California Battles The United States Environmental Protection Agency Over the Right to Curb Greenhouse Gas Emissions From Vehicles

By Olivier Theard

December and January were pivotal months in the continuing struggle over implementation of California’s stringent automobile greenhouse gas regulations.  California has tried for some time to impose its limits, adopted as regulations under AB 1493, which would require a 30% reduction in vehicle emissions by 2016, with phased cuts starting in model year 2009.  California’s push to cut vehicle emissions is a major component of its mandate under the Global Warming Solutions Act, which requires a reduction in greenhouse gas emissions to 1990 levels by 2020.  However, recent developments at the federal level have undermined California’s efforts.  After a whirlwind of court decisions and passage of a federal energy bill, the EPA denied California a waiver under the Clean Air Act that would allow California to implement its laws.  California has sued to reverse the decision.

Round One: California Beats Back a Court Challenge By Major Automakers Seeking to Invalidate California’s Regulations on Preemption Grounds

In December, California scored the first victory in the battle over its greenhouse gas regulations when a federal District Court in Fresno rejected automakers’ claims that the regulations were preempted by federal gas mileage standards, promulgated under the Energy Policy and Conservation Act (EPCA).  Central Valley Chrysler-Jeep, Inc. et al. v. James Goldstone, California Air Resources Board, (Dec. 11, 2007, CV F 04-6663).  District Judge Anthony Ishii’s ruling was guided by the U.S. Supreme Court’s recent decision in Massachusetts v. E.P.A., 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007), which held the EPA had the statutory authority under the Clean Air Act to regulate emissions of greenhouse gasses from new automobiles.  Id. at 127 S.Ct. at 1462, 167 L.Ed.2d at 277.  In particular, the U.S. Supreme Court in Massachusetts briefly discussed and rejected an argument by defendant EPA that it could not regulate greenhouse gases because such regulations could conflict with federal gas mileage standards:

EPA finally argues that it cannot regulate carbon dioxide emissions from motor vehicles because doing so would require it to tighten mileage standards, a job (according to the EPA) that Congress has assigned to DOT.  … But that DOT sets mileage standards in no way licenses EPA to shirk its environmental responsibilities. EPA has been charged with protecting the public’s "health" and "welfare," …. a statutory obligation wholly independent of DOT’s mandate to promote energy efficiency.  … The two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.  Massachusetts v. E.P.A., 127 S.Ct. at 1461-1462; 167 L.Ed.2d at 276.

The District Court held that Massachusetts established the broad authority of the EPA to regulate greenhouse gas emissions to protect the public health and welfare, "independent of the effect such regulation may have on fuel efficiency."  The District Court then concluded that the California regulations – if they were granted a Clean Air Act waiver by the EPA – should be considered no differently than EPA-promulgated regulations.  The court held that California’s regulations would be neither precluded nor preempted by EPCA gas mileage standards.  The District Court also rejected the argument that California’s regulations were preempted by foreign policy because they undermined the federal Executive Branch’s efforts to "speak with one voice" in negotiating greenhouse gas agreements with foreign nations.

Based on this decision, it appeared as though California, which had long sought, and even sued for, a Clean Air Act waiver, would finally be granted the waiver and be allowed to implement its law.  But, only one week later, the tide turned.

Round Two: EPA Denies California’s Request For a Waiver, Citing Federal Energy Bill

Just one week after what seemed like a major victory for California, President Bush on December 19 signed a new energy bill which, among other things, mandated gas mileage of 35 miles per gallon in new automobiles by 2020.  Though federal law results in a higher miles-per-gallon average, the law is not as aggressive as California’s and does not achieve emissions cuts as quickly or comprehensively.

On the same day, with the President’s signature on the energy bill barely dry, the EPA issued a decision denying California a Clean Air Act waiver to impose its regulations, contending that the newly-enacted federal energy bill was a better approach for combating global warming.  Explaining the EPA’s decision, EPA administrator Stephen L. Johnson wrote Gov. Arnold Schwarzenegger that the Energy Independence and Security Act of 2007 was a more effective solution.  "I strongly support this national approach to this national challenge which establishes an aggressive standard of 35 miles per gallon for all 50 states, as opposed to 33.8 miles per gallon in California and a patchwork of other states."

Johnson also wrote that under the Clean Air Act, California must have a "need to meet compelling and extraordinary conditions" in order to qualify for a waiver, and that because greenhouse gas emissions were an international phenomenon, California’s regulations did not qualify for a waiver.

EPA’s decision was unprecedented in that California has previously applied for and been granted more than 40 such waivers by the EPA, and had never been denied a waiver.  The EPA’s denial of a Clean Air Act waiver for the AB 1493 regulations affects not just California, but also prevents implementation of similar greenhouse gas emissions laws in more than a dozen other states.

Round 3: California Files a New Lawsuit Seeking to Overturn EPA’s Denial of a Waiver

On Jan. 2, California made good on its promise to sue the EPA over its decision, filing a petition for review in the Ninth Circuit Court of Appeals.  State officials contend the EPA had no legal or technical justification for denying a Clean Air Act waiver for California regulations implementing AB 1493.

California officials have also challenged the EPA’s contention that California did not have a "need to meet compelling and extraordinary conditions," a necessary condition to the granting of a Clean Air Act waiver.  According to California Attorney General Jerry Brown, global warming threatens the state’s Sierra snow pack, which provides one-third of California’s drinking water.  In addition, Brown noted that California has approximately 1,000 miles of coastline and levees that could be affected by rising sea levels.

Though the final outcome of this battle is uncertain, one thing appears clear:  California will not stop fighting.

For more information please contact Olivier F. Theard. Olivier Theard is an associate in the Business Trial Practice Group and the Environmental and Construction Practice Group in the firm’s Los Angeles office.