Key judge’s take on clean-power mandates sparks legal debate

Source: Hannah Northey and Jeremy P. Jacobs, E&E reporters • Posted: Monday, June 24, 2013

An influential federal judge splashed fuel last week on an already-raging argument over states’ clean energy mandates in a ruling that questioned the constitutionality of Michigan’s renewable portfolio standard.

Writing for a three-judge panel of the 7th U.S. Circuit Court of Appeals, Judge Richard Posner — seen by many as the most important conservative jurist outside the Supreme Court — said that by banning out-of-state renewables from counting toward its renewable portfolio standard, Michigan’s law “trips over an insurmountable constitutional objection.”

“Michigan cannot, without violating the commerce clause,” he went on, “discriminate against out-of-state renewable energy.”

Judge Richard Posner has set off a debate on the constitutionality of Michigan’s RPS program. Photo courtesy of the University of Chicago Law School

At issue is whether the RPS, which requires that 10 percent of Michigan’s energy be drawn from in-state renewable sources by 2015, violates the “dormant” Commerce Clause.

While the Constitution gives Congress the right to regulate commerce among states, courts have interpreted the reverse to also be true: States may not enact laws restricting interstate commerce or discriminating against out-of-state sources

The language has provided fodder for an anti-RPS movement led by the American Legislative Exchange Council, or ALEC.

“I do think it will spur new bills. The word of this court case is going to spread to statehouses across the U.S.; there will probably be more lawsuits to come,” said Todd Wynn, the director of ALEC’s task force on energy, environmental and agriculture issues.

But clean energy advocates say that’s not the case.

“It’s extremely unlikely anyone could use this case as a basis to successfully overturn a state law,” said John Moore, a senior attorney with the Natural Resources Defense Council. “No one could file a lawsuit using this case as a legally sound basis for invalidating a state law.”

Groups like ALEC, he said, are “grasping at straws” in claiming the case could affect existing state renewable energy programs, and Michigan’s law was not directly at issue in the case.

Solar advocates say there are many ways for states to ensure RPS programs don’t run afoul of dormant Commerce Clause issues.

And Rob Gramlich, senior vice president of public policy for the American Wind Energy Association, said the thrust of the decision is positive for renewable energy because the court backed the Federal Energy Regulatory Commission’s approval of a transmission planning and cost allocation plan in the Midwest. That plan bolsters the grid — be it for reliability or to integrate wind and solar.

“The court affirmed FERC’s ability to get infrastructure paid for, which is the main barrier to its development, by ensuring those who benefit pay their fair share,” Gramlich said.

He added, “This decision doesn’t change anything on the question of state RPS design, as that question was not before the court.”

Still, major questions remain.

‘The jurisprudence is murky as hell’

A key area of disagreement is whether Posner’s remarks on the Constitution’s Commerce Clause are “dicta,” the legal term for parts of an opinion that are not at issue in the case or not necessary for the judge to reach his or her ruling. That’s because the case focused on FERC’s approval of the program put forward by the Midwest Independent Transmission System Operator (MISO), not the constitutionality of the state’s RPS program (Greenwire, June 11).


Aspects of a ruling that are dicta are not binding. However, it will be up to future judges — specifically those on Posner’s 7th Circuit — to determine whether Posner’s Commerce Clause interpretation is dicta or part of the holding.


“Since it’s not litigated, it’s surprising that he gave such an opinion,” one legal expert said. “In fact, the [dormant Commerce Clause] isn’t ironclad, the jurisprudence is murky as hell and there are arguments that can be made on the other side. He’s sort of put the rabbit in the hat.”


But while backers of RPS programs seem inclined to dismiss the few sentences as dicta, several legal experts said they aren’t — but cautioned that doesn’t mean they will be particularly influential in future proceedings.


Michael Wara, a Stanford Law School professor who closely follows cases on renewables, said Posner’s remarks, while brief, are at the heart of how the judge dismissed Michigan’s argument that its RPS forbids crediting wind power from out of state.


“It’s doing work in the opinion,” Wara said.


Justin Pidot of the Sturm College of Law at the University of Denver put it another way: “It strikes me as pretty close to the heart of the analysis, although stated rather fliply and briefly.”


And George “Chip” Cannon, an energy regulatory attorney at Akin Gump Strauss Hauer & Feld, concurred but noted that the ruling didn’t invalidate Michigan’s RPS, so Posner’s remarks had very little effect in the case at hand.


“We’re of the view that it’s not dicta because he relied on that basis to find that the state’s argument was without merit,” Cannon said. “But it doesn’t result in making any particular RPS unenforceable. The issue on appeal was not whether a particular RPS violated the Commerce Clause. It’s a little bit of a gray area.”


Wara said Posner knows there is a complicated test for determining whether a law or regulation violates the dormant Commerce Clause.


First, he said, the court must find that it does, in fact, discriminate against out-of-state interests. Then the court must engage in a balancing test, weighing the effects on interstate commerce against the in-state benefits.


“This is not that kind of detailed analysis,” Wara said of Posner’s opinion.


In Michigan, the state could make a case that the in-state environmental effects — such as reduced air pollution — outweigh the interstate commerce infringement. Michigan didn’t have to make those arguments in the recent case, however, so it’s unclear at this point whether they would hold up in court.


It is also worth noting that even if a 7th Circuit judge finds that Posner’s remarks are part of the holding, they are only binding in the 7th Circuit. So while challengers to Colorado’s or California’s RPS may highlight Posner’s opinion, they would not be binding on those courts.


Further, the language of RPS statutes varies widely from state to state, so one could violate the dormant Commerce Clause while another might not.


“A problem with a number of these statutes where we just don’t know because we haven’t had an appellate court really do the work of analyzing one of these statutes,” Wara said.


But that also underscores the importance of Posner’s remarks because it remains unsettled law. So Posner’s conclusion will undoubtedly be cited in Colorado’s case and fuel future challenges.


“I don’t really see this as just a 7th Circuit issue,” Akin Gump’s Cannon said. “I can imagine seeing lawsuits popping up all over the place because of his comments.


“More than anything else,” he added, “it probably emboldens the industry.”