California lawmakers ushered in a robust suite of climate legislation at the end of the term in August, dedicating $54 billion to climate programs over the next five years. The state’s demonstrated dedication to climate issues dovetails with the federal government’s recent passage of the Inflation Reduction Act, which included several environmental provisions discussed in a recent WilmerHale alert. If signed by Governor Newsom, the new laws will impact oil and gas infrastructure, carbon dioxide emissions, and carbon sequestration capabilities, among other items. For example:
- Clean Energy: Under AB 1279, California codifies the existing goal to achieve carbon neutrality by 2045. The state aims to implement 90% clean electricity by 2035 and 95% by 2040, pursuant to SB 1020. Reaching these targets will require an 85% reduction in emissions across sectors, including transportation, oil and gas production, and agriculture.
- Carbon Sequestration: AB 1757 requires California to set goalposts for removing carbon from the atmosphere with natural methods, including planting trees, restoring wetlands, and increasing urban forestry projects. SB 905 requires the California Air Resources Board to set regulations for carbon sequestration projects at polluting industries, such as oil refineries.
- Nuclear: SB 846 extends the operation timeline for Diablo Canyon nuclear power plant, which was slated to close in 2025. Under the bill, owner and operator Pacific Gas & Electric will receive a $1.4 billion loan to continue operations until 2030. Environmental groups expressed opposition, but industry and lawmakers who favored SB 846 argued maintaining the power plant is crucial to meeting California’s projected energy needs.
- Oil and Gas Drilling: With SB 1137, new oil and gas wells will have to be built at least 3,200 feet away from homes, hospitals, and schools, but existing wells within those health protection zones will not be banned. Beginning January 1, 2023, notices of intentions to drill within these zones would not be approved absent certain circumstances, and by January 1, 2025 facilities within these zones must submit plans to comply with certain health, safety, and environmental requirements (with plan implementation commencing by January 1, 2027). Proponents of SB 1137 argued that oil drilling unduly harms Black and Latino residents, and that this measure will ease the burdens faced by communities atop major oil fields.
Not all pending climate legislation was successful. SB 260, the California Climate Corporate Accountability Act, failed in the Assembly. SB 260 would have mandated that US-based businesses with annual revenues exceeding one billion dollars annually report all greenhouse gas emissions attributable to the business, including direct emissions, electricity use, and indirect emissions from the supply chain, waste disposal, leased assets, and other sources. AB 2133, which would have increased goals for reducing GHGs, also failed. Under AB 2133, California would have aimed to reduce GHG emissions to 55% below 1990 emissions (the current target is 40%).
Governor Newsom has until September 30, 2022 to veto or sign the bills that passed. Because Governor Newsom indicated strong support for many of the bills at the end of the session, it is expected that the climate legislation will largely become law. Regulated industries and entities should prepare for compliance in the new legal landscape, and WilmerHale’s energy and environmental team is poised to help.