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US court dismisses industry challenge to Oregon fuel standards

Washington — A federal appeals court on Friday upheld Oregon's low-carbon fuel standards, dismissing a challenge brought by US refiners and truckers.

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The American Fuel & Petrochemical Manufacturers, American Trucking Associations and the Consumer Energy Alliance challenged Oregon's standards, known as the Clean Fuels Program, arguing it violates the US Constitution by discriminating against fuels produced outside Oregon and by attempting to regulate commerce outside the state.

But in a 2-1 decision released Friday, the US Court of Appeals for the 9th Circuit found the standards discriminated against fuels based on lifecycle greenhouse gas emissions not on state of origin. The decision backed an earlier decision from a lower court.

"The fact that the program labels fuels by state of origin does not render it discriminatory, as these labels are not the basis for any differential treatment," US Circuit Judge Andrew Hurwitz wrote in the decision.

The program requires Oregon fuel importers to reduce the carbon intensity of fuel sold in the state through deficits and credits with an aim of decreasing greenhouse gas emission from transportation fuel by 10% over 10 years.

Under the program, importers of gasoline, diesel, ethanol and biodiesel can buy or sell credits, store them for future use or use them to offset deficits.

In a dissenting opinion Friday, US Circuit Judge N. Randy Smith backed the arguments from refiners and truckers that the program was discriminatory to out-of-state fuels.

"Out-of-state entities bear the full brunt of the law's burden, even though all fuel producers (including in-state entities) contribute to greenhouse gas emissions (and consequently global warming)," Smith wrote. "At the same time, in-state entities not only avoid the burden of the law, they also receive a subsidy from the out-of-state entities in the sale of their valuable credits." -- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com