Rocky Mountain Farmers Union v. Goldstene, CASE NO. CV-F-09-2234 LJO DLB

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
Writing for the CourtLawrence J. O'Neill
Decision Date29 December 2011
PartiesROCKY 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, Plaintiffs, v. JAMES N. GOLDSTENE, Executive Officer of the California Air Resources Board, Defendant. consolidated with NATIONAL PETROCHEMICAL & REFINERS ASSOCIATION, AMERICAN TRUCKING ASSOCIATIONS, CENTER FOR NORTH AMERICAN ENERGY SECURITY, and THE CONSUMER ENERGY ALLIANCE, Plaintiffs, 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, Defendants. and related intervenor actions and amici.
Docket NumberCASE NO. CV-F-09-2234 LJO DLB,CASE NO. CV-F-10-163 LJO DLB

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, Plaintiffs,
v.
JAMES N. GOLDSTENE, Executive Officer
of the California Air Resources Board, Defendant.

consolidated with
NATIONAL PETROCHEMICAL & REFINERS ASSOCIATION,
AMERICAN TRUCKING ASSOCIATIONS, CENTER FOR NORTH AMERICAN ENERGY SECURITY,
and THE CONSUMER ENERGY ALLIANCE, Plaintiffs,
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, Defendants.

and related intervenor actions and amici.

CASE NO. CV-F-09-2234 LJO DLB
CASE NO.
CV-F-10-163 LJO DLB

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: December 29, 2011


ORDER ON RMFU PLAINTIFFS' SUMMARY ADJUDICATION MOTION Doc. 111

ORDER ON DEFENDANT'S RENEWED FED. R. CIV. P. 56(D) MOTION (Doc. 172)

ORDER ON RMFU PLAINTIFFS' PRELIMINARY INJUNCTION MOTION (Doc. 115)

ORDER ON RMFU PLAINTIFFS SUMMARY ADJUDICATION MOTION (Doc. 111)

ORDER ON DEFENDANT'S RENEWED FED. R. CIV. P. 56(D) MOTION (Doc. 172)

ORDER ON RMFU PLAINTIFFS' PRELIMINARY INJUNCTION MOTION (Doc. 115)

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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 "Plaintiffs" or "Rocky Mountain Plaintiffs") seek summary judgment pursuant to Fed. R. Civ. P. 56 and an order enjoining enforcement of California's Low Carbon Fuel Standard, Cal. Code Regs. tit. 17, §§95480-95490 ("LCFS"), regulations promulgated by defendant California Air Resource Board ("CARB")1 to implement provisions of California Assembly Bill 32 ("AB 32"), California's Global Warming Solutions Act of 2006, Cal. Health & Saf. Code, §38500 et seq.

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 ("EISA").

CARB argues that the Rocky Mountain Plaintiffs' 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 Plaintiffs' 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) ("Section 211(c)(4)(B)"), precluding Plaintiffs' preemption claim. Similarly, CARB argues that Section 211(c)(4)(B) authorizes California to violate the dormant Commerce Clause. Finally, Defendants argue that the LCS 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 parties' arguments, exhibits, and relevant case law, this Court finds that the LCFS impermissibly discriminates against out-of-state corn ethanol and impermissibly regulates

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extraterritorially in violation of the dormant Commerce Clause and its jurisprudence. Accordingly, the Rocky Mountain Plaintiffs' summary judgment motion is GRANTED in part.2 On its preemption claim, this Court finds that the Rocky Mountain Plaintiffs have failed to establish the appropriate standard of review. Accordingly, summary judgment is DENIED without prejudice on that issue. Because this Court's conclusions are based on arguments that are not subject to Defendants Fed. R. Civ. P. 56(d) motion, this Court DENIES that motion as moot. This Court further finds that because the Rocky Mountain Plaintiffs have established a likelihood of success on the merits of their Commerce Clause claim, and raise serious questions related to their preemption claim, likelihood of irreparable harm, and the balance of the equities so tips in their favor, this Court GRANTS the Rocky Mountain Plaintiffs' preliminary injunction motion and ENJOINS enforcement of the LCFS during the pendency of this litigation.

BACKGROUND3

Introduction

In enacting the Global Warming Solutions Act of 2006, AB 32, the California Legislature found, inter alia: "Global warming poses a serious threat to the economic well-being, public health, natural resources, and the environment of California." Cal. Health & Saf. Code, §38501. AB 32 set the goal of reducing green house gas ("GHG") 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, California's Governor issued Executive Order S-01-07 ("Executive Order"), setting a statewide goal to "reduce the carbon intensity of California's transportation fuels by at least 10 percent by 2020." In the Executive Order, the Governor called on CARB to "determine if [a low carbon fuel standard] can be adopted as a discrete early action measure pursuant to AB 32." Id. In June 2007, CARB adopted the low carbon fuel standard ("LCFS") as an early action measure. Public workshops

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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 "to 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." LCFS §95480. The LCFS was "designed to reduce California's dependence on petroleum" and "to stimulate and the production and use of alternative, low-carbon fuels in California." CARB, Final Statement of Reasons ("FSOR") at 457; FSOR at 461 ("One of the key advantages of the LCFS...is that it reduces our dependence on foreign oil."). In preparing the LCFS, CARB identified several "impacts" the regulation would have, including:

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, "[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." FSOR at 419. "The estimated capital investment for these new businesses is approximately $8.5 billion..." 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 ("ISOR") at ES-1.

The LCFS regulates transportation fuels that are "sold, supplied, or offered for sale in California" and "any person, who as a regulated party...is responsible for a transportation fuel in a calendar year." LCFS §95480.1(a). California's LCFS focuses on the "carbon intensity" of fuels to estimate emissions related to a fuel's lifecycle, including GHGs emitted when the fuel is extracted, refined, and transported

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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 fuel's production process. Providers are required to calculate the "carbon intensity" 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 party's 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...

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