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Ethanol Groups Seek Supreme Court Review Of California's Low-Carbon Fuel Standard

Friday, March 21, 2014

By Carolyn Whetzel  

Ethanol industry groups have asked the Supreme Court to determine whether California's low-carbon fuel standard violates the dormant commerce clause of the U.S. Constitution (Rocky Mountain Farmers Union v. Corey, U.S., docket number unavailable, 3/20/14).

The Renewable Fuels Association and Growth Energy filed a petition for writ of certiorari March 20, challenging an appellate court decision that reversed a district court's finding that the fuel standard discriminates against out-of-state commerce and is an extraterritorial regulation.

“California, through adoption of the LCFS, has violated the most basic, structural features of interstate federalism,’’ the groups said in a March 20 written statement announcing the filing. “LCFS not only discriminates against out-of-state commerce, but it seeks to regulate conduct in other States in direct contravention of our constitutional structure and at the direct expense of Midwestern farmers and ethanol producers.’’

Adopted by the California Air Resources Board in 2009, the low-carbon fuel standard (LCFS) is a key element of the state's effort to reduce greenhouse gas emissions. Effective in 2011, the LCFS requires transportation fuels sold in the state to be 10 percent less carbon intensive by 2020.

Methodology on Carbon Intensity

At issue in the litigation is the methodology CARB established for calculating the carbon intensity of the various fuels' life-cycle emissions, the emissions that result from production and transportation through consumption of the fuels .

To comply with the standard, fuel producers must either meet a specified annual intensity or use credits if their annual carbon intensity is too high.

Washington, Oregon, Maryland, Massachusetts, New York, Rhode Island and Vermont are among a group of states interested in adopting a similar low-carbon fuel standard.

Ethanol producers and crude oil companies filed lawsuits that were partially consolidated, alleging CARB unfairly assigned higher carbon intensity standards to out-of-state fuels.

In their petition, the Renewable Fuels Association and Growth Energy are asking the Supreme Court to determine if the Ninth Circuit erred in finding the standard does not facially discriminate against interstate commerce, since “on its face,’’ the fuel standard “treats chemically identical fuels differently based on where they are produced and how far they travel before they are used in California?

The petitioners' also want the court to weigh-in on whether fuel standard is an illegal attempt by California to regulate greenhouse gas emissions occurring in other states by rewarding and punishing industrial and agricultural activity taking place outside the state.

Ninth Circuit Opinion, Remand

In a Sept. 13, 2013, opinion, the U.S. Court of Appeals for the Ninth Circuit largely rejected the claims that the fuel standard violated the commerce clause (Rocky Mountain Farmers Union v. Corey, 2013 BL 250093, 9th Cir., No. 12-15135, 9/18/13; .

Overturning the district court, the appellate panel said that neither the ethanol nor the crude oil provisions in the fuel standard are facially discriminatory. The appeals court did, however, remand the case, directing the district court to determine if the ethanol provisions discriminate in purpose and effect.

In the petition, groups said the California standard will “pit states against each other, and allow the larger States to use their economic clout to force farmers and businesses in other States to conform to their idea of good policy--all while harming the Midwest ethanol industry.’’

A separate action filed in state court requires CARB to reopen the fuel standard to correct procedural issues that violated the California Environmental Quality Act (POETT LLC v. CARB, Cal. Ct. App., No. F064045, 7/15/13.

CARB held its first workshop March 10, outlining its plans to reopen the fuel standard.

 

To contact the reporter on this story: Carolyn Whetzel in Los Angeles at cwhetzel@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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