Diamond Alternative Energy, LLC v. EPA

In a 7-2 decision, the U.S. Supreme Court reversed the D.C. Circuit Court of Appeals and ruled that fuel producers had standing to challenge the Clean Air Act preemption waiver granted by the U.S. Environmental Protection Agency (EPA) for California’s Advanced Clean Cars I program regulations. The regulations impose fleet-wide limits on greenhouse gas emissions and mandate that automakers’ vehicle fleets sold in California include a certain percentage of zero emission vehicles. EPA granted a preemption waiver for the regulations in 2013 that was withdrawn in 2019. The fuel producers challenged the Biden administration’s 2022 rescission of the 2019 waiver withdrawal. EPA and California argued that the fuel producers did not have standing to challenge the waiver because setting it aside and invalidating the California regulations would not result in automakers manufacturing more gasoline-powered vehicles and would therefore not redress the fuel producers’ alleged injury. The Court described the injury and causation elements of standing as “straightforward,” finding that the regulations “likely cause” decreased purchases of gasoline and other liquid fuels and therefore “likely cause” monetary injuries to the fuel producers. Regarding the disputed element of redressability, the Court found that setting aside the preemption waiver and invalidating the California regulations “would likely redress at least some of the fuel producers’ monetary injuries” by resulting in more revenue from additional liquid fuel sales. The Court reasoned that it was not necessary to determine whether the fuel producers had standing based on their possible status an “object” of the California regulations. Instead, the Court found that the fuel producers “readily demonstrated” standing by applying “commonsense economic principles” regarding the impacts of regulation on the automobile market supplemented with record evidence from the fuel producers, EPA, California, and vehicle manufacturers. The Court rejected EPA and California’s argument that the fuel producers should be required to produce additional evidence regarding the impact of invalidating California’s regulations and also found that the case “does not present the unusual scenario where invalidating a challenged government restriction on businesses in a competitive market is not likely to have any effect.” Noting that its decision did not concern the merits of the fuel producers’ case, the Court remanded to the D.C. Circuit for further proceedings. Justice Sotomayor dissented, writing that the D.C. Circuit’s decision on the fuel producers’ standing was based on a factual misunderstanding that the entirety of the California regulations expired with vehicle model year 2025. She therefore would have vacated and remanded to the D.C. Circuit for reconsideration of the redressability analysis. Justice Jackson also dissented, writing that by agreeing to hear, and rendering a decision in, a case that was “largely moot already” and would soon be moot due to the Trump administration’s anticipated withdrawal of the waiver, the Court “gives fodder to the unfortunate perception that moneyed interests enjoy an easier road to relief in this Court than ordinary citizens.” Justice Jackson said the Court’s “insistence on resolving the standing question in this case strains our usual case-selection standards, which are highly selective,” and that the Court’s ruling, while it amounted “to little more than error correction in the context of a dispute that all agree will be over soon in any event,” would “no doubt aid future attempts by the fuel industry to attack the Clean Air Act.” Justice Jackson wrote that the Court’s standing analysis “also invites questions about inconsistent decisionmaking and whether this Court is holding business litigants to the same standards as everyone else.”

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The D.C. Circuit Court of Appeals denied petitions for review challenging the U.S. Environmental Protection Agency’s (EPA’s) 2022 reinstatement of the 2013 waiver under the Clean Air Act of federal preemption for California’s Advanced Clean Car Program regulations. The California regulations included greenhouse gas emissions requirements for automobiles for Model Years 2017 to 2025 and a requirement that around 15% of manufacturers’ fleets be zero-emissions vehicles by Model Year 2025. The D.C. Circuit found that neither state petitioners nor fuel petitioners (entities and trade associations involved in the production or sale of liquid fuels) had standing for statutory claims because they failed to allege that a favorable decision would redress their alleged economic injuries. The court said there was no basis to conclude that third-party automobile manufacturers “would, in fact, change course with respect to the relevant model years” if the court vacated the waiver. The D.C. Circuit therefore did not consider the merits of the fuel petitioners’ argument that California’s regulations did not meet the Clean Air Act’s criteria for a waiver of preemption or the merits of the state petitioners’ argument that the waiver was contrary to the Energy Policy and Conservation Act’s preemption of state fuel economy standards. The D.C. Circuit found that the state petitioners did have standing for their constitutional claim that the waiver provision of the Clean Air Act violated the “equal sovereignty principle.” The court, however, rejected this claim on the merits, concluding that the principle did not extend to laws enacted under Congress’s Commerce Clause power.

The D.C. Circuit issued an order regarding the format of September 15, 2023 oral arguments in challenges to EPA’s reinstatement of the waiver allowing California to regulate greenhouse gas emissions from motor vehicles. The order specified that oral arguments would feature counsel for private petitioners, state petitioners, EPA, and California and focus on standing and zone of interests, Clean Air Act authority and reconsideration authority, equal sovereignty, and Energy Policy and Conservation Act issues.

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The U.S. Supreme Court denied Ohio and 16 other states’ petition for writ of certiorari seeking review of the D.C. Circuit’s decision upholding the U.S. Environmental Protection Agency’s (EPA’s) grant of a preemption waiver for California’s Advanced Clean Car Program regulations. The question presented by the petition concerned congressional authority to give EPA the authority to waive preemption of California vehicle emissions standards. Justice Thomas would have granted the petition.