Supreme Court won’t hear dispute over Calif. fuel standard

Source: Jeremy P. Jacobs, E&E reporter • Posted: Tuesday, July 1, 2014

The Supreme Court declined Monday to take up a challenge from ethanol producers and other groups to California’s low-carbon fuel standard in a major win for the state’s efforts to address climate change.

More than 20 states and groups — including the Rocky Mountain Farmers Union, Renewable Fuels Association and American Fuel & Petrochemical Manufacturers Association — had asked the high court to review a federal appeals court ruling upholding California’s regulations — the first of their kind in the country.

The regulations were developed under California’s landmark 2006 global warming law, A.B. 32, which seeks to cut greenhouse gas emissions in the state to 1990 levels by 2020.

For the transportation sector, the regulations assign all fuels in the state a “carbon intensity” score. It’s calculated by taking into the account the life cycle of the fuel’s carbon emissions, including where it was produced and refined, and its transportation into the state.

California claims the regulations will cut the carbon content of fuels sold in the state by 10 percent by 2020, a reduction of 16 million tons.

Industry, led primarily by out-of-state ethanol producers, challenged the regulations. It claimed that the rules unlawfully discriminated against out-of-state fuel suppliers.

Specifically, it argued that the regime violated the U.S. Constitution’s “dormant” Commerce Clause, which grants Congress exclusively authority to regulate interstate economic activity. Courts have generally held that the inverse is also true — states may not implement programs that restrict interstate commerce.

They also contended that California was regulating “extraterritorially.”

In their petition to the Supreme Court, ethanol groups claimed that the regulations would “Balkanize the national economy, 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.”

In a large, consolidated case, the San Francisco-based 9th U.S. Circuit Court of Appeals rejected those arguments. And in a divided ruling, the judges upheld the program.

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

As is its custom, the Supreme Court offered no explanation on why it declined to review the case. The order effectively leaves the main aspects of the program in place, though there remains some litigation on smaller pieces of the regulations.

Environmental groups, which filed briefs supporting California, applauded the order.

“This is another case of Big Oil and Big Ethanol trying to avoid cleaning up their act,” David Pettit of the Natural Resources Defense Council said in a statement. “Californians deserve better, cleaner fuels for their cars and trucks. The state’s fuel standard will provide those options, while also spurring jobs and innovation and cutting harmful pollution.”

Growth Energy and the Renewable Fuels Association said they are “extremely disappointed” that the high court declined review.