Stakeholders should anticipate potential delays and market impacts amid the ongoing legal challenges and the Office of Administrative Law’s recent disapproval.

By Joshua Bledsoe, Winston Stromberg, Brian McCall, and Samantha Yeager

Environmental groups and a biofuel trade association are challenging the California Air Resources Board’s (CARB’s) November 2024 amendments to the California Low Carbon Fuel Standard Program (LCFS or the Program). The environmental groups allege that CARB violated the California Environmental Quality Act (CEQA) in adopting the amendments and certifying the amendments’ final environmental impact analysis (EIA). The trade association also asserts CEQA claims, as well as violations of the California Administrative Procedure Act, the California Constitution, the US Constitution, and Assembly Bill 32.

In this blog post, we provide an overview of the lawsuits — all of which were filed in the Fresno County Superior Court in December 2024. We also provide our initial insights, especially in light of the Office of Administrative Law’s (OAL’s) decision to disapprove the amendments on February 18, 2025.

Food & Water Watch et al. v. California Air Resources Board et al.

The first lawsuit focuses on changes related to the LCFS’s avoided methane crediting system.¹ It alleges that CARB’s amendments will increase environmental and health risks by incentivizing the expansion of operations at large-scale dairy farms.

For context, the LCFS creates a crediting system, under which producers of low-carbon fuel generate salable credits based on the fuel’s lifecycle carbon intensity (CI), volumes sold, and the Program’s applicable, annual CI benchmark. CARB accounts for avoided methane emissions when calculating the CI of renewable natural gas (RNG), which is considered a replacement for petroleum-based diesel due to RNG’s predominant use in mid- and heavy-duty engines. RNG produced via the anaerobic digestion of animal manure (e.g., at dairy farms located in the Central Valley) has negative CI scores under the LCFS. The regulatory amendments generally preserve the Program’s avoided methane crediting system in ways that the environmental groups claim will promote so-called “factory farming” and purportedly harm the environment and public health.

Specific allegations include that CARB failed to adequately analyze and mitigate the impacts of expanded operations and larger herd sizes at dairy farms. The environmental groups assert that CARB’s analysis improperly claimed that expansion was too speculative and that CARB has identified no statistical relationship between the installation of anaerobic digesters and an increase in herd sizes.² They further allege that CARB argued individual expansion projects were outside its authority and would be subject to subsequent environmental review, eliminating the need to conduct detailed CEQA review as part of the amendments.³

Petitioners also criticize CARB for not considering reasonable alternatives to the amendments, such as eliminating methane credits altogether or directly regulating methane emissions from farms, and for not analyzing the amendments’ impacts beyond California, despite the ability to generate LCFS credits nationwide. Finally, petitioners allege certain procedural violations, faulting CARB for not recirculating the Draft EIA after making modifications to the LCFS amendments.

The case number is 24CECG05508. A case management conference is scheduled for April 11, 2025.

Communities for a Better Environment et al. v. California Air Resources Board et al.

The second lawsuit alleges that CARB’s final EIA violated CEQA by analyzing several aspects of the amendments incorrectly or insufficiently and by failing to consider reasonable alternatives.⁴

The petitioners assert that CARB failed to analyze the impacts associated with CARB’s decision to modify the CI benchmark schedule and to modify how hydrogen produced with RNG as a feedstock is treated under the LCFS. They also critique a mechanism CARB chose to adopt that allows CARB staff to change the benchmark schedule in response to market conditions, without public rulemaking or CARB board approval.

Specifically, petitioners argue that CARB did not address or inadequately addressed certain impacts associated with these modifications, including:

• how an increase in crop-based biofuel production might harm global food production and create food insecurity;
• how the inclusion of Direct Air Capture projects in the LCFS program could lead to continued fossil fuel use that undermines California’s climate policies;
• how the amendments undermine the development of clean hydrogen by incentivizing hydrogen produced from methane; and
• how the refineries producing this methane-derived hydrogen release harmful air pollutants in the communities where they operate.

Additionally, petitioners contend that CARB failed to analyze zero-emissions alternatives, such as those focused on electric vehicles.

The case number is 24CECG05430. A case management conference also is scheduled for April 11, 2025.

Growth Energy v. California Air Resources Board

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

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

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

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

The case number is 24CECG05514.

Potential Remedies

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

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

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

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

OAL Notice of Disapproval

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

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

Prior Challenges to the LCFS

Previous LCFS litigation includes the POET I and POET II cases, which challenged CARB’s CEQA review. In POET I, the court held that CARB failed to meet its CEQA obligations when originally adopting the Program in 2009. The court issued a writ of mandate ordering CARB to remedy its deficient environmental review, but allowed the regulations to remain in effect, emphasizing the LCFS program’s environmental benefits. In the meantime, petitioners filed POET II, challenging CARB’s 2015 LCFS and Alternative Diesel Fuels (ADF) regulations. The Fresno County Superior Court dismissed the case as moot due to previous rulings in the POET I case. In 2017, the California Court of Appeal ruled that CARB did not faithfully execute the writ under POET I, failing to address NOx emissions from biodiesel in a manner that complied with CEQA. To comply with this ruling, CARB set aside its approval of parts of its 2015 environmental analysis, but again, the court let the remaining portions of the regulations remain in effect, albeit freezing the CI benchmarks until CARB came into full compliance with CEQA — leading to depressed LCFS credit prices. (For more details on the POET I and POET II cases, see this blog post.)

Beyond CEQA, California’s LCFS and a similar Oregon program faced and survived constitutional challenges. In 2019, the US Supreme Court denied certiorari in American Fuel & Petrochemical Manufacturers (AFPM), et al., v. O’Keeffe, et al (O’Keeffe), effectively affirming the Ninth Circuit’s decision that Oregon’s Clean Fuels Program, which is closely modeled after California’s LCFS program, does not violate the US Constitution’s Dormant Commerce Clause by impermissibly favoring in-state fuels over out-of-state fuels. This writ denial followed the Supreme Court’s refusal in 2014 to review a Ninth Circuit decision in Rocky Mountain I, which upheld California’s LCFS program under the same reasoning. (For more details on these cases, see this blog post.)

Latham & Watkins will continue to monitor developments in this area.

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1. Petition, Food & Water Watch et al. v. California Air Resources Board et al., No. 24CECG05508 (Cal. Super. Ct. Fresno Cnty. Dec. 18, 2024). ↩︎
2. Proposed Regulatory Amendments to Low Carbon Fuel Standard, Recirculated Draft Environmental Impact Analysis, p. 28. ↩︎
3. Id. at 41. ↩︎
4. Petition and Complaint, Communities for a Better Environment v. California Air Resources Board et al., No. 24CECG05430 (Cal. Super. Ct. Fresno Cnty. Dec. 18, 2024). ↩︎
5. Petition and Complaint, Growth Energy v. California Air Resources Board et al., No. 24CECG05514 (Cal. Super. Ct. Fresno Cnty. Dec. 18, 2024). ↩︎