Court rebuffs challenge to Ore. fuels regime

Source: Jeremy P. Jacobs, E&E News reporter • Posted: Monday, September 10, 2018

Federal judges today rejected a challenge to Oregon’s Clean Fuels Program to address climate change.

Representatives of oil and trucking industries challenging the program claimed it discriminated against petroleum and blended ethanol fuels from the Midwest by assigning them high values that would have to be offset.

But the San Francisco-based 9th U.S. Circuit Court of Appeals rejected those contentions today in a split 2-1 ruling.

Oregon’s 2015 regulations are largely based on California’s fuels program. The program assigns carbon intensities to fuels by taking into the account the life cycle of the fuel’s carbon emissions, including where it is produced and refined, and its transportation into the state.

The total limit of what can be used — the cap — is set by the state, which gradually ratchets it down through 2025.

Regulated industries must either stay under the cap or purchase credits. The goal is to reduce greenhouse gas emissions from use and production of transportation fuels by at least 10 percent compared to 2010 levels.

The American Fuel & Petrochemical Manufacturers, American Trucking Associations Inc. and the Consumer Energy Alliance claimed the program violated the so-called dormant Commerce Clause of the Constitution.

The Commerce Clause holds that only Congress may regulate interstate commerce. But some jurisprudence has also held that the nonstated inverse is also legally valid: States may not discriminate against out-of-state commerce.

Challengers contend that Oregon’s life-cycle carbon scoring discriminates against fuels made out of state, in part because the analysis includes the transportation of those fuels.

The dormant Commerce Clause argument is virtually identical to a challenge to California’s program. The 9th Circuit rejected that case in 2013, and the Supreme Court declined to review it.

“Under the dormant Commerce Clause, distinctions that benefit in-state producers cannot be based on state boundaries alone,” Judge Ronald Gould wrote in that case. “But a regulation is not facially discriminatory simply because it affects in-state and out-of-state interests unequally” (E&E News PM, Sept. 18, 2013).

The 9th Circuit today ruled that the Oregon case was “squarely controlled” by the precedent in that case.