DOE Settles Another HVAC Lawsuit
Litigation necessary, again, to overcome ‘unfeasible, unjustifiable’ standards
The U.S. Department of Energy (DOE) recently settled a lawsuit challenging its June 3, 2014, Final Rule that set 19 new energy conservation standards for walk-in coolers and freezers (WICF), including standards for panels and doors. The settlement vacated several contentious parts of the rule and remanded them for rulemaking while delaying the enforcement date of the remaining standards.
The settlement is a victory for the manufacturers and contractors who may have been substantially harmed by the standards had they remained in place. Yet, many in the industry are concerned about the growing need to litigate in order to ensure regulations are developed properly and fairly.
In the lawsuit, which the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) and Lennox Intl. Inc. filed jointly on Aug. 4, 2014, the petitioners argued the DOE had made multiple errors when promulgating its Final Rule and had set standards that were neither technically feasible nor economically justifiable for manufacturers and installers. But, before AHRI and Lennox took the matter to the courts, they petitioned the DOE to reconsider its rule outside of court.
“They denied the petition, so we asked the court to challenge the denial and the underlying rule,” said Amy Shepherd, general counsel at AHRI. “We shared why we thought there were some errors.”
As part of the settlement agreement, the DOE withdrew six energy conservation standards — two of which are applicable to multiplex condensing refrigeration units operating at medium and low temperatures and four of which are applicable to dedicated condensing refrigeration units operating at low temperatures — and created a working group under the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC). The working group includes a variety of stakeholders who will develop new recommendations for the vacated standards.
“The key thing is that the ASRAC approve and recommended the standards to the DOE,” Shepherd said. “The working group submits it to ASRAC; then, they have a meeting to consider and hopefully approve the standards. They then make the recommendation to the DOE.”
While AHRI president Stephen Yurek said it’s “unfortunate” they had to file for judicial review, they’re “pleased to be able to come to an amicable agreement” with the DOE and other stakeholders.
“We look forward to the negotiated rulemaking process that the DOE agreed to support,” Yurek said. “This will ensure the energy-efficiency standards vacated in the settlement for the relevant equipment types are achievable, but will deliver the energy savings and continued product utility at reasonable prices. These are the things the DOE and consumers both expect.”
A WIN FOR CONTRACTORS, TOO
Unlike most energy conservation standards, which primarily impact equipment manufacturers, walk-in coolers and freezers are assembled on-site by HVACR contractors. Because of this, ACCA intervened on the side of AHRI, arguing the DOE had inadequately analyzed the impacts on the small business contractors who assemble WICF and needs to take a closer look at the rule’s impact on installers, including revising its definition of WICF assemblers as manufacturers.
“We were pleased with the settlement because it preserved our interests in how this rule will apply to the contractors who, as assemblers of walk-in coolers and freezers, have some responsibility, which is unique,” said Charlie McCrudden, senior vice president for government relations at ACCA. “Most appliance standards are applied to the manufacturer or the importer.”
“The settlement is a win for commercial contractors and vindicates our position that the DOE did not address issues ACCA raised during the notice-and-comment phase of the rulemaking,” said ACCA president and CEO Paul Stalknecht. “The 2014 standard considers the small business contractors who install WICF equipment as the ‘manufacturer,’ since they assemble the various components on site. This potentially makes the contractor responsible for meeting the energy conservation standards that typically apply to manufacturers. If the DOE wants to treat contractors as manufacturers, they have to afford them the same considerations and review during the manufacturer impact analysis — something they did not do.”
SUPPORT FOR NEGOTIATED RULEMAKING
While litigation was necessary in this instance, industry leaders agree they do not wish to continue challenging the DOE’s final rules in court. To avoid future lawsuits, many are advocating for the continued use of the negotiated rulemaking process instead of the traditional notice-and-comment process.
“I think ASRAC is the way we’re going to do all our standards from now on,” McCrudden said. “There are a lot of benefits to doing it. The process itself can be contentious, but it does work, and it’s an effective way to avoid lawsuits. The notice-and-comment process makes stakeholders wait for months for the DOE to address their comments and make notifications before they present another version, which is much, much slower than the ASRAC process, where you can go back and forth on issues in a day.
“If you’ve got targets you’re trying to meet, you can figure out how you’re going to get there by having an open discussion and caucus,” he continued. “It’s harder because it takes more time and effort and a real commitment to be there, and it all occurs over a two- or three-month period, but it accelerates the process, and there’s much more interaction.”
Jon Melchi, vice president of government affairs and business development for Heating, Air-conditioning, and Refrigeration Distributors International (HARDI), said that while HARDI did not intervene in this particular lawsuit, its members support the negotiated rulemaking process as a method to ensure stakeholders have sufficient input.
“My understanding and hope is that industry advocates and the government can work out something that can save energy and, at the same time, meet the threshold for economical justifiability — especially in the WICF product class — and simply not put people out of business, because there was a lot of concern about that,” Melchi said. “Everybody wants to save energy, we can all agree on that, but we need to be very careful and take steps that don’t cost people their livelihoods.”
In addition to requiring the DOE to utilize the negotiated rulemaking process for WICF, Shepherd said the lawsuit prompts the DOE to change some of its other processes so that litigation might not be necessary in the future.
“The DOE is going to come up with a process for addressing identified errors in a rule,” she said. “In the WICF case, the DOE took the position that it couldn’t do that unless addressing the error would increase the stringency of the standard, and we don’t agree with that.
“We don’t like to litigate unless we have to,” Shepherd continued. “We think it’s important the DOE has a method to do something short of litigation and resolve these issues without taking it so far. That will be a very good process improvement.”
SIDEBAR: WHAT’S IN THE AGREEMENT?
The settlement includes the following provisions:
• Refrigeration standards for multiplex condensing systems at medium and low temperatures and for dedicated condensing systems at low temperatures will be vacated. The DOE will support the use of a negotiated rulemaking process concerning the vacated standards with a targeted completion date of December 2015 for this negotiated rulemaking process.
• The DOE will align walk-in coolers and freezers (WICF) refrigeration enforcement dates by issuing enforcement guidance, making clear it will not enforce the remaining WICF refrigeration standards until Jan. 1, 2020, provided that the anticipated negotiated rulemaking process delivers proposed standards to the DOE by Jan. 22, 2016. The WICF standards for doors and panels are not affected by the settlement.
• The DOE will consider and substantively address any potential impacts of the standards on installers and smaller manufacturers as part of the negotiated rulemaking process.
• Within six months, the DOE will initiate a public process to determine how it will address error corrections in future rulemakings. The DOE has also committed to employing its best efforts to finalize that process within one year of the settlement.
Information courtesy of AHRI.
Publication date: 10/05/2015