The Motor and Equipment Manufacturers Association, Inc. v. Environmental Protection Agency and Douglas Costle, Administrator, Environmental Protection Agency, Automobile Importers of America and State of California, Intervenors. Automotive Service Industry v. Environmental Protection Agency, State of California and Automobile Importers of America, Intervenors. Motor Vehicle Manufacturers Association of the United States, Inc. v. Douglas M. Costle, Administrator of the Environmental Protection Agency Environmental Protection Agency, State of California and Automobile Importers of America, Intervenors. Chrysler Corporation v. Environmental Protection Agency, State of California and Automobile Importers of America, Intervenors. General Motors Corporation v. United States Environmental Protection Agency and Douglas M. Costle, Administrator of the United States Environmental Protection Agency, State of California and Automobile Importers of America, Intervenors

Section 209 of the Clean Air Act, 42 U.S.C. § 7543 (Supp. I 1977), requires the Administrator of the Environmental Protection Agency (EPA) to waive federal preemption of motor vehicle emission control regulations for the State of California unless he makes certain findings that a waiver is inappropriate.1 In July 1978 the Administrator waived federal preemption for California regulations limiting the amount of maintenance that a manufacturer can require of motor vehicle purchasers in the written instructions which accompany new motor vehicles sold in that State. The issue in these cases2 is whether the Administrator's decision to do so was arbitrary, capricious, or otherwise not in accordance with law. We answer that question in the negative, and we accordingly deny the petition to set aside the Administrator's order.3

* BACKGROUND

The federal program for the control of motor vehicle emissions is the product of the Clean Air Act as amended, 42 U.S.C. § 7401 et seq. (Supp. I 1977).4 Section 202 of this statute establishes nationwide motor vehicle emission standards applicable to certain model years for three major pollutants, carbon monoxide, hydrocarbons, and oxides of nitrogen. Id. § 7521(b). It also sets long-term goals for the control of emissions, and authorizes the EPA Administrator to prescribe standards consistent with those goals for model years not covered by the statute. Id. § 7521(a). These regulations can take effect at such time as the Administrator finds them to be technologically feasible, giving appropriate consideration to the costs of compliance. Id.

Section 206 requires the Administrator to test or to have tested any new motor vehicle or new motor vehicle engine submitted by a manufacturer to determine whether the vehicle or engine conforms to the standards contained in section 202 and in the regulations promulgated under it. Id. § 7525(a).5 This "certification process" consists of various procedures which enable a manufacturer to demonstrate by use of a prototype that it has designed a class of motor vehicle which complies with the standards. One feature of this certification process is a durability test to determine the effects of deterioration on the functioning of the emission control system.6 The Administrator limits by regulation the amount of "scheduled maintenance" that can be performed on the prototype vehicle during this durability test.7

If the Administrator finds that the new motor vehicle will meet the applicable emissions standards he issues a certificate of conformity to cover the class of motor vehicles represented by the prototype. Id. at § 7525(a). This certificate is a condition precedent to the initial retail sale of new motor vehicles.8

Section 207 imposes two types of warranty obligations on manufacturers which are directly related to the standards issued in section 202. First it requires manufacturers to warrant to purchasers that each new motor vehicle is designed, built, and equipped to conform to the section 202 standards, and further to warrant that each is free of defects in materials and workmanship which cause a motor vehicle to fail to conform to the standards for their useful life. Id. § 7541(a).9 This is the defect warranty. Second, it provides that the Administrator shall impose a "performance warranty" on manufacturers whereby manufacturers will bear the costs of remedying any nonconformity with section 202 emission standards on vehicles maintained in accordance with the written maintenance instructions required by the statute. Id. § 7541(b).10 The written maintenance instructions, which manufacturers must furnish with each new motor vehicle, must conform to regulations promulgated by the Administrator. Id. § 7541(c)(3). If the purchaser fails to comply with the written instructions it relieves the manufacturer of his performance warranty obligations.11

By virtue of the unique status it enjoys under section 209 of the Clean Air Act, California has an emissions control program that parallels the federal program in many respects. This litigation grew out of a decision made by the California Air Resources Board (CARB), which is California's version of the federal EPA in the area of emissions control regulations. In May 1977, the CARB adopted regulations limiting the amount of scheduled maintenance that can be performed on the prototype used in the durability testing during California's certification process.12 No party in this court challenges the application of these maintenance restrictions to the certification process. Rather the object of challenge is the CARB's simultaneous decision to limit the maintenance a manufacturer can require of purchasers in the written instructions manufacturers must furnish with each new motor vehicle. Under these "in-use maintenance regulations," a manufacturer cannot require a purchaser to perform maintenance beyond that which a manufacturer can perform during the certification process.13 The furnishing of written instructions which abide by the in-use maintenance regulations is a condition precedent to the initial retail sale of new motor vehicles in California. The regulations also define the manufacturers' warranty obligations.

Foreshadowing the CARB's decision to adopt the regulations was a series of public hearings and workshops the CARB held to discuss proposed regulations limiting certification and in-use maintenance. At the first of these meetings, held in November 1976, the major topic was a CARB staff report which stated that "(d)ata available from emissions testing of in-use vehicles show that the degree of emission control which was demonstrated during the certification program is not being realized."14 The staff contended that one of the reasons the emissions systems on in-use vehicles were not controlling emissions as they had during certification was improper maintenance on emission-related parts. The staff suggested that by lowering the amount of maintenance that needed to be done on in-use vehicles, the CARB could reduce the risks of improper maintenance and encourage the production of more durable emission-related parts.

This staff report contained recommendations on the amount of maintenance that ought to be allowed, but owing to objections by manufacturers the CARB deferred any decision on the proposals. Over the next six months, the CARB staff studied the problem further, concentrating particularly on the questions raised by manufacturers about the technological feasibility of limiting maintenance on various parts.15 The final recommendations the staff made to the CARB significantly altered the staff's earlier recommendations on the amount of maintenance a manufacturer could require of motor vehicle purchasers.16 The CARB solicited comments from manufacturers and other interested parties on these proposals.

After formally adopting the regulations the CARB wrote to the EPA requesting a waiver pursuant to section 209. In accordance with the statute the Administrator conducted a public hearing at which all interested parties were invited to offer testimony for and against the waiver request. After this hearing was held, Congress amended the Clean Air Act, altering among other things the waiver provision.17 The Administrator announced that he would conduct another hearing to explore the implications of these amendments for the CARB's regulations. In the interim, the CARB adopted a resolution in which it found that the maintenance regulations "individually and collectively" met the requirements imposed by the amendments.18 The CARB introduced this resolution and the accompanying staff report at the second EPA hearing on the waiver request.

Nine months after the second hearing the Administrator announced his decision to waive federal preemption of the in-use maintenance regulations. He offered two basic reasons for his decision. First, he said, there was no plausible evidence in the record to indicate that California's new in-use maintenance regulations would impair the ability of California's emission standards for which a waiver had already been granted to protect the public health and welfare at least as ably as the corresponding federal standards. Second, he said, the manufacturers had failed to show that adherence to the regulations would be technologically infeasible, the costs of compliance considered. The Administrator concluded that lacking such evidence he had no alternative but to grant the waiver request.

These petitions ensued.

At the outset we note the modest scope of our inquiry. Three points bear emphasis. First, our review here is of the Administrator's decision to waive federal preemption for the State of California, not of California's decision to adopt the in-use maintenance regulations. Our concern is whether a federal officer properly discharged his responsibilities under a federal statute. If petitioners dislike the substance of the CARB's regulations, or if they believe the procedures the CARB used to enact them were unsatisfactory, then they are free to challenge the regulations in the state courts of California.

Second, section 706 of the Administrative Procedure Act, 5 U.S.C. § 706 (1976), governs our examination of whether the Administrator properly discharged his responsibilities under section 209. Ascaro v. Environmental Protection Agency, 188 U.S.App.D.C. 77, 83, 578 F.2d 319, 325 (1978); National Association of Demolition Contractors, Inc. v. Costle, 184 U.S.App.D.C. 173, 175 n. 1, 565 F.2d 748, 750 n. 1 (1977). This means we must uphold the Administrator's action unless we find that it is " 'arbitrary and capricious, . . . or otherwise not in accordance with law' or if (it) fails to meet statutory, procedural, or constitutional requirements." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971) (quoting 5 U.S.C. § 706). We cannot substitute our judgment for that of the Administrator. Ethyl Corp. v. Environmental Protection Agency, 176 U.S.App.D.C. 373, 406, 541 F.2d 1, 34 (en banc), cert. denied, 426 U.S. 941, 96 S.Ct. 2663, 49 L.Ed.2d 394 (1976). We must instead presume that the Administrator acted lawfully and so conclude unless our thorough inspection of the record yields no discernible rational basis for his action. See Barrier Industries Inc. v. Eckard, 190 U.S.App.D.C. 93, 98, 584 F.2d 1074, 1079 (1978); Appalachian Power Co. v. Environmental Protection Agency, 579 F.2d 846, 851 (4th Cir. 1978). The Administrator must give reasoned consideration to the issues before him and reach a result which rationally flows from this consideration. If he does so, and presents that rational basis in his decision, then his decision is not arbitrary and capricious. National Association of Food Chains, Inc. v. ICC, 175 U.S.App.D.C. 346, 352, 535 F.2d 1308, 1314 (1978) (per curiam); Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 393, 444 F.2d 841, 851 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971).

Third, aware of the technical expertise and need for flexibility of administrative agencies, courts typically defer to a nearly contemporaneous construction of a statute by an agency charged with administering it. See International Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 99 S.Ct. 790, 800 n. 20, 58 L.Ed.2d 808 (1979); United States v. National Association of Securities Dealers, 422 U.S. 694, 719, 95 S.Ct. 2427, 45 L.Ed.2d 486 (1975). Applying this principle the Supreme Court has held that the EPA's interpretation of the Clean Air Act is entitled to considerable respect. Union Electric Co. v. Environmental Protection Agency, 427 U.S. 246, 256, 96 S.Ct. 2518, 49 L.Ed.2d 474 (1978); Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 75, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975). "The construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong." Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371 (1967); accord, Beal v. Doe, 432 U.S. 438, 97 S.Ct. 2366, 53 L.Ed.2d 464 (1977); United States v. Burlington & Missouri River Railroad Co., 98 U.S. (8 Otto) 334, 341, 25 L.Ed. 198 (1879). For us to conclude that the Administrator misconstrued section 209 petitioners must show by clear and convincing evidence that his construction is unreasonable.

Thus mindful of our restricted rule, we turn to consider petitioners' claims. Petitioners posit five basic questions for decision. First, does section 209(b) empower the Administrator to consider a waiver of federal preemption for the CARB's in-use maintenance regulations? Second, if it does, what questions must the Administrator address before granting the waiver? Third, assuming the Administrator addressed the correct questions, how must he go about dealing with them? Fourth, if the Administrator properly addressed the correct questions, is there a discernible rational basis for the decision he reached? Finally, does the Administrator's decision to waive violate constitutional requirements? We examine these questions in turn.

The first question for decision is whether section 209 empowers the Administrator to consider a waiver of federal preemption for California's in-use maintenance regulations. Petitioners argue that the in-use maintenance regulations are not aimed at emissions control performance of new motor vehicles but instead purport to regulate in-use performance and post-sale obligations of manufacturers. As such, they contend, the regulations intrude on the pervasive federal regulatory scheme embodied in section 207, 42 U.S.C. § 7541 (Supp. I 1977), and are not subject to waiver under subsection (b) of section 209. Petitioners acknowledge that absent some provision for waiver the regulations are preempted by subsection (a) of section 209. They thereby avoid any explicit suggestion that section 207 alone effects a preemption of the CARB's in-use maintenance regulations and exclusively rely on a theory that subsection (b)'s waiver power is circumscribed by section 207.

The Administrator rejected this claim on the ground that the only relevant preemption provision is the express terms of subsection (a) and that whatever is preempted therein is subject to waiver under subsection (b). We agree.

Nothing in section 209 supports petitioners' one-way approach to waiver of federal preemption for California. Subsection (b) provides that unless the Administrator makes certain findings he must "waive application of this section " to California. 42 U.S.C. § 7543(b)(1) (Supp. I 1977) (emphasis added), reprinted in note 1 supra. The underscored phrase has no conceivable meaning other than to refer to subsection (a).19 Subsection (a) forbids any state from "adopt(ing) or attempt(ing) to enforce" standards relating to emissions from new motor vehicles, and from imposing any requirements relating to same as a "condition precedent" to the initial retail sale of motor vehicles. Id. § 7543(a). California's in-use maintenance regulations are attempts to enforce California's emission standards, and compliance with the regulations is a condition precedent to the initial retail sale of motor vehicles in California. The in-use maintenance regulations are, therefore, preempted by subsection (a). Subsection (b) authorizes the Administrator to waive application of subsection (a) for California; it contains no suggestion that the scope of this authority is something other than that defined by subsection (a). Hence the Administrator is empowered to waive federal preemption for California's in-use maintenance regulations.

The plain meaning of the statute indicates that Congress intended to make the waiver power coextensive with the preemption provision. Petitioners' efforts to reduce the phrase "of this section" to a truism would, if successful, render the California waiver provision either meaningless or ineffectual.

First, if only the pervasiveness of section 207's regulation of in-use performance is sufficient to restrict the Administrator's waiver authority, there is no reason why on the same reasoning a comparable limitation could not be found in section 202's pervasive regulation of national motor vehicle emission standards or section 206's pervasive regulation of the federal certification process. Sections 202, 206 and 207 are all integral parts of a comprehensive federal program; all three are equally treated in section 209(a). Yet were the Administrator to regard sections 202 and 206 as petitioners urge him to regard section 207, he would be powerless to consider waiving federal preemption for California's emission standards and certification process. This lack of power would render the waiver provision and indeed, the express preemption provision mere surplusage.20 It is axiomatic that a statute must be construed to avoid that result so that no provision will be inoperative or superfluous. See United States v. Menasche, 348 U.S. 528, 75 S.Ct. 513, 99 L.Ed. 615 (1955).

Second, if instead petitioners divine the limit on the waiver authority from section 207's particular area of regulation in-use performance then their argument is that Congress did not intend California to have any interests in emissions control once new motor vehicles leave the assembly line. Certainly section 209 makes no distinction among different types of in-use performance regulation which operate as enforcement procedures and conditions precedent.21 Thus on petitioners' reading the statute permits California to establish emission standards and certification procedures, but forbids it from ensuring that the standards are effective once the motor vehicle leaves the showroom. Yet the only time that a new motor vehicle is capable of polluting the environment is when it is out on the road. The purpose of the Clean Air Act is to reach precisely that kind of pollution. Our duty is to "favor an interpretation which would render the statutory design effective in terms of the policies behind its enactment and to avoid an interpretation which would make such policies more difficult of fulfillment, particularly where, as here, that interpretation is consistent with the plain language of the statute." National Petroleum Refiners Association v. FTC, 157 U.S.App.D.C. 83, 100, 482 F.2d 672, 689 (1973), cert. denied, 415 U.S. 951, 94 S.Ct. 1475, 39 L.Ed.2d 567 (1974).

The legislative history of section 209 supports the Administrator's interpretation that the waiver provision is coextensive with the preemption provision, thereby permitting the Administrator to consider waiving preemption of California's entire program of emissions control.22 No federal statute purported to regulate emissions from motor vehicles until 1965, when Congress enacted the Motor Vehicle Air Pollution Control Act, section 202 of which authorized the Secretary of Health, Education, and Welfare to prescribe emission standards.23 Although signs appear in the legislative history that this enactment was intended to enhance uniformity in national efforts at pollution control,24 the statute contained no express preemption provision. Consequently states generally felt free to adopt regulations in the field, and several states followed up the federal statute with regulatory schemes of their own.25

The states acting after 1965 were Johnnies-come-lately to the field compared to California, which had undertaken statewide efforts as early as 1958.26 Congress' entry into the field and the heightened state activity after 1965 raised the spectre of an anarchic patchwork of federal and state regulatory programs, a prospect which threatened to create nightmares for the manufacturers.27 Acting on this concern, Congress in 1967 expressed its intent to occupy the regulatory role over emissions control to the exclusion of all the states all, that is, except California.

As originally introduced in the Senate the Air Quality Act of 1967 did not contain an express preemption provision,28 though the topic of preemption quickly arose and immediately became the object of intense debate.29 The debate sharpened the differences between the states, which wanted to preserve their traditional role in regulating motor vehicles, and the manufacturers, which wanted to avoid the economic disruption latent in having to meet fifty-one separate sets of emissions control requirements. The bill that emerged from the Senate Committee contained a compromise: Subsection (a) preempted state programs of emissions control for new motor vehicles; subsection (b) provided an exception for California if that State determined that its standards would be "more stringent" than applicable federal standards.30 The Senate Committee explained:

On the question of preemption, representatives of the State of California were clearly opposed to displacing the State's right to set more stringent standards to meet peculiar local conditions. The auto industry conversely was adamant that the nature of their manufacturing mechanism required a single national standard in order to eliminate undue economic strain on the industry.

The committee has taken cognizance of both of these points of view. Senator Murphy convinced the committee that California's unique problems and pioneering efforts justified a waiver of the preemption section to the State of California.

S.Rep. No. 403, 90th Cong., 1st Sess. 33 (1967) (emphasis added).

Thus the Committee that formulated the waiver provision understood the costs involved in making an exception for California and decided to recommend that these costs be absorbed by allowing a waiver not of part of the preemption provision, but of the entire subsection (a). According to the Committee, the advantages of the California exception included the benefits for the Nation to be derived from permitting California to continue its experiments in the field of emissions control benefits the Committee recognized might "require new control systems and design," id. and the benefits for the people of California to be derived from letting that State improve on "its already excellent program " of emissions control, id. (emphasis added). There is no intimation in the Senate Committee report that the waiver provision was designed to permit California to adopt only a portion of such a program. The House accepted the Senate version.31

Congress had an opportunity to restrict the waiver provision in making the 1977 amendments, and it instead elected to expand California's flexibility to adopt a complete program of motor vehicle emissions control. Under the 1977 amendments, California need only determine that its standards will be "in the aggregate, at least as protective of public health and welfare than applicable Federal standards," rather than the "more stringent" standard contained in the 1967 Act.32 This change originated in the House. The House Committee Report explained:

The Committee amendment is intended to ratify and strengthen the California waiver provision and to affirm the underlying intent of that provision, i. e., to afford California the broadest possible discretion in selecting the best means to protect the health of its citizens and the public welfare.

H.R.Rep. No. 294, 95th Cong., 1st Sess. 301-02 (1977), U.S.Code Cong. & Admin.News 1977, p. 1380 (emphasis added). This language appears in the same House Report that elaborately describes section 207's regulatory format. The Report is barren of an indication that Congress intended to confine California's discretion to the adoption of emission standards, certification processes, and test procedures.33

Since the inception of the federal government's emissions control program it has drawn heavily on the California experience to fashion and to improve the national efforts at emissions control.34 The history of congressional consideration of the California waiver provision, from its original enactment up through 1977, indicates that Congress intended the State to continue and expand its pioneering efforts at adopting and enforcing motor vehicle emission standards different from and in large measure more advanced than the corresponding federal program; in short, to act as a kind of laboratory for innovation. Had Congress wanted to limit California's role to forbid its adoption of any program comparable to the federal scheme in section 207, it could have easily done so. It did not. For a court to do so despite the absence of such an indication would only frustrate the congressional intent.

We therefore are unable to find compelling indications in the text of the statute, in its legislative history, or in its underlying intent that the Administrator's interpretation of the waiver provision is wrong. We accordingly hold that section 209(b) empowers the Administrator to consider a waiver request for in-use maintenance regulations.

The second question for decision requires us to determine the substantive matters the Administrator must address in considering a request for a waiver of in-use maintenance regulations. It is the petitioners' view that the Administrator neglected to address certain statutorily-prescribed matters, and, in addition, that he improperly declined to examine the constitutional and antitrust implications of the in-use maintenance regulations. The Administrator contends that he addressed all questions the statute requires him to address, and that the constitutional and antitrust implications of the CARB regulations are beyond the scope of his review in a waiver proceeding. We essentially agree with the Administrator's position.

As noted, subsection (b) requires the Administrator to waive application of subsection (a) if California determines that its standards are at least as protective of the public health and welfare as applicable federal standards. A grant of the waiver is not necessarily automatic, however. Subsection (b) says that the Administrator shall not grant the waiver request if he finds (1) that California's determination of protectiveness was arbitrary and capricious; (2) that California does not need the standards to meet compelling and extraordinary circumstances; and (3) that the standards and accompanying enforcement procedures are inconsistent with section 202(a) of the Clean Air Act, which as indicated requires the Administrator's standards to be technologically feasible.

The parties agree that if the Administrator makes any one of these findings with respect to a waiver request involving California "standards" he must deny the request. In his waiver decision, however, the Administrator characterized the in-use maintenance regulations as "accompanying enforcement procedures" rather than as "standards." According to him, the word "standards" connotes a numerical value setting the quantitative level of permitted emissions of pollutants by a new motor vehicle. Thus for example a regulation limiting motor vehicle emissions of carbon monoxide to 3.4 grams per mile is in his view a "standard."

The Administrator says that "accompanying enforcement procedures," on the other hand, are criteria designed to determine compliance with applicable standards, and that the in-use maintenance regulations, being relevant to the manufacturers' ability to produce motor vehicles which will comply with the standards for their useful life, are properly classified as enforcement measures. The Administrator notes that section 209(b) refers to accompanying enforcement procedures only in the context of consistency with section 202(a). On this basis he concludes that in a waiver proceeding involving enforcement procedures tied to standards for which a waiver has already been granted the only questions he must address are (1) whether the enforcement procedures are so lax that they threaten the validity of California's determination that its standards are as protective of public health and welfare as applicable federal standards and (2) whether the enforcement procedures are consistent with section 202(a).

Petitioners insist that the in-use maintenance regulations are "standards." They say that a "standard" refers to any criterion with which the manufacturers must comply. Alternatively, they contend that however the in-use maintenance regulations are labeled, the Administrator must address each of the three statutory questions in every waiver proceeding. Thus they believe that the Administrator must deny the waiver if he finds that California acted unreasonably in concluding that the in-use maintenance regulations were as protective of the public health and welfare as federal regulations, or that the in-use maintenance regulations are not needed to meet compelling and extraordinary local conditions.

We need not resolve here the meaning of the word "standards" as it is used in every section of the Clean Air Act; our inquiry is confined to its use in section 209.35 In that setting we believe that the Administrator correctly classified the in-use maintenance regulations as "accompanying enforcement procedures" rather than as "standards."

Petitioners' definition would eliminate the concept of enforcement regulations as something distinct from a standard. Congress, however, clearly intended to make such a distinction in section 209. As noted, subsection (b) refers to "standards" and to "accompanying enforcement procedures." Subsection (a) provides that no state shall "adopt or attempt to enforce standards." These references to efforts at enforcement would have been unn