California LCFS Ruled Unconstitutional and Unlawful: A judge in Federal District Court in California issued a decision on December 29 finding that California’s Low Carbon Fuel Standard (LCFS) is unconstitutional on the grounds that it violates the Commerce Clause of the U.S. Constitution. As such, the LCFS is deemed as unlawfully seeking to regulate commerce occurring outside the state and discriminates against Midwestern ethanol. Based on this ruling, the judge issued a preliminary injunction against further implementation of the LCFS until the litigation is completed. This is a significant ruling in favor of U.S. ethanol producers. California is the single largest market for U.S. ethanol, and the LCFS would eventually exclude grain-based ethanol from most ethanol producers outside of California, to be replaced by imports of Brazilian sugarcane-based ethanol. This ruling upholds the claims made two years earlier by the RFA, together with other plaintiffs including Growth Energy, who filed for Summary Judgment and Preliminary Injunction against the LCFS. The RFA challenged the constitutionality of the LCFS on the grounds that it discriminates against interstate commerce in ethanol because it assigns worse carbon intensity (CI) scores to Midwest ethanol than to California ethanol; it attempts to regulate conduct occurring outside state borders; the benefits to California are outweighed by its excessive burdens; and it impermissibly interferes with federal laws protecting the domestic corn ethanol industry. More information can be found here.
CARB Issues Advisory on LCFS Reporting for CY2012: The December 2011 Federal Court ruling prevents CARB from enforcing LCFS requirements during the pendency of the litigation. Today, CARB appealed these rulings, seeking a stay of the ruling to allow CARB to continue LCFS implementation. This was accompanied with a request that all requirements in 2011 and 2012 are enforceable for the entire period, and as such CARB will continue its stakeholder and rulemaking processes. CARB issued Supplemental Regulatory Advisory 10-04B, effective January 1, 2012, which modifies Advisory 10-04A (issued July 2011) to reflect the anticipated LCFS modifications pending finalization of the December 16 proposed amendments. Advisory 10-04B extends guidance on electronic reporting requirements via the LCFS Reporting Tool (LRT), to include the use of a generic CI value for ethanol and biomass-based diesel; use of an interim CI value for HCICO-related reporting and annual credit balances; and clarification of the treatment of credits and deficits for fuels/blendstocks derived from potential-HCICOs in 2011. More information can be found here.
EPA Finalizes 2012 RFS2 Final Rule: After a month-long delay due to a review by the White House’s OMB, the EPA released on December 28 its Final Rule regarding CY2012 provisions of the RFS2. The new rule is consistent with the June 2011 NOPR, with the exception of a specific volume for cellulosic biofuel, versus a range, and postponing a final decision on the 2013 biodiesel volume. The final overall volume requirements and percentage standards are: • Biodiesel: 1.0 billion gallons • Advanced biofuel: 2.0 billion gallons • Cellulosic biofuel: 8.65 million gallons • Total renewable fuel: 15.2 billion gallons Additionally, EPA announced other changes, including a limitation on the ability of certain obligated parties to separate RINs; the allowance of RINs inadvertently generated due to accounting errors to be retired; two changes to RIN audit procedures; and definition changes for “annual cover crop.” More information on EPA’s Final Rule can found here.
EPA Proposes More Biofuel Pathways to Meet RFS2: EPA issued a Federal Register notice today that proposes biofuel pathways produced from camelina oil and energy grasses (energy cane, giant reed, and napiergrass). The proposal also includes an evaluation of renewable gasoline and renewable gasoline blendstocks, as well as biodiesel from esterification and clarifies the agency's definition of renewable diesel. Written comments must be received by February 6, and a request for a public hearing must be received by January 20. More information can be found here.