Staple: Obama’s Energy Credibility at Risk Again With New Auto Rules

Posted August 1, 2012 at 11:05am

A second Solyndra-like political moment may be near for the Obama administration as it finalizes landmark new rules on mileage and tailpipe emissions for cars and other light duty vehicles produced for model years 2017 to 2025.

Absent quick White House action, the political fallout from a flawed set of rules could further damage the president’s energy credentials and skew the country’s driving options for years to come.

The potential debacle does not concern the headline numbers for new vehicle fleets. These numbers include Corporate Average Fuel Economy standards of approximately 54 miles per gallon by 2025 and a 40 percent-plus cut in greenhouse gas emissions.

On that score, the auto manufacturers still largely see eye-to-eye with the Environmental Protection Agency and the Department of Transportation, the two agencies with the lead in crafting the new rules.

Rather, the simmering issue concerns the EPA’s penchant for picking winners when it comes to deciding which new high mileage and low emission vehicles will get nearly a decade’s worth of manufacturing incentives. These non-financial incentives (which over-weight zero or low emission vehicles in calculating fleet averages) will affect the production of millions of vehicles until at least 2025. Hence, they could play a large role in determining the next generation of gasoline-free cars that U.S. consumers can buy.

In the EPA’s view, only electric vehicles and fuel cell vehicles should be eligible for incentives because they embody the technologies that are most likely to advance the twin oil-saving and emission goals of the new rules. Natural gas vehicles and natural gas hybrids (with battery or gasoline reserve tanks) don’t make the cut, and thus will not get parity when it comes to incentives.

There lies the pending political (and legal) storm. For on an apples-to-apples basis, NGVs, like EVs, undeniably offer comparable oil savings. And the EPA’s own figures show that NGVs may even have lower full fuel cycle greenhouse gas emissions than EVs, depending on the source of the electricity used to charge an EV’s batteries.

Data submitted to the EPA also show that, given the lower sticker price for NGVs, the comparative cost per pound of reducing tailpipe emissions from EVs may be higher.

As importantly, the EPA’s narrow approach to incentives undercuts the administration’s “all of the above” energy policy and its recent efforts to champion NGVs and the use of natural gas more broadly. Notably, following up his 2012 State of the Union call out on natural gas, President Barack Obama told a North Carolina audience: “Over the last three years, we negotiated the toughest new efficiency standards for cars and trucks in history. … Think about an America where more cars and trucks are running on domestic natural gas than on foreign oil.”

In a similar vein, earlier this month the DOE announced the presumptive winners of $30 million in new research and development grants aimed at making the next generation of NGVs a game-changing consumer option. The grants focus on right-sizing fuel tanks and designing an affordable NGV home-refueling appliance for the 65 million residences now tied to local gas pipelines.

So will the White House manage to sync the EPA with the administration’s vision for natural gas? There’s still time — just. On July 16, the draft CAFE rules were sent to the Office of Management and Budget for a final review.

When it comes to new regulations and incentives, OMB is known to be cost-conscious, favoring efficient rules that expand rather than restrict consumer choices. Hence, given that the major auto manufacturers are, almost to a company, in favor of broad technology-neutral manufacturing incentives for alternative fuel vehicles, there is still a chance that the OMB will nudge the EPA in the right direction — a direction that encourages America’s auto makers to provide drivers with more gasoline-free options, including NGVs.

There’s plainly wide political support for that too. Govs. John Hickenlooper, a Colorado Democrat, and Mary Fallin, an Oklahoma Republican, forged a 13-state memorandum of understanding to spur production of NGVs for state fleets.

They  told the EPA in May: “It is our hope that any final rule will promote a pool of alternative fuel vehicles and will incentivize U.S. manufacturers to produce NGVs as well as other qualified clean and alternative fuel vehicles” so that “the national benefits of [our] MOU are not undermined.”

These governors will be watching the final rule closely as, no doubt, will many folks in other natural gas-rich swing states  such as Ohio, Pennsylvania and New Mexico.

Gregory C. Staple is CEO of the American Clean Skies Foundation.