Minnesota PUC ordered to consider environmental review for out-of-state power project

The Minnesota Public Utilities Commission must consider the environmental effects of a power plant slated to be built in Wisconsin, according to a state appeals court, which overturned the agency’s approval of the project.

The issue centers on a plan by Dairyland Power Cooperative and a Minnesota Power affiliate to build a $730 million, 550-megawatt, natural gas-fired power plant in Superior, Wis.

The PUC in October 2018 approved Minnesota Power’s plan to build, run and buy about half the capacity of the Nemadji Trail power plant through agreements with an affiliated company, South Shore Energy.

In its decision, the PUC rejected a petition to prepare an “environmental assessment worksheet” for the project, arguing the agency lacks the jurisdiction to order an environmental review for a project outside the state. The PUC also ruled that the Minnesota Environmental Policy Act (MEPA) didn’t apply to affiliated-interest agreements.

The PUC got both findings wrong, according to a Dec. 23 ruling by Minnesota Appeals Court Judge Louise Dovre Bjorkman. The judge ordered the PUC to determine whether the Nemadji Trail power plant might have significant environmental effects and, if so, to prepare an environmental assessment before reconsidering the affiliated-interest agreements.

Bjorkman ruled that the PUC can order an environmental assessment for a project outside the state. The Minnesota Legislature didn’t define the PUC’s jurisdiction as being limited to the state’s boundaries, Bjorkman said.

“The commission’s express authority to regulate construction of power plants in Minnesota, and to order environmental review before approving their construction, does not negate its authority to approve or reject Minnesota Power’s agreements with its Wisconsin affiliate regarding the construction, operation, and output of [the Nemadji Trail plant,]” the judge said. “Nor does it negate the commission’s authority to order an [environmental assessment] to inform that decision.”

Also, MEPA contains no geographical limitation, Bjorkman said, dismissing arguments that requiring an environmental assessment would violate the U.S. Constitution’s Commerce Clause, which bars state laws that expressly limit interstate trade.

“MEPA does not regulate commerce in Wisconsin or impose Minnesota’s environmental policies on Wisconsin,” Bjorkman said. “It merely provides a mechanism for informing the commission’s decision whether the affiliated-interest agreements are reasonable and consistent with the public interest.”

Bjorkman also ruled that affiliated-interest agreements fall under MEPA, saying that without the agreements the Nemadji Trail project wouldn’t be built.

“Because Minnesota Power cannot construct and operate [the Nemadji Trail plant] without the commission’s approval of the affiliated-interest agreements, the approval of the agreements will indirectly cause those physical activities,” Bjorkman said.

The Wisconsin Public Service Commission is still reviewing the Nemadji Trail power plant. If approved, Minnesota Power expects to bring the plant online by 2025.

A new precedent

The Nemadji Trail litigation isn’t the first dispute regarding out-of-state power that seeks to flow to Minnesota.

In 2016, Missouri River Energy Services, which serves public power utilities in Iowa, Minnesota, North Dakota and South Dakota, was part of a group that successfully sued to overturn Minnesota’s de facto ban on imports of coal-fired electricity.

In that decision, the Eighth Circuit Court of Appeals struck down a Minnesota statute called the Next Generation Energy Act that barred agreements to import or buy power from a source outside the state that would contribute to or increase statewide power-sector carbon-dioxide emissions. The court agreed with lower court rulings that the law violated the Commerce Clause.

Parties to the litigation included the state of North Dakota, the Industrial Commission of North Dakota, the Lignite Energy Council, Basin Electric Power Cooperative, the North American Coal Corp., Great Northern Properties Limited Partnership, MRES and Minnkota Power Cooperative.

The latest appeals court decision may make it harder to get power plants built, according to Tom Heller, MRES president and chief executive officer.

“It’s a bad precedent for power plant sitings,” Heller said. “It really doesn’t matter if you’re public power, private power or cooperatives.”