What is the latest on California’s Low Carbon Fuel Standard?

January 24, 2014 By

January 3, 2011

By David Hackett

Stillwater has been following the LCFS issues from the start and we have concerns about the feasibility of the biofuels program to meet the carbon intensity goals at an affordable price. Our calculations indicate that the regulation will increase motorists’ costs by billions of dollars per year as the transportation fuel industry is forced to import sugar cane ethanol from Brazil and send Midwest corn ethanol to replace the Brazilian volume. The upcoming January edition of our newsletter will have a more detailed analysis.

In mid-December, the California Air Resources Board decided that the biofuels portion of the Low Carbon Fuel Standard was in good shape but that the High Carbon Intensity Crude Oil regulation needed some refinement.

Then, right at the end of the year, Judge Lawrence J. O’Neill of the US District Court for the Eastern District of California declared the regulation unconstitutional. The regulation violates the commerce clause by discriminating against out-of-state ethanol suppliers and crude oil producers. “…this Court concludes that the LCFS discriminates against out-of-state corn-derived ethanol on its face.”

This ruling stayed the ARB from enforcing the LCFS during the course of the on-going litigation. ARB put out a notice on December 30, that they will “appeal the rulings and …seek an order staying the preliminary injunction, as long as the injunction remains in effect, ARB will respect the Court’s ruling and withhold enforcement of the LCFS requirements, including enforcement of the requirements described in this supplemental regulatory advisory.”

An unusual coalition made up the plaintiffs in this case. The Renewable Fuels Association and Growth Energy, two ethanol associations, plus other agricultural entities, had their case consolidated with that of the National Petrochemical & Refiners Association, the American Trucking Association, and other consumer groups. It isn’t often that RFA and NPRA are on the same side of an issue.

So what’s next? The Air Board will appeal the decision and will request an order that all the requirements of the LCFS in 2011 and 2012 be enforceable for the entire period. This will leave obligated parties with a choice: comply with the LCFS or wait to see what the courts decide.

Stayed tuned for more analysis of biofuels issues.

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