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EPA, California clash over fuel economy rules, signaling lengthy court battle

Washington — The heads of the US Environmental Protection Agency and the California Air Resources Board clashed Thursday over the collapse of fuel economy talks, indicating the near certainty of a court challenge expected to delay the imposition of federal rules forecast to boost domestic oil demand an estimated 644,000 b/d in a decade.

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At a US House of Representatives' Energy and Commerce subcommittee hearing Thursday, Mary Nichols, chairwoman of the California Air Resources Board, said that Trump administration officials cut off talks with California without cause.

"We have been open to accommodations that would adjust compliance timing and flexibility, that would create new paths to promote innovative technologies and zero emission vehicles, and that would benefit the public," Nichols testified. "Each time, the Trump Administration has been unwilling to find a way that works."

But in a letter sent Thursday to Representatives Cathy McMorris Rodgers, a Washington Republican, and John Shimkus, an Illinois Republican, EPA Administrator Andrew Wheeler wrote that Nichols was "unable or unwilling to be a good-faith negotiator."

Wheeler wrote that he met with Nichols "three or four times" on the proposed rule, but Nichols only offered a counterproposal that maintained the Obama-era standards with an extra year of compliance. This counterproposal had not been vetted by California Governor Gavin Newsom nor Attorney General Xavier Becerra, Wheeler wrote.

In August, EPA and the National Highway Traffic Safety Administration unveiled a proposal to roll back light duty vehicle fuel economy standards, set during the Obama administration, to increase to 54.5 miles per gallon by 2025, to freeze them at the 2020 target of 43.7 mpg.

The proposal, which Wheeler has said will be finalized this summer, would increase US oil consumption by as much as 283,000 b/d in 2025 and 644,000 b/d in 2030, according to a Rhodium Group study.

The proposal also revokes California's decades-old preemption waiver, which allowed it to set stricter fuel economy standards, which 13 states also follow. Talks between the Trump administration and California ended in February and automakers earlier this month urged President Trump to resume those talks in order to avoid splitting the US auto market in two.

The end of negotiations guarantee that the fuel economy standards would be tied up in litigation for years, said Michigan Representative Debbie Dingell, a Democrat. "This is going to the courts," she said.

But Heidi King, NHTSA's deputy administrator, testified that a court challenge was likely, even if talks with California were ongoing.

During Thursday's hearing, King said US oil production growth, and its trend toward becoming a net crude exporter, demonstrated the need for an easing of federal fuel economy rules. King said that US gasoline forecasts the Obama administration calculated when developing the rule in 2012 were roughly 40% lower than the actual prices.

"There has been a change in the fuel position of the United States," King said.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com