California to Require 100% Zero-Emission Passenger Vehicle Sales by 2035

By Latham & Watkins LLP on September 24, 2020 Posted in California, Environmental Regulation

The Governor has issued an Executive Order with sweeping implications for the oil and gas industry and others.

By Jean-Philippe Brisson, Joshua T. Bledsoe, Nikki Buffa, and Brian F. McCall

On September 23, 2020, California Governor Gavin Newsom signed Executive Order N-79-20, which will have sweeping implications for the oil and gas industry, automakers, low-carbon fuel producers, the logistics industry, and public transit agencies, among others (the Executive Order). Newsom announced the Executive Order against the backdrop of what he called “simultaneous crises,” none of which he argued is more impactful and forceful as the climate crisis. The press conference included Mary Nichols, Chair of the California Air Resources Board (CARB), standing before a small fleet of zero-emission vehicles.

In what will likely be viewed as the most far-reaching measure, the Executive Order requires all passenger vehicle sales starting in 2035 to have zero emissions — a mandate that essentially bans sales of new internal-combustion-powered passenger vehicles in California. As discussed below, the Executive Order raises several significant issues. Continue Reading

CARB Attempts to Contain LCFS Credit Prices

By Latham & Watkins LLP on January 13, 2020 Posted in California, Environmental Regulation

In recent LCFS amendments, CARB introduced a new price cap on all LCFS credit transfers and authorized limited future credit borrowing.

By Joshua T. Bledsoe, Brian F. McCall, and Kevin A. Homrighausen

On November 21, 2019, the California Air Resources Board (CARB) passed Resolution 19-27, approving several amendments to the Low Carbon Fuel Standard (LCFS) program designed to foster stability in the LCFS market and promote access to electric vehicle (EV) transportation for disadvantaged and low-income communities in California.

Concerns of Credit Price Run-up

The LCFS is a key pillar of California’s efforts to reduce greenhouse gas (GHG) emissions in the transportation sector. As discussed in previous posts, regulated entities must either: (1) ensure that fuels supplied in California meet annual, decreasing carbon intensity (CI) targets (e.g., by blending biofuels into gasoline and diesel); or (2) procure and surrender credits to CARB. Regulated entities can buy LCFS credits in the bilateral market or in the Credit Clearance Market (CCM), a CARB-administered market intended to supply cost-controlled credits in the event of a market shortage. The rulemaking appears to reflect CARB’s acknowledgment of long-held concerns in the LCFS market that deficit generation will outstrip credit generation, and the CCM will be unable to adequately cap credit prices. The steady advance of LCFS credit prices since the summer of 2017 is well documented in CARB’s Credit Transfer Activity Reports. The most recent LCFS amendments are intended to ensure that the CCM will continue functioning in the event of a credit shortage and to safeguard against a potential LCFS credit price run-up. Continue Reading

Air District Targets Southern California Logistics Industry

By Latham & Watkins LLP on November 25, 2019 Posted in California, CEQA, Environmental Regulation, Finance and project development, Permitting, Solar PV/Rooftop solar

A local air district is developing a rule that would require both existing and proposed warehouses to reduce trucking emissions or pay a mitigation fee.

By Joshua T. Bledsoe

The South Coast Air Quality Management District (SCAQMD or District) is developing a so-called Indirect Source Rule (ISR) that would require Southern California warehouses to reduce emissions associated with trucking activity and on-site equipment. Proposed Rule 2305, recently released by the District in discussion draft form, would establish the Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program — which would apply to owners and operators of warehouses located in the South Coast Air Basin (Basin) with greater than 100,000 square feet of indoor space in a single building. If the SCAQMD’s development timeline holds, Proposed Rule 2305 will phase in on July 1, 2020. Continue Reading

EPA Will Not Require Financial Assurances From Electric Power Sector

By Latham & Watkins LLP on July 16, 2019 Posted in Energy regulatory

EPA’s decision to forego financial requirements will likely face opposition by eNGOs.

By Claudia M. O’Brien and Stacey L. VanBelleghem

On July 2, 2019, the US Environmental Protection Agency (EPA) published its proposed decision not to impose new financial responsibility requirements on the Electric Power Generation, Transmission, and Distribution industry under Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), following nearly a decade of litigation, stakeholder input, and EPA assessment.

Section 108(b) and EPA’s Path to This Decision

CERLCA imposes a joint and several liability scheme that holds certain entities (e.g., certain owners and operators, generators, arrangers, and transporters of hazardous substances) liable for the costs or damages associated with environmental remediation. Section 108(b) of CERCLA authorizes EPA^[i] to develop regulations requiring owners or operators of certain “classes of facilities [to] establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” Section 108(b)(2) identifies factors to consider to determine the level of financial assurances necessary in light of the level of risk. These factors include: “the payment experience of the [Hazardous Substance Superfund], commercial insurers, courts settlements and judgments, and voluntary claims satisfaction.” Continue Reading

CEQA Case Report: Understanding the Judicial Landscape for Development

By Latham & Watkins LLP on May 17, 2019 Posted in California, CEQA, Environmental Litigation, Environmental Regulation

2018 Year in Review: Public agencies prevailed in 65% of CEQA cases analyzed.

By James L. Arnone, Marc T. Campopiano, Christopher W. Garrett, and Lucinda Starrett

Over the course of 2018, Latham & Watkins lawyers reviewed all 57 California Environmental Quality Act (CEQA) cases, both published and unpublished, that came before California appellate courts. These cases covered a variety of CEQA documents and other topics. Below is a compilation of information from the review and a discussion of the patterns that emerged in these cases. Latham will continue to monitor CEQA cases in 2019, posting summaries to this blog.

The California Court of Appeal heard 55 CEQA cases, while the California Supreme Court heard one case: Sierra Club v. County of Fresno. This case concerned what constitutes sufficient detail in an environmental impact report (EIR) and has implications for the preparation of EIRs as well as judicial review of agency decisions certifying EIRs.

In addition to the 56 state cases, one federal CEQA case, AquAlliance v. U.S. Bureau of Reclamation, was heard by the Eastern District of California.

Of the 57 cases, 26 were published, 25 were unpublished, and six were partially published. Figure 1 (above) shows all 57 cases sorted by topic. The greatest number of cases (28 of the 57, or 49%) focused on EIRs. In 2017, only 43% of cases focused on EIRs. Attorneys’ Fees, Justiciability, and Other Procedures accounted for 16 cases. This category includes issues such as mootness, statutes of limitations, waiver, and res judicata. Nine cases focused on Exemptions and Exceptions. Two cases focused on Mitigated Negative Declarations and two cases focused on Supplemental Review.

Figure 2 (right) shows the distribution of cases heard among the six appellate districts as well as the public agency success in each district. The Sixth District was the only district in which the public agencies prevailed in all cases. In the Fifth District, public agencies had the least success, prevailing in only 29% of the cases.

Figure 3 (below) sorts cases by topic and includes additional information on whether the public agency prevailed in each kind of case. For the purposes of this summary, if the public agency lost on any issue, it was deemed not to have prevailed. Overall, public agencies prevailed in 37 of 57 cases, or 65% of the time, the same percentage as in 2017, and won in 68% of EIR cases, compared with 55% in 2017. By contrast, public agencies prevailed in only 56% of cases involving Attorneys’ Fees, Justiciability, and Other Procedures, compared with 67% in 2017.

Additionally, a suite of amendments to the CEQA Guidelines went into effect this year. The California Office of Administrative Law adopted amendments relating to several sections, including those affecting greenhouse gas impacts, baseline procedural requirements, and permissible mitigation deferral. More detail on these amendments can be found in this article, published on Latham’s Environment, Land & Resources blog. The final adopted text of these amendments is publicly available here.

Read the full CEQA Case Report Year in Review 2018.

Supreme Court Won’t Hear Challenge to Oregon’s LCFS Program

By Latham & Watkins LLP on May 17, 2019 Posted in Environmental Litigation

High Court’s action clears pathway for low-carbon fuel standard programs.

By Joshua T. Bledsoe, Kimberly D. Farbota, and Brian F. McCall

On May 13, 2019, the US Supreme Court denied certiorari in American Fuel & Petrochemical Manufacturers (AFPM), et al., v. O’Keeffe, et al (O’Keeffe), effectively affirming a US Court of Appeals for the Ninth Circuit decision that upheld the constitutionality of Oregon’s Clean Fuels Program (CFP). The CFP is modeled after, and operates according to, the same principles and general structure as California’s Low Carbon Fuel Standard (LCFS) program. Petitioners argued that Oregon’s CFP discriminates against out-of-state fuels in violation of the US Constitution’s Dormant Commerce Clause. Oregon argued that while a state may not regulate wholly out-of-state commerce, there is no constitutional bar to a state regulating its fuels market based on a product’s objectively measured contributions to in-state harms (i.e., regulating based on harm caused by a fuel’s carbon intensity).

With the Supreme Court’s refusal to hear the case, the Ninth Circuit’s September 2018 ruling that Oregon’s CFP does not unconstitutionally favor in-state fuels over out-of-state fuels stands. The denial of certiorari follows a 2014 refusal by the Supreme Court to review a Ninth Circuit decision in a similar case, commonly known as Rocky Mountain I, that upheld the constitutionality of California’s LCFS program under the same reasoning. Continue Reading

CARB Amending SF6 Regulation: Stricter Requirements for California Electrical Equipment

By Latham & Watkins LLP on March 4, 2019 Posted in California, Environmental Regulation

California proposes phasing out the use of SF6 in GIE and further reducing allowable GHG emissions from such equipment.

By Aron Potash and Kimberly D. Farbota

California Air Resources Board (CARB) staff recently published a discussion draft (Draft Amendments) of potential changes to the current Regulation for Reducing Sulfur Hexafluoride Emissions from Gas Insulated Switchgear (SF6 Regulation).

Key proposed changes to the SF6 Regulation include:

Phasing out sulfur hexafluoride (SF6) gas-insulated equipment (GIE)
Further reducing allowable emissions from GIE
Expanding the regulation to encompass greenhouse gases (GHG) other than SF6

CARB held a workshop in Sacramento on February 25, 2019, during which staff presented an overview of changes proposed in the Draft Amendments and answered stakeholders’ questions. During the workshop, staff stated that CARB would like to hear any questions or concerns stakeholders may have about the Draft Amendments. Continue Reading

California Court of Appeal Agrees Two Activities Constitute One CEQA Project

By Latham & Watkins LLP on January 16, 2019 Posted in California, CEQA, Environmental Litigation, Environmental Regulation, Permitting

CEQA Case Report: Understanding the Judicial Landscape for Development[I]

By Christopher W. Garrett, Daniel Brunton, James Erselius, and Derek Galey

In a published decision issued June 12, 2018, County of Ventura v. City of Moorpark, Case No. B282466, the California Court of Appeal rejected part of the County of Ventura and the City of Fillmore’s (Petitioners’) appeal and affirmed the trial court’s decision that a beach restoration project undertaken by Broad Beach Geologic Hazard Abatement District (BBGHAD) and a related settlement agreement with the City of Moorpark (City) were exempt from CEQA review.

In summary, the court determined:

Two separate activities can constitute one “project” under CEQA so long as those activities serve a single purpose, have the same proponents, and are inextricably linked.
Courts do not balance the policies served by statutory exemptions against the goal of environmental protection because the legislature has already determined that the policy benefits of the exemption outweigh the benefits of environmental review.

The trial court determined that the beach restoration project and the related settlement agreement between BBGHAD and City were a single statutorily exempt project. Petitioners appealed on the grounds that even if the beach restoration was exempt, the settlement represented a separate, non-exempt project that was not properly reviewed under CEQA.

GIS Owners in California Must Comply With SF6 Regulation

By Latham & Watkins LLP on January 11, 2019 Posted in California, Energy regulatory

Gas-insulated switchgear owners face easy-to-miss, CARB-enforced emissions requirements.

By JP Brisson, Aron Potash, R. Andrew Westgate, Kimberly D. Farbota, and Christopher C. Antonacci

Since 2011, the California Air Resources Board (CARB) has regulated sulfur hexafluoride (SF6) emissions from gas-insulated switchgears (GIS). CARB’s SF6 Regulation applies to all entities that own GIS, including many entities that do not otherwise emit and report greenhouse gas (GHG) emissions such as wind farms, solar parks, and geothermal plants. Accordingly, some companies may not have realized that they are subject to the SF6 requirements. The SF6 Regulation includes emission rate limits, mandatory operating procedures, and recordkeeping and reporting requirements, as well as providing for monetary penalties in the event of a violation.

Background on SF6 Gases

SF6 is used in GIS equipment to protect electrical power plants and distribution systems by insulating circuits and interrupting electric currents. Since the initial use of SF6 in the 1950s, SF6-containing circuit breakers, transformers, switches, fuses, and other equipment have been used regularly because SF6 is non-flammable, non-corrosive, non-toxic, and an effective arc suppressant, which allows SF6 equipment to have a small footprint and be relatively low maintenance. GIS containing SF6 gases are typically found in most if not all substations and at many power generating facilities, including natural gas plants, wind farms, solar parks, and geothermal plants.

California Supreme Court Clarifies Standard of Review for EIRs and Requirements for Air Quality Impact Analyses

By Latham & Watkins LLP on January 8, 2019 Posted in California, CEQA

CEQA Case Report: Understanding the Judicial Landscape for Development^[I]

By Marc T. Campopiano, Christopher W. Garrett, Nathaniel L. Glynn, and Natalie C. Rogers

In a published opinion issued December 24, 2018, Sierra Club v. County of Fresno, Case No. S219783, the California Supreme Court determined that an environmental impact report (EIR) prepared and certified by Fresno County (County) for a development project failed to include certain information and analysis required by CEQA. The California Supreme Court held that the EIR did not adequately discuss potential health consequences that could be caused by a significant increase in pollutants resulting from the development project. In summary, the California Supreme Court determined:

A discussion of potential environmental impacts in an EIR must include sufficient detail to enable those who did not participate in its preparation to understand and to meaningfully consider the issues raised by the proposed project.
The issue of whether a discussion in an EIR is sufficient is a mixed question of law and fact subject to de novo review, though underlying factual determinations in an EIR are subject to a more deferential standard.
An EIR must either make a reasonable effort to correlate a project’s significant air quality impacts to potential health consequences, or explain why providing such an analysis is not feasible.
A lead agency does not impermissibly defer mitigation if it leaves open the possibility of employing better mitigation efforts consistent with improvements in technology.
A lead agency may adopt mitigation measures that do not reduce a project’s significant and unavoidable impacts to a less-than-significant level, so long as the agency can demonstrate in good faith that the mitigation measures will be at least partially effective in mitigating impacts.