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POET, LLC v. State Air Resources Board

California Court of Appeals, Fifth District

May 30, 2017

POET, LLC et al., Plaintiffs and Appellants,
v.
STATE AIR RESOURCES BOARD et al., Defendants and Respondents NATURAL RESOURCES DEFENSE COUNCIL, INC., Intervener and Respondent.

         APPEAL from an order the Superior Court of Fresno County No. 09CECG04659. Jeffrey Y. Hamilton, Jr., Judge.

          Wanger Jones Helsley, Timothy Jones, John P. Kinsey, and Dylan J. Crosby for Plaintiffs and Appellants.

          Xavier Becerra, Kamala D. Harris, Attorney General, Robert W. Bryne, Assistant Attorney General, Gavin G. McCabe, Supervising Deputy Attorney General, M. Elaine Meckenstock, Melinda Piling and Myung J. Park, Deputy Attorneys General, for Defendants and Respondents.

          Natural Resources Defense Council and David Pettit for Intervener and Respondent.

          OPINION

          FRANSON, J.

         The California Global Warming Solutions Act of 2006 (Health & Saf. Code, § 38500 et seq.) established the first comprehensive greenhouse gas regulatory program in the United States. Its goal is to progressively reduce greenhouse gas emissions to 1990 levels by 2020. The State Air Resources Board (ARB) was charged with achieving this goal. One of its actions was promulgating the low carbon fuel standards (LCFS) regulations that are the subject of this litigation.

         When ARB adopted the original LCFS regulations in 2009, it violated the California Environmental Quality Act (CEQA; Pub. Resources Code, § 21000 et seq.[1]). In 2013, we identified those violations and directed the issuance of a writ of mandate compelling ARB to take corrective action. (POET, LLC v. State Air Resources Bd. (2013) 218 Cal.App.4th 681 (Poet I).) Now, we consider whether ARB's actions satisfied that writ and corrected one of its CEQA violations. The specific question presented is whether ARB's disclosures about the project's effects on biodiesel consumption, and the related increases in nitrogen oxide (NOx) emissions, satisfied paragraph 3 of the writ of mandate.

         The writ provisions were drafted by this court. Therefore, we interpret paragraph 3 of the writ without deference to the trial court or ARB. We used the term “project” in paragraph 3 of the writ in the same way it is used in CEQA, the Guidelines[2] and CEQA case law. Stated generally, “project” includes the whole of an activity directly undertaken by a public agency. More specifically, when the agency's activity involves a regulation (as compared to building a physical structure, such as a road or power plant), the whole of the activity constituting the “project” includes the enactment, implementation and enforcement of the regulation. Here, the term “project” includes the whole of ARB's activity in promulgating and enforcing (1) the regulations originally adopted in 2009 and (2) the replacement regulations adopted in 2015 in response to the writ of mandate issued pursuant to Poet I.

         Consequently, ARB's view that the “project” included only the regulations adopted in 2015 was wrong and explains why it incorrectly chose 2014 NOx emissions as the baseline. The proper baseline for a project normally is the conditions existing when the environmental review of the project is commenced. Here, ARB's review commenced before the regulations were first approved in 2009. Thus, ARB's use of 2014 NOx emissions as the baseline was improper and generated flawed results when that baseline was plugged into the formula for calculating environmental change. Specifically, NOx emissions in 2014 were higher than the NOx emissions prior to the 2009 approval of the LCFS regulations, which caused ARB's most recent calculations of the yearly changes in NOx emissions to be too low and thus misleading. ARB's flawed analysis of NOx emissions did not cure the CEQA violation identified in Poet I or comply with paragraph 3 of the writ.

         Leaving the technical language of CEQA aside, the purpose of the writ was to provide the public and decisions makers with information omitted from the original environmental disclosure documents in 2009. Thus, one way to evaluate ARB's attempt at compliance is to ask whether the revised environmental disclosure documents provided all of the information that would have been provided if the original documents had complied with CEQA. The answer is “no, ” ARB's revised documents did not provide that information. In contrast to ARB's revised documents, CEQA-compliant original documents would not have used a 2014 baseline and would have shown that NOx emissions in 2015 and later were larger than the baseline, not smaller. Accordingly, we conclude the writ should not have been discharged and the CEQA violation continues uncorrected.

         The second major issue in this appeal is how to remedy ARB's failure to comply with CEQA and the writ. Pursuant to our discretionary authority to fashion appellate relief, we reverse the order discharging the writ and remand for further proceedings under a modified writ. The modifications direct ARB to address NOx emissions from biodiesel in a manner that complies with CEQA, including the use of a proper baseline. As to the fate of the current version of the LCFS regulations, only the provisions addressing diesel fuel and its substitutes[3] were affected by the flawed analysis of NOx emissions. Thus, the remainder of the LCFS regulations will be allowed to remain in effect. The provisions addressing diesel fuel and its substitutes appear, on balance, to provide environmental benefits that outweigh the potential adverse impacts and, therefore, we will not invalidate those provisions. Instead, the standards for diesel fuel and its substitutes in effect for 2017 shall remain the operative standards until the modified writ is discharged.

         We therefore reverse the order discharging the writ and remand for further proceedings.

         FACTS AND PROCEEDINGS

         Overview of LCFS Regulations

         The goal of the LCFS regulations is to progressively reduce the greenhouse gas emissions from transportation fuels used in California. (Cal. Code Regs., tit. 17, § 95480.) The LCFS regulations use carbon intensity values to approximate the greenhouse gas emissions generated from all stages of producing, transporting and consuming a fuel-that is, the fuel's complete lifecycle. (Cal. Code Regs., tit. 17, § 95484 [average carbon intensity requirements].) Regulated parties must meet average carbon intensity requirements for the gasoline and diesel fuel they handle each calendar year. (Id., subd. (a).) Carbon intensity is stated as grams of carbon dioxide equivalent per megajoule. For example, the 2017 average carbon intensity requirement for diesel fuel and its substitutes is 98.44 grams of carbon dioxide equivalent per megajoule. (Id., subd. (c).) In contrast, the carbon intensity value assigned to conventional diesel, based on average crude oil and average refinery efficiencies, is 102.01 grams of carbon dioxide equivalent per megajoule. (Cal. Code Regs., tit. 17, § 95488, subd. (c) [lookup table].) Thus, a regulated party handling only conventional diesel fuel would not meet the carbon intensity requirement for 2017. That regulated party would need to handle diesel fuel and substitutes assigned a lower carbon intensity. For instance, some biodiesels are assigned carbon intensity values of 37.54 (animal fat feedstock) or 56.95 (plant oil feedstock).

         Most providers of petroleum and biofuels in California are subject to the reporting and carbon intensity value requirements of the LCFS regulations. (Cal. Code Regs., tit. 17, §§ 95485 [demonstrating compliance], 95491 [reporting and recordkeeping].) Regulated parties file annual reports to show they have complied. The reports (1) calculate the average carbon intensity of the fuels handled by the regulated party and (2) determine the credits or deficits generated by comparing that average to the carbon intensity value set as the standard for that year. (Cal. Code Regs., tit. 17, § 95486 [generating and calculating credits and deficits].) If credits are generated, they can be deposited into an account maintained by ARB and, once banked, the credits may be (1) retained indefinitely, (2) retired to offset deficits and meet future compliance requirements, or (3) sold to other regulated parties. (Id., subd. (a)(1).) Transactions in carbon intensity credits are subject to public disclosure and other requirements. (Cal. Code Regs., tit. 17, § 95487.) ARB maintains a website reporting the monthly price and transaction volume of LCFS credits.

         First Appeal

         The history of the original LCFS regulations, [4] from the enactment of the authorizing legislation in 2006 through April 2010, is described in the “FACTS” section of Poet I, supra, 218 Cal.App.4th at pages 699 through 707 and need not be repeated here. The original LCFS regulations became effective in 2010 and were set forth in sections 95480 through 95490 of title 17 of the California Code of Regulations.

         In December 2009, plaintiffs POET, LLC and James M. Lyons filed this litigation to challenge the LCFS regulations, alleging violations of CEQA and California's Administrative Procedure Act (APA; Gov. Code, § 11340 et seq.). In November 2011, the trial court denied plaintiffs' petition for writ of mandate and filed a judgment in favor of ARB. Plaintiffs appealed.

         In May 2013, oral argument was held in the appeal. In June 2013, this court issued an order requesting input from counsel regarding the terms of the disposition and attached a tentative disposition. We asked counsel to make certain assumptions, including that certain CEQA violations had occurred and the LCFS regulations would be allowed to continue to operate. We stated our preference for a disposition “drafted so the superior court can take the language from the disposition and insert it into the peremptory writ of mandate” and asked counsel to take this into account when proposing changes or alternatives to the tentative disposition. Our order sought input on six topics of interest, including (1) maintaining the status quo and whether the 2014 standards should have been allowed to go into effect and (2) the framework for ARB's analysis of NOx emissions on remand.

         On July 15, 2013, our opinion in Poet I was filed. We reversed the denial of plaintiffs' petition for writ of mandate and remanded for the issuance of a writ directing ARB to correct its CEQA and APA violations. In August 2013, we denied ARB's petition for rehearing. The next month, ARB filed a petition for review in the California Supreme Court. On November 27, 2013, our high court denied ARB's petition for review and, later that day, this court issued a remittitur.

         In December 2013, plaintiffs submitted a proposed peremptory writ to the trial court. On January 6, 2014, the trial court signed and filed the proposal. On February 10, 2014, the trial court responded to ARB's objections by filing a modified version of the peremptory writ of mandate (February 2014 writ), [5] which is the operative writ for purposes of this appeal.

         As directed by the disposition in Poet I, the February 2014 writ compelled ARB to take action to correct its violations of CEQA. The writ provision at the center of this appeal is described in part I.C, post. We also took the unusual step of allowing the original LCFS regulations to remain in effect despite the CEQA violations. (See Poet I, supra, 218 Cal.App.4th at pp. 763, 767.) At the time, we estimated that, on balance, leaving the LCFS regulations in place would provide more protection for the environment than suspending their operation pending ARB's compliance with CEQA. (Id. at p. 762.) We stated that “the emissions of greenhouse gases will be less if the LCFS regulations are allowed to remain in effect, rather than being suspended. The possibility that the use of biodiesel will produce more NOx emissions than the petroleum-based diesel that it replaces does not justify throwing out the entire LCFS regulation.” (Id. at pp. 762-763.)[6] Consequently, we decided to preserve the status quo pending ARB's compliance with the writ by directing ARB to continue to adhere to the LCFS regulations standards in effect for 2013 until its corrective action was completed. (Id. at p. 767.)

         Corrective Action Relating to NOx Emissions

         The portion of the February 2014 writ relevant to this appeal concerns the deficiencies in ARB's analysis of NOx emissions and mitigation measures for any significant adverse environmental impact resulting from increased NOx emissions. ARB's actions to comply with the writ and remedy its CEQA violations are described in part I.D, post.

         ARB's Return, Discharge Order, Stay Requests and Appeal

         In November 2015, ARB filed its return to the February 2014 writ. (See pt. I.D.4, post.) In January 2016, the trial court issued an order discharging the writ. (See pt. I.D.5, post.) On February 5, 2016, plaintiffs filed a motion to stay the order discharging the writ pending an appeal. On February 29, 2016, the trial court's order denying the motion for a stay was served on the parties without holding a hearing.

         On March 4, 2016, plaintiffs filed a notice of appeal from the order discharging the writ and the order denying their motion for stay pending appeal. Plaintiffs then filed a petition for writ of supersedeas requesting a stay of the order discharging the writ pending a decision in this appeal. We denied the writ and request for a stay, even though plaintiffs established a strong probability of prevailing in this appeal because their showing relating to the balance of harms, which encompasses the-baby-with-the-bathwater problem, was insufficient.

         DISCUSSION

         I. COMPLIANCE WITH THE WRIT OF MANDATE

         A. Standard of Review

         1. Parties' Contentions

         Plaintiffs contend that, under the applicable standard of review, the issue presented is whether ARB prejudicially abused its discretion in its attempt to demonstrate compliance with the February 2014 writ. Plaintiffs refer to the abuse of discretion standard set forth in section 21168.5, which requires the agency to support its findings with substantial evidence and to proceed in the manner required by law.

         ARB contends the only issue on appeal is whether the superior court erred in discharging the writ. (Los Angeles Internat. Charter High School v. Los Angeles Unified School Dist. (2012) 209 Cal.App.4th 1348, 1355 [“issue is whether the trial court erred in ruling that the respondent … complied with the writ”].) To resolve this issue, ARB urges us to focus on its response to the writ and the superior court's assessment of that response. ARB contends the discharge order can be reversed only if ARB's action pursuant to the writ was so palpably unreasonable and arbitrary as to indicate an abuse of discretion as a matter of law. (Id. at pp. 1355-1356.)

         The parties' slightly different descriptions of the standard of review does not present an authentic controversy because, at bottom, both regard the fundamental issue as whether ARB's action complied with the writ and contend that action is reviewed for an abuse of discretion. We agree that the abuse of discretion standard applies to ARB's actions because ARB's attempt to comply with the writ is, for all practical purposes, an attempt to comply with CEQA. (§ 21168.5.)

         2. General Principles Regarding Abuse of Discretion Standard

         Our conclusion that the abuse of discretion standard of review applies does not complete the description of the principles applied to evaluate ARB's actions. “The abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of [the agency's action] under review.” (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711.) If findings of fact (whether express, implied or both) are challenged for lack of evidentiary support, the appellate court determines whether the findings are supported by substantial evidence. (Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova (2007) 40 Cal.4th 412, 426-427 (Vineyard).) In contrast, if ARB's resolution of a question of law is challenged, the appellate court subjects that question of law to an independent (i.e., de novo) review on appeal. (Id. at p. 427.) For example, the proper construction of CEQA presents a question of law subject to independent review on appeal. (Poet I, supra, 218 Cal.App.4th at p. 748.)

         3. Interpreting the February 2014 Writ

         The parties' dispute over ARB's compliance with the February 2014 writ is primarily a conflict about how to interpret the writ's provisions. We drafted the language in the writ that is the subject of the present dispute and, more fundamentally, we identified the CEQA violations the language was designed to remedy. Thus, we are in the best position to determine its meaning and explain its purpose. (Cf. Protect Our Water v. County of Merced (2005) 130 Cal.App.4th 488, 494 [“we are in as good a position as, and perhaps in a better position than, the trial court to decide” an issue that turns on the import of our earlier published opinion].) Accordingly, we conclude the interpretation of the writ should be treated as a question of law subject to our independent review and ARB's interpretation should be given no deference. In short, the abuse of discretion standard of review does not allow ARB to misconstrue the directions given by this court in Poet I.

         B. The CEQA Violation Relating to NOx Emissions

         The California Global Warming Solutions Act of 2006 charged ARB with regulating the sources of emissions of greenhouse gases. To reduce greenhouse gas emissions from the fuel used for transportation, ARB adopted a number of regulations, including the LCFS regulations. Diesel fuel was one of the transportation fuels addressed by the original LCFS regulations. ARB thought it could reduce the greenhouse gas emissions of diesel fuel by promoting the use of biodiesel, either as a substitute for, or blended with, petroleum-based diesel fuel. (Poet I, supra, 218 Cal.App.4th at p. 731.) Consequently, the original LCFS regulations attempted to encourage the production and use of biodiesel.

         The environmental disclosure document[7] generated by ARB in connection with proposing and adopting the original LCFS regulations violated CEQA by impermissibly deferring (1) the analysis of potential increases in the emission of NOx resulting from increased biodiesel use and (2) the analysis and formulation of mitigation measures for any significant increases in emissions. (Poet I, supra, 218 Cal.App.4th at pp. 698-699, 731-741.) These delays were not, standing alone, violations of CEQA. However, when the original LCFS regulations went into effect before the deferred analysis was completed, CEQA was violated. Without an analysis of NOx emissions and a determination of whether the emissions created a significant environmental effect (by itself or cumulatively), [8] the implementation of the original LCFS regulations created the possibility that unmitigated adverse environmental consequences were occurring.

         ARB's 2009 draft environmental disclosure document did not ignore the question of “whether the substitution of biodiesel for petroleum-based diesel would increase emissions of NOx.” (Poet I, supra, 218 Cal.App.4th at p. 704.) Instead, ARB sidestepped and never reached the question of whether any increase would constitute a “‘significant effect on the environment.'” (§ 21083, subd. (b).) “ARB's staff assumed that there would be no increase in the NOx emissions based on the position that, after conducting a test program for biodiesel, ARB would institute regulations setting fuel specifications for biodiesel that would ensure NOx emissions did not increase.” (Poet I, supra, at pp. 704-705, italics added.)

         The public response to ARB's release of the draft environmental disclosure document included comments challenging the assumption that promoting the use of biodiesel would not increase NOx emissions. (Poet I, supra, 218 Cal.App.4th at p. 705.) “In response to these comments, ARB reiterated its position that it would ‘ensure that biodiesel fuel use does not increase NOx emissions significantly by promulgating a new motor vehicle fuel specification for biodiesel.'” (Ibid.)

         ARB's assurance was an empty promise. The LCFS regulations were put into effect without any specifications for biodiesel sold in California. In April 2009, the Board[9] attempted to have the specifications ready in time by passing a resolution directing motor vehicle fuel specifications be proposed by December 2009. (Poet I, supra, 218 Cal.App.4th at pp. 705, 733 [Resolution 09-31].) As the complexities of creating specifications that reduced biodiesel's emissions unfolded and it became clear that deadline could not be met, ARB stated that the adoption of fuel specifications for biodiesel was “‘now tentatively scheduled for 2010.'” (Id. at p. 734.) This revised schedule was not met. A biodiesel emissions study was conducted and the report from that study was not issued until October 2011. (Ibid.) By June 2013 (shortly before our decision in Poet I), no regulation containing fuel specifications for biodiesel had been adopted. (Ibid.) Consequently, at that time, the LCFS regulations had been in effect since January 2010 (1) without the completion of the CEQA-required analysis of whether increased biodiesel use would increase NOx emissions and (2) without any fuel specification regulations to mitigate increases in NOx emissions that otherwise might occur from increased use of biodiesel.

         C. The Disposition from Poet I

         Our decision in Poet I dealt with the foregoing CEQA violation involving NOx emissions from biodiesel and with other CEQA violations. It (1) reversed the judgment denying plaintiffs' writ petition; (2) remanded the matter for further proceedings; (3) directed to trial court to grant plaintiffs' petition and issue a writ of mandate; and (4) specified terms to be included in the writ of mandate. (Poet I, supra, 218 Cal.App.4th at p. 766.) The terms in the writ required ARB to set aside its approval of the LCFS regulations.[10] (Ibid.) In addition, ARB was required to select a single decision maker to complete the project's environmental review before reapproving the LCFS regulations or approving a modified version of the regulations. (Id. at pp. 765, 767.) The third numbered paragraph in the disposition compelled ARB to:

         “Address whether the project will have a significant adverse effect on the environment as a result of increased NOx emissions, make findings (supported by substantial evidence) regarding the potential adverse environmental effect of increased NOx emissions, and adopt mitigation measures in the event the environmental effects are found to be significant.” (Id. at p. 767.)

         This language was tracked in paragraph 3 of the trial court's February 2014 writ (paragraph 3), which stated:

         “ARB shall address whether the project will have a significant adverse effect on the environment as a result of increased NOx emissions, make findings (supported by substantial evidence) regarding the potential adverse environmental effect of increased NOx emissions, and adopt mitigation measures in the event the environmental effects are found to be significant.”

         Whether ARB complied with the paragraph 3 and what appellate relief is appropriate if ARB did not comply are the two main issues in the appeal.

         D. ARB's Actions to Comply with Writ

         1. ARB's Modified Regulations

         ARB's attempts to comply with the February 2014 writ (which included preparing a revised analysis of NOx emissions from biodiesel) preceded its approval of a modified version of the LCFS regulations, rather than a reapproval of the original version without changes. The possibility of modification was recognized in Poet I, where we stated that ARB might exercise its discretion on remand by “reapproving the LCFS regulations or a modified version of those regulations.” (Poet I, supra, 218 Cal.App.4th at p. 765.) Before our decision in Poet I was filed, ARB was holding public workshops to discuss regulatory changes and amendments to the LCFS regulations.

         From 2013 through September 2015, ARB's staff held five overarching workshops to discuss the LCFS regulations as a whole and 16 topic-specific workshops to discuss proposed revisions. On December 30, 2014, an initial statement of reasons was released to the public in support of ARB's staff's proposal to readopt the LCFS regulations. Attached as an appendix was a draft Environmental Analysis of (1) the proposed LCFS regulations and (2) newly proposed regulations addressing alternative diesel fuels (ADF).[11] After a 45-day comment period and a public hearing in February 2015, the Board directed modifications be made to the proposed regulations. After another comment period, the Board held a public hearing on September 24, 2015, and continued its consideration of the proposed LCFS and ADF regulations until the next day.

         On September 25, 2015, the Board adopted resolutions that finalized its rulemaking determinations. The Board certified the final Environmental Analysis for the proposed LCFS regulations and ADF regulations, stating it met the requirements of CEQA. Based on the final Environmental Analysis (which is described in the next section of this opinion), the Board adopted (1) a set of findings and statement of overriding considerations and (2) the modified version of the LCFS regulations referred to in this opinion as the “2015 LCFS regulations.” (See fn. 4, ante.) The findings addressed NOx emissions by stating: “The E[nvironmental Analysis] found that while use of biodiesel can increase NOx emissions in some engines, depending in part on feedstock and blend level, total NOx emissions from biodiesel will decline from the 2014 baseline level under the proposed LCFS and ADF. Therefore, the Board finds that the use of biodiesel consistent with the proposed ADF will not result in a significant adverse impact to air quality.”

         The 2015 LCFS regulations took effect on January 1, 2016. They are set forth in sections 95480 through 95497 of title 17 of the California Code of Regulations.

         2. Final Environmental Analysis

         ARB's final Environmental Analysis stated that “adoption of the proposed LCFS and ADF regulations would be anticipated to result in changes from the 2014 baseline emissions level for several criteria air pollutants (e.g., emissions from the additional use of biodiesel and renewable diesel fuels).”[12]

         The final Environmental Analysis also stated:

         “Biodiesel and renewable diesel fuels have been found to reduce [particulate matter] emissions relative to conventional diesel. Renewable diesel has been found to decrease NOx relative to conventional diesel; however, biodiesel has been found to increase NOx emissions in some cases, depending on feedstock and type of engine [] used.”

         The final Environmental Analysis described the 2014 baseline conditions by stating approximately 65 million gallons of biodiesel and 114 million gallons of renewable diesel were consumed in California in 2014.[13] Next, it compared emissions from the combination of these diesel fuels with emissions from conventional diesel fuel to produce an estimate of what the emissions would have been if only conventional diesel fuel had been used. This comparison led ARB to conclude the use of the foregoing volumes of biodiesel and renewable diesel (taking into account the use of new technology diesel engines) increased NOx emissions of about 1.2 tons per day and decreased particulate matter (PM) about 0.8 tons per day. These figures do not describe the changes in emissions of NOx and PM caused by the version of the LCFS regulations in effect in 2014, because the final Environmental Analysis did not take the additional analytical step of separating the increases in biodiesel and renewable diesel usage caused by the LCFS regulations from the increases in usage caused by other factors, such as the incentives created by federal regulations for fuel standards and federal tax incentives. In other words, the emission comparison made was between (1) an estimate of the emissions of all diesel fuel and its substitutes used in 2014 and (2) a hypothetical emissions profile that would have been generated if conventional diesel had replaced all of the biodiesel and renewable diesel fuel used in 2014.

         The final Environmental Analysis's reference to biodiesel's “feedstock” as a factor affecting NOx emissions might encompass both the source of the organic matter (e.g., soybean, cottonseed, tallow, restaurant grease) used to produce the biodiesel and the rate at which the biodiesel is blended with conventional diesel. (See Poet I, supra, 218 Cal.App.4th at pp. 732-733.) A blend of 5 percent biodiesel and 95 percent conventional diesel fuel (B5) is the most common blend level in California. Blends of 20 percent or less of biodiesel (B20) generally can be used without engine modifications. Biodiesel, by itself, usually is considered a blendstock rather than a fuel blend, although it can be used in some engines built after 1994, provided certain engine parts such a gaskets and hoses are made from biodiesel-compatible materials.

         The final Environmental Analysis stated that if the proposed ADF and LCFS regulations were adopted in 2015, ARB's staff predicted future decreases in total NOx emissions from biodiesel and renewable diesel. Table 4-1 in the final Environmental Analysis set forth the projected changes in statewide NOx emissions for each year from 2014 through 2022. These projected changes were attributed to the total use of biodiesel and renewable diesel, not the incremental increase in use of these fuels caused by the ADF and LCFS regulations. Using 2014 as a baseline, the projected changes in net NOx emissions ranged from a reduction of 0.1 tons per day in 2015 to a reduction of 1.3 tons per day in 2022. Based on the progressively declining emissions of NOx and the projected reductions in other criteria pollutants, the final Environmental Analysis concluded the long-term impacts on air quality would be beneficial-that is, the regulations would not have an adverse environmental impact. We note that the final Environmental Analysis did not attempt to allocate the increased usage of biodiesel and renewable diesel between (1) the ADF and LCFS regulations and (2) other causes. Such an allocation was not made because ARB determined that the projected increased use of these fuels, whatever the cause, reduced air pollutants, including NOx. This reduction led to the conclusion that the environmental impact was not adverse.

         The final Environmental Analysis attempted to justify its use of the 2014 baseline for analyzing NOx emissions by discussing the possibility of comparing project NOx emissions to conditions existing in 2009-the year ARB prepared and adopted the original LCFS regulations. The final Environmental Analysis stated:

         “In the interest of public disclosure, ARB staff examined the current and expected future emissions of NOx from biodiesel relative to the NOx emissions from biodiesel that were occurring prior to the adoption of the original LCFS (2009). In 2009, there were few [new technology diesel engines], no renewable diesel, and little biodiesel in California, so the NOx emissions from biodiesel were minimal. Staff re-evaluated the 2009 data and determined that NOx emissions were approximately 0.3 [tons per day] greater than reported in the Draft ISOR and E[nvironmental Analysis]. However, since 2009, NOx emissions from biodiesel have increased with the increased use of biodiesel resulting from multiple incentives related to biodiesel since 2009. Thus, it is unclear and impossible to determine what portion of the increase in use is attributable to the original LCFS.” (Underlining omitted.)

         This discussion continued with a description of the incentives created by federal regulations for fuel standards and federal tax incentives. The final Environmental Analysis stated the view of ARB's staff that the economic incentives in the federal measures were more instrumental than the LCFS regulations in bringing biodiesel to California post-2009. The final Environmental Analysis stated California's proportionate share of the national supply of fuel was approximately 11 percent and noted California did not use its proportionate share of the nation's biodiesel, but used more that its proportionate share of renewable diesel. Because renewable diesel has lower NOx emissions, California's emission of NOx is less than if it used its proportionate share of biodiesel and renewable diesel. The final Environmental Analysis concluded that the increased use of renewable diesel, combined with increased new technology diesel engine adoption, “will cause the biodiesel-related NOx emissions in California to continue to decrease and ultimately return to 2009 levels by 2023.”[14] In view of the other factors promoting alternative fuels, the final Environmental Analysis also concluded “it is certainly possible that biodiesel use in California would continue at or near existing levels-or even increase-in the absence of an LCFS regulation.”

         3. Comments and ARB's Responses

         Another place where NOx emissions were addressed is the public comments to the draft Environmental Analysis and ARB's responses. Those comments included a challenge to ARB's use of a 2014 baseline to analyze the impacts of the 2015 LCFS regulations. One comment asserted an earlier baseline should have been used and an assessment made of the environmental changes between the adoption of the original LCFS regulations and the adoption of the 2015 LCFS regulations. ARB's response to the comment stated that an environmental baseline predating the beginning of the 2015 administrative proceedings (1) would be misleading, (2) was not required by law, and (3) was not required by Poet I. ARB's response stated it did not agree that an earlier “baseline would yield meaningful information for environmental analysis.”

         Another comment interpreted the information provided in the draft Environmental Analysis to mean the readoption of the LCFS regulations would result in additional NOx emissions of 1.29 tons per day. ARB's response explained that the figure of 1.29 tons per day for 2015 appearing in its disclosure documents represented the NOx emissions attributable to the use of biodiesel blends. The figure was higher than the NOx emissions that would have occurred if only conventional diesel was used to fulfill diesel fuel demand in California. As biodiesel was already used in 2015 to fulfill California's diesel fuel demand, ARB's response stated:

         “[T]he emissions the commenter refers to are already occurring as part of the current conditions. [¶] Thus, the 2014 and 2015 NOx emissions (1.35 [tons per day] in 2014 and 1.29 [tons per day] in 2015) associated with biodiesel use are not NOx increases resulting from the implementation of the proposed regulation starting in 2016, but are estimated emissions associated with current conditions. For purposes of the E[nvironmental Analysis], ARB analyzed impacts against 2014 conditions, the time when the environmental analysis began. ARB staff's analysis of NOx emissions from 2014 through 2023 (displayed in Table B-1), shows that NOx emissions would decrease over time with the implementation of the regulatory proposal.”

         In other words, the 1.29 tons per day of NOx emissions referred to in the comment were not incremental NOx emissions caused in 2015 by the LCFS regulations operating at that time. When the total of 1.29 tons per day was compared to the 1.35 tons per day from 2014, it showed NOx emissions were decreasing.

         Another comment raised the subject of cumulative impacts. (See § 21083, subd. (b)(2); Guidelines, §§ 15130 [discussion of cumulative impacts], 15355 [definition of cumulative impact].) ARB's response stated the implementation of the proposed ADF regulations would mitigate any potentially significant NOx emission impacts resulting from increased use of biodiesel associated with the proposed LCFS regulations. Based on this mitigation, the response concluded the “adoption of the proposed LCFS and ADF Regulations would not result in a cumulatively considerable contribution to a significant adverse [impacts] to long-term air quality.” (Underlining omitted.)

         The public's comments and ARB's responses to the comments were appended to the environmental analysis and were considered by the Board at its hearings in September 2015.

         4. ARB's Return to the Writ

         In November 2015, ARB filed its return to the February 2014 writ together with the final Environmental Analysis, ARB's responses to comments, and other supporting documents. The return explained ARB's attempt to comply with paragraph 3 by stating “[t]he Board addressed whether the project (the proposed LCFS and Alternative Diesel Fuel (‘ADF') regulations) will have a significant adverse effect on the environment as a result of increased NOx emission.” The return then set forth findings about NOx emissions caused by short-term construction projects for new or modified facilities built to satisfy the fuel demands incentivized by ARB's regulations. The return next addressed the emissions caused by using biodiesel, stating ARB found:

         “[1] that use of biodiesel can increase NOx emissions in some engines, depending in part on feedstock and blend level;

         “[2] that total NOx emissions from biodiesel will decline from the 2014 baseline level under the proposed LCFS and ADF regulations; and

         “[3] that the use of biodiesel consistent with the proposed regulations will not result in a significant adverse impact to air quality.

         “(Exhibit C at pp. 4-5, 14; see also Exhibit A at p. 4 [adopting findings].) Overall, ARB found that the LCFS and ADF regulations and the compliance responses to those regulations would result in long-term beneficial impacts to air quality through reductions in criteria pollutants (which include NOx emissions). (Exh. C at p. 1.) These findings are supported by substantial evidence. (E.g, Exhibit D at p. 30-31, 56-63, 127-130 [excerpts of EA]; Exhibit E [ADF ISOR Appendix B].) This satisfies paragraph 3 of the peremptory writ.”

         Plaintiffs objected to ARB's return, contending ARB had not complied with paragraph 3. Plaintiffs argued ARB had failed to consider the original LCFS regulations, which were part of the project. Plaintiffs also challenged ARB's use of a 2014 baseline, arguing the later baseline (1) allowed ARB to avoid acknowledging the past (i.e., 2010-2015) increases in NOx emissions caused by the original LCFS regulations and (2) skewed the analysis of the impact of future NOx emissions by comparing predicted future emissions to a baseline made higher by the NOx emissions caused by the original LCFS regulations, which became effective in January 2010. Plaintiffs contended ARB's approach violated paragraph 3 and ...


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