Earlier this week, the American Fuel & Petrochemical Manufacturers (AFPM), a trade association, filed a petition seeking Supreme Court review of a Ninth Circuit decision addressing Oregon’s Low-Carbon Fuel Standard (LCFS). Petitioners argue that the state policy violates the dormant Commerce Clause by regulating out-of-state conduct (extraterritorially) and discriminating against out-of-state producers. In 2014, the Supreme Court declined to review a Ninth Circuit decision upholding California’s LCFS. AFPM’s petition makes essentially the same arguments as those made in the rejected 2014 petition.
Oregon’s LCFS sets carbon-intensity targets for fuels imported into or produced in Oregon. State regulators assign carbon intensity values to various fuels based on extraction, production, and transportation methods. Each entity that produces fuel in Oregon or imports fuel into the state must meet average carbon intensity limits across all of its products. It can demonstrate compliance by producing or importing only fuels that meet the standard, by producing or importing fuels that meet the standard in aggregate, or by purchasing credits generated by fuels below the standard to reduce the average intensity of its products.
Relying on the Ninth Circuit’s decision upholding California’s nearly identical LCFS, a district court dismissed AFPM’s 2015 complaint that claimed the policy violates the dormant Commerce Clause. In September, the Ninth Circuit affirmed the dismissal. AFPM’s petition argues that the Ninth Circuit’s opinion is at odds with decisions of other federal appeals courts and contrary to Supreme Court precedent.
With regard to extraterritoriality, AFPM portrays the state’s carbon-intensity analysis as Oregon’s effort to “control conduct” in other states by restricting imports into Oregon. According to the petition, the Ninth Circuit’s holding that Oregon’s regulation is not extraterritorial because it only applies to fuels sold in Oregon contradicts recent decisions by the Fourth and Seventh Circuits and earlier decisions cited in the rejected 2014 petition by the First and Seventh Circuit. AFPM also highlights the 10th Circuit’s decision written by Justice Gorsuch holding Colorado’s RPS does not regulate extraterritorially and the Eighth Circuit’s review of a lower court decision holding a Minnesota law restricting coal-power imports did violate the dormant Commerce Clause as evidence that other circuits are “in need of this Court’s guidance” on extraterritoriality.
AFPM also argues that the Ninth Circuit’s failure to apply strict scrutiny to the LCFS contradicts decisions in nearly every circuit. Relying on its decision about California’s LCFS, the Ninth Circuit found that although Oregon’s carbon-intensity scores disadvantage some out-of-state fuels, the LCFS does not discriminate under dormant Commerce Clause doctrine because geography is “not the basis for any differential treatment.” AFPM counters that the policy assigns less favorable scores to Midwest corn ethanol than to Oregon corn ethanol and is therefore facially discriminatory. Courts reviewing facially discriminatory policies, according to AFPM, must find the policy unconstitutional unless the state can demonstrate that the law has a non-protectionist purpose and there is no less-discriminatory means for achieving that purpose.
AFPM’s petition is available on the Oregon page.