740 F.3d 507
9th Cir.2014Background
- California adopted the Low Carbon Fuel Standard (LCFS) to reduce greenhouse gas emissions from transportation fuels by lowering ‘‘carbon intensity’’ of fuels sold in the State.
- The LCFS assigns different default carbon-intensity ‘‘pathways’’ to fuels based in part on geographic origin and lifecycle factors (including transport), with Midwestern ethanol generally rated higher (worse) than California ethanol.
- Producers can replace default pathway values by submitting facility-specific data to establish individualized carbon-intensity figures.
- Rocky Mountain Farmers Union and other challengers sued in federal district court, which granted summary judgment and a preliminary injunction holding the LCFS ethanol provisions violated the dormant Commerce Clause.
- A divided Ninth Circuit panel reversed in part and remanded for further factfinding on discriminatory purpose or practical effect, instructing that strict scrutiny applies if discrimination is found, and Pike balancing applies if not. The court denied rehearing en banc.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the LCFS ethanol provisions facially discriminate against out-of-state commerce under the dormant Commerce Clause | LCFS assigns higher carbon intensity to out-of-state (Midwestern) ethanol than chemically identical in-state ethanol, so it facially discriminates and must fail strict scrutiny | California says geographic distinctions are based on objective lifecycle carbon-intensity factors (not origin) and producers may submit data to avoid default classifications | Panel held the provisions are not facially discriminatory on their face; remanded for district court factfinding on discriminatory purpose or practical effect; strict scrutiny applies only if discrimination is proved |
| Whether the LCFS impermissibly regulates extraterritorially (controls out-of-state conduct) | LCFS’s emphasis on out-of-state production, transport, and land-use means it has the practical effect of regulating conduct beyond California’s borders and is invalid | California contends it regulates only in-state market transactions and may lawfully aim to influence out-of-state choices; incentives are not the same as extraterritorial regulation | Panel concluded LCFS does not have unconstitutional extraterritorial reach as a matter of law; remand may reconsider practical effect with facts developed |
| Proper legal standard if discrimination is not facially shown | Plaintiffs insist strict scrutiny should apply given practical burdens on interstate commerce | Defendants: absent facial discrimination, apply Pike balancing (legitimate local benefits vs interstate burden) | Panel directed district court to apply strict scrutiny only if discriminatory purpose/effect is found; otherwise apply Pike balancing on remand |
| Whether summary judgment resolved the constitutional questions now or whether further factual development is needed | Plaintiffs argued constitutional invalidity can be decided on existing record | California relied on record evidence supporting non-discriminatory justifications and individualized-pathway process | Panel found summary-judgment stage required crediting California’s evidence and remanded for additional factfinding; denied en banc rehearing |
Key Cases Cited
- Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) (panel opinion reversing district court in part and remanding LCFS ethanol provisions for further factfinding)
- Pharmaceutical Research & Manufacturers of America v. Walsh, 538 U.S. 644 (2003) (state may regulate in-state commerce even if a goal is to influence out-of-state conduct)
- Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (balancing test for nondiscriminatory state regulations that incidentally burden interstate commerce)
- Philadelphia v. New Jersey, 437 U.S. 617 (1978) (facial discrimination analysis requires examining the statute’s plain language)
- Healy v. Beer Inst., 491 U.S. 324 (1989) (invalidates state laws whose practical effect regulates commerce wholly outside the State)
- Granholm v. Heald, 544 U.S. 460 (2005) (state laws that discriminate against interstate commerce face a virtually per se rule of invalidity)
- Massachusetts v. EPA, 549 U.S. 497 (2007) (state experimentation and incremental regulatory steps can be legally and practically significant)