In the past year, the battle lines have been clearly drawn over state-level renewable energy standards.
Opponents have brought all their artillery to the battlefield (often through some questionable tactics), but they've been defeated time and again. Still, challenges continue to bubble up from conservative think tanks and political front groups determined to find just one legal foothold from which to gain momentum and precedence.
In Colorado, the Energy and Environment Legal Institute failed to find that foothold when it lost a legal challenge to the state's target of 30 percent renewable energy by 2020.
The challenge to the renewable energy standard (RES) was based on three arguments, according to John Putnam, energy attorney with Kaplan, Kirsch & Rockwell, who represented a group of renewable energy companies in the case:
- Explicit discrimination against business from other states
- Regulation of activity entirely outside the state's territory, defined as "extraterritoriality"
- Implementation of undue burdens that outweigh the local benefits, called the "Pike test"
The federal U.S. District Court for the District of Colorado, however, determined that the RES is not a "mandate" that discriminates against or impacts transactions with out-of-state businesses. While the RES may indeed impact how companies do business in Colorado, protecting their profits isn't part of the deal:
In sum, out-of-state companies are free to generate electricity using whatever method they choose, can sell that electricity to whomever they choose -- inside or outside of Colorado -- and can do so at whatever price they choose. The RES does not control any aspect of a transaction between two out-of-state entities; it governs only whether electricity purchased by a Colorado utility counts towards that utility’s Renewables Quota.
Regarding the Pike balancing test that weighs benefits vs. burdens, the court found a RES-mandated shift from non-renewable electricity to renewable sources has had no impact on how electricity flows across state lines:
There is no evidence in the record showing that the Renewables Quota causes greater harm to out-of-state coal and hydrocarbon electricity generators than is caused to in-state coal and hydrocarbon electricity generators. In fact, the record shows that demand for out-of-state coal has increased since the RES was enacted.
Actually, Colorado's electricity demand has increased, the court noted: from 2007 to 2010, the state shifted from being a net exporter of electricity to exceeding in-state production by 2,000 gigawatt-hours.
But the Energy and Environment Legal Institute isn't giving up. The group plans to appeal, claiming with admirable flair that the decision is "paving the way" for an appeal in the 10th District.
How this impacts other states' RES challenges
Colorado's rejection is the third such decision against this "commerce clause" maneuver, following similar cases in Minnesota and California. It is "a very common mechanism to challenge states' progressive environmental regulations," according to Robert McKinstry, partner with Ballard Spahr.
The new twist in Colorado was adding the more specific charge of extraterritorial regulation to the argument. "If this type of challenge succeeded, it would knock out most state RESs," said McKinstry.
Commerce clause arguments are likely to play a more prominent role in disputes over environmental regulations across other states, especially in the adoption and implementation of federal greenhouse gas standards and controls. This isn't the end of state RES battles, or even of the ones hinging on commerce clause debates. Each state has specifics and nuances to their respective RES targets, and no two are exactly the same.
Other states have provisions that provide extra credit to in-state generation, which could be legally challenged. Putnam said the industry can expect future challenges to go after state carve-outs for particular technologies as well.
Colorado was arguably the furthest along in dealing with this issue. The decision to uphold the RES will likely have an impact in other similar challenges.
"It's the clearest, most direct assessment of that issue from a federal court so far -- evaluating an [RES] on the merits and finding it passes constitutional muster," Putnam said.