Recent guidance published by the California Air Resources Board (ARB) clarifies the treatment of diesel fuels under the Low Carbon Fuel Standard (LCFS) in light of the Court of Appeals’ May 30, 2017 decision in POET I. Meanwhile, in POET II, ARB recently filed a Motion for Judgment on the Pleadings (MJOP), in an attempt to have the lawsuit dismissed as moot before a hearing on the merits occurs. While the MJOP addresses all of the claims in POET II and various other filings have been made by the parties in connection with the motion (e.g., Requests for Judicial Notice, a Motion to Strike, etc.), this blog entry focuses only on the key aspects of the MJOP and POET’s opposition thereto.

New Guidance Regarding Implications of the POET I Decision

On November 22, 2017, the ARB posted regulatory guidance to clarify the scope of the writ of peremptory mandate issued by the Fresno County Superior Court on October 18, 2017 (the Modified Writ) to implement the May 30, 2017 POET I decision.

As we have discussed in previous posts, the POET I case arose from Petitioner POET, LLC’s challenges to the original LCFS regulation adopted by ARB in 2009. On April 10, 2017, the Court of Appeal ruled that ARB had failed to faithfully execute a writ of peremptory mandate requiring it to remedy violations of the California Environmental Quality Act (CEQA) that occurred during adoption of the original LCFS. In response to a petition for rehearing filed by ARB, the Court of Appeal reissued its opinion on May 30, 2017.

The regulatory guidance, released by ARB just before Thanksgiving, provides the following:

• The 2017 carbon intensity (CI) targets for conventional diesel fuels will remain in place until ARB takes appropriate corrective action to address deficiencies in its analysis of NOx emissions under the LCFS and the court discharges the Modified Writ.
• The 2017 CI targets will apply to transactions in the first quarter of 2018.
• Any changes to the 2017 CI targets will be assessed on a quarterly going-forward basis, and will not have retroactive impacts until, at the earliest, the quarter after the Modified Writ is discharged by the Superior Court.
• ARB will notify the market of any changes to the 2017 CI targets at least 30 days before such changes take effect.

The regulatory guidance clarifies that the POET I decision only affects “conventional diesel fuel and its substitutes,” noting that other LCFS fuels are not impacted.

ARB’s Motion for Judgment on the Pleadings in POET II

In the ongoing POET II case, where petitioner POET, LLC has challenged the LCFS and Alternative Diesel Fuels (ADF) regulations adopted by ARB in 2015, a hearing on the merits remains scheduled for December 21, 2017 in the Fresno County Superior Court. On November 21, 2017, respondent ARB filed a MJOP, in an attempt to bring an early resolution to POET II by having the case dismissed as moot. The MJOP was filed on an ex parte basis, much to the chagrin of POET, as was an application to continue the merits hearing scheduled for December 21 to an undetermined future date in order to accommodate a hearing on the MJOP. ARB later refiled the MJOP on November 29, 2017 as a noticed motion.

ARB argues that Petitioners’ claims are moot because no effective relief is available. ARB points out that Petitioners are requesting from the Superior Court a suspension or injunction of the LCFS and ADF, but highlights that the Court of Appeal (the parent court of the Superior Court) has twice declined to suspend the LCFS. Therefore, according to ARB, the Superior Court cannot defy the Court of Appeal and grant Petitioners their requested relief. Further, the MJOP argues that the POET I ruling requires ARB to preserve the status quo by continuing to adhere to the 2017 CI targets for diesel, and that enjoining or suspending the LCFS would directly contravene the POET I decision. On this basis, ARB asserts that Petitioners’ claims are no longer justiciable.

POET responds that the Court of Appeal in POET I was fully aware of POET II and specifically noted in its opinion that it was not intending to preclude the Superior Court from granting additional relief in POET II. POET emphasizes that the POET I decision at issue was narrow (i.e., assessing compliance with one paragraph of a writ of mandate that addressed the 2009 approval of the original LCFS) and that the requested relief in POET II that concerns the re-adopted LCFS would not somehow undermine the relief granted by the POET I court, but rather would be additional to it.

Next, ARB asserts that Petitioners’ claims concerning biodiesel-related NOx emissions are moot because there is no longer a final agency action on those issues that is ripe for judicial review. In accordance with the POET I decision, ARB has set aside its approval of portions of its CEQA Environmental Analysis (EA) concerning NOx emissions. Therefore, according to ARB, challenges to the discarded EA are moot, and challenges to ARB’s forthcoming court-ordered NOx emissions analysis, which is currently underway at the administrative level, are unripe. ARB further asserts that any of Petitioners’ causes of action that assume the LCFS causes an increase in NOx emissions should be dismissed as an attempt to have the Superior Court prejudge an issue not yet decided at the administrative level (i.e., by ARB).

POET responds by flipping ARB’s arguments on their heads, asserting that ARB’s arguments concerning rescission of the EA actually militate for judgement on the pleadings in favor of POET. The Petitioners’ reasoning is as follows: if ARB indeed rescinded the EA with regard to all issues concerning NOx emissions, then ARB’s findings when readopting the LCFS are no longer based on any valid CEQA document and are thus invalid. In its Opposition to the MJOP, POET also takes the opportunity to remind the Superior Court of the Court of Appeals’ critique of ARB for its “willingness to ignore the weight of authority to grasp the slenderest of reeds to justify misreading the writ [of mandate]” and of the Court of Appeals’ conclusion that “ARB did not act in good faith.”

Next Steps

ARB requested that the Superior Court hear the MJOP on December 21, 2017, in place of the scheduled merits hearing. On November 29, 2017, the Superior Court issued a scheduling order noticing a hearing of the MJOP on December 21. At the time of this writing, the merits hearing remains on the schedule for the same date. A declaration filed by ARB in connection with the MJOP suggests that the Superior Court will only hear the MJOP on December 21 and is inclined to continue the merits hearing until early 2018. As such, it is possible the judge will continue the merits hearing at the December 21 hearing itself. If the Superior Court grants ARB’s MJOP and issues a judgment on the pleadings, Petitioners will have the opportunity to appeal the case to the same Court of Appeal that issued the decisions in POET I.