Out of masterresource
By Mark Krebs – July 10, 2023
“The ‘wheels of justice’ are turning slowly, but they have turned, even within the District of Columbia ‘single party’.” Holding on to that victory is anything but a cracker for preserving consumer choice and freedom markets. I expect the fight to escalate in Biden’s intergovernmental war on natural gas and other fossil fuels.”
The US Circuit Court of Appeals for the District of Columbia (DC Circuit) has just handed beleaguered energy consumers a sweeping victory. The ruling overturned a final US Department of Energy (DOE) rule that would have prohibited the manufacture and sale of non-condensing boilers for use in commercial applications. The DOE’s ruling was challenged by natural gas stakeholders a few years ago – and later linked to a separate but similar case from the Air-Conditioning, Heating, and Refrigeration Institute (AHRI).
For those who are fluent in legal terminology, the Court’s historical review and logic can be downloaded here. The court concluded that the DOE failed to meet the “clear and compelling evidence” requirements that the DOE needs to mandate stricter minimum efficiency standards. Such proof is required by the Energy Policy and Conservation Act (EPCA).
The failures of the DOE were severe and numerous. Previously, the court had given the DOE ample opportunity to correct them. but they didn’t. Ultimately (read between the lines) it appears that the court has lost patience with “the agency” (DOE). One of the far-reaching results of this victory is that it undermines a veritable administrative state superweapon: the chevron deference. This aspect will be discussed in more detail below.
DC Circuit has set a precedent showing how the DOE routinely bends the rules to achieve its “administrative state” goals. Therefore, the Department of Energy should exercise more care and transparency in the future development of minimum efficiency standards for appliances. However, the DOE is probably more likely to find ways to circumvent it; maybe drastic.
Over the years I have provided updates on the status of these issues through MasterResource. Some of the most important points for this “victory” are:
The last link shows how hard the gas industry tried to politely give the DOE the opportunity to do the right thing. This started with a bug fix request dated February 12, 2017, which was ignored by the DOE. The reason it was ignored was because it went beyond correcting a mere typo. Rather, the aim was to correct a major conceptual error in EERE’s Monte Carlo analyses. This error effectively assumed that consumers (including commercial) NEVER make rational economic decisions. This error is perpetuated in subsequent analysis, rendering the Department of Energy’s conclusions meaningless.
The end result of this (among many other analytical biases discussed in the court ruling) is fatally distorted economic “choices” that almost always favor stricter standards, regardless of the actual economic situation. Because of this court decision, such routine biases arose and are now publicly displayed to demonstrate the full intent of regulatory failures occurring in the purposefully opaque bureaucratic processes designed to supposedly overcome so-called market failures.
See page 2 of the Court’s July 7, 2023 decision for a list of the “usual suspects” who have tried to thwart us, mainly other government agencies. Why such a show of force? Perhaps because her chevron reverence was and is vulnerable to the reality of her analytical misdeeds? And if you can’t trust government to do the “small things” fairly, then why trust them to do the “big things” right?
The “wheels of justice turn slowly,” but they did turn, even within the District of Columbia’s “single party” (Democrats and compliant Republicans). Holding on to this victory is anything but a cracker for preserving consumer choice and free markets. I expect the fight in Biden’s all-government war on natural gas and other fossil fuels to escalate.
What do we do now?
It’s too early for consumers and the natural gas industry to announce victory, even though the evidence is now solid and the DC Circuit is an important court. It’s time to build on a superior case. Specific recommendations follow:
- The thrashing DOE has adopted the attribution approach of random base case modeling and provides an opportunity to argue that the DOE overhauls its entire approach to consumer cost analysis. This does not mean a departure from Monte Carlo-based probability analyses. The full implications of this decision, as it extends to all “Covered Products” of the DOE, must be discussed publicly, particularly for rulemaking, which is already well underway and nearing the final rule stage.
- Fossil fuel suppliers must independently develop and maintain fuel price information that reflects marginal energy costs, which is what consumers actually pay, for key markets, rather than relying on average estimates from the Energy Information Administration.
- The DOE should be required to develop a public process to receive recommendations to revise its approach to consumer life cycle cost analysis.
- The fossil fuel industry needs to work together and collectively fund a continued and strong effort to combat anti-consumer government policies and for their own future. We may gain some and lose some, but that’s far better than losing everything. Losing everything is still a real, if not increasing, possibility in a scenario where the winner gets all that seems to be in the offing. Case in point: The United Nations plans to take on global “emergency powers” with Biden’s backing. What is a global emergency? The most obvious are pandemics and climate change.
- Most importantly, the fossil fuel industry should use this victory to highlight just how fallible government agencies can be.
This decision goes far beyond the details of compact commercial boilers. It goes to the heart of the question of the place of government agency in relation to actual stakeholders. Since the introduction of the “Chevron Deference” in 1984, federal courts have relied on an agency’s supposedly unique “expertise” to interpret ambiguous laws. This is clearly the case when regulatory measures such as the adoption of regulations setting minimum energy efficiency standards for appliances are being reviewed. On May 1, 2023, in Loper Bright Enterprises v. Raimondo, No. 22-451, the U.S. Supreme Court granted review of whether to repeal or limit the Chevron Deference. Subsequently, perhaps the most important victory in this case is that he becomes the “poster child” for why the administrative state’s abuse of chevron deference should end. In this case at least, the courts found that DOE was not worthy of respect. Perhaps SCOTUS will follow their example.
Finally, I would like to say thank you Tom Tanton for his clever help in fine-tuning this article. I would also like to acknowledge the legal expertise of barton dayas well as spires Mark Darrellfor their unwavering perseverance during this multi-year struggle.
Mark Krebs, a mechanical engineer and energy policy consultant, has been designing and evaluating energy efficiency programs for over thirty years. Mark has served as an adjudicator on dozens of federal energy efficiency lawsuits, has served as an advisor to the Department of Energy, and has submitted numerous state energy efficiency applications. You can find his many MasterResource articles on natural gas vs. electricity and federal deep decarbonization policy here. Mark’s first article appeared in Public Utilities Fortnightly entitled “It’s a War Out There: A Gas Man Questions Electric Efficiency” (December 1996). Krebs, who recently retired from Spire Inc., has founded an energy policy consultancy (Gas Analytic & Advocacy Services) with other experienced energy analysts.