Federal Court Holds U.S. Government Exceeded its Rulemaking Authority, Strikes Down Requirement that States Monitor and Reduce Highway Tailpipe Emissions

In March, a federal district court in Texas struck down the U.S. Department of Transportation, Federal Highway Administration’s (FHWA) most recent attempt to force states to regulate greenhouse gas tailpipe emissions on the highway. The court examined whether the federal agency’s statutory authority to require states to monitor highway “performance” included a go-ahead to require states to assess tailpipe emissions. This Biden-era emissions rule was the most recent iteration of multiple administrations’ back-and-forth on the subject. The state of Texas challenged FHWA’s rule as beyond the scope of its authority to regulate states’ actions impacting highway “performance.” In Texas v. U.S. Department of Transportation,[1] the Northern District of Texas agreed, vacating the rules as agency action beyond statutory authority. This case stands as an archetypal example of challenging unwanted federal rules on the basic principle that federal agencies can only act with authority from Congress.

Congress authorized DOT to assess states’ use of federal highway funds.

Federal statutes direct DOT to create the National Highway Performance Program, in part, to support the national highway system and ensure that states use federal highway funds toward that end. See 23 U.S.C. § 119(b); cf. 23 U.S.C. § 150(a) (noting goal of providing “means to the most efficient investment of Federal transportation funds”). Congress empowered DOT (who delegated this authority to FHWA) to “establish . . . measures for States to assess . . . the performance” of the National Highway System. See 23 U.S.C. § 150(c)(1), § 150(c)(3)(A)(ii)(IV)-(V). FHWA cited § 150(c)’s grant of authority to measure “performance” in adopting its environmental rules.

The DOT, under multiple administrations, flip-flopped on the meaning of highway system “performance.”

First, the Obama-era DOT/FHWA promulgated the first “performance” rules under the statute, effective in January 2017, which required states and localities to establish tailpipe CO2 emissions targets and report on their progress toward those goals. See National Performance Management Measures; Assessing Performance of the National Highway System, Freight Movement on the Interstate System, and Congestion Mitigation and Air Quality Improvement Program, 82 Fed. Reg. 5886, 5974, 5980-81 (Jan. 18, 2017). The agency justified its rules by interpreting “performance” to include “environmental performance” based on the fact that the transportation statutes “make the environment an integral part of the Federal-aid Highway Program.” Id. at 5995. 

The Trump administration reversed course shortly thereafter and repealed the tailpipe emissions rules. See National Performance Management Measures; Assessing Performance of the National Highway System, Freight Movement on the Interstate System, and Congestion Mitigation and Air Quality Improvement Program, 83 Fed. Reg. 24,920, 24,922-23 (May 31, 2018). DOT re-interpreted § 150(c)(3) more narrowly and determined that “performance” did not include environmental factors. See id. at 24,924.

Finally, the current administration reversed course again, reimplementing a tailpipe emissions measurement requirement for states. See National Performance Management Measures; Assessing Performance of the National Highway System, Greenhouse Gas Emissions Measure, 88 Fed. Reg. 85,364 (Dec. 7, 2023). This rule was the subject of Texas’s court challenge.

A federal district court agrees with Texas and concludes that Congress did not authorize DOT to implement environmental performance standards.

In December 2023, the state of Texas sued U.S. DOT, FHWA, and related entities to undo the most recent rule. See Texas v. USDOT, Complaint & Petition for Review (ECF 1), No. 5:23-CV-304-H (Dec. 19, 2023). Texas claimed, among other things, that the agency acted beyond the scope of its statutory authority when it interpreted § 150(c)’s use of “performance” to include environmental performance.

The court ultimately agreed, vacating the tailpipe emissions rule. The court noted that, while Congress sought to give DOT the power to keep tabs on states’ use of highway funds, it “did not authorize the DOT to create any [state] performance measure it deemed appropriate.” Texas v. USDOT, 2024 WL 1337375, at *8. Instead, Congress expressly limited DOT, and “performance” does not include how much greenhouse gases are produced by highway vehicles:

In sum, the statutory text indicates at every turn that measuring the “performance of the Interstate System ... [and] the National Highway System” does not authorize measures of environmental performance. The definitions of “performance,” “National Highway System,” and “Interstate System” instruct that it is the roadways' efficiency and reliability in facilitating travel, commerce, and the national defense that may be measured. The associated measures in Section 150(c)(3) support this conclusion by focusing on the systems' physical infrastructure. The DOT’s position, in contrast, would render other portions of the statute superfluous, and the national goal on which the DOT relies so heavily provides more support for the plaintiffs' position. Likewise, the statutory context consistently instructs the Court to reject the DOT’s expansive interpretation. Thus, the Court concludes that the DOT’s GHG emission measure is unauthorized by the statute.

Id. at *19.

The takeaway? Practitioners and affected persons alike should examine an agency’s claimed statutory authority before challenging a federal rule.

Texas v. USDOT reminds that federal agencies can only act with congressional authority; the scope of their power is not without limits. Agencies, in their rulemaking notices, should cite the statute(s) the agency relied upon as authority for their proposed rules and regulate only within that authority. An entity seeking to challenge a rule must carefully review and analyze the statute purportedly authorizing the agency’s action. If the action is beyond the scope of that statute, a challenger would be well-advised to raise this legal deficiency during the public comment period, as Texas did, and again in a court challenge.

At the point where a federal agency publishes a notice of proposed rulemaking, the agency often has made up its mind as to the wisdom, policy-wise, of adopting the proposed rule. Thus, challengers’ policy perspectives, while important for public rulemaking, will frequently be less persuasive to agency decisionmakers than legal arguments like those the court relied on in Texas v. USDOT. And, as demonstrated in that case, courts are much more willing to overturn federal rulemakings based on legal infirmities than policy-based agency judgments.

For more information on challenging agency action, please contact CullenLaw attorneys at info@cullenlaw.com.

[1] No. 5:23-CV-304-H, 2024 WL 1337375 (Mar. 27, 2024).