## Facts

- California’s Air Resources Board (CARB) adopted the Low Carbon Fuel Standard (LCFS) in 2009 under Cal. Code Regs. tit. 17, §§ 95480–95490 (2011) to cut greenhouse-gas emissions from transportation fuels sold in California.
- The LCFS assigns each fuel a “carbon intensity” score using lifecycle analysis that accounts for greenhouse-gas emissions from production, distribution (including transportation), and use.
- Regulated parties must meet annual carbon-intensity reduction targets through a credit/deficit system; higher-carbon-intensity fuels generate deficits that can be covered with credits.
- Carbon-intensity values can reflect multiple inputs (e.g., feedstock type, production process, electricity source, and transport distance). The LCFS allows individualized pathways and also uses default values for categories of fuel.
- Two sets of plaintiffs (including farm and ethanol interests, and petroleum, trucking, and consumer-energy groups) separately sued CARB, alleging the LCFS violated the dormant Commerce Clause and was preempted by the federal Renewable Fuel Standard in Clean Air Act § 211(o).
- In three December 2011 rulings, the Eastern District of California held the LCFS: (1) facially discriminated against out-of-state ethanol, (2) regulated extraterritorially by targeting ethanol production, (3) discriminated against out-of-state crude oil in purpose and effect, and (4) was not saved from preemption; the court enjoined LCFS enforcement.
- CARB appealed. The Ninth Circuit consolidated the appeals and reviewed the constitutional and preemption rulings and the resulting injunction.

## Issues

1. Whether the LCFS facially discriminates against interstate commerce by treating ethanol or crude oil differently based on geographic origin.
2. Whether the LCFS violates the dormant Commerce Clause’s extraterritoriality doctrine by using lifecycle analysis that accounts for out-of-state production and transportation emissions.
3. Whether the LCFS has a protectionist purpose or discriminatory effect against out-of-state fuels.
4. If the LCFS is nondiscriminatory, whether it nonetheless imposes an undue burden on interstate commerce under *Pike v. Bruce Church, Inc.*
5. Whether the LCFS is preempted by the Clean Air Act, including § 211(o) (the federal Renewable Fuel Standard) and related fuel-control preemption provisions and waivers.

## Decision

- The Ninth Circuit reversed the district court’s conclusion that the LCFS is facially discriminatory, holding the LCFS classifies fuels by carbon intensity rather than by state of origin.
- The court rejected the extraterritoriality ruling, concluding the LCFS regulates only fuels sold in California and does not control wholly out-of-state transactions; accounting for out-of-state emissions as part of lifecycle scoring does not, by itself, make the regulation extraterritorial.
- The court rejected the district court’s findings of discriminatory purpose and discriminatory effect on the record presented, treating the LCFS as an evenhanded market-access rule tied to emissions attributes.
- Because the case had been decided below on discrimination theories rather than a full balancing record, the court remanded for the district court to consider undue burden under *Pike* (whether burdens on interstate commerce are clearly excessive relative to local benefits).
- On preemption, the court rejected a broad reading that would displace California’s program; it held the plaintiffs had not shown that Clean Air Act § 211(o) preempted the LCFS as challenged.
- The court vacated the injunction and remanded for further proceedings consistent with its opinion.

## Legal Principles

- A regulation is facially discriminatory under the dormant Commerce Clause when it explicitly distinguishes between in-state and out-of-state economic interests; differential treatment tied to fuel attributes and factual inputs (including transport distance) is not facial discrimination merely because in-state and out-of-state producers may be affected differently.
- The extraterritoriality doctrine is limited; a state law is per se invalid only when it directly controls commerce occurring wholly outside the state (such as out-of-state pricing or transactions). A state may condition in-state sales on compliance with standards that consider out-of-state factors.
- A plaintiff may also attempt to show discrimination through purpose or practical effect, but environmental objectives aimed at reducing greenhouse-gas emissions can be legitimate state interests, and lifecycle-based classifications are not invalid solely because they reflect real differences among supply chains.
- When a state regulation is evenhanded and not discriminatory, dormant Commerce Clause review generally proceeds under *Pike v. Bruce Church, Inc.*: the law stands unless the interstate-commerce burdens are clearly excessive in relation to the putative local benefits.
- Federal preemption requires a clear conflict with federal law or an intent to displace state authority; Clean Air Act § 211(o)’s national renewable-fuel volume program does not, without more, bar a state from using a carbon-intensity standard for fuels sold in-state.

## Conclusion

The Ninth Circuit held that California’s LCFS is not facially discriminatory and does not violate the extraterritoriality doctrine, rejected findings of discriminatory purpose and effect on the existing record, vacated the injunction, and remanded for *Pike* undue-burden analysis; it also rejected the claim that Clean Air Act § 211(o) broadly preempted the LCFS as challenged.


Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013)