ST. PAUL (AP) — A three-judge federal appeals panel posed tough questions Wednesday as the states of North Dakota and Minnesota faced off in a legal battle over regulating coal-generated electricity.

Minnesota regulators are appealing a lower court decision last April to bar the state from enforcing key sections of its 2007 Next Generation Energy Act that restrict new power generation from coal. The lower court found that the law illegally regulates out-of-state utilities in violation of the U.S. Constitution’s commerce clause.

Thomas Boyd, a Minneapolis attorney representing North Dakota interests, told the 8th U.S. Circuit Court of Appeals that the law hampers their utilities’ ability to find buyers for power from existing coal-fired generating plants or to plan for new ones , the Star Tribune reported (http://strib.mn/1PH07ek ). And he said federal law, not state law, should govern interstate power sales.

The North Dakota parties to the case are the North Dakota Industrial Commission, three electric utilities, two coal companies and a coal trade group. They successfully argued in district court that the wording of Minnesota’s law makes illegal the sale of electricity in other states by large regional utilities that only partly serve Minnesota. When electricity is distributed on the regional power grid, they argued, its source is indistinguishable.

Alethea Huyser, an assistant Minnesota attorney general, was interrupted by Judge James Loker when she told the appeals panel that the state law “does not and could not” regulate the power grid.

“Yes it does,” he said to provoke a rebuttal.

Minnesota’s position is that the Next Generation Energy Act properly regulates coal power under contracts to import it into Minnesota, and under utilities’ regulator-approved plans for supplying power to Minnesota customers. Huyser said Minnesota regulators have never applied the law — and wouldn’t — in the broad, grid-restricting way that North Dakota suggests.

Boyd also faced a tough question, from another judge, about why the North Dakota utilities didn’t first ask the Minnesota Public Utilities Commission to interpret the law. Such regulatory decisions are part of the PUC’s mission, and can be appealed to the Minnesota Court of Appeals, rather than to federal courts.

Boyd said Minnesota’s regulatory process can be long and contentious. But Huyser said a PUC decision would have taken “far less time than the four years” the lawsuit has lasted.