Three Legal Takeaways from Fifth Circuit Decision Scrubbing Away DOE Rules on Appliance Efficiency

While constitutional law sometimes seems high-drama, mundane details like these can sometimes be outcome determinative, as they are in the recent Fifth Circuit decision styled State of Louisiana v. United States Department of Energy. This case reviews a Biden Administration attempt to repeal the establishment of US Department of Energy (DOE) energy efficiency rules applicable only to dishwashers and laundry machines whose cycles last less than one hour.

Below, we walk through the procedures which led up to the decision throwing out DOE’s repeal of this rule, how the facts of the case drove the Fifth Circuit’s conclusion, and outline three big-picture takeaways applicable to the broader regulated community:

• Regulatory challenges often begin and end with underlying statutes;
• Regulatory actions need to meaningfully engage with language in prior rulemakings; and
• Agencies need to evaluate options short of total repeal of statutes even where they question the statutory basis for the underlying regulations.

We break down these issues in greater detail below.

What’s at Stake?

In 2018, the Competitive Enterprise Institute (CEI) submitted a petition for rulemaking to DOE asking it to define a new class of dishwashers under the Energy Policy and Conservation Act of 1975. CEI proposed that the new class should comprise dishwashers with a normal cycle duration of under an hour, anticipating that this new class might offer better performance than currently available machines which are subject to energy and water restrictions applicable to dishwashers with wash cycles lasting longer than one hour. The next year, DOE agreed with CEI and began a rulemaking under the federal Administrative Procedure Act (APA) that established a new product class for dishwashers, and then took similar actions related to laundry machines. DOE justified the regulations on the grounds of its “recognition of cycle time as a valuable consumer utility.” These rulemakings were finalized in 2020.

Upon taking office, President Biden issued an Executive Order directing DOE to reconsider rules including these 2020 rulemakings affecting dishwashers and laundry machines. In 2021, the Biden Administration began a rulemaking to finalize the repeal of these rules. When these rulemakings became final in 2022, they were challenged by a group of states.

Breaking Down the Fifth Circuit’s Decision

The Fifth Circuit’s decision curiously begins with skepticism that DOE had any authority to regulate water efficiency in dishwashers and clothes washers. As part of its repeal efforts, DOE stated that the repeal was intended to promote “water conservation” by regulating “water use.” The court notes that while the relevant statute, the Energy Policy and Conservation Act of 1975 (EPCA), permits DOE to regulate “energy use” for machines like dishwashers and laundry machines, EPCA limits DOE’s regulation of “water use” regarding four specific products: showerheads, faucets, water closets, and urinals.

Importantly, the Fifth Circuit does not view these products as using “energy” — defined by EPCA as “electricity[] or fossil fuels” or “other fuels” — the way laundry machines and dishwashers do. “[T]he statute gave DOE power to regulate energy use for energy-using appliances (like dishwashers and washing machines) or water use for non-energy-using appliances (like showerheads, faucets, water closets, and urinals). No part of that text indicates Congress gave DOE power to regulate water use for energy-using appliances (like dishwashers and washing machines).” Accordingly, if the Fifth Circuit had been asked to reach the issue, the court would have found the original rules arbitrary and capricious as being outside of DOE’s jurisdiction.

Second, the Fifth Circuit posited that DOE’s efficiency standards “make Americans use more energy and more water for the simple reason that purportedly ‘energy efficient’ appliances do not work.” Related to dishwashers, the court supported this position through comment responses from the 2020 rule noting that “many consumers end up running their dishwasher multiple times to get dishes clean.” The court noted that the repeal rule failed to address these and similar concerns about laundry machines; “bare acknowledgment is no substitute for reasoned consideration.”

Next, the Fifth Circuit accepted the states’ argument that the Biden Administration’s repeal of the rule was arbitrary and capricious because DOE failed to assess the question of whether a one-hour cycle time for dishwashers and laundry machines (so-called “short cycle time”) is valuable to consumers, something it had acknowledged in its 2020 rulemakings. Instead of engaging with whether cycle time mattered, DOE noted that consumers could bypass the cycle time using “unregulated” appliance settings DOE intentionally did not validate which allowed for “quick” washes.

Finally, the Fifth Circuit determined that the repeal rules were invalid because DOE failed to consider options to save the rules short of repeal. In rescinding a prior action, “an agency cannot simply brand it illegal and move on.” Instead, agencies are required to evaluate alternatives other than full repeal. DOE did not do so here even though alternatives like promulgating (permitted) energy conservation standards for these appliances existed. 

Legal Takeaways

Three big-picture administrative law takeaways:

• Regulatory analysis begins, and often ends, with statutory text. Constitutionally, statutes drive regulations. The concept of administrative deference — i.e., that the courts should defer to relevant agencies’ interpretations of ambiguous statutes they are tasked to administer — is a key component to the modern regulatory state. But, statutory ambiguity is needed for administrative deference to take root. (The US Supreme Court is evaluating administrative deference this term in a paired set of cases – Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept. of Commerce. Our detailed discussion of this issue is here.)
• Regulatory actions need to engage with language used in related rulemakings. While part of the Fifth Circuit’s decision may be rooted in a subjective belief that “energy efficient” appliances don’t work, DOE’s failure to engage with appliance performance as a relevant criterion provided the procedural hook for the court to use to overturn the repeal rule.
• Where agencies want to repeal regulations, meaningful alternatives analysis is required. Finally, the Biden Administration’s attempts to repeal these rules began on its first day in office when it – like administrations before it – sought to undo many actions by the Trump Administration. When the rulemaking began, DOE continued this approach, seeking a “reset button” when it could potentially have accomplished similar objectives through a more tailored and reasoned approach.

One final note on state standing: like many cases, the Fifth Circuit’s inquiry begins with an evaluation of whether the states had standing to challenge the rule. Here, the court found that the states had standing based in part on declarations submitted by state employees showing that they preferred appliances with shorter operating cycles, such as would be permitted without the repeal rule. Given that this link is closer than in cases like Biden v. Nebraska where the Supreme Court found state standing based on injuries to a state-created entity, this decision comes as no surprise. (See our discussion here.)

Members of the firm’s Environmental & Energy & Cleantech groups regularly monitor state and federal regulations affecting the energy space.