B-217744, JUN 3, 1985, 64 COMP.GEN. 570

B-217744, JUN 3, 1985, 64 COMP.GEN. 570

ENVIRONMENTAL PROTECTION AND IMPROVEMENT - ENVIRONMENTAL PROTECTION AGENCY - AUTHORITY - FUEL ECONOMY - PERFORMANCE TESTING ENVIRONMENTAL PROTECTION AGENCY (EPA) IS RESPONSIBLE FOR DESIGNING AND ADMINISTERING FUEL ECONOMY PERFORMANCE TEST AND COMPUTING CORPORATE AVERAGE FUEL ECONOMY (CAFE) RATINGS FOR AUTO MAKERS. REQUEST QUESTIONED EPA'S HANDLING OF CAFE TESTS AND RATINGS IN THREE SPECIFIC AREAS. FINDINGS ARE: (1) EPA HAS BROAD STATUTORY AUTHORITY TO REFINE TEST PROCEDURES, EVEN IF HARDER TESTS HAVE THE EFFECT OF RAISING CAFE STANDARDS SLIGHTLY; (2) EPA'S USE OF INFORMAL ADVISORY CIRCULARS INSTEAD OF RULEMAKING PROCEDURES TO EFFECT TEST CHANGES IS IMPROPER UNLESS TEST CHANGES ARE "TECHNICAL AND CLERICAL AMENDMENTS" EXEMPTED FROM RULE MAKING BY STATUTE, OR UNLESS ONE OF THE ADMINISTRATIVE PROCEDURE ACT EXCEPTIONS APPLIES; AND (3) RULEMAKING PROPOSING ADJUSTMENTS TO CAFE RATINGS IS A LEGALLY ADEQUATE RESPONSE TO A COURT ORDER TO ADDRESS DISCREPANCIES RESULTING FROM TEST CHANGES EPA MADE IN 1979. TO REP. DINGELL.

TO THE HONORABLE JOHN D. DINGELL, JUNE 3, 1985:

YOUR LETTER OF FEBRUARY 8, 1985, REQUESTED OUR VIEWS ON SEVERAL MATTERS RELATING TO THE ENVIRONMENTAL PROTECTION AGENCY'S (EPA) HANDLING OF ITS TESTING RESPONSIBILITIES UNDER THE CORPORATE AVERAGE FUEL ECONOMY (CAFE) PROGRAM. SPECIFICALLY, YOUR CONCERNS ARE: (1) THE SCOPE OF EPA'S AUTHORITY TO MODIFY TEST PROCEDURES; (2) WHETHER TEST MODIFICATIONS MAY BE ACCOMPLISHED INFORMALLY; AND (3) WHETHER EPA HAS ADEQUATELY RESPONDED TO AN ORDER OF THE SIXTH CIRCUIT COURT OF APPEALS TO ADDRESS DISCREPANCIES RESULTING FROM TEST MODIFICATIONS MADE IN 1979. A FOURTH ISSUE REGARDING LIGHT TRUCKS HAS BEEN DEFERRED BY AGREEMENT WITH YOUR STAFF.

OUR VIEWS ARE, BRIEFLY, THAT EPA DID NOT EXCEED ITS BROAD AUTHORITY TO CHANGE TEST PROCEDURES, BUT CHANGES SHOULD HAVE BEEN MADE FORMALLY, UNLESS ONE OF THE SPECIFIC LIMITED EXCEPTIONS APPLIED TO A PARTICULAR CHANGE, AND THAT EPA'S PROPOSED RULEMAKING ADEQUATELY RESPONDED TO THE COURT ORDER. OUR REASONING IS EXPLAINED MORE FULLY BELOW.

I. BACKGROUND

IN RESPONSE TO THE ENERGY CRISIS, THE CONGRESS CREATED A COMPREHENSIVE BODY OF LAWS DEALING WITH THE PRODUCTION AND CONSERVATION OF ENERGY RESOURCES. AMONG THESE NEW LAWS WAS THE ENERGY POLICY AND CONSERVATION ACT, WHICH INCLUDED AN AMENDMENT TO THE MOTOR VEHICLE COST SAVINGS AND INFORMATION ACT. THE LATTER AMENDMENT CREATED THE CAFE PROGRAM. PUB.L. NO, 94-163, SEC. 301, 89 STAT. 871, 806, CODIFIED AT, 15 U.S.C. SECS. 2001 -12 (1982). FOR THE EXPRESS PURPOSE OF REDUCING GASOLINE CONSUMPTION BY MOTOR VEHICLES, CONGRESS ESTABLISHED AVERAGE FUEL ECONOMY STANDARDS. STAT. 874, SEC. 2(5). THROUGH DESIGN IMPROVEMENTS, TECHNOLOGICAL ADVANCES, SALES EFFORTS AND ANY OTHER MEANS AVAILABLE, EACH MANUFACTURER WAS REQUIRED ON THE AVERAGE TO MEET A PREDETERMINED ANNUAL STANDARD. DETERMINATION OF A MANUFACTURER'S AVERAGE FUEL ECONOMY RATING WAS BASED ON THE PERFORMANCE OF REPRESENTATIVE VEHICLES ON LABORATORY TESTS AND COMPUTED WITH REFERENCE TO THE TOTAL SALES OF ALL VEHICLES OF THE REPRESENTATIVE TYPE. 15 U.S.C. SEC. 2003 (1982).

THE LAW ESTABLISHED THE 1978-80 MODEL YEAR STANDARDS AT 18, 19 AND 20 MILES PER GALLON, RESPECTIVELY. IT ALSO SET THE STANDARD FOR 1985 AND THEREAFTER AT 27.5 MPG. THE SECRETARY OF TRANSPORTATION WAS AUTHORIZED TO SET THE 1981-84 INCREMENTAL STANDARDS AND TO REVIEW INDIVIDUAL MANUFACTURER PETITIONS FOR VARIANCES FROM THE SET STANDARDS.

EPA'S RESPONSIBILITIES UNDER THE ACT ARE TO DESIGN AND CONDUCT THE TESTS (WHICH ALSO MEASURE EXHAUST EMISSIONS FOR CLEAN AIR ACT COMPLIANCE), AND TO CALCULATE MANUFACTURERS' CAFE RATINGS APPLYING TEST RESULTS AND SALES DATA ACCORDING TO THE STATUTORY FORMULA.

MANUFACTURERS THAT FAIL TO MEET THEIR CAFE STANDARD FACE A PENALTY OF $5 PER 1/10TH OF AN MPG PER CAR PRODUCED BY THE MANUFACTURER THAT YEAR. CAFE SHORTFALL OF 1/10TH MPG FOR ITS FLEET COULD EASILY COST A MAJOR MANUFACTURER $20 MILLION IN PENALTIES.

II. STATUTORY TESTING REQUIREMENTS

ISSUES PRESENTED IN THIS CASE RELATE TO EPA'S EXECUTION OF ITS AUTHORITY TO DESIGN AND CONDUCT THE FUEL ECONOMY PERFORMANCE TESTS. THE MAIN STATUTORY PROVISION RELATING TO TEST DESIGN IS AS FOLLOWS:

(D)(1) FUEL ECONOMY FOR ANY MODEL TYPE SHALL BE MEASURED, AND AVERAGE FUEL ECONOMY OF A MANUFACTURER SHALL BE CALCULATED, IN ACCORDANCE WITH TESTING AND CALCULATION PROCEDURES ESTABLISHED BY THE EPA ADMINISTRATOR, BY RULE. PROCEDURES SO ESTABLISHED WITH RESPECT TO PASSENGER AUTOMOBILES *** SHALL BE THE PROCEDURES UTILIZED BY THE EPA ADMINISTRATOR FOR MODEL YEAR 1975 (WEIGHED 55 PERCENT URBAN CYCLE, AND 45 PERCENT HIGHWAY CYCLE, OR PROCEDURES WHICH YIELD COMPARABLE RESULTS. *** 15 U.S.C. SEC. 2003(D)(1) (1982).

ALSO RELEVANT IS SUBPARAGRAPH (3) OF THE SAME SECTION, WHICH READS:

(3) TESTING AND CALCULATION PROCEDURES APPLICABLE TO A MODEL YEAR, AND ANY AMENDMENT TO SUCH PROCEDURES (OTHER THAN A TECHNICAL OR CLERICAL AMENDMENT), SHALL BE PROMULGATED NOT LESS THAN 12 MONTHS PRIOR TO THE MODEL YEAR TO WHICH SUCH PROCEDURES APPLY. 15 U.S.C. SEC. 2003(D)(A) (1982).

THE STATUTE ALSO PROVIDES THAT PERSONS ADVERSELY AFFECTED BY ACTIONS TAKEN UNDER THE CAFE LAW MAY SEEK JUDICIAL REVIEW OF THOSE ACTIONS UNDER THE ADMINISTRATIVE PROCEDURE ACT (APA) BEFORE THEIR ENFORCEMENT. U.S.C. SEC. 2004(A) (1952). THIS SECTION APPLIES TO TESTING DECISIONS AS WELL AS STANDARD SETTING, AND DETERMINATIONS OF CREDITS AND PENALTIES, ETC.

III. SCOPE OF EPA'S AUTHORITY TO MODIFY TEST PROCEDURES

SEVERAL ISSUES RAISED IN THE REQUEST RELATE TO EPA'S AUTHORITY TO MODIFY THE 1975 FUEL ECONOMY PERFORMANCE TEST. EPA HAS ARGUED THAT IT HAS AUTHORITY TO MAKE TEST CHANGES TO IMPROVE TEST ACCURACY AND CLOSE LOOPHOLES. THE AUTOMOBILE MANUFACTURERS CLAIM THAT THESE CHANGES MAKE IT MORE DIFFICULT FOR THEIR CARS TO ACHIEVE THE PREDETERMINED STANDARD. THE EFFECT OF SUCH CHANGES, THEY SAY, IS TO RAISE THE CAFE STANDARD CONTRARY TO THE STATUTE.

NO ONE SERIOUSLY CONTENDS THAT THE CONGRESS CAST THE 1975 TEST IN CONCRETE, NEVER TO BE CHANGED. THE STATUTE EXPRESSLY ACKNOWLEDGES THE POSSIBILITY OF AMENDMENTS TO THE TEST PROCEDURES AND REQUIRES ONLY THAT THEY BE PROMULGATED A YEAR IN ADVANCE AND THAT THEY YIELD COMPARABLE RESULTS TO THE 1975 TEST. THE LEGISLATIVE HISTORY ELABORATED SOMEWHAT ON EPA'S AUTHORITY. THE HOUSE REPORT STATED:

THE WORDS "OR PROCEDURES WHICH YIELD COMPARABLE RESULTS" ARE INTENDED TO GIVE EPA WIDE LATITUDE IN MODIFYING THE 1975 TEST PROCEDURES, SO LONG AS THE MODIFIED PROCEDURE DOES NOT HAVE THE EFFECT OF SUBSTANTIALLY CHANGING THE AVERAGE FUEL ECONOMY STANDARDS. H.R. REP. NO. 340, 94TH CONG., 1ST SESS. 92. (HEREAFTER, HOUSE REPORT.)

THE RELATIONSHIP BETWEEN TIGHTER TEST PROCEDURES AND MORE STRINGENT STANDARDS WAS RECOGNIZED. THOUGH "COMPARABLE RESULTS" ARE NOT STATUTORILY DEFINED, THE HOUSE REPORT WOULD CLEARLY HAVE ALLOWED SLIGHT CHANGES IN THE FUEL ECONOMY STANDARDS AS A RESULT OF TEST PROCEDURE IMPROVEMENTS. THE PROVISION ORIGINATED IN THE HOUSE, AND THERE IS NO OTHER INDICATION ANYWHERE IN THE LEGISLATIVE HISTORY AS TO THE PROPER CONSTRUCTION OF THE TERM "COMPARABLE RESULTS," SO WE MUST ASSUME THE HOUSE REPORT WAS AUTHORITATIVE.

EPA ALSO CLAIMED AUTHORITY TO CLOSE LOOPHOLES IN THE 1975 TEST PROCEDURES. WE THINK IT HAS THAT AUTHORITY WITHIN THE LIMITS SET IN THE HOUSE REPORT CITED ABOVE. IT IS OBVIOUS THAT CONGRESS INTENDED THE CAFE LAW TO PRODUCE DRAMATIC REDUCTIONS IN FUEL CONSUMPTION, NOT JUST PAPER IMPROVEMENTS IN TEST RESULTS. ANTICIPATED FUEL SAVINGS WERE MORE THAN 3 MILLION BARRELS OF CRUDE OIL PER DAY. THE HOUSE REPORT ALSO EXPRESSED THE OPINION THAT LEGALLY ENFORCEABLE STANDARDS AND PENALTIES WERE INDISPENSABLE TO THE SUCCESS OF THE PROGRAM. HOUSE REPORT AT 86 87. VIEWED IN THIS CONTEXT EPA'S AUTHORITY TO CLOSE LOOPHOLES ALSO SEEMS CLEAR.

AT HEARINGS IN 1979, THE ADMINISTRATOR OF THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION TESTIFIED THAT THE GAP BETWEEN EPA TEST MILEAGE AND ACTUAL ON-THE-ROAD MILEAGE HAD INCREASED SIGNIFICANTLY BETWEEN 1975 AND 1979. MOTOR VEHICLE FUEL EFFICIENCY: HEARINGS BEFORE THE SUBCOMM. ENERGY AND POWER OF THE HOUSE COMM. ON INTERSTATE AND FOREIGN COMMERCE, 96TH CONG., 1ST SESS. 19 (STATEMENT OF JOAN CLAYBROOK) (HEREAFTER OVERSIGHT HEARINGS). GIVEN THE STATUTORY MANDATE TO PRODUCE RESULTS COMPARABLE TO THE 1975 TEST AND TO REDUCE ACTUAL FUEL CONSUMPTION, WE THINK EPA COULD HAVE LEGITIMATELY MADE TEST CHANGES DESIGNED TO NARROW THE GAP BETWEEN EPA TEST MILEAGE AND ACTUAL ON-THE-ROAD MILEAGE TO ITS 1975 LEVEL. IN OTHER WORDS, EPA COULD JUSTIFY CLOSING THE LOOPHOLES THAT ALLOWED SUCH DISCREPANCIES TO INCREASE AFTER 1975.

WE ARE NOT IN A POSITION TO ANALYZE THE EFFICACY OF THE TEST CHANGES THAT HAVE ACTUALLY BEEN MADE, OR TO EVALUATE THEIR IMPACT ON THE CAFE RATINGS OF ANY SPECIFIC MANUFACTURER, BUT WE THINK TEST CHANGES ARE CLEARLY AUTHORIZED.

IV. NEED FOR RULEMAKING TO ACCOMPLISH CHANGES IN TEST PROCEDURES

PRIOR TEST CHANGES

IN THE PAST, EPA USED ADVISORY CIRCULARS TO NOTIFY AUTOMAKERS OF PROPOSED TEST CHANGES AND TO SEEK THEIR INPUT. ADVISORY CIRCULARS ARE INFORMAL AND, ACCORDING TO EPA, NONBINDING. OVERSIGHT HEARINGS AT 93. EPA CHARACTERIZED ITS DECISIONS MADE BY ADVISORY CIRCULAR AS SUPPLEMENTARY TO THE EXISTING REGULATIONS. ID. AT 91-93. EPA ALSO MAINTAINED THAT ONLY MINOR CHANGES TO THE TEST PROCEDURES WERE MADE BY ADVISORY CIRCULARS. HOWEVER, EPA OFFICIALS ACKNOWLEDGED THAT WHAT CONSTITUTED A "MINOR" CHANGE WAS ESSENTIALLY A JUDGMENT CALL ON THE AGENCY'S PART. WE CANNOT ASSESS THE TECHNICAL ASPECTS OF THE TEST ITEMS HANDLED BY ADVISORY CIRCULAR, BUT IT SEEMS FAIRLY CLEAR THAT SOME CHANGES INFORMALLY AUTHORIZED AFFECTED MANUFACTURERS' CAFE RATINGS.

LEGAL REQUIREMENTS FOR CHANGES

THE CAFE STATUTE PROVIDES THAT TEST PROCEDURES SHALL BE "ESTABLISHED BY THE EPA ADMINISTRATOR, BY RULE." 15 U.S.C. SEC. 2003(D)(1) (1982). ADDITIONALLY, THE STATUTE PROVIDES THAT EXCEPT FOR "TECHNICAL AND CLERICAL AMENDMENTS" CHANGES TO TEST PROCEDURES SHALL BE "PROMULGATED NOT LESS THAN 12 MONTHS PRIOR TO THE MODEL YEAR TO WHICH THEY APPLY." 15 U.S.C. SEC. 2003(D)(3).

THE STATUTE EXPRESSLY REQUIRES RULEMAKING IN SECTION 2003(D)(1) AND REINFORCES THE REQUIREMENT FOR FORMAL RULEMAKING IN SECTION 2003(D)(3) BY USING THE WORD "PROMULGATED" TO DESCRIBE THE PUBLICATION REQUIREMENT. THE STATUTE ALLOWS ONLY ONE EXCEPTION TO RULEMAKING, AND THAT IS FOR "TECHNICAL AND CLERICAL AMENDMENTS" TO THE RULES. THE STATUTE DOES NOT DISTINGUISH BETWEEN "MINOR" AND OTHER CHANGES, AS EPA HAS ARGUED IT IS ENTITLED TO DO.

EPA HAS NEVER CLAIMED THAT THE CHANGES THAT THE CHANGES ACCOMPLISHED BY ADVISORY CIRCULAR WERE ONLY TECHNICAL AND CLERICAL AMENDMENTS, AND THE BURDEN WOULD BE ON THE AGENCY BOTH TO CLAIM THAT EXEMPTION AND TO PROVE IT IF CHALLENGED. HOWEVER, SINCE A STATUTORY EXCEPTION EXISTS, WE ARE NOT PREPARED TO RULE OUT COMPLETELY THE POSSIBILITY THAT EPA'S PAST ACTIONS FALL WITHIN THE EXCEPTION. IF THE CHANGES ACCOMPLISHED BY CIRCULAR WERE NOT "TECHNICAL AND CLERICAL" MATTERS, RULEMAKING WAS REQUIRED BY THE STATUTE, NO MATTER HOW CUMBERSOME IT MIGHT HAVE BEEN TO CONDUCT.

FUTURE USE OF ADVISORY CIRCULARS

IN A NOTICE OF PROPOSED RULEMAKING (NPRM), DISCUSSED MORE FULLY BELOW, EPA PROPOSED TO CONTINUE THE USE OF ADVISORY CIRCULARS FOR SO CALLED "MINOR" TEST CHANGES. 48 FED.REG. 56526-36 AT 56533. IN A LATER RELATED NPRM, EPA ATTEMPTED TO DEFINE A "SIGNIFICANT CAFE PENALTY" AS OCCURRING WHEN A TEST CHANGE OR CHANGES WOULD LIKELY HAVE A NEGATIVE CAFE IMPACT OF .10 MPG OR MORE. 49 FED.REG. 48024. LOGICALLY, THAT WOULD IMPLY THAT "MINOR TEST CHANGES" ARE THOSE WITH AN ANTICIPATED IMPACT OF-- .10 MPG OR LESS. SEE ALSO 45 FED.REG. 56525 AT NOTE 14.

AS TO FUTURE TEST CHANGES, THE APPLICABILITY OF THE RULEMAKING REQUIREMENT DEPENDS ON WHETHER PROPOSED TEST CHANGES ARE "TECHNICAL AND CLERICAL" PURSUANT TO THE STATUTE. THIS DOES NOT NEATLY TRANSLATE INTO A MILEAGE EQUIVALENT, BUT RATHER RELATES A BOTH THE PURPOSE AND EFFECT OF THE CHANGE.

IN ADDITION TO THE STATUTORY EXCEPTION, THERE ARE ALSO EXCEPTIONS A THE NOTICE AND COMMENT REQUIREMENTS OF THE APA, 5 U.S.C. SEC. 553 (1982) WHICH MIGHT PROVIDE A LEGITIMATE BASIS FOR INFORMAL ACTION ON TEST CHANGES. AGAIN, IF CHALLENGED, EPA WOULD HAVE TO PROVE THE APPLICABILITY OF THESE EXCEPTIONS.

INTERPRETATIVE RULES NEED NOT BE SUBJECTED TO FORMAL RULEMAKING. EPA'S EXPLANATIONS OF ITS USE FOR ADVISORY CIRCULARS AT THE 1979 OVERSIGHT HEARING MIGHT BE CONSTRUED AS AN ARGUMENT THAT THE CHANGES IT DISCUSSED WERE ONLY INTERPRETATIVE RULES. OVERSIGHT HEARINGS AT 91 93. HOWEVER, EPA HAS NOT YET CLAIMED THAT THIS EXCEPTION APPLIES.

THE SECOND BROAD EXCEPTION COMES INTO PLAY "WHEN THE AGENCY FOR GOOD CAUSE FINDS *** THAT NOTICE AND PUBLIC PROCEDURE THEREON ARE IMPRACTICABLE, UNNECESSARY, OR CONTRARY TO THE PUBLIC INTEREST." 5 U.S.C. SEC. 553(B)(B) (1982). EPA MENTIONED THE "GOOD CAUSE" EXCEPTION IN THE SAME NPRM IN WHICH IT ANNOUNCED ITS INTENTION TO CONTINUE ADVISORY CIRCULARS. 48 FED.REG. 56533 AT NOTE 19. HOWEVER, THE APA EXCEPTION REQUIRES THAT TO CLAIM IT, THE AGENCY MUST STATE ITS FINDINGS AND INCORPORATE "A BRIEF STATEMENT OF THE REASONS THEREFOR IN THE RULES ISSUED." 5 U.S.C. SEC. 553(B)(B) (1982). THIS LATTER PREREQUISITE TO THE EXCEPTION HAS NOT YET BEEN ACCOMPLISHED.

THE EXCEPTIONS TO FORMAL RULEMAKING DISCUSSED ABOVE SHOULD OBVIOUSLY BE EMPLOYED ON A CASE-BY-CASE BASIS. THEY ARE NOT AMENABLE TO A BLANKET ADVANCE APPROVAL BY RULE AS EPA HAS ATTEMPTED IN 48 FED.REG. 56533. SINCE THESE REASONABLE EXCEPTIONS DO EXIST, WE ARE NOT PREPARED TO STATE CATEGORICALLY THAT ALL FUTURE TEST CHANGES MUST BE DONE BY RULEMAKING. HOWEVER, WE DO THINK THAT EPA SHOULD CLEARLY STATE ITS LEGAL BASIS FOR CHOOSING INFORMAL PROCEDURES ANY TIME IT ELECTS TO ISSUE A TEST CHANGE BY ADVISORY CIRCULAR AND THAT IT SHOULD BE PREPARED TO DEFEND ITS CLAIM TO AN EXCEPTION IF CHALLENGED. V. THE GM DECISION AND EPA'S RESPONSE

IN 1979 GENERAL MOTORS AND FORD PETITIONED EPA FOR RELIEF FROM CHANGES THE AGENCY MADE TO THE 1979 TEST PROCEDURES. THE QUESTIONED CHANGES HAD BEEN MADE BY ADVISORY CIRCULAR. WHEN EPA DENIED THE PETITION AND RECONSIDERATION, THE COMPANIES FILED SUIT IN THE SIXTH CIRCUIT COURT OF APPEALS.

IN ITS ORDER, DATED JANUARY 26, 1982, THE COURT'S FINDING WAS:

THE EPA HAS MADE CERTAIN CHANGES IN THE RELEVANT TEST PROCEDURES. NOW BOTH FORD AND GENERAL MOTORS SEEK ADJUSTMENTS SO THAT CURRENT TESTING IS COMPARABLE TO THE 1975 TEST PROCEDURES. THEY CONTEND THAT THE EPA MADE THE PROPOSED ADJUSTMENTS WITHOUT COMPLYING WITH THE ADMINISTRATIVE PROCEDURE ACT, 5 U.S.C.A. SEC. 551, ET SEQ., (1975) AS 15 U.S.C.A. SEC. 2004 (1950 SUPP.) DICTATES IT MUST.

WE DEEM IT APPROPRIATE TO REMAND THIS CASE TO THE EPA SO THAT IT MAY INITIATE A PROPER RULEMAKING PROCEEDING CONCERNING PROCEDURES FOR ESTABLISHING AN ADJUSTMENT FACTOR FOR CURRENT TESTS TO DETERMINE THE CORPORATE AVERAGE FUEL ECONOMY OF MANUFACTURED VEHICLES COVERED BY THIS STATUTE. GENERAL MOTORS V. COSTLE, NOS. 80-3271, 80-3272, 80-3655 (6TH CIR. JAN. 26, 1952).

A NARROW, BUT REASONABLE, READING OF THE ORDER IS THAT EPA WAS OBLIGATED TO CONSIDER IN A FORMAL RULEMAKING THE ISSUE OF CAFE ADJUSTMENTS TO COMPENSATE FOR INFORMAL TEST CHANGES. THE COURT MADE NO DECISION ON THE MERITS. THIS LEFT UNRESOLVED THE SUBSTANTIVE ISSUES OF THE VALIDITY OF ADVISORY CIRCULARS, THEIR APPLICATION BY EPA TO "MINOR" TEST CHANGES, AND THE MEANING OF "COMPARABLE RESULTS." HOWEVER IT LEFT EPA ALMOST TOTAL DISCRETION AS TO HOW TO DEAL WITH THE CONSEQUENCES OF ITS 1979 TEST CHANGES.

EPA RESPONDED BY ISSUING AN NPRM ON DECEMBER 21, 1983, ALMOST 2 YEARS AFTER THE COURT ORDER WAS ENTERED. /1/ 48 FED.REG. 56526-36.THE NPRM REQUESTED COMMENTS ON THREE ALTERNATIVE PROPOSALS: NETTING OF TEST CHANGE RESULTS; MANUFACTURER SPECIFIC ADJUSTMENTS TO CAFE RATINGS; AND AN INDUSTRY-WIDE AVERAGE CAFE RATING ADJUSTMENT. THESE PROPOSALS SEEM LOGICALLY TO PROCEED FROM AN ASSUMPTION THAT MANUFACTURERS WERE DAMAGED IN THEIR CAFE RATINGS BY EPA'S 1979 CHANGES TO THE TEST PROCEDURES.

WE ARE NOT IN A POSITION TO ANALYZE THE VALIDITY OF THE TECHNICAL JUDGMENTS WHICH UNDERLIE ANY OF THE PROPOSED ALTERNATIVES. NOR DO WE FEEL WE SHOULD ENDORSE OR CRITICIZE ANY OF THE PROPOSALS, SINCE THE RULEMAKING IS STILL OPEN. WE DO NOT WANT TO SUBSTITUTE OUR JUDGMENT FOR THAT OF THE AGENCY. HOWEVER, WE DO FEEL THAT THE NPRM GENERALLY WAS A LEGALLY ADEQUATE RESPONSE TO THE SIXTH CIRCUIT'S MANDATE TO ADDRESS POSSIBLE ADJUSTMENT FACTORS IN A RULEMAKING.

WE ALSO THOROUGHLY EXAMINED THE STATUTE AND LEGISLATIVE HISTORY TO DETERMINE WHETHER THERE WAS ANY LEGISLATIVE MANDATE TO MAKE SPECIFIC CAFE ADJUSTMENTS. WHILE THE STATUTE DIRECTS THE METHOD FOR THE ORIGINAL CAFE CALCULATION AND FOR THE COMPUTATION OF CAFE CREDITS, IT DOES NOT ADDRESS THE POSSIBILITY OF CORRECTIONS TO THE CAFE RATINGS BECAUSE OF DEFICIENCIES IN THE TEST PROCEDURES. THE LEGISLATIVE HISTORY LIKEWISE PROVIDES NO GUIDANCE. A STATUTORY INJUNCTION TO COMPUTE THE CAFE ADJUSTMENT IN ANY PARTICULAR WAY WOULD ONLY BE BY ANALOGY TO THE OTHER COMPUTATION PROCEDURES. ABSENT A FIRM STATUTORY BASIS, WE ARE NOT PERSUADED THAT THE ADMINISTRATOR'S DISCRETION TO FASHION A REMEDY FOR PAST TEST PROCEDURE INADEQUACIES SHOULD BE IN ANY WAY CURTAILED.

VI. CONCLUSION

BECAUSE WE ARE UNAWARE OF POSSIBLE TECHNICAL OR CLERICAL REASONS WHICH MIGHT JUSTIFY EPA'S PAST HANDLING OF THE CAFE TESTING PROGRAM OR THE PROPOSED CAFE ADJUSTMENTS, WE ARE NOT IN A POSITION TO RAISE LEGAL OBJECTIONS TO THOSE CHANGES. WE DO THINK THAT IN THE FUTURE, EPA SHOULD USE FORMAL RULEMAKING TO ACCOMPLISH TEST CHANGES, UNLESS A SPECIFIC EXCEPTION ("TECHNICAL AND CLERICAL AMENDMENTS" OR APA EXCEPTION) APPLIES. FURTHERMORE, DECISIONS ABOUT EXCEPTIONS SHOULD BE MADE ON A CASE-BY-CASE BASIS.

WE HOPE THE FOREGOING INFORMATION IS USEFUL TO YOU. UNLESS YOU RELEASE IT EARLIER, THIS OPINION WILL BE AVAILABLE TO THE PUBLIC 30 DAYS FROM TODAY.

/1/ THIS SAME NPRM ALSO CONTAINED EPA'S ANNOUNCEMENT THAT IT WOULD CONTINUE THE ADVISORY CIRCULAR SYSTEM, AND WAS DISCUSSED IN THAT CONTEXT ON P. 5 ABOVE.