Group of 12 U.S. states challenge Trump fuel economy penalty freeze

WASHINGTON (Reuters) - A group of 12 states led by California and New York on Friday challenged the Trump administration’s decision to suspend a 2016 Obama administration regulation that more than doubled penalties for automakers that fail to meet fuel efficiency requirements.

FILE PHOTO: Traffic backs up on the Brooklyn Queens Expressway in New York, U.S., August 2, 2018. REUTERS/Lucas Jackson

Automakers protested the higher penalties, which they said could cost the industry up to $1 billion annually, and the Trump administration finalized the regulatory freeze on July 12. The 12 states, joined by the District of Columbia, filed a petition in the U.S. Court of Appeals for the Second Circuit to reverse the rule released by the National Highway Traffic Safety Administration (NHTSA).

Congress in 2015 ordered federal agencies to adjust a wide range of civil penalties to account for inflation and, in response, the NHTSA, under Democratic President Barack Obama, issued rules to eventually raise fines to $14 from $5.50 for every 0.1 mile per gallon of fuel that new cars and trucks consume in excess of the required standards.

The NHTSA, in response to a question on the lawsuit, on Friday reiterated its statement from last month that it was following the intent of Congress to ensure the penalty rate was set at the level required by law.

In a statement, the California attorney general, Xavier Becerra, said the Trump administration wants to “make these penalties meaningless,” while New York’s attorney general, Letitia James, called the rule “another misguided and reckless attempt by the Trump Administration to roll back the clock on our clean air standards.”

The move comes as the NHTSA and the Environmental Protection Agency are working to finalize a rewrite of the Obama administration’s fuel efficiency requirements through 2026.

The Obama-era rules called for a fleetwide fuel-efficiency average of 46.7 miles per gallon by 2026, compared with 37 mpg under the Trump administration’s preferred option.

The Alliance of Automobile Manufacturers, a trade group representing General Motors Co GM., Volkswagen AG VOWG_p.DE, Toyota Motor Corp 7203.T and others, had said the higher penalties could increase industry compliance costs by $1 billion annually and result in "significant economic harm."

Some automakers historically have paid fines instead of meeting fuel efficiency requirements. In February, Fiat Chrysler Automobiles FCHA.MI told Reuters it had paid $77 million in U.S. civil penalties in 2018 for failing to meet 2016 economy requirements.

Environmental groups urged the administration to retain the increase, noting U.S. fuel economy fines have lost nearly 75% of their original value.

Reporting by David Shepardson; Editing by Leslie Adler