US Postal Service hit with three lawsuits over slow-walk approach to EVs

Three lawsuits have been filed to force the US Postal Service (USPS) to review its plan to modernize the largest government-owned fleet in the nation with gasoline-powered vehicles rather than electric vehicles (EVs).

In the lawsuits by state attorneys general, climate groups, and a labor union, the USPS plan was called a missed opportunity to reduce vehicle emissions, support the transition to electrified transportation, and save money on fuel and maintenance costs.

The Next Generation Delivery Vehicle Acquisitions Program record of final decision was published on 23 February, setting the wheels turning on a plan to buy up to 165,000 vehicles over 10 years from Oshkosh Defense, a company with EV manufacturing experience limited to electric fire trucks and other highly specialized applications.

On 24 March, the purchase of 50,000 vehicles from Oshkosh Defense for $2.98 billion was announced, of which 10,019 would be battery EVs. That leaves 80% as internal combustion engines (ICE).

The plan was widely criticized by environmental and climate groups, Democrats in Congress, and EV companies when it was proposed in February 2021 by Republican-appointed Postmaster General William DeJoy as out of step with the nation's priorities and needs. And the chorus continued when the contract was signed.

"In general, USPS acquiring gasoline vehicles is at odds with the executive order from President Biden … for agencies to acquire ZEVs for federal fleets. We are seeing many government agencies trying to comply with the goals. It's perplexing," said Scott Hochberg, Center for Biological Diversity (CBD), in comments to Net-Zero Business Daily. CBD is the plaintiff in one of the lawsuits.

In December 2021, Biden issued an executive order calling for all federal light-duty vehicle acquisitions to be ZEVs by 2027 and all acquisitions to be ZEVs by 2035.

Biden also set a goal of 50% of new cars sold in the US be electric by 2030, and he's pledged to install 500,000 chargers nationwide by that year. The bipartisan infrastructure bill he pushed for and signed in 2021 includes $5 billion for states to install chargers and another $2.5 billion for local grants.

But none of that stopped USPS from moving ahead with a gasoline-powered future. The 50,000 vehicles will be delivered in 2023 through 2027, according to testimony before the US House of Representatives Committee on Oversight and Reform on 6 April by Next Generational Delivery Vehicle Executive Director Victoria Stephen.

Stephen said that $482 million has been authorized for Oshkosh Defense, though she said "only a small fraction" of that has been paid yet. Oshkosh is setting up an assembly line in a facility it is building in South Carolina.

The lawsuits ask federal courts to stop future payments and to force the postal service to conduct a new environmental review before resuming the contract. "Once the postal service does that, it will be abundantly clear they will need to purchase EVs," Hochberg said.

The reluctance on the part of postal service leaders to move aggressively into EVs seems even to have surprised the Postal Service's own Office of the Inspector General. It released a report in March 2022, shortly after the DeJoy plan was finalized, that concluded that the payback period would be 10-17 years to cover the higher initial cost of purchase of EVs and the need for charging infrastructure, depending on various assumptions.

"Our research confirms that electric vehicle technology is generally capable of meeting the Postal Service's needs," the report said. "Electric vehicles are generally more mechanically reliable than gas-powered vehicles and would require less maintenance. Energy costs will be lower for electric vehicles, as using electricity to power a vehicle is cheaper than using gasoline."

Missed opportunity

The size of the postal fleet and the way in which it's used make it ideal for electrification, said Hochberg. At about 212,000 vehicles, the postal service is the largest fleet in the government, and having it lead the way on electrification would send a message about government priorities on climate and health, he said.

But it's about more than messaging, Hochberg added. "These delivery vehicles go to almost every house in America—and, more important, they idle outside houses…[creating] a direct pipeline of tailpipe pollution into every community every day," he said. "These purchases would guarantee that would continue for decades to come."

He called the postal fleet "low-hanging fruit" in transport electrification because the delivery vehicles charge at central locations every night. Analysis by the postal service inspector general found that most drivers run routes that average about 24 miles per day, thus eliminating any issue of range. "This should be ground zero for electric vehicles," he said.

At the same time, the large volume of potential sales would be invaluable for promoting new advances in EV production, said Joe Britton, executive director, Zero Emission Transportation Association (ZETA).

"The entire automotive industry has been constrained by post-pandemic and other supply chain bottlenecks from global instability, but that is why it is so important to take federal action to invest in transportation electrification," Britton told Net-Zero Business Daily. "Our ability to scale production can be accelerated if we have strong market signals proving out durable demand, whether through tax credits or federal buyers like USPS."

Aging fleet

Driving the USPS' decision is a fact on which all parties agree: it's time to update the fleet. The majority of the postal service's approximately 141,000 long-life vehicles (LLVs), ie. mail trucks, were built between 1986 and 1994. Most lack air conditioning, and all lack advanced safety features such as airbags and 360-degree collision cameras—all of which will be installed in the new LLVs.

The old delivery trucks "are now beyond their intended service life and becoming increasingly expensive to operate and maintain," USPS said, with costs averaging at least $5,000 per year per vehicle. That's about $700 million per year just to keep the old vehicles in operation. The postal service's "no action" plan, which it rejected, would be to continue to service those vehicles and not replace those that are too costly to fix.

In addition to air conditioning, improved ergonomics for driver comfort, and safety features, the new generation of LLVs will reduce emissions, the postal service said. The current fleet has an average fuel efficiency of 8.2 mpg. The new fleet is expected to achieve 14.7 mpg when air conditioning is not used and 8.6 mpg when it's operating.

Given the 1.2 billion miles driven per year, the postal service said that the replacement fleet of 90% ICE vehicles and 10% BEVs would emit 309,270 metric tons (mt) of CO2 per year. This would be 258,000 mt/year lower than the "no action" alternative, USPS said.

Those emissions declines continue the agency's own climate activities, said Stephen in her congressional testimony. The service's target is to reduce its GHG emissions by 30% by fiscal year 2025 from its 2008 baseline, and through 2019 it had achieved a 28.3% reduction, she said.

Flawed analysis

While not disputing the benefits of replacing aging LLVs, climate advocates, federal government agencies, and the postal service inspector general seem to dispute almost every other part of the analysis.

The White House Council on Environmental Quality said the final environmental impact statement "warrant[s] further examination" and recommended a supplemental review.

The US Environmental Protection Agency (EPA) sent a comment letter to the postal service when the draft environmental review was published. EPA put the emissions of the 90/10 plan at 975,534 mt of CO2 per year, or more than three times the level that the postal service calculated. Much of this is because it found the postal service overestimated the fuel economy of the new vehicles by not taking into account the impact of vehicle air conditioning use.

"A 10% commitment to clean vehicles, with virtually no fuel efficiency gains for the other 90%, is plainly inconsistent with international, national, and many state greenhouse gas emissions reduction targets, as well as specific national policies to move with deliberate speed toward clean, zero-emitting vehicles," EPA wrote in its comment letter.

One of the key claims raised in the lawsuits references the alleged flaws in USPS' emissions analysis as pointed out by EPA and other analyses.

Proponents of EVs also said in comment letters and the lawsuits that the postal service has used a series of assumptions that unfairly reduce the projected cost of ICE vehicles or raise the cost of EVs.

In coming to the decision to lean on gasoline engines, the postal service said that buying ICE vehicles is cheaper than buying EVs on a total cost of ownership basis over 20 years. In its final environmental impact statement, it said buying and operating 75,000 battery EVs would cost $11.6 billion (in 2020 dollars) over 20 years, whereas buying and operating 75,000 ICE vehicles would cost $9.3 billion, it said.

USPS cited the greater initial expense of the vehicles and the need to install approximately 17,000 charging stations as primary drivers of those higher costs. It said that the elimination of the need to buy gasoline for those vehicles did not recover all of those costs.

"Our statutory mission is to provide universal postal services in a financially self-sufficient manner. Fleet electrification is a near-term opportunity, but not a mission-critical one," Stephen told Congress. "Our ambition can also include electrification, but it should not come at too severe a cost, nor should it interfere with other operational and financial objectives."

But her assertion about comparative costs contradicts analysis published in August 2021 by Atlas Public Policy, an analytics firm, that found 97% of the USPS fleet can be replaced by EVs at a saving of $4.3 billion by 2030 over the lifetime use of the vehicles, primarily thanks to fuel cost savings.

At this moment of high gasoline prices in the US, critics say the balance is tipping even more strongly towards EVs. The postal service used a gasoline price forecast from the US Energy Information Administration (EIA) that was made during the depth of the COVID-19 economic downturn in spring 2020. At the time, the average retail price of gasoline was about $2.19/gal, and EIA projected staying in a range of $2.21-$2.36/gal (in 2020 dollars) through 2030. Currently, the average retail price is $4.20/gal, according to AAA.

In its final notice about the purchase, the postal service rejected comments that it should revise the fuel cost assumption. It said it had conducted a sensitivity analysis of its plan with gasoline starting at $2.70/gal, which didn't affect its overall conclusion in favor of the 90/10 purchase plan.

Beyond the matters of emissions and fuel costs, the multiple lawsuits laid out a litany of errors and omissions in the USPS analysis that violate the basic rules set down in the National Environmental Policy Act (NEPA). The lawsuits say that the analysis ignored recent advances in EV range and underestimated future performance improvements and price reductions.

In essence, the lawsuit by 16 state attorneys general in the US District Court for the Northern District of California, led by California's Rob Bonta, said that USPS fell far short of the "hard look" required under NEPA. They said that courts have required a careful review for purchasing decisions that are "transformational [in] nature … [with] significant environmental and public health implications."

Their primary complaint includes USPS not considering more equal shares of ICE and EV purchases than the 90/10 or 0/100 options. The postal service said that it's open to greater EV purchases as cost and technology improve, as shown by its initial decision that 20% of its first 50,000 LLVs will be electric.

Another set of complaints centers around the performance of vehicles analyzed by the postal service. For example, the postal service said that its relatively heavy vehicles will need a battery of 94 kWh, or more than twice the 45 kWh that's on a typical light-duty vehicle today. That will not only raise the cost of an LLV, but that heavy vehicle will have a range of only 70 miles on a charge, USPS said.

But the Ford E-transit van, which is operating commercially, has weight similar to the LLVs, and it's run by a 68 kWh battery and has a range of 126 miles on a charge, according to the company.

The lawsuit from environmental groups said this performance also undermines the postal service's claim that 6% of its routes, approximately 12,500 of them, cannot be serviced by EVs because they are 70 miles or more. The postal service's claim doesn't jibe with its Office of Inspector General's findings either, which concluded that only 1.5% of postal routes are longer than 70 miles, and that even most of the longer routes can be served by EVs.

For real-world evidence that the postal service's outlook is wrong, ZETA's Britton pointed to private delivery fleets. "The Postal Service's main competitors—including UPS, FedEx, Amazon, DHL, Walmart, and more—are all electrifying because they understand that zero-emission delivery fleet vehicles are good for public health, the environment, and their bottom lines," Britton said.

In testimony before the House Oversight Committee, Britton said UPS has ordered 10,000 delivery vans from Arrival, and DHL has electrified 20% of its fleet and says it's on its way to a 70% electric fleet by 2025.

Outlook

Even as courts consider whether to hear the complaints, it's possible that other factors will influence the postal service's actions. Already, pressure seems to have moved it from its initial 10% EV plan to 20% in its first 50,000-vehicle purchase.

Second, a change in federal law has relieved the postal service of much of the financial pressure that has limited its infrastructure spending for nearly two decades. The service's massive debt was cited numerous times by officials as a reason for preferring gasoline vehicles (if one grants that they are less costly to own and operate). In March, Biden signed the Postal Service Reform Act, which will save the service an estimated $50 billion over 10 years by removing a requirement put in place by the Republican-controlled Congress in 2006 that the service pre-fund all retiree benefits, unlike every other federal agency.

Given that financial lifeline, Britton told Congress that he believes "USPS should be in a much stronger position now to make a short-term investment that will lead to long-term cost savings—and that will dramatically benefit the American people."

Third, Democrats are interested in providing more funding for USPS to get into the EV game. The version of the Build Back Better bill passed in the House in November included $2.5 billion for USPS to buy electric vehicles and another $3.4 billion for charging infrastructure at postal buildings. While Build Back Better died in the US Senate in December, if it's revived, those funds could again be available.

Posted 03 May 2022 by Kevin Adler, Chief Editor

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.