In a 2-1 decision, the Ninth Circuit Court of Appeals affirmed the dismissal with prejudice of a dormant Commerce Clause challenge to the Washington State Department of Ecology’s (Ecology’s) enforcement of the Washington Climate Commitment Act’s (CCA’s) decarbonization requirements. The plaintiff, which owns and operates a natural gas-fired electric generation facility in Chehalis, Washington, argued that Ecology impermissibly discriminated against out-of-state customers that consumed electricity generated at the facility by allocating no-cost allowances for greenhouse gas emissions associated with electricity sent to Washington utility customers while requiring the purchase of allowances at auction for emissions associated with electricity sent to other states. The Ninth Circuit concluded that the in-state and out-of-state customers were not “similarly situated entities” as required to establish a violation of the dormant Commerce Clause because Washington’s Clean Energy Transformation Act (CETA) independently imposed decarbonization obligations on in-state power generation that did not apply to exported electricity. The dissenting judge wrote that the majority’s application of the “similarly situated entities” test to exclude Ecology’s regulation from dormant Commerce Clause scrutiny would improperly allow “state regulation that increases the costs of intrastate commerce to justify facial discrimination against interstate commerce, without requiring any assessment of the degree to which interstate commerce is burdened.” He wrote that “the proper course here is to remand this case for factual development as to whether CETA’s compliance costs and the CCA allowances are ‘roughly equivalent’ in a way that would justify Washington’s otherwise discriminatory treatment of interstate electricity sales.”

Lawsuit challenging the allocation of “no-cost” allowances under Washington’s Climate Commitment Act to electric utilities that were already subject to the decarbonization mandate of an earlier statute.

PacifiCorp v. Sixkiller

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Ninth Circuit Rejected Dormant Commerce Clause Challenge to Allocation of Compliance Allowances for Implementation of Washington State Climate Law

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United States of America

Washington

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