For this reason, the mobile source portion of the CAA (Title II) generally "preempts" states from adopting their own emission standards for new motor vehicles or engines. There is an exception to this rule of federal preemption, however, in CAA Section 209(b) —
The [EPA] Administrator shall, after notice and opportunity for public hearing, waive application of this section [the preemption of State emission standards] to any State which has adopted standards (other than crankcase emission standards) for the control of emissions from new motor vehicles or new motor vehicle engines prior to March 30, 1966, if the State determines that the State standards will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards. EPA's Response to the Waiver Request and Resulting Litigation

EPA took two years, from late 2005 to late 2007, to respond to California's waiver request for its motor vehicle GHG emission standards. Following this decision, EPA announced that it would consider the California waiver request. As will be discussed further below, 14 other states and the District of Columbia have adopted regulations identical to California's, and 2 others have announced their intention to do so, but their ability to implement the regulations depends on California first being granted a waiver. On December 19, 2007, EPA announced its decision. EPA Administrator Stephen Johnson wrote California Governor Arnold Schwarzenegger to say, "I have decided that EPA will be denying the waiver and have instructed my staff to draft appropriate documents setting forth the rationale for this denial in further detail.... " According to press reports, the decision was taken against the unanimous advice of the agency's technical and legal staffs. It was published in the March 6, 2008 Federal Register , and will be referred to herein as the March 6 decision. The section adds:
No such waiver shall be granted if the Administrator finds that-
(A) the determination of the State is arbitrary and capricious,
(B) such State does not need such State standards to meet compelling and extraordinary conditions, or
(C) such State standards and accompanying enforcement procedures are not consistent with section 202(a) of this part. California's Justification of Its Waiver Request

In requesting a waiver, California argued that its standards met each of the CAA criteria: that they were at least as protective as applicable federal standards, because there are no federal GHG standards; that air pollution generally, and climate change in particular, present numerous conditions to the state that are compelling and extraordinary; and that the standards and enforcement procedures are consistent with Section 202(a), based on previous EPA interpretation of the consistency requirement. Positions of the Parties in the Waiver Denial Litigation

As noted, the active suit against the waiver denial is California v. EPA , filed May 5, 2008, by California, other states, and environmental groups. Alternatively, the Obama Administration EPA could wait until the D.C. Related Litigation

Aside from litigation over EPA's denial of California's request for a CAA preemption waiver, there is active litigation over state regulation of mobile source GHG emissions raising non-CAA preemption and other legal theories. The chief non-CAA preemption theory in this litigation is based on the Energy Policy and Conservation Act (EPCA), the authority under which the National Highway Traffic Safety Administration (NHTSA) establishes corporate average fuel economy standards ("CAFE standards"). More pertinent here, EPCA preempts states from adopting laws "related to" the federal fuel economy standards.
California has adopted regulations requiring new motor vehicles to reduce emissions of greenhouse gases (GHGs), beginning in model year 2009. The Clean Air Act (CAA) generally preempts states from adopting their own emission standards for mobile sources. However, the act allows such standards in California, if the state obtains a waiver of CAA preemption from EPA.
California requested this waiver in 2005, but EPA took until December 19, 2007, to decide that it would deny the request. On that day, EPA Administrator Stephen Johnson wrote California Governor Schwarzenegger to say, "I have decided that EPA will be denying the waiver and have instructed my staff to draft appropriate documents setting forth the rationale for this denial in further detail.... " According to press reports, the decision was taken against the unanimous advice of the agency's technical and legal staffs. The Administrator published a decision document denying the waiver in the March 6, 2008 Federal Register.
Following EPA's denial of the waiver request, California and environmental groups petitioned for review in the D.C. Circuit, with 18 other states intervening on California's side. The interest of the intervening states derives from the fact that under the CAA, other states may adopt motor vehicle emission standards identical to California's and avoid CAA preemption if California is granted a waiver. Fourteen states and the District of Columbia have already adopted such regulations.
This report reviews the nature of EPA's, California's, and other states' authority to regulate emissions from mobile sources, the applicability of that authority to GHGs, and issues related to the California waiver request. To obtain a waiver, California must meet conditions laid out in CAA Section 209(b): the state must first determine that its standards will in the aggregate be at least as protective of public health and welfare as applicable federal standards. The EPA Administrator must then find whether the state's determination is arbitrary and capricious; whether the state needs the standards to meet compelling and extraordinary conditions; and whether the standards and accompanying enforcement procedures are consistent with CAA Section 202(a).
This report does not analyze whether California is preempted from regulating mobile-source GHGs by the Corporate Average Fuel Economy (CAFE) requirements of the Energy Policy and Conservation Act of 1975, or the amended CAFE standards of the Energy Independence and Security Act of 2007 (P.L. 110-140). Under these laws, authority to set fuel economy standards is reserved to the federal government—specifically, the National Highway Traffic Safety Administration (NHTSA). In several court cases and in other venues, the auto industry is maintaining that the regulation of mobile-source GHG emissions is simply another method of regulating fuel economy, so California's GHG standards (and identical standards adopted by other states) are preempted. Two federal district courts have rejected this argument, but both decisions have been appealed.
On January 21, 2009, California submitted a formal request to President Obama and EPA Administrator-designate Lisa Jackson for reconsideration of the waiver denial. In response to this request, EPA will hold a hearing March 5, 2009, and will accept written comments until April 6.