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CAS Opposes Flexible Fuel Vehicle CAFE CreditCENTER FOR
AUTO SAFETY 1825 Connecticut Avenue, NW Suite 330 Washington, DC
20009-1160 (202) 328-7700
April 10, 2002
Docket
Management U.S. Department of Transportation Room PL-401
400 Seventh Street SW Washington DC 20590
Re: DOT
Docket No. NHTSA 2001-10774; 67 FR 10873 (Mar. 11, 2002)
As
a basis for this rulemaking, the National Highway Traffic
Administration (NHTSA) relied on a Report to Congress that makes the
case for terminating the CAFÉ credits for alternative fuel vehicles
established by the Alternative Motor Fuels Act of 1988 (AMFA).0
According to this Report, AMFA credits have resulted in a increase
in petroleum consumption of over 700 million gallons and about 2.4
MMTc (million metric tons carbon-equivalent) in greenhouse gas
emissions through 2000. Extension of the program as proposed by
NHTSA could cause a 20-fold increase in petroleum use and greenhouse
gas emissions for 2001-08).
In a vain effort to diminish the
adverse impact on national security and the environment and to
defend continuation of AMFA credits, NHTSA states in the Report to
Congress and the rulemaking notice, “It is also possible that
manufacturers might have responded to strong consumer demand for
performance and utility and produced the same vehicles without the
provision as they did with it. In this case, manufacturers would
have chosen to pay civil penalties rather than meet the CAFÉ
standard.”
The problem with this bootstrap argument is that
it ignores 25 years of domestic auto company executives telling
Congress and NHTSA that it is unlawful for them to pay civil
penalties under the CAFÉ law. Ford Vice President Helen Petrauskas
testified before the Senate on relaxing the 1985 CAFÉ standards:
[P]aying fines is not an alternative for Ford Motor Co. . . .
Failure to meet the standard is unlawful conduct. To us, that means
in the absence of an adjustment to the standard we have to carry out
a plan that meets the law, even it means curtailing availability of
larger cars and engines, restricting the availability of these
products to consumers, and even if it brings the jobs dislocation of
closing down plants.”0 GM Vice President Marina Whitman
testified: Unless the standard is lowered, full line
manufacturers face the prospect of restricting product availability,
which translates to plant closings, job losses, and lower economic
growth. . . . As the NHTSA has noted, under the law, failure to
comply with the standards after applying credits constitutes
“unlawful conduct.” Accordingly, GM cannot and does not consider the
payment of civil penalties to be a reasonable alternative for
determining a long-term compliance strategy.3 Although Chrysler,
which at that time was in compliance with the CAFÉ standards because
it had made the necessary investment in new technology to meet the
standards, argued that GM and Ford could just pay the penalties,
Ford Vice President Petrauskas sharply pointed out: [T]he view
that we need have - that the law requires one to take product
restrictions and does not allow the payment of penalties is one that
was expressed by Chrysler in 1982 at the time Chrysler petitioned,
successfully I might add, for a relaxation of the truck standard.4
Foreign manufacturers do not hold the same position and have
routinely paid penalties as a price of making fuel inefficient
vehicles. Whether the position of the domestic manufacturers is
legally correct or not doesn’t matter because they are like the
little boy who holds his breath, they have successfully used the
argument as a form of economic blackmail against the agency and
Congress. In its 1992 report, the National Academy of Science
observed that “violation of CAFÉ limits is not a socially or legally
neutral act.”5 The Academy recognized the distinction was subtle but
recommended a legislative change to clarify that payment of
penalties could be done by domestic manufacturers.
The
Report to Congress and NHTSA’s rulemaking notice erred in treating
ethanol produced for E85 vehicles to be the same as ethanol produced
for blending with straight gasoline to make blends of 10% ethanol or
less with gasoline (with 10% blends sometimes referred to as gasohol
and hereinafter as E10). A difference in tax treatment makes 10%
ethanol far more preferred by the ethanol industry than E85 blends.
E10 blends qualify for a 5.3¢ per gallon exemption from the motor
fuel excise tax which is the equivalent value of 53¢ per gallon. The
ethanol used in E85 blends qualify only for a 53¢ per gallon income
tax credit which is much less preferable to the up-front tax
exemption. NHTSA already recognizes that the demand for ethanol may
soar when MTBE is phased out. Coupled with difference in tax
treatment, which NHTSA failed to consider, production of ethanol for
alternative fuel vehicles will go little, if any, beyond the token
4.6 million gallons of E85 sold in 2000.
The Report to
Congress and NHTSA’s rulemaking notice erred in not doing a cost
estimate for alternative fuel vehicles and instead blandly relied on
the manufacturers’ position that they charged no more for an
alternative fuel vehicle than a standard vehicle. First this ignores
the fact the manufacturers can raise the price of all vehicles to
recover the cost of the alternative fuel system components on the
alternative fuel vehicles. Second, it ignores the cost to the
consumer of having to replace alternative fuel system components
after the warranty expires. CAS has received reports of optical
sensor failures on Ford vehicles that cost $900 to repair. NHTSA
should require detailed information from manufacturers on failure
rates and repair costs as well as the installation costs for the
original system.
The best way to improve energy security and
conservation is to set more stringent CAFÉ standards. The next best
way is to eliminate wasteful CAFÉ credits for alternative fuel
vehicles.
Sincerely,
Clarence M. Ditlow
Executive Director
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