Judicial Matters

Engine Manufacturers Association v. Huston
In Engine Manufacturers Association v. Robert J. Huston (citation omitted), the U.S. District Court for the Western District of Texas struck down state regulations that required non-road equipment operators to accelerate the acquisition of new, lower-polluting equipment and the disposal of more polluting equipment. Under the regulations, an increasingly larger percentage of a fleet’s inventory of non-road equipment would have to have met new, more demanding federal emission standards. Several industry organizations successfully challenged the regulations by arguing that they violated the Clean Air Act’s prohibition against state or local rules that impose emission standards on non-road vehicles and engines. The Texas Natural Resources Conservation Commission (TNRCC) argued that the rules did not violate the preemption provision because they did not establish any sales restrictions or sales quotas. The court, however, found that the rules were ” clearly an attempt by the state to control the emissions of non-road vehicles through a standard or other requirement.”

Engine Manufacturers Association v. SCAQMD
This case involved the legality of fleet regulations adopted by the South Coast Air Quality Management District (SCQMD). The regulations as originally adopted applied to fleet operators of street sweepers, public transit vehicles and urban buses, solid waste collection vehicles, airport passenger transportation ve hicles, including shuttles and taxicabs picking up airline passengers, and heavy-duty on-road vehicles. All of the fleet rules applied to public operators; three applied to private operators as well. Because of the importance of this case to future fleet programs, NGVAmerica (at that time, the NGVC) filed an amicus brief before the US Supreme Court. On April 28, 2004, the US Supreme Court ruled 8-1 that the fleet rules are pre-empted under the federal Clean Air Act. The Court essentially agreed with the Engine Manufacturers Association’s argument that the rules violated the CAA because they imposed standards in violation of section 209(a) of the CAA. The CAA generally preempts states from imposing motor vehicles standards. There is an exception for standards adopted by the state of California and approved via waiver from the US EPA. In this case, however, the regulations at issue were adopted by the SCAQMD and not California.

Prior to the Supreme Court’s decision, the US District Court for Central California had upheld the fleet regulations in their entirety, ruling that they were not “standard[s]” under the CAA because they regulate only the purchase of vehicles that are otherwise certified for sale in California and did not restrict the sale of vehicles. The court indicated that “[w]here a state regulation does not compel manufacturers to meet a new emissions limit, but rather affects the purchase of vehicles, as the Fleet Rules do, that regulation is not a standard.” The Supreme Court rejected this line of reasoning. The Court’s majority opinion, authored by Justice Scalia, stated that “[i]n addition to having no basis in the text of the statute, treating sales restrictions and purchase restrictions differently for pre-emption purposes would make no sense. The Manufacturer’s right to sell federally approved vehicles is meaningless in the absence of a purchaser’s right to buy them.”

The Supreme Court’s decision nevertheless left open the possibility that the fleet requirements could be salvaged. On remand, the Supreme Court ordered the District Court to determine the extent to which some of the SCAQMD’s rules may continue to be enforced. The US District Court for Central California ultimately ruled that the fleet rules applicable to state and local governments in California are not preempted by the CAA. See EMA v. SCAQMD, CV-00-9065 FMC (May 5, 2005 Order Denying Plaintiff’s Motion for Order Implementing S.Ct Decision). The District Court ruled that federal law does not preempt the internal purchasing decisions of state and local governments. The District Court recognized that unlike regulatory actions, actions by a state that are proprietary in nature – that is, related to the buying or contracting for the goods and services the state needs to function – may not be preempted by federal laws. The decision did not address the two other applications of the Fleet Rules left undecided by the Supreme Court – i.e., the application of the Fleet Rules to the federal government and whether the Fleet Rules are preempted as applied to used or leased vehicles.

What this Case Means for the NGV Industry: The case leaves open a number of options to state authorities that want to adopt aggressive requirements for fleets. In particular, it leaves open the continued ability of the state of California to adopt more stringent statewide requirements for fleets since it has authority under the CAA to adopt more stringent emission requirements for motor vehicles. And, in fact, California has moved to adopt a series of fleet regulations, including requirements for transit buses, refuse trucks, and on-road public fleet trucks. So far, these regulations have not been challenged. Other states should have the option of following California’s lead by adopting similar requirements. The CAA clearly allows other states to adopt California’s more stringent low-emission vehicle regulations for new motor vehicles. And it is likely that the same authority could be used by other states to adopt California’s fleet regulations.

With respect to whether state or local jurisdictions can adopt their own more aggressive fleet regulations (separate from regulations adopted in CA), the Supreme Court case means that it is unlikely that such regulations can be broadly applied with respect to private fleets. However, it appears that state and local jurisdictions can adopt fleet requirements as long as they target public fleets, or adopt requirements that are considered within the scope of their right to contract for services and goods. Nothing in the Supreme Court’s decision would disallow a state (or political subdivisions of a state) from acquiring NGVs and then requiring private sector firms to lease those NGVs from the municipality as a condition of the private firm receiving a license or franchise to provide taxi, airport shuttle, refuse or other local authority sanctioned services. Nor does the ruling appear to prohibit a state (or Air Quality Management District) from requiring municipalities to implement such a program. The private sector firm then could be given the option of either leasing the vehicles from the political subdivision or providing its own NGVs instead.

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