The 2007 law, widely decried as “anti-coal” by coal supporters, was an obvious violation of the Commerce Clause of the United States Constitution and an example of “overreaching” by Minnesota lawmakers, Minnesota U.S. District Judge Susan Richard Nelson said in her mid-April ruling.
North Dakota coal and electric utility interests praised the judge’s decision while Minnesota Gov. Mark Dayton denounced it, saying it would be appealed.
The law rubbed some nerves raw in North Dakota, a major energy-producing state for decades. The lignite coalfields in the western part of North Dakota produce nearly 30 million tons of the soft brown mineral annually. Much of the coal is used to fuel power plants in the state, some of which supply electricity to Minnesota.
The North Dakota Lignite Energy Council was among the plaintiffs in the 2011 suit that challenged the law. Other plaintiffs included North American Coal Corp., Minnkota Power Cooperative, Missouri Basin Municipal Power Agency, Great Northern Properties Ltd. Partnership, the Industrial Commission of North Dakota and the state of North Dakota.
North Dakota Attorney General Wayne Stenehjem said the litigation was a “last resort,” mounted only after “unfruitful meetings with Minnesota elected officials and regulators.” But the suit was necessary, he said, to protect the legal economic interests of North Dakota.
“The result of this litigation has been exactly what we predicted from the beginning,” he added. “We insisted that the state of North Dakota should not have to seek permission from Minnesota regulators to provide electricity to residents of Minnesota and other states in the region.”
North Dakota power plants export the vast majority of the electricity they produce to consumers in other states, including Minnesota, he noted. “The Commerce Clause was adopted as a critical part of the U.S. Constitution to prohibit one state from enacting restrictive laws that benefit one state at the expense of another state, which is precisely what this Minnesota statute did,” he said. Essentially, that is what Nelson concluded in her 48-page opinion.
“In addition to regulating wholly out-of-state transactions, which is itself a violation of the extraterritoriality doctrine” of the Constitution, the Minnesota law “also improperly requires non-Minnesota merchants to seek regulatory approval before undertaking transactions with other non-Minnesota entities,” she said.
The law provided an exemption, she said, if an entity could demonstrate to the Minnesota Public Utilities Commission’s satisfaction that it would offset the prohibited carbon dioxide emissions. “Thus, only by undertaking a ‘carbon dioxide reduction project’ approved by a Minnesota agency can, for example, a North Dakota generation and transmission cooperative inject coal-generated electricity” into the Midcontinent Independent System Operator grid to serve its North Dakota residents.
“If any or every state were to adopt similar legislation,” the judge continued, “the current marketplace for electricity would come to a grinding halt. In an interconnected system like MISO, entities involved at each step of the process — generation, transmission, and distribution of electricity — would potentially be subject to multiple state laws regardless of whether they were transacting commence outside of their home state. “Such a scenario is just the kind of competing and interlocking local economic regulation that the Commerce Clause was meant to preclude.”
Lignite Council President and CEO Jason Bohrer said that while the ruling was a victory “for the rule of law and the U.S. Constitution,” the real winners “are the residents of North Dakota, Minnesota and the entire upper Midwest.”
According to Lignite Council spokesman Steve Van Dyke, the law had resulted in a “dampening of interest” in coal by utilities in the region. Now, the move away from coal hopefully will be reversed, he said.
Stenehjem said the ruling “will allow North Dakota to continue its role as a vital and essential source of affordable electricity for consumers in Minnesota and across the country.”
North American Coal’s Freedom and Falkirk surface mines in North Dakota produced more than 21 million tons of coal in 2013. Freedom, the nation’s largest lignite producer, accounted for 13.6 million tons of that total.