Amicus Curiae Brief — American Fuel & Petrochemical Manufacturers, et al., Petitioners v. Jane O’Keeffe, et al.

No. 18-881

In The

Supreme Court of the United States

____________________

AMERICAN FUEL & PETROCHEMICAL

MANUFACTURERS, et al.,

Petitioners,

v.

JANE O’KEEFFE, et al.,

____________________

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

____________________

BRIEF AMICI CURIAE OF PACIFIC

LEGAL FOUNDATION, CATO INSTITUTE,

COMPETITIVE ENTERPRISE INSTITUTE,

COMMITTEE FOR A CONSTRUCTIVE

TOMORROW, INSTITUTE FOR ENERGY

RESEARCH, ENERGY AND ENVIRONMENT

LEGAL INSTITUTE, 60 PLUS FOUNDATION,

AND CAPITAL RESEARCH CENTER IN

SUPPORT OF PETITIONERS

____________________

DAMIEN M. SCHIFF

Counsel of Record

Pacific Legal Foundation

930 G Street

Sacramento, California 95814

Telephone: (916) 419-7111

Email: DSchiff@pacificlegal.org

Counsel for Amici Curiae – Additional Counsel within Cover

Additional Counsel

ANTHONY L. FRANÇOIS

DAVID J. DEERSON

Pacific Legal Foundation

930 G Street

Sacramento, California 95814

Telephone: (916) 419-7111

i

QUESTIONS PRESENTED

1.

Whether the Oregon Fuel Program—which

restricts transportation fuel imports based upon a

“life-cycle analysis” that regulates the manner in

which the fuels are produced and transported in

interstate and foreign commerce—is an impermissible

and unconstitutional extraterritorial regulation.

2.

Whether the Oregon Fuel Program—which is

designed to require and has the effect of requiring outof-state competitors to subsidize in-state producers—

violates the Commerce Clause.

ii

Table of Contents

Page

QUESTIONS PRESENTED ........................................ i

TABLE OF AUTHORITIES ...................................... iv

INTEREST OF AMICI CURIAE ................................ 1

SUMMARY OF REASONS FOR GRANTING THE

PETITION ................................................................... 4

REASONS FOR GRANTING THE PETITION ......... 6

I.

THE COURT SHOULD GRANT THE

PETITION BECAUSE THE DECISION

BELOW UNDERMINES THIS COURT’S

COMMERCE CLAUSE PRECEDENTS BY

PROVIDING A TEMPLATE FOR

EVADING THEM .......................................... 6

A.

The decision below holds that states may

use life-cycle analysis to regulate out-ofstate fuel production and shipping ............ 6

B.

This Court has consistently struck down

state laws that impede interstate trade

without reference to features of the

goods themselves ........................................ 9

C.

Under the decision below, life-cycle

analysis allows states to evade this Court’s

Commerce Clause precedents .................. 12

II.

SIGNIFICANT EXTRATERRITORIAL

STATE ACTION VIOLATES THE BASIC

PRINCIPLE OF FEDERALISM AND

CREATES AN URGENT BASIS FOR

THIS COURT’S REVIEW ........................... 14

iii

III.

THE COURT SHOULD GRANT THE

PETITION BECAUSE THE DECISION

BELOW CREATES GRAVE, IMMEDIATE

IMPLICATIONS FOR NATIONAL

FUEL MARKETS ........................................ 16

A.

The Fuel Program imposes one state’s

control over a national fuel market of

crucial significance to every American .... 16

B.

The decision below encourages other states

to use malleable life-cycle analysis to

regulate beyond their borders .................. 17

CONCLUSION.......................................................... 20

iv

Table of Authorities

Page

Cases

American Fuel & Petrochemical Manufacturers v.

O’Keeffe, 134 F. Supp. 3d 1270 (D. Or. 2015) ......... 7

American Fuel & Petrochemical Manufacturers v.

O’Keeffe, 903 F.3d 903 (9th Cir. 2018) .......... 4, 5, 10

Baldwin v. G.A.F. Seelig, Inc.,

294 U.S. 511 (1935) ......................................... 10, 11

Brown-Forman Distillers Corp. v. New York State

Liquor Authority, 476 U.S. 573 (1986) ........... 10, 11

Dep’t of Revenue of Ky. v. Davis,

553 U.S. 328 (2008) ................................................. 9

Fort Gratiot Sanitary Landfill, Inc. v. Michigan

Department of Natural Resources,

504 U.S. 353 (1992) ............................................... 11

Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997)....... 9

Healy v. Beer Inst., 491 U.S. 324 (1989)............ 5, 9-11

Hughes v. Oklahoma, 441 U.S. 322 (1979) .............. 11

Maine v. Taylor, 477 U.S. 131 (1986) ....................... 11

Mass. v. EPA, 549 U.S. 497 (2007) ........................... 14

New York Life Insurance Co. v. Head,

234 U.S. 149 (1914) ................................................. 7

Philadelphia v. New Jersey,

437 U.S. 617 (1978) ............................................. 5, 9

Rocky Mountain Farmers Union v. Corey, 730 F.3d

1070 (9th Cir. 2013), cert. denied,

134 S. Ct. 2875 (2014) ................................. 4, 10, 15

Rocky Mountain Farmers Union v. Goldstene,

843 F. Supp. 2d 1071 (E.D. Cal. 2013) ................. 15

Wyoming v. Oklahoma, 502 U.S. 437 (1992) ........... 12

v

Other Authorities

1 Tribe, Laurence H., American Constitutional Law

(3d ed. 2000) .......................................................... 15

Albrecht, Tim, LCFS Matures, Ethanol Producer

Magazine (Sept. 10, 2018), available at

http://www.ethanolproducer.com/articles/15575/

lcfs-matures (last visited Jan. 31, 2019) ................ 4

Burke, Debra, et al., Minimum Wage and

Unemployment Rates: A Study of Contiguous

Counties, 46 Gonz. L. Rev. 661 (2011) .................. 13

Cal. Air Res. Bd., Proposed Regulation to Implement

the Low Carbon Fuel Standard, Volume I, Staff

Report: Initial Statement of Reasons (2018) ......... 19

Farrell, Alexander & Sperling, Daniel, U.C. Davis

Inst. of Transp. Studies, A Low Carbon Fuel

Standard for California (2007) ....................... 17, 18

Life Cycle Associates LLC, A Clean Fuel Standard in

Washington State: Revised Analysis with Updated

Assumptions (Dec. 12, 2014) available at

https://bit.ly/2ULIYXj

(last visited Jan. 31, 2019) .................................... 17

Ne. States Ctr. for a Clean Air Future, Introducing a

Low Carbon Fuel Standard in the Northeast (July

2009), available at https://bit.ly/2Su2SbB (last

visited Jan. 31, 2019) ............................................ 17

Or. Dep’t of Envtl. Quality, Final Report: Oregon Low

Carbon Fuel Standards, Advisory Committee

Process and Program Design (Jan. 25, 2011) ... 8, 19

Rabe, Barry G., Greenhouse & Statehouse: The

Evolving State Government Role in Climate

Change (Nov. 2002) ................................................. 6

The Federalist No. 42 (James Madison)................... 15

The Federalist Nos. 7, 8, 11, 22

(Alexander Hamilton) ........................................... 14

vi

U.S. Dep’t of Labor, Minimum Wage Laws in the

States — January 1, 2019, https://bit.ly/2UHkLkI

(last visited Jan. 31, 2019) .................................... 12

U.S. Dep’t of Transp., Research & Innovative

Technology Admin., Bureau of Transp. Statistics,

Special Report: The Changing Tide of U.S.International Container Trade: Differences Among

the U.S. Atlantic, Gulf, and Pacific Coasts (Dec.

2011), available at https://bit.ly/2MPV5ji (last

visited Jan. 31, 2019) ............................................ 19

U.S. Energy Info. Admin, State Profiles and Energy

Estimates (2016), available at

https://www.eia.gov/state/seds/data.php (last

visited Jan. 31, 2019) .............................................. 7

1

INTEREST OF AMICI CURIAE 1

Pursuant to Rule 37.2(a), Pacific Legal

Foundation, Cato Institute, Competitive Enterprise

Institute, Committee for a Constructive Tomorrow,

Institute for Energy Research, Energy and

Environment Legal Institute (E & E Legal), 60 Plus

Foundation, Inc., and Capital Research Center

respectfully submit this brief amicus curiae in support

of the Petitioners.

Pacific Legal Foundation is the most experienced

public interest legal organization defending the

constitutional principle of federalism in the arena of

environmental law. PLF’s attorneys have participated

as lead counsel or counsel for amici in several cases

before this Court involving the balance between state

and federal environmental regulation of commercial

activities. See, e.g., Decker v. Nw. Envtl. Def. Ctr., 568

U.S. 597 (2013); Rapanos v. United States, 547 U.S.

715 (2006); Solid Waste Agency of Northern Cook

County v. U.S. Army Corps of Engineers, 531 U.S. 159

(2001).

The Cato Institute was established in 1977 as a

nonpartisan public policy research foundation

dedicated to advancing the principles of individual

1 Pursuant to this Court’s Rule 37.2(a), all parties have consented

to the filing of this brief. Counsel of record for all parties received

notice at least 10 days prior to the due date of the Amici Curiae’s

intention to file this brief.

Pursuant to Rule 37.6, Amici Curiae affirm that no counsel

for any party authored this brief in whole or in part, and no

counsel or party made a monetary contribution intended to fund

the preparation or submission of this brief. No person other than

Amici Curiae, their members, or their counsel made a monetary

contribution to its preparation or submission.

2

liberty, free markets, and limited government. Cato’s

Robert A. Levy Center for Constitutional Studies was

established in 1989 to help restore the principles of

limited constitutional government that are the

foundation of liberty. Toward those ends, Cato

publishes books and studies, conducts conferences,

publishes the annual Cato Supreme Court Review,

and files amicus briefs.

The Competitive Enterprise Institute is a

nonprofit

organization

incorporated

and

headquartered in Washington, D.C., dedicated to

promoting the principles of free markets and limited

government. Since its founding in 1984, CEI has

focused on raising public understanding of the

problems of overregulation. It has done so through

policy analysis, commentary, and litigation. CEI is

concerned that this kind of regulation allows one state

to exert extraterritorial influence on other states.

The Committee for a Constructive Tomorrow is a

nonprofit organization headquartered in Washington,

D.C. For over 30 years, CFACT has promoted freemarket approaches to meeting U.S. energy needs and

has opposed regulation and litigation aimed at

interfering in competitive markets. CFACT believes

that Oregon’s Low-Carbon Fuel Standard, by

asserting extraterritorial power over the nation’s fuel

supply, is a clear violation of the U.S. Constitution’s

Commerce Clause.

The Institute for Energy Research is a nonprofit

organization that conducts intensive research on the

functions, operations, and government regulation of

energy markets. IER maintains that freelyfunctioning energy markets provide the most efficient

and effective solutions to today’s energy and

3

environmental challenges, and, as such, are critical to

the well-being of individuals and society. IER is

funded entirely by tax deductible contributions from

individuals, foundations, and corporations. No

financial support is sought or accepted from

government entities.

The Energy and Environment Legal Institute is a

nonprofit organization that champions responsible

and balanced environmental policies that seek to

conserve the nation’s natural resources while

ensuring a stable and strong economy through energy

dominance. E & E Legal pursued a suit in Colorado

regarding their unconstitutional renewable energy

standard and see numerous parallels in the present

case.

The 60 Plus Foundation is a nonprofit organization

incorporated in Virginia and headquartered in

Alexandria, Va. The Foundation’s mission is to serve

the purpose of raising awareness and providing

information concerning senior citizens who are

disproportionately impacted by public policy issues. A

focus is on energy and environmental policies that

impact the costs many senior citizens on fixed incomes

must pay for energy.

The Capital Research Center is an investigative

think tank that studies how activist groups exert their

influence over the public policy process. In this case

CRC is concerned that a network of special interests

and radical environmental activists in one state,

organized into different legal entities (including

private businesses, state level nonprofit lobbying

organizations, national nonprofit issue advocacy

organizations, and others), are attempting to leverage

their political power to unconstitutionally force the

4

other 49 states into compliance with their agenda.

CRC performs no contract work and accepts no

government funds.

This case concerns amici because it implicates the

basic principles of federalism as a safeguard for

liberty.

SUMMARY OF REASONS FOR

GRANTING THE PETITION

The Court should grant the Petition because the

decision below conflicts with and undermines this

Court’s Commerce Clause decisions barring

extraterritorial state regulation. Relief in this Court

is urgent. Without it, Oregon’s violation of interstate

federalism, and its extraterritorial control of the

national fuel supply chain, will become permanent.

Worse, the problem is not limited to Oregon; the Ninth

Circuit has also approved a virtually identical scheme

out of California, Rocky Mountain Farmers Union v.

Corey, 730 F.3d 1070 (9th Cir. 2013), cert. denied, 134

S. Ct. 2875 (2014), and the state of Washington is

eyeing a similar approach. Tim Albrecht, LCFS

Matures, Ethanol Producer Magazine (Sept. 10, 2018),

http://www.ethanolproducer.com/articles/15575/lcfsmatures. Absent this Court’s review, the decision

below authorizes significant domestic trade conflict.

This Court has consistently struck state laws that

control actions in other states as Commerce Clause

violations. But Ninth Circuit precedent allows Oregon

to use a methodology called life-cycle analysis to evade

those precedents. American Fuel & Petrochemical

Manufacturers v. O’Keeffe, 903 F.3d 903, 917 (9th Cir.

2018) (“Because the [Oregon Clean Fuels] Program

5

does not legislate extraterritorially, American Fuel’s

claim fails . . . .”).

This Court has consistently struck down state laws

that impede the interstate flow of goods based on outof-state conduct rather than on features of the goods

themselves. Philadelphia v. New Jersey, 437 U.S. 617,

626–27 (1978) (collecting cases); Healy v. Beer Inst.,

491 U.S. 324, 337 (1989). The Fuels Program does not

change the composition or physical attributes of the

ethanol or finished gasoline it ostensibly regulates.

Rather, it uses life-cycle analysis as a legal fiction to

assign out-of-state greenhouse gas emissions,

resulting from the production of transportation fuel,

to the fuel itself. A life-cycle analysis estimates the

greenhouse gas emissions associated with making a

consumer product—such as fuel—regardless of where

they occur. Since the emissions from making fuel

cannot be measured by examining the fuel, the only

way for a state to regulate out-of-state emissions from

fuel production is to assign them—fictionally—to the

fuel itself. See O’Keeffe, 903 F.3d at 908–09. But if lifecycle analysis is a valid means for states to regulate

out-of-state conduct, as the Ninth Circuit has held,

then any state can use it to circumvent this Court’s

cases barring (i) interference with out-of-state

purchase contracts, and (ii) import/export bans based

on point of origin or destination.

The Court should grant the Petition because the

decision below violates a fundamental principle of

interstate federalism. The Framers of the

Constitution expressly sought to prevent states from

acting against each other through import duties, point

of origin restrictions, and other trade restraints which

the Articles of Confederation too freely permitted. The

6

decision below enables such trade restrictions

contrary to the Framers’ vision, and foments rather

than quells bad trade relations among the states.

The Court should also grant the Petition to address

Oregon’s foray into national control of fuel production,

and to protect the nation’s fuel supply chain from

Oregon’s interference. The Ninth Circuit holds that a

state does not regulate extraterritorially when it uses

its market power to coerce changes in conduct beyond

its borders, conduct that it cannot regulate directly.

Finally, the Court should grant the Petition

because the decision below invites domestic trade

conflicts. Life-cycle analysis models require

simplification and policy judgment to be used as

regulatory tools. States can easily exploit this

malleability to impose a range of barriers to trade in

milk, beer, liquor, coal, and other goods against their

neighbors.

REASONS FOR GRANTING THE PETITION

I.

THE DECISION BELOW UNDERMINES

THIS COURT’S COMMERCE CLAUSE

PRECEDENTS BY PROVIDING A TEMPLATE

FOR EVADING THEM

A.

The decision below holds that states may

use life-cycle analysis to regulate out-ofstate fuel production and shipping

Oregon has already taken ambitious steps toward

the reduction of greenhouse gas emissions from

sources in the state. Barry G. Rabe, Greenhouse &

Statehouse: The Evolving State Government Role in

Climate Change 30 (Nov. 2002).

7

But it is not content to stop there: it seeks to

control greenhouse gas emissions beyond its borders.

As one among equals, Oregon lacks the police power

to regulate emissions in other states. New York Life

Insurance Co. v. Head, 234 U.S. 149, 161 (1914). But

where police power is lacking, coercion through

market power may suffice. Together, the states in the

Ninth Circuit account for more than 17% of the

national market for liquid transportation fuels. 2

Manufacturing and shipping that fuel encompass an

enormous variety of commercial activity in many

states all over the nation and the world, which in turn

produces out-of-state emissions that Oregon (and

California, and others) would like to regulate. The

state’s control of its fuel market gives it market power

to control out-of-state emissions which it cannot

control through its police power.

In order to regulate emissions outside Oregon, the

Fuels Program uses life-cycle analysis to fictionally

assign out-of-state emissions generated during the

production of the fuel to the fuel itself. AFPM v.

O’Keeffe, 134 F. Supp. 3d 1270, 1275 (D. Or. 2015).

This legal fiction is referred to as a fuel’s “carbon

intensity.” Id. Life-cycle analysis estimates the

greenhouse gas emissions that result from each of the

production steps in making fuel or other consumer

products. For soybean biodiesel, as an example, these

2 The Ninth Circuit states (Alaska, Arizona, California, Hawaii,

Nevada, Idaho, Montana, Oregon, and Washington) consume

6,224.1 trillion Btu of petroleum fuels; the United States

consumes 36,070.2 trillion. U.S. Energy Info. Admin, State

Profiles and Energy Estimates, Table C1, Energy Consumption

Overview: Estimates by Energy Source and End-Use Sector

(2016), available at https://www.eia.gov/state/seds/data.php (last

visited Jan. 31, 2019).

8

steps include the cultivation and harvesting of

soybeans; transportation to the fuel production

facility; distillation of the soybeans into biodiesel

(accounting for the efficiency of the process as well as

the fuel used in production); and transportation of the

resulting biodiesel to market. Or. Dep’t of Envtl.

Quality, Final Report: Oregon Low Carbon Fuel

Standards, Advisory Committee Process and Program

Design 123 (Jan. 25, 2011) [hereinafter Advisory Final

Report] (“The direct carbon intensity of a fuel is

calculated by adding up greenhouse gas emissions

from each step in the fuel production process.”). 3

The Fuels Program does not distinguish any

physical attribute of the finished fuel it purports to

regulate. Pet. App. 125a (Compl. ¶ 43). It only assigns

an estimate of the emissions that a mathematical

model says resulted from making it and moving it

around. The variation in the carbon intensity of

different batches of ethanol or other fuel results from

differences in the emissions from its manufacture and

shipment to Oregon. Id. The Fuels Program thus

differentiates

between

manufacturing

and

transportation processes, without making any

distinction in the physical attributes of the resulting

fuel itself. Advisory Final Report, supra at 40.

The Fuels Program does not change or regulate the

characteristics, formulation, or any other real

attribute of the fuel itself. It does not reduce any

emissions that occur in Oregon; regardless of any

given imported fuel’s life-cycle production emissions,

all fuels of each type (gasoline, diesel, ethanol, etc.)

have identical emissions from burning them in

Available

at

https://www.oregon.gov/deq/FilterDocs/

LCFSreportFinal.pdf (last visited Jan. 31, 2019).

3

9

vehicles in Oregon. Put another way, the only

difference in life-cycle analysis of different batches of

gasoline or ethanol results from activity in other

states. In approving this method of cross-border

control, the decision below contradicts and

undermines this Court’s precedents.

B.

This Court has consistently struck down

state laws that impede interstate trade

without reference to features of the goods

themselves

The Fuels Program uses life-cycle analysis to

measure out-of-state emissions resulting from making

and shipping ethanol to Oregon, and then assigns

those emissions to otherwise identical shipments of

ethanol when they arrive in Oregon. Could similar

methodologies be used to control out-of-state

transactions, sources, or production methods for goods

like milk, beer, liquor, solid waste, or coal? The Court

should grant the Petition to consider whether lifecycle analysis is a constitutional means for a state to

extend its police power beyond its borders and beyond

this Court’s case law.

Where states impede interstate trade in goods

without reference to any physical attribute of the

goods themselves, this Court has consistently held

such laws to violate the Constitution. See, e.g., Healy,

491 U.S. at 337. State efforts to limit the import or

export of goods based on actions that occur outside the

state and which are not manifest in the goods

themselves

have

been

uniformly

held

unconstitutional. Philadelphia, 437 U.S. at 626–27

(citing cases). Excepting only those fields in which

states grant regulatory monopolies to public utilities,

Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997)

10

(natural gas), or where the state itself is a market

participant, Dep’t of Revenue of Ky. v. Davis, 553 U.S.

328 (2008) (municipal bonds), Amici are unaware of

any decision of this Court to the contrary.

The decision below relies on Rocky Mountain

Farmers Union v. Corey, but neither the O’Keeffe court

nor the Rocky Mountain court cites any case in which

this Court upheld a state law regulating goods in

interstate commerce that did not relate directly to

some physical attribute of the goods. See O’Keeffe, 903

F.3d at 916–17 (citing Rocky Mountain, 730 F.3d at

1101); Rocky Mountain, 730 F.3d at 1101–03

(distinguishing this Court’s Commerce Clause cases

on the basis that California’s Low Carbon Fuel

Standard uses life-cycle analysis instead of direct

price controls or import conditions). In fact, the

decision below radically conflicts with—and

undermines—this

Court’s

Commerce

Clause

precedents.

For example, in Baldwin v. G.A.F. Seelig, Inc., the

Court struck down a New York statute that imposed

minimum milk prices that dealers had to pay to

dairies, whether in New York or in neighboring states

such as Vermont. 294 U.S. 511, 519 (1935). In BrownForman Distillers Corp. v. N.Y. State Liquor

Authority, the Court struck down another New York

statute, this one conditioning access to the state’s

liquor market on distillers’ affirmation that their

prices to New York wholesalers were no higher than

the lowest prices the distillers charged to wholesalers

anywhere else in the nation. 476 U.S. 573, 575 (1986).

This Court held that the statute controlled out-ofstate transactions and thus violated the Commerce

Clause. Id. at 580–82. In Healy v. Beer Institute, this

11

Court invalidated a Connecticut law that required

importers of beer to affirm that they charged

Connecticut wholesalers no more than they charged in

other states. 491 U.S. at 326. This law had the

practical effect of controlling “commercial activity

occurring wholly outside the boundary” of the state,

id. at 337, and discriminated “against brewers and

shippers of beer engaged in interstate commerce[,]” id.

at 340. And in Fort Gratiot Sanitary Landfill, Inc. v.

Michigan Dep’t of Nat. Res., the Court struck down a

Michigan statute that prohibited private landfill

operators from accepting solid waste that originated

outside the county in which the landfill was located.

504 U.S. 353, 355 (1992).

Each of these unconstitutional state laws impeded

the interstate flow of an article of trade without

reference to any attribute of the article itself. The

three price control cases regulated out-of-state sales

between producers and wholesalers. Baldwin, 294

U.S. at 519; Brown-Forman, 476 U.S. at 575; Healy,

491 U.S. at 326. Fort Gratiot banned disposal of (more

or less) fungible solid waste based only on its point of

origin. 504 U.S. at 355. Baldwin and Healy applied to

transactions in immediately neighboring states.

Baldwin, 294 U.S. at 519 (milk purchased outside

New York state); Healy, 491 U.S. at 326 (beer prices

in specified neighboring states). The New York law in

Brown-Forman

expressly

regulated

conduct

nationwide, 476 U.S. at 575, while the imported waste

ban in Fort Gratiot had the effect of restricting

commerce within Michigan as well as between that

state and its neighbors, 504 U.S. at 361. Compare

Hughes v. Oklahoma, 441 U.S. 322, 336–37 (1979)

(striking law that banned export of minnows while

allowing their use in state), with Maine v. Taylor, 477

12

U.S. 131, 148 (1986) (upholding ban on import of live

bait fish based on likely impact of nonnative fish on

local species).

C.

Under the decision below, life-cycle

analysis allows states to evade this Court’s

Commerce Clause precedents

If Oregon directly legislated that ethanol made in

coal-fired plants, or crude oil produced from the oil

sands of Alberta, could not be used in Oregon, that law

would be struck down under Healy, Baldwin, BrownForman, and Fort Gratiot. See also Wyoming v.

Oklahoma, 502 U.S. 437, 461 (1992) (state cannot

require that a percentage of coal used in power plants

serving the state be mined in the state). The state

should not be able to do indirectly what it is

constitutionally forbidden from doing directly. The

Ninth Circuit’s ruling raises the important question of

whether these precedents can now be evaded by using

a life-cycle analysis model, rather than the cruder and

more obvious Twentieth Century methods of

extraterritorial regulation.

To illustrate, New York could identify out-of-state

activities involved in the production of milk. New

York’s minimum wage is higher than the federal

requirement, while neighboring Pennsylvania’s

equals the federal government’s. 4 New York might

argue that Pennsylvania’s lower wage puts New York

dairies and milk processors at a disadvantage. See,

e.g., Debra Burke, et al., Minimum Wage and

Unemployment Rates: A Study of Contiguous

4 See U.S. Dep’t of Labor, Minimum Wage Laws in the States —

January 1, 2019, https://bit.ly/2UHkLkI (last visited Jan. 31,

2019).

13

Counties, 46 Gonz. L. Rev. 661, 678–80 (2011)

(describing employment effects of different minimum

wage laws in state border areas of Washington and

Idaho). New York could then employ a life-cycle

analysis model that estimates economic inputs into

milk production, similar to the manner in which the

life-cycle analysis in the Fuels Program estimates

emissions from fuel production. Using that life-cycle

analysis, New York could assign a “minimum wage

effect” to all milk sold in-state, and require that sellers

with a lower assigned minimum wage enter into

contracts with their out-of-state suppliers to increase

the wages of the producer’s employees.

Using this approach, the Ninth Circuit’s decision

affirming the Fuels Program is a template for New

York and Massachusetts to re-erect their price

controls on out-of-state transactions in milk, beer, and

liquor, merely by fictionally assigning some

production or shipping input (a lower state minimum

wage, for example) to the imported product at the

state border. Oklahoma and Michigan can revive their

barriers to imported coal and waste by attributing

safety standards for mining or trash collection to the

imported goods. Under American Fuels &

Petrochemical Manufacturers v. O’Keeffe and Rocky

Mountain Farmers Union v. Corey, these states could

achieve the results that this Court struck down in

Baldwin, Healy, Brown-Forman, Fort Gratiot, and

Wyoming v. Oklahoma by developing a suitable lifecycle analysis model to achieve the desired results.

This Court should grant the Petition to decide

whether life-cycle analysis is indeed a constitutional

means for states to circumvent precedent and to

engage in cross-border regulation.

14

II.

SIGNIFICANT EXTRATERRITORIAL STATE

ACTION VIOLATES THE BASIC PRINCIPLE

OF FEDERALISM AND CREATES AN URGENT

BASIS FOR THIS COURT’S REVIEW

Policies like Oregon’s Fuel Program and

California’s Low Carbon Fuel Standard represent

extraterritorial state action of unprecedented scope.

Absent this Court’s review, the Ninth Circuit’s

holdings that such programs neither discriminate

against

interstate

commerce

nor

regulate

extraterritorially will become the law of the land, not

just of the Ninth Circuit: by their nature,

extraterritorial state regulations have effects outside

of the state which imposes them, and yet evade

political accountability in those “invaded” states.

Although “Massachusetts cannot invade Rhode

Island to force reductions in greenhouse gas

emissions,” Mass. v. EPA, 549 U.S. 497, 519 (2007),

Oregon is using economic coercion to force greenhouse

gas emission reductions on its fellow states. But the

Framers sought to prevent economic warfare among

the states just as surely as they meant to inhibit the

then-real possibility of armed conflict among the

states. The Federalist No. 7 (Hamilton) (describing the

potential of both armed and economic conflict among

the states under the Articles of Confederation); The

Federalist No. 8 (Hamilton) (detailing the potential

sources of armed conflict among the states under the

Articles); The Federalist No. 11 (Hamilton) (describing

the benefits of good trade relations among the states

under the proposed Constitution). Alexander

Hamilton underlined the Articles’ failure to support

good trade relations among the states:

15

The

interfering

and

unneighborly

regulations of some States, contrary to the

true spirit of the Union, have, in different

instances, given just cause of umbrage and

complaint to others, and it is to be feared

that examples of this nature, if not

restrained by a national control, would be

multiplied and extended till they become no

less serious sources of animosity and discord

than injurious impediments to the

intercourse between the different parts of

the Confederacy.

The Federalist No. 22. See also The Federalist No. 42

(Madison) (describing the harms of import duties

imposed by the states against each other, and the

deeper divisions likely to come under the Articles).

Allowing states to leverage their market power to

reach beyond their borders (and the limits of their

police power) and control activity that is properly the

subject of direct regulation by other states

undermines the basic principles of federalism on

which this nation as founded. And it does so in a

manner that leaves the invaded states with no legal

or political recourse. 5 See 1 Laurence H. Tribe,

American Constitutional Law § 6-5 (3d ed. 2000) (“The

checks on which we frequently rely to curb the abuse

of legislative power—election and recall—are simply

5 The Ninth Circuit’s approval in Rocky Mountain of California’s

“legal and political responsibility for emissions in other states”

suggests that the lower court found this to be a strength of their

respective programs, not a constitutional weakness. See 730 F.3d

at 1105–06 (quoting Rocky Mountain Farmers Union v.

Goldstene, 843 F. Supp. 2d 1071, 1092 (E.D. Cal. 2013)). Of

course, neither state’s officials are legally or politically

responsible to any electorate outside those states’ borders.

16

unavailable to those who have no effective voice or

vote in the jurisdiction which harms them. This

problem is most acute when a state enacts commercial

laws that regulate extraterritorial trade, so that

unrepresented outsiders are affected even if they do

not cross the state’s borders.”).

III.

THE DECISION BELOW CREATES GRAVE,

IMMEDIATE IMPLICATIONS FOR NATIONAL

FUEL MARKETS

A.

The Fuel Program imposes one state’s

control over a national fuel market of

crucial significance to every American

The Court should grant the Petition to address this

unprecedented foray into national control of fuel

production, and to protect the nation’s foundational

transportation fuel market from interference.

Gasoline and diesel fuel are the basic energy

inputs that provide most of the mobility and

commerce in American life and culture. It is difficult

to picture any significant part of the nation that does

not depend, daily, on a reliable market for

transportation fuel. It is also hard to imagine anyone

who is not harmed by the intentional manipulation or

the balkanization of that market. Fuel production is

an enormous and complex foundation of our economy.

When states like California and Oregon use their

market powers as a lever to exert control over the

foundational fuel supply chain in every other part of

the national market, then the states are no longer

equals. The Court should grant the Petition because

the Ninth Circuit ruling allows states to micromanage

the national fuel supply chain.

17

B.

The decision below encourages other

states to use malleable life-cycle analysis

to regulate beyond their borders

The Court should grant the Petition to prevent

multiple states from using life-cycle analysis to

engage in extraterritorial and discriminatory trade

conflicts. Washington State has investigated the

development of its own version of the Fuels Program.

Life Cycle Associates LLC, A Clean Fuel Standard in

Washington State: Revised Analysis with Updated

Assumptions (Dec. 12, 2014). 6 And a coalition of 11

states in the Northeast and Mid-Atlantic regions are

jointly developing their own regional low carbon fuel

standard. See Ne. States Ctr. for a Clean Air Future,

Introducing a Low Carbon Fuel Standard in the

Northeast (July 2009). 7

States can use life-cycle analysis to achieve any

purpose desired. Using such analysis to assign carbon

intensity values entails significant uncertainty,

generalization, simplification, and policy judgment.

Alexander Farrell & Daniel Sperling, U.C. Davis Inst.

of Transp. Studies, A Low Carbon Fuel Standard for

California § 2.8.2, at 41 (2007) (“The present

generation of transportation fuel [life-cycle analysis]

models . . . produce . . . values for each fuel pathway,

but these values must be understood as both

incomplete and, in many cases, highly uncertain.”).

One of the sources of “incompleteness and

uncertainty” is “[i]nherent variability and limited

quality in the data.” Drs. Farrell and Sperling identify

an important qualification to life-cycle analysis:

6 Available at https://bit.ly/2ULIYXj (last visited Jan. 31, 2019).

7 Available at https://bit.ly/2Su2SbB (last visited Jan. 31, 2019).

18

In general GREET 8 follows widely accepted

methods but significant uncertainties and

omissions remain and current methods are

not considered adequate by all experts. No

single approach may be able to address all

concerns. For instance, there is an

important trade-off between detail and

breadth, typically manifested in the choice

between detailed engineering-type processspecific [Life Cycle Assessments] of limited

extent

and

extensive

economy-wide

analyses of limited detail. It is not clear how

to resolve this tradeoff, and a highlydetailed, economy-wide analysis may be

impracticable.

A Low Carbon Fuel Standard for California, supra,

§ 2.8.2, at 41 (citations omitted).

Due to these limitations, states like California and

Oregon make numerous policy decisions about lifecycle analysis in implementing their programs. As a

regulatory tool, life-cycle analysis will always be

fraught with uncertainty and will require policy

decisions that the technical methodology alone does

not support. For example, California decided to

attribute emissions from land clearing (in Brazil and

elsewhere) to the production of ethanol in the United

States. Cal. Air Res. Bd., Proposed Regulation to

Implement the Low Carbon Fuel Standard, Volume I,

“GREET” refers to a methodology for calculating carbon

intensity developed by Argonne National Lab and used by

California in its Low Carbon Fuel Standard. Oregon made

adjustments to this methodology to suit their particular

purposes, resulting in a modified methodology called ORGREET. Advisory Final Report, supra, at VII.1.E.

8

19

Staff Report: Initial Statement of Reasons § IV.C

(Determination of Carbon Intensity Values, Indirect

Effects Analysis) (2018). By contrast, Oregon

determined that the science was too inconclusive to

include such effects in the Fuels Program. Advisory

Final Report, supra, § VII.2.A. California and Oregon

will always be able to manipulate any life-cycle

analysis to enforce discriminatory policy preferences

over those emission sources that otherwise fall outside

of the states’ police power. Interstate discrimination is

an intended feature of the Fuels Program, not a bug.

Under the Ninth Circuit’s ruling, California and

Oregon would be far from alone in wielding this

power. The malleability of life-cycle analysis models,

and the need to simplify and generalize their results

and fill in their gaps in order to use them as regulatory

tools, allows any state the freedom to retaliate against

Oregon (or discriminate against their neighbors) in

many ways. For example, Midwest states could act

against their Pacific counterparts by deciding to apply

the same life-cycle analysis model to only the U.S.

shipping emissions for consumer goods sold in their

states. The carbon penalties resulting from long

ground transport from the West (or East) Coast to the

Mississippi Valley would likely impede such trade, to

the benefit of Gulf Coast ports. This could have a

significant extraterritorial impact on port activity in

many of the same states that are currently

considering programs similar to the Fuels Program.

See generally U.S. Dep’t of Transp., Research &

Innovative Technology Admin., Bureau of Transp.

Statistics, Special Report: The Changing Tide of U.S.International Container Trade: Differences Among the

U.S. Atlantic, Gulf, and Pacific Coasts (Dec. 2011)

20

(describing differences between the markets served by

the three coastal port regions). 9

This type of domestic trade war is the antithesis of

federalism among the states, see pp. 14-16, supra, but

is precisely what the decision below allows unless the

Court grants the Petition in order to cabin the states’

extraterritorial use of life-cycle analysis.

CONCLUSION

This Court has consistently held that within our

system of federalism, states may not control actions

wholly outside their borders. This Court (rather than

the one below) should decide whether states may

constitutionally unravel this framework by using lifecycle analysis as a means of extraterritorial

regulation.

DATED: February, 2019.

Respectfully submitted,

DAMIEN M. SCHIFF

Counsel of Record

ANTHONY L. FRANCOIS

DAVID J. DEERSON

Pacific Legal Foundation

930 G Street

Sacramento, California 95814

Telephone: (916) 419-7111

Email: DSchiff@pacificlegal.org

Counsel for Amici Curiae Pacific Legal Foundation,

Cato Institute, Competitive Enterprise Institute, Committee For

a Constructive Tomorrow, Institute For Energy Research,

Energy And Environment Legal Institute, 60 Plus Foundation,

and Capital Research Center

9 Available at https://bit.ly/2MPV5ji (last visited Jan. 31, 2019).