Am. Fuel & Petrochemical Mfrs. v. O'Keeffe

• Decision Date: 23 September 2015
• Docket Number: Case No. 3:15–cv–00467–AA.
• Parties: AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS, American Trucking Associations, Inc., a trade association, and Consumer Energy Alliance, a trade association, Plaintiffs, v. Jane O'KEEFFE, Ed Armstrong, Morgan Rider, Colleen Johnson, and Melinda Eden, in their official capacities as members of the Oregon Environmental Quality Commission; Dick Pederson, Joni Hammond, Wendy Wiles, David Collier, Jeffery Stocum, Cory–Ann Wind, Lydia Emer, Leah Feldon, Greg Aldrich, and Sue Langston, in their official capacities as officers and employees of the Oregon Department of Environmental Quality; Ellen Rosenblum, in her official capacity as Attorney General of the State of Oregon; and Kate Brown, in her official capacity as Governor of the State of Oregon, Defendants, v. California Air Resources Board, State of Washington, Oregon Environmental Council, Inc., Climate Solutions, Natural Resources Defense Council, Environmental Defense Fund, and Sierra Club, Defendant–Intervenors.
• Court: U.S. District Court — District of Oregon

134 F.Supp.3d 1270

AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS, American Trucking Associations, Inc., a trade association, and Consumer Energy Alliance, a trade association, Plaintiffs,

v.Jane O'KEEFFE, Ed Armstrong, Morgan Rider, Colleen Johnson, and Melinda Eden, in their official capacities as members of the Oregon Environmental Quality Commission; Dick Pederson, Joni Hammond, Wendy Wiles, David Collier, Jeffery Stocum, Cory–Ann Wind, Lydia Emer, Leah Feldon, Greg Aldrich, and Sue Langston, in their official capacities as officers and employees of the Oregon Department of Environmental Quality; Ellen Rosenblum, in her official capacity as Attorney General of the State of Oregon; and Kate Brown, in her official capacity as Governor of the State of Oregon, Defendants,

v.California Air Resources Board, State of Washington, Oregon Environmental Council, Inc., Climate Solutions, Natural Resources Defense Council, Environmental Defense Fund, and Sierra Club, Defendant–Intervenors.

Case No. 3:15–cv–00467–AA.

United States District Court, D. Oregon.

Signed Sept. 23, 2015.

Clayton G. Northouse, Paul J. Ray, Paul J. Zidlicky, Roger R. Martella, Jr., Sidley Austin LLP, Washington, DC, Alexander M. Naito, Thomas C. Sand, Miller Nash Graham & Dunn LLP, Portland, OR, for Plaintiffs.

Christina L. Beatty–Walters, Rachel A. Weisshaar, Carla Scott, Oregon Department of Justice, Portland, OR, for Defendants.

M. Elaine Meckenstock, Office of the California Attorney General, Oakland, CA, Jonathan A. Wiener, California Department of Justice, San Francisco, CA, Leslie R. Seffern, Washington State Attorney General's Office, Olympia, WA, for Defendant–Intervenors.

OPINION AND ORDER

AIKEN

, Chief Judge:

Defendants Jane O'Keeffe, Ed Armstrong, Morgan Rider, Colleen Johnson, Melinda Eden, Dick Pederson, Joni Hammond, Wendy Wiles, David Collier, Jeffrey Stocum, Cory–Ann Wind, Lydia Emer, Leah Feldon, Greg Aldrich, Sue Langton, Ellen Rosenblum, and Kate Brown move to dismiss plaintiffs American Fuel and Petrochemical Manufacturers, American Trucking Associations, Inc., and Consumer Energy Alliance's claims pursuant to Fed.R.Civ.P. 12(b)(1)

and Fed.R.Civ.P. 12(b)(6). Defendant-intervenors California Air Resources Board and the State of Washington (collectively "State Intervenors") separately move to dismiss plaintiffs' complaint with prejudice. Defendant-intervenors Oregon Environmental Council, Inc., Climate Solutions, Natural Resources Defense Council, Environmental Defense Fund, and Sierra Club (collectively "Conservation Intervenors") also move for judgment on the pleadings under Fed.R.Civ.P. 12(c).¹ For the reasons set forth below, defendants' and defendant-intervenors' motions are granted, and this case is dismissed.

BACKGROUND

In 2007, the Oregon legislature found that climate change seriously threatened Oregon's economy, environment, and public health. Or.Rev.Stat. § 468A.200

. These threats included "[r]educed snowpack, changes in the timing of stream flows, extreme or unusual weather events, rising sea levels, increased occurrences of vector-borne diseases and impacts on forest health." Id. Such environmental damage would "have detrimental effects on many of [Oregon's] largest industries, including agriculture, wine making, tourism, skiing, recreational and commercial fishing, forestry and hydropower generation." Id. The Oregon legislature identified a need to assess and monitor the current level of greenhouse gas emissions ("GHG") in Oregon, "and to take necessary action to begin reducing greenhouse gas emissions in order to prevent disruption of [Oregon's] economy and quality, of life and to meet [Oregon's] responsibility to reduce the impacts and the pace of global warming." Id.

In 2009, the state resolved to lower GHG emissions from transportation fuels, which, at 30%, account for the largest single market share. Compl. ¶ 30; Or. Admin. R. 340–253–0000(1)

. Specifically, via House Bill 2186, the Oregon legislature instructed the Oregon Environmental Quality Commission ("EQC") to adopt rules to decrease lifecycle GHG emissions from transportation fuels, based on their carbon intensities, that are produced in or imported to Oregon by 10% over a 10–year period ("Oregon Program").² Compl. ¶¶ 30–31; Or. Admin. R. 340–253–0000(2)–(3).

In 2010, the Department of Environmental Quality ("DEQ") convened an advisory committee to help design a program consistent with House Bill 2186. Compl. ¶¶ 30–31. In January 2011, the DEQ published a final report outlining the advisory committee's process and recommendations. Id. at ¶ 33. In December 2012, the EQC adopted Phase 1 rules for the Oregon Program. Id. at ¶ 34. Phase 1 began on January 1, 2013, when the state began requiring regulated parties—i.e. "[a]ll persons that produce in Oregon or import into Oregon any regulated fuel"³ —to register for the Oregon Program and record/report the volumes and carbon intensities of their transportation fuels. Or. Admin. R. 340–253–0100(1)

, 340–253–0200, 340–253–0500, 340–253–0600 –50.

In January 2015, after the DEQ convened a second advisory committee, the EQC adopted Phase 2 rules. Compl. ¶¶ 35, 37. These rules require regulated parties to meet the annual clean fuel standards. Or. Admin. R. 340–253–0100

–250, 340–253–0400, 340–253–8010–20. The carbon intensity of a fuel is based on OR–GREET, a lifecycle emissions model developed by the Argonne National Laboratory and customized for Oregon. Or. Admin. R. 340–253–0040(44). The Oregon Program regulations include lookup tables that list the carbon intensities of a variety of fuels.⁴ Or. Admin. R. 340–253–8030 –40.

Beginning in 2016,⁵ regulated parties will need to hold credits equal to or greater than their deficits, on an annual aggregate basis, to demonstrate their compliance with the Oregon Program. Or. Admin. R. 340–253–8010

–20. A clean fuel credit is generated when fuel is produced, imported, dispensed, or used in Oregon and the carbon intensity value is lower than the clean fuel standard for that year. Or. Admin. R. 340–253–1000(5). Conversely, a clean fuel deficit is generated when fuel is produced, imported, dispensed, or used in Oregon and the carbon intensity value exceeds the clean fuel standard for that year. Or. Admin. R. 340–253–1000(6). Credits can be bought and sold, banked for the future, or used by a fuel importer or producer to offset a deficit created by the importation or production of other fuels. Or. Admin. R. 340–253–1050

. This structure allows regulated parties flexibility in complying with the Oregon Program, as no regulated party is required to sell any particular fuel or blend of fuels with a certain carbon intensity or origin.

On March 23, 2015, plaintiffs filed a complaint in this Court alleging that the Oregon Program: (1) discriminates against out-of-state commerce in violation of the Commerce Clause; (2) regulates extraterritorial activity in violation of the Commerce Clause and principles of interstate federalism; (3) is expressly preempted by section 211(c) of the Clean Air Act ("CAA") and the Environmental Protection Agency's ("EPA") Reformulated Gasoline Rule ("RFGR"); and (4) is conflict preempted by section 211(o ) of the CAA, which contains the Renewable Fuel Standard ("RFS") as amended by the Energy Independence and Security Act ("EISA").⁶ In June 2015, defendants and defendant-intervenors filed the present motions to dismiss.⁷

STANDARDS

Where the court lacks subject-matter jurisdiction, the action must be dismissed. Fed.R.Civ.P. 12(b)(1)

. The party seeking to invoke the subject-matter jurisdiction of the court bears the burden of establishing that such jurisdiction exists. Stock W., Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir.1989). The court may hear evidence regarding subject-matter jurisdiction and resolve factual disputes where necessary: "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the [court] from evaluating for itself the merits of jurisdictional claims." Kingman Reef Atoll Invs., LLC v. United States, 541 F.3d 1189, 1195 (9th Cir.2008).

Where the plaintiff "fails to state a claim upon which relief can be granted," the court must dismiss the action. Fed.R.Civ.P. 12(b)(6)

. To survive a motion to dismiss, the complaint must allege "enough facts to state a claim to relief that is plausible on its face."

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)

. For the purposes of a Fed.R.Civ.P. 12(b)(6) motion, the complaint is liberally construed in favor of the plaintiff and its allegations are taken as true. Rosen v. Walters, 719 F.2d 1422, 1424 (9th Cir.1983). Bare assertions that amount to nothing more than a "formulaic recitation of the elements" of a claim "are conclusory and not entitled to be assumed true." Ashcroft v. Iqbal, 556 U.S. 662, 680–81, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Rather, to state a plausible claim for relief, the complaint "must contain sufficient allegations of underlying facts" to support its legal conclusions. Starr v. Baca, 652 F.3d 1202, 1216, reh'g en banc denied, 659 F.3d 850 (9th Cir.2011).

Judgment on the pleadings is proper where "the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir.1990)

; Fed.R.Civ.P. 12(c). "Rule 12(c) is functionally identical to Rule 12(b)(6) and [the] same standard of review applies to motions brought under either rule." Cafasso, U.S. ex rel. v. General Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n. 4 (9th Cir.2011) (citation and internal quotations omitted).

DISCUSSION

The central issue to be decided in this case is whether the Oregon Program violates federal law. Defendants argue that dismissal of plaintiffs' Commerce Clause claims is required because they...