Federal Court Strikes Down Minnesota Coal Power Import Ban

A Minnesota law that bans power imports from new out-of-state coal-fired power plants is unconstitutional, a federal appeals court has deemed.

The U.S. Court of Appeals for the Eighth Circuit on June 15 upheld a decision by the U.S. District Court for the District of Minnesota that found that the statute's prohibitions had the effect of "controlling conduct" beyond Minnesota's state boundaries.

The Next Generation Energy Act was passed in 2007 primarily to place a moratorium on the construction of new coal plants in Minnesota, but it also barred state entities from importing power from new "large energy facilities" or entering into long-term power purchase agreements that would contribute to statewide power sector carbon dioxide emissions.

In 2011, arguing that the law violated the U.S. Constitution's Commerce Clause, neighboring state North Dakota and three nonprofit cooperatives that provide power to rural and municipal Minnesota-Basin Electric Cooperative, Minnkota Power Cooperative, and Missouri River Energy Services-sued Beverly Heydinger, who was appointed chair of the Minnesota Public Utilities Commission by Gov. Mark Dayton (R) in 2012.

In April 2014, ruling on the parties' motions for summary judgment, the Minnesota district court agreed with the plaintiffs, holding that the import restriction regulated out-of-state conduct because electricity of the grid "does not recognize state boundaries."

The Eighth Circuit on Wednesday backed the district court's decision. "[T]he law therefore has extraterritorial reach and will prevent utilities from adding capacity from prohibited sources anywhere on the grid, absent Minnesota regulatory approval or a dismantling of the federally encouraged and approved power network transmission system," wrote Judge James Loken for the court. "Minnesota may not do this without approval of Congress."

In an opinion that concurred in part, Eighth Circuit Judge Diana Murphy disagreed with Judge Loken's extraterritoriality analysis. The challenged provisions in the law would regulate entities outside Minnesota only if they imported power into Minnesota or had purchase agreements resulting in power being imported into Minnesota. "These provisions would not regulate commerce 'that takes place wholly outside of [Minnesota's] borders," she wrote.

She noted that the district court's injunction should be affirmed, however, because the challenged 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," she wrote.

For North Dakota, the Eighth Circuit's ruling to strike down "unconstitutional" restrictions imposed by the law is a victory, said Attorney General Wayne Stenehjem in a June 15 statement.

"If left in place, the law would have prevented North Dakota utilities from selling power into the Midcontinent Independent Transmission System Operator (MISO) market-hurting businesses and customers in both Minnesota and North Dakota," he said. "

Stenehjem also noted that the court's ruling means that Minnesota will be required to pay attorney fees for the State of North Dakota and the other plaintiffs, now estimated at over $1 million.

The case is State of North Dakota v. Beverly Heydinger (14-2156, 14-2251).

-Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)

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