Last week, the Ninth Circuit Court of Appeals issued its decision in Rocky Mountain Farmers Union v. Corey, ruling on the constitutionality of California’s Low Carbon Fuel Standard (LCFS). The Court of Appeals reversed the District Court’s holdings in large part, in particular finding that the LCFS does not on its face violate the dormant commerce clause. However, the Ninth Circuit directed the District Court to determine whether the LCFS imposes an excessive burden on interstate commerce.
The Corey decision addressed the District Court's December 2011 ruling that the LCFS violates the dormant commerce clause and impermissibly regulates extraterritorial conduct. As explained in depth in our previous analysis of the Eastern District’s ruling, the District Court held that the LCFS discriminates against out-of-state corn-derived ethanol and favors in-state corn-derived ethanol, and issued a preliminary injuction blocking the implementation of the LCFS.
First, the Ninth Circuit reversed the District Court’s holdings on the LCFS ethanol provisions, concluding that the LCFS’s provisions related to ethanol are not facially discriminatory. However, the Ninth Circuit remanded the case to the District Court to determine whether the ethanol provisions discriminate in purpose or effect. If the District Court finds that the provisions are not discriminatory, it must apply the balancing test established by the U.S. Supreme Court in Pike v. Bruce Church, Inc. Under the test, if the Court finds that the LCFS imposes a burden on interstate commerce that is clearly excessive in relation to its local benefits, the LCFS will be unconstitutional. (Judge Murguia dissented from the majority opinion here and would have affirmed the District Court's ruling that the ethanol provisions do facially discriminate against interstate commerce.)
Second, on the LCFS’s crude oil provisions, the Ninth Circuit affirmed that the provisions are not facially discriminatory, but reversed the District Court’s holding that the provisions are discriminatory in purpose or effect. The Ninth Circuit directed the District Court to also apply the Pike balancing test to the crude oil provisions. With these determinations in the hands of the Eastern District, the validity of the LCFS remains in limbo.
Third, the Ninth Circuit reversed the District Court's holding that the LCFS is an impermissible extraterritorial regulation.
Finally, the Ninth Circuit also vacated the District Court’s preliminary injunction of ARB’s implementation of the LCFS, which previously had been stayed by the Ninth Circuit pending resolution of the appeal. The Ninth Circuit affirmed the District Court’s holding that the Clean Air Act does not insulate California from scrutiny under the dormant commerce clause.