Dismantling the Latest Legal Delays in the Fight for Cape Wind

Jerry Elmer

WindThe new year has brought more of the same when it comes to the decade-long battle over the Cape Wind offshore wind energy project proposed to be built in federal waters off the coast of Massachusetts. While Europe continues to leap forward with deployment of offshore wind – tapping into this resource’s unparalleled capacity to deliver tremendous quantities of clean electricity – yet another dubious lawsuit has been filed in an effort to further delay America’s first offshore wind project. In a week that saw Cape Wind again successfully beat back its opponents’ legal claims, this time winning a favorable decision from a federal appellate court , longtime Bill Koch–backed Cape Wind opponents filed yet another new lawsuit in federal court in Boston.

The case is called Town of Barnstable v. Berwick; however, no one should be fooled as to who’s really driving this new case. As detailed in press reports and earlier posts, we have good reason to believe that it’s Mr. Koch’s Alliance, not the Town, that is continuing to pay the bills in the ongoing pursuit of a longstanding strategy of “delay, delay, delay.” This is expected to be the first of two posts that will focus on the new lawsuit’s fatal flaws.

Latest Legal Claims Fail to Stand Up to Scrutiny
We will set aside, for now, the new lawsuit’s fundamental errors of fact and instead focus on explaining why the new legal claims are wrong. Basically, this new lawsuit alleges that the Cape Wind project violates the United States Constitution in two ways: first, that Cape Wind allegedly violates the Supremacy Clause (because federal law governs interstate electricity markets); and, second, that Cape Wind supposedly violates the Commerce Clause (on the claimed basis that Massachusetts is impermissibly favoring an in-state developer over possible out-of-state developers, even though most of the Cape Wind project will be built in federal, not state, waters).

Two recently decided federal lawsuits in Maryland and New Jersey are instructive in understanding that both of the anti-Cape Wind arguments in this new lawsuit are without merit. In fact, these two legal arguments are so weak that they would reveal the real purpose of this newest anti-Cape Wind lawsuit – i.e., delay through endless, meritless litigation – even if Mr. Koch had not publicly confessed to such a strategy.

Let’s look at both of the new lawsuit’s central arguments separately.

The “Supremacy Clause” Does Not Apply
The “Supremacy Clause” of the U. S. Constitution says that federal law generally trumps state law; in areas where the federal government has pervasive, all-encompassing laws and regulations, states are not allowed to enact laws or policies that directly contradict the existing federal laws. Wholesale, interstate electricity markets are an area that the federal government regulates, through a federal agency called the Federal Energy Regulatory Commission (FERC).

In many parts of the country, FERC has created independent companies to manage and run the regional electricity grid. Here in New England, FERC has licensed the Independent System Operator-New England (ISO) to manage and run central aspects of New England’s electricity grid. For Pennsylvania, New Jersey, Maryland, and several other states, FERC has licensed a company called PJM to play a similar role with respect to that region’s electricity grid. Because PJM and ISO are very similar to each other, these two recently decided cases I referred to above may have some legal bearing on the recently filed lawsuit against Cape Wind. (For those who are interested, the names of the two lawsuits I am discussing are: PPL Energyplus, LLC v. Nazarian, the Maryland case; and PPL Energyplus v. Hanna, the New Jersey case. I’ll refer to them here as Nazarian and Hanna.)

PJM and ISO are concerned with making sure that their respective geographic regions always have enough electricity to keep the lights on for electricity customers. One thing that they do to ensure this is to run a so-called “Forward Capacity Auction” three years ahead of time. Electricity generators bid into this auction, in effect offering to sell electricity in the geographical area three years in the future. These Forward Capacity Auctions are a principal means by which these operators of the electricity grid ensure that they will have enough electricity in the future. The procedures used to run these auctions are approved in advance by FERC; the auctions themselves are monitored by FERC; and FERC has to approve the results of the auctions. In short, federal law governs every aspect of the ways these auctions are run.

What happened in both the Nazarian and Hanna cases is that, after the capacity auction was run by PJM, Maryland and New Jersey were concerned that there would be a future shortage of electricity in their states. As a result, after the auction was run, and after the federal agency (FERC) approved the results of the auction, Maryland and New Jersey tried to do an impermissible end-run around the auction results by offering additional money – outside the auction – to anyone who would build a power plant in their states. In fact, in the Maryland case, the state actually said publicly that the reason for its action was specifically to do an end-run around federal law and regulations that were responsible for the PJM auction and its results! Not surprisingly, the courts in both cases ruled that state laws or policies could not directly contradict federal law in a specific area in which the federal government has exclusive jurisdiction. This violates the Supremacy Clause.

These two decisions simply have no applicability to Cape Wind. Neither the Commonwealth of Massachusetts nor the developers of Cape Wind nor the utilities that signed contracts with Cape Wind are trying to do an end run around the ISO’s Forward Capacity Auction – nor around any federal statute, regulation or rule. In fact, the Cape Wind project was well on its way to being permitted before the ISO ever held its first Forward Capacity Auction in February 2008.

State Interests Trump Commerce Clause Concerns
The second argument being advanced in the recently filed anti-Cape Wind lawsuit relates to the U. S. Constitution’s Commerce Clause. Basically, as a general rule, the Commerce Clause says that in the absence of a compelling justification no individual state can pass a law that benefits in-state residents and harms out-of-state residents. For example, Massachusetts cannot pass a law that says: “At all grocery stores in Massachusetts, in-state residents get a 10% discount on the prices shown, and all of-of-state residents must pay a 10% premium on the prices shown.” This (hypothetical) law would violate the Commerce Clause because it discriminates in favor of in-state residents and against out-of-state residents.

In both the Nazarian and Hanna cases, the plaintiffs claimed that the state laws that would encourage construction of in-state power plants violated the Commerce Clause because they were aimed at getting power plants built – but in state only. However, the courts in both cases ruled that this does not violate the Commerce Clause. That is, the holdings in both Nazarian and Hanna cut directly against the legal theory that the anti-Cape Wind lawyers are asserting in the newly filed case.

In both Nazarian and Hanna, the courts found that states have regulatory authority over many aspects of siting and permitting power plants. These include environmental concerns and legitimate concerns about getting enough electricity for their state’s electricity customers. In both Nazarian and Hanna, the courts found that these legitimate areas of state interest trump any Commerce Clause concerns.

In fact, the Judge in the Nazarian case wrote that individual states are allowed to facilitate the financing and construction of “certain types of power plants within its borders (such as environmental-related regulation)” without offending the commerce clause. Of course, that is what Massachusetts did when it established a requirement for electric utilities to enter long-term contracts to buy clean renewable energy – a requirement that ultimately resulted in two long-term contracts signed between utilities and Cape Wind, as well as a number of contracts with other projects. What’s more, most of the Cape Wind project isn’t even located within the borders of Massachusetts – it’s in federal waters. The judge in the Nazarian case also said that federal law specifically “preserve[s] states’ jurisdiction over certain direct regulation of physical generation facilities [including, specifically to] promote certain environmentally desired types of generation facilities.” Again, this holding shows why the new lawsuit against Cape Wind will fail.

New Day, Same Old Delays
We all know there is a climate-change emergency, and that it is crucial to develop non-carbon-emitting power plants to avoid the worst consequences of climate change. We all know that building Cape Wind is good public policy.

Based on a review of the latest weak, meritless claims advanced by opponents, we also know that their central strategy appears to be nothing more than the same old “delay, delay, delay.”

Focus Areas

Climate Change

Places

Massachusetts

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