This post is part of the Environmental Law Review Syndicate, a multi-school online forum run by student editors from the nation’s leading environmental law reviews.

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By Christopher Hyner, Managing Editor—Georgetown Environmental Law Review

Climate change. Ocean dead zones. Fisheries depletion. Species extinction. Deforestation. World hunger. Food safety. Heart disease. Obesity. Diabetes. The list goes on. There is one issue at the heart of all these global problems that is too often overlooked by private individuals and policy makers alike—our demand for and reliance on animal products. We can take a substantial step towards addressing all these problems simultaneously through reducing or eliminating our reliance on meat and dairy products. This begs the question — what are the United States’ major governmental environmental policy enforcers doing to address animal agriculture’s contribution to climate change, if anything? This piece briefly highlights two things: (1) animal agriculture is a leading cause of many major environmental problems we face globally and domestically—most importantly, climate change; and (2) animal agriculture is too often left out of the policy discussion.

First, the interconnectedness of animal agriculture and the environment.

A multitude of environmental problems our planet faces share a common instigator: animal agriculture and our reliance on meat and dairy products. According to the United States Department of Agriculture (USDA), global agriculture—dominated by livestock production and the grains grown to support it—accounts for 30% of greenhouse gas emissions.[1] A 2006 study by the United Nation’s Food and Agriculture Organization (FAO) finds that 18% of global greenhouse gas emissions is directly attributable to livestock production, which is more than the emissions attributable to the entire transportation sector.[2] Whichever number is relied upon, agricultural emissions are only going to increase as rising incomes and urbanization drive a global dietary transition towards increased consumption of meat and dairy products.[3] The growing demand for animal agriculture is expected to be a major contributor to a roughly 80% increase in global greenhouse gas emissions from the agricultural sector.[4] This means that animal agriculture must be a central element of our efforts to mitigate climate change.

In addition to being a major contributor to climate change, animal agriculture is also one of the leading causes of many other environmental issues, including overfishing, destruction of wildlife, deforestation, and depletion of freshwater resources to hydrate livestock or irrigate fodder. According the FAO approximately 75% of the world’s fisheries are either exploited or depleted[5] due to fishing, which will likely lead to the complete depletion of currently fished fish stocks by 2048.[6] As to wildlife, in order to protect the interests of primarily the livestock industry, the USDA and Bureau of Land Management sponsor programs to kill or entrap wildlife that threaten the industry’s bottom line.[7] This has led to the decimation of wolf populations in the Pacific Northwest[8] and the mass round up of wild horses in the Midwest, which compete with cattle and sheep to graze on public lands.[9] With regard to deforestation, the World Bank has found that animal agriculture is responsible for roughly 90% of the razing of the Brazilian Amazon.[10] Lastly, but likely most critically, animal agriculture is the number one consumer of fresh water by a significant margin. Animal agriculture consumes on average 55 trillion gallons of water annually—more than 520 times the water used in hydraulic fracturing. [11] On a micro level, it takes roughly 5,000 gallons of water to produce 1lb. of beef.[12]

Second, the policies . . . or lack thereof.

Animal agriculture is a significant contributor, arguably the most significant, to a variety of pressing environmental issues. Despite the magnitude of the problem, relatively few global and national policies addressing the environmental effects of animal agriculture exist, and those that do exist are grossly inadequate. Federal agencies, specifically, have neglected their statutory authority to reduce greenhouse gas emissions from the animal agriculture industry.

The agency primarily responsible for regulating animal agriculture, the United States Department of Agriculture, fails to adequately address animal agriculture in its climate plan.
On April 23rd, 2015, Tom Vilsack, Secretary of the U.S. Department of Agriculture, unveiled the Agency’s “Building Blocks for Climate Smart Agriculture & Forestry” plan. The plan is primarily designed to “help farmers, ranchers, and forest land owners respond to climate change.[13] The USDA draws its authority to address climate change from the recent enactment of the Agricultural Act of 2014, or the “Farm Bill.”[14] Interestingly, the only reference to climate change in any provision of the most recent Farm Bill is in its reauthorization of the Office of International Forestry under Section 2405(d) of the Global Climate Change Prevention Act of 1990.[15]

USDA’s strategic climate plan, which grants that “[t]he dominant drivers of land use emissions of carbon are the conversion of forest and grassland to cropland and pasture” for animal agriculture, fails to establish concrete measures to reduce greenhouse gas emissions from animal agriculture.[16] The climate plan instead relies on voluntary conservation programs that provide technical assistance for resource management to encourage the animal agriculture industry to reduce greenhouse gas emissions.[17] One building block of the plan recommends the deployment of anaerobic digesters, lagoon covers, composting, and solids separators to reduce emissions from livestock—the equivalent of telling the industry to voluntarily change their light bulbs and to recycle more.[18] Another building block encourages rotational grazing management of livestock even though it has been shown that grazing makes less sense than Concentrated Animal Feeding Operations (CAFOs) in terms of accounting for emissions and overall sustainability.[19] These voluntary measures inadequately address animal agriculture’s contribution to climate change.

The two primary remedial measures the USDA identifies to curtail greenhouse gas emissions—improved agricultural management practices and nitrous oxide (N2O) and methane (CH4) sequestration—do not go far enough. Although USDA notes that improved agricultural management practices can have a potentially significant role in addressing the atmospheric build-up of greenhouse gas emissions, it admits that these benefits will be realized over the next century.[20] This is an essential step, but additional measures must be taken that will reduce greenhouse gas emissions in the short term to avoid the catastrophic effects of climate change.

Of particular concern is animal production’s contribution to N2O (nitrous oxide) and CH4 (methane) emissions. With both eyes on the economic wellbeing of the animal agriculture industry and ensuring that current levels of production are maintained, USDA looks to “technological advancement” as the pathway for reducing NO2 and CH4 emissions.[21] The USDA identifies sequestration capabilities as the key to reducing NO2 and CH4 emissions. The Agency, however, alleges that it does not know enough to specify any concrete practices to mitigate climate change, focusing on unknown economic consequences sequestration methods may have on the producer.[22] The USDA emphasizes that GHG mitigation is one of a number of conservation issues facing land management.[23] “Soil and water quality, wildlife resilience and sustainability, air quality,” among others are noted, and tradeoffs must be identified and evaluated in order to design effective programs that address climate change.[24] In other words, USDA evades imposing concrete measures to curtail N2O and CH4 emissions until it has a better understanding of whether such mitigation will have a negative impact on the industry’s economic viability as well as on attempts to address other conservation issues.

Likewise, the Obama Administration fails to adequately address animal agriculture in the Climate Action Plan.
The Obama Administration’s Climate Action Plan narrowly focuses on energy production with no mention of animal agriculture except as it may relate to “agricultural activities” in the release of nitrous oxide.[25] What the Climate Action Plan fails to tell us is that livestock is responsible for 65% of all human-related emissions of N20, which has 296 times the global warming potential of carbon dioxide.[26] Moreover, though carbon dioxide comprises a large percentage of greenhouse gas emissions, the Plan fails to explain that a substantial portion of those emissions are directly tied to the production life cycle of meat and dairy products.[27] These climate plans are simply lacking in generating sound policies that include strategies to reduce animal agriculture’s contribution to climate change.

Efforts to reduce carbon emissions from fossil fuels are certainly vital to addressing climate change. The administration’s policy picture, however, fails to address one of the leading causes of human-related greenhouse gas emissions by not directly curtailing emissions from animal agriculture. Animal agriculture is hardly mentioned by the agencies charged with developing policies and regulations to mitigate the negative impacts of not only climate change, but also other environmental and public health issues.

Concrete policies addressing animal agriculture’s environmental effects need to be created and implemented. The administration has several tools at its disposal to address this issue. First, the Obama Administration can pressure the USDA to redraft and implement a more sophisticated plan to cut greenhouse gas emissions from livestock production, much in the way the Environmental Protection Agency was charged in generating the Clean Power Plan in targeting fossil fuel emissions from power plants.

Second, eliminate all subsidies to animal agriculture and impose a meat tax. In his book, Meatonomics, David Simon spells out how eliminating subsidies and reforming taxes can force us to pay the true cost of meat and dairy products as well as put more money back into the taxpayers’ pockets.[28] In the United States, taxpayers support upwards of $38.4 billion a year in subsidies to animal food production and assume over $400 billion of externalized costs associated with animal food production including subsidies, healthcare costs, environmental costs, animal cruelty, and fish production.[29] Eliminating subsidies would rid our food system of market distortions and allow the market principles of free trade—the principles that govern our economy—to readjust our consumption patterns towards healthier and environmentally aligned products.[30]

All in all, if we want to make serious gains in minimizing harms to the environment and public health, we need concrete policies that take a serious stance on minimizing animal agriculture.

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[1] USDA, USDA Climate Change Science Plan 4 (2010), available at http://www.usda.gov/oce/climate_change/science_plan2010/USDA_CCSPlan_120810.pdf. These figures include contributions from land use change and deforestation for the purpose of agriculture—primarily to make land available for grazing.

[2] Henning Steinfeld et al., FAO, Livestock’s Long Shadow: Environmental Issues and Options (2006), available at http://www.fao.org/docrep/010/a0701e/a0701e00.htm. A more recent and comprehensive study published by Worldwatch Institute, however, finds that livestock and their byproducts actually account for 51% of worldwide human-related greenhouse gas emissions annually. Robert Goodland & Jeff Anhang, Livestock and Climate Change, World Watch Magazine, November/December 2009, at 11.

[3] David Tilman & Michael Clark, Global Diets Link Environmental Sustainability and Human Health, 515 Nature 518, 520 (2014).

[4] Id.

[5] FAO, General Situation of World Fish Stocks, http://www.fao.org/newsroom/common/ecg/1000505/en/stocks.pdf.

[6] Boris Worm et al., Impacts of Biodiversity Loss on Ocean Ecosystem Services, 314 Science 787, 790 (2006).

[7] USDA, Animal and Plant Health Inspection Service, https://www.aphis.usda.gov/wps/portal/aphis/ourfocus/wildlifedamage (last visited Oct. 15, 2015).

[8] Ralph Maughan, Wedge Wolf Pack Will be Killed because of its Increasing Beef Consumption, The Wildlife News (Sept. 28, 2012), http://www.thewildlifenews.com/2012/09/22/wedge-wolf-pack-will-be-killed-because-of-increasing-beef-consumption/.

[9] Ross W. Gorte et al., Cong. Research Serv., R40237, Federal Lands Managed by the Bureau of Land Management (BLM) and the Forest Service (FS): Issues in the 111th Congress 11 (2010); see also 157 Cong. Rec. H420 (daily ed. Jan. 24, 2011) (statement of Rep. Burton); 180 More Wild Horses Found Dead in Nevada, N.Y. Times, Oct. 12, 1988, at A15.

[10] Sergio Margulis, Causes of Deforestation of the Brazilian Amazon, The World Bank (2004), http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/02/02/000090341_20040202130625/Rendered/PDF/277150PAPER0wbwp0no1022.pdf.

[11] EPA, Draft Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources 14 (Feb. 2011), available at http://www2.epa.gov/sites/production/files/documents/HFStudyPlanDraft_SAB_020711.pdf.

[12] David Pimentel et al., Water Resources: Agricultural and Environmental Issues, 54 BioScience 909, 911 (2004).

[13] USDA, Building Blocks for Climate Smart Agriculture and Forestry, http://www.usda.gov/wps/portal/usda/usdahome?contentidonly=true&contentid=climate-smart.html (last visited Oct. 15, 2015).

[14] Id.; see also Katie Hoover, Cong. Research Serv., R43431, Forestry Provisions in the 2014 Farm Bill (Pl. 113-79) (2014).

[15] 7 U.S.C. § 6704(d) (2012).

[16] USDA, supra note 1, at 3-4.

[17] USDA, USDA’s Building Blocks for Climate Smart Agriculture & Forestry—Fact Sheet (Apr. 23, 2015), available at http://www.usda.gov/documents/climate-smart-fact-sheet.pdf.

[18] Id.

[19] Id.; see also Cowspiracy (A.U.M. Films 2014).

[20] USDA, supra note 18, at 4.

[21] USDA, supra note 1, at 15-17.

[22] Id.

[23] Id.

[24] Id.

[25] Climate Change and President Obama’s Action Plan, The White House, https://www.whitehouse.gov/climate-change#section-carbon-pollution (last visited Oct. 15, 2015).

[26] Supra, note 2, at xxi.

[27] Supra, note 3.

[28] David R. Simon, Meatonomics, 166 (2013); see also Marya Torrez, Accounting for Taste: Trade Law Implications of Taxing Meat to Fight Climate Change, 27 Geo. Int’l Envtl. L. Rev. 61 (2014).

[29] Id. at Appendix B.

[30] Emiko Terazono, OECD Warns Farm Subsidies Still Too High, Financial Times (Sept. 4, 2014), http://www.ft.com/cms/s/0/a42540e4-3384-11e4-85f1-00144feabdc0.html#axzz3okCLb03e.

This post is part of the Environmental Law Review Syndicate, a multi-school online forum run by student editors from the nation’s leading environmental law reviews.

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By Kristen Mae Rodgers, Note Editor, Vermont Journal of Environmental Law

Vermont is leading the nation in the local, sustainable food movement and the new food economy. In fact, Vermont is the frontrunner in farm stands, community supported agriculture (CSA) programs, and farmers’ markets per capita across the entire United States. According to the USDA, Vermont is one of few states to see a boom in new farms. In 2014, Vermont bucked national trends showing growth in large-scale agricultural operations, and instead favored growth in small-scale agricultural operations. These small-scale farms make up the real strength in the local food movement for the state and highlight Vermont’s community-based approach to agriculture.

The rise of new farms coupled with already well-established operations makes agriculture one of the most important facets to Vermont’s economy. Agriculture and other food related activities grew from $6.9 billion in 2007 to $8.6 billion in 2014. According to the 2014 VT Farm to Plate Annual Report, over 60,000 jobs within the state can be attributed to Vermont’s food system. Roughly 12,000 businesses in Vermont partake in the food system. Overall, Vermont is set to continue its agricultural growth into the future.

Vermont owes its booming agricultural economy to one of its most precious natural resources – soil. Soil is a finite resource in the state. Farmland with viable soils are in high demand statewide due to the growth of new farms and continuation of existing farm operations. This demand has especially impacted dairy farmers, who now have to travel substantial distances to grow enough forage for their animals. Soil integrity will play an even larger roll in the demand for farmland in the future, as climate change alters the viability of soils worldwide.

The importance of Vermont’s soils, and thus agriculture, is reflected in Vermont’s signature land use legislation. Act 250, formally named Vermont’s Land Use and Development Law (10 V.S.A. Chapter 151), ensures that development in Vermont will coincide with natural resource conservation. Act 250 specifically calls out for special consideration of “Primary Agricultural Soils”, also known as PAS. PAS as defined by 10 V.S.A. section 6001 are “. . . important farmland soils map unit[s] that the Natural Resources Conservation Service of the U.S. Department of Agriculture (NRCS) has identified and determined to have a rating of prime, statewide, or local importance.” PAS make up the backbone of Vermont’s agricultural economy.

Criterion 9(b) of Act 250 ensures that any development on farmland will be well thought out and least likely to damage PAS. Under Criterion 9(b) exist four subcriteria. The subcriteria of 9(b) call for: (1) any development to not impinge on abutting agricultural operations; (2) no other lands owned or controlled by the applicant be reasonably suited for development; (3) the development plans minimize the reduction of agricultural potential of PAS through compact development patterns; and (4) suitable mitigation will be provided for any reduction of PAS in accordance with 10 V.S.A. section 6093. Section 6093 deals with the flexibility of soil mitigation and whether onsite or offsite mitigation can occur for certain projects. Section 6093 allows for the District Commission to decide if “appropriate circumstances” exist that warrant offsite mitigation measures. The offsite mitigation decision must be consistent with local and regional plans, as well as Vermont’s codified Smart Growth Principals. Overall, this means that any development in Vermont must first and foremost protect the economic and agricultural viability of the land and surrounding villages.

In a series of recent District Commission hearings, Criterion 9(b) is going through the wringer. Act 250 allows for partial review of its 10 criteria to ensure that development plans meet specific criterion before applying for full Act 250 review. As proposed, the Green Mountain Center would create over 1 million square feet of development on rural Vermont countryside in Randolph, Vermont. The Green Mountain Center applicant is currently seeking review of Criteria 9(b) and 10. The hearings regarding Criteria 9(b) and 10 have spanned more than 6 months with no formal decision made by the District 3 Commission yet. Conservation groups like the Conservation Law Foundation and Vermont Natural Resources Council oppose the project due to its impact on farmland. The main issue at the hearings is if the Green Mountain Center developer’s plans will qualify for requested offsite mitigation. Offsite mitigation can only be allowed by the District Commission if appropriate circumstances exist. Current case law and documents from the Natural Resources Board, who oversee Act 250, give little guidance as to what appropriate circumstances mean. However, it is clear that offsite mitigation should only be favored in situations where development occurs in one of six state-designated growth centers. Because the Green Mountain Center is outside a designed growth center, the Commission is entering new territory for offsite mitigation under Act 250. One thing is for certain, the District 3 Commission’s decision will shape the way development in Vermont will occur in years to come.

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This post is part of the Environmental Law Review Syndicate, a multi-school online forum run by student editors from the nation’s leading environmental law reviews.

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By Sarah Stellberg, Editor-in-Chief, Michigan Journal of Environmental & Administrative Law

In his June 7, 2013 opinion in Illinois Commerce Commission v. FERC,[1] Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit inserted two lines of dicta on the constitutionality of Michigan’s Renewable Portfolio Standard, or Public Act 295 (PA 295).[2] By discriminating in favor of in-state renewable energy, he opined that Michigan’s law “trips over an insurmountable constitutional objection. Michigan cannot, without violating the Commerce Clause of Article 1 of the Constitution, discriminate against out-of-state renewable energy.”[3] The opinion will have little precedential value—it was not necessary for the holding, not fully briefed by the parties, and not binding on the Sixth Circuit. Nonetheless, the statement sent a ripple through the energy community, casting doubt upon Michigan’s law and the many similar Renewable Portfolio Standards with preferences for homegrown renewables. Twelve of these laws have already faced lawsuits alleging out-of-state discrimination,[4] and Judge Posner’s statement may be a harbinger of things to come in Michigan.

Two years later and several hundred miles away in the state capitol, Michigan legislators began launching their own attack on PA 295. After the RPS targets are met this year, there is no legal mandate for utilities to further increase their share of renewable generation. Republican legislators have introduced a bill that would repeal the renewable portfolio standard altogether.[5] Meanwhile, the Democratic proposal would increase the RPS to 20 percent by 2022.[6]

These efforts to rewrite Michigan’s comprehensive energy policy could spell trouble for the future of the Renewable Portfolio Standard. Yet with complete repeal unlikely, perhaps clean energy advocates should welcome the bills rattling around in Lansing. This legislative debate provides the perfect opportunity to rewrite PA 295 to fend off the constitutional challenge foretold in Judge Posner’s opinion.

Dormant Commerce Clause: The Legal Standard

The Commerce Clause of the U.S. Constitution grants Congress the power “[t]o regulate Commerce . . . among the several states.”[7] While the Clause contains no explicit language to this effect, courts have long recognized a negative implication of this enumerated power, known as the “dormant Commerce Clause,” which prohibits states from discriminating against or unduly burdening interstate commerce.[8]

Dormant Commerce Clause jurisprudence distinguishes between state laws that openly discriminate and those that impose a burden upon interstate commerce. The first category—laws that discriminate facially, purposefully, or in practical effect against out-of-state economic interests—are virtually per se invalid.[9] To uphold a discriminatory law, a court must find that the law is justified by a legitimate state interest unrelated to economic protectionism and that no less discriminatory alternative is available.[10]

The second category, facially neutral statutes, is subject to a lower level of scrutiny under the Pike v. Bruce Church, Inc. balancing test and will be upheld if the law’s putative local benefit outweighs its burden on interstate commerce.[11] In practice, the test is very forgiving to states. Unless the purported state interest appears to be illusory, courts rarely strike down state laws under the Pike test.[12]

Michigan’s Clean, Renewable, and Efficient Energy Act of 2008

Michigan’s Renewable Energy Standard is part of the 2008 Clean, Renewable, and Efficient Energy Act, or PA 295, signed into law on October 6, 2008 by then-Governor Jennifer Granholm.[13] The RPS requires Michigan electricity providers to supply at least 10 percent of their Michigan retail sales from renewable energy by 2015, with interim targets in 2012, 2013, and 2014.[14] The standard is applicable to Michigan’s investor-owned utilities, electric cooperatives, municipal electric utilities, and alternative electric supplier (AESs).[15]

Under PA 295, electric providers demonstrate compliance through the purchase and/or production of Renewable Energy Credits (RECs).[16] One REC is created for each megawatt-hour of renewable energy generation from qualified technologies, including wind, solar and solar thermal, biomass, hydroelectric, geothermal, municipal solid waste, and landfill gas.[17]

Michigan’s law contains two provisions that raise dormant Commerce Clause questions. First, eligible renewable energy systems must be located either within Michigan or within the service territory of a utility serving customers in Michigan (the “geographic sourcing restriction”).[18] Second, PA 295 grants a 1.1 REC multiplier each megawatt-hour generated from a renewable energy system built using equipment made in Michigan or constructed by a Michigan workforce (the “Michigan incentive multiplier”).[19] These two geographic restrictions lie at the heart of a potential constitutional challenge.

Michigan Incentive Multiplier Trips at Strict Scrutiny

The Michigan incentive multiplier holds little promise of withstanding judicial review under the dormant Commerce Clause. This location-based preference facially discriminates against non-Michigan entities by granting bonus RECs to renewable energy facilities constructed using Michigan equipment or labor. Comparable incentives are not provided to renewable energy producers who do not use Michigan sourced materials and labor. The effect of the multiplier, then, is to limit competition and shift business to in-state entities, thereby impeding the flow of interstate commerce. While a law that evenhandedly promotes investment in renewable power is constitutionally permissible, a preference for in-state industry is not.

Facial discrimination should be enough to strike down the Michigan Inventive Multiplier on Commerce Clause grounds. On top of that, however, contemporaneous evidence provides indications of a protectionist motive. The declared purposes of PA 295 were to promote a diversified fuel mix, promote greater energy security through the use of local resources, improve air quality, and to encourage private investment in renewable energy.[20] Of these, the only goal meaningfully served by the Michigan incentive multiplier is in-state economic development. Indeed, the Michigan Public Service Commission noted in its 2014 report on the implementation of PA 295 that the “Michigan inventive REC provision is meeting its intended purpose to encourage developers to maximize utilization of Michigan equipment and labor.” Governor Granholm was also forthright that a primary goal of PA 295 was to aid Michigan’s manufacturing industry. In an early press event on the bill, she noted: “the package will do a lot of things, but for me the most important thing is the job creation and adding a whole new sector” for Michigan’s economy.[21] The dormant Commerce Clause does not prohibit states from promoting local economic development and job growth. As one commentator noted, “[n]o renewable energy mandate passed a state legislature without the promise of thousands of new jobs.”[22] However, while a law that evenhandedly promotes investment in renewable power is constitutionally permissible, one intended to preference in-state industry interests by encouraging increased consumption of local goods or services is not.[23]

Murkier Waters for the Geographic Sourcing Restriction

The constitutionality of Michigan’s geographic sourcing restriction is less certain. Public Act 295 would be easily struck down if the law banned utilities from purchasing out-of-state renewable power altogether. However, the limit on eligible renewable power does not fall into this trap. The RPS permits utilities to satisfy the 10 percent mandate with electricity generated from a renewable energy system (1) located in Michigan or (2) within the nearby service territory of a utility that also serves Michigan, which would include parts of Indiana, Ohio, Minnesota, and Wisconsin.[24] By its plain terms, therefore, the Act does not discriminate based on the territorial boundary of the state.

The Supreme Court has made clear, however, that a state law “need [not] be drafted explicitly along state lines in order to demonstrate its discriminatory design.”[25] Here, Michigan has closed its doors to power from forty-five states and most of Indiana, Ohio, Minnesota, and Wisconsin based purely on location. By limiting eligibility in this way, the state has attempted to “dr[aw] a line around itself and treat[] those inside the line more favorably than those outside the line.”[26] While a few out-of-state generators were swept under Michigan’s protective reach, the vast majority of entities were categorically excluded based on their geographic location outside the Michigan distribution network. This type of geographic Balkanization would likely amount to facial discrimination.

Even assuming that the geographic sourcing restriction is facially neutral, the law undoubtedly has the practical effect of discriminating against out-of-state renewable power producers.[27] Again, PA 295 requires RPS-eligible power to be generated within the Michigan service territory. By severely limiting a supplier’s compliance options, the RPS ensures that the renewable power used to satisfy the RPS is generally produced in-state, or at least in close proximity to the state.

The delineation between a “discriminatory effect” sufficient to trigger heightened scrutiny and an “incidental burden” to which the Pike balancing would be applied is imprecise.[28] However, evidence suggests that the Michigan RPS more than “incidentally” burdens the interstate trade in renewable power. A 2015 report from the Michigan Public Service Commission indicates that “[n]inety-three percent of the energy credits used for 2013 compliance were from renewable energy generated in Michigan.”[29] Only seven percent came from renewable energy generated in Indiana, Iowa, Minnesota, and Wisconsin.[30] Furthermore, without the in-state mandate, renewable electricity produced in nearby states could be purchased far below current prices. The most recent contracts for new wind capacity in Michigan have levelized costs in the $50 to $55 per MWh range, according to a 2015 report from the Michigan PSC.[31] This exceeds the cost of other regional wind projects costs by over 30% and the nationwide average by roughly 50%.[32]

While this data does not demonstrate causation—that the RPS led to an appreciably greater use of in-state power and fewer imports than would otherwise have occurred—the data provides powerful evidence that PA 295 established a discriminatory barrier to the interstate sale and transmission of renewable energy into Michigan.

Applying Strict Scrutiny

The practical effect of a finding that PA 295 discriminates against interstate commerce is fatal. In order to uphold the law, a court must find that the law serves a legitimate state interest unrelated to economic protectionism, and that no less discriminatory means to advance its legitimate local interest.[33] The geographic sourcing restriction may be justified by legitimate public health, safety, or environmental goals that go beyond economic motivation. For example, local renewable power generation can displace electricity generated from coal and natural gas plants, thereby reducing conventional air pollutants, such as sulfur dioxide (SO2), nitrous oxides (NOx), and particulate matter, and improving local air quality and public health.[34]

However, Michigan would ultimately have difficulty mounting any defense that it lacks a non-discriminatory means to achieve these permissible state goals. The geographic sourcing restriction is a blunt method of mitigating line-losses or achieving in-state emissions reductions. Furthermore, many of these goals would arguably be better served by technology-forcing regulations for in-state power plants,[35] subsidies for in-state renewables generators, demand response or energy efficiency regulations, or purchase quotas not relying on homegrown renewable power. This point is only underscored by the decision of most states to enact similar RPSs without relying on in-state preferences. Therefore, if the geographic sourcing restriction were deemed discriminatory, it would almost certainly fail under the rigorous strict scrutiny test.

Pike Test – Finding a Legitimate Local Purpose

If the Michigan RPS is lucky enough to survive strict scrutiny, the next stop is the Pike balancing test. At this stage the court would determine whether the burdens imposed on interstate commerce by Public Act 295 are excessive in relation to a legitimate public interests served.[36]

The burden Michigan’s RPS imposes on the interstate renewable power market is certainly not insubstantial. The practical impact of Michigan’s RPS has been to preclude energy suppliers in 45 states from competing for a share of Michigan’s renewable energy demand. On the other hand, the state has not banned the import of renewable energy for purposes other than meeting the 10 percent mandate. Electricity may continue to move freely across the Michigan border through the MISO or PJM markets. Additionally, it is unclear to what extent leveling the playing field in Michigan would lead to a greater influx of out-of-state power.

At a more general level, Michigan’s law may be seen as an impediment to the goals embodied in FERC Order 888, namely unimpeded and efficient competition in the wholesale power marketplace.[37] As the share of renewable power generation increases nationwide, protectionist Renewable Portfolio Standards threaten to splinter national energy markets. Therefore, even if Michigan’s law has only an incidental burden on the regional trade in renewable energy, a court may reasonably conclude that a patchwork of preferential renewable energy laws across the nation places an unwelcome burden on interstate electricity markets.

However, Michigan should have no trouble establishing sufficient evidence of one or more of the legitimate state interests that outweigh any burden on interstate commerce. Michigan has asserted several local interests in the text of the law. PA 295 expressly aims to:

promote the development of clean energy, renewable energy, and energy optimization through the implementation of a clean, renewable, and energy efficient standard that will cost-effectively do all of the following[:]

(a) Diversify the resources used to reliably meet the energy needs of consumers in this state.

(b) Provide greater energy security through the use of indigenous energy resources available within the state.

(c) Encourage private investment in renewable energy and energy efficiency.

(d) Provide improved air quality and other benefits to energy consumers and citizens of this state.[38]

The economic development goal expressed in subsection (c) would not suffice as a legitimate state interest, and advertising this purpose on the face of the statute may compromise the state’s ability to justify its protectionist design on other grounds.

However, as suggested by subsections (a) and (b), renewable power does have the distinct advantage of helping insulate consumers and the state economy from electricity or fuel price spikes. Michigan consumers rely on coal and nuclear power for more than 80% of their electricity.[39] The entirety of Michigan’s coal is imported, mostly by rail from Wyoming and Montana, and to a tune of $1.2 billion dollars annually.[40] Michigan’s dependence on coal generation has been declining due to falling natural gas prices and pressure from environmental regulations, but the state also imports 75% of its natural gas needs.[41] This overreliance on imported fuels exposes the state to volatile or increasing fossil fuel prices. Furthermore, pending environmental regulations such as EPA’s Clean Power Plan and Mercury Air Toxics Rule, as well as nuclear waste disposal costs, mean that a large part of the state’s portfolio is subject to considerable regulatory risk. Renewable energy can serve as a financial hedge, reducing the state’s exposure to these risks.

Michigan’s geographic sourcing restriction may also be warranted to achieve local emissions reductions from fossil-fuel power plants, as advanced in subsection (d). The climate change impact of renewable energy accrues globally regardless of where emissions are displaced. Therefore, a state cannot justify in-state preferences on the “local” climate benefits of greenhouse gas emissions reductions. Nonetheless, renewable power generation displaces electricity generated from coal and natural gas plants, thereby reducing conventional air pollutants—sulfur dioxide (SO2), nitrous oxides (NOx), particulate matter, mercury, and lead—and improving local air quality and public health.[42] The actual effect on air quality depends on how renewable resources are added the supply mix. Constructing a solar energy project in Michigan has a chance of displacing polluting coal plants in Michigan. Buying RECS from an Arizona solar project probably does not. Under the more forgiving Pike Balancing test, however, Michigan would have little trouble establishing a rational connection between its purposes of air quality improvement and the geographic sourcing restriction, despite evidence that in-state location is an imperfect proxy for fossil fuel emission displacement.

While PA 295 does not expressly assert any state interest related to transmission losses and infrastructural costs, this is arguably one of the greatest state interests in the eligibility restriction based on the location of the power within the state’s distribution grid. First, requiring utilities to purchase renewable power from within the state avoids some electricity transmission and distribution losses, increasing the efficiency of Michigan’s generation mix. Transmission lines waste somewhere around 6% of the power they deliver.[43] Under both PJM and MISO’s Locational Marginal Price (LMP) schemes, customers in Michigan end up paying for the cost of these marginal losses.[44] PA 295 theoretically helps minimize the distance power travels to reach its load and thus the costs of delivering renewable electricity to Michigan consumers. Second, ramping up renewable power generation often entails costly transmission investments to move power from areas where renewable power is most abundant to load centers where it will be used. Notably, however, the court in ICC v. FERC itself rejected Michigan’s argument that it should pay a lower share of MISO transmission line investments because it draws little renewable power from outside the state.[45]

Conclusion

Michigan’s geographic sourcing restriction and Michigan incentive multiplier leave the state’s RPS vulnerable to a dormant Commerce Clause challenge. Of course, it is possible that PA 295 may never be contested in court, given the law’s carve-outs for certain existing projects and special interests that would have been most likely to sue. Here, an ounce of prevention was certainly worth a pound of cure. Article III limitations such as standing may also bar a challenge on the merits, as they did in a lawsuit against renewable standards in Connecticut.[46] Nevertheless, until the preferential language in Michigan’s RPS is removed, the law will remain in jeopardy.

For this reason, policymakers in Lansing should take heed. As Public Act 295 is retooled for a new chapter in Michigan’s energy policy, they have an opportunity to shield the state’s Renewable Portfolio Standard from constitutional challenge. Rather than a Michigan incentive multiplier, the state should provide production incentives for in-state renewable energy generators.[47] Rather than a geographic sourcing restriction, the state should condition RPS eligibility on in-state benefit delivery, such as local emissions offsets. These amendments would open Michigan’s borders to a blossoming renewable energy market while maintaining the state’s forward progress on its economic, environmental, and energy development goals.

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[1] 721 F.3d 764 (7th Cir. 2013).

[2] Mich. Comp. Laws Ann. §§ 460.1001 – 460.1195 (West, Westlaw through P.A. 2008, No. 295, § 1, Imd. Eff. Oct. 6, 2008).

[3] Ill. Commerce Comm’n, 721 F.3d at 776.

[4] State Cases, State Power Project, http://statepowerproject.org/states/.

[5] H.B. 4297, 98th Leg. Reg. Sess. (Mich. 2015), https://www.legislature.mi.gov/documents/2015-2016/billintroduced/House/htm/2015-HIB-4308.htm.

[6] The “Powering Michigan’s Future” bill package, announced by a group of Democratic lawmakers, includes House bills 4055, 4518 and 4519 and Senate bills 295, 296 and 297. See Andy Balaskovitz, Michigan Democrats propose doubling clean-energy standards, Mich. Energy News (Apr. 4, 2015), http://www.midwestenergynews.com/2015/04/23/michigan-democrats-propose-doubling-clean-energy-standards/.

[7] U.S. Const. art. I § 8, cl. 3.

[8] See, e.g., H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 531 (1949); Pike v. Bruce Church, Inc., 397 U.S. 137, 141-42 (1970).

[9] See Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978) (“[W]here simple economic protectionism is effected by state legislation, a virtual per se rule of invalidity has been erected.”); Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93, 99 (1994) (“[I]f a restriction on commerce is discriminatory, it is virtually per se invalid.”).

[10] Oregon Waste Systems, 511 U.S. 93, 100-01 (1994). The Supreme Court has only once upheld a discriminatory statute under this test. Maine v. Taylor, 477 U.S. 131, 151-52 (1986) (upholding Maine’s ban on the import of out-of-state baitfish because Maine had no other way to prevent the spread of parasites and the adulteration of its native baitfish species); see also Erwin Chemerinsky et al., California, Climate Change, and the Constitution, 25 Envtl. F. 50, 54 (July/Aug. 2008) (noting that only one law has survived strict scrutiny analysis).

[11] 397 U.S. at 142 (1970).

[12] Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 449 (1978) (Blackmun, J., concurring).

[13] Mich. Comp. Laws Ann. §§ 460.1001-460.1195 (Westlaw).

[14] Id. § 460.1027.

[15] Id. §§ 460.1021(1), 23(1), 25(1).

[16] Id. § 460.1027(5).

[17] Id. Hydroelectric can include waves, tides, currents or water released through a dam. This does not include “a hydroelectric pumped storage facility or a hydroelectric facility that uses a dam constructed after the effective date Act 295 unless the dam is a repair or replacement of a dam in existence on the effective date of Act 295 or an upgrade of a dam in existence on the effective date of Act 295 that increases its energy efficiency.” Id. § 460.1011.

[18] Id. § 460.1029(1).

[19] Id. § 460.1039(c)(2).

[20] Id. § 460.1001 (emphasis added)

[21] Nathan Bomey, Granholm Says RPS Would Lead to ‘Tens of Thousands’ of Jobs, Ann Arbor Bus. Rev. (May 30, 2008, 10:57 AM), http://www.mlive.com/business/index.ssf/2008/05/granholm_says_rps_would_lead_t.html.

Governors’ statements have been used to strike down several laws under the dormant Commerce Clause. For example, in Kassel v. Consolidated Freightways Corp., 450 U.S. 662, 671 (1981), the Supreme Court considered the Iowa Governor’s articulation of an impermissible purpose—deflecting burdensome interstate traffic on Iowa’s highways—in striking down an Iowa truck ban purportedly passed for highway safety reasons. Similarly in Waste Management Holdings v. Gilmore, 252 F.3d 316, 336 (4th Cir. 2001), the Fourth Circuit struck down a Virginia cap on landfill waste based on the legislative history and the governor’s statements eliciting an discriminatory intent—to prevent Virginia from “becoming New York’s dumping grounds.”

[22] John Farrell, In-State Renewable Energy Development and the Commerce Clause, Inst. for Local Self-Reliance (Feb. 2, 2011), http://www.ilsr.org/state-renewable-energydevelopment-and-commerce-clause.

[23] See, e.g., Alliance for Clean Coal v. Miller, 44 F.3d 591, 596-97 (7th Cir. 1995) (invalidating the facially neutral Illinois Coal Act, under which coal plants in Illinois were required to install scrubbers so they would be able to continue using Illinois coal as a Clean Air Act compliance option; Illinois legislature could not do an end-run around Commerce Clause restrictions by merely “encouraging” consumption of Illinois coal); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) (Hawaiian excise tax on liquor sales that exempted local varieties was found purposefully discriminatory, where Hawaii’s stated purpose for the exemption was to “foster the local industries by encouraging increased consumption of their product”

[24] Mich. Comp. Laws Ann. § 460.1029(1) (Westlaw).

[25] Amerada Hess Corp. v. Director, 490 U.S. 66 (1989). In Dean Milk Co. v. Madison, 340 U.S. 349, 350 (1951), for example, the court found that a Madison city ordinance requiring all milk sold in the city to be pasteurized and bottled within a five-mile radius of the city center was facially discriminatory. Similarly, in Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 353 (1977), the court struck down a North Carolina statute that banned the sale of apples from any states with a grading system other than USDA, even though the law precluded sales from only some states. Finally, in Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 576 (1997), the court held that a Maine property tax exemption for charitable institutions that serve mostly state residents was facially discriminatory, even though several out-of-state entities benefitted from the statute.

[26] C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 403 (1994) (O’Connor, J., dissenting).

[27] There appears to be some disagreement in the circuits as to whether discriminatory effects alone can trigger heightened scrutiny. However, Brown-Forman makes clear that heightened scrutiny applies not only when legislation is facially discriminatory, but also when a state statute or regulation’s “effect is to favor in-state economic interests over out-of-state interests . . . .” 476 U.S. 573, 579 (1986).

[28] As the Supreme Court has recognized, “there is no clear line separating close cases on which scrutiny [or tier of analysis] should apply.” Wyoming v. Oklahoma, 502 U.S. at 455 n. 12; see also Brown–Forman Distillers, Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (1986) (“We have . . . recognized that there is no clear line separating the category of state regulation that is virtually per se invalid under the Commerce Clause, and the category subject to the Pike v. Bruce Church balancing approach.”).

[29] Mich. Pub. Serv. Comm’n, Report on the Implementation of the P.A. 295 Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards 7 (Feb. 13, 2015), http://www.michigan.gov/documents/mpsc/PA_295_Renewable_Energy_481423_7.pdf.

[30] Id.

[31] Id. at 30.

[32] U.S. Dep’t of Energy, Energy Efficiency & Renewable Energy, 2014 Wind Technologies Market Report Highlights 4 (Aug. 2015), http://www.energy.gov/sites/prod/files/2015/08/f25/2014-Wind-Technologies-Market-Report-Highlights.pdf.

[33] See, e.g., Hughes v. Oklahoma, 441 U.S. 322, 336 (1979).

[34] See Kristen H. Engel, The Dormant Commerce Clause Threat to Marked-Based Environmental Regulation: The Case of Electricity Deregulation, 26 Ecology L.Q. 243, 266 (1999).

[35] For example, requiring coal-fired power plants to install carbon-capture technologies.

[36] Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

[37] Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, Order No. 888, 61 Fed. Reg. 21,540 (May 10, 1996).

[38] Mich. Comp. Laws Ann. § 460.1001 (Westlaw).

[39] U.S. Energy Info. Admin., Michigan, State Profiles and Energy Estimates (2014), http://www.eia.gov/state/?sid=MI.

[40] Id.

[41] U.S. Energy Info. Admin., Michigan, Natural Gas Annual (2014), http://www.eia.gov/naturalgas/annual/pdf/table_S24.pdf.

[42] See Engel, supra note 36, at 268 n.72.

[43] U.S. Energy Info. Admin., How much electricity is lost in transmission and distribution in the United States?, Frequently Asked Questions, http://www.eia.gov/tools/faqs/faq.cfm?id=105&t=3 (last updated July 10, 2015).

[44] See MISO, Electricity Prices: Wholesale Electric Rates, 2014 Transmission Expansion Plan (July 29, 2014), http://www.misomtep.org/electricity-prices/; PJM Markets: Energy and Ancillary Services; PJM Markets: Energy and Ancillary Services, PJM State & Member Training Dep’t Slideshow (Jul. 29, 2014), http://www.naruc.org/International/Documents/Mon%20PJM%20part%202.pdf.

[45] 721 F.3d 764 (7th Cir. 2013).

[46] Allco Finance Ltd. v. Klee, No. 3:13-cv-01874-JBA, 2014 U.S. Dist. LEXIS 170674 (D. Conn. Dec. 10, 2014).

[47] Such direct subsidization does not ordinarily run afoul of the dormant Commerce Clause prohibition on discriminatory treatment of interstate commerce. See New Energy Co. of Indiana v. Limbach, 486 U.S. 269 (1988) (“The Commerce Clause does not prohibit all state action designed to give its residents an advantage in the marketplace, but only action of that description in connection with the State’s regulation of interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibition; discriminatory taxation of out-of-state manufacturers does.”).