3 January 2012

A judge at the US District Court in Fresno issued a preliminary injunction on the enforcement of California low carbon fuel standard (LCFS). The LCFS rule was determined to violate the Commerce Clause of the US Constitution by attempting to regulate commercial activities that take place in other states, such as corn farming, ethanol production or refiner’s use of coal-based electricity.

The LCFS was challenged in court by two groups: a coalition of corn growers led by Rocky Mountains Farmers Union and by fuel refiners led by the National Petrochemical and Refiners Association.

The LCFS was approved in 2009 and became fully effective in April 2010. The standard—one of the key components of California GHG emission reduction plan—has been designed to reduce the carbon intensity of transportation fuels used in California by 10% by 2020. Under the law, fuel manufacturers and importers must ensure that their overall fuel mix sold in California meets the carbon intensity targets set by the standard.

The LCFS carbon intensity is based on life cycle analysis, including the so called “indirect land use changes” (ILUC)—the release of GHG emissions resulting from converting land from other uses to growing biofuel feedstocks (such as ethanol or soybeans). Under the LCFS, ILUC effects increase the carbon intensity of ethanol by as much as 30%, making its life cycle carbon score comparable or higher than that of gasoline and putting ethanol at a disadvantage. In addition, the LCFS carbon intensity ratings—which depend on production methods and the carbon intensity of energy used in the production process—have penalized corn ethanol produced in some other states, for instance in Nevada, compared to ethanol produced in California. The Court found this to be in violation of the constitutional Commerce Clause which grants Congress the authority to regulate commerce among the states and limits the power of the states to discriminate against or unduly burden interstate commerce.

To comply with the injunction, the California Air Resources Board (ARB) issued a regulatory advisory suspending LCFS requirements for 2011 and 2012. The ARB also said it intends to appeal the court rulings.

Source: Federal Court Rulings | California ARB | NPRA | Nebraska Attorney