Supreme Court rules fuel producers can sue EPA over ‘harming’ regulations

The Supreme Court decided last week that fuel producers do have standing to bring a lawsuit against the Environmental Protection Agency for allowing California’s more strict standards for car emissions under federal air pollution regulations.

Overturning a lower court, the justices ruled 7-2 in favor of the fuel producers who mostly agreed that the case should not have been dismissed on the Constitution’s Article III grounds, which determines whether or not a plaintiff has the right to sue.

“The government generally may not target a business or industry through stringent and allegedly unlawful regulation, and then evade the resulting lawsuits by claiming that the targets of its regulation should be locked out of court as unaffected bystanders,” Justice Brett Kavanaugh wrote in the majority opinion.

The lawsuit that originated the case of Diamond Alternative Energy, LLC v. EPA was between “fuel producers” — companies that produce and sell gas for cars, like the plaintiff — who argued that the EPA allowed California to implement stricter regulations on car emissions than it is permitted to under the state’s waiver of the Clean Air Act.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that the plaintiffs lacked standing in the case because automakers were unlikely to change the course of car production regardless of the regulations being enforced, and that third party injuries to the fuel producers were uncertain as a result.

Kavanaugh wrote that is simply not true.

“The fuel producers’ injury in fact and causation are straightforward and undisputed,” he wrote. He further suggested that those entities “might be considered direct objects of the California regulations because the regulations explicitly seek to restrict gasoline and other liquid fuel use in automobiles.”

What is the background of this case?

The Clean Air Act of 1963 is a federal regulation that preempts state governments from implementing their own car emissions standards by setting a nationwide benchmark. However, California has a waiver that allows it to set its own, which have historically been more strict than national regulations. Since the waiver was granted, the state has received over 100 waiver allowances to implement its own regulations.

In 2022, California implemented some of the most restrictive car emissions regulations in the world. They directly impacted car manufacturers, forcing those companies to make changes to engines and, ultimately, produce more electric vehicles and fewer liquid-gas consuming ones. Subsequently, 17 additional states and the District of Columbia adopted more stringent requirements.

By putting in such restrictions, the state and the EPA were trying to address “global climate change" rather than California air quality issues under the Clean Air Act, the plaintiffs argued. That, in turn, targeted the businesses that produce fuel.

While those fuel producers were not the companies or industry directly regulated, they argued that the regulations directly harmed their businesses and therefore could sue for the courts’ intervention.

While the Supreme Court’s decision does not determine who will win the lawsuit, it does allow it to proceed. Thus, giving third parties the right to sue when regulations not immediately directed at them cause “monetary injury,” which can be addressed in the courts.

Some supporters of the plaintiffs are calling it a win for private businesses over federal regulators.

“Businesses and property owners shouldn’t have to sit on the sidelines while unelected regulators steamroll entire industries,” said Ivan London, a senior attorney at Mountain States Legal Foundation who wrote an amicus brief on behalf of Texas mineral royalty coalitions and the National Association of Wholesaler-Distributors, in a celebratory statement.

“The court reaffirmed that if government rules harm you, then you have a right to challenge the government and its rules in court. That principle is foundational — and it’s worth fighting for.”

Dissenting opinions

Justices Ketanji Brown Jackson and Sonia Sotomayor wrote the dissenting opinions, highlighting that a major implicating factor in the particulars of the case — the electric vehicle mandate — is going to expire in just a few months.

“This case is unlikely to present a live controversy for much longer regardless of petitioners’ standing, as the administration is likely to withdraw the challenged rules,” wrote Sotomayor.

Jackson added to that by highlighting that the court decided to weigh in on a large, moneyed-interest argument for standing rather than other individuals with similar injuries who have attempted their redress in the past.

She argued that the court’s willingness to apply standing in the case of fuel producers’ interests versus other cases with “less powerful plaintiffs” suggests a level of “selectivity” that “begets judicial overreach and erodes public trust.”

“This case gives fodder to the unfortunate perception that moneyed interests enjoy an easier road to relief in this court than ordinary citizens,” wrote Jackson.

California Attorney General Rob Bonta said in a statement that he was disappointed with the courts ruling but would continue to defend the state’s authority under the Clean Air Act.

“Congress intended for California to be able to regulate emissions from new vehicles sold in our state, and we remain firmly committed to advancing and implementing strong standards that safeguard public health and reduce climate pollution,” Bonta said. “The fight for clean air is far from over.”