California Climate Laws Challenged

LINCOLN, Neb. (DTN) -- Agriculture and business groups in a lawsuit filed Tuesday say two California state laws mandating climate disclosures violate the Constitutional right to free speech and will lead to increased costs to businesses including farmers and ranchers.

California Democratic Gov. Gavin Newsom on Oct. 7, 2023, signed into law state senate bills 253 and 261, which compels thousands of businesses across the country and the world doing business in California to publicly state their opinions regarding the risks associated with climate change, to post those opinions on their websites and to disclose businesses' greenhouse gas emissions.

The American Farm Bureau Federation and the Western Growers Association joined the U.S. Chamber of Commerce and California business and ag interests in filing the lawsuit in the U.S. District Court for the District of Central California.

The legal action comes at a time when agriculture and business interests also have their eyes on what the U.S. Securities Exchange Commission will do with a similar controversial proposal to require publicly traded companies to report their GHG emissions, which also would require farms and ranches to report emissions to publicly traded companies, https://www.dtnpf.com/….

The SEC is expected to decide on the future of the proposal this spring, as it has been delayed several times already.

In the lawsuit filed this week, the farm groups outline how the new California laws will affect farmers and ranchers.

"Both laws unconstitutionally compel speech in violation of the First Amendment and seek to regulate an area that is outside California's jurisdiction and subject to exclusive federal control by virtue of the Clean Air Act and the federalism principles embodied in our federal Constitution," according to the lawsuit filed against the California Air Resources Board.

"These laws stand in conflict with existing federal law and the Constitution's delegation to Congress of the power to regulate interstate commerce. This court should enjoin the defendants from carrying out the state's plan."

The lawsuit asks the court to prevent the state of California from enforcing the laws.

The AFBF is concerned about a requirement for businesses doing business in California to report so-called Scope 3 emissions, which include indirect upstream and downstream GHG emissions.

"The burden of estimating Scope 3 emissions flows up and down the supply chain," the lawsuit said.

"Small businesses nationwide will incur significant costs monitoring and reporting emissions to suppliers and customers swept within the law's reach. For example, scores of family farm members of AFBF will need to report emissions to business partners that do business with entities covered by S.B. 253."

The lawsuit illustrates how the laws affect individual farms and ranches.

For example, it said Appleton City, Missouri-based cattle operation Triple H Farm operated by Garrett Hawkins "does not operate in California and does not sell directly" to California companies.

However, the lawsuit said "his cattle are in the supply chain of many companies that will be subject to Scope 3 reporting under S.B. 253. For example, Mr. Hawkins' cattle will ultimately be bought by packers that are subject to Scope 3 reporting under S.B. 253. And the grocery stores that the packers sell beef to similarly consist of companies that will be subject to Scope 3 reporting under S.B. 253."

The law passed through S.B. 253 applies to businesses with revenues of at least $1 billion. S.B. 261 applies to businesses with revenues of at least $500 million.

In signing statements from Newsom, he expressed concern about the costs and economic effect of implementing the bills. Newsom instructed California Air Resources to monitor those costs.

S.B. 261 requires companies to post to their websites their opinions about their financial risks related to climate. S.B. 253 requires emissions reporting.

"While AFBF's members will not be directly regulated by the challenged laws, its members will bear much of the burden," the lawsuit said.

"Nearly every farmer touches the value chain of those that will be directly regulated by the laws and thus will be caught up in those companies' efforts to report Scope 3 emissions, incurring burdensome compliance costs, regardless of their contacts with California. Moreover, some regulated companies may favor larger farms that can more easily supply the information, to the detriment of smaller operations, leading to increased consolidation and integration."

Todd Neeley can be reached at todd.neeley@dtn.com

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