White House Panel to Call for President to Push for Repeal of 1975 Regulations on Fuel Economy

A top-level White House advisory committee is preparing to urge President Reagan to seek drastic reduction of the nation’s controversial fuel economy standards for autos and light trucks, including outright repeal of the 1975 regulations, officials say.

The fuel regulations, long a prime target for Administration deregulators, were at the top of the agenda this week at a meeting of the Presidential Task Force on Regulatory Relief, according to C. Bowden Gray, counsel to the group.

The group, which was revived this month after several years in limbo, made no specific proposal regarding the fuel economy standards, officials said. Instead, it prepared a list of legislative options, ranging from minor reform to outright repeal, to be presented to Reagan next month for his decision.

‘Sentiment for Repeal’

And “there was strong sentiment for repeal” among task force members, Gray said in an interview.

Whether the Administration eventually decides to push for repeal “is up to the President to decide,” Gray said, conceding that there remains a strong residue of support for the regulations. But he rejected the notion that the economy standards are as untouchable as they were during the 1970s.

“I wouldn’t say that they are a sacred cow,” he said. “We are told more than 100 senators and congressmen favor modification of the regulations, and I’ve seen a four-inch-thick book compiled of editorials favoring repeal or modification. I’m not saying it will be easy, but at least we’re talking about it seriously at a high level for the first time.”

The task force includes among its members Atty. Gen. Edwin Meese III, Commerce Secretary Malcolm Baldrige, Budget Director James C. Miller III and the President’s chief economic adviser, Beryl W. Sprinkel. Treasury Secretary James A. Baker III and Labor Secretary William E. Brock III are also members but did not attend this week’s meeting.

Legacy of Energy Crisis

The fuel economy regulations date to the energy crisis of the mid-1970s, when U.S. fuel prices and supplies were regulated and when fuel shortages and spiraling prices were assumed to be inevitable. They were designed to force the auto makers, under pain of substantial fines, to meet a strict mile-per-gallon fuel economy schedule originally designed to double car mileage by 1985.

But, as fuel prices have plummeted and supplies have surged in recent years, many Administration officials and private economists alike have come to see the regulations as a market-distorting anachronism.

After the Administration deregulated oil prices early in its first term, Gray pointed out, auto makers found themselves unable to fill out their fleets with higher-profit large cars without paying fines of $5 a car for each one-tenth of a mile that each car exceeded the manufacturer’s fleet economy quota for the year.

That, in turn, put Detroit auto makers at an even greater disadvantage against the Japanese, who had come to dominate the market for the smaller, lighter cars that the fuel economy standards virtually forced the American manufacturers to build.

Standards Eased Twice

Even without any Administration move to dismantle the legislation, the Transportation Department’s National Highway Traffic Safety Administration twice has eased the original standards. Last year, it reduced the 1986 target from 27.5 m.p.g. to 26 m.p.g. and early in October extended the 26-m.p.g. standard through 1988.

By some estimates, that action this year saved Ford and General Motors, the U.S. auto makers most dependent on larger autos, about $410 million in fines. But Chrysler, which shifted to a small-car strategy after its near bankruptcy and federal bailout in the late 1970s, stood to gain nothing through those moves, and Chrysler Chairman Lee A. Iacocca has emerged as a vociferous champion of the regulations.

Iacocca denounced the October relaxation of the mileage standards as “a mockery of the law,” and Chrysler has declared: “Throwing out fuel economy standards . . . means we can’t read history. We are setting ourselves up for a third oil shock. It also means the end of America’s energy policy.”

GM and Ford thought otherwise, however. In a company statement, GM said that the rule had pushed U.S. auto makers “away from their traditional big car base” and added: “When the . . . law was passed a decade ago, it was not expected that it would favor Japanese manufacturers who have specialized in small cars with high average fuel economy.”

Ford Also Pleased

Ford also said it was pleased that the task force would recommend that Congress be urged to “address the inequities” in the fuel economy legislation. “Certainly, this is an issue that should be debated constructively to see whether the best interests of this country are being served by its continuation,” the company said in a statement.

The task force was originally constituted in January, 1981, to look into ways that the newly installed Reagan Administration could streamline federal regulation. It prepared and delivered to Reagan a report in August, 1983, and was then dissolved.

But, in the wake of the election last November, Gray said, Vice President George Bush urged Reagan to revive the task force and its mandate as the Administration entered its final two years in search of new goals.