Court Snubs Clean Diesel Technology

The 9th U.S. Circuit Court of Appeals ruled that publicly funded fleets in southern California can be required to buy low-polluting vehicles that run on compressed natural gas or other alternative fuels. Should the biodiesel industry be concerned about a possible precedent?
By Anduin Kirkbride McElroy | November 01, 2007
Usually when a local governmental entity announces that it will be using biodiesel blends in its fleets, biodiesel advocates cheer. These announcements often represent biodiesel's first entry into a given market, and they give the fuel legitimacy to other consumers in the area. When governmental entities prefer products that haven't been proven in the market, such as biobased products and renewable fuels, they can drive the market and elevate the industry.

One market that could use some elevation is the California renewable fuels market. The entire state has the capacity to produce about 46 MMgy and has another 3 MMgy under construction. Biodiesel has been somewhat forgotten in favor of ethanol, according to John McKinsey, an associate at the Sacramento, Calif., office of law firm Stoel Rives LLP. He explains that ethanol replaced methyl tertiary butyl ether last year as the agent used to reduce gasoline emissions, as required by the state implementation plan to comply with the Clean Air Act.

Biodiesel is just starting to receive recognition for its potential contribution to emissions reductions. This year, the California Department of Transportation (CalTrans) conducted a six-month pilot project to determine the feasibility of using B20 in its fleets, comprised of 4,500 trucks and construction vehicles. Biodiesel is also being reviewed by the California Air Resources Board, which is required by the state's Global Warming Solutions Act to reduce carbon dioxide emissions to 1990 levels by 2020.

One governmental sector of California, however, doesn't buy into biodiesel's air emission claims. The South Coast Air Quality Maintenance District (AQMD) is charged with developing and implementing strategies to meet air quality standards within the South Coast Air Basin, an area that includes the city of Los Angeles and portions of the surrounding counties. The basin is the only area in the United States classified by the U.S. EPA as an extreme nonattainment area for ozone. It is one of only five areas designated as a serious nonattainment area for small particulate matter.

Biodiesel has had a tough time being accepted for use in nonattainment areas. There is still a concern that it contributes to air pollution-at least as far as nitrogen oxides (NOx) are concerned. In nonattainment areas, NOx is especially a concern as many believe it contributes to the formation of smog. "The primary issue for this region is the potential for an increase in nitrogen oxide emissions," says AQMD spokeswoman Tina Cherry. "We have the worst air quality in the nation, and biodiesel can increase NOx emissions, which would hinder-not help-our air pollution problem."

The basin's extreme nonattainment status has prompted efforts to reduce diesel use in general, according to McKinsey. He explains that diesel wasn't heavily regulated in California until it was identified as a carcinogen a couple of years ago. "That changed everything," he says. "California had to limit diesel exhaust. Air districts are trying to reduce emissions further."

Since at least 70 percent of pollution in the basin comes from mobile sources, Cherry says the AQMD has taken steps to reduce emissions, especially from motor vehicles and engines that run on diesel fuel. In 2000, the AQMD enacted six fleet rules that require operators of various fleets (15 or more vehicles), such as street sweepers, garbage trucks and airport shuttles, to buy vehicles meeting specified emissions standards, or to buy vehicles having alternative-fuel engines, when adding to their fleets. In this case, "alternative-fuel engines" use compressed or liquefied natural gas, liquefied petroleum gas (propane), methanol, electricity or fuel cells. Hybrid electric and dual-fuel technologies that use diesel fuel are not considered alternative-fuel technologies for the purposes of the rule.

The fleet rules apply to fleet vehicle purchases only, not to vehicles that may already exist in a fleet. "If a fleet wants to add a vehicle to its fleet or replace a vehicle in its fleet, they have to do so with the cleanest vehicle available, which happens to be alternative fuel natural gas," Cherry says.

Fleets may use biodiesel if they choose to in any diesel vehicles in their fleet. The AQMD doesn't have the authority to regulate the type of fuel used in vehicles in the region; right now it only has authority to set guidelines for the purchase of new vehicles in certain fleets. Additionally, she says the number of vehicles under consideration isn't large enough to consider the fleet rules as a barrier to the use of biodiesel in the South Coast region. "There are thousands of other diesel sources in the region, especially the trucks used in moving goods throughout the region, that our fleet rules do not apply to," she says.

While this may be true, the AQMD fleet rules do cover a large number of vehicles. As a result of the rules, the region's fleets have already added more than 6,000 heavy-duty vehicles powered by natural gas and other alternative fuels, according to the AQMD.

Fleet Rules go to Court
The potential for this kind of impact led the Engine Manufacturers Association (EMA) to file suit in U.S. District Court in 2000, claiming the rules were pre-empted because they violated 209(a) of the federal Clean Air Act. Pre-emption means that the federal law precludes the state from enacting laws on the same subject. The Western States Petroleum Association intervened in the case on behalf of EMA. The case has traveled up and down the judicial system, even making a stop in the Supreme Court in 2004.

Most recently, the U.S. 9th Circuit Court of Appeals issued an opinion on the case and upheld virtually all applications of the fleet rules. The plaintiffs, the EMA and the Western States Petroleum Association, said the fleet rules are pre-empted by the Clean Air Act because they were an effort to control new motor vehicle emissions, and not merely proprietary actions of the state as a typical market participant.

The decision upheld a previous ruling by the district court that the fleet rules as applied to state and local governments are not pre-empted by the federal Clean Air Act due to market participation considerations. However, in the case of purchases made by other entities, such as federal government entities and private fleets, the court remanded the case back to the lower court. "The central question presented in this appeal is whether the Clean Air Act pre-empts the fleet rules insofar as they apply to state and local government entities," reads the opinion of the court, written by 9th Circuit Judge William Fletcher. "The market participant doctrine distinguishes between a state's role as a regulator, on the one hand, and its role as a market participant, on the other. Actions taken by a state or its subdivision as a market participant are generally protected from federal pre-emption."

This decision is the first time that the "market participant doctrine" was applied to the Clean Air Act. "Under the market participant doctrine, when government agencies, such as AQMD, purchase goods and contract for services, their actions are not subject to pre-emption by federal statutes, such as the federal Clean Air Act," the AQMD explains. "Further, as the court held in this case, the market participant doctrine applies not just when agencies seek to obtain the best price for goods and services, but also when they seek to further other goals, such as reducing or preventing air pollution."

The decision matters to the biodiesel industry because it could serve as a precedent for other local governments to prefer fuels or technologies in the name of air quality. "What just happened is really about air quality-it's a case that's affirming [the AQMD's] ability to do more to fight air emissions," McKinsey tells Biodiesel Magazine. "Right now what this case stands for is that local government can do more to take control of emissions and can do more to regulate the character of the fuel being used and how it's being used within their local areas despite the Clean Air Act."

EMA President Jed Mandel doesn't anticipate that this ruling will result in many local governments following the AQMD's lead. "Government and private sector entities have always been able to specify through the procurement process the specifications for their vehicles, so we do not see this ruling as having a wide-ranging impact," he says. "For our part, EMA will continue to advocate on behalf of truly clean technologies to ensure that all fleet owners have access to the widest range of clean vehicle options available." The error he sees in both the decision and in the fleet rule itself is that it restricts the flexibility of local governments to make local purchasing decisions, and it is based on old standards. "There is a significant irony inherent in the 9th Circuit's ruling," Mandel says. "Its net effect is to allow AQMD to bar state and local agencies from purchasing the cleanest available heavy-duty, on-highway vehicles. Today's new heavy-duty diesel vehicles emit particulate matter levels that are at the limit of detection and are essentially equivalent to zero. These vehicles also operate with NOx emissions that are 80 percent cleaner than when the fleet rules were adopted, and those emissions will be reduced to near-zero levels by 2010."

He continues, "When AQMD adopted the fleet rules in 2000, it did so with a specific assurance that the ban on diesel technology would be lifted if diesel could be shown to be clean. Today's clean diesels meet the criteria of more than a 71 percent reduction in particulate matter and a 54 percent reduction in NOx emissions that the AQMD Board established, but still the AQMD has failed to lift the ban on the purchase of the cleanest and most efficient heavy-duty on-highway vehicles available. The Court decision essentially upholds obsolete regulations on local governments."

Anduin Kirkbride McElroy is a Biodiesel Magazine staff writer. Reach her at
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