954 F.3d 1018
8th Cir.
2020
Read the full case

Background

  • FERC issued Order 1000 (2011), eliminating the federal right of first refusal (ROFR) in regional transmission planning for cost allocation, but preserved state authority over siting, permitting, and construction of transmission lines.
  • MISO removed federal ROFR from its tariff; several states (including Minnesota) enacted state ROFR statutes. Minnesota’s ROFR (Minn. Stat. §216B.246, subd. 2) gives incumbent transmission owners the right to build, own, and maintain new transmission lines that connect to their existing facilities.
  • After MISO incorporated Minnesota’s ROFR into its tariff, FERC approved the tariff; LSP (an out-of-state transmission developer) challenged FERC’s allowance and later sued Minnesota state agencies and utilities, claiming the state ROFR violates the dormant Commerce Clause.
  • The challenged project was the Huntley–Wilmarth 345 kV line; Xcel and ITC (incumbents) jointly exercised the ROFR to construct the line.
  • The district court dismissed LSP’s complaint for failure to state a claim, holding the statute is not overtly discriminatory and that Minnesota’s legitimate local interests outweigh any incidental burden on interstate commerce under Pike balancing.
  • On de novo review, the Eighth Circuit affirmed the dismissal, rejecting LSP’s facial- and effect-discrimination claims and concluding the statute does not impose an undue burden on interstate commerce.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Facial discrimination under the dormant Commerce Clause MN ROFR favors incumbents and in-state interests, excluding competitors like LSP The statute distinguishes incumbency (connecting to existing facilities), not state residence; it applies evenhandedly to incumbents regardless of headquarters Not facially discriminatory; statute draws a neutral incumbency-based distinction
Discriminatory purpose Legislative history shows intent to insulate incumbents from competition after Order 1000 Purpose is legitimate state regulation to ensure reliable, reasonable retail electric service and preserve existing regulatory approach No sufficient evidence of discriminatory purpose; state police power over utilities is legitimate
Discriminatory effect Because most incumbents are Minnesota-headquartered and control most lines, the law disproportionately burdens out-of-state entrants The law burdens any non-incumbent (in-state or out-of-state) equally; incumbency, not domicile, controls access No discriminatory effect found; statute applies evenhandedly to incumbents regardless of domicile
Undue burden (Pike balancing) ROFR prevents LSP from competing for MISO-approved projects; cumulative state ROFRs could nullify Order 1000 and eliminate competition Minnesota’s interest in siting/permitting/regulating utilities is strong; incumbents need not exercise ROFR; aggregate harm is speculative Burden is not clearly excessive relative to Minnesota’s legitimate interests; Pike challenge fails

Key Cases Cited

  • General Motors Corp. v. Tracy, 519 U.S. 278 (Sup. Ct. 1997) (distinguishing regulated local utilities from unregulated competitors in dormant Commerce Clause analysis)
  • Pike v. Bruce Church, 397 U.S. 137 (Sup. Ct. 1970) (articulating balancing test for incidental burdens on interstate commerce)
  • C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (Sup. Ct. 1994) (invalidating local flow-control ordinance under dormant Commerce Clause)
  • Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dep’t of Natural Resources, 504 U.S. 353 (Sup. Ct. 1992) (flow-control case under dormant Commerce Clause)
  • Hughes v. Oklahoma, 441 U.S. 322 (Sup. Ct. 1979) (burden of proof for showing discriminatory law rests with challenger)
  • Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (Sup. Ct. 1978) (Commerce Clause does not protect particular market structures)
  • Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm’n, 461 U.S. 375 (Sup. Ct. 1983) (state authority to regulate utilities falls within police power)
  • MISO Transmission Owners v. FERC, 819 F.3d 329 (7th Cir. 2016) (upholding FERC’s approach to avoid intruding on state siting/construction authority)
  • IESI AR Corp. v. Nw. Ark. Reg’l Solid Waste Mgmt. Dist., 433 F.3d 600 (8th Cir. 2006) (discussion of dormant Commerce Clause and discriminatory purpose/effect tests)
  • Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Sup. Ct. 2007) (pleading standard for plausibility on a Rule 12(b)(6) motion)
  • Ashcroft v. Iqbal, 556 U.S. 662 (Sup. Ct. 2009) (complaints must contain sufficient factual matter to state a plausible claim)
Read the full case