California Is Abusing The Legal System To Set Energy Policy

Undeterred by previous rulings against their novel legal theory, Governor Newsom and Attorney General Bonta have filed a lawsuit against oil and gas companies. The claim is that the companies have “deceived the public about the risks of fossil fuels now faulted for climate change-related storms and wildfires that caused billions of dollars in damage.”

These claims are an end-run around the proper democratic process and, if successful, would be economically destructive. Making these costs harder to bear, the lawsuits are a futile exercise in hypocrisy.

Federal courts have already dismissed similar claims against the automobile and electric power industries. Essentially the courts have stated that these lawsuits inappropriately use the courts to set national and state climate-related policies.

Anyone who has watched School House Rock knows, it is Congress’ role to pass the laws, which include setting energy and environmental policies for the country. Even in California, it is the responsibility of the legislature to set the state’s policies.

Both Congress and California’s legislature have implemented some taxes and restrictions – California’s to a much larger extent – but far stricter policies are possible. Presumably, these elected representatives refrain from doing so due to the very large costs families across the country would pay if these policies were implemented.

The lawsuits allow the politicians to impose these costly environmental policies on the entire nation by circumventing the legislatures that are charged with this responsibility and are directly accountable to voters. And make no mistake, if this frivolous lawsuit is successful, then families will ultimately pay the price.

A judgement of billions of dollars would harm the viability of the fossil fuel companies that fulfilled 81% of our nation’s energy needs. Families will also suffer from higher prices at the pump. The results from a 2022 study I authored found that “every $100 billion in potential judgements in these cases could raise gas prices by 31 cents per gallon – or an additional $326 per household per year.”

Beyond the national economic impact, the lawsuits will impose a particularly large economic burden on California. There are 39 different oil and gas exploration companies based in the state. According to the Energy Information Administration (EIA), California “was the seventh-largest producer of crude oil among the 50 states, and, as of January 2022, the state ranked third in crude oil refining capacity.” All this economic activity generates millions of jobs and billions of dollars in income for families across the state. If successful, the lawsuits would put all these economic benefits at risk.

California’s Legislative Analyst’s Office (LAO) estimated the impacts from phasing out the extraction of oil and gas in the state by 2045. Their results found that state and local governments in California would lose hundreds of millions of dollars in tax revenues and expose the state to lawsuits claiming that the phasing out of the oil and gas extraction “constitute the ‘taking’ of value by the government without just compensation” potentially costing the state “billions of dollars…over the next few decades.”

Further, California profits more from the sales of gasoline than either the federal government or the oil companies themselves. An analysis by the Western State Petroleum Association shows that the California government raises $1.08 in taxes for every gallon of gas sold in the state – nearly 8 times the amount earned by the oil companies ($0.14 per gallon) and 6 times the amount raised by the federal government ($0.18 per gallon).

All of these benefits from current energy production exemplify the Governor’s and AG’s hypocrisy in filing the lawsuit in the first place. But the hypocrisy goes further. The judge in a key California Environmental Quality Act case noted that case law references to climate change date to the 1970s. Therefore, California is also disingenuous in its allegation because the state has had information regarding the impact of greenhouse gas emissions on global climate change for nearly a half century.

Perhaps the large economic costs and blatant hypocrisy could be overlooked if the lawsuit could meaningfully address the problem of global climate change; but it won’t. Shaking down oil and gas companies does not change the inherent limitations of current alternative energy technologies. Take electric vehicles as an example.

Technologically, whether it is the shortage of the necessary rare earth elements, lack of charging infrastructure, or physical limitations, EVs are not ready to replace internal combustion engine (ICE) vehicles – perhaps one day, but perhaps never. Even if EVs were ready, the electric grid is not, and it is unreasonable to assume that the current infrastructure can generate sufficient electricity to meet future demand.

Due to these technological limitations, the lawsuit will not positively address the problem of global climate change. In fact, it will likely make the problem harder to address.

Even though many alternative energy technologies face extreme limitations, total U.S. greenhouse gas emissions have been declining for many years. According to the EIA, the U.S. has achieved “significant reductions in energy-related CO₂ emissions”. The main driver of the reductions in emissions has been the “switch from higher-carbon fossil generation to natural gas generation”. The lawsuits would, consequently, work against reducing overall GHG emissions by decreasing the supply, and therefore increasing the cost, of natural gas.

Frivolous lawsuits impose large unnecessary burdens, even when politicians use the veneer of global climate change to justify the litigation. If successful, Governor Newsom’s and AG Bonta’s attempt to shakedown the oil and gas industry will harm California’s economy while working against their purported goal of addressing the problem of global climate change.