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Watchdog group files suit challenging Calif.'s auction regulation

By Jessica M. Karmasek | Apr 17, 2013

SACRAMENTO, Calif. (Legal Newsline) -- Attorneys for a legal watchdog group have filed a lawsuit challenging California's "cap and trade" auction regulation.

The regulation creates a quarterly auction program requiring many California employers to bid significant amounts of money in order to continue to emit carbon dioxide.

The Pacific Legal Foundation, in a California superior court filing Tuesday, contends that businesses will be be faced with closing their doors, laying off employees or moving their businesses out of state because of the new regulation.

Filed on behalf of a group of California businesses, trade associations and individuals allegedly harmed by the regulation, PLF's lawsuit challenges the auction process as an unconstitutional state tax because it was not enacted by two-thirds majorities in both chambers of the legislature, as required for new taxes by the California Constitution.

According to its 22-page complaint, the California Air Resources Board, or CARB, devised the auction plan as a means of raising billions of dollars in revenue without any instruction or direction from the legislature.

In particular, CARB hatched the auction program purportedly to implement Assembly Bill 32, the 2006 legislation that requires reductions in the emission of carbon dioxide in California by the year 2020.

But PLF contends that nothing in AB 32 authorizes creation of an auction process to sell carbon dioxide emission allowances for billions of dollars.

Nor does the bill authorize the creation of any kind of new tax, the watchdog group argues.

"PLF's lawsuit holds CARB's feet to the fire because CARB cannot be allowed to siphon billions of dollars from California taxpayers in violation of the California Constitution," PLF Senior Staff Attorney Ted Hadzi-Antich said in a statement Tuesday.

"CARB must obey the law, just as the rest of us are required to do."

Hadzi-Antich says the state constitution is "crystal clear" that new state taxes require at least two-thirds approval in both chambers of the legislature.

"The 'cap and trade' auction program is a new state tax that will generate billions of dollars of revenues for the state on the backs of California taxpayers," he said. "Because it was not passed by at least a two-thirds majority vote of the legislature, it is unconstitutional. Case closed."

Hadzi-Antich says CARB's auction program isn't just unconstitutional but it's also an "assault on economic and environmental common sense."

"California cannot even hope to address global warming issues without widespread participation by other governments. Yet except for the isolated Canadian province of Quebec, no other governments are promulgating similar regulations," he said.

"As the costs mount and businesses move out of California, other states will welcome them."

He says there has to be a better, more rational way to deal with the issues than CARB's "all-too-transparent scheme" to generate billions of dollars for the state through an illegal tax.

The plaintiffs in the case include:

- The Morning Star Packing Company, a producer of canned diced tomatoes and tomato paste, headquartered in Woodland, Calif.;

- Merit Oil Company, a third-generation California family business whose operations include storing, transporting and selling a variety of petroleum products, including gasoline, diesel fuels, solvents, kerosene and lubricants;

- California Construction Trucking Association, or CCTA, a nonprofit California trade association representing nearly 1,000 members who own and operate on-road and non-road vehicles, engines and equipment, primarily in connection with construction projects;

- Dalton Trucking Inc., a California corporation in the business of operating and leasing loaders, dozers, blades and water trucks;

- Loggers Association of Northern California, or LANC, a California nonprofit trade associa­tion whose mission is to support, promote and advocate for the logging industry in Northern California. LANC has 160 members, many of whom are family logging businesses that have been involved in logging operations in California for generations;

- Ron Cinquini Farming, a farming operation in Chico, Calif., owned and operated by Ron Cinquini. Cinquini personally owns and farms 30 acres, farms another 125 acres under contract, manages his family's farm of 400 acres and performs custom farming work on another 600 acres;

- Robinson Enterprises Inc., headquartered in Nevada City, Calif., which engages in several businesses, including logging, petroleum products storage and transportation, construction services, heavy equipment fleet operation and manage­ment, and trucking;

- Construction Industry Air Quality Coalition, or CIAQC, a California trade association founded in 1989 by four Southern California trade associations: Associated General Contractors, Building Industry Association of Southern California, Engineering Contractors Association, and Southern California Contractors Association;

- Norman R. "Skip" Brown, a lifelong California resident, and his wife, Joanne L. Brown;

- Robert Michael McClernon, a California taxpayer; and

- The National Tax Limitation Committee, or NTLC, headquartered in Roseville, Calif., one of the oldest pro-taxpayer/entrepreneur organizations in the U.S.

Filed in Sacramento County Superior Court, the case is Morning Star Packing Company, et. al. v. California Air Resources Board.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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