Recent 8th Circuit Decision Could Hinder State Programs on Imported Coal Power

carbon dioxide

A June decision by the Eighth U.S. Circuit Court of Appeals, and other recent cases, demonstrate the extent of a state’s authority to regulate greenhouse gas (GHG) emissions is still uncertain, according to an analysis by the K&L Gates Law Firm.

“Moreover, the issue of state authority to regulate emissions may be further complicated if the U.S. Environmental Protection Agency’s Clean Power Plan (CPP) rule is implemented,” according to the July 20 assessment by a number of Gates attorneys.

The CPP, which is currently under judicial review at the D.C. Circuit, will require states to meet certain emission standards based on the individual states’ emission profiles.

“It is unclear at this point whether the CPP would preempt states’ existing renewable energy standards, or whether Commerce Clause challenges would remain viable if renewable energy standards are allowed under the CPP,” the Gates firm concluded.

Recently the 8th Circuit weighed in on a case (North Dakota v. Heydinger). In the Heydinger litigation, North Dakota, along with electric power cooperatives and coal companies, filed suit against Minnesota challenging the constitutionality of certain provisions of Minnesota’s 2007 Next Generation Energy Act (NGEA), a statute that regulates aspects of the use and generation of electric energy.

The challenged provisions virtually prohibited contracts for out-of-state power that would increase Minnesota’s statewide CO2 emissions. “If an entity could demonstrate to the Minnesota Public Utility Commission’s satisfaction that it would offset prohibited carbon dioxide emissions, it could be exempted from the prohibitions,” the law firm noted.

The plaintiffs in the aforementioned lawsuit argued that the GHG provisions of the Minnesota law violated the “dormant Commerce Clause,” of the U.S. Constitution.

The Commerce Clause authorizes Congress to “regulate Commerce with foreign Nations, and among the several States,” the firm notes. “Although the Commerce Clause does not expressly limit authority of states to regulate interstate commerce, the United State Supreme Court has interpreted the Commerce Clause to contain an implicit limitation on state authority,” according to the analysis.

On June 15, 2016, the Eighth Circuit affirmed the District Court’s judgment in favor of the plaintiffs, but the appellate panel disagreed on the basis. (The governor of Minnesota has promised his state will appeal).

“Judge Loken, writing the lead opinion, agreed with the District Court’s reasoning that the challenged provisions violated the extraterritoriality doctrine of the dormant Commerce Clause because they had the “practical effect” of controlling conduct beyond the boundaries of Minnesota,” Gates noted. In reaching that conclusion, “Judge Loken looked to the structure and operation of the regional transmission grid that serves Minnesota and fourteen other states.”

“Judge [James] Loken’s lead opinion, however, did not draw unanimous support from the panel,” noted K&L Gates. “In separate concurring opinions, Judges [Diana] Murphy and [Steve] Colloton agreed that the NGEA provisions were unconstitutional, but not because they violated the dormant Commerce Clause. Rather, both Judges Murphy and Colloton concluded that the provisions were invalid because they were preempted by federal law.”

Other legal decisions on similar issues have been mixed

“Heydinger adds to a growing number of cases considering how the dormant Commerce Clause limits a state’s authority to regulate GHG emissions within its borders,” according to K&L Gates.

For example, in 2013, the Ninth Circuit Court rejected a dormant Commerce Clause challenge to California’s Low Carbon Fuel Standards (LCFS). The standard was an outgrowth of California’s Global Warming Solutions Act, which was passed in 2006.

Similarly, Tenth Circuit affirmed a District Court’s decision that Colorado’s Renewable Energy Standard (RES) statute did not violate the dormant Commerce Clause.

Colorado’s RES requires that 20% of electricity sold to Colorado customers come from renewable sources. “Similar to electricity consumers in Minnesota, consumers in Colorado receive their electricity from a regional electrical grid that serves eleven states and portions of Mexico and Canada,” K&L Gates noted.

“Because all fossil fuel producers in the area served by the grid would be hurt equally and all renewable energy producers in the area will be helped equally, the Court concluded that the plaintiffs had failed to demonstrate how Colorado’s RES ‘disproportionately harms out-of-state businesses,’” the law firm said in the analysis.

“These cases demonstrate that the contours of a state’s authority to regulate GHG emissions is still uncertain,” the law firm said. “Until the Supreme Court weighs in, it is uncertain whether, or to what extent, Commerce Clause challenges to state emissions regulations will be viable,” the K&L Gates analysis said.

The analysis was done by K&L Gates partner Ankur Tohan and associates Alyssa A. Moir and Gabrielle E. Thompson.

This article was republished with permission

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