American Fuel & Petrochemical Manufacturers v. O’Keeffe

Over the dissent of one judge, the Ninth Circuit Court of Appeals affirmed the dismissal of a lawsuit challenging the Oregon Clean Fuels Program, which regulates production and sale of transportation fuels based on greenhouse gas emissions. The Ninth Circuit held that the Oregon program did not violate the dormant Commerce Clause and that it was not preempted by the Clean Air Act. With respect to the dormant Commerce Clause, the Ninth Circuit said its 2013 decision in Rocky Mountain Farmers Union v. Corey upholding California’s Low Carbon Fuel Standard (LCFS) “squarely controlled” on the issue of whether the Oregon program facially discriminated based on the state of origin. The Ninth Circuit concluded that, like the LCFS, the Oregon program distinguished among fuels based on lifecycle greenhouse gas emissions, not based on origin. The Ninth Circuit also upheld the district court’s finding that allegedly discriminatory statements by Oregon public officials did not undermine the Oregon program’s stated purposes of reducing Oregon’s greenhouse gas emissions. The Ninth Circuit also rejected the contentions that the Oregon program placed impermissible burdens on out-of-state fuels or provided impermissible benefits to in-state entities such as Oregon biofuel producers. Applying the Pike balancing test, the Ninth Circuit found that the complaint failed to plausibly allege that any burden on importers of out-of-state fuels was “clearly excessive” in light of the “substantial state interest” in mitigating greenhouse gas emissions. The Ninth Circuit also rejected a claim that the Oregon program regulated extraterritorially since, as with California’s LCFS in Rocky Mountain, the program applies only to fuels sold in, imported to, or exported from Oregon. With respect to preemption, the Ninth Circuit held that the U.S. Environmental Protection Agency’s exclusion of methane from the definition of volatile organic compounds did not constitute a finding pursuant to Section 211(c) of the Clean Air Act that regulation of methane was unnecessary. The exclusion therefore did not have a preemptive effect. In his dissent, Judge N. Randy Smith wrote that in his view the pleadings plausibly alleged that the Oregon program discriminated in practical effect and that it was plausible that there were nondiscriminatory means to advance Oregon’s interest in mitigating greenhouse gas emissions.