Bloomberg News

California Fuel Standard Doesn’t Discriminate, Court Says (2)

September 18, 2013

California’s low-carbon fuel standard doesn’t discriminate against Midwest ethanol producers, a federal appeals court ruled in upholding what it called “innovative” regulations to fight global warming.

Handing a victory to state regulators, the U.S. Court of Appeals in San Francisco ruled that, on its face, the standard isn’t unfair just because it assigns a higher “carbon intensity score” to ethanol made in the Midwest. The standard applies to companies that sell transportation fuel in the state and requires a 10 percent average reduction in carbon intensity by 2020.

“We will not at the outset block California from developing this innovative, nondiscriminatory regulation to impede global warning,” the judges said in a 2-1 ruling. The panel sent the case back to the trial court to determine whether the fuel standard’s purpose or effect is discriminatory.

The California Air Resources Board, which monitors air quality and administers the standard, asked the appellate judges to reverse a lower-court ruling that threw out parts of the carbon-fuel plan as unfair to out-of-state ethanol producers and illegal regulation of businesses outside of California.

“This is a very good step for Californians and the fight against climate change,” said Dave Clegern, a spokesman for the air resources board. “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,”

Farm Groups

Farm and oil-industry groups sued in 2011 to overturn the standard. The appeals court temporarily reinstated it after U.S. District Judge Lawrence O’Neill in Fresno ruled that by assigning a higher score to out-of-state ethanol, California was unconstitutionally interfering with interstate commerce.

The standards assign a higher carbon intensity score to ethanol produced in the Midwest. The higher score for Midwest ethanol is science-based and fair, because while the fuel is chemically and physically identical to ethanol produced in California, corn farming, transportation and processing produces more emissions, California officials say.

Peter Keisler and John O’Quinn, attorneys for corn growers and petrochemical manufacturers, didn’t immediately return e-mails seeking comment on the ruling.

The fuel standard discourages refiners such as Chevron Corp. (CVX:US) and Tesoro Corp. (TSO:US) from processing types of crude that release more carbon when produced and transported into the state, such as output from Canada’s oil sands.

The case is Rocky Mountain Farmers Union v. Goldstene, 12-15131, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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