Federal judge upholds Colo. renewables law, but opponents plan appeal

Source: Scott Streater, E&E reporter • Posted: Tuesday, May 13, 2014

Supporters of state renewable energy mandates won a major legal victory last week as a federal judge upheld Colorado’s standard, rejecting claims that it violates the Constitution by discriminating against other energy sources.

The ruling late Friday in U.S. District Court for the District of Colorado is the first to address the constitutionality of a state renewable energy standard (RES), and supporters say it could set a legal precedent for the more than 30 other states that have adopted similar standards.Colorado’s RES requires that 30 percent of the electricity from investor-owned utilities come from renewable sources by 2020.

The ruling by District Judge William Martinez in Denver stems from a federal lawsuit filed in 2011 by the Energy & Environment Legal Institute against Gov. John Hickenlooper (D), the Colorado public utilities commissioners and other state leaders.

The Energy & Environment Legal Institute — a Washington, D.C.-based nonprofit that bills itself as a strategic litigation, policy research and public education group — issued a statement saying it plans to challenge the ruling to the 10th U.S. Circuit Court of Appeals.

“At the end of the day, we all knew this case was headed to the Tenth Circuit and probably eventually to the Supreme Court,” David Schnare, the institute’s general counsel, said in the statement. “That is where it now will go.”

Lawyers for the institute argued that the RES violates the Constitution’s Interstate Commerce Clause by discriminating against out-of-state energy sources. The clause, they argued, prohibits states from imposing burdens on the interstate market for electricity.

But Martinez’s order dismissed claims that the RES harms other energy sources, ruling that the institute had “not met their burden of showing that any dispute of material fact exists as to whether the Renewables Quota discriminates against out-of-state interests.”

“Plaintiffs argue that the Renewables Quota places a restriction on how out-of-state goods are manufactured in that it requires out-of-state electricity to be generated according to Colorado’s terms,” Martinez wrote in his 23-page order.

“Plaintiffs contend that the Renewables Quota is a ‘mandate’ which requires energy produced wholly out-of-state to comply with Colorado-approved methods for renewable energy,” he added. “Plaintiffs argue that this mandate operates to project policy decisions made by voters in Colorado onto other states, such as Wyoming. The Court disagrees.”

He added, “As Plaintiffs acknowledge, a state can regulate electricity generation occurring within its borders.”

The “Renewables Quota” in the state standard “does not affect commerce unless and until an out-of-state electricity generator freely chooses to do business with a Colorado utility,” and thus, “it does not impermissibly control wholly out-of-state commerce,” he concluded.

Martinez wrote that he agreed with the institute’s argument that the renewables standard could influence “the way out-of-state electricity generators do business” because it provides Colorado utilities with an incentive to purchase electricity from so-called green sources.

But, he added, the “fact that this incentive structure may negatively impact the profits of out-of-state generators whose electricity cannot be used to fulfill the Quota does not make the Renewables Quota invalid.”

Could ruling set a precedent?

The E&E Legal Institute — no relation to E&E Publishing LLC — was known until last fall as the American Tradition Institute. It’s a frequent critic of U.S. EPA and has said it wants to emulate the legal approach employed by “hard-core environmentalists like the Natural Resources Defense Council” (Greenwire, Oct. 3, 2013).

Martinez’s ruling drew praise from four environmental groups that intervened in the case in defense of the renewables standard. The Conservation Colorado Education Fund, Environment Colorado, the Sierra Club and the Wilderness Society were represented by attorneys from Earthjustice and Western Resource Advocates.

The groups and their legal representatives said the ruling could set a legal precedent against challenges to other states’ renewable energy standards.

“We applaud the court for protecting the development of clean energy in Colorado and upholding the intent of Coloradans to move our state toward a future powered by clean, renewable energy,” Roger Singer, senior organizing manager for the Sierra Club Rocky Mountain Chapter’s Beyond Coal campaign, said in a statement.

Erin Overturf, a Western Resource Advocates attorney who helped represent the intervening groups, said the judge recognized that the institute’s arguments “were fundamentally flawed” and that the RES “does not burden interstate commerce and is therefore constitutional.”

“We have worked for a decade to build a strong renewable energy law with broad based public support from businesses and Coloradans across the state,” Kim Stevens, campaign director with Environment Colorado, said in a statement.

The ruling, Stevens added, “ensures that Colorado will continue to be a national leader when it comes to clean energy.”

The E&E Legal Institute in its statement disputed any claims that the ruling could set a legal precedent, arguing that Martinez’s decision “reaches no farther than the borders of Colorado and perhaps not even that far.”

“Because the law on these questions is unsettled, all 30 states with similar regulatory quotas will watch with great attention what next happens in the appellate court,” they said in the statement.

The institute also said in the statement that the Colorado RES “has had no meaningful impact on air quality within the State.”

Colo. voters backed standard

Most Colorado residents support renewable energy development, approving in November 2004 the first voter-approved renewables standard requiring that 10 percent of the state’s electricity come from renewable sources by 2015. The RES has been amended by the Legislature three times to the current 30 percent by 2020 standard.

But the issue sometimes has been a politically difficult one in the Centennial State.

Hickenlooper last year signed a controversial bill into law that doubled the RES for rural electric cooperatives in the state despite stiff opposition from Republican leaders and the Tri-State Generation and Transmission Association energy cooperative. The opponents of the legislation urged Hickenlooper to veto the bill, arguing that the requirement that electric co-ops with more than 100,000 customers must increase the minimum amount of renewable energy offered to 20 percent by 2020 would drive up electricity bills (E&ENews PM, June 5, 2013).

The fact that Colorado voters supported the original RES, however, played into Martinez’s ruling to uphold it.

“Fifty-four percent of Colorado voters voted to approve renewable energy standards for the state in 2004,” he wrote. “The Supreme Court has frequently admonished that courts should not ‘second-guess the empirical judgments of lawmakers concerning the utility of legislation.’”