Eighth Circuit Decision

In three separate opinions, the Eighth Circuit affirmed a district court’s 2014 decision that invalidated a Minnesota law prohibiting “any person” from “importing” coal-fired electricity into the state. One Judge concluded that the provision regulates extraterritorially in violation of the dormant Commerce Clause. Another judges rejected that conclusion, but found that it is preempted by the Federal Power Act. The third judge declined to decide the dormant Commerce Clause issue but held that it is preempted by the Clean Air Act.

Judge Loken found that the challenged provisions violate the dormant Commerce Clause because “they regulate activity and transactions taking place wholly outside of Minnesota.” He endorsed the district court’s understanding that the statute regulates a new out-of-state coal plant injecting power into the regional MISO grid because some of that power would inevitably flow into Minnesota. According to Judge Loken, Minnesota’s law will impermissibly “impose [its] policy on neighboring States.” The law prevents out-of-state utilities from “adding capacity from prohibited sources anywhere in the grid, absent Minnesota regulatory approval or the dismantling of the federally encouraged and approved MISO transmission system. This Minnesota may not do without the approval of Congress.”

Judge Murphy disagreed. She recognized that the physical operation of the electric grid makes it impossible to trace the flow of electric power, and the Minnesota legislature would not have tasked state regulators with the absurd and impossible job of enforcing the statute as Judge Loken envisions. Rather, “a sounder reading of the text is that the import provision in the statute applies to bilateral contracts in which a Minnesota utility agrees to purchase power from a new large energy facility out of state.” Nonetheless, Judge Murphy affirmed the lower court’s ruling because she concluded that the “import provision [] directly bans certain wholesale sales” and is therefore preempted by the Federal Power Act.

Judge Colloton suggested that he agreed with Judge Murpy about preemption under the Federal Power Act and added that the law also conflicts with and is therefore preempted by the Clean Air Act. Under the law, Minnesota’s import ban is not absolute; an entity may import power from otherwise prohibited sources if it demonstrates to Minnesota regulators that it has offset the emissions associated with the import. But according to Judge Colloton, the offset provisions “encroach on the source State’s authority to govern emissions from sources within its borders. If other States in the region enacted laws similar to the Minnesota statute, then an energy facility could be required to comply with multiple varying emissions requirements in order to sell wholesale energy through the MISO market.” In contrast, the Clean Air Act “is designed so that each operator of a pollution source need look to only one sovereign—the State in which the source is located—for rules governing emissions.”

The decisions and a summary of the case are available on the Minnesota case page.
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