Legal Challenges Await California Ban

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California’s move to ban new sales of gasoline vehicles faces a long road, with potential legal and political battles already emerging. Opponents say California's policy is at odds with federal jurisdiction over clean air policy and constitutional provisions governing interstate commerce. The oil and auto industries, among others, are likely to put up a major fight and showdowns in federal court are virtually guaranteed. "This is an important enough issue that it's likely to go to the Supreme Court," says Jeff Holmstead, a former Environmental Protection Agency (EPA) air official under former President George W. Bush. Gov. Gavin Newsom's Sep. 23 executive order directs California regulators to ban new sales of passenger vehicles running on internal combustion engines (ICE) by 2035 (OD Sep.23'20). The order also calls for medium- and heavy-duty vehicle sales to be 100% zero-emission by 2045 "where feasible," creating risks for the diesel market as well. The move would vastly hasten the decline of fuel consumption in a large slice of the US oil market (OD Sep.24'20). Legal Limbo Part of the legal tension comes down to state versus federal authority, sources tell Energy Intelligence. For example, opponents could argue that California’s policy is at odds with federal powers under the US Energy Policy and Conservation Act, the law underpinning national fuel economy regulations. It could also clash with the EPA's pre-eminence under the Clean Air Act to regulate tailpipe emissions. California may need a waiver to impose tougher rules of any kind than what the federal government sets (OD Sep.20'19). Another source of legal uncertainty is the Commerce Clause of the US Constitution, which grants Congress the power to regulate commerce between states. For example, it's unclear if Newsom's ban would bar consumers from purchasing ICE vehicles outside California's borders. “If you go to Arizona or Nevada, buy your car, and drive it back to California, will California register those cars? It raises Commerce Clause issues,” says Frank Maisano of law firm Bracewell and Giuliani, which represents energy industry clients. Constitutional questions could also flare up if the ban is perceived to benefit California-based companies, such as electric vehicle (EV) manufacturer Tesla, at the expense of out-of-state rivals. “It’s possible an automaker not based in California could challenge the law on that basis,” says a lobbying source. Further, the ban raises questions about the property rights of oil companies that have invested in production and related infrastructure in California and received government permits for such activity. "If the state artificially takes that away, there will be a question about whether that's an illegal taking of property," says Rock Zierman, chief executive of the California Independent Petroleum Association. He drew attention to a case involving the upstream sector, in which a court overturned a Monterey County ban on hydraulic fracturing for certain wells on the basis of property rights. Similar arguments could apply to the proposed ICE ban, Zierman suggested. Political Mobilizing Opponents of California's move are also mobilizing talking points in hopes of convincing the state to soften its approach. For now, Newsom’s goal is merely a statement of ambition and a directive to regulators. “It’s not binding,” says Derrick Morgan, a senior vice president at trade group American Fuel and Petrochemical Manufacturers. Past California ambitions on EV standards ultimately didn’t cross the finish line. “When the rubber hit the road, they had to walk it back significantly," Morgan adds. Transportation now represents the highest share of US greenhouse gases and the sector is front and center in the fight against climate change, which voters and politicians view as increasingly urgent (OD Aug.24'20).

Oil Demand, Security Risk , Low-Carbon Policy, Policy and Regulation, Electric Vehicles
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