California has unique authority under the Clean Air Act, allowing the state to keep aggressive mileage targets in place even if the federal standards are weakened. Other states are allowed to adopt California's rules, which 13 states and the District of Columbia have done.
But the EPA keeps threatening to challenge California's authority, pointing to the state's outsize influence over what cars get built.
"Federalism doesn't mean that one state can dictate to the rest of the country," Environmental Protection Agency chief Scott Pruitt said at a Senate hearing Tuesday.
The state is showing no sign of flinching. Its power to set its own vehicle emission guidelines has been in effect for 50 years. The state and the EPA have been in negotiations in an effort to reach a compromise that would keep emissions targets uniform nationwide.
So far, not much seems to be happening at the bargaining table. California has little incentive to make concessions.
The tension will increase next month, when the EPA completes a review of the current rules and starts to lay out its plans for rolling back mileage standards. The agency is under pressure from automakers who object that there isn't a large enough market right now to support a big infusion of smaller, lighter, less-polluting cars and trucks.
It's a familiar story in the auto industry: Gas prices are low, the profit margin on sport utility vehicles is high and even as the companies boast of plans to roll out dozens of new electrified vehicles in the next few years, they would prefer to soak up profits from the SUV buying binge for as long as possible.
Ford CEO Mark Fields warned the president a year ago that unless the mileage standards were more flexible, some 1 million American auto jobs could be lost.
The warning was widely dismissed by industry experts, who said it was based on misleading assumptions about gas prices, the cost of battery technologies and the types of workers who would be hit. The same study Fields cited envisioned another scenario in which keeping the mileage rules would lead to an increase of 144,000 jobs.
Many analysts say the industry's reluctance to push cleaner prototypes into the market echoes faulty business decisions American auto companies made more than a decade ago that helped precipitate a financial disaster for them that required a massive government bailout.