An attempt to block one of California's key climate change regulations, designed to cut greenhouse gas emissions from fuel, failed Monday when the U.S. Supreme Court declined to hear the case.

The regulation, known as the low-carbon fuel standard, requires oil companies to reduce the emissions associated with the fuels they sell in California, lowering emissions 10 percent by 2020. It has provoked fierce opposition from an unlikely alliance - the oil industry and Midwestern ethanol producers.

The alliance sprang from the regulation's own unusual rules, crafted by the California Air Resources Board. The board assigns different "carbon intensity" rankings to different fuels based on the amount of greenhouse gasses emitted by their production, delivery and use. Oil companies can lower the carbon intensity of their gasoline and diesel by blending more biofuels into those products.

The standard should be a boon to biofuel companies. But ethanol makers in the Midwest say the rules unfairly discriminate against them. The simple act of shipping their fuel to California, usually by train, boosts its carbon intensity. That places Midwestern companies at a disadvantage to anyone making ethanol within the Golden State, even if they use the same raw materials and the same equipment.

Oil companies, meanwhile, argue that there aren't enough low-carbon biofuels available to meet the mandate. They say the standard could send gasoline prices soaring.

So ethanol and oil companies sued to stop the standard, saying California was trying to regulate interstate commerce. In December 2011, a federal judge issued an injunction that blocked the state from enforcing the standard. But that injunction was overturned by the Ninth U.S. Circuit Court of Appeals in San Francisco. On Monday, the U.S. Supreme Court declined to review the Ninth Circuit Court's decision.

That won't end the fuel-standard fight. The U.S. District Court for the Eastern District of California, in Fresno, is still weighing whether the rules have the practical effect of unfairly discriminating against some companies. But advocates of the regulation still greeted Monday's news with relief.

"It's a lawsuit so there's always another step," said Erica Morehouse, attorney for the Environmental Defense Fund. "We can move forward with a lot of confidence that this policy is on strong legal footing."
