Federal court declares California LCFS unconstitutional

A federal district court in California blocked California’s Low Carbon Fuel Standard (LCFS) after declaring the regulation unconstitutional. The regulation violates the US Constitution’s dormant commerce clause by discriminating against out-of-state and foreign crude oil producers and fuel ethanol supplies, Judge Lawrence J. O’Neill of the US District Court for Eastern California said in his Dec. 29 decision.

“Having considered the parties’ arguments and relevant legal authority, this court finds that the LCFS discriminates against out-of-state and foreign crude oil while giving an economic advantage to in-state crude oil,” he wrote. “As explained in a separate order on the subject, this court further agrees with the [plaintiffs] that the LCFS discriminates against out-of-state corn ethanol and impermissibly controls extraterritorial conduct.

“Moreover, the defendants fail to establish that no alternative means exist to address their legitimate concerns of combating global warming,” O’Neill continued. “Because the LCFS discriminates against interstate and foreign commerce, and because the defendants failed to satisfy their burden to establish the absence of adequate alternatives, this court finds that the LCFS violates the dormant commerce clause.”

Officials from two of the organizations that sued California’s Air Resources Board over the LCFS immediately applauded the court’s action. “Today’s decision is a victory for the millions of Californians who travel the state every day in vehicles powered by gasoline and diesel fuel manufactured by our members,” National Petrochemical & Refiners Association Pres. Charles T. Drevna said.

“California’s low-carbon fuel standards would have raised gasoline and diesel fuel costs for all Californians, who already pay the highest fuel prices in the nation,” he added. “If fully implemented, the standards would have hurt consumers by discriminating against their use of renewable fuels from the Midwest and crude oil from our neighbor and ally Canada.”

Consumer Energy Alliance Executive Vice-Pres. Michael Whatley separately noted that the decision will help protect consumers in other states where officials might have contemplated adopting their own LCFS.

“High gasoline and diesel fuel prices are a tremendous drag on the American economy which is still struggling to emerge from the ongoing effects of the recession,” he said. “While CEA supports the development of all energy sources it is important to do so in a responsible manner that will not have undue and unnecessary impacts on American consumers and businesses.”

A CARB spokesman told OGJ that the state plans to appeal O’Neill’s decision to the US Ninth Circuit Court of Appeals and seek a stay of his injunction against implementing the regulation.

Contact Nick Snow at nicks@pennwell.com.

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