calif reponse ethanol en banc.pdf

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Nos. 12-15131, 12-15135

__________________________

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

_____________________________

ROCKY MOUNTAIN FARMERS UNION, et al.,Plaintiffs-Appellees,

v.

RICHARD W. COREY, in his official capacity as

Executive Officer of the California Air Resources Board, et al.Defendants-Appellants,

ENVIRONMENTAL DEFENSE FUND, et al.,

Intervenor-Defendants-Appellants._______________________________

On Appeal from the United States District Court for the Eastern District of California,

Fresno Division Case Nos. 1:09-cv-02234-LJO-GSA and 1:10-cv-00163-LJO-GSA

The Honorable Lawrence J. ONeill, Judge

________________________________

APPELLANTS RESPONSETO PETITIONS FOR REHEARING EN BANC

KAMALA D. HARRIS

Attorney General of California

ROBERT W. BYRNESenior Assistant Attorney General

GAVIN G. MCCABE

Supervising Deputy Attorney GeneralMARKW. POOLE, SBN 194520

DAVID A. ZONANA, SBN 196029

M. ELAINE MECKENSTOCK, SBN 268861Deputy Attorneys General

455 Golden Gate Avenue, Suite 11000San Francisco, CA 94102-7004

Telephone: (415) 703-5582

Fax: (415) 703-5480Email: [email protected]

Attorneys for Appellants Richard W. Corey, et

al.

Case: 12-15131 10/24/2013 ID: 8835715 DktEntry: 222 Page: 1 of 48


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TABLE OF CONTENTS

Page

i

INTRODUCTION ......................................................................................... 1

BACKGROUND ........................................................................................... 4

ARGUMENT ................................................................................................. 9

I. The Majority Correctly Concluded That The LCFS Does

Not Facially Discriminate Against Out-Of-State Ethanols ....... 9

A. As The Majority Properly Concluded, The LCFSs

Plain Text Distinguishes Ethanols Based On Their

Scientifically Calculated Carbon Intensities, NotTheir Origins ................................................................... 9

B. The Majority Correctly Compared SimilarlySituated Ethanols And Determined That The

LCFS Does Not Favor In-State Ethanols Or IsolateCalifornia Ethanol From Out-Of-State Competition .... 15

C. The Majority Did Not Improperly Consider ThePurpose Of The LCFS In Its Facial Discrimination

Analysis ......................................................................... 20

D. Petitioners Attack On The Science Of LifecycleAnalysis As Inherently Discriminatory Is Entirely

Lacking In Factual, Scientific And Legal Support ....... 24

II. The Majority Correctly Concluded That The LCFS Does

Not Regulate Extraterritorially ................................................ 28

III. The Panel Correctly Concluded That The LCFS DoesNot Discriminate, In Any Way, Against Out-Of-State

Crude Oils ............................................................................... 36

CONCLUSION ............................................................................................ 39



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TABLE OF AUTHORITIES

Page

ii

CASES

Alliance for Clean Coal v. Miller

44 F.3d 591 (7th Cir. 1995) ............................................................... 31

Bacchus Imports, Ltd. v. Dias

468 U.S. 263 (1984)..................................................................... 16, 38

Baldwin v. Seelig

294 U.S. 511 (1935)..................................................................... 14, 29

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.476 U.S. 573 (1986)........................................................................... 29

C&A Carbone, Inc. v. Clarkstown511 U.S. 383 (1994)......................................................... 21, 23, 29, 38

Camps/Newfound/Owatonna, Inc. v. Town of Harrison, Me.

520 U.S. 564 (1997)........................................................................... 10

Chemical Waste Mgmt., Inc. v. Hunt504 U.S. 334 (1992).................................................................... passim

City of Philadelphia v. New Jersey

437 U.S. 617 (1978)........................................................... 9, 13, 21, 22

Colon Health Centers of America, LLC v. HazelF.3d, 2013 WL 5737706 (4th Cir. Oct. 23, 2013) ..................... 16

Exxon Corp. v. Maryland

437 U.S. 117 (1978).................................................................... passim

Gravquick A/S v. Trimble Nav. Intl Ltd.323 F.3d 1219 (2003) ........................................................................ 30

Healy v. Beer Inst.491 U.S. 324 (1989)..................................................... 2, 28, 29, 30, 31



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(continued)

Page

iii

Intl Dairy Foods Assn v. Boggs

622 F.3d 628 (6th Cir. 2010) ....................................................... 30, 33

Kentucky v. Davis553 U.S. 328 (2008).................................................................... passim

Kleenwell Biohazard Waste & General Ecology

48 F.3d 391, 396 (9th Cir. 1995) ....................................................... 32

Maine v. Taylor477 U.S. 131 (1986)............................................................... 10, 14, 15

Minnesota v. Clover Leaf Creamery449 U.S. 456 (1981)......................................................... 30, 31, 33, 34

Natl Assn of Optometrists & Opticians v. Harris

682 F.3d 1114 (9th Cir. 2012) ........................................................... 19

Natl Elec. Mfrs. Assn v. Sorrell

272 F.3d 104 (2nd Cir. 2001) ...................................................... 30, 31

Natl Foreign Trade Council v. Natsios

181 F.3d 38 (1st Cir. 1999) ................................................................ 31

Natl Solid Wastes Mgmt. Assn v. Meyer165 F.3d 1151 (7th Cir. 1999) ........................................................... 33

Natl Solid Wastes Mgmt. v. Meyer

63 F.3d 652 (7th Cir. 1995) ............................................................... 33

NCAA v. Miller10 F.3d 633 (9th Cir. 1993) ............................................................... 31

New Energy Co. of Ind. v. Limbach

486 U.S. 269 (1988)........................................................................... 10



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(continued)

Page

iv

Or. Waste Sys., Inc. v. Dept. of Env. Quality

511 U.S. 93 (1994)...................................................................... passim

Oregon-Washington Railroad & Navigation Co. v. Washington270 U.S. 87 (1926)............................................................................. 14

Pharm. Research & Mfrs. of America v. Walsh

(PhRMA), 538 U.S. 644 (2003)................................................ 29, 33

S.D. Myers, Inc. v. City and Cnty of San Francisco253 F.3d 461 (9th Cir. 2001) ............................................................. 30

SPGGC, LLC v. Blumenthal505 F.3d 183, 194 (2nd Cir. 2007) .............................................. 32, 33

United Haulers Assn, Inc. v. Oneida-Herkimer Solid

550 U.S. 330 (2007)............................................................... 16, 19, 23

Valley Bank of Nev. v. Plus Sys., Inc.

914 F.2d 1186 (9th Cir. 1990) ............................................... 30, 31, 33

West Lynn Creamery, Inc. v. Healy

512 U.S. 186 (1994)..................................................................... 17, 35

STATUTES AND REGULATIONS

42 U.S.C. 7545(o)(1)(H) ........................................................................ 5

Cal. Health & Saf. Code 38501(a) ............................................................................................ 4

38501(c) ............................................................................................ 4 38550 ................................................................................................ 4



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(continued)

Page

v

Cal. Code Regs., Title 17

95481(a)(16), (38)............................................................................. 5 95482(b) ............................................................................................ 4

95485(a), (c) ..................................................................................... 7 95486(a) ................................................................................ 6, 10, 11

95486(b)(1) ............................................................................. 5, 7, 11

95486(c), (d) ................................................................................... 12

COURT RULES

Federal Rule of Appellate Proc. 35(a) ...................................................... 3

OTHERAUTHORITIES

Donald H. Regan, The Supreme Court and State Protectionism:

Making Sense of the Dormant Commerce Clause,84 Mich. L. Rev. 1091 (1986) ..................................................... 34, 35



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INTRODUCTION

In this case, Petitioners seek to invalidate Californias use of sound,

peer-reviewed science to reduce the greenhouse gas emissions that threaten

Californias coastal infrastructure, water supply, public health, environment

and economy. Petitioners allege that the Low Carbon Fuel Standard

(LCFS) somehow undermines the national economy, when, in fact, the

LCFS is designed to establish a market for a diverse array of low-carbon,

alternative fuels. In support of their petitions for rehearing en banc,

Petitioners attempt to manufacture a conflict with Supreme Court precedent

by advancing unsupported and expansive views of the dormant Commerce

Clause.

First, Petitioners argue that the LCFS is facially discriminatory against

out-of-state ethanols. However, on its face, the LCFS distinguishes ethanols

on the basis of their greenhouse gas emissions, not their origin, and has

assigned its most favorablescores to out-of-state ethanols. Thus, the

determinant of a fuels treatment is not whether [it] was generated out-of-

state. See Or. Waste Sys., Inc. v. Dept. of Env. Quality, 511 U.S. 93, 99,

107 (1994). And the LCFS does not isolate [California] by raising barriers

to the free flow of interstate trade. Chemical Waste Mgmt., Inc. v. Hunt,



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504 U.S. 334, 339-40 (1992). The majority properly concluded that the

LCFS does not facially discriminate.

Second, Petitioners argue that the LCFS regulates extraterritorially

because some out-of-state fuel producers may choose to reduce their

greenhouse gas emissions in order to compete more effectively in

Californias market. UnderPetitioners theory, a State may not regulate its

own marketwhen doing so may affect the choices made by out-of-state

firms competing in that market. That would be a radical expansion of the

law. In fact, the narrow extraterritoriality doctrine prohibits states from

directly control[ling] commerce occurring wholly outside the boundaries of

a Statein other words, commerce in othermarkets. Healy v. Beer Inst.,

491 U.S. 324, 336 (1989) (emphasis added). The majority correctly

concluded, without dissent, that this doctrine is not implicated by

Californias regulation of its own fuels market.

Third, the American Fuels & Petrochemical Manufacturers Association

Petitioners (AFPM) argue that the LCFSs original crude oil provisions, in

effect only during 2011, were designed to protect one type of California

crude against out-of-state competition. In fact, close to 200 crude oils

including those from California and more than 35 other states and countries

competed on identicalterms in the market. Further, the LCFS is expressly



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designed to reduce Californias consumption of fossil fuels, regardless of

their origin, and to establish an effective and durable market foralternative,

lower-carbon fuels, again regardless of their origin. As the full panel

correctly concluded, [t]here was no protectionist purpose, no aim to

insulate California firms from out-of-state competition. Opinion at 57.

In sum, Californias development of an innovative, market-based

regulation to address serious threats from fuels consumed in California does

not violate the dormant Commerce Clause. Indeed, Petitioners attempts to

dramatically expand this doctrine threaten the proper balance the Supreme

Court has struckbetween preventing economic isolation and favoring a

degree of local autonomy for States. SeeKentucky v. Davis, 553 U.S. 328,

338 (2008);see also Opinion at 31. Petitioners expansive view of this

doctrine would also undermine, if not eliminate, one of the key advantages

of federalismstates abilities to serve as laboratories of regulatory

innovation, try[ing] novel social and economic experiments without risk to

the rest of the country. Opinion at 31 (quotingNew State Ice Co. v.

Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting)).

This Courts opinion is entirely consistent with Supreme Court

precedent and the case law of this and other circuits. En banc review is not

warranted. Fed. R. App. Proc. 35(a).



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BACKGROUND

Finding that [g]lobal warming poses a serious threat to the economic

well-being, public health, natural resources and the environment of

California, the California Legislature mandated a reduction in Californias

greenhouse gas (GHG) emissions to 1990 levels by 2020. Cal. Health &

Saf. Code 38501(a), 38550. This landmark legislation expressly

continued Californias long tradition of environmental leadership by

placing California at the forefront of national and international efforts to

reduce emissions of greenhouse gases. Id. at 38501(c). The California

Air Resources Board (ARB) adopted the LCFS as part of a suite of

regulations to meet the Legislatures ambitious goals. ER 2202-03;see also

Opinion at 15-16.

The LCFS applies to nearly all transportation fuels currently

consumed in California and any fuels developed in the future. Opinion at

16 (citing Cal. Code Regs., tit. 17, 95480.1(a)). The LCFS requires a

gradual reduction in the GHG emissions associated with the use of

transportation fuels in California, culminating in a 10% reduction in carbon

intensity by 2020. ER 2197;see also Cal. Code Regs., tit. 17, 95482(b).

This predictable path for emissions reduction is intended to spur the

development and production of low-carbon fuels. Opinion at 17. Because



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the LCFSs standard for each year applies on an averagebasis, no regulated

party is required to sell any particular fuel or blend of fuels with a certain

carbon intensity or origin and no particular fuel or blend of fuels is

prohibited. See Opinion at 17.

Using a peer-reviewed scientific model, ARB calculates a particular

fuels GHG emissionsits carbon intensityon a lifecycle basis, including

emissions from the fuels production, transportation, and combustion. ER

2198;see also Cal. Code Regs., tit. 17, 95481(a)(16), (38). As recognized

by scientists and policy-makers alike, the lifecycle analysis is the only

accurate way to measure and compare fuels GHG emissions. Opinion at

19-20;see also, e.g., 42 U.S.C. 7545(o)(1)(H) (adopting lifecycle analysis);

ER 6:1201 at 7-8; Doc 72 at 5-8 (scientists amicus brief). This is

because the climate-change benefits of biofuels such as ethanol mostly

come before combustion, in the form ofGHGs absorbed by photosynthesis,

and because tailpipe emissions alone cannot capture the real GHG emissions

that correspond with various fuels. Opinion at 18;see also id. at 22.

For example, all ethanols have identical tailpipe emissions, but ethanol

produced using coal for electricity and heat results in more GHG emissions

than gasoline, whereas ethanol produced using a combination of biomass

and coal results in GHG emissions much lower than gasoline. Cal. Code



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Regs., tit. 17, 95486(b)(1) (Table 6 pathways ETHC007, CB0B001,

ETHC021).1 Similarly, electric vehicles have essentially no tailpipe

emissions, but operating an electric vehicle results in variable GHG

emissions depending on how the electricity was generated. See ER 4:769 at

16. As these few examples illustrate, [a]n accurate comparison [of

diverse fuels] is possible only when it is based on the entire lifecycle

emissions of each fuel pathway. Opinion at 19.

In addition to distinguishing between fuels based on their lifecycle

emissions, the LCFS distinguishes between crude-oil-derived fuels and

alternative fuels. Cal. Code Regs., tit. 17, 95486(a)(1), (2). Crude-oil-

derived fuels are regulated to prevent significant increases in average carbon

intensity and, ultimately, to reduce the use of these fuels and diversify

Californias fuels market. See Opinion at 26; ER 4:789 at 88, 91, 3:470,

5:921. Alternative fuels, in contrast, are regulated to stimulate the

development and production of low-carbon alternative fuels, regardless of

location, and, thus, to reduce carbon intensity. Opinion at 26; ER 4:791 at

97, 4:773-74, 9:2197; contra Rocky Mountain Farmers Union Petition

1 A copy of the current LCFS, as codified, was provided to the Courtin reader-friendly form as Exhibit 2 to Appellants Request for Judicial

Notice filed on November 30, 2012 (Doc. 187). Table 6 begins on page 57

of Exhibit 2.



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(RMFU) at 7 n.2 (mischaracterizing differential treatment of crude oils

and alternative fuels as a glaring inconsistency).

Lower-carbon fuels generate credits under the LCFS, which may be

used for compliance or sold to other regulated parties. Opinion at 17;see

also ER 4:773 at 29-30, 32; Cal. Code of Regs., tit. 17, 95485(a), (c).

Lower-carbon fuels can also obtain price premiums in California. ER 2:131

at 6-8. These incentives are intended to encourage producers, wherever

they are located, to develop fuels with lower carbon intensities for use within

the California market. Opinion at 17;see also,e.g., ER 6:1190, 6:1195-96,

6:1202. Thus, these incentives are available to all lower-carbon fuels,

regardless of origin. Indeed, the ethanols with the lowest and most valuable

carbon intensities come from Brazil and the Midwest, not California.

Opinion at 25; Cal. Code Regs., tit. 17, 95486(b)(1) (Doc. 187, Exh. 2 at

57-62).

Two sets of Plaintiffsboth comprised primarily of industry trade

groups challenged the constitutionality of the LCFS under the dormant

Commerce Clause and the Supremacy Clause. Deciding cross-motions for

summary judgment, the district court held that the LCFS facially

discriminated against out-of-state ethanol and regulated extraterritorially.

The court also held that the LCFS discriminated purposefully and in effect,



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but not facially, against out-of-state crude oils. The court did not reach

several other claims but certified the judgment under Federal Rule of Civil

Procedure 54(b). The court also issued an injunction.

On April 23, 2012, a motions panel of this Court stayed the district

courts orders, finding that ARB was likely to succeed on the merits of its

appeal. Doc. 54 at 3.

On September 18, 2013, this Court issued its opinion on the merits.

The full panel held that the LCFS does not discriminate against out-of-state

crude oil at allfacially, purposefully or in effect. The majority also held

that the LCFS does not facially discriminate against out-of-state ethanol or

regulate extraterritorially. The matter was remanded to the district court for

consideration of Plaintiffs remaining claims.

Concurring in the decision with respect to crude oil, Judge Murguia

dissented narrowly, concluding that the LCFS discriminates facially against

out-of-state ethanol and that it would not survive strict scrutiny because of

assumptions ARB made about the efficiencies of ethanol plants. Dissent

at 72-76. Judge Murguia did not reach the extraterritoriality issue. Dissent

at 73 n.2.



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ARGUMENT

I. THE MAJORITY CORRECTLY CONCLUDED THAT THE LCFSDOES NOT FACIALLY DISCRIMINATE AGAINST OUT-OF-STATE

ETHANOLS

A. As The Majority Properly Concluded, The LCFSs PlainText Distinguishes Ethanols Based On Their Scientifically

Calculated Carbon Intensities, Not Their Origins

Petitioners claim that the majority erroneously looked beyond the

regulations plain language in analyzing whether the LCFS facially

discriminates against out-of-state ethanol. RMFU at 11-12, 16; AFPM at 6

n.3;see also Dissent at 72-73. This claim is without merit.

Facially discriminatory laws expressly provide differential treatment

of in-state and out-of-state economic interests that benefits the former and

burdens the latter. See Or. Waste Sys., 511 U.S. at 99. In other words,

facial discrimination exists when in-state competitors are favored because

out-of-state origin is the statutory determinant of how a product or firm is

treated. See id. Thus, statutory language applying higher tax rates to waste

generated out-of-state was facially discriminatory. Id. (quoting Or.

statute) (emphasis added). Similarly, a prohibition against the importation

of any solid or liquid waste which originated or was collected outside the

territorial limits of the State discriminated on its face, City of Philadelphia

v. New Jersey, 437 U.S. 617, 618 (1978) (quoting N.J. statute) (emphasis



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added), as did an Alabama statute applying an additional fee to waste and

substances which are generated outside of Alabama, Chem. Waste Mgmt.,

Inc. v. Hunt, 504 U.S. 334, 338 (1992) (quoting Ala. statute) (emphasis

added). See also Camps/Newfound/Owatonna, Inc. v. Town of Harrison,

Me., 520 U.S. 564, 568 (1997) (higher taxes for firms operating principally

for the benefit of persons who are not residents of Maine);Maine v. Taylor,

477 U.S. 131, 133 n. 1 (1986) (prohibition against importation into this

State);New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 274 (1988)

(denial of favorable tax treatment based on origin). As these cases illustrate,

facially discriminatory laws expressly create black-and-white regulatory

universes where in-state entities are favored over out-of-state competitors on

the basis of their origin.

In contrast with these facially discriminatory laws, the plain language

of the LCFS provides that the carbon intensity of a particular ethanol is

determined using Method 1, as set forth in section 95486(b)(2)(B)

unless the regulated party is approved for using either Method 2A or Method

2B, as provided in section 95486(c) or (d). Cal. Code Regs., tit. 17,

95486(a)(2);see also Opinion at 20-21. Regardless of whether Method 1,

2A or 2B is chosen, the LCFS uses the same scientific toolCalifornia-

modified GREET (CA-GREET) model version 1.8bto calculate the



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lifecycle emissions of each and every ethanol pathway. Cal. Code Regs., tit.

17, 95486(b)(1);see also Opinion at 36. Neither this text nor any of the

three methods remotely resembles the origin-based text of facially

discriminatory laws.

Method 1 involves selecting a carbon intensity value from the Lookup

Table of already approved values. Cal. Code Regs., tit. 17, 95486(a)(2).

The selected value must closely correspond[] to the particular batch of

ethanol, based on specified factors. Id. The Lookup Table (Table 6) is

part of the regulation and contains over 40 values for ethanol.2 On its face,

Table 6s lowest and most favorable carbon intensity ethanols are pathways

ETHS001-006, which correspond to Brazilian ethanols, and pathways

ETHC030 and ETHC035, which correspond to ethanols from Midwestern

producer POET. Id. at 95486(a)(2); 95486(b)(1)(T);see also Doc. 187,

Exh. 2 at 57-62 (reader-friendly Table 6); Opinion at 25. The highest carbon

intensity ethanol is also Midwestern. Id. (ETHC007).

2Each value or pathway contains an abbreviated description of thatethanols lifecycle, including, for example, the type of thermal energy used.

See id. Some of these descriptions include references to the ethanolproducers location in California, the Midwest or Brazil, because, for some

parts of the lifecycle, location affects the actual GHG emissions

attributable to the fuel. Opinion at 36;see also, infra, Sec. I.D.



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Methods 2A and 2B permit the development of new, individualized

carbon intensity values either through modification of an existing pathway

(Method 2A) or through development of an entirely new pathway (Method

2B). Cal. Code Regs., tit. 17 95486(c), (d);see also Opinion at 21. Out-

of-state ethanols dominate the list of lower values obtained through these

two methods. ER 2:165-197; Doc. 168 at 31 (summarizing). Under

Methods 2A and 2B, which are part of the LCFSs plain text, this list is

constantly expanding. Seehttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-

apps.htm(Summary of all Pathways Table).

In sum, looking solely at the regulationsplain text, carbon intensity

does not correlate with in-state versus out-of-state origin and the most

favorable values correspond to ethanols from Brazil and the Midwest, not

California.

As its plain text demonstrates, the LCFS does not create a black-and-

white regulatory universe, based on origin, that favors in-state fuels and

disfavors out-of-state competitors. On its face, the LCFS determines an

ethanols treatment by scientifically modeling lifecycle GHG emissions,

using the identical tool each time, with the result that some out-of-state

ethanols fare better than their California competitors. As the majority held,

[u]nlike discriminatory statutes, the Fuel Standard does not base its

http://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htmhttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htmhttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htmhttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htmhttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htmhttp://www.arb.ca.gov/fuels/lcfs/2a2b/2a-2b-apps.htm


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treatment on a fuels origin but on its carbon intensity. Op. at 35-36;see

also id. at 39, 46. Under the LCFS, the determinant of which [carbon

intensity value] applies to any particular [ethanol] is notwhether the

[ethanol] was generated out-of-state. See Or. Waste, 511 U.S. at 99. The

LCFS is not discriminatory on its face. See id. (internal quotation

omitted). Indeed, it is a principle of nondiscrimination that States may

treat products differently when there is some reason, apart from their

origin to do so. Chem. Waste, 504 U.S. at 341.

Further, because the LCFS does not regulate in a black-and-white

fashion based on origin or provide its most favorable treatment to in-state

fuels, [t]he Fuel Standard does not isolate California and protect its

producers from competition.

3

Opinion at 36. The Supreme Court has

repeatedly indicated that such isolation is the hallmark of facially

discriminatory laws: What is crucial is the attempt by one State to isolate

itself by erecting a barrier against the movement of interstate trade.

Philadelphia, 437 U.S. at 628 (finding facial discrimination);see also id. at

623 (What is ultimate is the principle that one state in its dealings with

3In contrast to Petitioners allusions to the total elimination ofMidwest corn ethanol, Midwest ethanol dominates the California ethanol

market even with the LCFS in full effect. Compare RMFU at 7 with Doc.

21-7 at p. 23 of 100 (Exh. AA at 50);see also ER 2:131 at 5-8.



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another may not place itself in a position of economic isolation.)(quoting

Baldwin v. Seelig, 294 U.S. 511, 527 (1935)); Or. Waste, 511 U.S. at 107;

Opinion at 38-39. Indeed, [t]he point [of the dormant Commerce Clause] is

to prevent a State from retreating into economic isolation. Davis, 553

U.S. at 338 (internal quotations omitted).

It is this absence of economic isolation that distinguishes

nondiscriminatory quarantine laws from facially discriminatory ones, as the

majority properly recognized. AFPMs claim to the contrary, thatMaine v.

Taylorindicates that any quarantine law discriminates on its face, AFPM

at 8, is simply wrong. In 1992, six years afterMaine v. Taylor, the Court

wrote that legitimate quarantine laws [do] not discriminate against

interstate commerce as such, but simply prevent[] traffic in noxious articles,

whatever their origin. Chem. Waste, 504 U.S. at 347 (describing cases

including Oregon-Washington Railroad & Navigation Co. v. Washington,

270 U.S. 87 (1926)) (emphasis added). As the majority properly noted,

neither the quarantine upheld in Oregon-Washington nor the LCFS

completely eliminated trade in the covered article, Opinion at 47, unlike

the facially discriminatory law inMaine v. Taylorthat prohibited all

importation, 477 U.S. at 133 n. 1. In other words, unlike the LCFS, facially

discriminatory laws isolate the regulating State from interstate trade.



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The majority properly followed Supreme Court precedent in

concluding that the LCFS is not facially discriminatory. En banc review is

not warranted.

B. The Majority Correctly Compared Similarly SituatedEthanols And Determined That The LCFS Does Not

Favor In-State Ethanols Or Isolate California Ethanol

From Out-of-State Competition

Disregarding much of the LCFSs plain text (including much of Table 6

and the very existence of Methods 2A and 2B), Petitioners adopt the

dissents approach and base their facial discrimination arguments on a

comparison of just three pairs of ethanol pathways. RMFU at 6;see also

Dissent at 73 n.1. The dissent offers no explanation for this narrow, two-at-

a-time comparison that disregards more than 30 competing ethanols also

found on the face of Table 6. Petitioners attempt to explain, arguing that this

narrow, two-at-a-time comparison is proper because their selected ethanols

purportedly use identical production processes. RMFU at 7;see also id. at

13; AFPM at 8. As the majority correctly noted, Petitioners highly-

selective definition of production processes is flawed because it excludes

real differences in production that result in real differences in GHG

emissions. Opinion at 33;see also, infra, Section I.D. Petitioners narrow

comparative approach also conflicts with established law.



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As the majority recognized, the Supreme Court has repeatedly

indicated that any notion of discrimination assumes a comparison of

substantially similarly entities. United Haulers Assn, Inc. v. Oneida-

Herkimer Solid, 550 U.S. 330, 342 (2007) (quoting General Motors Corp. v.

Tracy, 519 U.S. 278, 298 (1997));see also Davis, 553 U.S. at 342;Opinion

at 32.4 Indeed, the comparison of similarly situated entities is so

fundamental to any notion of discrimination, that it is not discriminatory

to favor in-state entities, on the face of a statute, when the disfavored entities

are notsimilarly situated. Davis, 553 U.S. at 342-43.

The majority also recognized that products [that] compete in a single

market are similarly situated for purposes of the dormant Commerce

Clause. Opinion at 32 (citing Tracy, 519 U.S. at 299;Bacchus Imports, Ltd.

v. Dias, 468 U.S. 263, 268-69 (1984)). This is because the dormant

Commerce Clause protects the interstate market, not particular interstate

firms or particular methods of operation. Exxon Corp. v. Maryland,

437 U.S. 117, 127-28 (1978);see also United Haulers, 550 U.S. at 344

(citingExxon). Thus, the question is not whether a particular Midwest

4 The Fourth Circuit also just confirmed that a discrimination analysisbased on only a few competitors in the market improperly narrows the

scope of the judicial inquiry. Colon Health Centers of America, LLC v.Hazel,F.3d, 2013 WL 5737706 at *4 (4th Cir. Oct. 23, 2013).



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ethanol has a higher carbon intensity than a particular California ethanol but,

rather, whether Californias market is protected from out-of-state

competition. See also West Lynn Creamery, Inc. v. Healy, 512 U.S. 186,

193 (1994) (noting that facially discriminatory tariffs violate[] the principle

of the unitary national marketby handicapping out-of-state competitors)

(emphasis added).

[E]thanol has the same chemical and physical properties no matter

where (or how) it is produced. RMFU at 12; AFPM at 8. Thus, as the

majority correctly concluded, all ethanol producers around the world

compete, because ethanol is fungible. Opinion at 33. Under the dormant

Commerce Clause, then, all sources of ethanol in the California market

should be compared, because they are all similarly situated. Id.

The majoritys consideration of all competitors is the exact approach

adopted by the Supreme Court inExxon. When Maryland prohibited

refiners, all of which were located out-of-state, from operating retail gas

stations, the Court found no discrimination because other firms, both in-state

and out-of-state, could still compete. Exxon, 437 U.S. at 126. In reaching

that conclusion, the Court did not isolate and compare a small subset of

firms. Rather, it compared all competitors in the market and determined that

Marylands law did not prohibit the flow of interstate goods or create



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barriers against interstate dealers that were not refiners. Id. The Court

also rejected the notion that a shift of business from one interstate supplier

to another constitutes even a burden on interstate commerce, let alone

discrimination against it. Id. at 127.

Finding discrimination because one out-of-state ethanol fares less well

than one California ethanol, as the dissent does, turns the Supreme Courts

analysis on its head. Indeed, the LCFS is more obviously nondiscriminatory

than the law upheld inExxon, since, on the regulations face, some out-of-

state ethanols fare better than any California ethanol. Like Marylands law,

the LCFS does not prohibit the flow of interstate [ethanol] and does not

discriminate. See id. at 126.

The dissent does not respond to the majoritys similarly situated

analysis, although that analysis is fully supported, and indeed required, by

Supreme Court precedent. In fact, the dissent concurs in the majoritys

analysis of the LCFSs crude oil provisions, an analysis that properly

considered the full market. Opinion at 55; Dissent at 72 (concurring).

The LCFSs treatment of the full [ethanol] market is apparent on its face,

and that full market must be considered in determining whether the LCFS

facially discriminates. The majority properly did so.



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Petitioners similarly fail to explain how a comparison based on only

three pairs of ethanols with purportedly identical production processes,

rather than all competing products, is consistent with a doctrine that protects

markets from anti-competitive protectionism and expressly does not protect

particular methods of operation.5 See Exxon, 437 U.S. at 127;see also

Natl Assn of Optometrists & Opticians v. Harris, 682 F.3d 1114, 1151-52

(9th Cir. 2012), cert denied,133 S. Ct. 1241 (2013). Nor do they offer a

single case that supports the approach they advocateone in which the

majority of competitors are disregarded.

As the majority held, when the proper comparison of competing

products is performed, it is clear that the LCFS does not provide

differential treatment of in-state and out-of-state economic interests that

benefits the former and burdens the latter. United Haulers, 550 U.S. at

338 (quoting Or. Waste, 511 U.S. at 99).

5Petitioners comparison lacks factual, as well as legal, support. For

example, the California ethanols they select use less thermal energy and

electricity in the production process and less electricity generated by coal-

fired power plants than Petitioners purportedly identical Midwestethanols. Opinion at 22-23. An ethanol producer is not entitled to a

particular carbon intensity value simply because another producer, usingsome but not allof the same processes and resources, qualifies for that

value. Opinion at 44;see also id. at 33 (rejecting district courts overly

narrow definition of production processes).



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C. The Majority Did Not Improperly Consider The PurposeOf The LCFS In Its Facial Discrimination Analysis

Petitioners argue that the majority analytically put[] the cart before the

horse by improperly considering the purpose of the LCFS in its facial

discrimination analysis. RMFU at 10, 15; AFPM at 6-8;see also Dissent at

73. Petitioners claim that the majoritys use of phrases such as reason for

the distinctionand non-discriminatory reason demonstrate purportedly

improper consideration of purpose.6

E.g., RMFU at 9, 14-15; AFPM at 6.

These arguments mischaracterize the majoritys analysis and the Supreme

Courts jurisprudence.

First, the majority properly held that the LCFS is not facially

discriminatory because the Fuel Standard does not base its treatment on a

fuels origin but on its carbon intensity. Opinion at 35-36;see also id. at 49

([T]he carbon intensity values on [Table 6] are not assigned based on the

out-of-state character of fuels.). It did not rely on the LCFSs

nondiscriminatory purposes, instead of the regulation, to judge whether the

LCFS discriminates. See RMFU at 2. As discussed above, the majority

6 AFPM even goes so far as to claim that the majority described

Supreme Court precedent as archaic formalism, AFPM at 1, 7, when, in

fact, the majority was describing Appellees arguments, Opinion at 70.



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properly analyzed the full text of the regulation, consistent with Supreme

Court precedent.

Second, the phrases isolated by Petitioners refer not to the LCFSs

purpose but to the determinant of a fuels treatment,see Or. Waste, 511

U.S. at 99, as the majority itself made clear. After finding that there is a

nondiscriminatory reasonfor [a particular ethanols] higher carbon intensity

value namely its higher GHG emissions, the majority wrote, Stated

another way, CARB can base its regulatory treatmenton [higher]

emissions. Opinion at 36 (emphasis added). The Supreme Court has used

the word reason in precisely this same way: We have interpreted the

Commerce Clause to invalidate local laws that discriminate against an

article of commerce by reason ofits origin or destination out of State. C&A

Carbone, Inc. v. Clarkstown, 511 U.S. 383, 390 (1994) (emphasis added);

see also Philadelphia, 437 U.S. at 627 (recognizing as a principle of

nondiscrimination the ability to treat products differently based on some

reason, apart from their origin) (emphasis added).

Thepurposes of the LCFSto reduce GHG emissions and establish a

market for cleaner fuelswere not the basis for the majoritys facial

discrimination ruling. Rather, the majority recognized, from the face of the



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regulation, that the determinant of (or reason for) a fuels regulatory

treatment is its GHG emissions, not its origin.7 Opinion at 35-36, 40, 49-50.

It is also worth noting that Petitioners quoted rule that the purpose

of, or justification for, a law has no bearing on whether it is facially

discriminatoryderives from three cases involving laws that facially

constructed black-and-white regulatory universes by favoring all in-state

entities and disfavoring all out-of-state competitors. Or. Waste, 511 U.S. at

100 (citing Chem. Waste, 504 U.S. at 340-41,Philadelphia, 437 U.S. at 626);

see also RMFU at 15; AFPM at 3, 6. The LCFS is not such a law,supra,

Sec. I.A, and outside such black-and-white cases, the Court has recently and

repeatedly indicated that a laws protectionist purpose (or absence thereof) is

central to the discrimination inquiry. In 2008, when considering a law that

faciallyexempted interest on any State or local bond from income tax, the

Courtwrote: A discriminatory law is virtuallyper se invalid, and will

survive only if it [passes strict scrutiny]. Absent discrimination for the

forbidden purpose [of economic protectionism], however, the law will be

7As the majority noted, the determinant of a products treatment will

generally correlat[e] with the purposes of the regulation. Opinion at 39.Mentioning the existence of such an obvious correlation does not somehow

alter the majoritys analysis of the regulations plain text. See Opinion at

38-39.



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upheld unless [it fails the far less demandingPiketest]. Davis, 553 U.S. at

338-39 (citing, inter alia, Or. Waste, 511 U.S. at 99, 101;Philadelphia, 437

U.S. at 624) (internal quotations omitted) (emphasis added);see also United

Haulers, 550 U.S. at 338 (indicating that strict scrutinythe virtuallyper

se rule of invalidityis triggered by laws motivated by simple economic

protectionism) (internal quotations omitted) (emphasis added); Carbone,

511 U.S. at 390 (The central rationale for the rule against discrimination is

to prohibit state or municipal laws whose objectis local economic

protectionism.).

In any event, as discussed above, the majority did not base its facial

discrimination analysis on the LCFSs purpose. Rather, the majority

properly analyzed the complete plain text of the regulation and correctly

concluded that the LCFS does not determine an ethanols treatment based on

whether it originated in California or outside the State. The majority also

properly concluded that, on its face, the LCFS provides the most favorable

carbon intensity values to out-of-state competitors and that it does not isolate

Californias ethanol market from interstate commerce. These conclusions

and the ultimate conclusion that the LCFS does not facially discriminate

are entirely consistent with Supreme Court precedent.



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D. Petitioners Attack On The Science Of Lifecycle AnalysisAs Inherently Discriminatory Is Entirely Lacking In

Factual, Scientific And Legal Support

Petitioners argue that the reference to geography in the description of

some ethanol pathways requires a finding that the LCFS discriminates. E.g.,

RMFU at 9, 14; AFPM at 8. As the majority correctly concluded, these

geographic references correspond to regional averages, based on actual

emissions differences, and represent a convenience, not a burden, to ethanol

producers. Opinion at 43, 45, 47-51. In other words, these geographic

references and the data that underlie them reflect expert regulatory

judgment regarding accurate carbon intensity values. Opinion at 48.

While the dissent was troubled by one, narrow aspect of these averages,

Petitioners mount a broad attack on the science of lifecycle analysisone

that both the majority and the dissent correctly rejected.

As the full panel recognized, location is relevant, but not determinative,

for some elements of the scientific lifecycle analysis. Opinion at 37-42. For

plants that do not generate their own power, for example, location is relevant

to electricity emissions (along with efficiency), because the electricity in

the Midwest is generated by coal-fired power plants, whereas California

receives most of its power from renewable sources and natural gas, and

Brazil relies almost entirely on hydroelectricity. Id. at 23-24. Similarly,



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the calculation of transportation emissions must account for location, but the

method of transport and the energy density of the matter being transported

are highly salient factors as well. Seeid. at 23, 38-39. Thus, under the

LCFS, California ethanol produces the most transportation emissions,

because California producers import corn which is bulkier and heavier

than ethanol. Id. at 23.

All of the lifecycle factors, including those with some connection to

location, measure[] real differences in the harmful effects of ethanol

production. Opinion at 39. Yet Petitioners maintain that the dormant

Commerce Clause requires California to ignore these real differences in

emissions because, they claim, any consideration of, or reference to, location

is constitutionally prohibited. See RMFU 13-15; AFPM at 2, 8.

Both the majority and the dissent rejected this argument, recognizing

that using science and real data to calculate actual lifecycle emissions is not

discriminatory. Indeed, Judge Murguia concurred with the majority in

finding that the LCFSs 2011 crude oil provisionswhich also utilize a

lifecycle analysisare not discriminatory. And Judge Murguia concluded

that individualized carbon intensity values, based on a full lifecycle analysis

under Methods 2A and 2B, would be a reasonable, nondiscriminatory



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alternative to the average efficiency values she found objectionable.

Dissent at 74-75 (emphasis added).

The dissents only critique of the LCFS, in fact, involved

assum[ptions] about average plant efficiencies. Dissent at 75. In point of

fact, the average efficiency values in the LCFS reflect real data concerning

actual emissions, as external expert peer reviewers confirmed: The direct

emissions values for ethanol from corn and sugarcane, and the differences in

direct carbon intensity values for different ethanol production processes are

sound. ER 6:1286;see also ER 6:1269; Opinion at 34. The use of

averages based on real data avoid[s] costly and unnecessary individualized

determinations, Opinion at 43, and is not discriminatory, particularly when

Methods 2A and 2B allow plants that are more efficient than average to

obtain values that reflect their actual efficiencies while less efficient plants

benefitfrom the average. While this approach may produce both burdens

and benefits, those burdens and benefits affect both in-state and out-of-state

producers due to the imprecision of averages rather than discrimination.

Id. at 45.

More significantly for these petitions, by finding that individualized

lifecycle analyses are nondiscriminatory, Judge Murguia agreed with the

majority that the inclusion of transportation and electricity emissions does



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not discriminate, despite some connection to location. See Dissent at 75.

Petitioners, on the other hand, assert, without support from precedent or the

dissent, that any consideration of location is impermissible discrimination.8

E.g., RMFU at 14. Thus, Petitioners claim that California could use a

lifecycle analysis only if that analysis ignores hard data and sound science

and disregards real emissions. The dormant Commerce Clause does not

empower out-of-state ethanol producers to eliminate the factors of lifecycle

analysis that do not favor them while keeping those that do (including

corns uptake of carbon dioxide as it grows). Opinion at 50;see also ER

2:225 (ethanol industry lauding benefits of ethanol, relative to gasoline,

using full lifecycle analysis). As both the majority and the dissent held, the

dormant Commerce Clause does not require a State to ignore real harms that

result from its own consumption.

Under the LCFS, all ethanols are subject to the same treatmentthe

application of the same scientific lifecycle modeling tool. It is this

calculation of carbon intensity, not its origin, that determines a fuels

8 AFPM also asserts that the LCFS has no legitimate purpose,

dedicating two pages of its petition to the application of strict scrutinyalthough that is not the issue here. AFPM at 9-10;see also RMFU at 17. In

contrast, Judge Murguia easily concluded that the LCFS serves legitimate

purposes. Dissent at 74.



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competitiveness. And, the lowest and most favorable carbon intensities for

ethanols correspond to out-of-state ethanols. All of this is readily apparent

from the text of the LCFS. Consistent with Supreme Court precedent, the

majority correctly concluded that the LCFS is not facially discriminatory.

En banc review is not warranted.

II. THE MAJORITY CORRECTLY CONCLUDED THAT THE LCFSDOES NOT REGULATE EXTRATERRITORIALLY

Petitioners also argue that the LCFS regulates extraterritoriallyin

other words that, in practical effect, the LCFS directly controls commerce

occurring wholly outside [Californias boundaries]. See Healy, 491 U.S. at

336. As the majority properly held, the LCFS does not regulate

extraterritorially because [t]he Fuel Standard regulates only the California

market.9 Opinion at 58. Firms in any location may elect to respond to the

incentives provided by the Fuel Standard if they wish to gain market share in

California, but no firm must meet a particular carbon intensity standard, and

no jurisdiction need adopt a particular regulatory standard for its producers

to gain access to California. Id. at 58-59. This analysis and these

conclusions are entirely consistent with the case law of the Supreme Court

9 Judge Murguia neither concurred nor dissented concerning

extraterritoriality. Dissent at 73 n.2.



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and the Courts of Appeals. In fact, courts have repeatedly recognized that

state laws often influence the in-state and out-of-state conduct of those who

wish to participate in the regulated market. Thus, the extraterritoriality

doctrine invalidates only those rare state laws that regulate transactions in

otherjurisdictions.

The Supreme Court has only invalidated three laws under the narrow

extraterritoriality doctrine, and all three of those laws controlled prices in

other states. Healy, 491 U.S. 324;Brown-Forman Distillers Corp. v. N.Y.

State Liquor Auth., 476 U.S. 573 (1986);Baldwin, 294 U.S. 511;10see also

Opinion at 59. Confirming the narrowness of this doctrine, the Court

recently indicated that [t]he rule that was applied inBaldwin andHealy

is not applicable outside the price control context. Pharm. Research &

Mfrs. of America v. Walsh(PhRMA), 538 U.S. 644, 669 (2003). The

LCFS does not control prices in California, let alone in other states, and

Petitioners do not claim otherwise. Nonetheless, Petitioners continue to

argue thatBaldwin andHealy require invalidation of the LCFS. RMFU at

19; AFPM at 14-18. This position is entirely unsupported.

10 Petitioners also cite to Carbone for their expansive interpretation of

the extraterritoriality doctrine, RMFU at 20; AFPM at 14-15, but Carbone is

a discrimination case. Carbone, 511 U.S. at 391-92.



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The rule fromHealyprohibits a State from appl[ying] a state statute to

commerce that takes place wholly outside [the State] or directly

control[ling] commerce occurring wholly outside [the State]. Healy, 491

U.S. at 336. This rule does not prohibit a State from regulating transactions

in its own market, as California does with the LCFS, even when that

regulation has effects outside the State. E.g., Minnesota v. Clover Leaf

Creamery, 449 U.S. 456, 471-73 (1981) (upholding plastic container

prohibition, although out-of-state firms would have to conform to different

packaging requirements in Minnesota); Exxon, 437 U.S. at 125 (upholding

requirement that refiners divest themselves of in-state retail operations,

although all refiners were out-of-state); Gravquick A/S v. Trimble Nav. Intl

Ltd., 323 F.3d 1219, 1224 (2003) (rejecting extraterritoriality argument

because regulated transactions had sufficient connections to regulating

jurisdiction); S.D. Myers, Inc. v. City and Cnty of San Francisco, 253 F.3d

461, 469 (9th Cir. 2001) (same); Valley Bank of Nev. v. Plus Sys., Inc., 914

F.2d 1186, 1191 (9th Cir. 1990) (same).

When a State law is indifferent to transactions in other markets, as

the LCFS is, extraterritoriality contention[s] fail[]. Natl Elec. Mfrs. Assn

v. Sorrell, 272 F.3d 104, 110 (2nd Cir. 2001);see alsoIntl Dairy Foods

Assn v. Boggs, 622 F.3d 628, 642 (6th Cir. 2010) (upholding Ohios



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labeling requirement because how the Processors label their products in

Ohio has no bearing on how they are required to label their products in other

states).

Only laws that regulate out-of-state transactions with no nexus to the

regulating state are extraterritorial. Connecticut may not control the price of

beer in Massachusetts. Healy, 491 U.S. at 337-38. Nevada may not impose

its procedural rules on enforcement proceedings throughout the country.

NCAA v. Miller, 10 F.3d 633, 639 (9th Cir. 1993). And Massachusetts may

not force businesses to choose between doing business in Burma or with

Massachusetts. Natl Foreign Trade Council v. Natsios, 181 F.3d 38, 46

(1st Cir. 1999).11

The LCFS regulates no such out-of-state transactions. It regulates only

the carbon intensity of fuel sold in California. The production of fuel for

Californias market is no more wholly outside the State than was the

packaging of milk for Minnesotas market in Clover Leaf, the labeling of

lamps for Vermonts market in Sorrell, or the chain of transactions set off by

a Nevada ATM withdrawal in Valley Bank. See also Doc. 74 (professors

11RMFUs citation to Camps andAlliance for Clean Coal v. Miller,

44 F.3d 591 (7th Cir. 1995) are inapposite, as both, like Carbone, are

discrimination cases. See RMFU at 20.



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amicus brief) at 31-33. The LCFS does not reach beyond Californias

jurisdiction. Contra AFPM at 16.

As the above cases establish, states may regulate their own markets

even when that regulation influences the out-of-state conduct or decisions of

firms wishing to compete in those markets. RMFUs objection to the

LCFSs potential influences on the production of fuel outside the State is,

thus, without merit. Petitioners identify no wholly out-of-state commerce

likeHealys beer sales in other states that the LCFS even influences, let

alone regulates. Further, the difference between influence and regulation is

not a matter of semantics. See RMFU at 18-19. Under [RMFUs]

expansive interpretation [of this doctrine], virtually any regulation of local

markets would violate the Commerce Clause. Kleenwell Biohazard

Waste & General Ecology, 48 F.3d 391, 396 (9th Cir. 1995). The LCFS

does not directly regulate sales of [fuel] in other states. Nor does it prevent

other states from regulating [fuel] sales differently [within their markets].

See SPGGC, LLC v. Blumenthal, 505 F.3d 183, 194 (2nd Cir. 2007). It is

not an extraterritorial regulation.

AFPMs assertion that States are limited, in their own markets, to

regulations based on physical properties similarly has no basis in the law,

and AFPM provides none. See AFPM at 16. Indeed, none of the laws



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upheld against extraterritorial challenges inPhRMA, Valley Bank,Boggs or

SPGGCregulated based on physical properties. Like the laws upheld in

those cases and in Clover Leaf, the LCFS permissibly regulates Californias

own market to address harms to its people and its natural resources.

AFPMs attempted analogy to extraterritorial laws that required other

jurisdictions to adopt the regulating states standards is equally baseless.

Recognizing that the LCFS does no such thing, AFPM asserts that [t]here is

no difference between conditioning importation on another states

adoption of certain standards and conditioning importation on commercial

actors adherence to those standards. AFPM at 17. But there is an

enormous difference. The first is an unconstitutional violation of another

states sovereignty, because [n]o state has the authority to tell other polities

what laws they must enact. Natl Solid Wastes Mgmt. Assn v. Meyer, 165

F.3d 1151, 1153 (7th Cir. 1999);see alsoNatl Solid Wastes Mgmt. v. Meyer,

63 F.3d 652 (7th Cir. 1995). The second is straightforward market

regulation.

Minnesota may not require Wisconsin to prohibit plastic containers, but

Minnesota can prohibit those containers in its own market, even if that

means milk producers in Wisconsin must comply in order to access

Minnesotas market. Clover Leaf, 449 U.S. at 471-72. Just as Minnesota



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could take responsibility for the consequences of packaging used in its

market, including the use of fossil fuels in the production of plastic

containers,see id. at 468, California may take legal and political

responsibility for the harmful emissions associated with its own

consumption of fuels, contra AFPM at 5; RMFU at 4, 9, 21. See also

Donald H. Regan, The Supreme Court and State Protectionism: Making

Sense of the Dormant Commerce Clause, 84 Mich. L. Rev. 1091, 1187

(1986) (The existence of [divergent State regulatory views] can hardly be

thought to create a constitutional problem.). The LCFS does not extend

Californias police power beyond its jurisdictional bounds. Contra AFPM

at 15 (quoting Carbone, 511 U.S. at 393);see also Opinion at 61.

Finally, Petitioners raise a parade of horribles they claim will unfold

if the LCFS is upheld. RMFU at 3, 19, 21-22; AFPM at 5, 18. For example,

AFPM argues that California might next consider the GHG emissions

associated with oranges from Florida, cars from Michigan, milk from

Vermont, or wine from France, implying that the lifecycle analysis will

become a guise for economic protectionism. AFPM at 18. With the LCFS,

California has targeted transportation fuels because they are a significant

contributor to the States GHG emissions, has employed the lifecycle

analysis because it is the only way to accurately measure those emissions,



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and has designed a regulation that rewards low-carbon fuels regardless of

origin. Nothing in the Courts opinion upholding the LCFS would prevent a

different conclusion in another case involving wholly different facts. Indeed,

courts are well-suited to identify and invalidate protectionism whether

forthright or ingenious. West Lynn Creamery, 512 U.S. at 201 (citing

cases);see also Regan,supra, 84 Mich. L. Rev. at 1152 ([Ascertaining

protectionist purpose] is just the kind of problem courts are best at.).

Further, as the extraterritoriality cases discussed above demonstrate, courts

are perfectly capable of distinguishing rare, jurisdictional overreaches from

ordinary regulation of a states own market that influences the out-of-state

production of goods for that market. And, of course, thePike test empowers

courts to invalidate laws when their burdens on interstate commerce are

clearly excessive in relation to the putative local benefits.Davis, 553 U.S.

at 338-39 (internal quotation omitted).

Under existing doctrines, courts successfully protect interstate

commerce and prevent states from infringing on each others sovereignty.

The radical expansion of the extraterritoriality doctrine that Petitioners

advance here is unnecessary. And, in fact, that expansion would threaten

countless longstanding laws that regulate a states own market and, in so

doing, influence firms competing in that market.



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This Courts decision on extraterritoriality is entirely consistent with

the precedents of the Supreme Court and the circuit courts. En banc review

is not warranted.

III. THE PANEL CORRECTLY CONCLUDED THAT THE LCFSDOESNOT DISCRIMINATE,IN ANY WAY,AGAINST OUT-OF-STATE

CRUDE OILS

The full three-judge panel correctly concluded that the LCFSs 2011

crude oil provisions (the 2011 Provisions)12 do not discriminate at all

facially, by design or in effect. Opinion at 57, 72 (Murguia, J., concurring

concerning the crude oil regulations). AFPMs arguments to the contrary

are meritless.

As the panel noted, under the 2011 Provisions, a crude oils carbon

intensity was based on two factors: (1) whether it was a HCICO [high-

carbon intensity crude oil] and (2) whether it was an emerging or existing

source. Opinion at 52. Emerging HCICOs would use their individual

carbon intensities, and all other crude oils used the average carbon intensity

from Californias 2006 market. Id. In other words, all crudes, regardless of

12 When the 2011 Provisions proved infeasible, ARB amended them.

See Opinion at 28. Under the new system, all crude oil is assessed the samecarbon intensity value, either the average of the California market in the year

of sale or the average from 2010, whichever is higher. Id. This system

took effect on January 1, 2012. Id.



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origin, received the identicalcarbon intensity value, unless they were

emerging HCICOs. This identical treatment of non-emerging-HCICOs was

intended to direct investment into low-carbon alternativefuels rather than

reward efficient sources of crude oil, because alternative fuels are

necessary to reach Californias desired GHG emissions reductions. Opinion

at 26. In other words, the LCFS was designed to minimize the shuffling

of more efficient crudes to California as a means of compliance and to

maximize incentives for the development ofalternative lower-carbon fuels.

The distinction between emerging HCICOs and all other crudes was

intended to prevent significant increases in the carbon intensity of

Californias crude mix. Opinion at 53.

Under the 2011 Provisions, approximately 200 crudes from Alaska,

Algeria, Brazil, California, Canada, Indonesia, Norway, Qatar, and Texas, to

name but a few locations, were all assigned the same carbon intensity value

because none of them were emerging HCICOs. See ER 11:2698-2699,

2:124-128;see also Opinion at 7. Seen in context of the full market, the

2011 Provisions do not appear protectionist. Opinion at 55. Further, as the

panel also noted, the alleged burden of using a higher-than-actual carbon

intensity value falls on both in-state and out-of-state crudes, and there is no



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evidence that California prefers its allegedly benefited crudes over its

allegedly burdened ones. Opinion at 55-56.

These facts distinguish this case fromBacchus and Carbone. Contra

AFPM at 11-13. Those cases both involved favoritism of a single, local

industry or entity overallcompetitors. Opinion at 56. InBacchus, Hawaii

granted a tax exemption only to some locally produced alcoholic beverages,

leaving all other alcoholic beverages subject to the state liquor tax. Bacchus,

468 U.S. at 265. In Carbone, Clarkstown required all solid waste to be

processed at a single, designated facility, excluding all competitors from the

processing market. Carbone, 511 U.S. at 385, 391. Both of these laws

impermissibly and intentionally squelche[d] competition. Id. at 392;see

also Bacchus, 468 U.S. at 272; Opinion at 56 (noting explicit [protectionist]

purpose inBacchus). The 2011 Provisions did not squelch competition,

since numerous in-state and out-of-state crudes were assigned the identical

carbon intensity value. There was no protectionist purpose, no aim to

insulate California firms from out-of-state competition. Opinion at 57.

The panel also appropriately dismissed AFPMs claimthat the LCFSs

record is replete with purported admissions of protectionist intent. See

AFPM at 13. As the panel indicated, these few quotes from an expansive

recordare easily understood, in context, as economic defense of a



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[regulation] genuinely proposed for environmental reasons. Opinion at 56

n.13 (quoting Clover Leaf Creamery, 449 U.S. at 463 n.7). Notably, several

of AFPMs isolated quotations reflect the legitimate objective of shifting

California away from fossil fuels and toward alternative fuels. The policy

choice to reduce fossil fuel consumption may be unwelcome to every

producer of crude oil, including those in California, but it is not a cleverly

disguised way to protect Californias crude oil industry from outside

competition.

The panels holdings concerning crude oil are fully consistent with

Supreme Court precedent, and en banc review is not warranted.

CONCLUSION

The Courts decision is entirely consistent with Supreme Court

precedent and with the case law of this and other circuits. Defendants-

Appellants respectfully request that this Court deny the petitions for

rehearing en banc.



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40

Dated: October 24, 2013 Respectfully submitted,

KAMALA D.HARRIS

Attorney General of CaliforniaROBERT W.BYRNESenior Assistant Attorney General

GAVIN G.MCCABESupervising Deputy Attorney General

/s/ M. Elaine Meckenstock

M.ELAINE MECKENSTOCKDeputy Attorney General

Attorneys for Appellants Richard W. Corey,

et al.

NATURAL RESOURCES DEFENSE

COUNCIL

/s/ David Pettit

David PettitAttorney for Appellant-Intervenor

Natural Resources Defense Council, Inc.

SIERRA CLUB/s/ Joanne Spalding

Joanne SpaldingAttorney for Appellant-Intervenor Sierra

Club

CONSERVATION LAW FOUNDATION

/s/ Jennifer RushlowJennifer Rushlow

Attorney for Appellant-Intervenor

Conservation Law Foundation

ENVIRONMENTAL DEFENSE FUND/s/ Sean H. Donahue

Sean H. DonahueTimothy J. OConnor

Megan CeronskyAttorneys for Appellant-Intervenor

Environmental Defense Fund



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CERTIFICATE OF COMPLIANCE

PURSUANT TO CIRCUIT RULES 35-4 AND 40-1

I certify that the attached response complies with this Courts order dated October

10, 2013 (Doc. 219), authorizing Defendants-Appellants to file one consolidatedresponse, not to exceed 8,400 words, to the two en banc petitions filed in these

consolidated cases. I certify that the attached response is proportionately spaced,has a typeface of 14 points or more and contains 8,184 words.

October 24, 2013 /s/ M. Elaine Meckenstock

DatedM. Elaine MeckenstockDeputy Attorney General



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IN THE UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

Case Nos. 12-15131, 12-15135

CERTIFICATE OF SERVICE

I hereby certify that I electronically filed Appellants Response To

Petitions For Rehearing En Banc with the Clerk of the Court for the United

States Court of Appeals for the Ninth Circuit on October 24, 2013 using the

CM/ECF system. All case participants will be served electronically by the

CM/ECF system.

/s/ M. Elaine Meckenstock

M.ELAINE MECKENSTOCK


Documents

calif reponse ethanol en banc.pdf