North Dakota pursues lawsuit over anti-coal Minnesota law

A federal judge on April 12 held a hearing on, and took under advisement arguments about, a November 2011 lawsuit filed by the state of North Dakota against the state of Minnesota’s Next Generation Energy Act of 2007, which restricts import of coal-fired power into Minnesota.

North Dakota is the home of several lignite-fired, minemouth power plants that in part sell electricity into the Minnesota market. The North Dakota lawsuit, filed at the U.S. District Court for the District of Minnesota, said that Minnesota improperly usurped FERC authority to regulate interstate transmission and sales of electricity to enacting the Next Generation Energy Act (NGEA).

Other plaintiffs in the lawsuit include Basin Electric Power Cooperative, the Missouri Basin Municipal Power Agency d/b/a Missouri River Energy Services and Minnkota Power Cooperative.

“The plain terms of the NGEA go beyond Minnesota’s ‘traditional’ authority of regulating the use of its own resources, the oversight of generation facilities actually located within the state, and the rates charged for the retail consumption of electricity by Minnesota consumers,” said a March 22 filing by the plaintiffs. “The statute regulates not just emissions that occur in the state from the generation of electricity in Minnesota, but the NGEA also regulates those emissions that occur in the generation of electricity outside of the state where Minnesota has absolutely no right or authority to regulate such activities.”

The NGEA plainly states that its scope is necessarily extraterritorial in nature, as its goal is to address “global warming,” the plaintiffs said. The NGEA could not be more far-reaching, they added, as it states that “no person shall” engage in the proscribed transactions unless they agree to certain carbon offsets requirements. Thus, the NGEA imposes its restrictions on all persons involved in the generation, transmission, and/or sale at wholesale of electricity that is eventually consumed in Minnesota, the plaintiffs noted.

“The United States has exclusive jurisdiction over the transmission and sale at wholesale of electricity,” the plaintiffs added. “In particular, through its enactments, amendments, and expansion of the Federal Power Act (‘FPA’), Congress has empowered and authorized the Federal Energy Regulatory Commission (‘FERC’) to regulate and facilitate transmission and competition in the wholesale power markets for electricity flowing through interstate commerce. Congress has also enacted and expanded the Clean Air Act, and empowered the Environmental Protection Agency (‘EPA’) to address regional or national regulation regarding air quality. Plaintiffs and similarly-situated ‘persons’ are entitled to rely upon the federal government’s exclusive authority and jurisdiction over such activities for the long-term planning, development, and delivery of efficient and reliable energy, and should not have to be exposed to the vagaries and vicissitudes of Minnesota and potentially 49 other states imposing a patchwork of competing, evolving, and conflicting regulations.”

Great Northern’s South Heart power project endangered?

The plaintiffs later added in the March 22 filing: “By prohibiting or, alternatively, imposing conditions on the importation and purchase of coal-generated electricity transmitted from other states, and the sale at wholesale of that electricity, the NGEA will cause less coal to be mined to the detriment of North Dakota and its citizens, The North American Coal Corporation (‘North American Coal’), and Great Northern Properties Limited Partnership (‘Great Northern Properties’).” North American Coal is a major lignite miner in North Dakota and elsewhere, while Great Northern Properties is a coal reserve landholder.

Great Northern Properties has over 20 different developable lignite deposits scattered around central and western North Dakota. Since 2001, it has been proactive in the development of these reserves, mostly through minemouth power plant projects using clean coal technology. The Minnesota law will hurt those development efforts, the plaintiffs said.

“A case in point is the South Heart Project being developed by an affiliate of Great Northern Properties,” they added. “The South Heart Project will generate 175 MW of low-carbon electricity whose potential customers could include utilities and co-ops that could export to Minnesota. Because of NGEA, it is likely that potential Minnesota customers will be unwilling to commit to power purchase or other types of participation agreements relative to the South Heart Project.”

In the March 22 filing, the plaintiffs requested the court deny the defendants’ motion for partial judgment on the pleadings because the Minnesota statutes are preempted by federal law and otherwise invalid and unenforceable under the U.S. Constitution.

The Minnesota defendants answered the lawsuit in December 2011, basically denying all accusations. At one point in the answer, they said about the charges related to the South Heart Project: “Such allegations are speculative because there a number of reasons apart from the NGEA that could cause potential Minnesota customers to decide not to purchase power from the South Heart Project if and when it is built. To the extent such allegations seek to describe the South Heart Project and its anticipated operations, state that Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations. With respect to the first sentence, to the extent Plaintiffs are otherwise alleging that the NGEA is now negatively impacting or will negatively impact Great Northern Properties, state that the allegations are vague and Defendants lack knowledge or information sufficient to form a belief as to the truth of the allegations.”

The December 2011 answer said the plaintiffs had failed to state a claim upon which relief can be granted, the complaint is barred in part by the Eleventh Amendment and its fails in whole or in part otherwise for lack of subject matter jurisdiction.

Immediate issue is Minnesota effort to kill all but one lawsuit count

The March 22 plaintiff response, and the April 12 hearing, relate to a motion by the defendants to dismiss all but one of the counts in the lawsuit. In a March 1 filing that described that motion, the defendants said the North Dakota plaintiffs allege six claims. In Count I, they assert that part of the state law violates the Commerce Clause of the U.S. Constitution. In Counts II and III, plaintiffs claim that a section of the law violates the Supremacy Clause of the Constitution because it is preempted by two federal statutes, the Clean Air Act and the Federal Power Act.

In Count IV, plaintiffs allege that a law section violates the privileges and immunities clause of the U.S. Constitution. In Count V, plaintiffs reframe their Federal Power Act preemption claim as a claim for declaratory judgment. In Count VI, plaintiffs claim that a section of the NGEA violates the Minnesota Constitution’s prohibition against special legislation, casting this as a claim under the due process clause of the Fourteenth Amendment of the U.S. Constitution.

Defendants want the court to dismiss Counts II through VI because they said each of these claims fails as a matter of law. Counts III and V, the Federal Power Act preemption claims, fail because the state law regulates generation resources, not the transmission of electricity in interstate commerce or transmission facilities as plaintiffs contend. Count II, the Clean Air Act preemption claim, is without merit because Congress expressly preserved broad state authority to regulate air emissions, including CO2 emissions from power plants, the defendants said.

Count IV, the privileges and immunities clause claim, fails because the statute does not discriminate against North Dakota residents with regard to employment in Minnesota, the defendants added. Count VI, the due process claim, is barred by the Eleventh Amendment of the U.S. Constitution because plaintiffs’ claim is based on an alleged violation of state law.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.