34. Which of the following is the strongest argument that the state's action is constitutional?

Article I, Section 8, Clause 3 empowers Congress to «regulate commerce with foreign nations and among the several states, and with the Indian tribes.» Commerce is defined as «every species of commercial intercourse. .. which concerns more states than one» and including virtually every form of activity involving or affecting two or more states. Gibbons v. Ogden, 22 U.S. 1 (1824).

The Supreme Court has made it clear that the power of Congress to regulate commerce, although very broad, does have limits so as to not obliterate the distinction between what is national and what is local. To be within Congress's power under the Commerce Clause, a federal law must regulate under one of four categories: (i) channels of interstate commerce; (ii) instrumentalities of interstate commerce and persons and things in interstate commerce; (iii) articles moving in interstate commerce; or (iv) activities that have a substantial effect on interstate commerce.

Regarding activities that have a substantial effect on interstate commerce, when those activities are purely intrastate, the Court will uphold the regulation if it is of economic or commercial activity and if it can conceive of a rational basis on which Congress could conclude that the activity in aggregate substantially affects interstate commerce. Gonzales v. Raich, 545 U.S. 1 (2005). If the regulated intrastate activity is not commercial or economic, the Court generally will not aggregate the effects and the regulation will be upheld only if Congress can show a direct substantial economic effect on interstate commerce, which it generally will not be able to do. See, e.g., United States v. Lopez, 514 U.S. 549 (1995).

The mere existence of the federal commerce power restricts the states from discriminating against, or unduly burdening, interstate commerce. This restriction is called the Dormant Commerce Clause. Courts especially frown on intentional discrimination against out-of-staters. A discriminatory state or local law may be valid, however, if it: (i) furthers an important, non-economic state interest (e.g., health or safety); and (ii) there are no reasonable alternatives available.

The Commerce Clause does not prevent a state from preferring its own citizens when the state is acting as a market participant (e.g., buying or selling products, hiring labor, giving subsidies).

C is correct. The strongest argument to support the constitutionality of the state's action is the market participant exception to congressional commerce powers. Although Congress has the power to regulate any activity that has a substantial effect on interstate commerce, the Commerce Clause does not prevent a state from preferring its citizens when the state is acting as a market participant (buying and selling products, hiring labor, etc.). If the state owns and operates the power system, the argument can be made that it is acting as a market participant and that the Commerce Clause does not apply.

A is incorrect. When a state or local regulation discriminates against out-of-state actors in order to protect local economic interests, courts almost always hold such actions invalid. As a result, this would not be the strongest argument to support the constitutionality of the state action here.

B is incorrect. The fact that an activity occurs completely intrastate does not necessarily mean that Congress cannot regulate it. In fact, Congress may regulate purely intrastate activities if even a rational basis can be conceived regarding how the activity, in the aggregate, substantially affects interstate commerce. Moreover, by refusing to supply electric power to out-of-state purchasers residing in states that would not accept spent fuel from the plant for storage or disposal, it is likely to directly impact interstate commerce, thus falling within congressional powers to regulate.

D is incorrect. A rational relation between the state action and the health, safety, and welfare of the state's citizens is not enough to uphold it if the action discriminates against out-of-state actors in favor of local economic interests. Such a discriminatory state regulation must pass a stricter test — to further an important, non-economic state interest without any reasonable alternatives.