## Facts

- The Alliance for Clean Coal is a trade association representing entities that market and transport low-sulfur coal mined in western states.
- Federal Clean Air Act amendments required significant sulfur dioxide emission reductions from coal-fired utilities.
- Utilities could comply either by switching to low-sulfur coal (often mined out of state) or by installing scrubbers to continue burning higher-sulfur local coal.
- Indiana enacted the Environmental Compliance Plans Act (ECPA) to govern Indiana Utility Regulatory Commission (IURC) preapproval of utilities’ environmental compliance plans and related rate recovery.
- The challenged ECPA provisions required IURC consideration of a plan’s impact on “Indiana coal” and the “Indiana coal industry” and created incentives within the preapproval/rate framework that encouraged continued use of Indiana-mined coal.
- Preapproval was economically valuable to utilities because it effectively secured regulatory acceptance and rate recovery for compliance costs.
- The Alliance sued state officials and IURC members, claiming the specified provisions discriminated against out-of-state coal in violation of the Commerce Clause.
- The district court granted summary judgment for the Alliance and enjoined enforcement of the challenged provisions; the state defendants appealed.

## Issues

1. Whether the challenged ECPA provisions discriminate against interstate commerce by favoring Indiana-mined coal and burdening out-of-state coal, in violation of the dormant Commerce Clause.
2. Whether the ECPA’s characterization as a “voluntary” preapproval and rate-recovery framework, rather than an explicit purchase quota or ban, prevents Commerce Clause invalidation.

## Decision

- The Seventh Circuit affirmed the district court’s summary judgment for the Alliance.
- The court held the challenged ECPA provisions violated the dormant Commerce Clause because they discriminated against interstate commerce in practical operation and design.
- The court rejected Indiana’s argument that the scheme’s “voluntary” label and lack of an express embargo or quota cured the discrimination.
- The court concluded Indiana failed to justify the discriminatory measures as necessary to achieve a legitimate local purpose through no reasonable nondiscriminatory alternatives.

## Legal Principles

- State measures that discriminate against interstate commerce on their face or in practical effect are generally invalid and survive only if the state proves a legitimate local purpose that cannot be achieved by reasonable nondiscriminatory means.
- A state may not use utility regulation, incentives, or rate-recovery mechanisms to protect in-state producers by burdening out-of-state competitors.
- A scheme can be unconstitutional discrimination even without an explicit ban or quota when regulatory criteria and economic incentives predictably pressure regulated entities to favor in-state goods.

## Conclusion

The Seventh Circuit held that Indiana’s ECPA provisions tying environmental compliance plan approval and favorable rate treatment to the protection of “Indiana coal” functioned as impermissible economic protectionism and therefore violated the dormant Commerce Clause.


Alliance for Clean Coal v. Bayh, 72 F.3d 556 (7th Cir. 1995)