The U.S. Ninth Circuit Court of Appeals dismissed a challenge to the constitutionality of California’s Low Carbon Fuel Standard (LCFS), the state’s 2015 program requiring fuel producers to reduce greenhouse gas emissions from the use of their products.
The plaintiffs in the case, Rocky Mountain Farmers Union v. Corey, argued California’s LCFS violates the Commerce Clause of the U.S. Constitution because it interferes with and ultimately regulates interstate relations and trade and therefore usurps powers the Constitution specifically delegates solely to the U.S. Congress.
Similar Case, Same Result
This case was the second in which the Rocky Mountain Farmers Union and other industry groups challenged California’s LCFS, which has been revised twice. In 2014, the Ninth Circuit ruled against the groups’ challenge to two earlier versions of LCFS. The court found LCFS did not facially discriminate against interstate commerce in ethanol or crude oil and did not go beyond the state’s powers and regulate extraterritorially.
Although the plaintiffs’ claims had changed form since the first time the court upheld the LCFS, “both the regulations and the claims have the same core structure now as they did then,” the court ruled.
The court acknowledged states may not regulate extraterritorially or discriminate against interstate commerce, but it held LCFS did not do this and was a lawful exercise of legitimate state power under the doctrine of federalism, under which states have a role, in the words of the decision, as “laboratories for experimentation,” and under the state’s police power to regulate or prevent local harms.
Sided with State
In particular, the court ruled the purported threat of climate change to California businesses and residents justifies state regulation of greenhouse gas emissions from fuel use.
“California did not enact the LCFS because it thinks that it is the state that knows how best to protect Iowa’s farms, Maine’s fisheries, or Michigan’s lakes,” wrote the court in its January 18 decision. “California’s interest in the lifecycle of the fuels used by its consumers arises from a concern for the effects of the production and use of these fuels on California’s own air quality, snowpack, and coastline.
“California should be encouraged to continue and to expand its efforts to find a workable solution to lower carbon emissions, or to slow their rise,” the court said.
U.S. Supreme Court Appeal
It remains to be seen whether the Ninth Circuit’s decision will stand up to the scrutiny of the U.S. Supreme Court should it accept the challenge petitioners have filed to it and a similar ruling in a fuel standard case from Oregon, says Damien Schiff, a senior attorney at the Pacific Legal Foundation, who filed a friend of the court brief in the Oregon case.
“The Ninth Circuit just reaffirmed its decision with respect to the Oregon low-carbon fuel program, and that case and the present one are now on petition for review by the U.S. Supreme Court,” said Schiff. “Whether it’s a low-carbon fuel standard in California or renewable energy portfolio in Oregon, the same thing is happening in that you have fuels which are indistinguishable in all physical, scientific, relevant respects. The only difference is how they were produced.
“So the problem here is you have fuel produced in California and fuel produced outside of California, and the fuel itself is indistinguishable, yet the program assigns a different carbon lifecycle value based upon how the fuel was produced, so effectively, the program can then regulate fuel-production activities outside of the state, and we think this is unconstitutional,” Schiff said. “The significance of the Ninth Circuit decision to uphold the program is it allows states to regulate conduct outside of their jurisdiction and will substantially increase the economic burdens on out-of-state producers.”
Expecting Higher Costs
The Ninth circuit’s decision will result in higher costs for fuel and possibly for other products, should other states experiment with product regulations of their own, Schiff says.
“If this ruling stands, fuel costs, in particular, will increase because transportation fuels are more expensive to produce under LCFS,” said Schiff. “More broadly, consumers could see a real hit if this principle were expanded to other products.
“Under the Ninth Circuit’s rationale, a state might, for example, assign an animal welfare value to milk, and if milk is produced by out-of-state dairy cows that aren’t given a certain degree of health benefits or are housed in ways [the regulating state’s] animal welfare laws consider cruel, then the state could score it with a low animal welfare value, making those products harder to sell within the state,” Schiff said.
The LCFS is one of many ways state legislators are making California unaffordable for working people, says Wayne Winegarden, Ph.D., a senior fellow at the Pacific Research Institute.
“Try as it might, California’s legislature cannot repeal fundamental economic reality,” said Winegarden. “The Low Carbon Fuel Standard creates a subsidy for fuel sources preferred by California’s legislators and increases the costs on disfavored sources, in this case fossil fuels.
“As a result, the LCFS increases the costs of fuels and is another policy that makes California a less affordable place for families to live and work,” Winegarden said.
Kenneth Artz ([email protected]) writes from Dallas, Texas.