Energy Department’s Second Boiler Rule Vacated by D.C. Circuit

The Department of Energy didn’t address industry concerns when adopting stricter commercial boiler efficiency rules, the D.C. Circuit ruled Friday, vacating the final rule.

The department failed to provide a reasoned response to challenges that it used unreasonably high burner operating hours when calculating costs to consumers, a three-judge panel on the US Court of Appeals for the D.C. Circuit said. DOE also failed to provide notice and comment despite its reliance on new studies and data.

The ruling sends the Energy Department back to the drawing board on rules for commercial boilers, which which were adopted to reduce carbon emissions. The department said the new rule would have avoided producing about 16 million metric tons of carbon dioxide.

The panel rejected the department’s argument that tossing the rule would result in significant disruption of the status quo, saying manufacturers could resume production of boilers that meet the old standards.

The American Public Gas Association and other industry groups first sued the department in 2020, claiming that it failed to meet the “clear and convincing evidence” requirement to show that its standards from that year were technically feasible and economically justified, and would conserve energy.

A D.C. Circuit panel agreed with the groups in June 2022 but declined to vacate the rule and instead remanded it to the agency to satisfy the clear and convincing evidence standards.

The department then adopted a new rule that maintained the same standards as the prior rule, and industry groups sued again, arguing that the new final rule still failed to address critical defects in its 2020 rule. The rule is economically unjustifiable, but the department still used a model that greatly overestimated the potential for the standards to provide economic benefits, the groups argued.

The D.C. Circuit said that the department provided a sufficient response to the groups’ concerns about the fuel prices used in the agency’s life-cycle cost analysis, as it explained specifically in the revised rule how the data captures the prices paid by all consumers.

But it didn’t sufficiently address the groups’ comments that it used unreasonably high burner operating hours in its analysis. The department failed to address the impact of its underlying assumption that for every square foot of heated area, a building uses an average of 30 Btu/h, the judges said.

The panel wrote that because it found that the department couldn’t justify its failure to provide notice and comment for the new rule, it didn’t reach the groups’ argument that the agency used a flawed random assignment methodology.

Judges Robert L. Wilkins wrote the opinion, joined by Judges Karen LeCraft Henderson and Judith W. Rogers.

American Public Gas Association is represented by McCarter & English LLP. American Gas Association, which intervened in the case, represented itself.

The case is Am. Pub. Gas Ass’n v. Dep’t of Energy, D.C. Cir., No. 22-01107, 7/7/23.