Do Minnesota coal curbs overstep authority? | Finance & Commerce

Posted: 8:30 am Tue, July 17, 2012
By Frank?Jossi
Tags: Alexandra B. Klass, Beth Goodpaster, coal power, Fresh Energy, Lawrence J. O?Neill, Lignite Energy Council, Manitoba Hydro, Michael Noble, Minnesota Public Utilities Commission, Next Generation Energy Act, Renewal Fuels Association, Wayne Stenehjem

One exemption from coal-power restrictions went to Maple Grove-based Great River Energy?s Spiritwood Station plant in North Dakota. The new electricity and steam plant isn?t operational because of a lack of demand, according to a GRE spokesman. (Submitted photo)

North Dakota sues neighbor on behalf of energy industry

A federal court in St. Paul heard arguments in April over a lawsuit launched by North Dakota that threatens to undermine a portion of Minnesota?s renewable energy law regulating electricity purchases from coal-fired power plants.

?I think it?s a very important case,? said Michael Noble, executive director of Fresh Energy, an environmental advocacy group in Minnesota. ?That the state of North Dakota is bringing the case on behalf of an industry group is pretty significant.?

At the behest of the Bismarck, N.D.-based Lignite Energy Council and five other coal industry entities, North Dakota?s attorney general charges that Minnesota?s law violates the U.S. Constitution.

Repeated efforts to reach North Dakota?s attorney general, Wayne Stenehjem, were unsuccessful. And Minnesota officials involved in the case ? the Minnesota Public Utilities Commission and the Attorney General?s Office ? said they could not comment because litigation is ongoing.

The lawsuit was filed against the Minnesota Public Utilities Commission over the state?s Next Generation Energy Act, which was passed in 2007 with bipartisan support.

Overall, North Dakota?s case comes down to claims that Minnesota is attempting to regulate areas considered the authority solely of the federal government and that it violates the Commerce Clause.

Under the Next Generation Energy Act, Minnesota sought to reduce global greenhouse gases by setting a 2025 goal of having 25 percent of energy come from renewable energy sources such as wind and solar.

Moreover, the act prohibits construction of new coal plants in the state and restricts utilities from creating any more long-term power-purchase agreements for coal-derived energy from other states.

Things got ugly last year when Minnesota Gov. Mark Dayton vetoed a bipartisan bill that would have allowed the importation of 2,500 megawatts of electricity ? equal to roughly two Prairie Island nuclear plants.

Supporters pointed out that the bill would not have allowed new coal plants in Minnesota, but Dayton said at the time that it would add ?unacceptable risks to human health and to our climate.?

After Dayton?s veto, North Dakota?s Stenehjem said he had no other option but to sue.

Minnesota Public Radio quoted him as saying during the recent court hearing that ?there are lots of cases that implicate the commerce clause and make it clear that one state cannot impose restrictions on importation of a good or service in commerce to the detriment of another state, and that?s what we in North Dakota claim Minnesota has done with its Next Gen Act.?

Some observers see several weaknesses in the case on the surface, but there?s a general fear that a North Dakota victory could weaken the state?s renewable energy policy.

Noble recalls that in a 1998 Minnesota Supreme Court case, North Dakota preserved an exemption from a measure requiring utilities in Minnesota to estimate the environmental and economic costs of carbon dioxide emissions in the purchase and production of electricity. Environmentalists had opposed the exemption.

Alexandra B. Klass, a University of Minnesota law professor, said California lost a somewhat similar case last December involving the ethanol industry. In an effort to reduce carbon emissions, California began in 2007 to look at how much pollution was caused by transportation through its Low Carbon Fuel Standard program.

The ethanol industry sued through the Renewal Fuels Association, claiming the practice discriminated against out-of-state producers while favoring in-state and foreign companies. U.S.? Judge Lawrence J. O?Neill, based in Fresno, Calif., agreed and stopped the program through an injunction.

The ruling is being appealed, but it?s noteworthy. ?Can Minnesota say, ?We don?t want any more coal-fired generation from imports?? ? Klass said.

Winning the case is important for North Dakota?s electric energy sector because most of its power generation is exported ? mainly to Minnesota ? and nearly all is produced by coal-fired plants in the lignite-rich central western region, according to federal government data.

Minnesota imports nearly one-third of its electricity, but more than half of that comes from Manitoba Hydro, the rest from other importers, among them North Dakota. But the trend is clearly not in North Dakota?s favor, as federal government statistics show Minnesota?s reliance on coal has dropped from 66 percent to 53 percent from 2000 to 2010.

The arguments under debate are:

• North Dakota thinks the ban on long-term contracts with out-of-state coal plants violates the Commerce Clause and has hurt its lignite industry. Yet Beth Goodpaster, clean energy program director and attorney with the Minnesota Environmental Partnership, said the law does not prohibit an extension for existing agreements.
• The case charges that Minnesota is attempting to regulate areas that belong to the federal government, among them clean air and electricity pricing. North Dakota also claims Minnesota is attempting to regulate wholesale electric pricing, the purview of the Federal Energy Regulatory Commission (FERC). But states have some regulatory power under the Clean Air Act, and the Minnesota law doesn?t ?have anything to do with wholesale transactions? in electricity regulated by FERC, argued Goodpaster.
• North Dakota charges that Minnesota violates its own constitution by favoring in-state power providers. It?s true that the law carved out exemptions, Noble said. Two of the exemptions continue to cause controversy and haven?t been built ? the proposed Excelsior Energy integrated gasification combined cycle (IGCC) plant in northern Minnesota and the Big Stone II coal plant in South Dakota. A third exemption was granted to Maple Grove-based Great River Energy?s Spiritwood Station plant in North Dakota. The new electricity and steam plant isn?t operational because of a lack of demand, according to a GRE spokesman.

Noble said it?s a hard to argue that Minnesota favors its own power suppliers when two exempted plants aren?t even located in the state and a third, Excelsior Energy?s proposal, turned out to be ?entirely preposterous? and unlikely to get constructed.

The lawsuit, both Noble and Goodpaster believe, is without merit because it doesn?t impose additional burdens on North Dakota?s power producers.

?In general it?s important to pay attention to [the lawsuit], but the law is on solid ground legally,? Goodpaster said.

A decision is expected later this year.

This entry was posted on Tuesday, July 17th, 2012 at 8:30 am and is filed under Focus on Energy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Source: http://finance-commerce.com/2012/07/do-minnesota-coal-curbs-overstep-authority/

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