Indeck Corinth v. Paterson
New York power company argues that the regional initiative of Northeastern states to combat global warming violates the Constitution’s Compact Clause, deprives the company of due process and equal protection rights, and is preempted by federal law
Status: Out-of-court settlement reached Dec. 23, 2009 (subject to public comment and entry of consent decree by court)
Discussion & Analysis: In the absence of federal action on climate change, a group of Northeastern states began to fashion a collective regional response in 2003. Today, this effort is known as the Regional Greenhouse Gas Initiative (RGGI) and represents an unprecedented joint approach by a regional coalition of states to combat global warming. RGGI’s goal is to reduce carbon dioxide emissions from power plants in participating states through a mandatory cap-and-trade program. Ten states (CT, DE, MA, MD, ME, NH, NJ, NY, RI, and VT) have signed a “memorandum of understanding” to become participants in the process, while several other U.S. jurisdictions (DC and PA) and Canadian provinces are observing. Each RGGI participant state must enact agreed-on rules, by way of state legislation or administrative regulations, to implement the program. The initial RGGI compliance period began on January 1, 2009. If successful, RGGI will reduce emissions from power plants within the RGGI states by 10% by 2019, with further reductions in later years.
Less than a month after the RGGI emissions cap took effect in 2009, Indeck Corinth, L.P., owner of a co-generation plant in Corinth, New York, sued New York officials to halt RGGI’s implementation. Indeck made several claims specific to its Corinth plant and also argued that New York’s implementation of RGGI violates state and federal law. Indeck's complaint went on to assert that the RGGI framework itself is unconstitutional. In December 2009, Indeck and the state settled the case out of court, subject to a public comment period and final approval by the court. Nonetheless, Indeck’s complaint previews constitutional claims that could still be brought against RGGI and similar regional climate frameworks in the future.
Indeck argued that RGGI violates the Compact Clause of the U.S. Constitution, which limits the ability of states to enter into binding agreements with one another absent congressional approval. The RGGI states have not sought that approval, because RGGI is structured so that each state retains its sovereignty and cannot be bound against its will. No court has ever invalidated such an interstate agreement for lack of congressional consent. In the words of the Supreme Court, the Compact Clause is directed at a “combination tending to the increase of political power in the [s]tates, which may encroach upon or interfere with the just supremacy of the United States.” It is by no means clear that the RGGI arrangement rises to this level.
Indeck also alleged that New York’s implementation of RGGI violates the company’s due process and equal protection rights under the Constitution. These sorts of claims appear to have little chance of success. Courts generally do not find due process violations simply because a law imposes new, even unanticipated, costs on a company. This, however, can be a fact-specific analysis about which it is difficult to generalize. To sustain an equal protection claim, Indeck would have had to show either that the rules imposed under RGGI lack any rational basis (not likely after Massachusetts v. EPA) or that its co-generation facility in Corinth, New York is a member of a “suspect class,” a status normally reserved for groups suffering racial or gender discrimination.
Indeck’s complaint also made a federal preemption claim. Indeck alleged that to the extent New York regulators barred the company from recovering costs incurred under RGGI, their efforts are preempted by the federal Public Utilities Regulatory Policies Act, which guarantees co-generation facilities like the Corinth plant a certain rate of return. Indeck argued that it will not achieve this return unless it is allowed to raise prices on the electricity it sells to utilities in response to the increased costs of energy production under RGGI.
It is worth noting the existence of at least two other constitutional arguments—not presented by the Indeck complaint—that industry advocates have raised and that could appear in future lawsuits against RGGI or other regional climate change frameworks. The first is that such a state arrangement impermissibly burdens interstate commerce under the so-called “dormant” Commerce Clause. Such a claim would have been difficult for Indeck to sustain under legal precedent that affirms state power to enact environmental laws that only incidentally burden interstate commerce. The second constitutional claim is that RGGI should be preempted because it interferes with the federal government’s foreign policies, for example, by undermining U.S. diplomats’ bargaining positions in international climate treaty negotiations. Courts have not looked favorably on foreign policy preemption claims in the climate context, which may explain why Indeck did not raise it here.
Some or all of these issues could be mooted if Congress passes comprehensive climate legislation. Such legislation will probably either preempt state-operated cap-and-trade programs like RGGI outright, or fold them into a new, federal carbon allowance market. Further, the Supreme Court’s 2007 decision in Massachusetts v. EPA authorizes EPA under the Clean Air Act to regulate greenhouse gas emissions, and federal regulatory action here could result in at least a partial preemption of certain aspects of RGGI.
Key Opinions: None. See Indeck Corinth v. Paterson, Index No. 5280/2009, (N.Y. Sup. Ct., Albany Co., filed Jan. 29, 2009).
See Also: The official RGGI website is at http://www.rggi.org/home.htm. The page on stakeholder comments includes written comments from various sources, including from members of regulated industry. See http://www.rggi.org/about/stakeholders. For information about the Western Climate Initiative, a similar effort launched in 2007 by Western states (AZ, CA, NM, OR, and WA), see http://www.westernclimateinitiative.org/. Nine Midwestern states (IL, IN, IA, K S MI, MN, OH, SD, and WI) and a Canadian province launched the Midwestern Regional Greenhouse Gas Reduction Accord in November 2007, the third major regional agreement of its kind. See http://www.midwesterngovernors.org/Publications/Greenhouse%20gas%20accord_Layout%201.pdf.
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