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NLC scores victory over U.S. rural electric coops.

Cities and towns scored a major court victory over rural electric coops and the fed government last week when the Minnesota Court of Appeals affirmed a District Court decision authorizing the City of Rochester, Minnesota to acquire by "quick-take" certain electric service rights previously held by a rural electric coop. The court held that even though the public utility property was financed by the federal Rural Electrification Administration, the city's annexation right was not preempted by the federal Rural Electrification Act.

NLC had filed an amicus or friend of the court brief on behalf of Rochester; the United States filed an amicus brief on behalf of the coop claiming that municipal annexation or condemnation authority of rural electric coop territory is preempted by federal law.

Having failed at the state level to prohibit such annexation, the national rural electric coop association has waged an expensive Congressional and judicial campaign to preempt state laws. After seeking to preempt state law and municipal annexation rights last summer behind closed doors in the Congress, the rural electric cooperative association has announced it intends to renew its national campaign again this fall. One of the key issues in the case, City of Rochester v. People's Cooperative Power Association, Inc., was whether the city's annexation right was preempted by federal law. NLC, joined by the American Public Power Association and the National Institute of Municipal Law Officers, had argued that there is a strong presumption against federal preemption in matters of traditional local concern and that the Rural Electrification Act of 1936 does not grant the federal government the authority to "approve" a municipality' s condemnation of a customer service area belonging to to rural electric coop with an REA (Rural Electric Administration) loan.

The court rejected the federal government's preemption argument that it had approval rights under the Supremacy clause. The court agreed that the REA had approval rights where a coop voluntarily sought to dispose of its property, but noted that "important concerns justify a distinction" in the case of a municipal condemnation: "Condemnation proceedings, on the other hand, entail a careful determination and payment of fair value for that property."

The U.S. also argued that because the annexation by Rochester "impermissably interferes with the purposes of the RE Act," Rochaester's authority was preempted. The court disagreed, stating that the manifest objective of the Congress was to furnish electricity to Americans living in rural areas, but that once such an area is annexed by a municipality, it becomes part of an urban area, no longer under Congress' intent to serve persons in rural areas.

Finally the federal government argued that municipal condenmation of REA-financed cooperatives could interfere with the entire REA system, pointing to three federal court decisions. The court rejected this position also. It noted that the legislative history and the REA's own published policy made clear that the REA was expected to operate "|within the constraints of existing state regulatory schemes.'" The court held that unless a state or municipal action so seriously compromises the REA's interests, including a coop's ability to repay its federal loan, there can be no preemption.
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Title Annotation:National League of Cities
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Sep 13, 1993
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