SAN FRANCISCO — In a case seeking to stop California's first-in-the-nation mandate requiring fuel producers to reduce greenhouse gas emissions, federal justices on Tuesday focused their questions on whether the law discriminates against out-of-state businesses.
A three-justice panel of the 9th U.S. Circuit Court of Appeals heard oral arguments about the constitutionality of California's "Low Carbon Fuel Standard," a piece of the state's landmark global warming law, AB 32.
The California Air Resources Board, the agency in charge of implementing the law, said the standard will cut California's dependence on petroleum by 20 percent, and will account for one-tenth of the state's goal to cut greenhouse gas emissions by 2020.
The justices focused on the law's reliance on a "carbon intensity score," which measures pollution from a fuel's entire life cycle — such as the type of electricity used to produce it or the fuel used to transport it to California — not just when it is burned in a vehicle.
Out-of-state refiners and ethanol companies say the score discriminates against their products because transportation to California alone raises it. They argue the law violates the commerce clause of the U.S. Constitution by imposing limits on interstate commerce.
"Even if there is no discrimination, you still have a regulatory scheme whose whole purpose is to penalize imports, to penalize out-of-state conduct in an effort to control in-state emissions," Peter Keisler, a lawyer for the fuels industry, told the court
Earlier this year, U.S. District Court Judge Lawrence O'Neill in Fresno agreed with the plaintiffs, and halted implementation of the new law.
The 9th Circuit in April removed O'Neill's injunction after the state appealed, and allowed the law to move forward while the case wends its way through the courts.
The justices will now consider the testimony at Tuesday's hearing and make a ruling at a later time.
They posed tough questions for the state, which argues that the focus on the fuel's life cycle as a way to measure its pollution is based on sound science.
Deputy Attorney General Elaine Meckenstock said the mandate is meant to reduce greenhouse gas emissions and will spur innovation by fuels producers in all markets.
"The life cycle is the only way to accurately measure the greenhouse gas emissions from transportation fuels," she said.
Justice Mary Murguia focused on a comment from state regulators in legal documents saying the law would increase employment and tax revenue in California.
"Isn't this unambiguous evidence that the board was motivated by protectionism?" she asked.
Outside the courtroom, the chairman of the air resources board, Mary Nichols, said justice took the written comment about the benefit to California's economy out of context.
"The fact is, we do expect that this rule will have a beneficial effect on the California economy. But not to the exclusion of other states or other countries," Nichols said.
"We've already seen investments in California in unconventional fuels ... but those same kinds of businesses are springing up in Canada and in the Midwest and in other states, so this is something that is not uniquely beneficial to California," she added.
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