On June 25, 2012, the Supreme Court issued its decision in American Coatings Association, Inc. v. South Coast Air Quality Management District, 2012 Cal. LEXIS 155822. The decision centered on 2002 amendments to the South Coast Air Quality Management District’s (SCAQMD’s) Rule 1113, which limited certain pollution-causing substances in paints and coatings. At the time the amendments were adopted, emissions from architectural coatings in the South Coast Air Basin were larger than those generated by the entire refinery community, the furniture manufacturing industry and the aerospace industry combined. As such, the amendments were intended to force innovative technology and assist the SCAQMD in meeting federal ozone standards, by substantially reducing the VOC emissions generated by architectural coatings in the District.

Notwithstanding the above, paint and coating manufacturers immediately questioned whether the reductions necessary to meet the amended Rule 1113 could be accomplished using technology that was available at the time of adoption, and without compromising both human health and safety and the quality of paint and coating products. For this reason, the American Coatings Association (ACA) filed a petition for writ of mandate seeking to prohibit enforcement of the amended rule. Among other things, ACA alleged that the adoption of the 2002 amendments exceeded the District’s regulatory authority insofar as the District could not prove that the technology necessary to meet the emission limits set in the amendments was actually “available” upon adoption. The Superior Court disagreed with the ACA and denied the request for a writ of administrative mandate prohibiting enforcement of the rule. On appeal, the ACA was victorious, however. In its decision issued September 29, 2009, the Court of Appeal held that technology cannot be considered “best available retrofit technology” unless it exists or is rolled out at the time a pollution standard is promulgated. National Paint & Coatings Assn., Inc. v. South Coast Air Quality Management District (2009) 177 Cal. App. 4th 1494.

Reversing the Court of Appeal decision on this issue, the Supreme Court confirmed that the term “best available retrofit control technology” is appropriately interpreted broadly. In doing so, the Supreme Court blessed the adoption of pollution standards that are “technology-forcing,” and solidified a hurdle that faces industry in California when such standards cannot feasibly be met by compliance deadlines. The Court’s decision validates SCAQMD’s technology-forcing program. However, technology-forcing is not without risk. The decision recognizes that in order to meet low VOC limits manufacturers must replace solvents with water or other exempt compounds and that the “substitution of water for solvents can lead to inferior performance.” Air quality does not benefit if architectural coatings perform poorly, and the District and the coating manufacturers often disagree on what can be achieved. Poor performance of architectural coatings means structures must be painted more often using more paint and resulting in greater emissions. Striking the proper balance between performance and reducing emissions is important both for air quality and those who must comply with the rule.

Indeed, in its statement issued the day after the decision the ACA had this to say:

“. . .the South Coast and other air districts have been overly optimistic in predicting future technology that will allow for the high performance products that consumers and businesses expect and need. The court’s ruling will require paint and coatings manufacturers to reassess whether it is feasible to remain in the market in Southern California, since doing so could negatively affect their ability to produce high-quality, high-performing products. This decision will undoubtedly increase regulatory uncertainty for not only paint and coatings manufacturers, but other companies wishing to do business in the unstable California market.”

From a practical standpoint, the decision means that in the event technology-forcing standards cannot be met in any context, industries may reassess how and whether it is feasible to remain in business in California. Only time will tell, however, whether the decision will have any noticeable impact on how business is conducted in California. A link to the decision in its entirety can be accessed here: http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%2020120625053.xml&docbase=CsLwAr3-2007-Curr