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Judge blocks California's low-carbon fuel standard

A federal district court judge today ruled that California’s low-carbon fuel standard, known as LCFS, violates the commerce clause of the U.S. Constitution, a ruling that appears at least initially to be good news for the nation’s corn ethanol industry and bad news for environmental critics who have argued that corn-based ethanol leads to changes in land use in other countries.

The ruling was on the technical issue of whether one state can regulate farming in another state.

The Rocky Mountain Farmers Union and other groups argued in a suit filed on Dec. 24, 2009 that the California Air Resources Board’s fuel standard sought to regulate farming and ethanol production practices in other states, in violation of a commerce clause that specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct.

In their filing, the groups noted, “The LCFS imposes excessive burdens on the entire domestic ethanol industry while providing no benefit to Californians. In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security. One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS.”

Judge Lawrence J. O’Neill of the U.S. District Court in Fresno agreed with the arguments that the LCFS is in violation of the commerce clause, and found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct.

O’Neill issued an injunction against the regulator. The ruling means that refiners and ethanol producers won’t have to buy credits when importing oil and ethanol into California, as the regulations would have required in certain cases, the Wall Street Journal reported.

Renewable Fuels Association President and CEO Bob Dinneen and Growth Energy CEO Tom Buis issued a joint statement in reaction to the ruling.

“The state of California overreached in creating its low-carbon fuel standard by making it unconstitutionally punitive for farmers and ethanol producers outside of the state’s border,” the statement said. “With this ruling, it is our hope that the California regulators will come back to the table to work on a thoughtful, fair, and ultimately achievable strategy for improving our environment by incenting the growth and evolution of American renewable fuels.”

The ruling allows the California Air Resources Board to appeal O’Neill’s decision immediately to the U.S. Court of Appeals for the 9th Circuit. RFA and Growth Energy said they will fight any appeal that may be filed.