by Ilya Shapiro and Randal John Meyer
The Commerce Clause, while invoked since the New Deal as a warrant for progressive federal policy, actually provides protections for businesses against state regulations that burden interstate commerce. In Brown-Forman Distillers Corp. v. New York State Liquor Authority (1986), for example, the Supreme Court struck down New York’s Alcoholic Beverage Control Law on the ground that it regulated the price of alcohol outside the state.
Or take this hypothetical example: Colorado gets its electricity from a grid that services 11 states, Canada, and Mexico. Electricity used anywhere within this grid can come from any source that services it and, once loaded onto the grid, this electricity is identical, regardless of how it was produced or the fuel used to generate it. Yet Colorado renewable-energy regulations require that all energy that enters the state be created in compliance with certain parochial standards, which excludes the type of power generated by a particular power company in California. What Colorado has effectively enacted is an extraterritorial law, regulating economic activity outside the state and thus violating the Commerce Clause (more technically, the Dormant Commerce Clause, in the sense that Congress hasn’t explicitly legislated to prohibit the Colorado regulation).
This situation is not hypothetical, however, but the actual case of Energy & Environment Legal Institute v. Epel, wherein the U.S. Court of Appeals for the Tenth Circuit held that Colorado’s regime evaded Commerce Clause scrutiny because it did not consist of pure price controls. No matter that the regulations has a clear anticompetitive and protectionist effect on the interstate energy market—favoring in-state (complying) producers over out-of-state ones—the court sanctioned any state’s adoption of extraterritorial regulation so long as the state is savvy enough to crafts its rules as something other than a price-control mechanism.