Calif. appeals court upholds LCFS, vacates preliminary injunction

By Erin Voegele | September 18, 2013

The U.S. 9th Circuit Court of Appeals has ruled that California’s low carbon fuel standard (LCFS) program is constitutional, overturning a prior ruling that it violates interstate commerce laws. The court published its opinion on Sept. 18. A panel of three judges made the ruling, vacating a preliminary injection made by the lower district court. The panel included Judge Dorothy W. Nelson, Jude Ronald M. Gould and Judge Mary H. Murguia.

The panel affirmed in part, and revered in part the district court’s summary judgment. Regarding the plaintiff’s claim that the LCFS is preempted by the federal renewable fuel standard (RFS), the court expressed no opinion. A full copy of the opinion is available here.

Growth Energy, the Renewable Fuels Association, Redwood County Minnesota Corn and Soybean Growers, the American Fuel and Petrochemical Manufacturers Association, and  FKA National Petrochemical & Refiners Association are a few of the plaintiffs cited in the lawsuit, which was originally filed against the California Air Resources Board in 2009.

 Rulings issued by the district court in December 2011 found that the LCFS facially discriminated against out of state ethanol, impermissibly engaged in the extraterritorial regulation of ethanol production and discriminated against out-of-state crude oil, and was not saved by California’s preemption waiver in the Clean Air Act. Oral arguments on the appeal were made in October 2012.

“The district court applied strict scrutiny, and although it reasoned that the [LCFS] served a legitimate state purpose, it concluded CARB had not shown that its purpose could not be achieved in a nondiscriminatory way,” said appeals court in the opinion entered by Gould.

Gould’s opinion goes on to state that the appeals court has found that the LCFS does not facially discriminate against out-of-state commerce, reversing the lower court’s decision. The appeals court also ruled the LCFS does not violate the dormant Commerce Clause’s prohibition of extraterritorial regulation, also reversing that ruling made by the district court. The preliminary injunction enacted by the district court is vacated. The appeals court also remands the district court to consider whether the LCFS’s ethanol provisions discriminate in purpose or in practical effect. “If so, then the court should apply strict scrutiny to those provisions,” wrote Gould in the opinion. If not, the opinion directs the district court to apply a balancing test under which the plaintiffs would have to show that the LCFS imposes a burden on interstate commerce that is clearly excessive when compared to local benefits.  

Murguia dissented to a portion of the panel’s ruling. Within court documents, she noted that the current version of the LCFS facially discriminates against interstate commerce and that the state has failed to demonstrate that a nondiscriminatory version of the regulation would be unable to achieve its legitimate local interest of reducing greenhouse gas emissions.