Association of Irritated Residents, et al. v. California Air Resources Board (2011)

Background

On September 27, 2006, then Governor of California Arnold Schwarzenegger signed into law the Global Warming Solutions Act of 2006, or AB 32. The law seeks to fight climate change through comprehensive program reducing GHG emissions from all sources statewide. The act requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will cut the state’s GHG emissions to 1990 levels by 2020—a 25% reduction statewide.

On December 17, 2010 CARB selected a cap-and-trade program as the market mechanism to cut the state’s GHG emissions. CARB scheduled the program to take effect in 2012, placing a limit that would decrease by two percent each year through 2015. From 2015 through 2020, the proposed limit would decrease by three percent annually. AB 32’s rules would first apply to some of the major emitters—utilities and large industrial plants. In 2015, the rules would apply to fuel distributors as well, eventually totaling 360 businesses throughout California. The market would begin with a distribution of free allowances to businesses accounting for approximately 90 percent of the business’s overall emissions; however, for any additional emissions, the business must purchase the necessary allowances.

Case Discussion and Holding

On December 19, 2010, two days after CARB’s selection of a cap-and-trade program, a number of associations—among them the Association of Irritated Residents (AIR)—filed suit against CARB. The complaint alleged that CARB failed to meet the requirements of AB 32 as well as those for the California Environmental Quality Act (CEQA). AIR asked the court to require CARB to correct the deficiencies under both AB 32 and the CEQA before allowing implementation to proceed.

AIR alleged that CARB violated the requirements of AB 32 in three ways. First, AIR claimed CARB excluded sectors of the economy from emissions controls. Thus, selecting a cap-and-trade program could not allow for a determination of whether potential reduction measures achieved maximum technologically feasible and cost effective reductions. Second, CARB did not adequately consider the total costs and benefits to the environment, economy and public health before selection of its plan. Finally, CARB did not consider—as instructed to do in AB 32—information regarding GHG emission programs throughout the United States and the world.

The Court determined that the implementation and interpretation of AB 32 was delegated to CARB; thus, on review, the Court largely deferred to CARB’s findings and interpretations under an “arbitrary and capricious” standard of review. This standard affords CARB a “wide latitude” for interpretation and implementation, and challenging a determination under this standard is an extraordinarily difficult task. In this case, AIR was unable to overcome this burden, and the Court held that CARB’s findings satisfied the requirements of AB 32.

AIR also claimed that CARB violated the requirements under the CEQA in three ways. AIR’s first claim was that CARB did not “adequately analyze the impacts of the measures described” in the plan. Second, AIR claimed that CARB did not sufficiently consider alternatives to their chosen plan. Finally, in light of the first two allegations, AIR claimed that CARB approved and implemented its plan before completing the necessary environmental impact review (EIR).

In reviewing CARB’s compliance with the CEQA, the Court used a lesser standard—abuse of discretion. Under this standard, CARB’s findings would be upheld unless there was “no substantial evidence” supporting its decision or CARB did not proceed in a manner required by law. On the first claim, the Court found that CARB did not need to provide a comprehensive analysis of the various details of the plan that would be implemented at a later date. However, on AIR’s second and third claims, the Court found CARB in violation of the CEQA. With regard to CARB’s failure to analyze alternatives, the Court noted that CARB provided five alternatives to the selected plan. The first alternative, “no project,” received 10 pages worth of discussion in the documentation supporting CARB’s plan. However, the total discussion for the other four alternatives yielded only three pages in the same document. The Court was unsatisfied that the other four alternatives received sufficient analysis, and held that CARB violated the CEQA stating that CARB’s “analysis provides no evidence to support its chosen approach.” The Court also decided the third claim against CARB. On this issue, the Court treated a resolution adopted by CARB at a hearing in December 2008 as initiating the approval of CARB’s plan. However, the finalization of CARB’s CEQA review was not finalized until May 2009. In light of CARB’s “jumping the gun,” the Court held that CARB had not complied with CEQA’s requirements.

In response to CARB’s failures under the CEQA, the Court issued an injunction preventing any further implementation of the measures contained in the selected plan until CARB has satisfied the requirements of the CEQA.

Implications for Climate Change Policies

The result of the case will complicate California’s scheduled implementation of AB 32’s requirements. CARB may appeal to have the injunction removed. If the injunction is removed, CARB would be able to work on meeting its CEQA requirements during implementation of the plan (or more likely, during any appeals process that takes place). However, if the injunction is not lifted, CARB has a significant amount of work ahead that could slow the implementation of its plan. To satisfy the requirements of the CEQA, CARB will have to redo its analysis of proposed alternative plans and initiate another round of public comments.