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What’s the Latest on AB 32 at the California Air Resources Board?

It seems like a simple question: “What’s happening with AB 32 in California these days”? But the answer to that relatively straightforward question is rather complex, potentially very lengthy, constantly changing, but always fascinating. Let me give it a shot in under 1,000 words.

Remember way back in 2006, right about the time that the St. Louis Cardinals were beating the Detroit Tigers in the not-so-memorable World Series? California passed AB 32, which authorized the California Air Resources Board (ARB) to adopt measures to reduce California’s statewide greenhouse gas (GHG) emissions to 1990 levels by 2020. This direct mandate was no small task as it set to change the course of a top ten world economy.  It also became a continuous four-year flurry of regulatory output never before seen from any state agency, even one with a track record such as ARB’s.  The work started with the 2007 GHG mandatory reporting regulation, ran through the first Low Carbon Fuel Standard (LCFS), then the release of the Original Scoping Plan. It included a variety of smaller regulations known as “complementary measures” and finally ended with the 2011 adoption of the first economy-wide Cap and Trade program. Whew!

Flash forward nine years to Governor Jerry Brown’s second Inaugural Address in January 2015. In it he basically doubled down on these policies, and almost exactly a year ago as of this writing (April 29, 2015), he issued an Executive Order (B-30-15) which proposed a new 2030 GHG target of 40% of the 2020 levels—in a mere 15 years.  This non-legislative action begat another wave of regulatory and planning efforts that are piling up onto the continual legislative and judicial efforts that resulted from AB 32’s original implementation. Throw in the actions of other jurisdictions and federal executive action (Clean Power Plan), and it is that tsunami of things that are currently “happening” right now.  Let’s look at the biggest ones here:

2030 Scoping Plan

Originally designed to be updated every five years, ARB is about to release the third version of their foundational policy document in eight years. The 2030 Scoping Plan must be completed before the other regulatory updates focused on 2030 as it is the document that puts all the pieces together. It is tasked with the following:

Provide a roadmap to achieve the 2030 statewide GHG target;

Address the regional nature of the Clean Power Plan;

Unite ARB’s other major transportation programs—ZEV’s and Diesel—under the GHG banner;

Incorporate a whole new set of policies aimed at Short Lived Climate Pollutants (SLCP), aka “Super Pollutants”;

Outline a more focused approach to Environmental Justice communities within the State; and

Achieve all of this in a short timeframe, in a cost-effective manner, while looking at its impact on the state’s economy and potential for emissions to leak away.

ARB is still conducting workshops about the plan’s impacts on various sectors like agriculture and working lands, but has committed to presenting a final version to the public and their board in the fall of this year.

2016 Cap and Trade Amendments

This rulemaking is currently in the informal development stage, with the formal 45-day regulatory package release date recently delayed from May to July.  The existing structure of the Cap and Trade program is a known quantity in California, but ARB is proposing significant changes to its internal mechanisms, including allocation, cost-containment, and the cap itself.  These changes are quite major and stakeholders have a much firmer grip on what they mean this time around.

If the internal changes weren’t significant enough, ARB needs to factor in, and coordinate with Canada’s second linked providence, Ontario, and the U.S. EPA’s implementation of the Clean Power Plan (which was surprisingly stayed by the SCOTUS).  So needless to say, the process has become much more deliberate with lots of weedy stakeholder involvement. The most recent schedule is assumed to be a first hearing in September with a final re-adoption next spring or early summer.

Short-Lived Climate Pollutants

The SLCP plan, as it is known, was just released on April 11.  It focus additional spotlights on methane, refrigeration gases, and black carbon. Each of these gases requires a separate control mechanism and comes with their own controversies. The release of this plan was delayed by almost six months due to concerns over its treatment (or lack thereof) of forest issues. One of its main methane control strategies is the Oil/Gas Methane rule, which has been delayed almost a year so that it could be rewritten after stakeholder concerns.

Low Carbon Fuel Standard

The LCFS was recently completely reworked and readopted after a lawsuit caused it to be implemented in suspended animation for three years.  The new rule took effect January 1 this year, but is already scheduled for a full program review in 2017 and a regulatory update in 2018, which will focus on the post-2020 LCFS. The revamped regulation required every fuel provider to use updated Carbon Intensity (CI) scores, the first batch of which were released last week.  ARB will issue more biofuel CI batches in the coming months.

Outside the ARB

In a recent letter to legislative leadership, the state’s legislative counsel opined that the governor does not have the authority, without additional legislative approval, to extend beyond 2020 the provisions of AB 32. ARB disagrees and is continuing to move forward.

There is also a judicial shadow hanging over the Cap and Trade program. Though this isn’t a new lawsuit, it is expected that results of a California Chamber of Commerce’s appeal of a lower-court decision will be known by the end of this year.  That lawsuit questions a fundamental aspect of the program and, depending on the ruling, could impact the current rulemaking efforts.

Legislatively, there is a call for both additional oversight of ARB and its efforts, and also an explicit extension of AB 32 such that lawsuits like the Chamber’s would be rendered moot.  In addition, the Legislature continues to appropriate the billions of dollars the Cap and Trade program generates each year.

Even with the constant barrage of suggestions, criticisms and attention surrounding ARB’s climate change efforts, it is a train that keeps churning down the tracks. By the time we figure out if the Cubs can finally win the World Series again, I am sure it will be time for another ARB update as things change constantly out here in the land of wine and surf.

Jon Costantino oversaw the development and publication of the original AB 32 Scoping Plan when he served as Climate Change Planning Manager at the ARB. He is now a senior advisor in the Energy, Environment and Natural Resources practice group at Manatt, Phelps & Phillips, LLP, where he manages complex political and regulatory issues for clients in the areas of climate change, clean energy and environmental issues. Mr. Costantino can be reached at (916) 552-2365 or jcostantino@manatt.com.

This column is part of a series of articles by law firm Manatt, Phelps & Phillips, LLP’s Energy, Environment & Natural Resources practice. Earlier columns in the sixth edition of this series discussed Evaluating Traffic Impacts of Projects, California Water Bond Funding and Export of US Crude Oil.

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