ACT News 2017

Poet LLC

LCFS, for Most Part, Survives Challenge

April 21, 2017 in Biofuels, litigation by Rich Piellisch  |  No Comments

Court Orders CARB to Address Analytical Deficiencies,
Meanwhile the Program Continues for Most Clean Fuels

LCFS, California’s complicated low carbon fuel standard, has survived mostly intact the latest court ruling in favor of the plaintiff, South Dakota-based ethanol producer Poet, LLC, in an ongoing legal challenge. Once again, the court is requiring the California Air Resources Board to address deficiencies in its environmental analysis. But industry observers are pleased that the court has allowed the bulk of LCFS implementation to continue in the interim.


The bottom line for alt fuel suppliers? They can continue to earn their credits, at least for now.

Poet, LLC biorefinery for cellulosic ethanol in Emmetsburg, Iowa

The LCFS requires fuel providers to gradually reduce the CI/carbon intensity of their fuels by 10% by 2020. It is one of California’s suite of greenhouse gas-fighting policies.

‘The LCFS Has Spurred Innovation’

Since its adoption, the LCFS has spurred innovation and investment in renewable natural gas, biogas, biodiesel, ethanol, and electricity to power both heavy-duty and light-duty vehicles.

Through the third quarter of 2016, according to CARB data, the LCFS has delivered roughly 23 million metric tons of carbon reductions,.

The legal battle dates back to 2011, when the LCFS first went into effect. Poet claimed CARB improperly followed procedures of CEQA, the California Environmental Quality Act, when it first adopted the rule in 2009. This case is known in legal circles as Poet I.

Changing Baselines

After several rounds of legal review, and to remedy the claim, CARB re-adopted the LCFS in 2015 along with the separate, related Alternative Diesel Fuels regulation. A lower court accepted CARB’s remedy and dismissed the case, but Poet appealed, claiming CARB used the wrong baseline for considering NOx impacts associated with increased biodiesel consumption as a result of the regulation. When CARB re-adopted the regulation, it chose a 2014 baseline, instead of the original 2009 baseline.

The latest decision on April 10 from the California Court of Appeal for the Fifth Appellate District directs CARB to redo its CEQA analysis – again – to address whether the LCFS “is likely to have caused an increase in NOx emissions in the past and is likely to cause an increase in NOx emissions in the future.”

Diesel Frozen 

The court left unchanged provisions of the gasoline component of the LCFS, but froze the diesel component to 2017 levels until CARB can present its fix. That means, CI levels of gasoline will continue to ratchet down each year on the schedule established when CARB re-adopted the rule in 2015, while diesel CI reductions are frozen at 2017 levels until the case is resolved.

In a prepared statement, CARB responded: “We are pleased that the Court left the core provisions of the Low Carbon Fuel Standard intact, along with all of the Alternative Diesel Fuels regulation, recognizing their overall environmental benefits. Although we disagree with some aspects of the opinion, which we are still reviewing, CARB anticipates acting expeditiously to address the court’s ruling, and to move forward as appropriate with these important programs.”

‘The Court Did Not Close the Door to Biodiesel’

In its response to the decision, the National Biodiesel Board released the following statement: “While we continue to review and do not necessarily agree with the Court’s findings of a violation, it is positive the court recognized the environmental and public health benefits of biodiesel. We are pleased the court did not close the door to biodiesel under the LCFS and appreciate the ongoing efforts of the California Air Resources Board.”

Poet president and COO Jeff Lautt released the following statement:

“We appreciate that the court recognized that state regulations must be based on solid science to deliver cleaner, more affordable options at the pump. This is now the second time the court has ruled that the California Air Resources Board has not followed the law in implementing the Low Carbon Fuel Standard. We look forward to working with state officials to bring this program in line with the latest science.

Poet Says It Wants ‘Full Range of Renewable Options’

“Homegrown ethanol is America’s most abundant low-carbon fuel, and we must ensure that all renewable energy producers can compete on a level playing field against imported energy and fossil fuels. This is especially true given USDA’s recent research demonstrating ethanol has 43% lower greenhouse emissions than gasoline. This decision will require regulators to sit down, take a look at the science and finally get this right so there is a full range of renewable options available to California drivers who care deeply about their health and their climate.

“Poet is committed to working with other biofuel producers to deliver the best selection of homegrown fuels to California drivers, including biodiesel, Midwest ethanol, renewable diesel, and cellulosic ethanol. Poet supports an LCFS that’s based on sound science and allows all renewable fuel access to the market to improve California’s health and environment.”

‘Poet II’ Still Pending

CARB says it hopes to complete the new CEQA review this year, so the program could be fully back on track by early 2018, barring further complications.

Meanwhile, a separate case, known as Poet II, presents a parallel challenge to CARB’s 2015 re-adoption, with many of the same issues. A hearing in that case is slated for late July. The uncertainty presented by the continuing legal challenges creates difficulty for alternative fuel providers who rely on market certainty to guide long-term investment decisions.

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