A second federal district court has upheld California's ability to regulate GHG emissions from mobile sources (Central Valley Chrysler Jeep, Inc. v. Goldstone, Order (E.D. Cal., Dec. 12, 2007)). Following the lead of Green Mountain Chrysler Plymouth, Inc. v. Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007), the long-anticipated Central Valley opinion rejected claims that CARB's AB 1493 program was preempted by (1) the federal Energy Policy & Conservation Act ("EPCA"), which federal DOT uses to set CAFÉ standards, and (2) federal foreign policy considerations. We focus on attention here on the former aspects of the opinion.

In reaching its EPCA holding, the Central Valley court engaged in a three-step analysis (and in so doing took a slightly different approach than that followed by the Green Mountain judge) (Order, p. 20).

(1) First, does EPA have authority to issue emission control regulations that have an effect on fuel economy?

Conclusion: Relying solely upon language from the Supreme Court's decision in Massachusetts v. EPA, the Central Valley court had no problem concluding that EPA had such authority. In reaching this conclusion, the court was persuaded that EPA had a mandate to protect the environment and public health from climate impacts, unlike DOT (which has a fuel economy mandate), and that such an EPA mandate, when implemented, might necessarily lead to improvements in fuel economy. Indeed, and in a real shocker, the court found that EPA may issue tailpipe emission standards that even conflict with DOT's CAFÉ standards (Order, p. 28). The court also suggested that improvements in fuel economy which might result from EPA regulation were necessary to mitigate the alleged harm that mobile source emissions were causing to the climate.

(2) Second, if the answer to (1) is "yes", does the EPCA preclude EPA from doing so?

Conclusion: The Central Valley court concluded that nothing in the EPCA precluded EPA from issuing tailpipe emission standards which might have the effect of impacting fuel economy standards (plus, the preemption doctrine does not apply between federal statutes). Indeed, the court found that the EPCA compels DOT to harmonize its CAFÉ regulations with "other motor vehicle standards of the Government" (Order, p. 24).

(3) Third, is there any basis for treating a state regulation that has been granted a waiver under section 209 of the federal Clean Air Act ("CAA") any differently than an EPA issued regulation?

Conclusion: The Central Valley court completed its reasoning by finding that there was nothing in the EPCA (or the CAA, for that matter) to suggest that a California standard for which a preemption waiver was granted under section 209 of the CAA was not just another "motor vehicle standard[] of the Government" within the meaning of the EPCA for which DOT must endeavor to harmonized its CAFÉ standards (Order, p. 31). The court found no legal reason to draw a distinction between a federal regulation, on the one hand, and a state regulation for which a waiver of federal preemption had been granted under section 209 of the CAA (and thereafter by section 177 of the CAA for other States that elect to adopt the California standards) (Order, p. 32).

Our take on the situation: While we had no involvement in the case, some of us were betting that CARB was destined to lose this litigation, so are now fielding calls from our bookies. We aren't saying that we are sore losers, but the court seemed to shoe-horn its preemption analysis by an overly narrow reading of the EPCA, with the result that DOT is now stuck with the unenviable task of endeavoring to harmonize, when it issues CAFÉ standards, all of the following: (i) federal tailpipe emission standards that impact fuel economy; (ii) state tailpipe emissions standards that impact fuel economy; and (iii) state fuel economy standards.

Congress, of course is poised to foist more stringent federal CAFÉ standards on the OEMs as part of the pending energy bill. Under the version of the energy bill which the Senate is debating today, with respect to "work trucks" (8,500-10,000 GVWR) and "commercial and medium heavy duty vehicles" (>10,000 GVWR), DOT must meet a "maximum feasible improvement" CAFÉ standard (while passenger automobiles must meet a new 35 mph standard). We're thinking that DOT can just shrug and say the states have it handled.

We also continue to see the aftermath of Massachusetts v. EPA working its ways through the judiciary, as the Central Valley court was greatly persuaded by the Supreme Court's reasoning in that case as to EPA's mandate generally to issue health and safety regulations related to GHG emissions.