Industry moves forward with LCFS lawsuit

By Holly Jessen | February 09, 2010
Just a few weeks after Growth Energy and the Renewable Fuels Association filed a lawsuit in federal court over California's low carbon fuel standard (LCFS), the California Air Resources Board moved ahead anyway. On Jan. 12, the state's Office of Administrative Law gave final approval for phasing in LCFS, beginning in 2011. LCFS was first adopted by CARB in 2009 with a goal of reducing greenhouse gas (GHG) emissions by 10 percent by reducing the carbon intensity of transportation fuels used in California. For industry organizations such as the RFA and Growth Energy, the approval of California's LCFS was disappointing news.

"At a minimum, OAL should have sent the flawed regulation back to CARB, with direction they start over," said Growth Energy CEO Tom Buis, in a prepared statement. "As written, CARB is depriving Californians of the one low-carbon, sustainable fuel available right now as an alternative to oil— and that is ethanol."

RFA President Bob Dinneen said that California's LCFS "runs counter" to California Gov. Arnold Schwarzenegger's goal to decrease carbon emissions. "As crafted, the LCFS would virtually eliminate domestic ethanol, the only viable low-carbon alternative to gasoline, from the California marketplace in favor of imported ethanol and futuristic fuel technologies such as hydrogen and the electric car," he said.

RFA and Growth Energy filed the lawsuit to block "flawed regulation" on Dec. 24. A LCFS needs to be based on sound scientific principles and be consistent with federal laws, the two organizations said in a joint press release. "Were California to succeed in discriminating against corn-based ethanol as the LCFS is currently structured to do," the press release said, "it would empower other states to defy the intent of Congress and establish a patchwork of fuel regulations that would greatly complicate the nation's fuel infrastructure and potentially limit the trade of fuel and fuel components between states." The 2007 Energy Independence Security Act identified domestic ethanol as a fuel important for the United States' economy, energy security and environment. California's LCFS contradicts that sound judgment, the industry organizations argued. "One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS," the organizations said.

The way Todd J. Guerrero, an attorney within the energy group at Fredrikson & Byron P.A., explained it, due to the Supremacy Clause of the Constitution, state laws that interfere with or are contrary to federal laws are invalidated. In their lawsuit, RFA and Growth Energy allege that California's LCFS "stands as an obstacle" to Congress' intent in adopting EISA.

The organizations cited the Commerce Clause as granting the federal government authority to regulate commerce between states. "(It) has also long been understood to limit the power of the states to discriminate against or unduly burden interstate commerce," Guerrero said.

Growth Energy and the RFA consider the LCFS to be imposing "excessive burdens on the entire domestic ethanol industry". Furthermore, they don't feel it will provide any benefits to residents of that state. "In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security," the joint press release said.

The case will be closely watched as it unfolds by federal and state government, other industries and environmental organizations, Guerrero said. California's LCFS, if it goes through or fails, has implications for other state greenhouse gas initiatives. The next step in the process is for California to file a response to the lawsuit.