U.S. Legislative Issues

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On May 29, 2015, the Environmental Protection Agency (EPA) released the proposed volume requirement for the renewable fuel standard (RFS). Created by Congress in 2005, and enhanced by legislation in 2007, the RFS governs the amount of ethanol that must be blended by refiners each year into the gasoline supply.  The proposal also sets out a trajectory of growth for biodiesel, calling for 1.63 billion of biomass-based diesel for 2014, 1.7 billion gallons for 2015, 1.8 billion gallons for 2016, and 1.9 billion gallons for 2017.

The proposal marks EPA's first attempt since 2013 to address the limited capacity the nation's gasoline fuel market may have to absorb blends of gasoline with an excess of 10 percent ethanol, known as the "blend wall." In 2013, the agency proposed reducing the statutory targets for biofuels for 2014 by 9 percent but was met with strong resistance from the ethanol industry. In the current proposal, the 2014 RFS will be set to actual consumption. Proposed total renewable levels for 2015 and 2016 represent a 20 percent reduction of the original targets.

Public comments on the proposal are being accepted through July 27, 2015. The EPA intends to take final action on this proposal by Nov. 30, 2015, which will return the agency to the program’s statutory timeline for issuing RFS annual rules.



The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have released their proposal for a second round of regulations to reduce greenhouse gas emissions and improve fuel efficiency. Separate standards have been proposed for engines and trucks, much to the dismay of some OEMs which had been pushing for a single vehicle standard they say would better reward integration. The Phase 2 proposal does not endorse specific technologies, but instead sets performance objectives which truck, engine and trailer manufacturers can meet however they choose.

The proposed rules would affect companies that manufacture, sell, or import into the United States new heavy-duty engines and new Class 2b through 8 trucks, including combination tractors, all types of buses, vocational vehicles including municipal, commercial, recreational vehicles, and commercial trailers as well as 3/4-ton and 1-ton pickup trucks and vans.

According to the agencies, in model year 2027, the buyer of a new vehicle would recoup the extra cost of technology used to achieve the standard within:

• 2 years for a tractor/trailer combo
• 3 years for pick-ups and vans
• 6 years for vocational vehicles which are typically used longer than vehicles in other heavy-duty sectors

EPA and NHTSA define vocational vehicles as a wide variety of truck and bus types, including delivery trucks, refuse haulers, public utility trucks, transit, shuttle, and school buses. This segment also includes very specialized vehicles such as emergency vehicles, and cement and dump trucks. Vocational vehicles represent about one fifth of the total medium- and heavy-duty fuel consumption.

Under the proposal, the new CO2 and fuel consumption standards for vocational vehicles would start in MY 2021, with increased stringency in MY 2024, and a fully phased-in stringency level in MY 2027. The proposed vocational vehicle standards are differentiated using three vehicle weights and three driving cycles. The agencies are also proposing separate standards for emergency vehicles. The fully phased-in standards would achieve up to 16 percent reduction in CO2 emissions and fuel consumption relative to Phase 1. The agencies project that the proposed vocational vehicle standards could be met through improvements in the engine, transmission, driveline, lower rolling resistance tires, workday idle reduction technologies, and weight reduction.

For heavy-duty pickup trucks and vans, the agencies are proposing new CO2 emission and fuel consumption standards that would be applied in largely the same manner as the Phase 1 standards. Under this approach, all manufacturers face the same standards, but the average emission and fuel consumption rates applicable to each manufacturer depend on the manufacturer’s sales mix, with higher capacity vehicles (payload and towing) having less stringent targets. The proposed standards for this segment take the form of a set of target standard curves, based on a "work factor" that, as in Phase 1, combines a vehicle’s payload, towing capabilities, and whether or not it has 4-wheel drive. The proposed standards would become 2.5 percent more stringent every year from MYs 2021 to 2027.

The proposed program would reduce CO2 emissions and fuel consumption for these vehicles by about 16 percent beyond Phase 1 when fully phased in. The agencies believe most manufacturers would choose to meet the performance standards through increased use of the same technologies already being used to meet the 2014-2018 standards. These technologies include improvements in engines, transmissions, and lower rolling resistance tire technologies. Under Phase 2, the agencies expect newer, advanced technologies such as engine stop start and powertrain hybridization will also become available in this segment of the market. These newer technologies are NOT mandated but some manufacturers may choose to use them to meet the standard.

As with the Phase 1 program, the agencies are proposing separate standards and test cycles for tractor engines, vocational diesel engines, and vocational gasoline engines. For diesel engines, the proposed standards would begin in MY 2021 and phase in to MY 2027, with interim standards in MY 2024. They are also proposing a revised test cycle weighting for tractor engines to better reflect actual in-use operation. The proposed diesel engine standards would reduce CO2 emissions and fuel consumption by up to four percent compared to Phase 1. Technologies that could be used to meet the standards include: combustion optimization; improved air handling; reduced friction within the engine; improved emissions after-treatment technologies; and waste heat recovery.

Once the Phase 2 proposal is published in the Federal Register, there will be a 60-day comment period open to the public. NHTSA and the EPA will also be hosting public hearings to solicit input. NAFA is currently analyzing the proposal to gather more information on the following: payback and return on investment; maintenance costs for new technologies; the engine versus whole vehicle standard; and the provisions allowing OEMs to enter contractual arrangements with hybrid aftermarket providers.



The Senate Environment and Public Works (EPW) Committee has approved a six-year, $275 billion highway bill that would gradually raise baseline funding for surface transportation programs, increase truck freight efficiencies inside the boundaries of intermodal facilities, create dedicated freight funding, and give states an incentive to tax electric vehicles that don’t generate as much income as traditional "gas-guzzlers". The bipartisan bill, titled "Developing a Reliable and Innovative Vision for the Economy" or DRIVE Act, was marked up and unanimously approved on June 24.
 
The bill also includes a provision that designates "national electric vehicle (EV) charging and natural gas fueling corridors that identify the near- and long-term need for, and location, of EV charging infrastructure and natural gas fueling infrastructure at strategic locations along major national highways to improve the mobility of passenger and commercial vehicles that employ electric and natural gas fueling technologies across the U.S." The corridors would be designated within one year of passage and be updated and/or re-designated every five years. Input from stakeholders in the private and public sectors would be used in designating the corridors.

Before the DRIVE Act can move forward, however, it will need a designated funding source. With House and Senate tax writers pursuing dramatically divergent paths and time quickly running out, it is unlikely that a deal will be reached on long-term funding before current highway funding expires on July 31, 2015. Adding difficulty is the vow made by Senate Democrats to scuttle any deal that doesn’t include a multi-year bill. What we’re likely to see is another short-term patch, but it’s too soon to tell how long that extension might be for and whether lawmakers will keep up the momentum on a long-term solution in the meantime.  



Last month, Takata announced a nationwide recall of nearly 40 million vehicles due to defective driver and passenger side airbag inflators that have been linked to eight deaths and more than 100 injuries worldwide. For the past 11 months, automakers have scrambled to pinpoint the millions of vehicles that contain the defective Takata airbag inflators.

The National Highway Traffic and Safety Administration’s (NHTSA) is now reporting that all vehicle identification numbers (VINs) affected by the Takata recall have been loaded into an easily searchable online database. Consumers looking to see if their vehicles are part of the recall can check by entering their 17 digit VIN on SaferCar.gov, which will return a list of all recalls associated with a particular vehicle. The site also functions to provide regular updates on the status of this and other recalls of high interest. 

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