Coalition Sues CARB Over Emission Report Mandates
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California is being sued over its new emission laws mandating that companies there and out of state report their supply chain emissions and mitigation efforts.
The state government is accused of violating both the First Amendment by forcing a business “to engage in subjective speech” and the federal Clean Air Act, “which pre-empts a state’s ability to regulate emissions in other states — as California seeks to do by mandating reporting on out-of-state emissions.”
A 30-page complaint for declaratory and injunctive relief by the groups was filed Jan. 30 in the Los Angeles Western Division of the U.S. District Court for the Central District of California against the California Air Resources Board and its board chair and executive officer.
The lawsuit also was joined by California’s Central Valley Business Federation (representing 75 businesses and trade organizations with 400,000 employees) and the Los Angeles County Business Federation (420,000 employers, 5 million employees).
The legal action contends that by enacting Senate bills 253 and 261, California is forcing thousands of businesses “to make costly, burdensome and politically fraught statements” about their operations in California and around the world.
The parties accuse CARB of violating the First Amendment by forcing companies “to engage in controversial speech that they do not wish to make” unrelated to any commercial purpose or transaction but instead to place “political and economic pressure on companies” to behave according to California’s political agenda.
“The new corporate disclosure laws require businesses to report on emissions across their supply chain, including indirect emissions, no matter where they occur despite the fact that such emissions can be nearly impossible for a company to accurately calculate,” the chamber said in a statement. “The laws also require companies to subjectively report their worldwide climate-related financial risks and proposed mitigation strategies.”
It noted that California’s new laws, enacted last year, “apply to companies across the U.S. and worldwide on the basis of even minimal operations in the state of California, thus attempting to impose essentially a national standard.”
CARB can impose administrative penalties of $50,000 per reporting year for violations of S.B. 261. The parties noted that the law requires the businesses “to pay for the law themselves, with an annual fee being assessed on covered entities to defray CARB’s costs in administering and implementing the law.” Fees are to be deposited in a new “Climate-Related Financial Risk Disclosure Fund.”
Also, the lawsuit contends that small businesses nationwide are now forced to pay significant costs to monitor and report emissions “to suppliers and customers swept within the law’s reach. For example, scores of family farm members of AFBF [American Farm Bureau Federation] will need to report emissions to business partners that do business with entities covered by S.B. 253.”
To underscore non-California businesses across the nation now subject to CARB’s new powers, the lawsuit cited Triple H Family Farms, a Missouri cattle operation run by third-generation farmer Garrett Hawkins, his father and brother. Although the farm doesn’t operate in California or sell directly to businesses there, Hawkins’ cattle are in the supply chain of California grocery stores that are forced to report on emissions that would include the Hawkins farm.
“Hawkins fears that the requirements of S.B. 253 will have the potential to force rapid consolidation across agriculture, such that only the largest operations will survive” because of the expansive documentation and record keeping required by CARB over his supply chain greenhouse gas emissions.
The lawsuit also gave the example of Michael White, a fourth-generation Texas farmer from Wilbarger County who shares the same concerns and is facing the same regulatory burdens from CARB. White, his brother and nephew raise wheat, cotton, hay and cattle on their century-old Gene & Michael White Farms. The family is concerned that their beef and agricultural products will end up in the “value chain of companies subject to S.B. 253.”
The chamber predicted California’s laws now targeting public and private companies with forced greenhouse gas emissions costs and compliance “will be felt by businesses of all sizes, but especially small, Main Street businesses.”
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However, state Sen. Scott Wiener, a Democrat from San Francisco who authored S.B. 253 and heralded its success last year, issued a statement countering the lawsuit for making “bogus arguments about cost and implementation since it’s both inexpensive and easy for corporations to make these disclosures.”
Last year, California legislators were made aware in a state fiscal analysis that legal challenges could arise. The state Senate Rules Committee was presented in September with implications resulting from enacting S.B. 253. The document discussed “unknown but potentially significant costs” to the state Department of Justice’s anticipated “increased litigation referrals from its client, CARB, for legal challenges arising from this bill. DOJ notes the increased costs associated with this potential litigation are unquantifiable but potentially significant; however, DOJ will bill CARB for these costs, which CARB will reimburse fully.”
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