Court: California's Low-carbon Fuel Standard Legal

A U.S. appeals court in San Francisco Wednesday upheld California's pioneering low-carbon fuel standard and set aside an injunction against it, while ordering further proceedings in a federal trial court in Fresno.

A panel of the 9th U.S. Circuit Court of Appeals said the measure doesn't discriminate against out-of-state fuel producers and doesn't impede interstate commerce.

"Unless and until either the U.S. Supreme Court or Congress forbids it, California is entitled to proceed on the understanding that global warming is being induced by rising carbon emission and attempt to change that trend," wrote Circuit Judge Ronald Gould.

The fuel standard is one of three measures adopted by the California Air Resources Board to reduce climate-warming greenhouse gases generated by gasoline and other vehicle fuels used in the state.

All three regulations were developed under the state's landmark Global Warming Solutions Act of 2006, also known as AB 32, which is aimed at decreasing California greenhouse gas emissions to their 1990 level by 2020.

The fuel standard requires reductions in the amount of carbon dioxide and other gases generated by the production and shipment of the vehicle fuels, as measured by a so-called "carbon intensity" calculation.

It applies to all gasoline and other fuels used within the state, whether produced inside or outside California.

The other two programs restrict greenhouse gas emissions from vehicle tailpipes within California and require integrated land use and transportation planning in the state. 

The fuel standard was challenged by an array of ethanol and petroleum producers, who contended it discriminated against out-of-state companies and violated the U.S. Constitution's protection of interstate commerce.

But a three-judge panel of the appeals court unanimously ruled that the provisions for calculating the carbon intensity of crude oil don't discriminate against non-California producers.

"We conclude that CARB's purpose was genuine. There was no protectionist purpose, no aim to insulate California firms from competition," Gould wrote for the court.

The panel also said by a 2-1 vote said the calculation for the carbon intensity of ethanol production and shipping is not discriminatory "on its face," or in the abstract. 

But the panel said the case should go back to U.S. District Judge Lawrence O'Neill in Fresno to determinate whether the ethanol calculation is discriminatory in practice.

Ethanol is a biofuel made from plant materials such as Midwestern corn and Brazilian sugar cane.  While it results in reduced tailpipe emissions, the energy used to produce it -- such as coal in the Midwest -- can increase its carbon intensity.

The panel majority overturned a preliminary injunction issued by O'Neill. That injunction had already been stayed by the circuit court until the appeal was decided.

The decision means the fuel standard will remain in place for the time being, unless the injunction is reinstated by a higher court or the trial judge issues a new injunction in future proceedings. 

The American Fuel & Petrochemical Manufacturers Association said it was "deeply disappointed" by the ruling and is considering a further appeal, which could be made either to an expanded circuit court panel or to the U.S. Supreme Court.

"Although the low-carbon fuel standard is a California law, its broad reach and intended scope means that implementing the LCFS will have adverse consequences throughout the nation's fuel refining facilities and supply chain far beyond California's borders," said association President Charles Drevna. 

Another group, Secure Our Fuels, predicted the decision will result in "higher costs at the pump and diminished energy security."

But Air Resources Board spokesman Dave Clegern said, "This is a very good step for Californians and the fight against climate change. 

"We are pleased, on behalf of the people of California and its environment, that the court recognized the importance of this program and that the low-carbon fuel standard remains in effect," Clegern said.

The Environmental Defense Fund, which joined the air board in defending the regulation, also praised the ruling. 

"The court clearly upheld a groundbreaking policy that will protect consumers and the environment by diversifying our fuel mix and providing more choices for a clean energy future," said Tim O'Connor, the group's California climate initiatives director.

The appeals court majority said the state Legislature, in enacting AB 32, was entitled to determine that global warming could threaten California's economy, public health and environment.

"With its long coastlines vulnerable to rising waters, large population that needs good and water, sizable deserts that can expand with sustained increased heat, and vast forests that may become tinderboxes with too little rain, California is uniquely vulnerable to the perils of global warming," Gould wrote. 

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