California Beats Back DOE Refusal of Right to Set Efficiency Standards

In California Energy Commission v. U.S. Department of Energy, handed down by the Ninth Circuit today, the California Energy Commission (CEC) appealed from DOE's denial of a waiver it sought from preemption under the Energy Policy and Conservation Act (“EPCA”), 42 U.S.C. § 6297, so it could establish water efficiency standards for residential clothes washers. (As the panel explains, the "EPCA expressly preempts state regulation of energy efficiency, energy use, or water use of any product covered by federal energy efficiency standards.") To get the waiver, CEC had to show that the state regulation was “needed to meet unusual and compelling State or local . . . water interests.” 42 U.S.C. § 6297(d)(1)(B).

If you haven't heard, California has been having a drought for a while now.

In 2002, California passed a state law mandating water-efficiency standards for washing machines, which the CEC duly issued. The CEC petition for a waiver of express EPCA preemption, and the (Bush II) DOE accepted its application as complete in December 2005. DOE rejected the petition a year later, giving the following reasons:

First, CEC’s proposed regulations purported to take effect on January 1, 2007, far less than the statutory three-year minimum, and CEC did not provide any information necessary to support a different effective date.

Second, CEC did not meet the statutory standard, which requires a state to show unusual and compelling water interests. CEC contended that a cost-benefit analysis showed that its regulation would be preferable to non-regulatory alternatives, but CEC’s petition did not support its conclusions with the underlying data that would have allowed DOE to determine whether the statutory standard was satisfied.

Third, the record demonstrated that CEC’s proposed regulation would make a class of washers unavailable in California, requiring denial of the waiver petition.

CEC appealed to the Ninth Circuit.

As a preliminary matter, the panel had to establish that it had jurisdiction. DOE challenged the court’s jurisdiction under the EPCA to review the denial of the waiver, on the basis that EPCA granted appeals only from specific EPCA provisions to the circuit courts. This wasn't one of them, so CEC should have gone to federal district court first. The Ninth Circuit responded that, well, EPCA grants appeals from another specific set of provisions to the federal district courts, too, and this wasn't one of those, either. Since the logic could be applied both ways, obviously this was left up to the discretion of the courts, and, duly filling in the blanks from Florida Power & Light Co. v. Lorion, 470 U.S. 729, 741-45 (1985), as to how it should exercise this jurisdiction, the Ninth Circuit said yup, we should take it. (I'd go into the reasoning, but its pretty clear to me that if the panel had not wanted to take the case, and order CEC to head to district court, it could have filled in the blanks that way, too.)

On the substance, the Ninth Circuit panel rejected DOE's reasons for refusing to grant the waiver as arbitrary and capricious, in violation of the APA. The panel's reasoning for rejecting the first justification is, to be honest, a bit opaque: Basically, they said that its ridiculous to reject an application for a waiver on the basis that when it finally got approved, there would not be a long enough wait, because they could have just changed the effective date or consulted with CEC on that point. And further, since the DOE approval timeline was unpredictable, it was arbitrary for DOE to be strict about what dates the information provided pertained to. See Slip Op at 14581 ("The DOE argues, in effect, that it was entitled to reject the CEC’s data and analysis as entirely irrelevant and inapplicable because the proposed implementation timeline could not be granted under the EPCA. This argument is contrary to the preponderance of evidence standard, as well as common sense.").

As for the second justification, the panel noted that, contrary to what DOE contended, CEC did support its conclusions with underlying data sufficient for DOE's purposes, as shown by the record itself. In the record, "the CEC provided 'a full explanation of its assumptions, data, and analyses' in the form of its own rulemaking record" for the California regulations. In fact, the Ninth Circuit noted, DOE referred to that portion of the record itself--proof that it not only was there, but that DOE actually knew it was there.

Finally, the Ninth Circuit panel rejected the third justification, because the preponderance of the evidence did not show that the class of washers in question--top loading washing machines--would not be available in 2010, when that part of the regulations was to go into effect. DOE, it said, had to "weigh the commenters’ evidence of future availability of top-loaders against that offered by the CEC. The DOE’s finding cannot be sustained on the strength of its citation only of the commenters’ evidence with reference to present capabilities." (emphasis added).

The panel remanded the petition to the DOE for re-consideration. The tone of today's opinion betrays a strong suspicion that the rejection of the waiver petition was pretextual. Therefore, what the (Obama) DOE does with the petition on remand will be telling.