PORTLAND, Ore. (CN) – Oregon can continue rating fuels based on their greenhouse gas emissions despite claims by oil and gas companies that the program is unconstitutional, the Ninth Circuit ruled Friday.
The American Fuel and Petrochemical Manufacturers, American Trucking Associations, and Consumer Energy Alliance sued the state environmental commission in 2015, asking a federal judge to block Oregon’s Clean Fuels Program on the basis that it is unconstitutional, unenforceable and discriminatory. Under the program, regulated businesses must keep the average carbon intensity of all transportation fuels used in Oregon under an annual limit. Fuels with carbon intensity below the limit generate credits for the businesses, while those above the limit result in a deficit.
U.S. District Judge Ann L. Aiken refused, finding the Oregon program was nearly identical to a California program that the Ninth Circuit had previously approved.
The fuel companies appealed, arguing this past March that the program discriminates against out-of-state businesses that import fuel into Oregon while unfairly benefiting Oregon fuel producers.
“They have credits and we have deficits,” Paul Zidlicky, attorney for the petrochemical producers, told the 3-judge panel, referring to business interests in Oregon and those out of state. “This is a subsidy that the out-of-state has to pay to the in-stater to prop up the in-stater’s business.”
On Friday, a divided panel of the Ninth Circuit ruled in Oregon’s favor. U.S. Circuit Judges Raymond C. Fisher and Andrew D. Hurwitz found the companies did not show the program’s purpose is discriminatory, rather than intended to deliver its stated effect of reducing greenhouse gas emissions by a minimum of 10 percent below 2010 levels by 2025. U.S. Circuit Judge N. Randy Smith, meanwhile, wrote in a dissent that he could not dismiss the claim.
The panel agreed with Judge Aiken that the earlier ruling over a similar California program rendered the companies’ claims moot.
“Like its California counterpart, the Oregon program discriminates against fuels based on lifecycle greenhouse gas emissions, not state of origin,” Hurwitz wrote for the panel.
And Oregon was within its right to “try novel social and economic experiments” to achieve its goal of safeguarding a healthy environment, the panel found.
“It is well settled that the states have a legitimate interest in combating the adverse effects of climate change on their residents,” Hurwitz wrote.