Rocky Mountain Farmers Union v. Corey

–

–

In a longstanding constitutional challenge to California’s low-carbon fuel standard (LCFS), a California federal court found that its prior ruling that challengers of the LCFS had stated a preemption claim was clearly erroneous. The court therefore dismissed preemption claims with prejudice. In addressing the plaintiffs’ dormant Commerce Clause claims, the court found that the Ninth Circuit’s decision in Rocky Mountain Farmers Union v. Corey foreclosed the plaintiffs’ claim that the LCFS’s ethanol provisions had a discriminatory purpose but found that the plaintiffs had stated a claim that the LCFS ethanol provisions discriminated in practical effect against Midwestern ethanols and had “plausibly alleged that that burden far outweighs the benefits California will obtain as a result of the LCFS.” The court dismissed, however, dormant Commerce Clause claims against the LCFS’s crude oil provisions, finding that the plaintiffs had not and could not state a claim that the provisions discriminated against foreign crude oils in practical effect. The court rejected the argument that claims against the original and 2012 versions of the LCFS were moot, noting that these earlier versions affected how credits were calculated under the 2015 version. The court said, however, that the plaintiffs’ relief would be limited to declaratory and injunctive relief to address the present and future effects of the original and 2012 versions. The court said recalculation of past credits would be barred by the Eleventh Amendment.

The Ninth Circuit denied the petitions for rehearing en banc over the dissent of seven judges, including the partial dissent of Judge Mary H. Murguia. She joined the portion of the dissent from the denial of rehearing that addressed facial discrimination.  The dissent, authored by Judge Milan D. Smith, Jr., pointed to at least three ways in which the court had erred.  One, the majority had found “at least facially constitutional a protectionist regulatory scheme that threatens to Balkanize our national economy.”  Two, the majority “compound[ed] its error” by finding that the legitimate local concern of combating climate change justified the LCFS ethanol provisions when the state had admitted that they would have little to no effect on climate change.  Three, the LCFS ethanol provisions clearly impermissibly sought to control conduct in other states.  Although the court denied the petition for rehearing without an opinion, Judge Ronald M. Gould, who wrote the court’s September 2013 majority opinion, wrote a concurrence supporting the September opinion and countering the “overstatements” of the dissent.  Of particular note to those who may be wondering what will happen next in this case, Judge Gould stated: “the tone and substance of the dissent is perhaps aimed at encouraging Supreme Court review.  A petition for writ of certiorari from the parties who sought rehearing is likely forthcoming, but our court properly declines to give its judicial imprimatur to the dissent’s position.  Because Supreme Court review is possible, however, I set forth my own views on that prospect. On the one hand, the Supreme Court’s considered judgment could be helpful to clarify as soon as practical what states may do of their own accord to deter or slow global warming.…On the other hand, the record in this case is incomplete and thus unsuitable for understanding the full scope of the issues presented.… The issues raised by the dissent … may be rendered moot by the district court’s decision [on remand], and in any event there will be a more complete record, including findings on purpose and effect, on which to make a ruling about the controlling legal principles.”

Two separate petitions for rehearing en banc were filed. The Rocky Mountain Farmers Union plaintiffs—representing farming and ethanol interests—filed one petition, in which they argued that the Ninth Circuit had contravened Supreme Court precedent by “invok[ing] the state’s purported nondiscriminatory purposes to avoid strict scrutiny of a facially discriminatory regulatory regime” and that the court “also failed to recognize that the LCFS by design impermissibly regulates conduct occurring in other states.” 

The American Fuels & Petrochemical Manufacturers Association (AFPM) plaintiffs—representing petrochemical, energy, and trucking industry groups—argued in their petition that the Ninth Circuit had impermissibly abandoned the strict scrutiny framework for assessing “regulations that, on their face, impose discriminatory burdens on imported products based on ‘state boundaries’” and that the LCFS’s lifecycle analysis regulated “interstate and foreign commerce—the production and transportation of fuels—occurring wholly outside of California.” The AFPM plaintiffs also argued that the Ninth Circuit’s conclusion that the LCFS’s crude oil provisions did not violate the dormant Commerce Clause was in conflict with Supreme Court and other federal circuit court precedents. The AFPM plaintiffs contended that the crude oil provisions, which benefited a certain California crude oil while burdening imported and Alaskan crude oils, were not immune from challenge merely because they also burdened other California crude oils.

Justice Kagan granted an application for an extension of time to file a petition for writ of certiorari. The deadline was extended to June 17, 2019.

The Ninth Circuit Court of Appeals upheld California’s Low Carbon Fuel Standard (LCFS), rejecting claims under the Commerce Clause that largely echoed unsuccessful arguments made before the Ninth Circuit in a previous appeal concerning only the 2011 and 2012 versions of the LCFS. The Ninth Circuit noted that although the LCFS had been repealed and replaced in 2015, the “core structure” of the regulations (with their emphasis on fuels’ lifecycle emissions) and claims was the same as it had been when the court decided the first appeal. The Ninth Circuit therefore ruled that its prior decision on the 2011 and 2012 versions of the LCFS precluded the plaintiffs’ claims that the 2015 LCFS constituted impermissible extraterritorial regulation and that it facially discriminated against interstate commerce in ethanol and crude oil. Regarding extraterritoriality, the court rejected the argument that the LCFS was motivated by a concern for environmental harms in other states, stating: “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.” The court said California’s interest in lifecycle emissions arose from its concern about climate change’s impacts on California and that the LCFS was therefore “a classic exercise of police power.” Regarding facial discrimination, the court said that California was attempting “to address a vitally important environmental issue with vast potential consequences” and that it could not offer “a potential solution to the perverse incentives that would otherwise undermine any attempt to assess and regulate the carbon impact of different fuels … without the ability to differentiate the different production processes and power generation that are used to produce those fuels.” The Ninth Circuit also held that the plaintiffs’ “structural federalism” claim was precluded by the court’s recent decision on Oregon’s Clean Fuel Program, in which the Ninth Circuit concluded that any such claim would be contingent on a finding that the program regulated extraterritorially. The Ninth Circuit emphasized that “[t]here is simply no reason to search beyond the Commerce Clause for the Constitution’s limits on the ability of states to affect interstate commerce.” In addition, the Ninth Circuit found that the plaintiffs had failed to take advantage of the opportunity given by its earlier decision on the 2011 and 2012 LCFS to show that the LCFS was actually intended “to prop up local fuel interests” and discriminate against interstate commerce. The court also dismissed claims against the 2011 and 2012 versions of the LCFS as moot because the challenged laws were no longer in effect and plaintiffs’ obligations under the earlier versions had been discharged.

The U.S. Supreme Court denied three petitions seeking review of the Ninth Circuit decision that reversed district court rulings that California’s Low Carbon Fuel Standard (LCFS) violated the dormant Commerce Clause. Two of the denied petitions were those filed by the parties who had challenged the LCFS; their petitions sought review of the Ninth Circuit’s conclusions that the LCFS did not facially discriminate against interstate commerce and did not constitute extraterritorial regulation. The third was the conditional cross-petition filed by the State of California defendants.

In a conditional cross-petition for writ of certiorari, the State of California defendants sought review on the issues of whether Section 211(c)(4)(B) of the Clean Air Act (authorizing California to set emissions requirements) barred petitioners’ challenges and whether changes to the Low Carbon Fuel Standard regulations’ treatment of 2011 California crude oil sales rendered some aspects of petitioners’ challenges moot.

Two petitions for writs of certiorari were filed in the U.S. Supreme Court seeking review of the Ninth Circuit decision that revived California’s Low Carbon Fuel Standard (LCFS). The petition filed by the Rocky Mountain Farmers Union and other parties associated with the ethanol industry presents two questions: (1) whether the Ninth Circuit erred “in concluding that the [LCFS] does not facially discriminate against interstate commerce” and (2) whether the Ninth Circuit erred “in concluding that the [LCFS] is not an extraterritorial regulation.”