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N.D. eyes suit against Minn. over carbon pricing

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A requirement by Minnesota regulators for electric utilities to factor costs for emitting carbon dioxide into their power generating plans affects utilities that export electricity to the state, and at least one of Minnesota's neighbors is ready to fight the requirement in court.

North Dakota Attorney General Wayne Stenehjem said Tuesday that his state is considering a lawsuit against Minnesota over the plan, which starting in 2012 will require utilities to assume costs between $9 and $34 for each ton of carbon dioxide emitted.

As part of the Minnesota Next Generation Energy Act, the Minnesota Legislature directed the state Public Utilities Commission to establish the carbon dioxide cost requirement so that utilities and regulators would have to consider the future costs of emitting greenhouse gases when building new power plants or deciding on future power generating needs. The PUC established the requirement in an order issued two years ago.

Stenehjem considers the cost requirement a carbon tax, although no revenues or fees will be collected from utilities. But the fact that future costs of emitting carbon must be considered when a new power plant is built might make it more difficult for utilities to prove that coal or natural gas generation is cheaper than renewable alternatives like wind and solar.

Stenehjem said the cost requirement attempts to regulate North Dakota energy policy in violation of the Commerce Clause of the U.S. Constitution.

"[The policy] proposes to impose a cost on energy-producing facilities that emit carbon dioxide, even though those facilities might be outside of the state of Minnesota," Stenehjem said in an interview. "It would result in higher electricity bills for everybody, with no appreciable improvement in the environment."

Bill Glahn, director of the Minnesota Office of Energy Security, said state officials would agree to meet with North Dakota or any other state that had concerns about the law, which he said was prompted by a widely held belief that carbon dioxide emissions will be regulated in the future.

"We see it as a planning tool, something that somebody should take into account when they're doing their planning work," Glahn said. "[It's] not something that would keep a plant from happening or keep a project from getting developed, but making sure that we're getting the numbers right or as best we can as we look toward the future."

Glahn also said he hopes North Dakota and Minnesota can resolve their differences without going to court.

Stenehjem said much of the electricity Minnesotans use is supplied by power generation facilities in North Dakota. He said North Dakota doesn't need guidance from Minnesota on how carbon dioxide emissions should be controlled.

"We have probably the cleanest air and the best environment here in North Dakota [of] anywhere in the nation, and we frankly don't need Minnesota and Minnesota's officials to come here and tell us they love the environment more than we do," he said.

Stenehjem called North Dakota a leader in carbon capture and storage techniques, and he said North Dakota officials have invited Minnesota legislative leaders to come see the state's efforts.

Despite a visit by North Dakota officials to Minnesota in January to try to work out an agreement over Minnesota's carbon cost requirement for utilities, Stenehjem said a lawsuit is likely because the discussions have so far gone nowhere.

"All of our efforts have fallen on deaf ears," he said.

State Sen. Ellen Anderson, a St. Paul Democrat who helped push for the carbon cost requirement in the Legislature, said the law protects Minnesota electricity customers from future rate hikes that could result from underestimating the cost of future carbon regulation. Emitting carbon may be free now, but it won't always be that way, she said.

"We wanted to make sure that when power companies make their decisions about where electricity should come from in the future that they do it in a way that best serves the interests of Minnesotans," she said. "It needs to be the cleanest and the cheapest form of energy."