Tenth Circuit Rejects Constitutional Challenge To Colorado's Renewable Energy Mandate

On July 13, the Tenth Circuit upheld Colorado's renewable energy mandate against a claim that it impermissibly interferes with interstate commerce. This decision, addressing a state's power to encourage or require the development of renewable energy resources and infrastructure, is significant because EPA's Clean Power Plan—expected to be finalized within weeks—contemplates such policies as one of four "building blocks" for regulating carbon dioxide emissions from power plants. Additionally, the Tenth Circuit's decision may influence the outcome of a challenge to a similar law pending before the Eighth Circuit.

The U.S. Constitution expressly gives Congress the power to "regulate Commerce . . . among the several States." Courts have long interpreted this provision as implying that the states cannot interfere with interstate commerce— a doctrine known as the "dormant" or "negative" Commerce Clause. With limited exceptions, a state may not treat out-of-state economic actors differently than in-state ones. The Supreme Court has often explained that the purpose of this doctrine is to prevent "economic Balkanization" among the states, a principle it recently referenced in Comptroller of Treasury of Maryland v. Wynne, 135 S. Ct. 1787 (2015), where it struck down an aspect of Maryland's income tax regime.

In Energy & Environment Legal Institute v. Epel, the plaintiffs argued that Colorado's policy requiring the state's electricity generators to ensure that 20 percent of the electricity they sell to in-state customers is renewably generated violates the Commerce Clause because it takes business away from out-of-state producers of fossil-fuel-fired electricity in favor of in-state renewable electricity generation. The plaintiffs claimed this result was inevitable based on the facts that the electric grid is interconnected, electricity is a fungible product, and Colorado is a net importer of electricity. The Tenth Circuit rejected this challenge and affirmed the district court's grant of summary judgment in favor of the state defendants, holding that the policy does not regulate conduct outside Colorado's territory (the only aspect of the lower court holding from which plaintiffs appealed). The court found the Colorado mandate, which regulates the quality of a good sold to in-state residents, "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." Op...