Fuel Standards Snarl Global Warming Law

     SAN JOSE, Calif. (CN) – California cannot enact and enforce fuel standards that conflict with federal law, a federal judge ruled, effectively striking down portions of the state’s Global Warming Solutions Act of 2006.

     A conglomeration of petrochemical and farming interests sued the California Air Resources Board (CARB) over the state’s Low Carbon Fuel Standards, a 2007 executive order by then-Gov. Arnold Schwarzenegger to help implement the global warming law, AB 32. The standards focus on the “carbon intensity” of fuels to estimate emissions, including greenhouse gases, during all phases of a fuel’s lifecycle – extraction, refining, transportation and use – with a goal of a 10 percent reduction in fuel carbon intensity by 2020.
     Under the Low Carbon Fuel Standards (LCFS) regulations, fuel providers must either meet carbon intensity standards by blending fuels with ethanol or by purchasing credits on the open market from approved organizations.
     U.S. District Judge Lawrence O’Neill sided with CARB on summary judgment Thursday. While California enjoys wide latitude to enact tough clean air standards under the federal Clean Air Act, the state is not insulated from Commerce Clause challenges, he found.
     “Nothing in the text or history of the Clean Air Act clearly evidences Congress’ intent” to grant California new powers, O’Neill wrote. “Moreover … the Clean Air Act and the Energy Independence and Security Act do not authorize defendants to violate the Commerce Clause.”
     In a separate decision, O’Neill found that LCFS impermissibly discriminate against and regulate out-of-state corn ethanol, also in violation of the Commerce Clause. LCFS assign more favorable carbon intensity values to California corn-derived ethanol than ethanol derived from other state sources.
     “If every state were to adopt legislation based on a lifecycle analysis of fuels, one of two outcomes may occur,” O’Neill wrote. “First, the ethanol market would become Balkanized, since a producer would have strong incentives to either relocate its operations in the state of largest use, or sell only locally to avoid transportations and other penalties … (interfering) with the ‘maintenance of a national economic union unfettered by state-imposed limitations on interstate commerce.'”
     “Second, there is a danger that inconsistent legislation, if adopted by sister states, would cause significant problems to the ethanol market,” he added. “Ethanol producers and suppliers in any State would be hard-pressed to satisfy the requirements of 50 different LCFS regulations which may require 50 different levels of reductions over 50 different time periods. … Based on these considerations, the court concludes that LCFS impermissibly controls conduct outside of its borders.”
     Granting summary judgment for the National Petrochemical and Refiners Association, O’Neill also found that LCFS discriminates against out-of-state and foreign crude oil while giving an economic advantage to oil produced in California.
     “To the extent that defendants seek to address (greenhouse gases) emitted during the production and transportation of fuels, CARB may regulate production facilities, refineries, and farms in California with an LCFS that does not shift the burden to out-of-state or foreign entities,” he wrote.
     “To the extent that defendants argue that alternative approaches do not allow them to control leakage [of greenhouse gases] outside of California’s borders, defendants are reminded that they may not regulate … outside of California,” he added.
     “Although alternative approaches [like a fossil fuel tax] may be less desirable for a number of reasons, defendants have failed to establish there are no nondiscriminatory means” to fight global warming in California, O’Neill concluded. “Because other, nondiscriminatory means exist … the LCFS must be struck down.”

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