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In recent LCFS amendments, CARB introduced a new price cap on all LCFS credit transfers and authorized limited future credit borrowing.

By Joshua T. Bledsoe, Brian F. McCall, and Kevin A. Homrighausen

On November 21, 2019, the California Air Resources Board (CARB) passed Resolution 19-27, approving several amendments to the Low Carbon Fuel Standard (LCFS) program designed to foster stability in the LCFS market and promote access to electric vehicle (EV) transportation for disadvantaged and low-income communities in California.

Concerns of Credit Price Run-up

The LCFS is a key pillar of California’s efforts to reduce greenhouse gas (GHG) emissions in the transportation sector. As discussed in previous posts, regulated entities must either: (1) ensure that fuels supplied in California meet annual, decreasing carbon intensity (CI) targets (e.g., by blending biofuels into gasoline and diesel); or (2) procure and surrender credits to CARB. Regulated entities can buy LCFS credits in the bilateral market or in the Credit Clearance Market (CCM), a CARB-administered market intended to supply cost-controlled credits in the event of a market shortage. The rulemaking appears to reflect CARB’s acknowledgment of long-held concerns in the LCFS market that deficit generation will outstrip credit generation, and the CCM will be unable to adequately cap credit prices. The steady advance of LCFS credit prices since the summer of 2017 is well documented in CARB’s Credit Transfer Activity Reports. The most recent LCFS amendments are intended to ensure that the CCM will continue functioning in the event of a credit shortage and to safeguard against a potential LCFS credit price run-up.

Under the TCI program, fuel suppliers would be required to hold allowances to cover their reported emissions.

By Jean-Philippe Brisson, Joshua T. Bledsoe, and Benjamin W. Einhouse

The Transportation & Climate Initiative (TCI), a regional collaboration of Northeast and Mid-Atlantic states and the District of Columbia, has advanced its program to reduce greenhouse gas (GHG) emissions from the combustion of transportation fuels. On October 1, 2019, TCI published a Framework for a Draft Regional Policy Proposal (the Policy Proposal).

This blog post reviews the presentation of the TCI program’s key design elements and summarizes key stakeholder comments on the Policy Proposal.

By Joshua T. Bledsoe and Kimberly D. Farbota

On September 27, 2018, the California Air Resources Board (CARB) passed Resolution 18-34, extending the Low Carbon Fuel Standard (LCFS) Program to 2030 and making significant changes to the design and implementation of the Program. This blog outlines seven takeaways for market participants and stakeholders.

1. CARB Appears Committed to the LCFS

While California’s Cap-and-Trade Program attracts the lion’s share of attention in the trade press, CARB may view the LCFS as an equally important greenhouse gas (GHG) emissions reduction measure. According to CARB, the Cap-and-Trade Program’s traditional role in the state’s overarching scheme has been to backstop GHG reductions, not drive them. Under this interpretation, the Cap-and-Trade Program has acted as an insurance policy guaranteeing the state’s GHG emissions reduction trajectory via operation of the program’s hard cap in the event that other, more direct emissions reduction measures fail to achieve expected reductions (e.g., the Renewables Portfolio Standard, Advanced Clean Car Standards, Title 24 Energy Efficiency Standards, the LCFS, etc.).

By Joel C. Beauvais and Stacey L. VanBelleghem

On August 21, 2018 the Trump administration released its proposed Affordable Clean Energy (ACE) rule to replace the Obama administration’s Clean Power Plan (CPP). Both rules would regulate CO2 emissions from existing electric generating units (EGUs) pursuant to Section 111(d) of the Clean Air Act (CAA). The ACE proposal includes three elements:

  • Replacing the CPP with new emission guidelines for CO2 emissions from existing EGUs
  • Revising implementing regulations to guide the Environmental Protection Agency (EPA) and states on this and future Section 111(d) rulemakings
  • Revisions to the New Source Review (NSR) program for power plants

Here are six key points stakeholders should know about EPA’s proposed ACE rule.

Appeal in POET II could complicate California Air Resources Board’s proposed LCFS amendments.

Joshua T. Bledsoe, Kimberly D. Farbota

In the case commonly referred to as POET II, petitioner POET, LLC, a biofuels manufacturer, challenged the Low Carbon Fuel Standard (LCFS) and Alternative Diesel Fuels (ADF) regulations which the California Air Resources Board (ARB) adopted in 2015. After briefing had been completed, defendant-respondent ARB filed a motion for judgement on the pleadings (MJOP) on November 21, 2017, in an attempt to have the case dismissed in light of earlier rulings in the related POET I case. On January 5, 2018 the Fresno County Superior Court issued a ruling granting the MJOP with respect to all claims and dismissing the entire case as moot. On March 6, 2018, POET noticed an appeal of the Superior Court’s decision to the California Court of Appeal for the Fifth Appellate District, the same Court of Appeal that issued the decisions in POET I. In that decision, the court sharply criticized the ARB for not acting in good faith and found that ARB failed to comply with the California Environmental Quality Act (CEQA).

Also on March 6, 2018, ARB released proposed amendments to the LCFS that would, inter alia, extend the Program to 2030. Included in the amendment package is an analysis of nitrogen oxide (NOx) emissions attributable to the LCFS, prepared in an attempt to fulfill the writ of mandate issued in POET I. On March 12, 2018, ARB released Regulatory Guidance Document 18-01, which updates prior guidance regarding ARB’s plans to meet the requirements of the writ of mandate issued in POET I. The appeal in POET II carries important implications for the Regulatory Guidance, the amendment package, and potentially for the future of the LCFS Program.

By Joshua Bledsoe and Kimberly Farbota

Recent guidance published by the California Air Resources Board (ARB) clarifies the treatment of diesel fuels under the Low Carbon Fuel Standard (LCFS) in light of the Court of Appeals’ May 30, 2017 decision in POET I. Meanwhile, in POET II, ARB recently filed a Motion for Judgment on the Pleadings (MJOP), in an attempt to have the lawsuit dismissed as moot before a hearing on the merits occurs. While the MJOP addresses all of the claims in POET II and various other filings have been made by the parties in connection with the motion (e.g., Requests for Judicial Notice, a Motion to Strike, etc.), this blog entry focuses only on the key aspects of the MJOP and POET’s opposition thereto.

New Guidance Regarding Implications of the POET I Decision

On November 22, 2017, the ARB posted regulatory guidance to clarify the scope of the writ of peremptory mandate issued by the Fresno County Superior Court on October 18, 2017 (the Modified Writ) to implement the May 30, 2017 POET I decision.

As we have discussed in previous posts, the POET I case arose from Petitioner POET, LLC’s challenges to the original LCFS regulation adopted by ARB in 2009. On April 10, 2017, the Court of Appeal ruled that ARB had failed to faithfully execute a writ of peremptory mandate requiring it to remedy violations of the California Environmental Quality Act (CEQA) that occurred during adoption of the original LCFS. In response to a petition for rehearing filed by ARB, the Court of Appeal reissued its opinion on May 30, 2017.

By Joshua T. Bledsoe and Kimberly Farbota

In a previous post, we described how potential delays in the resolution of the case commonly known as POET I could create uncertainty regarding the future of the California Low Carbon Fuel Standard (LCFS). On August 23, 2017, the Supreme Court of California issued an order: (1) denying California Air Resources Board (ARB)’s petition for review of the appellate decision in POET I; (2) denying ARB’s request for an order directing depublication of the associated opinion; and (3) remitting the case to the Fresno County Superior Court.

As we have discussed in previous posts, the POET I case arises from petitioner POET, LLC’s challenges to the original LCFS regulation adopted by ARB in 2009. On April 10, 2017, the Court of Appeal ruled that ARB had failed to faithfully execute a writ of peremptory mandate requiring it to remedy violations of the California Environmental Quality Act (CEQA) that occurred during adoption of the original LCFS. In response to a petition for rehearing filed by ARB, the Court of Appeal reissued its opinion on May 30, 2017. The revised opinion narrows the holding to focus more squarely on the facts of the case, but does not substantively alter the April 10, 2017 opinion. On July 10, 2017, ARB filed a petition with the California Supreme Court seeking depublication of the May 30, 2017 opinion, or in the alternative, Supreme Court review. In the petition, ARB argued that the decision should be depublished because it creates unnecessary confusion about how agencies and courts should address uncertainty under CEQA. ARB also argued that Supreme Court review could provide clarification regarding the standards by which compliance with a CEQA-related writ should be measured. As is common practice, the Supreme Court’s August 23, 2017 order did not provide the Court’s reasons for denying ARB’s petition and request.

By Joshua Bledsoe and Kimberly Farbota

Two recent developments in the interrelated legal challenges commonly known as POET I and POET II may create additional uncertainty for the future of the Low Carbon Fuel Standard Program (LCFS).

Earlier this year, the California Court of Appeal for the Fifth Appellate District (Court of Appeal) issued two opinions in the POET I case, both of which were adverse to the California Air Resources Board (ARB). As we have discussed in previous posts, the POET I case arises from petitioner POET, LLC’s challenges to the original LCFS regulation adopted by ARB in 2009. On April 10, 2017, the Court of Appeal ruled that ARB had failed to faithfully execute a writ of peremptory mandate (the Writ) requiring it to remedy violations of the California Environmental Quality Act (CEQA) that occurred during adoption of the original LCFS. In the opinion, the Court of Appeal largely agreed with petitioner POET, LLC, finding that ARB failed to comply with CEQA’s requirement that it analyze the degree to which nitrogen oxide (NOx) emissions would be impacted by implementation of the LCFS.

In response to ARB’s petition for a rehearing, the Court of Appeal reissued its opinion on May 30, 2017. The revised opinion narrows the holding to focus more squarely on the facts of the case, but does not substantively alter the April 10, 2017 opinion. In the revised opinion, the Court of Appeal assigned continuing jurisdiction to the Fresno County Superior Court (Superior Court) over POET I pending ARB’s completion of the revised NOx analysis and discharge of a reissued writ.

By Joshua T. Bledsoe and Max Friedman

As discussed in a previous post, the California Court of Appeal for the Fifth Appellate District (Court of Appeal) ruled on April 10, 2017 that the California Air Resources Board (ARB) had failed to properly follow a writ of peremptory mandate (the Writ) requiring ARB to remedy violations of the California Environmental Quality Act (CEQA) that occurred during adoption of the original Low Carbon Fuel Standard (LCFS). The Court of Appeal largely agreed with the petitioner, POET, LLC (POET), a South Dakota-based ethanol producer, holding that ARB had failed to comply with CEQA’s requirement that it analyze the degree to which nitrogen oxide (NOx) emissions from biodiesel fuels had been and would be impacted by the implementation of the LCFS. Indeed, the Court of Appeal found that ARB had acted in bad faith in selecting a definition of the “CEQA project” that failed to account for NOx emissions attributable to the original LCFS.

As a result, the Court of Appeal directed the Fresno County Superior Court (Superior Court) to deny ARB’s request for dismissal of the Writ and to set aside its 2015 approval of the CEQA analysis regarding NOx emissions from biodiesel until ARB had conducted a revised analysis. The Court of Appeal also froze the carbon intensity (CI) targets for diesel fuel at 2017 levels until ARB had completed its revised NOx assessment. The Superior Court implemented the Court of Appeal’s ruling on April 20, 2017, vacating its prior discharge of the Writ and modifying the reissued Writ as required by the higher court. However, on April 28, 2017 the Superior Court vacated its April 20th order as premature due to subsequent filings by ARB.

By Joshua T. Bledsoe and Max Friedman

In two recent posts, we discussed how California’s Low Carbon Fuel Standard (LCFS) had been thrown into a state of potential upheaval by two interrelated legal challenges commonly known as POET I and POET II, including a recent oral argument before the California Court of Appeal for the Fifth Appellate District (Court of Appeal) in POET I. That proceeding aimed to determine whether a lower court correctly dismissed a writ of peremptory mandate (the Writ) requiring the California Air Resources Board (ARB) to remedy violations of the California Environmental Quality Act (CEQA) that occurred during promulgation of the original LCFS regulation. ARB re-adopted the revised LCFS regulations in September 2015, but POET, LLC (POET), a South Dakota-based ethanol producer, contended that these revisions failed to properly discharge ARB’s responsibilities under the Writ.

Court Rules Against ARB over NOx Analysis

In its published April 10, 2017 opinion in POET I, the Court of Appeal largely agreed with POET, reversing the lower court’s dismissal of the Writ and holding that ARB had failed to comply with CEQA’s requirement that it analyze the degree to which nitrogen oxide (NOx) emissions from biodiesel fuels had been and would be impacted by the implementation of the LCFS rules. The Court found that ARB’s failure to properly define the scope of the project caused ARB to use an improper baseline against which NOx emissions could be measured. As a result, the Court concluded that ARB’s analysis of NOx emissions from biodiesel fuel was deficient under CEQA, and the environmental analysis was inadequate as an informational document disclosing the entirety of the project’s impacts.