Environmental Groups Sue over California’s Low-Carbon Fuel Standard

December 20, 2024

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by Debra Kahn (Politico Pro) The lawsuits allege the California Air Resources Board’s amendments to the program could increase pollution. -- Environmental groups filed a pair of lawsuits Wednesday against California’s trading program for transportation fuel emissions, arguing that its support of biofuels will increase air pollution and greenhouse gases.

What happened: The suits are targeting the California Air Resources Board’s low-carbon fuel standard, which the agency amended last month.

The first suit, by Communities for a Better Environment, filed in Fresno County Superior Court, alleges CARB violated the California Environmental Quality Act by failing to analyze the environmental impact of incentivizing biofuels in the amendments to the low-carbon fuel standard that it approved last month.

Another one, filed by Food and Water Watch, Defensores Del Valle Central Para El Aire Y Agua Limpio and Animal Legal Defense Fund in the same court, alleges CARB violated CEQA by failing to properly analyze the environmental effects of incentivizing the production of gas from dairy manure.

CARB officials said they wouldn’t comment on pending litigation but that the program is “a successful policy tool among California’s portfolio of innovative measures to address climate pollution and improve air quality.” READ MORE

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Environmental Groups, Biofuel Trade Association Challenge Amendments to the California Low Carbon Fuel Standard (JD Supra)

Excerpt from Canadian Press/Yahoo!: Environmentalists say the LCFS program has stimulated the production of polluting biofuels, competing with food production and contributing to deforestation. They want California to focus more on expanding the charging infrastructure for electric vehicles. READ MORE

Excerpt from Bloomberg: And it underscores a challenge the rest of the US is facing: How to combat global warming when rising oil demand continues to keep even the dirtiest crude flowing from the ground.

An analysis of data from the Environmental Protection Agency and California Air Resources Board show not only that California is home to some of the most polluting oil, but that drillers behind solar projects that receive credits under the state's carbon-trading system, called the Low Carbon Fuel Standard, or LCFS, are operating some of the most carbon-intensive oil and gas facilities in the US.

(Read the methodology used to estimate the value of carbon credits and companies’ emissions intensity online.) READ MORE

Excerpt from JD Supra: Growth Energy v. California Air Resources Board

The final lawsuit was filed by biofuel trade association Growth Energy, which took issue with the amendments’ approach to ethanol, specifically the cost and difficulty of complying with new requirements placed on biofuels generally.5 Ethanol producers must meet certain criteria under these requirements, including feedstock tracking, third-party certification, and certain environmental management practices.

Growth Energy first alleges that CARB’s EIA did not adequately assess the potential impacts of these new ethanol requirements, which it argues could lead to increased use of higher-carbon fuels and air pollutants given that compliance may prove cost-prohibitive for ethanol producers supplying California. Second, it claims that the LCFS amendments are arbitrary and capricious, lacking substantial evidence to support the necessity of these new requirements. It argues that CARB’s own projections show a decrease in ethanol demand, contradicting the rationale for imposing these requirements on biofuels more broadly (i.e., avoiding a “rapid” or “dramatic” increase in demand).

Third, Growth Energy contends that the new ethanol requirements are void for vagueness under the Due Process Clause, as they fail to sufficiently define the standards that regulated entities must comply with and could lead to arbitrary enforcement. Fourth, it argues that California is unlawfully delegating governmental functions to the European Union, as the new requirements require CARB to approve EU-recognized certification systems for 2028 fuel pathways, without opportunity for public comment. Finally, Growth Energy asserts that the LCFS amendments violate the Global Warming Solutions Act’s mandate to minimize costs, maximize benefits, and ensure equitable treatment — arguing that the new ethanol requirements disproportionately impact ethanol producers and low-income communities.

Growth Energy seeks a court order to set aside CARB’s approval of the LCFS amendments and enjoin their implementation until CARB complies with CEQA and other applicable laws.

The case number is 24CECG05514.

Potential Remedies

In all of these cases, petitioners seek a writ of mandate commanding CARB to set aside its approval of the LCFS amendments, certification of the EIA, and adoption of findings in connection with the amendments. They also leave open the possibility that one or more of them may seek an injunction to prevent the implementation of the amendments until a legally adequate CEQA analysis is conducted.

No motion or application seeking injunctive relief has been filed, but each petition includes a request for an injunction in its “prayer for relief.” For example, Communities for a Better Environment seeks a “temporary stay, temporary restraining order [TRO], and preliminary and permanent injunctions.”

A court will not issue a TRO or injunction based on a petition alone. To seek a TRO, petitioners would need to seek ex parte (emergency) relief from the court. In the alternative, to seek a preliminary injunction, petitioners would need to file a motion. For the court to consider issuing a TRO and/or preliminary injunction, petitioners would need to demonstrate that implementation of the amendments will result in irreparable harm (i.e., that the balance of equities favors petitioners) as well as a likelihood of success on the merits.

CARB would be expected to oppose any request for a TRO or preliminary injunction. Accordingly, stakeholders will have line-of-sight and some degree of temporal notice, via the filing of ex parte TRO papers or injunction motions, should petitioners pursue such relief.

OAL Notice of Disapproval

In a significant development for the LCFS credit market, the OAL has issued to CARB a Notice of Disapproval of a Regulatory Action concerning the amendments. According to CARB, the disapproval, dated February 18, 2025, identified inconsistencies of certain amendment provisions with the clarity standard as outlined in Government Code Section 11349(c), which mandates that regulations be written or displayed in a manner easily understood by those directly affected. CARB has acknowledged the OAL’s concerns and plans to address these inconsistencies, with the intention of resubmitting the LCFS amendments within the 120-day period allowed under Government Code Section 11349.4. During this time, CARB will continue to implement the current version of the LCFS Regulation, which has been in effect since July 2020, while working to resolve the identified clarity issues.

As such, the phase-in of the more aggressive CI reduction targets for calendar year 2025 established in the amendments, commonly known as “the stepdown,” will not take effect on the timeline originally contemplated by CARB. The effective date of the stepdown depends on: (1) when OAL approves the revised rulemaking package and files it with the Secretary of State; (2) whether CARB seeks an early effective date (which it did for the 2018 LCFS rulemaking, but so far has not for the 2024 amendments); and (3) when the CARB Executive Officer calculates credit and deficit generation for fuel volumes reported to CARB in 2025 (i.e., before or after the 2024 amendments take effect). In light of the delayed effective date of the amendments, it may be more difficult for petitioners to make the required showing of irreparable harm to secure injunctive relief in the near term.

Prior Challenges to the LCFS

...

5. Petition and Complaint, Growth Energy v. California Air Resources Board et al., No. 24CECG05514 (Cal. Super. Ct. Fresno Cnty. Dec. 18, 2024). READ MORE