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Ethanol and farm groups sue California over fuel standard

The ethanol trade groups, Growth Energy and the Renewable Fuels Association, along with state and local farm groups, have filed a federal lawsuit challenging Calfornia's low carbon fuel standard. The groups' lawsuit alleges that the new rule, which will be phased in starting in 2011, unfairly discriminates against corn-based ethanol made primarily in the Midwest, in violation of the Commerce and Supremacy clauses of the U.S. Constitution.

The complaint, filed in federal district court in Fresno, California on December 24, says the fuel standard "is unconstitutional because (i) it conflicts with and is preempted by federal law, including the Energy Independence and Security Act of 2007; (ii) it interferes with the regulation of interstate commerce; and (iii) it discriminates against out-of-state corn ethanol producers and importers and improperly regulates their extraterritorial conduct."

The lawsuit, which was also brought by Rocky Mountain Farmers union, the Redwood County, Minnesota Corn and Soybean Growers, and Penny Newman Grain, Inc., was filed against the California Air Resources Board, which is part of the California Environmental Protection Agency.

Stanley Young with the Air Resources Board told Agriculture.com Tuesday, "We feel that their claims are without merit. This is a regulatory decision to provide cleaner, low carbon fuels to California consumers and we will vigorously defend it in court."

The goal of the new low carbon fuel standard is to encourage fuel blenders to use fuels that put out lower levels of greenhouse gases in production, transportation and when burned in vehicles. Before the Air Resources Board approved the fuel standard last April, its estimates of how green a fuel is included the concept of indirect land use. It assumed that as more corn is used to make ethanol in the U.S. that rainforests and tropical savannahs will be destroyed in other countries in order to grow more crops.

The lawsuit alleges that the fuel standard "penalizes all corn ethanol based on the purported indirect effects of assumed farming practices that occur predominately outside California and through the regulation, California seeks to curb or eliminate these farming practices throughout the United States and beyond by making the entire corn ethanol market responsible for them."

The fuel standard also assumes that ethanol made from sugar cane in Brazil is greener. The effect of the new fuel standard, the lawsuit says, "will be to required regulated entities producing gasoline for sale in California quickly to try to obtain ethanol produced in Brazil, not the United States."

At the federal level, the EPA is also using indirect land use to estimate how green ethanol is, but the federal 2007 energy law exempts older ethanol plants from meeting tougher greenhouse gas requirements under a new renewable fuel standard. California does not and the lawsuit alleges that the state’s fuel standard interferes with the federal law.

In a joint website statement, Growth Energy and the Renewable Fuels Association (RFA) summed up the effects of California's action.

"…by closing California’s borders to corn ethanol from other states, the LCFS [low carbon fuel standard] will change how corn is farmed and ethanol is produced all over the country. The Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct. The LCFS imposes excessive burdens on the entire domestic ethanol industry while providing no benefit to Californians. In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security. One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS."

Regardless of the outcome of the lawsuit, the fact that both RFA and Growth are financing it together is a big change in the internal politics of the ethanol industry. Growth Energy was formed in part by frustrations over how the RFA was responding to criticism of ethanol in Washington and the media. At times, according to some in the industry, members of the two lobbying groups were barely talking to one another. Then, about a year ago, the National Corn Growers Association began an effort to get industry groups working more closely together, our sources say.

"Corn relies on ethanol and vice-versa, so it just made sense for us to work together on policy issues," NCGA president and South Dakota farmer Darrin Ihnen told Agriculture.com Tuesday.

The group, informally called the ethanol alliance, also includes the American Coalition for Ethanol and has met several times in the past year.

Ihnen said the NCGA hasn’t decided whether to join the lawsuit but the topic will be on the agenda when the group's board meets in January. "As a board, we’ll decide, should we get involved and how we’ll get involved," he said.

The ethanol trade groups, Growth Energy and the Renewable Fuels Association, along with state and local farm groups, have filed a federal lawsuit challenging Calfornia's low carbon fuel standard. The groups' lawsuit alleges that the new rule, which will be phased in starting in 2011, unfairly discriminates against corn-based ethanol made primarily in the Midwest, in violation of the Commerce and Supremacy clauses of the U.S. Constitution.

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