903 F.3d 903
9th Cir.2018Background
- Oregon enacted the Clean Fuels Program (CFP) to reduce lifecycle greenhouse gas (GHG) emissions from transportation fuels by setting declining annual carbon-intensity (CI) limits and requiring regulated parties to hold credits ≥ deficits.
- CI values ("pathways") are calculated via default tables or individualized lifecycle analysis using OR‑GREET (modeled on GREET); credits/deficits flow from fuels’ CI relative to the standard; credits may be bought, sold, or banked.
- Petroleum importers must use average petroleum CI pathways; ethanol/biodiesel producers can use California LCFS values adjusted for Oregon, individualized OR‑GREET values, or defaults. Some in‑state and out‑of‑state fuels receive lower CI scores than others.
- Plaintiffs (American Fuel & trade associations) sued Oregon officials alleging CFP violates the dormant Commerce Clause (facial purpose/effect/extraterritoriality) and is preempted by 42 U.S.C. § 7545(c) (Clean Air Act §211(c)).
- The district court dismissed; the Ninth Circuit panel affirmed, applying Rocky Mountain Farmers Union v. Corey and concluding the CFP regulates by CI (not origin), lacks plausible discriminatory purpose/effect, does not impermissibly reach extraterritorial conduct, and is not preempted by EPA’s methane decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Facial discrimination under the Commerce Clause | CFP assigns higher CI to petroleum and Midwest ethanol, discriminating against out‑of‑state fuels | CFP classifies by lifecycle CI, not origin; some out‑of‑state fuels get favorable CI | Denied — CFP is facially neutral; classification by CI (lifecycle emissions) is not facial discrimination (Rocky Mountain control) |
| 2) Discriminatory purpose | Legislative/executive statements show intent to favor Oregon biofuels | Statements reflect environmental and economic benefits; not probative of protectionist purpose | Denied — pleadings do not plausibly show a protectionist purpose; legitimate environmental goals suffice |
| 3) Discriminatory effect (practical effect favoring in‑state interests) | Program’s credits/subsidy mechanics effectively shield in‑state producers and burden out‑of‑state competitors (West Lynn Creamery theory) | Credits are awarded based on CI irrespective of origin; out‑of‑state entities also generate credits; no plausible discriminatory effect alleged | Denied — complaint fails to plausibly allege discriminatory effect; CFP treats similarly‑situated fuels by CI and permits out‑of‑state credits |
| 4) Extraterritorial regulation / interstate federalism | CFP controls conduct outside Oregon by factoring lifecycle stages (including transport) | CFP applies only to fuels sold/imported/exported in Oregon; firms outside may respond but are not compelled — follows Rocky Mountain | Denied — CFP does not impermissibly regulate conduct wholly outside Oregon; comparable to California LCFS |
| 5) Preemption under CAA §211(c) | EPA’s exclusion of methane from VOC regulation (§211(k)) indicates EPA found regulation of methane unnecessary, preempting state measures under §211(c)(4)(A)(i) | EPA’s §211(k) decision is limited and not a §211(c) finding that regulating methane’s GHG contributions is unnecessary | Denied — EPA’s non‑regulation under §211(k) is not a §211(c) preemption finding |
Key Cases Cited
- Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) (upholding California LCFS principles; controlling precedent that CI‑based regulation is not facially discriminatory)
- City of Philadelphia v. New Jersey, 437 U.S. 617 (1978) (state may not discriminate against articles of commerce from outside the state)
- Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (nondiscriminatory state regulation upheld unless burden on interstate commerce is clearly excessive relative to local benefits)
- Healy v. Beer Inst., 491 U.S. 324 (1989) (prohibition on extraterritorial state regulation that controls commerce outside state borders)
- West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994) (facially neutral tax plus subsidy exclusively benefiting in‑state producers can be unconstitutional)
- Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of State of Or., 511 U.S. 93 (1994) (dormant Commerce Clause prohibits discriminatory state regulations)
- Clover Leaf Creamery Co. v. Minnesota, 449 U.S. 456 (1981) (nondiscriminatory measures can be upheld despite adverse interstate impacts)
- Massachusetts v. EPA, 549 U.S. 497 (2007) (states have legitimate interests in addressing climate change)
- Exxon Mobil Corp. v. U.S. Envtl. Prot. Agency, 217 F.3d 1246 (9th Cir. 2000) (states’ police powers include air pollution prevention)