The Nickel Report

Since President Trump’s election, his Administration has emphasized cooperative federalism and has opened the door for more state responsibility.  California is walking through that door, and has positioned itself, according to its elected officials, at the vanguard of the so-called “resistance” to the Administration and its policies, real and perceived.  This is particularly clear on environmental, energy, and natural resource matters.  Last week illustrates the growing divide between California and the federal government in these areas.

On June 1, President Trump announced that the United States would withdraw from the Paris Climate Accord.  Governor Jerry Brown (D) described President Trump’s decision as “insane” and “deviant.”  Two days later, Governor Brown landed in Beijing, China, with a stated goal of carrying on the United States’ commitments that were made at Paris.  On June 6, Governor Brown and the Chinese Minister of Science and Technology signed a Memorandum of Understanding on advancing innovation and development of, and investment in, low-carbon energy resources and clean technologies, and to develop a California-China Clean Technology Partnership.

California already has a precedent setting “cap-and-trade” program designed to reduce the emission of greenhouse gases from multiple sources.  The program is implemented by the California Air Resources Board (CARB) and is already linked with other market based programs in other states and the Province of Quebec.  In a sense of déjà vu, the existing program was put in place in 2006, in part as California’s response to President George W. Bush’s abandonment of the Kyoto Protocol—the precursor to Paris—and opposition to mandatory caps on greenhouse gas emissions.  In April, in a win for the state, the cap-and-trade program was upheld by the California Court of Appeal Third Appellate District in a 2-1 decision.  The challenge to the program, however, appears to be headed to the California Supreme Court.  The California legislature is also working to extend the cap-and-trade program beyond 2020.

On the day of President Trump’s Paris announcement, Governor Brown announced an agreement with the governors of New York and Washington to create the U.S. Climate Alliance.  This alliance of states intends to pursue state policies to achieve the United States’ goal of reducing greenhouse gas emissions by 26-28 percent from 2005 levels and meeting or exceeding the targets of the federal Clean Power Plan. An additional 10 states and territories have joined the alliance as of June 6, accounting for almost 20 percent of the United States’ greenhouse gas emissions.  Governor Brown’s recent comments also indicate that California may attempt to integrate its cap-and-trade program with China’s emerging greenhouse gas trading markets.

Recent legislative actions signals that California is poised to push the limits of environmental regulation even further.  The existing state target mandates that 50 percent of the state’s energy be from renewable sources by 2030.  The State Senate passed Senate Bill 100 (SB 100) last week, which would move up the deadline for the 50 percent target to 2026 and establish a target of 100 percent renewable energy by 2045.  Earlier this year, records were broken when favorable conditions resulted in brief windows where the state’s energy demand was being met with over 50 percent renewable energy, which will put wind into the sails of legislation like SB 100.  Energy storage—for when the wind doesn’t blow and the sun doesn’t shine—is still one of the primary limitations to increasing the renewable mandates.  Backers of these more stringent renewable targets are betting on innovation and new technologies rising to the challenge.  There may be evidence of progress in this area as new storage projects come on-line:  current projects underway in 2017 are anticipated to add 77.5 megawatts of energy storage to California’s energy grid, which can help built resiliency into the grid by addressing renewable energy output variability, temporal mismatch between generation and demand, and the uncertainty regarding weather forecasts.

California’s recent environmental actions extend beyond climate change.  Senate Bill 49 (SB 49)—a potentially consequential measure—passed the State Senate last week.  SB 49 is intended by legislators to adopt, at the state level, existing federal environmental standards under the federal Clean Water Act, Clean Air Act, Safe Drinking Water Act, Endangered Species Act, and “other federal laws.”  Specifically, to the extent that state laws do not already codify pre-2017 federal standards, SB 49 would require state agencies to establish such standards.

The State Senate’s findings supporting SB 49 identify the law’s purpose and target:  that “Beginning in 2017, a new presidential administration and United States Congress will be in control of one party that has signaled a series of direct challenges to these federal laws and the protections they provide, as well as to the underlying science that makes these protections necessary, and to the rights of the states to protect their own environment, natural resources, and public health as they see fit.  These measures safeguard public health and ensure we continue to make policy based on the best available science, not ‘alternative facts’ or polluter propaganda.”   The Trump Administration has not to date finalized regulatory actions weakening the standards in the federal environmental laws identified above.  However, the United States Congress has rescinded several Obama Administration environmental regulations under the Congressional Review Act.

There are numerous legal and practical questions about how SB 49 would be implemented by California regulatory agencies as they seek to incorporate rules designed and intended for nationwide application.  Even more troublesome, SB 49 would create a new right for private citizens to bring public interest lawsuits in state court in response to violations of these incorporated federal standards.  As a result, SB 49 could result in a wave of state court litigation by third parties.

There are additional fights looming between the federal government and California, ranging from the status of EPA’s Clean Air Act waiver for mobile source standards to attempts by the legislature to limit the federal government’s ability to sell federal land within California.

California has long been the trend setter with environmental laws and policies in the United States.  California has a disproportionate influence on domestic environmental policy due to the size of its economy.  California recently passed France as the world’s sixth-largest economy.  Decisions made in California will reverberate around the country and the world and, in many cases, be replicated.  Regulated entities operating inside and outside of California need to pay attention to what is happening in Sacramento and prepare for the practical implications of the fallout from the looming battles between California and the Trump Administration on environmental, energy, and natural resource matters.