By: David G. Tuerck
Now being litigated in federal court is a case that threatens to wipe out, with a stroke of the pen, $2.5 billion in investments in what is intended to become the Cape Wind power project. For more than 10 years, Cape Wind has been trying to build 130 wind turbines in Nantucket Sound against intense opposition from local homeowners and businesses.
Until recently, the legal strategy adopted by opponents was focused on environmental, safety and cultural concerns over the project. But early this year, opponents took a different tack, raising a constitutional issue that could reach the U.S. Supreme Court. In Town of Barnstable v. Ann G. Berwick, the plaintiffs argued that the state violated the “Dormant” Commerce Clause and the Supremacy Clause of the U.S. Constitution in its efforts to secure private financing for Cape Wind.
Under the Dormant Commerce Clause, state governments may not favor in-state, over out-of-state, providers of some good or service being marketed to residents. According to the Cape Wind opponents who brought the case, the state violated this doctrine when it threatened to block a merger requested by Nstar, which had balked at buying power from Cape Wind at rates far higher than it would have had to pay out-of-state providers. The implicit message from the state to Nstar was: “Buy the prescribed amount of power from Cape Wind at whatever rates it demands or forget about the merger.”
The case was dismissed in federal district court on the grounds that the 11th Amendment to the Constitution protects states from suits in federal court by persons seeking redress for past wrongs.
At the time of its adoption, the purpose of the 11th Amendment was to shield states from suits over Revolutionary War debts on which they had defaulted. The amendment embodies the doctrine of “sovereign immunity,” derived from the ancient — and problematic — doctrine that “the King can do no harm.”
Racist Southern officials proclaimed sovereign immunity in order to renege on debts incurred during Reconstruction. Now defendants in the case want to use the same doctrine to get themselves off the hook for inflicting extravagantly high electric rates on state businesses and residents.
So what is to come of the case?
The plaintiffs have hired Harvard Law’s Laurence Tribe, perhaps the nation’s foremost constitutional scholar, to represent them on their appeal. On Nov. 6, Tribe and others filed a brief in the federal appeals court, in which they argued that, as matters stand, Nstar will be buying power “under a contract brought about by state coercion rather than a voluntary market transaction” — and with the result that “cheaper, out-of-state renewable energy sources will be locked out of the Massachusetts market.” This is a blow to the defendants since the district court judge cited Tribe in his decision. In a recent interview, Tribe said that he is “confident” that the U.S. Supreme Court would agree with his interpretation of the law.
Tribe’s reputation and strong opinions on the matter might very well embolden Cape Wind’s opponents to appeal all the way to the Supreme Court, if they have to. If so, the case would become a Sword of Damocles hanging over the project, threatening to undo the promises being made by its sponsors to investors. It is likely that prospective investors will take note of this threat before they put up the additional $1.4 billion that Cape Wind needs in order to start construction.
There would be rich irony in the denouement of this issue if the state succeeded in driving away the very private investors whom it sought to reassure by pressuring Nstar into the Cape Wind deal.
David G. Tuerck is executive director of the Beacon Hill Institute and professor of economics at Suffolk University.