Refiners and Truckers Associations Challenge California LCFS in Federal Court

03 February 2010

The National Petrochemical & Refiners Association (NPRA) filed a legal challenge to California’s Low Carbon Fuel Standard (LCFS) with the US District Court, Eastern District of California, Fresno Division. NPRA was joined in the suit by the American Trucking Associations (ATA); the Center for North American Energy Security, an organization dedicated to the development of oil sands, oil shale and other unconventional resources in North America; and the Consumer Energy Alliance, an organization advocating, among other things, more access to offshore and onshore oil & natural gas.

The California 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. The regulation also levies the calculation of Indirect Land Use Change (ILUC) effects against biofuels, against the opposition of the biofuels industry.(Earlier post.)

The complaint makes a number of charges, including that the California LCFS violates the Commerce Clause and the Supremacy Clause of the United States Constitution. These charges echo those in a complaint against the LCFS filed by two ethanol trade groups—the Renewable Fuels Association (RFA) and Growth Energy—in December 2009. (Earlier post.)

The NPRA complaint claims that the LCFS violates the Commerce Clause because:

• It directly regulates interstate and foreign commerce and extraterritorial conduct, including the extraction, production and transport of transportation fuels and fuel feedstocks outside of California.

• It imposes substantial burdens on interstate commerce that are excessive in relation to the claimed local benefits.

• It discriminates both on its face, and as applied, against transportation fuels and fuel feedstocks imported from outside of California with the intended effect of (i) promoting in-state production of transportation fuels, and (ii) “keep[ing] consumer dollars local by reducing the need to make fuel purchases from beyond [California’s] borders.”

The LCFS violates the Supremacy clause, according to the complaint, because it conflicts with the Energy Policy Act of 2005 (EPAct 2005), Pub. L. No. 109-58, 119 Stat. 594, the Energy Independence and Security Act of 2007 (EISA) §§ 201 et seq., Pub. L. No. 110-140, 121 Stat. 1492, and the federal Renewable Fuels Standard.

Because the carbon intensity metric of fuels within the LCFS accounts not only for a fuel’s physical characteristics, but also the energy necessary to bring the transportation fuel to market in California, chemically identical fuels are assigned different carbon intensities under the LCFS, the complaint notes. By regulating the fuel pathway of transportation fuels—i.e., the manner in which transportation fuels are produced and ultimately reach the California market—the LCFS directly regulates interstate commerce and conduct occurring outside of California, the complaint charges.

California’s LCFS also would have little or no impact on GHG emissions nationwide and would harm our nation’s energy security by discouraging the use of Canadian crude oil—our nation’s largest source of crude—and ethanol produced in the American Midwest. Discouraging the use of North American transportation fuel sources would only create additional, unneeded burdens for California’s consumers and economy, increase our reliance on energy from less stable parts of the world, and weaken our national security. The LCFS is an ineffective tool for reducing GHG emissions. The fuel prohibited from use in California will simply be used elsewhere, which will result in increasing overall GHG emissions as a result of less stringent environmental standards in places those fuels would ultimately be consumed and of increased GHG emissions from increased transportation distances.

— NPRA President Charles T. Drevna

The LCFS would essentially ban imports to California of fuels derived from unconventional sources such as oil sands from Canada, oil shale from the Western US, or domestic coal supplies that can be converted into transportation fuels. Discouraging these fuels will simply increase costs while failing to prevent their export to and consumption by other nations.

—ATA Vice President Rich Moskowitz

Eleven Northeast and Mid-Atlantic states have announced that they are following California in adopting their own LCFS. (Earlier post.)

In response to the lawsuit, Mary Nichols, CARB chairman, issued the following statement:

Their actions are shameful. This is a critical tool to help us break our dependence on fossil fuels. It will protect us from volatile oil prices and provide consumers with cleaner fuels and provide the nation with greater energy security. Our analysis shows that producing alternative fuels under this standard can save consumers as much as $11 billion over the next decade, and that’s in California alone. Instead of fighting us in court, they should be working with us to provide consumers in California and the rest of the nation with the next generation of cleaner fuels. Resources Comments Discouraging these fuels will simply increase costs while failing to prevent their export to and consumption by other nations. Yeah, I can just as well buy those Afghan drugs, because if I don't, it will be sold to others. This guy needs to take some economy lessons. To start with the law of supply and demand. Gee Whiz, the governmental leftist NIMBYs and BANANAs are being challenged. Wonderful. I don't live in LA, but I'll never forget driving through there on Christmas Eve with my eyes watering from the smog. There's many known studies of pollution lung damage in Ca. and they are likely trying to stop that more than play leftist. Isn't the Law of Supply and Demand a simple creation of a PUSH society. There are 1001 ways to create a widespread demand for just about every thing. This can be seen during democratic elections. A smart Internet program + enough $ can convince the majority to vote for just about anybody. The same applies for junk food, clothing, larger cars, drinks, over sized homes, etc.

It is sad to admit it but demands are easily created to sell what is made available even if it can kill us. Look how junk food creats obesity responsible for most type-II diabetes, high blood pressure, artery and heart problems etc. Treating junk food related deseases cost more than oil wars and we accept it because we have been repeatedly told that is a fair demand.

Oh Harvey you're just not conspiracy-minded enough; the PTB didn't create a demand for junk food to sell you junk food, they created a demand for junk food so they could sell you treatments and medicines for diabetes, high blood pressure, artery and heart problems, etc. And self-help books, fad-diets, healthclub memberships and exercise equipment for your weight problem. This is where the REAL MONEY is made, this is the real reason you'll never get a healthcare plan.

;^)

C-ARB is getting themselves into a big mess. This is what happens when you put a bunch of zealous global warming fanatics on a governor appointed board, who violate the law and make a mockery out of sound economics - in order to impose their flawed political agenda.

Besides violating Interstate Commerce Law and possibly the U.S. Constitution, C-ARB also cheated on the carbon footprint of conventional biofuels, in order to disqualify them. Problem is, they won’t be able to prove indirect land use change theory in court, against biofuels. That’s because land displacement is a false claim that has Not taken place on the ground.

That’s easy to prove. For ethanol, the 2009 U.S. corn crop was 3 million acres less than it was the previous year, and the yield was roughly 10% higher per acre. The average size of our corn crop has remained about the same for over sixty years. The yield per acre has increased dramatically and will double by 2030, without increasing acreage.

Even if we ever needed additional corn acreage, it wouldn’t displace other crops or result in off-set acreage being planted in foreign countries. We have plenty of unused arable land for many years to come. Besides, if you planted too much corn, there would be a bigger surplus than we already have, and that would disrupt the current price-balance of supply and demand. Most likely, a hundred years from now, corn acreage will still be about the same, and biofuels will be based on heterotrophic algae, fed with sugars, including corn sugars, or based on something else entirely. That is, if biofuels are still around at all.

Indirect land use cahnge theory is also based on a false projection – That the number of acres planted in corn would double. That’s not going to happen. C-ARB rules should be based on fact, not conjectures.

C-ARB falsely applied indirect land use change to out of state ethanol production, partly to protect their own emerging “in-state” biofuels program, which will be unable to meet demand, with Corn Belt ethanol shut out. So California will likely fail to meet Federal blending mandates. Their response is that importing foreign ethanol from Brazil is more favorable than importing American domestic ethanol. That’s False. By the time you harvest Brazilian sugarcane by hand, burn it for production power, burn what’s left over in the field, ship it from refineries to the dock, load it onto ocean going ships burning bunker, the dirtiest fuel available, then ship it thousands of miles to terminals in California and distribute it to retail outlets – It’s Not going to be environmentally superior to shipping American ethanol from the Corn Belt. Furthermore, Brazil had a below average sugarcane crop this year. They dropped their own blend of ethanol in gasoline from 25% to 20%. So what makes C-ARB think they can get all the ethanol they need from Brazil? The 54 cent per gallon import tariff also impacts the price.

C-ARB illegally incorporated the controversial indirect land use change theory into their rules, without scientific proof or independent peer review, especially in the realm of agricultural economics. Instead, C-ARB foolishly rode the coattails of the EPA’s false assumptions, and a fraudulent EPA peer review of the theory. Like the EPA, C-ARB also used outdated and inaccurate information, for corn and ethanol production and co-products. The footprint of corn ethanol is evolving. It’s a lot better than C-ARB portrays it.

Also weighing-in on C-ARB’s arrogant application of indirect land use change theory, is the formal letter of protest by 111 scientists led by 3 prominent experts. This was ignored, also a violation of state law. It will be difficult for C-ARB to explain in court - why they implemented a theory that is discredited by experts and that the EPA dumped with “serious uncertainties”.

Furthermore, rules regulating fuels should Not be carved in stone. Biofuels are evolving, and the rules should be flexible enough for adjustments to be made. For example, if farm tractors, ethanol refineries, locomotives or long haul trucks - were converted to run on 50-50 ethanol-water, processed onboard into hydrogen, that would change the environmental footprint of Corn Belt biofuels shipped into California.

The effects of C-ARB LCFS rules, as they stand, would be devastating. It would disrupt the fuel supply. Fuels could periodically be more expensive in the state, and that will further damage the California economy and increase their deficit. It could also put people in the Corn Belt out of work. Until the California biofuels industry evolves, which may take years, there could be a shortage of ethanol and petroleum in California. Whatever California rejects from out of state – that fuel will have to come from somewhere, and it could also be more expensive. C-ARB’s rules are also being used as a tactic to pick winners prematurely, by protecting emerging “pet” technologies in California, that will get a “leg up” on the competition for fuels and energy. In another sense, the state is maneuvering to “monopolize” its fuel supply, thereby restricting free enterprise and dictating which industries will win or lose – a violation of Interstate Commerce.

A low carbon fuel standard, based on scientific fact and gradually implemented, would be beneficial – but not as C-ARB has corrupted it.

California produces 40% of the oil it uses, it is highly unlikely that oil would be taken out of the state, but they have a point.

The courts have ruled CO2 a pollutant and California has had the right to regulate pollutants within the state, they lose on that one. They will try, but they will fail.

This shows how hard it will be to get clean domestic fuels in ANY state with the status quo. Rather than say 10% by 2020, just allow the sale of M85 and cellulose E85. Any station that wants to sell those fuels and is stopped by oil companies will be allowed to.

USA is producing about 30% of the crude oil it consumes and has to import almost 70%. Canada has become the largest outside supplier with about 2.5 million barrels/day. That is equivalent to 50% of USA's production and 15% of USA's consumption. The other 55% is imported from 15+ other countries.

Industrial countries could produce enough sugar cane/grain ethanol and/or cellulosic ethanol to replace the 75+ million barrels/day they consume without adversed effects on food production and/or major changes in land use.

Transport vehicles, machinery, HVAC + increased industrial electrification, regardless of what many naysayers pretend, may be the best long lasting strategy to reduce oil imports and trade deficits.

Most electrified machines are inherently superior (in many ways) to ICE machines, do not have to cost more and should eventually cost less within one or two decades.

Harvey,

I think EVs will become popular and reduce imported oil over the coming years. We will see with the Leaf, Volt and others very soon now. If the economies of scale arguments are true, then the demand for batteries should increase production and lower the cost per unit.

Quoth Aureon:

It could also put people in the Corn Belt out of work.
The number of corn-state workers employed is not a legitimate figure of merit for low-carbon fuels.

Quoth Harvey D:

Industrial countries could produce enough sugar cane/grain ethanol and/or cellulosic ethanol to replace the 75+ million barrels/day they consume without adversed effects on food production and/or major changes in land use.
Please show figures to back up this claim.  The USA cannot even come close.

With all of the natural gas flaring and all of the oil spills in Russian and other oil producing countries in addition to all of the pumping and fuels needed to transport oil to the US, it cannot be proved by anyone that oil sands and coal and shale have a higher CO2 production in the resulting gasoline. Because it sells its CO2 production to Canadian oil fields through a long pipe, a North Dakotas company can claim no CO2 production for part of its gas.

CARB is just being fraudulent by not requiring small cars and small houses. The best possible way to save money for California government is to eliminate CARB and their non provable and false theories and practices. Even after seeing what France has done, they have not required the building of negative carbon nuclear power plants. They could even build them in Mexico with French money and ship the power to the US. California power is much more costly than French power. ..HG..

There is no way that the production of ethanol can release less CO2 than just producing gasoline from coal and growing permanent trees on the corn fields instead to capture CO2. This calculation can be done from the numbers available from the US gov website that promotes ethanol. Just growing corn and preserving it in a salt mine forever whilst making gasoline from coal or natural gas will even capture far more carbon than using it for ethanol does. Without out the subsidies and mandates and tarifs, corn fuel ethanol production would vanish. Smaller more efficient engines would eliminate the need for ethanol. ..HG..

"Please show figures to back up this claim. The USA cannot even come close."

I'm not sure... how much feedstock goes to cattle that could go to (a) people directly and (b) to ethanol or other fuel production? I've seen numbers all over the map about how many pounds of corn go into each pound of beef, pork, or poultry.

Clearly if Americans replaced some of their meat consumption with equal calories of grain or vegetables, there'd be a net surplus of corn. How much? Dunno. When to the declining returns catch up? Dunno.

"75+ million barrels/day"

The U.S. consumes about 20 million barrels of oil per day,
2/3 of that is imported. We consume around 140 billion gallons of vehicle fuel per year. We can make close to 100 billion gallons of biofuel per year from 1 billion tons of biomass. Even if we could manage only 70 billion gallons of biofuel, that would reduce our oil imports more than 20% or enough to stop importing middle eastern oil.

Current and Future Ethanol Yield from Feed Corn

This is the best case scenario for corn ethanol – current yield per acre projected to 2030 – without planting any additional corn acreage:

Current biomass waste yield per acre from this year’s corn crop (165 bushels per acre), for cobs and stover, is about 4.5 tons per acre biomass only. Leave 1/3 in the field, and take 2/3 or 3 tons per acre at 88 million acres = 264 million tons of biomass X 100 gallons per ton avg. = 26 Billion Plus gallons of ethanol – just from cobs and stover. Available with the build-out of Cellulsic ethanol commercialized: 2012 to 2020.

Corn yield will double by 2030, and biomass residue will increase 1.5 (estimate). So by 2030 (20 years), 26 billion gallons X 1.5 from corn crop biomass waste only (2030) = 39 billion gallons a year (2030).

Now the corn grain: Today the yield is 165 bushels per acre at approaching 3 gallons per bushel = 495 gallons per acre. We now take the starch from 1 out of 4 bushels. So the current best case yield is 495 gallons X 88 million acres X 25% = 10.9 billion gallons a year.

And without adding any more corn acreage, that will double to 22 billion gallons a year by 2030.

Hypothetically, today, we could also take the starch out of the entire feed corn crop, and that would give us 4 times the amount of corn grain based ethanol: Today, that would be 10.9 X 4 = 43.6 billion gallons a year, now. And 87.2 billion gallons in 2030, just from the grain.

Now using the new Greenshift process to extract corn oil out of the distiller residues, we are getting 107% more fuel. That 7% is crude, non-edible corn oil. So today the best case is 10.9 billion gallons X 7% = 0.763 billion gallons per acre per year corn oil from 1 out of 4 bushels. Take it from all feed corn and get 3 billion gallons per year corn oil today. And that doubles to 6 billion gallons crude corn oil in 2030.

We also get high protein distillers grains livestock feed as the other co-product. That can be used as feed or optionally processed (gasified or other) into additional fuel. Every bushel today yields 18 pounds of DDGS. Extract most of the oil, and that leaves roughly 16.75 pounds per bushel protein. Best case maximum, for fuel production = 16.75 pounds X 165 bushels per acre = 2,764 pounds = 1.38 tons per acre X 22 million acres = 30.36 million tons X 100 gallons per ton gasified = 3 billion gallons today.

Or, best case from the entire corn crop = 3 billion X 4 = 12 billion gallons a year, today. And 24 billion gallons by 2030. Converting distillers grains to fuel is not recommended, unless there is a surplus, or in the future, another livestock feed outcompetes distillers grains – such as algae – which is also a complete protein expected to provide additional livestock feed as a co-product of the coming algal fuels.

We also have a sorghum crop, increasing dramatically, on less desirable land conditions (not suited to corn) that supplied 10-15% of last years ethanol feedstock. And likewise, you would extrapolate-out that for additional grain based, biomass based, and oil based, and optional feed co-product based fuel – in addition to corn.

Note - This is just the ethanol-oil potential from corn and sorghum. These best case figures Don’t include processing the full range of biomass waste products available, from landfill biomass, sewage, food processing residues, forestry and woodworking residues, other agricultural residues, and industrial biomass residues, etc. And it Doesn’t include the production of algae and duckweed, which is currently at 6,000 gallons per acre per year, for oil and ethanol respectively, plus co-product biomass that can go to feed or fuel depending on demand.

if Americans replaced some of their meat consumption with equal calories of grain or vegetables, there'd be a net surplus of corn.if Americans replaced some of their meat consumption with equal calories of grain or vegetables, there'd be a net surplus of corn.
A large fraction of which would be converted to DDG, which requires some high-value application or all of the carefully-justified co-product credits go out the window.  Worse, there is a limit to the fraction of DDG which cattle can tolerate before it becomes toxic to them.  I don't see humans eating DDG-flakes for breakfast.

I think Aureon's claim of a doubling of maize yields in 20 years is risible.  Historical yields have only been beefed up because of higher inputs of chemicals, and the cost of those chemicals (esp. nitrogen) is a serious limitation.  Fixing and adding lots of nitrogen to make a product which has none is simply wasteful, as well as polluting.  Miscanthus has a much higher yield than maize and doesn't put lots of nitrogen in the harvested portion.  If we are going for raw BTU yield, non-maize crops are the way to go... but we still can't meet our needs for energy through the route of liquid fuels.  As petroleum supplies shrink, the bulk of the difference must come from electricity.

We already have a big surplus of corn. We export 20% of our entire feed corn crop. Ethanol takes up another 25%. If we didn’t do both of these, we’d be flooded with corn, and the price would fall out. Then farms would fail. Things are balanced the way they are now – supply and demand. We only use 1/3 of our arable land. We could grow a lot more corn, if there was demand.

Doubling the corn yield per acre by 2030 is Not something I just made up. That’s a projection by Dupont and Danesco who are developing it. Corn yield increased by 10% in the past two years. Also, corn is likely to be engineered with a sugary stalk, without sacrificing the grain yield. That will be handled like cane juice to make more ethanol, on top of the above estimates. That could be an additional 300-400 gallons per acre. That’s another 26-35 billion gallons of ethanol, within 20 years (best case scenario).

In the end, we may wind-up feeding corn sugars to heterotrophic algae or duckweed, and multiply the yield of carbohydrates, oils and proteins several more times. Nitrogen or NPK is going to be recycled from livestock manure, from the biogas digester residues and the algae grown on it. This is part of the advanced management technology that is integrating the ethanol industry with the livestock industry. See: “Bion Environmental Technologies Plans Closed-Loop Livestock and Ethanol Production Facility in Schroeppel, NY”.

I agree that Miscanthus is a great biomass crop. The yield is roughly 20 to 25 tons per acre. Algae is being produced at the rate of 200 to 300 tons per acre, and that will be integrated with corn ethanol and livestock.

The integration of a corn ethanol plant with livestock and heterotrophic algae could produce grain ethanol, cellulosic ethanol, distillers grains, meat or dairy, corn oil, algae oil – biodiesel and nutriceuticals, algae ethanol, complete protein algae feed, NPK fertilizer, bio-plastics, and manure-based digester biogas - for CHP production power and surplus electric power for the grid.

We only use 1/3 of our arable land. We could grow a lot more corn, if there was demand.
Ha!  US corn production has pushed into zones where only drawdowns of fossil water permit cultivation.  Those fields will not be growing corn 20 years from now; they may not be growing any kind of crop.
Doubling the corn yield per acre by 2030 is Not something I just made up. That’s a projection by Dupont and Danesco who are developing it. Corn yield increased by 10% in the past two years.
How much more water will this take?  No amount of genetic engineering will improve rainfall or replenish the Ogalalla aquifer.  You can promote subsidies with great success, but actual production requires attention to inconvenient facts such as Liebigs Law of the Minimum.

An additional 30 billion gallons of EtOH (energy equivalent to about 20 billion gallons of gasoline) is nice, but it comes nowhere near to replacing the US's ~140 billion gallon annual gasoline consumption.  Then there's the distillate, heating oil, jet fuel, etc.  The heavy lifting must be done by electrification, because biofuels can only be bit players.  Most of the people promoting ethanol are actually promoting petroleum (deliberately or unwittingly), because ethanol can neither replace petroleum nor undercut it on price.

In this case, I have to say that CARB has good intention, but impractical.

A more practical solution would be the adoption of the Pickens plan: phasing in the use of NG/methane for heavy-duty vehicles. These vehicles will eventually be a dual-fueled vehicle: methane for long haul and H2 for short-haul, local use, due to the shorter range when H2 is stored in the same methane tank.

The Barnett shale gas find in northwestern Louisiana will provide lot of natural gas for the country over the years. Trucks take 40% of our liquid road fuel, so if we can run them 90% on natural gas we are ahead of the game.

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