EPA: Transportation Dept Underestimated Gas Price Rise

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The Environmental Protection Agency says another arm of the Bush administration may be low-balling the economic benefits of increasing fuel economy standards for cars and trucks.

Echoing criticism previously voiced by Democrats and environmentalists, the EPA said in comments filed with the Transportation Department that the department would have been better off using higher estimates for future gasoline prices when it proposed increasing the average fuel economy of all vehicles to 31.6 miles per gallon by 2015.

The proposed fuel economy increase was based in part on estimates that gas would range from $2.04 a gallon to $3.37 a gallon, averaging $2.42 a gallon in 2016.

"EPA has several concerns with the methodology used to determine the relative benefits and costs of the alternatives analyzed," Susan Bromm, director of EPA's Office of Federal Activities, said in a letter last month to DOT.

Gas prices were already over $3 a gallon when Transportation Secretary Mary Peters unveiled the increase in fuel economy standards in April. The national average price for unleaded gasoline peaked in mid-July at $4.11 and was down to $3.68 on Tuesday, according to the AAA.

Congress last year required the National Highway Traffic Safety Administration — an agency within DOT — to set mileage standards at the "maximum feasible" level each year, reaching a minimum of 35 mpg by 2020, a 40 percent increase over current standards.

If the highway administration uses a higher estimate for gas prices in its analysis, it could make a more cost-effective case for raising the requirements beyond 31.6 mpg by 2015.

Gas prices estimated by NHTSA "are more optimistic than I think any reasonable person would be in this era," said Frank O'Donnell, president of Clean Air Watch.

The EPA also expressed concern that the Transportation Department placed too low a value on the societal benefits of reducing greenhouse gas emissions from cars and trucks by increasing mileage performance.

The highway administration placed a value of $7 a ton on the domestic social costs to the United States of greenhouse gas emissions, failing to consider the global costs of climate change, the EPA said.

Administration spokesman Rae Tyson declined to say if the agency plans to change its economic assumptions.

"We will take all comments into account as we draft the final fuel economy regulation," Tyson said.