Rocky Mountain Farmers Union v. Corey

California Air Resources Board (CARB) (defendant) passed the Fuel Standard to decrease greenhouse-gas emissions related to transportation fuel. The Fuel Standard set a declining annual cap on carbon intensity for fuel sold in California. A fuel’s carbon-intensity score was determined by its total lifecycle greenhouse-gas emissions caused by production and transportation. The distance travelled to California was a factor but was not determinative alone. Fuel producers received credits, or generated deficits, depending on whether their fuel was above or below the Fuel Standard’s annual carbon-intensity cap. There was a market for producers to trade, bank, and borrow Fuel Standard credits. No fuel was barred from California’s market for exceeding the cap, but producers needed to purchase Fuel Standard credits to offset a noncompliant fuel’s deficit. The credit system incentivized producers to develop low-carbon fuel to earn a beneficial market position in California. At the time of trial, fuel from the Midwest had the lowest carbon-intensity score. Rocky Mountain Farmers’ Union (RMFU) (plaintiff) sued CARB, arguing the Fuel Standard violated the Dormant Commerce Clause, improperly regulated conduct outside of California, and encouraged the development of conflicting emissions regulations. The district court ruled the Fuel Standard facially discriminated against out-of-state ethanol and promoted inconsistent state emissions regulations. CARB appealed.