Yesterday, the U.S. Court of Appeals for the Eighth Circuit issued a decision in North Dakota v. Heydinger that affirmed a federal district court’s decision invalidating a Minnesota statute that prohibited the importing of coal-fired electricity into Minnesota.

The opponents of the statute put forth three reasons for why the Minnesota statute was invalid. First, they argued that the state statute was preempted by the Federal Power Act.  Second, they argued that the state statute was also preempted by the Clean Air Act.  Finally, they claimed that the Minnesota statute was unconstitutional because it violated the dormant Commerce Clause (which, as relevant here, invalidates state statutes that exert control over activities taking place entirely outside of that state’s borders).

The district court had held that the Minnesota statute violated the dormant Commerce Clause but did not address either preemption argument. While the Eighth Circuit affirmed the decision to invalidate the statute, the three judges on the panel disagreed in their reasoning and each offered a separate opinion:

• Judge Loken stated that the statute was unconstitutional under the dormant Commerce Clause. He reasoned that because a non-Minnesota generator cannot guarantee that no electrons flow to Minnesota when it injects electricity into the MISO grid as part of a contract with a non-Minnesota customer, the Minnesota state statute regulates transactions taking place wholly outside of Minnesota.  Judge Loken did not address either of the preemption arguments.
• Judge Murphy disagreed with Judge Loken’s dormant Commerce Clause analysis, explaining that electrons do not actually “flow” and there is no way to trace whether electric power from a specific source enters Minnesota.  As a result, Judge Murphy interpreted the statute as applying to contracts in which a Minnesota utility purchases power from a source in a different state, and thus it does not regulate transactions that have nothing to do with Minnesota.  However, Judge Murphy did hold that the Minnesota statute was preempted by the Federal Power Act because it regulates the wholesale sales of electric energy in interstate commerce, over which FERC has exclusive jurisdiction.  She did not discuss the Clean Air Act preemption argument.
• Judge Colloton held that the Minnesota statute was preempted by both federal statutes and, as a result, did not discuss the dormant Commerce Clause issue.  He agreed with Judge Murphy’s reasoning about why the state statute was preempted by the Federal Power Act.  He also held that the Minnesota statute was preempted by the Clean Air Act because it included a provision that would allow the import of non-Minnesota power if the non-Minnesota generator met certain offset requirements.  Judge Colloton held that this conflicted with the federal regulatory scheme that Congress created in the Clean Air Act and is therefore preempted.