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USPS Is Facing New Legal Challenges to Its Vehicle Contract and Its Authority to Increase Prices

Environmental groups and a union are suing the Postal Service over its failure to buy more electric vehicles, while mailers are fighting rate hikes.

The U.S. Postal Service is facing challenges on multiple fronts of its plan to modernize the agency, as environmental groups are suing it over its purchase of primarily gas-powered vehicles to replace its aging fleet and mailers are protesting its ability to significantly increase rates. 

USPS failed to fulfill all of its legal obligations in conducting an impact study as required by the National Environmental Policy Act, said the groups Earthjustice, CleanAirNow KC, the Sierra Club and the Center for Biological Diversity in a lawsuit filed in the U.S. Court for the Northern District of California. Separately, the National Resources Defense Council and United Auto Workers filed a lawsuit making similar allegations in the U.S. Court for the Southern District of New York. The groups are pushing USPS to purchase more electric vehicles as it replaces 165,000 delivery trucks and vans. 

Postal leadership has come under fire from activists, Democratic lawmakers and the White House over its plan to purchase primarily internal combustion engine vehicles rather than EVs, so far committing to buying just 20% electric in its initial order of 50,000 trucks. Postmaster General Louis DeJoy has said he is open to buying a larger share of EVs, but cannot afford to do so without an appropriation from Congress. 

Following the White House and Environmental Protection Agency making similar allegations, the lawsuits accused USPS of bypassing its statutory and regulatory requirements to conduct a thorough review of the environmental impacts of its new gas guzzling vehicles. The new trucks, to be manufactured under a contract awarded to Oshkosh Defense, would increase the fuel economy of the postal trucks from 8.2 miles per gallon to just 8.6. Postal officials have noted current vehicles do not have air conditioning, and the vehicles will get 14.7 miles per gallon when the cool air is not running. The new vehicles will also have more cargo space and require fewer trips, USPS has said.

Earthjustice and the other groups called USPS’ process astounding, noting it did not issue a final impact study until after it had already awarded its contract to Oshkosh. They faulted the Postal Service for failing to properly account for long-term savings from EVs, using unreasonably low gas prices in making its calculations, and neglecting factors such as local air quality and environmental justice considerations. The study undercounted greenhouse gas emissions that would result from the vehicles and failed to analyze all pollutants that come from internal combustion engines, they said. 

“As the largest government fleet in the nation, the Postal Service’s improper action will not only needlessly pollute every American community for decades to come,” the activists said, “but it will also cost millions more in taxpayer funds and leave the agency vulnerable to fluctuating fuel prices.”

The groups asked the court to block USPS from moving forward with the Oshkosh contract until it conducts a new impact study that meets all of its legal obligations. The Biden administration previously pushed the Postal Service to do just that, but management said further consideration of its options and impacts would not yield better information or change the agency’s decisions. Leading Democrats in Congress have also called on USPS to pause or cancel its contract until it vows to purchase primarily EVs.  

“The Postal Service’s plan to purchase thousands of combustion mail trucks will not only deliver pollution to every neighborhood in America, it’s also unlawful,” said Adrian Martinez, a senior attorney with Earthjustice. “DeJoy’s environmental process was so rickety and riddled with error that it failed to meet the basic standards of the National Environmental Policy Act.”

The Postal Service has also faced backlash for allowing Oshkosh to build the new vehicles at a new plant in South Carolina, instead of at its existing facilities in Wisconsin. The change will enable the company to use non-union labor as it manufactures the trucks, which some Democratic lawmakers said amounted to a bait-and-switch. 

“With this contract, USPS and Oshkosh Defense abandoned the Wisconsin workers that built the company and failed taxpayers with a sham process to evaluate the environmental and community impacts of these vehicles,” said Ray Curry, UAW’s president. “It’s time to halt production and start the procurement process over.”

Kim Frum, a USPS spokesperson, declined to address the specifics of the lawsuits but said the Postal Service is committed to including EVs in its new fleet. 

“As we have stated repeatedly, we must make fiscally prudent decisions in the needed introduction of a new vehicle fleet,” Frum said. “We will continue to look for opportunities to increase the electrification of our delivery fleet in a responsible manner, consistent with our operating strategy, the deployment of appropriate infrastructure, and our financial condition, which we expect to continue to improve as we pursue our plan.”

In a recent interview, DeJoy said USPS will not see all 50,000 vehicles from its initial order on the road until 2027. After initially promising only 10% of vehicles would be electric, he opted to up the rate for the first batch to 20%. While postal management has suggested it could buy a higher rate of EVs in the future if more funding becomes available, DeJoy said the next purchase is too far away to make a determination. 

“I'm not even thinking about that right now,” he said. 

Rethinking Pricing? 

The Postal Service’s biggest customers, meanwhile, are requesting the agency’s regulator reconsider the authority it provided management in 2020 to raise rates much higher than inflation. DeJoy has tapped into the authority on multiple occasions and called the historically unusual increases a key part of his plan to allow USPS to break even. Earlier this month, USPS announced it would raise rates for regular, First-Class mail by 6.5% and increase them by 8.5% for package services beginning July 10. 

PostCom, an association of large-scale mailers, and the Alliance of Nonprofit Mailers have asked the Postal Regulatory Commission to revoke that authority, noting the Postal Service’s financial outlook has changed dramatically since President Biden signed a reform measure into law. The overhaul is expected to save a combined $107 billion for USPS by eliminating existing debt and taking future liabilities off of its books. The groups previously sought to block the new authority from taking effect, but they lost the case in federal court. 

In response to the mailers’ petition, postal management said the groups were simply trying to relitigate a matter that had already been settled. While USPS is currently enjoying cash reserves of more than $20 billion, the agency said the reform law did not solve all of its fiscal issues and the higher price authority was still necessary. The mailers countered they were seeking a new review in light of new facts, not appealing an old decision. 

The reform law “radically changes the financial obligations of the Postal Service,” the groups said, and PRC “has a duty to revisit its rules when circumstances change.” The commission is set to look back at the pricing mechanism in 2025, but has left the door open to do so before that “if necessary.” 

In his interview, DeJoy said not using the high price increases would amount to a subsidy for large mailers and it would be “negligent” to not take advantage of his authority. 

“Boy, I'd love to be Mr. Great Guy who didn't raise the prices and didn't change a thing, yet all of a sudden had the place profitable,” DeJoy said. “It doesn't get done that way. It doesn't get done without making change.”