Tags: California | Fuel | Standard | gasoline

California Asks Court to Permanently Reinstate Fuel Standard

Tuesday, 16 Oct 2012 01:47 PM

California’s low-carbon fuel standard, which is tougher on ethanol produced in the Midwest, was questioned today by a panel of federal appeals court judges who said it appeared to discriminate against out-of-state fuel producers.

Attorneys for the California Air Resources Board, which monitors and regulates air quality, are asking the U.S. Court of Appeals in San Francisco to reverse a judge’s ruling that struck down portions of carbon fuel standards on grounds that they’re unfair to out-of-state ethanol producers and illegally regulate businesses outside of California.

The standards assign a higher so-called carbon intensity score to ethanol produced in the Midwest. The score is science-based and fair, because while the fuel is chemically and physically identical to ethanol produced in California, corn farming, transportation and processing produces emissions that increase its score, California officials say.

California says that its standard would boost employment and increase the tax base by replacing out-of-state fuel, said Justice Dorothy Nelson. “Isn’t this unambiguous evidence” that the standard is a form of state protectionism, she asked at a hearing today in San Francisco.

Ethanol producers challenging California’s low-carbon standard are trying to “prevent California from following sound science,” Deputy Attorney General Elaine Meckenstock told the judges today. The standard “controls only the carbon intensity of the fuels sold in California” and is neutral about where the fuel is produced.

Temporary Reinstatement

Farm and oil-industry groups sued the state last year to overturn the standards. After they won a judge’s ruling in December, the standards were temporarily reinstated by the federal appeals court, which is hearing arguments today from both sides.

California’s carbon standards apply to any company that sells transportation fuel in the state and requires a 10 percent average reduction in “carbon intensity” by 2020.

Fuel sales generate credits or deficits for companies, depending on the carbon intensity of their product. Companies subject to the carbon regulations can use credits to comply with standards or sell them to other companies, and those with deficits must purchase credits to meet standards.

U.S. District Judge Lawrence O’Neill in Fresno, California, ruled Dec. 29 that California’s method of assigning a higher score to ethanol produced out of state violates interstate commerce laws.

Deck Stacked

Lawyers for Rocky Mountain Farmers Union, a farmers’ group and plaintiff in the case, says the standard should be blocked because California is attempting to assert authority over out- of-state businesses and “stacks the deck to favor fuels made in California over those made in the Midwest.”

“Midwest producers will be completely driven out of the California ethanol market by 2018,” John Kinsey, an attorney for the farmers’ group, said in a court filing.

Oil industry groups also oppose the standards, which discourage refiners such as Chevron Corp. and Tesoro Corp. from processing types of crude that release more carbon when produced and transported into the state, such as output from Canada’s oil sands.

Biggest Buyer

California, the most populous U.S. state, is also the country’s biggest buyer of new cars and trucks. In 2012’s first half, drivers in the Golden State bought 827,614 new vehicles, or 11.4 percent of the nationwide total, according to data from the California New Car Dealers Association.

California carbon allowances for December 2013 delivery slipped 25 cents per metric ton on Dec. 30, a day after O’Neill’s ruling. Prices continued to tumble in January, reaching a record-low of $13 a metric ton, on speculation that the same argument could be used to block California’s cap-and- trade program.

Futures fell 15 cents, or 1 percent, to $14.25 a metric ton yesterday, according to data compiled by CME Group Inc.’s Green Exchange.

California’s low-carbon fuel standard and cap-and-trade program are both measures developed as part of the 2006 global- warming act, known as “AB 32,” which requires a reduction in the state’s greenhouse gas emissions to 1990 levels by 2020.

Under the cap-and-trade program, the state will “cap” carbon emissions from power generators, oil refineries and other industrial plants and cut that limit gradually to achieve a roughly 15 percent reduction by 2020.

The case is Rocky Mountain Farmers Union v. Goldstene, 12-15131, U.S. Court of Appeals, San Francisco.

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California’s low-carbon fuel standard, which is tougher on ethanol produced in the Midwest, was questioned today by a panel of federal appeals court judges who said it appeared to discriminate against out-of-state fuel producers.
Tuesday, 16 Oct 2012 01:47 PM
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