The Department of Energy issued an interim final rule on February 19, 2026, effective immediately, that removes the fuel content factor from the petroleum-equivalency factor used to calculate the fuel economy of electric vehicles for corporate average fuel economy standards. This action follows a September 5, 2025, decision by the United States Court of Appeals for the Eighth Circuit, which vacated a 2024 final rule and held that the fuel content factor exceeded the department's authority under federal law. The rule addresses compliance calculations for light-duty vehicle manufacturers, impacts environmental and energy policy, and invites public comments until March 23, 2026. By eliminating this factor, the department aims to align its methodology with statutory limits while planning additional updates to reflect evolving technology and data.
Historical Background
The petroleum-equivalency factor originated from the Energy Policy and Conservation Act of 1975, which mandated fuel economy standards for vehicles. Under 49 U.S.C. 32904, the Department of Energy determines this factor for electric vehicles, considering elements such as electrical energy efficiency, national generation and transmission efficiencies, energy conservation needs, and usage patterns compared to petroleum-fueled vehicles. The Environmental Protection Agency uses this factor in calculating manufacturers' compliance with standards set by the Department of Transportation's National Highway Traffic Safety Administration.
Early rulemaking included a 1981 final rule establishing initial calculations, followed by a 1994 notice of proposed rulemaking that introduced a scarcity factor to quantify fuel value. After public input, the department shifted in a 1999 proposal to a fuel content factor of 1.0 divided by 0.15, mirroring treatment of non-electric alternative fuel vehicles under 49 U.S.C. 32905. The 2000 final rule adopted this approach, setting the factor at 82,049 watt-hours per gallon for vehicles without petroleum accessories, justified partly as an incentive for electric vehicle production to address scarcity.
A 2021 petition from the Natural Resources Defense Council and Sierra Club prompted a review, leading to a 2023 notice of proposed rulemaking suggesting removal of the fuel content factor. However, the 2024 final rule opted for a phase-out from model years 2027 to 2030, citing benefits for petroleum conservation and vehicle production incentives.
Key Players and Legal Proceedings
The Department of Energy's Office of Critical Minerals and Energy Innovation leads this rulemaking, with Kevin Stork as the contact for inquiries. The Environmental Protection Agency and Department of Transportation play integral roles, as the factor affects their enforcement of corporate average fuel economy standards.
States including Iowa, Arkansas, Florida, Idaho, Kansas, Mississippi, Missouri, Montana, Nebraska, Ohio, Oklahoma, Texas, and Utah, along with the American Free Enterprise Chamber of Commerce, challenged the 2024 rule in Iowa et al. v. Wright, Case No. 24-1721. The Eighth Circuit's opinion, issued September 5, 2025, vacated the rule, ruling that the fuel content factor contradicted the department's long-standing interpretation of 49 U.S.C. 32904(a)(2)(B)(iii) and exceeded statutory bounds. The court noted the factor's flat application did not quantify scarcity or value as required, instead functioning as a broad incentive, rendering other statutory factors redundant.
This decision remanded the matter to the department, prompting the current interim rule. Perspectives vary: petitioners argued the factor unlawfully inflated electric vehicle fuel economy values, potentially distorting market incentives. Supporters of the prior rule, including environmental groups, viewed it as promoting energy conservation through increased electric vehicle adoption.
Analysis of Statutory Authority
The Eighth Circuit emphasized that 49 U.S.C. 32904(a)(2)(B) lists four specific factors for determining the petroleum-equivalency factor, and the fuel content factor's inclusion deviated from these. The court highlighted the department's shift from quantifying scarcity in earlier proposals to a flat incentive in the 2000 and 2024 rules, stating, 'If Congress aimed to empower DOE to incentivize the production of electric vehicles so long as the use of electric vehicles conserved energy overall and scarce fuels in particular, Congress easily could have drafted the statute in that broad manner.' This interpretation underscores limits on agency discretion.
Section 32905, which applies the 1.0/0.15 factor to non-electric alternative fuels, explicitly excludes electric vehicles, directing them instead to section 32904's factors. The department now concludes that adopting this factor for electric vehicles lacks basis in either provision, aligning with the court's holding that it 'lacks statutory authority.'
Implications for Fuel Economy Calculations
Removing the fuel content factor adjusts the petroleum-equivalency factor to 12,307 watt-hours per gallon for vehicles without petroleum accessories and 11,706 for those with them, down from prior values of 82,049 and 73,844. This change uses the gasoline-equivalent energy content of 12,307 watt-hours per gallon, multiplied by accessory and driving pattern factors of 1.0 or 0.9 and 1.0, respectively.
Short-term effects include recalibrated compliance for manufacturers, potentially requiring adjustments to fleet compositions. Long-term, this may influence electric vehicle market dynamics, as lower equivalency values could reduce perceived fuel economy benefits in regulatory contexts. Different viewpoints exist: industry groups may see this as reducing regulatory burdens, while advocates for electrification argue it undervalues electric vehicles' efficiency gains. The rule notes outdated inputs like electricity generation efficiency, signaling forthcoming proposals to update these based on current data.
In the forward-looking conclusion, this interim rule addresses immediate legal compliance by eliminating an unauthorized factor, setting the stage for comprehensive revisions. Potential next steps include a notice of proposed rulemaking to refine remaining elements, incorporating public comments on this rule. Ongoing debates may center on balancing statutory constraints with energy conservation goals, while challenges could arise from integrating updated efficiency data and adapting to technological advancements in electric vehicles. These developments will shape federal policy on vehicle emissions and fuel standards, influencing manufacturers, consumers, and environmental outcomes.
