WASHINGTON, January 4, 2012 -The California Air Resource Board says it will appeal a decision by a federal court judge preventing implementation of the state’s Low Carbon Fuel Standard, a key element in rules aimed at reducing greenhouse gas emissions and promoting new fuel technologies.

Adopted last year, the standard progressively requires producers and refiners to reduce emissions from their fuels by 10% by 2020. To meet the carbon intensity requirements of the LCFS, fuel providers must either blend fuels with ethanol or purchase credits on the open market from approved organizations.

But federal Judge Lawrence O'Neill issued a preliminary injunction in Fresno late Thursday, ruling that the standard violates the Commerce Clause of the U.S. Constitution that prohibits state regulation of interstate commerce. O’Neill’s ruling specifically allows the state and the Air Resources Board to appeal to the ruling immediately.

The CARB said it will abide by O’Neill’s ruling and cease enforcement of the LCFS for now. However, the board is appealing the decision before the Ninth Circuit Court of Appeals and has asked O’Neill to stay his injunction pending the outcome.

The board and many environmental groups say the standard is an evenhanded regulation that encourages cleaner, low-carbon fuels by regulating fuel providers in California and does not discriminate against fuels on the basis of geography. However, the ethanol industry says the standard favors in-state producers and refiners because it also considers emissions occurring in the transportation of biofuels, as well as those occurring during the growth of feedstocks and the production of biofuels.

The LCFS was adopted in 2007 as part of a larger climate mitigation package (A.B. 32). O'Neill said California has the latitude to enact tough clean air standards under the federal Clean Air Act, but said nothing in any federal legislation authorizes the CARB to violate the Commerce Clause.

Separately, O'Neill found that state’s fuel standard specifically discriminated against out-of-state corn ethanol, also in violation of the Commerce Clause, because it assigns more favorable carbon intensity values to California corn-derived ethanol than ethanol derived from corn coming from other states.

In a joint statement issued last week, the Renewable Fuels Association and trade group Growth Energy, who are both plaintiffs in the case, said California “overreached” in creating the standard, calling the LCFS “unconstitutionally punitive for farmers and ethanol producers outside of the state's border.”

The two industry groups said they hope that “California regulators will come back to the table to work on a thoughtful, fair, and ultimately achievable strategy for improving our environment by incenting the growth and evolution of American renewable fuels.”

The delay in implementing the LCFS is privately recognized by state biodiesel and advanced biofuel interests as a setback. Biodiesel and next-generation biofuels are regulated favorably under the standard compared to conventional corn ethanol. State biodiesel industry leaders have said they expected their fuel go a long way toward meeting the standard’s requirements in the first few years.

Another special interest, the Brazilian sugarcane ethanol industry, which filed as a friend of the court in support of the LCFS, could also be affected by a delay in implementing the standard. The CARB fuel rule allows that sugarcane ethanol generates far more credits for compliance than corn ethanol, making the primarily Brazilian product a preferable fuel alternative to domestically produced corn ethanol under the state standard.

As the Renewable Fuel Association’s Geoff Cooper, a vice president for research and analysis, recently pointed out in a blog, California imports sugarcane ethanol from Brazil rather than corn ethanol from Nebraska or Kansas; and in turn, corn ethanol from the Midwest travels to Houston or Galveston via rail, then is shipped to Brazil via tanker to “backfill” the volumes they sent to the United States. Cooper cited this “ethanol shuffle” as posing the “irony of a tanker full of U.S. corn ethanol bound for Brazil passing a tanker full of cane ethanol bound for Los Angeles or Miami along a Caribbean shipping route. Remember, this is all being done in the name of reducing GHG emissions.”


Original story printed in January 4, 2012 Agri-Pulse Newsletter.

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