Tag: federalism

Upholding Clean Energy in Colorado—and Hopefully Beyond

McNishBy Samantha Caravello—November 17 at 7:26 a.m.

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.[1]

In the lawsuit, Energy and Environment Legal Institute v. Epel (“EELI”),[2] 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.[3] Plaintiffs’ complaint focused on the second potential violation, alleging that the Renewables Quota improperly regulates wholly extraterritorial commerce.[4]

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.[5] 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.[6] 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.[7]

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,[8] 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,[9] 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,[10] 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.


[1] Colo. Rev. Stat. Ann. § 40-2-124 (West 2013).
[2] No. 11–cv–00859–WJM–BNB, 2014 WL 1874977 (D. Colo. May 9, 2014).
[3] Id. at *3.
[4] Id.
[5] Id. at *6.
[6] Id.
[7] 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.
[8] 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).
[9] No. 11–cv–3232 (SRN/SER), 2014 WL 1612331 (D. Minn. Apr. 18, 2014).
[10] Rocky Mountain Farmers Union v. Corey, 134 S. Ct. 2875 (2014).

Smart Rules for the Smart Grid (HELR Podcast)

Power lines_Wikimedia Commons Non-dropframe
Photo credit: Non-dropframe, Wikimedia Commons

By Sachin Desai — Oct. 24, 2013 at 8:18am

What makes the Smart Grid “smart”?  Of course the technology plays a role.  Grid-scale batteries allow renewable energy generators to be more competitive.  New smart meters allow homeowners to know which appliances are energy hogs.  However, what also makes the Smart Grid “smart” is legal in nature.  In particular, a unique approach is being undertaken to develop the standards and regulations that will govern the new grid.  Professor Joel Eisen, one of the nation’s energy law experts, leads us through this critical aspect of the renewable energy revolution in an article and podcast published by the Harvard Environmental Law Review (HELR).

The Smart Grid has often been compared to the internet, a giant network, governed by an underlying set of traffic rules, which allows energy to travel, two-way, from place to place just like information.  However, unlike the internet, the Smart Grid is being built in an environment with huge entrenched interests, as well as multiple federal and state regulatory agencies with diverging missions.  The current grid consists of 3,200 electric utilities, interacting with even more suppliers and supporting businesses.  To top it off, citizens groups are resisting the Smart Grid due to privacy concerns.

So how can all these different organizations come together to develop the common foundation of rules and standards that will govern the electric internet?  One traditional route is command and control – where (federal) agencies set the rules after notice and comment.  However, private groups and state agencies have fought against this approach, in large part arguing that federalism prevents the federal government from reaching into private homes and intrastate utility operations.  Another traditional route is self-regulation – where the private sector set its own rules (many internet standards were set this way).  However, getting so many actors with different incentives together on their own has proven difficult, to say the least.

Professor Eisen discusses an alternative: a novel, “democratically-led” process for rule-making.  It’s a two-part process. First, the National Institute of Standards and Technology, through its Smart Grid Interoperability Panel (SGIP), has brought together hundreds of participants to set standards through negotiation and dialogue.  SGIP can leverage its benign, disinterested status (it does not have regulatory power) to bring skeptics to the table.  The Federal Energy Regulatory Commission (FERC) can turn those standards into legally enforceable regulations only once “sufficient consensus” has been reached among the body.  This process, especially in light of recent FERC decisions, has allowed Smart Grid standards to be created and implemented in an environment otherwise resistant to change.  Professor Eisen discusses this and more in his article, “Smart Regulation and Federalism for the Smart Grid,” published by HELR in the fall issue of Volume 37.  Professor Eisen also sat down with Sachin Desai of HELR to talk about this article and the concepts behind it an HELR exclusive podcast, “Smart Rules for the Smart Grid.”

Administrative Proxies for Judicial Review: Building Legitimacy from the Inside-Out

By Emily Hammond and David L. Markell

Judicial review is considered an indispensible legitimizer of the administrative state. Not only is it a hallmark feature of the Administrative Procedure Act (“APA”), but the various standards of review reinforce democratic norms, promote accountability, and act as a check against arbitrariness. Unreviewable agency actions, therefore, must find their legitimacy elsewhere. This article evaluates the promise of “inside-out” legitimacy as an alternative or complement to judicial review. We theorize, based on insights from the administrative law and procedural justice literatures, that administrative process design can do much to advance legitimacy without the need to rely on judicial review to check administrative decisionmaking. Next, we connect the theoretical conceptions of legitimacy to administrative behavior by offering metrics for testing intrinsic legitimacy. To demonstrate how these metrics might be applied, we present an empirical study of an innovative administrative fire-alarm process that enables interested parties to petition the Environmental Protection Agency (“EPA”) to withdraw states’ authorization to administer the major environmental statutes. While this process may trigger a variety of responses by EPA, there is generally little recourse to the courts for citizens dissatisfied with the process or its outcomes. Our findings suggest that, even without external checks, EPA engages in numerous behaviors indicative of intrinsic legitimacy. In addition, the process itself produces real substantive outcomes. Armed with these findings, we conclude with an assessment of institutional design features that may contribute to inside-out legitimacy.

 

Cite as: Emily Hammond and David L. Markell, Administrative Proxies for Judicial Review: Building Legitimacy from the Inside-Out, 37 Harv. Envtl. L. Rev. 313 (2013).

 

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Smart Regulation and Federalism for the Smart Grid

By Joel B. Eisen

This Article examines the “Smart Grid,” a set of concepts, technologies, and operating practices that may transform America’s electric grid as much as the Internet has done, redefining every aspect of electricity generation, distribution, and use. While the Smart Grid’s promise is great, this Article examines numerous key barriers to its development, including early stage resistance, a lack of incentives for consumers, and the adverse impacts of the federal-state tension in energy regulation. Overcoming these barriers requires both new technologies and transformative regulatory change, beginning with the development of a foundation of interoperability standards (rules of the road governing interactions on the Smart Grid) that will influence development for many years. This Article describes the federally coordinated standard-setting process started in the 2007 Energy Independence and Security Act, leading to a collaborative dialogue among hundreds of participants, with leadership from the National Institute of Standards and Technology (“NIST”). After setting forth the need for interoperability standards and elaborating on the standard-setting process, the Article focuses on a 2011 order by the Federal Energy Regulatory Commission (“FERC”) that declined to adopt an initial group of standards. While this may appear a step backward, the Article argues to the contrary, finding that FERC’s order supports the flexibility of the Smart Grid Interoperability Panel, the NIST-led process that will produce interoperability standards critical to a wide range of energy saving technologies. FERC’s order allows this process, not a regulator’s imprimatur, to give standards credibility. By holding off on forcing adoption of the standards, but preserving the potential for more significant federal intervention later, it may lead to state adoption of the resulting standards. In this adaptive approach to energy law federalism, neither top-down federal regulation nor private sector standard setting is the exclusive means of overseeing Smart Grid development. FERC’s approach may promote a more positive federal-state relationship in the development of the Smart Grid, and may even portend a more collaborative relationship in energy law federalism generally, avoiding the disruptive jurisdictional clashes that have marked recent attempts to innovate in the electric grid.

Cite as: Joel B. Eisen, Smart Regulation and Federalism for the Smart Grid, 37 Harv. Envtl. L. Rev. 1 (2013).

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Federalism in the Air: Is the Clean Air Act’s “My Way or No Highway” Provision Constitutional After NFIB v. Sebelius?

By David Baake

Since the New Deal era, the Supreme Court has interpreted the Spending Clause to permit Congress to use conditional grants to encourage state governments to take action that Congress could not require them to take. In National Federation of Independent Business v. Sebelius, the Supreme Court unexpectedly restricted this power, holding for the first time ever that a conditional grant was unconstitutionally coercive because the amount of money at stake was so large that the states had no real choice but to comply with the attached conditions. This remarkable development in Spending Clause jurisprudence will likely embolden states to challenge the constitutionality of a wide variety of statutes, including Section 179(b)(1) (“Section 179”) of the Clean Air Act, which empowers the Environmental Protection Agency to prohibit, with limited exceptions, the distribution of federal highway money to states that fail to submit adequate State Implementation Plans (SIPs).

In this article, I assess the likelihood that a Spending Clause challenge to Section 179 would succeed, post-Sebelius. In Part I of this Article, I briefly discuss the Sebelius Court’s Spending Clause holding. In Part II, I argue that Section 179 should survive a facial constitutional challenge after Sebelius because, at least where applied to SIP plans for pollutants emitted by mobile sources, the provision can be construed as an attempt to restrict the use of federal funds to projects that advance the general welfare, rather than as an attempt to coerce the states into adopting particular policies. Finally, in Part III, I argue that Section 179 should survive an as-applied constitutional challenge, even if it is applied to SIP plans for pollutants that are not emitted by mobile sources. I argue that the decision to enact a SIP “remains the prerogative of the States not merely in theory but in fact,” because (1) a state that does not wish to promulgate a SIP can petition EPA to promulgate a Federal Implementation Plan (FIP) and thereby halt the sanctions clock; and (2) the amount of money at stake will likely be significantly less than the amount at stake in Sebelius.

Cite as: David Baake, Federalism in the Air: Is the Clean Air Act’s “My Way or No Highway” Provision Constitutional After NFIB v. Sebelius?, 37 Harv. Envtl. L. Rev. F. 1 (2012).