CARB to appeal LCFS ruling, request enforcement through 2012

By Kris Bevill | January 06, 2012

Almost exactly two years after filing a lawsuit to challenge the constitutionality of the California Air Resources Board’s Low Carbon Fuel Standard, a California district court sided with a coalition of ethanol and petroleum interests on Dec. 29, ruling that the LCFS violates the Commerce Clause of the U.S. Constitution by discriminating against Midwestern ethanol. Because the carbon intensity (CI) rating for corn-based ethanol produced in the Midwest is higher than the CI for California-produced ethanol, industry groups such as the RFA contended that obligated parties would have to eventually exclude Midwest ethanol from their supplies in order to comply with the LCFS. Judge Lawrence O’Neill agreed with this argument and as a result the court forbade CARB from enforcing the regulation, effectively ending the LCFS—at least for now.

Soon after the court issued its ruling, CARB declared that it will seek a stay of the preliminary injunction when it appeals the decision, asking the court to allow it to enforce the LCFS through 2012. On Jan. 5, a CARB spokesman said the agency planned to file its appeal that day. “We fully expect to prevail in court with our appeal,” the spokesman said. In the meantime, the agency is also moving ahead with its stakeholder and rulemaking processes related to the LCFS, issuing a supplemental advisory for stakeholders on Dec. 30 to guide them through the 2012 compliance period should they once again be required to comply with the program.  

Matt Hartwig, director of public affairs at the Renewable Fuels Association, said his group will monitor CARB’s actions and react accordingly. “The RFA is hopeful the decision by Judge O’Neill will be upheld and the LCFS will continue to be stopped,” he said in a recent blog post. “It unlawfully regulates out of state activities and discriminates against ethanol on a geographic basis and would close off the largest market for U.S. ethanol (the state of California) for virtually all grain-based ethanol producers.”

Lyle Schlyer, president of Calgren Renewable Fuels LLC in Pixley, Calif., said he does not agree with the court’s decision to end the LCFS, but that all of the California-based ethanol producers agree the regulation should not favor California producers in any way. “We don’t want it to,” he said. “We want to compete on a level playing field just like the Midwest producers want to compete on a level playing field.”

Schlyer’s concern with eliminating the LCFS is that it will also remove the incentive for producers to implement innovative production methods in order to reduce their CI rating. “In my view, the LCFS encourages innovation more than RFS2 [the renewable fuel standard],” he said. Calgren has taken measures to improve its rating, as have several Midwest producers including Poet and Green Plains Renewable Energy, and Schlyer believes producers who invest in reducing their CI should be rewarded for their efforts. “As an industry we should recognize the opportunity to lower our CI,” he said. “But we do think regulatory activity should look to industry for input on how to achieve goals.”

Schlyer said he is hopeful that the court’s ruling will prompt CARB and the industry to collaborate on a simplified program which rewards successful CI reductions but does not discriminate against fuels based solely on their origin. Hartwig said the RFA “is not opposed” to regulations that promote carbon reduction, but at a national level rather than on a state-by-state basis. “If based on the best available science and grounded in real world perception, a national low carbon fuel strategy that complements the RFS would be something the RFA and its members would support,” he said.