chamber of commerce appeals decision

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  • 8/18/2019 Chamber of Commerce appeals decision

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  • 8/18/2019 Chamber of Commerce appeals decision

    4/72

    TO BE

    FILED

    IN

    THE

    COURT

    OF APPEAL

    APP 008

    Court of Appeal Case

    Number.

    COURT

    OF

    APPEAL

    THI

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    DIVISION

     

    ATTORNEY

    OR PARTY

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    number and

    address :

    Supedor

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    law co

    rn

    ATTORNEY

    FOR

    (Name):

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    ellan

    ts Cali

    forni

    a Cha

    rnbe

    r of

    Com

    mer

    ce  

    et

      l

    APPELLANT/PETITIONER:

    Ca

    lifo

    rnia

    Cham

    ber of

    Com

    mer

    ce  

    et a

    RESPONDENT/REAL

    PARTY

    IN INTEREST:

    C

    alifo

    rnia

    A

    ir

    Re

    sour

    ces Bd

     

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    t

    a

    CERTIFICATE

    OF

    INTERESTED

    ENTITIES

    OR PERSONS

    (Check

    one):

    INITIAL CERTIFICATE

    SUPPLEMENTAL

    CERTIFICATE

    Notice:

    P

    leas

    e

    read rules

    8.208

    and

    8.488

    befo

    re co

    mple

    ting th

    is

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    You may use this

    form

    for the initial

    ce

    rtific

    ate

    in

    an

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    l

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    al

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    ry writ. You

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    This form

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      There

    are

    no

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    this certificate

    under rule

    8.208.

    b

    Interested

    entities

    or

    persons

    required

    to

    be

    listed

    under rule

    8.208

    are

    as follows:

    (1)

    (2)

    (3)

    (4)

    (5)

    Full

    name

    of

    interested

    entity

    or

    person

    Nature

    of interest

     Explain :

     

    Continued

    on

    attachment

    2

     

    The

    undersigned

    certifies

    that the

    above-listed

    persons or entities  corporations,

    partnerships,

    firms,

    or

    any

    other

    association,

    but

    not

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    entities

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    their

    agencies have either

    (1)

    an

    ownership

    interest of

    10

    percent

    or

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    the party

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    entity; or (2) a

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    the

    justices

    should

    consider

    in determining

    whether

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    disqualify

    themselves,

    as

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    in

    rule

    8.208 e 2 .

    Form Approved for Optional

    use

    Judicial Council of

    California

    APP 008

    (Rev January 1

    2009]

    Cal.

    Rules

    of

    Court,

    rules 8.209.

    8

    488

    www

    Courtinfo cv

    gnu

    Date:

    Octo

    ber

      7 2

    014

    JAM

    ES R PA

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    (TYPE

    OR PRINT

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    CERTIFICATE

    OF

    INTERESTED ENTITlES OR

    PERSONS

      TURE

    OF PARTY OR ATTORNEY(

    Page

     

    of

     

  • 8/18/2019 Chamber of Commerce appeals decision

    5/72

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  • 8/18/2019 Chamber of Commerce appeals decision

    6/72

    4

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  • 8/18/2019 Chamber of Commerce appeals decision

    7/72

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  • 8/18/2019 Chamber of Commerce appeals decision

    8/72

     

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     ..

     

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    :

     ..

     

    V

  • 8/18/2019 Chamber of Commerce appeals decision

    9/72

    TABLE

    OF

    AUTHORITIES

    r

    Page s

    CASES

    [

    Addison

    v.

    Department

    ofMotor

    Vehicles

     1977

    69

    Cal.App.3d

    486

    24, 26

    [

    Ailarito

    Properties,

    Inc.

    v. City

    of

    Haf

    Moon

    Bay

     2006

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    Cal.App.4th

    572

    28

     

    American

    Federation

    ofLabor

    v.

    Unemployment

    Ins.

    Appeals

    Bd .

     1996

    13

    Cal.4th

    1017

    1, 24

    Assn.for

    Retarded

    Citizens

    ii.

    Dept. of

    Devp. Svcs.

    r

     1985)

    38 Cal.3d

    384

    26

     

    Calif

    Assn.

    of

    Prof

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    v.

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    [

     2000

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    Calif

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    Industry Assn.

    v.

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    Valley

    Air

    Pollution

    Control

    District

     

    2009 178 Cal.App.4th

    120

     

    j

    Calif Farm Bureau

    Federation

    v. State

    Water

    Resources

    Control Bd.

     2011

    51

    Cal.4th

    421

    passim

    Cal.

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    Assn. v.

    Matosantos

     2011 53 Cal.4th

    231

    22

    Citizens Assoc.

    of

    Sunset

    Beach

    v.

    Orange

    Co. LAFCO

     2012 20 9 Cal.App.4th

    1182

    23

     

    Citizens

    to

    Save California

    v.

    California

    Fair

    Political

    Practices Commission

     ]

     2006

    145

    Cal.App.4th

    7 6

    11, 26, 27

    Collier

    v.

    City

    and

    County

    ofSan

    Francisco

     2007

    151

    Cal.App.4th

    1326

    43 ,

     

    Conservatorship

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    Whitley

     

    2010

    50

    Cal.4th

    1206

    i6, 19

    [

    vi

  • 8/18/2019 Chamber of Commerce appeals decision

    10/72

    C

    urti

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  • 8/18/2019 Chamber of Commerce appeals decision

    12/72

    Ste.

    Marie

    v.

    Riverside

    County

    Regional Park

    and

    Open-.

    Spa ce

    District

     2009 46

    Cal.4th

    282

    31

    Townzen

    v. El

    Dorado

    County

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    64

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    1350

    40

    Yamaha Corp.

    ofAmerica

    v.

    State

    Bd.

    of

    Equalization

     1998 19 Cal.4th

     

    26

    CALIFo1uiIA

    CoNsmu’rioN

    CAL.

    C0NsT. art.

    XIII

    11

    CAL.

    CONsT. art.

    XIIIA

    5,

    41

    CAL. CONsT.

    art.

    XIIIA,

    §

    3

    37

    STATuTEs

    Cal.

    Stats.

    1991,

    ch .

    799

     AB 2038 ,

    §

    3

    43

    Cal. Stats. 2005, C.

    488

     AB 32

    passim

    Cal. Stats.

    2012,

    ch .

    39

     SB ioi8 ,

    §

    25

    9

    Cal.

    Stats.

    2014, ch.

    2

     SB 103

    42

    Cal.

    Stats.

    2014, ch. 25  SB

    852

    41

    Cal. Stats.

    2014, ch.

    36

     SB

    862

    42

    Cal.

    Govt.

    Code

    §

    16428.8 a

    b

    9

    Cal.

    Health

     

    Saf

    Code

    §

    25205.6

    50

    Cal.

    Health  

    Saf. Code

    §

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    38599

    6

    Cal.

    Health  

    Saf.

    Code

    §

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    13

    Cal.

    Health

     

    Saf.

    Code

    §

    3850 1 a

    4

    Cal.

    Health  

    Saf.

    Code §

    3850

    i b

    4

     x

  • 8/18/2019 Chamber of Commerce appeals decision

    13/72

     lean

    Air

     ct

    42

    U.S.C.

     

    765

    lo d 2

    33

    42

    U.S.C.

     

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    lo d 3

    33

    Cal.

    Health  

    Saf.

     ode

     

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    14

    Cal. Health

     

    Saf.

    Code

     

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    14

    Cal.

    Health

     

    Saf.

     ode

     

    3850

    1 e

    14

    Cal. Health

      Saf.

     ode

     

    3850 1 h)

    14

    Cal.

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      Saf.

     ode

     

    38505 a

    8

    Cal.

    Health

      Saf.

     ode

     

    38505 k

    7

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    Health

      Saf.

     ode

     

    38530

    6

    Cal.

    Health

     

    Saf.

    Code

     

    38550

    6,

    7

    Cal.

    Health

      Saf.

    Code

     

    38560

    7

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    Health

      Saf.

     ode

     

    385

    61 b)

    7

    Cal. Health

     

    Saf.

    Code

     

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    7,

    20 ,

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     ode

     

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    62 a

    8

    Cal.

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    Code

     

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    Health  

    Saf.

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    7

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    passim

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    8

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     ode

     

    105310 f

    former Health  

    Saf.

    Code372.7 f

    43

     

  • 8/18/2019 Chamber of Commerce appeals decision

    14/72

    REGULATIONS

    Cal

    C

    ode Regs

     

    Ti

    t 17

    Div

    3

    Ch 1

    Sub

    ch.

    10 Art

    8

    17C C R

    95

    801

    et

    seq

    8

    17

    C C R

    95

    802

     a

    8

    17C C R

    95

    802

    a 8

     

    8

    17

    C C R

    95

    802

     a 4

    1

    8

    17

    C C R

    9

    5802

     a

    55

    8

    17 C C R

    95

    810

    -958

    14

    8

    17

    C.C

    .R.9

    5811

    8

    17 C C R

    9581

    2

    8

    17 C C R

    95

    830  

    95

    834

    5

    17 C C R

    9584

    0

    8

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    95856

    8

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    70

    pass

    im

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    9

    5890

    -958

    92

    10

    17 C C R 95

    959

    5

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    17 C C R

    9

    59

    10

    17

    C C R

    95912 k 

    9

    17 C C R i

     

    9

    17

    C C R

    9

    592

     

    9

    17 C C R

    959

    9

    xi

  • 8/18/2019 Chamber of Commerce appeals decision

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    OTHER

    AuTH01UTIES

    58

    Cal.Jur.3d

    564  Statutes

     

    135

    31,

    32

    76

    Ops.Cal.Atty.Gen. 11

     1993

    25

    Cal.

    Air

    Resources

    Bd.

    Archived Auction

    Information

     

    Results

     Sept. 18

    2014 ,

    available

    online

    at

    http

      //www.

    arb.

    ca.gov/cc/capandtrade/auction/auctio

    n_archive.htm

    10

    Cal.

    Air

    Resources

    Bd.

    California Greenhouse

    Gass

    Inventory

    for

    2

    000-2012

     

    By

    Category

    as

    Defined

    in

    the

    2008

    Scoping

    Plan

     Mar.

    24, 2014 ,

    available

    online

    at

    http   //www.

    arb . ca.gov/cc/inventory/data/tables/ghg_i

    nventory_scopingplan_00-12_2014-03-24.pdf

    47

    Cal. Legislative

    Analyst’s Office

    The

    2012-13 Budget:

    Funding

    Requests for

    High-Speed

    Rail

     Apr.

    17, 2012 ,

    available online

    at

    http

      //www.lao. ca.gov/analysis/2o12/transportation/hi

    gh-speed-rail-o41712.aspx

    42

    Clerk of the California

    Assembly,

    Assembly

    Handbook

     2005-2006 ,

    available online

    at

    http://clerk.assembly.

    ca.gov//clerk/billslegislature/doc

    uments/Asm_Handbook_2005-o6.pdf

    30

    Clerk of the California

    Assembly,

    Assembly

    J-Iandbook

     2011-2012 ,

    available

    online

    at

    http

     

    //www.leginfo.ca.gov/pdf/2011_12_Legi_HandBo

    ok.pdf

    30

    Regional Greenhouse Gas

    Initiative, Inc.,

    RGGI

    States’

    First

    CO

    Auction

    Off

    to

    a Strong

    Start  Sept.

    29,

    2008 ,

    available

    online

    at

    http  

    / /w .rggi .org /docs/ rggpress929

    2008

    .pdf

    34

    xi i

  • 8/18/2019 Chamber of Commerce appeals decision

    16/72

    U.S.

    Environmental

    Protection

    Agency Sources of

    Greenhouse

    Gas Emissions

     Apr.

    17

    2014

    available

    online

    at

    http

      //www

    epa gov/climatechange/ghgemissions/sour

    ces/lulucf html

    47

    XII’

  • 8/18/2019 Chamber of Commerce appeals decision

    17/72

    I.

    INTRODUCTION

    AND

    SUMMARY

    OF

    ARGUMENT

    This

    lawsuit

    addresses

    only one

    component

    of the regulatory

    program

    adopted

    by California’s

    Air Resources Board

    following

    the

    Legislature’s

    enactment

    of

    Assembly

    Bill 32 to reduce

    greenhouse

    gas

     GHG emissions.

    The

    lawsuit

    does

    not

    challenge the

    merits

    of

    climate change science;

    it

    does

    not

    challenge

    the Legislature’s

    authority

    to

    regulate

    GHG

    emissions in California;

    and it

    does not

    challenge

    the

    Board’s decision

    to

    use a “cap and

    trade”

    method

    of

    reducing GHG emissions

    by

    placing a limit on the

    aggregate GH G

    emissions

    of covered

    entities,

    then issuing

    an emissions

    allowance

    for each

    covered

    entity

    but

    allowing

    an entity to

    increase

    its

    GHG

    emissions

    by

    acquiring additional allowances from other entities that

    “trade” part

    of their allowances

    for

    compensation.

    The only

    thing

    challenged is the part of the

    Board’s

    regulatory program that

    allows

    the Board

    to

    allocate

    GH G

    allowances

    to

    itself and then sell

    the

    allowances to

    GHG

    emitters, thereby

    raising

    tens

    of billions

    of

    dollars

    of revenue

    for

    the

    state

    Th e challenged action by an unelected,

    politically-appointed

    state

    board

    to

    engraft into

    a

    regulatory

    program

    a

    massive

    revenue

    raising

    device is

    unlawful

    because

    i t exceeds the

    authority granted

    to

    the

    Board by

    AB 32 and it

    imposes

    what is

    an

    invalid

    tax.

    Absent

    from

    AB

    32

    is

    any

    language

    giving

    the

    Air

    Resources

    Board

    the

    unprecedented

    authority

    to

    raise

    tens of

    billions

    of

    dollars

    of state

    revenue

    by

    withholding and auctioning

    off

    a

    percentage of

    the statewide GH G

    emissions

    allowances

    adopted

    by

    the Board.

     See

    American Federation of

    Labor

    v.

    Unemployment

    Ins.

    Appeals

    Bd.

     1996 13 Cal.4th

    1017,

      42

    [an administrative agency

    ha s only

    the powers

    conferred

    on it

    by

    statute or

    by

    the

    Constitution].

    The

    oniy

    money-making

    power

    that

    AB 32

    conferred

    on

    the Board

    is the

     

  • 8/18/2019 Chamber of Commerce appeals decision

    18/72

    au

    thor

    ity t

    o c

    harg

    e

    a

    r

    egul

    atory

    fee

    lim

    ited to

    c

    over

    ing

    the or

    dina

    ry

    a

    dmin

    istra

    tive

    co

    sts

    of im

    ple

    men

    ting

    the

    GH

    G

    em

    iss i

    ons r

    egula

    tory

    pro

    gram

    .

     H

    ealt

    h  

    S

    afet

    y Cod

    3859

    The fact

    that

     B

     

    explici tly allows

    the

    Board to

    impose

    a

    lim

    ited re

    gula

    tory

    fee

    f

    or

    or

    dinar

    y

    ad

    mini

    strat

    ive co

    sts

    bu

    t

    con

    tain

    s

    no

    la

    ngu a

    ge

    expl

    icitl

    y au

    thor

    izing

    t

    he

    Boa

    rd

    to

    with

    hold

    an

    d the

    n

    a

    uctio

    n off GH

    G

    emi

    ssion

    s

    allo

    wan

    ces

    for

    b

    illion

    s

    o

    f

    dolla

    rs

    indi

    cate

    s

    t

    he

    Leg

    isla

    tu re

    did n

    ot

    i

    nten

    d

    to

    g

    ive t

    he Bo

    ard

    the no

    vel

    an

    d

    inc

    redib

    le

    p

    owe

    r

    t

    o ad

    opt r

    egul

    ation

    s

    to

    raise

    mas

    sive

    reve

    nu e

    for

    purposes other than the ordinary

    costs

    of

    administering

    the

    r

    egul

    atory

    prog

    ram.

    And

    th

    e

    leg

    islati

    ve

    h

    istor

    y o

    f

     B

      re

    flect

    s

    not

    hing

    that

    cou

    ld

    be

    co

    nstru

    ed to

    supp

    ort

    the

    gran

    ting of suc

    h mas

    sive

    r

    even

    ue

    ra

    ising

    auth

    orit

    y.

    The bil

    l’s fi

    ndin

    gs a

    nd

    dec

    lara

    tions

    ,

    an

    d

    t

    he

    seve

    n

    leg

    islat

    ive r

    epor

    ts an

    d ana l

    yses

    of th

    e

    bi

    ll

    ma

    ke

    no

    me

    ntion o

    f any

    suc

    h au

    thori

    ty.

    To

    the

    co

    ntra

    ry,

    the enro

    lled bill r

    epor

    t

    pre

    pare

    d

    by

    the A

    ir Re

    sou

    rce

    Bo

    ard

    e

    xpli

    ci tly

    note

    d  B  

    aut

    horiz

    es onl

    y

    fees

    nec

    essa

    ry

    to

    sup

    port

    e

    ssen

    tial,

    d

    irect p

    rogr

    am

    c

    osts

    . Lik

    ewis

    e  the

    bil

    l sig

    ning lett

    er

    the

    B

    oard pre

    pare

    d for

    the

    G

    ove

    rnor

    ’s sig

    natu

    re

    em

    pha

    size

    d

    t

    hat

    any fe

    es

    c

    olle

    cted

    f

    rom

    s

    ourc

    es

    of G

    HG

    em

    issi

    ons

    wou

    ld

    be

    use

    d

    on ly

    to

    s

    uppo

    rt e

    ssen

    tial an

    d d

    irec

    ts prog

    ram

    cos

    ts

    asso

    ciate

    d with

    the

    bill.

    E

    qua

    lly

    te

    lling

    is

    th

    e

    fa

    ct

    tha

    t

    w

    hen

      duri

    ng

    f

    loor

    d

    ebate

     

    legis

    lator

    s ask

    ed

    wh

    ethe

    r  B   w

    ould

    give

    the

    Bo

    ard

    unli

    mite

    d

    auth

    ority

    to

    im

    pose a

    bro

    ad rang

    e of

    c

    harg

    es

    the

    Spe a

    ker

    o

    f the

    A

    ssem

    bly

     an

    d

    the bi

    ll’s

    au

    thor

    em

    phat

    icall

    y

    as

    sure

    d the

    m

    that

    t

    he

    b

    ill au

    thori

    zed

    t

    he Bo

    ard to

    im

    pos

    e

    only a

    lim

    ited n

    arro

    w

    char

    ge fo

    r

    prog

    ram

    adm

    inis

    tratio

    n

    an

    d co

    sts . At this

    p

    oint

    deb

    ate

    ende

    d

    and

    the

    bill was

    passed.

     

  • 8/18/2019 Chamber of Commerce appeals decision

    19/72

    Anyone

    remotely

    familiar

    with

    the Legislature

    knows

    that

    if

    AB

    32

    was intended

    to allow

    the Board

    to

    raise

    tens of

    billions of

    dollars

    of

    state

    revenue

    on

    the backs of

    a small

    sector

    of

    California’s

    business community,

    there

    would

    have

    been more vigorous

    legislative

    debate

    and

    substantial

    opposition

    to

    AB 32. Yet,

    after

    legislators

    were

    assured

    the

    bill

    authorized

    only

    a

    limited

    administrative

    fee,

    debate

    ceased

     

    obviously because it was

    understood that

    AB 32

    was

    not intended

    to

    allow

    the Board

    to

    implement

    the

    unprecedented

    billions

    of doll ar s

    revenue-raising

    program it

    later

    did.

    There

    is

    another separate

    and

    independent

    reason why

    AB

    32

    cannot

    be

    read

    to authorize the

    Board to

    raise

    billions

    of dollars of

    state

    revenue

    by

    withholding

    for

    itself

    a

    percentage

    of the

    GHG

    emissions

    allowances

    and

    then

    auctioning

    them

    off

    to

    the

    highest

    bidders. Such

    a

    charge

    for

    emission

    allowances

    constitutes

    a tax that

    is

    unconstitutional

    because

    it

    was

    not passed

    by

    a two-thirds vote in

    each

    house

    of

    the

    Legislature

    and

    courts must

    presume that the

    ‘Legislature

    did

    not intend

    to

    violate the

    Constitution

    The California

    Supreme’s Court’s

    decision

    in Sinclair Paint

    Co.

    v.

    State

    Bd .

    of

    Equalization  1997

    15

    Cal.4th

    866 sets forth

    the

    test whether

    a

    charge

    imposed by

    the

    state

    as

    part

    of

    an

    environmental

    regulatory

    program

    is

    a

    fee or

    a

    tax.

    If

    the

    charge

     i

    bears

    a

    reasonable relationship between

    the amount

    charged and the

    burdens imposed

    by

    the

    fee

    payer’s

    operations,

     2

    the

    charge

    is

    not

    used for unrelated revenue

    purposes, and

     3

    the

    remedial

    measures

    funded

    with the

    charge

    have

    a

    causal connection

    or

    nexus to

    the fee

    payer’s operations,

    then

    the charge

    is

    a regulatory

    fee.

    If

    the

    charge

    is

    lacking

    in

    any of

    those respects,

    it is

    a

    tax.

     

  • 8/18/2019 Chamber of Commerce appeals decision

    20/72

    As

    ex

    p

    lai

    ne

    d in

    de

    ta

    il

    i

    n

    th

    is

    br

    ie

    f,

    th

    e

    ch

    ar

    ge

    a

    G

    HG

    em

    it

    ter

    co

    ve

    re

    d

    by

    t

    he

    ad

    m

    in

    ist

    ra

    tiv

    e

    p

    ro

    gr

    am

    m

    u

    st

    p

    ay to

    th

    e

    B

    oa

    rd

    t

    o

    a

    cq

    uir

    e

    a

    dd

    iti

    on

    al

    G

    H

    G

    e

    mi

    ss

    io

    ns

    a

    ll

    ow

    a

    nc

    es d

    oe

    s

    n

    ot

    me

    et

    the

    requirements

    to

    be

    a

    law ful

    regulatory

    fee.

    Simply

    stated  the

    a

    mo

    u

    nt of

    th

    e a

    uc

    ti

    on

    c

    ha

    rg

    es

    l

    ac

    ks a r

    ea

    so

    na

    b

    le

    re

    la

    tio

    n

    sh

    ip

    to th

    e

    b

    urd

    e

    ns

    po

    se

    d

    b

    y the

    pa

    ye

    rs

    o

    p

    era

    ti

    on

    s th

    e

    c

    ha

    rg

    es

    a

    re

    us

    ed

    for

    u

    nre

    la

    te

    d

    r

    ev

    en

    ue

    pu

    rp

    os

    es

      an

    d

    the

    b

    roa

    d

    pr

    og

    ra

    m

    s

    f

    un

    de

    d

    h

    av

    e

    no

    ca

    us

    al

    co

    nn

    ec

    ti

    on

    to

    th

    e

    bu

    si

    ne

    ss

    ac

    ti

    vit

    ie

    s

    o

    f t

    he

    p

    ay

    er

    s.

    C

    on

    se

    qu

    en

    tl

    th

    e

    c

    ha

    rg

    es c

    on

    sti

    tu

    te

    t

    ax

    es

    t

    ha

    t a

    re

    un

    la

    wf

    ul

    be

    ca

    us

    e

    th

    e

    y

    w

    er

    e no

    t

    passed by

    a

    two thirds

    vote in

    each

    house

    of

    the

    L

    eg

    is

    la

    tur

    e.

    I

    n

    su

    m

     

    b

    ec

    au

    se

    th

    e

    m

    a

    ss

    iv

    e

    sta

    te

     r

    ev

    en

    ue

     r

    ais

    in

    g

    de

    vi

    ce

    th

    e

    B

    o

    ard en

    gr

    af

    te

    d i

    nt

    o

    t

    he

    r

    eg

    ul

    at

    ory p

    ro

    gr

    am

    ex

    ce

    ed

    s t

    he

    au

    th

    or

    ity

    g

    ra

    nt

    ed

    to

    th

    e

    B

    oa

    rd

    b

    y

     

    B

    32

     

    a

    nd

    /o

    r b

    e

    ca

    us

    e it im

    p

    os

    es

    an

    inv

    al

    id

    ta

    x, th

    e

    jud

    g

    me

    nt

    o

    f th

    e

    Su

    pe

    ri

    or C

    o

    ur

    t up

    ho

    ld

    in

    g th

    e

    ch

    ar

    ge

    s

    m

    u

    st

    b

    e rev

    e

    rse

    d.

    II.

    PR

    O

    C

    ED

    U

    R

    A

    L B

    A

    C

    KG

    R

    O

    U

    N

    D

    AN

    D

    S

    T

    AT

    E

    M

    EN

    T

    O

    F

    TH

    E

    CA

    S

    E

    P

    ro

    ce

    d

    ura

    l Hi

    st

    or

    y.

    Ca

    li

    for

    ni

    a

    C

    h

    am

    b

    er

    o

    f Co

    m

    m

    er

    ce

    , e

    t al

    . v

    C

    a

    lif

    or

    nia  

    r

    R

    es

    ou

    rc

    es

    B

    o

    ard

    , et

    a

    l.,

    a

    ct

    io

    n

    n

    o.

    34

     2

    O

    12

     8

    OO

    0

    1U

    .

    A

    p

    pe

    ll

    an

    ts

    California

    Chamber

    of Commerce

    a

    nd

    Larry

    Dic

    ke

     “

    C

    aiC

    h

    am

    b

    er

    ” 

    fi

    le

    d t

    he

    ir v

    e

    rif

    ied co

    m

    pl

    ain

    t

    o

    n N

    o

    ve

    m

    be

    r 13

    20

    12 

    T

    he

    C

    ali

    fo

    rn

    ia

     

    r

    Re

    so

    ur

    ce

    s

    B

    oa

    rd

     “A

    RE

    ” 

    a

    nd

    it

    s ex

    ec

    ut

    iv

    e d

    ire

    ct

    or a

    n

    d

    b

    oa

    rd

    m

    em

    b

    er

    s

    w

    er

    e

    n

    am

    e

    d a

    s

    re

    sp

    on

    de

    n

    ts

     

    so

    me

    ti

    me

    s

    c

    ol

    le

    cti

    ve

    ly

    re

    fer

    re

    d

    to

    as “A

    RB”

     .

    T

    he

    co

    m

    pla

    in

    t

    ch

    a

    lle

    ng

    ed

    t

    he

    le

    ga

    lit

    y o

    f

     RB

    reg

    u

    lat

    io

    ns

     

    CCR

    sections

    9 87 

    and

    95910

     

    95914  

    which

    impose massive

     

  • 8/18/2019 Chamber of Commerce appeals decision

    21/72

    finan

    cial

    b

    urde

    ns

    on

    a

    s

    mall

    se

    gme

    nt

    o

    f Cali

    forni

    a’s b

    usin

    ess

    co

    mmu

    nity

    an

    d ra

    ise

    tens o

    f

    bil

    lion

    s

    of

    dol

    lars o

    f

    st

    ate

    rev

    enue

    .

    The

    petit

    ion

    alleg

    ed

    the

    reg

    ulat

    ions

    w

    ere

    u t

    vir

    es

    and

    not a

    utho

    rized

    by

    AB

    32;

    and the regulations

    impose

    a

    tax

    not

    enacted

    by

    a

    2/3

    vote

    in

    ea

    ch

    ho

    use of

    the

    Le

    gisla

    ture

    , in

    vi

    olati

    on o

    f

    Cal

    .

    Con

    st.

    arti

    cle

    X

    IIIA

    .

     J

    oint

    Ap

    pend

    ix

    file

    d

    here

    with

     “J

    A”

    o

    oo

    i o

    o

    io.

     

    A

    RB

    ’s

    ans

    wer

    gene

    rally

    de

    nied

    th

    e a

    llega

    tion

    s.

     JA 02

    48-

    02

    55 .

    T

    he

    Nat

    iona

    l

    A

    ssoc

    iatio

    n o

    f

    Man

    ufac

    turer

    s

     “

    NA

    M”

    intervened

    on

    behalf

    of

    petitioners and the

    Environmental

    Defense

    Fund

     “ED

    F” 

    and

    Natu

    ral

    R

    esou

    rces

    D

    efen

    se

    C

    oun

    cil

     “N

    RD

    C”

    int

    erven

    ed

    on

    b

    eha

    lf of

    resp

    onde

    nts.

     J

    A 030

    7-03

    24;

    JA 02

    62-

    0

    294

    .

    M

    orn

    ing

    Star

    Pa

    ckin

    g

    Co

    ., et al

    v

    AR

    B,

    acti

    on N

    o.

    4

    2

    1

     

    80

    0014

    64.

    A

    ppe

    llant

    s

    Morn

    ing Star

    Pac

    king

    Co 

    et

    aL  “ 

    orni

    ng

    S

    tar”

    file

    d

    th

    eir

    ve

    rifie

    d

    com

    plain

    t o

    n

    A

    pril

    1

    6 201

    3

    n

    ami

    ng

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    spon

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    lleng

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    regu

    latio

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    17

    C

    CR s

    ectio

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    958

    30

     

    95

    834

    ,

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    5870

    and

    959

    10   959

    14 

    on

    s

    ubst

    antia

    lly

    the

    sa

    me

    g

    roun

    ds

    as

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    alC

    ham

    ber.  J

    A

    054

    9-05

    72.

    Th

    e

    Cai

    Cham

    ber

    and

    M

    orn

    ing

    Sta

    r case

    s

    we

    re d

    eem

    ed

    relat

    ed

    and

    assi

    gned

    to

    Judg

    e

    Tim

    oth

    y

    F F

    rawl

    ey .

     J

    A

    0

    579-

    058 1.

     

    T

    he

    CalC

    ham

    ber an

    d Mor

    ning

    St

    ar c

    ases

    w

    ere

    a

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    ogeth

    er

    in

    a

    se

    vera

    l

    hou

    r

    h

    earin

    g

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    th

    e

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    peri

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    our

    t

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    Au

    gus

    t 28

    ,

    201

    3.

     R

    epo

    rters Tran

    scrip

    t

    date

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    8

    /28/1

    3  “R

    T”

    at

    pp

    .

    1

    -75.

     

    Th

    e

    Sup

    erior

    Cou

    rt

    iss

    ued its

    Jo

    int

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    ulin

    g

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    n

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    bmit

    ted

    M

    atter

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    ling

    ” on

    N

    ovem

    ber

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    2013

     

    up

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    ing

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    re

    gula

    tion

    s.  JA

    15

    66 -1

    588

    .

  • 8/18/2019 Chamber of Commerce appeals decision

    22/72

    Jud

    gme

    nt

    w

    as

    enter

    ed

    in

    bot

    h

    ca s

    es

    o

    n

    Dec

    embe

    r

    20,

    201

    3;

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    ulin

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    rea

    son

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    ad

    opte

    d.

     J

    A

    158

    9-16

    17;

    JA

    1

    618

    -164

    5. 

    Notices of

    Entry

    of

    Judgment

    were served

    in

    both

    cases on

    Jan

    uary

    9,

    20

    14.

     JA

    164

    6-16

    80;

    JA

    168

    1-17

    14.

    Tim

    ely

    n

    otice

    s

    o

    f

    ap

    peal

    w

    ere

    filed

    .

     JA

    17

    38-1

    741;

    JA

    174

    2-

    17

    45;

    JA

    1746

    -177

    9.

    T

    his

    Cou

    rt

    c

    onso

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    ed

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    Morn

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    S

    tar

    case

    s.

     JA

    19

    53-1

    983

    Th

    e

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    artie

    s

    stipu

    late

    d

    to the

    JA

    .

     JA

    1

    953-

    1983

    Fac

    tual

    B

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    grou

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    AB

    3

    2 wa

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    ority

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    b

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    uses

    of

    the

    Leg

    islat

    ure

    in

    Aug

    ust

    200

    6.

     

    JA

    1

    07.

    O

    n

    Se

    ptem

    ber

    2

    7, 20

    06 ,

    t

    he

    Gov

    erno

    r

    si

    gned

    A

    B

    3

    2 in

    to

    law

    .

    Sta

    tute

    s 20

    06,

    c

    hapt

    er

    488

    ,

    He

    alth

    and

    S

    afety

    Cod

    e secti

    ons

    385

    00

     

    385

    99.

    A

    B

    32’

    s

    sta

    ted

    o

    bjec t

    ive

    is

    t

    o redu

    ce

    GHG

    e

    miss

    ions

    in t

    he

    stat

    e to

    19

    90 lev

    els

    b

    y

    20

    20.

     Se

    ctio

    n

    385

    50. 1

    T

    he L

    egi

    slativ

    e

    Co

    unse

    l’s

    D

    iges

    t

    sta

    tes: “Th

    e

    bi l

    l w

    ould

    req

    uire

    th

    e

    s

    tate

    bo

    ard

    [AR

    B]

    to

    adop

    t

    a state

    wide

    gree

    nho

    use

    gas

    emis

    sion

    s

    li

    mit

    equ

    ival

    ent

    to

    t

    he

    sta

    tewi

    de

    g

    reen

    hous

    e

    gas

    emis

    sion

    s le

    ve ls

    in

    199

    0

    to be

    achiev

    ed

    by

    2

    020 ,

    as

    s

    pec i

    fied .

     

    A

    B 32

    re

    quir

    es th

    e

    AR

    B

    to:

     i

    im

    ple

    men

    t

    a

    GHG

    em

    issi

    ons

    m

    oni

    torin

    g

    p

    rogr

    am  Se

    ction

    385

    30 ;

     2

     

    dete

    rmin

    e

    wh

    at

    th

    e

    stat

    ewid

    e

    G

    HG em

    issio

    ns leve

    l

    was

    in

    199

    0,

    an

    d

    th

    en

    ach

    ieve

    th

    at

     

    U

    nles

    s

    ot

    herw

    ise

    i

    ndic

    ated,

    sect i

    on  s

     ”

    refe

    rs

    to

    th

    e

    H

    ealt

    h

     

    Sa fety

    Code.

     

    AR

    B’s

    A

    dmi

    nistr

    ative R

    eco

    rd

     “A

    R” 

    a

    t

    A

    -o0

    00oi

    .

     

  • 8/18/2019 Chamber of Commerce appeals decision

    23/72

    lev e

    l

    by

    20 2

    0

     S

    ectio

    n

    38

    550 

    ;

    and

     3 

    ad

    opt a

    reg

    ulat

    ory pro

    gram

    to ach

    ieve

    th

    e

    requ

    ired

    G

    HG

    re

    duct

    ions in

    t

    he

    “ma

    xim

    um

    tec

    hnol

    ogic

    ally fe

    asibl

    e a

    nd

    co

    st-e

    ffect

    ive”

    wa

    y.

     Sec

    tio n

    s 3856

    0  

    38562.

    In

    d

    esig

    ning

    re

    gula

    tions

    ,

    t

    he

    A

    RB

    was

    auth

    oriz

    ed

    to

    c

    onsi

    der

    “d

    irec t

    emis

    sion

    re

    duc

    tion

    m

    eas

    ures, al

    tern

    ative

    com

    plian

    ce

    m

    echa

    nism

    s, ma

    rket

    -bas

    ed

    co

    mpli

    ance mech

    anis

    ms,

    and

    po

    tenti

    al

    mon

    etar

    y

    and

    non

    mon

    etary

    in

    cent

    ives for

    s

    ourc

    es”

    in

    orde

    r ach

    ieve

    “th

    e m

    axi

    mum

    fe

    as ib

    le

    and

    cost

    -effe

    ctive red

    uctio

    ns

    of

    gree

    nhou

    se

    gas

    emissions

    by

    20

    20 .”

     Section

    38561 b .

    A

    “ma

    rket

    -bas

    ed com

    plian

    ce

    me

    chan

    ism

    mean

    s

    eith

    er:

     i

    A

    syste

    m

    o

    f

    m

    ark

    et-ba

    sed de

    clin

    ing ann

    ual

    ag

    greg

    ate

    em

    issi

    ons

    limi

    tatio

    ns fo r s

    ourc

    es

    o

    r categ

    or ie

    s

    of so

    urce

    s

    th

    at

    em

    it

    gr

    eenh

    ouse

    g

    ases.

     2  

    G

    reen

    hou

    se g

    as

    e

    miss

    ions

    exc

    hang

    es ,

    ba

    nkin

    g,

    cred

    its,

    and

    o

    ther

    trans

    acti

    ons,

    gove

    rned

    by

    rul

    es and

    pro

    toco

    ls

    established

    by

    the state board,

    that

    result

    in

    the

    same

    gree

    nhou

    se

    gas emi

    ssion

    red

    uctio

    n, ove

    r the sam

    e

    tim

    e

    pe

    riod,

    as

    d

    irec

    t com

    plia

    nce

    w

    ith

    a gree

    nhou

    se

    ga

    s

    e

    miss

    ion

    lim

    it

    or

    e

    miss

    ion

    red

    uctio

    n mea

    sure

    ad

    opte

    d

    by the

    sta

    te

    bo

    ard p

    ursu

    ant

    to

    th

    is div

    isio

    n.

     S

    ec ti

    on 385

    05 

    k .

    32 re

    quire

    d

    t

    he reg

    ulati

    ons to be

    op e

    rativ

    e by

    Janu

    ary

     

    2

    012

    .  S

    ec ti

    on 385

    62 

    a .

    In ado

    ptin

    g

    reg u

    latio

    ns,

    the A

    RB

    w

    as

    direc

    ted t

    o

    min

    imiz

    e co

    sts,

    c

    onsi

    der the c

    ost

    e

    ffec

    tiven

    ess

    of

    the

    regu

    latio

    ns

    an

    d

    m

    inim

    ize th

    e

    adm

    inis

    trati

    ve bu

    rden

    of

    com

    plyin

    g

    w

    ith t

    he reg

    ulati

    ons.

     S

    ec tio

    ns

    3

    856

    2 b

    1 ,

     

    5

    7 .  

    Th

    e o

    nly

    r

    even

    ue-r

    aisin

    g

    a

    utho

    rity m

    ent

    ioned

    i

    n

      32

    is

    in

    sec

    tion

    385

    97 ,

    wh

    ich

    au

    thori

    zes

    th

    e

    A

    RB to

    ado

    pt “a

    sch

    edule of

    fee

    s

     

  • 8/18/2019 Chamber of Commerce appeals decision

    24/72

    to

    be

    paid

    by

    th

    e

    sou

    rces o

    f

    g

    reen

    hous

    e

    gas emis

    sion

    s”

    to

    pay

    pro

    gram

    a

    dmin

    istra

    tion

      ost

    s

    The

    R

    egu

    latio

    ns

    In

      i

    sput

    e

    O

    n Ja

    nua

    ry

    1

    2

      12

      the ARB

    ’s

    regulations went into

    effect.

     Cal. Code Regs.,

    Tit.

      7 

    Div.

    Ch.

    Sub

    ch . 10,

    Art

    .

    5  

    958

    01

    et s

    eq].

     

    The

    regu

    latio

    ns

    im

    pose

    a

    “cap a

    nd tr

    ade”

    syst

    em ,

    pl

    acing

    a

    ca

    p

    o

    n GH

    G

    em

    issio

    ns

    fro

    m enti

    ties

    t

    hat emit

    at

    least 25

    ,000

    metr

    ic

    ton

    s o

    f

    GH

    G p

    er

    yea

    r.

     17

    CCR

    ,

     

    958

    10-9

    581

    4.

    Thes

    e en

    titie

    s

    are

    “c

    over

    ed en

    tities

    .”

     17

    CC

    R,

     

    95

    802

    a ; 9581

    1;  

    958

    12.

    Un

    der the regulations, the

    ARB

    issues

    “allowances,” each of

    whi

    ch

    giv e

    s

    the h

    olde

    r the

    righ

    t

    to

    em

    it

    on

    e

    ton

    of

    ca r

    bon

    diox

    ide

    eq

    uiva

    lent.  17 C

    CR,

     

    95

    802

     a 8

     ,  

    41 ,  

    ;

    see

    also

    sec

    tio n

    3

    850

    5 a .

     

    A c

    ov e

    red

    ent

    ity mu

    st

    pos

    sess

    ,

    a

    nd then su

    rren

    der

    back

    to

    the

    AR

    B,

    on

    e

    a

    llow

    ance

    for e

    ach ton

    of

    car

    bon

    d

    ioxi

    de em

    issio

    ns

    i

    t

    p

    rodu

    ces

    w

    ithin

    a

    give

    n

    com

    plia

    nce pe

    riod.  

    17 C

    CR,

     

    95

    856.

     

    T

    he re

    are

    th

    ree

    c

    omp

    lian

    ce per

    iods

    :

    201

    3-14

    , 20

    15-1

    7, an

    d

    2

    018

    -20.

     1

    7

    CC

    R,

     

    958

    40. T

    he cap

    d

    ecli

    nes

    du

    ring

    eac

    h

    c

    om p

    lianc

    e per

    iod,

    r

    educ

    ing

    stat

    ewid

    e emis

    sion

    s.

     17

    C

    CR

    ,

     

    958

    11-1

    2;

    95

    841

    ;  

    95

    850-

    58.

    G

    HG a

    llow

    anc

    es

    are not

    “pr

    oper

    ty or a

    pro

    pert

    y

    rig

    ht”

    but are

    trad

    able

    .

     17

    C

    CR,

     

    958

    02 a

      8 ;

    958

    20 c

     ;

     

    959

    21. A

    c

    over

    ed

    en

    tity

    m

    ay in

    creas

    e

    its G

    HG em

    issio

    ns by

    acq

    uirin

    g

    a

    ddit

    iona

    l

     

    The

    c

    osts

    ar

    e

    li

    mite

    d and

    mus

    t be

    con

    sist

    ent

    w

    ith

    He

    alth

    and

    Sa

    fety C

    ode sec

    tion

    5

    700

    1,

    th

    e

    C

    ali fo

    rnia

    EPA

    ’s fee

    acc

    oun

    tabil

    ity

    pro

    gram

    .

     

    Co

    vere

    d

    indu

    strie

    s

    incl

    ude

    pe

    trole

    um ref

    inin

    g,

    cem

    en t

    p

    rodu

    ction

    , co

    gene

    ratio

    n,

    gl

    ass prod

    ucti

    on, h

    yd r

    ogen

    pr

    oduc

    tion

    ,

    iron

    and s

    teel prod

    uctio

    n, petro

    leum

    and

    na

    tura

    l

    g

    as sys

    tem

    s,

    elec

    trici

    ty

    g

    ener

    ating

    f

    ac ili

    ties, pu

    lp

    an

    d pap

    er

    ma

    nufa

    cturi

    ng,

    a

    nd

    other consumers and suppliers

    of

    electricity,

    natural

    gas,

    and

    pe

    trol

    eum

    .

     1

    7 C

    CR,

     

    95

    811.

     

  • 8/18/2019 Chamber of Commerce appeals decision

    25/72

    allowances from

    other

    covered

    entities without

    increasing

    overall

    statewide GHG

    emissions

    since the

    total number

    of allowances is

    capped.5

    This

    declining

    “cap” on the

    allowances

    in circulation, along

    with the

    ability

    to

    “trade” allowances among covered

    entities,

    are

    features

    of

    a

    cap

    and trade

    program.

    Greatly

    expanding

    authority

    granted

    to it by

    AB 32 , the AR B

    adopted

    additional

    regulations empowering itself

    to

    undertake

    an

    unprecedented,

    multi-billion dollar revenue-generating program. It

    allocated

    to itself

    a

    substantial portion

    of

    the allowances in order

    to

    sell

    them

    to

    the highest

    bidders

    to

    generate

    state revenue.

     17

    CCR,

    §

    95870,

    95910-95914.

    The regulations

    initially

    directed

    the

    revenue

    to

    the Air Pollution Control Fund and