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Obama Directs Environmental Protection Agency To Reconsider Bush Administration Denial Of California Clean Air Act Waiver Request

Beveridge & Diamond, P.C. - Client Alert, January 27, 2009

In his first significant action on global warming, President Barack Obama yesterday issued two executive orders aimed at improving the fuel efficiency of passenger vehicles.  The first directed the Environmental Protection Agency (EPA) to reconsider his predecessor’s denial of California’s application for a preemption waiver from the Clean Air Act (CAA) to enable the state to set strict automobile emission and fuel efficiency standards.  The second directed the U.S. Department of Transportation (DOT) to finalize this Spring its rulemaking to implement 2007 legislation to develop tighter corporate average fuel economy (CAFE) standards for 2011.  The second order also directed DOT to undertake a separate rulemaking process in later years that will consider other legal, scientific and technological issues related to climate change.

Obama’s directive to EPA quickly fulfilled a major campaign pledge.  Last March, after not acting on California’s waiver request for several years, former EPA Administrator Stephen Johnson denied the request, concluding that Section 209(b)(1)(B) of the CAA was not intended to allow individual states to set vehicle emission standards to address global climate change.  California quickly filed a legal challenge to that decision which is now pending in the U.S. Court of Appeals for the District of Columbia (California v. E.P.A., appeal docketed, No. 08-1178 (D.C. Cir., May 5, 2008).  The day after President Obama was inaugurated, California Governor Arnold Schwarzenegger asked the Obama administration to reconsider the EPA’s decision denying the waiver.  A copy of the Governor’s letter can be accessed here.  California’s tailpipe emission regulations themselves are the subject of another lawsuit brought by the auto industry against the state in a U.S. district court in California (Central Valley Chrysler-Jeep v. Witherspoon, 2007 WL 135688 (E.D. Cal. 2007)).

EPA’s denial of the waiver has prevented California from implementing its 2002 legislation requiring a 30 percent reduction in greenhouse gas (GHG) emissions from passenger cars and light-duty trucks by 2016.  As GHG emissions from cars and trucks account for some 40% of the state’s total GHG emissions, the so-called “tailpipe emission standards” are a key component of the state’s effort to reduce its GHG emissions to 1990 levels by 2020, as required under the California Global Warming Solutions Act of 2006 (AB 32).  The California Air Resources Board (CARB), the state agency implementing AB 32, has estimated that the new rules would cut GHG emissions from passenger vehicles 18 percent by 2020, and 27 percent by 2030.

At least 13 other states plan to implement California’s tailpipe emission standards if the waiver is granted.  The 13 states that have adopted California's standards but, like California, cannot enforce them absent an EPA waiver are Arizona, Connecticut, Maine, Maryland, Massachusetts New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington.  Other states, including Florida, Iowa, North Carolina and Utah, are considering adoption of the standards.

To be clear, Obama’s executive order does not require EPA to grant California’s waiver request.  Rather, it requires EPA to undertake a legal process to reconsider the denial of the waiver.  This raises several legal issues.

First, while policies change with administrations, it’s a little more difficult for legal analyses to change.  For EPA to reverse its prior decision to deny the waiver request, it will have to develop a legal rationale that explains if not accommodates such a 180 degree shift.  The politics have grabbed most of the attention, but there are substantive legal issues involved.  Most notably, Section 209(b)(1) of the CAA provides that the waiver must be denied if EPA finds that the State doesn’t need separate standards in order “to meet compelling and extraordinary conditions.”  While climate change is a compelling and extraordinary condition, it is difficult to contend that global warming is unique to California.  This issue will have to be resolved, especially if the other states that wish to adopt California’s tailpipe emission standards are to be able to do so if EPA reverses course and grants California its waiver.

Second, California’s pending lawsuit challenging the waiver denial cannot be ignored.  The case has been briefed, and as a matter of jurisdiction, the decision to dismiss or remand it to the EPA at this point lies with the Court of Appeals.  Even if the EPA and the State were to decide to withdraw the case, they are not the only parties to the action, as the auto industry has been granted intervenor party status and will be heard on this issue as well.

Third, the public cannot be shut-out of EPA’s reconsideration process.  Concurrent with Governor Schwarzenegger’s letter to Obama, CARB Chair Mary Nichols sent a letter to the new EPA Administrator, Lisa Jackson, suggesting EPA skip a public hearing because the issue was already extensively noticed and heard, and conduct only a “short supplemental comment period” before granting the state’s waiver request.  (A copy of CARB’s letter can be accessed here.  However, EPA may lack the authority to do that, as Section 209(b)(1) of the CAA requires “notice and opportunity for public hearing.”  There will be opportunities to participate in EPA’s reconsideration process, though it is yet not clear what they will be.

One of the issues that is sure to be addressed in the public comments is the contention that it is improper under the CAA as well as unsound economic and environmental policy to allow a “patchwork” of differing state emission standards, and that instead there should be a single federal standard.  As noted above, this was one of the primary bases for the EPA’s decision to deny the waiver, citing the 2007 federal law to update the CAFE standards setting national fleet average emission requirements.  President Obama’s second executive order appears to have been aimed at addressing that argument.  It directed the DOT to accelerate work in drafting more stringent federal fuel efficiency standards, as required by the 2007 law.  The fuel efficiency standard is expected to be finalized by this spring and will require more stringent fleet efficiency standards by 2011 (impacting the industry beginning with the 2012 auto models), and meet the 2007 law’s requirement that fleets average 35 mpg by 2020.  Last year DOT proposed a rule that would phase-in this goal by requiring a 25% increase in the CAFE standards to an average of 31.6 mpg by 2015.

President Obama’s two orders set the stage for a major policy debate at the federal level.  The two strands of this policy debate — which will be played-out first in the comments on California’s CAA waiver request — are first, the neo-federalism issues that arise when states address climate change differently and whether there needs to a national standard instead; and second, what those national CAFE standards should be.  Both involve significant legal and scientific issues as well as economic and environmental policy questions.

Many environmentalists point to the 2007 U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497, which affirmed EPA’s power to regulate global warming pollution from motor vehicles, and urge that these issues be resolved by EPA promulgating uniform national emission standards that match California’s.  In one of her first acts on the job, EPA Administrator Lisa Jackson sent an email to all EPA employees last Friday, January 23, in which she outlined her five major priorities.  “Reducing greenhouse gas emissions” was a the top of the list, and she stated that her EPA “will move ahead to comply with the Supreme Court's decision recognizing EPA's obligation to address climate change under the Clean Air Act.”  It bears mention that thus far the courts that have addressed this issue have concluded that Massachusetts v. EPA does support the efforts by individual states to adopt tailpipe emission standards to address climate change — including the California court considering the auto industry’s challenge to California’s 2002 law.  In Central Valley Chrysler-Jeep v. Witherspoon, 2007 WL 135688 (E.D. Cal. 2007), the California court upheld California’s 2002 tailpipe regulations and disregarded the plaintiff automakers’ preemption arguments.

If EPA grants the state’s request for an abbreviated comment period and then quickly grants the waiver, CARB has indicated that California’s standards could be implemented as soon as this spring.  AB 32 establishes an aggressive implementation schedule, and thus CARB is eager to implement the tailpipe emission standards.  There is political momentum both to grant California’s waiver request and to increase the CAFE standards soon.  However, the outcome is not certain.  The only conclusion to be drawn at this point is that all concerned should monitor developments closely in the months ahead, and be ready to participate in the upcoming comment period and/or public hearing on EPA’s reconsideration of California’s waiver request.

For more information, please contact Nico van Aelstyn at nvanaelstyn@bdlaw.com.