California’s Waiver Request Under the Clean Air Act to Control Greenhouse Gases From Motor Vehicles

Congressional research reportFeb 10, 2009

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Prepared for Members and Committees of Congress

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California has adopted regulations requiring new motor vehicles to reduce emissions of

greenhouse gases (GHGs), beginning in model year 2009. The Clean Air Act (CAA) generally

preempts states from adopting their own emission standards for mobile sources. However, the act

allows such standards in California, if the state obtains a waiver of CAA preemption from EPA.

California requested this waiver in 2005, but EPA took until December 19, 2007, to decide that it

would deny the request. On that day, EPA Administrator Stephen Johnson wrote California

Governor Schwarzenegger to say, “I have decided that EPA will be denying the waiver and have

instructed my staff to draft appropriate documents setting forth the rationale for this denial in

further detail.... ” According to press reports, the decision was taken against the unanimous advice

of the agency’s technical and legal staffs. The Administrator published a decision document

denying the waiver in the March 6, 2008 Federal Register.

Following EPA’s denial of the waiver request, California and environmental groups petitioned for

review in the D.C. Circuit, with 18 other states intervening on California’s side. The interest of

the intervening states derives from the fact that under the CAA, other states may adopt motor

vehicle emission standards identical to California’s and avoid CAA preemption if California is

granted a waiver. Fourteen states and the District of Columbia have already adopted such

regulations.

This report reviews the nature of EPA’s, California’s, and other states’ authority to regulate

emissions from mobile sources, the applicability of that authority to GHGs, and issues related to

the California waiver request. To obtain a waiver, California must meet conditions laid out in

CAA Section 209(b): the state must first determine that its standards will in the aggregate be at

least as protective of public health and welfare as applicable federal standards. The EPA

Administrator must then find whether the state’s determination is arbitrary and capricious;

whether the state needs the standards to meet compelling and extraordinary conditions; and

whether the standards and accompanying enforcement procedures are consistent with CAA

Section 202(a).

This report does not analyze whether California is preempted from regulating mobile-source

GHGs by the Corporate Average Fuel Economy (CAFE) requirements of the Energy Policy and

Conservation Act of 1975, or the amended CAFE standards of the Energy Independence and

Security Act of 2007 (P.L. 110-140). Under these laws, authority to set fuel economy standards is

reserved to the federal government—specifically, the National Highway Traffic Safety

Administration (NHTSA). In several court cases and in other venues, the auto industry is

maintaining that the regulation of mobile-source GHG emissions is simply another method of

regulating fuel economy, so California’s GHG standards (and identical standards adopted by other

states) are preempted. Two federal district courts have rejected this argument, but both decisions

have been appealed.

On January 21, 2009, California submitted a formal request to President Obama and EPA

Administrator-designate Lisa Jackson for reconsideration of the waiver denial. In response to this

request, EPA will hold a hearing March 5, 2009, and will accept written comments until April 6.

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Introduction ..................................................................................................................................... 1

California’s Greenhouse Gas Requirements.................................................................................... 2

EPA’s Response to the Waiver Request and Resulting Litigation ................................................... 3

Actions by Other States ................................................................................................................... 6

Waiver Criteria ................................................................................................................................ 7

California’s Justification of Its Waiver Request........................................................................ 7

The Decision Document’s Argument for Waiver Denial........................................................... 8

Positions of the Parties in the Waiver Denial Litigation ........................................................... 9

Previous Waiver Requests ............................................................................................................. 10

Related Litigation ...........................................................................................................................11

Comments and Conclusions .......................................................................................................... 13

Figure 1. California GHG Emission Requirements......................................................................... 3

Table 1. States Adopting California’s Mobile Source GHG Standards ........................................... 5

Author Contact Information .......................................................................................................... 14

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Every federal law imposing environmental standards raises the question of whether the states are

allowed to set stricter standards. In deference to states’ rights, Congress’s usual approach is to

allow stricter state standards; for example, the Clean Air Act (CAA) allows stricter state standards

for stationary sources of air pollution (power plants, refineries, etc.). For mobile sources of air

pollution, however—cars, trucks, planes, etc.—a lack of national uniformity creates a problem,

since manufacturers would potentially face the task of complying with different standards in each

state. Such standards would fragment the national market, increasing costs and complicating the

manufacture, sale, and servicing of the affected products. For this reason, the mobile source

portion of the CAA (Title II) generally “preempts” states from adopting their own emission

standards for new motor vehicles or engines.1 In general, it allows only federal standards for

motor vehicle emissions.

There is an exception to this rule of federal preemption, however, in CAA Section 209(b)2—

The [EPA] Administrator shall, after notice and opportunity for public hearing, waive

application of this section [the preemption of State emission standards] to any State which

has adopted standards (other than crankcase emission standards) for the control of emissions

from new motor vehicles or new motor vehicle engines prior to March 30, 1966, if the State

determines that the State standards will be, in the aggregate, at least as protective of public

health and welfare as applicable Federal standards.3

Only California adopted such standards “prior to March 30, 1966,” so only California can qualify

for such a preemption waiver. (Although only California may be granted a waiver under this

section, elsewhere in the Act, as discussed later in this report, there is a waiver of preemption for

other states that have adopted California’s standards, if EPA grants California a waiver.)

Faced with severe air pollution problems, especially in Los Angeles and the San Joaquin Valley,

California has regularly developed more stringent standards for motor vehicle emissions than

those required by federal law. In order to impose its standards, the state has requested and been

granted Section 209(b) waivers at least 54 times since 1967.4 Using Section 209(b) waivers,

California has served as a laboratory for the demonstration of cutting-edge emission control

technologies, which, after being successfully demonstrated there, were adopted in similar form at

the national level. Catalytic converters, cleaner fuels, and numerous other advances were

introduced in this way. Currently, waivers allow California to require that a portion of each

manufacturer’s sales meet Zero Emission Vehicle (ZEV) and Partial ZEV requirements, which

has stimulated the sale of electric and hybrid vehicles.

CAA § 209(a), 42 U.S.C. § 7543(a). See also S.Rept. 91-1196 (1970), p. 32.

42 U.S.C. § 7543(b).

As will be discussed in greater detail below, there are three conditions placed on the grant of such waivers: The

Administrator is to deny a waiver if he finds: (1) that the state’s determination is arbitrary and capricious; (2) that the

state does not need separate standards to meet compelling and extraordinary conditions; or (3) that the state’s standards

and accompanying enforcement procedures are not consistent with Section 202(a) of the Act.

Personal communication, U.S. EPA Office of Transportation and Air Quality, July 20, 2007.

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On July 22, 2002, California became the first state to enact legislation requiring reductions of

greenhouse gas (GHG) emissions from motor vehicles. The legislation, AB 1493, required the

California Air Resources Board (CARB) to adopt regulations requiring the “maximum feasible

and cost-effective reduction” of GHG emissions from any vehicle whose primary use is

noncommercial personal transportation. GHGs are defined by the state as carbon dioxide,

methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, but for

the purpose of this regulatory program, only the first four of these are subject to control. The

reductions were to apply to motor vehicles manufactured in the 2009 model year and thereafter.

Under this authority, CARB adopted regulations September 24, 2004, requiring gradual

reductions in fleet average GHG emissions until they are about 30% below the emissions of the

2002 fleet in 2016.5 As illustrated in Figure 1, the regulations set separate standards for two

classes of vehicles. The first class consists of all passenger cars, plus light duty trucks and SUVs

weighing 3,750 lbs. or less; these vehicles must reduce emissions by an average of 36.5%

between 2009 and 2016. The second group consists of light trucks and passenger vehicles over

3,750 lbs., which must reduce emissions 24.4% over the same time period.

The regulations require reductions in fleet averages, rather than compliance by individual

vehicles. They provide substantial flexibility, including credit generation from alternative fuel

vehicles and averaging, banking, and trading of credits within and among manufacturers.

Credits—and debits for any year in which a manufacturer exceeds the standards—must be

equalized within five years of their generation, with the first equalization required in 2014. Thus,

manufacturers would not be subject to penalties for failure to meet the standards until 2014 at the

earliest.6 Following adoption of these regulations by CARB, they were subjected to public

comment and legislative review, and CARB submitted a request to U.S. EPA, December 21,

2005, for a preemption waiver under Section 209(b).

A table showing the mandated reductions year-by-year can be found in CARB’s Regulations to Control Greenhouse

Gas Emissions from Motor Vehicles, Final Statement of Reasons, August 4, 2005, p. 8 at http://www.arb.ca.gov/regact/

grnhsgas/fsor.pdf.

California Air Resources Board, Regulations to Control Greenhouse Gas Emissions from Motor Vehicles; Request for

Waiver of Preemption Under Clean Air Act Section 209(b), December 21, 2005, Attachment 2, Support Document, p.

2, available at http://www.arb.ca.gov/cc/docs/att2_support.pdf. Hereafter referred to as “Support Document.”

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Figure 1. California GHG Emission Requirements

(grams/mile, CO2 equivalent)

Source:

California Air Resources Board

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EPA took two years, from late 2005 to late 2007, to respond to California’s waiver request for its

motor vehicle GHG emission standards. The agency’s long response time was doubtless the result

of intense debate over the waiver request within the Bush Administration, which from its arrival

in Washington had opposed regulatory approaches to reducing GHG emissions. In addition, the

agency was waiting for the U.S. Supreme Court to decide a case it had accepted that squarely

presented the issue of whether GHGs are “air pollutants” under the CAA, and thus subject to

EPA’s regulatory authority. This case began when EPA, in 2003, denied a petition asking it to

regulate GHG emissions from new motor vehicles under CAA section 202(a).7 The agency

concluded it lacked authority under the CAA to regulate motor vehicle emissions based on their

climate change effects. In its April 2, 2007 decision in Massachusetts v. EPA,8 the Supreme Court

resolved this authority issue, finding 5-4 that—

The Clean Air Act’s sweeping definition of “air pollutant” includes “any air pollution agent

or combination of such agents, including any physical, chemical ... substance or matter

which is emitted into or otherwise enters the ambient air.... ” ... Carbon dioxide, methane,

nitrous oxide, and hydrofluorocarbons are without a doubt “physical [and] chemical ...

substance[s] which [are] emitted into ... the ambient air.” The statute is unambiguous.9

42 U.S.C. § 7521(a).

549 U.S. 497 (2007).

Id. at 528-529 (emphasis in original).

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Thus, the Court’s majority had no doubt that the CAA gives EPA authority to regulate GHGs from

new motor vehicles, although the specifics of such regulation are subject to agency discretion.

(See CRS Report RS22665, The Supreme Court’s Climate Change Decision: Massachusetts v.

EPA, by (name redacted).)

Following this decision, EPA announced that it would consider the California waiver request. The

agency held public hearings on May 22, 2007, in Arlington, VA, and on May 30, 2007, in

Sacramento, CA. Under pressure from California’s Senator Boxer, who chairs the Environment

and Public Works Committee,10 and other California leaders, including Governor Schwarzenegger

and Attorney General Brown,11 EPA Administrator Johnson announced that he would decide

whether to grant the waiver request by the end of 2007.12

During the public comment period, the agency received more than 60,000 comments, the vast

majority of them urging it to grant the waiver. Support came from environmental groups, the

Manufacturers of Emission Controls Association, the National Association of Clean Air Agencies

(which represents state and local air pollution control departments), and a number of governors.

As will be discussed further below, 14 other states and the District of Columbia have adopted

regulations identical to California’s, and 2 others have announced their intention to do so, but

their ability to implement the regulations depends on California first being granted a waiver.13

Thus, many of them have weighed in in support of the waiver request.

The auto industry and the U.S. Department of Transportation (DOT), among others, opposed a

waiver grant. The auto industry maintains that there is effectively no difference between

California and federal emission standards in their impact on criteria air pollutants (ozone, in

particular), that the benefits of the GHG regulations are “zero,” and that emissions from

California’s auto fleet will actually increase as a result of the regulations as consumers keep older,

higher-emitting cars longer.14

At a May 22, 2007 hearing, for example, Senator Boxer stated, “EPA already has all the authority it needs to begin

regulating greenhouse gas emissions from motor vehicles now. The Supreme Court’s landmark decision has now

cleared the way. The time to act is now. The clearest example of this point is the case for the California waiver. ...

Further delay in this matter is simply unacceptable.” See Opening Statement of Senator Barbara Boxer, U.S. Senate,

Committee on Environment and Public Works, Hearing on “Examining the Case for the California Waiver,” May 22,

2007, at http://epw.senate.gov/public/index.cfm?FuseAction=Hearings.Statement&Statement_ID=39508511-fd9e469b-80af-faaf843f6696.

See “California Attorney General to File Lawsuit if EPA Fails to Act on Waiver Past October 25,” Daily

Environment Report, May 23, 2007, p. A-13.

Testimony of Stephen L. Johnson, Administrator, U.S. EPA, before the Senate Committee on Environment and

Public Works, July 26, 2007, at http://epw.senate.gov/public/

index.cfm?FuseAction=Files.View&FileStore_id=1a49cc26-6d6b-4f55-9eb4-759b7e0e039c.

The 14 states are Arizona, Connecticut, Florida, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New

York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington. Under Section 177 of the Act, states that have

nonattainment or “maintenance” areas can adopt California’s emission standards for mobile sources in lieu of federal

standards. Every state except Hawaii, North Dakota, and South Dakota would be eligible to adopt California’s

standards under this so-called “piggyback” provision. Thus, there is broad interest in the California waiver decision and

more at stake than would be the case if only California had adopted the regulations.

Alliance of Automobile Manufacturers, “California Waiver Request,” presentation materials from U.S. EPA public

hearing, Sacramento, CA, May 30, 2007.

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. States Adopting California’s Mobile Source GHG Standards

Table 1

State

2006 Population

Legislation/Regulation

Arizona

6,166,318

California

Connecticut

District of Columbia

Florida

Maine

36,457,549

3,504,809

581,530

18,089,888

1,321,574

Maryland

Massachusetts

5,615,727

6,437,193

New Jersey

New Mexico

8,724,560

1,954,599

New York

19,306,183

Oregon

3,700,758

Pennsylvania

12,440,621

Rhode Island

1,067,610

Vermont

623,908

Washington

Total

6,395,798

132,388,625

Executive Order 2006-13, September 8,

2006

AB 1493, July 22, 2002

Public Act 04-84, May 4, 2004

Law 17-0151, March 19, 2008

Executive Order 07-127, July 13, 2007

Amendments to Chapter 127, December 19,

2005

Senate Bill 103, April 24, 2007

Amendments to the state’s LEV regulations,

December 30, 2005

P.L. 2003, Chapter 266, January 14, 2004

Executive Order 2006-69, December 28,

2006

Chapter III, Subpart 218-8, November 9,

2005

Regulations (Division 257; OAR 340-2560220; and Division 12), June 22, 2006

Amendments to Title 25, Chapters 121 and

126, December 9, 2006

Air Pollution Control Regulation No. 37,

December 22, 2005

Amendments to Subchapter XI, November

7, 2005

House Bill 1397, May 6, 2005

Pew Center on Global Climate Change for information and links to state regulations, at

http://www.pewclimate.org/what_s_being_done/in_the_states/vehicle_ghg_standard.cfm, U.S. Census Bureau for

population data. As of February 28, 2008, the Pew Center also listed Colorado and Utah as having announced

their intention to adopt California’s standards, although neither state had formally adopted legislation or

regulations as of that date.

Source:

On December 19, 2007, EPA announced its decision. EPA Administrator Stephen Johnson wrote

California Governor Arnold Schwarzenegger to say, “I have decided that EPA will be denying the

waiver and have instructed my staff to draft appropriate documents setting forth the rationale for

this denial in further detail.... ” According to press reports, the decision was taken against the

unanimous advice of the agency’s technical and legal staffs.15 His staff did subsequently draft a

“EPA Chief Denies Calif. Limit on Auto Emissions,” Washington Post, December 20, 2007, p. A1. Documents

shown to, and transcribed by, congressional staff have included numerous statements by senior EPA staff

recommending that the Administrator grant the waiver; and the Administrator did not identify any staff

recommendation suggesting denial. See U.S. Senate, Committee on Environment and Public Works, Hearings, January

24, 2008, and February 27, 2008. Additional detail confirming the above was provided as the result of an investigation

by the House Oversight and Government Reform Committee. See “White House Involved in California Waiver

(continued...)

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decision document, which the Administrator signed on February 29, 2008.16 It was published in

the March 6, 2008 Federal Register,17 and will be referred to herein as the March 6 decision.

It came as no surprise that the Administrator’s denial of California’s waiver petition was

challenged in court. The first petitions for review were filed soon after the December 19 letter by

California, 15 other states, and environmental groups, arguing that the letter itself constituted

final agency action and was thus ripe for review. With the issuance of the March 6 decision

document, these suits based on the EPA letter were dismissed (by the court or by stipulation) and

replaced, on May 5, 2008, by a suit in the D.C. Circuit challenging that document.18 Petitioners in

California v. EPA are California, 18 other states, and numerous environmental groups. Most of

the California congressional delegation, including Speaker of the House Nancy Pelosi and

Senators Boxer and Feinstein, are participating in the case as amici on behalf of the petitioners.

The legal arguments of petitioners and respondent EPA are summarized in the “Waiver Criteria”

section of this report, under the subsection discussing the “Compelling and Extraordinary

Conditions” waiver criterion that is the focus of these arguments. Briefing in the case is now

underway; a decision is likely in spring, 2009 (unless mooted by the Obama Administration EPA’s

possible reversal of the denial).

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As noted above, California is the only state permitted to adopt more stringent emission standards

under the waiver provision of Section 209(b). CAA Section 177, however, provides that any state

with an EPA-approved State Implementation Plan—every state except Hawaii, North Dakota, and

South Dakota—“may adopt and enforce for any model year standards relating to control of

emissions from new motor vehicles or new motor vehicle engines” provided: (1) that the

standards are identical to standards for which California has been granted a waiver; and (2) that

California and such state have adopted the standards at least two years before the commencement

of the model year to which the standards apply. Relying on this authority, and presuming that

California will be granted a waiver, 14 other states (Arizona, Connecticut, Florida, Maine,

Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode

Island, Vermont, and Washington) and the District of Columbia have adopted or announced their

intention19 to adopt California’s greenhouse gas emission controls. Including California, these

states account for 44% of the total U.S. population (Table 1).20 Thus, the stakes involved (both

the environmental consequences and the potential impact on the auto industry) go well beyond

California.

(...continued)

Denial,” May 19, 2008, at [http://oversight.house.gov/investigations.asp?start=25&id=121].

Related materials can be found at http://www.epa.gov/otaq/ca-waiver.htm.

73 Federal Register 12013.

State of California v. U.S. EPA, No. 08-1178 (D.C. Cir. filed May 5, 2008).

In some cases, only one branch of government (e.g., the Governor, through Executive Order) has ordered the

adoption of the California GHG standards. Without reviewing each state’s regulatory process, it is unclear to CRS

whether, in such cases, the state can be considered to have adopted the standards.

Colorado and Utah can perhaps be added to this list: in Utah’s case, the state has joined a regional group that has

pledged to adopt the California standards; in Colorado, the Governor has released a Climate Action Plan that includes

the California standards. Neither state has issued regulations as of this writing, however.

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As noted earlier, Section 209(b) says that the EPA Administrator “shall ... waive” the prohibition

on state emission standards “if the State determines that the State standards will be, in the

aggregate, at least as protective of public health and welfare as applicable Federal standards.” The

section adds:

No such waiver shall be granted if the Administrator finds that(A) the determination of the State is arbitrary and capricious,

(B) such State does not need such State standards to meet compelling and extraordinary

conditions, or

section 202(a) of this part.

As originally enacted in 1967, Section 209(b) was worded differently. The waiver process did not

involve, as it does today, an initial determination of protectiveness by California that EPA can

reject only on an “arbitrary and capricious” standard that is deferential to the state. This bow to

California was added by the 1977 amendments, the legislative history of which stresses that the

changes made in Section 209(b) were “intended to ratify and strengthen the California waiver

provision and to affirm the underlying intent of that provision, i.e., to afford California the

broadest discretion possible in selecting the best means to protect the health of its citizens and the

public welfare.”21

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In requesting a waiver, California argued that its standards met each of the CAA criteria: that they

were at least as protective as applicable federal standards, because there are no federal GHG

standards; that air pollution generally, and climate change in particular, present numerous

conditions to the state that are compelling and extraordinary; and that the standards and

enforcement procedures are consistent with Section 202(a), based on previous EPA interpretation

of the consistency requirement.22

Of particular importance (see following section) is the state’s case that it faces compelling and

extraordinary conditions. These include the potential of rising sea levels that would bring

increased salt water intrusion to its limited supplies of water; diminishing snow pack that would

also threaten its limited water supply; and higher temperatures that would exacerbate the state’s

U.S. Congress, House Interstate and Foreign Commerce Committee, Clean Air Act Amendments of 1977, May 12,

1977, H.Rept. 95-294, pp. 301-302.

The state concluded that, since there are no federal test procedures that measure GHGs for climate change purposes,

inconsistency with Section 202(a) can only be shown if there is inadequate lead time to permit the development of

technology to meet the regulatory requirements. The state based the standards on technologies already available on

vehicles or demonstrated by auto companies and component suppliers, so it concluded that the standards were

consistent with the need for adequate lead time. See CARB, Support Document accompanying the December 21, 2005

Waiver Request, previously cited, pp. 19-43.

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ozone nonattainment problem, which is already the worst in the nation.23 But the state argues that

it need not demonstrate that it faces unique threats from GHG emissions, since EPA must

consider not just the GHG controls, but the state’s entire motor vehicle emissions program in

evaluating the waiver request. According to the state: “The relevant inquiry under section

209(b)(1)(B) is whether California needs its own emission control program to meet compelling

and extraordinary conditions, not whether any given standard is necessary to meet such

conditions.”24

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In its March 6 decision document denying California’s waiver request, EPA explained that its

denial was based solely on CAA Section 209(b)(1)(B), the “compelling and extraordinary

conditions” criterion. It did not address the other two criteria above.

EPA concluded that California did not need its GHG emission standards to meet compelling and

extraordinary conditions. At the outset, this argument required EPA to reverse its historical

position that the “State standards” mentioned in Section 209(b)(1)(B) embrace California’s entire

motor vehicle emissions control program, not merely the standards that are the subject of the

waiver request. This longstanding agency position was based partly on statutory text: the phrase

“such State standards” in 209(b)(1)(B) seems to refer back to “State standards ... in the

aggregate.” Lending further support is 1977 legislative history, which speaks to a situation where

EPA might want to approach an air pollution problem by cranking down on the allowable

emissions for one pollutant, but California might prefer to address the problem by cutting down

on another. “To deal with such a situation,” says the 1977 House report, “the Committee

amendment requires the Administrator of EPA to grant a waiver for the entire set of California

standards.”25

For California’s GHG regulations, however, EPA found the opposite – that it was “appropriate” to

consider the need to meet compelling and extraordinary conditions with reference to the GHG

regulations alone. The reason for the switch, EPA said, was that GHG standards address a global

problem, whereas in the past California’s motor vehicle program, and its waiver requests, had

only addressed local and regional problems. Local and regional air pollution problems are rooted

in local causes, such as thermal inversions and the large number of vehicles in California. In

contrast, GHG concentrations are essentially uniform across the globe, and are not uniquely

connected with causal factors in California. Based on this lack of nexus between local conditions

and global GHG concentrations, California does not, EPA concluded, “need” its GHG emission

standards to meet the compelling and extraordinary condition of climate change.

Alternatively, EPA argued, the impacts of climate change in California are simply not the kind of

impacts that Congress had in mind by the phrase “compelling and extraordinary conditions.” The

1967 legislative history of Section 209(b), the agency points out, refers to California’s “peculiar

local conditions” and “unique problems,” suggesting to EPA that to be compelling and

extraordinary, the impacts of climate change in California must be significantly different from

those in other states. To prove such uniqueness, California had noted in its petition that it faced

CARB, Support Document, p. 18.

Support Document, p. 15.

H.Rept. 95-294, p. 302 (emphasis added).

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greater temperature increases from climate change than the rest of the nation, that it has the

largest agriculture-based economy of any state, the largest coastal population, and so on. EPA was

not persuaded, concluding that global climate change will affect the nation and the world in ways

very similar to California.

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As noted, the active suit against the waiver denial is California v. EPA, filed May 5, 2008, by

California, other states, and environmental groups. In their joint brief, these petitioners argue first

that EPA erred in not applying Section 209(b)(1)(B) to California’s motor vehicle emissions

program as a whole. Petitioners reassert the textual argument – that “such State standards” in

Section 209(b)(1)(B) refers back to the phrase “State standards ... in the aggregate.” They also

stress the longevity of EPA’s historical position that the entire California motor vehicle emissions

program must be assessed.26

Petitioners then make a typical Chevron step one / Chevron step two argument. By way of

background, the Supreme Court in Chevron U.S.A. Inc. v. NRDC set out what has become the

canonical framework for judicial review of federal agency action.27 Under Chevron, the reviewing

court first asks whether “Congress has directly spoken to the precise question at issue.”28 If so,

the court is to “give effect to the unambiguously expressed intent of Congress.”29 On the other

hand, if the statute is found to be “silent or ambiguous” on the question, the court must proceed to

Chevron step two and ask whether the agency’s interpretation was “permissible.”30 A petitioner

challenging agency action will, if possible, argue that the agency interpretation fails under step

one, since under step two the court generally must accord the agency interpretation a considerable

degree of deference.

Petitioners’ “Chevron step one” argument is that EPA’s exclusion of climate change impacts in

California from “compelling and extraordinary conditions” because they are not local/regional

and not unique to the state violates the plain meaning of Section 209(b)(1)(B). Petitioners argue

that the fact that smog reduction was the dominant concern in 1967, when the section was

enacted, does not mean that the broad language of Section 209(b) should be confined to that

situation today. To buttress this view, petitioners argue that construing “compelling and

extraordinary” to require that conditions in California be unique is contradicted by CAA Section

177, discussed above. How, they ask, can it make sense to allow other states to adopt California’s

standards if California’s authority is limited to addressing problems unique to that state?

Petitioner’s “Chevron step two” argument is that even assuming EPA’s interpretation of

compelling and extraordinary conditions survives Chevron step one, it is not a “permissible”

interpretation. It is not permissible, they contend, because it conflicts with the Supreme Court’s

view in Massachusetts v. EPA that climate change is within the CAA’s scope notwithstanding that

Congress did not have it in mind when the CAA was enacted. Moreover, the deference normally

accorded an agency’s interpretation under Chevron step two should be at a minimum here,

See, e.g., 49 Federal Register 18,887, 18,889-90 (May 3, 1984).

467 U.S. 837 (1984).

Id. at 842.

Id. at 843.

Id.

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petitioners argue, because EPA’s waiver denial infringes on state sovereignty and reverses its

longstanding practice of assessing California’s vehicle emissions control program in the

aggregate.

In response to petitioners’ arguments, the Bush Administration EPA argued, in one of its last legal

briefs filed January 9, 2009, that its waiver rejection should be upheld. Its positions and

supporting arguments in the brief track those in its decision document – and are all positioned

under the usually deferential Chevron step two. As for the threshold issue, EPA argues that its

decision to review California’s GHG regulations separately was a reasonable interpretation of an

ambiguous statute. EPA then argues that it reasonably interpreted the reference to compelling and

extraordinary conditions in Section 209(b)(1)(B) to focus on local conditions, and on whether

those conditions are sufficiently different from the rest of the country. Under that interpretation, it

contended, California had not demonstrated that its standards were “needed” to meet such

conditions.

The fate of the California v. EPA litigation hinges on what action, if any, the newly arrived

Obama Administration officials take at the EPA. EPA could reverse the Bush Administration

EPA’s waiver denial, making the present suit moot but inviting a judicial challenge to the reversal

in a new suit by the auto manufacturers. Alternatively, the Obama Administration EPA could wait

until the D.C. Circuit rules (putting it in the probably unacceptable position of defending the

waiver denial at oral argument), or until Congress mandates that the waiver be granted (mooting

any litigation). The complexities of each of these courses of action are explored in the final

section of this report.

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As noted earlier, California has requested waivers under Section 209(b) on many occasions. A

precise count of the number of such requests is difficult to determine, according to EPA’s Office

of Transportation and Air Quality (OTAQ), in large part because the nature of such requests

varies. The state has requested waivers for new or amended standards on at least 55 occasions; on

at least 42 other occasions, the state has requested “within the scope” determinations (i.e., a

request that EPA rule on whether a new regulation is within the scope of a waiver that the agency

has already issued). Adding all of these together, one might say that there have been nearly 100

waiver requests.31

Of these, all were granted in whole or in part. EPA has repeatedly found, as recently as September

2008, that California faces compelling and extraordinary conditions (as to conventional

pollutants, not climate change) and needs its own standards to meet these conditions.32 In general,

as the Administrator stated in a 1975 waiver determination:

These provisions must be read in the light of their unusually detailed and explicit legislative

history.... Congress meant to ensure by the language it adopted that the Federal government

would not second-guess the wisdom of state policy here.... Sponsors of the language

Personal communication, U.S. EPA, Office of Transportation and Air Quality, July 20, 2007. California has also

submitted about 10 waiver requests for non-road vehicles and engines under Section 209(e). These form a third

category.

73 Federal Register 52042, September 8, 2008.

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eventually adopted referred repeatedly to their intent to make sure that no “Federal

bureaucrat” would be able to tell the people of California what auto emission standards were

good for them, as long as they were stricter than Federal standards.33

In arguing thus, the Administrator foreshadowed the House Interstate and Foreign Commerce

committee report on the 1977 CAA Amendments, which revisited and strengthened California’s

position in seeking a waiver. The report, accompanying amendments to Section 209(b) that gave

the subsection its current form, states:

The Administrator, thus, is not to overturn California’s judgment lightly. Nor is he to

substitute his judgment for that of the State. There must be clear and compelling evidence

that the State acted unreasonably in evaluating the relative risks of various pollutants in light

of the air quality, topography, photochemistry, and climate in that State, before EPA may

deny a waiver.34

Although EPA had never denied a request outright before the GHG waiver, on at least six

occasions prior to the 1977 CAA amendments, the agency granted a waiver in part, while denying

or delaying the effective date of other parts of the request on feasibility grounds.35 In 1975, the

Administrator denied a waiver for the 1977 model year, but granted it for 1978.36 Since the 1977

amendments, there was at least one instance in which EPA made a determination that California’s

requirements were feasible in part, granting a waiver for the 2007 through 2011 model years, but

making no decision for model years after that.37

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Aside from litigation over EPA’s denial of California’s request for a CAA preemption waiver,

there is active litigation over state regulation of mobile source GHG emissions raising non-CAA

preemption and other legal theories. This litigation, filed by auto dealers, trade associations, and

auto manufacturers, seeks to prevent California and other states from implementing the California

mobile source GHG standards even if the EPA waiver denial is overturned by the courts or

reversed by EPA. Suits are pending in four federal judicial circuits—not coincidentally, the

circuits containing most of the states that have adopted the California GHG controls. Courts

addressing this litigation have not doubted that without a California waiver, state regulation of

GHG emissions from motor vehicles is preempted by the CAA, and the non-CAA litigation is

moot.

The chief non-CAA preemption theory in this litigation is based on the Energy Policy and

Conservation Act (EPCA), the authority under which the National Highway Traffic Safety

Administration (NHTSA) establishes corporate average fuel economy standards (“CAFE

40 Federal Register 23103, May 28, 1975.

U.S. House of Representatives, Committee on Interstate and Foreign Commerce, Clean Air Act Amendments of

1977, H.Rept. 95-294, May 12, 1977, pp. 301-302.

According to EPA, the dates were May 6, 1969 (34 Federal Register 7348), April 30, 1971 (36 Federal Register

8172), April 25, 1972 (37 Federal Register 8128), April 26, 1973 (38 Federal Register 10317), November 1, 1973 (38

Federal Register 30136), and July 18, 1975 (40 Federal Register 30311).

40 Federal Register 30311, July 18, 1975.

71 Federal Register 78190, December 28, 2006.

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standards”).38 Enacted in 1972, EPCA today requires NHTSA to prescribe separate fuel economy

standards for passenger and non-passenger automobiles beginning with model year 2011, to

achieve a combined fuel economy average for model year 2020 of at least 35 miles per gallon.39

More pertinent here, EPCA preempts states from adopting laws “related to” the federal fuel

economy standards.40 The auto industry argues that this preemption is fatal to state regulation of

GHG emissions from cars. The argument runs that the only known way to reduce GHG emissions

is to improve gas mileage, so that a state regulation of auto GHG emissions is a law “related to”

the federal emission standard, hence invalid.

Two decisions on the merits have been handed down so far, both rejecting the non-CAA

preemption theories, including under EPCA. In the first, Green Mountain Chrysler Plymouth

Dodge Jeep v. Crombie,41 the district court ruled that the relationship between Vermont’s

California-identical GHG standards and EPCA was better analyzed as an interplay between two

federal statutes (EPCA and the CAA), rather than as a federal-state preemption question. So

viewing the matter, the court pointed out that NHTSA has consistently treated EPA-approved

California emissions standards as constituting “other motor vehicle standards of the

Government,” which EPCA says NHTSA must consider when setting CAFE standards.42 This

suggests that EPCA was meant to coexist with the CAA, rather than supersede it. Moreover,

noted the court, in a related context the Massachusetts v. EPA decision saw the CAA and EPCA

CAFE provisions as harmonious.43 Thus, the court found the CAA section 209/EPCA relationship

to be one of overlap, not conflict. Despite its conclusion that preemption doctrine did not apply,

the court also did a preemption analysis, finding that Vermont’s GHG standards were preempted

neither by EPCA nor as an intrusion upon the foreign policy authority of the United States. An

appeal is pending.

In the second decision, Central Valley Chrysler Jeep, Inc. v. Goldstene,44 a district court similarly

rejected claims that California’s regulation of GHG emissions from cars and trucks was precluded

by EPCA, preempted by EPCA, and preempted as an intrusion on federal authority over foreign

policy.45 An appeal is pending in this case as well.

The legal theories pressed in the Crombie and Goldstene cases are similar to those in two Rhode

Island suits, consolidated as Lincoln Dodge, Inc. v. Sullivan,46 challenging that state’s adoption of

the California standards. Recently, the district court held that the claims of the auto manufacturers

and trade associations in this case were barred by collateral estoppel, a legal doctrine that

prohibits parties from relitigating issues they have already adjudicated (as these plaintiffs had

done in Crombie and Goldstene).47 The Rhode Island auto dealers, by contrast, had themselves

never raised the issues in the case, and thus were held to be viable plaintiffs, allowing the case to

The fuel economy provisions of EPCA are codified at 49 U.S.C. §§ 32901-32919.

49 U.S.C. § 32902(b)(2)(A).

49 U.S.C. § 32919.

508 F. Supp. 2d 295 (D. Vt. 2007).

49 U.S.C. § 32902(f).

549 U.S. at 532.

529 F. Supp. 2d 1151 (E.D. Cal. 2007).

In 2006, the district court dismissed claims under the Dormant Commerce Clause and Sherman Antitrust Act.

No. 1:06-CV-00070 (D.R.I. filed February 13, 2006).

November 24, 2008.

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proceed. In a fourth preemption case, New Mexico’s adoption of the California GHG standards

has been challenged as preempted under EPCA in Zangara Dodge, Inc. v. Curry.48

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In considering whether to reverse the Bush Administration’s stance on the California waiver, the

incoming Administration faces several important decisions regarding the potential for greenhouse

gas regulations. EPA has now received at least eight petitions asking the agency to regulate GHGs

from different sources, including cars and trucks, aircraft, ocean-going ships, nonroad engines

and equipment (such as locomotives, construction equipment, farm equipment, forklifts, harbor

craft, and lawn and garden equipment), and fuels—in addition to the California waiver request.

The agency also faces lawsuits seeking to force it to regulate GHGs from stationary sources,

including power plants, petroleum refineries, and the Portland cement industry. A decision on any

of the petitions is likely to be seen as a precedent for the others, and would have implications for

the agency’s position in the pending waiver-denial litigation.

The incoming Obama Administration is sympathetic to greenhouse gas controls. At the same

time, both Congressional leaders and President Obama have stated their intention to make the

passage of economy-wide GHG controls a priority. A decision on the California waiver and the

other pending petitions needs to be viewed, therefore, in the context of its potential impact on

such legislation as well as the precedent it might set for GHG regulations under existing CAA

authority.

From statements made during the election campaign, President Obama appears poised to reverse

EPA’s denial of the waiver request,49 and since his inauguration, the President has ordered EPA to

review the decision. In general, a regulation (or “rule”) can be reversed by following the same

procedural steps that were taken to promulgate it. The waiver decision is not a regulation—it was

never formally proposed in the Federal Register, and CAA Section 307 does not treat decisions

under Section 209(b) as being subject to the administrative procedures that it sets out for

regulatory decisions – but the same general principal (i.e., following the same procedural steps

the agency took to make the original decision in order to reverse it) presumably applies. A waiver

decision, states Section 209(b), requires only “notice and opportunity for a public hearing” before

it is made. In reaching the March 6, 2008 decision, the EPA Administrator requested public

comment on whether he should grant the waiver, held two public hearings, and six months later

announced that he had decided not to grant a waiver, stating his reasons.

Thus, reversing the decision could be relatively simple – less complicated than reversing a formal

regulation. It would not require a formal proposal, since the original decision was not proposed.

Instead, the Administrator can take action following notice and opportunity for a public hearing.

The final step would be to set forth a rationale for the decision’s reversal. This could be relatively

straightforward, as well: the justification for granting a waiver was prepared by EPA staff, before

No. 1:07-CV-01305 (D.N.M. filed December 27, 2007).

“Obama Likely to Take Action on Regulating Emissions, Clearing California Waiver Request,” Daily Environment

Report, November 13, 2008, p. A-1. Of course, the decision is made by the EPA Administrator, not by the President.

Since the Bush Administration was criticized for having – at least to outward appearances – pressured the EPA

Administrator to deny the waiver, President Obama and his Office of Management and Budget may be hesitant to

become too overtly involved in EPA’s reconsideration of its waiver denial.

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Administrator Johnson discarded it and changed course in December 2007.50 Thus, a reversal by

the new EPA Administrator might be the quickest way to address the issue.

California and EPA are already pursuing this tack: a January 21, 2009 letter to EPA from the

California Air Resources Board formally requests EPA to reconsider its denial, and based on the

Board’s arguments (similar to those pressed by California in the litigation), grant the waiver.51 In

her confirmation hearing, Administrator Jackson stated that she would reconsider the waiver

request, and President Obama requested the agency to do so January 26. On February 6, the

agency announced that it would hold a hearing on California’s request March 5, 2009, in

Arlington, VA, and that it would take public comment through April 6.

Given the determination to proceed administratively, there may be little need for Congress to

involve itself in the decision; nevertheless, interest in the issue is expected to remain high until it

is resolved.

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(name redacted)

Specialist in Environmental Policy

[redacted]@cr s.loc.gov, 7-....

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov, 7-....

The history of the decision is known in some detail as the result of an investigation by the House Oversight and

Government Reform Committee. See “White House Involved in California Waiver Denial,” May 19, 2008, at

http://oversight.house.gov/investigations.asp?start=25&id=121.

Letter from Mary Nichols, Director, California Air Resources Board, to EPA Administrator-Designate Lisa P.

Jackson, dated January 21, 2009, available at http://www.arb.ca.gov/newsrel/arbwaiverrequest.pdf .

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