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A little bit of background is necessary to understand the issues and potential ramifications associated with the lawsuit over California’s LCFS. In 2009, CARB finalized the LCFS, which would require a 10% reduction in the carbon intensity (“CI”) of the state’s transportation fuels by 2020. The rule defines CI as the amount of lifecycle GHG emissions, per unit of energy of fuel delivered. The rule assessed different CI values for various types of ethanol, including assigning lower CI values to California corn-derived ethanol than to Midwest corn-derived ethanol. In addition, the rule created a CI distinction with regard to conventional and unconventional crude oil, including fuels derived from the Canadian oil sands. CARB does allow for a producer to obtain a customized CI value if it can demonstrate that its energy use data “deviates substantially from that of the pathways” represented in this initial rule. 

Judge O’Neil’s ruling held that California’s LCFS violates the Commerce Clause. First, the ruling found that the LCFS facially discriminated against out-of-state ethanol by penalizing Midwest producers for larger lifecycle GHG emissions. Judge O’Neil also agreed with the plaintiffs’ argument that the LCFS is attempting to control commerce wholly outside the state’s border. Finally, Judge O’Neil ruled that CARB failed to demonstrate that reducing climate change could be achieved through other non-discriminatory means. According to Judge O’Neil, there are other non-discriminatory means to reducing GHG emissions from the transportation sector, including adopting a tax on fossil fuels.  

If upheld by the Ninth Circuit, Judge O’Neil’s ruling could potentially signal a blow to other state and regional climate initiatives. Several Northeastern states are working on developing a clean fuel standard based in part on California’s LCFS and with the goal of reducing the CI value of transportation fuels by 10% over the next decade. Oregon and Washington State are also considering adopting a LCFS based on California’s model. Judge O’Neil’s ruling could influence these fledgling fuel standard efforts by encouraging states to eliminate CI distinctions between different types of ethanol and conventional and unconventional crude.  

It will also be important to monitor the effect of this ruling on other state climate initiatives. In one notable case, North Dakota, electric cooperatives and coal producers are suing Minnesota over its Next Generation Act. Minnesota’s legislation committed the state to reducing GHG emissions 30% by 2023 and 80% by 2050. Specifically, the legislation prohibited utilities from purchasing power from new plants unless the GHG emissions associated with that power are fully offset. The lawsuit contends that Minnesota’s law violates the Commerce Clause by discriminating against North Dakota’s coal interests. North Dakota is home to one of the world’s largest reserves of lignite coal, which provides a majority of the fuel used in Minnesota’s coal-fired power plants.   The state’s power plants also export significant amounts of electricity to Minnesota. The plaintiffs are also arguing that exemptions provided in the law for four specific projects favor Minnesota businesses at the expense of North Dakota business interests. Undoubtedly, the plaintiffs will point to Judge O’Neil’s ruling in urging the court to block Minnesota’s Next Generation Act.    

Judge O’Neil’s ruling could also spur a proliferation of lawsuits challenging other state climate regulations. 

The court heard more than 75 minutes of argument.  Based on the questions asked, the court did not appear inclined to rule on standing grounds, as both the utilities' lawyer and the Acting U.S. Solicitor General have urged.  Indeed, during their respective presentations, the court's traditionally more conservative Justices asked questions seeming to defend the role of the federal courts in interpreting common law.

On the other hand, the lawyer representing the state interests experienced difficulty describing a "manageable" lawsuit and was peppered with questions by the court's traditionally more liberal Justices.  Manageability is key to the political question doctrine analysis.  The issues that the court seemed to struggle with here include the extent to which EPA has acted decisively, or when and to what extent it will do so.  The states' lawyer urged the court not to shut the courthouse door to state nuisance lawsuits based solely on "a promise to regulate." 

Judging from commentary published following the argument, the general consensus seems to be that this particular lawsuit is likely to fail, but on narrower grounds than some opposed to the suit had hoped, and without shutting the door entirely on climate change-related tort claims.  Somewhat predictably, business-oriented publications have been more willing to speculate that a decision preventing the AEP case from going forward will put an end to climate change-related tort litigation, whereas members of the plaintiffs' bar have opined that an adverse decision in AEP would present only a temporary setback, after which additional legal theories will be developed and tested (similar to the litigation history in the asbestos, tobacco, and hazardous waste contexts).  More interestingly, some reports have quoted attorneys who represent chemical, refining, manufacturing and insurer organizations -- which naturally would oppose continued litigation in this area -- as stating that climate change litigation is likely to continue regardless of how the high court rules.

Notwithstanding the various predictions concerning the future of litigation in this area, there is likely to be at least a temporary respite while observers wait to see what the Supreme Court rules and, more importantly, how the ruling is crafted.  Indeed, there is current evidence to support such a notion, given the status of two pending cases related to climate change and/or common law nuisance. 

First, in North Carolina v. TVA, a petition for writ of certiorari is currently pending. Although the Supreme Court could have decided to hear the case at the same time asAEP, it now appears that the court will decide whether to take the case after it decidesAEP.   The facts of the North Carolina v. TVA case are as follows.  In 2006, North Carolina, on behalf of its citizens, sued the Tennessee Valley Authority (TVA) and alleged that TVA’s coal-fired power plants were a public nuisance.  The trial court agreed as to some plants and issued an injunction requiring use of additional pollution control technology.  In 2010, the Fourth Circuit reversed and held that the trial court had applied the wrong state law and that the plants’ emissions did not create a nuisance.  The holding implied that a broad range of causes of action (such as nuisance actions related to climate change) could be preempted by the Fourth Circuit’s broad view of the Clean Air Act. North Carolina then filed a petition for writ of certiorari with the Supreme Court. Depending on whether the Court decides AEP on narrow or broad grounds, preemption could be the next big question in climate change litigation.  Only the question of thefederal common law of nuisance is before the Court in AEP.  Thus, further cases may be needed to decide the preemption issue.

Second, the Kivalina litigation in the Ninth Circuit currently is on hold, too.  In Kivalina, a coastal Native Alaskan village of approximately 390 Inupiat residents sued 24 oil and energy companies, claiming that the large quantities of GHGs emitted by the defendants contribute to climate change, which in turn has caused coastal ice to melt, resulting in coastal erosion that will require relocating the village (at an estimated cost of $400 million).  This case remains pending before the Ninth Circuit, where it has been stayed until the Supreme Court rules in AEP v. Connecticut.

In sum, the future of climate change-related tort litigation undoubtedly will be affected to some degree by the Supreme Court's decision AEP v. Connecticut.  Whether or not the case is allowed to proceed is likely to be less significant in this regard than the particular bases articulated for the Court's decision, as well as whether a majority of Justices can reach agreement.  

In the Senate, most of the anticipated action will take place in the Senate Energy & Natural Resources Committee (SENR) where the bipartisan leadership of Chairman Bingaman and Ranking Member Murkowski are essential for success.  Senator Bingaman met with President Obama at the White House shortly after the State of the Union to discuss the CES but has remained guardedly supportive of the President’s proposal.  Senator Murkowski remains in a listening mode but open to the discussion.

Today, Majority Leader Harry Reid indicated that Murkowski and Bingaman “have an agreement on the standard.”  However, within hours of that statement Murkowski stated that the Majority Leader had “jumped the gun.” 

Reaching bipartisan agreement will come down to definitions of what is “clean.”  “Clean” in the White House agenda focuses on air emissions, primarily greenhouse gas emissions.  However, opponents of that approach are more focused on the broader lifecycle of environmental impacts associated with any given energy source. Some don’t consider coal even with carbon capture & storage to be clean noting coal ash and other challenges to the sector. Others don’t consider nuclear “clean” citing waste issues in particular.  Secretary Chu during testimony today before SENR on the DOE budget was specific in describing eligible clean energy sources as including nuclear as noted here in a section of his written testimony:

"A Clean Energy Standard will provide a clear, long-term signal to industry to bring capital off the sidelines and into the clean energy sector. It will grow the domestic market for clean sources of energy – creating jobs, driving innovation and enhancing national security. And by drawing on a wide range of energy sources including renewables, nuclear, clean coal and natural gas, it will give utilities the flexibility they need to meet our clean energy goal while protecting consumers in every region of the country."

In the Senate, feasibility of a CES will largely come down to how many votes will be gained by broadening the definition of “Clean” as envisioned by the Obama Administration versus the number of votes that will be turned off by such an approach.  One can expect Senate hearings and negotiations to begin in earnest on a CES in mid-to-late March at the earliest.

Feasibility of the Clean Energy Standard in the House of Representatives appears to be more a matter of overcoming distaste by Republican leadership for perceived government mandates of such a legislative approach.  House Energy and Power subpanel chairman Ed Whitfield, speaking this morning to National Electricity Forum made his view known on a CES: "My preference is that we not try to establish a federal standard. Now there are some on my committee that disagree with that, I know that some in the Senate disagree with that. So that’s another issue that we’ll be looking at as we move forward.”

The Comer v. Murphy Oil USA case originated in Mississippi. In the aftermath of Hurricane Katrina, Gulf Coast property owners sued oil companies, coal companies, and chemical manufacturers for property damage alleging that the companies’ greenhouse gas emissions contributed to global warming which in turn contributed to increased sea levels and the ferocity of Hurricane Katrina. The district court dismissed the case on political question doctrine and standing grounds, but the Fifth Circuit originally reversed holding that (1) plaintiffs had standing to bring their nuisance, trespass, and negligence claims; and (2) plaintiffs’ nuisance, trespass, and negligence claims did not present non-justiciable political questions. The Fifth Circuit did not reverse the trial court’s decision that plaintiffs did not have standing to bring their unjust enrichment, fraudulent misrepresentation, and civil conspiracy claims.  

The Defendants sought rehearing en banc by the Fifth Circuit. Seven of the sixteen judges recused themselves leaving nine active judges, the minimum quorum needed for en banc review. Six of the nine judges voted to grant rehearing en banc. This grant had the effect, per court local rules, of vacating the initial Fifth Circuit decision. After the briefing began, an additional judge recused herself. The Fifth Circuit concluded (with some judges dissenting) that it no longer had a sufficient en banc quorum for the appeal to continue, and thus dismissed the case. With the original Fifth Circuit decision already vacated, this meant that the original trial court decision dismissing the case was reinstated. Plaintiffs then filed a petition for writ of mandamus. 

What happens next? If the Supreme Court decided to grant the petition in Comer, the Court would decide whether the Fifth Circuit should have dismissed the case after determining that it lacked a quorum to proceed with the rehearing en banc. This question is a constitutional and statutory one. Thus, if the Court takes the case, it would not be deciding any of the underlying climate change-related issues. Instead, those will be addressed in AEP v. Connecticut. AEP is one of the other two major climate change-related tort cases. At issue in AEP is whether states can seek redress under federal common law for the effects of climate change allegedly caused by anthropogenic (i.e., man-made) greenhouse gas emissions. The third case—Kivalina v. ExxonMobil, in which an Inupiat Eskimo village sued twenty-four oil, coal, and electric utility companies, alleging that their emissions have contributed to global warming and thereby caused Arctic sea ice to diminish—is still pending on appeal in the Ninth Circuit. 

Even though the questions before the Supreme Court do not directly relate to the underlying climate change allegations, a decision to take the case still could have some impact on the future of climate change litigation. If there is a narrow ruling in AEP, it is possible that Comer could still proceed and address additional issues.  AEP will address the application of the political question doctrine, displacement of federal common law, and standing as it relates to the allegations of states, cities, and three private groups that six companies’ plants are creating a nuisance and thus their GHG emissions should be capped. Comer, by contrast,is not limited to nuisance. Comer relates to a multitude of sources whereas AEP focuses on a more limited set— this could impact the judicially manageable standards prong of the political question doctrine analysis. Comer has a set of private plaintiffs, potentially differentiating the standing analysis from AEP primarily involving states. Depending on the breadth of any Supreme Court ruling in AEP, a return trip to the Court might be necessary in other cases. If threshold issues are surmounted, AEP and Comer also present different causation scenarios. Comer has the most attenuated chain of events in support of causation of the three pending climate tort cases. 

At various times in the course of the ongoing climate change debate, there has been a disconnect in some areas of the U.S. between scientific reports such as the WMO's and governmental or other public perceptions of and reactions to climate change.  That appears to be changing, however, based on a couple of recent reports concerning the effects of climate change on particular resources.  For example, as reported by the AP on December 2, Alaska wildlife officials have released a report acknowledging that scientific and traditional evidence increasingly shows climate change at unprecedented rates throughout the Arctic. The Alaska report, entitled "Climate Change Strategy," says warming temperatures could affect Alaska's bodies of water and also notes the potential for fire patterns, altered stream flows, and coastal erosion.  This represents a significant departure for the state, which is suing to overturn the federal listing of polar bears as a threatened species because of declining sea ice habitat. 

In a similar vein, a New York Times piece released just before Thanksgiving notes that residents of the Larchmont neighborhood in Norfolk, VA, are now forced to pay close attention to the lunar calendar to avoid the effects of tidal flooding that increasingly are disrupting life in their community (as well as elsewhere along the East Coast).  The Norfolk residents are forced, among other things, to park their cars in different areas, change their routes, avoid traveling to certain locations at certain times, etc.  The principal cause of this disruption is the fact that Norfolk -- which is bounded on three sides by water -- has experienced the highest relative increase in sea level on the East Coast -- 14.5 inches since 1930.  As water backs up into city streets and front lawns become too saline to support grass, the residents have vigorously lobbied city, state, and federal authorities to take action.  Indeed, significant investments have already been made, but with the sea level continuing to rise, there is a growing perception that it makes less sense to continue to do so.  In any event, as with the report out of Alaska, the issues in Norfolk highlight the disconnect between public perceptions/action regarding climate change and reality that is increasingly difficult to ignore.  So, whereas Virginia AG Ken Cuccinelli is trying to prove that a prominent climate scientist engaged in fraud when he was a researcher at the University of Virginia, the affected residents of Norfolk are less interested in such politically motivated debate.  Rather, as one resident interviewed for the Times article expressed, "No one who has a house here is a skeptic." 

Proponents of AB32 are answering the charge. Joe Romm, a well-known climate expert and blogger, considers it to be "one of the most progressive pieces of environmental legislation ever enacted." According to Romm, in addition to reducing pollution levels and dependence on foreign oil, AB32 is spurring market growth in California’s clean tech and clean energy industries. His climate blog reports that AB32 has stimulated more than $9 billion of private investment, helped pave the way for more than 12,000 companies, and has contributed to the creation of more than 100,000 green jobs. Also, by sending a clear carbon price signal, AB32 provides the long term market certainty necessary for businesses to invest. As a result, California’s clean energy sector has grown stronger and now sits at the forefront of our nation’s energy innovation. In 2007 alone, Californian businesses patented 1,401 new clean technologies, constituting one sixth of all clean energy technology patents in the nation for that year. Contrary to the arguments of the jobs initiative, supporters of AB32 argue that the law has helped buoy California’s economy through the recent recession.

Megan McGowan suggests http://solveclimate.com/blog/20100818/are-moderate-republicans-obamas-leadership-keys-federal-climate-law   that a lack of Presidential leadership and no support from moderate Republicans are to blame for failures on cap-and-trade legislation and these dynamics will need to change for future success. The article quotes Republicans and environmentalists who think Obama needs to stop listening to nervous political advisors, get out of listening mode, get bipartisan agreement on principles, lock the door with moderates and come out when there is a deal. Similarly, McGowan notes the reality of climate change and the likely change of margins in the next Congressional session will require moderate Republicans to come to the table, as simple party opposition will no longer be a politically feasible position.

An alternative “what now” analysis comes from Michael Brune, the new head of the Sierra Club, the nation’s largest conservation organization. In an interview with Yale Environment 360 http://e360.yale.edu/content/feature.msp?id=2303, Brune suggests the path forward is a multi-pronged attack on climate change. This alternative path would put less emphasis on one-single bill and moderate deal-making, and emphasize:

·        Less environmental ngo-corporate collaboration on cap-and-trade policy replaced in part by a more adversarial approach until corporations make clear commitments to change their operations and public policy positions.

·        Grassroots campaigns to prevent the building of new coal-fired power plants,

·        Public support for EPA actions to reduce pollutants in the air,

·        Scaling up renewable energy support, and

·        Scaling up production and demand for natural gas.

Both perspectives share a common goal of creating political space in Washington, D.C. to create meaningful action on climate change.  At the core of McGowan’s article is an implicit deal-making that involves grand concessions to traditionally intensive ghg sectors such as coal and oil, whereas there is likely less room for such concessions in the path suggested by Brune. It remains to be seen if a political path forward can accommodate both perspectives.