Acting as laboratories for energy policy, some states have been much more effective than the federal government in promoting renewable energy development, often through the enactment of Renewable Portfolio Standards (“RPS”). RPSs require electricity-selling companies to generate a minimum percentage of their electricity from renewable sources. These minimum targets generally increase over time, growing clean energy development and decreasing reliance on fossil fuels. RPSs are currently in place in 29 states and the District of Columbia, but a number of these state policies have been targeted by legal challenges.
Earlier this year, the pro-free market group Energy and Environment Legal Institute (“EELI”) filed a lawsuit challenging Colorado’s Renewable Energy Standard (“RES”), which was approved by Colorado voters in a 2004 ballot initiative and subsequently codified into state law. The RES creates a “Renewables Quota” for electricity retail utilities, requiring them to “generate, or cause to be generated, electricity from eligible energy resources” in specified amounts.
In the lawsuit, Energy and Environment Legal Institute v. Epel (“EELI”), EELI claimed that the Renewables Quota violates the dormant Commerce Clause, which is a doctrine that courts have implied from Constitution’s Commerce Clause. The dormant Commerce Clause prohibits states from unlawfully burdening or discriminating against interstate commerce. In the Tenth Circuit, there are three ways a statute may violate this doctrine: first, if it clearly discriminates against interstate commerce in favor of intrastate commerce; second, if it has the practical effect of regulating wholly outside the state; and third, if it imposes a burden on out-of-state commerce which is excessive in relation to the local benefits it creates. Plaintiffs’ complaint focused on the second potential violation, alleging that the Renewables Quota improperly regulates wholly extraterritorial commerce.
In May, the federal district court for the District of Colorado ruled in favor of state defendants and intervening environmental and renewable energy organizations and upheld the validity of the Colorado law. The court rejected plaintiffs’ extraterritoriality claims, concluding that the RES regulates only Colorado entities and those extraterritorial entities that choose to do business with Colorado entities. The RES does not require out-of-state entities to do business in any particular manner, but simply determines whether energy purchased from an out-of-state generator will count towards a Colorado utility’s Renewables Quota. Concluding that this did not amount to extraterritorial regulation, the court granted summary judgment in favor of defendant Colorado and intervening environmental and renewable energy organizations.
This decision was a success for clean energy—Colorado’s renewable energy sector is growing, jobs are being created, and public opinion supports the RPS. Unsurprisingly, though, plaintiffs appealed the decision to the Tenth Circuit Court of Appeals. In briefs filed over the past few months, plaintiffs argued that the district court improperly relied on a “factually inapposite, nonbinding case” from the Ninth Circuit instead of a Minnesota federal district court case that would have been more favorable to the plaintiff-appellants. The state and nonprofit respondents in the EELI case argue—convincingly, in my opinion—that plaintiffs have this wrong. (Not to mention that neither the Minnesota nor the Ninth Circuit case is binding on the District of Colorado or the Tenth Circuit.)
In the Ninth Circuit case, Rocky Mountain Farmers Union v. Corey, that court upheld California’s Low Carbon Fuel Standard (LCFS). Although the LCFS encouraged out-of-state entities to offer low carbon ethanol that would allow them access to the California market, the court determined that because there was no requirement for an out-of-state entity to meet particular standards, there was no extraterritorial regulation. In the District of Minnesota case, North Dakota v. Heydinger, that court considered a Minnesota statute prohibiting the importation of electric power that would increase statewide carbon dioxide emissions, and it concluded that the statute did impermissibly regulate wholly out-of-state commerce. As the court held in EELI, the Colorado RES regulates only the Colorado market and affects out-of-state entities only insofar as they choose to respond to RES-created incentives. This feature makes the Colorado RES more similar to the California LCFS than to the Minnesota prohibition.
Both EELI and Heydinger are currently on appeal, and the outcome of these cases may impact similar challenges in other states and determine the likelihood of Supreme Court review on this issue. In June, the Supreme Court declined to hear Rocky Mountain Farmers Union, leaving California’s LCFS in place, and perhaps indicating an unwillingness to decide whether state renewable energy incentives violate the dormant commerce clause. Or perhaps the Court, flooded with petitions warning of economic disaster due to environmental regulations, is just waiting until more circuit courts have spoken—and split—on the issue. Depending on how EELI and Heydinger turn out, these cases could provide sufficient reason for the Supreme Court to get involved. Given the states’ innovative leadership in this arena and Congress’s inability to take comprehensive action on climate and energy policy, the fate of Colorado’s RES may have significant implications for clean energy in this country.
UPDATE: The Tenth Circuit has scheduled oral argument for EELI v. Epel for January 21, 2015.
Harvard Law School’s Environmental Policy Initiative is tracking these cases and more at the State Power Project. The author relied on the State Power Project website to find some of the case briefs cited in this blog.
 Colo. Rev. Stat. Ann. § 40-2-124 (West 2013).
 No. 11–cv–00859–WJM–BNB, 2014 WL 1874977 (D. Colo. May 9, 2014).
 Id. at *3.
 Id. at *6.
 See id. at *7. The court also granted summary judgment for defendants on their claims that the RES does not discriminate against interstate commerce, id. at *5, and does not improperly burden interstate commerce relative to local benefits, id. at 9. The court concluded that plaintiffs had failed to show any burden imposed by the RES on interstate commerce. Id.
 Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013), reh’g en banc denied, 740 F.3d 507 (9th Cir. 2014), and cert. denied, 134 S. Ct. 2875 (2014).
 No. 11–cv–3232 (SRN/SER), 2014 WL 1612331 (D. Minn. Apr. 18, 2014).
 Rocky Mountain Farmers Union v. Corey, 134 S. Ct. 2875 (2014).