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SCOTUS Asked to Nix All Extraterritorial State Energy Laws (Not Just Pricing)

November 18, 2015 By Cheryl Kaften

Pacific Legal Foundation, Cato Institute, National Federation of Independent Business Small Business Legal Center (NFIB Legal Center), and Reason Foundation filed a brief in the U.S. Supreme Court (No. 15-471) on November 16 asking the justices “to take up a case challenging state regulations of commerce occurring wholly beyond their borders.”

Specifically, the petitioners are requesting that SCOTUS consider whether the U.S. Court of Appeals Tenth Circuit was incorrect when it concluded last July that the Constitution’s prohibition against extraterritorial state legislation and regulation is limited to price-control statutes.

If the justices agree to hear the case, they will look at a situation in which Colorado has adopted a law that regulates how electricity sold within it is generated – effectively controlling emissions from the production of electricity that occurs wholly outside its borders; regardless of where it is produced, or whether it has any impact on the quality of the electricity imported into the state.

If allowed to wield such power, states could erect all sorts of barriers to interstate commerce, the petitioners assert. For example, they note, a North Dakota power plant’s emissions can certainly be regulated by North Dakota. But, under the logic of the decision made on July 13 in the U.S. Court of Appeals Tenth Circuit (No. 14-1216), “it also could be regulated by all of the other states serviced by the regional transmission organization that it sells power to …. Since that regional transmission organization connects to a grid that covers nearly all of the country east of the Rockies, it could potentially be regulated by dozens of other states as well.”

What’s more, they point out, “There are an endless variety of similar regulations that states could impose on their neighbors … including employment benefits, hour and wage laws, workers compensation, and anti-discrimination programs.”

Conversely, the brief argues, “Our Constitution enshrines a system of competitive federalism that ensures government accountability and experimentation by pitting states against each other for voters, taxpayers, and industry…. For this competition to endure, courts must enforce the Constitution’s structural protections for it.”

Among these protections, the petitioners noted, is the Dormant Commerce Clause. Although this clause is primarily a grant of power to the federal government to regulate interstate commerce, they said, “The courts have recognized for centuries that it also restricts state laws that frustrate interstate commerce.”

The challenged Colorado law runs afoul of the Constitution, they said, in that it requires electricity generators whose power is used within the state to produce an increasing percentage of their power from renewable sources.

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