Wednesday, July 15, 2015

Tenth Circuit Holds that Colorado’s Renewable Energy Mandate Does Not Violate Dormant Commerce Clause

On July 13, the Tenth Circuit (Tymkovich, Ebel, Gorsuch) issued a decision in Energy and Environment Legal Institute v. Epel.  In 2004, Colorado enacted a Renewable Energy Standard requiring Colorado utilities to generate or otherwise obtain specified quantities of electricity from renewable sources.  The Energy and Environment Legal Institute, which advocates for free markets, sued to challenge the renewable energy standard on the ground that it violates the dormant Commerce Clause, a principle that polices against state interference with interstate commerce.  In the district court, EELI argued that the mandate violates the dormant Commerce Clause (a) under the balancing test of Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), because its burdens on interstate commerce outweighed any local benefits; (b) under City of Philadelphia v. New Jersey, 437 U.S. 617 (1978), because it clearly discriminates against out-of-state businesses; and (c) under Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935), because it regulates extraterritorial conduct.  The district court rejected each of these arguments. 

On appeal, EELI argued only the extraterritoriality point.  The Tenth Circuit affirmed, holding that Colorado’s renewable energy mandate lacks the essential characteristics of cases in which courts have found invalid extraterritorial effects:  “it isn’t a price control statute, it doesn’t link prices paid in Colorado with those paid out of state, and it does not discriminate against out-of-staters.”  The court noted that EELI had not explained how Colorado’s mandate disproportionately harms out-of-state businesses.  Without naked discrimination against out-of-state businesses, the court held, the renewable energy mandate would fall under the Pike balancing test, which EELI had not raised on appeal.  The court rejected EELI’s contrary reading of Baldwin and its progeny, which according to EELI prohibits any state regulation that has the practical effect of controlling conduct beyond the state’s borders.

—Todd Aagaard

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