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In its new draft rules on vehicles, EPA signals it might let California finally regulate rail.

Buried at the bottom of the Environmental Protection Agency’s draft rules on greenhouse gas limits for cars and trucks was a proposal related to another highly polluting form of transit: trains.
The EPA said Wednesday it was considering giving states more authority to regulate locomotives, specifically citing concern that its current policy could impede California’s “exploration of regulations” for trains and train engines. The Golden State has been lobbying the EPA to tighten its standards for locomotives, or to allow it to do so, for years. However, a 1998 rule limits states' ability to regulate emissions for a range of nonroad vehicles, including trains.
I’m not going to pretend this could be a huge deal for climate change. Trains are responsible for just 2% of transportation emissions in the U.S. This is, however, a huge deal for public health and environmental justice. Exposure to diesel exhaust causes lung cancer. Trains also emit nitrogen oxides and particulate matter, which irritate the lungs, exacerbate respiratory diseases including asthma, and contribute to premature deaths. Rail yards are often located near densely populated areas and disproportionately neighbor low-income communities that suffer from a combination of economic, health, and environmental burdens.
But while public health is the most urgent reason to cut pollution from trains, the most promising solutions to address that pollution — batteries and hydrogen fuel cells — will also pretty much eliminate the climate impacts of trains, as a treat.
California petitioned the EPA to tighten its standards for trains back in 2017. “We cannot deliver on our collective responsibility to improve conditions on the ground for overburdened communities without new action by U.S. EPA to require a transition to zero and near-zero emission locomotives,” wrote Mary Nichols, then-chair of the California Air Resources Board, or CARB, the state agency that regulates emissions.
CARB’s concern isn’t just public health, but federal compliance. The state is not on track to meet federal air quality standards. California’s rail yards are already a major source of pollution, and rail operators are planning expansions. The state expects freight rail to increase 50% in the next seven years.
“Locomotives are so dirty that state regulators identified reducing their pollution as the biggest single strategy in their plan to reduce smog to federal health standards by 2037 — responsible for more than 30% of the emissions cuts needed, more than any other sector, including all cars and trucks on the road,” the Los Angeles Times’ editorial board wrote in a recent piece on the need to clean up the rail industry.
“California is a leader on climate,” said Chris Chavez, deputy policy director for the Coalition for Clean Air, a statewide organization working on air quality issues. “The problem is that we still have the dirtiest air in the nation.”
Part of the challenge is that trains are incredibly durable. They are typically “remanufactured,” or repaired and restored, every seven to 10 years, but can otherwise stick around for decades. EPA tightened its emissions standards for locomotives in 2008, but “remanufactured” trains aren’t required to upgrade to the highest standards. Chavez said that in the South Coast Air Quality Management District, a region that encompasses Orange County and much of Los Angeles, some 30% to 50% of the trains still only meet the dirtiest, lowest-level EPA standards. “Those are the most polluting engines that are available and they’re in the dirtiest air basin in the country.”
Under the Trump administration, California’s petition went unanswered. But late last year, Biden’s EPA finally responded. Though it didn’t commit to tightening standards for trains at the federal level, the agency said it had assembled a “rail study team” to evaluate technologies to reduce train emissions, as well as policy options to get the industry to turn over its fleet to trains with newer, cleaner technologies more quickly. It also hinted that it was planning to clarify its policy on state-promulgated regulations.
California hasn’t been idly standing by. State regulators determined that although they had no authority to regulate the manufacture of locomotives, they could issue rules for railroad operators and the types of equipment they use. Next month, CARB is expected to vote on a set of new rules designed to force the industry to begin retiring its oldest trains and replacing them with newer, cleaner models, and by 2035, with zero- or near zero-emission trains that are powered by batteries, overhead electric lines, or hydrogen fuel cells. While the regulations would pertain to trains that are “in-use” in California, it would have implications for the whole of North America, since the rail system is interconnected, and trains frequently travel far beyond their owners’ tracks.
The Inflation Reduction Act could help. The legislation included $3 billion for grants and rebates to reduce air pollution from ports and $60 million for the Diesel Emissions Reduction Act program, which funds pollution reduction projects related to transportation in low-income and disadvantaged communities.
CARB’s rules are sure to face litigation from the rail industry, which claims that the “entire proposed regulation is preempted by federal laws and regulations.” The Association of American Railroads says the industry is already working toward zero-emission rail, with major railroads like BNSF and Union Pacific piloting battery-electric and hydrogen fuel cell trains, but that these solutions won't be commercially available “for the foreseeable future.” But the EPA could soon strengthen California’s case.
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1. Suffolk County, New York – Rarely do I get to say battery fire fears can be quelched but we have a very good example brewing in the Empire State.
2. Loudon County, Virginia – I can’t believe it: Data Center Alley is going to enact a moratorium.
3. Pulaski County, Arkansas – Entergy has dropped the lawsuit it filed against an Arkansas newspaper over the publication of a power deal with Google.
4. Darlington County, South Carolina – We conclude this week’s Hotspots with a focus on a GOP-leaning county rejecting a renewables moratorium.
A conversation with Sam Lyman of the Bitcoin Policy Institute.
This week’s conversation is with Sam Lyman, head of research at the Bitcoin Policy Institute. Originally focused on cryptocurrency, Lyman’s organization has expanded to policy and messaging development around data centers, most notably providing research many AI boosters cite to claim foreign influence is driving opposition to new hyperscale projects. Last week, the think tank released a new report calling for a novel solution to the data center permitting bottleneck: direct cash payments from data center projects to individuals involved with building them, as well as residents nearby facilities once they’re operating.
I reached out to BPI and asked for a chat with Lyman about the data center dividend proposal. I also tried to get to the bottom of where this increasingly relevant think tank stands on the general idea of a national data center law. The conversation was immensely informative. So here it is, in a lightly abridged and edited format.
Let’s start with the data center dividend proposal. Walk my readers through it.
Data center dividends came from the idea that, ideally in the AI revolution, we want all Americans to benefit. Especially rural Americans. You look at the landscape today, the majority of AI data centers are being built in rural America. It’s critical they’ll benefit from the massive wealth AI will unlock.
There’s lots of ways to make that happen. People point to the jobs AI data centers will build out, for example. But with data center dividends, we take the logic of the Alaska Permanent Fund and we apply it to America’s rural counties, which are sitting on a proverbial gold mine right now but lack any kind of public mechanism allowing them to benefit from that in a maximal way.
If you look at the tax revenue these data centers create, which is astronomical, how do we distribute this tax revenue in a way where it has the most tangible impact on the families living there? We believe data center dividends are the best way to do that – after allocating money for schools, public safety, and infrastructure, it allows these counties with tens of millions of dollars left over to distribute them as they see fit. They should distribute that money to the men and women who make those data centers happen in the first place.
The most effective form of a dividend would take a direct payment: a cash payment, a physical check, a direct deposit. Or the form of credits paying back property taxes, utility bills, an endowment for scholarships. There’s a number of different forms this can take.
Hopefully this gets the conversation going about how we can make these work for everybody.
Who do you want to see set up this dividend mechanism? How’s your approach to implementation?
The report is addressed to county commissioners. I’m thinking of commissioners who represent both sides of the political spectrum facing this huge backlash. Many of them want to do good by their communities and their voters, even if it means doing a data center, in places where it’s difficult to explain right now. Dividends make this indisputably clear.
I tried to put myself in the shoes of an enterprising county commissioner who sees the merits in the data center buildout and wants to break out of the political storm. It’s important to note data centers can be a huge economic boon for communities, in ways that can impact lives positively.
Have any communities – counties, as you noted – taken this idea up yet? Are there any models for this proposal?
The best analogue is West Feliciana, Louisiana, which is the case study we feature. West Feliciana made an agreement with a data center developer where in lieu of taxes, they make direct payments of about $90 million a year to the parish. That triples the community’s tax budget every year. It leaves ample room not only for essential services but dividends afterwards. Louisiana then passed a law – Act 434 – that allowed West Feliciana to remit some of those payments to residents as a tax credit. This bill first provided the opportunity for the parish to even remit those payments as cash, but it was changed in the legislature to make it a credit. That’s the closest we’ve gotten so far.
As far as reaching out to individual counties, we’re a think tank. We put ideas into the universe. We haven’t had anyone reach out to us since the publication of the report so far but we’re hoping they will.
Your report does lay out how there’s a bottleneck in development and this could help with easing it. Do you see an impetus to put ideas like the dividend out there right now, in light of the increased data center scrutiny in this year’s midterms?
Our publication is irrespective of the midterms. But it is tied to the fact that a bottleneck facing the data center buildout includes it becoming a politicized issue. We’re of the belief these projects shouldn't be political at all. One way to break through the noise is by showing how they can benefit those involved in construction and residents who live there. Data centers are critical infrastructure; other forms of critical infrastructure aren’t being politicized. Our efforts are to demonstrate how these shouldn’t be political.
When it comes to the future of AI data center regulation, this proposal is obviously geared towards incentivizing a resolution to the bottleneck through using resources produced from data centers – namely, new investment.
Where does your organization stand on the increased push for environmental or siting regulation on AI data centers?
I’m not familiar with what you might be referring to there.
I mean, there’s all kinds of proposals at the federal level and in states for everything from being required to pay for infrastructure upgrades to being required to use closed-loop cooling to siting restrictions, like temporary moratoria.
What I’m asking is, what else do you as an organization believe when it comes to regulating AI data center development at the federal level? State level?
We believe data centers should work for the communities where they’re being built. That’s important. So the concept of BYOP – Bring Your Own Power – we very much support that idea. We think the Ratepayer Protection Pledge is a great proposal because ultimately we want data centers, with them being critical infrastructure, to not only strengthen our national security but strengthen the communities where they’re being built.
Some states are rejecting data centers. We think that’s a mistake because it's something that’ll ultimately short-change the people who live there. For the states that do decide to build data centers, it's up to them what regulations make data centers more sustainable over time.
There’s increased public discussion for policy on AI development – as an organization, do you see any role in the federal government making policy here with a national data center law?
We think AI will be key to America’s prosperity over the long-term. We have concerns about the regulation of open-source artificial intelligence; bitcoin is a form of open-source software and open-source money. We believe intelligence should be something available to all Americans. That’s our concern with talk about regulating AI right now, it feels like a ploy for regulatory capture.
But what about national policy on AI data centers? Does your think tank support the national legislature doing a federal data center bill or is that something best for localities or states?
It depends on the bill. Are you talking about Sen. Bernie Sanders’ national moratorium?
With a permitting deal seemingly on the horizon, Republican Gabe Evans and Democrat Scott Peters may be about to see their partnership pay off.
The fate of permitting reform legislation that could smooth the way to all kinds of new and improved energy infrastructure — including transmission lines and renewables — is currently hostage to opaque discussions between Senate committee chairs. Rhode Island Senator Sheldon Whitehouse, the Democratic ranking member of the Senate Environment and Public Works Committee, told a Rhode Island business group earlier this week that “we’re actually in a pretty good place on permitting reform,” and that there was “maybe another week of negotiations.” Whitehouse’s Republican counterpart on the EPW committee, West Virginia Senator Shelly Moore-Capito, told Semafor on Friday that any bill has “got to pop out of here in the next 48 hours.”
If that’s going to happen, it will be because Republicans and Democrats have decided it’s worth it to get along. Any deal will eventually have to be voted on by the House, which has already produced several bills on a bipartisan basis, and even passed one — the SPEED Act — late last year.
Two of the busier House members on this issue are Scott Peters, a Democratic former environmental lawyer from San Diego, and Gabe Evans, a first term Colorado Republican representing a suburban and rural district north of Denver that includes wind farms and crude oil production. “The district that I represent truly is an all of the above energy district,” Evans told me.
Their latest effort is a bill aimed at smoothing out permitting for transmission development, especially interregional transmission. Last week, the two congressmen unveiled the CLEAR Act, seeking to apply a stricter set of standards for lawsuits against transmission projects that aligned with how natural gas and hydropower projects are treated under the Federal Power Act (it’s much harder to sue to stop these projects). Earlier this year, the two also sponsored the CERTAIN Act, a more comprehensive streamlining of federal permitting for energy infrastructure projects.
“We’re proud to have a lot of our work as the foundation for this, and I think if they send us over something that includes this, it’s got a really good chance of passing in the House,” Peters told me. Evans added that bringing forward bipartisan bills “gives a little bit more impetus to the Senate to know that the House is looking for these things.”
While the Senate’s deal will be up to the senators, Peters told me he envisions a broad permitting package that could include reforms to the National Environmental Policy Act to shorten permitting timelines, preventing the president from nixing individual projects, and reform Section 401 of the Clean Water Act which effectively devolves power to tribes and states to block a variety of interstate projects. “I think it’s coming together pretty well,” Peters said. “Obviously, we’re waiting for white smoke from the Senate.”
A permitting reform package may be one of the last major bills several bipartisan-minded House members get to vote on.
Election day is about six weeks off, and while Peters will likely have an easy time getting reelected for this eighth term, Evans is in a tough race. His purple-hued district is a target for the House Democratic campaign arm, which is hoping to flip it to former Colorado House of Representatives member Manny Rutinel, who worked as a lawyer at the environmental group Earthjustice. The Cook Political Report rates the race as toss-up, and Nate Silver gives Rutinel a roughly 75% to win.
But Rutinel won’t be getting any campaign help from Peters.
When I asked Peters about the timing of releasing a bill that could boost an endangered Republican’s bipartisan bona fides less than two months before an election, Peters told me that he and Evans had been working on it “for a while,” and that “my colleagues know that I’ve worked with Republicans to get problems solved.”
He said he wasn’t “participating in Gabe’s election” and wasn’t giving any money to his campaign, but also that he wouldn’t campaign Evans’ challenger, despite the opportunity to bolster his own caucus.
Peters is not shy about praising Evans. “What I appreciate about Gabe is that it takes a little bit of initiative to separate yourself from the majority — particularly when you’re in the trifecta — and do your own thing. He’s been a good partner in helping find ways to reduce process and make things go faster,” he told me.
Evans told me that he and Peters met early in this Congress, as Evans was getting settled into his new office in the Longworth building. “We’ve built the relationship over the last two years with a lot of the different areas that we’ve collaborated on.”
“I always try to meet the members of my committee and find out who will work with me. And I was fortunate to find Gabe,” Peters said.
“I do want to win the majority in the next Congress,” Peters went on, but “the norm should be that we figure out ways to work together to solve problems, and, you know, we’ll let the voters of Colorado 8 decide who to send me.”
Evans, for his part, told me that he had to work with Democrats to get anything passed as a member of a minuscule Republican minority in the Colorado statehouse, and that the 40-plus members of the bipartisan Problem Solvers Caucus have agreed not to campaign against each other. “There’s 385 other members that you can go pick fights with,” he said.