California and environmentalists are readying for Oct. 16 oral arguments in their bid to overturn a district court ruling that found the state's landmark low-carbon fuel standard (LCFS) violates the Constitution's Commerce Clause by attempting to regulate interstate fuel transactions and discriminates against fuel producers in other states.
One environmental attorney recently said that a loss for California in the pending U.S. Court of Appeals for the 9th Circuit lawsuit could "scale back" the state's "historic role" in crafting air and climate pollution rules for mobile sources that are more stringent than federal rules, which other states -- and sometimes EPA -- then adopt.
Oregon and Washington, as well as about a dozen states in the Northeast, are considering pursuing their own LCFS regulations. And a new coalition of academic and research institutions is beginning talks with EPA on implementing a national LCFS that would augment -- or even supplant -- the agency's renewable fuel standard.
A three-judge panel of the 9th Circuit will hear arguments in the suit, Rocky Mountain Farmers Union, et al. v. James Goldstene and Environmental Defense Fund, et al., which pits oil companies and Midwest ethanol producers against the California Air Resources Board (CARB), which crafted the LCFS regulation. The industries originally filed several lawsuits in early 2010, but those were consolidated into the Rocky Mountain case.
The LCFS requires California fuel suppliers to reduce the carbon intensity of gasoline and diesel fuel 10 percent by the end of 2020, by blending more biofuels into their products and/or by purchasing credits earned by clean-vehicle manufacturers and electricity suppliers. California is appealing a December 2011 ruling by the U.S. District Court for the Eastern District of California in which the court found the LCFS violates the Constitution.
The industries argue in part the LCFS discriminates against out-of-state corn ethanol producers by giving the product a higher carbon-intensity score and consequently illegally regulates interstate commerce.
Oil companies also allege the LCFS unlawfully discriminates against different types of crude oils by assigning them high lifecycle greenhouse gas (GHG) emission scores.
But California and environmental attorneys in briefing have argued the lower court erred in part by finding the LCFS requirement that all fuels be subject to the lifecycle GHG emissions test is illegal.
In a Sept. 6 reply brief filed with the court, state attorneys argued the LCFS cannot protect California ethanol because the most favorable carbon intensity values actually correspond to out-of-state ethanol. The state also argues the commerce clause protects the market for fuels, not methods of production and transportation. The brief adds that neither the lifecycle analysis for the LCFS nor its individual variables discriminate on the basis of origin.
Environmentalists Outline Case
Attorneys representing the Environmental Defense Fund (EDF), which is an intervenor in the case supporting CARB, held a teleconference Oct. 11 to explain the case and their arguments ahead of the appellate court hearing. Sean Donahue, with the firm Donahue & Goldberg, counsel for EDF, argued the lifecycle emissions analysis is a "neutral, scientifically valid measure of emissions . . . and we feel pretty confident about that. The fact that some facilities are higher emitting than others doesn't make the law discriminatory against those."
Donahue said it is possible the 9th Circuit could find the LCFS is not discriminatory but still represents a "burden" to interstate commerce. This could lead the court to rule that the arguments in the case should be subject to the "Pike balancing test," which is a "fact-intensive balancing test to figure out if the burden on commerce clearly outweighs the benefit of the law to the state," Donahue said. Under the Pike balancing test, the burden is on the party challenging the statute to show that it imposes too great a burden on commerce, according to the Constitution.
If the court decides to use that test, it is unclear whether the 9th Circuit would consider the arguments or remand the issues to the district court, Donahue said. "We think there is a strong legal basis for ruling for us on that, because we think Congress has given California the power to regulate fuels, notwithstanding the alleged burdens on interstate commerce. So we think the 9th Circuit could and should affirm California's power."
Donahue said the court could make a decision within four to eight months after hearing oral arguments, and that at least some of the issues could be remanded to the district court.
Donahue added that the court's decision will have broad ramifications. "One of the points we raise is that the kinds of arguments industry plaintiffs are making really would scale back states' historic role, and California has been such an important path-blazer on a lot of forms of pollution control," he said.