North Dakota vs. Minnesota: Dust-up over carbon

  • Article by: JENNIFER BJORHUS , Star Tribune
  • Updated: January 15, 2010 - 12:13 AM

North Dakota is none too pleased with Minnesota as a deadline nears for what North Dakota claims will be a tax on coal-fired electricity.

A long-simmering dispute between North Dakota and Minnesota appears to be coming to a head. North Dakota Attorney General Wayne Stenehjem is saying he very likely will sue Minnesota over its so-called "carbon tax" on emissions, calling it an illegal attempt to regulate another state's industry.

"We simply feel that we've been forced into this posture," Stenehjem said in an interview this week. "We have attempted everything we can think of to work with officials in Minnesota."

Stenehjem declined to put a timeframe on the lawsuit or say in which court it was likely to be filed, but he said his group is calculating the economic damage to North Dakota.

The interstate showdown comes as Congress works on national legislation to curb emissions of carbon dioxide -- a major greenhouse gas contributing to global warming -- via various schemes, including a cap-and-trade system that sets a limit on emissions and creates a market for "permits to pollute."

But with health care dominating the agenda, it's not clear when carbon legislation will get passed. International climate talks in Copenhagen before Christmas resulted in a nonbinding agreement for countries to cut emissions, but it didn't get specific.

Minnesota gets much of its electricity from North Dakota. North Dakota generates most of it by burning coal, which spews carbon dioxide. Coal is a $2.8 billion industry in North Dakota and lawmakers approved a litigation war chest of $500,000 for the dispute with Minnesota. There's $400,000 left, Stenehjem said.

The Bismarck Tribune on Dec. 29 reported Stenehjem's intentions to sue. That was about 10 days after the Industrial Commission of North Dakota held a closed-door meeting to discuss potential litigation. The commission consists of North Dakota's governor, agriculture commissioner and attorney general.

The outcome of such a lawsuit could potentially affect the ability of states to implement environmental regulation of one of the most important greenhouse gases, said Frederick Weston, a former utilities regulator at the Vermont-based Regulatory Assistance Project, a nonprofit working on environmental issues.

"I would imagine federal and state policymakers will follow this case with interest," Weston said.

The carbon fracas goes back to the Next Generation Energy Act that Minnesota passed in 2007. The law instructed Minnesota's utility regulators to include the cost of the carbon dioxide emissions into the cost of electricity from coal-fired power plants to price the power more accurately. Minnesota is one of a number of states that use some method to account for the cost of carbon emissions from the power sector in their planning.

The Minnesota Public Utilities Commission (PUC) now estimates that carbon emissions cost $9 to $34 per ton. That's not a tax or surcharge but is an analytical tool for evaluating purchases of electricity or the construction of new power plants. It goes into effect in 2012.

North Dakota argues the adjustment amounts to a tax on its power. The new planning mechanism will make North Dakota's coal-fired electricity prohibitively expensive, Stenehjem argues, and have a chilling effect on its industry.

Stenehjem said Minnesota exempted at least one Minnesota facility from the carbon policy.

Stenehjem said North Dakota has "done more than any other state in carbon capture and regulation" and invested millions of dollars in research addressing carbon. He said he invited Minnesota lawmakers last May to tour carbon-capture projects in North Dakota and got no response.

"We haven't even had a courtesy of a response to our letter," he said. "Minnesota is doing nothing except passing these laws," Stenehjem said. "We're actually doing something." Stenehjem said Minnesota Commerce Commissioner Glenn Wilson called him after Christmas about the potential litigation. The Commerce Department declined to comment.

State Sen. Ellen Anderson, DFL-St. Paul, said North Dakota doesn't have a legal argument. Minnesota's new carbon policy applies to Minnesota, too, she said, so it isn't penalizing any state.

"It's not about North Dakota. It's about coal," said Anderson, who chairs the Environment, Energy and Natural Resources Budget Division. Anderson said she didn't recall getting an invitation from North Dakota.

Anderson said she anticipates a federal cap on carbon in 2010 and feels it's "ridiculous" for neighboring states to be discussing suing each other over the issue. They should sit down and talk, she said.

Jennifer Bjorhus • 612-673-4683

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