[Federal Register Volume 84, Number 144 (Friday, July 26, 2019)]
[Rules and Regulations]
[Pages 36007-36034]
[FR Doc No: 2019-15259]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA-2018-0017]
RIN 2127-AL94

Civil Penalties

AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).

ACTION: Final rule.

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SUMMARY: This final rule confirms the determination NHTSA announced in
the notice of proposed rulemaking (NPRM) that the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation
Adjustment Act or 2015 Act) does not apply to the civil penalty rate
applicable to automobile manufacturers that fail to meet applicable
corporate average fuel economy (CAFE) standards and are unable to
offset such a deficit with compliance credits. In addition, this final
rule is finalizing the agency's determination that even if the
Inflation Adjustment Act applies, increasing the CAFE civil penalty
rate would have a negative economic impact, and therefore, in
accordance with the Energy Policy and Conservation Act of 1975 (EPCA)
and the Energy Independence and Security Act of 2007 (EISA), the
current CAFE civil penalty rate of $5.50 should be retained, instead of
increasing to $14 in model year 2019.

DATES:
    Effective dates: This rule is effective as of September 24, 2019.
Upon reconsideration, this rule supersedes the final rule published at
81 FR 95489, December 28, 2016 (delayed at 82 FR 8694, January 30,
2017, 82 FR 15302, March 28, 2017, 82 FR 29010, June 27, 2017, and 82
FR 32139, July 12, 2017), which went into force in accordance with the
decision of the United States Court of Appeals for the Second Circuit
in NRDC v. NHTSA, Case No. 17-2780.
    Petitions for reconsideration: Petitions for reconsideration of
this final rule must be received not later than September 9, 2019.

ADDRESSES: Any petitions for reconsideration should refer to the docket
number of this document and be submitted to: Deputy Administrator,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue
SE, West Building, Fourth Floor, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief

Counsel, NHTSA, telephone<PHONE_NUMBER>, facsimile<PHONE_NUMBER>,
1200 New Jersey Ave. SE, Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

Table of Contents

A. Executive Summary
B. Background
    1. CAFE Program
    2. Civil Penalties Inflationary Adjustment Act Improvements Act
of 2015
    3. NHTSA's Actions to Date Regarding CAFE Civil Penalties
    a. Interim Final Rule
    b. Final Rule
    c. Initial Reconsideration and Request for Comments
    d. Notice of Proposed Rulemaking
C. Overview of the Comments
D. Response to the Comments
    1. NHTSA's Reconsideration Authority
    2. Applicability of the 2015 Act
    3. Harmonizing the 2015 Act and EPCA
    4. ``Negative Economic Impact''
    a. EPCA Factors
    b. Other Economic Considerations
    5. $10 Cap
E. Rulemaking Analyses and Notices
    1. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
    2. Regulatory Flexibility Act
    3. Executive Order 13132 (Federalism)
    4. Unfunded Mandates Reform Act of 1995
    5. National Environmental Policy Act
    6. Executive Order 12778 (Civil Justice Reform)
    7. Paperwork Reduction Act
    8. Privacy Act
    9. Executive Order 13771

A. Executive Summary

    As explained in the proposed rule (83 FR 13904 (April 2, 2018)),
NHTSA has almost forty years of experience in implementing the
corporate average fuel economy (CAFE) program and its civil penalty
component. This includes oversight and administration of the program's
operation, how the automobile manufacturers respond to CAFE standards
and increases, and the role of civil penalties in achieving the CAFE
program's objectives. The CAFE civil penalty provisions 49 U.S.C.
32912(b) and (c), established by EPCA, are complex, containing
statutory requirements that must be met if the penalty amount is to be
increased, as well as a statutory cap of $10 on the maximum penalty
amount, among other provisions, that distinguish it from ordinary civil
penalty provisions, such as the general penalty for CAFE violations
found in 49 U.S.C. 32912(a).
    After the new administration took office and upon further
consideration of the issues, NHTSA determined that it was appropriate
and necessary to reconsider the applicability of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation
Adjustment Act or 2015 Act) to the CAFE civil penalty provision found
in EPCA. In reconsidering the CAFE civil penalty rule and the
applicability of the 2015 Act to the statutory provision, NHTSA had two
objectives: First, to determine whether the CAFE civil penalty rate was
the kind of penalty to which the 2015 Act applied, and second, if it
did apply, whether increasing the civil penalty rate for the CAFE
provision will have a negative economic impact. NHTSA has carefully
considered these objectives and comments received in reconsidering the
CAFE civil penalty statute that NHTSA administers and the application
of the 2015 Act to it.\1\
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    \1\ This final rule is promulgated under NHTSA's authority,
delegated to it by the Secretary (49 CFR 1.95(a)), under 49 U.S.C.
Chapter 329. Cf. Opinion, ECF No. 205, NRDC v. NHTSA, Case No. 17-
2780, at 13, 17 (2d Cir., June 29, 2018) (citing the ``judicial
review provision of EPCA [49 U.S.C. 32909(a)] as ``the legislative
authorization to petition for review'' of NHTSA's indefinite delay
rule; ``Judicial review here is authorized by Section 32909 of
EPCA.'').
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    As a result of this review, including consideration of all the
comments received on its proposed rule, NHTSA has reconsidered its
earlier decisions that accepted applicability of the 2015 Act and its
predecessors to the CAFE civil penalty provision in 49 U.S.C.
32912(b).\2\ Accordingly, NHTSA is finalizing its determination that
the CAFE civil penalty rate is not a ``civil monetary penalty'' that
must be adjusted for inflation under the 2015 Act. Prior to the
proposed rule, NHTSA's Federal Register notifications on its inflation
adjustments under the 2015 Act did not consider whether the CAFE civil
penalty rate fit the definition of a ``civil monetary penalty'' subject
to adjustment under the 2015 Act, instead proceeding--without
analysis--as if the 2015 Act applied to the CAFE civil penalty rate.
After taking the opportunity to reconsider this matter and fully
analyze the issue and consider the comments received on its proposal,
NHTSA concludes that the CAFE civil penalty rate is not covered by the
2015 Act.
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    \2\ NHTSA has the authority to reconsider its prior rules for
the reasons described in Section D.1.
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    NHTSA is finalizing its determination that civil penalties assessed
for CAFE violations under Section 32912(b) are not a ``penalty, fine,
or other sanction that'' is either ``a maximum amount'' or ``a specific
monetary amount.'' \3\ As explained in the proposed rule, the civil
penalties under consideration here are part of a complicated market-
based enforcement mechanism. Any potential civil penalties for failing
to satisfy fuel economy requirements, unlike other civil penalties, are
not determined until the conclusion of a complex formula, credit-
earning arrangement, and credit transfer and trading program. In fact,
after NHTSA determines there is a violation, the ultimate penalty
assessed is based on the noncompliant manufacturer's decision, not
NHTSA's, on whether and how to acquire and apply any credits that may
be available to the manufacturer, and on the decisions of other
manufacturers to earn and sell credits to a potentially liable
manufacturer.\4\ Manufacturers can also claim future credits as a means
of meeting their current liability based upon projected credits to be
earned within three subsequent model years. The amount that a
manufacturer might actually pay under the CAFE civil penalty statute is
dependent upon a fluid, multi-year process, involving credit trading
with other manufacturers at unknown prices and unverifiable credits to
be earned in the future. In other words, what the noncompliant
manufacturer pays is much more the function of market forces, trading
of credits, and manufacturers' projections of future performance, than
it is just the application of the CAFE penalty rate.
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    \3\ As discussed below, this determination reflects a change in
NHTSA's position on this issue from when NHTSA previously adjusted
the CAFE civil penalty rate from $5 to $5.50 in 1997 and its earlier
announcements of adjustments of the rate to $14 in its July 2016
interim final rule and its December 2016 final rule.
    \4\ See 49 U.S.C. 32903.
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    Moreover, after consideration of comments, NHTSA concludes that
Congress did not intend for the 2015 Act to apply to this specialized
civil penalty rate, which has longstanding, strict procedures
previously enacted by Congress that limit NHTSA's ability to increase
the rate. Congress specifically contemplated that increases to the CAFE
civil penalty rate for manufacturer non-compliance with CAFE standards
may be appropriate and necessary and included a mechanism in the
statute for such increases. Critically, this mechanism requires the
Secretary of Transportation to determine specifically that any such
increase will not lead to certain specific negative economic effects.
In addition, Congress explicitly limited any such increase to $10 per
tenth of a mile per gallon.\5\ These restrictions have been in place
since the statute was amended in 1978. Though Congress later amended
the CAFE civil penalty provision in 2007, Congress left in place
unaltered both the mechanism for increases and the upper limit of an
increased civil penalty under the

statute. NHTSA's determination regarding the applicability of the 2015
Act to the EPCA CAFE civil penalty provision is also confirmed by the
Office of Management and Budget (OMB), the office directed by Congress
to issue guidance on the implementation of the 2015 Act. OMB's views
regarding the applicability of the 2015 Act to the EPCA CAFE civil
penalty provision are set forth in a comprehensive opinion included in
the docket for this final rule, in which OMB concurs with NHTSA's
assessment that the 2015 Act does not apply to the CAFE civil penalty
rate.\6\ OMB supported its conclusion by noting first, that it was not
aware of any other penalty scheme with the unique features of the CAFE
civil penalty scheme, and also ``[i]n light of (1) EPCA's distinction
between the penalty rate and the penalty itself, (2) the
incompatibility of the structure of the CAFE penalty scheme and the
2015 Act, and (3) the inconsistent treatment of the CAFE penalty rate
under inflation adjustment schemes over time.'' These factors, which
OMB found supportive of NHTSA's conclusion that the 2015 Act does not
apply to the CAFE civil penalty rate, are discussed throughout this
document.
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    \5\ NHTSA concludes the 2015 Act also does not apply to the $10
cap.
    \6\ July 12, 2019 Letter from Russell T. Vought, Acting Director
of the Office of Management and Budget, to Elaine L. Chao, Secretary
of the United States Department of Transportation, available at
Docket No. NHTSA-2018-0017-0018 (OMB Non-Applicability Letter).
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    In addition to reconsidering the application of the 2015 Act to the
EPCA CAFE civil penalty provision, NHTSA has reconsidered its decisions
in the July 2016 interim final rule and December 2016 final rule to
increase the CAFE civil penalty rate and, as a result, is retaining the
current civil penalty rate applicable to 49 U.S.C. 32912(b) of $5.50
per tenth of a mile per gallon for automobile manufacturers that do not
meet applicable CAFE standards and are unable to offset such a deficit
with compliance credits, rather than increasing the rate to $14 in
model year 2019.
    Even if the 2015 Act is applied to the CAFE civil penalty rate,
NHTSA has determined that the rate should remain the same in order to
comply with EPCA, which must be read harmoniously with the 2015 Act.
The 2015 Act confers discretion to the head of each agency to adjust
the amount of a civil monetary penalty by less than the amount
otherwise required for the initial adjustment, with the concurrence of
the Director of the Office of Management and Budget, upon determining
that doing so would have a ``negative economic impact.'' In EPCA,
Congress previously identified specific factors that NHTSA is required
to consider before making a determination about the ``impact on the
economy'' as a prerequisite to increasing the applicable civil penalty
rate. NHTSA believes that these statutory criteria are appropriate for
determining whether an increase in the CAFE civil penalty rate would
have a ``negative economic impact'' for purposes of the 2015 Act. Under
EPCA, NHTSA faces a heavy burden to demonstrate that increasing the
civil penalty rate ``will not have a substantial deleterious impact on
the economy of the United States, a State, or a region of a State.''
Specifically, in order to establish that the increase would not have
that ``substantial deleterious impact,'' NHTSA would need to
affirmatively determine that it is likely that the increase would not
cause a significant increase in unemployment in a State or a region of
a State; adversely affect competition; or cause a significant increase
in automobile imports. In light of those statutory factors--and the
absence of persuasive evidence to support making the EPCA findings--
NHTSA concludes that increasing the CAFE civil penalty rate would have
a negative economic impact. Thus, NHTSA is not adjusting the rate under
the 2015 Act, even if it applied.
    Even if EPCA's statutory factors for increasing civil penalties are
not applied, NHTSA has determined, after consideration of comments,
that the $14 penalty will lead to a negative economic impact that
merits leaving the CAFE civil penalty rate at $5.50. Based on available
information, including information provided by commenters, the effect
of applying the 2015 Act to the CAFE civil penalty would potentially
drastically increase manufacturers' costs of compliance. OMB has
concurred with NHTSA's determination that increasing the CAFE civil
penalty rate by the otherwise required amount will have a negative
economic impact.\7\
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    \7\ July 12, 2019 Letter from Russell T. Vought, Acting Director
of the Office of Management and Budget, to Elaine L. Chao, Secretary
of the United States Department of Transportation, available at
Docket No. NHTSA-2018-0017-0019 (OMB Negative Economic Impact
Letter).
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    In summary, NHTSA concludes that:
     The 2015 Act does not apply to the CAFE civil penalty
rate, so no rate increase is permitted, except pursuant to the scheme
established in EPCA;
     Even if the 2015 Act did apply to the CAFE civil penalty
rate, the 2015 Act must be read in conjunction with EPCA, and
considering the EPCA factors, increasing the CAFE penalty rate to $14
would have a ``negative economic impact''; and
     Even if the EPCA factors did not apply, increasing the
CAFE civil penalty rate to $14 would still have a ``negative economic
impact.''

The result is the same under all of these scenarios: The CAFE civil
penalty rate is and will continue to be set at $5.50, rather than
increasing to $14 in MY 2019.\8\
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    \8\ Without this rule, the CAFE civil penalty rate would
increase to $14 beginning with civil penalties assessed for model
year 2019.
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    In EPCA, Congress also imposed a cap of $10 on the CAFE civil
penalty rate. NHTSA has determined that this statutory cap also does
not meet the definition of a ``civil monetary penalty'' that requires
adjustment under the 2015 Act. OMB agrees with this assessment.\9\
Thus, even if the CAFE civil penalty rate is a ``civil monetary
penalty'' under the 2015 Act and regardless of whether increasing it
would have a ``negative economic impact,'' NHTSA has determined that
any increase would be statutorily capped by EPCA at $10.
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    \9\ OMB Non-Applicability Letter.
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    The general penalty in 49 U.S.C. 32912(a) for other violations of
EPCA, as amended, promulgated in 49 CFR 578.6(h)(1), is subject to
additional inflationary adjustments for 2017, 2018, and 2019. In this
rule, NHTSA is finalizing the 2017, 2018, and 2019 inflationary
adjustments to this general penalty amount.

B. Background

1. CAFE Program

    NHTSA sets \10\ and enforces \11\ corporate average fuel economy
(CAFE) standards for the United States light-duty vehicle fleet, and in
doing so, assesses civil penalties against vehicle manufacturers that
fall short of the standards and are unable to make up the shortfall
with credits.\12\ The civil penalty amount for CAFE non-compliance was
originally set by statute in 1975, and since 1997, has included a rate
of $5.50 per each tenth of a mile per gallon (0.1) that a
manufacturer's fleet average CAFE level falls short of the applicable
standard. This shortfall amount is then multiplied by the number of
vehicles in that manufacturer's fleet.\13\ The basic

equation for calculating a manufacturer's civil penalty amount before
accounting for credits, is as follows:
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    \10\ 49 U.S.C. 32902.
    \11\ 49 U.S.C. 32911, 32912.
    \12\ Credits may be either earned (for over-compliance by a
given manufacturer's fleet, in a given model year), transferred
(from one fleet to another), or purchased (in which case, another
manufacturer earned the credits by over-complying and chose to sell
that surplus). 49 U.S.C. 32903.
    \13\ A manufacturer may have up to three fleets of vehicles, for
CAFE compliance purposes, in any given model year--a domestic
passenger car fleet, an import passenger car fleet, and a light
truck fleet. Each fleet belonging to each manufacturer has its own
compliance obligation, with the potential for either over-compliance
or under-compliance. There is no overarching CAFE requirement for a
manufacturer's total production.

(penalty rate) x (amount of shortfall, in tenths of an mpg) x (number
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of vehicles in manufacturer's fleet).

    Automakers have paid more than $890 million in CAFE civil
penalties, up to and including model year (MY) 2014 vehicles.\14\ On
top of the costs of paying these civil penalties, manufacturers have
also spent additional money towards generating overcompliance credits
and purchasing credits from other manufacturers. Starting with the
model year 2011, provisions in the CAFE program provided for credit
transfers among a manufacturer's various fleets. Commencing with that
model year, the law also provided for trading between vehicle
manufacturers, which has allowed vehicle manufacturers the opportunity
to acquire credits from competitors rather than paying civil penalties
for non-compliance. Manufacturers are required to notify NHTSA of the
volumes of credits traded or sold, but the agency does not receive any
information regarding total cost paid or cost per credit. Thus, while
NHTSA is not aware of the amount of money manufacturers spend on
generating overcompliance credits or purchasing credits from other
manufacturers, NHTSA believes it is likely that credit generation and
credit purchases involve significant expenditures. Moreover, NHTSA
expects that an increase in the penalty rate, which would apply to all
manufacturers, would result in an increase in such expenditures.\15\
Because of expected shortfalls in CAFE compliance in current and
upcoming model years, the agency currently anticipates many
manufacturers will face the possibility of larger expenditures on CAFE
penalties or increased costs to acquire credits over the next several
years than at present.\16\
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    \14\ Penalty reporting for MY15 and newer vehicles was not
reported at the time of this rule. The highest CAFE penalty paid to
date for a shortfall in a single fleet was $30,257,920, paid by
DaimlerChrysler for its import passenger car fleet in MY 2006. Since
MY 2012, only Jaguar Land Rover and Volvo have paid civil penalties.
See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
    \15\ See 83 FR 13904, 13916 (Apr. 2, 2018) (``[I]ncreasing the
penalty rate to $14 would lead to significantly greater costs than
the agency had anticipated when it set the CAFE standards because
manufacturers who had planned to use penalties as one way to make up
their shortfall would now need to pay increased penalty amounts,
purchase additional credits at likely higher prices, or make
modifications to their vehicles outside of their ordinary redesign
cycles. NHTSA believes all of these options would increase
manufacturers' compliance costs, many of which would be passed along
to consumers.''). NHTSA did not receive any comments providing
information to the contrary.
    \16\ NHTSA's ``Manufacturer Projected Fuel Economy Performance
Report'' indicates that the total U.S. fleet projected fuel economy
value fails to meet the standards for model year 2017 and
increasingly so for model year 2018. Available at https://one.nhtsa.gov/CAFE_PIC/MY_2017_and_2018_Projected_Fuel_Economy_Performance_Report.pdf (Apr.
30, 2018).
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    NHTSA has long had authority under the Energy Policy and
Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912
(1975), to raise the amount of the penalty for CAFE shortfalls if it
makes certain findings,\17\ as well as the authority to compromise and
remit such penalties under certain circumstances.\18\ Recognizing the
economic harm that increases in CAFE civil penalties could have on the
automobile industry and the economy as a whole, Congress capped any
increase in the original statutory penalty rate at $10 per tenth of a
mile per gallon. Further--and significantly--Congress has forbidden
NHTSA from increasing the CAFE civil penalty rate under EPCA unless
NHTSA concludes through rulemaking that the increase in the penalty
rate both (1) will result in, or substantially further, substantial
energy conservation for automobiles in model years in which the
increased penalty may be imposed, and (2) will not have a substantial
deleterious impact on the economy of the United States, a State, or a
region of the State. A finding of ``no substantial deleterious impact''
may only be made if NHTSA determines that it is likely that the
increase in the penalty (A) will not cause a significant increase in
unemployment in a State or a region of a State, (B) adversely affect
competition, or (C) cause a significant increase in automobile imports.
Nowhere does EPCA define ``substantial'' or ``significant'' in the
context of this provision.
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    \17\ 49 U.S.C. 32912.
    \18\ 49 U.S.C. 32913.
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    The authority to compromise and remit penalties is extremely
limited and must be applied on a case-by-case basis. If NHTSA seeks to
compromise or remit penalties for a given manufacturer, a rulemaking is
not necessary, but the amount of a penalty may be compromised or
remitted only to the extent (1) necessary to prevent a manufacturer's
insolvency or bankruptcy, (2) the manufacturer shows that the violation
was caused by an act of God, a strike, or a fire, or (3) the Federal
Trade Commission certifies that a reduction in the penalty is necessary
to prevent a substantial lessening of competition. NHTSA has never
previously attempted to undertake this process. To date, NHTSA has
never utilized its ability to compromise or remit a CAFE civil penalty.
These various statutory provisions and requirements, coupled with the
formula for determining the total potential civil penalty due from a
manufacturer, demonstrate the unique nature of the CAFE civil penalty
provision and distinguish it from a typical civil penalty provision
that merely sets forth an amount to be paid for a regulatory violation.

2. Civil Penalties Inflation Adjustment Act Improvements Act of 2015

    On November 2, 2015, the Federal Civil Penalties Inflation
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act),
Public Law 114-74, Section 701, was signed into law. The 2015 Act
required Federal agencies to make an initial ``catch-up'' adjustment to
the ``civil monetary penalties,'' as defined, they administer through
an interim final rule and then to make subsequent annual adjustments
for inflation.\19\ The amount of increase for any ``catch-up''
adjustment to a civil monetary penalty pursuant to the 2015 Act was
limited to 150 percent of the then-current penalty. Unless an exception
applied, agencies were required to issue an interim final rule for the
initial ``catch-up'' adjustment--without providing the opportunity for
public comment ordinarily required under the Administrative Procedure
Act (APA)--by July 1, 2016.\20\
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    \19\ A `` `civil monetary penalty' means any penalty, fine, or
other sanction'' that meets three requirements: the ``penalty, fine,
or other sanction'' must be ``for a specific monetary amount as
provided by Federal law'' or have ``a maximum amount provided for by
Federal law''; the ``penalty, fine, or other sanction'' must be
``assessed or enforced by an agency pursuant to Federal law''; and
the ``penalty, fine, or other sanction'' must be ``assessed or
enforced pursuant to an administrative proceeding or a civil action
in the Federal courts.'' 28 U.S.C. 2461 note, Federal Civil
Penalties Inflation Adjustment 3(2).
    \20\ The 2015 Act authorized full notice-and-comment rulemaking
procedures if the head of an agency was adjusting the amount of a
civil monetary penalty by less than the otherwise required amount
because she determined either that increasing the civil monetary
penalty by the otherwise required amount would have a negative
economic impact or that the social costs of increasing the civil
monetary penalty by the otherwise required amount outweighed the
benefits. Such a determination required the concurrence of the
Director of the Office of Management and Budget. 28 U.S.C. 2461
note, Federal Civil Penalties Inflation Adjustment 4(c).

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    The method of calculating inflationary adjustments in the 2015 Act
differs substantially from the methods used in past inflationary
adjustment rulemakings conducted pursuant to the Federal Civil
Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation
Adjustment Act), Public Law 101-410. Civil penalty adjustments under
the 1990 Inflation Adjustment Act were conducted under rules that
sometimes required significant rounding of figures. For example, any
increase determined under the 1990 Inflation Adjustment Act had to be
rounded to the nearest multiple of $25,000 in the case of penalties
greater than $200,000. Under these rules, NHTSA never adjusted the CAFE
civil penalty rate above $5.50.
    The 2015 Act altered these rounding rules. Now, penalties are
simply rounded to the nearest $1. Furthermore, the 2015 Act ``resets''
the inflation calculations by excluding prior inflationary adjustments
under the 1990 Inflation Adjustment Act. To do this, the 2015 Act
requires agencies to identify, for each civil monetary penalty, the
year and corresponding amount(s) for which the maximum penalty level or
range of minimum and maximum penalties was established (i.e.,
originally enacted by Congress) or last adjusted other than pursuant to
the 1990 Inflation Adjustment Act.
    Significantly, Congress also included a provision in the 2015 Act
that directed the Director of OMB to issue periodic guidance to
agencies implementing the inflation adjustments required under the 2015
Act. The Director of OMB provided initial guidance to agencies in a
February 24, 2016 memorandum.\21\ In that guidance, OMB specifically
instructed agencies to identify the penalties to which the 2015 Act
would apply among the penalties that each agency is responsible for
administering, and noted that:
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    \21\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb.
24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last accessed
May 22, 2018).

    Agencies with questions on the applicability of the inflation
adjustment requirement to an individual penalty, should first
consult with the Office of General Counsel of the agency for the
applicable statute, and then seek clarifying guidance from OMB if
necessary.\22\
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    \22\ Id.

    Subsequent guidance from OMB reiterated agencies' responsibility to
identify applicable penalties and to consult with the individual
agency's Office of General Counsel and to seek clarifying guidance from
OMB with questions regarding the applicability of the 2015 Act to
particular penalties.\23\
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    \23\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 Annual
Adjustment Pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available
online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (last accessed July 10, 2018);
Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2018, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015 (Dec. 15, 2017),
available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf (last accessed July 10, 2018); Memorandum from
the Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2019, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 (Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last
accessed May 31, 2019).
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    For those penalties subject to the statute's definition of ``civil
monetary penalties,'' the memorandum provided guidance on how to
calculate the initial adjustment required by the 2015 Act. The initial
catch up adjustment is based on the change between the Consumer Price
Index for all Urban Consumers (CPI-U) for the month of October in the
year the penalty amount was established or last adjusted by Congress
and the October 2015 CPI-U. The February 24, 2016 memorandum contains a
table with a multiplier for the change in CPI-U from the year the
penalty was established or last adjusted to 2015. To arrive at the
adjusted penalty, the agency must multiply the penalty amount when it
was established or last adjusted by Congress, excluding adjustments
under the 1990 Inflation Adjustment Act, by the multiplier for the
increase in CPI-U from the year the penalty was established or adjusted
as provided in the February 24, 2016 memorandum. The 2015 Act limits
the initial inflationary increase to 150 percent of the current
penalty. To determine whether the increase in the adjusted penalty is
less than 150 percent, the agency must multiply the current penalty by
250 percent. The adjusted penalty is the lesser of either the adjusted
penalty based on the multiplier for CPI-U in Table A of the February
24, 2016 memorandum or an amount equal to 250% of the current penalty.
    Additionally, the 2015 Act gives agencies discretion to adjust the
amount of a civil monetary penalty by less than otherwise required if
the agency determines that increasing the civil monetary penalty by the
otherwise required amount will have either a negative economic impact
or if the social costs of the increased civil monetary penalty will
outweigh the benefits.\24\ In either instance, the agency must publish
a notice, take and consider comments on this finding, and receive
concurrence on this determination from the Director of OMB prior to
finalizing a lower civil penalty amount.
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    \24\ Public Law 114-74, Sec. 701(c).
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3. NHTSA's Actions to Date Regarding CAFE Civil Penalties

a. Interim Final Rule
    On July 5, 2016, NHTSA published an interim final rule, without
notice and comment, adopting inflation adjustments for civil penalties
under its administration, following the procedure and the formula in
the 2015 Act. NHTSA did not analyze at that time whether the 2015 Act
applied to all of its civil penalties. One of the adjustments NHTSA
made at the time was raising the civil penalty rate for CAFE non-
compliance from $5.50 to $14.\25\ NHTSA also indicated in that notice
that the maximum penalty rate that the Secretary is permitted to
establish for such violations would increase from $10 to $25, although
this was not codified in the regulatory text.\26\ NHTSA made these
adjustments without seeking public comment and without discussing with
the Department of Transportation Office of General Counsel whether the
2015 Act applied to these rates, whether the adjustments conflict with
EPCA's penalty rate increase procedures, or whether making the
adjustments would have negative economic consequences. NHTSA also
raised the maximum civil penalty for other violations of EPCA, as
amended, to $40,000.\27\
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    \25\ 81 FR 43524 (July 5, 2016). This interim final rule also
updated the maximum civil penalty amounts for violations of all
statutes and regulations administered by NHTSA, and was not limited
solely to penalties administered for CAFE violations.
    \26\ For the reasons described in Section D.5, the maximum
penalty rate that the Secretary is permitted to establish for such
violations is $10.
    \27\ 81 FR 43524 (July 5, 2016).
---------------------------------------------------------------------------

    In response to the changes to the CAFE penalty provisions issued in
the interim final rule, the Alliance of Automobile Manufacturers
(Alliance) and the Association of Global Automakers (Global) jointly
petitioned NHTSA for reconsideration (the Industry Petition).\28\ The
Industry

Petition raised concerns with the significant impact, which they
estimated to be at least $1 billion annually, that the increased
penalty rate would have on CAFE compliance costs. Specifically, the
Industry Petition raised: The issue of retroactivity (applying the
penalty increase associated with model years that have already been
completed or for which a company's compliance plan had already been
``set''); which ``base year'' (i.e., the year the penalty was
established or last adjusted) NHTSA should use for calculating the
adjusted penalty rate; and whether an increase in the penalty rate to
$14 would cause a ``negative economic impact.''
---------------------------------------------------------------------------

    \28\ Jaguar Land Rover North America, LLC also filed a petition
for reconsideration in response to the July 5, 2016 interim final
rule raising the same concerns as those raised in the Industry
Petition. Both petitions, along with a supplement to the Industry
Petition, can be found in Docket ID NHTSA-2016-0075 at
www.regulations.gov.
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b. Final Rule
    In response to the Industry Petition, NHTSA issued a final rule on
December 28, 2016.\29\ In that rule, NHTSA agreed that raising the
penalty rate for model years already fully complete would be
inappropriate, given how courts generally disfavor the retroactive
application of statutes. NHTSA also agreed that raising the rate for
model years for which product changes were infeasible due to lack of
lead time did not seem consistent with Congress' intent that the CAFE
program be responsive to consumer demand. NHTSA therefore stated that
it would not apply the inflation-adjusted penalty rate of $14 until
model year 2019, as the agency believed that would be the first year in
which product changes could be made in response to the higher penalty
rate.
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    \29\ 81 FR 95489 (December 28, 2016). The December 2016 final
rule did not impact the portions of the July 5, 2016 interim final
rule not dealing with CAFE, which are expected to be finalized as
part of NHTSA's 2019 inflationary adjustments.
---------------------------------------------------------------------------

    Beginning in January 2017, NHTSA took action to delay the effective
date of the December 2016 final rule.\30\ As a result of a recent
decision of the United States Court of Appeals for the Second Circuit,
that December 2016 final rule is now in force.\31\ That decision by the
Second Circuit does not affect NHTSA's authority to reconsider the
applicability of the 2015 Act to the EPCA CAFE civil penalty provision
through notice-and-comment rulemaking and to issue this final rule.\32\
Absent this final rule determining that the 2015 Act does not apply to
the CAFE civil penalty rate, the rate would have increased beginning
with model year 2019 for noncompliances that will likely be determined
in approximately late 2020.\33\
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    \30\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28,
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017).
    \31\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No.
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule,
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is
now in force.'').
    \32\ NHTSA is permitted to issue this final rule for the reasons
explained in Section D.1.
    \33\ See 81 FR 95489, 95492 (Dec. 28, 2016). Civil penalties are
determined after the end of a model year, following NHTSA's receipt
of final reports from the Environmental Protection Agency (EPA),
i.e., no earlier than April 2020 for model year 2019 noncompliance.
See 77 FR 62624, 63126 (Oct. 15, 2012).
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c. Initial Reconsideration and Request for Comments
    In light of CAFE compliance data submitted by manufacturers to
NHTSA showing that many automakers would begin to fall behind in
meeting their applicable CAFE standards beginning in model years 2016
and 2017,\34\ in July 2017, the agency indicated it was reconsidering
its earlier decision in the July 2016 interim final rule to increase
the CAFE civil penalty rate. In that reconsideration announcement, the
agency explained that it was, for the first time, seeking public
comment on the legal, factual, and policy issues implicated by the
question of whether the rate should be increased. NHTSA requested
public comment on whether and, if so, how to amend the CAFE civil
penalty rate.\35\
---------------------------------------------------------------------------

    \34\ ``MYs 2016 and 2017 Projected Fuel Economy Performance
Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm.
    \35\ 82 FR 32140 (July 12, 2017). Comments on this document can
be found at: https://www.regulations.gov/docket?D=NHTSA-2017-0059.
In the NPRM, NHTSA generally described the comments it received in
response to its reconsideration notice, including that ``[v]ehicle
manufacturers, either directly or via their respective representing
organizations, also expressed support for the reconsideration of the
2016 final rule.'' 83 FR 13904, 13907 (Apr. 2, 2018). NHTSA did not
intend to suggest, as one commenter to the NPRM read it, that all
``the vehicle manufacturers who submitted comments uniformly
supported reconsideration of the CAFE penalty increase.'' Comment by
Workhorse Group Inc., NHTSA-2018-0017-0010 (Workhorse Comment), at 2
n.3. NHTSA acknowledges that one electric vehicle manufacturer,
Faraday Future, submitted a comment to the reconsideration notice
requesting that NHTSA consider the economic impact of a change to
the CAFE civil penalty rate on electric vehicle manufacturers. See
Docket ID NHTSA-2017-0059-0016. NHTSA discusses this issue below.
---------------------------------------------------------------------------

d. Notice of Proposed Rulemaking
    On April 2, 2018, NHTSA published a notice of proposed rulemaking
(NPRM) announcing that it had tentatively determined, upon
reconsideration, that the 2015 Act should not be applied to the CAFE
civil penalty formula provision found in 49 U.S.C. 32912 and proposed
to retain the current civil penalty rate of $5.50 per .1 of a mile per
gallon, rather than to increase it to $14 beginning in model year
2019.\36\ Through its reconsideration of the applicability of the 2015
Act to the CAFE civil penalty rate, NHTSA is carrying out its
responsibility, as OMB instructed in its guidance, to determine whether
the penalties under its jurisdiction are ``civil monetary penalt[ies]''
as defined by the 2015 Act.\37\ The agency's proposal is based on a
legal determination, after reconsideration, that the CAFE civil penalty
rate is not a ``civil monetary penalty'' as contemplated by the 2015
Act and that therefore the 2015 Act does not apply to the NHTSA CAFE
civil penalty formula. Specifically, NHTSA proposed that the formula is
not a ``penalty, fine, or other sanction'' that is either ``a specific
monetary amount'' or ``a maximum amount.'' Instead, as OMB highlights
in the docketed opinion,\38\ Congress expressly described the rate in
the CAFE statute as an ``amount . . . to be used in calculating a civil
penalty,'' not a ``civil penalty'' itself.\39\ The CAFE statute
outlines a process that NHTSA uses to determine a potential penalty and
that manufacturers use to determine their specific penalty. In
particular, the $5.50 per .1 mile is merely a rate that goes into a
complex, statutory formula used to calculate a potential penalty
amount, but the actual civil penalty amount ultimately depends on the
decisions of both the violator and potentially other manufacturers.
---------------------------------------------------------------------------

    \36\ NHTSA's reconsideration authority is discussed in Section
D.1.
    \37\ OMB's February 2016 guidance confirms that each agency is
``responsible for identifying the civil monetary penalties that fall
under the statutes and regulations [it] enforce[s].'' Memorandum
from the Director of OMB to Heads of Executive Departments and
Agencies, Implementation of the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015, at 2 (Feb. 24, 2016),
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
    \38\ OMB Non-Applicability Letter, at 4-5.
    \39\ 49 U.S.C. 32912(c)(1)(A).
---------------------------------------------------------------------------

    This proposal reflected a change in NHTSA's position on this issue
from when NHTSA previously adjusted the CAFE civil penalty rate from $5
to $5.50. Mindful of the Alliance and Global's comment that ``the
practical and legal issues implicated by such a reduction may prove to
be insuperable,'' \40\ at this time, NHTSA is

exercising its judgment not to revisit its determination from more than
twenty years ago to increase the rate by fifty cents, even if that
decision did not take into account the agency's considered
interpretation of the statute.\41\
---------------------------------------------------------------------------

    \40\ Comment by Alliance of Automobile Manufacturers and
Association of Global Automakers, NHTSA-2018-0017-0011 (Alliance and
Global Comment), 18 n.75. Because of these practical and legal
issues and because the agency is ``reluctant to draw inferences from
Congress' failure to act,'' Schneidewind v. ANR Pipeline Co., 485
U.S. 293, 306 (1988), Congress not reinstating the $5 rate--in 2007
in EISA or otherwise--means little, contrary to the suggestion of
some commenters. See Comment by California Air Resources Board,
California Department of Transportation, District of Columbia
Department of Energy and Environment, and New Jersey Department of
Environmental Protection, NHTSA-2018-0017-0014 (CARB Comment), at
20; Comment by Attorneys General of New York, California, Delaware,
the District of Columbia, Illinois, Iowa, Maryland, Massachusetts,
New Jersey, Oregon, Vermont, Virginia, and Washington, NHTSA-2018-
0017-0015 (Attorneys General Comment), at 8, 9-10.
    \41\ In light of the conclusions that NHTSA reaches in this
final rule and the agency's decision to maintain the current $5.50
civil penalty rate at this time, rather than increase it to $14
beginning in MY 2019, any modifications to the civil penalty rate,
as appropriate, would be more properly the subject of future
rulemakings. As stated in the NPRM, NHTSA is considering a separate
rulemaking to determine whether the CAFE civil penalty rate should
be reduced to $5, in light of NHTSA's decision here that the 2015
Act should not be applied to the CAFE civil penalty rate. In
addition, some commenters here have contended that the CAFE civil
penalty rate of $5.50 should be increased under EPCA, even if the
2015 Act is not applied. See infra at Section D.4.a. NHTSA plans to
consider these potentially conflicting positions and any further
changes to the CAFE civil penalty rate that might be appropriate in
a future rulemaking.
---------------------------------------------------------------------------

    Even if one were to assume that the CAFE penalty rate was subject
to the 2015 Act, NHTSA proposed in the alternative to maintain the
current $5.50 civil penalty rate based on a tentative finding that--
either in light of the statutory factors Congress requires NHTSA to
analyze under EPCA in determining whether an increase in the civil
penalty rate will have ``a substantial deleterious impact on the
economy'' or otherwise--increasing the CAFE civil penalty rate would
result in a ``negative economic impact.'' Pursuant to OMB's guidance,
NHTSA consulted with OMB before proposing this reduced catch-up
adjustment determination and submitted its NPRM to the Office of
Information and Regulatory Affairs (OIRA) for review. In any event,
NHTSA proposed that any adjustment would be capped by the $10 limit in
49 U.S.C. 32912(c)(1)(B), which would remain unadjusted.
    NHTSA also proposed to finalize the 2017 and 2018 inflationary
adjustments for the maximum penalty for general CAFE violations in 49
U.S.C. 32912(a).\42\
---------------------------------------------------------------------------

    \42\ In this final rule, NHTSA also finalizes the 2019
inflationary adjustments for the general CAFE maximum penalty.
---------------------------------------------------------------------------

C. Overview of the Comments

    NHTSA received sixteen comments on the NPRM. NHTSA received
comments from the following entities and individuals: The Alliance of
Automobile Manufacturers; the Association of Global Automakers; Jaguar
Land Rover North America LLC; Center for Biological Diversity; Natural
Resources Defense Council; Sierra Club (and some of its members); the
Union of Concerned Scientists; Center for American Progress; Attorneys
General of New York, California, Delaware, the District of Columbia,
Illinois, Iowa, Maryland, Massachusetts, New Jersey, Oregon, Vermont,
Virginia, and Washington; the California Air Resources Board; the
California Department of Transportation; the District of Columbia
Department of Energy and Environment; the New Jersey Department of
Environmental Protection; the Institute for Policy Integrity at New
York University School of Law; Workhorse Group Inc.; and other
individuals.

D. Response to the Comments

1. NHTSA's Reconsideration Authority

    As a threshold matter, NHTSA must address the various comments
submitted regarding the agency's ability to reconsider its previous
rules on this issue and upon reconsideration, change its position
regarding the applicability of the 2015 Act to the CAFE civil penalty
rate and the need to invoke the ``negative economic impact''
exception.\43\ NHTSA, like all agencies, is permitted to change its
views based upon its experience and expertise, provided that the
requirements of the APA and other governing statutes are met. To do so,
an agency must show that it is aware it is changing its position and
provide a reasoned explanation for the change.\44\ This holds true even
if the agency's position has been ``longstanding,'' as some commenters
characterized here,\45\ because the agency must continually consider
varying interpretations and reassess their validity.\46\
---------------------------------------------------------------------------

    \43\ See, e.g., Workhorse Comment, at 3; Comment by Center for
American Progress, NHTSA-2018-0017-0013 (CAP Comment), at 3;
Attorneys General Comment, at 6; Comment by Institute for Policy
Integrity at New York University School of Law, NHTSA-2018-0017-0017
(IPI Comment), at 2-3.
    \44\ Alliance and Global Comment, at 4-5 (citing Encino
Motorcars LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016); FCC v. Fox
Television Stations, Inc., 556 U.S. 502, 515-16 (2009)).
    \45\ See, e.g., Workhorse Comment, at 3; Attorneys General
Comment, at 6; IPI Comment, at 1.
    \46\ Rust v. Sullivan, 500 U.S. 173, 186-87 (1991); see also
Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126 (2016); FCC
v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009); Nat'l
Cable & Telecommunications Ass'n v. Brand X internet Servs., 545
U.S. 967, 981 (2005); GenOn REMA, LLC v. U.S. E.P.A., 722 F.3d 513,
525 (3d Cir. 2013) (An agency ``is not forever held to its prior
interpretations, as the continued validity and appropriateness of
the agency's rules is an evolving process.''); Strickland v. Comm'r,
Maine Dep't of Human Servs., 48 F.3d 12, 18 (1st Cir. 1995) (``[A]n
explained modification, even one that represents a sharp departure
from a longstanding prior interpretation, ordinarily retains
whatever deference is due.''). Given that the current penalty rate
has been in effect since it was set decades ago, however, NHTSA will
apply its new position on a prospective basis only from the
effective date of this final rule.
---------------------------------------------------------------------------

    Here, NHTSA expressly acknowledged in the NPRM that its tentative
determination that the CAFE civil penalty rate is not a ``civil
monetary penalty'' subject to inflationary adjustment under the 2015
Act ``reflects a change in NHTSA's position on this issue.'' \47\ As
NHTSA explained in the NPRM, NHTSA proposed the change because it
previously ``did not consider'' the issue and had proceeded in the July
2016 interim final rule ``without analysis'' of the statutory
interpretation and policy issues considered in this rulemaking and
without the benefit of public comment.\48\ Accordingly, after providing
a comprehensive ``reasoned explanation'' in the NPRM,\49\ NHTSA reached
a tentative determination that a change was appropriate and that its
proposed change was justified--an analysis upon which it then sought
comment.\50\
---------------------------------------------------------------------------

    \47\ 83 FR 13904, 13908 (May 2, 2018). As established in OMB's
opinion and explained further below, NHTSA's changed position
comports with OMB's interpretation of the 2015 Act--that is, the
interpretation provided by the office designated by Congress to
issue guidance to all agencies on how the 2015 Act should be
implemented. OMB Non-Applicability Letter.
    \48\ 83 FR 13904, 13904-05 (May 2, 2018). Comments noting that
NHTSA has previously ``acknowledged'' that the 2015 Act applies to
the CAFE civil penalty rate, Comment by Center for Biological
Diversity, Natural Resources Defense Council, Sierra Club, and the
Union of Concerned Scientists, NHTSA-2018-0017-0012 (CBD Comment),
at 9; see also CARB Comment, at 6; IPI Comment, at 2, miss the
point: NHTSA expressly recognized its past position in the NPRM, but
the agency noted that it had adopted that position without analyzing
the issue. After appropriate examination, NHTSA changed its position
to comport with the applicable statutes. It is irrelevant that
``none of the commenters who responded to NHTSA's [previous] request
for comments offered the legal interpretation that NHTSA is now
proposing,'' Workhorse Comment, at 3-4, or that the Alliance and
Global have previously stated that ``NHTSA is not empowered to
exempt the CAFE program from th[e] directive'' of the 2015 Act,
Industry Petition, at 1. NHTSA is permitted to--and, in fact, has
the responsibility to--interpret Federal statutes related to matters
under its purview, see U.S. ex rel. Hall v. Payne, 254 U.S. 343,
347-48 (1920) (``[The Secretary of the Interior] could not
administer or apply the act without construing it.''), and the
public has now had a full opportunity to comment on the proposed
interpretation.
    \49\ 83 FR 13904, 13908-11 (May 2, 2018).
    \50\ One commenter noted that ``NHTSA did not consult with the
Department of Justice or any other agencies besides DOT and OMB in
crafting its interpretation of the Inflation Adjustment Act
applicable to the entire federal government,'' as evidence that
NHTSA's interpretation does not merit deference. Workhorse Comment,
at 3. As noted above, OMB has provided its views on the
applicability of the 2015 Act to the CAFE civil penalty rate in a
comprehensive opinion included in the docket for this rulemaking.
OMB Non-Applicability Letter. In addition, as part of its review of
the NPRM before publication in the Federal Register, OIRA within OMB
managed an interagency review process, in which the Department of
Justice and other agencies were able to review and provide comments
on NHTSA's proposal. Moreover, consultation principally with OMB was
appropriate as the 2015 Act directed OMB to provide guidance to
agencies on implementing the inflation adjustments required under
the 2015 Act.

---------------------------------------------------------------------------

    To the extent that NHTSA's ``prior policy has engendered serious
reliance interests that must be taken into account,'' NHTSA has
provided ``a more detailed justification'' than what sufficed to create
its previous policy.\51\ As explained in the NPRM and further below,
NHTSA did not previously consider the issue at all and thus any
explanation is ``more detailed'' than the one it previously provided.
Regardless, ``reliance does not overwhelm good reasons for a policy
change,'' even in instances that would ``necessitate systemic,
significant changes'' to regulated entities' practices.\52\ NHTSA
believes that correcting an erroneous legal interpretation of a statute
to align its practice with what Congress required and exercising
authority conferred by Congress to avoid a ``negative economic impact''
both constitute ``good reasons for a policy change.'' Moreover, ``the
extent to which the Department is obliged to address reliance will be
affected by the thoroughness of public comments it receives on the
issue,'' \53\ and only one regulated entity submitted a comment
containing any argument that its reliance on NHTSA's previous policy
supports an increase in the CAFE civil penalty rate to $14.\54\ The
reliance argued in this single comment does not override NHTSA's
obligation to apply the 2015 Act as enacted or to act in accord with
the statute--and with OMB's concurrence \55\--to avoid imposing a
``negative economic impact.''
---------------------------------------------------------------------------

    \51\ Fox, 556 U.S. at 515.
    \52\ Navarro, 136 S. Ct. at 2128 (2016) (Ginsburg, J.,
concurring).
    \53\ Id. at 2128 n.2.
    \54\ See Workhorse Comment, at 3.
    \55\ OMB Negative Economic Impact Letter.
---------------------------------------------------------------------------

    It is of no consequence that the 2015 Act does not expressly state
that NHTSA may reconsider its previous rules on the initial inflation
adjustment. For one, the APA defines ``rule making''--the mechanism
mandated by the 2015 Act for enacting the initial catch-up adjustment
and for invoking the ``negative economic impact'' exception--to include
the process of ``amending, or repealing a rule.'' \56\ But in any
event, no specific statutory or codified regulatory authority is
required. It is well-established that agencies have various inherent
powers.\57\ And it has been affirmed repeatedly that, in the absence of
a Congressional prohibition, agencies have the inherent power to
reconsider their own decisions.\58\ This inherent authority encompasses
an agency reconsidering how it previously interpreted a statute and
amending an

existing regulation by going through the notice-and-comment rulemaking
process under the APA, particularly when its updated interpretation
``closely fits the design of the statute as a whole and its object and
policy.'' \59\
---------------------------------------------------------------------------

    \56\ 5 U.S.C. 551(5) (`` `[R]ule making' means agency process
for formulating, amending, or repealing a rule.''). Moreover,
NHTSA's regulations provide that ``[t]he Administrator may initiate
any further rulemaking proceedings that he finds necessary or
desirable.'' 49 CFR 553.25.
    \57\ See, e.g., Vermont Yankee Nuclear Power Corp. v. Nat. Res.
Def. Council, Inc., 435 U.S. 519, 544 (1978) (noting ``the very
basic tenet of administrative law that agencies should be free to
fashion their own rules of procedure''); Morton v. Ruiz, 415 U.S.
199, 231 (1974) (``The power of an administrative agency to
administer a congressionally created and funded program necessarily
requires the formulation of policy and the making of rules to fill
any gap left, implicitly or explicitly, by Congress.''); Gadda v.
Ashcroft, 377 F.3d 934, 948 n.8 (9th Cir. 2004) (``Of course, our
statutory and inherent powers to regulate attorneys admitted to the
Ninth Circuit bar coexist with the separate, independent powers of
federal administrative agencies to do the same. . . . In the case of
agencies, this power, though limited, exists whether or not
expressly authorized by statute.''); Ober v. Whitman, 243 F.3d 1190,
1194-95 (9th Cir. 2001) (indicating that agencies have the inherent
authority to exempt de minimis violations from regulation if not
prohibited by statute); Tate & Lyle, Inc. v. C.I.R., 87 F.3d 99, 104
(3d Cir. 1996) (``Inherent in the powers of an administrative agency
is the authority to formulate policies and to promulgate rules to
fill any gaps left, either implicitly or explicitly, by Congress.'')
(citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 843 (1984)); Nat. Res. Def. Council, Inc. v. Sec. & Exch.
Comm'n, 606 F.2d 1031, 1056 (D.C. Cir. 1979) (``An agency is allowed
to be master of its own house, lest effective agency decisionmaking
not occur in [a]ny proceeding.'').
    \58\ See, e.g., Motor Vehicles Mfrs. Ass'n v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 42 (1983) (``[A]n agency must be given
ample latitude to `adapt their rules and policies to the demands of
changing circumstances.' '' (quoting Permian Basin Area Rate Cases,
390 U.S. 747, 784 (1968))); Am. Trucking Associations v. Atchison,
T. & S. F. Ry. Co., 387 U.S. 397, 416 (1967) (``We agree that the
Commission, faced with new developments or in light of
reconsideration of the relevant facts and its mandate, may alter its
past interpretation and overturn past administrative rulings and
practice. . . . This kind of flexibility and adaptability to
changing needs and patterns of transportation is an essential part
of the office of a regulatory agency. Regulatory agencies do not
establish rules of conduct to last forever; they are supposed,
within the limits of the law and of fair and prudent administration,
to adapt their rules and practices to the Nation's needs in a
volatile, changing economy. They are neither required nor supposed
to regulate the present and the future within the inflexible limits
of yesterday.'') (cleaned up); Cobra Nat. Res., LLC v. Fed. Mine
Safety & Health Review Comm'n, 742 F.3d 82, 101 (4th Cir. 2014)
(``[A]n administrative agency, charged with the protection of the
public interest, is certainly not precluded from taking appropriate
action because of a mistaken action on its part in the past.''
(quoting NLRB v. Balt. Transit Co., 140 F.2d 51, 55 (4th Cir.
1944))); Kindred Nursing Centers E., LLC v. N.L.R.B., 727 F.3d 552,
560 (6th Cir. 2013) (``An agency may depart from its precedents, and
provided that the departure from precedent is explained, our review
is limited to whether the rationale is so unreasonable as to be
arbitrary and capricious. An administrative agency may reexamine its
prior decisions and may depart from its precedents provided the
departure is explicitly and rationally justified.'') (cleaned up);
ConocoPhillips Co. v. U.S. E.P.A., 612 F.3d 822, 832 (5th Cir. 2010)
(``Embedded in an agency's power to make a decision is its power to
reconsider that decision.''); Tokyo Kikai Seisakusho, Ltd. v. United
States, 529 F.3d 1352, 1360-61 (Fed. Cir. 2008) (``[A]dministrative
agencies possess inherent authority to reconsider their decisions,
subject to certain limitations, regardless of whether they possess
explicit statutory authority to do so.''); Friends of Boundary
Waters Wilderness v. Bosworth, 437 F.3d 815, 823-24 (8th Cir. 2006)
(``Agencies given the authority to promulgate a quota are presumed
to have the authority to adjust that quota.''); S. California Edison
Co. v. F.E.R.C., 415 F.3d 17, 22-23 (D.C. Cir. 2005) (``[O]f course,
agencies may alter regulations. Agencies may even alter their own
regulations sua sponte, in the absence of complaints, provided they
have sufficient reason to do so and follow applicable
procedures.''); Macktal v. Chao, 286 F.3d 822, 825-26 (5th Cir.
2002) (``[I]t is generally accepted that in the absence of a
specific statutory limitation, an administrative agency has the
inherent authority to reconsider its decisions.''); Harrington v.
Chao, 280 F.3d 50, 59 (1st Cir. 2002) (``Agencies do have leeway to
change their interpretations of laws, as well as of their own
regulations, provided they explain the reasons for such change and
provided that those reasons meet the applicable standard of
review.''); Belville Mining Co. v. United States, 999 F.2d 989, 997
(6th Cir. 1993) (``Even where there is no express reconsideration
authority for an agency, [ ] the general rule is that an agency has
inherent authority to reconsider its decision.''); Rainbow Broad.
Co. v. F.C.C., 949 F.2d 405, 409 (D.C. Cir. 1991) (``Agencies enjoy
wide latitude when using rulemaking to change their own policies and
the manner by which their policies are implemented. . . . According
agencies the power to change their minds about their own policies,
practices and procedures rests on a sound policy basis. Agencies
need some flexibility in carrying out their authority.''); Dun &
Bradstreet Corp. Found. v. United States Postal Serv., 946 F.2d 189,
193 (2d Cir. 1991) (``It is widely accepted that an agency may, on
its own initiative, reconsider its interim or even its final
decisions, regardless of whether the applicable statute and agency
regulations expressly provide for such review.''); Dawson v. Merit
Sys. Prot. Bd., 712 F.2d 264, 267 (7th Cir. 1983) (describing ``the
general rule that administrative agencies have the power to
reconsider decisions on their own initiative''); Dana Corp. v. ICC,
703 F.2d 1297, 1305 (D.C. Cir. 1983) (``[T]he agency is entitled to
have second thoughts, and to sustain action which it considers in
the public interest upon whatever basis more mature reflection
suggests.''); Trujillo v. Gen. Elec. Co., 621 F.2d 1084, 1086 (10th
Cir. 1980) (``Administrative agencies have an inherent authority to
reconsider their own decisions, since the power to decide in the
first instance carries with it the power to reconsider.'');
Mazaleski v. Treusdell, 562 F.2d 701, 720 (D.C. Cir. 1977) (``We
have many times held that an agency has the inherent power to
reconsider and change a decision if it does so within a reasonable
period of time.'') (quoting Gratehouse v. United States, 512 F.2d
1104, 1109 (Ct. Cl. 1975)); Albertson v. FCC, 182 F.2d 397, 399
(D.C. Cir. 1950) (``The power to reconsider is inherent in the power
to decide.'').
    \59\ Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417-18
(1993) (cleaned up); see also U.S. Telecom Ass'n v. F.C.C., 400 F.3d
29, 35 (D.C. Cir. 2005) (``[I]f an agency adopts `a new position
inconsistent with' an existing regulation, or effects `a substantive
change in the regulation,' notice and comment are required.'')
(quoting Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995));
Nat'l Classification Comm. v. United States, 22 F.3d 1174, 1177
(D.C. Cir. 1994) (``[A]n agency may depart from its past
interpretation [of a statute] so long as it provides a reasoned
basis for the change.'') (citing Motor Vehicles Mfrs. Ass'n v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); Torrington
Extend-A-Care Employee Ass'n v. N.L.R.B., 17 F.3d 580, 589 (2d Cir.
1994) (similar).
---------------------------------------------------------------------------

    It is common practice for agencies--including NHTSA--to exercise
their inherent reconsideration authority.\60\ That is because
``reconsideration is often the sole means of correcting errors of
procedure or substance,'' and ``[t]here may also be instances when
unmistakable shifts in our basic judgments about law or policy
necessitate the revision or amendment of previously established rules
of conduct.'' \61\ In fact, agencies may even have a duty to reconsider
their rules. As the Supreme Court has noted:
---------------------------------------------------------------------------

    \60\ See, e.g., 82 FR 14671, 14671 (Mar. 22, 2017) (``The EPA
[in a joint notice with NHTSA] has inherent authority to reconsider
past decisions and to revise, replace or repeal a decision to the
extent permitted by law and supported by a reasoned explanation.''
(citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009))); 76 FR 22565, 22578 (Apr. 21, 2011) (``An agency generally
remains free to revise improperly promulgated or otherwise
unsupportable rules, even in the absence of a remand from a Court. .
. . Agencies have particularly broad authority to revise their
regulations to correct their errors. . . . Moreover, an agency may
reconsider its methodologies and application of its statutory
requirements and may even completely reverse course, regardless of
whether a court has determined that its original regulation is
flawed, so long as the agency explains its bases for doing so.'')
(citations omitted); 75 FR 6883, 6884 (Feb. 12, 2010) (``The
Department [of Labor] has inherent authority to change its
regulations in accordance with the Administrative Procedure Act
(APA).''); 64 FR 60556, 60580 (Nov. 5, 1999) (NHTSA ``believe[s]
that nothing in [the statute] derogates our inherent authority to
make temporary adjustments in the requirements we adopt if, in our
judgment, such adjustments are necessary or prudent to promote the
smooth and effective achievement of the goals of the amendments.'').
    \61\ Bookman v. United States, 453 F.2d 1263, 1265 (Ct. Cl.
1972).

    An initial agency interpretation is not instantly carved in
stone. On the contrary, the agency, to engage in informed
rulemaking, must consider varying interpretations and the wisdom of
its policy on a continuing basis.\62\
---------------------------------------------------------------------------

    \62\ Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 863-64 (1984) (emphasis added). In a subsequent case, the
Supreme Court confirmed that such reconsiderations should be done,
at a minimum, ``in response to changed factual circumstances, or a
change in administrations.'' Nat'l Cable & Telecommunications Ass'n
v. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (citing Motor
Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut.
Automobile Ins. Co., 463 U.S. 29, 59 (1983) (Rehnquist, J.,
concurring in part and dissenting in part)).

At bottom, ``[i]f an agency is to function effectively, however, it
must have some opportunity to amend its rules and regulations in light
of its experience.'' \63\
---------------------------------------------------------------------------

    \63\ Fla. Cellular Mobil Commc'ns Corp. v. F.C.C., 28 F.3d 191,
196 (D.C. Cir. 1994).
---------------------------------------------------------------------------

    OMB's February 2016 guidance on implementing the 2015 Act confirms
that each agency is ``responsible for identifying the civil monetary
penalties that fall under the statutes and regulations [it]
enforce[s].'' \64\ This is an ongoing responsibility for each agency,
as confirmed in OMB's subsequent guidance in December 2016, December
2017, and December 2018.\65\ In the docketed opinion regarding NHTSA's
determination that the 2015 Act does not apply to the CAFE civil
penalty rate, OMB affirms that it is appropriate for NHTSA to
reconsider its previous interpretation of the 2015 Act.\66\ NHTSA has
specific statutory authority to administer the CAFE standards program
\67\ and retains general authority--beyond its inherent authority--to
do so efficiently and in the public interest.\68\ In the text of the
2015 Act, Congress did not prohibit or otherwise restrict agencies from
reconsidering whether an initial catch-up adjustment is required or, if
so, the magnitude of such an adjustment.
---------------------------------------------------------------------------

    \64\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015, at 2
(Feb. 24, 2016), available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
    \65\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 annual
adjustment pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015, at 2 (Dec. 16, 2016),
available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf (``Agencies are responsible for
identifying the civil monetary penalties that fall under the
statutes and regulations they enforce.''); Memorandum from the
Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2018, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015, at 2 (Dec. 15, 2017), available at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf
(``Agencies are responsible for identifying the civil monetary
penalties that fall under the statutes and regulations within their
jurisdiction.''); Memorandum from the Director of OMB to Heads of
Executive Departments and Agencies, Implementation of Penalty
Inflation Adjustments for 2019, Pursuant to the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015, at 2
(Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019)
(``Agencies are responsible for identifying the civil monetary
penalties that fall under the statutes and regulations within their
jurisdiction.'').
    \66\ See generally OMB Non-Applicability Letter.
    \67\ See, e.g., 49 U.S.C. 32902, 32912. The Secretary's
authority under EPCA is delegated to NHTSA. 49 CFR 1.95(a)
(delegating authority to NHTSA to exercise the authority vested in
the Secretary under chapter 329 of title 49 of the U.S. Code); see
also 1.94(c).
    \68\ See 49 U.S.C. 302(a) (stating the Secretary of
Transportation is governed by the transportation policy described in
part in 49 U.S.C. 13101(b), which provides that oversight of the
modes of transportation ``shall be administered and enforced to
carry out the policy of this section and to promote the public
interest''); 49 U.S.C. 322(a) (``The Secretary of Transportation may
prescribe regulations to carry out the duties and powers of the
Secretary. An officer of the Department of Transportation may
prescribe regulations to carry out the duties and powers of the
officer.''); 49 U.S.C. 105(c)(2) (directing the NHTSA Administrator
to ``carry out . . . additional duties and powers prescribed by the
Secretary''); 49 CFR 1.81(a)(3) (``Except as prescribed by the
Secretary of Transportation, each Administrator is authorized to . .
. [e]xercise the authority vested in the Secretary to prescribe
regulations under 49 U.S.C. 322(a) with respect to statutory
provisions for which authority is delegated by other sections in
this part.'').
---------------------------------------------------------------------------

2. Applicability of the 2015 Act

    Multiple commentators disagreed with NHTSA's proposed determination
that the $5.50 civil penalty rate used in the formula for manufacturer
violations of fuel economy standards in 49 U.S.C. 32912(b) is not a
``civil monetary penalty'' subject to adjustment under the 2015
Act.\69\ After thorough consideration of all these comments, NHTSA
adopts its tentative determination. To be a ``civil monetary penalty''
that must be adjusted for inflation under the 2015 Act, a ``penalty,
fine, or other sanction'' must be, among other things, ``for a specific
monetary amount as provided by Federal law'' or have ``a maximum amount
provided for by Federal law.'' \70\ The CAFE civil penalty rate is
neither.
---------------------------------------------------------------------------

    \69\ See, e.g., Workhorse Comment, at 3; CBD Comment, at 7; CAP
Comment, at 2-3; CARB Comment, at 7-8; Attorneys General Comment, at
7; IPI Comment, at 1.
    \70\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 3(2).
---------------------------------------------------------------------------

    For one, the CAFE civil penalty rate is an input in a formula that
is used to calculate a penalty. And although the CAFE civil penalty
rate is capped at $10 by statute,\71\ the civil penalty for
manufacturers that violate an average fuel economy standards, as
defined in 49 U.S.C. 32912(b), has no maximum amount. The higher the
shortfall or the higher the number of vehicles in the fleet, the higher
the potential penalty (before accounting for credits). This formula
stands in stark contrast to the immediately preceding provision
specifying the ``general penalty'' for

EPCA violations: ``A person that violates section 32911(a) of this
title is liable to the United States Government for a civil penalty of
not more than $10,000 for each violation.'' \72\ The phrase ``not more
than'' plainly denotes that the $10,000 civil penalty is a maximum
amount for each violation, and, as such, this amount (as promulgated in
49 CFR 578.6(h)(1)) was properly adjusted pursuant to the 2015 Act.\73\
---------------------------------------------------------------------------

    \71\ 49 U.S.C. 32912(c)(1)(B). The $10 cap is addressed further
in Section D.5.
    \72\ 49 U.S.C. 32912(a); see also 49 U.S.C. 30165(a)
(establishing that violations of the National Traffic and Motor
Vehicle Safety Act are generally subject to ``a maximum amount'' of
``not more than'' $21,000 per violation and a ``maximum penalty'' of
$105 million for a related series of violations).
    \73\ 81 FR 43524, 43526 (July 5, 2016). The penalty in 49 U.S.C.
32912(a), promulgated in 49 CFR 578.6(h)(1), is subject to
additional inflationary adjustments for 2017 and 2018, which were
proposed in the NPRM, and for 2019, which is being finalized in this
rule. Applying the multiplier for 2017 of 1.01636, as specified in
OMB's December 16, 2016 guidance, results in an adjusted maximum
penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as
specified in OMB's December 15, 2017 guidance, results in an
adjusted maximum penalty of $41,484. NHTSA received no comments
objecting to these proposed adjustments and finalizes those
inflationary adjustments in this rule. Applying the multiplier for
2019 of 1.02522, as specified in OMB's December 14, 2018 guidance,
results in an adjusted maximum penalty of $42,530. In accordance
with the procedures provided in the 2015 Act, and confirmed by OMB's
guidance on implementing the 2015 Act, NHTSA finalizes the 2019
adjustment for the general CAFE penalty through this final rule. 28
U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment
4(b)(2); Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2019, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015, at 4 (Dec. 14,
2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf (last accessed May 31, 2019) (``In
accordance with the 2015 Act, agencies shall adjust civil monetary
penalties notwithstanding Section 553 of the Administrative
Procedure Act (APA). This means that the public procedure the APA
generally requires (i.e., notice, an opportunity for comment, and a
delay in effective date) is not required for agencies to issue
regulations implementing the annual adjustment.'') (footnote
omitted).
---------------------------------------------------------------------------

    The $5.50 rate also is not a ``penalty'' for a ``specific monetary
amount.'' Again, the rate is one factor in a complex formula that is
used to calculate the penalty. Moreover, the portion of the penalty
calculated by NHTSA is only the potential penalty. The ultimate penalty
owed is determined by the manufacturer based on the statutory provision
authorizing the deduction of ``the credits available to the
manufacturer.'' \74\ The CAFE civil penalty statute states expressly
that this credit reduction process is part of the calculation of the
civil penalty.\75\ It is not, as some commenters suggested,\76\ a
distinct process that is conducted after the penalty has already been
calculated.\77\ The inputs to the civil penalty formula, including the
reduction for available credits, are joined by the conjunctive ``and''
in the statute.\78\ And while it is true, as one commenter noted, that
``a specific penalty amount will still result after manufacturer
credits are taken into account,'' \79\ that is not ``a specific
monetary amount as provided by Federal law,'' as required by the 2015
Act. The amount is determined by a process codified in Federal law, but
the specific final penalty amount itself is not ``provided by Federal
law.'' The ``specific monetary amount'' is unknown until the
manufacturer decides to use any available credits it has, or can
acquire, to make up for the shortfall identified by NHTSA.\80\ In fact,
if a manufacturer has enough credits or has a plan to earn sufficient
credits in the future, the penalty ultimately calculated may be
zero.\81\ It is the manufacturer who decides this, not the agency.\82\
---------------------------------------------------------------------------

    \74\ 49 U.S.C. 32912(b)(3).
    \75\ 49 U.S.C. 32912(b)(3). Section 32903(h) is not to the
contrary, as one commenter suggested. See CAP Comment, at 2. That
provision describes a refund process that is relevant only after ``a
civil penalty has been collected,'' not before the civil penalty--
including any credit reduction--is fully calculated.
    \76\ See, e.g., CARB Comment, at 11 (``NHTSA knows exactly how
much a manufacturer owes and must pay in civil penalties for failing
to meet the CAFE standard--NHTSA calculates that amount. What NHTSA
may not know is how exactly the manufacturer will satisfy that
amount (direct payment vs. credits), but the specific amount owed,
i.e., the civil penalty, is very much known.''); Attorneys General
Comment, at 7 (``Nor does the availability of a credit mechanism
that allows a manufacturer an alternate means to fully or partially
comply with the CAFE standards have any bearing on the nature of the
penalty. . . .''); IPI Comment, at 3 (``Credit trading and transfers
allow the manufacturer to reduce its incidence of non-compliance,
but the penalty per incidence of non-compliance remains fixed and
specific. . . .'').
    \77\ One commenter stated ``many, if not all, civil monetary
penalties assessed by any agency depend, on some level, on the
regulated entity's decisions about whether, and how, to comply with
a regulatory standard.'' IPI Comment, at 2-3. The comment cited no
specific examples, but regardless, the unique feature in the CAFE
civil penalty scheme relevant in this context is that the
calculation of the civil penalty amount expressly includes a
reduction for the credits available to the manufacturer. A
manufacturer could both decide not to meet an applicable CAFE
standard and not to pay a civil penalty (or to pay a smaller
penalty). Under other civil penalty schemes, a person who does not
comply with a regulatory standard does not get to decide whether or
how much of a penalty to pay.
    \78\ 49 U.S.C. 32912(b).
    \79\ CBD Comment, at 8. The comment further stated that ``[t]his
is no different from other rate-based penalty systems which allow
for some reduction of liability,'' but cited no example.
    \80\ NHTSA is able to request supplemental reports and audit a
manufacturer's compliance plan, see, e.g., 49 CFR 537.8, but
ultimately, it is the manufacturer's decision on how to use the
credits available to it.
    \81\ 49 CFR 536.5(d). A manufacturer may propose a plan to earn
future credits within the subsequent three model years in order to
comply with its regulatory obligations for the current model year,
and NHTSA will not even initiate compliance proceedings until the
time that the manufacturer's approved plan indicates that credits
will be earned or acquired to achieve compliance. 49 CFR 536.7.
Although many manufacturers have not met applicable standards, only
one manufacturer paid civil penalties for MY 2014 and only two paid
civil penalties for MYs 2012 and 2013. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
    \82\ Manufacturers instruct NHTSA on how they wish to allocate
their credits or otherwise account for shortfalls. See 49 CFR
536.5(d)(2), (6).
---------------------------------------------------------------------------

    Credit flexibilities were expressly included in the statute by
Congressional design to give industry the ability to decide how to
achieve the required fuel economy improvements efficiently. Notably, as
mentioned in the NPRM, Congress gave manufacturers the ability to trade
credits with other manufacturers in 2007 in EISA, introducing an
additional level of complexity to the calculation process, which is
different from other civil penalty calculations. This is far from a
direction to the agency to execute a ``minor mathematic calculation
used to figure up a total penalty number,'' as one commenter described
it.\83\
---------------------------------------------------------------------------

    \83\ CARB Comment, at 9-10. Although the introductory language
of the statutory provision may be ``similar'' to that of the general
penalty for EPCA violations, as noted by the commenter, the process
described for calculating the penalty is the material difference, as
explained above.
---------------------------------------------------------------------------

    As explained in the opinion included in the docket for the rule,
OMB concurs with NHTSA's interpretation of the 2015 Act: OMB agrees
that the CAFE civil penalty rate is not a ``penalty, fine, or other
sanction'' that ``is for a specific monetary amount'' because EPCA
distinguishes between the rate, the ``amount . . . used in calculating
a civil penalty,'' and the ``civil penalty'' itself.\84\ Nor does OMB
believe that the CAFE penalty has a ``maximum amount provided for by
Federal law'': There is no limit to the level of civil penalty that can
be imposed under EPCA because the civil penalty rate is merely one
factor in the formula used to calculate the potential civil penalty
liability. OMB explains further that the $10 cap does not qualify as
``maximum amount provided for by Federal law'' because it limits the
``amount . . . used in calculating a civil penalty,'' not the ``civil
penalty'' itself. Moreover, the $10 cap cannot be ``assessed or
enforced'' at the time of the violation as required by the 2015 Act.
Rather, it serves as a limitation on NHTSA's authority to alter the
penalty rate.
---------------------------------------------------------------------------

    \84\ OMB Non-Applicability Letter, at 4-5.
---------------------------------------------------------------------------

    Because of the changes that Congress enacted to the CAFE program
through

EISA in 2007, Congress was not necessarily ``on notice'' that NHTSA
would apply the 2015 Act to the CAFE civil penalty rate, as one comment
stated, merely because it had done so in 1997.\85\ In fact, NHTSA did
not make any subsequent adjustments to the $5.50 rate, even as it
repeatedly made adjustments to its other civil penalties--including an
adjustment to the maximum general penalty under EPCA in 49 U.S.C.
32912(a).\86\
---------------------------------------------------------------------------

    \85\ Attorneys General Comment, at 9.
    \86\ 64 FR 37876 (July 14, 1999); 66 FR 41149 (Aug. 7, 2001); 69
FR 57864 (Sept. 28, 2004); 70 FR 53308 (Sept. 8, 2005); 71 FR 28279
(May 16, 2006); 73 FR 9955 (Feb. 25, 2008) (adjusting maximum
general penalty under EPCA and another NHTSA penalty); 75 FR 5244
(Feb. 2, 2010).
---------------------------------------------------------------------------

    Apparently concerned about the ease with which the CAFE civil
penalties program could damage the economy and the automobile industry
in particular,\87\ Congress imposed a strict, tailored procedure for
adjusting the CAFE civil penalty rate, requiring robust substantive
findings and specific procedures, including providing opportunity for
the Federal Trade Commission to comment and requiring at least eighteen
months before an increased rate can go into effect.\88\ This process
stands in stark contrast to the summary approach delineated in the 2015
Act, which presumptively requires an interim final rule without notice
and comment for the initial catch-up adjustment and similarly requires
subsequent adjustments to be made without the traditional notice-and-
comment process outlined in the APA.\89\
---------------------------------------------------------------------------

    \87\ See, e.g., ``Energy Initiatives of the 95th Congress,'' S.
Rep. No. 96-10, at 175-76 (1979) (``Representative Dingell (D-
Mich.), concerned that increasing the penalties could lead to
layoffs in the automobile industry, insisted that raising the
penalties be contingent upon findings by the Secretary of
Transportation that increasing the penalties would achieve energy
savings and would not be harmful to the economy.''); H.R. Rep. No.
94-340, at 87 (1975) (``The automobile industry has a central role
in our national economy and that any regulatory program must be
carefully drafted so as to require of the industry what is
attainable without either imposing impossible burdens on it or
unduly limiting consumer choice as to capacity and performance of
motor vehicles.''); 121 Cong. Rec. 18675 (June 12, 1975) (statement
of Rep. Sharp) (``[W]e recognize that we have serious unemployment
in the American auto industry and we want to preserve this important
segment of the economy.'').
    \88\ See 49 U.S.C. 32912(c).
    \89\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 4(b).
---------------------------------------------------------------------------

    One comment observed that ``the 2015 Act provides that an agency
need not make inflation-based adjustments if it has implemented a
discretionary adjustment . . . greater than the annual inflation
adjustment.'' \90\ NHTSA agrees with the general notion offered by the
commenter that this provision suggests Congress intended the inflation
adjustments required under the 2015 Act to coexist with discretionary
adjustments provided for under other statutes. But as described in the
NPRM and below--and recognized by OMB in the opinion included in the
docket for this rulemaking \91\--the CAFE civil penalty program is
unique--namely, that the amount in question is a single input in a
complex market-based penalty program, and not the penalty amount
itself. And as OMB further explains in its opinion, the statutory
structure of EPCA itself strongly indicates that Congress did not
intend the 2015 Act to apply to the CAFE civil penalty rate. Under
EPCA, there is no automatic increase in the penalty rate, the burden is
on the Secretary to demonstrate an absence of economic harm before
increasing the rate, and any increase is capped at $10. In contrast,
under the 2015 Act, increases are automatic, the Secretary has the
burden of demonstrating economic harm to stop an initial increase and
has no power to stop future increases, and the potential penalty
increases are unlimited. It is highly unlikely that Congress intended
to shift from the EPCA scheme to the 2015 Act scheme without any
reference to EPCA. Accordingly, NHTSA determines that Congress did not
intend for the 2015 Act to apply to the CAFE civil penalty rate.\92\
---------------------------------------------------------------------------

    \90\ Attorneys General Comment, at 9 (citing 28 U.S.C. 2461
note, Federal Civil Penalties Inflation Adjustment 4(d)).
    \91\ OMB Non-Applicability Letter, at 4-6.
    \92\ To the extent the 2015 Act does apply to the CAFE civil
penalty rate, EPCA prohibits NHTSA from increasing the CAFE civil
penalty rate--for an inflation adjustment or otherwise--at this
time, for the reasons described below.
---------------------------------------------------------------------------

    Some commenters noted that the 2015 Act is designed to keep civil
monetary penalties at the same levels, in real terms, not increase
them.\93\ In response, NHTSA notes that the 2015 Act itself repeatedly
refers to the adjustments as ``increases.'' \94\ Accepting the
commenters' point, however, would actually provide further support for
NHTSA's determination that the 2015 Act does not apply to the CAFE
civil penalty rate. Because of the unique nature of the CAFE civil
penalty formula, applying the 2015 Act to it would exceed the purpose
of the 2015 Act noted by those commenters to ``maintain'' the real
value of civil monetary penalties: Instead, doing so would constitute
an increase.\95\ Moreover, as OMB noted in the opinion included in the
docket, the unique features of EPCA also make the 2015 Act inconsistent
with the CAFE civil penalty rate because, under EPCA, Congress required
the Secretary of Transportation to regularly establish the maximum
feasible fuel efficiency standards based on, among other things,
developing technology, as opposed to applying a rote, formulaic
increase to the penalty rate.\96\ Rather than ``maintain[ing]'' the
real value of the CAFE civil penalty formula through inflation
adjustment procedures, Congress chose other means: The CAFE civil
penalty formula is based in part on the amount of the manufacturer's
shortfall, and Congress requires NHTSA to prescribe the maximum
feasible average fuel economy standards annually.\97\ If a manufacturer
failed to

adapt to the increasing standards, its shortfall--and in turn, its
penalty calculation (before accounting for credits)--increases
automatically.\98\ Requiring an inflation adjustment on top of that
would be gratuitous. The fact that Congress deliberately enacted a
mechanism that would increase the potential CAFE penalty amounts
without requiring inflation adjustments--fully ``aware that inflation
would effectively reduce the real value of the [CAFE] civil penalty
rate over time'' \99\--indicates that Congress did not intend for the
CAFE civil penalty rate to be subject to inflation adjustments and thus
that the 2015 Act was not intended to apply to that calculation.\100\
---------------------------------------------------------------------------

    \93\ See, e.g., CBD Comment, at 7; CAP Comment, at 3-4; CARB
Comment, at 13; IPI Comment, at 19-20. One of these commenters
claimed that ``Congress especially intended inflationary adjustments
to apply in areas of heightened regulatory concern, such as health
and safety, the environment, and consumer protection.'' CBD Comment,
at 6 (citing James Ming Chen, Inflation-Based Adjustments in Federal
Civil Monetary Penalties, 34 Yale L. & Pol'y Rev. 1, 3 (2015)).
There is nothing in the 2015 Act that supports this claim. The
original source cited by the comment's cited source is not the
legislative history of the 2015 Act--or even the 1990 Inflation
Adjustment Act--but a Federal Register notice from 1973, identifying
various recommendations from the Administrative Conference of the
United States. 38 FR 19782, 19792 (July 23, 1973). The
recommendation in question had nothing to do with inflation
adjustments; the Administrative Conference merely noted that ``[i]n
many areas of increased concern (e.g., health and safety, the
environment, consumer protection) availability of civil money
penalties might significantly enhance an agency's ability to achieve
its statutory goals.'' 38 FR 19782, 19792 (July 23, 1973).
    \94\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 4(c), 5(a), 5(b)(2)(C), 6.
    \95\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment 2(b)(2). One commenter noted that ``remedial legislation
should be construed broadly to effectuate its purposes.'' CARB
Comment, at 10, 16-17 (quoting Tcherepnin v. Knight, 389 U.S. 332,
336 (1967)). As one of the cases cited by this commenter expressly
affirms, ``[t]hat principle, however, `does not give the judiciary
license, in interpreting a provision, to disregard entirely the
plain meaning of the words used by Congress.' '' Belland v. Pension
Ben. Guar. Corp., 726 F.2d 839, 844 (D.C. Cir. 1984) (quoting Symons
v. Chrysler Corp. Loan Guar. Bd., 670 F.2d 238, 241 (D.C. Cir.
1981)).
    \96\ OMB Non-Applicability Letter, at 6.
    \97\ 49 U.S.C. 32902(a). One commenter noted that ``[w]hile
Congress has directed NHTSA to set CAFE standards at the maximum
feasible level, this does not necessarily amount to `continuous fuel
standard increases,''' pointing out that ``CAFE standards have once
decreased and otherwise, until a few years ago, remained the same
for 20 years.'' CARB Comment, at 13. This is an accurate but
misleading characterization. What the comment failed to mention was
that it was Congress' decision to keep the standards flat over this
period, not the agency's. For a significant portion of this period,
Congress prohibited NHTSA from using funds ``to prepare, propose, or
promulgate any regulations . . . prescribing corporate average fuel
economy standards for automobiles . . . in any model year that
differs from standards promulgated for such automobiles prior to
enactment of this section.'' Public Law 104-50, Sec. 330; see also
Public Law 104-205, Sec. 323; Public Law 105-66, Sec. 322; Public
Law 105-277, Sec. 322; Public Law 106-69, Sec. 321; Public Law 106-
346, Sec. 320. Moreover, from 1985 until EISA was signed into law in
2007, Congress set the average fuel economy standard for passenger
automobiles at 27.5 miles per gallon by default and did not require
any increases--annually or otherwise, or to the maximum feasible
level or otherwise. See Public Law 94-163, Sec. 301; Public Law 103-
272, Sec. 1(d). Instead, Congress permitted, but did not require,
that NHTSA establish a higher or lower standard for passenger cars
if the agency found that the maximum feasible level of fuel economy
is higher or lower than 27.5 miles per gallon.
    \98\ See, e.g., Workhorse Comment, at 1 (``In effect, increasing
the civil penalty rate increases the stringency of the CAFE
Standards.''). This mechanism also counters the argument that a CAFE
civil penalty rate of $5.50 ``effectively stall[s] fuel economy.''
CARB Comment, at 10; see also CAP Comment, at 2 (``[R]educing the
penalty below the statutorily-mandated rate will likely lead to many
more manufacturers electing to pay penalties rather than to comply
with the law.''). The CAFE civil penalty formula enacted by Congress
already incentivizes automakers to improve fuel economy without the
need to conduct inflation adjustments--a reality that the same
commenter that made this argument appeared to recognize just a few
pages later: ``Increases in the CAFE standards reflect continuing
improvements in the technological ability of manufacturers to
increase fuel economy, as reflected in the fact that most
manufacturers have been meeting or exceeding the CAFE standards in
recent years even as the standards have been increasing.'' CARB
Comment, at 13.
    \99\ 83 FR 13904, 13910-11 (May 2, 2018).
    \100\ One commenter argued that ``other agencies have had no
trouble applying inflation adjustments to the civil penalties
associated with'' regulatory standards that ``undergo statutorily
required reviews at regular intervals to increase stringency.'' IPI
Comment, at 4. The comment only cited one example: An adjustment by
the Department of Energy to the maximum civil penalties it can
impose for violations of its energy efficiency standards, among
other violations. See 83 FR 1289, 1291 (Jan. 11, 2018) (``Any person
who knowingly violates any provision of Sec.  429.102(a) may be
subject to assessment of a civil penalty of no more than $449 for
each violation.''; ``In accordance with sections 333 and 345 of the
Act, any person who knowingly violates any provision of paragraph
(a) of this section may be subject to assessment of a civil penalty
of no more than $449 for each violation.''). This example is wholly
distinct from the CAFE civil penalty calculation, in which the
increased stringency is expressly included as a factor.
---------------------------------------------------------------------------

    It is important to keep in mind that the overarching purpose of the
CAFE program is to conserve petroleum. Thus, although the penalty is
expressed based on the shortfall from the standard rather than the
additional amount of fuel that will be consumed as a result of the
shortfall, the cost of the penalty per increased gallon consumed shows
how the actual penalty rate for excessive fuel consumption has
increased as the standards themselves have increased.
    Assume the CAFE civil penalty rate is fixed at $5, and consider two
cases. In the first case, Manufacturer A has a fuel economy shortfall
of 1.0 mpg and a production volume of 1 million passenger cars for MY
1978 in which the applicable CAFE standard is 18.0 mpg. Before
accounting for credits, the civil penalty for MY 1978 would be $50
million [= (10 tenths of a mile per gallon shortfall) x ($5.00 per
tenth of a mile per gallon shortfall) x (1,000,000 vehicles)]. Assuming
an average lifetime of 130,000 miles for Manufacturer A's vehicles, the
fuel use over the lifetimes of all of Manufacturer A's vehicles would
be 7.65 billion gallons [= (130,000 miles)/(17 miles per gallon) x
(1,000,000 vehicles)]. Had Manufacturer A met the CAFE standard of 18.0
mpg, the total fuel use would have been 7.22 billion gallons [=
(130,000 miles)/(18 miles per gallon) x (1,000,000 vehicles)]. Thus,
the increased fuel use impact on society attributed to the CAFE non-
compliance would be 0.43 billion gallons [= (7.65 billion gallons)-
(7.22 billion gallons)]. This means that the penalty cost per gallon is
$0.116.
    In the second case, Manufacturer A's MY 2017 vehicle attribute-
based CAFE standard is 36.0 mpg, double the MY 1978 standard. Holding
everything else identical, Manufacturer A's fuel economy shortfall
would have to be 3.8 mpg (for a fuel economy of 32.2 mpg) to produce
the same 0.43 billion gallons of societal impact of increased fuel use:
Assuming the same average lifetime of 130,000 miles for Manufacturer
A's vehicles, the fuel use over the lifetimes of all of Manufacturer
A's vehicles would be 4.04 billion gallons [= (130,000 miles)/(32.2
miles per gallon) x (1,000,000 vehicles)]. Had Manufacturer A met the
CAFE standard of 36.0 mpg, the fuel use would have been 3.61 billion
gallons [= (130,000 miles)/(18 miles per gallon) x (1,000,000
vehicles)]. The increased fuel use impact on society attributed to the
CAFE non-compliance would be 0.43 billion gallons [= (4.04 billion
gallons)-(3.61 billion gallons)]. With this 3.8 mpg shortfall,
Manufacturer A would incur, before accounting for credits, a civil
penalty of $190 million [= (38 tenths of a mile per gallon shortfall) x
($5.00 per tenth of a mile per gallon shortfall) x (1,000,000
vehicles)]. For the same impact on societal fuel use, Manufacturer A's
MY 2017 potential civil penalty is 3.8 times higher than the MY 1978
potential civil penalty, meaning that the penalty cost per gallon is
$0.442.
    Three comments argued that Congress demonstrated it knew how to
exempt statutes from the application of the 2015 Act by expressly
excepting statutes like the Internal Revenue Code of 1986 and the
Tariff Act of 1930 from the adjustment process.\101\ But the penalties
under these statutes are not exempted from the definition of ``civil
monetary penalty''; rather, Congress acknowledged that the penalties
under these statutes are ``civil monetary penalties'' that would
otherwise need to be adjusted but for Congress' express exemption. In
contrast, NHTSA's determination is that the CAFE civil penalty rate
does not satisfy the definition of ``civil monetary penalty'' given by
Congress and thus does not need to be exempted from Congress'
adjustment mandate.
---------------------------------------------------------------------------

    \101\ CBD Comment, at 6; CARB Comment, at 8; Attorneys General
Comment, at 9.
---------------------------------------------------------------------------

    One comment noted ``on a fundamental level that Congress
specifically designated the CAFE penalty as `a civil penalty.' '' \102\
As NHTSA noted in its NPRM, however, ``EPCA's use of the terminology
`civil penalty' in 49 U.S.C. 32912(b) is not dispositive. The 2015 Act
does not apply to all civil penalties, but rather `civil monetary
penalties,' a defined term.'' \103\ Moreover, as explained above, the
``civil penalty'' referenced in 32912(b) is not referring to the $5.50
rate, but the result of the entire complex calculation and credit
application process.
---------------------------------------------------------------------------

    \102\ CARB Comment, at 9 (quoting 49 U.S.C. 32912(b)); see also
Attorneys General Comment, at 7 (``Congress expressly designated the
CAFE penalty, which is monetary, as `a civil penalty.' '').
    \103\ 83 FR 13904, 13908 n.24 (Apr. 2, 2018).
---------------------------------------------------------------------------

    Several commenters pointed out that other agencies adjusted civil
penalties for inflation under the 2015 Act that involved what the
commenters characterized as a rate or formula.\104\ In support, these
commenters provided numerous examples of penalties involving a simple
multiplier that other agencies adjusted for inflation. The examples
involve maximum penalties

per violation and/or per day.\105\ NHTSA did not and does not take the
position that any penalty involving a multiplier is not a ``civil
monetary penalty'' subject to inflationary adjustment under the 2015
Act. Indeed, most of the civil penalties that NHTSA properly adjusted
for inflation under the 2015 Act in its interim final rule are like the
examples provided by commenters: Maximum penalties involving a simple
multiplier.\106\ NHTSA acknowledged in the NPRM that these types of
maximum penalties are subject to inflationary adjustment.\107\ As NHTSA
explained in its NPRM: ``One example of a penalty that is for `a
maximum amount' is the `general penalty' in EPCA for violations of 49
U.S.C. 32911(a). That `general penalty' is `a civil penalty of not more
than $10,000 for each violation.' This sets `a maximum amount' of
$10,000 per violation. . . . Accordingly, this civil penalty level was
properly adjusted. . . .'' \108\ NHTSA is finalizing its inflationary
adjustment of that maximum penalty per violation in this final rule.
NHTSA also adjusted many non-CAFE penalties that are maximum penalties
that use a simple multiplier of the number of violations or number of
days.\109\
---------------------------------------------------------------------------

    \104\ CBD Comment, at 8 (citing numerous examples of agencies
adjusting ``rate-based penalties'' to account for inflation); CAP
Comment, at 3; CARB Comment, at 8-9; Attorneys General Comment, at
8.
    \105\ See CBD Comment, at 8; CAP Comment, at 3; CARB Comment, at
8-9; Attorneys General Comment, at 8.
    \106\ NHTSA is not reconsidering portions of the interim final
rule (81 FR 43524 (July 5, 2016)) that address non-CAFE penalties.
Most of the penalties adjusted for inflation are maximum penalties
that involve a multiplier. For example, NHTSA adjusted the penalties
for school bus-related violations of the National Traffic and Motor
Vehicle Safety Act from a maximum of $10,000 per violation, as set
by statute, to a maximum of $11,940 per violation. Id. at 43525
(adjusting 49 CFR 578.6(a)(2)) A separate violation occurs for each
school bus or item of school bus equipment, ``and for each failure
or refusal to allow or perform a required act.'' 49 CFR 578.6(a)(2).
    \107\ See 83 FR at 13909.
    \108\ 83 FR at 13909 (citations omitted).
    \109\ See 81 FR 43524 (July 5, 2016).
---------------------------------------------------------------------------

    NHTSA agrees with commenters that maximum penalties such as these
are properly subject to inflationary adjustment. But the penalty for
violations of CAFE standards is not a maximum penalty that uses a
simple multiplier. As a threshold matter, the CAFE civil penalty rate
alone is not a ``civil monetary penalty'' as defined by the 2015 Act.
The CAFE statute expressly states that the rate is an ``amount . . . to
be used in calculating a civil penalty,'' not a ``civil penalty'' on
its own.\110\ In any event, unlike maximum penalties that use a simple
multiplier, the CAFE civil penalty rate is not subject to inflation as
a ``maximum amount provided by federal law.'' Other penalties expressly
include language, such as ``a maximum civil penalty'' or a ``civil
penalty of not more than'' a specified value per violation, which
indicate they are for a maximum amount.\111\ No such language is
included for the CAFE penalty, which instead expressly may not ``be
compromised or remitted'' except in extremely rare circumstances.\112\
This stands in stark contrast to maximum penalties, where the agency
has authority to determine the appropriate penalty amount.\113\
---------------------------------------------------------------------------

    \110\ 49 U.S.C. 32912(c)(1)(A).
    \111\ See, e.g., 49 U.S.C. 30165(a)(3); 32912(a).
    \112\ See 49 U.S.C. 32913(a). Contrast this constraint with the
broad, discretionary authority delegated by Congress for NHTSA's
other civil penalties: ``The Secretary of Transportation may
compromise the amount of a civil penalty imposed under this
section.'' 49 U.S.C. 30165(b)(1).
    \113\ See, e.g., 49 U.S.C. 30165(c). Statutory schemes that
allow for mitigation, as pointed out by commenters, are not
comparable because those are for maximum penalties, and thus subject
to inflationary adjustment. Moreover, it is up to the agency to
determine the appropriate mitigation. Under the CAFE penalty, it is
the violator who determines how much to pay, based on use of
credits, not the agency.
---------------------------------------------------------------------------

    Additionally, the penalty for violating a CAFE standard does not
use a simple multiplier comparable to the examples provided by
commenters. For the examples provided, as well as the penalties NHTSA
properly adjusted for inflation, the agency can readily determine the
penalty inputs by adding up the number of violations and/or the number
of days as appropriate under the statute. The multiplier for a
regulated entity that violated a provision of law can only go up (if
the penalty uses a multiplier of the number of days); it cannot go
down. Even if there were a set penalty per day (as opposed to a
maximum), that is a certain penalty: For every day that an entity
violates the law, it must pay the specific penalty set by law.
    None of this is true of the penalty for violations of CAFE
standards. Unlike other penalties, the entity that violated the law can
take unilateral action to decrease or eliminate the penalty.\114\ A
reduction in the control of the entity that violated the law means the
penalty is not for ``a specific monetary amount.'' The agency cannot
readily calculate the penalty inputs: It needs instructions from the
regulated entity to do so. That makes this a complex formula unlike any
other. The CAFE penalty is not a fixed penalty based on the number of
violations and amount of time that has passed. The law allows
manufacturers to base their penalty on future actions (a carry-back
plan or acquisition of credits from a competitor), on actions unrelated
to the specific violation at issue (transfers or trades), or even to
obtain a refund of a civil penalty previously paid.\115\ The
multipliers in other penalty schemes relate to how much the entity
violated the law (how many violations, or for how long). The CAFE
penalty calculation, on the other hand, includes a reduction unrelated
to the manufacturer's actions to meet the standard. A manufacturer can
intentionally design its vehicles to exceed the standard and yet still
not pay a penalty. But that decision is up to the manufacturer, not the
agency--which is compelled by law to reduce the penalty if the
manufacturer elects to use credits available to it. NHTSA is not aware
of any comparable penalty structure with a similarly complex statutory
formula that must factor in decisions of the violator and third-party
actors (i.e., other manufacturers), and no commenter has provided an
example of one.
---------------------------------------------------------------------------

    \114\ See 49 U.S.C. 32912(b)(3).
    \115\ 49 U.S.C. 32903(f), (g), (h); 32912(b).
---------------------------------------------------------------------------

    The Institute for Policy Integrity critiqued NHTSA for relying on
the Congressional Budget Office's (CBO's) assessment of the 2015 Act's
revenue effects across all applicable penalties for ten years.\116\
Some courts have relied on CBO cost estimates to determine legislative
intent.\117\ The Institute for Policy Integrity provided no evidence
that the CBO's assessment was flawed nor did it provide its own
calculation of the amount of fines NHTSA should expect to collect to
compare to the CBO estimate, much less one that would offset the
significant disparity between the CBO's estimate and the Alliance and
Global's calculation as described in the NPRM.\118\ OMB has reviewed
CBO's assessment and, as stated in its opinion, reached the same
conclusion as NHTSA: The billions of dollars estimated to be paid in
CAFE civil penalty payments grossly exceeds CBO's projection of
additional revenue that would be collected across the entire Federal
Government under the 2015 Act over the same time period--an analysis
Congress was aware of when it enacted the 2015 Act.\119\ Regardless,
the CBO estimate is not the sole support NHTSA relied on to make its
determination that

the 2015 Act is not applicable to the CAFE civil penalty rate; rather,
it served as additional evidence--on top of the plain language of the
statute, the unique complexity of the CAFE civil penalty scheme, the
legislative history of EPCA, and other indicators--further justifying
NHTSA's determination.
---------------------------------------------------------------------------

    \116\ IPI Comment, at 5.
    \117\ See, e.g., Nunes-Correia v. Haig, 543 F. Supp. 812, 815
(D.D.C. 1982) (``[T]he Congressional Budget Office (`CBO') cost
estimates . . . demonstrate that Congress clearly intended the Act
to apply retroactively.'')
    \118\ 83 FR 13904, 13911 (Apr. 2, 2018). CARB and the co-
signatories to its comment similarly failed to provide such evidence
when they asserted that ``the costs estimated by the automakers are
not just the cost of facing an adjusted penalty but also include
technology costs and other costs such as insurance, financing, and
taxes--with the latter two (technology and other costs) making up
the bulk of the estimated costs.'' CARB Comment, at 11-12.
    \119\ OMB Negative Economic Impact Letter, at 5.
---------------------------------------------------------------------------

    NHTSA also received some comments about the rounding rule in the
2015 Act, which provides that ``[a]ny increase determined under this
subsection shall be rounded to the nearest multiple of $1.'' \120\
NHTSA observed in the NPRM that this rounding rule suggests the Act was
not intended to apply to the small dollar value CAFE civil penalty
rate, since it would not serve a de minimis rounding function. As a
practical matter, if the rounding rule applied to a small dollar
penalty rate, it would prevent any annual inflationary increases
(absent extraordinary inflation).\121\
---------------------------------------------------------------------------

    \120\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation
Adjustment[thinsp]5(a).
    \121\ 83 FR 13904, 13911 (Apr. 2, 2018).
---------------------------------------------------------------------------

    One commenter argued that this interpretation ``ignores basic math
because applying the [2015] Act results in more than a de minimis
increase from $5.50.'' \122\ This misconstrues NHTSA's point: NHTSA was
referring to subsequent annual inflationary increases after the initial
catch-up adjustment. For example, if the CAFE civil penalty rate was
adjusted to $14 in the initial catch-up adjustment, the rate would not
have been adjusted applying either the 2017, 2018, or 2019 multipliers
(1.01636, 1.02041, and 1.02522, respectively) and rounding to the
nearest dollar. If the original rate was $6, the last time the
multiplier would have allowed an inflation adjustment to $7 under the
rounding rule was 1981, during a time of significant inflation.\123\
---------------------------------------------------------------------------

    \122\ IPI Comment, at 5.
    \123\ Data available at https://data.bls.gov/pdq/SurveyOutputServlet.
---------------------------------------------------------------------------

    Another commenter conceded that ``such rounding may prevent some
annual inflationary adjustment for small penalties,'' but nonetheless
observed that ``[i]f Congress had wanted small penalties to be excluded
. . . , it would have explicitly said so.'' \124\ But statutes must be
read to avoid rendering provisions ``insignificant, if not wholly
superfluous.'' \125\ As NHTSA has shown, having to apply the statute's
rounding rule to such a small rate would violate that principle,
particularly when the rounding rule is viewed, as NHTSA must, in
``context'' and in line with the ``overall statutory scheme.'' \126\
---------------------------------------------------------------------------

    \124\ CARB Comment, at 12.
    \125\ Duncan v. Walker, 533 U.S. 167, 174 (2001); see also Green
v. Bock Laundry Mach. Co., 490 U.S. 504, 509 (1989) (rejecting an
interpretation that ``would compel an odd result'').
    \126\ Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809
(1989) (citing United States v. Morton, 467 U.S. 822, 828 (1984)).
---------------------------------------------------------------------------

    The same commenter also asserted that even ``if the rounding rule
does trap small penalties at their catch-up adjustment level, agencies
can always adjust them through their own penalty adjustment
procedures.'' \127\ True enough, but the commenter went on to claim
that in this specific case, ``this would just be an inflation
adjustment, [so] NHTSA should not have difficulty with satisfying [the
EPCA] factors.'' \128\ This heavily underestimates the burden required
by statute to increase the CAFE civil penalty rate,\129\ discussed in
more detail in the NPRM and below. And this burden is there for a
reason: Given that the CAFE civil penalty rate serves as one element in
a formula that yields an actual potential penalty, rounding the rate to
the nearest dollar has outsized impacts that must be carefully
considered. For instance, rounding the current $5.50 rate to $6.00 is
not merely a $0.50 increase in a penalty, but a 9% increase. An
automaker who sells 100,000 vehicles of a single model that fails to
meet its target fuel economy standard by one mile per gallon would face
a potential penalty of $6,000,000 instead of $5,500,000. This is not a
minor difference.
---------------------------------------------------------------------------

    \127\ CARB Comment, at 12.
    \128\ CARB Comment, at 13.
    \129\ See 49 U.S.C. 32912(c).
---------------------------------------------------------------------------

    Because NHTSA is not ``increas[ing]'' the CAFE civil penalty rate--
because the 2015 Act does not apply or because doing so would have a
negative economic impact--the rounding rule is inapplicable.\130\
---------------------------------------------------------------------------

    \130\ See Alliance and Global Comment, at 16-17. If the 2015 Act
applies to the CAFE civil penalty rate, rounding up to the nearest
dollar would constitute an increase in the rate that would be
permissible only if NHTSA made the requisite findings--and followed
the congressionally-mandated procedure--under EPCA, discussed
further below.
---------------------------------------------------------------------------

3. Harmonizing the 2015 Act and EPCA

    In the alternative, even if the 2015 Act did apply, the ``negative
economic impact'' exception of the 2015 Act is best read in harmony
with EPCA to ensure both statutes are given meaning. A few commenters
argued that the 2015 Act and EPCA should not be read together because
they have different purposes.\131\ NHTSA agrees that the overarching
purposes of the two statutes are different. But that does not obviate
the need to harmonize the statutes. Indeed, both statutes recognize the
importance of limiting increases to penalties to avoid damaging the
economy. Although the statutes may have different ultimate objectives,
they share that motivating concern and should be read together, as part
of a unified code of Federal law, with the goal of upholding that
common principle. NHTSA believes its interpretation achieves that goal.
---------------------------------------------------------------------------

    \131\ See, e.g., CAP Comment, at 4; Attorneys General Comment,
at 11; IPI Comment, at 4.
---------------------------------------------------------------------------

    Relatedly, NHTSA is mindful of the comments that argued that the in
pari materia canon of statutory interpretation may not be the perfect
tool for the interpretive question here.\132\ But as NHTSA noted in the
NPRM, the ``principles underlying'' this canon--most notably, that the
statutes enacted by Congress should be read as a whole and interpreted
harmoniously--provided further support for NHTSA's proposed position,
which it now adopts.\133\ None of the comments objected to NHTSA's
point that ``[t]his approach to statutory interpretation is consistent
with NHTSA's past practice.'' \134\
---------------------------------------------------------------------------

    \132\ See, e.g., CARB Comment, at 15; Attorneys General Comment,
at 11.
    \133\ 83 FR 13904, 13912 (Apr. 2, 2018).
    \134\ 83 FR 13904, 13912 (Apr. 2, 2018) (citing 80 FR 40137,
40171 (Aug. 12, 2015) (interpreting a term in EISA by looking to how
the term is defined in the Motor Vehicle Safety Act, ``[g]iven the
absence of any apparent contrary intent on the part of Congress in
EISA'')).
---------------------------------------------------------------------------

    Here, NHTSA is interpreting a statutory provision about whether
increasing a civil monetary penalty by the otherwise required amount
will have a negative economic impact. Even statutes that apply broadly
across agencies must be interpreted and reconciled with other Federal
laws. NHTSA must presume that Congress knew each agency would have to
determine what ``negative economic impact'' meant and whether raising
any of its civil monetary penalties by the otherwise required amount
would cause one. And NHTSA must also presume that in passing the 2015
Act, Congress was aware of the longstanding CAFE civil penalty scheme
it had previously enacted, including the constraints it imposed on
raising the penalty rate if doing so would have a substantial
deleterious impact on the economy.\135\ Congress established these
specific

constraints for a reason, and without any evidence that Congress
intended to override those constraints, NHTSA cannot do so
unilaterally. Most importantly, no commenter provided persuasive
argument or evidence that NHTSA's interpretation was contrary to the
plain meaning of the 2015 Act or Congress' intent.
---------------------------------------------------------------------------

    \135\ As NHTSA noted in the NPRM, the CAFE civil penalty
structure is also constrained by NHTSA's exceptionally--and
atypically--limited ability to compromise or remit CAFE civil
penalties. 83 FR 13904, 13912 (Apr. 2, 2018). One commenter sought
to minimize the effect of this constraint by noting ``the CAFE
program's numerous built-in compliance flexibility mechanisms which
soften the sting of the penalties.'' Attorneys General Comment, at
11-12. But the ``compliance flexibility mechanisms'' described by
the commenter are all actions taken by the manufacturer, not NHTSA.
---------------------------------------------------------------------------

    One comment challenged NHTSA's position that a broad interpretation
of the 2015 Act would be ``punitive,'' instead characterizing CAFE
civil penalties as ``safety valves, because they allow the car
manufacturers to avoid the requirements imposed by vehicle standards in
case compliance costs are too high.'' \136\ But whether or not the
effect is properly understood as punitive, if compliance costs and the
calculated levels of civil penalties are both ``too high,'' then the
``safety valve'' is not so ``safe'': Either option would impose a
``negative economic impact.'' With respect to the CAFE civil penalty
rate specifically, the statutory civil penalty formula already provides
for increases over time, as described above. Construing ``negative
economic impact'' to require a full inflation adjustment to the CAFE
civil penalty rate--on top of the built-in adjustment to the standards
themselves--would subject manufacturers to unduly harsh levels of civil
penalties (before accounting for credits). As discussed in the NPRM, it
is particularly important to avoid a punitive interpretation here
because ``the inflation adjustment essentially acts as a `one-way
ratchet,' where all subsequent annual adjustments will be based off
this `catch-up' adjustment with no ensuing opportunity to invoke the
`negative economic impact' exception.'' \137\ EPCA itself imposes a
similar ``one-way ratchet'' constraint.\138\
---------------------------------------------------------------------------