Fuel Economy Plan Likely to Omit Rule for Big SUVs

Posted on August 17, 2005 by LCT Staff - Also by this author - About the author

DETROIT – The Bush Administration is expected to abandon a proposal to extend fuel economy regulations to include Hummer H2s and other huge SUVs, auto industry and other officials said. The proposal was among a number of potential strategies outlined by the administration in 2003 to overhaul mileage requirements for light trucks — SUVs, pickup trucks and minivans. It had been seen by industry officials as likely to be adopted.

But the impact of the tougher requirements would have been borne almost solely by the increasingly troubled domestic auto industry, a concern for the administration. Its broad plan to overhaul the light-truck mileage rules would change the regulatory system from one using average mileage for an automaker's entire annual light-truck output to one that sets up five or six classes, determined by a vehicle's size.

The rules, the first major rewriting of fuel economy standards since they were created in the 1970s, will be released late this month. They are sure to renew vigorous debate about the nation's dependence on foreign oil, a matter underlined by rapidly rising oil and gas prices.

The administration’s plan is still being reviewed by the Office of Management and Budget, which has had a role in drafting the plan. Further revisions could be made, including whether to extend the regulatory system to cover larger vehicles. Until the details are published, its potential effect on the nation's oil consumption will not be fully clear. And the volatility of oil prices could push consumers toward buying more efficient vehicles, a trend that may outstrip regulations in determining fuel consumption in years ahead.

"We have no comment on it until we're ready to release it," said Rae Tyson, a spokesman for the National Highway Traffic Safety Administration. "It's still a fluid process at this point. We look forward to significant fuel savings without sacrificing safety or doing harm to the American economy."

Because cars, SUVs and other light-duty vehicles account for 40% of the nation's oil use, changes in the regulatory system are always watched closely, more so in an era of increased concern over foreign oil imports, rising fuel prices and debate on the effects of global warming. The broad outline of the Bush plan is almost certain to meet objections from environmentalists and those hoping for an aggressive approach to curbing dependence on foreign oil. But domestic automakers are likely to see it as a victory, since the new plan will decrease advantages that some foreign automakers, like Honda, have in the current system because they do not make the heaviest trucks and SUVs.

Roughly speaking, corporate average fuel economy regulations — known as C.A.F.E. standards in the industry — divide each automaker's annual new vehicle production into two categories: passenger cars and light-duty trucks. New cars must average 27.5 miles a gallon and light trucks 21.2 miles a gallon in 2005 models and 22.2 miles by 2007. The figures represent lab-generated mileage and overstate the numbers that can be achieved on the road. Rules for cars are not being changed.

When the current two-category system was created in the 1970s, cars ruled the American road. Since then, automakers have developed new classes of vehicles that qualify as trucks, including SUVs, minivans and family-oriented pickup trucks with two rows of seats. As a result, not only is the number of vehicles on the road increasing, but the average new vehicle is getting lower mileage than it did two decades ago because so many more new vehicles are trucks. An increasing emphasis on horsepower is also a major factor.

Larger SUVs and pickup trucks weighing more than 8,500 pounds when loaded, like many Hummers and Ford Excursions, have been exempt from the regulations. When the system was created, vehicles of that weight were generally used for commercial purposes, but now hundreds of thousands sold each year are intended for family use.

Automakers have had powerful incentives to produce such vehicles because they are exempt from fuel regulations, have had rich profit margins and many consumers can claim tax breaks for them. The administration had suggested including larger SUVs in fuel economy regulations in a first wave of proposals in December 2003, but domestic automakers objected that such a move would harm their fragile bottom lines.

The decision not to include larger SUVs was a recent development, said people briefed on the deliberations, who declined to be identified before the plan is made public. There could still be revisions, and the plan's release will be followed by a public comment period and then a revised final rule, which must be published by next April to have an effect on 2008 models.

Gasoline prices have become a powerful counterweight to regulatory benefits given the biggest gas guzzlers. Many automakers, seeing the weakness in sales of large SUVs this year — they have recovered only after heavy discounting — are re-emphasizing plans for smaller, lighter SUVs in the future.

Under the Bush Administration plan, about half a dozen size classes will be determined by the vehicle's length and width. Instead of an overall mileage requirement for the total fleet of light trucks a manufacturer sells in a model year, makers will have to meet some kind of target or average within each size class. As a result of the proliferating categories, it will probably become more difficult to predict fuel economy trends.

"It's an invitation to game the system and increase our oil dependence and the pollution that results," said Dan Becker, a global warming strategist for the Sierra Club. "The Bush Administration is failing to use the most powerful weapon in its arsenal to save people money at the pump."

Gloria Bergquist, a spokesperson for the Alliance of Automobile Manufacturers, a lobbying group for General Motors, Toyota and several other producers, said: "The one thing we haven't heard is what the values will be for the different categories, and that will really tell us what the system means. Once the proposal comes out, we will have to take a hard look at it and see what the benefits may be to improving fuel economy."

The administration has taken some steps to increase fuel regulations for light trucks, raising the mileage standard for trucks to 22.2 miles a gallon for 2007 models, from 20.7 miles a gallon in 2004 models. Environmentalists have argued that gains from that move were offset by credits given to automakers for making vehicles that can use ethanol, even though there are few gas stations that carry the required blend.

Under the administration's plan for 2008 to 2010 models automakers will have a choice of complying with the new size-based system or the current system, though a further increase beyond 22.2 miles a gallon is expected in the current system. After 2010, the current system will be eliminated.

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