Importing Energy, Exporting Regulation

December 1, 2014

This Article identifies and addresses a growing contradiction at the heart of United States energy policy. States are the traditional energy regulators and energy policy innovators—a role that has only grown more important without a settled federal climate policy. Federal regulators and market pressures, however, increasingly demand integrated national and international energy markets. Deregulation, the rise of renewable energy, the shale revolution, and new sources of motor fuel precursors like crude and ethanol have all increased interstate energy trade.

This Article shows how integrated national energy markets are driving states to regulate imported fuel and electricity based on how it was produced elsewhere. That is, states that import energy are now exporting their energy regulations to address production in their trading partners. But exported regulation has its own problems: it threatens to splinter interstate markets, undercutting the federal push for integrated and efficient energy markets, and it violates the U.S. Constitution’s dormant Commerce Clause. Indeed, these innovative exported regulations are now caught up in litigation across the country.

This Article argues that, to preserve the state role, while also maintaining a national energy market, Congress should empower the Federal Energy Regulatory Commission to immunize nondiscriminatory state laws from Commerce Clause scrutiny if, and only if, they do not threaten to splinter interstate energy markets. The Article considers how these federal regulators might assess state energy laws in three salient areas: regulation of (1) imported electricity, (2) imported fuel, and (3) energy export and supply chains.

December 2014

No. 3

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