Recent Seventh Circuit Decision Could Impact Minnesota's Coal Moratorium

 The United States Court of Appeals for the Seventh Circuit recently issued a decision in Illinois Commerce Commission, et al., v. Federal Energy Regulatory Commission (“FERC”), which has the potential to influence and provide direction for the federal district court currently considering the constitutionality of Minnesota’s Next Generation Energy Act (“NGEA”).  In Illinois Commerce Comm’n, the Seventh Circuit heard a challenge to FERC’s approval of the Midcontinent Independent System Operator, Inc.’s (“MISO’s”), Multi-Value Project (“MVP”) tariff for financing new high-voltage power lines. As noted here, the constitutionality of a Michigan statute was questioned by the Seventh Circuit. 

Michigan’s Clean, Renewable, and Efficient Energy Act prohibits utilities from using renewable energy generated outside of the state to satisfy the requirement that the utilities’ retail supply portfolios include at least ten percent renewable energy by 2015.  A group of petitioners argued that, as a result of this statutory provision, Michigan ratepayers would pay costs well in excess of any benefits they derive from MVPs, in violation of the long-standing cost causation principle.  In response, the Seventh Circuit stated that "Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy." 

This statement from the Seventh Circuit could implicate other statutes that treat power generated out-of-state differently than power generated in-state.  One such statute is the NGEA.  Passed in 2007, the NGEA mandates that (1) Minnesota's fossil fuel use be reduced by 15% by 2015, and (2) renewable energy sources account for 25% of the state's total energy use by 2025.  In order to achieve these goals, the NGEA prohibits any person (1) from constructing in Minnesota a “new large energy facility that would contribute to statewide power sector carbon dioxide emissions”, (2) “import[ing] or commit[ting] to import from outside the state power from a new large energy facility that would contribute to statewide power sector carbon dioxide emissions”, and (3) “enter[ing] into a long-term power purchase agreement that would increase statewide power sector carbon dioxide emissions.”  These prohibitions were recently challenged by the State of North Dakota and other complainants in the United States District Court, District of Minnesota. 

In North Dakota v. Swanson, North Dakota claimed that the NGEA violates the Commerce Clause by facially discriminating against and unduly burdening interstate commerce.  Although the case is still in the early stages, some commentators believe that the decision in Illinois Commerce Comm’n  “will have serious echoes” across the country that could jeopardize statutes like the NGEA that are currently facing challenges, both judicial and legislativeOthers predict that the Seventh Circuit's decision will have a minimal impact on the NGEA's validity because the court’s language was arguably dicta and the cases cited, such as Alliance for Clean Coal v. Miller and Wyoming v. Oklahoma, do not necessarily stand for the proposition that discrimination against out-of-state coal violates the Commerce Clause when states favor renewable energy over other types of electrical generation.  With the deadlines stretching into 2014, the federal judge in North Dakota v. Swanson will have plenty of time to consider the Illinois Commerce Comm’n case and its potential applicability to the NGEA.

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