Environmental -- 2016

North Dakota v. Heydinger   (8th Circuit)

Challenge to Minnesota's Next General Energy Act restricting out-of-state electricity

This suit challenges Minnesota’s Next Generation Energy Act (NGEA), which, in an effort to combat climate change, sought to regulate and impose its energy and environmental policies on electricity generated in other states. The NGEA prohibits importing electricity into Minnesota from “new large energy facility that would contribute to statewide power sector carbon dioxide emissions,” while exempting certain facilities that use natural gas as a fuel, effectively putting the burden of the restriction on coal-fueled facilities. Statewide power sector carbon dioxide emissions include emissions from facilities in other states.

We filed an amicus brief arguing that this law will substantially impede the interstate market for electricity and potentially spur other states to adopt similar laws. This could result in a web of inconsistent and clashing local regulations that would destroy the national common market and impose untold costs on manufacturers and other consumers.

Our brief argued that the Commerce Clause of the Constitution forbids states from regulating commerce outside their borders, and Minnesota’s law applies to out-of-state facilities as well as wholly out-of-state transactions, since there is no way to ensure that electric power generated for another entity outside of Minnesota will not, in fact, be introduced into Minnesota. The law is unconstitutional because it purports to allow a state to ban imported products based solely on how they were produced in other states. The Supreme Court has ruled that such a limitation is prohibited; a state may not put pressure on others to reform their economic standards by imposing obstructions to the normal flow of commerce between the states.

On June 15, 2016, the Eighth Circuit affirmed the lower court's ruling, holding that the law was preempted by the Federal Power Act, which gives exclusive jurisdiction to regulate the sale of electricity in interstate commerce to the Federal Energy Regulatory Commission. A concurring judge also found the law preempted by the Clean Air Act, which prevents one state from encroaching on another state's authority to govern emissions from sources within its borders. A third judge ruled that the challenged statute restricts interstate commerce by forcing a merchant to seek regulatory approval in one state before undertaking a transaction in another, thus as a practical matter controlling conduct beyond the boundaries of Minnesota. The judges agreed that the law caused hardship by interfering with the abilitiy of electric supply companies to plan, invest in, and conduct their business operations.

The decision is an important reminder of the national nature of electricity distribution, leaving to each state the power to regulate generation within its boundaries but preventing actions by one state that would prevent others from carrying out their responsibilities independently.

Related Documents:
NAM amicus brief  (January 27, 2015)


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