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Ethanol Groups File Suit Challenging Constitutionality of California Low Carbon Fuel Standard
25 December 2009
Two ethanol trade groups—the Renewable Fuels Association (RFA) and Growth Energy—have filed a complaint in Federal District Court in Fresno, California, challenging the constitutionality of the California Low Carbon Fuel Standard (LCFS). The two organizations are arguing that, as structured, the LCFS violates both the Supremacy Clause and the Commerce Clause of the US Constitution. The LCFS calls for at least a 10% reduction from 2006 levels in the carbon intensity (measured in gCO2e/MJ) of California’s transportation fuels by 2020. (Earlier post.)
The LCFS regulation also levies the calculation of Indirect Land Use Change (ILUC) effects against biofuels, against the opposition (earlier post) of the biofuels industry, and to the particular detriment of corn ethanol.
The Supremacy Clause (Article VI, Paragraph 2) establishes the Constitution, Federal Statutes, and treaties as “the supreme Law of the Land”, mandating that state judges be bound by them, even if state constitutions or laws conflict.
The Commerce Clause (Article I, Section 8, Clause 3) gives Congress the power to regulate commerce “with foreign Nations, and among the several States, and with the Indian Tribes”. The application of the Interstate Commerce Clause has been wrangled over in court since the early 1800s.
In a statement describing their action, the two groups said:
The LCFS contradicts the sound judgment of Congress when it passed the 2007 Energy Independence Security Act and singled out the importance of domestic ethanol for our nation’s environment, energy security, and economy. The LCFS erects new regulatory obstacles to ethanol, frustrates the federal Renewable Fuel Standard, and threatens the nationwide market for domestic ethanol. Because congressional policy cannot coexist with California’s regulation, the latter must give way to the former, the supreme law of the land.
Additionally, by closing California’s borders to corn ethanol from other states, the LCFS will change how corn is farmed and ethanol is produced all over the country. The Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct.
The LCFS imposes excessive burdens on the entire domestic ethanol industry while providing no benefit to Californians. In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security. One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS.
Other RFA arguments against the LCFS. On 15 December, Bob Dinneen, RFA President and CEO, sent a letter to Mary Nichols, Chairwoman of the California Air Resources Board (ARB) and Susan Lapsley, Director of California’s Office of Administrative Law (OAL), arguing that because ARB failed to respond to significant comments submitted by RFA and other stakeholders, under the California APA, OAL must disapprove the LCFS.
(The OAL ensures that agency regulations are clear, necessary, legally valid, and available to the public. OAL is responsible for reviewing administrative regulations proposed by more than 200 state agencies for compliance with the standards set forth in California’s Administrative Procedure Act (APA), for transmitting these regulations to the Secretary of State and for publishing regulations in the California Code of Regulations.)
Other complaints cited by the RFA in the letter were several issues that the RFA said ARB staff effectively failed to address in the FSOR (Final Statement of Reasons); and that although ARB has cast 2010 as only a “reporting year”, the reporting compliance mechanisms such as forms and formats are not provided in the rule, meaning that entities who need to begin keeping the records for reporting in May do not know what information must be collected in what format starting in January 2010.
I bring these matters to ARB’s attention so that ARB can direct its staff to withdraw the package to address these inadequacies. If ARB does not withdraw the rule to fix these deficiencies, OAL must return the rule to ARB—as was done to the Phase 3 Reformulated Gasoline regulations after OAL determined ARB had failed to respond to comments.
—Letter from Bob Dinneen
“Significant comments” to which ARB did not respond, according to Dinneen, were:
Direct Lifecycle GHG Emissions. The RFA charged that ARB ignored the comments of stakeholders stating that the agency’s GREET (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation) model assumptions overestimated fossil energy use on farms and at ethanol plants. RFA provided reports from Argonne National Laboratory (where the GREET model was created and is maintained) and Christianson & Associates showing that ethanol plants consume less fossil energy than assumed by ARB.
Further, wrote Dinneen, several commenters referenced the article by Liska et al. in the Yale Journal of Industrial Ecology that showed lower direct carbon intensity values than the GREET model values used by ARB. (Earlier post.) The Liska et al. analysis found direct lifecycle GHG emissions associated with the production of corn ethanol are in the range of 37.5 to 48.1 grams of carbon dioxide-equivalent per megajoule (gCO2e/MJ), compared to ARB’s range of 47.4 to 75.1 gCO2e/MJ.
NERA Studies on Timing of GHG Releases. Dinneen charged that ARB made no attempt whatsoever in the FSOR to respond to the reports by NERA Economic Consulting submitted by RFA on the issue of timing of GHG emissions. The NERA papers suggested that ARB examine an additional method (social cost of carbon) for accounting for emissions over time. Using the method recommended by NERA, the emissions from indirect land use change that CARB attributes to corn ethanol would be reduced by 24% (from 30 gCO2e/MJ to 22.9 gCO2e/MJ).
Treatment of Ethanol Co-Products in Analysis. RFA and many other stakeholders, including a number of university animal scientists, provided comments to ARB stating that the agency undervalued ethanol co-products—primarily distillers dried grains with solubles (DDGS)—in its Global Trade Analysis Project (GTAP) analysis and did not account for the fact that DDGS partially replaces soybean meal.
Reduced Methane Emissions from Decreased Enteric Fermentation. RFA submitted comments indicating that if ARB was going to penalize corn ethanol for price-induced indirect GHG effects that worsen the carbon score of ethanol, then credit should be given for price-induced GHG effects that reduce GHG emissions
GTAP Model Elasticity Governing Yields on Newly-Converted Lands (Productivity With Respect to Area Expansion). ARB used central values for the elasticity that governs yield with respect to area expansion. This is an important parameter in the GTAP model and has a significant effect on the final ILUC (indirect land use change) results. Dinneen said that ARB effectively guessed at what this value should be because there was no good empirical data or reference to guide the agency’s use of this elasticity.
RFA and several other stakeholders obtained data that would help ARB select a more appropriate value for this elasticity. RFA submitted a report to ARB from Informa Economics. Many other stakeholders, including UNICA (the Brazil sugar cane association) and Monsanto, also provided data to ARB. All of this data showed that ARB should use an elasticity value closer to 1.0, rather than ARB’s median value of 0.59.
Carbon Derating Factor. In response to RFA’s comment that ARB did not correct its analysis to reflect the impact of ARB’s own assumption on carbon storage in building products, ARB states that it made an error due to “miscommunication.” Dinneen says that the ILUC emissions estimates in the look-up table were never adjusted to account for ARB’s own assumption in the ISOR that not all the carbon in the cleared woody material is released to the atmosphere during the year following the clearing—i.e., since some of the wood is used for building material, it continues to sequester carbon after the clearing event.
Certain Land Types Omitted From GTAP Model. RFA commented that ARB’s GTAP model does not include idle cropland and Conservation Reserve Program (CRP) land. This forces the model to immediately “reach” overseas when it looks for land to convert to crops. RFA has repeatedly requested that ARB and Purdue add CRP land, idle cropland, and cropland pasture to the model’s land inventory since the Summer of 2008.
Yield Improvements. Dinneen said that ARB received dozens of comments regarding the insufficient treatment of crop yields in the land use change analysis. One peer reviewer stated that ARB’s treatment of yield leads to overstated ILUC emissions. If ARB had used proper yield values, as recommended by stakeholders and peer reviewers, Dinneen said, the ILUC penalty for corn ethanol would have been approximately 11-15% lower.
Indirect GHG Effects Associated With Other Fuels. Several commenters, particularly the New Fuels Alliance (NFA), made repeated comments that the LCFS sets up an unlevel playing field by not examining the indirect, price-induced GHG effects of other fuels. Only one mention is made of the Lifecycle Associates study commissioned by NFA to examine indirect petroleum effects, Dinneen said, charging that ARB mischaracterizes the findings of that study.
One of the study’s main conclusions is that “[t]he GHG impact of petroleum estimated herein ranges from 90 to 120 g CO2e/MJ (grams of CO2 equivalent emissions per megajoule (MJ) of gasoline fuel consumed), depending on the source of the petroleum and to what extent indirect emission impacts are included.” The upper end of this range is 25% higher than the figure used by ARB for the carbon intensity of gasoline, Dinneen pointed out.
Overall, Dinneen wrote, if current data and information had been “properly” incorporated into ARB’s analysis, the ILUC penalty for corn ethanol would have been in the range of 4-11 gCO2e/MJ, rather than the current estimate of 30 gCO2e/MJ. Under those results, corn ethanol would generally offer a 25-30% GHG reduction benefit relative to gasoline, rather than the current finding that corn ethanol offers little or no GHG savings compared to gasoline. Such GHG savings, Dinneen said, would allow regulated parties to utilize corn ethanol for LCFS compliance for the first several years of the policy.
ARB’s blatant disregard for current data and information related to the lifecycle GHG emissions associated with corn ethanol resulted in significant overestimation of the carbon intensity of corn ethanol. ARB’s faulty analysis will have real and significant impacts on US corn ethanol producers and the ability of regulated parties to comply with the LCFS. By the 2012 timeframe, most sources of corn ethanol will not help regulated parties achieve the mandatory GHG reductions under the program. Thus, regulated parties will quickly phase out their use of corn ethanol.
—Letter from Bob Dinneen
Adam J. Liska, Haishun S. Yang, Virgil R. Bremer, Terry J. Klopfenstein, Daniel T. Walters, Galen E. Erickson, and Kenneth G. Cassman (2009) Improvements in Life Cycle Energy Efficiency and Greenhouse Gas Emissions of Corn-Ethanol, Journal of Industrial Ecology, doi: 10.1111/j.1530-9290.2008.00105.x
NERA Economic Consulting (2009) Accounting for Differences in the Timing of Emissions in Calculating Carbon Intensity for the California Low Carbon Fuels Standard (April 2009)
Unnasch. S., et al. (2009) Assessment of Life Cycle GHG Emissions Associated with Petroleum Fuels. Life Cycle Associates Report LCA-6004-3P, prepared for New Fuels Alliance
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