North Dakota v. Heydinger

Citation825 F.3d 912
Decision Date15 June 2016
Docket NumberNo. 14–2156, No. 14–2251,14–2156
PartiesState of North Dakota, et al., Plaintiffs–Appellees/Cross Appellants, v. Beverly Heydinger, Chair, Minnesota Public Utilities Commission, et al., Defendants–Appellants/Cross Appellees. American Wind Energy Association, et al., Amici on Behalf of Appellants. American Coalition for Clean Coal Electricity, et al., Amici on Behalf of Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

825 F.3d 912

State of North Dakota, et al., Plaintiffs–Appellees/Cross Appellants
v.
Beverly Heydinger, Chair, Minnesota Public Utilities Commission, et al., Defendants–Appellants/Cross Appellees.


American Wind Energy Association, et al., Amici on Behalf of Appellants.


American Coalition for Clean Coal Electricity, et al., Amici on Behalf of Appellees.

No. 14–2156
No. 14–2251

United States Court of Appeals, Eighth Circuit.

Submitted: October 21, 2015
Filed: June 15, 2016


Counsel who presented argument on behalf of the appellants/cross-appellees was Alethea M. Huyser, AAG, of Saint Paul, MN. The following attorney also appeared on this brief; Michael Everson, AAG, of Saint Paul, MN.

Counsel who presented argument on behalf of the appellees/cross-appellants was Thomas H. Boyd, of Minneapolis, MN. The following attorney also appeared on the appellee brief; Brent A. Lorentz, of Minneapolis, MN.

825 F.3d 913

The following attorneys appeared on amicus briefs in support of appellants: Mark N. Templeton of Chicago, IL, appeared on the brief of Steven Gaw and Steven Weissman. Gene Grace, American Wind Energy Association, of Washington, DC, and Rick Umoff, Solar Energy Industries Association, of Washington, DC, appeared on the brief of The American Wind Energy Association and Solar Energy Industries Association. Scott R. Strand of St. Paul, MN, appeared on the brief of Minnesota Center for Environmental Advocacy, Fresh Energy and The Izaak Walton League of America—Midwest Office. Joanne Spalding of San Francisco, CA, Sean H. Donahue of Washington, DC, Howard A. Lerner of Chicago, IL, Benjamin Longstreth of Washington, DC, and Graham G. McCahan and Vickie L. Patton of Boulder, CO appeared on the brief of Environmental Defense Fund, Environmental Law and Policy Center, Natural Resources Defense Counsel and Sierra Club.

The following attorneys appeared on amicus briefs in support of appellees: Peter S. Glaser and Patrick F. Hofer appeared on the brief of American Coalition for Clean Coal Electricity and National Mining Association. Jonathan Wood of Sacramento, CA appeared on the brief of Pacific Legal Foundation and National Federation of Independent Business Small Business Legal Center. Steven J. Lechner and Maegan L. Woita of Lakewood, CO appeared on the brief of Montana Coal Council and Mountain States Legal Foundation. Kate Comerford Todd, Sheldon Gilbert, Roger R. Martella, Jr., Eric D. McArthur, Joshua J. Fougere, Maureen B. Soles, Richard Moskowitz, Linda E. Kelly, and Quentin Riegel of Washington, DC, and Benjamin L. Gerber of St. Paul, MN, appeared on the brief of Chamber of Commerce of the United States of America, The Minnesota Chamber of Commerce, The National Association of Manufacturers, and The American Fuel and Petrochemical Manufacturers. John M. Baker, Erin Sindberg Porter, and Karl C. Procaccini of Minneapolis, MN, and Douglas L. Healy of Springfield, MO, appeared on the brief of American Public Power Association, National Rural Electric Cooperative Association and Missouri Joint Municipal electric Utility Commission.

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

825 F.3d 914

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.

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, 47 S.Ct. 294, 71 L.Ed. 549 (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, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002) ; New Eng. Power Co. v. New Hampshire , 455 U.S. 331, 340–41, 102 S.Ct. 1096, 71 L.Ed.2d 188 (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.

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, 128 S.Ct. 2733, 171 L.Ed.2d 607 (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.”

825 F.3d 915

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 , ––– U.S. ––––, 136 S.Ct. 760, 768, 193 L.Ed.2d 661 (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...

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