Speaker 04:
And then it's, and then it dropping down two lines, such standards, referring to the same standards, shall be applicable to such vehicles and engines for their useful life.

[01:15:44] Speaker 04:
So if this vehicle is not, not emitting the relevant pollutant, because it, for example, doesn't have a tailpipe, and that's where carbon dioxide comes out, then it couldn't be in the same class, because it's not, in his judgment, cause or contribute to air pollution from that standard, from that pollutant, because pollutants are not one size fit all.

[01:16:05] Speaker 09:
You want to, I stopped you, you wanted to go to other statutes like in Brown and Williams and the statutes other than the FDCA.

[01:16:15] Speaker 09:
So is that like the RFS, right?

[01:16:20] Speaker 09:
a scheme which presupposes the availability of liquid fuel?

[01:16:24] Speaker 04:
Is that what you're... That is certainly one of them, but that actually wasn't what I was referring to.

[01:16:27] Speaker 09:
Okay.

[01:16:28] Speaker 04:
So what I was referring to was when Congress has dealt with electric vehicles, again, it has rejected a mandate four times in the last five years.

[01:16:37] Speaker 04:
Instead, it has picked other options.

[01:16:39] Speaker 04:
It has created a tax credit in 26 USC 30D.

[01:16:44] Speaker 04:
It has created demonstration projects in 42 USC 13281, and it has allowed for the development of infrastructure to permit their growth.

[01:16:53] Speaker 04:
It has encouraged, it has not mandated, and as the Supreme Court noted in the MCI case, the court and the EPA is not just bound by Congress's ultimate or desired policy choice, but by the methods that it chose to use.

[01:17:07] Speaker 04:
And here, the Congress has never chosen to mandate, and it has never allowed it to do so.

[01:17:13] Speaker 11:
Can I ask you, for your view, if the shift to electrics is, no, let me put it the other way.

[01:17:25] Speaker 11:
If it's technologically feasible to comply with the new standards without shifting to electrics, but it just costs a lot more to do it that way, would you agree that that doesn't then tee up a major question?

[01:17:37] Speaker 11:
That it has to be technologically only achievable by going the electric route?

[01:17:42] Speaker 04:
As long as it doesn't cross the line of 202A3A from it at one, because there is a point where it has become so costly that it's not feasible.

[01:17:52] Speaker 04:
And it goes back to what I was talking with Judge Pan a few minutes ago, where they're just turning it into a public health statute instead of one that balances.

[01:17:59] Speaker 04:
So if it satisfies that, then it wouldn't be a major question just for it to be less expensive.

[01:18:04] Speaker 04:
In my friend's terms, the compliance.

[01:18:07] Speaker 11:
So prohibitively costly.

[01:18:10] Speaker 04:
Prohibitively costly would, I think, run afoul of that other provision, as this court noted in Energy Coalition in the Balancing Act.

[01:18:18] Speaker 09:
If you just look at the statute on its face, put aside major question, put aside electrification, it seems like the focus of the statute is on technical feasibility.

[01:18:32] Speaker 04:
Yes, Your Honor.

[01:18:33] Speaker 09:
The provision you just read and the one in A1 about

[01:18:41] Speaker 09:
allowing time for the new technology to be developed and such?

[01:18:45] Speaker 04:
The provisions that we were just talking about, because I've learned my lesson about trying to interpret your honor's questions ahead of time, but yes, the provisions that we were just talking about are talking about technological feasibility in a way very similar to what the statute of issue in West Virginia against EPA.

[01:19:01] Speaker 04:
And technological feasibility in that case was not moving

[01:19:04] Speaker 04:
between major sources of electricity and technological feasibility here isn't moving between major propulsion systems.

[01:19:13] Speaker 04:
I have a number of arguments about the arbitrary and capricious issue, but I am way over time, so unless you have questions.

[01:19:20] Speaker 11:
Thank you very much for your argument.

[01:19:24] Speaker 11:
From EPA now, Ms.

[01:19:25] Speaker 11:
Chen.

[01:19:37] Speaker 05:
Good morning, and may it please the court, Sue Chen for the United States.

[01:19:41] Speaker 05:
With me today are Daniel Durdke from the Justice Department and David Borland and Seth Noble.

[01:19:49] Speaker 05:
To protect the public from harmful motor vehicle emissions, Congress directed EPA to reduce emissions through technology in 7521A.

[01:19:58] Speaker 05:
And that's exactly what EPA did here.

[01:20:01] Speaker 05:
Before we can get to the statutory arguments, I'd like to first address the threshold questions, first looking at exhaustion, the time bar, and then I'll speak briefly as to zone of interest.

[01:20:13] Speaker 05:
Petitioners waive all their statutory arguments for three reasons.

[01:20:16] Speaker 05:
First, they failed to raise these issues with reasonable specificity as required by 76070.

[01:20:21] Speaker 05:
Second, the regulatory elements that petitioners object to were established in the 2010 rule, and so the challenge is time barred.

[01:20:30] Speaker 05:
And finally, EPA expressly said that it was not reopening these elements.

[01:20:36] Speaker 05:
The court should strictly enforce 76070's mandatory exhaustion rule and hold that petitioners waive their statutory arguments with failure to exhaust.

[01:20:45] Speaker 05:
In response to our exhaustion argument, the fuel requirement on page nine offers three snippets from the record where they supposedly raise these issues.

[01:20:54] Speaker 05:
But those three snippets are just vague references to EPA's authority in the context of other discussions about other issues.

[01:21:03] Speaker 05:
So the best example they offer, and it's not very good, is JA-612, which is a discussion about the Energy Independence and Security Act and the Renewable Fuel Standards,

[01:21:14] Speaker 05:
And the commenter notes EPA's authority to set standards under 7521A1, but then says that EPA's encouragement of zero emission vehicles at the expense of internal combustion vehicles is an overreach of authority inconsistent with statutory design of the Clean Air Act.

[01:21:33] Speaker 11:
So I might quibble with you a little bit on which one's the best.

[01:21:36] Speaker 11:
It may be that the trading one at least speaks a little more specifically, but if we just, for,

[01:21:43] Speaker 11:
present purposes at least, if we put aside reasonable specificity, I think they seem to be placing the principal focus not on the fact that, yeah, we did it with reasonable specificity, but that we didn't need to do it at all because this is a presupposition.

[01:21:58] Speaker 11:
This is the kind of presupposition that the agency just has to address every time.

[01:22:02] Speaker 05:
So they're relying on a key assumptions doctrine.

[01:22:07] Speaker 05:
And that doctrine has been displaced here by the Supreme Court's 2016 decision in Ross v. Blake.

[01:22:13] Speaker 05:
which held that mandatory exhaustion statutes are mandatory and there's no room for judicial discretion.

[01:22:20] Speaker 05:
This court then applied Ross in Fleming v. USDA

[01:22:24] Speaker 05:
and held that when a statute imposes a mandatory exhaustion rule, courts can excuse the failure to exhaust no matter the reason.

[01:22:33] Speaker 05:
And so we ask that you follow Ross and Fleming and apply 7607D's exhaustion rule as written, which recognizes no exception for key assumptions.

[01:22:46] Speaker 11:
So suppose there is.

[01:22:47] Speaker 11:
I know I'm familiar with that line of cases.

[01:22:49] Speaker 11:
But suppose, yes, for obvious reasons.

[01:22:54] Speaker 11:
Suppose that the key assumption doctrine subsists.

[01:23:00] Speaker 11:
It persists.

[01:23:02] Speaker 11:
What's your answer to their argument?

[01:23:04] Speaker 11:
I'm not saying it necessarily does, but just for purposes of fleshing out the principal focus of their submission, as I understand it.

[01:23:09] Speaker 05:
So the statutory issues that they're raising are not assumptions in the context of this rule.

[01:23:16] Speaker 05:
This is a well-established regulatory framework that EPA has used in every single vehicle greenhouse gas route.

[01:23:22] Speaker 05:
And EPA specifically said it was not reopening those structural elements.

[01:23:26] Speaker 05:
So it can't be that every time the agency tightens its standards, that somehow reopens the fundamental structure to challenge.

[01:23:37] Speaker 05:
That would deny automakers the predictability they need to be able to run their processes.

[01:23:44] Speaker 11:
So your argument is that

[01:23:46] Speaker 11:
Then you're melding together the fact that it's happened before with key assumptions.

[01:23:52] Speaker 05:
Many times.

[01:23:52] Speaker 11:
Yeah, once or a million times.

[01:23:55] Speaker 11:
I'm just saying that you're baking that into key assumptions.

[01:24:01] Speaker 11:
And I haven't seen that done before.

[01:24:03] Speaker 11:
I mean, I'm not saying that there's not a reason to do that or that doesn't make sense.

[01:24:06] Speaker 11:
I'm just saying that that seems like something.

[01:24:09] Speaker 11:
I don't recall a key assumption case.

[01:24:10] Speaker 11:
There's not that many of them.

[01:24:12] Speaker 11:
I don't recall a key assumption case that specifically treats this question of

[01:24:16] Speaker 11:
What happens in a situation in which the rule has actually come up a few times already with the same features baked into it?

[01:24:23] Speaker 11:
Do you still have to redo the key assumption every single time?

[01:24:27] Speaker 11:
And your answer is no.

[01:24:30] Speaker 05:
Right.

[01:24:30] Speaker 05:
Especially when EPA specifically said it was not reopening these elements.

[01:24:35] Speaker 05:
And I think a helpful case might be Hispanic Affairs Project via CASA.

[01:24:39] Speaker 05:
This is 901 F3rd 378, which was decided in 2018.

[01:24:44] Speaker 05:
And there, the key assumption, there was a key assumption, but the court was stressing that this was the first time that the agency had made that assumption in this court.

[01:24:56] Speaker 05:
It was the first time that EPA or agency was regulating in that area.

[01:25:02] Speaker 05:
And so there was no prior regulatory source to be found for that authority.

[01:25:09] Speaker 05:
And so I think it is important that this is not the first time that the agency

[01:25:14] Speaker 11:
But what if it was the first time?

[01:25:16] Speaker 11:
I take that point.

[01:25:17] Speaker 11:
I think I understand that submission that the assumption works differently.

[01:25:21] Speaker 11:
It essentially gets turned off when this is a repeated repeated exercise.

[01:25:25] Speaker 05:
But do you have I think we would have a weaker argument.

[01:25:29] Speaker 09:
Can I ask you to focus on just the major question piece?

[01:25:33] Speaker 09:
So for preservation.

[01:25:35] Speaker 09:
So suppose they say the argument they make is lack of statutory authority for this rule.

[01:25:44] Speaker 09:
to force electrification um without the major question overlay the question would be whether the statute contains authority with the major question overlay the question is whether the statute contains clear authority they don't specifically mention major question is that a forfeiture of the major question point

[01:26:12] Speaker 09:
Or is that just kind of like a standard of review that's encompassed in the statutory question?

[01:26:22] Speaker 05:
So I think the major questions doctrine is a principle of statutory interpretation.

[01:26:26] Speaker 05:
And they don't need to say the word major questions doctrine in their comments.

[01:26:30] Speaker 05:
What they do need to do is to present the underlying interpretive issues that they're now raising in court.

[01:26:36] Speaker 05:
And they haven't done that.

[01:26:38] Speaker 09:
And you think that they, I get the point about averaging and trading and stuff, but you don't think it was fairly preserved in this record, the argument that EPA lacks statutory authority to force electrification?

[01:26:56] Speaker 05:
No, they didn't say anything about forcing electrification at all.

[01:26:59] Speaker 05:
There's nothing about

[01:27:02] Speaker 05:
averaging an EV somehow means that this was now an effective EV mandate.

[01:27:08] Speaker 05:
We don't have any of that.

[01:27:11] Speaker 11:
But you do make the argument, I thought in your brief, maybe you can point me to it or disabuse me of this misimpression, but I thought you do make the argument that there was an independent requirement to preserve

[01:27:24] Speaker 11:
whether you call it major questions or not, there was an independent requirement to preserve the argument that we're now calling major questions in the rulemaking process, and that wasn't abided by.

[01:27:35] Speaker 05:
They needed to raise interpretive questions.

[01:27:42] Speaker 11:
Right, but not just that they needed to address averaging and electrification, but that they needed to address

[01:27:54] Speaker 11:
major questions, in other words, the need that because of the degree to which it's been done here or whether you call it a difference in degree or difference in kind, what's happening here is something that's so significant that it kicks into play, it brings into play this doctrine to the effect that there has to be especially clear authorization to do it.

[01:28:14] Speaker 05:
I don't think they needed to say this is major questions because of XYZ.

[01:28:19] Speaker 05:
they do need to preserve the underlying legal and factual predicates of the arguments that they're now making, including that the statute doesn't allow EPA to do averaging, the statute doesn't allow EPA to include EVs, and that these standards are so strict that they basically force the use of EVs.

[01:28:38] Speaker 05:
Those are the things that they should have made in comments.

[01:28:42] Speaker 03:
I'm sorry, you're conceding that they didn't have to exhaust the major questions issue?

[01:28:47] Speaker 03:
They didn't have to say major questions,

[01:28:50] Speaker 11:
Well, they don't have to use the words.

[01:28:52] Speaker 11:
But is that all you're saying?

[01:28:53] Speaker 11:
Because I'm just reading from your brief.

[01:28:54] Speaker 11:
This is page 39 of your brief.

[01:28:58] Speaker 11:
Let me make sure I've got the brief in the right case.

[01:29:00] Speaker 11:
Yeah?

[01:29:01] Speaker 07:
OK.

[01:29:01] Speaker 11:
So I think there's two cases here.

[01:29:04] Speaker 11:
They can run together in one slide.

[01:29:06] Speaker 11:
Petitioners also fail to articulate their view that the level of projected electrification and indirect effects on the economy triggers the major questions doc.

[01:29:16] Speaker 05:
So I think we meant to say that they didn't say that the, because their argument is the major question argument they're making is that it's a major question because this is an even argument.

[01:29:26] Speaker 05:
And they didn't say in comments that the level of, or the stringency of the standards means this is an even argument.

[01:29:36] Speaker 05:
Not that this triggers a major question.

[01:29:40] Speaker 03:
So why do you think they don't need to raise major questions

[01:29:44] Speaker 03:
specifically because that would put the agency on notice that they need to address that.

[01:29:49] Speaker 05:
Because major questions often is a principle of statutory interpretation.

[01:29:53] Speaker 05:
I don't think they needed to raise that in comments.

[01:29:56] Speaker 05:
And certainly when they raise interpretive issues, that is an issue of statutory interpretation that the agency would have to deal with.

[01:30:07] Speaker 05:
And so we're focused on giving the agency the opportunity to deal with these particular interpretive issues at the comment stage rather than

[01:30:15] Speaker 11:
know what this means on on the major question so you you're you're you're just saying you're fine that you may not have known that you needed a point to particularly clear stash authority authority that doesn't matter um we don't think they needed to raise the major okay

[01:30:46] Speaker 11:
And can I ask you on, although I don't want to shift precipitously away from the threshold questions, on the ultimate substantive questions that are before us, do you agree that the EPA rule practically mandates electrification?

[01:31:12] Speaker 05:
Do you agree with that?

[01:31:13] Speaker 05:
No.

[01:31:14] Speaker 05:
Because there are, in fact, internal combustion vehicles that can meet the standards.

[01:31:20] Speaker 05:
Without EVs, as Judge Pan points out, there is Subaru.

[01:31:24] Speaker 05:
So the standards do not, in effect, mandate anyone to use.

[01:31:29] Speaker 05:
Now, automakers want to use EVs because they provide a cheaper compliance tax, but that's not the same thing as a mandate.

[01:31:38] Speaker 09:
The rule doesn't mandate.

[01:31:40] Speaker 09:
on its face, but is it technologically feasible to meet these standards without electrifying?

[01:31:49] Speaker 05:
Yes, and Subaru is the evidence of that.

[01:31:53] Speaker 11:
And you don't think that you'd think anybody could be a Subaru?

[01:31:58] Speaker 05:
We think that

[01:32:01] Speaker 05:
We think this shows that there are internal combustion vehicles that can meet the standard.

[01:32:08] Speaker 05:
Whether people want to do that, whether people want to be Subaru is a whole separate issue.

[01:32:14] Speaker 11:
OK, so I mean, it seems to me that you heard both arguments on the other side.

[01:32:19] Speaker 11:
It seems to me there's a fundamental disagreement on whether the rule, as a matter of technological feasibility,

[01:32:27] Speaker 11:
requires electrification.

[01:32:29] Speaker 05:
And this is why it was important for petitions to have raised this issue before the agency.

[01:32:35] Speaker 05:
The agency could have looked at its modeling and crunched the numbers and given us a definitive answer one way or another, but they haven't.

[01:32:43] Speaker 05:
And so the court shouldn't draw a favorable inference based on absence of this clear analysis in their favor.

[01:32:51] Speaker 11:
Do you think that the case would look different if

[01:32:56] Speaker 11:
the only technologically feasible way to comply with the standard were to go down the electrification route.

[01:33:07] Speaker 05:
You can see that that would be a major question No, so let me answer so answer your question The case could look different in that if this if you agree with us that this Rule were not an effective EV mandate, then I think you have an easier path saying Petitions or argument is predicated on this being an EV mandate.

[01:33:29] Speaker 05:
It's not so we don't need to resolve other issues

[01:33:32] Speaker 05:
If you think that this were an EV mandate, it's still not a major question, because the major questions doctrine, as I said, is a principle of statutory interpretation.

[01:33:43] Speaker 05:
So the major question inquiries here is not whether EPA can set standards to force

[01:33:53] Speaker 05:
EVs.

[01:33:54] Speaker 05:
That's not a question of statute of limitations.

[01:33:57] Speaker 05:
The relevant interpretive questions here are whether EPA can consider all feasible technologies and setting standards, whether it can set standards using averaging, whether it can define classes to include EVs, and none of these questions qualifies as major because these are things that EPA has been doing for years.

[01:34:16] Speaker 05:
So there's no transformative claim of new authority.

[01:34:21] Speaker 09:
But suppose EPA did set a standard under which the only technologically feasible means of compliance is 100% electrification.

[01:34:39] Speaker 09:
Do you assert that power?

[01:34:45] Speaker 09:
Would that be consistent with the statute on your view?

[01:34:50] Speaker 05:
Yes, because I think we need to draw a distinction between having authority to do something versus using that authority in a reasonable way.

[01:35:01] Speaker 05:
I understand.

[01:35:02] Speaker 09:
There might be arbitrary and capricious challenges, but your theory would support a 100% electrification

[01:35:14] Speaker 09:
rule mandatory in the sense that that's the only technologically feasible means of compliance.

[01:35:22] Speaker 05:
So I think that would come about if EPA were to set its standards at zero.

[01:35:28] Speaker 05:
And that's assuming that there are no technologies like carbon capture that could be installed on internal combustion vehicles.

[01:35:41] Speaker 05:
So then the question is, does EPS have authority to set standards at zero?

[01:35:46] Speaker 09:
And the answer is yes, because 7521A authorizes- If they did set it at zero, would that trigger the major question doctrine?

[01:35:56] Speaker 05:
No, because.

[01:36:01] Speaker 05:
Let me just go back and clarify.

[01:36:04] Speaker 05:
Answers still no, but when it comes to a zero emissions standard, of course, EPA has to have the record to support that standard.

[01:36:12] Speaker 05:
Now, I think your hypothetical pos is whether EPA could in theory set a standard that we might see right now as extreme on this record.

[01:36:23] Speaker 05:
But that's not enough to trigger the major questions doctrine, because you can always imagine some extreme use of any regulatory

[01:36:30] Speaker 05:
So, for example, the Clean Air Act authorizes EPA to set national ambient air quality standards.

[01:36:39] Speaker 05:
And with the right hypothetical record, those standards would be zero.

[01:36:44] Speaker 09:
But no one... I mean, why is it extreme on your theory?

[01:36:48] Speaker 09:
Your theory is that electricity is just another

[01:36:55] Speaker 09:
kind of technology.

[01:36:56] Speaker 09:
It's like thinking about a catalytic converter or something.

[01:36:59] Speaker 05:
I'm not saying it's extreme in general.

[01:37:01] Speaker 05:
I'm saying it might look extreme at this point.

[01:37:05] Speaker 05:
That's why I assume we're talking about a hypothetical.

[01:37:08] Speaker 05:
But if EPA, whatever standards EPA sets, it has to be supported by the record at that point.

[01:37:19] Speaker 09:
I mean, it's going to be easy to support.

[01:37:23] Speaker 09:
Electric vehicles are so much more efficient.

[01:37:26] Speaker 09:
You say electric vehicles are technologically feasible.

[01:37:30] Speaker 09:
If you electrify to 100%, you can get, I don't know what the number is, 100 miles per gallon standard, whatever it is.

[01:37:39] Speaker 09:
You set the, you say the scheme, the only standard on the face of the statute is technological feasibility.

[01:37:52] Speaker 09:
And there you go.

[01:37:55] Speaker 05:
That would still not trigger the major questions doctrine, because again, the question is not about whether EPA can set a zero standard.

[01:38:03] Speaker 05:
You have to frame it in stash form.

[01:38:06] Speaker 05:
And so the question is, can EPA set a standard that considers all feasible technologies, which it would have to do no matter what standard?

[01:38:18] Speaker 11:
Can you just make sure you point the mic to where you're at?

[01:38:22] Speaker 05:
Is this better?

[01:38:23] Speaker 11:
I think I think it will be let me just make sure I'm understanding where we are in the argument so as a matter of the arguments architecture this exchange.

[01:38:32] Speaker 11:
Is assuming that we're passed an off ramp.

[01:38:35] Speaker 11:
that's a different one, which is that we're not even talking about mandating, as a practical matter, electrification at all in this rule, because this rule just doesn't do that.

[01:38:43] Speaker 11:
And so we don't have to engage with the question of whether we would, in theory, have the capacity to mandate it to 100%.

[01:38:50] Speaker 11:
But if you go down that road, then I guess I have the same question.

[01:38:55] Speaker 09:
Meaning to just put aside the question what this rule does and ask about,

[01:38:59] Speaker 05:
the logic of the assertion of power, of potentially setting a zero emissions standard.

[01:39:05] Speaker 03:
So wouldn't 42 USC section 7521A2 come into play?

[01:39:11] Speaker 03:
Because that says that the standard 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.

[01:39:25] Speaker 05:
Right.

[01:39:25] Speaker 05:
These are built-in guardrails for

[01:39:28] Speaker 03:
So if the EPA followed all of the statutory directives and guardrails, it could theoretically set

[01:39:41] Speaker 03:
a standard that meets these requirements.

[01:39:43] Speaker 05:
Exactly.

[01:39:43] Speaker 05:
And the fact that it could set the standard to zero doesn't trigger the major questions doctrine because, again, there are lots of standards that agencies can set and they, in theory, could all be set to zero.

[01:39:56] Speaker 05:
It doesn't mean that all those issues are major questions because major questions doctrine is limited to extraordinary cases, not every time an agency sets a standard.

[01:40:08] Speaker 11:
Right.

[01:40:09] Speaker 11:
It depends on what the standard does.

[01:40:10] Speaker 11:
And it just if EPA just announces there shall be no more gas powered vehicles.

[01:40:18] Speaker 11:
All vehicles from year 2026 on have to be electric vehicles.

[01:40:25] Speaker 05:
That would not

[01:40:28] Speaker 11:
That sounds kind of major, just as a descriptive matter.

[01:40:30] Speaker 11:
You think that might be a big deal?

[01:40:33] Speaker 05:
But again, the major questions inquiry is not about particular outcomes.

[01:40:37] Speaker 05:
It's about statutory questions.

[01:40:41] Speaker 05:
And so the statutory question is, can EPA, when it's setting standards, consider all feasible technologies?

[01:40:48] Speaker 05:
And as just Pam points out, if it's feasible, then that is the authority that Congress gave EPA to act.

[01:40:58] Speaker 09:
You do need, I'll give you, you do need some element of novelty.

[01:41:06] Speaker 09:
But a big part of the major questions doctrine is the economic and political significance of the power asserted.

[01:41:15] Speaker 09:
And that seems easily satisfied.

[01:41:19] Speaker 05:
But again, the major questions doctrine does not revolve around particular outcomes.

[01:41:25] Speaker 05:
you have to look at the statutory questions.

[01:41:28] Speaker 09:
You look at the scope of the power asserted.

[01:41:33] Speaker 09:
And I mean, it may be that you have that power, but that's an application of the doctrine, not a reason for treating a 100% electrification mandate as just another standard.

[01:41:47] Speaker 05:
And the scope of the power asserted is the ability to set standards.

[01:41:51] Speaker 05:
And I think especially in this case, when you're looking at

[01:41:56] Speaker 05:
potential collateral consequences.

[01:41:57] Speaker 05:
I mean, Congress intended for and designed these standards to have collateral consequences on things like fleet makeup and supply chains.

[01:42:07] Speaker 05:
And so that's just the nature of standards that push for technological innovation and adoption in something as ubiquitous as motor vehicles.

[01:42:16] Speaker 05:
So the fact that EPA's standards can have effects on other things is not a reason to think that EPA acted beyond what Congress could reasonably be expected to have.

[01:42:29] Speaker 11:
And the other side has invoked West Virginia.

[01:42:34] Speaker 11:
And so in the hypothetical situation, after you've gotten past the fact that, under your view, this case does not involve a mandate at all, but if we're in mandate land,

[01:42:45] Speaker 11:
And in a hypothetical situation in which the mandate is 100% that it's just we're not doing gas vehicles anymore, gas powered vehicles anymore.

[01:42:52] Speaker 11:
We're only going to do EVs.

[01:42:53] Speaker 11:
And the argument from the other side, of course, is going to be, well, that's

[01:42:57] Speaker 11:
West Virginia because that wasn't a complete shift.

[01:43:01] Speaker 11:
It was just saying you shift from 26, 27 to 36 or so.

[01:43:05] Speaker 11:
I can't remember the exact numbers, but you shift in some measure.

[01:43:09] Speaker 11:
We're talking about a complete shift.

[01:43:11] Speaker 11:
And I guess the difference at that point is just what you define as the relevant denominator.

[01:43:14] Speaker 11:
Is it motor vehicles or is it motor vehicles that are gas powered?

[01:43:21] Speaker 05:
and its motor vehicles.

[01:43:22] Speaker 05:
The big difference between this case and West Virginia is that Congress set a completely different regulatory scheme.

[01:43:29] Speaker 05:
The problem in West Virginia was that EPA had no authority to regulate renewable plants.

[01:43:38] Speaker 05:
The Clean Power Plan was shifting electricity production from coal plants, which is a regulated source, to renewable plants.

[01:43:45] Speaker 05:
That completely changed the regulatory scheme, which was to reduce emissions at regulated sources and not to shift away from them.

[01:43:54] Speaker 05:
Here, 7521A authorizes EPA to regulate motor vehicles, and they're defined functionally without regard to their propulsion source.

[01:44:05] Speaker 05:
And motor vehicles are the only sources that we're talking about here.

[01:44:09] Speaker 05:
So, in other words, we start off with motor vehicles.

[01:44:14] Speaker 05:
Thanks to the rule, we end up with motor vehicles that have emission controls on them.

[01:44:19] Speaker 05:
And that is E.K.

[01:44:21] Speaker 05:
acting within the heart of the regulatory scheme that Congress set up, which is to reduce harmful emissions by putting emission controls on motor vehicles.

[01:44:29] Speaker 11:
So you think the analog to, I think the baseline in West Virginia was power plants.

[01:44:36] Speaker 11:
Right.

[01:44:36] Speaker 11:
And the idea was, well, if you're shifting from coal to a different kind of source, then that's a shift that is major.

[01:44:45] Speaker 11:
And you would say that relevant baseline here is modes of transportation.

[01:44:48] Speaker 11:
So it would be shifting from cars to bikes.

[01:44:51] Speaker 05:
Yes.

[01:44:52] Speaker 11:
That would be the... But as long as you're within the scheme of cars,

[01:44:58] Speaker 05:
Right.

[01:44:58] Speaker 11:
Not just cars, just motor vehicles.

[01:45:01] Speaker 11:
Yeah, right.

[01:45:02] Speaker 05:
So this idea of shifting from gas cars to electric cars, I think that draws a false distinction between these two types of vehicles.

[01:45:10] Speaker 05:
And it's one that 7521A does not recognize.

[01:45:14] Speaker 05:
Because remember, it talks about motor vehicles.

[01:45:17] Speaker 05:
So the shift from electric to gas is not relevant as a legal matter under 7521A.

[01:45:24] Speaker 11:
Okay, can I bring us back to non-mandate land?

[01:45:30] Speaker 11:
Because the first fork in the road is between mandate and non-mandate.

[01:45:33] Speaker 11:
And you think this is a non-mandate case.

[01:45:36] Speaker 11:
In the non-mandate world, is there a difference between a situation in which the agency thinks it's technologically feasible to comply without shifting to electricals,

[01:45:52] Speaker 11:
without electrification.

[01:45:53] Speaker 11:
It's still technologically feasible to do it through traditional engines and do that.

[01:45:57] Speaker 11:
But the agency is actually not agnostic as between those two possibilities.

[01:46:01] Speaker 11:
It actually wants to bring about a shift towards electrification.

[01:46:08] Speaker 11:
Do you see a difference between what the agency wants to do?

[01:46:13] Speaker 11:
Because some of the statements

[01:46:14] Speaker 11:
that have been pointed to that are outside of the rule itself, but that are officials, various officials, commenting on the result of the rule point to a desire, a hope, an aspiration backed by the rule that this is going to engender a shift.

[01:46:32] Speaker 11:
And that seems different to me.

[01:46:34] Speaker 11:
Conceptually, there's a distinction between that.

[01:46:36] Speaker 11:
And yeah, it could.

[01:46:38] Speaker 11:
And it could be a shift.

[01:46:40] Speaker 11:
But the agency is just agnostic as between them.

[01:46:45] Speaker 05:
Agency is agnostic as between specific technologies.

[01:46:51] Speaker 05:
When tightening standards, of course, EPA is pushing for automakers to use more emission control technologies, period.

[01:46:59] Speaker 05:
And of course, that includes electrification.

[01:47:02] Speaker 05:
Now, if the shift means that automakers are going to use better and more efficient emission controls, that's great.

[01:47:11] Speaker 05:
But at the end of the day, what EPA is worried about is automakers meeting their fleet average standards however they could.

[01:47:18] Speaker 11:
So then how do you?

[01:47:21] Speaker 11:
We were looking for the various statements in the rule itself.

[01:47:24] Speaker 11:
If we disregard statements outside the rule, we're looking at the rule itself.

[01:47:28] Speaker 11:
So there was a statement on page 60 of the Joint Appendix, the third column 74493 of Volume 86 of the Federal Register.

[01:47:37] Speaker 11:
Compliance with the final standards will necessitate greater implementation and pace of technology penetration through MY 2026 using existing GHG reduction technologies, including further deployment of BEV and PHEV technologies.

[01:47:52] Speaker 05:
Right, and that's just saying that standards have gotten tighter, more technologies will be used, those technologies include electrification.

[01:48:01] Speaker 05:
It's not a mandate to specifically use more electrification.

[01:48:05] Speaker 11:
And it's not a recognition you don't think that the only way to comply is through at least some use of electrification.

[01:48:14] Speaker 05:
Right, it just notes that there are, that electrification is an option.

[01:48:19] Speaker 11:
People might make that choice.

[01:48:21] Speaker 11:
And actually you're predicting, you don't deny that the prediction definitely is that more manufacturers will make that choice under the rule than without it.

[01:48:32] Speaker 05:
That is the penetration analysis, yes, but that might not.

[01:48:36] Speaker 09:
I'm not sure we should be reading statements in the preamble as if they were statutory text, but let me do that for a minute.

[01:48:47] Speaker 09:
I read it very differently and I was surprised by your

[01:48:51] Speaker 09:
answer that this is not a mandate, because it says compliance will necessitate technology penetration, including further deployment of electrification.

[01:49:06] Speaker 05:
Right.

[01:49:07] Speaker 05:
So there are other kinds of emission control technologies that are on the table.

[01:49:13] Speaker 09:
Electrification is included

[01:49:16] Speaker 09:
in the technology penetration that will be necessitated by compliance.

[01:49:22] Speaker 09:
It seems like the most natural reading of this by far is the standards will force technological change.

[01:49:31] Speaker 09:
And that part of it is unexceptional, but one part of that change will be electrification.

[01:49:38] Speaker 05:
Right, because electrification is one of the emission control technologies that can be used for automakers to comply with the standard.

[01:49:47] Speaker 05:
It's not the only one that can be used.

[01:49:49] Speaker 05:
What EPA is mandating with this rule, in effect, is more emission control technologies.

[01:49:57] Speaker 05:
It's agnostic as to what kind it is.

[01:50:00] Speaker 11:
In other words, when it says including electrification, in your view, what I'm saying is that's likely going to happen.

[01:50:07] Speaker 11:
Our tables are predicting that it's going to happen.

[01:50:10] Speaker 11:
But it's not the only way that it can happen.

[01:50:12] Speaker 03:
That's right.

[01:50:13] Speaker 03:
That's exactly right.

[01:50:15] Speaker 03:
Is there anything that precludes the EPA from

[01:50:21] Speaker 03:
contemplating penetration that includes electrification because it seems that it would be very artificial to try to set a standard to avoid electrification in order to not spark a major questions challenge, which I think is the bottom line of what your friend on the other side is suggesting.

[01:50:40] Speaker 03:
That the EPA must avoid electrification because any kind of requirement of electrification would spark a major question.

[01:50:50] Speaker 03:
I don't see any support for the idea that the EPA cannot consider or even require some amount of electrification.

[01:51:00] Speaker 03:
It could be on an extreme level.

[01:51:02] Speaker 03:
We might be getting into a major question land.

[01:51:05] Speaker 03:
But in just setting a run of the mine emission standard and expecting that to mandate some electrification, that doesn't seem to fall outside of what the statute requires or does it?

[01:51:20] Speaker 05:
Right, and in fact, A2 directs EPA to consider feasibility basically of the requisite technology and there's no carve out for electrification.

[01:51:31] Speaker 05:
I just want to step back for a second.

[01:51:33] Speaker 05:
The whole point of 7521A is for EPA to protect the public by reducing motor vehicle emissions by using technology.

[01:51:41] Speaker 05:
So it would be really perverse to require EPA to ignore electrification, which is not only a very effective technology, but also one that's embraced by automakers.

[01:51:56] Speaker 05:
I do want to address the question about the standards applying to EVs because I agree that is important to the outcome.

[01:52:06] Speaker 05:
So the regulatory scheme revolves around motor vehicles.

[01:52:11] Speaker 05:
And 7550 defines motor vehicles functionally, not based on emission level.

[01:52:18] Speaker 05:
It says any self-propelled vehicle designed for transport on public roads.

[01:52:24] Speaker 05:
And that includes EVs.

[01:52:25] Speaker 05:
So then you look at 7521A, which applies the standards to emissions from any class or classes of new motor vehicles.

[01:52:34] Speaker 05:
And by using the words class,

[01:52:36] Speaker 05:
classes, Congress is identifying the harmful emission as a problem that occurs at the class level rather than the individual vehicle level, and so the standards apply to the class.

[01:52:50] Speaker 05:
And if you keep reading A1, the last sentence actually says that.

[01:52:54] Speaker 05:
It says, such standards shall be applicable to such vehicles, meaning motor vehicles,

[01:52:59] Speaker 05:
whether these vehicles are designed as complete systems or incorporate devices to prevent or control such pollution.

[01:53:07] Speaker 05:
So this last sentence is saying that the standards apply to motor vehicles with devices that prevent pollution, which perfectly describes EVs.

[01:53:18] Speaker 05:
Could you repeat which statute that was?

[01:53:20] Speaker 05:
I'm sorry, this is 7521A1.

[01:53:26] Speaker 05:
So this is still the language about standards applying to emissions from any pollution, from any class or classes.

[01:53:34] Speaker 05:
It's just the last sentence of that provision.

[01:53:38] Speaker 05:
And our reading is in line with the regulatory scheme, which is to reduce emissions by putting control on these.

[01:53:46] Speaker 05:
Because both EVs and internal combustion vehicles are motor vehicles with emission controls on them, electrification is a lot more effective, but that's not a reason to disqualify them or motor vehicles with that technology from the effort to reduce motor vehicles.

[01:54:05] Speaker 05:
And in fact, to exclude EVs from the standards would deprive automakers of a really effective and a cheaper way to comply.

[01:54:14] Speaker 05:
It would also create this absurd outcome where automakers would be able to use emission controls that are 99% effective, but not 100% effective, which is, again, contrary to Congress's goal with 7521A.

[01:54:30] Speaker 05:
And of course, automakers who produce the EVs are not here complaining about

[01:54:36] Speaker 05:
their product being regulated.

[01:54:38] Speaker 05:
And I do want to note that the Auto Alliance conveners, they actually represent automakers who produce something like 95% of new motor vehicles in the United States and not just a few new petitions suggested.

[01:54:55] Speaker 11:
Let me make sure my colleagues don't have additional questions for you this time.

[01:54:59] Speaker 03:
I'm interested in the zone of interest.

[01:55:02] Speaker 05:
And if I could also get a word in about the time

[01:55:06] Speaker 05:
So the zone of interest excludes parties more likely to frustrate and further the statutory objective.

[01:55:13] Speaker 05:
And here, 7521A's objective is to use technology to reduce emissions while giving due regard to the burden on automakers.

[01:55:23] Speaker 05:
Petitioners want EPA to ignore electrification, and that would

[01:55:30] Speaker 05:
impede EPA's efforts to regulate emissions and automakers' ability to comply with the emissions standards.

[01:55:39] Speaker 05:
As for Energy Future Coalition, that is a fuel case, not a case dealing with the standards as such.

[01:55:46] Speaker 05:
And as Delta Construction explained, the breadth of the zone of interest varies by the provision at issue.

[01:55:56] Speaker 11:
And you wanted to make a word about timeliness?

[01:55:58] Speaker 05:
Sure, yes.

[01:55:59] Speaker 05:
The time bar, as we said, the disputed parts of EPA's program for greenhouse gas standards were established in 2010.

[01:56:10] Speaker 05:
Petitioners missed their jurisdictional 68 deadline.

[01:56:14] Speaker 05:
And because their opening briefs don't argue that EPA

[01:56:19] Speaker 05:
reopened the 2010 rule, either actually or constructively, they have forfeited that argument.

[01:56:26] Speaker 05:
And then on top of that, they have in effect conceded our forfeiture argument by not disputing it in the reply.

[01:56:38] Speaker 11:
All right.

[01:56:39] Speaker 11:
Thank you, Council.

[01:56:40] Speaker 11:
Thank you.

[01:56:44] Speaker 11:
We'll hear from Respondent Interveneers Council now.

[01:56:47] Speaker 11:
Mr. Donahue.

[01:56:55] Speaker 08:
Judge Srinivasan, and may it please the court.

[01:56:58] Speaker 09:
You might need to put the mic up for the podium.

[01:57:02] Speaker 08:
You just want to hear me.

[01:57:06] Speaker 08:
How's that?

[01:57:07] Speaker 08:
Better?

[01:57:08] Speaker 08:
So on exhaustion, we submit there's just a complete failure to exhaust any of the arguments, statutory, factual arguments about the grid.

[01:57:18] Speaker 08:
The Clean Air Act 7607D7B is quite explicit, as this court has said.

[01:57:25] Speaker 08:
It enforces it strictly for good reason.

[01:57:27] Speaker 08:
And these arguments were not raised.

[01:57:31] Speaker 08:
The reply brief does its best to point to comments, and none of them comes close.

[01:57:39] Speaker 08:
There's no mention of averaging, for example.

[01:57:42] Speaker 08:
And I would cite a case on key assumptions that utility or regulatory group case 744 F3, 748 note 4, where the court kind of said,

[01:57:54] Speaker 08:
There's been a more basic failure to identify the key assumption of what.

[01:58:00] Speaker 08:
There was no comment that said you can't do averaging in the context of greenhouse gases, but then failed to elaborate.

[01:58:06] Speaker 08:
There's nothing.

[01:58:07] Speaker 08:
There's a toe void.

[01:58:09] Speaker 08:
My clients have to comply with this provision.

[01:58:12] Speaker 08:
It's important.

[01:58:14] Speaker 08:
It's not just a kind of empty formality.

[01:58:17] Speaker 08:
And this argument shows why it's important, because there's been a lot of argument about what is the actual impact of this rule?

[01:58:25] Speaker 08:
How far does it go in creating incentives or going further with electrification?

[01:58:29] Speaker 08:
And all kinds of arguments have been treated as somehow

[01:58:33] Speaker 08:
established that there's some kind of statutory bar against some kind of electrification, which I think is totally wrong.

[01:58:40] Speaker 08:
But one reason that we're less sort of up to speed than we would be is that none of this stuff was raised before the agency.

[01:58:49] Speaker 08:
The next time EPA sets standards, as Mr. Wall suggested, I am sure that people will raise these arguments with great detail, but it's really not proper

[01:59:00] Speaker 08:
not fair to other parties, to the agency or to the court itself, to go ahead and grapple with things this important that were not raised at all.

[01:59:09] Speaker 11:
Can I just start with something?

[01:59:10] Speaker 11:
I think I heard you say statutory bar against electrification.

[01:59:13] Speaker 11:
I just want to make sure.

[01:59:14] Speaker 11:
You mean statutory mandate for electrification?

[01:59:16] Speaker 08:
No, I'm saying they say there's something in the statute that says EPA has to somehow exclude one technology that is substantial, even though it's the most effective.

[01:59:27] Speaker 08:
And that leads to the next point I'd like to make.

[01:59:30] Speaker 08:
We've used the term electrification a lot, and of course that's like a spectrum from our steering, which does reduce pollution, and things like stop-start technology, those little batteries that turn off the car at a stoplight and then start it back up again.

[01:59:47] Speaker 08:
to hybrids, various kinds of hybrids, including plug-in hybrids that can operate on the battery all the time if you plug them in enough, and then to battery electric vehicles.

[02:00:00] Speaker 08:
And so just one point I'd make about that is, first of all, it's important to try to figure out what the petitioners are saying about where the line is.

[02:00:09] Speaker 08:
take them to say EPA can't rely on power steering or hybrids or even perhaps plug-in hybrids.

[02:00:14] Speaker 08:
It's gotta use gas, apparently.

[02:00:16] Speaker 08:
That's their rule.

[02:00:17] Speaker 08:
But it's sort of an odd rule that has no basis, we think, in the statute.

[02:00:22] Speaker 11:
I thought part of what they're saying is that one group that you can consider together is every group that the agency itself says we should treat as zero emitters.

[02:00:31] Speaker 11:
And that would include hybrids.

[02:00:33] Speaker 11:
Even though in theory the agency could have done something different with hybrids, but they didn't.

[02:00:36] Speaker 08:
Well, this is the class argument.

[02:00:39] Speaker 08:
I think if I'm understanding the court's question, the statute says any class or classes, so language that suggests some discretion for the agency.

[02:00:51] Speaker 08:
The agency has never created a special class for any particular sort of subcategory of emission-producing technologies, including electric vehicles.

[02:01:01] Speaker 08:
And so – and we think that dramatically – and again, this is all unexhausted statutory speculation that the agency hasn't had a chance to fully elaborate on, but the far better reading is that EPA has it right that you can

[02:01:15] Speaker 08:
include non-emitting vehicles.

[02:01:18] Speaker 08:
And I think the text of Section 7521A, that second sentence of A1 that talks about preventing and controlling pollution, preventing pollution, we think the natural reading is, and this is a Clean Air Act theme,

[02:01:35] Speaker 08:
The Clean Air Act says where you can actually prevent pollution instead of having to struggle with capturing it and then storing it.

[02:01:44] Speaker 08:
That's better.

[02:01:44] Speaker 08:
That's in the very first section of the Clean Air Act.

[02:01:47] Speaker 08:
7401C talks about that as directing the federal government

[02:01:53] Speaker 08:
to focus on prevention where it can.

[02:01:55] Speaker 08:
So the idea that EPA has to exclude these clean cars from the categories is just a stretch.

[02:02:05] Speaker 08:
And then, of course, there's the fact that Congress did define motor vehicle in a way that is agnostic as between what powers the vehicle, which seems quite significant.

[02:02:17] Speaker 03:
And is there another statutory provision that allows the EPA to include EVs in the class?

[02:02:23] Speaker 03:
I'm looking at 42 USC 7521A3A2, which says that the EPA may designate classes based on gross vehicle weight, horsepower, type of fuel used, or other appropriate factors.

[02:02:37] Speaker 08:
Yeah, I mean, I think that attests to the fact that Congress

[02:02:42] Speaker 08:
was okay with EPA using these functional categories.

[02:02:47] Speaker 08:
That's what the definition of motor vehicle itself is.

[02:02:50] Speaker 08:
Note, as EPA's brief points out, there's another provision that talks about, I think it's a heavy duty vehicles provision that does identify, does talk about

[02:03:04] Speaker 08:
internal combustion engine.

[02:03:06] Speaker 08:
So it stands in contrast to this one.

[02:03:12] Speaker 08:
So I think that when that issue is properly preserved, that EPA should and will win it.

[02:03:21] Speaker 08:
But it really, precisely because it's important, it seems like a total failure to raise it before the agency is not excusable here.

[02:03:33] Speaker 08:
I mean, it seems like at a common sense level, if it's really a major question, somebody would have pointed it out, right?

[02:03:41] Speaker 08:
If major questions, as it seems to, involves a certain amount of we know it when we see it, the fact that nobody raised this in the very extensive public comment period is significant.

[02:03:57] Speaker 11:
But I think part of their argument is that it's

[02:03:59] Speaker 11:
It's so major and it's such a fundamental presupposition that actually the exhaustion principles don't matter because it becomes the keyest of key assumptions.

[02:04:07] Speaker 08:
Right.

[02:04:08] Speaker 08:
And I think first of all, I think I would point to that you are like

[02:04:13] Speaker 08:
It might not matter that nobody cited major questions in terms or cited Brown and Williamson or any of the particular cases, but there was just no one said, apparently, no one's been able to identify anyone who said you can consider electric vehicles and you can consider hybrids.

[02:04:30] Speaker 08:
Presumably, they don't seem to say that hybrids are statutorily verboten.

[02:04:36] Speaker 08:
But once you go from a plug-in hybrid that's mostly battery in practice

[02:04:42] Speaker 08:
to a fully battery electric vehicle, all of a sudden becomes illegal.

[02:04:46] Speaker 08:
Nobody said that.

[02:04:48] Speaker 08:
And it doesn't require sort of parsing and a bad faith reading of anyone's comments to get there.

[02:04:53] Speaker 08:
There's a void.

[02:04:57] Speaker 08:
So I'd also just like to certainly agree with Ms.

[02:05:02] Speaker 08:
Chen about West Virginia.

[02:05:03] Speaker 08:
This is not like West Virginia.

[02:05:05] Speaker 08:
This is about making the regulated sources cleaner, which is what West Virginia says EPA can do.

[02:05:12] Speaker 08:
And this is EPA using the exact same methodology that it has used since the Clean Air Act was enacted 50-plus years ago of assaying the technologies that are out there, determining which ones are feasible, cost-effective, and then basing standards on a realistic

[02:05:33] Speaker 08:
Assumption of what?

[02:05:34] Speaker 08:
And note that this isn't even pushing to the limit of EPA's power, as this court has recognized in a lot of the early cases under Clean Air Act Title II, which is technology enforcing, which is where EPA says the technology isn't really quite ready right now, but we really need the public health benefits.

[02:05:54] Speaker 08:
And we think that we can get there.

[02:05:56] Speaker 08:
The sort of direction of study is such that these are all off the shelf.

[02:06:01] Speaker 08:
These are all on the road now.

[02:06:03] Speaker 08:
the technologies that this rule is based on.

[02:06:06] Speaker 08:
And that's doubtless why, coupled with the fact that they think that this is where their business is going, the alliance, which represents basically all auto manufacturers that sell in the United States, is supporting this rule and saying things like, on page three of their brief, the auto industry is already rapidly deploying electric vehicles in their US sales fleet,

[02:06:31] Speaker 08:
Even apart from the final rule, there's nothing – this is page six – there's nothing unprecedented about EPA's use of fleet-wide averaging, banking, and trading under Section 202.

[02:06:42] Speaker 08:
You're in setting standards that require greater deployment of emission-reducing technologies such as electric vehicles.

[02:06:50] Speaker 08:
I think it's the idea that the agency is, you know, overstepping is in significant tension with the fact that the industry itself is saying it's going to go faster than the agency even requires.

[02:07:06] Speaker 11:
Thank you very much.

[02:07:06] Speaker 11:
My colleagues don't have questions for you.

[02:07:07] Speaker 11:
Thank you, Council.

[02:07:09] Speaker 11:
Mr. Wall will give you, start with five minutes for rebuttal.

[02:07:14] Speaker 00:
Your Honor, I have to say I'm fairly floored.

[02:07:17] Speaker 00:
I've been litigating this case for a year on the belief that we were in mandate.

[02:07:23] Speaker 00:
And I got that from the rule because it says at page five of the JA, their standards are achievable.

[02:07:30] Speaker 00:
I'm reading at the bottom of the second, the middle column on JA5.

[02:07:34] Speaker 00:
It says they're achievable, primarily, not only, primarily,

[02:07:38] Speaker 00:
through the application of advanced gasoline vehicle technologies, because of course they'll still be 83% potentially gas vehicles, but with a growing percentage of electric vehicles, we project that the standards can be met with gradually increasing sales

[02:07:54] Speaker 00:
from 7% to 17% of EVs.

[02:07:58] Speaker 00:
In their brief, they had every opportunity to come back and say, this is not about forced electrification.

[02:08:03] Speaker 00:
We are not mandating a transition.

[02:08:05] Speaker 00:
You can do this only by improving the efficiency of gasoline-powered vehicles.

[02:08:10] Speaker 00:
There's not one word in their brief about that.

[02:08:13] Speaker 00:
The automakers' brief.

[02:08:15] Speaker 11:
Go ahead.

[02:08:15] Speaker 00:
I was just going to say, if Mr. Donahue had read just the next sentence in the automakers' brief, it is true that EPA's new standards will require

[02:08:23] Speaker 00:
greater deployment of electric vehicles by full-line vehicle manufacturers.

[02:08:29] Speaker 00:
And I understand the government to now turn to Subaru.

[02:08:32] Speaker 00:
Judge Band, there's not a word in their brief about it.

[02:08:34] Speaker 00:
The Subaru comment letter is not even in the JA in this case.

[02:08:37] Speaker 00:
They have never tried to say, no one on that side of the V in all of the briefs in this case has tried to say, no, no, no, this is still an option.

[02:08:46] Speaker 00:
It's just a matter of cost.

[02:08:47] Speaker 00:
You can improve your gas power vehicles and you can still manage to meet the standard.

[02:08:51] Speaker 00:
The rule says,

[02:08:53] Speaker 00:
You can achieve it primarily through improving gas engines, but it can be met, it says, by ramping up sales of EVs.

[02:09:01] Speaker 11:
That has always been, if the government now... I don't even understand that statement, though, to do the work that you're reading into it.

[02:09:07] Speaker 11:
Because it doesn't say can only.

[02:09:10] Speaker 11:
It says it can be met, and of course it can be met.

[02:09:11] Speaker 11:
I mean, nobody denies that the projected percentage is gonna go up.

[02:09:15] Speaker 11:
The question is whether the percentage goes from seven to 17, because that's the only way practically to comply.

[02:09:20] Speaker 00:
The way I understand this and the way I have always understood the other side not to fight is that they put so many zeros in the standards for EVs that the only way to comply with the standards they've set is to either make more EVs or to buy credits from companies like Tesla that manufacture EVs.

[02:09:43] Speaker 00:
If the government's position is now that it primarily should be an only,

[02:09:47] Speaker 00:
that it's achievable through the application of advanced gasoline vehicle technologies alone.

[02:09:52] Speaker 00:
Now, you can also choose to sell more EVs, but you don't have to.

[02:09:56] Speaker 00:
That'd be the first time the government's ever said that, and frankly, I'd like to see it in writing.

[02:10:01] Speaker 00:
I don't think the evidence in the record could support that proposition.

[02:10:06] Speaker 03:
I hear their position to be that they're allowed to require some electrification because it's technologically feasible.

[02:10:16] Speaker 03:
They're just setting an emission standard.

[02:10:18] Speaker 03:
And is it technologically feasible?

[02:10:21] Speaker 03:
And one of the aspects of that is electrification.

[02:10:24] Speaker 03:
And it seems that there's nothing in the statute, and you can correct me if I'm wrong, that says you can't consider electrification, and even some mandatory electrification.

[02:10:34] Speaker 03:
We'd be maybe in a different world if we had Judge Katz's hypothetical where zero emissions, 100% electrification is required.

[02:10:46] Speaker 03:
If we're just requiring, I guess, my hypothetical to the state's attorney, maybe it requires 1% or 2% electrification, what's wrong with that?

[02:10:57] Speaker 00:
Oh, Judge Pan, I think the government's also making that argument.

[02:11:00] Speaker 00:
I understood the government to be making both arguments this morning.

[02:11:04] Speaker 00:
And the first argument is not supported by the record and does not appear in their briefs.

[02:11:09] Speaker 00:
Now, the second argument, I absolutely grant they are saying,

[02:11:12] Speaker 00:
we can require some electrification if it's technologically feasible.

[02:11:15] Speaker 00:
Now first, I think that's clearly a major question, and the government is quite candid about saying.

[02:11:20] Speaker 03:
So even 1% electrification would be a major question.

[02:11:22] Speaker 00:
If you force electrification, doesn't matter what the percentage was in West Virginia, if you force electrification, that's a major question.

[02:11:29] Speaker 03:
So you think they have to avoid mandatory electrification?

[02:11:32] Speaker 03:
They have to set a standard that is not going to rely in any way, shape, or form on mandatory electrification?

[02:11:38] Speaker 00:
Oh, I don't think that's what the act says.

[02:11:40] Speaker 00:
So in 202A1, it said.

[02:11:42] Speaker 00:
The administrator can set standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment cause or contribute to air pollution.

[02:11:54] Speaker 00:
And the debate here between the parties is, do only some vehicles in the class have to cause or contribute to air pollution in the EPA's view, or is the class defined by that in all of them?

[02:12:03] Speaker 00:
And I take even the government to acknowledge that if we're right about our statutory interpretation, they cannot feed EVs into the standard and set the standard by considering EVs.

[02:12:12] Speaker 00:
And that's what's so odd about this case.

[02:12:14] Speaker 03:
So your position, I just want to make sure I'm understanding you, is that the EPA, in setting emission standards to protect public health, cannot consider electric vehicles in the mix of classes of automobiles that are being regulated.

[02:12:30] Speaker 00:
If it says that those vehicles do not emit the relevant pollutant.

[02:12:34] Speaker 00:
So it didn't say that for hybrids.

[02:12:36] Speaker 00:
It said for strong and mild hybrids, those are burning gas, so they do.

[02:12:40] Speaker 00:
And it put them in the class.

[02:12:40] Speaker 00:
And we haven't challenged that here.

[02:12:42] Speaker 03:
I'm just trying to get the big picture of your argument.

[02:12:44] Speaker 03:
You're saying EPA cannot consider electric vehicles in regulating classes of vehicles.

[02:12:50] Speaker 03:
They can't regulate electric vehicles.

[02:12:51] Speaker 03:
They can only regulate combustion engine vehicles.

[02:12:55] Speaker 00:
If they say that the EVs do not emit the relevant pollutants,

[02:12:58] Speaker 00:
They are not eligible to be included in the class for which the administrator sets a standard.

[02:13:02] Speaker 03:
But what about the definition of motor vehicle, which doesn't exclude EVs, and these other statutory provisions that say that classes can be defined by things like weight of the vehicle?

[02:13:13] Speaker 00:
The definition of motor vehicle, like I agree, that's not doing any work here.

[02:13:16] Speaker 00:
That's broad enough to cover any vehicle.

[02:13:19] Speaker 00:
What's doing the work is that it tells you, you have to have a class of cars or engines that emits the relevant pollutant.

[02:13:26] Speaker 00:
You get that class and you can set a standard for the class.

[02:13:30] Speaker 03:
So does your argument then reduce to interpretation of class or classes of vehicle and an insistence that it must

[02:13:37] Speaker 03:
invariably be read to exclude electric vehicles?

[02:13:40] Speaker 00:
On our second argument, on whether you can force electrification, I take it both parties, that's the argument, 202A1 and how to read that class's language.

[02:13:49] Speaker 00:
They say it's clear in their favor.

[02:13:52] Speaker 00:
We say not clear enough to be a major question.

[02:13:54] Speaker 00:
And even if you don't buy that overlay, we're right about the most natural meaning.

[02:13:58] Speaker 00:
I think everybody agrees that's the second question.

[02:14:01] Speaker 00:
And then the first one is, can they average it all?

[02:14:03] Speaker 00:
And no, that doesn't depend on 202A.

[02:14:06] Speaker 00:
That depends on other provisions in 202 and in Title II more generally that indicate that what Congress had in mind was you set these standards, and then you determine whether individual vehicles comply.

[02:14:17] Speaker 00:
Nothing about average.

[02:14:17] Speaker 03:
Doesn't that really hamstring the agency?

[02:14:20] Speaker 03:
It's been given a task by Congress to set emissions levels to protect public health, and you're telling them they have to ignore the most effective technology to set these standards at a level that they do have to be technologically feasible and have economic considerations

[02:14:36] Speaker 03:
But you're hamstringing them, aren't you, by saying that they cannot consider electric vehicles?

[02:14:42] Speaker 00:
I'm not.

[02:14:42] Speaker 00:
Congress says, and the last time it looked at this most closely with respect to the second case you hear this morning, it said to NHTSA, unlike here, you can fleet wide average, but you can't consider electric vehicles.

[02:14:52] Speaker 03:
So the same argument.

[02:14:53] Speaker 03:
I'm sorry, but every time they've applied this exact same statute before, they have not read it this way.

[02:15:00] Speaker 03:
And it hasn't been challenged.

[02:15:01] Speaker 00:
They have averaged and they have allowed electrification as a compliance flexibility.

[02:15:05] Speaker 03:
And the classes of vehicles included electric vehicles.

[02:15:08] Speaker 00:
They have folded them in, that's right, but only in a way that was a compliance flexibility.

[02:15:12] Speaker 00:
You could meet it other ways.

[02:15:14] Speaker 00:
And what's new about this, and what squarely tees up the major question doctrine is, they've now asserted.

[02:15:18] Speaker 11:
Right, but apart from major questions, I mean, you can shift to major questions, but in terms of the underlying statutory authority, you'd have the same problem with what happened before.

[02:15:25] Speaker 00:
Yes, I have a problem both with averaging and with folding in the EVs.

[02:15:28] Speaker 00:
But the reason I think it's sort of different for all of the threshold purposes we were talking about earlier and major questions is, before, it was meant to be a shield for the industry.

[02:15:38] Speaker 00:
And now they've gone to a sort.

[02:15:41] Speaker 00:
It is now something that forces the kind of transition that you saw in West Virginia.

[02:15:46] Speaker 11:
So there's obviously a disagreement on that.

[02:15:48] Speaker 11:
And on that, you say that you're stunned because you've always understood the case to be different.

[02:15:58] Speaker 11:
I'm just looking for something in the written record

[02:16:02] Speaker 11:
that tells me that they viewed the case as you thought they viewed the case.

[02:16:06] Speaker 11:
Is that the statement that you identified?

[02:16:08] Speaker 11:
Is that the best one?

[02:16:10] Speaker 11:
Even in the brief, I don't think they ever, as far as I know, in the brief, they don't actually agree with your characterization.

[02:16:18] Speaker 00:
I think it's a little bit like the dog that didn't bark, I guess, Your Honor, which is in the rule, I take all this language.

[02:16:25] Speaker 00:
I'll grant that it's very carefully frayed.

[02:16:30] Speaker 00:
I take all of this language as the most natural meaning to be.

[02:16:33] Speaker 00:
My understanding from my clients, and the automakers say at page six of their brief, they are required to make more EVs or buy credits.

[02:16:42] Speaker 00:
That's the only way they can satisfy the standard.

[02:16:44] Speaker 00:
And I wrote the rule that way.

[02:16:46] Speaker 00:
I didn't take the other side to dispute it.

[02:16:48] Speaker 00:
And the first time I've heard anybody say, no, no, you don't have to make more EVs or buy credits to meet our standard, was here in court this morning.

[02:16:55] Speaker 11:
And it seems to me.

[02:16:56] Speaker 11:
But I think even the word require, it depends on

[02:16:59] Speaker 11:
it could mean that we're required to do it because that's by far the most cost-effective way to do it.

[02:17:04] Speaker 11:
We're essentially required to do it.

[02:17:07] Speaker 11:
It just begs the question of what are we making to the concept of being required, just like the $1 lesson costs that we had a debate about that.

[02:17:15] Speaker 11:
And so I don't know that that question has ever been actually joined and addressed in any of the materials.

[02:17:20] Speaker 00:
I mean, we joined it in our opening brief by saying you're forcing electrification.

[02:17:24] Speaker 00:
The time for them to say that wasn't true was in the red room.

[02:17:27] Speaker 00:
But I look at the rule, and I don't think that's the right reading that you're giving to me.

[02:17:32] Speaker 00:
When it says primarily achievable, but with a growing percentage, we predict the standards can be, we project that the standards can be met with gradually increasing sales.

[02:17:42] Speaker 00:
The most natural meaning of that is that's the only way you can satisfy the standard.

[02:17:48] Speaker 00:
If they wanted to say it's achievable, not primarily, just achievable with gasoline technologies, they could have said it in the rule.

[02:17:55] Speaker 00:
I mean, this rule was more aggressive because of all the options they were considering, right?

[02:18:00] Speaker 00:
The president issues the EEO, and then they come out with a more aggressive rule than anything the EPA had been considering before.

[02:18:07] Speaker 00:
They say in the rule, I think this is page 51, that it drives electrification,

[02:18:11] Speaker 00:
They say at page 60 that it necessitates greater deployment of technologies, including EVs.

[02:18:18] Speaker 00:
I mean, at every point, the most natural reading of the language is the one we've given it.

[02:18:22] Speaker 00:
And I would have thought that if anyone ever disagreed with that, they would have put it in the brief.

[02:18:28] Speaker 11:
So the table that has Subaru at zero is also in the rule, right?

[02:18:32] Speaker 11:
Right.

[02:18:33] Speaker 11:
So I mean, I think the statements

[02:18:36] Speaker 11:
they can be judged against the empirical stuff that's laid out in the rule, one of which is a zero.

[02:18:43] Speaker 11:
At least you would agree that if your interpretation of the bottom of the middle column of JA5 to the top of the right column of JA5 is right, that's incompatible with what the rule itself says about Subaru in the table.

[02:18:57] Speaker 00:
Oh, so I haven't studied Subaru enough in the table to know, and obviously the government never pointed, I can't stand here and tell you that I know anything about Subaru, which is not in the case.

[02:19:08] Speaker 11:
But in terms of the representation that it's going to be at zero, that just couldn't be possible.

[02:19:13] Speaker 11:
No manufacturer can be at zero.

[02:19:15] Speaker 00:
I'm not sure exactly what the agency meant by that, and I don't know how they ran the numbers for Subaru.

[02:19:22] Speaker 00:
All I can tell you is,

[02:19:23] Speaker 00:
If I have always understood that to be their position and I didn't understand them to dispute it until today, I think as the case comes to the court, it should take it that way.

[02:19:32] Speaker 00:
If the court thinks that there's now some open question about that, then I think the parties ought to have a chance to address it, because I'd like to see the evidence in the rule, not outside the rule, but in the rule for tannery purposes, that the agency can point to to say, no, no, you don't need to electrify in order to meet

[02:19:49] Speaker 00:
I have been over the rule multiple times.

[02:19:54] Speaker 00:
I don't see anything like that in there.

[02:19:57] Speaker 00:
But at the end of the day, for major questions purposes, the government quite candidly says we can move to 100 percent and it's not a major question.

[02:20:05] Speaker 00:
All respect, I disagree.

[02:20:06] Speaker 00:
You turn to the text.

[02:20:08] Speaker 00:
I think it clearly says you can't include EVs in the class and you can't average.

[02:20:12] Speaker 00:
But again, I don't need to be right about that.

[02:20:14] Speaker 00:
All the court has to say is 202A1 is not clear that you can set standards with respect to EVs.

[02:20:21] Speaker 00:
If you want to do what you were doing with averaging and compliance flexibilities, fair enough.

[02:20:26] Speaker 00:
But when you move to a mandate, you've gone further than Congress would allow.

[02:20:30] Speaker 00:
That's a decision for Congress unless it's clearly vested in the agency.

[02:20:33] Speaker 00:
That's the way that we think the court should resolve the case.

[02:20:37] Speaker 09:
What do you do with the clause at the end of A1, which says that the vehicles or engines that are subject to regulation include systems that incorporate devices designed to prevent or control pollution?

[02:21:02] Speaker 09:
If you contrast prevent with control,

[02:21:07] Speaker 09:
Seems like that's saying prevent control means drive down, prevent means drive down to zero.

[02:21:12] Speaker 09:
That tends to suggest that zero emitters can be in the relevant class.

[02:21:18] Speaker 00:
So I should have addressed that Judge Katz's.

[02:21:21] Speaker 00:
Appreciate the question.

[02:21:22] Speaker 00:
The first thing to note is that the second sentence is doing different work from the first.

[02:21:27] Speaker 00:
First tells you the class for the second in a one a one.

[02:21:30] Speaker 00:
Exactly.

[02:21:31] Speaker 00:
So it says it tells you how long the standards apply.

[02:21:35] Speaker 00:
It says the standards apply for the useful life of the vehicle, and subsection D defines the useful life.

[02:21:41] Speaker 00:
And so it says the standards that are set under the first sentence, they're in effect for the useful life of the vehicle, regardless of how the vehicle is designed or manufactured.

[02:21:51] Speaker 00:
So the second sentence isn't expanding the class in the first sentence, it's just telling you how long the regulations last.

[02:21:59] Speaker 00:
And then the second thing I'd say is, when we say, Judge Katz,

[02:22:04] Speaker 00:
vehicles and engines designed as complete systems or incorporate devices to prevent or control such pollution.

[02:22:10] Speaker 00:
That is a perfectly natural way to talk about traditional vehicles that burn liquid fuel and produce emissions.

[02:22:16] Speaker 00:
It is not at all a natural way to talk about EVs.

[02:22:19] Speaker 00:
If I said that my iPod is designed as a complete system to prevent or control record skips,

[02:22:27] Speaker 00:
You'd say like, no, it's just a different kind of technology.

[02:22:30] Speaker 00:
And it feels like we're having the West Virginia debate all over again.

[02:22:34] Speaker 00:
It's not that you can't come up with some literal hyper-technical reading of best system of emission reduction.

[02:22:40] Speaker 00:
It just says, ah, that's a renewable fuel power plant.

[02:22:43] Speaker 00:
But it is not the most natural reading of system or prevent or control pollution in the context of this provision.

[02:22:50] Speaker 03:
I'm sorry, you're saying this language doesn't include electric vehicles, engines that are designed

[02:22:56] Speaker 03:
or incorporate devices to prevent or control pollution.

[02:22:58] Speaker 03:
That doesn't apply to electric vehicles.

[02:23:00] Speaker 00:
That's exactly what we're saying, Judge Pan, as we said in our brief.

[02:23:03] Speaker 00:
That's dealing with traditional vehicles and trying to design them to run cleaner and emit less.

[02:23:09] Speaker 03:
And they want to say, why doesn't that apply to electric vehicles?

[02:23:12] Speaker 03:
It just seems on its face that it would.

[02:23:13] Speaker 00:
I just don't think that's naturally the way we talk about something that doesn't emit the pollutant in the first place.

[02:23:19] Speaker 00:
This is really natural language for Congress to use when it wants to talk about vehicles that emit the relevant pollutant but are designed in some way to try to prevent or control or capture it.

[02:23:31] Speaker 00:
And we know because it's following the first sentence, and the first sentence is talking about classes that emit the relevant pollutant.

[02:23:37] Speaker 00:
So what Congress has in mind are polluting vehicles.

[02:23:40] Speaker 00:
When they come in and say,

[02:23:41] Speaker 03:
Sorry, but you don't think an EV was designed to prevent pollution?

[02:23:45] Speaker 00:
I don't think within... No.

[02:23:48] Speaker 00:
That is what I mean.

[02:23:50] Speaker 00:
The text of this provision in context, if you set aside my first argument to Judge Katz, which is this doesn't expand the relevant class at all, but if you set that aside, no, in context, it follows a sentence that talks about setting standards for vehicles that emit pollutants.

[02:24:06] Speaker 00:
And then it says standards apply for the useful life regardless of how they are designed to prevent or control that pollution.

[02:24:14] Speaker 00:
It is not meant to capture vehicles that in the EPA's view

[02:24:18] Speaker 00:
Don't trigger the first sentence at all.

[02:24:20] Speaker 00:
Don't emit the relevant pollutant.

[02:24:22] Speaker 00:
I'm not denying that just as in West Virginia, you can look at the words and try to give them some literal reading, but that is not the most natural meaning in content.

[02:24:29] Speaker 11:
So do you read prevent not to mean prevent altogether?

[02:24:32] Speaker 00:
I read it to mean the devices or the systems that are incorporated into the vehicle are preventing the pollution, which is to say it's a vehicle that would otherwise be producing the pollutant absent that system and here what they have are just vehicles that they say don't emit the relevant pollutant in the first place.

[02:24:48] Speaker 09:
So I guess it would be odd to speak of a bicycle as a vehicle that prevents or controls pollution.

[02:24:58] Speaker 00:
I find it very weird, but I think on their view, they would have to say that they could put bicycles in the class because they can put things in the dynamite pollutants.

[02:25:08] Speaker 09:
Well, I mean, they're not motor vehicles.

[02:25:11] Speaker 09:
It's just a linguistic point.

[02:25:13] Speaker 00:
If you had a motorized bike, right, I think they would say that could fall within both sentences.

[02:25:20] Speaker 00:
And now at that point, they might be willing to say, ah, that's a major question, because now you've gotten into modes of transportation as opposed to motor vehicles.

[02:25:28] Speaker 00:
And I would say, look, that's not a distinction from West Virginia.

[02:25:31] Speaker 00:
West Virginia was factories.

[02:25:33] Speaker 00:
Here it's motor vehicles.

[02:25:34] Speaker 00:
You can make the factories run cleaner.

[02:25:36] Speaker 00:
You can't make them switch power sources.

[02:25:38] Speaker 00:
I can put in cars for factories, and the sentences I just said are equal.

[02:25:45] Speaker 11:
Thank you, Council.

[02:25:46] Speaker 11:
Thank you to all Council.

[02:25:47] Speaker 11:
We'll take this case under submission.

[02:25:49] Speaker 11:
and we'll take a brief recess before we switch to the next case.

[02:25:53] Speaker 11:
Okay, I guess are we ready to transition to the second case?

[02:25:57] Speaker 11:
Thank you, Councilman.

[02:25:58] Speaker 11:
Mr. Carter, please proceed when you're ready.

[02:26:00] Speaker 10:
Chief Judge Srinivasan, and may it please the court.

[02:26:04] Speaker 10:
This case involves another prong in the administration's strategy to outflank Congress on a major policy question by forcing electrification of the nation's vehicle.

[02:26:16] Speaker 10:
In this case, however,

[02:26:17] Speaker 10:
agency's path is blocked not just by the lack of clear congressional authorization, but by an express statutory prohibition.

[02:26:27] Speaker 10:
Section 32902H is crystal clear that in setting fuel economy standards, NHTSA may not consider the fuel economy of dedicated automobiles like electric vehicles

[02:26:38] Speaker 10:
It shall consider dual-fueled vehicles, like plug-in hybrids, to be operated only on gasoline or diesel fuel, and it may not consider the availability of compliance credits.

[02:26:51] Speaker 10:
Congress enacted subsection H because it intended alternative fuel vehicles and credits to be compliance flexibilities.

[02:26:58] Speaker 10:
It recognized that if NHTSA could take them into account in setting the standards, they would become effectively mandatory.

[02:27:06] Speaker 10:
In other words, Congress wanted to encourage production of alternative fuel vehicles by creating an incentive to produce them.

[02:27:13] Speaker 10:
But it was not willing to mandate them by allowing NHTSA to set standards that can only be met with a fleet that includes alternative fuel vehicles.

[02:27:23] Speaker 10:
But that is precisely what NHTSA did in this rulemaking.

[02:27:27] Speaker 10:
In its zeal to facilitate a transition to an all-electric fleet, a goal that Congress never authorized the agency to pursue,

[02:27:35] Speaker 10:
NHTSA violated all three prongs of subsection H, and as a result, it sets standards that cannot be met by a fleet of conventional gas-powered vehicles as Congress requires.

[02:27:49] Speaker 10:
I will begin with and focus primarily on the first prong of subsection H, which in categorical terms forbids the agency to consider the fuel economy of electric vehicles.

[02:28:02] Speaker 11:
So can I just ask you, as you begin,

[02:28:05] Speaker 11:
Everything you've said and you're about to say would equally be true of the rule that would come into place if you got the relief you seek.

[02:28:14] Speaker 10:
That is not true, Chief Judge.

[02:28:17] Speaker 10:
The only electric vehicles that were included in baseline in the prior 2020 rule

[02:28:25] Speaker 10:
were the ones that were in what the government calls the pre-existing fleet.

[02:28:29] Speaker 10:
That was in the prior rule, the 2017 fleet.

[02:28:32] Speaker 10:
And at that point, it was only 0.6% of the vehicles that were in the fleet were electric vehicles.

[02:28:39] Speaker 11:
But NHTSA went well beyond including- But as to that, under your view, even that was wrong.

[02:28:45] Speaker 10:
Yes, that was unlawful for them to do that.

[02:28:47] Speaker 10:
That's correct.

[02:28:48] Speaker 11:
So it is equally true.

[02:28:50] Speaker 11:
In other words, the prior rule that would now come into place

[02:28:56] Speaker 11:
would be equally invalid, given the arguments you're making now.

[02:29:00] Speaker 10:
I don't know that I would go so far to say invalid.

[02:29:02] Speaker 10:
I think it was unlawful for the agency in 2020 to include the baseline, the 2017 EVs.

[02:29:09] Speaker 11:
Yeah, I meant invalid in terms of invalid under the law.

[02:29:12] Speaker 10:
Yes, whether that made a difference to the standards that were set in that rulemaking, I don't know.

[02:29:16] Speaker 10:
I would not be surprised to find out that only 0.6% of the vehicles in the fleet didn't, in fact, make a difference, the level at which the standards were set back in 2020.

[02:29:24] Speaker 11:
But equally unlawful.

[02:29:26] Speaker 10:
Yes, equally unlawful.

[02:29:28] Speaker 11:
Is there something that seems odd about that, that everybody has assumed, including a rule that kind of pointed in the opposite direction in the eyes of some, that at least taking into account electrical vehicles in fashioning the baseline was OK?

[02:29:48] Speaker 10:
So it doesn't strike me as odd because it was such a small percentage.

[02:29:53] Speaker 10:
I don't think the parties were focused on that issue in the way they became focused on it in this rulemaking, because NHTSA went well beyond the baseline fleet.

[02:30:01] Speaker 10:
And the baseline fleet here included 2 percent electric vehicles, much more than 0.6.

[02:30:07] Speaker 10:
But they also went beyond

[02:30:09] Speaker 10:
the pre-existing fleet and included two additional categories of electric vehicles in this rule.

[02:30:16] Speaker 10:
First, they also included in the baseline the electric vehicles that the agency projected would be added to the fleets to comply with the state zero emission vehicle mandates.

[02:30:27] Speaker 10:
And it's even considered in this rulemaking, the electric vehicles that it projected would be produced in response to these very standards, the amended standards being set in this rulemaking

[02:30:38] Speaker 10:
as long as the electric vehicles were added outside model years 2024 to 2026.

[02:30:43] Speaker 10:
So you have additional categories of electric vehicles being added that bring the percentage way above where it was in the 2020 rule.

[02:30:52] Speaker 10:
And so it's not surprising in this rulemaking that parties focused on subsection H. And when you look at subsection H, it's very clear

[02:31:00] Speaker 10:
that it draws no distinction between whether it's a pre-existing vehicle or one that you're projecting is going to be produced in response to a state mandate.

[02:31:08] Speaker 10:
There's nothing in subsection H that allows you to treat those two kinds of electric vehicles differently.

[02:31:14] Speaker 03:
The statute says... Can we focus on the baseline for a minute?

[02:31:17] Speaker 03:
Because isn't one way of looking at the baseline is that it's just an objective thing.

[02:31:22] Speaker 03:
It just is what the world is without the regulation.

[02:31:26] Speaker 03:
And it doesn't seem to be something that's subject to

[02:31:29] Speaker 03:
policy concerns or mucking around with it.

[02:31:32] Speaker 03:
It just seems to be an objective thing.

[02:31:34] Speaker 03:
And in terms of amending the regulation, what the agency seems to do is it amends the regulation and it compares it to the baseline.

[02:31:45] Speaker 03:
But it's not, it doesn't have to.

[02:31:47] Speaker 03:
It could just set a regulation without comparing it to a baseline.

[02:31:51] Speaker 03:
It just doesn't seem like the baseline is number one, something other than objective, and number two, subject to this

[02:31:59] Speaker 03:
carrying out rulemaking.

[02:32:01] Speaker 03:
It's just something you compare to the amended rule.

[02:32:04] Speaker 10:
So, Judge Penn, I don't think the baseline is quite as objective as Your Honor is making it out to be because it is still the projection.

[02:32:12] Speaker 10:
What NHTSA is doing is saying, we're looking at the electric vehicles that were in the 2020 fleet, and we project that you will continue to make those electric vehicles in 2024.

[02:32:24] Speaker 10:
And so in some respect, they are not just reflecting reality.

[02:32:27] Speaker 10:
They are constructing it.

[02:32:28] Speaker 10:
They are saying, because you made them then, we are now going to set our standards at such a level of stringency that you will be required to continue producing.

[02:32:36] Speaker 03:
Well, it's an assumption that they're making in setting a baseline.

[02:32:41] Speaker 03:
But the idea of the baseline is this is what the world looks like absent the amended regulation.

[02:32:47] Speaker 10:
That is the idea of the baseline.

[02:32:49] Speaker 10:
And your honor is?

[02:32:49] Speaker 03:
That just seems like an objective concept to me.

[02:32:52] Speaker 10:
Well, whether it's objective or not, the question is, is the agency considering the fuel economy of electric vehicles when it includes them in the baseline?

[02:33:00] Speaker 10:
And it seems to me it necessarily is.

[02:33:03] Speaker 10:
As the agency itself explained, this is on page.

[02:33:05] Speaker 03:
Well, there are electric vehicles in the baseline because the real world has electric vehicles.

[02:33:10] Speaker 03:
And in the real world, they will continue to make more electric vehicles in response to things that are not related to the rulemaking.

[02:33:17] Speaker 03:
It just seems to me analytically different

[02:33:21] Speaker 03:
from carrying out C, G, and F to have a baseline.

[02:33:27] Speaker 03:
The baseline is just what you compare it to.

[02:33:30] Speaker 10:
So a couple of points.

[02:33:31] Speaker 10:
There's no dispute that subsection H requires the agency to ignore aspects of reality.

[02:33:37] Speaker 10:
That's true on this interpretation.

[02:33:39] Speaker 10:
It's true on ours as well.

[02:33:41] Speaker 10:
It's just a question to what extent ignoring quote unquote

[02:33:45] Speaker 10:
But as to the question of whether you are carrying out subsection F when you construct an analytical baseline that includes electric vehicles, it seems to me that you absolutely, clearly are.

[02:33:58] Speaker 10:
As NHTSA itself explained, it's 973 of the Joint Appendix.

[02:34:02] Speaker 10:
They said, we use electrification technologies assigned in the baseline fleet as the starting point for regulatory analysis.

[02:34:12] Speaker 03:
Correct, but F is forward-looking.

[02:34:14] Speaker 03:
It talks about considerations in the decision, and it lists things that seem to be forward-looking.

[02:34:19] Speaker 03:
Feasibility, practicability, and it seems to be, there is gonna be some kind of a baseline assumption, but in terms of applying F, that's a forward-looking application.

[02:34:32] Speaker 10:
I agree that it's forward-looking, and what it is asking the agency to do is to assess, among other factors, technological feasibility and economic practicability.

[02:34:42] Speaker 10:
And NHTSA does that through its model.

[02:34:44] Speaker 10:
It models a fleet to determine whether or not the standards are technologically feasible and economically practical.

[02:34:52] Speaker 10:
And when you put electric vehicles in that fleet, that necessarily means that NHTSA is considering their fuel economy as it considers technological feasibility and economic practicability.

[02:35:04] Speaker 10:
Because the electric vehicles in the baseline are not just there at the start.

[02:35:08] Speaker 10:
They are there at the end as well.

[02:35:10] Speaker 10:
They are carried forward into the fleet that knits and models to assess whether the standards are technologically feasible and economically practical.

[02:35:20] Speaker 10:
In fact, if your honors wanted to see a picture.

[02:35:26] Speaker 10:
To see a picture.

[02:35:27] Speaker 11:
That must have been quite a dramatic point you just made.

[02:35:29] Speaker 10:
I'm about to get even more dramatic.

[02:35:33] Speaker 10:
If you want to see a picture,

[02:35:35] Speaker 10:
of what it looks like to violate subsection H, you could do no better than table 536 on page 1087 of the Joint Appendix.

[02:35:46] Speaker 10:
What that table shows is that in every one of the regulatory alternatives that NHTSA considered in this rulemaking, electric vehicles comprised at least four to 5% of the fleet in model years 2023 or 2024 through 2026.

[02:36:04] Speaker 10:
And in the alternative that they selected as the standard, that's alternative 2.5, electric vehicles comprised five to 6% of the fleet in the standard setting years rising to 7% by 2029.

[02:36:17] Speaker 10:
If NHTSA had complied with subsection H in this rulemaking, every number in that chart would be a zero because NHTSA is not allowed to set standards based on an assumed penetration of electric vehicles.

[02:36:32] Speaker 10:
Statute says flatly,

[02:36:34] Speaker 10:
the agency may not consider the fuel economy of electric vehicles.

[02:36:38] Speaker 10:
They try to punch holes in it by reading the limitations that don't appear there.

[02:36:43] Speaker 10:
As I say, the statute says may not consider fuel economy of electric vehicles full stop.

[02:36:47] Speaker 10:
What do they read that to mean?

[02:36:49] Speaker 10:
They read that to mean that they may not consider the new or additional electric vehicles that would be produced as a means of complying with the standards in the model years covered by the standards.

[02:37:01] Speaker 10:
Now that is a whole lot of words that they have just added to the statute.

[02:37:05] Speaker 10:
And the government's brief repeats that formulation or variations on it more than a dozen times, but never once did they even

[02:37:15] Speaker 10:
to explain how that formulation can be derived from or squared with the statutory text because it cannot be.

[02:37:22] Speaker 10:
Those limitations do not appear in the text and it is not free to read them in to suit its own sense of how the statute should operate.

[02:37:31] Speaker 09:
So.

[02:37:34] Speaker 09:
Is there any difference between how the statute operates for amendments versus

[02:37:43] Speaker 09:
regular standards promulgated in the first instance.

[02:37:47] Speaker 09:
This cross-reference in H to CF and G is a bit of a head-scratcher.

[02:37:55] Speaker 10:
It is a bit of a head-scratcher.

[02:37:56] Speaker 09:
C and G are amendments.

[02:37:58] Speaker 09:
Right.

[02:37:59] Speaker 09:
It might be a little bit simpler.

[02:38:03] Speaker 09:
Your argument might be a little simpler in the context of amendments because the reference, the function carried out in

[02:38:13] Speaker 09:
C and G is amending.

[02:38:17] Speaker 09:
And you can't consider electric vehicles in carrying out the function of amending.

[02:38:21] Speaker 09:
That's very easy.

[02:38:23] Speaker 09:
And maybe the same logic applies to F, but maybe you're doing something in promulgating original standards that is outside of F.

[02:38:38] Speaker 09:
So I don't know.

[02:38:40] Speaker 10:
There are a couple of things.

[02:38:41] Speaker 10:
And I do agree that you don't even need to ask the agency considered the fuel economy of electric vehicles and carrying out F here, as there's no doubt that they were carrying out subsection G and probably subsection C as well.

[02:38:53] Speaker 10:
Here's how I make sense of why it's CF and G and not the other.

[02:38:58] Speaker 07:
Right.

[02:38:59] Speaker 10:
When when you are setting a standard, you're governed by F.

[02:39:03] Speaker 10:
whether it's a new standard or an amended standard, if the statutory language says you have to set it at the maximum feasible level, you are governed by F. You are also doing an additional when you invoke subsection C or G. You are making a discretionary decision to amend the standards in the first instance.

[02:39:24] Speaker 10:
So I think that's why you see Congress adding C and G to subsection H, which is to make clear that even in that threshold step of making the discretionary decision of whether to amend an existing standard, they can't consider the fuel economy of electric vehicles.

[02:39:41] Speaker 09:
I had thought the amendment case might be a little bit simpler, because if we're under F, at least facing a question about

[02:39:52] Speaker 09:
whether these factors are exclusive.

[02:39:55] Speaker 09:
It says the agency must consider those four factors.

[02:39:59] Speaker 09:
It doesn't say it may not consider anything else, and could electric vehicles bear on some other consideration?

[02:40:07] Speaker 09:
Maybe yes, maybe no, but I had thought you don't get into any of that under C and G.

[02:40:16] Speaker 09:
But your formulation equates the two.

[02:40:18] Speaker 09:
If C and G are just about the discretionary decision, whether or not to amend at all, then we might have the same question regardless.

[02:40:28] Speaker 10:
I think C and G, Judge Cassidy, are about both.

[02:40:30] Speaker 10:
But I don't think C and G takes you outside of F. I think when you are amending a standard under C or G, you are subject to that maximum feasible standard, and F tells you when.

[02:40:42] Speaker 09:
And when you're

[02:40:44] Speaker 09:
you've made the discretionary decision to amend, and then you're fixing the standard, you're still carrying out the function of C and G. I believe so, yes.

[02:40:56] Speaker 10:
And you're also, at that point, carrying... And you're also within F. Okay.

[02:41:02] Speaker 11:
Is my understanding right, as a historical matter, that before the statute was amended to refer to C, F, and G,

[02:41:13] Speaker 11:
the way everything came together was that there was an H provision, but it only applied to amendments.

[02:41:23] Speaker 10:
I have not looked at that Chief Justice Srinivasan.

[02:41:25] Speaker 10:
I don't know the answer to that.

[02:41:26] Speaker 10:
Whether when H was originally enacted, you're saying it applied only to amendments.

[02:41:31] Speaker 11:
I thought there was a time at which this prohibition, the limitations provision, which is what H is,

[02:41:40] Speaker 11:
only apply to amendments and didn't cover what's now in F and used to be in E. I do not believe that is the case, but I can't, I can't warrant.

[02:41:50] Speaker 10:
You don't, you think the way I thought the original version of H incorporated F, but I could be mistaken.

[02:41:59] Speaker 11:
Incorporated new standards and not just amended standards.

[02:42:03] Speaker 10:
Yes, incorporated any time the agency was carrying out the task of deciding what is the maximum feasible average fuel.

[02:42:11] Speaker 03:
That's my recollection, but again, I would... So what do you make of the fact that H excludes A and B, which is about setting standards?

[02:42:20] Speaker 10:
I don't think Congress needed to include A and B, because it would have been redundant, because the only thing the agency is doing under A and B is deciding the maximum feasible fuel

[02:42:30] Speaker 03:
But why would they bother to mention C, G, and F?

[02:42:35] Speaker 03:
They could just say, in carrying out this provision, you shall do these things.

[02:42:39] Speaker 10:
Well, I think they, as I say, included C and G to make clear that they were also picking up that discretionary determination whether to amend a standard.

[02:42:48] Speaker 03:
But wouldn't it be simpler just to say, when you apply this standard, we will not do these three things?

[02:42:54] Speaker 03:
It just seems very odd that they would specifically single out C, G, and F, and not A and B, if they meant for it to apply to everything.

[02:43:02] Speaker 10:
If what you mean by when you apply this standard, Judge Pan, if you're talking about this.

[02:43:05] Speaker 03:
Carrying out, they say when you're carrying out C, G, and F, but they could have just said when you're carrying out anything under this statute or this provision, you should not consider these three things.

[02:43:16] Speaker 10:
Well, they may have picked up some things that they wouldn't have wanted to pick up if they had made it when you're carrying out the statute writ large.

[02:43:22] Speaker 10:
For example, if you look at subsection D, there is an option to give a manufacturer who doesn't think it can meet the standard a break.

[02:43:30] Speaker 10:
And there is a discretionary decision that the agency has to make there in deciding whether to give that manufacturer a break.

[02:43:38] Speaker 10:
It would not be subject, in my understanding of subsection H, to this limitation.

[02:43:42] Speaker 03:
Right, so they purposefully excluded D, but they also purposefully excluded A and B. I don't think they purposefully excluded all of D. D has two parts.

[02:43:51] Speaker 10:
D, you have to make a discretionary determination whether to give a manufacturer a break from the general standard.

[02:43:57] Speaker 10:
If the agency does do that, then it has to give that manufacturer a new standard that is the maximum feasible level that manufacturer can achieve.

[02:44:07] Speaker 03:
That would be subject to H. So your friend on the other side would say that Congress

[02:44:12] Speaker 03:
specifically precluded A and B, which means that they didn't intend for this limitation to apply to every single stage of this process invariably.

[02:44:23] Speaker 03:
And I take your position to be very absolutist.

[02:44:27] Speaker 03:
Never, ever consider these three things.

[02:44:29] Speaker 10:
Well, there are two parts to the analysis.

[02:44:31] Speaker 10:
One, are you considering the fuel economy of the electric vehicle?

[02:44:34] Speaker 10:
And two, are you doing it in carrying out one of the enumerated subsections?

[02:44:39] Speaker 10:
One of the enumerated subsections is subsection F, which tells the agency how to decide what the maximum feasible average fuel economy is.

[02:44:48] Speaker 10:
So anytime they're deciding what is the maximum feasible average fuel economy, carrying out subsection F and the subject H. But I believe your position is

[02:44:57] Speaker 03:
Anything they do in connection with F, including setting a baseline, is part of carrying out.

[02:45:04] Speaker 03:
And I think your friend on the other side thinks that because they've carved out things that are not subject to H, it doesn't invariably apply to every single step in the process.

[02:45:16] Speaker 10:
It applies to every phase of what they do under F. That at a minimum.

[02:45:21] Speaker 03:
But then the question is whether setting a baseline is carrying out making an amendment

[02:45:26] Speaker 03:
And it seems that if the statutory structure precludes some things, it lends support to the idea that not every single thing you do, including comparing to a baseline, must abide by H. As a threshold matter, I don't think you have to decide anything about F here, because they were undoubtedly carrying out CNG and everything.

[02:45:46] Speaker 10:
But even setting that aside, I agree that the question under F would be, are they carrying out subsection F when they construct the baseline?

[02:45:55] Speaker 10:
And I think the answer for the reasons I explained previously is undoubtedly they are.

[02:45:59] Speaker 10:
I don't understand even NHTSA to argue that its analytical baseline is not part and parcel of its determination of what standards are technologically feasible and economically practical.

[02:46:11] Speaker 10:
Because as I say, where you start affects where you end.

[02:46:15] Speaker 10:
Maybe another way to come at this is to think about economic practicability.

[02:46:18] Speaker 10:
One of the factors the agency looks at in assessing economic practicability is what's going to be the vehicle price under the standard that we're setting?

[02:46:27] Speaker 10:
How much is that vehicle price going to increase?

[02:46:30] Speaker 10:
Well, how you think about that question is going to be very much influenced by what is the price of the vehicle in the baseline.

[02:46:37] Speaker 10:
A lower baseline price is going to yield a

[02:46:40] Speaker 10:
higher absolute and percentage price increase, and it may well be that if you have one baseline price, the standards are technologically feasible and economically practical, and not if you have a lower baseline.

[02:46:54] Speaker 03:
Is it possible theoretically to set an amended regulation without comparing it to a baseline?

[02:47:01] Speaker 10:
Theoretically, I think that would be possible.

[02:47:03] Speaker 10:
I don't think you would have to look at a baseline, but I think that actually further reinforces my position because statute doesn't anywhere direct them to create a baseline, but it does direct them not to consider the fuel economy of electric vehicles.

[02:47:17] Speaker 10:
So I don't see how they can take the discretionary step of constructing a baseline as part of what they're doing under subsection F and circumvent the statutory requirement.

[02:47:27] Speaker 10:
I don't have any problem with them constructing a baseline.

[02:47:29] Speaker 10:
That seems like a reasonable thing to do.

[02:47:33] Speaker 10:
Subsection F says if you are going to consider that baseline as part of your determination of what level of fuel economy is technologically feasible and economically practical, you have to exclude electric vehicles from your consideration.

[02:47:46] Speaker 11:
In other words, if there was a thing that the agency did every year called a baseline report, and it was just for public information, and it incorporated electric vehicles because it's a fact about the world that those are part of the baseline,

[02:48:00] Speaker 11:
and you don't have any problem with that because it doesn't have anything to do with the process we're doing here.

[02:48:04] Speaker 11:
But then if they use that annual report as part of the predicate against which they then constructed the next iteration of the mileage requirements, then you would think that runs afoul of the statute.

[02:48:18] Speaker 10:
That's correct.

[02:48:18] Speaker 10:
They are incorporating it in

[02:48:20] Speaker 10:
what they analyze and

[02:48:32] Speaker 10:
an environmental impact statement to comply with NEPA.

[02:48:36] Speaker 10:
They can think about the fuel economy of electric vehicles when they do that, just as long as that doesn't enter into their standards.

[02:48:42] Speaker 11:
Can I ask this question?

[02:48:43] Speaker 11:
And the very beginning of your argument, you talked about what Congress was trying to do here.

[02:48:49] Speaker 11:
And is it your view that the Congress that enacted these provisions, if they knew everything that we now know about the way these are going to play out, and let's just say that we're now at the point where

[02:49:02] Speaker 11:
the scenario that's mapped out by the government is in play, such that if you don't take into account electrical vehicles, we're at a point where there's really nothing that can be done anymore.

[02:49:14] Speaker 11:
If Congress knew that that's where we were headed, is it your view that they actually intended the result that you want, or is it your view that

[02:49:22] Speaker 11:
Congress probably wasn't thinking about it, but that's just what the statute says.

[02:49:26] Speaker 11:
And so we give effect to the words and maybe take it one step further and say, and that result isn't antithetical to what Congress would have thought about, but they just didn't have this in mind, this scenario at all.

[02:49:41] Speaker 10:
I don't know whether they had in mind this scenario at all, but I think my view is slightly different than either of those options.

[02:49:48] Speaker 10:
My view is they built flexibility into this law that can be used to address that situation.

[02:49:54] Speaker 10:
Not in subsection H. Subsection H is about as inflexible as statutory provisions come.

[02:50:01] Speaker 10:
The flexibility to address NHTSA's concern about obsolete fuel economy standards.

[02:50:06] Speaker 10:
increasing penetration of electric vehicles appears in Section 32904A2B of the statute.

[02:50:14] Speaker 10:
That is the provision that directs the Department of Energy to determine what fuel economy will be imputed to electric vehicles.

[02:50:21] Speaker 10:
Remember, electric vehicles don't have an actual real-world fuel economy because they don't earn fuel.

[02:50:27] Speaker 10:
but you have to assign them a number for purposes of this statute.

[02:50:31] Speaker 10:
Congress charged the Department of Energy with doing that.

[02:50:34] Speaker 10:
The Department of Energy comes up with a so-called petroleum equivalency factor to get an imputed fuel economy for electric vehicles.

[02:50:42] Speaker 10:
Adjusting that petroleum equivalency factor, as the Department of Energy is in the course of doing right now, for the first time since the year 2000, could eliminate, or at least- You think it would eliminate?

[02:50:52] Speaker 11:
I mean, we can ask the government that.

[02:50:53] Speaker 11:
I mean, I understand how it could do,

[02:50:55] Speaker 11:
it could do work to affect the disparity.

[02:51:00] Speaker 10:
I do think it could eliminate it.

[02:51:02] Speaker 10:
If you brought the fuel economy of electric vehicles down from the stratosphere where it is currently now and made it roughly equivalent to the fuel economy achieved by conventional vehicles, I think NHTSA's hypothetical concern goes away.

[02:51:15] Speaker 10:
But at a minimum, they can substantially mitigate it.

[02:51:18] Speaker 09:
And then if they do that,

[02:51:20] Speaker 09:
We have a redo of the Texas case.

[02:51:22] Speaker 09:
There'll be a question about whether there's a major question to adjust the scheme to force electrification.

[02:51:30] Speaker 10:
Well, that doesn't seem to me that it would be forcing electrification.

[02:51:32] Speaker 10:
What would be driving?

[02:51:34] Speaker 09:
Well, if they adjust the numbers, Judge Srinivasan said the statute can only go so far if electrification is a compliance option, but not something you can consider on the front end.

[02:51:50] Speaker 09:
And you said, well, that's no problem.

[02:51:52] Speaker 09:
You can solve that problem by having DOE compute a different number.

[02:52:00] Speaker 10:
The problem that is solved by DOE imputing a different number is NHTSA's concern that if you get bleeds that are substantially electrified, NHTSA's standards will become obsolete because every manufacturer will already meet them by virtue of the compliance boost they get from the EVs and won't have to make any changes to their conventional internal combustion engine.

[02:52:24] Speaker 10:
Number one, it's not clear that that's going to result, as long as there are any manufacturers out there that do not substantially electrify if they continue to produce exclusively or substantially conventional vehicles.

[02:52:38] Speaker 10:
And it's the standards will always remain relevant.

[02:52:40] Speaker 10:
But this hypothetical really only has bite in a world in which everyone has substantially electrified.

[02:52:47] Speaker 10:
And we're in a world where we say, but we would still like to see these standards

[02:52:51] Speaker 10:
drive further improvements to the fuel economy of the conventional.

[02:52:56] Speaker 10:
That's what bringing down the petroleum equivalency factor will do.

[02:52:59] Speaker 10:
It will not, it will actually push away from electrification because it would decrease the incentive under this statute to produce electric fuel.

[02:53:08] Speaker 03:
So I don't understand how the petroleum equivalency factor would play into the analysis that NHTSA does in setting the standard.

[02:53:15] Speaker 03:
How would that work?

[02:53:16] Speaker 10:
It shouldn't play into the analysis that NHTSA does in setting the standard on our view

[02:53:20] Speaker 03:
No, no, I understand.

[02:53:21] Speaker 03:
But you were saying that that would ameliorate the real world problems with going with your view.

[02:53:27] Speaker 03:
And I just am having trouble following the train of logic.

[02:53:30] Speaker 10:
So the train of logic is that the real world problem that it identifies trades on the enormous gap between the imputed fuel economy of electric vehicles and the actual fuel economy of conventional vehicles.

[02:53:44] Speaker 10:
When you get that huge compliance boost, that's what would allow manufacturers to say, we don't need to do anything to our conventional vehicles to comply with the standards.

[02:53:53] Speaker 11:
In fact, not only do we not need to do anything, we could actually retrogress.

[02:53:59] Speaker 10:
That's possible.

[02:54:00] Speaker 10:
That's also possible under, it says interpretation of the statute.

[02:54:04] Speaker 10:
So under either interpretation, ours or theirs, automakers can avoid making... You'd have more occasion under yours, but I... I think that's probably right.

[02:54:12] Speaker 11:
I'd stop you going through the train of logic.

[02:54:14] Speaker 10:
I think that was the train of logic.

[02:54:16] Speaker 10:
So the hypothetical that NHTSA has put forward trades on that enormous gap between the EVs, imputed fuel economy,

[02:54:25] Speaker 10:
and the real-world fuel economy of conventional vehicles, you bring that down, it will no longer be the case that automakers just say, because we've got electric vehicles, we automatically comply with the standards.

[02:54:37] Speaker 03:
So you're saying that with this imputed value, the fuel economy of electric vehicles will be lower?

[02:54:44] Speaker 10:
Yes, what the Department of Energy has proposed to do right now is to bring that imputed fuel economy down by like 72 percent, where the electric vehicle imputed fuel economy will be about one-fourth of what it is today.

[02:54:58] Speaker 10:
And there are petitioners or there are commenters, including my client AFPM, who are urging the agency to go even farther.

[02:55:05] Speaker 03:
And so when – I'm just to finish this to make sure you understand.

[02:55:09] Speaker 03:
So then you're saying that

[02:55:10] Speaker 03:
When you determine whether any automaker is complying, you would be looking at the lower number, therefore it wouldn't be.

[02:55:18] Speaker 10:
It wouldn't get that huge compliance.

[02:55:20] Speaker 10:
Okay, I understand.

[02:55:20] Speaker 10:
That's exactly right.

[02:55:22] Speaker 09:
And they can, the statute doesn't require that imputed number.

[02:55:29] Speaker 09:
to bear any relation to the reality that the electric vehicles are really way more efficient.

[02:55:37] Speaker 10:
So I see the statutory factors as pretty flexible and what DOE is required to consider.

[02:55:43] Speaker 10:
There are four of them.

[02:55:44] Speaker 10:
They look at the efficiency of the vehicle itself, look at the efficiency of

[02:55:48] Speaker 10:
the generation transmission facilities in the country.

[02:55:52] Speaker 10:
It's really the last two factors that I think DOE could sensibly look at, private solution that I'm proposing here.

[02:55:59] Speaker 10:
The last two factors are the need to conserve energy and the patterns of use of electric vehicles compared to conventional vehicles.

[02:56:09] Speaker 10:
I think it would be perfectly lawful, sensible,

[02:56:11] Speaker 10:
for the Department of Energy to take a look at those two factors and say, given this changed fact about the world, that the patterns of use of electric vehicles have substantially changed, they have much higher market penetration than they did 20 years ago when we first looked at this, and we want to ensure that automakers still have an adequate incentive to conserve energy, that third factor, continuing to improve the fuel economy of their conventional fleets.

[02:56:36] Speaker 10:
That would be perfectly rational, non-arbitrary,

[02:56:39] Speaker 10:
them to take those factors into account and sue the policies of the statute itself is trumpeting here to continue improving the fuel economy of the conventional fleets and use that as a reason to bring down the fuel equivalency factor.

[02:56:54] Speaker 10:
I did want to address part of the government's reading of subsection F because

[02:57:01] Speaker 10:
I think the closest that they come to a textual argument in this case is their contention that subsection H confines the agency only when it is deciding what increases over and above the existing fuel economy level are feasible.

[02:57:18] Speaker 10:
I don't think that is a tenable reading of either subsection H or subsection

[02:57:24] Speaker 10:
words increase or improvement do not appear in either provision that is notable because in this statute congress knew how to require increases when it wanted increases if you look at subsection b2c of the statute in that provision congress required nitsa for model years 2011 to 2020 quote-unquote prescribe annual fuel economy standard increases

[02:57:48] Speaker 10:
that increase the applicable average fuel economy standard rate, twice using the word.

[02:57:53] Speaker 10:
Similarly, subsection G2, Congress imposed a lead time requirement for amendments, but only when an amendment makes a standard more stringent.

[02:58:03] Speaker 10:
Well, Congress obviously contemplated that standards, amended standards could be less stringent.

[02:58:08] Speaker 10:
There's nothing, no comparable language in subsection F. Subsection F does not command every time they have a new round of fuel economy standards or an amended

[02:58:18] Speaker 10:
that it has to be an improvement over the existing level of fuel economy.

[02:58:21] Speaker 10:
In fact, as we pointed out in our reply brief, in 1986, NHTSA decreased the fuel economy standards from 1987 to 88 by 1.5 miles per gallon in response to change circumstances.

[02:58:34] Speaker 10:
In particular, the agency pointed to the fact that there had been a substantial shift in consumer demand toward larger vehicles as a result of lower gas prices.

[02:58:42] Speaker 10:
And it also pointed out that the technology on which the agency had originally relied in finding the standards to be feasible had not in practice yielded the anticipated fuel economy benefits.

[02:58:54] Speaker 10:
So standards can go down.

[02:58:56] Speaker 11:
Let me make sure my colleagues don't have additional questions at this time.

[02:58:58] Speaker 11:
We'll give you some time for rebuttal.

[02:59:00] Speaker 11:
Thank you, Mr. McArthur.

[02:59:10] Speaker 11:
Mr. Buschbacher.

[02:59:21] Speaker 13:
Thank you, Chief Judge Srinivasan.

[02:59:22] Speaker 13:
May it please the court, Michael Buschbacher, for the biofuels interveners.

[02:59:25] Speaker 13:
This case, like the other two that are being argued today and tomorrow, arises out of this administration's regulatory push

[02:59:32] Speaker 13:
to phase out and eliminate the internal combustion engine, replace it with the electric car.

[02:59:38] Speaker 13:
No law authorizes them to do this.

[02:59:40] Speaker 13:
No law authorizes any agency to do this, at least of all NHTSA, which, as Mr. MacArthur has just covered, is statutorily forbidden from even considering electric vehicles when it's setting standards.

[02:59:51] Speaker 13:
We agree completely with that argument.

[02:59:53] Speaker 13:
What I'd like to focus on is this counterargument that NHTSA makes in the final rule

[02:59:58] Speaker 13:
where it says it just had to consider some electric vehicles because otherwise would ignore the reality that California and other states have their own state electric vehicle mandates.

[03:00:08] Speaker 03:
May I ask you a threshold question?

[03:00:10] Speaker 03:
Yes.

[03:00:10] Speaker 03:
There's an argument that the claims you're making were not raised by the petitioners and absent extraordinary circumstances, interveners may join only on a matter that has been brought before the court by a petitioner.

[03:00:22] Speaker 03:
So there's an argument we shouldn't even consider.

[03:00:24] Speaker 03:
your argument on the merits.

[03:00:25] Speaker 03:
Can you address that?

[03:00:26] Speaker 13:
Yeah, happy to.

[03:00:27] Speaker 13:
So if you look at going to the initial statement of the issues that AFPM filed to their brief pages 43 and 44, they argue that these standards are preempted by EPCA.

[03:00:41] Speaker 13:
They go on to say that it was arbitrary and capricious for the agency to consider them.

[03:00:46] Speaker 13:
That, at the very least, gets us into the closely related standard that Judge Katz has nicely articulated in

[03:00:53] Speaker 13:
in the Old Dominion electric co-op case.

[03:00:56] Speaker 13:
It's also logically antecedent to it.

[03:00:58] Speaker 13:
So NHTSA has this counter-argument, right, that we had to consider these electric vehicles because these state mandates are legal obligations forcing automakers to make electric cars.

[03:01:11] Speaker 13:
Well, if they're not legitimately forcing them to do that, which is our argument, then... Well, does it have to be legitimate?

[03:01:18] Speaker 03:
I guess that's a different question.

[03:01:19] Speaker 13:
Well, I mean, maybe you don't have to, on this threshold question, whether you agree with me or not doesn't matter.

[03:01:26] Speaker 13:
My point is that we're raising something that's logically antecedent.

[03:01:31] Speaker 13:
And again, I think it's closely related.

[03:01:32] Speaker 13:
It's covered in their brief.

[03:01:34] Speaker 13:
And like I said, it's in the initial statement of the issues.

[03:01:36] Speaker 13:
No one objected to our intervention when we raised this.

[03:01:40] Speaker 13:
But I don't think that is a impediment to us making these arguments.

[03:01:48] Speaker 13:
So let me address the EPCA preemption point.

[03:01:50] Speaker 13:
So it isn't reality, Judge Bannon and the rest of the panel, because those laws are preempted by a neighboring provision in EPCA, which says that states may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards.

[03:02:07] Speaker 13:
The relation between these state electric vehicle mandates and NHTSA standards is obvious.

[03:02:10] Speaker 13:
That's why NHTSA spent so much time talking about them and considering them.

[03:02:14] Speaker 13:
NHTSA can't dodge this either by just saying, well, we don't really know.

[03:02:18] Speaker 13:
about preemption, because that's just plainly not true.

[03:02:22] Speaker 13:
They do have a view on preemption.

[03:02:24] Speaker 13:
They discuss this on pages 1062 and 1146 of the Joint Appendix, where they find that these state laws are real legal obligations that states are free to enforce.

[03:02:33] Speaker 13:
That finding, and it is a finding, is contrary to law.

[03:02:37] Speaker 13:
And at the very least, it was arbitrary and capricious for the agency presented with these comments and these issues to just say, we're going to leave that for another day.

[03:02:47] Speaker 13:
That is black letter arbitrary and capriciousness under Little Sisters.

[03:02:51] Speaker 09:
What does the preemption argument get you above and beyond Mr. MacArthur's core point, right?

[03:03:02] Speaker 09:
We've been discussing whether the agency can consider electric vehicles as a fact about the world.

[03:03:15] Speaker 09:
And if the answer for projecting, let's just say 20 to 2020 baseline, right?

[03:03:21] Speaker 09:
If the answer to that question is no, your side has won the case.

[03:03:28] Speaker 09:
If the answer to that question is yes, they can consider electric vehicles as a fact about the world.

[03:03:35] Speaker 09:
Doesn't really matter how and why those vehicles came into the world.

[03:03:43] Speaker 09:
They're just there.

[03:03:45] Speaker 13:
Well, so two points on that.

[03:03:47] Speaker 13:
One is that what they're trying to do here is get in through the back door something that they're barred from bringing in the front door.

[03:03:54] Speaker 13:
And we think that EPCA bars both the front and the back door here.

[03:03:58] Speaker 13:
So I agree.

[03:03:59] Speaker 13:
If they can't bring in the front door at all, then this falls by the wayside.

[03:04:03] Speaker 13:
It's not a counter argument that carries the day on the considering point from EPCA.

[03:04:09] Speaker 13:
On the back door point.

[03:04:11] Speaker 13:
I think that the reality here has to be taken into account with the fact that these are vulnerable to challenge.

[03:04:17] Speaker 13:
I like the way that AFPM actually put it in their brief, to go back to the threshold point, too, where they said that it put the rules in a tenuous position.

[03:04:24] Speaker 13:
It's something the agency just doesn't consider.

[03:04:26] Speaker 13:
It has a long-standing view, going back to 2002, where it has treated these laws as being preempted by EPCA.

[03:04:33] Speaker 13:
And then it changes that and says, we don't know.

[03:04:35] Speaker 13:
And now it says that they're legal obligations.

[03:04:38] Speaker 13:
But it never analyzes that factual reality.

[03:04:40] Speaker 13:
So even if they can consider it, it was arbitrary and capricious for them to do so without looking at the reality that these are subject to challenge and that they are exempted by EPCA.

[03:04:52] Speaker 09:
And I think there's another point here, which is that there's... I mean, suppose the challenge prevailed and California couldn't

[03:05:02] Speaker 09:
and force this going forward, I mean, you wouldn't require these electric vehicles to be taken out of the world or destroyed or something, right?

[03:05:12] Speaker 13:
No, I mean, so we're still not at the model years that are covered, right?

[03:05:15] Speaker 13:
So these are looking forward into the operation that this electric car mandate that California and other Section 177 states have.

[03:05:23] Speaker 13:
And those have a forward, so if you actually look at the model years that they set the standards for, the only increases in the penetration of EVs according to

[03:05:31] Speaker 13:
Put note 10 of the other side's brief, I think it's on page 54.

[03:05:35] Speaker 13:
The only increases off of the baseline that they use from 2020 are from the state electric car mandate.

[03:05:42] Speaker 13:
I'm not talking about taking anything out of reality.

[03:05:44] Speaker 13:
We're talking about adding new things into it.

[03:05:46] Speaker 13:
And they can't do that.

[03:05:48] Speaker 13:
At the very least, the agency can't just assume that these things are going to play out the way they do.

[03:05:53] Speaker 11:
What's the standard under which you decide what are the things that the agency has to forecast?

[03:05:59] Speaker 11:
I mean, you said subject to challenge.

[03:06:00] Speaker 11:
Never underestimate the ingenuity of interested parties and their lawyers.

[03:06:05] Speaker 11:
I mean, everything is subject to challenge.

[03:06:08] Speaker 13:
I don't mean like it could be sued in court.

[03:06:09] Speaker 13:
What I mean is this is a substantial aspect of the problem.

[03:06:13] Speaker 13:
This is the Little Sisters of the Poor standard.

[03:06:16] Speaker 13:
What it says is when the agency knows about a legal issue, when it's been raised in litigation, when the agency's gotten comments on it, it has to give a reasoned explanation for it.

[03:06:24] Speaker 13:
So we think we clearly meet that.

[03:06:25] Speaker 13:
It's the agency's own longstanding interpretation that they've never refuted.

[03:06:29] Speaker 13:
It's the fact that it was raised in the comments and that it's been raised in litigation before put the agency well on notice that it had to look at this.

[03:06:38] Speaker 13:
And it can't just say, we're going to just pretend that these are going to have their full effect without even considering the possibility that they might not have the effect we're imputing.

[03:06:48] Speaker 03:
So what should they have done?

[03:06:49] Speaker 03:
Should they have changed their baseline to assume that this would be preempted?

[03:06:54] Speaker 03:
Or did they just have to explain why they were using the assumption that they did?

[03:06:58] Speaker 13:
So I think they could have done a couple different things.

[03:07:01] Speaker 13:
One, they could have said, well, we don't know, so we're just not going to put them in.

[03:07:05] Speaker 13:
That would, I think, have been reasonable.

[03:07:06] Speaker 13:
And they could have stayed with their interpret.

[03:07:08] Speaker 13:
Their view is, we don't have a view about EPCA preemption.

[03:07:10] Speaker 13:
We don't want to reach that in this rule.

[03:07:12] Speaker 13:
And if they did that, then they could have said, we're just not going to include them.

[03:07:17] Speaker 13:
Because getting into that would require them.

[03:07:18] Speaker 03:
But you think it's impermissible for them to assume that there wouldn't be a preemption?

[03:07:21] Speaker 03:
Because I guess at the time that they promulgated this, there was no challenge.

[03:07:25] Speaker 13:
So if you look at the way that the timing was structured, it was they have their rule that repeals their interpretation.

[03:07:32] Speaker 13:
And then there's a 59-day window that you get to challenge that.

[03:07:35] Speaker 13:
That closes at the end of February.

[03:07:37] Speaker 13:
And then nine days later or so, EPA puts the waiver back in place.

[03:07:43] Speaker 13:
So there was just never an opportunity.

[03:07:44] Speaker 03:
But they must have some discretion to decide what assumptions they're going to.

[03:07:48] Speaker 03:
Absolutely.

[03:07:49] Speaker 03:
And I guess Judge Casas's point is, too, that even regardless of the preemption issue,

[03:07:55] Speaker 03:
there was increased penetration of electrical vehicles historically, and they've been overperforming standards anyway.

[03:08:03] Speaker 03:
So why is it not within their discretion and reasonable to make this assumption that the world will be the way it is without preemption?

[03:08:11] Speaker 13:
That's just not what they said, and it's not what they did.

[03:08:15] Speaker 13:
They do make all kinds of claims about how electrification is happening.

[03:08:18] Speaker 13:
But the only increases in the model years that are covered are the ones that are driven by these state electric car mandates.

[03:08:25] Speaker 13:
So that's what they're hanging their hat on.

[03:08:27] Speaker 13:
And that's what I think is a problem.

[03:08:28] Speaker 13:
If you're going to do that and say, this is the one thing we're so sure about, the reality we're so sure about, we're going to put it in.

[03:08:33] Speaker 03:
But they don't have to be sure, right?

[03:08:35] Speaker 03:
They can just say, we're assuming that these.

[03:08:36] Speaker 13:
Yeah, they have still good reasons for that.

[03:08:39] Speaker 13:
And they don't even cross that threshold, right?

[03:08:41] Speaker 13:
My point is, my front line argument is that there's really only one answer if you go down that road, and that these are preemptible.

[03:08:50] Speaker 13:
But if they had just said, we're making some kind of prediction about,

[03:08:54] Speaker 13:
We think there's a 30% chance that these would go away.

[03:08:57] Speaker 13:
And so we're going to discount that by 30% or amortize that in some way.

[03:09:02] Speaker 13:
But they don't do anything like that.

[03:09:03] Speaker 13:
There are a number of options that agencies have when it comes to giving a reasonable explanation.

[03:09:07] Speaker 13:
What Little Sisters of the Poor and the Regents case from the Supreme Court both say, they can't just entirely ignore it.

[03:09:14] Speaker 13:
And that's what they did here.

[03:09:15] Speaker 13:
They didn't even consider it.

[03:09:17] Speaker 13:
They just bracketed off entirely and then made this unlawful finding that states are free to enforce them.

[03:09:25] Speaker 13:
And that finding, I do think, is contrary to law, because states are not free to them.

[03:09:30] Speaker 13:
The statute says states may not.

[03:09:32] Speaker 13:
And so that point is designed to bake this in in a way that I think is really pernicious.

[03:09:37] Speaker 13:
It means that if we prevail in our challenges, at least the ghost of those standards lingered on here in the NHTSA standard, because they've been baked into what they've put forward for the future.

[03:09:49] Speaker 13:
And that, to me, is a very serious problem.

[03:09:51] Speaker 13:
I've never seen an agency

[03:09:52] Speaker 13:
I'm not aware of any case the other side hasn't pointed to any case where an agency has done something and at the very least they had to consider it.

[03:10:01] Speaker 11:
Thank you counsel.

[03:10:09] Speaker 11:
Thank you.

[03:10:09] Speaker 11:
From the government now Mr. Koppel.

[03:10:21] Speaker 01:
I'm Josh Koppel for the United States.

[03:10:23] Speaker 01:
May it please the court?

[03:10:26] Speaker 01:
EPCA establishes an iterative process in which the Secretary establishes new fuel economy standards at least every five years that continually push automakers to do more to improve the fuel economy of their fleet.

[03:10:40] Speaker 01:
Section 32902A makes clear that each time the secretary issues new standards, they're to be set at the maximum feasible average fuel economy level that the secretary decides the manufacturers can achieve in that future model year.

[03:10:55] Speaker 01:
Not at the level that manufacturers have achieved, but rather at the maximum fuel economy level that they can achieve in the future if required to do so.

[03:11:05] Speaker 01:
Certainly, the secretary has to understand the current state of the fleet, however,

[03:11:10] Speaker 01:
in order to know whether the standards that he's setting will result in the production of a fleet that reflects the maximum average fuel economy level.

[03:11:19] Speaker 01:
And it's on the basis of the existing fleet that the secretary determines what additional improvements manufacturers can achieve.

[03:11:27] Speaker 01:
To determine the maximum fuel economy level manufacturers can achieve, the secretary is guided by the four factors identified in subsection F, including technological feasibility and economic practicability.

[03:11:38] Speaker 01:
And subsection H identifies factors the Secretary may not consider in that determination, including electric vehicles or the potential use of compliance credit.

[03:11:48] Speaker 01:
So subsection H ensures that the Secretary sets the standards at a level that can feasibly and practicably be achieved by manufacturers, making improvements only to the fuel economy of traditional vehicles.

[03:12:01] Speaker 01:
Although the statute also allows the manufacturers to achieve compliance by instead producing electric vehicles if they choose to do so.

[03:12:09] Speaker 11:
So what you just said, the way you describe the regime, seems like a totally coherent regime that could have been constructed.

[03:12:17] Speaker 11:
I think it's hard to dispute that proposition.

[03:12:20] Speaker 11:
But the question is whether it's consistent with what H says.

[03:12:23] Speaker 11:
And what's your best argument about the actual words of H that

[03:12:30] Speaker 11:
make what the scenario that you just outlined the best way to understand what the words say?

[03:12:37] Speaker 01:
So I do want to get to age, but I think we have to understand age in the entire statutory context.

[03:12:42] Speaker 01:
And so I want to start, actually, with subsection A, which, again, directs the secretary to set the fuel economy standard at the maximum feasible fuel economy level that manufacturers can achieve.

[03:12:54] Speaker 01:
So A is already making clear that the inquiry here is a forward-looking one.

[03:13:00] Speaker 01:
Subsection B3B makes this even clearer.

[03:13:03] Speaker 01:
It says that the secretary has to revisit the standards at least every five years.

[03:13:08] Speaker 01:
So this is going to be an iterative process where each time the secretary pushes manufacturers to improve their fuel economy and improve their fuel economy to the maximum level, maximum feasible level.

[03:13:24] Speaker 01:
In subsection F,

[03:13:27] Speaker 01:
identifies four factors.

[03:13:28] Speaker 01:
Each of those is forward-looking.

[03:13:31] Speaker 01:
It's not relevant to determining what the current fleet is.

[03:13:38] Speaker 01:
You don't consider technological feasibility when you compile just data on the existing fleet.

[03:13:43] Speaker 01:
You don't consider economic practicability.

[03:13:44] Speaker 01:
That's an objective question.

[03:13:46] Speaker 01:
the factors in subsection F are all forward-looking, and they're all directed at what additional improvements manufacturers can feasibly and practically make.

[03:13:56] Speaker 01:
And then subsection H, which specifically constrains the Secretary's consideration of subsection F factors, similarly, those factors identified in subsection H then are forward-looking.

[03:14:10] Speaker 01:
And again, we know this because subsection F factors are all forward-looking, and in any event, under subsection A,

[03:14:17] Speaker 01:
the inquiry that the secretary is to engage in is a forward-looking one.

[03:14:21] Speaker 01:
What is the maximum feasible dual-economy level that manufacturers can?

[03:14:28] Speaker 11:
Again, saying that it's forward-looking and that's the way that the world should exist seems totally coherent.

[03:14:37] Speaker 11:
But I'm just looking at the words of H. Where in the words of H?

[03:14:43] Speaker 11:
H doesn't say forward-looking.

[03:14:46] Speaker 11:
F, I mean, I think you could understand the factors in F to be primarily forward-looking.

[03:14:51] Speaker 11:
But what I have to do is give effect to the words of H. What's the construction?

[03:14:57] Speaker 11:
What's the interpretation that the government is advancing of what the actual syllables that are in H?

[03:15:04] Speaker 11:
What's the interpretation that the government's advancing that's going to allow me to get to the result, the very coherent result you think is the way the statute is?

[03:15:12] Speaker 01:
I think there's a couple ways the court

[03:15:15] Speaker 01:
could get to that result.

[03:15:16] Speaker 01:
I think that independently supporting this approach here.

[03:15:19] Speaker 01:
First, subsection H specifically applies in carrying out subsection C, F, and G. And because the F factors are necessarily forward-looking, those are all directed at figuring out what additional technological improvements manufacturers can feasibly, practicably achieve.

[03:15:37] Speaker 01:
Therefore, H also only applies in conducting that forward-looking determination.

[03:15:43] Speaker 11:
Second, and so what would you say that when it says in carrying out CF and G, what it means is in carrying out CF and G in so far as it's non-forward-looking.

[03:16:00] Speaker 11:
Is that what you mean?

[03:16:02] Speaker 11:
That's when you may not consider, I'm sorry, when it is forward-looking, you may not consider.

[03:16:08] Speaker 01:
Well, it's not adding a constraint when it's forward-looking.

[03:16:11] Speaker 01:
The factors in subsection F are inherently forward-looking.

[03:16:15] Speaker 01:
So because subsection H only applies when the secretary carries out subsection F inquiry, therefore the subsection H constraints are also forward-looking.

[03:16:26] Speaker 01:
What about C and G?

[03:16:27] Speaker 01:
So C and G are added only to get at this

[03:16:31] Speaker 01:
preliminary decision that the secretary makes whether to amend the standards.

[03:16:35] Speaker 01:
It doesn't make any sense to think that the actual standard setting process is different whether the secretary is establishing standards for a particular model year for the first time or if he's amending them.

[03:16:47] Speaker 01:
The only difference is in that preliminary discretionary determination whether to amend the standards.

[03:16:52] Speaker 09:
Why not?

[03:16:54] Speaker 09:
It would be perfectly rational to have a system that is more constraining when

[03:17:01] Speaker 09:
the government establishes a standard and everyone plans to comply with it, and then they change those rules, then when 18 months out, they're just establishing a new standard for the first time.

[03:17:17] Speaker 01:
A couple points.

[03:17:18] Speaker 01:
First of all, I don't think even petitioners argue that the standard setting process is different if you're amending or if you are establishing for the first time, aside from this preliminary decision.

[03:17:30] Speaker 01:
Second, no, that's right.

[03:17:31] Speaker 09:
You all both sides of this case want us to decide this as an F question.

[03:17:37] Speaker 09:
I get that, but not clear to me that the amendment question is the same from the initial promulgation question.

[03:17:45] Speaker 01:
Yeah.

[03:17:46] Speaker 01:
Second, you raise this question about the lead time requirement, 18-month lead time.

[03:17:51] Speaker 01:
That's going to apply even when the secretary amends under CNG if the secretary is raising the fuel economy level.

[03:17:57] Speaker 01:
So when the secretary amends the standard of.

[03:18:00] Speaker 09:
That's true, except agreed, but the initial promulgation will have caused the manufacturers to incur all sorts of costs designed to comply with that standard.

[03:18:14] Speaker 01:
That may be, but once the secretary decides that he's going to go ahead and amend, he can certainly, again, take a clear-eyed realistic picture of where he's starting from, what the existing fleet looks like, and what the statute is constraining is the ability to consider that manufacturers may comply by producing additional electric vehicles.

[03:18:42] Speaker 03:
So on the textual basis for the forward-looking interpretation that you're advocating, the H says carrying out C, F, and G. And then the operative language in C and G is prescribing regulations amending the standard, which is forward-looking.

[03:19:00] Speaker 03:
And F is considerations for decisions, which is forward-looking, because you're considering new decisions.

[03:19:08] Speaker 03:
So it seems that there is a textual basis

[03:19:11] Speaker 03:
on carrying out prescribing regulations or carrying out considerations on decisions that are, that's all forward-looking.

[03:19:21] Speaker 03:
Do you agree?

[03:19:22] Speaker 01:
Yes, I think that's right.

[03:19:24] Speaker 01:
And even leaving subsection F aside, right, subsection G says that when you're doing the amendment process, it just points back to subsection A, right, which confirms

[03:19:34] Speaker 01:
that the standard setting process, once the secretary has decided to go ahead and amend, the standard setting process is the same.

[03:19:40] Speaker 01:
And subsection A, again, itself makes clear that the determination that's the focus of the statute here is this forward-looking determination.

[03:19:49] Speaker 01:
What is the maximum feasible fuel economy level that manufacturers can achieve?

[03:19:53] Speaker 01:
There's no prohibition against the secretary starting from this objective baseline when he determines what additional improvements can be made.

[03:20:04] Speaker 11:
Do you think that the way the petitioners are reading the statute is implausible?

[03:20:13] Speaker 01:
I think that it certainly results in, it creates absurd results and it imputes to Congress

[03:20:24] Speaker 01:
limited foresight, I'd say.

[03:20:25] Speaker 01:
I mean, as the example in our brief demonstrates, at some point in the very near future, under petitioners reading, the fuel economy standards lack all tea.

[03:20:36] Speaker 01:
And they won't, at that point, mandate manufacturers to improve their fuel economy, even commensurate with their ability to improve the fuel economy of their gas-powered fleet.

[03:20:47] Speaker 11:
What about the argument on that, by the way?

[03:20:49] Speaker 11:
I know I'm sidetracking you, but it directly raises the question of, is the DOE's reconsideration a fix?

[03:20:59] Speaker 01:
It might push out that date marginally, but not substantially.

[03:21:04] Speaker 01:
First of all, the example we give in our brief assumed a fuel economy level or fuel economy equivalent for electric vehicles of 160 miles per gallon.

[03:21:12] Speaker 01:
That's actually at the very, very low end under the current scheme.

[03:21:16] Speaker 01:
So even if DOE amends the petroleum equivalency factor, that's still not going to be far off.

[03:21:22] Speaker 01:
from the average fuel economy equivalent of electric vehicles, even at that point.

[03:21:28] Speaker 01:
The only way that DOE amending the petroleum equivalency factor down would completely get rid of this problem is if it did it to such an extent that electric vehicles had no fuel economy advantage over combustion engine vehicles.

[03:21:42] Speaker 01:
And we know that can't be what Congress intended, because Congress created an incentive to produce electric vehicles or to produce dedicated vehicles.

[03:21:51] Speaker 01:
And if the Department of Energy reduces the petroleum equivalency factor to that amount, it's completely wiped out the statutory incentive that Congress very clearly required.

[03:22:00] Speaker 01:
As long as there's a statutory incentive, this problem arises, where at some point, once manufacturers have created some level of dedicated vehicles in their fleet, and to a relatively small level, the fuel economy standards lack any teeth.

[03:22:16] Speaker 11:
What about the fact that you're

[03:22:19] Speaker 11:
taking into account the future years other than 2024 to 2026.

[03:22:25] Speaker 11:
So that's forward-looking.

[03:22:28] Speaker 01:
It is forward-looking.

[03:22:32] Speaker 01:
Part of the reason that NHTSA did that was because it was necessarily starting with the 2020 fleet, and so it was projecting how that fleet had already evolved and would continue to evolve leading up to

[03:22:45] Speaker 01:
model year 2024 when the standards began.

[03:22:47] Speaker 01:
And then at the back end, NHTSA was projecting the long-term effects of the rule.

[03:22:53] Speaker 01:
So even at that point, NHTSA was not really projecting how – it wasn't this forward-looking inquiry about how manufacturers could

[03:23:04] Speaker 01:
could adapt their fleets by creating additional dedicated vehicles in the standard setting years.

[03:23:09] Speaker 01:
This court doesn't need to reach that issue, though, because it's clear that any error on that front was harmless.

[03:23:14] Speaker 01:
And so the court could just decide that the error was harmless, and it doesn't need to address that.

[03:23:20] Speaker 01:
I will note that in this recent notice of proposed rulemaking, it has amended the way that it deals with those years to make sure that it is not projecting manufacturers creating electric vehicles in response to the proposed

[03:23:34] Speaker 03:
On your harmless error argument, I read your brief to be saying that you ran a sensitivity analysis on this asserted error about the extra years, and that it would result in a $1,371 increase instead of a $1,261 increase, and you say this is harmless because in a different part of

[03:23:59] Speaker 03:
the regulation, you said that a cost increase of $1,574 would only be slightly beyond the level of economic practicability.

[03:24:08] Speaker 03:
Am I reading that correctly?

[03:24:09] Speaker 01:
So what NHTSA said was that regulatory alternative three was slightly beyond the level of economic practicability.

[03:24:16] Speaker 01:
Regulatory alternative three would have caused an additional increase

[03:24:24] Speaker 01:
Model year 2026, an additional increase in the price of vehicles of $358.

[03:24:30] Speaker 01:
The sensitivity analysis that we're talking about would have caused an additional price increase of $155 on average.

[03:24:38] Speaker 01:
So yes, the price increases much less than under regulatory alternative three, which Nitsa said was just beyond the level of economic practicability.

[03:24:47] Speaker 03:
So there's another error that you concede that you made with respect to the hybrid

[03:24:52] Speaker 03:
vehicles, you were supposed to count them only with respect to the combustion engine aspect, but you counted the whole thing.

[03:24:59] Speaker 03:
And there is no analysis about the two errors, if we assume this was an error, including the extra years, and the other error.

[03:25:06] Speaker 03:
So how do we know that that's harmless, these two errors together?

[03:25:10] Speaker 01:
So correcting the conceded error regarding plug-in hybrid electric vehicles actually would have reduced the incremental price of model year 2026 vehicles by $23.

[03:25:22] Speaker 01:
So in some ways, these are likely to be offsetting errors.

[03:25:26] Speaker 01:
Now, it's true you can't just add them up and assume that you're going to get to the same result.

[03:25:31] Speaker 03:
You're saying that error goes in a different direction in terms of the?

[03:25:35] Speaker 01:
Yes.

[03:25:36] Speaker 01:
Controlling for correcting the error regarding plug-in hybrid electric vehicles

[03:25:40] Speaker 03:
anything seems to make the standards more economic if you take out the electrical vehicles

[03:25:49] Speaker 01:
So they're plug-in hybrid electric vehicles, which are very expensive because they contain both the electric power train and the internal combustion engine.

[03:25:58] Speaker 01:
Now, consumers want them because they also contain some of the benefits of both.

[03:26:01] Speaker 01:
And so consumers are willing to pay more for them.

[03:26:04] Speaker 01:
If you consider plug-in hybrid electric vehicles only as running on gasoline, you see less consumer demand for that, and so less purchase of those expensive vehicles.

[03:26:13] Speaker 01:
That's likely the reason the sensitivity analysis shows

[03:26:17] Speaker 01:
the incremental price of vehicles actually going down.

[03:26:22] Speaker 11:
Can I get back to the text of H for a second?

[03:26:24] Speaker 11:
So is it fair to say then, H says the following, and I'm just reading from it, in carrying out subsection C, F, and G of this section, the Secretary of Transportation may not consider the fuel economy of dedicated automobiles, and let's just say EVs.

[03:26:40] Speaker 11:
What the government says is,

[03:26:43] Speaker 11:
Actually, the way to read that is in carrying out subsection C, F, and G of this section, the Secretary of Transportation may consider the fuel economy of dedicated automobiles as long as, and then you read in a forward-looking criteria.

[03:26:59] Speaker 01:
I don't believe that's right.

[03:27:00] Speaker 01:
I don't believe that considering the current state of the fleet is part of subsection C, F, and G.

[03:27:11] Speaker 01:
it would be introducing an exception that it's kind of not there, right?

[03:27:15] Speaker 01:
The entirety of subsection CF and G are this forward-looking determination.

[03:27:19] Speaker 01:
And so when subsection H constrains, prohibits the secretary from considering the fuel economy of electric vehicles, it's in that context of making that forward-looking determination.

[03:27:30] Speaker 09:
You would have to say that constructing the model that is going to support the amended standard

[03:27:42] Speaker 09:
is not carrying out the function of the provisions that permit the amendment.

[03:27:53] Speaker 01:
The baseline, I'd say, determining where the existing fleet is, determining the current fuel economy that manufacturers have already achieved, that is not part of the

[03:28:06] Speaker 01:
As an input to the model that fixes the standard, the amended standard.

[03:28:12] Speaker 01:
That's not part of the mandate of what the statute directs the secretary to do.

[03:28:16] Speaker 01:
What the statute directs the secretary to do is to make this forward-looking determination of what fuel economy level manufacturers can achieve in the future, considering what technological improvements are feasible and practicable.

[03:28:30] Speaker 01:
That's all a forward-looking determination, and it doesn't

[03:28:34] Speaker 01:
The mandate in the statute doesn't go to the secretary's assessment of where we are at the beginning of the regulatory period.

[03:28:46] Speaker 11:
So if the agency says, you're talking to an agency official, and they just say, OK, I'm going to carry out my responsibility.

[03:28:52] Speaker 11:
And I'm going to start out by just setting the baseline.

[03:28:55] Speaker 11:
And then your view is, well, you're not carrying out responsibility, actually.

[03:28:59] Speaker 11:
You can go ahead and do that.

[03:29:00] Speaker 11:
But actually, you're not carrying out responsibility when you set the baseline.

[03:29:05] Speaker 01:
The responsibility is in setting the standards that will have the effect that Congress intends, whatever that is in a given statute.

[03:29:11] Speaker 01:
Constructing the baseline, that is an objective, necessary predicate first step.

[03:29:21] Speaker 01:
But it's not the mandate itself that is in the statute here.

[03:29:26] Speaker 11:
That would just be a mistaken conception on the person's part, is that they're actually not carrying out their responsibility vis-a-vis

[03:29:34] Speaker 11:
setting up the standards, vis-a-vis prescribing the standards, because it's just a predicate.

[03:29:40] Speaker 01:
If all the secretary is doing is establishing a baseline, he's not fulfilling his duty under the statute.

[03:29:45] Speaker 01:
He needs to determine what fuel economy level manufacturers can achieve, not what they've already achieved.

[03:29:51] Speaker 11:
But I guess the argument is just that, yeah, if you're just doing the thing that sets the baseline, which is like creating a report or, as was suggested, using that for purposes of an environmental impact statement or something,

[03:30:04] Speaker 11:
That's one thing, but when it's the first step of actually prescribing the standard, then you're doing that thing as part of carrying out your responsibility to prescribe the standard.

[03:30:15] Speaker 01:
As an initial matter, I don't think this court needs to decide whether constructing that baseline is part of the mandate of subsection A, because subsection H prohibition is constrained to when the secretary carries out the functions of subsection F, which clearly are forward-looking.

[03:30:31] Speaker 01:
But even if this court doesn't want to go that route and does look at what is the mandate of subsection A, subsection A doesn't require an initial step.

[03:30:44] Speaker 01:
It's a one-step mandate.

[03:30:47] Speaker 01:
Set the fuel economy standard at the maximum feasible level.

[03:30:50] Speaker 01:
Manufacturers can't achieve.

[03:30:51] Speaker 01:
That's a forward-looking mandate, forward-looking.

[03:30:55] Speaker 01:
Suppose the baseline were

[03:30:59] Speaker 09:
Suppose there were no factual support for baseline in this model.

[03:31:04] Speaker 09:
Could a petitioner challenging the agency action of amending the rule say that the amendment was arbitrary and capricious because the baseline in the model that supports the amendment is unsupported?

[03:31:22] Speaker 09:
if there was no, I'm not sure I'm understanding the question, if there was no factual basis for- Someone is challenging an amendment and they say the amendment is arbitrary and capricious because it was arrived at through a model whose baseline was X and there's no support for that baseline.

[03:31:45] Speaker 01:
I think that would be arbitrary and capricious because there would be, without,

[03:31:50] Speaker 01:
Right, in judging the amendment.

[03:31:53] Speaker 01:
Well, I'm not sure that the, not because the baseline is arbitrary and capricious, but because the forward-looking determination of the maximum feasible fuel economy level that manufacturers can achieve then has no reason to base it.

[03:32:06] Speaker 11:
Right, which that makes it sound like then the baseline is an integral part of arriving at that ultimate thing that is arbitrary and capricious.

[03:32:17] Speaker 01:
It certainly is an integral part of the Secretary's decision-making.

[03:32:24] Speaker 01:
But again, it's not the mandate that the statute is directed to.

[03:32:28] Speaker 01:
And it's certainly not the consideration.

[03:32:30] Speaker 01:
It's the subject of subsection F. That is the forward-looking determination.

[03:32:39] Speaker 01:
Before we conclude, I would like to mention

[03:32:42] Speaker 01:
In case this court determines that there is a prejudicial error, whether it's with regard to considering electric vehicles outside of the standard setting years or considering electric vehicles that already existed, the proper remedy here

[03:32:56] Speaker 01:
is remand without vacator, there's a serious possibility and indeed a likelihood that NHTSA could support and would support the 2022 standards on remand even under a corrected analysis.

[03:33:10] Speaker 01:
And vacator of the rule would have significant disruptive consequences.

[03:33:15] Speaker 01:
have serious adverse effects on energy conservation, increasing gasoline consumption.

[03:33:21] Speaker 01:
It would harm the environment and the public health.

[03:33:24] Speaker 01:
And it would reinstate the 2020 rule and, in fact, employed many of the same methodologies that petitioners challenge here.

[03:33:31] Speaker 01:
So it really makes no sense to reinstate a rule that rests on some of those, if this court finds that,

[03:33:41] Speaker 01:
including electric vehicles, considering electric vehicles that already exist.

[03:33:44] Speaker 01:
If the court finds that that was error, it makes no sense to reinstate those prior rules.

[03:33:49] Speaker 01:
At the same time, remanding without vacator would cause no injury.

[03:33:53] Speaker 01:
If NHTSA does determine on remand that somewhat less stringent standards are supported

[03:34:01] Speaker 01:
The statute allows NHTSA to amend fuel economy standards downward at any time, and manufacturers will simply receive compliance credits to the extent that they have already exceeded the standards.

[03:34:12] Speaker 01:
In contrast, if this court vacates, NHTSA will have no opportunity to re-promulgate more stringent standards, even if the agency determines that's appropriate because of this 18-month lead time requirement statute.

[03:34:29] Speaker 09:
Could they support

[03:34:31] Speaker 09:
Could they support these standards if we were to conclude that even considering electric vehicles for purposes of the 2020 baseline is impermissible?

[03:34:46] Speaker 01:
Yes, it is possible for manufacturers to comply with these standards even without producing a single electric vehicle.

[03:34:52] Speaker 01:
So if you look at the data underlying this rule, for example, hybrid electric vehicles, and there's not plug-in hybrids, standard hybrid electric vehicles, there's no question it was allowed to consider those, receive fuel economy compliance values in the 60s, 70s, 80 mile per gallon range.

[03:35:08] Speaker 01:
And that's in the 2020 fleet before the technological improvements that will be made by 2026.

[03:35:13] Speaker 01:
NHTSA standards in 2026 require a fuel economy level of around 49 miles per gallon.

[03:35:19] Speaker 01:
So with increased reliance on standard hybrid electric vehicles, advanced engine technologies, mass reduction, aerodynamic improvements, it is certainly feasible for manufacturers to achieve the 2022 standards even without creating

[03:35:35] Speaker 01:
any electric vehicles, and so it would be possible for NIST to support the rule even without considering any electric vehicles.

[03:35:40] Speaker 01:
Even though you don't have a Subaru line in the record of this case.

[03:35:43] Speaker 01:
We don't have a Subaru line, but from what I gather from the discussion.

[03:35:47] Speaker 11:
I have one question about the way the amendment process works as compared with the construction of a new standard.

[03:35:57] Speaker 11:
So suppose we have some back and forth about whether it's possible to construe H as having its principal role in the amendment context and as having a lesser role in the obligation of a new standard.

[03:36:10] Speaker 11:
So I know you've got some problems with that.

[03:36:13] Speaker 11:
Just bear with me.

[03:36:14] Speaker 11:
Let's assume that's the scenario that we're operating in.

[03:36:18] Speaker 11:
Is it set in stone that when the agency creates a new

[03:36:24] Speaker 11:
mile per gallon target for a year as to which there's already been one in place, that that's necessarily an amendment?

[03:36:31] Speaker 11:
Or could the agency just say, I'm not just picking at one part of the old rule, I'm just vanquishing the entire rule, even though it deals with the same year, it's a year in the future, let's say 2025.

[03:36:45] Speaker 11:
2025, so I'm not amending 2025, I'm actually just doing a new rule as to 2025.

[03:36:50] Speaker 11:
And then by doing that,

[03:36:52] Speaker 11:
have the capacity to take into account, by hypothesis, electric vehicles to a greater extent than would be the case were it an amendment?

[03:37:01] Speaker 01:
We haven't raised that argument.

[03:37:03] Speaker 01:
I'm not sure whether that's consistent with the statute at this point.

[03:37:07] Speaker 01:
If it's important, we'd be happy to address that.

[03:37:11] Speaker 11:
OK.

[03:37:11] Speaker 11:
I just didn't know whether you knew of something that's set in stone already that says that any time the agency is affecting

[03:37:22] Speaker 11:
a numerical value for a year for which there's already one.

[03:37:25] Speaker 11:
That's by definition an amendment.

[03:37:27] Speaker 01:
There's nothing that I know of on either side of that question.

[03:37:32] Speaker 11:
The court has no further questions.

[03:37:34] Speaker 01:
We ask the court to deny the petitions.

[03:37:35] Speaker 11:
Thank you.

[03:37:36] Speaker 11:
Thank you, Mr. Koppel.

[03:37:39] Speaker 11:
We'll hear from the intervener on the respondent side.

[03:37:43] Speaker 11:
Mr. McCombs.

[03:37:47] Speaker 06:
Thank you, Mr. Chief Judge.

[03:37:52] Speaker 06:
I'd like to make two points about intervenors' arguments.

[03:37:59] Speaker 06:
So we've heard from intervenors that their claim is logically exceeding the petitioners.

[03:38:04] Speaker 06:
But we know that's wrong, because the only way we reach their APCA preemption argument fall is if petitioners lose.

[03:38:10] Speaker 06:
If petitioners are correct, that there is no way any electric vehicle for any purpose at any time

[03:38:17] Speaker 06:
There's no occasion to investigate whether NHTSA can consider these electric vehicles produced and responding to California standards.

[03:38:25] Speaker 06:
Second, the only way we would reach EPCA preemption in the first place is if it had any impact on standards at all.

[03:38:33] Speaker 06:
On this record, it doesn't.

[03:38:35] Speaker 06:
The only way we would get this backboring effect that interveners are worried about is if NHTSA's reliance on California standards to model the baseline ended up setting the baseline

[03:38:45] Speaker 06:
But no one's made that argument.

[03:38:48] Speaker 06:
Certainly no one's made that showing.

[03:38:49] Speaker 06:
And all the evidence in the record points the other way.

[03:38:52] Speaker 06:
That automakers are historically over-compliant, year after year, producing more electric vehicles than required by California standards.

[03:39:00] Speaker 06:
So if anything, it's as proxy for the baseline is too conservative.

[03:39:04] Speaker 06:
You can see that at JA-907.

[03:39:08] Speaker 06:
But turning to the petition at hand, we have two readings of section 32902H before the court.

[03:39:14] Speaker 06:
petitioners, and petitioners runs into several problems that NHTSA doesn't face.

[03:39:20] Speaker 06:
The first is the specific inclusions and exclusions that Congress wrote in subsection H.

[03:39:26] Speaker 06:
Second is the structural decision with which Congress wrote the Catholic Statute, specifically the role of the subsection factors.

[03:39:34] Speaker 06:
And third is the absurd results that defeat both of Congress's express objectives, incentivizing alternative fuel vehicles and keeping the focus on the fuel economy.

[03:39:46] Speaker 06:
Returning to that first problem, and it is a big one, petitioners give no effect to the exclusions that Congress wrote to subsection H. It says constrained

[03:39:56] Speaker 06:
three sections, C, F, and G, and it is not constrained in carrying out the balance of the sections, including the standard setting provisions of A, B, and D. And petitioners give no effectiveness.

[03:40:08] Speaker 06:
The Supreme Court tells us in the National Association of Manufacturers versus DOD case that when we see an enumerated list like this, we need to give effect to those exclusions.

[03:40:18] Speaker 06:
So we need to come up with some theory of the statute that explains why A, B, and D are not in but C, F,

[03:40:25] Speaker 06:
Fish tissue's redundancy theory just doesn't work.

[03:40:29] Speaker 09:
One of the big problems with that theory is they admit that... Yes, in the abstract, but does that structural intuition have less force in the context of a statute which seems to have some very strange and inexplicable redundancies?

[03:40:54] Speaker 09:
Two.

[03:40:55] Speaker 09:
I mean, if they cross reference A but not B, what would we make of that?

[03:40:59] Speaker 06:
I mean, so I think I hear your question, Judge Katz, as did Congress write this statute precisely.

[03:41:06] Speaker 06:
And there's every reason to think it did, because it was trying to do something very precise.

[03:41:10] Speaker 06:
It was trying to incentivize alternate-fueled vehicles, but not too much.

[03:41:14] Speaker 06:
It was worried about a wholesale switch over.

[03:41:17] Speaker 06:
So it was putting its thumb on the scale, but trying to not press down too hard.

[03:41:22] Speaker 06:
And that kind of precise balance objective is exactly the thing we expect to see behind a very precise statute.

[03:41:29] Speaker 06:
I think the Chief Judge had a question about what the Alternative Motor Fuels Act looked like, and that's in the green addendum at A22 and

[03:41:37] Speaker 06:
or you see it basically put two clamps on NHTSA's analysis, one for the amendment provisions and one for the four maximum feasible factors.

[03:41:47] Speaker 06:
Now at the time that it did that, NHTSA had been doing CAFE rulemakings for 10 years.

[03:41:52] Speaker 06:
And in every single one of those rulemakings from the very first in 1977, it had always looked at those four maximum feasible factors in terms of a specific set of fuel economy improvements that it was considering.

[03:42:05] Speaker 06:
whether that's a new engine, technology, or otherwise.

[03:42:08] Speaker 06:
And it would analyze each of those factors against those improvements.

[03:42:13] Speaker 06:
So it was logical to understand Congress when it constrained the consideration of those factors as constraining the consideration of those improvements.

[03:42:23] Speaker 06:
But under Petitioner's theory, none of that matters, because everything's sort of wrapped up in the standard setting analysis anyway.

[03:42:30] Speaker 06:
I think that bears out in the recession

[03:42:33] Speaker 06:
Subsection H doesn't bind subsection D. But that makes no sense, because the subsection D is the small manufacturing section.

[03:42:41] Speaker 06:
And it includes the words maximum feasible average fuel economy, just like all the other standard settings.

[03:42:47] Speaker 06:
So there's no reason why there's sort of theory that F distributes everything through that term everywhere.

[03:42:53] Speaker 06:
That doesn't make any sense.

[03:42:55] Speaker 06:
It also uses a phrase, the maximum feasible average fuel economy level that manufacturers

[03:43:02] Speaker 06:
And that same phrase appears in subsection A. So it doesn't make sense why we can sort of do this workaround and daisy chain these statutes together to get at the standards set under A, but not under B.

[03:43:17] Speaker 06:
And the Supreme Court tells us that's exactly how we're not supposed to read an enumerated list like this.

[03:43:23] Speaker 06:
In the NAM case I mentioned, we're looking at a direct review statute under the Clean Water Act.

[03:43:28] Speaker 06:
And it had, again, the Court of Appeals gets actions that arise under this, this, and this, and this section.

[03:43:36] Speaker 06:
And the government had a theory that, well, we can kind of get there anyway through this workaround.

[03:43:41] Speaker 06:
And the Supreme Court said, no, you have to give effect to those exclusions.

[03:43:45] Speaker 06:
You have to come up with a theory of the statute

[03:43:47] Speaker 06:
that you don't get there anyway, you have to give me.

[03:43:52] Speaker 06:
I think the last point I'd turn to is the absurd results that the petitioner's reading creates.

[03:43:58] Speaker 06:
And it's on their brief.

[03:44:01] Speaker 06:
We also raised one, the domestic minimum standard, where we get a minimum standard that is higher than the maximum standard, which cannot be right.

[03:44:10] Speaker 06:
And they argue that we got this wrong somehow, that those two are tethered together and they travel together.

[03:44:16] Speaker 06:
But that's wrong.

[03:44:17] Speaker 06:
In the plain text of subsection B4, the domestic minimum standard is always set at 92% of the projected average fuel economy of the combined fleet.

[03:44:27] Speaker 06:
In other words, what is the industry's performance overall, not 92% of the average standard.

[03:44:34] Speaker 11:
But didn't NHTSA do it differently?

[03:44:35] Speaker 06:
Yeah.

[03:44:35] Speaker 06:
And so ironically, what they're citing is NHTSA's practice over the statutory text, which is

[03:44:40] Speaker 06:
not their primary argument.

[03:44:42] Speaker 06:
So METSA is using the CAFE standard as a proxy for what that industry performance is.

[03:44:48] Speaker 06:
That's very reasonable under their view of the statute, because those two are not going to diverge significantly.

[03:44:54] Speaker 06:
CAFE standard is always going to keep track with industry performance, because they are using a realistic baseline.

[03:45:00] Speaker 06:
It's only when we get to petitioners' partial view

[03:45:05] Speaker 06:
that those two start to diverge, if that were what it had to do, then you would have to get a different proxy to do that projection before, and we would get exactly the desired result we explained in our report.

[03:45:21] Speaker 06:
There are no further questions from the court?

[03:45:23] Speaker 11:
I have to sit down.

[03:45:24] Speaker 11:
Thank you, counsel.

[03:45:25] Speaker 11:
Thank you.

[03:45:28] Speaker 11:
MacArthur will give you five minutes for rebuttal.

[03:45:33] Speaker 10:
So I have yet to hear a textually coherent explanation of how the various limitations the government reads into subsection H can be found in that provision.

[03:45:42] Speaker 10:
I don't have any problem with the fact that the statute is forward-looking.

[03:45:47] Speaker 10:
The EVs in the baseline don't remain somewhere in the past.

[03:45:50] Speaker 10:
They get carried forward into the fleet that NHTSA models to determine whether its standards are feasible and practical in those future model years.

[03:46:00] Speaker 10:
NHTSA's determination is based in part on the presence of those EVs in the fleet, and that transforms them

[03:46:08] Speaker 10:
into a regulatory mandate and away from the compliance flexibility that Congress intended them to be.

[03:46:16] Speaker 10:
Because they have such a problem with plain text, they go to absurd results.

[03:46:20] Speaker 10:
We are nowhere close to the territory of invoking the absurd results canon.

[03:46:25] Speaker 10:
They say their analysis would be divorced from reality.

[03:46:28] Speaker 10:
because the baseline fleet would be a quote unquote fictional fleet but the fleet of conventional vehicles is not fictional it is quite real and it is only that fleet that congress permitted the agency to consider in setting these standards congress all the time directs agencies

[03:46:44] Speaker 10:
to exclude aspects of quote-unquote reality from their analysis.

[03:46:48] Speaker 10:
And it had a good reason for doing so here, because it wanted to preserve the incentive it enacted and prevent the agency from turning it into a regulatory mandate in precisely the way the agency has done here.

[03:47:00] Speaker 10:
At the end of the day, all they really mean by the analysis being divorced from reality is that the standards will be more

[03:47:07] Speaker 10:
or will be less stringent than they would be if they were set based on what would be achievable with electric vehicles in the fleet.

[03:47:15] Speaker 10:
That is the choice Congress made when it prohibited them from considering the fuel economy of electric vehicles.

[03:47:21] Speaker 10:
The other observed results of Section B4, the domestic minimum standard, there's a reason you're hearing that only from the interveners

[03:47:28] Speaker 10:
because it is contrary to NHTSA's own interpretation of the statute.

[03:47:33] Speaker 10:
Council mentioned the plain language of the statute.

[03:47:36] Speaker 10:
NHTSA's interpretation is perfectly consistent with the plain language.

[03:47:40] Speaker 10:
The key language is that NHTSA must take 92% of the average fuel economy for the combined fleets, the projected fuel economy for the combined fleets.

[03:47:52] Speaker 10:
It doesn't say the projected fuel economy to be achieved by the combined fleets.

[03:47:56] Speaker 10:
It says for the combined fleets.

[03:47:58] Speaker 10:
NHTSA has reasonably read that to mean projected to be required for the combined fleets.

[03:48:05] Speaker 10:
You might ask, why are we talking about a projection if we're talking about the standard?

[03:48:09] Speaker 10:
Here you need to remember that the CAFE standard isn't actually a miles per gallon standard.

[03:48:13] Speaker 10:
It is a mathematical function that depends on what happens in the future.

[03:48:16] Speaker 10:
You only get a miles per gallon standard at the end of the model year.

[03:48:20] Speaker 10:
And so when NHTSA is setting the standards, it has to project what the standard will be.

[03:48:24] Speaker 10:
And it's that projection that NHTSA uses to derive the 92% for the domestic minimum.

[03:48:31] Speaker 10:
So it completely avoids the anomaly that the interveners have raised here.

[03:48:36] Speaker 11:
Can you just address the government submission that

[03:48:40] Speaker 11:
The statute refers the relevant provision H, the most relevant provision H, refers to CF and G. But the only reason C and G are included is to deal with the kind of ex ante intent.

[03:48:53] Speaker 11:
To deal with the ex ante intent of whether, as I understood it, that's what they're saying, is that F really is doing all the work here.

[03:49:00] Speaker 11:
And C and G are only about the reasons for which an amendment is being undertaken.

[03:49:04] Speaker 10:
I agree with that interpretation.

[03:49:05] Speaker 10:
I think F is doing the work when you're setting the standard.

[03:49:08] Speaker 10:
Even in the amendment context.

[03:49:09] Speaker 10:
Even in the amendment context.

[03:49:10] Speaker 10:
And that's because if you look at the amendment provisions, the substantive standard for the amendment provisions is maximum feasible fuel economy.

[03:49:18] Speaker 10:
F tells you how to determine the maximum feasible fuel economy.

[03:49:20] Speaker 11:
But that's the only reason C and G are in there.

[03:49:22] Speaker 10:
As far as I can tell, that's how to make sense of the way Congress approached

[03:49:28] Speaker 10:
Council for interveners mentioned that I conceded that subsection H doesn't constrain D at all.

[03:49:34] Speaker 10:
That is not what I said.

[03:49:35] Speaker 10:
D also includes that maximum feasible standard when you actually set the alternative standard for the small manufacturer.

[03:49:41] Speaker 10:
That's going to be subject to H because it will be carrying out subsection F and deciding maximum feasible fuel problem.

[03:49:47] Speaker 10:
Council also mentioned that when Congress originally enacted this provision in 1988, there was an unbroken string of

[03:49:53] Speaker 10:
NHTSA having improved the fuel economy standards, that is factually incorrect.

[03:49:57] Speaker 10:
As I mentioned in my outset, 1986, NHTSA decreased the fuel economy standards.

[03:50:03] Speaker 10:
Congress enacted subsection H right on the heels of that in 1988.

[03:50:11] Speaker 10:
There were some points on harmless error that I would indulge the court's patients to address.

[03:50:17] Speaker 11:
Can you can you first speak to before you go to almost there and if you could just briefly kind of account through that be appreciated but on vacated versus if we get to that stage remand without vacated versus vacated because that's something that the government has argued and both in its brief and today.

[03:50:35] Speaker 10:
I actually think it might be more useful if I go quickly through harmless error first and then address it as a setup to understand the point on vacant.

[03:50:43] Speaker 10:
So very quickly on harmless error, we easily carried the not onerous burden that we have to show prejudice.

[03:50:49] Speaker 10:
We identified comments in the record that were submitted to the agency explaining that these standards could not be achieved by a fleet of conventional vehicles and would in effect require production of electric vehicles.

[03:51:01] Speaker 10:
The agency never disagreed with that, never provided any analysis to the contrary in the rule.

[03:51:07] Speaker 10:
What it said instead is that the standards are feasible without further production of electric vehicles beyond what is already expected in the baseline.

[03:51:16] Speaker 10:
And if you look at the auto innovators amicus brief, they show, and it doesn't dispute it, that if you back out all the electric vehicles and you treat the plug-in hybrids as gas vehicles as required by the statute,

[03:51:27] Speaker 10:
the average fuel economy of the compliance fleet declines by 3.4 miles per gallon.

[03:51:32] Speaker 10:
That is a huge difference, and there's no basis in this record to conclude that it would be technologically feasible and economically practical to make that difference back up with improvements to the fuel economy of the conventional fleet.

[03:51:44] Speaker 10:
Indeed, even considering all of the unlawful compliance flexibilities that NHTSA considered in its rulemaking, they themselves projected that automakers would fall short of the standard by 0.7 miles per gallon,

[03:51:55] Speaker 10:
in 2026, quickly on the sensitivity analysis.

[03:52:00] Speaker 10:
There are a lot of numbers flying back and forth between our brief and the government's brief.

[03:52:05] Speaker 10:
The good news is, if you agree with our reading of the statute, there is no reason to delve into any of that, because they never ran a sensitivity analysis that corrected all of the errors.

[03:52:14] Speaker 10:
For these purposes, you can put our errors into four categories.

[03:52:17] Speaker 10:
There's the EVs in the 2020 fleet,

[03:52:19] Speaker 10:
the state mandated EVs, plug-in hybrids, and the improper consideration of all of the compliance flexibilities in years outside the standard setting years.

[03:52:29] Speaker 10:
As to the first, they never ran an analysis, never said in the rule, do not even say in their brief in this court that backing out the 2020 EVs was harmless.

[03:52:38] Speaker 10:
That by itself should be game over for them on harmless air.

[03:52:41] Speaker 10:
As to the other three errors, they did run sensitivity analyses that corrected them, but only one at a time.

[03:52:47] Speaker 10:
They never ran an analysis that corrected even more than one of them, let alone all of them, simultaneously.

[03:52:52] Speaker 11:
But as to the first one, they did say remand without vacator.

[03:52:57] Speaker 10:
As to the first one, they did say remand without vacator.

[03:52:59] Speaker 10:
They never said that it was harmless.

[03:53:00] Speaker 10:
The first time I heard that was from the podium today, and it is a post-hoc rationale that should not be considered, both because they didn't say it in the rule, and it's chain rebarred, and they didn't put it in their brief, and it's waived.

[03:53:11] Speaker 10:
Quickly then on remand without vacator.

[03:53:14] Speaker 10:
That's the default rule for unlawful agency action and there is no reason for departing from it here.

[03:53:20] Speaker 12:
The default rule is vacator.

[03:53:22] Speaker 10:
I said that wrong, I apologize.

[03:53:24] Speaker 10:
Default rule is vacator, and there's no reason from departing from that here.

[03:53:28] Speaker 10:
Both of the allied signal factors point squarely toward vacator.

[03:53:31] Speaker 10:
Here, the errors were very serious.

[03:53:34] Speaker 10:
Not a case in which the agency simply failed to adequately explain its rationale or to consider an aspect of the problem.

[03:53:41] Speaker 10:
They flagrantly and systematically violated express restrictions on their authority, and there's

[03:53:48] Speaker 10:
no likelihood for the reasons I just explained that they could impose this same rule that as a 3.4 miles per gallon boost from improper compliance flexibilities on remit.

[03:54:00] Speaker 10:
Second, on second factor, disruptiveness

[03:54:03] Speaker 10:
As Judge Cassis explained in his opinion for the court in the Long Island power case, disruption only matters insofar as it's likely the agency will be able to rehabilitate its rule on remand.

[03:54:15] Speaker 10:
For the reasons I just explained, there's really no possibility of that here.

[03:54:20] Speaker 10:
And in any event, the egg hasn't been scrambled.

[03:54:21] Speaker 10:
If you vacate these rules, it's not as if we're gonna be in a situation where we go to no fuel economy standards for the model years at issue.

[03:54:28] Speaker 10:
It will, as the agency recognizes,

[03:54:30] Speaker 10:
automatically resurrect the prior standards from 2020.

[03:54:34] Speaker 10:
There will be no disruption to the regulated industry.

[03:54:37] Speaker 10:
The auto innovators are here alongside us in this case requesting.

[03:54:40] Speaker 11:
Thank you council.

[03:54:45] Speaker 11:
Thank you to all council in this case.

[03:54:47] Speaker 11:
We'll now proceed to the NRDC challenge.

[03:54:54] Speaker 11:
Mr. Huffman, please proceed when you're ready.

[03:54:57] Speaker 12:
Good afternoon, Your Honors.

[03:54:58] Speaker 12:
May it please the Court.

[03:55:00] Speaker 12:
The Energy Policy and Conservation Act requires, so to say, fuel economy standards at the maximum level possible for automakers.

[03:55:09] Speaker 12:
The agency failed to do so here.

[03:55:11] Speaker 11:
I'm sorry to interrupt you.

[03:55:12] Speaker 11:
Can you make sure, maybe lower the podium a little bit and make sure you're speaking into the mics?

[03:55:16] Speaker 11:
Thank you.

[03:55:19] Speaker 11:
Is that better, Your Honor?

[03:55:21] Speaker 12:
Just project as well as you can.

[03:55:22] Speaker 12:
We appreciate it, thank you.

[03:55:25] Speaker 12:
The agency failed to set required maximum feasible standard as a sweeping and counterfactual assumption that excluded from consideration a cost-effective and well-established efficiency technology.

[03:55:39] Speaker 12:
First, the agency assumed that no pickup truck whatsoever could use what's called a high compression ratio for Atkinson-enabled engines.

[03:55:49] Speaker 12:
Second, the agency assumed that any sport utility or other vehicle that currently uses the same engine design as a pickup truck can't use these engines either.

[03:56:02] Speaker 12:
And these assumptions are a big deal.

[03:56:04] Speaker 12:
They affect the bottom line.

[03:56:06] Speaker 12:
Unlike in the petitions the court just heard, there's no argument from the agency here that the errors we allege are harmless.

[03:56:13] Speaker 12:
And that makes sense.

[03:56:14] Speaker 12:
The assumptions apply to millions of pickup trucks and sport utility vehicles sold every year.

[03:56:21] Speaker 12:
And this is very cost-effective technology.

[03:56:24] Speaker 12:
Addressing these vehicles are some of the best-selling and least efficient vehicles out there.

[03:56:29] Speaker 12:
Applying this sort of well-developed, you know, the National Academies reports talk about this technology, applying this to sort of this large portion, an inefficient portion of the feet,

[03:56:40] Speaker 12:
of the fleet is really the core place that Nissan should be focusing its efforts.

[03:56:45] Speaker 12:
And these engines are almost tailor-made for how pickup trucks are actually used in the real world.

[03:56:51] Speaker 12:
It can operate in two different modes.

[03:56:53] Speaker 12:
It operates in an efficient Atkinson cycle mode for routine driving, which the record tells us is mostly what these vehicles are doing.

[03:57:02] Speaker 12:
But it can automatically switch to a higher power on auto cycle mode for infrequent tasks like towing or hauling.

[03:57:11] Speaker 12:
The agency says, no, categorically, no pickup truck can use these engines.

[03:57:17] Speaker 12:
Now, the reason it assumes that, it depends where you look.

[03:57:20] Speaker 12:
So it's joint appendix.

[03:57:22] Speaker 12:
It's not page 952.

[03:57:23] Speaker 12:
This is the affirmative rationale that they gave.

[03:57:27] Speaker 12:
This is what's in the Federal Register.

[03:57:29] Speaker 12:
And there's not much there.

[03:57:30] Speaker 12:
It's a couple of sentences.

[03:57:32] Speaker 12:
But what it says is, if you try to use it in a pickup truck, pickup trucks are spending so much of their time doing high load operations.

[03:57:41] Speaker 12:
that the engine's not going to spend much time in the efficient Atkinson mode, so you're going to get minimal benefit from the technology.

[03:57:48] Speaker 12:
And again, this is at JA952, and the footnote, they say, and these are their words, they say this is based on confidential conversation with automate.

[03:57:58] Speaker 12:
Now, that rationale is arbitrary and capricious, as we explained in our opening brief, but the agency has also walked away from it here in litigation.

[03:58:06] Speaker 12:
their response brief, page 113, it's note 25.

[03:58:10] Speaker 12:
Now they say they did not rely on confidential data.

[03:58:14] Speaker 12:
They say they relied on public data, but they don't cite any public data.

[03:58:19] Speaker 12:
Not in the footnote, not in the Federal Register, not in their brief.

[03:58:22] Speaker 12:
And that alone makes this assumption about pickup trucks arbitrary and capricious.

[03:58:27] Speaker 12:
In this court's decision in the Tripoli rocketry case, that's 437 F-375, this court made clear that even in areas where an agency claims technical expertise, under the Administrative Procedure Act, the court cannot simply accept technical assumption proffered by the agency merely because it reflects the agency's judgment.

[03:58:50] Speaker 12:
And just like in Tripoli rocketry, the agency hasn't provided any data that supports the exclusion of this technology.

[03:58:57] Speaker 12:
And that absence of data is also what distinguishes the agency's cited deference cases.

[03:59:05] Speaker 12:
Now in its brief in litigation, the agency proffers a new rationale for excluding these engines from pickup trucks.

[03:59:12] Speaker 12:
Now it's not about minimizing the benefit.

[03:59:14] Speaker 12:
Now they say if you tried to use one of these in a pickup truck,

[03:59:17] Speaker 12:
it would start to knock and eventually break down.

[03:59:19] Speaker 12:
So it went from minimal efficiency benefits to it would break.

[03:59:25] Speaker 12:
Now, there's no data supporting that either.

[03:59:27] Speaker 12:
So the agency tries to sort of reason it out from generalities about basic engine operation.

[03:59:35] Speaker 12:
It claims that knock, this is when the piston compresses the fuel air mixture and it ignites because it's getting hot before the spark plug goes.

[03:59:43] Speaker 12:
And if you get that, you can make this sort of knock, knocking or tapping sound.

[03:59:47] Speaker 12:
says that that knock is just an inescapable consequence of physical construction of one of these high compression ratio engines.

[03:59:55] Speaker 12:
But we know from the record that that's not true.

[03:59:58] Speaker 12:
It is a categorical matter.

[04:00:00] Speaker 12:
There are already engines using this exact same physical design in large SUVs that has the compression ratio that the agency says is necessary.

[04:00:10] Speaker 12:
And there's hundreds of thousands of these on the road without any knocking problem.

[04:00:15] Speaker 12:
Now, even if there wasn't

[04:00:16] Speaker 12:
that counterexample in the record, the agency's exclusion of the pickup trucks is still arbitrary and capricious because it hasn't offered a sufficient explanation under this court's precedent.

[04:00:28] Speaker 12:
So the brief has a lot of words about pistons and valves, but none of that's in dispute.

[04:00:34] Speaker 12:
And it all just leads up to a very true statement that if you over-compress the mixture in a cylinder and get knock,

[04:00:41] Speaker 12:
Yes, that's just what it means to over-compress if you haven't knocked.

[04:00:46] Speaker 12:
If you're not knocking, you haven't over-compressed.

[04:00:49] Speaker 12:
So it's not explaining anything.

[04:00:51] Speaker 12:
What the agency's obligated to explain is why these engines supposedly will knock in every pickup truck.

[04:00:58] Speaker 12:
And for that, all they say is that higher compression ratio engines press more than lower compression ratio engines.

[04:01:06] Speaker 12:
That a 13 to 1 ratio is higher than a 10 to 1 ratio.

[04:01:10] Speaker 12:
And again, that's true.

[04:01:11] Speaker 12:
We can't dispute 13 is greater than 10.

[04:01:14] Speaker 12:
But that doesn't explain anything.

[04:01:15] Speaker 12:
And the easiest way to show that, I think, is that you can swap in any two ratios you want into their explanation, and nothing changes, because none of the reasoning is tied to a specific ratio.

[04:01:28] Speaker 12:
So for instance, you could take out the magic number 13, which they say is necessary, and put in 11.8.

[04:01:35] Speaker 12:
11.8 is the current ratio used by the Tacoma pickup truck.

[04:01:38] Speaker 12:
So we know that that works, but all of their reasoning still holds.

[04:01:42] Speaker 12:
11.8 is higher than 10.

[04:01:44] Speaker 12:
11.8 will compress more than 10.

[04:01:47] Speaker 12:
There's also, to sort of correct, which is a little bit sort of misleading suggestion in the brief, there's not an inherent trade-off between increasing compression ratio and increasing power.

[04:01:59] Speaker 12:
And the easiest way to see this is at JA273.

[04:02:02] Speaker 12:
This lays out for the Tacoma pickup truck.

[04:02:06] Speaker 12:
It's got side by side.

[04:02:07] Speaker 12:
It shows it's offered with two different engines.

[04:02:10] Speaker 12:
And the lower compression ratio engine is also the lower powered.

[04:02:14] Speaker 11:
Do you think they're entirely unrelated?

[04:02:17] Speaker 12:
No, Your Honor, it's just that much more goes into engine design.

[04:02:21] Speaker 12:
The brief also seems to suggest sometimes that this is the only variable that changes.

[04:02:25] Speaker 12:
Automakers each year just decide what compression ratio and everything stays the same.

[04:02:30] Speaker 12:
But you can change the size of the cylinders, the number of cylinders, the orientation of the cylinders, the number of valves.

[04:02:36] Speaker 12:
There's a whole host of things.

[04:02:38] Speaker 12:
And that's what automakers do.

[04:02:40] Speaker 12:
They have a design and account for all of these factors when they're trying to put in an engine there.

[04:02:45] Speaker 12:
So there's no reason to think that they can't design, use a higher compression ratio and still get more power out of it.

[04:02:52] Speaker 12:
You can see that in the example of the Toyota, that's again a JA273.

[04:03:00] Speaker 12:
I'd like to shift gears just briefly because there's another independent arbitrary and capricious assumption that the agency made that also warrants a remand back to the agency.

[04:03:10] Speaker 12:
So automakers sometimes use the same engine in different vehicle lines as a cost-spreading measure.

[04:03:17] Speaker 12:
The agency here says that any time a sport utility or other vehicle is currently using the same engine design as a pickup truck,

[04:03:25] Speaker 12:
They exclude consideration that those SUVs could be upgraded with a high compression ratio engine.

[04:03:31] Speaker 12:
The agency doesn't dispute that these SUVs and other vehicles are technologically capable.

[04:03:36] Speaker 12:
They just say that it's too expensive for automakers to break up an engine sharing family.

[04:03:41] Speaker 12:
But we know that that's not true also because of the record.

[04:03:45] Speaker 12:
The only example the agency gives of an engine sharing family is the family that includes the Chevy Colorado pickup truck.

[04:03:52] Speaker 12:
sites in our reply at 22.

[04:03:57] Speaker 12:
But in the prior round of rulemaking, that family included the Chevy Equinox SUV.

[04:04:02] Speaker 12:
Now, under the agency's reasoning, Chevy would have had to have kept the Equinox on the same engine path as the Colorado pickup.

[04:04:10] Speaker 12:
But that's not what happened.

[04:04:12] Speaker 12:
The automaker broke up the engine sharing family.

[04:04:15] Speaker 12:
They upgraded the Equinox with a different engine.

[04:04:17] Speaker 12:
So it shows that it can be economically practical

[04:04:21] Speaker 12:
to break up these engine-sharing families.

[04:04:24] Speaker 12:
And even ignoring that sort of contrary record evidence, the agency's economic rationale is arbitrary because it fails to account for the statutory factor, which tells the agency to look at what's economically practical.

[04:04:37] Speaker 12:
So even if it were true that it would be more economic to generally keep engine-sharing families together, it doesn't mean that it's impractical to break them up at times,

[04:04:48] Speaker 12:
the agency does not dispute that these other vehicles are technologically capable of using this particular engine technology.

[04:04:56] Speaker 03:
So with respect to the disparate treatment between SUVs and pickups, is that something that was preserved before the agency?

[04:05:05] Speaker 03:
If you can just tell me, how was that raised before the agency in the rulemaking?

[04:05:12] Speaker 03:
Because it looks like

[04:05:14] Speaker 03:
From what I can tell, you were relying on a comment that seems to me a little oblique.

[04:05:19] Speaker 03:
Pickups have 18% to 19% higher power to weight than both cars and truck SUVs.

[04:05:25] Speaker 03:
Is there something else?

[04:05:26] Speaker 03:
Because it's just not clear that this particular argument about the disparate treatment between SUVs and pickups was put before the agency.

[04:05:36] Speaker 12:
Yes, sir.

[04:05:36] Speaker 12:
When the agency made these proposals, they laid out certain criteria that they said, you know, render these engines ineffective.

[04:05:44] Speaker 12:
And we and many other commenters put in comments that said that none of those rationales are valid, like that these technologies, high compression ratio engines should be able to apply to every vehicle in the fleet.

[04:05:56] Speaker 12:
So we would definitely, the agency was certainly on notice that

[04:06:01] Speaker 12:
public commenters thought that these engines could be used on all of these vehicles.

[04:06:05] Speaker 12:
If I'm understanding your question.

[04:06:07] Speaker 03:
Yes, but nothing more specific than that with respect.

[04:06:09] Speaker 03:
I mean, you just make very detailed arguments here about specific SUVs and models and things.

[04:06:16] Speaker 03:
And it wasn't clear to me the agency had a chance to respond to these types of very specific arguments that you're making.

[04:06:23] Speaker 12:
Yes, Your Honor.

[04:06:23] Speaker 12:
The comments were very detailed.

[04:06:25] Speaker 12:
I don't think they're maybe not quoted in the agency's response to comments.

[04:06:29] Speaker 12:
But some of these comments, they're

[04:06:31] Speaker 12:
dozens of pages long talking about how these engines can be used in these vehicles and from expert regulator like the California's Air Resources Board put in a comment with a lot of detail on it.

[04:06:44] Speaker 12:
That's actually useful to point out that this is the only agency that seems to think there's a problem with this technology, both the regulators at California's Air Resources Board, the EPA also in their last rulemaking

[04:06:57] Speaker 12:
acknowledge that at least six cylinder trucks, all of them could use this technology.

[04:07:01] Speaker 12:
So this is really off on its own.

[04:07:03] Speaker 12:
They have no data.

[04:07:06] Speaker 12:
It's arbitrary.

[04:07:09] Speaker 12:
No further question.

[04:07:11] Speaker 11:
We'll give you some time for rebuttal.

[04:07:12] Speaker 11:
Thank you, Mr. Copple.

[04:07:21] Speaker 01:
May it please the court.

[04:07:22] Speaker 01:
In setting fuel economy standards, NHTSA uses the CAFE model to simulate how the entire car fleet will evolve years into the future in response to proposed fuel economy.

[04:07:33] Speaker 01:
And NHTSA accounts for more than 70 potential technological upgrades that manufacturers can use to improve the fuel economy of their vehicles.

[04:07:41] Speaker 01:
It unnecessarily makes determinations about how certain technologies are likely to be used and which applications of those technologies are a feasible means to improve fuel economy.

[04:07:52] Speaker 01:
NRDC's petition focuses on one of dozens of technologies, a high compression ratio engine.

[04:07:57] Speaker 01:
And NHTSA reasonably determined that that particular technology is not a feasible means of improving the fuel economy of pickups.

[04:08:05] Speaker 01:
NHTSA explained that as between two otherwise equal engines, a high compression ratio engine will produce less power and less torque than a standard engine.

[04:08:16] Speaker 01:
And automakers want to maintain the power and torque of their pickups in possible contrast with their passenger vehicles and SUVs because that power is critical to the pickup's ability to haul and tow, which is a key feature of the pickup truck.

[04:08:34] Speaker 01:
Perhaps most tellingly, the reasonableness of NHTSA's determination is confirmed by automaker actions in practice.

[04:08:41] Speaker 01:
Based with increasing fuel economy levels, both before the 2022 rulemaking and after, we would expect that if high compression ratio engines were a feasible means to improve the fuel economy of pickups, we would expect automakers to be using them.

[04:08:57] Speaker 01:
But the record shows that the opposite is true.

[04:09:00] Speaker 01:
In the model year 2020 fleet, there wasn't a single pickup that used a high compression ratio engine.

[04:09:06] Speaker 01:
And recently, actually, Toyota announced the 2024 Tacoma, which is a vehicle that previously used when NRDC erroneously labels a high compression ratio engine.

[04:09:16] Speaker 01:
Toyota announced the Tacoma is going to have a turbocharged engine.

[04:09:19] Speaker 01:
Turbocharging is a distinct technology line that can be used to improve the fuel economy of pickups.

[04:09:30] Speaker 01:
That vindicates NHTSA's decision to model Toyota taking the Tacoma down that turbocharging path as opposed to the high compression ratio path.

[04:09:38] Speaker 01:
The prediction that NRDC says was arbitrary and capricious turns out to have been exactly correct.

[04:09:44] Speaker 01:
To be clear, NHTSA didn't say that a high compression ratio engine can never work in a pickup.

[04:09:51] Speaker 01:
It said that it's not a feasible means to improve the fuel economy.

[04:09:56] Speaker 01:
So take a hypothetical pickup with a 3.5-liter, six-cylinder standard engine.

[04:10:02] Speaker 01:
An automaker may be able to make that pickup work with all the falling and tone capacity by upsizing the engine to a 5-liter, eight-cylinder engine.

[04:10:11] Speaker 01:
But that's not going to improve fuel economy because the larger engine, even though it's a high compression ratio engine, will burn more fuel.

[04:10:19] Speaker 01:
And there will be more energy losses, pumping losses, and friction losses because it's a larger engine.

[04:10:24] Speaker 01:
And the automaker may have to redesign the truck to fit the larger engine in the truck.

[04:10:31] Speaker 01:
So that's going to be a very expensive proposition.

[04:10:33] Speaker 01:
Again, it's just not a feasible means for an automaker to improve the fuel economy of a pickup.

[04:10:39] Speaker 01:
And again, that's borne out in the record.

[04:10:41] Speaker 11:
What's your response to the other side's argument about the comparable SUVs?

[04:10:47] Speaker 01:
Yeah, so they cite the Palisade and the Telluride, which had high compression ratio engines and maximum torque levels on par with some pickups.

[04:10:54] Speaker 01:
But those are not comparable engines.

[04:10:56] Speaker 01:
First, the Palisade and the Telluride have 3.8 liter engines.

[04:11:00] Speaker 01:
The pickups they compare it to have 3.5 liter engines.

[04:11:04] Speaker 01:
So the SUVs have engines that are 89% larger.

[04:11:08] Speaker 01:
And as a result, if you actually look at the fuel economy of the Palisade and the Telluride, they're around the middle of their class, medium-sized performance SUVs.

[04:11:18] Speaker 01:
They're not getting huge fuel economy benefits.

[04:11:21] Speaker 01:
Furthermore, the maximum torque numbers at NRDC sites are misleading.

[04:11:27] Speaker 01:
Maximum torque is produced at high engine speed, say 5,000 revolutions per minute.

[04:11:31] Speaker 01:
But pickups need to be able to produce power at low engine speed, 1,000 RPM.

[04:11:38] Speaker 01:
Because that's going to reduce the wear and tear.

[04:11:40] Speaker 01:
That's going to reduce the risk of damage.

[04:11:43] Speaker 01:
And so comparing max torque doesn't demonstrate that these engines are actually.

[04:11:47] Speaker 01:
And why is that?

[04:11:48] Speaker 11:
So it sounds like what you're saying is just by definition, SUVs and pickups are not comparable.

[04:11:54] Speaker 01:
No, what I'm saying is that, well, pickups are designed to be able to produce lots of power at low engine speeds because they need that to tow.

[04:12:04] Speaker 01:
When they're towing, they might be towing for hours, and they can't be operating at high engine speeds the entire time.

[04:12:10] Speaker 01:
SUVs aren't designed to tow.

[04:12:11] Speaker 01:
And actually, if you look, for example, at the Palisade and the Telluride, their towing capacity is lower than the Tacoma, which NRDC compares them to.

[04:12:19] Speaker 01:
Furthermore, if you look at the owner's manual of the Palisade and the Telluride, the driver is warned when towing uphill

[04:12:27] Speaker 01:
Make sure to keep your speed at 45 miles per hour or less You're not gonna see that warning in a pickup because pickups are built for towing They're built for hauling and they really do have more capacity.

[04:12:38] Speaker 03:
So again Are you saying that the examples they give of SUVs?

[04:12:45] Speaker 03:
that Like the Palestine that tell you right they do not share parts with pickup trucks and

[04:12:51] Speaker 01:
Those don't share a part.

[04:12:53] Speaker 01:
So the policy in the Telluride use high compression ratio engines, but they're not producing, first of all, if you were to keep the size the same, they are not producing the same power or torque which pickups need.

[04:13:07] Speaker 01:
They don't really have the same power and torque and towing and hauling capability as the pickups.

[04:13:13] Speaker 01:
So the notion that,

[04:13:17] Speaker 01:
Look, we have some SUVs that have high compression ratio pickups.

[04:13:21] Speaker 01:
That does not demonstrate that high compression ratio engines are a feasible means to improve the fuel economy of pickups without compromising on power or calling into them.

[04:13:33] Speaker 03:
Yes, but I thought part of their argument was even if you can establish this doesn't work for pickup trucks, based on this assumption of part sharing, you imputed in your model that SUVs shouldn't have

[04:13:46] Speaker 03:
Atkinson engines either, but they can.

[04:13:50] Speaker 01:
So that's a separate issue, I think, distinct from the Palisade and Telluride issue.

[04:13:53] Speaker 01:
I'm happy to address that.

[04:13:55] Speaker 01:
So NHTSA did not assume that no SUV could use a high compression ratio engine.

[04:14:00] Speaker 01:
But manufacturers use parts sharing to achieve economies of scale, share research and development costs, and it's an important part of their business model.

[04:14:09] Speaker 01:
And so NHTSA determined that when manufacturers share a part between multiple vehicles, if that part in one vehicle is going to receive some kind of technological upgrade, NHTSA is going to model that in the other vehicles that share the same part.

[04:14:24] Speaker 01:
Because that keeps this part sharing.

[04:14:26] Speaker 01:
It continues to model part sharing.

[04:14:29] Speaker 01:
And so necessarily, NHTSA said that because pickups cannot use high compression ratio engines, we're not going to model

[04:14:36] Speaker 01:
the application of high compression ratio engines in vehicles that share an engine with pickups.

[04:14:42] Speaker 01:
Now, it's true that sometimes automakers break up part sharing families.

[04:14:48] Speaker 01:
But first of all, that really is, I think, on the margins.

[04:14:52] Speaker 01:
The model necessarily has to make tractable an incredibly complex reality.

[04:14:57] Speaker 01:
And so it is a valid assumption that manufacturers will continue to share parts.

[04:15:02] Speaker 01:
And this has no data on which part sharing families a manufacturer might break up.

[04:15:08] Speaker 01:
And so it really wouldn't have a reasonable

[04:15:09] Speaker 01:
basis to model particular families being broken up.

[04:15:14] Speaker 01:
I think that it's also helpful to think about this through a particular example.

[04:15:19] Speaker 01:
So take, for example, the Toyota Camry.

[04:15:22] Speaker 01:
In the model year 2020 fleet, there were 23 variants or trims of the Camry, the XC, LE, XSC, et cetera.

[04:15:30] Speaker 01:
Most of those 23 variants used a high compression ratio engine.

[04:15:35] Speaker 01:
But three of them did not.

[04:15:37] Speaker 01:
Toyota wanted to provide its consumers with an option to have a Camry with a more powerful engine.

[04:15:42] Speaker 01:
So for three of those trims, they used the engine from the Toyota Tacoma pickup, which does not have a high compression ratio engine.

[04:15:51] Speaker 01:
So for those three models only then, NHTSA did not simulate the application of a high compression ratio engine.

[04:15:59] Speaker 01:
So yes, it's true that Toyota could put a high compression ratio engine in the Camry.

[04:16:03] Speaker 01:
And for most of the variants, it did.

[04:16:06] Speaker 01:
But it wanted to provide this other option.

[04:16:07] Speaker 01:
And the only way that it can do so

[04:16:10] Speaker 01:
economically, is not to create a whole new engine, more powerful engine for these three trims, but to share parts.

[04:16:20] Speaker 01:
And that's what NHTSA was modeling when it modeled part sharing.

[04:16:25] Speaker 01:
Not only does that address the SUVs and passenger vehicles that share an engine with pickup trucks, but it also asserts the miscellaneous other alleged errors that

[04:16:39] Speaker 01:
the NRDC asserts.

[04:16:41] Speaker 01:
So part sharing explains, for example, why it didn't model the application of high compression ratio engines in vehicles that share an engine with a vehicle with 405 or more horsepower.

[04:16:52] Speaker 01:
And it didn't model the application of a high compression ratio engine in those GM vehicles that used a variant of the same engine as the General Motors pickup trucks.

[04:17:06] Speaker 01:
Unless the court has further questions

[04:17:07] Speaker 01:
we ask the court to deny in our petition for review.

[04:17:11] Speaker 01:
Thank you, Mr. Koppel.

[04:17:15] Speaker 11:
Mr. Huffman will give you the three minutes for rebuttal, if you ask for.

[04:17:22] Speaker 12:
Thank you, Your Honor.

[04:17:23] Speaker 12:
Excuse me.

[04:17:24] Speaker 12:
Thank you, Your Honor.

[04:17:26] Speaker 12:
I just want to point out that the Council got up and talked about how this is supposed to be its low-end torque is a differentiating factor.

[04:17:34] Speaker 12:
I mentioned towing uphill.

[04:17:36] Speaker 12:
Again, none of that's in the rule.

[04:17:39] Speaker 12:
None of that's even in their brief.

[04:17:40] Speaker 12:
This is all new stuff, and the agency hasn't shown that they even have access to this data that's now supposed to be the determining factor.

[04:17:51] Speaker 12:
You started off sort of describing the burden of the task or something like that, how they modeled 70 technologies and how there's got to be some allowance.

[04:18:00] Speaker 12:
And we don't sort of dispute that as a general principle, but we're not asking them to model some prototype widget that's going to go on a niche portion of the market, three-wheeled motor cycle.

[04:18:10] Speaker 12:
We're talking about the biggest block of the least efficient vehicles on the road, millions of vehicles sold every year.

[04:18:16] Speaker 12:
We're talking about a technology that's very well developed, very mature.

[04:18:20] Speaker 12:
And as they acknowledge in their brief, essentially all you need to prime it or to get it going is the ability to vary the timing on the valves.

[04:18:30] Speaker 12:
And they acknowledge that essentially every vehicle sold today already has that.

[04:18:35] Speaker 12:
So the fleet is primed to expand this technology.

[04:18:40] Speaker 12:
And also to point out that in their modeling, they have an incredible ability to fine tune the model.

[04:18:46] Speaker 12:
We talked about how like pickups need to tow and they may be doing it, you know, all day long up a mountain or something like that.

[04:18:52] Speaker 12:
The record data is that overwhelmingly, pickup trucks do not tow or haul.

[04:18:57] Speaker 12:
75% of pickup trucks tow one time a year or less, or less being zero.

[04:19:04] Speaker 12:
NHTSA doesn't have to make it an all or nothing proposition.

[04:19:06] Speaker 12:
If they really think that there's some portion of the fleet of behemoth trucks that are towing all the time, they can allow the model to exclude it on those and allow it to propagate to the other 75%, 80% of the fleet that could use the technology.

[04:19:21] Speaker 12:
These are not real constraints that the agency has.

[04:19:25] Speaker 12:
That's its real concern.

[04:19:29] Speaker 12:
Any further questions?

[04:19:30] Speaker 11:
Thank you, Council.

[04:19:31] Speaker 11:
Thank you to both Councils.

[04:19:32] Speaker 11:
We'll take this case under submission.