The U.S. Department of Energy (DOE) working group tasked with developing new manufactured home energy efficiency standards (as mandated by the Energy Independence and Security Act of 2007 – “EISA”) via a “negotiated rulemaking” process, held its first meeting in Washington, D.C. on August 4-5, 2014. Given the potential cost impact of any such standards on manufacturers and consumers, this will be an extremely important process and a subject that HUD Code industry members, manufacturers – and particularly smaller and medium-sized manufacturers — will need to watch and monitor with the utmost vigilance going forward.
As is explained in greater detail below, the working group meeting addressed a number of key procedural issues – including “ground rules” for operation of the working group and the status of a “draft proposed rule” developed by DOE and then selectively leaked to parties in interest – as well as an initial framework of substantive issues and concerns for potential consideration and analysis by the group.
In significant ways, the outcome of this opening meeting fully vindicates, once again, concerns raised – and views expressed – by MHARR since DOE first took-up this matter nearly seven years ago.
By way of background, EISA directs DOE to “establish standards for energy efficiency in manufactured housing” in “consultation with the Secretary of housing and Urban Development, who may seek further counsel from the Manufactured Housing Consensus Committee” (MHCC). DOE (as reported to the MHCC) began a conventional “in-house” rulemaking process to develop those standards shortly after EISA was adopted seven years ago. Subsequently, as reported by MHARR, a copy of a “draft proposed” DOE manufactured housing energy rule was selectively leaked to certain parties in interest, including the Manufactured Housing Institute (MHI), as confirmed by references to specific details of the DOE draft in public MHI documents from 2012 (and now directly by MHI’s representative to the DOE working group).
Following strenuous MHARR objections to the selective leak, there was no further public DOE activity on the manufactured housing energy rulemaking until a June 25, 2013 “Request for Information” (RFI) on three issues (cost, enforcement and the interrelationship between air exchange and other matters including condensation) that MHARR raised in its very first written comments to DOE in response to an Advance Notice of Proposed Rulemaking (ANPR). In its comments, MHARR specifically urged DOE (among other things) to: (1) discard the selectively leaked “draft proposed rule;” and (2) “allow sufficient time for the development, analysis and evaluation of information concerning potential adverse impacts and the cost implications of any new standard.” Subsequently, at a June 6, 2014 public meeting of DOE’s Appliance Standards and Rulemaking Advisory Committee (ASRAC), DOE announced that it would convert the EISA-based manufactured housing energy rulemaking process from a conventional in-house rulemaking to a “negotiated rulemaking,” leading to the establishment of the working group.
1. STATUS OF THE PRIOR “DRAFT PROPOSED” MH ENERGY RULE
Near the outset of the working group meeting, MHARR and other working group members requested disclosure of the information and (selectively leaked) draft rule developed by DOE during its in-house rulemaking to ascertain where DOE had “left-off” in its efforts and what information it had developed. DOE representatives at the meeting initially indicated that the material could be provided, subject to confirmation with DOE’s Office of General Counsel (OGC). The next day, however, a DOE official asserted that those materials were not “relevant,” and indicated that based on OGC advice, they would not, in fact, be provided to the working group. This was followed by a statement from OGC which acknowledged that the draft proposed rule had been “improperly disclosed” to parties in interest and had been rejected by the Office of Management and Budget (OMB) on that ground, but was “pre-decisional” – in that it did not represent DOE’s official, final position — and thus was exempt from disclosure, including disclosure to the working group.
Aside from any questions as to the validity of DOE’s claim of “pre-decisional” status for the draft proposed rule, the statements by the DOE working group representative and DOE OGC effectively seek to draw a bright “line-in-the-sand” between the previous in-house rulemaking process, leading to the development of the draft proposed rule and its “improper disclosure,” and the current “negotiated rulemaking” process. Presumably, this is to: (1) “insulate” the current process from contamination by the earlier process and its “improper” culmination; and (2) thereby insulate the current process – to the maximum degree possible – from later legal challenges based on the prior “improper” action.
MHARR maintains, however, that any such “contamination” could occur in any event if any standards proposal, sub-proposal or concept — based in whole, in part, related-to, or even influenced by the prior “improperly disclosed” draft proposed rule — is presented to the working group for consideration. Such a proposal would: (1) breach OGC’s supposedly bright line between the two proceedings; (2) automatically make the prior “draft proposed rule” and any related information, materials and documents “relevant” to the current negotiated rulemaking; and (3) expose the current rulemaking and DOE process to a variety of potential challenges, now and/or later. Given these points, it is understandable that MHI – as a recipient of the “improperly disclosed” DOE draft proposed rule – did not present to the working group (at this meeting) a standards proposal that, according to a long string of reports in the trade press, it developed subsequent to the leak of the DOE draft proposed rule.
Thus, while it appears – at least on its face — that DOE is going “back to drawing board” on this rule, as sought by MHARR in its previous RFI comments, maximum vigilance will be necessary during the negotiated rulemaking process to identify all recipients of the “improperly disclosed” draft and related information, and ensure that the current process is, in fact, a fresh start, from scratch, rather than a mere fig-leaf to paper over the prior “improper” action and results that were rejected by OMB.
2. MODIFICATION OF PREJUDICIAL WORK GROUP “GROUND RULES”
At the meeting, members of the working group were provided a four-page set of “ground rules” for the operation of the group, the development of its recommendations to DOE and DOE consideration of those recommendations. While mostly innocuous, the original work group ground rules included provisions that would have been extremely prejudicial to any participating member that chose not to join a work group “consensus” and instead dissent from any recommendation.
Under the original ground rule language – that according to DOE, has been used for all previous ASRAC working groups – any member of the work group, whether in agreement with a work group consensus or not, would be barred, just by being a member of the work group, from: (1) filing “negative comments” on any DOE proposed rule (or rule preamble) resulting from the working group’s recommendations; (2) taking “any action to inhibit the adoption of the [DOE] recommended proposed standard” resulting from a working group recommendation; or (3) taking “a position materially inconsistent with the [DOE] standard or determination in court.”
MHARR strenuously objected to these “rules” (which DOE acknowledged were not based on any statute or regulation) on the ground that they amounted to an involuntary de facto waiver of statutory and constitutional due process rights of possible dissenters just by being a member of the working group. Other members also pointed out that these prohibitions had not been disclosed to working group members before or at the time that they applied for membership.
Following a nearly three-hour debate, all of these provisions were deleted from the ground rules and replaced with language stating that all members would work “in good faith” to try to achieve consensus (which was a criterion for working group membership in any event).
3. SUBSTANTIVE ISSUES
While the entire first day of the meeting was occupied with procedural issues, members, on the second day, began to develop a non-binding “map” of issues – subject to further development – that they believe should be considered by the working group. During this discussion, MHARR stressed the overriding importance of affordability (based on the federal manufactured housing law) in relation to any and all technical issues considered. Most particularly, MHARR emphasized – as it has all along – the utmost importance of an affordable purchase price for consumers, given the fact that there are no “life-cycle” energy cost savings for consumers priced out of the manufactured housing market (and the housing market as a whole) by any initial purchase price and unreachable down-payment that are needlessly inflated by unnecessary regulatory compliance costs – especially when all HUD Code manufacturers already provide consumers with a full-range of energy packages on an optional basis as a matter of consumer choice. MHARR also emphasized areas of overlap with the federal manufactured housing law (Title VI), including the necessity that any proposed standards be cost justified and also performance-based, rather than prescriptive to the maximum extent possible.
The issues “map” is, however – and will continue to be — a work in progress as the working group receives and develops additional information.
4. FUTURE MEETING SCHEDULE
Given its mandate to provide a recommendation to DOE by September 30, the working group has scheduled further meetings forAugust 21-22, September 9-10 and 22-23 and October 1-2, 2014, if needed. While it is difficult to see how the working group can develop a consensus proposal in less than 60 days, ASRAC does have the option of extending the life of the working group.
MHARR will continue to fully participate in all working group meetings and will provide updates on these important deliberations as they take place, going forward.
