State of North Dakota v. Beverly Heydinger ( 2016 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 14-2156
No. 14-2251
___________________________
State of North Dakota, et al.
lllllllllllllllllllll Plaintiffs - Appellees/Cross Appellants
v.
Beverly Heydinger, Chair, Minnesota Public Utilities Commission, et al.
lllllllllllllllllllll Defendants - Appellants/Cross Appellees
------------------------------
American Wind Energy Association, et al.
lllllllllllllllllllllAmici on Behalf of Appellants
American Coalition for Clean Coal Electricity, et al.
lllllllllllllllllllllAmici on Behalf of Appellees
____________
Appeals from United States District Court
for the District of Minnesota - Minneapolis
____________
Submitted: October 21, 2015
Filed: June 15, 2016
____________
Before LOKEN, MURPHY, and COLLOTON, Circuit Judges.
____________
LOKEN, Circuit Judge.
A 2007 Minnesota statute provides that “no person shall . . . (2) import or
commit to import from outside the state power from a new large energy facility that
would contribute to statewide power sector carbon dioxide emissions; or (3) enter
into a new long-term power purchase agreement that would increase statewide power
sector carbon dioxide emissions.” Minn. Stat. § 216H.03, subd. 3(2) and (3). The
State of North Dakota, three non-profit cooperative entities that provide electric
power to rural and municipal utilities in Minnesota, and others brought this action
against the Commissioners of the Minnesota Public Utilities Commission (“MPUC”)
and the Minnesota Department of Commerce (“MDOC”) (collectively, “the State”).
Plaintiffs claimed, inter alia, that these prohibitions violate the Commerce Clause.
After extensive submissions and argument, the district court1 granted plaintiffs
summary judgment and a permanent injunction, concluding that the above-quoted
provisions are “impermissible extraterritorial legislation” and therefore “a per se
violation of the dormant Commerce Clause.” North Dakota v. Heydinger, 15 F. Supp.
3d 891, 919 (D. Minn. 2014). The State appeals. We affirm.
I. Background.
To light and heat our homes and offices, electric power must be generated from
an energy source, such as fossil and nuclear fuels, sun, and wind; transmitted over
high voltage transmission lines from generating facilities to distribution stations; and
delivered to individual consumers over local, low voltage distribution lines. An
electric utility may engage in any or all of these activities.
1
The Honorable Susan Richard Nelson, United States District Judge for the
District of Minnesota.
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The Federal Power Act, enacted in 1935, responded to a Supreme Court
decision that the Commerce Clause bars the States from regulating certain interstate
electricity transactions. Pub. Util. Comm’n of R.I. v. Attleboro Steam & Elec. Co.,
273 U.S. 83, 89 (1927). To fill this gap, Congress granted the Federal Power
Commission, now the Federal Energy Regulatory Commission (“FERC”), jurisdiction
over “the transmission of electric energy in interstate commerce and . . . the sale of
electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824(b)(1). The Act
left to the States most matters they had traditionally regulated, including local electric
utility rates and the siting of power plants, see § 824(a) and (b), subject to limits
imposed by the Commerce Clause. See New York v. FERC, 535 U.S. 1, 19-23
(2002); New Eng. Power Co. v. New Hampshire, 455 U.S. 331, 340-41 (1982).
It proved difficult to bring electricity efficiently and cost effectively to rural
areas, and to municipalities that have publicly-owned distribution systems. To
address this problem, small local utilities formed large cooperative entities having
sufficient capital to build captive generation and transmission facilities and to
leverage local members’ buying power in an increasingly integrated electric power
market. Three of these cooperative entities are a principal focus in this case, Basin
Electric Cooperative (“Basin”); Minnkota Power Cooperative, Inc. (“Minnkota”); and
Missouri River Energy Services (“MRES”). Headquartered in North Dakota, Basin
has 135 rural electric cooperative members spread across nine States, including
twelve in Minnesota. Basin owns its own generation and transmission resources and
enters into power purchase agreements with other generation and transmission
utilities. Minnkota is a regional generation and transmission utility based in North
Dakota that provides electric power to its members, who are distribution cooperatives
in North Dakota and Minnesota, including various Indian reservations. Located in
South Dakota, MRES provides power to more than sixty municipalities in Minnesota
and three other States.
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Technology has substantially changed the electric power industry since 1935,
reducing the cost of generating and transmitting electricity and enabling new entrants
to challenge the generating monopolies of traditional utilities. See Morgan Stanley
Capital Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 535-36 (2008). To encourage
“robust competition in the wholesale electricity market,” FERC encouraged utilities
participating in regional transmission grids to create independent system operators
(“ISOs”) and regional transmission organizations (“RTOs”), entities that “would
assume operational control -- but not ownership -- of the transmission facilities
owned by its member utilities [and] then provide open access to the regional
transmission system to all electricity generators at rates established in a single . . .
tariff that applies to all eligible users.” Midwest ISO Transmission Owners v. FERC,
373 F.3d 1361, 1364 (D.C. Cir. 2004) (quotation omitted); see 18 C.F.R. § 35.34(a).
Today, these regional organizations control most of the nation’s transmission grid.
FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 768 (2016).
Basin, Minnkota, and MRES are members of the Midcontinent Independent
Transmission System Operator (“MISO”), an ISO established in 1998 and approved
by FERC as the first RTO in 2001. MISO controls over 49,000 miles of transmission
lines, a grid that spans fifteen States, including Minnesota, and parts of Canada. See
Midwest ISO, 373 F.3d at 1365. Its thirty transmission-owning members include
investor-owned utilities, public power utilities, independent power producers, and
rural electric cooperatives. In Minnesota, most retail distribution utilities, now
referred to as load-serving entities or “LSEs,” see 16 U.S.C. § 824q(a)(2), are either
members of MISO or non-members who participate in its energy markets.
FERC requires that an approved RTO such as MISO has operational authority
for all transmission facilities under its control, be the only provider of transmission
services over those facilities, and have sole authority to approve or deny all requests
for transmission service. “Thus, whatever its structure, once a utility [makes] the
decision to surrender operational control of its transmission facilities to [MISO], any
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transmissions across those facilities [are] subject to the control of [MISO].” Midwest
ISO, 373 F.3d at 1365. The Supreme Court recently explained how an RTO such as
MISO efficiently allocates the supply and demand for electric power:
[RTOs] obtain (1) orders from LSEs indicating how much electricity
they need at various times and (2) bids from generators specifying how
much electricity they can produce at those times and how much they will
charge for it. [RTOs] accept the generators’ bids in order of cost (least
expensive first) until they satisfy the LSEs’ total demand. The price of
the last unit of electricity purchased is then paid to every supplier whose
bid was accepted, regardless of its actual offer; and the total cost is split
among the LSEs in proportion to how much energy they have ordered.
Elec. Power Supply, 136 S. Ct. at 768. MISO generators commit their electricity to
be sold to the MISO market; LSE buyers take electricity out of the market without
regard to its generation source. MISO -- not individual generators -- controls which
generation facilities operate at any given time. Though utilities still enter into
bilateral purchase agreements as a way to meet their reserve capacity requirements,2
“any electricity that enters the grid immediately becomes a part of a vast pool of
energy that is constantly moving in interstate commerce.” New York, 535 U.S. at 7.
The Minnesota statute at issue is part of the Next Generation Energy Act
(“NGEA”), a statute intended to reduce “statewide power sector carbon dioxide
emissions” by prohibiting utilities from meeting Minnesota demand with electricity
2
“‘Capacity’ is not electricity itself but the ability to produce it when
necessary.” Conn. DPUC v. FERC, 569 F.3d 477, 479 (D.C. Cir. 2009), cert. denied,
558 U.S. 1110 (2010). To ensure system reliability, MISO maintains a systemwide
installed capacity reserve and requires each LSE to have control, through ownership
or purchase, of sufficient capacity to meet its peak load plus a reserve. FERC and
state utility regulators have overlapping, at times conflicting, jurisdiction to impose
and monitor capacity requirements. Id. at 481-84. Basin conducts this planning on
a region-wide basis.
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generated by a “new large energy facility” in a transaction that will contribute to or
increase “statewide power sector carbon dioxide emissions.” The statute regulates
“the total annual emissions of carbon dioxide from the generation of electricity within
the state and all emissions of carbon dioxide from the generation of electricity
imported from outside of the state and consumed in Minnesota.” Minn. Stat.
§ 216H.03, subd. 2. The challenged prohibitions in § 216H.03, subd. 3(2) and (3),
are enforced by MPUC and MDOC. When either agency determines that “any person
is violating or about to violate [§ 216H.03], it may refer the matter to the attorney
general who shall take appropriate legal action.” Id., subd. 8.
Since NGEA enactment, MDOC and MPUC have declined to clarify how these
prohibitions apply to electricity transmitted under MISO’s control. As the district
court explained, Heydinger, 15 F. Supp. 3d at 899-903, plaintiffs submitted extensive
evidence describing the impact the prohibitions have on their obligations to meet
region-wide demand for electric power:
(i) Dairyland Power Cooperative (“Dairyland”) is a Wisconsin generation and
transmission cooperative that sells wholesale electricity through the MISO market to
LSE members scattered across several states, including Minnesota. Dairyland is part-
owner of a coal-fired plant, Weston 4, located in central Wisconsin. In a 2011
administrative proceeding, MDOC at the urging of environmental groups took the
position that § 216H.03 restricts Dairyland’s ability to rely on electricity generated
by Weston 4 to serve its Minnesota members. Dairyland noted that MISO was
responsible for dispatching all electricity Dairyland generates. MDOC nonetheless
took the position that Weston 4 is a “new large energy facility” subject to the NGEA
unless an exemption applied. MDOC explained:
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In sum, Dairyland must meet the resource needs of its system as [a]
whole. Regardless of whether that analysis takes into account MISO
purchases, sales, dispatch, or constraints, Dairyland does not separately
plan for its Minnesota and Wisconsin load. Thus, 1) all of Dairyland’s
generation is dispatched for the benefit of Dairyland’s entire
membership, 2) all members will share in the benefits of any MISO
energy sales, and 3) all members will bear responsibility for any MISO
purchases. In other words, all of Dairyland’s members are part of the
same system.
After nearly a year of enforcement proceedings, MPUC concluded that Weston 4 fell
within the NGEA exemption for new large facilities that were under MPUC
consideration before April 1, 2007. See § 216H.03, subd. 7(1).
(ii) In early 2012, Basin notified the State that it was transmitting electricity
from “Dry Forks,” a Wyoming coal-fired plant, to meet increased demand in the
booming North Dakota “oil patch,” a transmission that brought electric power into
the Eastern Interconnection and subject to MISO’s control. MDOC asked Basin for
analysis of “whether that provision of power to MISO was a violation of Minnesota
Statutes § 216H.03.” After Basin responded, neither MPUC nor MDOC answered
Basin’s request for confirmation whether this transmission violated § 216H.03, subd.
3. Plaintiffs submitted declarations by Basin officers that Basin is apprehensive about
entering into long-term power purchase agreements to serve non-Minnesota load due
to § 216H.03, which interferes with Basin’s ability to make investment decisions such
as its planned development of a coal-fired plant in Selby, South Dakota.
(iii) Minnkota has increasing surplus capacity from its partially-owned coal-
fired plant in North Dakota. Concerned that this will trigger NGEA enforcement, two
LSE members in Minnesota have declined to enter into long-term purchase
agreements with Minnkota. (iv) MRES declined to purchase capacity from a coal-
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fired facility in Wisconsin after determining the transaction would be viewed by the
State as violating the NGEA.
The district court concluded that (i) plaintiffs have standing to challenge Minn.
Stat. § 216H.03, subd. 3(2) and (3), under the Commerce Clause, and the issue is ripe
for judicial review; (ii) the court would not abstain from deciding the Commerce
Clause issue; (iii) the Commerce Clause extraterritoriality doctrine is not limited to
price-control statutes; and (iv) § 216H.03, subd. 3(2) and (3), unambiguously apply
to transactions outside Minnesota that place energy in the MISO market and therefore
unconstitutionally compel out-of-state cooperatives to conduct their out-of-state
business according to Minnesota’s terms because they cannot ensure that out-of-state
coal-generated electricity they inject into the MISO grid will not be used to serve
their Minnesota members. Heydinger, 15 F. Supp. 3d at 904-18. On appeal, the State
and its supporting amici challenge each of those rulings.
II. Standing and Ripeness.
A. Standing. Article III of the Constitution limits the jurisdiction of federal
courts to “Cases” and “Controversies.” To establish an Article III case or
controversy, a plaintiff must show it has suffered an injury in fact fairly traceable to
the challenged conduct that will likely be redressed by a favorable decision. See
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). When a statute is alleged to
violate the Commerce Clause, plaintiffs have standing if the law “has a direct
negative effect on their borrowing power, financial strength, and fiscal planning.”
Jones v. Gale, 470 F.3d 1261, 1267 (8th Cir. 2006), cert. denied, 549 U.S. 1328
(2007), quoting S.D. Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583, 592 (8th Cir.
2003), cert. denied, 541 U.S. 1037 (2004). The district court determined that at least
three plaintiffs have standing -- Basin, MRES, and Minnkota. Heydinger, 15 F. Supp.
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3d at 905-06 & n.8. Plaintiffs meet the Article III standing requirement if we
conclude, reviewing the issue de novo, that at least one of these plaintiffs has standing
to sue. See Jones, 470 F.3d at 1265.
As the district court concluded, the summary judgment record clearly
establishes that the prohibitions in § 216H.03, subd. 3(2) and (3), are interfering with
Basin’s ability to transmit power and enter into power purchase agreements occurring
entirely outside Minnesota. Basin’s concern that the statute will prohibit or sharply
curtail its out-of-state transactions is well-grounded in the statute’s plain text and is
reinforced by the position taken by MDOC in the Dairyland proceeding and by
MPUC questioning whether Basin’s Dry Forks transfer violated § 216H.03 and then
intentionally leaving the question unanswered. This is probable economic injury
resulting from governmental action that satisfies Article III’s injury-in-fact
requirement. See Clinton v. New York, 524 U.S. 417, 433 (1998). On this record,
the State’s assertion that there is no real threat of enforcement because MDOC and
MPUC do not intend to enforce the prohibitions based on transactions in the MISO
markets is not credible.
B. Ripeness. The State argues the district court erred in concluding that
plaintiffs’ claims are ripe for judicial review. Heydinger, 15 F. Supp. 3d at 906. The
ripeness doctrine is aimed at preventing federal courts, through “premature
adjudication, from entangling themselves in abstract disagreements.” Abbott Labs.
v. Gardner, 387 U.S. 136, 148 (1967). A party seeking federal review must show “the
fitness of the issues for judicial decision and the hardship to the parties of
withholding court consideration.” Id. at 149. Both factors must exist “to at least a
minimal degree.” Neb. Pub. Power Dist. v. MidAm. Energy Co., 234 F.3d 1032,
1039 (8th Cir. 2000).
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Reviewing this issue de novo, we agree with the district court that plaintiffs’
claims are ripe for judicial review. See Parrish v. Dayton, 761 F.3d 873, 875 (8th Cir.
2014) (standard of review). The challenge is fit for review because the issues are
predominately legal, and the challenged prohibitions are currently causing hardship
by interfering with the ability of plaintiffs such as Basin to plan, invest in, and
conduct their business operations. Delaying judicial resolution would force these
plaintiffs “to gamble millions of dollars on an uncertain legal foundation.” Neb. Pub.
Power, 234 F.3d at 1039. It also risks harm to all citizens in the region served by
MISO by preventing or discouraging the development of electric power capacity
needed to meet their demands. See Pac. Gas & Elec. Co. v. State Energy Res.
Conservation & Dev. Comm’n, 461 U.S. 190, 201-02 (1983). In our view, given this
potentially “disastrous impact,” the uncertainty regarding how MDOC and MPUC
will enforce these prohibitions confirms that the claims are ripe for review. Gardner
v. Toilet Goods Ass’n, 387 U.S. 167, 172 (1967).
III. Abstention.
The State argues the district court should have declined to decide this case
under the abstention doctrine established in Railroad Commission of Texas v.
Pullman Co., 312 U.S. 496 (1941). “Pullman requires a federal court to refrain from
exercising jurisdiction when the case involves a potentially controlling issue of state
law that is unclear, and the decision of this issue by the state courts could avoid or
materially alter the need for a decision on federal constitutional grounds.” Moe v.
Brookings Cty., 659 F.2d 880, 883 (8th Cir. 1981). The district court declined to
abstain because “Minn. Stat. § 216H.03 is not sufficiently ambiguous, and because
there is no possibility that the state law determination will moot the federal
constitutional question.” Heydinger, 15 F. Supp. 3d at 907. We review this ruling
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for abuse of discretion. See Nat’l City Lines, Inc. v. LLC Corp., 687 F.2d 1122, 1126
(8th Cir. 1982) (standard of review).
The State argues that whether the prohibitions in § 216H.03, subd. 3(2) and (3),
apply to transactions in the MISO energy markets is unclear, and therefore “it would
be appropriate to abstain so that the MPUC can issue a formal interpretation as part
of an administrative proceeding.” But in the context here, this is insufficient reason
for the district court to decline its “virtually unflagging obligation” to exercise federal
jurisdiction. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800,
817 (1976). In the first place, the State has had years to “issue a formal
interpretation” and has intentionally not done so. MDOC declined to rule or even
opine on the constitutionality of § 216H.03 in the Dairyland proceeding, and MPUC
failed to answer Basin’s request for a ruling whether the statute applied to Basin’s
transfer of electricity from the Dry Forks plant into the MISO markets.
Of equal significance, the State has failed to put forth a plausible limiting
interpretation of § 216H.03, subd. 3(2) and (3), that would “moot the federal
constitutional question.” The repeated assertions in the State’s briefs that the
prohibitions do not apply “to the MISO short-term energy markets” are contrary to
the plain meaning of the statute; moreover, they do not answer whether the statute
nonetheless impacts transactions by out-of-state MISO members to obtain adequate
electric power capacity for the region. In this situation, “[i]f the statute is not
obviously susceptible of a limiting construction, then even if the statute has never
been interpreted by a state tribunal it is the duty of the federal court to exercise its
properly invoked jurisdiction.” City of Houston v. Hill, 482 U.S. 451, 468 (1987)
(quotation and alteration omitted); see Middle S. Energy, Inc. v. Ark. Pub. Serv.
Comm’n, 772 F.2d 404, 418 (8th Cir. 1985), cert. denied, 474 U.S. 1102 (1986).
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IV. The Commerce Clause Merits.
The Commerce Clause grants to Congress the power to “regulate Commerce
. . . among the several States.” U.S. Const. art. I, § 8, cl. 3. Although the Clause does
not expressly limit the States’ ability to regulate commerce, the Supreme Court has
interpreted it as including a “‘dormant’ limitation on the authority of the States to
enact legislation affecting interstate commerce.” Healy v. Beer Inst., 491 U.S. 324,
326 n.1 (1989). A state statute that discriminates against interstate commerce in favor
of in-state commerce is usually a per se violation of this constitutional limitation.
Likewise, a statute that has the practical effect of exerting extraterritorial control over
“commerce that takes place wholly outside of the State’s borders” is likely to be
invalid per se. Id. at 336. Beyond those limitations, a statute will run afoul of the
Commerce Clause as construed in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970),
if it imposes an undue burden on interstate commerce that outweighs its local
benefits. See generally Hazeltine, 340 F.3d at 593; Cotto Waxo Co. v. Williams, 46
F.3d 790, 793 (8th Cir. 1995).
The Supreme Court has applied the extraterritoriality doctrine in relatively few
cases. The “critical inquiry is whether the practical effect of the regulation is to
control conduct beyond the boundaries of the State.” Healy, 491 U.S. at 336
(quotation and citations omitted); see Brown-Forman Distillers Corp. v. N.Y. State
Liquor Auth., 476 U.S. 573, 582 (1986); Edgar v. MITE Corp., 457 U.S. 624, 643
(1982); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521 (1935). A state statute has
undue extraterritorial reach and “is per se invalid” when it “requires people or
businesses to conduct their out-of-state commerce in a certain way.” Cotto Waxo, 46
F.3d at 793. The State argues the district court erred in ruling that Ҥ 216H.03, subd.
3(2)-(3), violates the extraterritoriality doctrine and is per se invalid.” Heydinger, 15
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F. Supp. 3d at 910, 916-19. We review this issue of law de novo. See S. Union Co.
v. Mo. Pub. Serv. Comm’n, 289 F.3d 503, 505 (8th Cir. 2002).
1. The State and its supporting amici argue that only price-control and price-
affirmation laws can violate the extraterritoriality doctrine, an argument that would
seemingly insulate all environmental prohibitions from this Commerce Clause
scrutiny. This categorical approach to the Commerce Clause would be contrary to
well-established Supreme Court jurisprudence. See W. Lynn Creamery, Inc. v. Healy,
512 U.S. 186, 201 (1994) (“Our Commerce Clause jurisprudence is not so rigid as to
be controlled by the form by which a State erects barriers to commerce.”); cf. Ill.
Commerce Comm’n v. FERC, 721 F.3d 764, 776 (7th Cir. 2013), cert. denied, 134
S. Ct. 1277 (2014) (“Michigan cannot, without violating the commerce clause . . .
discriminate against out-of-state renewable energy.”).
The district court correctly noted the Supreme Court has never so limited the
doctrine, and indeed has applied it more broadly. Heydinger, 15 F. Supp. 3d at 911.
In Edgar v. MITE Corp., the Court invalidated the Illinois Business Take-Over Act;
a plurality ruled the Act invalid in part because of its “sweeping extraterritorial
effect.” 457 U.S. 624, 642 (1982).3 We have twice applied the doctrine outside the
price-control context. See S. Union, 289 F.3d at 507; Cotto Waxo, 46 F.3d at 793-94.
Our sister circuits have considered whether a variety of non-price laws were
unconstitutionally extraterritorial. See, e.g., Am. Beverage Ass’n v. Snyder, 735 F.3d
362, 366 (6th Cir.), cert. denied, 134 S. Ct. 61 (2013); Am. Booksellers Found. v.
Dean, 342 F.3d 96, 100, 103-04 (2d Cir. 2003); Nat’l Solid Wastes Mgmt. Ass’n v.
Meyer, 63 F.3d 652, 659-60 (7th Cir. 1995), cert. denied, 517 U.S. 1119 ( 1996).
3
Though that portion of Edgar was a plurality opinion, the majority in Healy
described Edgar as a decision that “significantly illuminates the contours of the
constitutional prohibition on extraterritorial legislation.” 491 U.S. at 333 n.9.
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A panel of the Tenth Circuit recently took a somewhat contrary position in
Energy & Environment Legal Institute v. Epel, 793 F.3d 1169 (10th Cir.), cert.
denied, 136 S. Ct. 595 (2015). At issue was the validity of a Colorado statute
requiring “electricity generators to ensure that 20% of the electricity they sell to
Colorado consumers comes from renewable sources.” Id. at 1170. In upholding the
law, the court ruled that “non-price standards for products sold in-state” may be
amenable to Commerce Clause scrutiny under the Pike balancing test, or “for traces
of discrimination” in favor of in-state commerce, but they do not warrant “near
automatic condemnation” under the extraterritoriality doctrine. Id. at 1173. Whether
a state statute with extraterritorial effect should be deemed “per se invalid,” or should
be analyzed under the Pike balancing test, is a difficult issue we have not previously
addressed. In this case the State has not argued that the district court erred in
applying the per se standard, as opposed to the Pike balancing test.4
2. The State primarily argues that the prohibitions in § 216H.03, subd. 3(2) and
(3), do not apply to the “MISO short-term energy markets” and therefore do not
violate the extraterritoriality doctrine. The State contends that the statute regulates
only “contracts or other commitments to import electricity in the future” and the
“persons who contract with a generating facility to import electricity into Minnesota
for use by Minnesota customers.” By contrast, the MISO markets are for short-term
energy and thus do not implicate the NGEA prohibition on long-term power purchase
agreements. Thus, the statute as the State would have us read it leaves non-
Minnesota entities free to transact business with other non-Minnesota entities.
4
The extraterritorial effect alleged in Epel -- “some out-of-state coal producers
. . . will lose [Colorado] business,” 793 F.3d at 1171 -- is different than the effect that
invalidates Minn. Stat. § 216H.03, subd. 3(2) and (3).
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The district court concluded that this contention is contrary to the plain
language of the statute. Heydinger, 15 F. Supp. 3d at 908-10. Subdivision 2 of
§ 216H.03 expressly defines “statewide power sector carbon dioxide emissions” as
including emissions from the generation of electricity that is “imported from outside
the state and consumed in Minnesota.” Clause (2) of subdivision 3 provides that “no
person” shall “import or commit to import” power from a large new energy facility
located “outside the state,” a command plainly encompassing both present and future
transactions.5 Clause (3) prohibits entering into a new long-term power purchase
agreement “that would increase emissions” from an out-of-state generating facility,
whether presently existing or not. These broad prohibitions plainly encompass non-
Minnesota entities and transactions. The presumption against extraterritoriality does
not apply when the statute’s text is clear. Cotto Waxo, 46 F.3d at 792-93.
Not only do the challenged prohibitions apply to non-Minnesota utilities, they
regulate activity and transactions taking place wholly outside of Minnesota. In the
regional MISO transmission grid, a person who “imports” electricity does not know
the origin of the electrons it receives, whether or not the transaction is pursuant to a
long-term purchase agreement with an out-of-state generator. As a State expert
described the energy market, the “contract path” between the importer and generator
“represents a flow of dollars, not a flow of electrons.” In the MISO grid, electrons
flow freely without regard to state borders, entirely under MISO’s control. Thus,
when a non-Minnesota generating utility injects electricity into the MISO grid to meet
its commitments to non-Minnesota customers, it cannot ensure that those electrons
will not flow into and be consumed in Minnesota. Likewise, non-Minnesota utilities
that enter into power purchase agreements to serve non-Minnesota members cannot
guarantee that the electricity eventually bid into the MISO markets pursuant to those
5
The word “import” means “to bring in from a foreign or external source:
introduce from without.” Webster’s Third New International Dictionary 1135 (1986).
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agreements will not be imported into and consumed in Minnesota. As MDOC
observed in the Dairyland proceeding, “it is impossible to determine that no electrons
from a generation unit reach a particular end-use customer, unless the generation
resource and end-use customer are completely disconnected from each other
physically.” Thus, generators such as Basin, Minnkota, and MRES cannot prevent
energy they place in the MISO grid to serve non-Minnesota customers from being
imported into Minnesota, and a Minnesota LSE cannot do business with those out-of-
state generators without “importing” electrons from their coal-fired facilities.
Like persons who post information on an out-of-state internet website, out-of-
state utilities entering into purchases and sales of electricity in the MISO transmission
grid “cannot prevent [electricity users in Minnesota] from accessing the [electrons].”
Am. Booksellers, 342 F.3d at 103. And the statute provides that all MISO
participants must comply with the challenged prohibitions any time they enter into
a transaction or agreement that may “import” electricity into Minnesota. To avoid
this direct impact on activities and transactions that are otherwise entirely out-of-state
commerce, integrated regional utilities like Basin must either unplug from MISO or
seek regulatory approval from MDOC and MPUC. “Forcing a merchant to seek
regulatory approval in one State before undertaking a transaction in another directly
regulates interstate commerce.” Brown-Forman, 476 U.S. at 582. For this reason, the
district court correctly concluded that the challenged prohibitions have “the practical
effect of controlling conduct beyond the boundaries of” Minnesota. Cotto Waxo, 46
F.3d at 793.6
6
This case is unlike cases where the regulated out-of-state entities had the
physical ability to segregate products bound for the regulating State from products
bound for other States. See Rocky Mountain Farmers Union v. Corey, 730 F.3d
1070, 1102-03 (9th Cir. 2013), cert. denied, 134 S. Ct. 2875 (2014) (ethanol); Int’l
Dairy Foods Ass’n v. Boggs, 622 F.3d 628, 646-47 (6th Cir. 2010) (dairy products);
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The State argues that Ҥ 216H.03 merely regulates in an area of traditional state
authority.” Without question, Minnesota and other States have long regulated the
siting, construction, and operation of electric generating facilities located within their
borders. See Minn. Stat. §§ 216B.243, 216B.24; S. Union, 289 F.3d at 507.
Minnesota “retains broad regulatory authority to protect the health and safety of its
citizens and the integrity of its natural resources.” Maine v. Taylor, 477 U.S. 131,
151 (1986). Consistent with that authority, plaintiffs did not challenge, and the
district court did not enjoin, enforcement of § 216H.03, subd. 3(1), which prohibits
constructing within Minnesota a new large energy facility that would contribute to
statewide carbon dioxide emissions.
But unlike Clause (1), Clauses (2) and (3) of § 216H.03, subd. 3, seek to reduce
emissions that occur outside Minnesota by prohibiting transactions that originate
outside Minnesota. And their practical effect is to control activities taking place
wholly outside Minnesota. In determining whether a law has extraterritorial reach,
the Supreme Court has instructed us to consider “how the challenged statute may
interact with the legitimate regulatory regimes of other States.” Healy, 491 U.S. at
336. Other States in the MISO region have not adopted Minnesota’s policy of
increasing the cost of electricity by restricting use of the currently most cost-efficient
sources of generating capacity. Yet the challenged statute will impose that policy on
neighboring States by preventing MISO members from adding capacity from
prohibited sources anywhere in the grid, absent Minnesota regulatory approval or the
SPGGC, LLC v. Blumenthal, 505 F.3d 183, 195-96 (2d Cir. 2007) (prepaid gift
cards); Nat’l Elec. Mfrs. Ass’n v. Sorrell, 272 F.3d 104, 110 (2d Cir. 2001), cert.
denied, 536 U.S. 905 (2003) (lamps); Hampton Feedlot, Inc. v. Nixon, 249 F.3d 814,
819 (8th Cir. 2001) (livestock); Cotto Waxo, 46 F.3d at 793 (petroleum-based
sweeping compounds).
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dismantling of the federally encouraged and approved MISO transmission system.
This Minnesota may not do without the approval of Congress.
V. Remaining Issues.
The district court enjoined the defendant state officials “from enforcing Minn.
Stat. § 216H.03, subd. 3(2)-(3).” Heydinger, 15 F. Supp. 3d at 919. The State argues
an injunction was improper because plaintiffs did not “establish that no set of
circumstances exists under which the Act would be valid.” United States v. Salerno,
481 U.S. 739, 745 (1987). But this standard does not apply to extraterritorial
challenges under the Commerce Clause. The State has not cited a Supreme Court
decision applying the Salerno standard to a facial Commerce Clause challenge. And
in Healy, a facial extraterritoriality challenge, Salerno was not even cited in the
Court’s majority, concurring, or dissenting opinions. 491 U.S. at 324-49.
The State further argues that the injunction “should have been limited to what
was necessary to cure the supposed extraterritorial reach.” But the State fails to put
forth a more limited alternative injunction. Given the overbroad prohibitions in
§ 216H.03, subd. 3(2) and (3), it would be inappropriate to speculate as to what
narrower prohibitions would be free of improper extraterritorial effect yet would
achieve a significant part of the statute’s apparent purpose. In these circumstances,
the district court did not abuse its discretion by simply enjoining enforcement of the
two invalid subsections of § 216H.03, subd. 3, leaving Minnesota to craft an
alternative.
In its summary judgment order, the district court declined to award plaintiffs
attorneys’ fees. Heydinger, 15 F. Supp. 3d at 919. Plaintiffs cross-appealed that
ruling. While their cross-appeal was pending, the district court ruled that they are
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entitled to recover fees but did not determine the amount to be awarded. North
Dakota v. Heydinger, No. 11-CV-3232, 2014 WL 7157013, at *1-2 & n.1 (D. Minn.
Dec. 15, 2014). Accordingly, we dismiss the cross-appeal as moot. See In re
Rodriquez, 258 F.3d 757, 759 (8th Cir. 2001) (“If, while an appeal is pending, an
event occurs that eliminates the court’s ability to provide any effectual relief
whatever, the appeal must be dismissed as moot.”).
The judgment of the district court is affirmed.
MURPHY, Circuit Judge, concurring in part and concurring in the judgment.
I respectfully disagree with Judge Loken's extraterritoriality analysis. The
challenged provisions in the Next Generation Energy Act would regulate entities
outside Minnesota only if those entities "import" electric power into Minnesota or
enter into power purchase agreements that result in power being imported into
Minnesota. These provisions would not regulate commerce "that takes place wholly
outside of [Minnesota's] borders." For these reasons I disagree with Judge Loken's
conclusion that the provisions have an unconstitutional extraterritorial effect. See
Healy v. Beer Inst., 491 U.S. 324, 336–37 (1989).
The district court's injunction should nonetheless be affirmed because both of
the challenged statutory provisions are preempted by the Federal Power Act. That act
gives the Federal Energy Regulatory Commission exclusive jurisdiction to regulate
wholesale sales and the transmission of electric energy in interstate commerce. See
New York v. FERC, 535 U.S. 1, 6–7 (2002).
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I.
The Constitution gives Congress the power "[t]o regulate Commerce . . . among
the several States." U.S. Const. Art. I, § 8, cl. 3. That power also has a "negative or
dormant implication," which "prohibits state taxation or regulation that discriminates
or unduly burdens interstate commerce and thereby impedes free private trade in the
national marketplace." Gen. Motors Corp. v. Tracy, 519 U.S. 278, 287 (1997)
(citations omitted). Under the dormant Commerce Clause, a statute faces strict
scrutiny and is almost always invalid if it "discriminates against interstate commerce."
Dept. of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008). If the law is
nondiscriminatory and "regulates even-handedly to effectuate a legitimate local
public interest, and its effects on interstate commerce are only incidental, it will be
upheld unless the burden imposed on such commerce is clearly excessive in relation
to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
One line of Supreme Court cases has invalidated statutes which have an
impermissible extraterritorial effect by "controlling commercial activity occurring
wholly outside the boundary of the State." Healy, 491 U.S. at 337. The critical
inquiry in these cases "is whether the practical effect of the regulation is to control
conduct beyond the boundaries of the State." Id. at 336.
The Minnesota statute at issue before us provides that "no person shall:"
(1) construct within the state a new large energy facility that would
contribute to statewide power sector carbon dioxide emissions;
(2) import or commit to import from outside the state power from a new
large energy facility that would contribute to statewide power sector
carbon dioxide emissions; or
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(3) enter into a new long-term power purchase agreement that would
increase statewide power sector carbon dioxide emissions.
Minn. Stat. § 216H.03, subd. 3. The phrase "statewide power sector carbon dioxide
emissions" is defined as the total carbon dioxide emissions "from the generation of
electricity within the state" and "from the generation of electricity imported from
outside the state and consumed in Minnesota." Id. subd. 2.
The two challenged statutory provisions apply to companies which are engaged
in commerce which enters into Minnesota. Clause (2) applies to entities that "import"
power "from outside the state." Id. subd. 3. The power purchase agreement provision
in clause (3) applies to entities which enter into agreements that increase Minnesota's
carbon emissions from electricity generation in Minnesota or from generation of
electricity "imported from outside the state and consumed in Minnesota." See id.
subds. 2–3. These provisions do not allow Minnesota to regulate transactions that
occur "wholly outside" the state.
Judge Loken relies on incorrect assumptions to conclude that the statute
operates extraterritorially because it applies to all events occurring anywhere on the
MISO grid (Midcontinent Independent System Operator). In his view the statute
regulates flows of electrons because a generating facility outside Minnesota which
"injects electricity into the MISO grid . . . cannot ensure that those electrons will not
flow into and be consumed in Minnesota." Experts have pointed out, however, that
electrons do not behave like drops of water flowing through a pipe, for this "is not
how electricity works." Brief of Electrical Engineers et al. as Amici Curiae
Supporting Respondents, New York v. FERC (No. 00-568), 2001 WL 605124 at *6
("Brief of Electrical Engineers"), cited in New York, 535 U.S. at 7 n.5. "Water pipe
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metaphors for the transmission of electricity are popular, but misleading." Id.
(citation omitted).
In the electricity transmission system, individual electrons do not actually
"flow" in the same sense as water in a pipe. Id. at *6–7. Rather, the electrons
oscillate in place, and it is electric energy which is transmitted through the
propagation of an electromagnetic wave. Id. Electricity on the grid behaves
according to the laws of physics, and it cannot be dispatched from one particular
place to another. Id. at *8–9. "Energy flowing onto a power grid energizes the entire
grid, and consumers then draw undifferentiated energy from that grid." Id. at *9.
How the grid actually works is important because in interpreting a Minnesota
statute we presume that the legislature did "not intend a result that is absurd,
impossible of execution, or unreasonable." Minn. Stat. § 645.17(1). For example, if
a coal power plant in Arkansas were to bid its generation into the MISO market and
be requested by MISO to generate power, that coal plant would not inject electrons
into the grid to "flow into and be consumed in Minnesota" as suggested by Judge
Loken, even though Minnesota utilities were simultaneously drawing power from the
grid. The actual flows of power are unpredictable, uncontrollable, and untraceable.
Brief of Electrical Engineers at *2, 15–16. Because the energized grid behaves as an
undifferentiated electromagnetic wave, and there is no way to trace the flows of
electric power on the grid from generators to local distribution substations. Thus, it
would be impossible for the Minnesota Attorney General to enforce the statute as
Judge Loken envisions. See id. The State concedes as much in its brief where it
states that it "could not enforce" the import provision against transactions in the
MISO short term energy markets. Interpreting the import provision to apply to all
new power plants in MISO (or elsewhere as appellees contend) is therefore not
reasonable.
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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. The language in the statute supports this
interpretation because it creates exemptions for certain "contract[s]" entered into
before 2007 "to purchase power from [an approved] new large energy facility" and
for power purchase agreements "between a Minnesota utility and [an approved] new
large energy facility located outside Minnesota." Minn. Stat. § 216H.03, subd.
7(2)–(3). This interpretation avoids making the statute "impossible of execution."
See Minn. Stat. § 645.17(1).
To be sure, the statute is ambiguous as to exactly which actions would "import"
power from outside the state. Our duty in such a situation is to adopt a reasonable
construction of the statute which avoids the constitutional problems in the statutory
interpretation by the appellants. See Union Pac. R.R. Co. v. U.S. Dep't of Homeland
Sec., 738 F.3d 885, 892–93 (8th Cir. 2013). We presume the Minnesota legislature
did not intend its statute to be interpreted in a manner which raises serious
constitutional questions. See Clark v. Martinez, 543 U.S. 371, 381–82 (2005). We
also presume that Minnesota laws do not apply extraterritorially. See Morrison v.
Nat'l Australia Bank Ltd., 561 U.S. 247, 255 (2010); In re Pratt, 18 N.W.2d 147, 153
(Minn. 1945).
Judge Loken contends that the presumption against extraterritoriality does not
apply here because the statute's text clearly provides for extraterritorial applications.
I disagree. Although the statute covers power plants outside Minnesota which enter
into contracts with utilities within the state, that does not mean it controls commerce
occurring wholly outside the state. A state may subject out of state companies to its
laws when they enter into commerce within the state without violating any
extraterritoriality principle. See, e.g., Pharm. Research & Mfrs. of Am. v. Walsh, 538
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U.S. 644, 669–70 (2003) (rejecting extraterritoriality challenge to Maine's
prescription rebate program brought by out of state drug manufacturers).
In Cotto Waxo Co. v. Williams, 46 F.3d 790 (8th Cir. 1995), our court
explained the distinction between wholly extraterritorial regulation and regulations
which apply to out of state companies entering into commerce within a state. In Cotto
Waxo, an out of state manufacturer was forced to stop selling its products in
Minnesota after the latter's legislature issued a ban on them. The company contended
that the Minnesota law was invalid because it prevented "an out-of-state manufacturer
from selling its product to out-of-state retailers and end users." Id. at 793. We
explained that Cotto Waxo had "misapprehend[ed] the meaning of extraterritorial
reach," which refers to statutes that "necessarily require[] out-of-state commerce to
be conducted according to in-state terms." Id. at 793–94. Although the Minnesota
law "[c]learly . . . affected Cotto Waxo's participation in interstate commerce," its
effect was not unconstitutionally extraterritorial because it was "indifferent to sales
occurring out-of-state" and Cotto Waxo was "able to sell to out-of-state purchasers
regardless of [its] relationship to Minnesota." Id. at 794.
In this case like in Cotto Waxo, the text of the import provision bars contracts
between generators and utilities in Minnesota, but allows the generators to contract
freely with utilities outside Minnesota. See 46 F.3d at 793–94. It therefore does not
control conduct wholly outside Minnesota. See id. Compare Quik Payday, Inc. v.
Stork, 549 F.3d 1302, 1308 (10th Cir. 2008) (rejecting extraterritoriality challenge to
enforcement of Kansas's payday lending law against internet lender based in Utah
making loans to Kansans located in their home state), and State ex rel. Swanson v.
Integrity Advance, LLC, 870 N.W.2d 90, 95–96 (Minn. 2015) (rejecting
extraterritoriality challenge to Minnesota's payday lending law by Delaware internet
lender), with Midwest Title Loans, Inc. v. Mills, 593 F.3d 660, 669 (7th Cir. 2010)
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(invalidating Indiana lending law as applied to an Illinois company lending to Indiana
residents using contracts which were made and executed entirely in Illinois).
The text of this Minnesota statute indicates that the import provision does not
cover activity which occurs "wholly outside" the state, Healy, 491 U.S. at 336, and
the State reasonably construes this statute as having no application to transactions on
the MISO market. I therefore respectfully disagree with Judge Loken's conclusion
that the challenged provisions operate extraterritorially.
II.
This case can be resolved by a preemption analysis that avoids the complex
issues surrounding an application of the extraterritoriality doctrine to the electricity
markets, because both challenged statutory provisions are preempted by the Federal
Power Act (FPA). See Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 347 (1936)
(Brandeis, J., concurring). The FPA gives exclusive jurisdiction to the Federal
Energy Regulatory Commission (FERC) over "the transmission of electric energy in
interstate commerce" and "the sale of electric energy at wholesale in interstate
commerce." New York, 535 U.S. at 6–7; 16 U.S.C. § 824(b)(1). The act
distinguishes between wholesale sales among electric power generators and utilities,
which are regulated by FERC, and retail sales of electricity by load serving entities
who purchase power at wholesale and resell it to end users. See FERC v. Electric
Power Supply Ass'n (EPSA), 577 U.S. ___, ___, 136 S. Ct. 760, 767–68 (2016).
The import provision in the Minnesota statute covers transactions which
"import or commit to import from outside the state power from a new large energy
facility." Minn. Stat. § 216H.03, subd. 3(2). Since the import provision bans
contracts for power from new large power plants, it thus bans wholesale sales of
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electric energy in interstate commerce. The FPA "'leaves no room either for direct
state regulation of the prices of interstate wholesales' or for regulation that 'would
indirectly achieve the same result.'" EPSA, 577 U.S. at ___, 136 S. Ct. at 780
(quoting Northern Natural Gas Co. v. State Corp. Comm'n of Kan., 372 U.S. 84, 91
(1963)). The FPA therefore preempts the import provision.
Appellants contend that the import provision in this statute is not preempted
because it relates to a traditional area of state regulation not covered by the FPA.
FERC has recognized that the states retain authority under the FPA to regulate in
"traditional areas" such as the "administration of integrated resource planning and
utility buy-side and demand-side decisions" and "utility generation and resource
portfolios." See New York, 535 U.S. at 24 (quoting FERC Order 888). The import
provision in this statute, however, does not fall into any of those categories. Unlike
those state laws, the import provision here directly bans certain wholesale sales.
The transactions covered by the power purchase agreement provision (which
are contracts for 50 megawatts or more of capacity) are wholesale transactions. See
Minn. Stat. § 216H.03, subd. 3(3).7 These agreements cover capacity on the national
electricity grid and are thus made "in interstate commerce." See EPSA, 577 U.S. at
___, 136 S. Ct. at 768; New York, 535 U.S. at 17. FERC has jurisdiction to regulate
certain parameters of the capacity market, and "the price of capacity is indisputably
a matter within the Commission's exclusive jurisdiction." New England Power
Generators Ass'n, Inc. v. FERC, 757 F.3d 283, 290 (D.C. Cir. 2014); cf. Hughes v.
Talen Energy Mktg., LLC, 578 U.S. ___, No.14-614, slip op. at 11-15 (Apr. 19, 2016)
7
In the electricity markets "capacity" is the ability to produce electric power
when necessary. Utilities purchase capacity from electric power generators to ensure
they can obtain enough power during peaks in electricity demand. See Conn. Dep't
of Pub. Util. Control v. FERC, 569 F.3d 477, 479 (D.C. Cir. 2009).
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(discussing FERC regulation of capacity markets). Minnesota's ban on certain
capacity contracts directly conflicts with FERC's jurisdiction. The power purchase
agreement provision is thus also preempted by the FPA.
I agree with Judge Loken that we have jurisdiction and concur in the judgment,
but I disagree with Judge Loken's extraterritoriality analysis and would instead affirm
the district court's injunction because both of the challenged provisions are preempted
by the FPA.
COLLOTON, Circuit Judge, concurring in the judgment.
The plaintiffs in this case challenge the validity of Minnesota statute
§ 216H.03, subd. 3(2) and (3) on three grounds. They contend that the statute is
preempted by the Federal Power Act, 16 U.S.C. § 824, et seq., preempted by the
Clean Air Act, 42 U.S.C. § 7401, et seq., and unconstitutional under the “dormant”
Commerce Clause. The district court accepted the latter contention and permanently
enjoined Minnesota from enforcing the statutory provisions. I agree that the plaintiffs
have standing to sue and that the dispute is ripe for resolution.
Although the district court did not address whether the Minnesota statute is
preempted by one or both of the federal statutes, we should consider that question
first. According to the Supreme Court, a preemption claim “is treated as ‘statutory’
for purposes of our practice of deciding statutory claims first to avoid unnecessary
constitutional adjudications.” Douglas v. Seacoast Prods., Inc., 431 U.S. 265, 271-72
(1977); accord Ariz. Dream Act Coalition v. Brewer, No. 15-15307, 2016 WL
1358378, at *9 (9th Cir. Apr. 5, 2016); C.E.R. 1988, Inc. v. Aetna Cas. & Sur. Co.,
386 F.3d 263, 272 n.13 (3d Cir. 2004). If federal law preempts the Minnesota statute,
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then it is unnecessary to address whether the statute violates a dormant limitation
implied from the Commerce Clause.
The parties dispute the scope of the Minnesota statute. The plaintiffs urge a
broad interpretation under which the statute regulates activity occurring entirely
outside Minnesota. The State favors a narrower construction that applies only to
bilateral contracts in which a Minnesota entity agrees to purchase power from an out-
of-state energy provider. It is unnecessary to resolve that dispute (or to decide
whether the question should be addressed first by the state courts, see R.R. Comm’n
of Tex. v. Pullman Co., 312 U.S. 496 (1941)), because even under the State’s
narrower view, the Minnesota statute is preempted by federal law.
Insofar as the Minnesota statute bans wholesale sales of electric energy in
interstate commerce, I agree with Part II of Judge Murphy’s opinion that the statute
is preempted by the Federal Power Act. The Federal Energy Regulatory Commission
has exclusive jurisdiction over the interstate wholesale market for electricity,
including wholesale rates. See Hughes v. Talen Energy Mkg., 136 S. Ct. 1288, 1297
(2016). Because a State may not regulate wholesale rates, it follows that a State may
not impose a complete ban on wholesale sales, effectively forbidding the parties to
arrive at any mutually agreeable price.
The Minnesota statute by its terms, however, does not constitute a complete
ban on wholesale sales of energy that contribute to or increase statewide power sector
carbon dioxide emissions. Subdivision 3 contains general prohibitions, but
subdivision 4 establishes exceptions: If a “project proponent” demonstrates that it
will “offset the new contribution” to emissions by reducing an existing facility’s
emissions or by purchasing carbon dioxide allowances, or by a combination of both,
then the prohibitions of subdivision 3 do not apply. The statute, therefore, permits
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a project proponent to conduct transactions otherwise prohibited by subdivision 3 if
it meets the offset requirements. For example, in a proceeding concerning a new
coal-fired plant of Great River Energy in North Dakota that would be used in part to
serve Minnesota customers, the Minnesota Public Utilities Commission solicited
comment on a carbon offset proposal to reduce emissions at other facilities that Great
River Energy operated in North Dakota. SA 261. The State contends that a North
Dakota entity also could satisfy the offset provision by purchasing carbon dioxide
allowances from California or northeastern States.
Minnesota’s effort to require an out-of-state entity to comply with the statute’s
offset provision conflicts with the Clean Air Act. The Clean Air Act regulates
emissions through a cooperative federalism approach. The Act grants the
Environmental Protection Agency authority to establish baseline standards, including
limits on emissions. 42 U.S.C. §§ 7408, 7409. It then calls for each State to develop
a State Implementation Plan to regulate stationary sources within its boundaries.
§§ 7407, 7410(a)(1). Each State’s plan must include “control measures, means, or
techniques,” such as “enforceable emission limitations” or “marketable permits,” to
meet the Act’s requirements. § 7410(a)(2)(A). States are permitted to employ
emissions standards more stringent than those specified by the federal requirements.
§ 7416.
Each State is granted “primary responsibility for assuring air quality within [its]
entire geographic region.” § 7407(a); see also § 7401(a)(3). The 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. “[A]llowing ‘a
number of different states to have independent and plenary regulatory authority over
a single discharge would lead to chaotic confrontation between sovereign states.’”
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N.C., ex rel. Cooper v. Tenn. Valley Auth., 615 F.3d 291, 301 (4th Cir. 2010) (quoting
Int’l Paper Co. v. Ouellette, 479 U.S. 481, 496-97 (1987)).
The offset requirements of the Minnesota statute 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. By demanding offsets or allowance
purchases from a North Dakota energy facility as a condition for contracting to
provide power to Minnesota customers, Minnesota’s statute conflicts with the
regulatory scheme that Congress designed in the Clean Air Act. If Minnesota has
concerns with emissions from its neighbors, then it may seek recourse through one
of the Act’s several mechanisms by which affected States may challenge emissions
from source States. See 42 U.S.C. § 7426; Tenn. Valley Auth., 615 F.3d at 310-11.
For these reasons, the challenged provisions of Minnesota law, Minn. Stat.
§ 216H.03, subd. 3(2) and (3), are preempted by federal law. I concur in the
judgment affirming the district court’s injunction and dismissing the cross-appeal as
moot.
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