The U.S. Court of Appeals for the Fifth Circuit has denied a petition for rehearing filed by the City of Morgan City, LA, contesting the ability of the Rural Utilities Service (RUS), formerly the Rural Electrification Administration (REA), to interfere in the city's condemnation of the service territory of a rural electric cooperative (Case No. 93-4295). Last September, the RUS (em alleging potential harm to its loan programs (em won a fight at the same court to prevent Morgan City from condemning assets owned by South Louisiana Electric Cooperative Association (SLECA).
In its petition for rehearing, Morgan City argued that the September ruling was inconsistent with the U.S. Supreme Court's decision in Arkansas Electric
Co-op. Corp. v. Arkansas PSC, 461 U.S. 375 (1983). The Supreme Court had ruled that the Rural Electrification Act did not preempt a state's "mere assertion of jurisdiction" to regulate a cooperative's rates. Upholding its previous order, the Fifth Circuit distinguished a mere assertion from a concrete action, noting that in Arkansas the Supreme Court said concrete action taken by a state "may so seriously compromise important federal interests, including the ability of the [co-op] to repay its loans, as to be implicitly preempted by the [REA].
Three judges dissented, claiming that the majority had "approved a breathtaking federal power grab by REA from local government units that otherwise enjoy broad eminent domain authority." American Public Power Association executive director Larry Hobart strongly disagreed with the majority opinion: "We are seriously considering an appeal to the Supreme Court and feel confident that we will eventually prevail."