Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Memo on Cap and Trade

Memo on Cap and Trade

Ratings: (0)|Views: 24 |Likes:
Published by joejoe48
A lot of information on Cap and Trade funding.

Showing this is really a tax. Showing that such funding to be used to fund High Speed Rail is really illegal.
A lot of information on Cap and Trade funding.

Showing this is really a tax. Showing that such funding to be used to fund High Speed Rail is really illegal.

More info:

Categories:Presentations
Published by: joejoe48 on Apr 19, 2014
Copyright:Traditional Copyright: All rights reserved

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

04/28/2014

pdf

text

original

 
062043\6001126v5
 February 18,2014
Re:
Legality of Use of Cap-and-Trade Auction Proceeds to Fund High-Speed Rail In his 2014-15 budget, the Governor proposes to allocate $250 million of cap-and-trade auction proceeds to the California High-Speed Rail Authority (the “Authority”). You asked us to consider whether the use of such proceeds to fund high-speed rail would be legal. In short, we believe that an appropriation of cap-and-trade auction proceeds to fund high-speed rail would be vulnerable in a legal challenge because high-speed rail construction will in and of itself not further the goals of AB 32 – that is, to reduce greenhouse gas (“GHG”) emissions statewide to 1990 levels by 2020 – and therefore such appropriation would constitute the use of auction proceeds for an unrelated revenue purpose, which is prohibited under
Sinclair Paint Company v. State Board of Equalization
, 15 Cal.4th 866 (Cal. 1997). 1.
Background on Cap-and-Trade in California
The Global Warming Solutions Act of 2006 (Chapter 488, Statutes of 2006, codified atHealth & Saf. Code, §§ 38500 et seq.), commonly referred to as AB 32, did two important things: (1) it established the goal of reducing GHG emissions statewide to 1990 levels by 2020,
see
 Health and Saf. Code, § 38550; and (2) it authorized the California Air Resources Board (“CARB”) to adopt regulations creating “market-based compliance mechanisms” to achieve that goal,
see id.
 §§ 38562, 38570. Pursuant to such authority, CARB then adopted regulations that established California’s GHG emissions cap-and-trade program.
See
 17 Cal. Code Regs., §§ 95800 et seq. In short, CARB’s regulations place a “cap” on aggregate GHG emissions from entities responsible for roughly 85% of California’s emissions. To implement the cap-and-trade program, CARB allocated a certain number of carbon allowances equal to the cap. Each allowance equals one ton of carbon dioxide equivalent. Under the cap-and-trade program,
 
 February 18, 2014 Page 2
062043\6001126v5
CARB provides some allowances for free, while making others available for purchase at auctions. Once the allowances have been allocated, entities may then “trade” (i.e., buy and sell on the open market) the allowances in order to obtain enough to cover their total emissions for a given period of time. To date, CARB has conducted five separate auctions since November 2012.
1
 Cumulatively, these auctions have resulted in a total of $532 million in state revenue, and future quarterly auctions are expected to raise additional revenue. By law, auction proceeds are placed into a special fund in the State Treasury – the Greenhouse Gas Reduction Fund – from which they are available for appropriation by the Legislature.
See
Gov. Code, § 16428.8. From there, the monies must be used “to facilitate the achievement of reductions of greenhouse gas emissions in [California] consistent with” AB 32.
2
 Health & Saf. Code, § 39712. 2.
The Governor’s 2014-15 Proposed Budget
The Governor’s 2014-15 budget proposes to allocate $250 million of cap-and-trade auction revenues to the Authority, including $58.6 million for Phase I project planning as well as $191.4 million for construction and right-of-way acquisition for the first phase of the Initial Operating Section.
See
 G
OVERNOR
S
B
UDGET
2014-15,
 
P
ROPOSED
B
UDGET
S
UMMARY
,
available at
http://www.ebudget.ca.gov/2014-15/BudgetSummary/BSS/BSS.html. 3.
Use of Cap-and-Trade Auction Proceeds to Fund High-Speed Rail Will Not Furtherthe Purposes of AB 32 and Therefore Will be Vulnerable in a Legal Challenge.
The constitutionality of CARB’s cap-and-trade program has been raised in two separate lawsuits,
California Chamber of Commerce v. California Air Resources Board 
 (Case No. 34-2012-80001313, Sacramento Superior Court) and
 Morning Star Packing Co. v. California Air  Resources Board 
 (Case No. 34-2013-80001464, Sacramento Superior Court), respectively. If found to be unconstitutional, the cap-and-trade program would be undone in its entirety.
 3
 Even assuming that cap-and-trade is found to be constitutional, however, cap-and-trade auction proceeds nevertheless may not be appropriated by the legislature for unrelated revenue purposes. And because the construction of high-speed rail would not further the purposes of AB 32, any such appropriation would be subject to legal challenge.
1
 A sixth auction will be held on February 19, 2014.
See
C
ALIFORNIA
E
NVIRONMENTAL
P
ROTECTION
A
GENCY
,
 
A
IR
R
ESOURCES
B
OARD
,
 
A
UCTION
I
NFORMATION
, http://www.arb.ca.gov/cc/capandtrade/auction/auction.htm (last visited February 8, 2014).
2
 In addition to the auction revenues, AB 32 and the implementing regulations authorize CARB to collect a fee to recover the administrative costs of carrying out AB 32.
See
 Health & Saf. Code, § 38597; 17 Cal. Code Regs., §§ 95200 et seq. Such fees are intended to collect an amount of funds necessary to recover CARB’s costs of implementing and enforcing AB 32 each fiscal year.
3
 In fall of 2013 the Sacramento Superior Court upheld the constitutionality of the cap-and-trade program, finding that such program did not constitute an unconstitutional tax.
See
Joint Ruling on Submitted Matters, Case No. 34-2012-80001313 (Aug. 28, 2013). This issue now is pending on appeal.
 
 February 18, 2014 Page 3
062043\6001126v5
a.
Cap-and-trade auction proceeds must be used to advance the goals of AB 32.
If ultimately deemed constitutional, cap-and-trade necessarily would be found to constitute any one of three valid fees recognized in the case law: (1) special assessments that are based on the value of a benefit conferred on property; (2) development fees exacted in return for permits and other privileges; or (3) regulatory fees imposed under the State’s police power.
See Sinclair Paint v. State Bd. of Equalization
, 15 Cal. 4th 866, 874 (Cal. 1997). Although cap-and-trade does not fit clearly into any one of these three respective types of fees, it most likely would be characterized as a regulatory fee. Broadly, regulatory fees are not dependent on government-conferred benefits or privilege and are imposed under the police power.
 Id.
 at 875. Courts have found such fees valid so long as: (1) fee revenues are spent for purposes related to the regulatory activities for which those fees were assessed; and (2) the amount of fees assessed and paid does not exceed the reasonable cost of providing the protective services for which the fees are charged.
See Cal. Farm Bureau Fed’n v.State Water Res. Control Bd.
, 51 Cal.4th 421, 437-42 (Cal. 2011);
Cal. Bldg. Indus. Ass’n v.San Joaquin Valley Air Pollution Control Dist.
, 178 Cal.App.4th 120, 131-32 (Cal. Ct. App. 2009);
Sinclair Paint 
, 15 Cal.4th at 876-80. Notably, California courts have recognized that regulatory fees legally may be imposed as part of a broader regulatory scheme for which the fee payer does not receive any perceived “benefit.”
See Pennell v. City of San Jose
, 42 Cal.3d 365, 375 (Cal. 1986). In
Sinclair Paint 
, for example, the Supreme Court noted that the State may impose industry-wide “remediation” or “mitigation” fees intended to defray the actual or anticipated adverse effects of an industry’s business operations.
See Sinclair Paint 
, 15 Cal.4th at 877-78. “From the viewpoint of general police power authority,” the
Sinclair Paint 
 court continued, “we see no reason why statutes or ordinances calling on polluters or producers of contaminating products to help in mitigation or cleanup efforts should be deemed less ‘regulatory’ in nature than the initial permit or licensing programs that allowed them to operate.”
 Id.
 at 877. But the
Sinclair Paint 
 court also noted that such “remediation” or “mitigation” fee measures at the least have required a “causal connection” or “clear nexus” between the product and its identified adverse effects.
 Id.
 at 878, 881. Based on the foregoing analysis, cap-and-trade auction proceeds must be used for purposes related to the regulatory activities for which those fees were assessed. And in line with such requirement, Health and Safety Code section 39712 plainly requires that auction proceeds be used “to facilitate the achievement of reductions of greenhouse gas emissions in [California] consistent with” AB 32. Thus, in order for cap-and-trade auction proceeds validly to be appropriated to a state agency, any such appropriation must be used to further the purposes of AB 32.

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->