States and municipalities have brought litigation in state court arguing that energy companies should be liable for the effects of global climate change. District courts across five states have issued conflicting rulings on whether state court or federal court is the proper forum to litigate these claims, and whether courts or legislatures should address global environmental questions. In addition, legal investigations and lawsuits are underway by state Attorneys General, particularly in New York where the Attorney General has filed a climate and securities-related lawsuit under the Martin Act. As these municipal lawsuits move to federal appellate court, Hon. C. Boyden Gray joins us to discuss the latest developments in climate change litigation at the municipal level, and the developments involving the New York Attorney General’s litigation.
C. Boyden Gray, Founding Partner, Boyden Gray & Associates
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Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Environmental Law & Property Rights Practice Group and Litigation Practice Group, was recorded on Tuesday, October 8, 2019, during a live teleforum conference call held exclusively for Federalist Society members.
Wesley Hodges: Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is an update on the climate change litigation. My name is Wesley Hodges, and I am the Associate Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the expert on today's call.
Today we are very fortunate to have with us Mr. C. Boyden Gray, who is the Founding Partner at Boyden Gray & Associates. He also teaches energy and environmental law at Scalia Law School at the George Mason University. After our speaker gives his remarks, we will have time for Q&A, so please keep in mind what questions you have for Mr. Gray or for these topics. Thank you very much for sharing with us today. Mr. Gray, the floor is yours.
Hon. C. Boyden Gray: Thank you very much. There is a bunch of litigation going on, and these litigation movements tend to come in little waves in this area upon the development of something that happens internationally or nationally. Who knows exactly what started this wave, but it’s not the first one. And in fact, it will be largely—not completely—but largely disposed of by answers provided by the U.S. Supreme Court in previous rounds of litigation from years ago. There are about 14 cases pending. There could be more, even as we speak, that could be filed today. There could be more by the end of the week.
But the main cases are in New York and California district courts in cases brought by the states, and then there are cases in Maryland filed by Rhode Island that are back and forth doing the same thing the New York and California litigation went through where it was ultimately a motion to dismiss. And the district courts in New York and California ruled in favor of the energy companies, denying -- remanded to state courts and granting dismissal of the state court claims. There are appeals pending, and the same is true in Maryland, Colorado, and Rhode Island. They are at various stages of litigation with their appellate courts.
Some lawsuits request for stays; that is, the energy companies have lots of requests for stays to allow for appeals to the First and [inaudible 2:40] Circuits. And just recently, I think yesterday or the day before, the energy companies filed an emergency stay petition with the Chief Justice in the U.S. Supreme Court to grant a stay after the losing position in their stay petitions in the Fourth Circuit last week.
The move for stay in the Supreme Court’s a little unusual. Those who are more familiar than I with Supreme Court practice realize that it’s very rare, if ever, the Supreme Court grants a stay in a lower court. That happened in the Clean Power Plan, a rule promulgated by the Obama EPA and reversed by the current administration. There was a stay in the court of appeals issued by the Supreme Court which was the first time I think a stay was issued for a case that hadn’t yet gotten to the Court. This might even be -- other than that, you might be talking, in a sense, about status quo cases that are still in federal district court.
I think, with one exception, New York litigations by the New York Attorney General under the state’s Martin Act, which I will describe in more detail later, with the exception of that one case, which is a securities related case. These others are tort related suits, damages related suits, and ultimately, I believe, they will be ruled preempted by the federal Clean Air Act, as the Court ruled several years ago in American Electric Power v. EPA. The AEP case held that the comprehensiveness of the Clean Air Act was such that these cases which belonged in federal court to begin with were all preempted by the U.S. legislation. What this means is that, perhaps with the exception of the Martin Act cases I’ll get to, this tends to have the pressure of a move through Congress, which is really where energetic U.S. policy belongs.
In that context, and I’m getting a little ahead of some of the details here, but in that context, I think it’s fair to keep in mind that the past history of actions under the cloud of climate change, global warming, has been the largest since the fight between the developed and undeveloped countries where developed countries are accused by the undeveloped countries, less developed countries, of playing the game of, “Well, we’ve gotten our economic development under our belt using vast amounts of energy and poisoning the atmosphere, and now we’re going to stop you from doing the same,” leaving a totally unlevel playing field.
And what these less developed countries say about that -- I know I’m getting ahead of the litigation that’s pending in American courts here, but the fact remains that we’re not producing the lion’s share of climate change poison gasses, greenhouse gasses anymore. That’s being done by China and by India and by Asia as a whole, and as a result of some of the coal use in California, a lot of traditional pollution comes over maybe as much as a quarter or a third, comes over the Pacific Ocean and gets in the atmosphere into the Rockies, and adds quite a bit of cost and mortality on the West coast.
So it is a serious matter that the Far East has not yet taken hold of what they could. It is true, as I said, that perhaps we did get a head start, but it’s also equally true and I think more relevant that as they clean up their regular pollution, which they know they have to, it’s really an easy thing to take care of CO2 at the same time. We didn’t have that advantage because we didn’t know -- nobody knew 40, 50 years ago of the dangers posed, so we didn’t have the opportunity to do that. They do, and they’re not really taking advantage of it, and so this, think, is going to make it difficult long-term to see a lot of progress until these Asian countries are asked to cooperate and to get involved.
We get a lot of criticism in America from our European allies for not taking this seriously enough, but I think it’s fair to say that we’ve certainly kept up with them, and may even be ahead of them, if you look at the last 10 or 15 years, largely thanks to natural gas production which has displaced a lot of our coal. Germany, for example, is increasing its coal production because Merkel shut down all the nuclear power plants, and they can’t make their system work without the baseload reliable power fueled now by more coal power plants.
So Europe has got some difficulties, and they don’t have any, I think, better solution to this Asian problem than we do. So we have to watch what happens. The Kyoto treaty, the first international effort to do something about this, was voted 92 to nothing to reject, largely because of the Far East job steal problem. And even under Obama, the Waxman-Markey bill failed, primarily not because of Republican defection, but because of a handful of Democratic senators in the Midwest who didn’t want to see continued job loss to China, particularly since it’s a topic in the current trade jockeying back and forth between us and China.
Back to the cases, the rule of thumb is that there are some broad issues that affect the disposition of these cases. One of them is federalism versus what might be called the separation of powers. Who takes the thing? The war on this is that is it the federal jurisdictions or is it state? And if it’s the federal, where does it really belong? Does it belong in the courts, the Executive branch, or the Congress?
And I think the way the past litigation developed, it developed that this was really a federal issue. The courts are not capable of handling this. They don’t have the staff, they don’t have the expertise, the don’t have the jurisdictional reach, they don’t have the experience of dealing with an international issue, and so it ends up in federal court, and there the Supreme Court says U.S. Congress has voted against the question that these cases that are pending now and that were like the ones that were pending in earlier litigation are to be, or will be, with all likelihood, I mean, that’s never certain, but with all likelihood will be preempted by the Clean Air Act.
Now, there were a couple of cases which don’t quite fit my description of these tort-like actions in the jurisdictions of, as I mentioned, California and New York, and then Maryland, Colorado, and Rhode Island. One is a case called Juliana, which is I think in New York, and it’s a constitutional case which argues that there is a constitutional right to clean air or a constitutional right even going more fundamentally to, if you take into account the rhetoric of the Democratic candidates for President, there’s the right to climate free food, such as steak and hamburgers, which come from cows who emit various forms of global greenhouse gasses.
I don’t think that the Supreme Court is going to do anything with this case under the precedent of American Electric Power or the Clean Air Act of 1990. And I just don’t see the Supreme Court recognizing some vague rights of clean food under the Supreme Court. That is a thing which I think they would look again to Congress and expect Congress to take action, if there is any action to be taken. The Juliana case has been watched quite carefully. I said it was in New York. I stand corrected. It is in the Ninth Circuit. It was argued on June 4 of this year, and it’s the result of a class action brought by a bunch of children, and so it has that unique characteristic which has caught a lot of attention. But again, I don’t think that’s going to be a case that’s going to really have an impact.
The case that is a little bit of an outlier from court cases that I’ve talked about before is a case under the Martin Act brought by the New York Attorney General in 2015 in New York against one of the measures of the Martin Act. Now, the Martin Act is probably the last gasp of the so-called blue sky laws. I’m old enough to remember when doing a securities case, you had to research leading blue sky law cases -- or states; not cases, states. Well, the cases in those states. Luckily, those things sort of disappeared state by state by state. And there really isn’t any blue sky law left. It’s all dominated by the federal securities laws at 33 and 34 acts and the Mutual Fund Act and whatnot.
But there is an active relic, you could call it, perhaps, in New York called the Martin Act. And it is very, very expansive. You don’t need to prove intent to get any kind of argument through about misrepresentation or fraud. Professor Phillip Hamburger, who is a well-known administrative law expert, has said that under New York’s Martin Act, the state attorney general can subpoena information whenever he considers it relevant to an investigation of what he considers a material misrepresentation by a corporation. And there is really almost no way to contain what he may try to do. And the courts, he says, allow prosecutors to circumvent the courts. They are providing profoundly dangerous constitutional violations. So this is an important case, not necessarily because of climate change, but because it’s an outlying statute. The Wall Street Journal itself calls the Martin Act the worst law in America.
The case against Exxon is purely securities based. It’s argued by the state that Exxon keeps two sets of books, one for general costs of carbon, if you will, metric, which they use to calculate any diminution and demand and, therefore, value of their reserves, and the other set of books is really a different thing. It’s a case-by-case, project-by-project calculation of costs of developing that particular project which has only the most indirect impact on the multiplicity of projects that Exxon [inaudible 15:17] has. And Exxon has based its work in all respects on third-party organizations such as the International Energy Agency and the U.S. Energy Information Administration. It’s kind of hard to question what they’ve said, and it’s been public, but they’ve said counter to questioning, it is based on publicly available expert contributions. So I think the facts are very clearly on Exxon’s side.
The case, I think, will be tried the 23rd of October, so it’s just around the corner. So it won’t be long before we find out what happens there. I think it’s relevant in this connection that the federal Securities and Exchange Commission has reviewed claims like those made by the new attorney general but has declined to file charges. The SEC’s two-year review involved the same 4 million pages of documents produced to the New York attorney general, but in August of 2018, the agency quit its investigation and issued a quote, “closure letter” without charge [inaudible 16:43]. I mean, the law here is not completely settled, but I don’t think it’s binding on New York, but I think it’s relevant to how the case will ultimately be decided.
I want to go back to the comparative situation with our allies and sometimes enemies. I think it’s very important to emphasize again that while we get criticized on a constant basis by especially our European friends for being slow to get engaged, pointing to, for example, the Paris climate change accord, which the President has indicated he’s going to exit, we have done just as well as they have in terms of [inaudible 17:46] meeting the initial expectations that all countries face when the treaty was first proposed. So I don’t think we have anything to worry about with our allies.
I think it would be really helpful if we could get together or closer with them to work out a better relationship with our Asian allies and sometimes competitors for dealing with this problem. Not everybody agrees that climate change is as big a problem as many, many argue. But even probably the leading European scientist, Bjorn Lomborg, is not himself a climate skeptic but believes that we are going about this the wrong way, and we ought to spend more research on alternative fuels and other technologies that would get us to a better place a lot cheaper than we are now pursuing.
A couple of points I think to bear in mind and maybe to develop further later, again, to ensure the world and ensure the American public that we’re not dragging our feet, we led the way -- we led on the arguments, led on the proposals, for what Ban Ki-moon, then Head of the U.N. called the greatest environmental treaty ever developed. That was the Montreal Protocol which related use of ozone depleting substances, CFCs, chlorofluorocarbons, which are very, very powerful greenhouse gasses, we led the way with that. The reductions under that treaty have been extraordinary. The stratospheric ozone problem has been largely solved, but it is also true that these greenhouse gasses -- I mean, these CFCs are also greenhouse gasses, and we got a huge head start, a huge down payment on dealing with greenhouse gasses when the Montreal Protocol went in to effect, and that is something which the United States takes, I think, leading credit for.
Apart from the contribution that natural gas has made to reducing coal use and reducing CO2 commensurate with what’s happened in Europe, I think a new element has been introduced which holds a great, great interest for the future that our reforestation that comes from taking better care of our forests and wooded areas, agricultural soils, food scraps, coastal wetlands, things like that which in the aggregate offset well over 10 percent of the total of greenhouse gas emissions, say, in 2017.
And if you look at the past when there was huge reforestation, I mean, the reforestation of ’27 is a fraction of what happened in the last two centuries as we reforested what we had taken down in the first two centuries to build America. Those greenhouse gasses from the 16th, 17th, and then part of 18th centuries have now gone through this and aren’t relevant anymore, but the uptake of those same gasses by the reforestation that occurred in the east of the Mississippi has been quite substantial.
And for example, the reforestation just 1990 to 2013, which doesn’t encompass the major reforestation of most of the 20th century, that reforestation just from 1990 to 2013 reduced greenhouse gas concentrations by the equivalent of 634 million tons. And that sounds Greek to most people, but this has probably eliminated as much carbon atmospherically as current U.S. climate change regulations. So you can see how agriculture and forestry and why the Amazon rain forest is so important in this whole area and will get more attention in the future.
And it’s another way of, I guess, saying that bringing rifle shot lawsuits city by city in courts that have no capacity to deal with any actual issues of this complexity is really the wrong way to go, and I think that’s what’s going to happen. It’s going to be found to be the wrong way to go to most of the cases that are now pending.
And on that note, I will stop and see if there’s any questions that people have about climate change generally and the cases in particular.
Wesley Hodges: Well, very good. Thank you so much, Mr. Gray. Let’s go ahead and go to our first caller.
Rick Karlin: Good afternoon. Rick Karlin here, Times Union newspaper, Albany, New York. The Martin Act case -- when and where is that going to be held, in what venue? I’m trying to get more update on the status of that.
Hon. C. Boyden Gray: I think it’s in New York. I think it’s in New York City, but I’m not sure.
Rick Karlin: Okay. And it’s in federal district, southern district?
Hon. C. Boyden Gray: No, it’s in state court. It’s a state court action.
Rick Karlin: Oh, okay. Okay, okay, okay. In Manhattan. Okay.
Hon. C. Boyden Gray: Yeah.
Rick Karlin: Are you involved? Is your group involved in this at all? Are you offering briefs?
Hon. C. Boyden Gray: Not that I know of. I mean, I’m not involved in it personally, and we don’t track what -- I mean, The Federalist Society is a loose conglomeration of people who don’t even have a common handshake, and we don’t know what everybody is doing. But I wouldn’t be surprised if some of the lawyers involved in that case are maybe connected to The Federalist Society in New York. I have no idea.
Rick Karlin: Right. Okay. Do you think that’s the leading example of sort of the scatter shot approach that you talked about just now? And as you know, there is a new Attorney General who is now the Attorney General of New York other than Eric Schneiderman, who launched the case. Do you think that makes any difference?
Hon. C. Boyden Gray: No. And I’m not sure I would say I think this is the leading -- it’s dealing with pretty well settled science which has been used by a lot of different entities around the world, actually, not just the country. And so I don’t know that it’s all that unique from that perspective. It’s just a little different in terms of its jurisdictional background.
Rick Karlin: Okay.
Wesley Hodges: Mr. Gray, do you have anything else that you’d like to dive in on into more detail regarding climate change?
Hon. C. Boyden Gray: I think the one thing which I didn’t discuss which probably is worth some mention is let’s assume for the moment that my crystal ball is generally correct that this puts a lot more pressure on Congress to try to do something more successfully than they were able to do under Waxman-Markey in the beginning of the Obama administration, and they do come out with some sort of -- reach some sort of accommodation to say, “We are going to deal with this in a bipartisan fashion. Let’s see what the options are.”
The past practice in the area of air pollution has been that mechanisms that use the market, that use the forces of the marketplace, are far more efficient and effective and cheap, really, cheaper than command and control regulation that is what our EPA, Environmental Protection Agency, and most other country EPAs and most state EPAs rely upon. It really is a remarkable difference.
And there are two ways of approaching -- at least two ways of approaching a market oriented legislated solution. One is to impose a tax, impose also at the border to try to catch cheaters, so to speak, from coming in from outside. A lot of difficulty in devising how that’s going to be implemented. The other is a use of a cap and trade system which may sound Greek to a lot of people on the phone, if there are a lot of people on the phone. And a cap and trade system allocates certain limits to utilities that decline over time and that incentivize utilities to trade amongst themselves, each utility looking to find a partner or partners who may be able to do it cheaper than they’re doing it, or to encourage these other third parties to buy their credits, to take care of their own obligations.
The so-called cap and trade system, which is the system used in Europe, it’s used separately in California, it’s used in New England. It was used for CO2. It was used -- is being used for SO2 in the United States, was put in the Clean Air Act of 1990. And we’ve all but eliminated SO2 from 18 to 20 million tons back in 1980 to virtually zero today. Not zero, but down below 2 million tons. It’s been an enormous success, and no impact on the economy, no adverse impact that anyone can measure.
So there are two ways of doing this legislatively. The Obama administration did try to employ a carbon cap and trade system as a partial approach to the legislation that they had pending, but one thing they wouldn’t do is something which I think would have to be done, which is to say that if you’re going to use a tax or cap and trade system as the method for reducing greenhouse gasses, you don’t need to use command and control, which is much more expensive and much more difficult and much more fraught with bad feeling and arguments and court suits and makes lawyers rich but nobody else.
The deal that I think would work, could work, would be for the Republicans to accept some sort of cap and trade requirement tax, some sort of market incentive, in return for which EPA would suspend all of its carbon regulation as long as that tax or cap and trade system were in place moving carbon emissions down. But there are a lot of very powerful environmentalists who won’t, they say, ever agree to that under any circumstances, so I don't know what happens. But that’s one possible way out of this polarized situation.
There are, of course, many who think that nothing needs to be done, and one wonders from that big snowstorm of a couple weeks ago out in the West that maybe we’re headed for a cool or freezing winter. So I just don’t know. I’m not a scientist. But I do think it’s something everyone should do, which is to hedge bets and don’t build so many houses in flood plains where you shouldn’t be allowed to buy insurance or shouldn’t be allowed to build because it puts the burden on the entire country if a flood does happen to materialize.
Wesley Hodges: Well, very good. Thank you so much for those comments, Mr. Gray. Looks like we do have another question.
Charlie Carter: This is Charlie Carter in Raleigh, North Carolina. I wanted to add something to something Boyd mentioned earlier, the Ninth Circuit litigation and the children’s crusade or whatever it is. We’ve just gone through a process here twice now with that so-called children’s crusade filing petitions for rulemaking with our environmental management commission. Both times they were rejected.
And the second time, it became much more apparent who was actually behind it. And rather than the three young ladies who put their name on the petition, it was actually the Duke University Environmental Law clinic and an outfit out of Oregon, an advocacy outfit out of Oregon that’s funding this whole thing. So don’t be misled into thinking there’s some sort of children’s crusade going on here. But we unanimously rejected the petitions both times to zero carbon dioxide emissions by 2050. Interestingly, our Democratic governor just came up with a draft energy plan that proposed to do exactly that by 2050, so we’ll see where we’re headed now.
Hon. C. Boyden Gray: Well, I’m sorry Duke seems to be involved in this in that way because as you may know, my family comes from North Carolina, and I grew up there and have always viewed myself as a Carolina fan. So I’m sorry Duke has misbehaved a little bit.
Charlie Carter: Well, I would agree with you there. I actually was an undergraduate at Duke, and I’ve been sorry to see that the folks from over there are leading this charge. But we’ll deal with it.
Wesley Hodges: Well, seeing no more questions from the audience, Mr. Gray, do you have any closing thoughts for us or anything else you’d like to cover before we wrap up today?
Hon. C. Boyden Gray: I think I’ve said everything I -- I don’t know what to say, so…
Wesley Hodges: Well, very good. We appreciate your time and expertise. On behalf of The Federalist Society, I would like to thank you again for your valuable time and expertise today. We welcome all listener feedback by email at firstname.lastname@example.org. Thank you all for joining us for the call. We are now adjourned.
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