In re Minnesota Power’s Petition for Approval of EnergyForward Resource Package

Reversing an intermediate appellate court’s decision, the Minnesota Supreme Court held that the Minnesota Public Utilities Commission’s consideration of affiliated-interest agreements governing construction and operation of a natural gas power plant in Wisconsin by a Minnesota utility’s affiliate did not require review under the Minnesota Environmental Policy Act (MEPA). Under the utility’s agreements with the affiliate—which owned half of the Wisconsin power plant and half of the power generated by the plant—the affiliate agreed to sell 48% of capacity produced by the plant to the utility. First, the Supreme Court concluded that the statute requiring Commission approval of affiliated-interest agreement did not require environmental review. The court acknowledged that the Commission’s determination of whether an affiliated-interest agreement was “reasonable and consistent with the public interest” could take environmental impacts into account, but the court found that this “focused consideration” was “narrower than the broad consideration of the environmental impact of a utility action” in an environmental review under MEPA. Second, the Supreme Court rejected the intermediate appellate court’s conclusion that the Commission’s approval of the agreements was an “indirect cause” of the physical activities of constructing and operating the power plant and therefore a “project” under MEPA. The Minnesota Supreme Court adopted the U.S. Supreme Court’s causation standard for the National Environmental Policy Act in Department of Transportation v. Public Citizen, 541 U.S. 752 (2004), and concluded that “in light of the informational role served by MEPA review, the line that must be drawn requires a ‘reasonably close causal relationship’ between the environmental effect and the alleged cause.” In this case, the Minnesota Supreme Court found that MEPA review did not apply to the Commission’s decision because it did not have the authority to permit construction and operation of the power plant, which the utility said would be built and run without the Commission’s approval. The court remanded for the Court of Appeals to determine whether the Commission’s approval of the affiliated-interest agreements was supported by substantial evidence because the Court of Appeals had not yet addressed that issue. A dissenting justice would have held that MEPA’s plain language encompassed the Commission’s approval of the agreements and that application of MEPA would not regulate interstate commerce in violation of the Commerce Clause.

The Minnesota Supreme Court granted a petition to review a Minnesota Court of Appeals decision that found that the Minnesota Public Utilities Commission should have complied with the Minnesota Environmental Protection Act (MEPA) when it approved agreements associated with construction of a new natural gas power plant in Wisconsin.

The Minnesota Court of Appeals affirmed the Minnesota Public Utilities Commission’s approval of a utility’s affiliated-interest agreements related to the utility’s stake in a new natural gas-fired power plant in Wisconsin. In a previous decision, the Court of Appeals found that the Commission erred by approving the agreements without complying with the Minnesota Environmental Policy Act. The Minnesota Supreme Court reversed this ruling. On remand from the Supreme Court, the Court of Appeals addressed the remaining issues of whether substantial evidence supported the Commission’s determinations that the power plant was needed and that the power plant would serve the public interest better than a renewable-resource alternative. The Court of Appeals found that substantial evidence supported the Commission’s determinations that the power plant was needed as a low-cost source of energy and because its dispatchable capacity provided a hedge against market pricing. The Court of Appeals also rejected the argument that the Commission’s conclusion that the power plant’s impact on overall system costs would be less than the comprehensive costs of wind or solar alternatives was not supported with sufficient detail and evidence.

The Minnesota Court of Appeals found that the Minnesota Public Utilities Commission had erred by approving “affiliated-interest agreements” associated with construction and operation of the Nemadji Trail Energy Center (NTEC)—a proposed 525 megawatt natural gas power plant in Wisconsin—without complying with the Minnesota Environmental Policy Act (MEPA). The court concluded that MEPA applied to affiliated-interest agreements and that the Commission had jurisdiction to order the preparation of an environmental assessment worksheet (EAW) under MEPA for a project in another state to determine whether an environmental impact statement should be prepared. The court noted that the affiliated-interest agreements contemplated a utility’s undertaking of the physical activities of constructing and operating NTEC, which the court described as “definite, site-specific actions that will affect not only the plant’s immediate location but also its surrounding environment, most notably through the large quantities of carbon dioxide that the plant will emit.” The court said “[t]he impact of such emissions on air quality is precisely the type of environmental effect that MEPA addresses.” The court directed the Commission to determine whether NTEC might have significant environmental effects, and if so, to prepare an EAW before reassessing whether to approve the agreements.

Environmental groups petitioned the Minnesota Court of Appeals for review of the Minnesota Public Utilities Commission’s (MPUC’s) approval of agreements that gave a utility a 50% stake in a new gas-fired power plant (the Nemadji Trail Energy Center) to be constructed in Wisconsin. The environmental groups asserted that the MPUC had made its decision without satisfying the requirements of the Minnesota Environmental Policy Act and that the MPUC had ignored an administrative law judge’s conclusion that the utility agreements would not be in the public interest.