Judge strikes down Minnesota's anti-coal energy law

A federal judge on Friday struck down a landmark 2007 Minnesota law that bans new power generation from coal, saying it regulates business activities of out-of-state utilities in violation of the U.S. Constitution's commerce clause.

U.S. District Judge Susan Richard Nelson enjoined the state from enforcing key sections of the law, which North Dakota coal and utility interests said hampered their ability to find buyers for power from existing coal-fired generating plants or to plan for new ones.

"It is a complete victory for us," North Dakota Attorney General Wayne Stenehjem said in an interview.

Minnesota Gov. Mark Dayton said the state will appeal the ruling and "oppose North Dakota's intentions with every means at our disposal."

North Dakota, joined by utilities and coal companies, sued Minnesota two years ago, saying the state's Next Generation Energy Act violated the U.S. Constitution by improperly restricting electricity sales by North Dakota power companies.

Under Nelson's order, Minnesota can't enforce state restrictions on electricity imports from new power plants that increase greenhouse gases. No Minnesota utility has announced plans to do that. But the order, if upheld, could open the door to Minnesota utilities buying more coal-generated power from other states.

Minnesota relied on western coal for 46 percent of its electricity in 2013, according to the U.S. Energy Information Administration. North Dakota got 79 percent of its power from coal, including lignite mined in that state.

"This statute overreaches," wrote Nelson, who serves on the federal bench in St. Paul. She called the law a "classic example of extraterritorial regulation" and concluded that if every state had such laws "the current marketplace for electricity would come to a grinding halt."

The commerce clause gives Congress the power to regulate interstate commerce.

In a statement, Dayton said the law doesn't prevent utilities from building new power plants as long as they offset the new emissions. He said the law encourages replacing older, more polluting plants with cleaner ones.

"In this case, North Dakota operators propose to build new, coal-fired power-generating plants without offsetting emission reductions," Dayton said in a statement. "Prevailing winds will carry those toxic emissions directly into Minnesota. That shameful practice should not be permitted by either the state or federal government."

Michael Noble, executive director of Fresh Energy, a St. Paul clean energy advocacy group that filed a friend of the court brief in support of Minnesota, said the state law, and the judge's ruling, may not matter anymore.

Federal rules imposed by the Obama administration already create a barrier to new coal-fired generation, and proposed rules to be issued in June will affect existing coal plants. Noble said renewable energy is the fastest-growing segment of the power industry, and consumers support it. North Dakota is a major source of wind energy, for example.

"The net effect of this decision is no effect on the energy industry," he said.

In the litigation, however, plaintiff Minnkota Power Cooperative, which services local electric co-ops in Minnesota and North Dakota, contended that it wants to sell other utilities the excess power from its coal-fired plant in Center, N.D. Basin Electric Power Cooperative of Bismarck, another of the utilities that brought the suit, said its electricity deals in states as far away as Wyoming risked running afoul of the Minnesota law.

"You can only look at it as the correct legal outcome based on the facts," added David Sasseville, a Minneapolis attorney who filed a friend of the court brief supporting North Dakota for the Minnesota Chamber of Commerce and the National Mining Association.

Stenehjem said the ruling gives North Dakota utilities the ability to plan for their generation needs without having to get clearance from Minnesota regulators.

Stenehjem said the lawsuit was the last resort for his state after fruitless meetings with Minnesota regulators, state legislators and former Gov. Tim Pawlenty, who signed the measure into law.

The Minnesota Commerce Department and the state Public Utilities Commission, an independent regulatory body that plays a key role in enforcing state energy laws, were defendants in the suit, which was brought by the North Dakota Industrial Commission, three electric utilities, two coal companies and a coal trade group. The Minnesota attorney general, also a defendant, represented the state agencies.