Trial Materials: Poet LLC vs.California Air Resources Board/CEQA

On October 30, 2015 a Trial Materials was filed involving a dispute between Lyons, James M., Poet Llc, and California Air Resources Board, Corey, Richard, for 02 Unlimited - Writ of Mandate in the District Court of Fresno County.

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KAMALA D. HARRIS
Attorney General of California
GAVIN G. MCCABE E-FIEED
Supervising Deputy Attorney General
MELINDA PILLING, SBN 274929 11/14/2016
JANELLE M. SMITH, SBN 231801
M. ELAINE MECKENSTOCK, SBN 268861 FRESNO COUNTY SUPERIOR COURT
Deputy Attorneys General By: C Prendergast, Deputy
1515 Clay Street, 20th Floor
Oakland, CA 94612-0550
Telephone: (510) 879-0299 EXEMPT FROM FILING FEES
Fax: (510) 622-2270 UNDER GOVT. CODE § 6103
E-mail: Elaine.Meckenstock@doj.ca.gov
Attorneys for Respondents

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF FRESNO
10

13 POET, LLC; JAMES M. LYONS, Case No. 15 CE CG 03380

14 Petitioners,

15 RESPONDENTS’ OPPOSITION BRIEF

16 Judge: Hon. James Petrucelli
CALIFORNIA AIR RESOURCES Date: January 20, 2017
17 BOARD; RICHARD COREY, in his official Time: 9 AM
capacity as Executive Officer of the California
18 Air Resources Board, Action Filed: October 30, 2015

19 Respondents.
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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF CONTENTS

Page
INTRODUCTION
FACTUAL AND PROCEDURAL BACKGROUND .
A The Original LCFS Regulation and the Previous POET Litigation.
B Rulemakings for the New LCFS and ADF Regulations
Cc The Use of Altemative Diesel Fuels and Related Emissions
ARGUMENT
I STANDARD OF REVIE!
A Judicial Review of Quasi-Legislative Acts by Expert Agencies Is Highly
Deferential
B ARB’s Certified Regulatory Program and CEQA Standard of Review
10 IL. PETITIONERS’ CLAIMS CONCERNING THE ORIGINAL LCFS ARE NOT BEFORE THIS
COURT AND, IN ANY EVENT, LACK FACTUAL OR LEGAL BASIS 10
ll
A Petitioners’ Claims Concerning the Original LCFS Are Based on the False
12 Premise that the Original LCFS Caused Any and All Biodiesel-Related
Increases in NOx Emissions since 2009 11
13 B ARB Properly Used Existing Conditions as the Baselin 12
14 Cc ARB Properly Defined the Project. 13
D. ARB Properly Considered Cumulative Impacts 15
15
E. ARB Did Not Improperly Piecemeal Its Environmental Review. 16
16 Til. PETITIONERS’ CLAIMS OF INADEQUATE MITIGATION OF BIODIESEL NOX EMISSIONS
FROM THE NEW LCFS REGULATION FAIL 17
17
The ADF Regulation Is a More than Adequate Mitigation Measure 18
18 Substantial Evidence Supports the Use of DTBP 18
19 Substantial Evidence Supports ARB’s Assessment of Potential NOx
Impacts from Lower Biodiesel Blends 20
20 Substantial Evidence Supports ARB’s Assessment of New Technology
Diesel Engines. 23
21
PETITIONERS’ OTHER CLAIMS OF INADEQUATE ANALYSIS OR MITIGATION ALSO
22 FAIL 25
ARB Properly Concluded that Potential Impacts from Future,
23 Undetermined Construction Projects Were Speculative 25
24 Substantial Evidence Supports ARB’s Approach to “Fuel Shuffling” 28
Substantial Evidence Supports ARB’s Analysis of Criteria Pollution from
25
Possible Increases in Biodiesel Use . 33
26 PETITIONERS’ CLAIMS OF INADEQUATE ALTERNATIVES ANALYSIS ARE WITHOUT
MERIT... 35
27 A ARB Was Not Obligated to Consider Growth Energy’s Cap and Trade
Alternative Because It Did Not Meet the Goals of the New LCFS 35
28
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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF CONTENTS
(continued)
Page
B ARB’s Handling of Growth Energy’s Proposed Alternative to the ADF
Regulation Also Complied with CEQA 37
VI. THE NEW LCFS REGULATION Is NOT UNLAWFUL UNDER AB 32 39
VII. THE PEER REVIEW OF THE NEW LCFS AND ADF REGULATIONS COMPORTED WITH
SECTION 57004 OF THE HEALTH AND SAFETY CODE . 41
VIII. ARB COMPLIED WITH THE APA.
A. Petitioners’ Claims of Inadequate Notice Regarding Changes to the
Regulations Are Baseless 45
1 The ADF Proposal Contained an Exemption for Certain Biodiesel
Providers, and ARB’s Limited Change to the Scope of that
Exemption Did Not Require Re-starting the Rulemaking 45
10 The Removal of Redundant and Unnecessary Regulatory Language
Does Not Require Re-starting the Rulemaking 47
ll
B. ARB’s Rulemaking Files Complied with the APA 48
12 CONCLUSION 30

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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF AUTHORITIES

Page
CASES

Al Larson Boat Shop, Inc. v. Board of Harbor Commissioners
(1993) 18 Cal. App.4th 729
Alliance of Small Emitters/Metals Industry v. South Coast Air Quality Mgmt. Dist.
(1997) 60 Cal.App.4th 55 26, 27

Am. Coatings Assn., Inc. v. South Coast Air Quality Dist.
(2012) 54 Cal.4th 446 8, 10, 14, 26

Banning Ranch Conservancy v. City of Newport Beach
(2012) 211 Cal.App.4th 1209 34
10
Barthelemy v. Chino Basin Municipal Water Dist.
ll
(1995) 38 Cal.App.4th 1609 9,22
12
California Native Plant Soc. v. City of Rancho Cordova
13 (2009) 172 Cal. App.4th 603 17, 23, 24, 25
14 Californians for Alternatives to Toxics v. Cal. Dept. of Pesticide Regulation
(2006) 136 Cal.App.4th 1049 ..
15
City of Long Beach y. Los Angeles Unified School District
16 (2009) 176 Cal. App.4th 889 39
17
Communities for a Better Env't v. S. Coast Air Quality Mgmt. Dist.
18 (2010) 48 Cal.4th 310 12, 13

19 Communities for a Better Environment v. City of Richmond
(2010) 184 Cal.App.4th 70 17
20
Dunn-Edwards Corp. v. So. Coast Air Quality Mgmt. Dist.
21 (1993) 19 Cal.App.4th 519 ... 23
22
Ebbetts Pass Forest Watch v. Dept. of Forestry & Fire Protection
23 (2008) 43 Cal.4th 936 . .

24 Envtl. Council of Sacramento vy. City of Sacramento
(2006) 142 Cal.App.4th 1018 11, 21, 26
25
Goleta Union School Dist. v. Regents of Univ. of Cal.
26 (1995) 37 Cal.App.4th 1025 30
27 Gray v. County of Madera
28 (2008) 167 Cal.App.4th 1099 .. 17
iii
Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF AUTHORITIES
(continued)
Page
Grisham y. Philip Morris U.S.A., Inc.
(2007) 40 Cal.4th 623 10

Habitat and Watershed Caretakers v. City of Santa Cruz
(2013) 213 Cal.App.4th 1277 36

Hughes v. W. MacArthur Co.
(1987) 192 Cal.App.3d 951 18

In re Bay-Delta Programmatic Environmental Impact Report Coordinated
Proceedings
(2008) 43 Cal.4th 1143 27
10 Koster v. County of San Joaquin
ll (1996) 47 Cal.App.4th 29 27

12 Laupheimer v. State of Cal.
(1988) 200 Cal.App.3d 440 16
13
Laurel Heights Improvement Assn. v. Regents of the University of California
14 (1988) 47 Cal.3d 376 34, 35
15 Long Island Care at Home, Ltd. v. Coke
(2007) 551 U.S. 158 45
16

17 Los Angeles Unified Sch. Dist. v. City of Los Angeles
(1997) 58 Cal.App.4th 1019 26
18
Marin Mun. Water Dist. v. KG Land California Corp.
19 (1991) 235 Cal.App.3d 1652 26

20 Moss v. Cnty. of Humboldt
21
(2008) 162 Cal.App.4th 1041 15

Neighbors for Smart Rail vy. Exposition Metro Line Const. Auth.
22
(2013) 57 Cal.4th 439 12, 13
23
North Coast Rivers Alliance v. Marin Mun. Water Dist.
24 (2013) 216 Cal.App.4th 614 22, 24

25 Our Children’s Earth Found. v. Cal. Air Res. Bd.
(2015) 234 Cal.App.4th 870 40
26
Paulek v. Cal. Dept. of Water Res
27
(2014) 231 Cal. App.4th 35 32, 49
28
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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF AUTHORITIES
(continued)
Page
Plant Insulation Co. v. Fibreboard Corp.
(1990) 224 Cal. App.3d 781 10

POET, LLC vy. Cal. Air Resources Bd.
(2013) 218 Cal.App.4th 681 2,3,4

Rocky Mountain Farmers Union v. Corey
(2013) 730 F.3d 1070 31

San Francisco Baykeeper, Inc. v. Cal. State Lands Comm'n
(2015) 242 Cal.App.4th 202 17, 25

San Francisco Fire Fighters Local 798 v. City & Cty. of San Francisco
10 (2006) 38 Cal.4th 653
ll
Sierra Club v. City of Orange
12 (2008) 163 Cal. App.4th 523 35, 37, 39
13 South County Citizens for Smart Growth v. County of Nevada
(2013) 221 Cal.App.4th 316 22
14
Tuolumne Cnty. Citizens for Responsible Growth, Inc. v. City of Sonora
15 (2007) 155 Cal.App.4th 1214 15
16 Uphold Our Heritage v. Town of Woodside
17 (2007) 147 Cal.App.4th 587 39

18 Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova
(2007) 40 Cal.4th 412
19
W. States Petroleum Assn. v. Bd. of Equalization
20 (2013) 57 Cal.4th 401 8, 44,45
21 Yamaha Corp. of Am. v. State Bd. of Equalization
(1998) 19 Cal.4th 1
22
23 STATUTES

24 United States Code, title 42
§ 7545(0)(2)(BYC). 30
25 § 7545(0)(2)(B)DTV) «7, 1, 12

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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF AUTHORITIES
(continued)
Page
Government Code
§ 11346(b 49
§ 11346.5.. 48
§ 11346.8 (c) 46
§ 11347.3 (b)(6) . . Ag
§ 11347.3 (b)(7) . . 49

Health and Safety Code
§ 38560.5.. 40
§ 38562 (b) 40
§ 43830.8.. 47
§ 57004 (b) Al, 42, 43
10 § 57004 (d) 41, 43
§ 104500 (b) 43
ll § 104520... 43

12 Public Resources Code
§ 21002. 37, 39
13 § 21065. 14
14 § 21068.5.. 26
§ 21080. 14
15 § 21080.5.. 23
§ 21080.5 (c)
16 § 21093 26
§ 21167, et seq. 10
17
§ 21168.5.....

OTHER AUTHORITIES

California Code of Regulations, title 13
20 § 2291... 18
§ 2293.1 18
21 § 2293.4 18
22
§ 2293.6 (a) 18, 19, 21
Subarticle 2, Appendix 1 19
23

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27

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Respondents’ Opposition Brief (15 CE CG 03380)
TABLE OF AUTHORITIES
(continued)
Page
California Code of Regulations, title 14
§ 15088 23
§ 15125 (a) 13
§ 15126.6
(a) 38
§ 15145 27
§ 15250. 9, 23
§ 15251.
§ 15252.
§ 15384 (a)

California Code of Regulations, title 17
10 § 60000-60008
§ 60005 34
ll § 60005 (b) passim
§ 60006 35
12 § 60007 (a 3, 32,44
§ 95484, 12
13
§ 95801 et seq. 40

Federal Register, Vol 77, 59,458 (Sept. 27, 2012)
15
Oregon Administrative Rules § 340-253-0000, et seq. 29
16

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20

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23

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Respondents’ Opposition Brief (15 CE CG 03380)
INTRODUCTION
Petitioners POET LLC and James Lyons (“Petitioners”) challenge the Low Carbon Fuel

Standard (“LCFS”) and Alternative Diesel Fuels (“ADF”) regulations adopted by the California

Air Resources Board (“ARB”) in 2015. These quasi-legislative regulations were adopted through

separate but concurrent rulemaking proceedings. The LCFS is designed to reduce the carbon

intensity of California’s transportation fuels, where carbon intensity reflects the greenhouse gas

emissions associated with each unit of energy the fuel provides. To that end, the LCFS

establishes declining carbon-intensity standards intended to drive innovation in the processes by

which existing fuels are made as well as in the development and commercialization of new,

10 lower-carbon fuels. The ADF regulation establishes a framework for the commercialization of

ll new alternatives to petroleum diesel in order to encourage those alternatives while maintaining or

12 improving protection for public health and the environment. The ADF also establishes pollution

13 control levels for biodiesel—levels that trigger requirements to reduce or eliminate increases in

14 emissions of nitrogen oxides (“NOx”). In sum, the LCFS is designed to encourage the

15 development and use of alternative fuels in order to reduce carbon intensity (and therefore reduce

16 greenhouse gas emissions), while the ADF is designed to ensure that non-greenhouse-gas impacts

17 of alternative diesel fuels, such as biodiesel, are identified and mitigated as needed.

18 Petitioners allege that ARB’s adoption of these regulations violated the California

19 Environmental Quality Act (“CEQA”), the California Administrative Procedure Act (“APA”),

20 and provisions of the Health and Safety Code. None of these claims has merit. Indeed, many of

21 Petitioners’ claims rest on false premises. For example, several of Petitioners’ claims are based.

22 on their assertion that ARB failed to analyze and mitigate the potential for increases in NOx

23 emissions from biodiesel use. But ARB carefully analyzed this potential environmental impact;

24 concluded that biodiesel use is increasing due to a federal biodiesel mandate and federal biodiesel

25 tax credit; concluded that biodiesel use, in some contexts, can increase NOx emissions; and

26 adopted mitigation measures that will reduce these emissions over time. ARB’s analysis is

27 supported by substantial evidence, and its decision to recognize and mitigate impacts of federal

28 biodiesel incentives went above and beyond CEQA’s requirements. Petitioners’ claims fail.
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Respondents’ Opposition Brief (15 CE CG 03380)
Petitioners’ other claims are without merit for similar reasons: they misstate the record and

the legal requirements. ARB discussed all of the environmental effects Petitioners claim were

ignored or inadequately analyzed, and ARB’s conclusions regarding those effects are supported

by substantial evidence. ARB also considered appropriate alternatives to its proposed project and

reasonably rejected others—including the ones Petitioners prefer—because those alternatives

would not further core objectives of the project, would not produce greater environmental

benefits than the proposed project, or both.

Further, ARB submitted the scientific portions of both regulations for external peer review,

following the statutory requirements of the Health and Safety Code and the established

10 procedures that implement those requirements. ARB also fully complied with the APA.

ll Petitioners’ allegations of inadequate notice concerning regulatory changes vastly overstate the
12 significance of those changes. And, although they allege that the LCFS rulemaking file was

13 incomplete, Petitioners identify no omitted information that was required to be in that file. In fact,

14 the publicly-available rulemaking file contained, as required, the information upon which ARB

15 relied and all the comments submitted to ARB during each of the public comment periods.
16 The Petition should be denied.

17 FACTUAL AND PROCEDURAL BACKGROUND
18 A The Original LCFS Regulation and the Previous POET Litigation
19 The LCFS regulation at issue in this case is the second LCFS regulation adopted by ARB.

20 The original LCFS was first adopted in 2009, went into full effect in 2011, and was rescinded in

21 2015. (LCFS 8407.') Like the new LCFS at issue here, the original LCFS set declining carbon-

22 intensity standards for the transportation fuels used in California and left regulated parties free “to

23 determine the mix of fuels they would use to meet the annual standard.” (POET, LLC v. Cal. Air

24 Resources Bd. (2013) 218 Cal.App.4th 681, 702.) Like the new LCFS, the original LCFS

25
' This brief contains references to two administrative records—one for the new LCFS
26 regulation and one for the ADF regulation. These are signaled herein by citation to “LCFS” or
“ADF” followed by the page number (e.g., LCFS 8407 or ADF 1152). For the Court’s
27 convenience, Respondents are simultaneously filing a compendium containing the pages of the
record cited to herein.
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Respondents’ Opposition Brief (15 CE CG 03380)
employed a lifecycle analysis to determine a fuel’s carbon intensity value. (/bid.) Lifecycle

analysis is a scientific method for calculating the greenhouse gas emissions from all stages of a

fuel’s “lifecycle”’—including production, distribution, and consumption. (See id. at p. 702.)

Petitioners in this case challenged the original LCFS, alleging, inter alia, violations of

CEQA and the APA. (See id. at p. 708.) The superior court rejected all twenty-five of

Petitioners’ claims. (/d. at p. 709.) Petitioners appealed as to four claims, and, in 2013, the Court

of Appeal reversed. The Court of Appeal noted that “ARB’s efforts to complete the LCFS

regulations ... satisfied a vast majority of the applicable legal requirements, but ran afoul of

several procedural requirements imposed by CEQA and the APA.” (Jd. at p. 696.) Relevant here,

10 the Court held that ARB had improperly deferred mitigation of a potential increase in NOx

ll emissions that might result from a potential increase in biodiesel use. (Jd. at p. 759.) After

12 concluding that, on balance, “the environment will be given greater protection if the LCFS

13 regulations are allowed to remain operative pending ARB’s compliance with CEQA,” the Court

14 of Appeal directed the superior court to issue a peremptory writ of mandate that left the original
15 LCFS in place, frozen at its 2013 standards, while ARB corrected the identified procedural errors.

16 (id. at pp. 762, 767.) Among other actions, ARB was required to set aside its approval of the

17 original LCFS. (/d. at p. 766.) ARB did so in in September 2015, at the same time that it adopted

18 anew LCFS—the one that is the subject of this lawsuit. (LCFS 80312-13.)

19 On November 23, 2015, the Respondents in the prior POET lawsuit filed their Return to the

20 Writ in that case. Over Petitioners’ objections, this Court (Judge Hamilton) discharged the writ

21 on January 5, 2016. After an unsuccessful stay motion in this Court, Petitioners appealed, raising

22 the identical claims they raise here in their first “cause of action” and in Section III.B of their

23 Opening Brief. (See Verified First Amended Petition for Writ of Mandate (“Pet.”) at {| 68-74;

24 Petitioners’ Opening Brief (“Pet. Br.”) at 13:4-18:24.) Petitioners have asserted they “believe

25 these claims are properly advanced in” their appeal.” (Respondents’ Request for Judicial Notice

26 (“RIN”), Exh. A at 241.6.) That appeal is fully briefed but not yet set for argument.

27 ? Petitioners also asserted that they raised the claims in this court “because Respondents
have specifically asserted they are not the proper subject of [Petitioners’] appeal.” (See RJN,
28 (continued...)
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Respondents’ Opposition Brief (15 CE CG 03380)
B Rulemakings for the New LCFS and ADF Regulations

2 Partly in response to the POET writ, ARB undertook to develop a new LCFS regulation and

an ADF regulation, with the intent that the latter would, among other things, reduce NOx

emissions related to biodiesel use. After a series of public workshops in 2013 and 2014, ARB

staff proposed the new LCFS and ADF regulations on January 2, 2015, releasing their Initial

Statements of Reasons, draft Environmental Analysis, and other materials. (See ADF 1152-72,

1173; LCFS 8338-69, 8370.) The Environmental Analysis (“EA”) treated the new LCFS and

ADF regulations as one project for CEQA purposes because the two regulations are interrelated.

(LCFS 70119, 70126.) The Initial Statement of Reasons (“ISOR”) for the ADF was 87 pages and

10 had six substantive, subject-specific appendices with a combined total over 100 references to

ll studies, reports and similar materials, all of which were made available in the public rulemaking

12 file. (See ADF 1179-80). The ISOR for the LCFS was almost 300 pages and had eight

13 substantive, subject-specific appendices with a combined total of well over 200 references to

14 studies, reports and similar materials, all of which were made available in the public rulemaking

15 file. (See LCFS 8378-83.) The 43-page draft EA was an appendix to both ISORs.

16 The new LCFS regulation was “designed to encourage the use of cleaner low-carbon fuels

17 in California, encourage the production of those fuels, and, therefore, reduce GHG [greenhouse

18 gas] emissions.” (LCFS 8385.) The new LCFS was based on lifecycle analysis and included

19 declining, annual carbon-intensity standards to reduce the carbon intensity of California’s fuels by

20 ten percent by 2020. The new LCFS “is performance-based and fuel-neutral;” it allows market

21 participants to determine which fuels to use to meet the standards. (LCFS 8385.) While the new

22 LCES shared “the basic framework of the [original] LCFS regulation,” it also reflected numerous

23 changes and new provisions. (LCFS 8386; 8386-99.)

24 The ADF regulation had two major parts: 1) a three-stage process for alternative diesel

25 fuels to be introduced into California, “including, if necessary, a determination of mitigation

26
(...continued)
27 Exh. A. at 24.6.) That statement is puzzling because Petitioners raised these issues in their
Petition which was filed in October 2014, long before the appeal in the other case.
28
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Respondents’ Opposition Brief (15 CE CG 03380)
measures to ensure no degradation in air quality[;]” and 2) “[i]n-use requirements [e.g.,

emissions-reducing additives] for biodiesel as the first ADF.” (ADF 1183.) Those in-use

requirements were designed to “reduce NOx [from biodiesel] from current levels” while

preserving the other air pollution benefits of biodiesel, including reductions in particulate matter

(“PM”) and greenhouse gas emissions. (/bid.)

The public had 45 days to comment on the proposed regulations and related materials,

including the draft EA. (ADF 1170, LCFS 8367.) Ata public meeting on February 19, 2015, the

Board considered the proposals, accepted additional public comment, and directed the Executive

Officer to take a series of actions, including bringing the proposed regulations, along with staffs

10 written responses to comments, back to the Board for consideration for adoption. (ADF 25114-18 .|

ll LCFS 62580-81.) As ARB staff considered public comments and other information, ARB

12 determined it would be appropriate to make some modest changes to the proposals. Accordingly,

13 ARB noticed 15-day public comment periods—three for the LCFS and one for the ADF, (LCFS
14 63225-38, 67917-21, 68723-26; ADF 19303-17.) At a Board meeting on September 23, 2015,

15 after considering public comments and ARB staff’s responses to those comments, the Board

16 approved the EA and adopted the new LCFS and ADF regulations. (LCFS 80309-32; ADF

17 24811-20.) The Board also set aside its approval of, and repealed, the original LCFS regulation.

18 (LCFS 80312.) California’s Office of Administrative Law approved both of the new regulations

19 on November 16, 2015, and both went into effect at the start of 2016. (See LCFS 80563-64; ADF

20 25042.)

21 Cc The Use of Alternative Diesel Fuels and Related Emissions
22 The use of biodiesel and its emissions impacts was one of the significant issues in the first

23 POET case and in the 2015 LCFS and ADF rulemakings. Biodiesel is a lower-carbon alternative

24 to petroleum diesel and can be blended with petroleum diesel in different concentrations, referred

25 to as blends or blend levels. (LCFS 70134.) “B5,” a blend of five percent biodiesel with ninety-

26 five percent petroleum diesel, “is the most common blend level in California.” (LCFS 70135.)

27 ARB has been studying the emissions impacts of biodiesel use since at least 2009,

28 including reviewing the literature and commissioning studies to help fill gaps in that literature.
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Respondents’ Opposition Brief (15 CE CG 03380)
ARB “implemented one of the most comprehensive studies of renewable and CARB certified

diesel fuels” that led to a final report in 2011. (ADF 2636-37.) While that study “showed that

B20 [a blend of twenty percent biodiesel] and higher biodiesel blends would likely increase NOx

emissions” compared to petroleum-based California diesel, the NOx emissions impact of lower

level biodiesel blends, such as BS, “was unclear.” (ADF 2937.) ARB then contracted with UC

Riverside to examine emissions from B5 blends. (/bid.) The results of that study were issued in

June 2014 and presented at a public workshop on July 1, 2014. (See ADF 440-41, 442-62.)

After reviewing that study and other relevant studies, ARB concluded that biodiesel can

“increase NOx emissions in some circumstances, depending on feedstock, blend level, and

10 vehicle technology.” (ADF 1221.) Specifically, ARB found that biodiesel use in light- or

ll medium-duty engines results in no NOx increases. (ADF 1217, 20520.) Similarly, ARB found

12 that “use of biodiesel in blends up to B20 in NTDEs results in no detrimental NOx impacts.”

13 (ADF 1207; see also ADF 1216, 20520.) NTDEs are new technology diesel engines that are

14 equipped with Selective Catalytic Reduction (“SCR”). (ADF 1216.) As to non-NTDE heavy-

15 duty engines, ARB found that NOx increases can occur and vary with blend level and with

16 whether the biodiesel is made from soy (called “low saturation”) or from animal fat (called “high

17 saturation”). (ADF 1213). Accordingly, the ADF regulation set pollution control levels based on

18 saturation level (feedstock of soy or animal fat), blend level, and time of year (because NOx

19 emissions can contribute to ozone formation and time of year is relevant to the risk of ozone

20 formation). (ADF 1218-19; see also LCFS 70296-97.)

21 The studies ARB reviewed also demonstrated beneficial emissions impacts of biodiesel and

22 of renewable diesel (another alternative to petroleum diesel). (See ADF 20510, 1183-84.)

23 “Renewable diesel [was] found to decrease NOx emissions relative to conventional diesel.”
24 (ADF 20619 [emphasis added]; see also ADF 1216-17.) ARB also found that both renewable

25 diesel and biodiesel “decrease the emission rates of particulate matter, hydrocarbons and carbon

26 monoxide,” as well as greenhouse gases. (See ADF 1188; see also ADF 1187, 20549-50.) Along

27 with ozone, particulate matter and carbon monoxide are “criteria pollutants” for which ARB and

28 USS. EPA have set standards. (ADF 5719, 5735.) Particulate matter from diesel-fueled engines
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Respondents’ Opposition Brief (15 CE CG 03380)
(“diesel PM”) “typically accounts for about 70 percent of the state’s estimated potential ambient

air toxic cancer risks.” (LCFS 8528; see also ADF 5751, 5726.)

Both biodiesel and renewable diesel use have increased in California since 2009. (ADF

20619.) Based on market data and regulatory programs at both the state and national levels, ARB

concluded that federal incentives for biodiesel were the primary drivers “bringing biodiesel to
California post-2009,” noting, in particular, the federal Renewable Fuel Standard (“RFS2”) and a

federal tax credit for each gallon of biodiesel blended into petroleum diesel. (See ibid.)

Beginning with 2009, RFS2 has required increased sales of biodiesel each year. (42 U.S.C. §

7545(0)(2)(B)(i)(IV); see also 77 Fed. Reg. 59,458, 59,461 (Sept. 27, 2012) [“[RFS2 is] driving

10 production of biomass-based diesel”]; LCFS 27611.) In addition, a $1.00 per-gallon biodiesel tax
ll credit “incentivized biodiesel production above the RFS level.” (LCFS 27612 [emphasis added].)
12 However, while California typically receives about 11 percent of the national supply of any
13 given transportation fuel, the State has received less than that share of biodiesel, and more than
14 that share of renewable diesel, since 2009. (ADF 20551, 20619.) ARB concluded that the

15 original LCFS (and other California policy signals) were responsible for the presence of relatively

16 more renewable diesel, and less biodiesel, in California. (ADF 20619.) The displacement of

17 some biodiesel with renewable diesel “led to decreases in NOx” because, as noted above,
18 renewable diesel produces lower NOx emissions than either biodiesel or petroleum diesel. (Ibid.)

19 With regard to impacts of the new LCFS and ADF regulations, ARB concluded that “‘it is

20 certainly possible that biodiesel use in California would continue at or near existing levels — or

21 even increase — in the absence of an LCFS regulation.” (ADF 20552.) ARB also anticipated that

22 use of renewable diesel would continue to grow under the new regulations and that use of NTDEs

23 would increase. (/bid.) Accordingly, ARB concluded that NOx, PM and other emissions would

24 decrease under the new LCFS and ADF regulations, through the LCFS’s incentives for renewable

25 diesel and the ADF’s in-use requirements for biodiesel, as well as through the trend in increased

26 deployment of NTDEs. (ADF 20549-51.) ARB, thus, concluded the regulations’ “long-term

27 impacts on air quality would be beneficial.” (bid. [emphasis in original].)

Respondents’ Opposition Brief (15 CE CG 03380)
ARB’s other findings and conclusions are discussed, below, as needed to respond to

Petitioners’ claims.

ARGUMENT

I STANDARD OF REVIEW

Because Petitioners dedicated several pages of their Opening Brief to arguing the standard

of review under CEQA, Respondents describe the appropriate standard of review under CEQA

below. However, there is another standard of review applicable here as well, because Petitioners

also bring other challenges to these quasi-legislative actions by an expert agency.

A Judicial Review of Quasi-Legislative Acts By Expert Agencies Is Highly
Deferential
10

ll “Quasi-legislative administrative decisions are properly placed at that point of the

12 continuum at which judicial review is more deferential.” (Yamaha Corp. of Am. v. State Bd. of

13 Equalization (1998) 19 Cal.4th 1, 7 [internal quotation omitted].) “‘[QlJuasi-legislative rules ...

14 tepresent[ ] an authentic form of substantive lawmaking: Within its jurisdiction, the agency has

15 been delegated the Legislature's lawmaking power.’” (W. States Petroleum Assn. v. Bd. of

16 Equalization (2013) 57 Cal.4th 401, 415, quoting Yamaha Corp. of Am., supra, 19 Cal. 4th at p.

17 10 [modification in original].) “Because agencies granted such substantive rulemaking power are

18 truly ‘making law,’ their quasi-legislative rules have the dignity of statutes. When a court

19 assesses the validity of such rules, the scope of its review is narrow. If satisfied that the rule in

20 question lay within the lawmaking authority delegated by the Legislature, and that it is reasonably

21 necessary to implement the purpose of the statute, judicial review is at an end.” (/bid. [internal

22 quotation omitted]; see also Am. Coatings Assn. v. So. Coast Air Quality Dist. (2012) 54 Cal.4th

23 446, 460.) “The courts exercise limited review of legislative acts by administrative bodies out of

24 deference to the separation of powers between the Legislature and the judiciary, to the legislative

25 delegation of administrative authority to the agency, and to the presumed expertise of the agency

26 within its scope of authority.” (San Francisco Fire Fighters Local 798 v. City & Cty. of San

27 Francisco (2006) 38 Cal.4th 653, 667 [internal quotation omitted].)

Respondents’ Opposition Brief (15 CE CG 03380)
In adopting the LCFS and ADF regulations, ARB exercised its delegated law-making

power and its considerable expertise in the field of air pollution control. These regulations, then,

are entitled to the dignity of statutes, and judicial review of their validity is narrow.

B ARB’s Certified Regulatory Program and CEQA Standard of Review
As Petitioners acknowledge, ARB has a regulatory program certified by the Secretary of the

Resources Agency, pursuant to Public Resources Code section 21080.5, as meeting CEQA’s

tequirements. (Cal. Code Regs., tit. 17, §§ 60000-60008.) This certification exempts ARB from

the requirements in Chapters 3 and 4, and section 21167 of the Public Resources Code, “except as

provided in Article 2 (commencing with Section 21157) of Chapter 4.5.” (See Pub. Res. Code §

10 21080.5, subd. (c); Cal. Code Regs., tit. 14, §§ 15250, 15251.) ARB’s procedures are the

ll “functional equivalent of CEQA environmental review.” (Californians for Alternatives to Toxics

12 v. Cal. Dept. of Pesticide Regulation (2006) 136 Cal.App.4th 1049, 1067-1068.)
13 The court reviews an agency’s CEQA compliance for a prejudicial abuse of discretion,

14 (Ebbetts Pass Forest Watch v. Dept. of Forestry & Fire Protection (2008) 43 Cal.4th 936, 944.)
15 “Abuse of discretion is established if the agency has not proceeded in a manner required by law

16 or if the determination or decision is not supported by substantial evidence.” (Pub. Res. Code §

17 21168.5; see also Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova
18 (2007) 40 Cal 4th 412, 426.) Substantial evidence means “enough relevant information and

19 reasonable inferences from this information that a fair argument can be made to support a

20 conclusion, even though other conclusions might also be reached,” (Cal. Code Regs., tit. 14, §

21 15384, subd. (a).) “[T]he mere presence of conflicting evidence in the administrative record does

22 not invalidate” an agency’s CEQA determinations. (Barthelemy v. Chino Basin Municipal Water

23 Dist. (1995) 38 Cal.App.4th 1609, 1620.)
24 Petitioners bear the burden of proof to demonstrate that ARB abused its discretion, and the

25 presumption is that ARB’s environmental analysis is legally sufficient. (See A/ Larson Boat

26 Shop, Inc. v. Board of Harbor Commissioners (1993) 18 Cal.App.4th 729, 740.) As

27 demonstrated below, ARB complied with its certified regulatory program and CEQA in adopting

28 the new LCFS and ADF regulations.

Respondents’ Opposition Brief (15 CE CG 03380)
Il. PETITIONERS’ CLAIMS CONCERNING THE ORIGINAL LCFS ARE NOT BEFORE THIS
COURT AND, IN ANY EVENT, LACK FACTUAL OR LEGAL BASIS

As Petitioners note, the arguments in Section III.B of their Opening Brief (corresponding to

the first “cause of action”), are identical to arguments advanced in their pending appeal seeking to

teverse the discharge of the writ concerning the original (and now repealed) LCFS. (Pet. Br. at

13 n.3.) Petitioners claim they included these arguments in this challenge to the new LCFS “in

the event the Court of Appeal’s decision ... does not dispose of this cause of action.” (/bid.) But

this case is set to be heard on January 20, 2017, whereas Petitioners’ appeal has not yet been set

for argument. It is, then, entirely unclear how this court could determine what, if anything, will

10 remain of Petitioners’ first cause of action. This cause of action should be denied on this basis

ll alone. (See Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 642 [noting plaintiffs

12 may not “divide a primary right and enforce it in two suits”); Plant Insulation Co. v. Fibreboard

13 Corp. (1990) 224 Cal.App.3d 781, 787 [describing “public policies of avoiding conflicts that

14 might arise between courts if they were free to make contradictory decisions ... relating to the

15 same controversy”].) Petitioners have conceded as much, asserting in their reply to the Court of

16 Appeal that “these claims are properly advanced [there] because they relate to Respondents’

17 compliance with the Peremptory Writ [in the earlier case].” (Respondents’ Request for Judicial

18 Notice, Exh. A at p. 24.6.) Respondents’ compliance with the Peremptory Writ is not before

19 this Court; indeed, this Court has already discharged that writ.

20 Further, and regardless of the status of Petitioners’ appeal, any issues related to the 2009

21 adoption of the original LCFS are not before this court in this lawsuit challenging the 2015

22 adoption of the new LCFS and ADF regulations. (See Am. Coatings Assn., Inc., supra, 54

23 Cal.4th at p. 460 [“Because we address the validity of the amendments as adopted in 2002, we

24 consider only the administrative record before the agency at that time.”]; see also Pub. Res. Code

25 § 21167, et seq.].) This case concerns only the actions ARB took in 2015—the adoption of the

26 new LCFS and ADF regulations. Petitioners’ first “cause of action” fails for this reason alone.

27 This “cause of action” also has other fatal flaws, as discussed below.

28
10
Respondents’ Opposition Brief (15 CE CG 03380)
A Petitioners’ Claims Concerning the Original LCFS Are Based on the False
Premise that the Original LCFS Caused Any and All Biodiesel-Related
Increases in NOx Emissions Since 2009
The crux of Petitioners’ first “cause of action” is that any and all NOx emissions increases

from biodiesel use in California were caused by the original LCFS. (Pet. Br. at pp. 13-17.) This

contention is simply false, and this cause of action fails as a result.

ARB expressly found that federal programs have been the primary driver of increased

biodiesel use (and any resulting increase in NOx emissions) in California since 2009.

Specifically, ARB found that the federal RFS2 program and a federal biodiesel tax credit “were

more instrumental [than the original LCFS] in bringing biodiesel to California post-2009.”

10 (LCFS 70178.) CEQA does not require agencies to analyze and mitigate the effects of federal

ll programs. Rather, “CEQA only requires that an EIR discuss ‘[the] significant environmental

12 effects of the proposed project.’” (Envti. Council of Sacramento v. City of Sacramento (2006)

13 142 Cal. App. 4th 1018, 1036 [emphasis in original, quoting Pub. Res. Code § 21100, subd. (a)].)

14 ARB’s conclusions concerning increases in biodiesel use since 2009 are supported by two

15 unchallenged facts: 1) that these federal programs provide “attractive economic incentives” that

16 have significantly increased biodiesel use throughout the country; and 2) that, since 2009,

17 California has received less than its typical share of national biodiesel and more than its typical

18 share o

Case Info

Judge

Petrucelli, James Track Judge’s New Case

Case No.

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Document Filed Date

November 14, 2016

Case Filing Date

October 30, 2015

County

Parties

California Air Resources Board Respondent
Corey, Richard Respondent
Jones, Timothy Attorneys for Plaintiffs
Lyons, James M. Petitioner
Meckenstock, Margaret E Attorneys for Defendants
Poet LLC Petitioner
Nicolas Cardella Attorneys for Plaintiffs
Janelle Smith Attorneys for Defendants
Myung Park Attorneys for Defendants
John Kinsey Attorneys for Plaintiffs
Dylan Crosby Attorneys for Plaintiffs
David Pettit Attorney
Mark Poole Attorney
Gavin McCabe Attorney
Lynn Haug Attorney
Christopher Campbell Attorney
Daniel Stein Attorney
Mark Waterman Attorney

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Trial Materials: Poet LLC vs.California Air Resources Board/CEQA

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