United States Court of Appeals

For the Eighth Circuit

___________________________

No. 18-2559

___________________________

LSP Transmission Holdings, LLC

lllllllllllllllllllllPlaintiff - Appellant

v.

Katie Sieben, Commissioner, Minnesota Public Utilities Commission, each in his

or her official capacity; Dan M. Lipschultz, Commissioner, Minnesota Public

Utilities Commission, each in his or her official capacity; Matthew Schuerger,

Commissioner, Minnesota Public Utilities Commission, each in his or her official

capacity; John Tuma, Commissioner, Minnesota Public Utilities Commission,

each in his or her official capacity; Valerie Means, Commissioner, Minnesota

Public Utilities Commission, each in his or her official capacity; Steve Kelley,

Commissioner, Minnesota Department of Commerce, each in his or her official capacity

lllllllllllllllllllllDefendants - Appellees

ITC Midwest LLC; Northern States Power Company, doing business as Xcel Energy

lllllllllllllllllllllIntervenors below - Appellees

------------------------------

United States Department of Justice

lllllllllllllllllllllAmicus Curiae

Iowa Department of Justice

lllllllllllllllllllllAmicus on Behalf of Appellant(s)
Great River Energy; Minnesota Power; Otter Tail Power Company; Southern

Minnesota Municipal Power Agency; Edison Electric Institute

lllllllllllllllllllllAmici on Behalf of Appellee(s)

 ____________

Appeal from United States District Court 

for the District of Minnesota

 ____________

 Submitted: October 16, 2019

Filed: March 25, 2020 

____________

Before SMITH, Chief Judge, GRUENDER and BENTON, Circuit Judges. 

____________

SMITH, Chief Judge.

LSP Transmission Holdings, LLC (LSP) filed this appeal against Minnesota’s

Public Utilities Commission and Department of Commerce; ITC Midwest, LLC

(ITC); and Northern States Power Company doing business as Xcel Energy (“Xcel”)

(collectively, “Appellees”). LSP asserts that the district court1 erred in deciding that

Minnesota’s right of first refusal (ROFR) provision does not violate the dormant

Commerce Clause. The provision grants incumbent electric transmission owners a

ROFR to construct, own, and maintain electric transmission lines that connect to their

existing facilities. Minn. Stat. § 216B.246, subdiv. 2. Upon de novo review, we

affirm.

1The Honorable Donovan W. Frank, United States District Judge for the

District of Minnesota.

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I. Background

A. Federal ROFR

Pursuant to the Federal Power Act (FPA), the Federal Energy Regulatory

Commission (FERC) regulates interstate transmission of electricity and the sale of

electricity at wholesale in interstate commerce. LSP Transmission Holdings, LLC v.

Lange, 329 F. Supp. 3d 695, 700 (D. Minn. 2018) (citing 16 U.S.C. § 824(b)(1)).

States, however, retain jurisdiction over the retail sale of electricity and the

generation, transmission, and distribution of electricity in intrastate commerce. Id.

(citing 16 U.S.C. § 824(b)(1)). 

FERC is also authorized to “divide the country into regional districts for the

voluntary interconnection and coordination of facilities for the generation,

transmission, and sale of electric energy” and to “promote and encourage such

interconnection and coordination within each such district and between such

districts.” Id. (quoting 16 U.S.C. § 824a(a)). “Regionally, FERC-approved

nongovernmental agencies, independent system operators (‘ISO’s), oversee the

operation and expansion of electric transmission grids. Each ISO issues a tariff, which

establishes the terms by which its members build and operate grids. These tariffs are

subject to the approval of FERC.” Id. at 700–01 (internal citations omitted).

Before issuing Order 1000, FERC allowed incumbent public utility

transmission providers to exercise their federal ROFR. Under that regulatory regime,

incumbents held priority status in choosing to construct new electric transmission

lines in their respective service territories. See id. at 701 (citing MISO Transmission

Owners v. FERC, 819 F.3d 329, 332 (7th Cir. 2016)). In 2011, “FERC issued Order

1000,” which in part, “eliminated the federal ROFR.” Id. (citing Transmission

Planning & Cost Allocation by Transmission Owning & Operating Pub. Utils., 136

FERC 61051, 3 ¶ 7 (2011) (hereinafter “Order 1000”)). Order 1000 specifically

“direct[s] public utility transmission providers to remove from their [Open Access

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Transmission Tariffs] or other Commission-jurisdictional tariffs and agreements any

provisions that grant a federal right of first refusal to transmission facilities that are

selected in a regional transmission plan for purposes of cost allocation.”Order 1000

at 3 ¶ 7.2

In substance, FERC’s Order 1000 reformed “its electric transmission planning

and cost allocation requirements for public utility transmission providers.” Order

1000 at 1 ¶ 1 (citing 16 U.S.C. § 824e). “Order 1000 [is also] consistent with

[FERC’s] effort to manage electric grids on a regional level” but “recognize[s] that

states c[an] continue to regulate electric transmission lines.” LSP Transmission, 329

F. Supp. 3d at 701 (“We acknowledge that there is longstanding state authority [over]

certain matters that are relevant to transmission planning and expansion, such as

matters relevant to siting, permitting, and construction. However, nothing in . . .

[Order 1000] involves an exercise of siting, permitting, and construction authority.”

(quoting Order 1000 at 33 ¶ 107)).

2

“A ‘transmission facility selected in a regional transmission plan for purposes

of cost allocation’ is one that has been selected, pursuant to a Commission-approved

regional transmission planning process, as a more efficient or cost-effective solution

to regional transmission needs.” Order 1000 at 2 ¶ 5. The elimination of the federal

ROFR did not apply to utilities that were not selected in a regional transmission plan

for purposes of cost allocation. See id. at 3 ¶ 7. 

This limitation was born of . . . [FERC’s] concern that a complete ban

could potentially threaten grid reliability if nonincumbents failed to

complete needed projects in a timely fashion. The upshot was that rights

of first refusal could be retained for facilities located wholly within the

service territory of an incumbent whose development costs would not be

spread to other parties . . . . 

S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 73 (D.C. Cir. 2014).

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B. State ROFR

Regionally, Minnesota is governed by the FERC-approved regional

transmission entity known as Midcontinent Independent System Operator (MISO).

Id. “In accordance with Order 1000, MISO removed the federal ROFR provisions

from its tariff.” Id. Thereafter, in response to Order 1000, Minnesota, along with other

states,3 enacted a state statutory ROFR. Id. (citing Minn. Stat. § 216B.246, subdiv. 2).

Minnesota’s ROFR law provides the following:

An incumbent electric transmission owner has the right to construct,

own, and maintain an electric transmission line that has been approved

for construction in a federally registered planning authority transmission

plan and connects to facilities owned by that incumbent electric

transmission owner. The right to construct, own, and maintain an

electric transmission line that connects to facilities owned by two or

more incumbent electric transmission owners belongs individually and

proportionally to each incumbent electric transmission owner, unless

otherwise agreed upon in writing. This section does not limit the right

of any incumbent electric transmission owner to construct, own, and

maintain any transmission equipment or facilities that have a capacity

of less than 100 kilovolts.

Minn. Stat. § 216B.246, subdiv. 2.

After MISO removed the federal ROFR and incorporated Minnesota’s ROFR

into its tariff, FERC approved the tariff. LSP Transmission, 329 F. Supp. 3d at 702

(citing Midwest Indep. Transmission Sys. Operator, Inc., 150 FERC 61037, 61176

3

“In response to Order 1000, several states enacted their own ROFR laws.”LSP

Transmission, 329 F. Supp. 3d at 701 n.3 (citing N.D. Cent Code § 49-03-02.2; S.D.

Codified Laws § 49-32-20; Neb. Rev. Stat. § 70-1028; 17 Okla. Stat. § 292). 

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¶ 25 (2015) (hereinafter “MITSO”)). LSP, a transmission company based outside of

Minnesota, challenged MISO’s tariff. FERC, however, ruled that MISO is authorized

to consider state laws in the regional transmission planning process. Based on

FERC’s ruling, LSP requested a rehearing. LSP argued, in part, “that FERC should

preclude states from enacting ROFR laws.” Id. (citing MITSO at 61176 ¶ 24). FERC

subsequently denied LSP’s request for rehearing. Id. (citing MITSO at 61176 ¶ 25). 

C. Procedural History

After FERC denied LSP’s request for rehearing, LSP first filed a petition for

review against FERC, which was denied by the Seventh Circuit. See MISO

Transmission Owners, 819 F.3d at 337. LSP contended that FERC erred in allowing

MISO to recognize state ROFR laws. Id. at 336. The Seventh Circuit ultimately held

that FERC’s goal—“to avoid intrusion on the traditional role of the States in

regulating the siting and construction of transmission facilities”—was proper and that

Order 1000 terminated the federal ROFR, not ROFR laws enacted by states. Id.

(internal quotation omitted).

Prior to LSP filing the present lawsuit, Xcel—a Minnesota-based public

utility—and ITC—a Minnesota-based transmission company—“jointly exercised

their rights of first refusal under § 216B.246” to construct the Huntley-Wilmarth line.

LSP Transmission, 329 F. Supp. 3d at 703. The line is a proposed 345 kilovolt

electric transmission line that was approved by FERC and is projected to traverse

Minnesota for approximately 40 miles. Id. It “will connect two substations—[Xcel’s]

existing Wilmarth substation north of Mankato, Minnesota and ITC[’s] . . . Huntley

substation, . . . south of Winnebago, Minnesota,” which was under construction at the

time LSP filed its complaint against the Appellees. Id. “The [line] is scheduled to be

complete[d] by January 1, 2022.” Id.

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In September 2017, LSP filed the instant lawsuit against Minnesota’s Public

Utilities Commission and Department of Commerce, challenging the constitutionality

of Minnesota’s ROFR provision. LSP argued that the law violates the dormant

Commerce Clause by discriminating against or placing an undue burden on interstate

commerce. Eventually, Xcel and ITC intervened as defendants. Appellees then filed

separate motions to dismiss LSP’s complaint for failure to state a claim. 

The district court granted the motions. In doing so, the court concluded that

General Motors Corp. v. Tracy, 519 U.S. 278 (1997), forecloses LSP’s arguments

that Minnesota’s ROFR law overtly discriminates against nonincumbent or out-ofstate transmission companies. The court also determined that even if Tracy does not

foreclose LSP’s overt-discrimination arguments, its arguments still fail because

Minnesota’s ROFR applies equally to all incumbent electric transmission owners.

Both in-state and out-of-state owners may use the ROFR and, thus, it does not

discriminate for the former or against the latter. 

As for LSP’s contentions that Minnesota’s ROFR law also places an undue

burden on interstate commerce, the district court held that Minnesota’s interest in

regulating its own local electricity market outweighs any incidental effects on

interstate commerce. After the court entered its order dismissing LSP’s complaint,

LSP filed this appeal.4

II. Discussion

A. Standard of Review

We review de novo the district court’s dismissal of LSP’s complaint. U.S. ex

rel. Raynor v. Nat’l Rural Utils. Coop. Fin., Corp., 690 F.3d 951, 955 (8th Cir. 2012).

4A number of amici also filed briefing: one in support of LSP, two in support

of the Appellees, and one—filed by the United States—as a neutral advisor. 

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“In deciding a motion to dismiss under Rule 12(b)(6), a court assumes all facts in the

complaint to be true and construes all reasonable inferences most favorably to the

complainant.” Id. And while “a complaint need not contain ‘detailed factual

allegations,’ it must contain facts with enough specificity ‘to raise a right to relief

above the speculative level.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555 (2007)). With that said, “[t]o survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

“Threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements, do not suffice.” Id. (quoting Iqbal, 556 U.S. at 678). 

B. Constitutionality

The Commerce Clause “grants Congress the power to regulate commerce

between the states.” IESI AR Corp. v. Nw. Ark. Reg’l Solid Waste Mgmt. Dist., 433

F.3d 600, 604 (8th Cir. 2006) (citing U.S. Const. art I, § 8, cl. 3). “Implicit within the

Commerce Clause is a negative or dormant feature that prevents individual states

from regulating interstate commerce.” Id. (quoting United Waste Sys. of Iowa, Inc.

v. Wilson, 189 F.3d 762, 765 (8th Cir. 1999)). In other words, “[t]he dormant

Commerce Clause keeps states from enacting ‘laws that discriminate against or

unduly burden interstate commerce.’” Id. (quoting S.D. Farm Bureau, Inc. v.

Hazeltine, 340 F.3d 583, 592 (8th Cir. 2003)).

When analyzing allegations that a state or local law violates the dormant

Commerce Clause, we examine the law for the presence of both overt and non-overt

discrimination. Hampton Feedlot, Inc. v. Nixon, 249 F.3d 814, 818 (8th Cir. 2001).

“First, if the law in question overtly discriminates against interstate commerce, we

will strike the law unless the state or locality can demonstrate, ‘under rigorous

scrutiny, that it has no other means to advance a legitimate local interest.’” Id.

(quoting U & I Sanitation v. City of Columbus,205 F.3d 1063, 1067 (8th Cir. 2000)).

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“The discrimination may take one of three forms. The law may be discriminatory on

its face or, even if it is facially neutral, the law may have a discriminatory purpose or

a discriminatory effect.” U & I Sanitation, 205 F.3d at 1067. Under the dormant

Commerce Clause, a law is discriminatory if it benefits in-state economic interests

while also inordinately burdening out-of-state economic interests. Hampton Feedlot,

249 F.3d at 818.

“Second, even if a law does not overtly discriminate against interstate

commerce, the law will be stricken if the burden it imposes upon interstate commerce

is ‘clearly excessive in relation to the putative local benefits.’” Id. (quoting U & I

Sanitation, 205 F.3d at 1067). This is the Pike balancing test. See S.D. Farm Bureau,

340 F.3d at 593 (citing Pike v. Bruce Church, Inc.,397 U.S. 137 (1970)). Essentially,

“[t]hose challenging the legislative action have the burden of showing that the

statute’s burden on interstate commerce exceeds its local benefit.” Hampton Feedlot,

249 F.3d at 818.

1. Overt Discrimination

As a preliminary matter, the parties extensively argue whether the Supreme

Court’s decision in Tracy forecloses LSP’s arguments that the Minnesota ROFR

provision overtly discriminates against nonincumbent and out-of-state transmission

companies. Tracy held that Ohio’s differential tax treatment of natural gas sales by

regulated local gas utilities and unregulated producers or marketers—whether in state

or out of state—did not violate the Commerce Clause. 519 U.S. at 310. In reaching

its holding, the Supreme Court concluded that Ohio’s favorable tax treatment of local

utilities whose natural gas sales or distribution to consumers were tax-exempt did not

violate the Commerce Clause because the local distribution utilities were not similarly

situated to the producers or marketers. Id. at 287–310.

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Here, the district court pointed out that “[m]any of the entities that own existing

transmission facilities [in Minnesota] are regulated public utilities, who serve captive

markets and have monopolies with respect to the sale of electricity to consumers.”

LSP Transmission, 329 F. Supp. 3d at 707. The court found that Tracy’s reasoning

applies in the present case because LSP, as an unregulated transmission company, is

not similarly situated to Minnesota’s regulated utilities and transmission

companies—“the existing transmission line owners with a right of first refusal.” Id.

at 708. The court thus concluded that the Minnesota ROFR law did not discriminate

against LSP.

We do not, however, need to decide whether Tracy is applicable. If controlling,

Tracy would only resolve the overt discrimination issue of the dormant Commerce

Clause analysis, and the non-overt undue burden question would remain. We would

have to consider the latter under the Pike balancing test. Therefore, accepting as true

the allegation in the complaint that Minnesota-defined incumbent transmission

owners and LSP are competitors, i.e., similarly situated, in the transmission expansion

or development market, we address LSP’s arguments using the full dormant

Commerce Clause analysis.

a. Facial Discrimination

“A statute ‘overtly discriminates’ if it is discriminatory on its face, in its

purpose, or through its effects.”R & M Oil & Supply, Inc. v. Saunders, 307 F.3d 731,

734 (8th Cir. 2002) (quoting U & I Sanitation, 205 F.3d at 1067). “The burden to

show discrimination rests on [LSP who is] challenging the validity of” Minnesota’s

ROFR law. Hughes v. Oklahoma, 441 U.S. 322, 336 (1979). LSP asserts that the

Minnesota law expressly grants a ROFR to in-state entities only and thus gives them

impermissible preferential treatment “to build new MISO-approved transmission lines

in Minnesota.” Appellant’s Br. at 25. LSP also argues that Minnesota’s ROFR

provision is indistinguishable from the various “flow control” laws that this court and

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the Supreme Court have invalidated. Id. at 26–27 (citing Ben Oehrleins & Sons &

Daughter, Inc. v. Hennepin Cty., 115 F.3d 1372, 1376 (8th Cir. 1997) (affirming that

provisions of county ordinance “prevent[ing]the delivery of County waste to

out-of-state processors are unconstitutional”)).5 And according to LSP, the district

court should not have disregarded its facial-discrimination claim on the basis that

some of Minnesota’s incumbents with in-state operations are headquartered in other

states. LSP claims, “What matters for purposes of determining whether an entity is

in-state is not where it is headquartered, but whether it has a meaningful in-state

presence.” Appellant’s Br. at 28. 

LSP’s facial-discrimination claim fails. The district court concluded that

Minnesota’s ROFR “statute draws a neutral distinction between existing electric

transmission owners whose facilities will connect to a new line and all other entities,

regardless of whether they are in-state or out-of-state.” LSP Transmission, 329

F. Supp. 3d at 708. We agree. 

Minnesota’s ROFR law states, “An incumbent electric transmission owner has

the right to construct, own, and maintain an electric transmission line that has been

approved for construction in a federally registered planning authority transmission

plan and connects to facilities owned by that incumbent electric transmission owner.”

Minn. Stat. § 216B.246, subdiv. 2. The Minnesota law further defines an

“[i]ncumbent electric transmission owner” as “any public utility that owns, operates,

and maintains an electric transmission line in this state; any generation and

transmission cooperative electric association; any municipal power agency; any

power district; any municipal utility; or any transmission company.” Id. § 216B.246,

5LSP also cites two Supreme Court flow-control decisions, which include C &

A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994); Fort Gratiot Sanitary

Landfill, Inc. v. Mich. Dep’t of Nat. Res., 504 U.S. 353 (1992). These cases do not

involve interests that are comparably similar to the present case.

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subdiv. 1(c). Currently, incumbents in Minnesota include entities headquartered in

Iowa, North Dakota, South Dakota, Wisconsin, and Minnesota. Many of these entities

also own and operate facilities in states other than Minnesota.

LSP argues that the headquarters site for entities treated as Minnesota

incumbents should be irrelevant to our discrimination analysis. Relying on our

Oehrleins decision, LSP urges us to decide that these incumbents have meaningful

Minnesota operations and, therefore, should be considered in-state entities who are

not discriminated against by Minnesota’s ROFR provision. See 115 F.3d at 1386–87.

LSP states that the Minnesota law is per se invalid against out-of-state entities.6

We disagree. Oehrleins involved a county ordinance that required waste

generated within the county to be transferred to facilities within that same county.

This court rejected plaintiffs’ “‘market access’ theory” argument, which “assume[d]

that an out-of-state concern that permanently locates an operation within the state is

still an ‘out-of-state’ entity that can complain that a law that even-handedly restricts

a local market is ‘discriminatory.’” Id. at 1386. 

6For additional support, LSP also cites to Florida Transportation Services., Inc.

v. Miami-Dade County, 703 F.3d 1230, 1259 (11th Cir. 2012) (stating that the

Commerce Clause demands a focus on “where [a] company’s business takes place or

where its political influence lies”); and Walgreen Co. v. Rullan, 405 F.3d 50, 58 (1st

Cir. 2005) (refusing to hold “that a favored group must be entirely in-state for a law

to have a discriminatory effect on commerce”). These cases are distinguishable

because they do not consider state regulation of certain matters relevant to

transmission planning and expansion.

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We further stated: 

A Delaware corporation doing business in Minnesota could not argue

that it is discriminated against by Minnesota laws that apply equally to

all businesses operating in the state. South Dakota companies may

cho[o]se not to locate operations in Minnesota because of comparatively

high state taxes that apply to all businesses, but this is not discrimination

under the Commerce Clause.

Id. at 1386–87. “It would be a different matter, of course, if the state were to treat a

company incorporated or principally located in another state differently from

Minnesota companies on that basis.” Id. at 1387 n.13. Such is not the case here.

Minnesota’s preference is for electric transmission owners who have existing

facilities, and its law applies evenhandedly to all entities, regardless of whether they

are Minnesota-based entities or based elsewhere. 

In some instances, laws that restrain both intrastate and interstate commerce

may be discriminatory. This is not such an instance. FERC continues to acknowledge

“longstanding state authority over certain matters that are relevant to transmission

planning and expansion, such as matters relevant to siting, permitting, and

construction.” Order 1000 at 33 ¶ 107. The building of transmission lines inheres in

the processes of siting, permitting, and constructing, which are integral to

transmission planning and expansion. As the Supreme Court aptly stated, “We cannot

. . . accept appellants’ underlying notion that the Commerce Clause protects the

particular structure or methods of operation in a . . . market.” Exxon Corp. v.

Governor of Md., 437 U.S. 117, 127 (1978).

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After reviewing the plain language of Minnesota’s ROFR law, we hold that this

law is not facially discriminatory. LSP’s facial-discrimination claim fails.7

b. Discriminatory Purpose

“In determining whether a regulation has a discriminatory purpose, courts

consider both direct and indirect evidence.” IESI AR Corp., 433 F.3d at 604.

This includes: 1) statements by lawmakers; 2) the sequence of events

preceding the [statute]’s adoption, including irregularities in the

procedures; 3) the state’s consistent pattern of discriminating against, or

disparately impacting, a particular class of persons; 4) the [statute]’s

historical background, including whether it has been historically used to

discriminate; and 5) the [statute]’s use of highly ineffective means to

promote the legitimate interest asserted by the state. 

Id. LSP, based on its complaint and public documents, posits that Minnesota’s ROFR

provision has a discriminatory purpose. It cites the provision’s legislative history.

LSP points to supporters’ hearing testimony and asserts that “Minnesota lawmakers

openly sought to insulate incumbent transmission owners from competition

introduced by Order No. 1000.” Appellant’s Br. at 36. 

Appellees, on the other hand, contend that Minnesota’s “purpose in regulating

electricity is to provide consumers ‘in . . . [Minnesota] with adequate and reliable

services at reasonable rates.’” Intervenors-Appellees’ Br. at 47 (quoting Minn. Stat.

§ 216B.01). They also explain that the legislative history of the Minnesota ROFR law

7Appellees correctly note that it would be somewhat awkward to label a

Minnesota law as discriminatory despite benefitting a company that has an operation

in Minnesota but is principally located or headquartered elsewhere. Although briefly

discussed in Oehrleins, we have not squarely addressed the issue of whether an entity

that has an in-state presence but is headquartered elsewhere is considered an in-state

entity for the purpose of dormant Commerce Clause review. We need not do so now. 

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reveals that the Minnesota legislature previously considered alternatives to the statute

but decided it was more appropriate to maintain its “longstanding, successful

regulatory approach for selecting the owners and operators of transmission lines.” Id. 

Out of 16 incumbents, there are “eleven . . . headquartered in Minnesota” that

also “own 16,229 miles, or 87 percent, of transmission line[s] in Minnesota.” Compl.

at 22, LSP Transmission Holdings, LLC v. Swanson, et al.,

No. 0:17-cv-04490-DWF-HB (D. Minn. Sept. 29, 2017), ECF No. 1. LSP also states

that the four largest owners—three of which are utilities—comprise at least “79

percent of transmission line assets in Minnesota.” Id. at 23. This, along with the

hearing testimony, reflects that Minnesota’s ROFR law is not primarily aimed at

protecting in-state interests but at maintaining a regulatory system that has worked

and provided “adequate and reliable services at reasonable rates” to Minnesota

residents. Intervenors-Appellees’ Br. at 47 (quoting Minn. Stat. § 216B.01). Cost

effective and reliable electricity transmission remains vital for efficient distribution

to those residents.

Significantly, state police power includes regulating utilities. Ark. Elec. Coop.

Corp. v. Ark. Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983). Such state regulation

inherently involves siting, permitting, and constructing transmission lines. Further,

FERC has left such control to state authority and has not deemed that state ROFR

laws use “highly ineffective means” to accomplish the interests of states. The Seventh

Circuit agreed when it denied LSP’s petition for review against FERC. On this record,

we cannot conclude that Minnesota’s ROFR provision has a discriminatory purpose,

and we affirm the district court’s dismissal of LSP’s discriminatory-purpose claim. 

c. Discriminatory Effect

We now address whether Minnesota’s ROFR law is discriminatory in its effect.

“A regulation discriminates in effect if it favors in-state economic interests over

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out-of-state interests.” IESI AR Corp., 433 F.3d at 605. LSP claims that Minnesota’s

ROFR provision produces disproportionate, discriminatory effects because of the 16

incumbents, 11 are Minnesota-based, and only 5 are based elsewhere. Appellees

respond by arguing that “nothing in § 216B.246 imposes any greater burden on

out-of-state entities trying to enter the transmission-line market than it does on

Minnesota entities—they are all excluded unless they own or buy the transmission

facility in Minnesota to which the new transmission line will connect.”

Intervenors-Appellees’ Br. at 45. 

As discussed above, many of the incumbents that possess the ROFR under

Minnesota’s law are headquartered in Minnesota. These entities control most of the

transmission lines in Minnesota. Three out of the four top majority owners are

utilities. LSP’s argument that disproportionate ownership by incumbents shows

discriminatory effects misses the point. States have traditionally regulated utilities,

and FERC continues to recognize the important role states play in regulating the

siting, permitting, and constructing of transmission lines as transmission needs are

planned and expanded.

Minnesota’s decision to allow entities other than utilities, such as independent

transmission companies, to qualify as incumbents does not show an intent to favor

in-state interests. If an entity does not already own an existing transmission facility

in Minnesota, then it—whether a Minnesota or an out-of-state entity—faces the

incidental hurdle that is placed by the Minnesota ROFR provision. If an incumbent

owner chooses not to exercise its ROFR, for whatever reason, then other entities,

including LSP, can seek approval and gain transmission facilities in Minnesota.

Simply put, we discern no discriminatory effect. 

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2. Undue Burden

Because Minnesota’s ROFR provision does not discriminate against

out-of-state interests, we consider LSP’s undue-burden claim. LSP contends that the

Minnesota law violates the Commerce Clause under the Pike balancing test.

“That test requires balancing a legitimate local public interest against its

incidental burden on interstate commerce.” S. Union Co. v. Mo. Pub. Serv. Comm’n,

289 F.3d 503, 508 (8th Cir. 2002). A law fails this balancing analysis when “the

burden imposed on such commerce is clearly excessive in relation to the putative

local benefits.” Pike, 397 U.S. at 142.

LSP alleges that the state law is burdensome because it cannot compete for

Minnesota’s MISO-approved transmission projects. Additionally, it argues that the

law has a negative aggregate effect because “if every state were to adopt a ROFR

statute, the cumulative effect of such statutes would nullify Order No. 1000’s

abolition of federal ROFRs and eliminate competition in the market.” Appellant’s Br.

at 53. It further adds that the Minnesota law’s purported benefits are speculative. 

Conversely, Appellees argue that LSP alleges insufficient facts to sustain its

substantial burden for asserting a Pike claim. They claim that “[n]one of the cases that

LSP cites in its balancing analysis address any state interest comparable to the interest

in regulating utilities.”8 Intervenors-Appellees’ Br. at 51. They also assert that if any

federal action is warranted, Congress—not the courts—is best suited to take it. 

Minnesota enacted its ROFR law, in part, in response to the uncertainty

produced by FERC’s Order 1000. Its goal was “to preserve the historically-proven

status quo for the construction and maintenance of electric transmission lines.”

8

 LSP cites Pike, 397 U.S. at 137; Cotto Waxco Co. v. Williams, 46 F.3d 790

(8th Cir. 1995); and Pioneer Military Lending, Inc. v. Manning, 2 F.3d 280 (8th Cir.

1993). Once more, the contexts and interests in the aforesaid cases are not analogous

to that involved in the instant case. 

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Defendants-Appellees’ Br. at 34. This goal is within the purview of a State’s

legitimate interest in regulating the intrastate transmission of electric energy. See 16

U.S.C. § 824(b)(1). Put differently, “unlike the regulation of natural gas, a field in

which FERC has jurisdiction both over pricing and over the siting of interstate lines,

the states retain authority over the location and construction of electrical transmission

lines.” Ill. Commerce Comm’n v. FERC, 721 F.3d 764, 773 (7th Cir. 2013) (internal

citation omitted). 

The second part of the Pike balancing test requires us to consider the burden

imposed on interstate commerce. Minnesota’s ROFR law could affect LSP’s ability

to build MISO-approved transmission lines in Minnesota. But from an aggregate

standpoint, this record does not establish that the cumulative effect of state ROFR

laws would eliminate competition in the market completely. Incumbents are not

obligated to exercise their ROFRs, and some incumbents may not be obligated by

their states’ public utilities or service commissions to build federally-approved

transmission lines. Moreover, FERC’s Order 1000 did not eliminate the federal

ROFR for incumbents not selected in regional transmission plans for purposes of cost

allocation. 

We also note that “the Supreme Court has rarely invoked Pike balancing to

invalidate state regulation under the Commerce Clause.” S. Union Co., 289 F.3d at

509. Hence, we cannot say that the burden imposed by Minnesota’s ROFR law is

clearly excessive in relation to Minnesota’s legitimate state interests in regulating its

electric industry and maintaining the status quo. We, therefore, affirm the dismissal

of LSP’s undue-burden claim. 

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III. Conclusion

For the foregoing reasons, we affirm the district court’s dismissal of LSP’s

complaint.

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