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Federal Register / Vol. 86, No. 159 / Friday, August 20, 2021 / Proposed Rules
28, 2016.15 In that rule, NHTSA agreed that raising the penalty rate for model years already fully complete at the time the 2015 Act was enacted would be inappropriate, given that courts generally disfavor the retroactive application of statutes, and that applying penalties to model years that were already completed could not deter non-compliance, incentivize compliance, or lead to any improvements in fuel economy. NHTSA
also agreed that raising the rate for model years for which product changes were infeasible due to lack of lead time from the enactment of the 2015 Act did not seem consistent with Congress intent that the CAFE program be responsive to consumer demand.
Accordingly, NHTSA stated that it would not apply the inflation-adjusted penalty rate of $14 plus any adjustments for inflation that occurred or may occur until Model Year 2019, as the agency believed that 2019 would be the first year after the 2015 Act in which product changes could reasonably be made in response to the higher penalty rate. This final rule had an effective date of January 27, 2017.
3. NHTSA Reconsideration Beginning in January 2017, NHTSA
took a series of actions to delay the effective date of the December 2016
final rule, ultimately leading to a rule announcing that the effective date would be delayed indefinitely.16 In April 2018, the United States Court of Appeals for the Second Circuit vacated NHTSAs indefinite delay of the rules effective date, clarifying that the December 2016 rule was in force.17
In July 2019, NHTSA finalized a rule determining that the 2015 Act did not apply to the CAFE civil penalty rate. On August 31, 2020, the United States Court of Appeals for the Second Circuit vacated the July 2019 rule and ruled that the December 2016 rule was back in force. The Second Circuit denied panel rehearing on November 2, 2020.

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4. Subsequent Petitions and Interim Final Rule On September 9, 2019, the Institute for Policy Integrity at New York University School of Law IPI
submitted a petition for reconsideration of NHTSAs July 2019 final rule. IPI
15 81

FR 95489 December 28, 2016.
16 82 FR 8694 January 30, 2017; 82 FR 15302
March 28, 2017; 82 FR 29009 June 27, 2017; 82
FR 32139 July 12, 2017.
17 Order, ECF No. 196, NRDC v. NHTSA, Case No.
172780 2d Cir., Apr. 24, 2018; Opinion, ECF No.
205, NRDC v. NHTSA, Case No. 172780, at 44 2d Cir., June 29, 2018 The Civil Penalties Rule, 81
FR 95,489, 95,48992 December 28, 2016, no longer suspended, is now in force..

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argued that the rule was unreasonable and not in the public interest because it did not properly account for the associated costs and benefits.
Additionally, IPI challenged NHTSAs statutory interpretations. NHTSA did not issue a decision on the petition prior to the Second Circuits decision vacating the rule.
Following the Second Circuits decision, on October 2, 2020, NHTSA
received a petition for rulemaking from the Alliance for Automotive Innovation requesting that the adjustment to $14
not be applied until Model Year 2022.18
According to the Alliance Petition, Model Years 2019 and 2020 are effectively lapsed now, and manufacturers are unable to change MY 2021 plans at this point. The Alliance argued that, as in the December 2016 rule, applying the increased penalty to any violations that are temporally impossible to avoid or cannot practically be remedied does not serve the statutory purposes of deterring prohibited conduct or incentivizing favored conduct. According to the Alliance, doing so would effectively be punishing violators retroactively.
In addition to relying on the reasoning of the December 2016 rule as it applied to the increase based on the timing of the enactment of the 2015 Act, the Alliance Petition noted, but did not provide detailed evidence of, the significant economic impact suffered by the industry due to COVID19.
Accordingly, the Alliance Petition also cited the now-revoked Executive Order 13924,19 requiring Federal agencies to take appropriate action, consistent with applicable law, to combat the economic emergency caused by COVID19.
Several individual vehicle manufacturers submitted supplemental information to NHTSA further articulating the negative economic position they were in due to the COVID19 public health emergency and the potential and significant adverse economic consequences of the increased civil penalty rate.
After considering the issues raised, NHTSA granted the Alliances petition and promulgated an interim final rule providing that the increase 20 will apply beginning with Model Year 2022. The interim final rule contended that applying the increased civil penalty rate 18 The Alliance also submitted a supplement to its petition on October 22, 2020 Alliance Supplement.
19 See Executive Order 14018, 86 FR 11855, Revocation of Certain Presidential Actions Feb.
24, 2021.
20 The rate is increasing to $14, plus any adjustments for inflation that occurred or may occur. 49 CFR 578.6h2.

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to vehicles in Model Years 2019, 2020, and 2021 would not result in additional fuel savings and would impose higher penalties retroactively because those model years were already completed, or, for Model Year 2021, production plans were set prior to the Second Circuits decision striking down the 2019 rule.
The interim final rule relied in large part on the reasoning in the December 2016 final rule, though it did not discuss the extent to which the four years between the two rules should affect that reasoning. Additionally, the interim final rule attempted to account for the negative economic impact on the automotive sector caused by the global outbreak of COVID19.21 That interim final rule amended the relevant regulatory text accordinglyeffective immediately and without having afforded prior notice or the ability to comment in advanceand requested comment within ten days. The interim final rule also noted that IPIs petition was moot, and, to the extent it was not moot, NHTSA denied it.
The interim final rule is currently the subject of legal challenges in the Second Circuit and Ninth Circuit.22
E. Summary of Comments Received Before NHTSAs interim final rule was published but after the agency had announced, through the publication of the Fall 2020 Unified Agenda of Regulatory and Deregulatory Actions, that it had initiated a rulemaking in response to the Alliances petition, NHTSA received two letters regarding the rulemaking: one jointly from the State of New York, the Natural Resources Defense Council, and the Sierra Club, and one from Tesla.23 These letters raised concerns with NHTSAs rulemaking, particularly with the entities inability to comment on the Alliances petition for rulemaking in advance. NHTSA did not respond to these letters prior to the publication of the interim final rule, but included both letters in the docket when the interim final rule was published and noted that they will be treated as comments for appropriate consideration. 24
After the interim final rule was published, NHTSA received eight substantive comments.25 NHTSA
received comments from:
21 The reasoning for the interim final rule is set forth more fully in the January 14, 2021 notice published at 86 FR 3016.
22 NRDC v. NHTSA, No. 21139 2d Cir.; New York v. NHTSA, No. 21339 2d Cir.; Tesla v.
NHTSA, No. 2170367 9th Cir..
23 NHTSA202100010001; NHTSA2021
00010009.
24 86 FR 3016, 3023 n.74 Jan. 14, 2021.
25 NHTSA received a ninth comment that simply said, Help. NHTSA202100010018. Without
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