Am. Petroleum Inst. v. Cooper
| Decision Date | 16 December 2011 |
| Docket Number | No. 5:08–CV–396–FL.,5:08–CV–396–FL. |
| Citation | 835 F.Supp.2d 63 |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | AMERICAN PETROLEUM INSTITUTE, and National Petrochemical and Refiners Association, Plaintiffs, v. Roy A. COOPER, III, Attorney General of the State of North Carolina, Defendant, and North Carolina Petroleum and Convenience Marketers Association, Intervenor–Defendant. |
OPINION TEXT STARTS HERE
Burley Bayard Mitchell, Jr., Pressly M. Millen, Robert T. Numbers, II, Womble, Carlyle, Sandridge & Rice, Raleigh, NC, for Plaintiffs.
Alexander McClure Peters, Melissa L. Trippe, N.C. Department of Justice, Raleigh, NC, for Defendant.
A. Bartlett White, Hatch Little & Bunn, LLP, Charles F. Marshall, III, Eric M. David, Brooks Pierce McLendon Humphrey & Leonard, LLP, Raleigh, NC, for Intervenor–Defendant.
This matter comes before the court on defendant's and intervenor-defendant's motions for summary judgment pursuant to Federal Rule of Civil Procedure 56 (DE 84, 86).1 Plaintiffs timely responded in opposition, and defendant and intervenor-defendant replied. For the following reasons, defendant's and intervenor-defendant's motions are granted.
American Petroleum Institute (“API”), a national trade association of approximately 400 corporate members that represents America's oil and natural gas industry, and National Petrochemical and Refiners Association (“NPRA”), a non-profit trade association that represents American refiners and petrochemical manufacturers, seek declaratory and injunctive relief allowing their members to retain the ability to sell only ethanol-blended gasoline to distributors and retailers in North Carolina, notwithstanding the prohibitions in the North Carolina Act of July 14, 2008 (“Ethanol Blending Statute”), 2008 N.C. Sess. Laws 222, signed into law August 17, 2008.2 Plaintiffs contend that the Ethanol Blending Statute is preempted by several federal statutes and violates the Commerce Clause of the United States Constitution.
Plaintiffs named Roy A. Cooper III, Attorney General of North Carolina, as defendant in this action. On February 27, 2009, the North Carolina Petroleum and Convenience Marketers Association (“NCPCMA”), a statewide trade organization composed of approximately 300 businesses engaged in the marketing of petroleum and convenience products, was allowed leave to intervene as a defendant.
On October 2, 2008, plaintiffs moved for summary judgment as to their facial challenge to the Ethanol Blending Statute. Defendant and intervenor-defendant also moved for summary judgment, in motions filed May 22, 2009. The parties negotiated joint submission of certain factual stipulations for use in deciding plaintiffs' motion for summary judgment.
On January 27, 2010, the court denied plaintiffs' motion for summary judgment and granted the motions of defendant and intervenor-defendant in corresponding part. The court held that plaintiffs had standing to bring this action, but that the Ethanol Blending Statute was not facially preempted by the Federal Renewable Fuel Program, the Lanham Act, the Petroleum Marketing Practices Act (“PMPA”), and that it did not interfere with the Commerce Clause. Following the court's order, the parties engaged in discovery on plaintiffs' as-applied challenge to the Ethanol Blending Statute.
On August 29, 2011, defendant and intervenor-defendant filed separate motions for summary judgment. Once again, the parties provided stipulations of fact relevant to the court's determination, which supersede the earlier stipulations.3 Defendant and intervenor-defendant argue that the stipulations confirm that the Ethanol Blending Statute is not preempted by federal law and that it does not violate the Commerce Clause. Plaintiffs timely responded in opposition on September 28, 2011, arguing that defendant and intervenor-defendant are not entitled to summary judgment on plaintiffs' preemption claims or commerce clause claims, and that genuine issues of material fact remain as to whether the Lanham Act preempts the Ethanol Blending Statute, whether the federal renewable fuel standard program preempts the blending statute, whether the PMPA preempts the blending statute, and whether the Ethanol Blending Statute violates the Commerce Clause. Defendant and intervenor-defendant replied.
The parties stipulate to certain facts that may be assumed to be true for the purposes of this action, memorialized in an extensive list lodged on the docket at entry 83. The court briefly summarizes the facts relevant to its ruling herein.
There are two types of gasoline relevant to the instant case-conventional gasoline, which does not contain ethanol, and ethanol blended gasoline (E10), which does. (Stip. ¶ 3.) There are many actors involved in extracting, preparing, shipping, and ultimately selling gasoline. For purposes of this order, the relevant actors are divided into two groups, suppliers and marketers. Plaintiffs represent various suppliers, who supply petroleum products to marketers in North Carolina. (Stip. ¶ 1.) 4 Intervenor-defendant represents various marketers, which include retailers and distributors, as those terms are defined in the Ethanol Blending Statute. (Stip. ¶ 2.) A federal tax excise credit currently known as the Volumetric Ethanol Excise Tax Credit (“VEETC”) allows a party that blends ethanol with gasoline to claim a credit against its gasoline excise tax obligations to the Internal Revenue Service. (Stip. ¶ 144.) At its core, this case involves a dispute over who blends conventional gasoline with ethanol in North Carolina.
The North Carolina Ethanol Blending Statute requires that suppliers must offer for sale to marketers gasoline unblended with ethanol that can be blended with ethanol. SeeN.C. Gen.Stat. § 75–90(b). Additionally, the statute prohibits any contract provision between suppliers and marketers that restricts or prevents blending by marketers, and therefore prevents marketers from receiving a federal or state tax credit for doing so. Id. § 75–90(c).
There are multiple ways to blend gasoline and ethanol to created blended product. Suppliers currently manufacture various forms of unblended gasoline, including full octane gasoline suitable for use in vehicles as well as “blendstock,” a petroleum product with an octane lower than its final intended octane level, which can be reached after it is blended with 10% ethanol. (Stip. ¶ 4.) Blendstock with a lower octane content, such as 84–octane, is not suitable for use in vehicles as fuel. (Stip. ¶ 28.). Suppliers ship these gasoline products to North Carolina primarily through petroleum pipelines. If a marketer wants to purchase blended E10 at the terminal from the supplier, the unblended gasoline is transported to a designated tank and blended through a computer-controlled and automated system with the appropriate amount of ethanol plus the supplier's additives. The blended E10 is deposited from the terminal rack into a valve in the marketer's vehicle. This process is called “inline blending.” (Stip. ¶¶ 70, 71.)
If, however, a marketer wants to blend the E10 himself, he must engage in a process called “below the rack” or “splash blending.” (Stip. ¶ 72.) The marketer purchases the conventional gasoline from the supplier, and then adds ethanol into the unblended gasoline “below the rack” into a valve at the bottom of the marketer's transport vehicle. ( Id.) With regard to these two forms of blending, the parties stipulate that records reflect that various problems have arisen both with splash blending and inline blending, which problems typically involve too much percentage ethanol in blended gasoline. (Stip. ¶¶ 86–120). The parties also stipulate that there is no evidence in the record that errors in splash blending have resulted in harm to consumers. (Stip. ¶ 121.)
Through the end of 2010, the blending statute had not materially affected the number of different petroleum products that suppliers had to ship to terminals in North Carolina to offer a full slate of gasoline products. (Stip. ¶ 49.) Additionally, suppliers have not, to date, experienced any supply problems due to North Carolina marketers seeking to purchase unblended conventional gasoline (Stip. ¶¶ 67, 69.)
Under federal law, each gallon of renewable fuel, i.e., ethanol, is assigned a Renewable Identification Number (“RIN”) by its producer, and that RIN must be transferred along with the renewable fuel until it is blended with gasoline or diesel fuel. (Stip. ¶ 138.) A party that blends renewable fuel with gasoline or diesel fuel may separate the associated RIN. Under standards promulgated by the Environment Protection Agency (“EPA”), suppliers must acquire these separated RINs to demonstrate compliance with renewable fuel obligations. (Stip. ¶ 139.) Marketers, by contrast, do not have to satisfy a renewable fuel obligation, but can acquire and trade RINs on the open market. In the years 2008 through 2010, suppliers have sold excess RINs to third parties and those suppliers that needed to purchase RINs to comply with their renewable volumeobligations (“RVO”) were able to do so. (Stip. ¶¶ 129, 131.) The Ethanol Blending Statute provides marketers with significant flexibility to adjust their purchasing as the market for ethanol and gasoline changes. When the economic factors, including RIN prices, favor buying ethanol and blending it, North Carolina marketers have that ability. When economic factors favor buying preblended gasoline, marketers can take advantage of that as well. (Stip. ¶ 136.)
The briefs reveal that certain facts remain disputed. Defendant and intervenor-defendant point out that plaintiffs, despite their complaints that the Ethanol Blending Statute is preempted by federal law and violates the Commerce Clause, have managed to take advantage of gaps in the statute by developing business practices that attempt to maximize their ability to sell blended gasoline...
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American Petroleum Institute v. Cooper
...and correspondingly denied the Plaintiffs' motion for summary judgment (“As–Applied Summary Judgment Order”). See Am. Petroleum Inst. v. Cooper, 835 F.Supp.2d 63 (E.D.N.C.2011). On the federal renewable fuel program preemption issue, the court concluded that suppliers were essentially seeki......
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Am. Petroleum Inst. v. Cooper
...correspondingly denied the Plaintiffs' motion for summary judgment ("As-Applied Summary Judgment Order"). See Am. Petroleum Inst. v. Cooper, 835 F. Supp. 2d 63 (E.D.N.C. 2011). On the federal renewable fuel program preemption issue, the court concluded that suppliers were essentially seekin......