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U.S. Supreme Court Denies Review of California Low-Carbon Fuel Standard

June 30, 2014

The U.S. Supreme Court today denied several petitions seeking review of the Ninth Circuit's decision upholding California's Low-Carbon Fuel Standard ("LCFS") against claims that the LCFS violates the Commerce Clause of the U.S. Constitution. While today's decision makes the Ninth Circuit's decision final, the underlying issue -- how far individual states can go to regulate greenhouse gases and promote renewable energy without violating the Commerce Clause -- will remain the subject of intense litigation. For example, recent lower-court decisions from Colorado and Minnesota, reaching apparently opposite conclusions on the constitutionality of state renewable portfolio requirements, suggest that the Supreme Court may ultimately have to step into the fray.

As we've previously reported here and here, California's LCFS requires petroleum distributors in the state to reduce the carbon intensity of motor fuels they sell by blending them with biofuels or other lower-carbon alternatives. The LCFS contains a complex mechanism which uses a life-cycle analysis to assign carbon intensity scores to different biofuels production processes, providing a significant economic advantage to fuels with lower carbon intensity scores. This mechanism was challenged by a coalition of out-of-state alcohol fuels producers and trade groups, who argued that California's mechanism discriminates against them on its face by assigning higher carbon intensity scores to out-of-state producers than in-state producers. California rebutted these claims by asserting that its life-cycle analysis model is location-neutral and reflects the reality that production of alcohol fuels in some areas has a greater carbon footprint than fuels produced within California. Alcohol fuels produced in the Midwest, for example, generally have a higher carbon footprint than fuels produced within California because Midwest biofuels are produced using electricity from a grid that relies more heavily on coal-fired plants and because of the lengthy transportation routes required to deliver Midwest fuels into California add to the out-of-state fuel's carbon intensity.

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U.S. District Court Rejects Broad Commerce Clause Attack on Colorado's Renewable Portfolio Standard

May 13, 2014

On May 9, the Judge William J. Martinez of the U.S. District Court for the District of Colorado summarily dismissed a broad-based challenge to the Colorado Renewable Portfolio Standard ("RPS"), which argued that the RPS per se violates the "dormant" Commerce Clause of the United States Constitution. The decision supports the view that a RPS will pass muster under the Commerce Clause as long as it regulates in-state and out-of-state generators in an even-handed way, and does not impose restrictions on RPS eligibility that favor in-state generators over out-of-state generators. Energy & Environmental Legal Inst. v. Epel et al., No. 11-cv-00859-WJM-BNB (issued May 9, 2014).

Enacted by Colorado voters in 2004 and amended several times since, the Colorado RPS now requires Colorado's investor-owned utilities to obtain 30% of their electricity from renewable sources by 2020, while cooperatives serving 100,000 or more meters must meet a 20% standard, and smaller cooperatives and municipal utilities must meet a 10% standard. In 2011, plaintiff Energy and Environmental Legal Institute (then known as the American Traditions Institute) filed a lawsuit seeking to invalidate Colorado's RPS statute on Commerce Clause grounds. Last week's decision rejects that challenge in its entirety, although plaintiffs have indicated they plan to appeal to the U.S. Court of Appeals for the Tenth Circuit.

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Complicating "Coal By Wires" Regulation, Minnesota Court Strikes Down Greenhouse Gas Regulation

April 21, 2014

In a ruling with potentially far-reaching consequences for state-level attempts to regulate greenhouse gases, the U.S. District Court for the District of Minnesota on April 18 issued a ruling striking down key elements of Minnesota's Next Generation Energy Act ("NGEA"). For the Pacific Northwest, in particular, the ruling could complicate efforts by Washington, Oregon, and California to limit "coal by wires" -- the importation of coal-generated electricity from plants located in states like Montana and Arizona. State of North Dakota et al. v. Heydinger et al., No. 11-cv-3232 (SRN/SER) (issued April 18, 2014).

Passed by Minnesota's legislature in 2007, the NGEA is aimed at reducing the carbon footprint of electricity consumed in the state. The statute prohibits new power plants within Minnesota that "would contribute to state power sector emissions." To address the "coal by wires" problem, the statute also broadly prohibits importing power generated outside Minnesota if that generation "would contribute to statewide power sector carbon dioxide emissions," and also prohibits long-term power purchase contracts from facilities larger than 50 MW that would contribute to Minnesota's power sector carbon dioxide emissions.

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Ninth Circuit Denies Rehearing in Greenhouse Gas Case, Continues to Struggle With Standing in Climate Litigation

February 13, 2014

A recent order of the U.S. Court of Appeals for the Ninth Circuit illustrates the extent to which courts continue to struggle with otherwise routine legal issues when confronting claims related to climate change and greenhouse gas emissions. The order denies rehearing of last year's Ninth Circuit panel decision in Washington Environmental Council v. Bellon, which concluded that a group of environmental plaintiffs seeking to force the Washington Department of Ecology to issue greenhouse gas regulations lacked standing to bring the claim.

The rehearing order was unusual in several respects. Ordinarily, a dissatisfied party to the case seeks rehearing and, in nearly all cases, rehearing is denied in a short order simply noting that an insufficient number of judges supported the request for rehearing. Perhaps the most unusual aspect of the Ninth Circuit's order is that it arose from a Ninth Circuit judge seeking rehearing, rather than from one of the parties. This suggests that at least some of the Ninth Circuit's judges view the October panel opinion as not just incorrect, but so seriously wrong that the Court should re-examine the decision even in the absence of any request to do so by the losing parties. The order is also unusual in that it included two impassioned opinions alternatively defending and attacking the October panel opinion.

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SLAPP Suit Blocked: Court of Appeals Rejects SLAPP Claim in Public Records Act Case

February 3, 2014

The Washington Court of Appeals today concluded that Washington's "anti-SLAPP" statute cannot be invoked when a municipality seeks a declaratory judgment to clarify its obligations under the Public Records Act. The Court's conclusions should be a welcome relief for Washington municipalities seeking to clarify their obligations under the Public Records Act and thereby to minimize their exposure to the substantial penalties that are sometimes imposed under the Act. City of Seattle v. Egan, No. 69129-5-I (Wash. App. Div. I, filed Feb. 3, 2014).

The Court of Appeal's decision arises from a Public Records Act request for documents related to an internal investigation of complaints filed against four Seattle police officers. Among the documents requested are 36 "dash-cam" videos. Believing the videos are exempt from disclosure under RCW 9.73.090(1)(c), which prohibits cities from providing videos to the public when legal action involving those videos is pending, the City withheld 35 of the 36 videos. In the face of threat of lawsuit seeking to force disclosure of the videos, the City filed a motion for declaration and preliminary injunction, asking the lower court to declare that the 35 videos are exempt from Public Records Act disclosure. The Public Records Act authorizes this procedure under RCW 42.56.540.

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Over Heated Dissent, Ninth Circuit Rejects Rehearing in Low Carbon Fuel Standards Challenge, Setting Up Possible Supreme Court Commerce Clause Showdown

January 23, 2014

The U.S. Court of Appeals for the Ninth Circuit today rejected petitions for rehearing of its decision in Rocky Mountain Farmers Union v. Corey, the opinion issued last September which rejected constitutional challenges to California's low-carbon fuel standard. Seven judges dissented from the decision and took the unusual step of publishing their dissent which, in strongly-worded language, accused the majority of disregarding "longstanding dormant Commerce Clause doctrine" and placing the circuit "squarely at odds with Supreme Court precedent." This prompted Judge Ronald Gould to take the equally unusual step of issuing a written opinion defending the majority's decision to deny the petitions for rehearing.

As we have previously discussed, last fall, the Ninth Circuit, in a 2-1 split decision, upheld California's low-carbon fuel standard against challenges brought by out-of-state ethanol manufacturers, farmers, and allied interests. The challengers argued that, by using a geographically-based system for assessing the carbon footprint of different sources of ethanol and assigning higher default scores to Mid-Western producers than to California producers, California's system discriminated on its face against these out-of-state producers, and therefore violated the Commerce Clause of the U.S. Constitution. Under a doctrine known as the "dormant Commerce Clause," the courts have long held that states are prohibited from imposing constraints on interstate commerce that discriminate against out-of-state economic interests and artificially favor in-state interests. The panel's majority concluded that the low-carbon fuel standard is not facially discriminatory because California's system for assessing the carbon footprint of different ethanol sources is based on objective scientific evidence rather than on impermissible discrimination against out-of-state producers. Nonetheless, the Court remanded the case to the trial court to review evidence that might prove whether the low-carbon fuel standard discriminates against out-of-state producers in practice.

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Ninth Circuit Rejects Petition Seeking Regulation of Greenhouse Gases in Washington

October 25, 2013

Two October decisions of the federal courts are likely to have significant implications for regulation of greenhouse gases ("GHG") under the Clean Air Act. Of greatest note for the State of Washington, the Ninth Circuit last week overturned a lower court's order that would have required the Washington Department of Ecology ("Ecology") to set standards limiting GHG emissions from Washington's five oil refineries. The Court of Appeals concluded that the environmental plaintiffs lacked standing to bring their complaint. (Washington Environmental Council v. Bellon, No. 12-35323 (issued Oct. 17, 2013)).

In that case, two environmental groups filed a lawsuit in U.S. District Court under the Clean Air Act's citizen suit provisions arguing that Ecology, which administers the Clean Air Act in Washington under an EPA-approved State Implementation Plan, is obligated to set GHG emissions limits on the five refineries under the Act's "Reasonably Available Control Technology" requirements. The District Court agreed, ordering Ecology to develop GHG emissions limits for the five oil refineries by 2014.

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Washington Supreme Court: Executive Privilege Allows Governor To Withhold Documents Under Public Records Act

October 17, 2013

In a milestone decision, the Washington Supreme Court today upheld Gov. Christine Gregoire's assertion of executive privilege to prevent disclosure of documents under the Washington Public Records Act. Concluding that the "cardinal and fundamental" constitutional principle of separation of powers overrides the Public Records Act's "strongly worded mandate for broad disclosure of public records," today's decision permits the Governor to assert executive privilege over documents created in the process of formulating policy and prevent disclosure of those documents under the Public Records Act. The decision effectively creates a new Public Records Act exemption for documents created in the executive branch policy formulation process. It also shifts the burdens of proof that generally apply under the Public Records Act. (Freedom Foundation v. Gregoire, Wa. Sup. Ct. No. 86384-9 (decided Oct. 17, 2013)).

Today's decision arose from a dispute over a half-dozen documents created by Governor Gregoire and her senior advisory staff discussing controversial topics such as replacement of Seattle's Alaska Way Viaduct, the Columbia River Biological Opinion, and medical marijuana legislation. An employee of the Freedom Foundation requested eleven documents on these subjects under the Public Records Act, which generally requires all government documents to be released upon request unless a specific exemption applies. Gov. Gregoire released five of the documents and a redacted version of a sixth. The remaining documents were withheld, but rather than following the usual course of relying on a specific statutory exemption to justify withholding, the Governor's office asserted executive privilege over the documents. The Governor argued that executive privilege is inherent in the separation of powers scheme implied in the Washington constitution, and the documents were subject to executive privilege because they were used by the Governor to formulate policy. The lower court agreed with these arguments and the Supreme Court accepted direct review.

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Federal Court Decision Illustrates Hazards of FERC-Jurisdictional Markets in the Pacific Northwest

October 7, 2013

The U.S. District Court for the District of Maryland last week issued an opinion striking down a "contract for differences" designed to ensure an adequate long-term power supply. The decision underscores some of the pitfalls that may be arise from creation of an "Energy Imbalance Market" ("EIM") or similar FERC-jurisdictional "centralized" markets here in the Pacific Northwest. PPL Energy Plus, LLC v. Nazarian, D. Md. No. MJG-12-1286 (issued Sept. 30, 2013).

The case arises from the struggles of the Maryland Public Service Commission ("MPSC") to address long-term power supplies in Maryland, particularly in constrained areas of the PJM market. The MPSC was concerned that in PJM -- the regional transmission organization ("RTO") that operates electric markets in the mid-Atlantic region, where prices are set based upon fluctuating Locational Marginal Price -- fails to provide adequate incentives for construction long-term power supplies. To address this problem, the MPSC approved a "contract for differences" between the local supplier and a generation developer. The contract creates a mechanism that effectively ensures a stable long-term price for generation by compensating the generation owner when short-term locational prices fall below the long-term guaranteed price.

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Will Protectionism Foil California's Increased RPS Mandate?

September 23, 2013

Under AB 327, passed this month by the California legislature, California has cleared the way to ratchet up its aggressive Renewable Portfolio Standard ("RPS") mandate beyond the 33% it already requires. But the legislature did nothing to address the most troubling aspect of California's RPS program, the "Portfolio Content Categories" -- commonly referred to as "buckets" -- which systematically favor in-state renewable resources over out-of-state resources. A recent report from the National Renewable Energy Laboratory ("NREL") shows, however, that California is rapidly running out of easily-developed in-state resources. It is therefore becoming increasingly clear that, unless California lowers the wall it has erected around its renewable energy market, it will either be unable to meet its ambitious renewable energy goals or else meeting those goals will come at an exorbitant cost to the state's consumers.

On the other hand, if California lowers or eliminates barriers to outside resources, access to huge and highly desirable resources in other parts of the West will allow California to achieve its ambitious climate and renewable energy goals in the most economically efficient manner. Even if California's legislature is unwilling to lower these barriers voluntarily, recent decisions from the federal courts demonstrate that its protectionist policies can be overcome through a legal challenge under the Commerce Clause of the U.S. Constitution.

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Ninth Circuit Upholds California's Low Carbon Fuel Standard, Finding No Discrimination Against Out-of-State Fuel Producers

September 18, 2013

The U.S. Court of Appeals for the Ninth Circuit today issued what may prove to be a landmark decision concerning California's efforts to regulate emissions of greenhouse gases ("GHG"). The Appeals Court concludes that California's Low-Carbon Fuel Standard ("LCFS") does not violate the Commerce Clause even though California uses a life-cycle analysis of carbon intensity that penalizes, for example, ethanol from the Midwest produced using coal-fired electricity, and favors ethanol using less carbon-intensive methods of production. Concluding that California's ambitious efforts to address GHG emissions should not be limited by "archaic formalism," the opinion allows states considerable room to experiment with new approaches to GHG regulation. That being said, the opinion also makes clear that environmental protection cannot be used as an excuse to arbitrarily burden interstate energy transactions. Rocky Mountain Farmers Union et al. v. Corey et al., No. 12-15131 (issued Sept. 18, 2013).

The LCFS, adopted as part of the Global Warming Solutions Act of 2006 (commonly referred to as "AB 32"), is aimed at reducing GHG emissions from California's transportation sector, which account for about 40% of the state's total GHG emissions. Using 2010 carbon intensity as a baseline, the LCFS requires fuel producers and blenders to meet specific carbon intensity limits, which decline annually from the 2010 baseline through 2020. Producers that exceed the limits are awarded credits that can be sold to producers that fail to meet the limits. For gasoline producers, blending gasoline with ethanol is the only practicable way to meet the LCFS.

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Washington Supreme Court: Water Pollution Control Act Covers Non-Point Pollution, Takings Claim Rejected

August 15, 2013

The Washington Supreme Court today issued an opinion reading the state's Water Pollution Control Act ("WPCA") broadly to cover non-point sources and concluding that the Washington Department of Ecology ("Ecology") is authorized to issue orders to control non-point sources even without definitive proof that the non-point source is a direct cause of water pollution. The Court also rejected a claim of an unconstitutional "taking" for lack of a sufficient evidence. The opinion substantially strengthens Ecology's hand in dealing with non-point sources, and may result in stronger enforcement action aimed at, for example, requiring landowners to implement "Best Management Practices" to help control non-point pollution. (Lemire v. State of Washington, Dept. of Ecology, No. 87703-3 (issued Aug. 15 2013)).

The case arises from a lengthy dispute between Ecology and Columbia County rancher Joseph Lemire concerning pollution in Pataha Creek, which runs through Lemire's property. Ecology identified Pataha Creek as polluted under the state's water quality assessment, which is required under the federal Clean Water Act. In a 2003 evaluation of Columbia County's watersheds, Ecology and the Columbia Conservation District identified conditions on Lemire's ranch that were detrimental to water quality. These included, for example, overgrazing, damage to riparian vegetation, and excrement in the riparian zone, which Ecology believes likely contributed to high water temperatures, reduced dissolved oxygen, damage to aquatic life, and the presence of pathogens in the water. To remedy these problems, Ecology recommended measures such as construction of fences to exclude cattle from the riparian zone and off-stream watering troughs. Eventually, after unsuccessfully negotiations with Lemire, Ecology ordered him to implement these measures, relying on the WPCA to justify its action.

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May: A Tough Month for Climate Plaintiffs, But Odd Fifth Circuit Decision Leaves the Door Ajar

June 13, 2013

In May, the federal courts rejected two more major cases in which plaintiffs sought damages from large emitters of greenhouse gases based on claims of climate-caused property damage. As a result of the U.S. Supreme Court's action, one of the major theories espoused by plaintiffs -- federal common law nuisance -- now appears to be dead. The fate of other major theories, however, remains uncertain because a federal appeals court could not escape a procedural tangle and therefore failed to definitively address those theories.

In the first case, involving the Native Village of Kivalina, Alaska, the Supreme Court denied a petition for certiorari filed by the plaintiffs, whose claim was earlier rejected by the U.S. Court of Appeals for the Ninth Circuit. As reported here previously, the Kivalina plaintiffs claimed that release of greenhouse gases has caused a significant decline of Arctic sea ice. Without the protection of sea ice, wave and storm damage from the Arctic Sea eroded the land underlying the Village. Under the plaintiffs' theory, greenhouse gas emitters are responsible for this property damage because greenhouse gases have caused the sea ice decline. The Ninth Circuit rejected Kivalina's claims, based on the federal common law of nuisance, concluding that federal common law has been displaced by the federal regulatory scheme under the Clean Air Act, which, as interpreted by the Supreme Court's 2007 opinion in Massachusetts v. EPA, reaches greenhouse gases as well as more traditional "criteria" pollutants. The Supreme Court's denial of certiorari appears to be the last gasp for climate lawsuits based on the federal common law. (Native Village of Kivalina v. Exxon Mobil Corp. et al. (Sup. Ct. Docket No. 12-1072).

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Casting A Constitutional Cloud On In-State Renewable Preferences, Seventh Circuit Upholds Transmission Cost-Spreading

June 12, 2013

In a decision with important implications for both renewable energy and transmission developers, the U.S. Court of Appeals for the Seventh Circuit last week largely upheld a cost-spreading mechanism developed by the Midwest Independent Transmission System Operator ("MISO") to encourage expansion of high-voltage transmission facilities. Written by the renowned Judge Richard Posner, the decision (Illinois Commerce Commission v. Federal Energy Regulatory Commission, 7th Cir. Docket Nos. 11-3421 et al., issued June 7, 2013) may in time be most remembered for lighting the fuse that ultimately brought down the many state renewable energy policies that artificially favor in-state renewable producers at the expense out-of-state producers.

The holding is a response to Michigan's argument that it does not benefit from the high-voltage transmission lines favored by the MISO policy. Because its Renewable Portfolio Standard does not allow Michigan utilities to count out-of-state renewables toward meeting the requirement that they obtain ten percent of their power from renewables by 2015, improving transmission for out-of-state renewables does not benefit Michigan ratepayers. Thus, Michigan argued, it should not be required to bear a share of the cost of these facilities. Judge Posner rejected this argument in strikingly plain terms: "Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy." This holding threatens to unravel state laws from California to Massachusetts that, in various ways, artificially favor in-state renewable producers over out-of-state producers.

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Washington Appeals Court Finds PUDs Have Authority to Condemn Public Trust Lands

May 7, 2013

The Washington State Court of Appeals today issued an opinion finding that Washington Public Utility Districts ("PUDs") have the statutory authority to condemn state school trust lands in order to construct transmission lines and other utility infrastructure. Today's opinion is the latest chapter in a twisting saga that began in 1996, when Okanogan County PUD began planning a new transmission line between existing substations in Pateros and Twisp in the Methow Valley. The opinion confirms that, unless state lands have been dedicated to a particular public use, PUDs have authority to condemn those lands for utility purposes. By extension, the opinion should allow other Washington municipalities, such as Port Districts, cities, and towns, to condemn state lands for public purposes because they have statutory condemnation authority similar to that of PUDs.

The long and winding road of litigation began with a decade of environmental review, culminating in a Court of Appeals opinion confirming that Okanogan PUD's environmental review met required standards and that the PUD did not act arbitrarily in selecting the route for the transmission line. (Gebbers v. Okanogan County Public Util. Dist. No. 1, 144 Wn.App. 371, 183 P.3d 324, rev. denied, 165 Wn.2d 1004, 198 P.3d 511 (2008)). The PUD then began obtaining easements covering the selected route. After negotiating easements for about 85% of the required land, the PUD then filed a petition for condemnation against the remaining property owners. Among the parcels involved in the condemnation proceeding was a tract of state school trust lands.

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