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October 6, 1989


Gesell, United States District Judge.

The opinion of the court was delivered by: GESELL


 Plaintiffs Gas Appliance Manufacturers Association ("GAMA"), a trade association representing almost 100 percent of U.S. manufacturers of water heaters, and six individual manufacturers attack an Interim Rule issued by the Secretary of Energy. The rule establishes efficiency standards for water heaters to be used in new federal government construction. These requirements are a minuscule part of a comprehensive regulation setting efficiency standards for numerous components of federal buildings. GAMA contends that the water heater regulations mandate a small increase in energy efficiency that is not cost-effective because excessive capital expenses would be required to develop water heaters that comply. In support of this position, GAMA notes that the Secretary wholly failed to address its objections in the rulemaking proceeding and relied on outside studies without stating any reasons for adopting the conclusions of those studies in the face of factual, informed objections. The Secretary disputes GAMA's claims.

 The issues are before the Court on the relevant administrative rulemaking record and cross-motions for summary judgment which have been fully briefed and argued.


 The challenged portion of the Interim Rule, which was published January 30, 1989 at 54 Fed. Reg. 4538, is found in Section 9.3.2 and part of Table 9.3-1. Under this DOE Interim Rule, within 180 days of the July 31, 1989, effective date, federal agencies must design all future federal commercial and multi-family high rise residential buildings in accordance with the standards. The standards are mandatory only for federal buildings, but the Secretary is recommending that states and manufacturers follow suit, and GAMA argues that these other sectors will respond to this recommendation. The potential injury to GAMA's member firms is substantial if the challenged rule is upheld.

 The Court has jurisdiction pursuant to the Administrative Procedure Act, 5 U.S.C. sections 553, 701 et seq. Under the APA, the Court must set aside agency action that is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law. *fn1" The scope of review under this standard is narrow and a court should not substitute its judgment for the agency's; nevertheless, the agency must demonstrate a rational connection between the facts found and the decision made. Motor Vehicle Manufacturers Association v. State Farm Mutual Insurance Co., 463 U.S. 29, 77 L. Ed. 2d 443, 103 S. Ct. 2856 (1983).


 The relevant material facts are not in dispute.

 The DOE Interim Rule carried out a statutory mandate to set minimum performance criteria for most aspects of energy use in federal buildings found in the Energy Conservation Standards For New Buildings Act of 1976, 42 U.S.C. ยง 6833. After some delays and amendments to the Act, DOE moved forward with an effort that culminated in the 1989 Interim Rule.

 The portion of the regulations at issue here set "standby loss requirements" for gas, oil and electric commercial storage water heaters, i.e. efficiency standards for the loss of heat experienced by a water heater while holding heated water not immediately being drawn down.

 Since 1983, the Secretary has relied heavily on standards developed under the auspices of the American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. ("ASHRAE"). The standby loss requirements at issue here were first published in a 1987 Proposed Interim Rule. They were explicitly based on new energy performance standards developed and proposed by the ASHRAE Standing Standard Project Committee ("the ASHRAE committee"), which since 1984 had been conducting research on energy performance standards on a parallel track and in close cooperation with DOE. The new standards under attack in this case are more stringent than previous standards proposed by either DOE or ASHRAE.

 GAMA filed written comments with DOE criticizing the standby loss criteria of the Proposed Interim Rule and testified at one of the three public hearings DOE held on the rule. In its written comments, GAMA stated:

The standby loss requirements proposed in Table 9.3-1 for commercial water heaters are far too stringent. Neither DOE nor ASHRAE has analyzed the practical or economic impact of these proposed standards. GAMA knows of no currently available ...

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