This commentary was originally featured in Forbes on June 22, 2017
America’s most regulation-friendly court, the United States Court of Appeals for the Ninth Circuit, stunned the public on May 10th by acceding to a Trump Administration request for additional time to consider whether a state agency, the California Air Resources Board (CARB), should have unprecedented power to materially impede interstate commerce. The case, Dalton Trucking, Inc. v. EPA, was initiated by a group of small businesses and their trade associations to challenge an Obama-era approval of a CARB regulation that will affect millions of companies, workers and consumers.
CARB’s regulation governs diesel engines used in an extensive variety of off-road mobile equipment, such as lawnmowers, forklifts, graders, excavators, lifters and tractors. It affects large numbers of public and private organizations, including manufacturing companies, construction firms, mining operations, distribution centers, universities and county public works departments. It also affects individual teenagers who mow lawns for pocket money.
With supine deference to CARB’s wishes, EPA violated the Clean Air Act by approving the regulation without assessing independently whether California’s residents require emissions controls that far surpass in scope and stringency any regulatory standards applicable anywhere else in the nation.
In 1967, Congress rightly enacted the Clean Air Act to protect public health and welfare from air pollution. Recognizing that the free flow of commerce across state lines should not be inhibited by individual states enforcing up to 50 different sets of motor vehicle emissions requirements, Congress preempted state regulation and ordered EPA to promulgate a uniform, national set of standards. Because of certain localized air pollution problems caused by its unique geography and topography, California is the only state permitted by the Clean Air Act to initially deviate from the federal standards, but only if California proves to EPA that it has “compelling and extraordinary conditions” requiring emissions restrictions that differ from the federal ones.
Consistent with CARB’s notoriety as the most aggressive regulatory agency in the nation, California’s diesel requirements tighten emissions controls to such an extent that it is nearly impossible for all but the largest and most highly capitalized companies to comply. Smaller outfits do not have the cash or credit to retrofit existing vehicles or to purchase new, compliant ones. As a result, small players providing the lifeblood of economic growth are being forced out of business, while larger companies are taking over market share, decreasing competition and increasing prices for goods and services throughout the chain of distribution. EPA was complicit in this market-distorting process because it approved CARB’s regulation without reference to any demonstrated need, thereby violating EPA’s duty to reject CARB rules that are not required to meet “compelling and extraordinary conditions” in California.
Why should the rest of us care if California jumps off a cliff? California is the single largest market in the nation and the sixth largest in the world. Out-of-state firms that wish to do business in the Golden State will be required to retrofit their existing diesel fleets or purchase new equipment at great cost, effectively creating an insurmountable barrier excluding from California’s market all but the most well heeled companies. Moreover, due to an often overlooked and much misunderstood wrinkle hidden in the fabric of the Clean Air Act, other states are permitted to adopt California’s EPA-approved regulations without any further EPA oversight, thereby exporting CARB’s market-stifling stunts to the rest of the nation.
CARB objected unsuccessfully to EPA’s motion to delay the lawsuit. By giving EPA time to reconsider the diesel regulation, the Ninth Circuit’s ruling provides the new Administration with the opportunity to lawfully discharge its responsibilities under the Clean Air Act. Meanwhile, California is hiring more lawyers to see how far it can push EPA during the upcoming comment period on the reconsideration. In those proceedings, the public will have an opportunity to push back by encouraging EPA to restrain CARB’s overreaching, authoritarian hand.