Oil, Gas Industry Fights Oregon Clean Fuel Program

PORTLAND, Ore. (CN) – Attorneys representing petroleum and trucking interests told a Ninth Circuit panel on Tuesday that Oregon’s clean fuel program discriminates against out-of-state businesses.

A number of oil and trucking trade associations sued Oregon’s governor and attorney general in 2015, claiming the state’s Clean Fuels Program is preempted by the federal Clean Air Act.

Started by former Governor John Kitzhaber, the Clean Fuel Program is part of a 2009 authorization directing the state’s Department of Environmental Quality to reduce greenhouse gas emissions.

The program requires importers to reduce the carbon intensity of fuel sold in Oregon, and the trade groups say the regulations discriminate against refiners from out of state.

The mandate from the Oregon legislature was to adopt rules that would decrease greenhouse gas emissions from transportation fuel by 10 percent over the course of a decade.

Importers of gas, diesel, ethanol and biodiesel are subject to deficits and credits under the program based on carbon intensity, measured against the clean fuel standard of the year.

But the trade groups say the program is “tailored to benefit fuel producers within Oregon at the expense of fuel importers and refiners that produce fuels in other states and countries,” according to the complaint.

The groups also named as defendants members of the Oregon Environmental Quality Commission and DEQ in their official capacities.

U.S. District Judge Ann Aiken dismissed the lawsuit after finding for the government defendants, and the trade groups appealed to the Ninth Circuit.

This week in Portland’s Pioneer Courthouse, attorney Paul Zidlicky advanced the argument that Oregon’s fuel program violates the Commerce Clause.

“They have credits and we have deficits,” Zidlicky 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.”

The Oregon government intended to “claw back some money going out,” Zidlicky said.

Circuit Judge Andrew Hurwitz pressed the attorney on how the case could be resolved on remand.

“Why would we look at what politicians said,” Hurwitz asked, “To look at the purpose of the statute?”

“From the face of the regulation, do we really need evidence about the purpose?”

Much of the back-and-forth exchanges between the panel and attorneys dealt with how the program’s purpose should be interpreted – what the legislature has said versus what is in the district court’s record.

“The purpose of the program is to reduce carbon intensity,” attorney Denise Fjordbeck for the government told the panel. “The regulations fall from that. That’s the purpose and that’s the effect.”

Circuit Judge N. Randy Smith told Fjordbeck that the allegations of the complaint are that “the state supports the unique local industry of green fuel producers at the expense of others.”

“I have to accept them as true. I’m not anxious to do that, but the law requires me to do it,” Smith said.

Fjordbeck said that gas and diesel suppliers were not required to buy credits from producers in Oregon.

“But nonetheless, they’re being bought from Oregon,” Smith retorted, noting that no industry in Oregon is negatively affected by the program.

“Is this legislative abuse or just a powerful safeguard?” he asked. “All they’re asking for is the right to go out and discover if they’re right or wrong. Why not give them that opportunity?”

Arguing for the intervening California Air Resources Board, attorney Elaine Meckenstock said that petroleum and biofuels do not compete in the same market, which was a “threshold issue” in the case.

Hurwitz asked Meckenstock if the trade groups could amend their complaint to allege that they do compete. She responded that it would be difficult for them, but conceded that they could.

When the attorneys had exhausted their allotted time, Smith thanked the attorneys for their arguments, acknowledging that it was a “tough case.”

Circuit Judge Raymond Fisher also sat on the panel. He teleconferenced from his chambers in Pasadena, Calif.



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