On April 18, 2014, the U.S. District Court for the District of Minnesota struck down key provisions of Minnesota’s Next Generation Energy Act (NGEA), Minn. Stat. ch. 216H, concluding the provisions violated the Dormant Commerce Clause. North Dakota v. Heydinger, __ F.Supp.2d__, 2014 WL 1612331 (D. Minn. Apr. 18, 2014). We previously reported on the Court’s prior decision in this matter, denying the defendants’ motion to dismiss.

Passed in 2007, the NGEA sets targets for statewide reductions of anthropogenic greenhouse gases, Minn. Stat. 216H.02, subd. 1, and mandates measures to help meet those targets. One of these measure addresses the fact that Minnesota obtains over 30 percent of its electrical power from North Dakota and other neighboring states. Specifically, Minn. Stat. 216H.03 prohibits importing to Minnesota power from new out-of-state power plants, or entering long-term power purchase agreements, if doing so would “contribute to statewide power sector carbon dioxide emissions.” Minn. Stat. § 216H.03, subds. 2, 3. Power plants can overcome these prohibitions if they offset any increase in GHG emissions pursuant to specific requirements in the Act. Id. subd. 4(a).

The state of North Dakota, and various electrical power providers and associations sued the Commissioners of Minnesota’s Public Utilities Commission, Pollution Control Agency, and Department of Commerce (who have authority to enforce the NGEA), claiming the NGEA violated the Dormant Commerce Clause and was preempted by federal laws including the Federal Power Act, 16 U.S.C. §§ 791a et seq. (“FPA”), and the Clean Air Act, 42 U.S.C. §§ 7410 et seq.

The Court agreed with the plaintiffs that the NGEA violated the Dormant Commerce Clause; it constituted an “extraterritorial reach,” having the practical effect of controlling conduct beyond the boundaries of the state, and was thus per se invalid. Cotto Waxo Co. v. Williams, 46 F.3d 790, 792, 793 (8th Cir.1995). The defendants countered that the NGEA only limits reliance on GHG-emitting power generation by in-state utilities that serve Minnesota residents; that is, it only concerns electricity to be consumed in Minnesota.

In rejecting this argument, the court emphasized that due to the nature of the grid, a purchaser of electricity cannot know whether the electricity it ultimately receives is from the generation resources that the purchaser bid into. The court likened the grid to a reservoir:

“If I want to buy 10 buckets of water, my chosen seller would dump in 10 buckets at its location, and I would take out 10 buckets at my location. The molecules I take out are not the ones my seller dumped in.” Id. at *2.

The court analogized the power grid to a bucket of water. (Source: http://smkydssp.blogspot.com)

The court compared power in the electrical grid to buckets of water added to a reservoir. (Source: http://smkydssp.blogspot.com)

 

Thus, the court reasoned, “if a non-Minnesota power producer entity injects electricity into the grid to satisfy its obligations to a non-Minnesota member, it cannot ensure that the electricity will not travel to and be removed in—in other words, be imported to and contribute to statewide power sector carbon dioxide emissions in—Minnesota.” In this way, non-Minnesota entities attempting to conduct business with each other outside of Minnesota would be subject to the NGEA. This, the court held, was a clear violation of the Dormant Commerce Clause. Because the Court resolved the case on the Constitutional claim it did not reach the plaintiffs’ preemption claims.

Advertisements