Am. Fuels & Petrochemical Mfrs. Ass'n v. Corey

AMERICAN FUELS & PETROCHEMICAL MANUFACTURERS ASSOCIATION, et al., Plaintiffs, v. RICHARD W. COREY, in his official capacityas Executive Officer of the California Air Resources Board, et al., Defendants.

Lead Case: 1:09-cv-2234-LJO-BAM

C/w member case: 1:10-cv-163-LJO-BAM

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

August 28, 2015

AMENDED¹ MEMORANDUM DECISION AND ORDER RE DEFENDANTS' MOTION TO DISMISS AND MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 326²)

I. INTRODUCTION

Currently before the Court is Defendants' and Defendant-Intervenors'³ motion to dismiss certain claims in Plaintiffs' First Amended Complaint, Doc. 325 ("the FAC").⁴ Doc. 327. Defendants move to dismiss the claims largely on the ground previous litigation in this case has resolved the claims or precludes Plaintiffs from asserting them. See id. at 2. In addition, Defendants move for judgment to be entered in their favor and against Plaintiffs on various aspects of Plaintiffs' claims. See id. The Court didnot set a hearing for the motion and the parties did not request one. The Court finds it appropriate to rule on the motion without oral argument. See Local Rule 230(g). For the following reasons, the Court GRANTS IN PART and DENIES IN PART the motion.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Abbreviated Facts and Procedural History.

The Court incorporates by reference the summary of the extensive procedural history of this consolidated action contained in the Court's recent Memorandum Decision on Plaintiffs' motion to amend. See Rocky Mountain Farmers Union v. Goldstene, No. 1:09-cv-2234-LJO-BAM, 2014 WL 7004725, at *1-8 (E.D. Cal. Dec. 11, 2014) ("RMFU Amendment"). Only a brief recitation of the factual and procedural background necessary to resolve Defendants' motion to dismiss follows.

The RMFU Plaintiffs filed this consolidated action in December 2009 (Doc. 1), a first amended complaint on January 11, 2010 (Doc. 7), and a second amended complaint on January 28, 2010 (Doc. 11). Plaintiffs filed their complaint on February 2, 2010. See 1:10-cv-163-LJO-BAM, Doc. 1. The cases were consolidated on October 18, 2010. See 1:10-cv-163-LJO-BAM, Doc. 99.

Plaintiffs challenge the constitutionality of California's Low Carbon Fuel Standard ("the LCFS"), 17 Cal. Code Regs. §§ 95480-90.⁵ RMFU Amendment, 2014 WL 7004725, at *1. The LCFS "is a collection of regulations promulgated by Defendant California Air Resources Board ('CARB') to implement provisions of California Assembly Bill 32 ('AB 32'), California's Global Warming Solutions Act of 2006." Id. (citations omitted). Plaintiffs challenged both the original LCFS regulations, which went into effect on January 1, 2011 ("the 2011 provisions" or "the Original LCFS"), as well as the LCFS's provisions pertaining to crude oil, which were amended in 2012 ("the Amended LCFS"). See id. at *7.

The parties filed complex cross-motions for summary judgment, which the Court resolved in three separate orders, primarily in Plaintiffs' favor. See RMFU Amendment, 2014 WL 7004725, at *1(citing Rocky Mountain Farmers Union v. Goldstene, 843 F. Supp. 2d 1042 (E.D. Cal. 2011) ("Rocky Mountain Preemption"); Rocky Mountain Farmers Union v. Goldstene, 843 F. Supp. 2d 1071 (E.D. Cal. 2011) ("Rocky Mountain Ethanol"); Rocky Mountain Farmers Union v. Goldstene, Nos. 09-cv-2334-LJO-DLB, 10-cv-163-LJO-DLB, 2011 WL 6936368 (E.D. Cal. Dec. 29, 2011) ("Rocky Mountain Crude"). Defendants timely appealed those orders. See Rocky Mountain Farmers Union v. Goldstene, 730 F.3d 1070, 1086 (9th Cir. 2014) ("RMFU"), reh'g denied, 740 F.3d 507, 508 (9th Cir. 2014), cert. denied, 134 S.Ct. 2875 (2014), 134 S.Ct. 2884 (2014).

1. Rocky Mountain Crude.

In Rocky Mountain Crude, this Court addressed Plaintiffs' challenges to the crude oil provisions of the Original LCFS. 2011 WL 6936368. The Court found that those provisions "discriminate[d] against out-of-state and foreign crude oil while giving an economic advantage to in-state crude oil." Id. at *1. Specifically, the Court found that "[t]he design and practical effect of the LCFS [was] to favor California [high carbon intensity crude oils ('HCICOs')] and discriminate against foreign HCICOs and out-of-state and foreign existing crude sources." Id. at *12.⁶

The LCFS did so by giving California TEOR "an artificially favorable and lower carbon intensity value" while "all other existing crude sources [were] assigned higher carbon intensity values than the actual carbon intensity values for those crudes." Id. at *12. Similarly, the LCFS gave "California's HCICO favorable treatment by assigning it the baseline average carbon intensity value, a value that is substantially lower than its actual carbon intensity score; no other HCICOs receive[d] this favorable treatment." Id. Conversely, "[c]rude oils from Alaska and foreign countries are disadvantaged because they are assigned a carbon intensity value that is higher than the actual carbon intensity value for those crudes." Id. at * 14. The Court "included two tables that showed some of the crude oils in the California market and compared their assessed carbon intensities with their individual carbonintensities." RMFU, 730 F.3d at 1098 (citing Rocky Mountain Crude, 2011 WL 6936368, at *11 n.5, *12 n.6). Based on these two tables, the Court observed that "California TEOR was treated favorably compared to out-of-state sources based on a comparison of a fuel's individual carbon intensity to its assigned carbon intensity." Id. at 1099.

The Court found that the "LCFS gives an economic advantage to California TEOR over foreign HCICOs and assigns a mandatory economic disadvantage to out-of-state and foreign existing crude sources." Id. at *17. Accordingly, the Court held that the LCFS discriminated against interstate commerce by design and in practical effect because it was "designed to discourage the entry of foreign HCICOs from entering the California market, while giving an advantage to California's HCICO," thereby giving "an economic advantage to an in-state interest." Id. at *14. "The LCFS' favorable treatment of California's TEOR as compared to other HCICOs and other existing crude sources violate[d] the Commerce Clause even though the distinctions drawn appear[ed] to be neutral." Id. at *13.

The Court found that even though the LCFS's crude oil provisions were "related to economic protectionism," they served a legitimate local purpose. Id. at *15. Nonetheless, because the LCFS's goal of reducing global warming could be achieved by other, nondiscriminatory alternatives, the Court found that the LCFS's crude oil provisions were impermissibly discriminatory against interstate and foreign commerce, in violation of the Commerce Clause. Id. at *16. The Court therefore struck down the LCFS as unconstitutional. Id.

2. RMFU.

On appeal, the Ninth Circuit affirmed in part, reversed in part, vacated in part, and remanded the case to this Court. Id. at 1077.

The Ninth Circuit disagreed with this Court's determination that the Original LCFS's crude oil provisions "treated crude oil in a facially neutral manner but . . . taken as a whole . . . discriminated against out-of-state crude oil in purpose and effect." RMFU, 730 F.3d at 1097. The Ninth Circuit held that this Court erred by failing to analyze "the full market" for crude oils in California. See RMFU, 730F.3d at 1099.

The Ninth Circuit acknowledged that, according to the two tables relied on by this Court, the LCFS appeared to treat California TEOR favorably compared to other foreign crude oils. See id. at 1099. But the Ninth Circuit noted that those "tables left out several significant parts of the 2006 [crude oil] market," and "[t]he remainder—almost one quarter of the market—alters the impression of the" LCFS's crude oil provisions. Id. The Ninth Circuit provided the following table, which "show[ed] the full California crude-oil market in 2006":

% 2006

Market

Carbon Intensity

Assigned Carbon

Intensity

Variance

CA TEOR

14.8

18.89

8.07

-10.82

Gas Injection

1.3

12.75

8.07

-4.68

Water Flood

6.10

5.57

8.07

+2.50

California Primary

16.5

4.31

8.07

+3.76

Alaska Light

14.8

4.36

8.07

+3.71

Imported Light

44.4

4.65

8.07

+3.42

Venezuela Heavy

0.063

21.95

21.95

—

Id. Based on the data contained in this table, the Ninth Circuit concluded:

Seen in context of the full market, the [LCFS's crude oil provisions] do not appear protectionist, though they do assess California TEOR a carbon intensity well below its individual value. California TEOR benefited from an assessed carbon intensity lower than its individual carbon intensity. But California Primary has the lowest individual carbon intensity in the market; it suffered more from the same arrangement than light crude from Alaska or abroad. Under the [LCFS's crude oil provisions], California Primary and Water Flood were both assessed carbon intensity values higher than their individual values. Those burdened sources together made up 22.6% of the 2006 market; the benefited California sources formed only 16.1%. This burden on "major in-state interests . . . is a powerful safeguard against legislative abuse."

RMFU, 730 F.3d at 1099 (citations omitted).

The Ninth Circuit observed that CARB's stated purposes for enacting the Original LCFS's crude oil provisions "were: (1) to prevent an increase in the carbon intensity of California's crude oil market; (2) to avoid fuel shuffling; and (3) to direct innovation toward the development of alternative fuels rather than the search for more efficient methods of crude-oil extraction." RMFU, 730 F.3d at 1098. The Ninth Circuit that these stated purposes for enacting the Original LCFS were "genuine," id. at 1100, and therefore held that the LCFS's crude oil provisions had "no protectionist purpose, no aim to insulateCalifornia firms from out-of-state competition." Id.

The Ninth Circuit observed that "[h]aving found a protectionist purpose, which [the Ninth Circuit] conclude[d] was incorrect," this Court "did not discuss evidence of an actual adverse effect created by" the...