Opinion ID: 1578403
Heading Depth: 1
Heading Rank: 20

Heading: The Expenditures Of Public Funds For The Installation Of Equipment For Conservation Of Energy And For Production For Sale Of Equipment For Conservation Of Energy Is For A Public Purpose.

Text: The Act provides for two types of energy financing programs  the energy loan program and the energy loan insurance program. Minn.Stat. §§ 116J.925-116J.926. The energy financing programs authorized by the Act serve a public purpose since they will benefit the community, energy conservation is a proper government concern, and undue private benefit will not result. Energy conservation and development of alternative energy have become important concerns of Minnesota citizens. The reason for the great concern to the State of Minnesota is that the energy used in Minnesota is almost entirely imported. Therefore, cost effective investments in energy conservation will have the effect of increasing the total amount of Minnesota's financial resources for all other types of investments. Energy conservation is, in principle, the same as energy production, and achieving cost-effective energy conservation in Minnesota is the same as producing energy at a cost per unit cheaper than the price per unit of imported energy. As energy conservation and development of alternative energy resources involve new technology, there is little conventional financing available. Because conventional financing sources view energy conservation projects differently than business loans, even though they have parallel impacts on business profitability, investment opportunities are being foregone even though they would be cost effective. Because such energy conservation investments are being foregone, Minnesota is wasting valuable energy resources, and money is being spent on energy which would be available for other types of investments within the state. Defendant argues that the benefits from the North Atlantic project are too speculative because there is no requirement that heat exchangers be installed in Minnesota. While Minn.Stat. § 116J.924 does not require that the qualified energy projects be installed in the State, the rules promulgated by the plaintiff provide that projects will only be approved if they are economically advantageous to the State, facilitate a reliable source of energy to Minnesota and diminish Minnesota's reliance on imported energy. 4 MCAR § 14.073. As illustrated by this project, plaintiff will evaluate the impacts from the projects before insuring the loan. In this case, the benefits to Minnesota are clear as North Atlantic uses Minnesota subcontractors, and the proceeds of the loan are expected to finance projects primarily in Minnesota and the surrounding states. Furthermore, courts have found a public purpose even though most of the benefit goes out of state. Square Butte Electric Cooperative v. Hilken, 244 N.W.2d 519 (N.D.1976) (approving condemnation for a power line even though most power will go out of state); Adams v. Greenwich Water Co., 138 Conn. 205, 83 A.2d 177 (1977) (approving eminent domain for reservoir which will also benefits citizens of another state). Similarly, the Minnesota Supreme Court approved the purchase by the state of a building and equipment to lease it to a private company as serving the public purpose of providing a market for area agricultural products and alleviating unemployment, even though there was no requirement that Minnesota products be used. Chun King Sales, Inc. v. County of St. Louis, 256 Minn. 375, 98 N.W.2d 194 (1959). The energy needs of the people of Minnesota are a proper governmental concern. The energy financing programs established by the Act are but one of several steps taken by the Legislature in reaction to the growing concern about Minnesota's dependence on imported energy. While there have been no Minnesota cases specifically addressing the use of public funds for the development of energy conservation and alternative energy resources by providing financial assistance to private facilities, Minnesota has long approved the issuance of revenue bonds for municipal utilities. Williams v. Village of Kenyon, 187 Minn. 161, 244 N.W. 558, 561 (1932). Since energy conservation is in principle the same as energy production, the longstanding recognition of energy production as a valid public purpose is persuasive. Additionally, the interest and concern of the state in conserving energy is very much like the interest and concern of the citizenry of the State of Minnesota in preventing pollution, recognized by the Minnesota Supreme Court in Minnesota Pollution Control Agency v. Hatfield, 294 Minn. at 265, 200 N.W.2d at 575. Energy conservation and alternative energy development have been held to be a public purpose in all but one of five cases considering the question. Nicoll v. City of Eugene, 52 Or.App. 379, 628 P.2d 1213 (1981); Douglas v. Judge, 174 Mont. 32, 568 P.2d 530 (1977); State ex rel. Douglas v. Thone, 204 Neb. 836, 286 N.W.2d 249, 252-254 (1979); In Idaho Water Resource Board v. Kramer, 97 Idaho 535, 548 P.2d 35 (1976). The only case which found no public purpose in an energy related project is State ex rel. McLeod v. Riley, 276 S.C. 323, 278 S.E.2d 612 (1981). In Riley, the South Carolina Supreme Court invalidated a statute permitting the issuance of general obligation bonds to finance an alcohol fuel development loan program. The court found that any public benefit from such a program was too indirect and speculative to pass constitutional muster. 278 S.E.2d at 615. The Court's rationale in Riley is much like that of the minority cases finding industrial revenue bonds not for a public purpose because the public benefit was found to be indirect. The Minnesota Supreme Court has consistently rejected such a narrow approach to a determination of public purpose, City of Pipestone v. Madsen, 287 Minn. 357, 178 N.W.2d 594 (1970), and, indeed, has held that a public purpose exists even if a private corporation will receive a large benefit. Id. 287 Minn. at 373, 178 N.W.2d at 603. Accordingly, the Court follows the liberal approach to public purpose of the Minnesota Supreme Court and the majority trend of cases from other jurisdictions and finds that energy conservation and the development of alternative energy constitutes a public purpose.