Rep. Jay Obernolte, R-Hesperia, is asking the U.S. Environmental Protection Agency not to grant a waiver that would allow the In-Use Locomotive Regulation to take effect.

In a letter co-signed by 74 congressmembers, Obernolte told EPA Administrator Michael Regan that the rule, adopted in April 2023 by the California Air Resources Board and set to start taking effect in 2030, is unnecessary and impossible to follow because the required technology doesn’t exist.

Trains account for just 0.5% of all U.S. greenhouse gas emissions — which are responsible for climate change — and despite the industry taking steps to cut those emissions, the rule “has the potential to undermine the progress made by the railroads,” Obernolte’s letter read.

“Forcing the adoption of unproven technology could inadvertently move freight from the rail sector to (the) heavy-duty trucking sector,” which emits far more pollution, the letter added.

Obernolte, whose district includes cities in San Bernardino County’s High Desert as well as parts of Colton, Highland, Loma Linda, Redlands and San Bernardino, fears the rule will cause Burlington Northern Santa Fe to pull the plug on its $1.5 billion Barstow International Gateway project, killing 20,000 jobs, because the project would need all-electric locomotives that don’t exist.

Rail projects such as the Barstow gateway “would be canceled completely as development would become cost-prohibitive” if the rule were enacted, Burlington Northern spokesperson Lena Kent said via email.

Also, “thousands of existing and promised well-paying jobs would vanish” and “the cost of goods movement through California would increase to the point of being non-competitive, shifting cargo to other ports outside the state,” Kent said.

“Our national supply chain and West Coast port throughput would suffer without new rail projects that improve efficiency.”

The air resources board declined to comment on Obernolte’s letter. But according to information given by board spokesperson Lys Mendez, emissions from just one train exceed those from 400 heavy-duty trucks.

“The reduced nitrogen oxide and diesel particulate matter — of which there is no known safe level of exposure — will bring an estimated $32 billion in health savings by preventing 3,200 premature deaths and 1,500 emergency room visits and hospitalizations,” the statement provided by Mendez said.

“Cancer risk from exposure to air toxins within one mile of locomotive operations is expected to be reduced by 90%. Many rail operations, particularly in urban areas, tend to be located in places that are home to low-income residents and communities of color, who often bear a disproportionate burden from the impacts of air pollution,” the statement added.

Toxic exhaust from trucks and trains serving the logistics industry is a sensitive topic in the Inland Empire, where mega-warehouses stretching into the horizon support tens of thousands of jobs.

Environmental justice activists want the government to strictly limit or eradicate diesel emissions linked to cancer, asthma, heart attacks and other health problems. But logistics industry advocates warn the rules sought at the state and federal levels have unrealistic timelines and the industry is already taking steps to curb emissions.

Under the rule, by 2035, all locomotives operating in California will have to run in “zero-emission configuration” or in a way that doesn’t emit pollution.

“Presently, there are no commercially available freight locomotives that could comply with the (zero-emission) requirements of the regulation,” Obernolte’s letter states.

The rule also forces freight train companies to deposit money into a spending account that can only be used for zero-emission technology, with the amount deposited based on their trains’ emissions.

Burlington Northern and Union Pacific — the two Class I freight train companies operating in California — could each be forced to deposit up to $800 million a year, Obernolte’s letter read.

If the EPA adopts the rule, it could lead to a byzantine level of state-by-state locomotive regulations, disrupting a freight train industry that’s best regulated by the federal government, Obernolte said.

Responding to Obernolte’s questions at a Wednesday, May 15, House committee hearing, Regan said his agency is “going through a very thorough evaluation right now (of the rule) and we’ve got a lot of things to consider.”

“I have pledged, and so have my team members, to follow the science and follow the law. We have to be sure that any action that we take does both of those things, especially follow the law,” Regan said.

He did not provide a timeframe for when the EPA will decide whether to grant the rule a waiver.

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The “crisis” in California’s insurance market was caused by “a laser focus only on affordability,” said Nancy Watkins, a principal at Milliman, an actuarial firm, at a legislative hearing on Wednesday.  The companies are operating with “very crude tools” at the expense of availability and reliability, she said.

She said the current regulatory system is too rigid. “It’s like you’ve got your steering wheel locked straight ahead, you’ve got your speed set on cruise control, and now you find yourself on the Pacific Coast Highway,” she said. “What insurance company would agree to that?”

Home insurance premiums in California are a little cheaper than the national average — and much lower than premiums in other disaster-prone states like Florida and Louisiana. That’s without accounting for the fact that California has some of the most expensive housing in the country. 

California still has about 115 companies offering home insurance, said Michael Soller, a deputy commissioner for the state’s insurance department. As for whether more companies are likely to follow State Farm and Allstate, “we don’t think that will happen,” he said

Consumer and insurance industry groups and other experts have ideas for what they’d like to see California do in the wake of the news — few of which they agree upon. Here’s the debate over four of those ideas. 

Require State Farm to keep issuing new policies

There’s disagreement whether this idea, backed by the group Consumer Watchdog, is legal.

The idea hinges on how insurance prices are regulated in California. Under current laws, insurance companies can’t just charge whatever they want: They have to submit their proposed rates to the insurance department, which they back up by explaining their projected costs, losses, revenue and more. State regulators can approve a company’s proposed rates, or deny them, if they think, for example, the rates are unjustifiably high, or so low that they could put the company’s finances at risk.

Harvey Rosenfield, founder of Consumer Watchdog, said if a company suddenly says that it’s not going to take the same number of customers that it had projected when it got the department’s approval, then it has changed the assumptions on which the approval was based. 

“They granted themselves a de facto rate increase by reducing the risk” in a state where that’s illegal, said Rosenfield. The department could issue a notice to State Farm, he said, and tell the company it needs to keep selling new home insurance policies until it submits new rates and those rates are approved. 

The insurance department disputes that it has the power to do this. “Their claims are not supported by law,” said Soller, the deputy commissioner. “There’s a reason why it hasn’t been done by any insurance commissioner before.”

Let insurance companies use forward-looking catastrophe models

The kinds of data and statistical models insurance companies can use to set prices may sound like a nighttime sleep aid, but it’s a matter of lively discussion in insurance circles. 

When a company tries to justify rate changes, it is required to rely on past losses to project future losses. It can’t use factors like the locations of new homes it is covering — whether they’re in downtown San Francisco or rural wine country — or the increased risk of wildfires due to climate change.

“We do it in a very old-fashioned way, and it needs to be updated,” said Rex Frazier, president of the Personal Insurance Federation of California, an insurance industry group that counts State Farm as a member. He supports the use of forward-looking models, which are generally provided by other private companies. California already permits insurers to use models for earthquake insurance. 

If a company is trying to figure out how much it should charge for earthquake coverage, it would look at proximity to fault lines, Frazier said, but for wildfire insurance, California doesn’t do that. 

“For wildfire it just says ‘Well, looking backward, what have you paid over the last 20 years for wildfire clients?’” he said. 

Consumer groups generally oppose letting insurance companies use models, fearing that companies will use them to justify extreme price hikes, and that complex math will make scrutiny a challenge.

“They’re just very sophisticated crystal balls,” said Amy Bach, executive director for United Policyholders, a consumer group. Modeling companies generally see their models as intellectual property, which can pose a challenge for transparency. “Our fear is that they overstate risk,” said Bach. 

About a week and a half after State Farm’s announcement, the insurance department said it would host a public workshop on use of models in insurance pricing, ahead of considering regulations. The workshop will take place on July 13. 

On Wednesday, the Assembly’s insurance committee held a hearing on models. When asked by a legislator whether the department was moving toward incorporating catastrophe models, a department representative confirmed that it was. 

“Historic losses do not fully account for growing wildfire risks, or risk mitigation measures taken by communities,” said Michael Peterson, a deputy commissioner at the insurance department, during the hearing.

Address the increasing cost of insurance — for insurance companies

Insurance companies are just like us: They buy insurance! When insurance companies buy it, it’s called “reinsurance.” 

The cost of reinsurance has risen dramatically, and State Farm cited “a challenging reinsurance market” as one of the reasons it decided to stop selling new home insurance policies in California. 

When insurance companies explain their costs to the insurance department as part of the process for justifying their prices, they aren’t allowed to include the cost of reinsurance. The department hasn’t historically permitted it, Soller said, because it doesn’t regulate reinsurance. 

“What are insurers supposed to do when, on the one hand, the Department of Insurance is telling them ‘maintain your solvency’ and then, on the other hand, when their costs go up, you can’t charge for it,” said Frazier.

Insurance industry groups say it would help if they could incorporate the cost of reinsurance into their prices. But consumer groups say that the move would cause premiums to spike. 

“Californians would see immediate massive rate hikes — both as soon as that went into effect and ongoing,” said Carmen Balber executive director of Consumer Watchdog. A reinsurance provider regulated by California would address problems she sees with the reinsurance market, Balber said, but that doesn’t exist currently.

Reduce the risk of disasters

The underlying problem is that disasters happen in California — at an increasing rate thanks to climate change — and that homes are at risk. They’re in the middle of the woods, or surrounded by flammable grasslands, or on the edge of bluffs that are expected to erode. Making homes less likely to burn, flood or collapse would be good for homeowners and would also make California feel less risky to insurers.

There’s no shortage of ideas for how to reduce risk, and there’s been action on this front in recent years. The insurance department, for example, has required insurance companies to consider whether homeowners take certain steps to protect their homes — like installing fire-resistant vents and clearing out vegetation under decks — in their prices.

California has set aside $2.7 billion for wildfire resilience over the past three years, according to the insurance department. When the department convened a group of environmental advocates, researchers, and public policy and insurance experts to make recommendations on how to reduce the risks of climate change, they came up with a long list. Among the recommendations: 

• Create statewide hazard maps so that future risks are more clear to the public 
• Increase funding to retrofit homes 
• And apply fire-resistant building codes in areas with moderate to higher fire risk.

Cutting greenhouse gas emissions would ultimately be the best way to reduce the risk, said Alice Hill, chair of the group convened by the department and a senior fellow for energy and the environment at the Council on Foreign Relations. But the world will get warmer even if we reduce emissions, she said, so focusing on where and how homes are built remains important.

“That could mean not building in areas that are just becoming too risky,” Hill said.

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WASHINGTON (AP) — Companies would be required to disclose the greenhouse gas emissions they produce and how climate risk affects their business under new rules proposed Monday by the Securities and Exchange Commission as part of a drive across the government to address climate change.

Under the proposals adopted on a 3-1 SEC vote, public companies would have to report on their climate risks, including the costs of moving away from fossil fuels, as well as risks related to the physical impact of storms, drought and higher temperatures caused by global warming. They would be required to lay out their transition plans for managing climate risk, how they intend to meet climate goals and progress made, and the impact of severe weather events on their finances.

The number of investors seeking more information on risk related to global warming has grown dramatically in recent years. Many companies already provide climate-risk information voluntarily. The idea is that, with uniform required information, investors would be able to compare companies within industries and sectors.

“Companies and investors alike would benefit from the clear rules of the road” in the proposal, SEC Chairman Gary Gensler said.

The required disclosures would include greenhouse gas emissions produced by companies directly or indirectly — such as from consumption of the company’s products, vehicles used to transport products, employee business travel and energy used to grow raw materials.

The SEC issued voluntary guidance in 2010, but this is the first time mandatory disclosure rules were put forward. The rules were opened to a public comment period of around 60 days and they could be modified before any final adoption.

Climate activists and investor groups have clamored for mandatory disclosure of information that would be uniformly required of all companies. The advocates estimate that excluding companies’ indirect emissions would leave out some 75% of greenhouse gas emissions.

“Investors can only assess risks if they know they exist,” Mike Litt, consumer campaigns director of the U.S. Public Interest Research Group, said in a prepared statement. “Americans’ retirement accounts and other savings could be endangered if we don’t acknowledge potential liabilities caused by climate change and take them seriously.”

“Climate risks and harms are growing across our communities with threats to our economy,” said Rep. Kathy Castor, D-Fla., chair of the House Select Committee on the Climate Crisis. “Investors, pension fund managers and the public need better information about the physical and transition-related risks that climate change poses to hard-earned investments,”

On the other hand, major business interests and Republican officials — reaching down to the state level — began mobilizing against the climate disclosures long before the SEC unveiled the proposed rules Monday, exposing the sharply divided political dynamic of the climate issue.

Hester Peirce, the sole Republican among the four SEC commissioners, voted against the proposal. “We cannot make such fundamental changes without harming” companies, investors and the SEC, she said. “The results won’t be reliable, let alone comparable.”

The SEC action is part of a governmentwide effort to identify climate risks, with new regulations planned from various agencies touching on the financial industry, housing and agriculture, among other areas. President Joe Biden issued an executive order last May calling for concrete steps to blunt climate risks, while spurring job creation and helping the U.S. reduce greenhouse gas emissions that contribute to climate change.

Biden has made slowing climate change a top priority and has set a target to cut U.S. greenhouse gas emissions by as much as 52% below 2005 levels by 2030. He also has said he expects to adopt a clean-energy standard that would make electric power carbon-free by 2035, along with the wider goal of net-zero carbon emissions through the economy by 2050.

“This is a huge step forward to protect our economy and boost transparency for investors and the public,” White House national climate adviser Gina McCarthy tweeted as the SEC acted.

The premier business lobby, the U.S. Chamber of Commerce, and the American Petroleum Institute, the oil industry’s top trade group, expressed objections in letters to the SEC last year.

Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at API, said Monday the group is concerned that the SEC’s proposal could require disclosure of information that isn’t significant for investors’ decisions, “and create confusion for investors and capital markets.”

“As the (SEC) pursues a final rule, we encourage them to collaborate with our industry and build on private-sector efforts that are already underway to improve consistency and comparability of climate-related reporting,” Macchiarola said in a statement.

The threat that opponents could take the SEC to court over the regulations has loomed.

Last June, a group of 16 Republican state attorneys general, led by Patrick Morrisey of West Virginia, raised objections in a letter to SEC Chairman Gensler. “Companies are well positioned to decide whether and how to satisfy the market’s evolving demands, for both customers and investors,” they said. “If the (SEC) were to move forward in this area, however, it would be delving into an inherently political morass for which it is ill-suited.”

Morrisey previously threatened to sue the SEC over expanded disclosures from companies of environmental, social and governance information.

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