Although the Department of Energy (DOE) announced its final rule establishing regional standards for air conditioners, heat pumps, and furnaces last October, the fight is not over yet. Through the legal advocacy group Cause of Action, the Heating, Air-conditioning and Refrigeration Distributors International (HARDI) has filed a petition to intervene through the United States Court of Appeals against the DOE. HARDI’s petition to appeal the rule is based on the claim that DOE failed to follow proper procedures in issuing the rules for regional efficiency standards.

According to the new rule, the country will be divided into three regions, and the minimum efficiency standards for residential HVAC appliances will vary depending on the region in which they are installed. The new rules become effective in May 2013 for non-weatherized furnaces, and in January 2015 for weatherized furnaces, central air conditioners, and heat pumps.

“The Department of Energy utilized a direct final rule procedure which is designed to expedite rule makings when there are few challenges,” HARDI Director of Government Affairs Jon Melchi said. “There are certain procedures that they are required to fulfill in order to utilize this regulatory tool and we have contended that they did not do so. In December, the American Public Gas Association petitioned the court of appeals regarding the direct final rule process that established regional standards. We are intervening in the case on APGA’s behalf.”

HARDI believes there are a handful of procedural requirements that the DOE has to undergo in order to make a direct final ruling and that those requirements simply were not fulfilled. Among them are what HARDI believes are the DOE’s failure to recognize significantly affected entities such as distributors and contractors when considering the “consensus agreement” negotiated between the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) and environmental advocates. HARDI believes the DOE added items to the direct final rule that were not part of that consensus agreement and ignored over 40 comments filed in opposition to the Direct Final Rule.

When asked for a comment on the lawsuit, AHRI president and CEO Steve Yurek said, “We are disappointed that our industry partners have taken this action. Even if this lawsuit is ultimately successful - and we don’t believe it will be - regional standards are inevitable and a settled issue. There are many more important threats that our industry must unite to meet. It is our hope that we can put this behind us quickly and move on.”

HARDI now has to wait for the U.S. Court of Appeals to respond to its petition. There is no set timetable; it is at the court’s discretion. In the meantime, HARDI is advising all of its members to proceed as if the rules are going to go into effect on May 1, 2013 unless they hear otherwise.

“The DOE simply did not do a thorough economic analysis, especially their due diligence in assessing the economic impact to small businesses,” Melchi said. “And that has been a bone of contention for us all along and something every federal agency should be compelled to do for any regulatory proceeding.”

Looking Out for Its Members

HARDI is concerned that what they believe is DOE’s failure to follow proper procedures will cause financial harm to HARDI’s distributor members. They also worry about the precedent this will set for the HVACR industry going forward.

“If we were to simply ignore this abuse of statutory process, all federal agencies would remain unchecked,” Melchi said. “This rule completely changes the nature of HVAC distribution forever going forward and for the DOE to not impart all due diligence in creating a regulation that impacts the livelihoods of businesses and individuals is counter to the way the regulatory process is supposed to work. This process is a perfect example of why small businesses are angry with Washington, D.C. Our voices and views were not considered. We had hoped that DOE would do a thorough analysis as required by law for decades and make sure that the new regulation is economically justified, technologically feasible, and likely to save considerable energy before a new standard is established.

“HARDI‘s opposition of the regionalization of HVAC’s minimum efficiency standards is not the impetus for deciding to challenge DOE’s Direct Final Rule. HARDI members are more concerned about the federal agency’s overreach of their statutory authority and abuse of this formal legal procedure,” said HARDI Government Relations Co-Chair, Steve Porter, Johnstone Supply, said, “If not addressed, this precedent could negatively affect countless future regulatory actions. We need to speak out in an effort to minimize the potential for our members to be negatively impacted by every federal agency on issues ranging from commerce to labor to transportation.”

According to HARDI President Bud Mingledorff, the members are unified.

“For years HARDI members have been discussing regional standards then the consensus agreement, and now the potential impact of DOE’s direct final rule on our industry. Over the last several weeks alone, four individual votes were cast among varying levels of HARDI’s membership leaders, each of whom unanimously determined joining this litigation was the right thing to do,” Mingledorff said.

HARDI is working with Cause for Action which is a nonpartisan organization that uses public advocacy and legal reform tools to ensure greater transparency in government, protect taxpayer interests, and promote economic freedom.

“One of the reasons we were interested in this case is because we believe the Department of Energy is definitely overstepping its bounds by not adhering to the procedural rules that it should,” Mary Beth Hutchins, communication director of Cause of Action said.