In re Minn. Power's Petition for Approval of the Energyforward Res. Package

• Citation: 938 N.W.2d 843
• Decision Date: 23 December 2019
• Docket Number: A19-0704,A19-0688
• Parties: In the MATTER OF MINNESOTA POWER'S PETITION FOR APPROVAL OF the ENERGYFORWARD RESOURCE PACKAGE.
• Court: Court of Appeals of Minnesota

938 N.W.2d 843

In the MATTER OF MINNESOTA POWER'S PETITION FOR APPROVAL OF the ENERGYFORWARD RESOURCE PACKAGE.

A19-0688

A19-0704

Court of Appeals of Minnesota.

Filed December 23, 2019

Review Granted March 17, 2020

Evan J. Mulholland, Kevin P. Lee, Minnesota Center for Environmental Advocacy, St. Paul, Minnesota (for relators Minnesota Center for Environmental Advocacy, Union of Concerned Scientists, and Sierra Club)

Paul C. Blackburn, Honor the Earth, Callaway, Minnesota; and Frank Bibeau, Deer River, Minnesota (for relator Honor the Earth)

Keith Ellison, Attorney General, Ian Dobson, Assistant Attorney General, St. Paul, Minnesota (for respondent Minnesota Public Utilities Commission)

Michael C, Krikava, Elizabeth M. Brama, Briggs and Morgan, P.A., Minneapolis, Minnesota; and David R. Moeller, Minnesota Power, Duluth, Minnesota (for respondent Minnesota Power)

Christine Hottinger, Minneapolis, Minnesota (for amicus curiae Friends of the Climate)

Considered and decided by Bjorkman, Presiding Judge; Hooten, Judge; and Klaphake, Judge.^*

BJORKMAN, Judge

In these consolidated appeals, relators challenge an order by the commission denying a petition for an EAW and approving respondent-utility’s affiliated-interest agreements related to a proposed natural-gas power plant in Wisconsin. Relators argue that (1) the commission erred by concluding that the Minnesota Environmental Policy Act (MEPA), Minn. Stat. §§ 116D.01 -.11 (2018), does not apply to the agreements and (2) the decision to approve the agreements is arbitrary and not supported by substantial evidence. Because the commission erred by denying the EAW petition, we reverse and remand.

FACTS

In July 2017, respondent Minnesota Power petitioned the commission for approval of its EnergyForward Resource Package, including the proposed natural-gas resource that is the focus of this appeal—a 525 megawatt natural-gas combined-cycle power plant in Superior, Wisconsin, known as the Nemadji Trail Energy Center (NTEC). Minnesota Power seeks to (1) construct, (2) operate, and (3) purchase approximately half the capacity of NTEC, through three agreements with its Wisconsin affiliate, South Shore Energy LLC.¹ Affiliated-interest agreements are not effective unless the commission approves them as "reasonable and consistent with the public interest." Minn. Stat. § 216B.48, subd. 3 (2018).

The commission referred the issue of whether "the proposed gas plant resource" is necessary and reasonable for a contested-case proceeding before an administrative law judge (ALJ). The ALJ received public comments, extensive testimony and documentary evidence, and multiple rounds of argument from the parties, including various "clean energy organizations" that intervened in the contested case to oppose Minnesota Power’s petition. Based on that record, the ALJ concluded that Minnesota Power failed to demonstrate a need for NTEC, making the affiliated-interest agreements not reasonable and consistent with the public interest, and recommended that the commission not approve the agreements. The ALJ also noted that relator Honor the Earth (HTE) submitted public comment requesting an environmental impact statement (EIS) but declined to rule on the need for an EIS as outside the scope of the contested-case proceeding.

HTE then filed a petition with the Minnesota Environmental Quality Board (EQB) requesting that an EAW be prepared with respect to the proposed project. The EQB forwarded the petition to the commission.

Consequently, the commission was presented with two issues: (1) whether to grant the petition for an EAW and, if not, (2) whether to approve the affiliated-interest agreements. The commission denied the EAW petition, reasoning that MEPA does not apply to the affiliated-interest agreements and it lacks jurisdiction to order an EAW for a power plant outside of Minnesota. And the commission approved the affiliated-interest agreements with conditions.

Relators Minnesota Center for Environmental Advocacy, Union of Concerned Scientists, and Sierra Club (collectively MCEA) appealed by writ of certiorari. HTE filed a separate certiorari appeal, and this court consolidated the appeals.

ISSUES

I. Does MEPA apply to the affiliated-interest agreements?

II. Can the commission order an EAW for a project outside of Minnesota?

ANALYSIS

The denial of an EAW is subject to judicial review by writ of certiorari. Minn. Stat. § 116D.04, subd. 10. In a certiorari appeal, our review is "generally deferential." In re Envtl. Assessment Worksheet for 33rd Sale of State Metallic Leases , 838 N.W.2d 212, 216 (Minn. App. 2013), review denied (Minn. Nov. 26, 2013). We will affirm unless the commission’s decision is unreasonable, arbitrary or capricious, unsupported by substantial evidence, or contrary to law. Minn. Stat. § 14.69 (2018). But we will consider whether the commission has "taken a hard look at the problems involved, and whether it has genuinely engaged in reasoned decision-making." In re Enbridge Energy , 930 N.W.2d 12, 21 (Minn. App. 2019), review denied (Minn. Sept. 17, 2019). And we review questions of law de novo. Metallic Leases , 838 N.W.2d at 216.

Minnesota recognizes that human activity, including "energy production and use," impacts the environmental resources that are critical to the welfare of current and future generations of Minnesotans and has committed, through MEPA, to protecting and preserving those resources. Minn. Stat. § 116D.02, subds. 1, 2(9). MEPA requires governmental agencies to administer all state laws and rules in accordance with that commitment, and to proactively, systematically, and cooperatively consider and minimize negative impacts on the environment. Minn. Stat. § 116D.03, subd. 1.

MEPA also specifically requires governmental agencies to consider environmental consequences when deciding whether to approve a proposed "project." Citizens Advocating Responsible Dev. v. Kandiyohi Cty. Bd. of Comm'rs , 713 N.W.2d 817, 823 (Minn. 2006). MEPA contemplates preparation of two principal categories of project-specific review reports—an EAW and an EIS. An EAW is a brief preliminary report that sets out the basic facts necessary to determine whether the proposed project requires the more rigorous review of an EIS.² Minn. Stat. § 116D.04, subd. 1a(c).

An EAW is required for certain types of projects, or upon a conforming citizen petition. Minn. Stat. § 116D.04, subd. 2a(b), (e) ; Minn. R. 4410.1000, subps. 2-3 (2017). A citizen petition requesting preparation of an EAW must demonstrate that, "because of the nature or location of a proposed project, there may be potential for significant environmental effects" that a Minnesota governmental agency should consider. Minn. Stat. § 116D.04, subd. 2a(e) ; see Minn. R. 4410.1100 (2017) (establishing rules for EAW petition process). If the agency deciding whether to approve the project—the responsible governmental unit (RGU)—determines that this standard is met, it "shall order the preparation of an EAW." Minn. R. 4410.1100, subp. 6. If the petition "fails to demonstrate the project may have the potential for significant environmental effects," the RGU "shall deny" it. Id.

Here, the commission did not deny the EAW petition because it failed to demonstrate that NTEC may have the potential for significant environmental effects. Rather, the commission concluded that (1) MEPA does not apply to the affiliated-interest agreements because NTEC is not a MEPA "project," and (2) the commission lacks jurisdiction to order an EAW for a power plant in Wisconsin. Relators challenge both conclusions.

I. MEPA applies to the affiliated-interest agreements.

"Because the EAW requirement applies to ‘projects,’ determining whether an action is a ‘project’ is a threshold issue." Metallic Leases , 838 N.W.2d at 216. Deciding that issue requires interpretation of MEPA and the MEPA rules, which present questions of law that we review de novo. Id.

The definition of "project" is "somewhat circular." Minnesotans for Responsible Recreation v. Dep't of Nat. Res. , 651 N.W.2d 533, 539 (Minn. App. 2002) ( MRR ). MEPA does not define the term but uses it to define "governmental action" as "activities, including projects wholly or partially conducted, permitted, assisted, financed, regulated, or approved by units of government." Minn. Stat. § 116D.04, subd. 1a(d) (emphasis added). The MEPA rules define "project" as "a governmental action, the results of which would cause physical manipulation of the environment, directly or indirectly." Minn. R. 4410.0200, subp. 65 (2017). But the rules clarify that "[t]he determination of whether a project requires environmental documents shall be made by reference to the physical activity to be undertaken and not to the governmental process of approving the project." Id. In synthesizing these definitions, we have determined that a MEPA "project" is a "definite, site-specific, action that contemplates on-the-ground environmental changes." Metallic Leases , 838 N.W.2d at 217 (quoting MRR , 651 N.W.2d at 540 ).

The affiliated-interest agreements contemplate Minnesota Power undertaking two physical activities: (1) constructing NTEC and (2) operating NTEC.³ These are definite, site-specific actions that will affect not only the plant’s immediate location but also its surrounding environment, most notably through the large quantities of carbon dioxide that the plant will emit. The impact of such emissions on air quality is precisely the type of environmental effect that MEPA addresses. See Minn. R. 4410.0200, subp. 23 (2017) (defining "environment" as "physical conditions existing in the area that may be affected by a proposed project," including "land, air, water, minerals, flora, fauna, ambient noise, energy resources, and artifacts or natural features of historic, geologic, or aesthetic significance"); see also Minn. R. 7849.1500, subp. 2 (2017) (requiring review of a proposed power plant’s "anticipated emissions," including carbon dioxide). And it is undisputed...