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Eighth Circuit Panel Rules Minnesota Climate Change Law Unconstitutional

By Thomas Braun, Sara Bergan & Andrew Moratzka on June 15, 2016
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Today, the Eighth Circuit determined that the Next Generation Energy Act (“NGEA”), a Minnesota law that established power sector standards for carbon dioxide emissions, was unconstitutional (decision available here). In so doing, the Court affirmed the decision of District Court Judge Susan Nelson, whose 2014 decision we covered in “Court Declares Minnesota Coal Law Unconstitutional: Electrons Favor the Laws of Physics to Those of Governments.”

However, the Eighth Circuit panel arrived at Judge Nelson’s conclusion by a different route. Only one member of the panel – U.S. Circuit Judge James Loken – explicitly agreed with Nelson that the NGEA violated the dormant Commerce Clause. Judge Loken found that the NGEA’s “broad prohibitions plainly encompass non-Minnesota entities and transactions” and “regulate activity and transaction taking place wholly outside of Minnesota” because “when a non-Minnesota generating utility injects electricity into the MISO grid to meet its commitments to non-Minnesota customers, it cannot ensure that those electrons will not flow into and be consumed in Minnesota.  Likewise, non-Minnesota utilities that enter into power purchase agreements to serve non-Minnesota members cannot guarantee that the electricity eventually bid into the MISO markets pursuant to those agreements will not be imported into and consumed in Minnesota.”

By contrast, Judge Murphy disagreed with Judge Loken’s extraterritoriality analysis while Judge Colloton never even reached the dormant Commerce Clause question. Judge Murphy reasoned that because the NGEA’s importation prohibition “bans contracts for power from new large power plants, it thus bans wholesale sales of electric energy in interstate commerce” in direct contravention of the Federal Power Act’s grant of exclusive jurisdiction over “the transmission of electric energy in interstate commerce” to the Federal Energy Regulatory Commission.  Meanwhile, Judge Colloton reasoned that, “[b]y demanding offsets or allowance purchases from a North Dakota energy facility as a condition for contracting to provide power to Minnesota customers, Minnesota’s statute conflicts with the regulatory scheme that Congress designed in the Clean Air Act,” which allows each state to regulate emissions from sources within its borders through State Implementation Plans.

Since the panel was divided on the application of the dormant Commerce Clause to the NGEA, the permissible scope of state regulation of the energy sector remains uncertain. The concurrences in today’s decision in the Eighth Circuit add additional complexity and uncertainty by asserting that Minnesota’s law may be in conflict with the Clean Air Act or preempted by the Federal Power Act. In addition, and with respect to the question of whether state energy policy may run afoul of the extraterritorial doctrine of the dormant commerce clause, the Tenth Circuit recently came to a different conclusion in the face of a similar challenge to Colorado’s renewable portfolio standard (the Tenth Circuit decision can be found here). While the ultimate outcome is uncertain, the Eighth Circuit decision is sure to spark continued discussion and debate. Watch this space for updates as these issues move forward.

 

 

 

Photo of Thomas Braun Thomas Braun

Thomas Braun is a partner in Stoel Rives’ Environment, Land Use & Natural Resources group who has broad experience in matters involving environmental and energy issues at the federal, state, and local levels. Thomas works strategically and finds creative solutions to matters involving…

Thomas Braun is a partner in Stoel Rives’ Environment, Land Use & Natural Resources group who has broad experience in matters involving environmental and energy issues at the federal, state, and local levels. Thomas works strategically and finds creative solutions to matters involving (1) management, remediation, and redevelopment of contaminated properties (brownfields), (2) siting, permitting, and development of large commercial facilities, (3) due diligence in corporate and real estate transactions, and (4) regulatory compliance and response to enforcement actions.

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Photo of Sara Bergan Sara Bergan

Sara Bergan is an energy law attorney who helps renewable energy clients navigate structured deals within a complex regulatory framework. She has broad experience helping renewable energy clients through the development, procurement, construction, and acquisition/divestiture stages. Although she has worked on wind, solar…

Sara Bergan is an energy law attorney who helps renewable energy clients navigate structured deals within a complex regulatory framework. She has broad experience helping renewable energy clients through the development, procurement, construction, and acquisition/divestiture stages. Although she has worked on wind, solar, storage and other renewable energy projects of all sizes, she has focused primarily on utility scale projects and has particular experience in community-based or shared solar programs.

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Photo of Andrew Moratzka Andrew Moratzka

Andrew Moratzka focuses on litigation of various utility- and energy-related issues. Drew represents iron mines, paper companies, refineries, steel manufacturers and other large industrial customers in electric and gas rate cases and various regulatory matters at the state and federal level. He also…

Andrew Moratzka focuses on litigation of various utility- and energy-related issues. Drew represents iron mines, paper companies, refineries, steel manufacturers and other large industrial customers in electric and gas rate cases and various regulatory matters at the state and federal level. He also represents independent power producers. In these roles, Drew regularly appears before state public utilities commissions and administrative law judges. Drew also has experience arguing energy-related and bankruptcy-related issues at the appellate level. Given his background, clients also retain Drew for utility contract negotiations and to consult on various legislative matters. Drew is a past chair of the firm’s Energy Development practice group.

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  • Posted in:
    Environmental
  • Organization:
    Stoel Rives LLP

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