Rocky Mountain Farmers Union v. Goldstene
ROCKY MOUNTAIN FARMERS UNION, Redwood County Minnesota Corn and Soybean Growers, Penny Newman Grain, Inc., Growth Energy, Renewable Fuels Association, Rex Nederend, Fresno County Farm Bureau, Nisei Farmers League, and California Dairy Campaign v. James N. GOLDSTENE, Executive Officer of the California Air Resources Board, Defendant National Petrochemical & Refiners Association, American Trucking Associations, Center for North American Energy Security, and the Consumer Energy Alliance v. James Goldstene, Executive Officer of the California Air Resources Board, Mary D. Nichols, Daniel Sperling, Ken Yeager, Dorene D'Adamo, Barbara Riordan, John R. Balmes, Lydia H. Kennard, Sandra Berg, Ron Roberts, Ronald O. Loveridge, member of the California Air Resources Board Arnold Schwarzenegger, Governor of the state of California, and Edmund Brown, Attorney General of the state of California, and related intervenor actions and amici
Attorneys
John P. Kinsey, Timothy Jones, Wanger Jones Helsley PC, Fresno, CA, John C. OâQuinn, PHV, Stuart A. C Drake, PHV, Kirkland and Ellis L.L.P. (Washington), Bryan M. Killian, PHV, Charles H. Knauss, PHV, Thomas R. Lotterman, PHV, Bingham McCutchen L.L.P. (Washington, DC), James W. Coleman, PHV, Paul J. Zidlicky, PHV, Roger R. Martella, PHV, Sidley Austin L.L.P. (D.C.), Washington, DC, Marie L. Fiala, Sidley Austin L.L.P., San Francisco, CA, for Plaintiffs., Mark William Poole, Gavin Geraghty McCabe, California Department Of Justice, Margaret Elaine Meckenstock, Office of the Attorney General (San Francisco), Timothy Joseph OâConnor, Environmental Defense Fund, San Francisco, CA, for Defendant.
Full Opinion (html_with_citations)
ORDER ON RMFU PLAINTIFFSâ SUMMARY ADJUDICATION MOTION (Doc. Ill)
ORDER ON DEFENDANTâS RENEWED FED. R. CIV. P. 56(D) MOTION (Doc. 172)
ORDER ON RMFU PLAINTIFFSâ PRELIMINARY INJUNCTION MOTION (Doc. 115)
ORDER ON RMFU PLAINTIFFS SUMMARY ADJUDICATION MOTION (Doc. Ill)
ORDER ON DEFENDANTâS RENEWED FED. R. CIV. P. 56(D) MOTION (Doc. 172)
ORDER ON RMFU PLAINTIFFSâ PRELIMINARY INJUNCTION MOTION (Doc. 115)
Introduction
Plaintiffs Rocky Mountain Farmers Union, Redwood County Minnesota Corn and Soybean Growers, Penny Newman Grain, Inc., Fresno County Farm Bureau, Nisei Farmers League, California Dairy Campaign, Rex Nederend, Growth Energy and the Renewable Fuels Association (collectively âPlaintiffsâ or âRocky Mountain Plaintiffsâ) seek summary judgment pursuant to Fed.R.Civ.P. 56 and an order enjoining enforcement of Californiaâs Low Carbon Fuel Standard, CaLCode Regs. tit. 17, §§ 95480-95490 (âLCFSâ), regulations promulgated by defendant California Air Resource Board (âCARBâ)
Rocky Mountain Plaintiffs argue that the LCFS violates the Commerce Clause, U.S. Const, art. I, § 8, cl. 3 and is preempted by federal law. In this summary judgment motion, the Rocky Mountain Plaintiffs argue that the LCFS fails as a matter of law because it: (1) impermissibly discriminates against out-of-state corn ethanol; (2) impermissibly regulates commerce and the channels of interstate commerce; (3) excessively burdens interstate commerce without producing local benefits; and (4) is preempted by the Energy Independence and Security Act of 2007 (âEISAâ).
CARB argues that the Rocky Mountain Plaintiffsâ motion improperly and prematurely seeks to adjudicate fact-based issues. By separate motion, CARB moves to deny this motion pursuant to Fed. R.Civ.P. 56(d) as premature, because the parties have conducted only limited discovery, and as a sanction for the Rocky Mountain Plaintiffsâ failure to produce certain requested and court-ordered discovery. Moreover, CARB contends that the LCFS is authorized by 42 U.S.C. § 7545(c)(4)(B) (âSection 211(c)(4)(B)â), precluding Plaintiffsâ preemption claim. Similarly, CARB argues that Section 211(c)(4)(B) authorizes California to violate the dormant Commerce Clause. Finally, Defendants argue that the LCFS neither violates the Commerce Clause nor is preempted by EISA as a matter of law and that the Rocky Mountain Plaintiffs lack standing to raise a preemption claim.
Having considered the partiesâ arguments, exhibits, and relevant case law, this Court finds that the LCFS impermissibly discriminates against out-of-state
Background
Introduction
In enacting the Global Warming Solutions Act of 2006, AB 32, the California Legislature found, inter alia: âGlobal warming poses a serious threat to the economic well-being, public health, natural resources, and the environment of California.â Cal. Health & Saf.Code, § 38501. AB 32 set the goal of reducing green house gas (âGHGâ) emissions in California to 1990 levels by the year 2020. To attain these goals, AB 32 charged CARB to develop and implement regulations in a number of areas.
In January 2007, Californiaâs Governor issued Executive Order S-01-07 (âExecutive Orderâ), setting a statewide goal to âreduce the carbon intensity of Californiaâs transportation fuels by at least 10 percent by 2020.â In the Executive Order, the Governor called on CARB to âdetermine if [a low carbon fuel standard] can be adopted as a discrete early action measure pursuant to AB 32.â Id. In June 2007, CARB adopted the low carbon fuel standard (âLCFSâ) as an early action measure. Public workshops on the issue and formal rule-making procedures followed, culminating in the final adoption of the regulation in April 2010. Cal.Code Regs. tit. 17, §§ 95480-95490.
LCFS
Plaintiffs challenge the LCFS regulations in this action. The purpose of the LCFS is âto implement a low carbon fuel standard, which will reduce greenhouse gas emissions by reducing the full fuel-cycle, carbon intensity of the transportation fuel used in California.â LCFS § 95480. The LCFS was âdesigned to reduce Californiaâs dependence on petroleumâ and âto stimulate and the production and use of alternative, low-carbon fuels in California.â CARB, Final Statement of Reasons (âFSORâ) at 457; FSOR at 461 (âOne of the key advantages of the LCFS
Biofuels will displace some percent of petroleum-based transportation fuels.
Reducing the volume of transportation fuels that are imported from other states will reduce foreign imports of oil into the U.S.
The biorefineries to be built in the States will provide needed employment, an increased tax base for the States, and value added to the biomass used as feedstock. These benefits will be more important in rural areas of the State that are short on employment but rich in natural resources.
Displacing important transportation fuels with biofuels produced in the State keeps more money in the States.
FSOR at 479. CARB estimated that under the LCFS, â[u]p to eighteen cellulosic ethanol and six corn ethanol plants could be built [in California] by 2020 with a total annual capacity of 1.2 billion gallons.â FSOR at 419. âThe estimated capital investment for these new businesses is approximately $8.5 billion ...â FSOR at 420. CARB estimates that the LCFS will reduce emissions from the transportation sector by about 16 million metric tons in 2020. CARB, Initial Statement of Reasons (âISORâ) at ES-1.
The LCFS regulates transportation fuels that are âsold, supplied, or offered for sale in Californiaâ and âany person, who as a regulated party ... is responsible for a transportation fuel in a calendar year.â LCFS § 95480.1(a). Californiaâs LCFS focuses on the âcarbon intensityâ of fuels to estimate emissions related to a fuelâs life-cycle, including GHGs emitted when the fuel is extracted, refined, and transported to California. It establishes different standards for gasoline and diesel fuels, and provides for a gradual implementation of the fuel standards for both, with a goal to reduce the carbon intensity of fuel by 10% by the year 2020. See LCFS § 95482(b), (c).
The LCFS requires providers to comply with reporting requirements which obligate them to identify for fuels sold or imported into California, the type of fuels, whether the fuel is blended, and the fuelâs production process. Providers are required to calculate the âcarbon intensityâ of each fuel component to determine their score. LCFS § 95486(a), and must compare it with the statewide average carbon intensity level for that year. If a partyâs score is below the statewide average level, the party may generate credits, provided it has obtain credit-generation approval by CARB. One obtains and maintains approval depending on how that party produces, ships, delivers and distributes its fuels from the location where the fuel is produced to where it ends up in California. LCFS § 95484(d)(2). If the partyâs carbon intensity score is above the statewide average level, the party will generate deficits, which must be canceled either by retiring accumulated credits or purchasing credits from others. LCFS § 95485.
Reductions in the average carbon intensity were mandated to begin in 2011, with the reduction requirement increasing through the year 2020.
Carbon Intensity
âCarbon intensity is not an inherent chemical property of a fuel, but rather it is a reflective of the process in making, distributing, and using that fuel.â FSOR at 951. The âLCFS contains no requirements that dictate the exact composition of compliant transportation fuels.â FSOR at 442. The LCFS does ânot set[] a fuel standard,â and it does not âestablish any motor-vehicle specifications.â FSOR at 439, 442.
*1081 A gallon of ethanol made from corn grown and processed in the Midwest will, under a microscope or other analytical device, look identical in every material way to a gallon of ethanol processed from sugar cane grown in Brazil. Both samples of ethanol will have the same boiling point, the same molecular composition, the same lower and upper limits of flammability-in other words, both will have identical physical and chemical properties because both products consist of 100% ethanol. On the other hand, corn ethanol from the Midwest will have different carbon intensity than the sugar cane ethanol from Brazil.
ISOR V-30.
Carbon intensity is defined as âthe amount of lifecycle greenhouse gas emissions, per unit of energy of fuel delivered, expressed in grams of carbon dioxide per megajoule. LCFS § 95481(a)(ll). âLife-cycle greenhouse gas emissionsâ are defined as the:
aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes), as determined by the Executive Officer, related to the full fuel life-cycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer, where the mass values for all greenhouse gases are adjusted to account for their relative global warming potential.
LCFS § 95481(a)(28). The lifecycle analysis âinclud[es] all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of finished fuel to the ultimate consumer.â LCFS § 95481(a)(28). In short, carbon intensity is an estimate of emissions related to a fuelâs lifecycle that focuses on GHGs emitted when the transportation fuel is extracted, refined, and transported to California.
CARB-Assigned Corn Ethanol Carbon Intensity Values
The LCFS has assigned carbon intensity scores for gasoline and gasoline substitutes, embodied in the Table 6 of LCFS § 95486(b), titled âCarbon Intensity Look-up Table for Gasoline and Fuels that Substitute for Gasolineâ (âTable 6â). CARB, through Table 6, assigns different carbon intensity scores to different gasoline and gasoline substitutes, including gasoline, ethanol from corn, ethanol from sugar cane, compressed natural gas, liquified natural gas, electricity, and hydrogen. These carbon intensity values set a 2010 baseline carbon intensity value to each of the fuels and pathways. Within the âethanol from cornâ section, more than a dozen âpathwaysâ are identified, each assigned a carbon intensity value. Numerous distinctions are drawn among different categories of corn ethanol producers.
Plaintiffs argue that the LCFS discriminates against out-of-state ethanol producers on its face, because the LCFS assigns more favorable carbon intensity values to California corn-derived ethanol than to Midwest corn-derived ethanol. The relevant section of Table 6 assigns the following values to the different corn-ethanol pathways
Land Use or Other
_Direct Emissions Indirect Effect_Total
Midwest Average; 80% Dry Mill; 20% 69.40 30 99.40
Wet Mill; Dry DGS_
California average; 80% Midwest Aver- 65.66 30 95.66 age; 20% California, Dry Mill; Wet DGS; NG_
California; Dry Mill; Wet SGS; NG 50.70_30_80.70
Midwest; Dry Mill; Dry DGS, NG_68.40_30_98.40
Midwest; Wet Mill, 60% NG, 40% Coal 75.10_30_105.10
Midwest; Wet Mill, 100% NG_64,52_30_94,52
Midwest; Wet Mill, 100% Coal_90,99_30_120,99
Midwest; Dry Mill, Wet, DGS_60.10_30_90,10
California; Dry Mill; Dry DGS, NG_58.90_30_88.90
Midwest; Dry Mill; Dry DGS, 80% NG; 63.60 30 93.60 20% Biomass_
Midwest; Dry Mill, Dry DGS; 80% NG; 56.80 30 86.80 20% Biomass__
California; Dry Mill, Dry DGS; 80% NG; 54.20 30 84.20 20% Biomass__
California; Dry Mill; Wet DGS; 80% NG; 47.44 30 77.44 20% Biomass_
Customized Carbon Intensity Values and Pathways
In addition to the default assigned values contained in Table 6, CARB provides two methods for a facility to apply for a customized total carbon intensity value. See LCFS § 95486(c), (d). Under these mechanisms â named Method 2A and Method 2B in the LCFS â a facility may show that it has more efficient equipment or uses cleaner electricity to gain an individualized carbon intensity value. Under these methods, a facility may also propose its own pathway. âProducers whose energy use data are different from the values used in the development of the fuel pathways or producers whose process deviates substantially from that of the pathways represented in [Table 6] can propose their own pathways according to Methods 2A and 2B.â FSOR at 508.
CARB submits that to date, 44 Midwest corn ethanol facilities have registered for pathways in Table 6, with 25 indicating that they can produce ethanol lower than the 2010 baseline assigned in Table 6. Five Midwest corn ethanol facilities have applied under Method 2A and Method 2B, with a total of 22 pathways, all of which tentatively have been granted a rating lower than the value for the 2010 baseline for that pathway. Moreover, to date, three facilities that are Midwest; Dry Mill, Dry DGS, NG have applied under Method 2A for an individualized carbon intensity value, and tentatively have been given a value lower than the 2010 baseline for California gasoline.
Judicial Notice, Objections, and Consideration of Evidence and Arguments
In addition to the pending motion, the parties have submitted requests for judicial notice, objections to evidence submitted, motions to strike, and other miscellany. Moreover, this Court has received multiple amici curiae briefs. This Court carefully reviewed and considered the record, including all evidence, arguments, points and authorities, declarations, testi
Moreover, this Court will not address the request for judicial notice specifically, but notes the following applicable standards. To be judicially noticeable, a fact must not be subject to a reasonable dispute because it must be either generally known within the territorial jurisdiction of the court or âcapable of accurate and ready determination by sources whose accuracy cannot reasonably be questioned.â Fed.R.Evid. 201. âJudicial notice is appropriate for records and reports of administrative bodies.â United States v. 14.02 Acres of Land More or Less in Fresno County, 547 F.3d 943, 955 (9th Cir. 2008). This Court may not take judicial notice, however, of documents filed with an administrative agency to prove the truth of the contents of the documents. The comments made by third parties that are included in the ISOR or FSOR are subject to hearsay objections, and do not rise to the âhigh degree of indisputabilityâ required for judicial notice for their truth. Jespersen v. Harrahâs Operating Co., 444 F.3d 1104, 1110 (9th Cir.2006) (citing Fed. R.Evid. 201 advisory committeeâs note). If cited, these statements may be considered for their existence, but not their truth. Id. In addition, this Court takes judicial notice of public records not subject to reasonable dispute. See Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1354-55 (7th Cir.1995) (court properly refused to take judicial notice of corporationâs SEC form to determine disputed fact because âits contents were subject to disputeâ). While this Court may take judicial notice of the legislative histories, the statements contained therein may be subject to dispute.
SUMMARY JUDGMENT MOTION
Standard of Review
Fed.R.Civ.P. 56 permits a âparty against whom relief is soughtâ to seek âsummary judgment on all or part of the claim.â In a summary judgment motion, a court must decide whether there is a âgenuine issue as to any material fact.â Fed.R.Civ.P. 56(c); see also, Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). A party seeking summary judgment/adjudication bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party may satisfy this burden by: (1) presenting evidence that negates an essential element of the nonmoving partyâs case; or (2) demonstrating that the non-moving party failed to make a showing of sufficient evidence to establish an essential element of the nonmoving partyâs claim, and on which the non-moving party bears the burden of proof at trial. Id. at 322, 106 S.Ct. 2548. âThe judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.â Fed.R.Civ.P. 56(c). âIf the party moving for summary judgment meets its initial burden of identifying for the court those portions of the material on file that it believes demonstrates the absence of any genuine issues of material fact,â the burden of production shifts and
To establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor, but âmust do more than simply show that there is some metaphysical doubt as to the material facts.â Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). It is sufficient that âthe claimed factual dispute be shown to require a jury or judge to resolve the partiesâ differing versions of the truth at trial.â First Nat. Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); T.W. Elec. Serv., 809 F.2d at 631. The nonmoving party must âgo beyond the pleadings and by her own affidavits, or by depositions, answer to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.â Celotex, 477 U.S., at 324, 106 S.Ct. 2548. Fed.R.Civ.P. 56(e) requires a party opposing summary judgment to âset out specific facts showing that there is a genuine issue for trial.â âIn the absence of specific facts, as opposed to allegations, showing the existence of a genuine issue for trial, a properly supported summary judgment motion will be granted.â Nilsson, Robbins, et al. v. Louisiana Hydrolec, 854 F.2d 1538, 1545 (9th Cir.1988).
Discussion
I. Commerce Clause Challenges
The dormant Commerce Clause âdirectly limits the power of the States to discriminate against interstate commerce.â Wyoming v. Oklahoma, 502 U.S. 437, 454, 112 S.Ct. 789, 117 L.Ed.2d 1 (1992); NCAA v. Miller, 10 F.3d at 633, 638 (9th Cir.1993). âDiscrimination simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.â United Haulers Assân v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 331, 127 S.Ct. 1786, 167 L.Ed.2d 655 (2007). âThe Commerce Clause ... is in its negative aspect ... a limitation on the regulatory authority of the states. Thus, although a state has power to regulate commercial matters of local concern, a stateâs regulations violate the Commerce Clause if they are discriminatory in nature or impose an undue burden on interstate commerce.â Shamrock Farms Co. v. Veneman, 146 F.3d 1177, 1179 (9th Cir. 1998) (citations and internal quotations omitted).
A. Whether LCFS is Subject to Commerce Clause Challenge
Defendants contend that the LCFS is not subject to Commerce Clause challenge. This Court addresses Defendantsâ arguments by separate order. In short, this Court concluded Section 211(c)(4)(B) of the Clean Air Act provides no express or unambiguous authority for California to violate the Commerce Clause. Accordingly, the LCFS is subject to Commerce Clause scrutiny.
B. Applicable Standard of Review
In reviewing a dormant Commerce Clause challenge, the Court must first consider the applicable standard of review. If a law discriminates against out-of-state entities, or attempts to regulate beyond a stateâs jurisdiction, then the Court applies a strict scrutiny standard. Healy v. Beer Inst., 491 U.S. 324, 336-37, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989). If a law regulates in-state and out-of-state entities evenly and attempts to regulate only in-state activity, then the Court applies a balancing test. Pike v. Bruce
The Rocky Mountain Plaintiffs contend that the LCFS is subject to strict scrutiny analysis because it discriminates against out-of-state interests. A law or regulatory scheme âcan discriminate against out-of-state interests in three different ways: (1) facially; (2) purposefully, or (3) in practical effect.â Natl Assân of Optometrists & Opticians LensCrafters, Inc. v. Brown, 567 F.3d 521, 525 (9th Cir.2009). The Rocky Mountain Plaintiffs argue that the LCFS discriminates in all three ways. The Rocky Mountain Plaintiffs assert that the LCFS: (1) facially discriminates because it assigns a higher carbon intensity score to corn-derived ethanol from the Midwest than it assigns to corn-derived ethanol from California; (2) practically discriminates because it purports to base carbon intensity scores on variables that are intertwined with origin (transportation and electricity); and (3) purposefully discriminates by closing California to Midwest corn ethanol while preserving a market for local corn ethanol. The Rocky Mountain Plaintiffs further argue that the LCFS impermissibly regulates out-of-state activity and is subject to strict scrutiny analysis. In the alternative, the Rocky Mountain Plaintiffs argue that the LCFS also fails the Pike analysis because it excessively burdens interstate commerce without producing local benefits.
Defendants counter that the strict scrutiny analysis is improper, because the LCFS is a neutral law that applies evenly to all fuel-providers within the state of California. Defendants further contend that Defendantsâ arguments as to the burdens and effects of the LCFS are unripe and premature, and are the subject of Defendants Fed.R.Civ.P. 56(d) motion. Defendants move separately for judgment in their favor, arguing that the LCFS does not burden interstate commerce and produces local benefits. Defendants assert that the Rocky Mountain Plaintiffs provide no evidence of a negative effect on interstate commerce or injury to any of the Rocky Mountain Plaintiffs or their members. Defendants submit that the Midwest ethanol industry is thriving, notwithstanding the LCFS and its application. Defendants suggest that there is no danger of future harm to the Midwest ethanol industry, because it is increasing its efficiency, diminishing its carbon footprint, and therefore, becoming more competitive in California. Finally, Defendants argue that the EPAâs approval of E 15, the increasing numbers of flex-fueled vehicles on the road, and the growth of international exports of corn ethanol will expand the non-California ethanol market substantially. Based on these arguments, Defendants oppose the Rocky Mountain Plaintiffsâ summary judgment motion, and move for summary judgment in their favor.
To determine the appropriate standard of review, the Court must first consider whether the LCFS overtly discriminates against interstate commerce or impermissibly regulates interstate commerce. If the answer is in the affirmative, then this Court shall address the remaining factors under the strict scrutiny analysis. If the Court finds that the LCFS is nondiscriminatory, then the Court shall address the Pike balancing factors to analyze the Rocky Mountain Plaintiffsâ dormant Commerce Clause challenge.
C. Strict Scrutiny Analysis 1. Whether the LCFS facially discriminates against interstate commerce
States may not âdiscriminate against an article of commerce by reason
Relying on LCFS § 95486(b) and Table 6, Plaintiffs argue that the LCFSâ discriminatory treatment of physically and chemically identical fuels is reflected on the face of the LCFS. Plaintiffs point out that although corn ethanol produced in California and the Midwest have âidentical physical and chemical properties,â ISOR V-30, Table 6 provides lower, more favorable carbon intensity scores for corn ethanol produced in California than corn ethanol produced in the Midwest. As reflected in the table, supra, California corn-derived ethanol pathways are assigned 10% lower carbon intensity score as compared to the Midwest counterpart pathways. Plaintiffs contend that this difference reflects âdifferential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.â Oregon Waste Sys. v. Depât of Envtl. Quality, 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994). By assigning a higher carbon intensity score to the Midwest, the LCFS creates an âeconomic barrier against competition with the products of another state.â Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 527, 55 S.Ct. 497, 79 L.Ed. 1032 (1935).
Plaintiffs point out that the LCFS assigns higher carbon intensity values to corn ethanol âbased on ... [the] location of the production facility.â FSOR at 508. Plaintiffs contend that imposition of a higher carbon intensity score based on the âlocation of the production facilityâ constitutes express discrimination against Midwest corn-derived ethanol in favor of California corn ethanol. Moreover, Plaintiffs argue that CARB may not discriminate against out-of-state facilities based on transportation. In creating the LCFS, CARB acknowledged that âthe carbon intensities of some California produced fuels ... benefit from shorter transportation distances.â FSOR at 521. Plaintiffs argue, however, that CARB may not impose a barrier to interstate commerce based on the distance that the product must travel in interstate commerce.
Defendants maintain that the LCFS applies evenhandedly to all ethanol used as a fuel in California. Defendant explain that all ethanol sold as fuel in California will receive a carbon intensity value based on its lifecycle GHG emissions analysis. LCFS § 95483; Scheible Deck, ¶¶ 26, 34-42. In so stating, CARB admits one exception applies to a Midwest ethanol for which a specific source cannot be identified. In that event, the fuel may be assigned the Midwest average carbon intensity value. Scheible Deck, ¶ 39. Defendants explain that for all ethanol pathways, the carbon intensity value is determined by the application of the same scientific modeling tool (CA-GREET). Scheible Deck, ¶¶ 15-25. Defendants conclude that because the LCFS applies the same emissions modeling tool and same regulatory mechanism to all ethanol pathways sold in California, re
Having considered the partiesâ arguments, relevant case law, and admissible evidence, this Court finds that the LCFS and Table 6 explicitly differentiate among ethanol pathways based on origin (Midwest vs. California) and activities inextricably intertwined with origin (electricity provided by Midwest power companies vs. California power suppliers and interstate transportation). When comparing plants with the same feedstock and production process, the LCFS assigns a higher Cl on the basis of origin alone. Although California applies the same CA-GREET formula to all pathways evenly, the variables within the formula favor California ethanol producers by assigning lower Cl scores based on location. For at least four pathways identified on Table 6 that have identical production processes that create physically and chemically identical ethanol, the Lookup Table assigns a higher score to the ethanol produced in the Midwest and the lower score to the ethanol produced the same way in California. The following table, derived from Table 6, illustrates the comparison:
Carbon Intensities Assigned to Midwest and California Corn Ethanol
Difference Between Carbon Intensities for Midwest and Assigned Total Carbon California Corn Etha-Fuel_Fuel Pathway_Intensity (gC02e/MJ) nol (gC02e/MJ)_
Corn Ethanol 1. Midwest; Dry Mill; 98.40 9.50 _DrvDGS: NG_
la. California; Dry Mill; 88.90 â _DrvDGS: NG_
2. Midwest; Dry Mill; 90.10 9.40 _WetDGS: NG_
2a. California; Dry Mill; 80.70 â _WetDGS: NG_
3. Midwest; Dry Mill; 86.80 9.36 WetDGS; 80% NG; _20% Biomass_
3a. California; Dry Mill; 77.44 â WetDGS; 80%NG; _20% Biomass_
Plaintiffs point out that the LCFS assigns Midwest ethanol over 10% higher carbon intensity over its California ethanol counterpart. For example, Midwest; Dry Mill; Dry DGS; NG is assigned a carbon intensity score of 98.40 gC02e/MJ, whereas California; Dry Mill; Dry DGS, NG has a score of 88.90 gC02e/MJ. The difference â -9.50 gC02e/MJ â is more than 10% of the value of the California fuelâs assigned carbon intensity. Similar differences appear for the Dry Mill; Wet DGS; NG pathway and the Dry Mill; Wet DGS; 80% NG; 20% Biomass corn-derived ethanol pathway. The LCFS treats Midwest corn-derived ethanol differently than similar corn-derived ethanol made in California. In assigning higher Cl scores based on, inter alia, the location of the production facility and the distance the product travels, scores that ultimately will affect the price of the product, this Court concludes that the LCFS discriminates against out-of-state corn-derived ethanol on its face.
CARB attributes the difference in carbon intensity values to multiple âscientificâ
The Court concludes that the LCFS offends the Commerce Clause after considering the unique challenge presented. This is not the quintessential dormant Commerce Clause challenge. Clearly, a law that compels the use of in-state products or forbids the use of out-of-state products would violate the Commerce Clause. See, Alliance for Clean Coal v. Miller, 44 F.3d 591, 596 (7th Cir.1995). So, too, would a law that imposes a surcharge on an out-of-state product made in an identical fashion. See, Oregon Waste, 511 U.S. at 100, 114 S.Ct. 1345. While the ethanol made in the Midwest and California are physically and chemically identical when ultimately mixed with petroleum, and while the pathways may be the similar, this Court appreciates that the carbon intensities of these two otherwise-identical products are different according to lifecycle analysis. Indeed, the point of the LCFS is to penalize the differences between the California and Midwest ethanol. â the carbon emissions from the transportation, the different farming methods used, and the different types of electricity provided to and used by the plants â to reduce emissions. Although CARBâs goal to combat global warming may be âlegiti
The LCFS facially discriminates against interstate commerce notwithstanding the fact that it may also benefit some out-of-state interests or burden some in-state interests. Under the LCFS, Brazilian sugarcane ethanol has a lower Cl score than some in-state corn ethanol pathways. Because the LCFS makes production process, feedstock and origin relevant, comparing pathways with different production processes or feedstocks is a red herring. As set forth above, when comparing pathways with the same feedstock and production processes, the LCFS discriminates on the basis of origin. Moreover, a facial discrimination challenge is not defeated simply because other out-of-state interests may benefit. See Daghlian v. DeVry Univ., Inc., 582 F.Supp.2d 1231, 1243-44 (C.D.Cal.2007) (California lawâs exception for Hawaiian entities did not defeat facial discrimination claim); Limbach, 486 U.S. at 274, 108 S.Ct. 1803 (âexplicitly depriv[ing] certain products of generally available beneficial tax treatment because they are made in certain other Statesâ discriminates even though âsome out-of-state manufacturersâ benefitted). Similarly, while in-state providers are penalized for transporting corn from out-of state, strict scrutiny still applies. â[L]egislation favoring in-state economic interests is facially invalid under the dormant Commerce Clause, even when such legislation also burdens some in-state interests or includes some out-of-state interests in the favored classification.â Daghlian v. DeVry Univ., 582 F.Supp.2d 1231, 1243 (C.D.Cal.2007) (internal quotes omitted).
Moreover, the Method 2A and Method 2B procedures in the LCFS do not alter this Courtâs conclusion that the LCFS discriminates on its face against out-of-state corn ethanol. Method 2A and Method 2B set forth administrative procedures through which a regulated party may seek to amend the LCFS Lookup Tables to add additional fuel pathways. LCFS § 95486(c)-(f). It is no defense to describe methods that might allow amendment of the LCFS in a manner that might amelio
For the foregoing reasons, this Court finds that the LCFS impermissibly discriminates on its face against out-of-state entities.
2. Whether the LCFS Controls Extraterritorial Conduct
As an alternative argument, the Rocky Mountain Plaintiffs contend that strict scrutiny also applies to the LCFS if it attempts to âcontrol conduct beyond the boundary of the state.â Healy v. Beer Inst., 491 U.S. 324, 336-37, 109 S. Ct. 2491, 105 L.Ed.2d 275 (1989). Under this doctrine, the âCommerce Clause ... precludes the application of a state statute to commerce that takes place wholly outside of the Stateâs borders, whether or not the commerce has effects within the State.â Edgar v. MITE Corp., 457 U.S. 624, 642-43, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). The Commerce Clause also forbids a state âstatute that directly controls commerce occurring wholly outside the boundaries of a Stateâ as that statute âexceeds the inherent limits of the enacting Stateâs authority and is invalid regardless of whether the statuteâs extraterritorial reach was intended by the legislature.â Healy, 491 U.S. at 336, 109 S.Ct. 2491. âThe critical inquiry is whether the practical effect of the regulation is to control conduct beyond the boundaries of the State.â Id. (citing Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986)). This Court evaluates the practical effect of the statute ânot only by considering the consequences of the statute itself, but also by considering how the challenged statute may interact with the legitimate regulatory regimes of other States and what effect would arise if not one, but many or every, State adopted similar legislation.â Id. âGenerally speaking, the Commerce Clause protects against inconsistent legislation arising from the projection of one state regulatory regime into the jurisdiction of another State.â Id.
The Rocky Mountain Plaintiffs argue that the LCFS controls conduct that occurs wholly outside of California. The Rocky Mountain Plaintiffs point out that most of the production of corn ethanol occurs entirely outside of California. In addition, that production has no impact on the chemical or physical properties of the corn ethanol ultimately used in California or the tailpipe emissions of motor vehicles that will use the ethanol in California. The Rocky Mountain Plaintiffs contend that, in addition to regulating emissions in California, the ambitious LCFS calibrates Cl scores so that they regulate, among other things, deforestation in South Amer
Defendants argue that the Rocky Mountain Plaintiffs rely on the mistaken assertion that the LCFS is âregulatingâ the activities that it takes into consideration to determine Cl values. Defendants explain that the LCFS creates a market-based system which includes a yearly average performance standard and the availability of trading for credits and debits. In-state and out-of-state producers with higher Cl values are not required to reduce Cl values or to make changes in production or distribution in order to sell their ethanol in California. Nor are regulated parties prevented from purchasing fuels with higher/ Cl values. Based on this system, Defendants submit, any out-of-state effects are indirect, rather than direct regulations. Moreover, Defendants argue that the Commerce Clause protects the ethanol market, not individual particular interstate firms. Defendants admit that the LCFS structure will shift the market by weakening the position of the higher-CI producers relative to lower-CI producers causing some higher-CI producers may choose to withdraw from the California market. Defendants maintain, however, that these market forces do not regulate commerce outside of Californiaâs boundaries.
Ostensibly, the LCFS regulates only fuel-providers in California. This fact, however, does not resolve the issue. Defendantsâ arguments improperly focus on whether or not the LCFS directly regulates the out-of-state entities. As set forth above, the âcritical inquiry is whether the practical effect of the regulation is to control conduct beyond the boundaries of the State.â Healy, 491 U.S. at 336, 109 S.Ct. 2491. By using the lifecycle analysis approach to reducing GHG emissions, California is attempting to account for-and reduce-emissions from the entire pathway. Differences in Cl scores are based on CARBâs assessment of Midwest states â â[flarming practices (e.g. frequency and type of fertilizer used); [c]rop yields; [h]arvesting practices; [and] [Collection and transportation of the crop.ââ ISOR IV â 4 to IV-5. In addition, the LCFS includes a âland use changeâ component, with higher scores given to the Midwest and Brazil. LCFS § 95486(b); Table 6. According to CARB, the LCFS assigns carbon intensity based on these activities to provide an âincentive for regulated parties to adopt production methods which result in lower emissions.â FSOR at 84. Defendants cannot dispute that the âpractical effectâ of the regulation would be to control this conduct â occurring wholly outside of California. Indeed, the aim of the LCFS is to change these practices to reduce GHG emissions. But in penalizing these practices to âincentive regulated parties to changeâ their conduct (including conduct occurring wholly outside of the state), the LCFS impermissibly attempts to âcontrol conduct beyond the boundary of the state.â Healy, 491 U.S. at 336-37, 109 S.Ct. 2491.
Defendants admit that, in enacting the LCFS, âCalifornia has essentially assumed legal and political responsibility for emissions of carbon resulting from the
Moreover, the LCFS impermissibly regulates the channels of interstate commerce. Before a party can generate credits under the LCFS regulation, for example, it must produce maps and other documentation to prove to CARB how its fuel or feedstock is transported to California. See LCFS § 95484(d)(1). Any âmaterial changeâ to the transportation â including changes to out-of-state legs of the transportation, such as replacing ârail with truck or ship transport,â LCFS § 95484(d)(2)(D) â must be approved by CARB or else the party loses its right to generate credits. The registration form CARB requires ethanol producers to submit âentails providing facility information that supports the identification of Carbon Intensity (Cl) values and an Initial Demonstration of the Physical Pathway (how the fuel arrives to California) for the fuel(s) produced at [the registrantâs] facility.â Dinnen Deck Exh. 1 (âCalifornia Air Resources Board Low Carbon Fuel Standard Biofuel Producer Registration Formâ). This Court agrees with Rocky Mountain Plaintiffs that this type of regulation âforc[es] a merchant to seek regulatory approval in one State before undertaking a transaction in another,â causing the LCFS to âdirectly regulate[] interstate commerce.â Brown, 476 U.S. at 582, 106 S.Ct. 2080.
The Court further considers âhow the challenged statute may interact with the legitimate regulatory regimes of other States and what effect would arise if not one, but many or every, State adopted similar legislation.â Healy, 491 U.S. at 336, 109 S.Ct. 2491. âThe purpose of the Commerce Clause is to protect the nation against economic Balkanization.â Pac. Nw. Venison Producers v. Smitch, 20 F.3d 1008, 1015 (9th Cir.1994). The Rocky Mountain Plaintiffs submit that the LCFS would Balkanize the ethanol market, because if every state adopted such a regime, they would plainly âinterfere[ ] with free tradeâ in ethanol and ethanol production. See Armco, Inc. v. Hardesty, 467 U.S. 638, 644, 104 S.Ct. 2620, 81 L.Ed.2d 540 (1984). Defendants counter that because the cost of ethanol production and plants is so high, the LCFS would not Balkanize the ethanol production market.
If every State were to adopt legislation based on a lifecycle analysis of fuels, one of two outcomes may occur. First, the ^ethanol market would become Balkanized, Since a producer would have strong incentives to either relocate its operations in the State of largest use, or sell only locally to avoid transportation and other penalties. This would interfere with the âmaintenance of a national economic union unfettered by state-imposed limitations on interstate commerce.â Healy, 491 U.S. at 335-36, 109 S.Ct. 2491. Second, there is a danger that inconsistent legislation, if adopted by sister states, would cause significant problems to the ethanol market. Ethanol producers and suppliers in any State would be hard-pressed to satisfy the requirements of 50 different LCFS regula
3. Whether the LCFS serves a legitimate local purpose
Once a state law is shown to discriminate against interstate commerce âeither on its face or in practical effect,â or to exercise extraterritorial control, the burden falls on the State to demonstrate both that the statute âserves a legitimate local purpose,â and that this purpose could not be served as well by available nondiscriminatory means. Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979); see also, e.g., Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 957, 102 S.Ct. 3456, 73 L.Ed.2d 1254 (1982); Hunt v. Washington State Apple Advertising Commân, 432 U.S. 333, 353, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); Dean Milk Co. v. Madison, 340 U.S. 349, 354, 71 S.Ct. 295, 95 L.Ed. 329 (1951).
The Rocky Mountain Plaintiffs submit that the LCFS serves no local purpose. They point out that the purported goal is to combat global climate change, which serves either a national or international purpose, not a local purpose. The Rocky Mountain Plaintiffs contend that instead of focusing on local GHG emissions, like smog in the Central Valley, the LCFS has a purpose and aim that is broader than its territory.
Defendants argue that the LCFS serves the legitimate and local purpose to reduce the risks of global warming. Defendantsâ correctly point out that in Massachusetts v. EPA, 549 U.S. 497, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007), the Supreme Court recognized that a state has a âwell-founded desire to preserve its sovereign territoryâ from the threats of rising seas and other impacts of global warming. Id. at 519, 522, 127 S.Ct. 1438. âThat these climate-change risks are âwidely-sharedâ does not minimize [Californiaâs] interestâ in reducing them. Id. at 522, 127 S.Ct. 1438.
Significantly, in Massachusetts v. EPA the Supreme Court held that states have standing to ask the federal government to regulate GHG emissions. 549 U.S. 497, 127 S.Ct. 1438. Nevertheless, the Court explained in dicta that a state has a local and legitimate interest in reducing global warming. Based on this authority, this Court finds that the LCFS serves a local and legitimate interest.
4. Whether that purpose could be served through other nondiscriminatory means
The final consideration in the strict scrutiny analysis is whether California has established that the goal of reducing global warming cannot be adequately served by nondiscriminatory alternatives. California has failed to establish this fact. While this Court recognizes that the lifecycle analysis is a widely-accepted approach nationally and internationally to reduce GHG emissions, Defendants have failed to establish that they could not achieve this goal through other nondiscriminatory means. The Rocky Mountain Plaintiffs suggest several nondiscriminatory alternatives. For example, an LCFS that does not contain the discriminatory components may be effective in reducing GHG emissions. In addition, Defendantsâ expert concedes that California could âadopt a tax on
5. Conclusion
Defendants and their amicus defend the use of lifecycle analysis as âinternationally recognized,â and the lifecycle factors to be âuniversally applied.â Defendants further suggest that the federal government could permissibly use a lifecycle analysis approach in federal regulations on carbon intensity. This position highlights the Rocky Mountain Plaintiffsâ challenge. The dormant Commerce Clause enshrines the principle that the federal government can regulate commerce in ways that the States cannot. See Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 422, 66 S.Ct. 1142, 90 L.Ed. 1342 (1946). Undoubtedly, the federal government may pass similar legislation if it choose.
II. Preemption Claim
A. Introduction
Rocky Mountain plaintiffs argue that the LCFS stands as an obstacle to the accomplishment of the full purposes and objectives of Congress when it enacted EISA. Rocky Mountain plaintiffs contend that EISA reflects Congressâ judgment that:
the production of transportation fuels from renewable energy would help the United states meet rapidly growing domestic and global energy demands, reduce the dependence of the United States on energy imported from volatile regions of the world that are politically unstable, stabilize the cost and availability of energy, and safeguard the economy and security of the United States.
Pub.L. 110-140 § 806(a)(4), 121 Stat. 1492, 1722 (2007). Rocky Mountain plaintiffs assert that Congress adopted EISA to serve two purposes: (1) to enhance energy independence and security and to protect pre-existing investment by mandating the use of renewable fuels, and is so mandating; (2) to help the United States contribute to global efforts to reduce GHG emissions. To further those dual goals, Rocky Mountain plaintiffs contend that Congress struck a balance: Biorefineries,
Defendants oppose Rocky Mountain plaintiffsâ motion on a number of grounds. Defendants argue first that Rocky Mountain plaintiffs lack standing to pursue their preemption claim. Next, Defendants argue that preemption requires clear Congressional intent to preempt California in the area of air pollution, which does not exist. Third, Defendants contend that the EPAâs approval of E 15 blends fundamentally alters the landscape of plaintiffsâ preemption claim. Fourth, Defendants argue that Plaintiffs produce no evidence of a conflict between the LCFS and RFS2. Fifth, Defendants submit that the Rocky Mountain plaintiffs cannot establish causation. The Court considers the partiesâ arguments in turn.
B. Standing
Defendants argue that discovery has revealed that the Rocky Mountain plaintiffs lack standing to pursue their preemption claim. This Courtâs Article III jurisdiction âdepends on the existence of a âcase or controversy.â â GTE California, Inc. v. Federal Communications Commission, 39 F.3d 940, 945 (9th Cir.1994). âTo enforce Article Illâs limitation of federal jurisdiction to âcases and controversies, Plaintiffs must demonstrate ... standing Nelson v. National Aeronautics and Space Admin., 530 F.3d 865, 873 (9th Cir.2008). To satisfy the Constitutionâs standing requirement, âa plaintiff must show (1) it has suffered an âinjury in factâ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that there injury will be redressed by a favorable decision.â Friends of the Earth, Inc. v. Laidlaw Envtâl Servs., Inc., 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000); Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Nelson v. NASA 530 F.3d 865, 873 (9th Cir.2008).
As the parties seeking to invoke federal jurisdiction, Rocky Mountain plaintiffs bear the burden of demonstrating that they have standing in this action. Lujan, 504 U.S. at 561, 112 S.Ct. 2130. Rocky Mountain plaintiffs must demonstrate standing âfor each claim [they] seek[] to pressâ and for âeach form of relief sought.â DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) (quoting Laidlaw, 528 U.S. at 185, 120 S.Ct. 693). âThe
The Rocky Mountain plaintiffs represent groups that have an interest in protecting the corn ethanol industry. Plaintiffs are corn growers (California and out-of-state farmers), users, merchants and marketers of distillers grain (a by-product created during the corn-to-ethanol process that is fed to cows), producers of corn ethanol, and importers of ethanol into California from other states. This Court has described the Rocky Mountain plaintiffs in its Motion to Dismiss Order:
âFarmer Plaintiffsâ
Rocky Mountain Farmers Union is a cooperative association representing family farmers and ranchers in Wyoming, Colorado, and New Mexico. Its members include farmers who grow No. 2 corn for use in producing ethanol nationwide.
Redwood County Minnesota Corn and Soybean Growers is a not-for-profit corporation whose members, located in Redwood County, âą Minnesota, include farmers who grow No. 2 corn for use in producing ethanol nationwide.
Penny Newman Grain, Inc. (âPenny Newmanâ) is a leading merchant in the market for grains and feed by-products in the southern San Joaquin Valley and worldwide. Penny Newman is headquartered in Fresno, California and has other offices in California and Tennessee and commodities handling and storage facilities in Hanford and Bakersfield.
Rex Nederend is a farmer and rancher who owns a dairy near Tipton, California and ranches near Wasco and Lemoore, California. He purchases and uses distillersâ grains at his dairy and he grows No. 2 corn that, when market conditions permit him to do so, he would attempt to sell to biorefineries for use in producing ethanol.
Fresno County Farm Bureau (âFarm Bureauâ) is a non-profit membership organization that advocates for farmers and farming interests in Fresno County. Its members include corn growers who, when market conditions permit them to do so, would attempt to sell to biorefineries for use in producing ethanol. Farm Bureauâs members also include dairies that purchase and use distillers grains.
Nisei Farmers League (âNiseiâ) is an organization committed to serving the needs of California agriculture. With over 1000 members, the organization is headquartered in Fresno, California. Nisei members include corn growers located in Modesto and Tulare who, when conditions permit them to do so, would attempt to sell to biorefineries for use in producing ethanol. Niseiâs members also include dairies in Kings, Tulare, and Fresno counties that purchase and use distillersâ grains.
California Dairy Campaign (âCDCâ) represents the views and interests of California Dairy Farmers. Headquartered in Turlock, CDC has approximately 300 members. Its members include dairy farms located in Madera, Kings, Fresno, Tulare, and Kern Counties that purchase and use distillers grains. Because the milk price is heavily regulated, CDC members are sensitive to the prices of commodities. CDC members*1097 are concerned that the LCFS and its impact on gasoline prices will increase the costs of their inputs.
âCom Ethanol Indust'i'y Plaintiffsâ
Growth Energy in a non-profit corporation committed to the promise of agriculture and growing Americaâs economy through cleaner, greener energy. Formed in 2009, Growth Energy and its members include firms that produce ethanol in motor fuels sold in Fresno County and other parties of the state as well as companies who provide equipment and technology used to produce ethanol from corn.
Renewable Fuels Association is a trade association whose members include a broad cross-section of businesses, individuals, and organizations dedicated to the expansion of the fuel ethanol industry in the United States. Its members include producers of ethanol for use in motor vehicle fuels sold in Fresno County and other parts of California; importers of ethanol into California from other states; growers of corn for use in the production of ethanol; and marketers of distillers grains and other feed co-products in California.
Rocky Mountain Farmers Union, 719 F.Supp.2d 1170, 1180 (E.D.Cal.2010).
Defendants originally argued that this summary judgment motion should be denied as premature, pursuant to Fed. R.Civ.P. 56(d), because the parties had not yet conducted discovery. In response, this Court allowed Defendants to conduct limited discovery on the issue of standing and to file a supplemental opposition to this motion. Some discovery was conducted. Defendants sent out a set of interrogatories and took the deposition of Robert Dinnen (âMr. Dinnenâ), Chief Executive Officer of, and the Fed.R.Civ.P. 30(b)(6) person most knowledgeable for, plaintiff Renewable Fuels Association (âRFAâ). Defendants then filed a supplemental opposition to this motion, and renewed their Fed.R.Civ.P. 56(d) motion to deny the motion as premature.
The limited discovery conducted on the Rocky Mountain plaintiffs produced limited results. Defendants assert that in their responses to the interrogatories, the âfarmer plaintiffsâ filed only objections, failing to identify a single plaintiff or plaintiffs member who had suffered economic injury. The Rocky Mountain plaintiffs dispute this characterization, contending that after the objections were filed, the farmer plaintiffs filed supplemental responses identifying injury. The Rocky Mountain plaintiffs provide no citation to, or quotations from, those responses. Nevertheless, this Courtâs review of these documents reveals that the farmer plaintiffs objected on a number of grounds to the interrogatories. In response to each interrogatory, the farmer plaintiffs explained that the question was ânot reasonably calculated to lead to the discovery of admissible evidence, as these Responding Plaintiffs are not fuel providers.â The farmer plaintiffs similarly responded to Defendantsâ requests for production of documents.
As to the âindustry plaintiffs,â Defendants assert that both Growth Energy and RFA failed to identify a single member who had suffered economic injury, claiming that as trade associations, they cannot have this information. RFA argues that it provided the information that it had in response to the interrogatories. RFA agrees that its status as a trade association precludes it from actively seeking out such information from its members. Moreover, RFA submits that it would have disclosed any such information if RFA had any. Growth Energy, on the other hand, provided a declaration from an outside expert, Stuart Harden (âMr. Hardenâ), who re
The farmer plaintiffs have failed to carry their burden to establish that they have standing to pursue the preemption claim. While this Court does not expect the Rocky Mountain plaintiffs to provide all documents necessary to establish standing as to the farmer plaintiffs, the Rocky Mountain plaintiffs have a burden to establish standing â âwith the manner and degree of evidence required at the successive stages of the litigation.â â Legal Servs. Corp., 552 F.3d at 969 (quoting Lujan, 504 U.S. at 561, 112 S.Ct. 2130). At this stage, this Court allowed, and the parties conducted, limited discovery on' the standing issue. Thus, as this stage of the litigation, the Rocky Mountain plaintiffs were required to submit some evidence to establish standing. Here, they provided none.
Although the LCFS regulates fuel providers, the farmer plaintiffs were not precluded from asserting standing. âWhen the plaintiff is not himself the object of the government action or inaction he challenges, standing is not precluded, but it is ordinarily âsubstantially more difficultâ to establish.â Lujan, 504 U.S. at 562, 112 S.Ct. 2130 (quoting Warth v. Seldin, 422 U.S. 490, 505, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). The farmer plaintiffs could have established standing. The farmer plaintiffs could establish the injury in fact requirement by showing that âabsent the [LCFS], there is a substantial probability that they would [not be injured] and that, if the court affords the relief requested, the [injury] would be removed.â Warth, 422 U.S. at 504, 95 S.Ct. 2197. Through their interrogatories, Defendants asked the farmer plaintiffs whether the LCFS has caused or will cause economic injuries to them or their members, including going out of business, losing profits, losing market share, and being unable to obtain financing. Although the questions were not limited to fuel providers specifically, the farmer plaintiffs objected to those questions on the grounds that there were not fuel providers. In addition, although they bear the burden, the farmer plaintiffs provided no evidence to establish standing in response to the Defendants standing challenge. Indeed, the Rocky Mountain plaintiffs appear to concede this point, as the reply papers focus exclusively on the alleged harm to âgrandfathered ethanol plants.â None of the farmer plaintiffs appears to be a grandfathered ethanol plant. Accordingly, this Court finds that the farmer plaintiffs lack standing to assert a preemption claim.
The industry plaintiffs argue that they have individual and associational standing. Growth Energy and RFA argue that they LCFS indisputably regulates the GHG emissions their members, âmost of whom are grandfathered ethanol plants.â They argue that the LCFS imposes burdens and requires conduct that would not be required in the absence of the regulation; it constrains and conditions membersâ ability to sell corn ethanol to California refiners. In addition, Growth Energy and RFA argue that CARB assigns their members a Cl score that cannot be altered unless the members affirmatively prove to CARB that a far lower score should be assigned. The industry plaintiffs submit that these facts are âmore than enoughâ to meet Article Illâs standing requirement of a concrete, particularized, and actual or imminent injury.
âEven in the absence of injury to itself, an association may have standing solely as the representative of its members.â Warth, 422 U.S. at 511, 95 S.Ct. 2197. To establish associational standing, each industry plaintiffs must establish the following three prongs: (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organizationâs purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Defendants challenge the industry plaintiffsâ associational standing on multiple grounds. Defendants argue that the industry plaintiffs fail the first prong, because: (1) the associations have failed to demonstrate that any of their members have suffered an injury in fact; and (2) even if evidence of actual or imminent injury to a specific plant were introduced, plaintiffs would be unable to establish that the LCFS caused any economic injury. Defendants argue that the industry plaintiffs fail the third Hunt prong, because the preemption claim requires the participation of individual members in the lawsuit. The Court considers each argument.
The first prong requires the industry plaintiffs to establish the âirreducible constitutional minimumâ requirements of injury; namely that at least one of its members:
suffered an âinjury in factâ â an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of â the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third part not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Bennett v. Spear, 520 U.S. 154, 167, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). To establish associational standing, the industry plaintiffs must âsubmit affidavits ... showing, through specific facts ... that one or more of their members would ... be âdirectly affectedâ by the allegedly illegal activity.â Summers v. Earth Island Inst., 555 U.S. 488, 129 S.Ct. 1142, 1151-52, 173 L.Ed.2d 1 (2009) (quoting Lujan, 504 U.S. at 563, 112 S.Ct. 2130).
Next, the Court considers whether the industry plaintiffs establish the third Hunt prong; namely, that âneither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.â 432 U.S. at 343, 97 S.Ct. 2434. Although the requested injunctive relief may not require the participation of the individual members, the industry plaintiffs must also establish that the âclaim assertedâ does not require the participation from individual members. A claim asserted does not require the participation from individual members if it âraises a pure question of law.â Intâl Union, United Auto., Aerospace, and Agricultural Implement Workers of Am. v. Brock, 477 U.S. 274, 288, 106 S.Ct. 2523, 91 L.Ed.2d 228 (1986).
Defendants assert that the industry plaintiffs fails to establish that their as-applied preemption claim is a pure question of law. Defendants argue that to establish their claim, Growth Energy and RFA must offer evidence that demonstrates that the LCFS has unlawfully presented an obstacle to the accomplishment of Congressional objectives expressed in RFS2. Plaintiffs argue that the LCFS presents and obstacle to the Congressional objectives by âdriving down the demand for grandfathered corn ethanol.â Defendants argue that to prove this alleged conflict, plaintiffs would be required to introduce evidence of how the regulation affects competition in the ethanol industry, generally, and grandfathered plants, specifically. Defendants submit that the industry plaintiffs failed to provide any information about the impact of the LCFS on their members, including specified grandfathered members.
As to RFA, Defendantsâ arguments are meritorious. RFA has no access to its membersâ business information. RFA failed to identify any of its members as a grandfathered ethanol plant. In addition, RFA failed to establish than any of its members suffered an injury in fact. Thus, RFA would be unable to establish, on its own, the claim asserted. âBecause [RFA] has not identified a single member who was or would be injured by [the challenged action], it lacks standing to raise this challenge.â Chamber of Commerce of the United States v. EPA 642 F.3d 192, 200 (D.C.Cir.2011).
RFAâs âflaw is inconsequential, however, because [RFAâs co-plaintiff] has identified allegedly injured members.â Id. As discussed more fully above, the record demonstrates that Growth Energy has submitted declarations that contain the information Defendants identified. Defendants challenge both Growth Energy and
C. Substantive Challenges
1. Applicable Law
Rocky Mountain Plaintiffs argue that the LCFS is preempted by EISA, codified in relevant part in Section 211(o), which modified the RF S2. Under the U.S. Constitutionâs Supremacy Clause, the U.S. Constitution and federal laws âshall be the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.â U.S. Const. Art. VI, cl. 2. Under the Supremacy Clause, âCongress has the authority, when acting pursuant to its enumerated powers, to preempt state and local law.â Oxygenated Fuels v. Davis, 331 F.3d 665, 667 (9th Cir.2003). When considering the scope of preemption, the Court considers Congressional purpose, which is the âultimate touchstone of preemption analysis.â Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541, 121 S.Ct. 2404, 150 L.Ed.2d 532 (2001) (internal quotations omitted).
A âstate law is invalid to the extent it âactually conflicts with a ... federal statute.â â Intâl Paper v. Ouellette, 479 U.S. 481, 491-92, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987). Such a conflict can result in preemption where it is impossible for a private party to comply with both the state and federal requirements. English v. Gen. Elec. Co., 496 U.S. 72, 79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990). âTension between federal and state law is not enough to establish conflict preemption.â Incalza v. Fendi North America, Inc., 479 F.3d 1005, 1010 (9th Cir.2007). A court finds preemption only in âthose situations where conflicts will necessarily arise.â Goldstein v. California, 412 U.S. 546, 554, 93 S.Ct. 2303, 37 L.Ed.2d 163 (1973). A âhypothetical conflict is not a sufficient basis for preemption.â Total TV v. Palmer Communications, Inc., 69 F.3d 298, 304 (9th Cir.1995). Conflict preemption can also be found where âthe state law âstands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.â â Intâl Paper, 479 U.S. at 491-92, 107 S.Ct. 805 (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)).
2. Standard of Review
In Defendantsâ separate summary judgment motion, Defendants assert that this Court must reject Plaintiffsâ facial preemption challenge in toto if any provision of the LCFS can be valid under any set of circumstances. âA facial challenge to a [statute] is ... the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the [statute] would be valid.â United States v. Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095, 95 L.Ed.2d 697 (1987). âIn particular, a generally applicable statute is not facially invalid unless the statute âcan never be applied in a constitutional manner.â â United States v. Kaczynski, 551 F.3d 1120, 1124-25 (9th Cir.2009) (quoting Lanier v. City of Woodburn, 518 F.3d 1147, 1150 (9th Cir.2008) (drug testing policy not facially invalid because the challenger failed to provide a reason why the policy could not be constitutionally applied to applicants for certain types of jobs)) (emphasis in original).
Where a plaintiff challenges an enactment as prima facie invalid, Salerno requires the plaintiff to show that there can be no valid application of a particular challenged provision. However, Salerno does not require a plaintiff to show that every provision within a particular multifaceted enactment is invalid. When a statute contains unobjectionable provisions that are separable from those found to be unconstitutional, a court reviewing the statute should maintain the statute is no far as it is valid. In other words, some of the provisions might be facially invalid, and might not.
Each Fleet Rule contains multiple provisions, placing restrictions on specific lists of public or private entities. Those provisions within the Rules that constitute state proprietary action are valid provisions, not valid applications of a single, unseverable provision.
498 F.3d at 1049-50 (emphasis in original) (internal quotations and citations omitted). The Court then remanded the action to the district court âto decide in the first instance whether the remaining provisions of the [regulation] are preempted by the Clean Air Act.â Id.
Neither party addresses this standard in their separate motions. In their separate summary judgment motion, Defendants failed to establish that the LCFS is valid in toto because some provisions of the LCFS do not conflict with Section 211(o). In this motion, Defendants fail to isolate the offending portions of the LCFS. Neither party addresses the issue of severability. Neither party explains sufficiently their position of whether the LCFS is a series of severable restrictions on dissimilar entities or single, integrated market-based compliance mechanism that applies to all fuel providers in the California market.
In a footnote under the Commerce Clause challenge arguments, the Rocky Mountain Plaintiffs assert that in Defendantsâ separate summary judgment motion, Defendants mischaracterize Rocky Mountain Plaintiffsâ âfacial discriminationâ claim as a âfacial challenge.â A law is facially discriminatory, as opposed to facially nondiscriminatory, when âit is not necessary to look beyond the text of this statute to determine that it discriminates against interstate commerce.â Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 575-76, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997). A challenge is facial, as opposed to as-applied, when the âclaim and the relief that would follow ... reach beyond the particular circumstancesâ of the plaintiffs. Doe v. Reed, â U.S. -, 130 S.Ct. 2811, 2817, 177 L.Ed.2d 493 (2010).
The characterization of the challenge is important to understand the appropriate standard of review. Defendants oppose the Rocky Mountainsâ facial discrimination
This Court cannot determine the merits of the preemption claim until the parties brief further the standard of review. For failing to set forth an applicable standard of review, the Rocky Mountain Plaintiffs have failed to establish that they are entitled to judgment as a matter of law on this claim. Accordingly, this Court DENIES without prejudice the Rocky Mountain Plaintiffsâ summary judgment motion related to its preemption claim.
PRELIMINARY INJUNCTION MOTION
Standard of Review
A âpreliminary injunction is an extraordinary and drastic remedy.â Munaf v. Geren, 553 U.S. 674, 128 S.Ct. 2207, 2219, 171 L.Ed.2d 1 (2008). As such, the Court may only grant such relief âupon a clear showing that the plaintiff is entitled to such relief.â Winter v. Natâl Res. Def. Council, Inc., 555 U.S. 7, 129 S.Ct. 365, 375, 172 L.Ed.2d 249 (2008). To prevail, the moving party must show: (1) a likelihood of success on the merits; (2) a likelihood that the moving party will suffer irreparable harm absent a preliminary injunction; (3) that the balance of equities tips in the moving partyâs favor; and (4) than an injunction is in the public interest. Id. at 374. In considering the four factors, the Court âmust balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief.â Winter, 129 S.Ct. at 376 (quoting Amoco Co. v. Vill. of Gambell, Alaska, 480 U.S. 531, 542, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987)); Indep. Living Ctr. of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644, 651 (9th Cir. 2009). Alternative, a âpreliminary injunction is appropriate when a plaintiff demonstrates ... that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiffs favor.â Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir.2011).
Discussion
Likelihood of Success on Merits
Pursuant to Winter, Plaintiffs must make a âclear showingâ that they are âlikely to succeed on the merits.â 129 S.Ct. at 375-76; Stormans, Inc. v. Selecky, 571 F.3d 960, 978 (9th Cir.2009). For the reasons set forth above, this Court found that the LCFS violates the Commerce Clause. In addition, this Court finds the Rocky Mountain Plaintiffsâ preemption claim raises âserious questionsâ as to whether the LCFS conflicts with Section 211(o) of the Clean Air Act. Accordingly, this factor strongly favors injunctive relief.
Irreparable Injury Absent an Injunction
Next, the Court considers whether Plaintiffs will suffer irreparable injury absent an injunction. âPreliminary injunctive relief is available only if plaintiffs âdemonstrate that irreparable injury is likely in the absence of an injunction.â â Johnson v. Couturier, 572 F.3d 1067, 1081
Harm to Defendants/Balance of Equities
The purpose of a preliminary injunction is to preserve the status quo if the balance of equities so heavily favors the moving party that justice requires the court to intervene to secure the positions until the merits of the action are ultimately determined. University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981). According to Plaintiffs, âstatus quoâ means the last uneontested status that preceded the pending controversy. See, GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1210 (9th Cir. 2000). In this case, this Court cannot preserve the status quo, since the LCFS came into force on January 1, 2011, after these motions were filed but before the parties finished briefing these motions and before these motions were resolved. Because the LCFS is incremental, however, this Court can preserve the status quo to enjoin defendants from enforcing the LCFS further.
Defendants are concerned that failure to enforce the LCFS will harm the public by increasing GHGs. The Rocky Mountain Plaintiffs counter that those concerns are too attenuated within this context. In addition, the Rocky Mountain Plaintiffs submit that the LCFS will cause real, concrete harm to the United States ethanol industry that tips the balance of equities in their favor. This Court agrees.
Public Interest
As a final factor, the Court considers the public interest. âIn exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction.â Winter, 129 S.Ct. at 376-77 (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982)). âThe public interest analysis for the issuance of a preliminary injunction requires [the Court] to consider whether there exists come critical public interest that would be injured by the grant of preliminary relief.â Indep. Living, 572 F.3d at 659. Here, the public has an interest in protecting Constitutional rights. That is, it is in the public interest to enjoin enforcement of a state regulation that offends federal law. California also argues that the public has an interest to enforce a regulation that would reduce GHG emissions. This Court agrees, but only if the enforcement is done legally. Such is not the case here. Ac
Conclusion
As set forth above, Plaintiffs make a âclear showingâ that they are likely to succeed on the merits of dormant Commerce Clause claim and their preemption claim raises âserious questionsâ as to whether the LCFS conflicts with Section 211(o) of the Clean Air Act. In addition, the Rocky Mountain Plaintiffs establish that they are suffering irreparable harm. Having considered the publicâs interest, the balance of equities, and other relevant factors, and for the reasons set forth above, this Court grants the Rocky Mountain Plaintiffsâ preliminary injunction motion.
CONCLUSION AND ORDER
For the foregoing reasons, this Court:
1. GRANTS judgment in favor of the Rocky Mountain Plaintiffs and DENIES Defendantsâ summary judgment motion on the Rocky Mountain Plaintiffsâ dormant Commerce Clause claim. Using a strict scrutiny analysis, this Court finds that the LCFS discriminates against out-of-state corn-derived ethanol while favoring in-state corn ethanol and impermissibly regulates extraterritorial conduct. In addition, Defendants have failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming;
2. DENIES judgment without prejudice on the Rocky Mountain Plaintiffsâ preemption claim for failure to address the standard of review;
3. DENIES as -moot Defendantsâ Fed. R.Civ.P. 56(d) motion, because this Court does not reach the subject of that motion;
4. GRANTS the Rocky Mountain Plaintiffs motion for a preliminary injunction;
5. ENJOINS Defendants from further enforcing the LCFS during the pendency of this litigation; and
6. CERTIFIES judgment on Plaintiffsâ dormant Commerce Clause claim pursuant to Fed.R.Civ.P. 54(b), even though there is an outstanding claim for relief based on the claim of preemption. Because the LCFS is unenforceable in that it violates the Commerce Clause, there is no just reason for delay in these proceedings; and
7. DIRECTS the clerk of court to enter judgment in favor of the Rocky Mountain Plaintiffs and against Defendants on the Plaintiffsâ dormant Commerce Clause claim.
IT IS SO ORDERED.
. The defendant in this action is James N. Goldstene, in his official capacity as Executive Director of the California Air Resources Board (''CARBâ).
. This Court leaves unaddressed some arguments raised by the Rocky Mountain Plaintiffs. Because this Court finds that the LCFS discriminates against interstate commerce on its face, for example, this Court does not reach the Rocky Mountain Plaintiffs' arguments related to discriminatory effects or factors relevant to an analysis pursuant to Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). In addition, because neither party has established an appropriate standard of review to determine the merits of the Rocky Mountain Plaintiffsâ preemption claim, this Court does not reach the merits of that claim. This Court neither resolves nor asserts an opinion on these arguments, unless otherwise specified.
. This Court presents only the background facts that are relevant to this motion.
. The LCFS assigns carbon-intensity scores for corn ethanol based on the "location of the production facility (California or Midwest),â the "type of corn milling (wet or dry),â the "type of distillers grains produced (wet or dry),â and the "source of fuel for heat energy and co-generated electrical power (natural gas, coal, biomass).â FSOR at 508.
. See Cheminsky, et al., "California, Climate Change, and the Constitution,â 25 The Environmental Forum 4, 50, 55 ("If California aims to stop leakage by treating electricity generated outside of the state differently than electricity generated inside its borders, the state will almost certainly lose when facing a lawsuit based on dormant Commerce Clause grounds. This means that California should avoid making regulatory distinctions between in-state energy and out-of-state energy and create a process that is blind to the location of energy production.â)
. Because this Court found that the LCFS discriminates against interstate commerce on its fact, this Court declines to address the Rocky Mountain Plaintiffsâ alternative argument related to the alleged discriminatory effects and purpose of the LCFS.
. The Rocky Mountain Plaintiffs further argue that the LCFS would not reduce GHG emissions and that any assertion that it would combat global warming is "mere speculationâ and too tenuous. See, e.g., Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005) (striking down a law prohibiting the sale of wine out-of-state over the Internet to avoid underage drinking was "mere speculationâ and too tenuous). This Court does not reach this argument.
. Indeed, the federal government has adopted a lifecycle analysis in its RFS2, part of which is the subject of Plaintiffsâ preemption claim, discussed below.
. Additionally, resolution of this issue, if refiled, may require further briefing on the issue of its impact on the grandfathered ethanol plants in light of EPA's change from E10 to E15 during the pendency of this motion.