FRANK F. SKILLERN*
Constitutional and Statutory Issues of
Federalism in the Development of
Energy Resources t
T ABLE OF CONTENTS
Page
Introduction
534
I. Commerce Clause Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 538
A.
B.
C.
D.
E.
Affirmative Powers to Congress. . . . . . . . . . . . . . . . . . . . . . . . ..
National League of Cities v. Usery . .......................
Negative Limitation on State Regulation. . . . . . . . . . . . . . . . . ..
Preemption ...........................................
State Involvement in the Market ..........................
1. State-subscribed Business-Alexandria Scrap Corp . ......
2. State-owned Businesses ..............................
3. State-owned Resources-Limitations under the
Privileges and Immunities Clause . . . . . . . . . . . . . . . . . . . . ..
F. State Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
G. Federal Power Transferred to State. . . . . . . . . . . . . . . . . . . . . ..
H. Statutory Preemption: The Federal Common
Law of Nuisance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
I. Preemption by the Clean Water Act. . . . . . . . . . . . . . . . . . ..
2. Preemption by the Clean Air Act ......................
3. Preemption by the Resource Conservation
and Recovery Act and the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
538
539
542
550
556
556
558
561
564
571
573
575
577
578
·Professor of Law, Texas Tech University, School of Law, Lubbock, Texas.
1This article is a revised version of a 1981 report, "The Role of the Federal and State
Governments in the Development of Energy Resources Under Cooperative Federalism Programs." The report was funded by the former Texas Energy and Natural Resources Advisory
Council, Austin, Texas (now defunct and realigned) and the Center for Energy Research,
Texas Tech University, Lubbock, Texas. The views expressed herein reflect those of the author
and not TENRAC or CER.
The author is indebted to William A. Anderson II, Bracewell and Patterson,
Washington, D.C., and A. Dan Tarlock, Professor of Law, liT Chicago-Kent College of Law,
Chicago, lllinois, who read the article for publication review. Any errors are attributable solely
to the author.
The author gratefully acknowledges the assistance of Evaleen Broyles, J.D. Candidate,
1985, Texas Tech University, in researching and checking the authorities used in this paper.
533
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I.
VOL. XVII, NO.4
Summary............................................. 578
II. Equal Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 581
III. Selected Cooperative Federalism Programs. . . . . . . . . . . . . . . . . . ..
A. The Clean Air Act .....................................
B. The Clean Water Act ...................................
C. The Coastal Zone Management Act .......................
D. The Federal Surface Mining Control and Reclamation Act ...
E. The Resource Conservation and Recovery Act. . . . . . . . . . . . ..
F. Litigation under Cooperative Programs ...................
I. Clean Air Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
2. Clean Water Act ....................................
3. Coastal Zone Management Act ........................
4. Federal Surface Mining Control and Reclamation Act. . . ..
5. Solid Waste ........................................
6. Preemption-Burden on Interstate Commerce ...........
7. State Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
8. Conclusions ........................................
584
584
587
591
592
594
596
596
598
606
607
611
613
614
616
IV. Concluding Observations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 618
INTRODUCTION
The development of energy resources has raised new and recurring problems of federalism. These problems concern matters such as how, when,
and in what manner various natural resources should be developed to satisfy national demand for energy. The federal government has adopted several programs that directly affect the use of coal, nuclear, hydroelectric, oil
and gas, and other sources of energy. Many of those programs are aimed at
environmental protection. 1 Often they involve federal programs under the
so-called cooperative federalism concept. 2 A more recent example is the
federal Nuclear Waste Policy Act of 1982.3
At the same time states have not been inactive in the energy legislation
arena. The states have been concerned over the development of various
resources located on land within their jurisdictions. They also have been
concerned about federal programs that favor expedited use of one resource,
'E.g .. Federal Surface Mining Control and Reclamation Act, 30 U.S.c. §§ 1201 et seq.
(1982); Coastal Zone Management Act, 16 U.S.c. §§ 1451 et seq. (1982); Marine Protection,
Research, and Sanctuaries Act, 33 U.S.c. §§ 1411 et seq. (1982); National Environmental
Policy Act of 1969 (NEPA), 42 U .S.c. §§ 4321 et seq. (1982).
'E.g., Clean Water Act, 33 U.S.c. §§ 1251 et seq. (1982); Clean Air Act, 42 U.S.c.
§§ 7401 et seq. (1982).
'42 U.S.C. §§IOIOI et seq. (1982).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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such as coal, over others. States have had to address the so-called boom
town effect of developing energy resources. When the resources are located
in undeveloped areas, the state must assume the costs of providing housing,
essential services, and otherwise handling the rapid, but sometimes temporary, growth in the area. The states have responded to these problems in
various ways.
Several states have adopted severance taxes, i.e., taxes on the resource
at the time of its extraction from the land. 4 Louisiana enacted a "first-use"
tax.' This tax is imposed on oil and gas produced outside the state at the
time of its first local use, refining, processing, or transportation across the
state, e.g., through pipelines carrying oil and gas. The Louisiana tax primarily reached oil and gas produced on the federally owned Outer Continental Shelf.
States have responded in other manners to environmental hazards associated with developing resources. In some instances states have sought to
impose stricter standards on plants using particular resources such as high
sulfur coal or nuclear energy. 6 States also have adopted strict liability statutes for damage caused by oil spills or hazardous waste discharges,7 and
more recently, for cleanup costs or personal injury damages caused by releases of hazardous substances. 8 Other states have sought to limit the use of
particular resources such as nuclear energy within their jurisdiction. This
has been done through requirements that permanent safe storage for nuclear wastes be achieved before licensing more plants,' or through other
restrictions on the use of nuclear energy for power generation. 10
The states also have been concerned about the disposal and use of nuclear and hazardous materials generated either within or without their jurisdictions. Some states or their subdivisions have imposed special limitations
on the location of hazardous or nuclear waste disposal sites within the
'E.g., TEX. NAT. RES. CODE ANN. §§ 201.051 et seq. (Vernon 1982) (oil and gas production); Severance Beneficiary Tax, id., §§ 202.05 I et seq. See text accompanying note 133, infra,
for discussion of the Montana coal severance tax.
'47 LA. REV. STAT. § 1303 (West 1984 Supp.). See Edwards, Zehner, & Moore, Constillltional and Policy Implications of Louisiana's Proposed Environmental Energy Tax: Political
Expedienc:v or Effective Regulation? 58 TuL. L. REV. 215 (1983). See also text accompanying
note 118, infra, for discussion of the Louisiana First Use Act.
'See Union Electric v. EPA, 427 U.S. 246 (1976); Northern States Power Co. v. Minnesota, 447 F.2d 1143 (8th Cir. 1971). See text accompanying note 66, infra, for discussion of
the Northern States Power case.
1 E.g., FLA. STAT. ANN. § 376.12 (West 1984 Supp.); WASH. REV. CODE ANN. § 90.48.336
(West 1984 Supp.).
'MINN. STAT. ANN. §§ 115B.04 et seq. (West 1984 Supp.); N.J. STAT. ANN. § 58:1023.11 to -23.11z as amended, 1977 N.J. Laws, c. 346, § 4. (West 1984). CAL. HEALTH AND
SAFETY CODE §§ 25300 et seq. (West 1984).
'See CAL. PUB. RES. CODE § 25524.2 (West 1977). See text accompanying note 72, infra,
for discussion of this statute.
I·See CAL. PUB. RES. CODE § 25524.1 (West 1977) (citing); TEX. REV. Ctv. STAT. ANN. art.
4590f-1 (Vernon 1984 Supp.) (disposal of low-level radioactive waste on state lands).
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states" or on the transportation of hazardous and nuclear materials across a
state. '2 States also have sought to regulate the importation of solid, hazardous, or nuclear wastes into their jurisdictions for disposal.'3
All of these state measures have been challenged judicially by affected
industry, private parties, or public entities or officials. Inevitably these state
measures dealing with natural resources present conflicts with either federal
statutes or programs. Those conflicts can raise serious constitutional questions. Not all of these state measures have been successful. Nonetheless,
states have adopted and continue to consider measures, such as regulation
of hazardous or solid waste, that relate to or affect resource development.
The legal and constitutional problems of federalism that these measures inevitably raise almost invariably will have to be resolved on a case-by-case
basis."
The legal issues typically involved with state natural resource statutes
are problems of statutory construction or of validity under the federal Constitution. The statutory issues usually concern the scope of authority delegated to an official or agency, whether statutory procedures were followed,
the intent of the legislature, and similar issues concerning statutory interpretation.
The federal constitutional issues are complicated. The major constitutional issue concerning the validity of state legislation relating to natural resources comes from the Commerce Clause. The wording of the Commerce
Clause is relatively simple. It merely states, "The Congress shall have
Power ... To regulate Commerce with foreign Nations, and among the several States . . . . '" S This regulatory authority delegated to Congress is no
longer available to the states.
"E.g., NEW YORK CITY HEALTH CODE, § 175.107 (1976), as ciled Gnd reviewed in United
States v. City of New York, 463 F. Supp. 604 (S. D.N. Y. 1978). See text accompanying note 70,
infra, for discussion of this ordinance.
"See CAL. HEALTH & SAFETY CODE § 25855 (West 1984); WASH. REV. CODE ANN.
§ 90.48.180 (West 1984 Supp.) (waste disposal permits). Cf. New York v. NRC, 550 F.2d 745
(2d Cir. 1977) (action seeking to require NRC to prepare an environmental impact statement
under NEPA before allowing air shipment of special nuclear material across the state).
"E.g., WASH. REV. CODE ANN. § 70.105.010 el seq. (West Supp.); MONT. CODE ANN.
§§ 75-10-401 el seq. (1983). See also Philadelphia v. New Jersey, 437 U.S. 67 (1978). See text
accompanying note 43, infra, for discussion of the New Jersey importation statute.
"A general rule is difficult, if not impossible, to articulate because of the diverse interests
and factors involved. See generally Note, The Commerce Clause and Federalism: Implicalions
for Slale Conlrol of Nalural Resources, 50 GEO. WASH. L. REV. 601 (1982). Included are the
nature of the state program (regulatory, tax, etc.), its purpose, its justifications, its impact on
commerce, and existing social conditions. Also implicated are the federal interests in commerce, in the subject matter being regulated, and the manner of regulation. As the discussion
of cases in this article reveals, the results in similar cases are not always consistent, and opinions have changed over the years with changes in the federal and state interests involved. See.
e.g., C. MEYERS & A. TARLOCK, WATER RESOURCES MANAGEMENT, pp. 388-92 (1980). BUI see
Eule, Laying Ihe Dormanl Commerce Clause 10 Resl, 91 YALE L.J. 425 (1982), proposing a
model for the negative limitation of the Commerce Clause over state commercial legislation.
"U .S. CON ST. art. I, § 8, cl. 3
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Nonetheless, under the Tenth Amendment, the states have reserved to
themselves all authority not otherwise delegated to Congress. It is under the
Tenth Amendment that states typically justify their statutes as being within
the reserved police power for the protection of the health and general welfare of their residents. The cases are legion which deal with the accommodation of these competing claims.
Another limitation on state legislative power is the Equal Protection
Clause. The Fourteenth Amendment prohibits states from denying persons
equal protection of the law. When state natural resource statutes discriminate between persons in-state and out-of-state, an equal protection problem
may arise. Obviously, because natural resources usually are destined for
interstate commerce, issues of equal treatment frequently are raised.
These constitutional issues will be examined as they relate to the development of natural resources. One objective is to determine what actions a
state may take without violating the Constitution. In addition, several selected federal programs will be examined to determine the respective roles
of the state and federal government under them. The ones studied use in different ways a cooperative approach to the federalism issues. This article will
examine the extent of state involvement under the federal program, who has
responsibility for enforcement and standard-setting, the effect of compliance with state law, and whether actions under cooperative programs are
deemed state or federal actions for other constitutional or statutory purposes.
From this discussion of the Commerce Clause and Equal Protection
Clause issues and the examination of various cooperative programs, determinations can be made of possible action for states. Suggestions can be
made about preferable state responses to the various federal programs relating to the development of natural resources. Ways to simplify the decisionmaking process can be considered, particularly where it involves coordinated action by the federal and state governments to develop available
resources. A serious problem in the development of energy resources has
been the complicated and often time-consuming procedures under various
federal and state statutes. Methods by which this regulation can be reduced,
simplified, or rendered nonduplicative also will be mentioned.
Additionally, little is gained by state statutes enacted which are constitutionally dubious and almost certainly subject to challenge in court. The
techniques discussed will attempt to minimize federal constitutional or statutory challenges.
I.
"See Tarlock, Nalional POII'er, Slale Resource SOl'ereignlr alld Federalism in Ihe 1980s:
Scaling America's Magic Moulllaill, 32 KAN, L. REv. III (19lD), for a review of the evolution
and current trend in natural resources Commerce Clause cases. See gellerally L. TRIBE.
A~IERICAN CONSTITUTIONAl. LAW 319 el seq. (197R). Because Commerce Clause cases are so
numerous, this article deals primarily with those involving natural resources that have been
decided by the United States Supreme Court.
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I. COMMERCE CLAUSE PRINCIPLES
A. Affirmative Powers to Congress
Because the Commerce Clause reflects authority over matters respecting
interstate commerce that are constitutionally delegated by the states to the
federal government, they are matters over which the state retains no power.
The scope of the Commerce Clause is virtually without limit. It embraces all
subjects that are in or affect interstate commerce. As the Supreme Court
has stated, "The Commerce Clause is in no sense a limitation upon the
power of Congress over interstate and foreign commerce. On the contrary,
it is ... a grant to Congress of plenary and supreme authority over those
subjects." 17
The Commerce Clause also includes an inherent navigational servitude
in the federal government over all navigable waters. Under this servitude the
federal government has the power to regulate commerce on navigable
waters without having to pay just compensation, for example, to riparian
landowners who might be denied certain uses of those waters. 18 The judicial
reasoning is that under the Commerce Clause the federal government was
given a servitude in navigable waters which is a property interest that the
government can exercise whenever it desires. Under this navigational servitude, the federal government has the authority to exercise control over inland waterways, wetlands, floodplains, coastal zones, and similar areas that
are parts of navigable waters.
The scope of the Commerce Clause also can be seen in federal environmental legislation affecting surface mining, playa lakes, arroyos, and
groundwater located on private lands. Under the Commerce Clause, Congress has the authority to regulate minerals or resources that are subjects of
interstate commerce. That power extends to establishing safety standards,
environmental standards, and other types of requirements relating to the
extraction, processing, transportation, and ultimate use of the product in
interstate commerce.
Similarly, the clause authorizes Congress to legislate concerning groundwater, 19 playa lakes, or wetlands. Even though those waters may not necessarily be navigable waters, if the legislation relates to regulation of interstate
commerce, it is within the scope of the power constitutionally delegated to
Congress. Thus, if the extraction of minerals produces dangerous byproducts that threaten pollution or contamination of groundwater, playa lakes,
or wetlands, Congress can legislate to control how the resource is extracted
to prevent harm that occurs strictly on private property. 20 Likewise, legisla"Prudential Ins. Co. v. Benjamin. 328 U.S. 408, 423 (1945).
"See, e.g., United States v. Rands, 389 U.S. 121 (1967) (loss of access to use navigable
waters as a port site noncompensible) and cases discussed therein.
"See Sporhase v. Nebraska ex reI. Douglas, 458 U.S. 941 (1982) (groundwater overdraft
is national problem which Congress could address under Commerce Clause).
2·See, e.g., Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264,101 S.
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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tion could be adopted to prevent the use of private lands for disposal of hazardous wastes even if the wastes are generated on privately owned lands. 2I
Obviously, as in the situation of on-site waste disposal on private
lands, Congress does not always exercise to the fullest extent its power to
regulate interstate commerce. At one end of the continuum, Congress has
the authority, if the subject matter is within the commerce power, to legislate to the total exclusion of the states. At the other end of the continuum,
Congress is limited in exercising its commerce power when it interferes with
the powers reserved to the states under the Tenth Amendment. Between
these extremes, Congress can and usually does accommodate the state and
federal interests in various ways.
One method is for Congress, in some areas, simply to assume total federal control over the subject matter. Arguably, Congress has done this with
licensing the construction and operation of nuclear power plants. More
often Congress adopts a so-called cooperative federalism approach in which
both federal and state governments operate concurrently. Or Congress has
the option of delegating the responsibility to the state and permitting the
state to legislate in whatever manner it deems appropriate for the designated
subject matter. This has occurred, for example, in the area of regulating
interstate insurance companies and to a large extent in the area of family
law. In the areas of energy, natural resources, and environmental law , however, Congress frequently has used the cooperative federalism approach.
B. National League of Cities v. Usery
Until 1976 it appeared that the congressional authority under the Commerce
Clause was not limited by the police power reserved to the states under the
Tenth Amendment. Previously the Commerce Clause had been deemed a
delegation of matters within the domain of Congress from the states. The
Tenth Amendment was viewed as merely reserving all other powers not
otherwise delegated to the federal government. In National League of Cities
v. Usery" the Court for the first time since 1936 23 interpreted the Tenth
Amendment as a limitation on the exercise of congressional power under
the Commerce Clause.
C!. 2352 (1981), and Hodel v. Indiana, 452 U.S. 314,101 S. Ct. 2376 (1981)(upholding Federal
Surface Mining Control and Reclamation Act which regulates surface mining on public or
private lands). See also Blumm, The Clean Water Act's Section 404 Permit Program E11Iers Its
Adolescence: An Institutional and Programmatic Perspective. 8 ECOLOGY L.Q. 409, 414-19
(1980), for a discussion of the application of the section 404 program to private lands. On the
development of the scope of congressional legislative authority under the Commerce Clause,
see generally L. TRIBE, note 16 supra, at 232-44.
"C/. Nuclear Waste Policy Act of 1982, 42 U.S.c. §§ 10101 et seq. (1982) (radioactive
waste disposal).
"National League of Cities v. Usery, 426 U.S. 833 (1976). See also L. TRIBE, note 16
supra, at 308-18.
2lThe only other case declaring a federal statute unconstitutional on Tenth Amendment
grounds was Ashton v. Cameron Cty. Dis!., 298 U.S. 513 (1936) (federal bankruptcy act inapplicable to state irrigation district).
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In Usery Congress had extended the federal minimum wage law to embrace local and state public employees. The appellants contended that extending the federal minimum wage law to public employees interfered with
the states' sovereign rights and a republican form of government assured
under the Tenth Amendment. They argued the federal law interfered with
distinctly local governmental, sovereign functions concerning how local
money should be expended. Because the federal law would prescribe a minimum wage for state and local employees such as policemen and firefighters,
the state and local governmental functions were directly and adversely affected.
The United States Supreme Court in Usery agreed with the states' arguments. The Court concluded the Tenth Amendment protected state and
local governments from interference with their traditional sovereign, governmental functions. It found that the federal minimum wage law requiring
certain wages to be paid to state and city employees would interfere directly
with the local government's determination of a proper allocation of its revenues. The Court held the Commerce Clause delegation of regulating interstate commerce to the federal government did not extend to interference
with strictly governmental functions of state and local governmental units.
Hence the federal minimum wage law was invalid as applied to city and
state employees.
The death knell may have sounded, if it has not already tolled, for
Usery. In a series of cases since that decision, the Court has refused to
expand its holding in Usery to limit federal power on Tenth Amendment
grounds. In Hodel v. Virginia Mining and Reclamation Ass'n 24 the Court
refused to invalidate the Federal Surface Mining Control and Reclamation
Act (FSMCRA).2S The district court had concluded that the Act's "steep
slope" provisions were unconstitutional under Usery as a federal regulation
of the state in its traditional governmental functions. The Court disagreed.
According to the Court, for a successful Usery claim, three requirements must be met.
First, there must be a showing that the challenged statute regulates the "States
as States." ... Second, the federal regulation must address matters that are indisputably "attributes of state sovereignty." ... And, third, it must be apparent that the States' compliance with the federal law would directly impair their
ability "to structure integral operations in areas of traditional functions."26
The Court rejected the Usery argument because the first requirement
was not met. The Court concluded that the steep slope and other requirements applied to coal operators who are private individuals and businesses.
They do not apply to states. Moreover, the Court rejected the argument that
the Act forces the states to adopt programs. If a state does not wish to implement the Act through an approved program, a federal program will be
452 U.S. 264 (1981).
"30 U.S.c. §§ 1201 el seq. (1982).
"16 E.R.C. 1037 (1981) (footnotes and citations omitted).
24
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
541
promulgated and carried out by the federal government. Hence, according
to the Court, there is no coercive interference with the legislative processes
of the states. "The most that can be said is that the Surface Mining Act establishes a program of cooperative federalism that allows the States within
limits established by federal minimum standards, to enact and administer
their own regulatory programs, structured to meet their own particular
needs. "27 This conclusion comports with the treatment of several other federal cooperative programs, including the Clean Air Act and the Clean
Water Act.
The Court continued by noting that under the plenary power granted
Congress by the Commerce Clause it could have preempted and regulated
the entire field of interstate mining. Being able to do that constitutionally,
Congress has the authority to do less and permit the states to have a regulatory role, as Congress chooses. The Court stated,
[c)ontrary to the assumption by both the District Court and appellees, nothing
in National League of Cities v. Usery suggests that the Tenth Amendment
shields states from pre-emptive federal regulation of private activities affecting
interstate commerce. To the contrary, National League of Cities explicitly reaffirmed the teaching of earlier cases that Congress may, in regulating private
activities pursuant to the commerce power, "pre-empt express state-law determinations contrary to the result which has commended itself to the collective
wisdom of Congress .... ""
Thus the statute was held to be reasonably related to the goal of regulating
interstate commerce and hence constitutional.
In reaching this conclusion, the Court noted that the result is the same
even if the federal action displaces laws enacted under the state's police
powers. In acting affirmatively to regulate interstate commerce Congress
can affect otherwise proper exercises of the police power by a state. In the
words of the Court, "[Ilt would therefore be a radical departure from longestablished precedent for this Court to hold that the Tenth Amendment prohibits Congress from displacing state police power laws regulating private
activity." 29
Other cases have also refused to expand Usery. Equal Employment Opportunity Comm 'n v. Wyoming 30 applied the federal Age Discrimination
Act to prohibit Wyoming from imposing a mandatory retirement age of 55
for state game wardens. The Court has sustained the federal Price-Anderson Act which limits liability for nuclear accidents against Tenth Amendment challenges. 31 It also has held that application of the federal Railroad
Labor Act is not prohibited by the Tenth Amendment to employees of a
state-owned and operated commuter train. 32
"/d. (citalions omilled).
"/d. at 1038 (emphasis in original).
19/d. at 1039.
lOlO3 S. Ct. 1054 (1983).
"Duke Power Co. v. Caroline Envt'l Study Group Inc., 436 U.S. 658 (1978).
"United Transportation Union v. Long Island Rail Road Co., 455 U.S. 678 (1982).
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Currently, a case involving the application of the federal Fair Labor
Standards Act to municipal public transit workers is pending before the
Court. The Court vacated a lower court's application of Usery for reconsideration in light of United Transportation Union. 33 The district court adhered to its earlier ruling that the federal act's requirement of overtime pay
for employees did not apply to the San Antonio Metropolitan Transit Authority.34 The Supreme Court heard arguments on March 19, 1984. But the
case was set over for the 1984-85 Term for reargument on the question of
"[w]hether or not the principles of the Tenth Amendment as set forth in
[Usery] should be reconsidered. "3'
C. Negative Limitation on State Regulation
The Commerce Clause also can operate to invalidate state legislation even in
instances in which the federal government has not acted. Because that clause is
an express delegation to Congress of authority to regulate matters in interstate
commerce, those matters may be removed from state authority regardless of
whether Congress has exercised its power. This implicit limitation on the
authority of states to take action with respect to matters in interstate commerce is the so-called dormant aspect of the Commerce Clause. In other
words, because the power to regulate interstate commerce has been delegated to Congress, it is removed from the domain of the states. Hence, if a
state enacts legislation that interferes with or burdens interstate commerce,
its legislation may be invalid even though it does not conflict with any federallegislation. Any effort to exercise a power-the regulation of interstate
commerce-which the states delegated to Congress in the federal Constitution is invalid.
In Southern Pacific Co. v. Arizona 36 the Court elaborated on this passive aspect of the Commerce Clause in terms of its objectives.
[Elver since Gibbons v. Ogden, 9 Wheat. I, the states have not been deemed to
have authority to impede substantially the free flow of commerq: from state to
state, or to regulate those phases of the national commerce which, because of
the need of national uniformity, demand that their regulation, if any, be prescribed by a single authority .... J7
The Court clarified how this limitation operates when Congress has not
acted.
For a hundred years it has been accepted constitutional doctrine that the commerce clause, without the aid of Congressional legislation, this affords some
"457 U.S. 1102 (1982).
"557 F. Supp. 455 (W. D. Tex. 1983).
"53 U.S.L. W. 3184 (U .S. Sept. 25, 1984). [Ed. note: While this article was being typeset,
the U.S. Supreme Court decided Garcia v. San Antonio Metropolitan Transit District. The
Court held that overtime pay provisions of the federal Fair Labor Standards Act did apply to
the district's employees. Particularly relevant was the Court's express overruling of Usery. 53
U.S.L.W. (Feb. 19, 1984) (5 to 4 decision).l
"325 U.S. 761 (1945). For a thoughtful proposal on the negative aspects of the Commerce Clause, see Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425
(1982).
"325 U.S. at 767 (citation and footnote omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
543
protection from state legislation inimical to the national commerce, and that in
such cases, where Congress has not acted, this Court, and not the state legislature, is under the commerce clause the final arbiter of the competing demands
of state and national interests .... 38
A leading case on the dormant aspects of the Commerce Clause is Pike
v. Bruce Church, Inc. 39 Pike involved an Arizona statute that required all
cant elopes grown in Arizona and offered for sale to be packed in containers
approved by an appropriate state official. The company conducted business in Arizona and California, growing cantelopes in Arizona and transporting them thirty-one miles to a processing and packing plant in California. Shipment into interstate commerce followed. The state official sought
to enjoin the company from transporting the cantelopes out of Arizona
until they were packed in containers approved by the official. This requirement would force the company to build packing and processing facilities in
Arizona rather than using those already available in California.
The state first argued to the Supreme Court that the statute did not
burden or affect interstate commerce. According to the state, the statute
operated only locally on the packing and processing of cantelopes for subsequent shipment in interstate commerce. Thus, the statute does not affect
interstate commerce but only the intrastate packaging of goods ultimately
to be shipped in interstate commerce. Nor, according to Arizona, does the
statute directly prohibit the shipment of cantelopes in interstate commerce.
The Court initially rejected both of these threshold arguments. The
Court noted that cantelopes are highly perishable and were destined for
shipment to a designated interstate location. Moreover, the Court noted the
statutes operate to require the company to conduct an operation in-state
which is already being done out-of-state. Thus the Court concluded that the
statute does affect interstate commerce. The question then became whether
it did so unconstitutionally.
Citing Huron Portland Cement Co. v. Detroit,40 the Court stated the
general rule applicable to determine the validity of state statutes affecting
interstate commerce. The rule entails balancing as well as considering whether
the effects are direct or indirect. The test, according to the Court, is: "Where
the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be
upheld unless the burden imposed on such commerce is clearly excessive in
relation to the putative local benefits. "4' The Court concluded that the
Arizona statute imposed an unreasonable burden on interstate commerce.
The state sought to justify the statute as protecting the reputation of
Arizona growers and assuring quality products are shipped from Arizona.
The Court acknowledged that to protect the reputation of products from
"Id. at 769.
"397 U.S. 137 (1970).
"Id. at 142. See also text accompanying note 80, infra, for a discussion of Huron
Portland Cement Co. v. Detroit.
"Id. (citation omitted).
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Arizona from being deceitfully or fraudulently represented in interstate
commerce was a legitimate local interest.
However, the Court concluded that the Arizona statute was not designed to protect against bad and improperly packaged goods being shipped
from Arizona. Rather the statute operated to have Arizona's name on the
cantelopes grown in Arizona. The Court viewed the statute as basically requiring the grower to go into the packing business in Arizona. Thus the statute was closely analogous to others requiring that business operations be
conducted in the home state. Those types of statutes, according to the
Court, imposed a "particular burden on commerce [that] has been declared
to be virtually per se illegal."42 The Court held that just as a state may not
require a person to do business within its jurisdiction to provide local employment, it cannot require a grower to go into the packing business for the
sole purpose of enhancing the reputation of other producers within the
state.
The dormant limitation of the Commerce Clause was raised more recently in City of Philadelphia v. New Jersey. 43 In City of Philadelphia, New
Jersey had adopted a statute that prohibited the importation of solid or liquid wastes generated outside of the state to be disposed of in landfills within
the state. New Jersey justified the statute on the grounds that available sanitary landfill was diminishing rapidly within the state. It argued that the statute was necessary to protect the health and welfare of its citizens by providing areas for proper disposal of solid and liquid waste generated within
the state. It also argued that the state law was not preempted by any federal
statute.
The Court summarily dismissed the preemption issue. It concluded that
the federal Resource Conservation and Recovery Act (RCRA) did not
preempt state regulation. In fact the Court noted that RCRA encouraged
state programs for the proper disposal and treatment of solid and liquid
waste rather than establishing an exclusive federal program for those purposes. 44
The Court next considered whether the burden imposed on interstate
commerce was excessive and improper. The statute, according to the Court,
directly prohibited the transportation of goods in interstate commerce. The
Court rejected the argument that waste, being worthless, was not protected
by the Commerce Clause. The Court concluded that the value of the subject
is not crucial to the determination of what subjects are appropriate for interstate commerce. The waste clearly was being transported in interstate
commerce and, hence, is within the domain of the Commerce Clause.
The Court determined that, notwithstanding the local interest in protecting the environment and the appropriate use of available land, the state
"397 U.S. at 145 (citation omitted).
"437 U.S. 617 (1978).
"42 U.S.c. ~~ 69-49 (1982) (state plans). The RCRA is at 42 U.S.c.
( 1982).
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regulation was an undue burden on interstate commerce. The Court viewed
it as a protectionist measure which is per se invalid under the Commerce
Clause. The Court refused to determine whether the purpose or the means
used in the statute were protectionistic. It concluded that the statute was invalid when that purpose was accomplished by discriminating against articles
of commerce from outside the state without some valid reason for the
discriminatory classification. The Court also found no valid local purpose
was served by treating out-of-state waste differently from waste generated
in-state. According to the Court, a state may not isolate itself from an interstate problem, such as handling waste materials, and avoid that problem
by creating barriers to interstate commerce through state law.
Lastly, the effort of the state to analogize the importation of waste to
quarantine laws was rejected. The Court held that quarantine laws have
been upheld because the objects in commerce are inherently dangerous both
at their point of origin and in transit. Hence they must be controlled. The
Court found, however, that New Jersey had failed to show that solid or liquid wastes were inherently dangerous or harmful in transit. The health
threat arises in their disposal at landfills. Thus the New Jersey statute was
invalid.
In 1979, the Supreme Court again had the opportunity to review Commerce Clause limitations on state regulation of natural resources. Hughes v.
Oklahoma 45 involved an Oklahoma statute that prohibited the transportation of minnows for sale out-of-state if they were procured within the
waters of the state. The defendant was licensed by Texas to operate a commercial minnow business. He had purchased for transport to Texas a load
of minnows caught in Oklahoma from a licensed Oklahoma dealer.
The Commerce Clause challenge to the Oklahoma statute was rejected
by the Oklahoma state court. The conviction of the defendant was upheld
on the basis of Geer v. Connecticut. 46 In Geer the United States Supreme
Court had held that wild animals and fish within the borders of the state are
owned by the state for the benefit of all of its people. Oklahoma justified its
statute as a conservation measure to protect against depletion of the minnows in Oklahoma waters by commercial exploitation.
In Hughes the Supreme Court expressly overruled Geer v. Connecticut.
The Geer Court had reasoned "that the State had the power, as representative for its citizens, who 'owned' in common all wild animals within the
State, to control not only the taking of game, but the ownership of game
that had been lawfully reduced to possession."47 This ownership by the
state carried with it the power to own and confine wild game within the
state's jurisdiction. In effect, the Court concluded that the state's owner"441 U.S. 322 (1979). S('(' Note. Hughes v. Oklahoma (lnd Baldwin v. Fish & Game Commission: Till' COll1l11('rce Clalls(' and Slale COlllrol (~r Nalliral R('sollrc('s. 66 VA. L. REV. 1145
(19RO).
"161 U.S. 519 (JR96).
"441 U.S. at 327 (footnote omitted) (emphasis in original).
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ship removed the sale or exchange of wild game from being considered commerce, or that at least a statute confining its shipment to intrastate commerce prevents it from ever becoming interstate commerce.
The Hughes Court reviewed developments after Geer and concluded
that Geer must be overruled. The facts in Hughes were on all fours with
those in Geer. The Court's conclusion was "that challenges under the Commerce Clause to state regulations of wild animals should be considered according to the same general rule applied to state regulations of other natural
resources, and [we] therefore expressly overrule Geer. "4'
The Court then proceeded to apply the general rule of Pike v. Bruce
Church. 4"
Under that general rule, we must inquire (I) whether the challenged statute
regulates evenhandedly with only "incidental" effects on interstate commerce,
or discriminates against interstate commerce either on its face or in practical effect; (2) whether the statute serves a legitimate local purpose; and, if so, (3)
whether alternative means could promote this local purpose as well without
discriminating against interstate commerce. 50
The Court went on to discuss the burden of proof in Commerce Clause
cases. It concluded that
[tJhe burden to show discrimination rests on the party challenging the validity
of the statute, but "[wJhen discrimination against commerce . . . is demonstrated, the burden falls on the State to justify it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake. "51
Moveover, the practical impact of the law is to be determined by the court.
Next the Court proceeded to examine the effect of the statute. It concluded that the law operated as a direct restraint on interstate commerce in
minnows. The statute, according to the Court, on its face discriminates
against interstate commerce. This express discrimination "invokes the
strictest scrutiny of any purported legitimate local purpose and of the
absence of any nondiscriminatory alternatives. "l2
The Court then considered the state's justification of the statute as a
conservation measure. It rejected this purpose because of the statute's impact on out-of-state residents. Under this rationale, the legitimate state interest in conservation would force all persons outside a state to bear the full
costs of conserving the wild animals within its border when equally
available, nondiscriminatory methods are available to the state. The Court
noted that the state did not take the least discriminatory alternative, but
rather the most blatant one. The state law did not limit the number of minnows that could be taken by licensed minnow dealers nor did it restrict in
"fd. at 335.
"397 U.S. 137 (1970). See afso text accompanying note 39 slipra.
"441 U.S. at 336.
"fd. (citation omitted).
"fd. at 337.
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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any way how the minnows could be used within the state. Therefore the
Court concluded that the Oklahoma statute violated the Commerce Clause.
In Hunt v. Washington Apple Advertising Comm 'n 53 the Court again
was confronted with accommodating the federal interest in a national common market under the Commerce Clause and competing local interests. In
Hunt, North Carolina had adopted a statute that prohibited the sale of apples in the state unless they were shipped in closed containers marked only
with the appropriate federal grade or standard, (l) "unclassified," (2) "not
graded," or (3) "grade not determined." North Carolina justified this
statute as a means to protect consumers of apples from fraudulent and
deceptive standards from various states shipping apples into North
Carolina. The state argued that at least seven other states had standards
which were not uniform nor consistent with either federal standards or each
other.
The Commission challenged the standards based on Washington's
elaborate and extensive system for grading Washington grown apples sold
in interstate commerce. Apples produced in Washington were of better
quality than those under the USDA standard and were marked accordingly.
The North Carolina statute operated to prohibit the sale of Washington apples in North Carolina or to require that they be completely repackaged and
resealed without any grades or with the appropriate lower USDA grade in
order to be shipped into North Carolina.
To accommodate the conflicting national and state interests in Hunt,
the Court first quoted from Southern Pacific Co. v. Arizona ex reI.
Sullivan, "in the absence of conflicting legislation by Congress, there is a
residuum of power in the state to make laws governing matters of local concern which nevertheless in the same measure affect interstate commerce or
even, to some extent, regulate it."54 The Court acknowledged that that residuum of power is even stronger when the state acts to protect its residents
in matters relating to health and consumer protection with respect to the
sale of foodstuffs. The Court concluded, however, that the North Carolina
statute not only imposed an unreasonable burden on interstate sale of
Washington apples, but also discriminated against them.
The Court noted that the North Carolina statute discriminated against
Washington's producers by increasing their costs of selling their apples in
North Carolina, while not affecting any local producers of apples in North
Carolina. Local producers still were able to sell apples either ungraded or
with the appropriate USDA grade, which they were able to do before the
statute's enactment. The Court further determined that the statute effectively deprived Washington of the competitive and economic benefits of its
grading system. The extensive Washington grading system had been
recognized nationally as superior to the USDA system. Within the apple in"432 u.s. 333 (1977).
"325 U.S. 761. 767 (1945) (citations omitted), quoled i11432 U.S. at 350.
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dustry the Washington system had been nationally recognized as superior.
The North Carolina statute operated to the detriment of the Washington
system and to the benefit of the local North Carolina apple industry.
The third means of discrimination was the levelling effect required by
the North Carolina statute. By prohibiting the sale of apples with state
grading systems, North Carolina effectively downgraded Washington apples to the inferior USDA standard, again to the benefit of the local apple
industry. This downgrading protects the local industry from competing with
out-of-state products. According to the Court, it is precisely this type of
discriminatory protection the Commerce Clause prohibits by assuring a free
national market for produce in interstate commerce. The net effect of the
North Carolina state would be either for the Washington producers to
withhold the superior apples from the North Carolina market or force them
to enter that market at a lower price than their products otherwise would be
entitled to.
Having determined that the North Carolina statute discriminated
against interstate commerce, the Court then considered whether the state
adequately justified its legislation. According to the Court,
[w]hen discrimination against commerce of the type we have found is
demonstrated, the burden falls on the State to justify it both in terms of the
local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake. II
The Court then considered the state's reasons for its legislation, rejecting the state's justification that the law was protecting consumers from
deceptive and confusing methods in marking apples. As applied to the
Washington apples, the statute allows apples without any grades to be
marketed in closed containers. As the Court noted, that practice could
cause greater deception and confusion among differing state grades and
also denies purchasers of apples necessary information concerning their
quality.
In addition, the Court found that the statute operates principally on
brokers or wholesalers of apples, and not on the consuming public. Those
persons probably would be knowledgeable about the quality and grades of
apples and are not likely to be confused or deceived by conflicting state
standards. But the information regarding the standards and grades were not
made available to the ultimate purchasers of the apples at the retail level.
Hence the statute does not protect consumers against the problems it is
designed to eliminate. Moreover, as applied to Washington apples, the
statute could not achieve the objective of eliminating deception and confusion, because the Washington grades were in all cases equal or superior to
the USDA standards, and that information can only be beneficial to the
consumer.
Lastly, the Court concluded that less discriminatory alternatives were
"432 U.S. al 353 (cilalions omilled).
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available to North Carolina to achieve its objectives of avoiding deceptive
and confusing practices in the sale of apples from out-of-state. Suggested
alternatives included having out-of-state prod~cers note at least the USDA
grade in addition to any state-required grade on shipments. Or North
Carolina could consider banning any state grades which did not at least
meet the USDA grades, while allowing those that are equal to or better than
the USDA grades. The Court acknowledged that some confusion with the
latter alternative might still exist, "[hJowever, it is the type of 'confusion'
that the national interest in the free flow of goods between the States
demands be tolerated." 56
A diametrically opposing result was reached in a later case, Exxon
Corp. v. Governor oj Maryland. 57 In Exxon Corp. Maryland adopted a
statute that prohibited oil producers or refiners from operating retail service
stations within the state. The statute also required that any price reductions
voluntarily extended by the refiners or producers to independent dealers be
applied uniformly to all stations they supplied. These so-called voluntary
allowances typically were given independents to meet local, not statewide,
competitive situations.
In contract to Hunt, the Supreme Court held the Maryland statute did
not violate the Commerce Clause. It first rejected the argument that the
statute operated against interstate commerce. The Court noted that the
statute operated on intrastate commerce because there were no producers or
refiners in Maryland. Without local producers or refiners, disparate treatment could not be established.
Moreover, the Court found that the statute created no barriers against
interstate independent dealers. The record revealed that several interstate
independent dealers of petroleum own and operate their own retail stations
and compete with independent Maryland dealers. The Act did not prohibit
the flow of interstate petroleum, impose an additional cost on out-of-state
independents, or distinguish between in-state and out-of-state companies.
Thus the Court rejected the argument that the Act operated discriminatorily
in favor of in-state independent dealers to the detriment of out-of-state
retailers and producers. In the words of the Court,
[w]hile the refiners will no longer enjoy their same status in the Maryland
market, in-state independent dealers will have no competitive advantage over
out-of-state dealers. The fact that the burden of a state regulation falls on some
interstate companies does not, by itself, establish a claim of discrimination
against interstate commerce. 58
The Court next rejected the company's argument that the statute imposes an undue burden on interstate commerce. The companies argued that
several out-of-state refiners will stop selling petroleum products in
Maryland and deprive its citizens of their special services. The Court
"fd. at 354 (footnote omitted).
"437 U.S. 117(1978).
'" fd. at 126 (footnote omitted).
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acknowledged that the statute could result in some shift of interstate
business from out-of-state retailers who choose to go out of business in
Maryland to others who will continue to do business in Maryland. It also
acknowledged the shift in business from retailer stations to independent
dealers. The Court concluded, however, that "interstate commerce is not
subjected to an impermissible burden simply because an otherwise valid
regulation causes some business to shift from one interstate supplier to
another. "59 The Court proceeded to reject the company's argument that the
Commerce Clause protects "the particular structure or methods of operation in a retail market. "60 The Court stated that these arguments relate
more to the wisdom, rather than validity, of the state legislation.
Lastly, the Court rejected what it termed the company's novel argument that because of the national economic market for petroleum products,
no state can regulate the retail marketing of gas. The company feared that
legislatures in other states were considering similar legislation that could
have severe effects on national refiners and producers. The Court rejected
this argument, refusing to find "that the Commerce Clause, by its own
force, pre-empts the field of retail gas marketing. "61 The Court noted that it
"rarely held that the Commerce Clause itself pre-empts an entire field from
state regulation, and then only when a lack of national uniformity would
impede the flow of interstate goods.' '62 Without a conflicting congressional
enactment, a showing of discrimination, or a burden on interstate commerce, the Court was unwilling to invalidate the Maryland statute.
D. Preemption
Preemption is a situation in which the federal government has affirmatively
acted by adopting legislation that precludes state legislation concerning the
same subject matter addressed by the federal law . Preemption also may be implied in several situations. First, if the subject matter is comprehensibly
treated by federal legislation and the federal objectives and purposes would be
undermined by conflicting state regulation, then under the Supremacy
Clause, the federal statute is declared the supreme law ofthe land and prevails
over any conflicting state law. 63 Second, if the federal legislation and state
regulation are in direct conflict so that the regulated party cannot comply with
both, courts assume Congress intended that the federal law should prevail. 6'
Third, preemption is implied, even if Congress has not acted, if the regulated
"Id.
oOld.
"Id.
., Id.
at 127.
(citations omitted).
at 128 .
(citations omitted).
"u .S. CONST. art. VI, § 2. See text accompanying note 46, infra. for discussion of Northern States Power CO. I'. Minnesota. See Hines v. Davidowitz, 312 U.S. 52 (1941) (state law
deemed obstacle to federal objectives).
"Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43 (1963) (impossible for regulated party to meet state and federal standards which were in direct conflict).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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subject matter is one requiring uniform rules at the national level. 6S
The preemption issue has been raised in several natural resources cases.
The nuclear power arena is one that is fraught with preemption issues. In an
early case, Minnesota v. Northern States Power Co., 66 the state sought to
impose stricter effluent standards on the water discharged from the company's plant into a nearby river. The company's construction and operation
of the plant had been licensed by a permit from the former Atomic Energy
Commission (AEC) (now the Nuclear Regulatory Commission). The company argued that the Atomic Energy Act of 1954, which authorized the
AEC to regulate health and radiological matters concerning the operation
of plants, prohibited the states from enacting conflicting legislation. The
state argued it had the authority under the Tenth Amendment police power
to establish regulations of surface waters in the state for the protection of
the health of its residents.
In Northern States Power, the Eighth Circuit concluded that the federal Atomic Energy Act preempted the state regulations. The court viewed the
history of the development of the atomic energy industry. It noted that
atomic energy originally was a federal monopoly, which was changed in
1954 to a program for fostering and developing private use of nuclear
power. The court concluded, however, that the 1954 Amendments had not
relinquished to the states the ability to set more stringent radiological or effluent standards than the federal ones.
In justifying its conclusion, the Eighth Circuit noted the extensive and
comprehensive nature of the federal program relating to nuclear energy. It
further observed the need for uniformity in construction and operation of
plants. Without federal standards, each state could impose its own regulations which would defeat the federal purpose of developing a private
nuclear power industry. The court also reviewed the legislative history of
the 1954 and subsequent amendments to the Atomic Energy Act and concluded that those amendments were not intended to give states the authority
to regulate radiological or other discharges from federally licensed plants.
The Eighth Circuit's opinion subsequently was affirmed by the United
States Supreme Court without opinion. This result is important because of
efforts by many states to restrict the siting of nuclear power plants or
nuclear waste disposal sites within their jurisdictions. When those state efforts have been challenged judicially, the reviewing courts have relied heavilyon Northern States Power as precedent to conclude that nuclear power is
an area preempted by the federal government. 67
Hence, the precedential value of Northern States Power remains an im"Southern Pacific Co. v. Jensen, 244 U.S. 205 (1917) (maritime law).
"447 F.2d 1143 (8th Cir. 1971), a/I'd lIIelll .. 405 U.S. 1035 (1972).
"E.g. .. United States v. City of New York, 463 F. Supp. 604 (S.D.N.Y. 1978) and test accompanying note 70 infra. See a/so Pacific Legal Foundation v. State Energy Resources Conservation & Development Comm'n, 472 F. Supp. 191 (S.D. Cal. 1979), rev'd, 659 F.2d 903 (9th
Cir. 1981).
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portant issue. One commentator has argued the opinion's precedential
value is lessened because of its affirmance by the Supreme Court without
opinion. 68 It also has been suggested that its precedential value is limited to
the particular facts and issues of each case. Cases by the United States
Supreme Court in areas other than nuclear power have suggested that lower
courts' opinions affirmed by it without opinion do have less precedential
value. 69 Nonetheless, Northern States Power remains a significant opinion
in the area of nuclear energy concerning the states' abilities to legislate concerning nuclear power or disposal of nuclear waste within their jurisdictions.
For example, in United States v. City of New York, 70 the city's health
code was amended to require, in addition to the necessary federal permits
and licenses, a "Certificate of Health and Safety for Nuclear Reactor
Operation" from the city's health commissioner. 71 The explanatory notes
of the ordinance emphasized the city's responsibility for handling radiation
releases and, hence, its concern about reactor location. The city justified the
ordinance as a health and safety siting measure, not one regulating
radiological hazards. The city also argued the federal statute did not
preempt the field entirely, but allowed local siting decisions. It pointed out
that the AEC lacked authority to consider local siting matters.
The federal district court rejected the city's arguments. Relying heavily
on Northern States Power, it concluded the federal statute preempted the
city's ordinance.
The Supreme Court clarified the precedential value of Northern States
Power in Pacific Gas and Electric Co. v. State Energy Resources Conservation and Development Comm 'no 72 In PaCific Gas, the Court had to consider
whether California's Warren-Alquist Act was preempted by the federal
Atomic Energy Act (AEA). Under the California act, a utility planning to
build a nuclear power plant in California had to seek certification from the
state commission. One section of the statute prohibited certification of new
nuclear power plants until the commission, "finds that there has been
developed and that the United States through its authorized agency had approved and there exists a demonstrated technology or means for the
disposal of high-level nuclear wastes. "73 In upholding the California act,
"Meek, Nile/ear Power and State Radiation Protection Measures: The Importance
Preemption, 10 ENVT'L L. 1,7-9 (1979).
"See cases discussed id. at 7 n.25.
(~r
"United States v. City of New York, 463 F. Supp. 604 (S.D.N.Y. 1978).
"Id. at 606
"461 U.S. 190 (1983).
"CAL. PUB. RES. CODE § 25524.2 (West 1977, and Supp. 1984).
Another section of the California Act had been challenged and sustained by the Ninth
Circuit. An applicant for certification must submit three alternate sites, including one not
located in the coastal zone. The Ninth Circuit held that the provision also was not preempted
by the AFA. Pacific Legal Found. v. State Energy Resources Conservation and Development
Comm'n, 659 F.2d 903 (9th Cir. 1981). The company's petition for certiorari to review that
portion of the Ninth Circuit decision was denied by the Supreme Court. 457 U.S. 1133 (1983).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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the Ninth Circuit had concluded the state measure was intended to deal with
nonradiological factors and hence would not be preempted under the AEA.
The Supreme Court agreed with the Ninth Circuit's interpretation of
the state's justification for its statute. The state argued that its measure was
not involved with radiological safety nor evaluating the means of permanent waste disposal selected by the federal government. Nor was the act intended to regulate the operation or construction of nuclear power plants.
Rather the state's rationale for the statutes was to protect California
residents from having to bear the financial risk of funding nuclear power
plants which would have limited on-site storage space and no permanent
storage facility that could lead to closing a plant. The economic impact
could be dramatic from the uncertainty of power supplies and the economic
factors of shutting down a plant.
The Court accepted the Ninth Circuit interpretation of the California
statute. It concluded that the AEA preempted state activities with respect to
safety or the construction or operation of nuclear power plants, but did not
preclude states from regulating for nonsafety or nonradiological reasons.
On this basis, it distinguished Northern States Power as a case in which the
state was directly regulating for radiological purposes."
The Court went further to reject the argument that the state statute was
inconsistent with the federal efforts to develop a national program for the
nuclear waste disposal problem. It also rejected the company's argument
that the state act would frustrate the AEA's purpose of fostering the nuclear
power industry. The Court agreed with the Ninth Circuit, that consistent
with the AEA,
Congress has allowed the States to determine-as a matter of economicswhether a nuclear plant vis-a-vis fossil fuel plant should be built .... Therefore the legal reality remains that Congress has left sufficient authority in the
states to allow the development of nuclear power to be slowed or even stopped
for economic reasons. 75
The preemption problem has been raised in nonnuclear contexts as
well. One case involved the use of tankers in Puget Sound. In Ray v. Atlantic Richfield Co. (Area),'· the state of Washington had enacted a law that
restricted the size of tankers entering Puget Sound, imposed design standards on all tankers using the Sound, required a local tug escort for tankers
not meeting the design standards, and required state licensed pilots on
larger tankers engaged in coastal or foreign trade.
In Area, the United States Supreme Court invalidated most of the state
law. It held the federal Port and Waterways Safety Act preempted the state
regulation of vessels coming into Puget Sound and the design and construction requirements imposed by the state law. The Court concluded that
"103 S. Ct. at 1726. n .24.
"/d. at 1731.1732.
"435 U.S. 151 (1978).
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under federal law those matters were regulated by the federal government
acting through the Coast Guard. The Court concluded that the federal
statute preempted any state regulation; hence, the state law could not stand.
The Court did, however, leave intact the Washington tanker law requirements of locally licensed tugs. Although the Secretary of Transportation had the authority to issue regulations concerning tugs, none had been
promulgated. Because the local tug requirement related to health and safety, the state could regulate the area unless the federal government later did
so preemptively. In addition, the licensed pilot requirement for registered
(foreign trade) vessels was not preempted. The federal statute clearly prohibited local pilots on enrolled (coastal trade) vessels, but did not mention
registered ones.
The preemption issue had been raised earlier in Askew v. American
Waterways Operators, Inc. 77 In Askew, the state of Florida had enacted a
statute imposing strict liability for oil spills on persons causing spills in or
affecting state territorial waters or adjacent property. The plaintiffs argued
that the law was unconstitutional under the Commerce Clause. They argued
that the law had been preempted by the Federal Water Quality Improvement Act, which established a program of liability for oil spill cleanup costs
incurred by the federal government. The plaintiffs argued that the federal
law preempted any state liability statutes.
The United States Supreme Court in Askew held the state strict liability
statute was valid. The Court noted that the federal act was extensive and
established an elaborate federal program for oil spill liability . However, the
Court noted that the liability provisions related to harm and damages on the
high seas and applied to costs incurred by the federal government. The act
itself allowed state regulation. 78 After reviewing the legislative history, the
Court concluded Congress did not intend to preclude states from enacting
oil spill liability statutes.
The Court also noted that the state law furthered the federal purpose of
trying to avoid oil spills and to expedite cleanup when they occurred. The
Court rejected the argument that oil spill liability was an area of maritime
law requiring national uniformity under federal law. Hence, the state law
was permissible.
An interesting contrast with Arco is Huron Portland Cement Co. v.
Detroit,79 which involved both preemption and negative limitation issues
under the Commerce Clause. In that case the city had adopted a smoke
abatement code which was applied to the appellant's vessels which docked
in the Port of Detroit. The ships, while docked, kept their boilers fired so
that they could operate loading and unloading machinery. When the fires
**
"411 U.S. 325 (1973).
"/d. at 329. The Clean Water Act currently authorizes state regulation. 33 U.S.c.
1321 (0) (I) & (2) (1982).
"362 U.S. 440 (1960)
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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were cleaned, dense black exhaust smoke was emitted in violation of the ordinance. A criminal prosecution was brought against the company for
violation of the code.
The company in Huron argued that Congress had legislated a comprehensive scheme for certifying and maintaining vessels engaged in interstate commerce. The company maintained that the federal program for
ship certification and licensing had preempted any contrary state program.
The federal program included certification of the vessel engines and boilers.
In addition, the company argued that the ordinance imposed an undue
burden on interstate commerce.
The Court rejected the company's preemption and dormant Commerce
Clause arguments. The Court noted that the Detroit ordinance did not
directly conflict with the federal statute. The ordinance was a valid regulation to eliminate air pollution and protect the public health in Detroit. The
regulation was not contrary to the federal statute's purposes to assure the
vessel's seaworthiness for transportation in interstate commerce. The
federal program is to assure safety and protection of the vessel for maritime
navigation. It was not intended as a health measure for smoke abatement, a
legitimate local interest.
The Court thus rejected the company's preemption argument. It concluded "that there is no overlap between the scope of the federal ship inspection laws and that of the municipal ordinance here involved. ".0
The Court next rejected the company's argument that the ordinance
imposed an undue burden on interstate commerce. This argument was
based on the fact that the company ships were licensed and enrolled for
navigation in interstate commerce by the federal government. The company
argued that because it had a federal license to operate in navigable interstate
waters, it could do so without hindrance from local authorities.
The Court disagreed that the Detroit ordinance imposed an undue
burden on vessels engaged in interstate commerce. It noted that "[tlhe mere
possession of a federal license ... does not immunize a ship from the
operation of the normal incidents of local police power, not constituting a
direct regulation of commerce. "8J The Court determined that the "Detroit
ordinance requires no more than compliance with an orderly and reasonable
scheme of community regulation."'2 The Court concluded that "[sltate
regulation, based on the police power, which does not discriminate against
interstate commerce or operate to disrupt its required uniformity, may constitutionally stand. "'3 Hence, the Smoke Abatement Ordinance of Detroit
was declared valid.
80 Id.
"Id.
"Id.
"Id.
446.
447.
448.
(citations omitted).
at
at
at
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E. State Involvement in the Market
The Supreme Court has had to consider different kinds of situations than
those in which the state was attempting to regulate or restrict interstate business. It also has had to determine the effect on interstate commerce of stateowned or -operated businesses. In addition, it has reviewed programs in
which a state subsidizes or provides other incentives to private businesses.
Different rules have evolved in these situations, in part because of the direct
state involvement in the business which is allegedly discriminatory or unreasonably interfering with interstate commerce.
I. STATE-SUBSIDIZED BUSINESS-ALEXANDRIA SCRAP CORP.
In 1976, the United States Supreme Court first considered the impact on interstate commerce of a state subsidy program for its residents. Maryland
enacted a program to deal with the problem of abandoned and scrap vehicles. The legislature sought to expedite the scrap process through two
means. The first was to impose a fine on wreckers keeping for more than
one year vehicles of a certain age for spare parts. The other facet of the legislation was a subsidy to scrap processors for the destruction of any vehicle
formerly titled in Maryland. If the destroyed vehicle came from a Maryland-licensed wrecker, the processor and wrecker would share the subsidy;
if the vehicle came from an unlicensed source, the processor would receive
the entire subsidy. To protect the processor against suits by third parties
claiming the vehicles were not abandoned, the statute required different
documentation of title. The supplier of the abandoned vehicle had to present either a "Wrecker's Certificate," which could only come from a licensed wrecker; a properly endorsed certificate of title; a certificate from a
police department vesting title in the supplier after statutory notices; or a
bill of sale from a police auction. 84
The Maryland statute also created a special category for old, inoperative vehicles. Vehicles that were eight years old and inoperable were
subject to the same subsidy provisions without the requirement of the title
documentation required for abandoned vehicles.
Six years later the statute was amended. During the first six-year period
96 percent of the vehicles for which subsidy was paid were for old, inoperable vehicles, so-called hulks. After the amendment, a scrap processor
had to provide the state with title documentation to receive the subsidy.
Out-of-state scrap processors had to provide the same title documentation
that was required for abandoned vehicles, while in-state processors could
receive a subsidy upon showing only an indemnity agreement. The indemnity agreement was merely an agreement by the supplier of the hulk to indemnify the processor against any claims from third parties with respect to the
vehicle. Because it is easier for the supplier of a hulk to sign an indemnity
"'Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976).
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agreement than to provide title documentation, there was a sharp decline in
the number of hulks received by out-of-state scrap processors from
Maryland suppliers.
In Hughes v. Alexandria Scrap Corp.,8l the United States Supreme
Court reviewed the constitutionality of the Maryland program. The company challenged the Maryland statute as violating the Commerce Clause by
unduly interfering with the flow of hulks eligible for the subsidy across state
lines. It also challenged the statute on equal protection grounds, claiming
that it discriminated against in-state and out-of-state scrap processors by
allowing Maryland processors to use indemnity agreements. The company
argued that under the Pike test, the burden and discrimination were not
justified by significant local interests, and further, less onerous alternatives
were available to the state.
The Court rejected the company's arguments by finding the state had
not imposed a burden on nor had discriminated against interstate commerce. The Court noted a primary purpose of the Commerce Clause is to
establish the free flow of raw materials and products in commerce without
barriers between the states. The Court reviewed prior cases and concluded
that when a state statute was struck down it either prohibited interstate
commerce, unduly burdened it by regulating goods flowing across state
lines, or discriminated against products in interstate commerce.
The Court viewed the situation in Hughes quite differently from earlier
cases. Rather than burdening commerce, the state sought to bolster and
enhance interstate commerce in hulks. By entering the marketplace itself
and increasing the value of the product, the state effectively created a
market for hulks. The state had a legitimate purpose of enhancing the
state's environment by removing abandoned and scrapped vehicles. Thus,
the Court concluded that Maryland had not imposed a burden on interstate
commerce by entering the marketplace itself.
The Court also rejected the argument that the amendment to the
statute was discriminatory, either for purposes of the Commerce Clause or
Equal Protection Clause. The Court noted that this was a case of first impression in which it had to decide whether the state participation in the
marketplace constituted a violation of the Commerce Clause. The Court expressly refused to rule that the state, by entering into a market and confining its trade to its own citizens or businesses within the state, creates a
burden on interstate commerce. According to the Court, "[w]e do not
believe the Commerce Clause was intended to require independent justification for such action. Maryland entered the market for the purpose, agreed
by all to be commendable as well as legitimate, of protecting the State's environment."86 The Court noted the effect on interstate commerce by the
amendment was not the result of a trade barrier prohibited by the Com" Id.
"Id. at 809.
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merce Clause. In the words of the Court, the hulks "remain within
Maryland in response to market forces, including that exerted by money
from the State. Nothing in the purposes animating the Commerce Clause
forbids a State, in the absence of congressional action, from participating in
the market and exercising the right to favor its own citizens over others. "87
The Court next rejected the company's argument that the Maryland
statute violated the Equal Protection Clause by its discrimination between
in-state and out-of-state scrap processors. The company argued that there
were basically no differences between the operations of in-state and out-ofstate processors. Moreover, according to the company, the discrimination
does not further any legitimate state interest.
The Court accepted the state's justification for the statute. It applied a
rational relation test to determine the validity of the statute under the Equal
Protection Clause. 88 The state argued that the objective of the amendment
was to use limited state funds to remove abandoned cars and hulks from the
Maryland landscape. The underlying assumption was that abandoned
vehicles delivered to Maryland processors were abandoned in Maryland and
those delivered to out-of-state processors were abandoned in other states.
The Court concluded that the Maryland justification was rational and the
underlying assumptions were reasonable. The Court stated, "[t]he 1974
amendment bears a rational relationship to Maryland's purpose of using its
limited funds to clean up its own environment, and that is all the Constitution requires. "89
2. STATE-OWNED BUSINESSES
In 1980, the Supreme Court was confronted with a situation similar to that
in Alexandria Scrap. Reeves, Inc. v. Stake 90 involved a cement plant that
had been operated by South Dakota for more than fifty years. In 1978,
because of a shortage of cement, the state decided that its cement previously
available to anyone, would be available only to residents of the state. The
company was a Wyoming purchaser who for longer than twenty years had
purchased about 95 percent of its cement from the South Dakota plant. Its
business was sharply curtailed by the state's restriction of purchases to
residents. The company sued, challenging the state's action as violating the
Commerce Clause.
The state court treated the case as analogous to Alexandria Scrap. It
considered that the state was acting in a proprietary capacity rather than as
a regulator of business. Because South Dakota in Stake was acting as a
market participant, it had the freedom to restrict its sales and participation
in the business to its own residents. As the Supreme Court had noted in
"' Id. at 810 (footnotes omitted).
"See also discussion of Equal Protection Clause at text accompanying note 169, infra.
"426 U.S. at 814 (citations omitted).
'"447 U.S. 429 (1980)
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Alexandria Scrap, this was not a burden on interstate commerce, nor, "'the
kind of action with which the Commerce Clause is concerned. "'91
In Stake, the Court cited additional justification for treating differently the state's acting in a proprietary capacity for Commerce Clause purposes. The Court emphasized that the Commerce Clause is intended to
enhance the free flow of goods in a common market across the nation. It
addresses situations in which there are burdens or barriers placed on interstate commerce through taxes or other regulations that operate discriminatority, provide economic protection for in-state businesses, or burden interstate commerce. 92 But the Commerce Clause was not intended to prohibit a
state from freely entering the marketplace.
The Court further noted that state proprietary activities are often
burdened with the same restrictions or limitations that are imposed on
private market participants. "Evenhandedness suggests that, when acting as
proprietors, States should similarly share existing freedoms from federal
constraints, including the inherent limits of the Commerce Clause."9)
Thus, the Court concluded that the activity of South Dakota was not
in violation of the Commerce Clause. It noted that the state, as owner of a
business, was easier to fit within the definition of market participant than
was Maryland in the subsidy program involved in Alexandria Scrap. Hence
the general rule of A lexandria Scrap applies to permit the state restriction of
its business activities to its residents.
The Court also rejected the company's suggestion that South Dakota
had exploited the interstate business and should not now be allowed to
withdraw from it. The Court observed the self-serving nature of that statement, noting that it equally was accurate to say that the neighboring states
were able to benefit from South Dakota's foresight and long-range planning. But the Court rejected the argument for more basic reasons, concluding that to accept the argument would mean that a state would not have the
freedom to develop its own relationship with its residents concerning local
problems and local interests. Moreover, it would restrict the state's ability
to seek new experimental means for solving local problems and distributing
governmental largesse. 94
The Court next rejected as inapplicable and too far-reaching the argument that the South Dakota preference was protectionistic. According to
the Court, any effort by a state to provide state-funded education, police,
and fire protection, energy from a state-owned power plant, and business
development programs could be viewed as economic protectionism. The
Court acknowledged "[s]uch policies, while perhaps 'protectionist' in a
loose sense, reflect the essential and patently unobjectionable purpose of
"Id.
"Id.
"Id.
"Id.
at
at
at
at
435. quoting from Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 805 (1976).
435-37.
439 (citations omitted).
440-41.
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state government-to serve the citizens of the State. "9'
The Court also rejected the contention that South Dakota's action was
tantamount to an effort to hoard its natural resources. It noted that cement,
unlike natural resources, is the result of a complex manufacturing process
and labor conducted on raw materials. The Court noted that the state had in
no way attempted to limit access to the raw materials, resources, nor otherwise restrict the ability of firms from other states to locate cement plants
within its boundaries.
The Court also rejected the notion that South Dakota's action places
its suppliers of ready-mixed concrete at a competitive advantage in the outof-state market. The Court noted that that argument, carried to its extreme,
would mean that South Dakota could limit its business to its residents if it
barred out-of-state sales. That would be allowing even greater protectionism. The Court pointed out that the dilemma of the out-of-state suppliers was due in part to their states' lack of foresight in locating alternative
sources of supply or helping to provide them with the necessary materials,
rather than simply South Dakota's unwillingness to supply them.
Stake was decided over a strong dissent 96 that argued that South
Dakota was engaged in economic protectionism. Moreover, it noted that
the state in its proprietary capacity was doing what it could not do directly
by regulation through legislation. The dissenters would apply the Commerce Clause to governmental activities on the basis of the activity involved. Their test would be:
If a public enterprise undertakes an "integral operatio[n] in areas of traditional
governmental functions," National League of Cities v. Usery, 426 U.S. 833,
852 (1976), the Commerce Clause is not directly relevant. If, however, the State
enters the private market and operates a commercial enterprise for the advantage of its private citizens, it may not evade the constitutional policy against
economic Balkanization. 97
According to the dissenters, "[t]his distinction derives from the power of
governments to supply their own needs ... and from the purpose of the
Commerce Clause itself, which is designed to protect 'the natural functioning of the interstate market. ... ' "98
Thus the cases on direct state involvement in the interstate market
reflect conflicting concerns of the Supreme Court. On the one hand, the
Court is seeking to preserve the free flow of commerce at the national level
as required under the Commerce Clause. At the same time, the Court has to
acknowledge the impact on interstate commerce of state activities. In accommodating these interests, the Court seems to rely on two principles.
First, the Court is showing great deference and concern for the preser"Id. at 442.
"Mr. Justice Powell wrote the dissenting opinion in which Justices Brennan, White, and
Stevens joined.
"447 U.S. at 449-50 (dissenting opinion).
"Id. at 450 (citations omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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vation of the state's sovereignty. Thus it gives freedom to the state to determine how its economic resources shall be used and permits allocation of
those resources in favor of its in-state residents. This in turn is consistent
with the decision in Usery, which happened to be decided on the same day
as Reeves. 99
Second, the Court refuses simply to rely on a proprietary/governmental distinction in determining limitations on state action under the Commerce Clause. Thus, if the state is acting as a proprietor, the Court tends to
conclude that its impact on the market is not imposing any burden on interstate commerce. The Court does not seem inclined to draw distinctions
between the nature of the activities on the basis of whether they are governmental or proprietary. Irrespective of the nature of the activity, the activity
will not be violative of the Commerce Clause so long as the Court continues
to treat the state as a market participant rather than regulator. In that case
the activity is, in the words of the Court, not the kind of action at which the
Commerce Clause is aimed.
This is not to say that when the state acts as a market participant it is
automatically immune from Commerce Clause limitations. The Court in
Reeves took pains to emphasize that it was dealing with the end product of a
manufacturing process in the state-owned cement plant. It was not dealing
with regulations or limitations on the natural resources themselves. If the
state were acting as owner of the natural resources destined for sale and
use in interstate commerce, different results could follow. A state probably
would not be allowed to monopolize its natural resources or deny reasonable access to them by other states or nonresidents. Hughes v. Oklahoma" oo
suggests that if a monopoly is preserved, an accommodation between the
national interest and the local interest must be reached.
3. STATE-OWNED RESOURCES-LIMITATIONS UNDER
THE PRIVILEGES AND IMMUNITIES CLAUSE
Hicklin v. Orbeck" o" illustrates another limitation, the Privileges and Immunities Clause, on a state's ability to favor its own citizens in the development
of its natural resources. In Hicklin, Alaska had enacted the so-called Alaska
Hire Statute to address the problem of high unemployment in the state.
Under that statute persons entering into oil and gas leases, unitization
agreements, and easements or right-of-way permits for oil and gas pipelines
to which the state was a party had to hire qualified Alaska residents in preference to nonresidents. The Act applied not only to the parties to the contract, but to suppliers, distributors, independent contractors, and others
working with the parties to the contract.
The statute was challenged by five nonresidents prevented from work"See text accompanying note 23, supra. for detailed discussion of Use/:\,.
'"°Hughes \'. Oklahoma, 441 U.S. 322 (1979). See text accompanying note 45 supra.
'0'437 U.S. 518 (1978).
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ing in Alaska. They alleged the Act violated the Privileges and Immunities
Clause of the federal Constitution. ,02 The state justified the statute as a
measure to alleviate serious high unemployment among its residents. In addition, the state noted the Act applied to oil and gas, which was owned by
the state on state lands. By its terms it also was limited to activities by
employers in the state. The state maintained that for these reasons the
statute did not violate the federal Constitution.
The United States Supreme Court disagreed with the state's arguments.
The Court began with the premise that the Privileges and Immunities Clause
is intended to put citizens of all the states who move interstate on the same
footing with respect to benefits a state provides its citizens. It is intended to
permit citizens to move from one state to another fairly and freely without
impediments that are not imposed on citizens of the receiving state.
The Court looked to Toomer v. Wi/sell ,03 to determine the test for
validity of a state statute challenged under the Privileges and Immunities
Clause. The Court acknowledged that that clause does not preclude
disparate treatment if the disparity in treatment is supported by valid
reasons independent from the mere fact of nonresidency. Quoting from
Toomer the Court stated, "[a] 'substantial reason for the discrimination'
would not exist ... 'unless there is something to indicate that non-citizens
constitute a peculiar source of the evil at which the [discriminatory] statute
is aimed.' "'04 The Court continued, "[m]oreover, even where the presence
or activity of nonresidents causes or exacerbates the problem the State seeks
to remedy, there must be a 'reasonable relationship between the danger
represented by non-citizens, as a class, and the ... discrimination practiced upon them.' "105
Applying the Toomer principles to the Alaska Hire Statute, the Court
held it invalid. First, the Court concluded that nonresidents were not the
source of the evil that the state legislature sought to remedy; rather, the high
unemployment was due in large part to lack of education, lack of job train. ing, and geographical remoteness from job opportunities.
But even assuming that the nonresidents were the source of the evil
sought to be remedied, the Court held the discrimination under the Act did
not bear a substantial relationship to the particular evil that the nonresident
presented. First the Court noted that the Alaska Hire Statute gives job
preference to all Alaskans, whether or not employed. Even assuming the
state could favor unemployed residents over nonresidents, according to the
Court, the statute would have to be narrowly drawn to achieve that benefit
for the state's unemployed.
The Court next rejected Alaska's argument that because it owned the oil
'''U.S. CONST. art. IV, § 2.
103
334 U.S. 385 (1948).
'''437 U.S. at 525-26, quoling Toomer v. Whitsell, 334 U.S. at 398 (emphasis in original).
1O'ld. at 526, qlloling Toomer v. Whitsell, 334 U.S. at 399.
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and gas resources to which its statute applied, it is removed from the prohibitions of the Privileges and Immunities Clause. The Court noted Baldwin v.
Montana Fish & Game Comm'n'06 and several Commerce Clause cases'07
have determined that state ownership in and of itself does not make the state
regulation and control of owned resources absolute. The Court concluded
that the state's ownership here was a crucial, but not dispositive, factor.
The Court noted the statute far exceeded matters in which the state
might have legitimate proprietary interests. It pointed out that the statute
applies to
employers who have no connection whatsoever with the State's oil and gas, perform no work on state land, have no contractual relationship with the State,
and receive no payment from the State. The Act goes so far as to reach suppliers who provide goods or services to subcontractors who, in turn, perform
work for contractors despite the fact that none of these employers may
themselves have direct dealings with the State's oil and gas or ever set foot on
state land. Moreover, the Act's coverage is not limited to activities connected
with extraction of Alaska's oil and gas.'·'
The Act also includes employment opportunities at refineries and distribution systems of Alaskan oil and gas.
Next the Court discussed Hicklin in light of Commerce Clause considerations, even though no Commerce Clause challenges were raised to the
statute. In Commerce Clause cases, state ownership of natural resources has
been an insufficient basis for discrimination against nonresidents or imposition of unreasonable burdens on interstate commerce. Those cases
"establish that the Commerce Clause circumscribes a State's ability to
prefer its own citizens in the utilization of natural resources found within its
borders, but destined for interstate commerce." '09 The Court noted the
Alaska oil and gas was predominantly intended for out-of-state distribution
and sale. In closing, the Court stated,
[ajlthough the fact that a state-owned resource is destined for interstate commerce does not, of itself, disable the State from preferring its own citizens in the
utilization of that resource, it does inform analysis under the Privileges and Immunities Clause as to the permissibility of the discrimination the State visits
upon nonresidents based on its ownership of the resource.' I.
Hence, the Alaska Hire Statute was unconstitutional.
Although Hicklin was decided principally on the Privileges and Immunities Clause issue, the Court's extensive discussion of Commerce Clause
ramifications of state-owned resources cannot be ignored. In other contexts, the Court has noted that the same principles apply basically when
'''436 u.S. 371, 379-80 (1978).
'''E.g., West v. Kansas Natural Gas, 221 U.S. 229 (1911) (Oklahoma bar on interstate
shipment of its natural gas invalid); Pennsylvania v. West Virginia, 262 U.S. 553 (1923) (natural gas priority for residents before any interstate shipment violates Commerce Clause).
10'437 U.S. at 530.
'''Id. at 533.
'101d.
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state statutes are challenged under either the Privileges and Immunities
Clause or the Commerce Clause.'" Thus, it seems clear that state ownership
of a resource is significant and an analytical starting point for evaluating the
applicability of either the Commerce Clause or Privileges and Immunities
Clause. The distinction between state legislation limited to the extraction or
removal of a natural resource within the state also may be relevant. It seems
equally clear, however, that state legislation, even with respect to stateowned prop.erty, giving preferences to its citizens must be narrowly drawn
to pass constitutional muster.
An example of a natural resource type of statute may be the Montana
elk hunting license system upheld in Baldwin v. Montana Fish & Game
Comm 'n.'" Under the Montana system, a resident paid $4 for an elk
license, while a nonresident had to pay $151. Moreover, the nonresident had
to obtain a "combination license," that permitted taking one elk and two
deer. A Montana licensed hunting guide and five nonresidents who
previously hunted elk in Montana sued, challenging the licensing system
under the Privileges and Immunities and the Equal Protection Clauses of
the federal Constitution.
The Supreme Court first rejected the Privileges and Immunities Clause
argument, holding that access to big game hunting is not within the purview
of the clause. Historically, according to the Court, the Privileges and Immunities Clause has protected those categories of rights basic and essential
to the reasons the Union was formed. They include job opportunities, ability to transfer property, access to courts, and ability to travel. But the clause
does not reach big game hunting, which the Court characterized as a recreation and a sport, not a nonresident's livelihood. "Equality in access to
Montana elk is not basic to the maintenance or well-being of the Union." "3
The Court then determined that the statute had a rational relation to
legitimate conservation objectives. Hence, it did not violate the Equal Protection Clause.
F. State Taxation
State-imposed taxes are another means by which Commerce Clause issues
have been raised with respect to natural resources. Early cases indicated that
a state was free to impose tax on its natural resources as property owned or
within the state. The taxes would be allowed as long as they were imposed at
the time of, or related to, extraction of the resource, even if the resource
was destined predominantly for interstate commerce and the costs would be
passed onto consumers in other states. Under this rationale, several states
'''See Baldwin v. Montana Fish & Game Comm'n, 436 U.S. 371 (1978) and cases discussed therein. See also note 45 supra.
'''436 U.S. 371 (1978).
'" hi. at 388.
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adopted so-called severance taxes and use taxes on their natural
resources.'"
The states also used other means to tax resources in interstate commerce. A tax was imposed by some states on the first use of the resource in
that state. In other instances, tax credits would be given residents, but not
nonresidents.
Several recent cases have significantly modified earlier approaches to
state taxation as a burden on or interference with interstate commerce. They
also have clarified the test to determine the validity of state-imposed taxes
on natural resources in interstate commerce.
In 1979, in Arizona Public Service Co. v. Snead, "' the United States
Supreme Court declared the New Mexico Electric Energy Tax Act unconstitutional. The Act imposed a tax on the privilege of generating electrical power within the state. The Act further allowed a credit against the
gross receipts tax for power sold at retail within New Mexico. Thus, New
Mexico power companies received a benefit not available to out-of-state
power companies without any New Mexico gross receipts tax to offset the
energy tax.
The Court concluded that the New Mexico energy tax was invalid
under the Supremacy Clause."6 It held that the federal Tax Reform Act of
1976'17 prohibited state taxes on the generation or transmission of electricity
in interstate commerce that resulted in a greater tax burden on the interstate
electricity than is imposed on the intrastate electricity. The Court concluded
that the New Mexico Act discriminated by creating a greater tax on the electricity transmitted out-of-state than on that sold within the state. Hence,
under the Supremacy Clause the Act was invalid.
The Court also rejected New Mexico's argument that the 1976 federal
Act was beyond the congressional authority, holding instead it was within
the scope of interstate commerce. Moreover, it concluded that prohibiting
the state tax was a rational method of avoiding any interference with interstate commerce. The Court noted that the generation of power within
New Mexico creates environmental and other problems of significant local
concern; however, the federal Act requires that any remedial tax must fall
equally and fairly on interstate and intrastate commerce.
Two significant 1981 tax cases further clarified the extent of the state
taxing authority under the Commerce Clause. In Maryland v. Louisiana"'
the Louisiana "first use" statute was challenged under the Supremacy
Clause and the Commerce Clause. The Louisiana statute imposed a tax on
"'See, e.g., authorities cited at note I supra.
"'441 U.S. 141 (1979).
"'The Supremacy Clause provides in part, "[tlhe Laws of the United States which shall be
made in Pursuance [of the Constitutionl ... shall be the Supreme Law of the Land .... " U.S.
CONST. art. VI, § 2.
'''The provision involved in Snead is codified at 15 U.S.c. § 391 (1982).
"'451 U.S. 725 (1981).
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oil and gas from the federally owned Outer Continental Shelf (OCS). The
tax was imposed on the pipeline companies for gas produced in the OCS
and sent to refineries and processing plants in Louisiana for distribution in
interstate commerce. The act minimally taxed most intrastate use of the gas
through tax credits and other devices. However, there were no exceptions
for gas shipped out-of-state, which most of the oil and gas was.
Louisiana justified the statute as the equivalent of a severance tax not
otherwise applicable to the resource. It further asserted that the tax was
necessary to compensate the state for environmental harm and other social
problems associated with the development of the OCS gas and pipelines
across the state. Moreover, it noted that the tax was imposed on identifiable
activities within the state such as the use of the pipelines, processing at
plants in the state, and sale, use, and treatment in manufacturing, and treatment at points within the state. In addition, the state noted that the first use
tax sought to equalize the state-produced oil and gas which is subject to a 7
percent severance tax with that produced elsewhere and not subject to a
severance tax.
The Court first held that the Louisiana First Use Tax violated the
Supremacy Gause as directly conflicting with the Natural Gas Act, '" as
amended by the Natural Gas Policy Act of 1978. '20 The Court noted that
under those acts the pricing of oil and gas in interstate commerce from the
wellhead to delivery to consumers was vested initially in the Federal Power
Commission, now the Federal Energy Regulatory Commission (FERC). The
Court pointed out that under the 1978 Act FERC was responsible for
establishing appropriate pricing and determinations of costs which can be
passed onto consumers. The Louisiana statute, declaring the amount of tax
"a cost associated with uses made by the owner in preparation of marketing
of the natural gas"l2l was usurping the functions of the federal agency.'22
Under the Supremacy Gause, this conflict renders the state statute void.
The Court next considered the validity of the tax under the Commerce
Clause. The Court began with the premise that
a state tax is not per se invalid because it burdens interstate commerce since interstate commerce may constitutionally be made to pay its way .... The State's
right to tax interstate is limited, however, and no state tax may be sustained unless
the tax: (I) has a substantial nexus with the State; (2) is fairly apportioned; (3)
does not discriminate against interstate commerce; and (4) is fairly related to the
services provided by the State.'"
In applying this test, the Court rejected the state's argument that the
processing and use of pipelines in Louisiana interrupted the flow of interstate
commerce to make the activity local. The Court said that the oil and gas flow'''15 U.S.c. §§ 717a el seq. (1982).
20
'
15 U.S.c. § 3320 (1982).
"'47 LA. REV. STAT. § 1303 (West Supp. 1984).
'''451 U.S. at 751.
'''Id. at 754 (citations omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
567
ing through pipelines and being processed in Louisiana on their way to other
states were continuously in and part of interstate commerce.
The Court then evaluated the tax for Commerce Clause purposes in
terms of its practical effect. Here the Court found that the tax is inherently
discriminatory against interstate commerce by its tax credits for OCS gas
consumed in Louisiana. Competitive users in other states would be burdened
with the tax. Moreover, the Court noted that the tax favors Louisiana producers of oil and gas by allowing a tax credit for the first use tax paid against
any severance tax paid. The severance tax credit also encourages owners of
OCS gas to invest and produce Louisiana oil and gas. Lastly, the Court noted
that the tax, by giving credit to local utilities who use OCS gas, provides instate consumers with a lower utility rate because the OCS gas is not subject to
either a severance tax or the first use tax. Out-of-state consumers, however,
would have to pay a higher rate because of the first use tax imposed on the
OCS gas.
Next, the Court rejected the state's argument that the first use tax was
compensatory to equalize the burden of the severance tax on local production. The state attempted to analogize the first use tax as complementing the
severance tax in the same way that a sales tax complements a use tax. The
Court rejected the analogy, in part, because the state is not entitled to a
severance tax from resources extracted from federally owned land. The sales
and use tax analogy is weak because those taxes basically are taxing the
equivalent event, but a first use and severance tax are not. Moreover, the
Court noted that the justification for compensatory taxes is equality of treatment between local and interstate commerce. In Louisiana, there was no
equality of treatment because of the favorable tax credit provisions for local
producers and consumers.
Another major tax case was decided by the Supreme Court in 1981. In
Commonwealth Edison Co. v. Montana,124 the Montana severance tax,
which set varying rates up to a maximum of 30 percent of the contract price
on each ton of coal mined in the state, was challenged by local and out-ofstate producers. The tax applied to coal mined on private or public lands.
The Montana Supreme Court had upheld the tax on three grounds.
First, it concluded that the tax was imposed on an intrastate activity, the extraction of the mineral from lands within the state before its entry into interstate commerce. Second, the Montana court found the tax satisfied the
test of Complete Auto Transit, Inc. v. Brady'2S which permitted a state tax
under the Com:nerce Clause. Last, the Montana Supreme Court concluded
'''453 U.S. 609 (1981). See Comment. The Incomplele Complete Auto Transit TeSl: Commerce Clause Analysis in Commonwealth Edison Co. v. Montana. 8 COLUM. 1.
ENVIRONMENT'L L. 185 (1982); Note. Commerce Clause I'. Coal Severance Taxalion. 84 W.
VA. L. REV. 1123 (1982).
"'430 U.S. 274 (1977).
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that its severance tax was not prohibited by any federal act and hence did not
violate the Supremacy Clause.
In Commonwealth Edison, the United States Supreme Court first
clarified the basis for taxing natural resources as local activities. The Court
rejected its earlier approach that treated the extraction of the mineral as a
local activity and strictly intrastate prior to entry of the item into interstate
commerce. That fact no longer will immunize state taxes from Commerce
Clause scrutiny. The Court instead held that severance taxes had to be
evaluated according to the general test applied to all state taxes under the
Commerce Clause.
'
The applicable test was enunciated in Complete Auto Transit, Inc. v.
Brady. 126 That four-part test provides "a state tax does not offend the Commerce Clause if it 'is applied to an activity with a substantial nexus with the
taxing State, is fairly apportioned, does not discriminate against interstate
commerce, and is fairly related to services provided by the State. "'127 The
Court noted that there was no argument over the first two parts of the test.
Obviously, there was a substantial nexus with Montana where the coal is
located, and because the severance occurs only in Montana, the tax cannot
be fairly apportioned to any other state. The companies contended that the
other two parts of the Complete Auto Transit test were not satisfied.
The companies argued that the Montana severance tax discriminates
against interstate commerce because 90 percent of the coal mined in Montana is shipped out-of-state. Hence the tax is passed to out-of-state utilities
and consumers. The companies also argued the tax is discriminatory under
the Commerce Clause if its burden falls primarily on out-of-state consumers.
The Court first rejected the discrimination argument. It noted the tax
was not discriminatory in that it applied equally to coal used in-state or in
other states. The rate did not depend on the destination of the coal.
The Court also rejected the companies' argument that Montana was exploiting its monopoly position with respect to coal by placing the principal
burden of the tax on out-of-state consumers. An assumption underlying the
companies' argument is that the Commerce Clause assures out-of-state
residents access at reasonable prices to another state's resources regardless of
whether and on what terms the state's residents have access to the same
resources. The Court rejected this assumption because it is tantamount to
holding that the Commerce Clause allows out-of-state residents to dictate the
manner in which resources shall be developed and depleted in another state.
Next, the Court noted the tax is applied in a nondiscriminatory manner. The
burden on out-of-state consumers is greater because of their consumption of
the coal, not the manner in which the tax is imposed.
The companies then argued that the severance tax was excessive and not
fairly related to the services provided by the state. They also argued that the
'''/d.
"'453 U.S. at 617, quo/ing Complete Auto Transit, Inc. v. Brady, 430 U.S. at 279.
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
569
amount of tax the state receives exceeds the amount of the value of the services the state provides the mining industry. The Court observed that the
companies' argument could be based on two assumptions: either that the rational relation test requires that the state's power to tax interstate commerce
is limited to the value of the services provided, or the state's reason for imposing the severance tax is reimbursement for the actual costs of its services.
The Court rejected those arguments as based on a misunderstanding of
the "fairly related" portion of the Complete Auto Transit test. The Court accepted the Montana Supreme Court's finding that the coal severance tax was
enacted as a general revenue measure rather than as a user fee or specific tax
for state-related services. The Court noted that a state has wide latitude in
enacting general revenue taxes.
According to the Court, general revenue taxes do not have to bear a
direct relation to the service provided or provide a direct benefit to the taxpayer. Rather, those taxes are valid if they provide the taxpayer the benefit of
public services generally associated with the privileges of living in an organized society. The purpose of general revenue taxes is to provide a means of
distributing the costs of government.
In so characterizing general revenue taxes, the Court relied on prior due
process cases.'l8 The Court held, however, that the same principles apply to
taxation of interstate activities for Commerce Clause purposes. It noted that
in prior interstate commerce tax cases the activity could not achieve a
privileged position and be taxed only based on the services provided it.
Rather taxes could be imposed to require the interstate business to carry its
just share of the tax burden. "The 'just share of state tax burden' includes
sharing in the cost of providing 'police and fire protection, the benefit of a
trained work force,' and 'the advantages of a civilized society.' "'"
In justifying the severance tax, the Court proceeded to analogize it to ad
valorem property taxes.
The entire value of the coal, before transportation, originates in the State, and
mining of the coal depletes the resource base and wealth of the State, thereby
diminishing a future source of taxes and economic activity .... In many
respects, a severance tax is like a real property tax, which has never been
doubted as a legitimate means of raising revenue by the situs State (quite apart
from the right of that or any other State to tax income derived from use of the
property)."O
The Court stated that the basis for validating a general revenue tax is to
determine whether it discriminates against interstate commerce and is apportioned to activities occurring within the state.
According to the Court, "[t]he relevant inquiry under the fourth prong
of the Complete Auto Transit test is not ... the amount of the tax or the
value of the benefits allegedly bestowed as measured by the cost the State in"'/d. at 622-25.
'''/d. at 626-27 (citations omitted).
I)o/d. at 624 (citations and footnotes omitted).
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curs on account of the taxpayer's activities. "131 The Court found a close interaction between the first and fourth prongs of the Complete Auto Transit
test. In order to be taxed, the activity must have a substantial nexus with the
state.
Beyond that threshold requirement, the fourth prong of the Complete Auto
Transit test imposes the additional limitation that the measure of the tax must be
reasonably related to the extent of the contact, since it is the activities or
presence of the taxpayer in the State that may properly be made to bear a "just
share of state tax burden. ""2
The Court applied the fourth part of the test and upheld the severance
tax. It concluded that the tax is imposed on the mining of coal within Montana and is measured on a percentage of the value of the coal taken. For that
reason it bears a proper proportion to the activities of the companies in the
state and to their ability to enjoy opportunities and protections the state provides in relation to those activities.
The Court also rejected the companies' efforts to have the Court determine appropriate tax rates. It declined to do so because that is a legislative,
not a judicial, judgment. It further noted that a legal test of validity based on
the rate would be difficult to construct. At what point a tax becomes excessive cannot easily be determined because of the variables involved.
However, the Court did suggest that tax not measured in proportion to the
benefits of the taxpayer's activity or presence and bearing no relation to the
taxpayer's presence and activities in the state may unduly burden commerce.
Next the Court addressed the question of whether, under the Supremacy
Clause, the Montana coal severance tax frustrates the purposes of the
Federal Mineral Lands Leasing Act of 1920, as amended by the Federal Coal
Leasing Amendments Act of 1975. Under these Acts, the economic rents in
the form of royalties attributable to coal on federal lands go to the federal
government for redistribution among the states. The companies argued that
the coal severance tax operates to disrupt this distribution of economic rent
by giving a disproportionate amount of them directly to Montana.
First, the Court noted that this argument seems to contradict the companies' Commerce Clause argument. Under this argument the companies
assert that the federal government would receive less money because the companies would bid less for the coal because of the tax they would have to pay
Montana. Under the Commerce Clause argument, however, the companies
were arguing that the cost of obtaining the coal was increased because the
amount of economic rent was increased by the tax paid for the coal.
Nonetheless, even assuming that the royalty payment to the federal
government would be reduced, the Court held that this did not violate the
1920 Act. The Court noted that in section 32 of that Act, states were expressly authorized to impose severance taxes without any limit stated on their
"'hi. at 625 (emphasis in original) (footnotes omitted).
'''hi. at 626 (emphasis in original) (citations omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
571
amounts. Because the Montana tax is otherwise lawful, the 1920 Act does not
prohibit it.
Last, the Court rejected the companies' argument that the tax is unconstitutional because it interferes with national energy policies which have,
in effect, preempted the field. The Court reviewed several federal statutes,
including the Energy Policy and Conservation Act of 1975 and the
Powerplant and Industrial Fuel Use Act of 1978 (PIFUA), and concluded
that neither of those acts preclude severance taxes. Rather, PIFUA in section
601 (a)(2) "clearly contemplates the continued existence, not the preemption, of state severance tax on coal and other minerals." 133 Hence, the
Court affirmed the Montana Supreme Court decision upholding the coal
severance tax.
G. Federal Power Transferred to State
Another group of Commerce Clause cases involved the effect of a transfer
of the federal authority over interstate commerce to states. The problems
differ from the preemption and negative limitations issues previously discussed. If Congress deems it appropriate to exercise its commerce power
over a field by delegating the regulatory authority to the state, the issue
becomes what limitations exist on state regulations. In other words, after
appropriate congressional delegation, can a state in its regulations be discriminatory or impose burdens on interstate commerce or taxes on out-ofstate businesses that are not imposed on its residents?
Probably the best illustration of Congress acting in this manner is the
McCarren Act. 134 Under the McCarren Act, Congress expressly delegated to
the states all regulatory and tax authority over insurance companies. Congress determined that the insurance business was more appropriately a matter of local concern and should be subject to local control. Thus, under the
McCarren Act it recognized the room for nonuniform treatment of insurance
companies by the various states.
In Prudential Ins. Co. v. Benjamin, 13l the company challenged a South
Carolina statute which imposed a tax upon foreign insurance companies as a
prerequisite for a certificate of insurance to do business in the state. The tax
was based on the gross receipts of the company from business done in South
Carolina without regard to whether that business was local or interstate in
nature. No similar tax was imposed on South Carolina insurance companies.
The company argued that the tax was discriminatory and imposed an
undue burden on interstate commerce. It argued that the tax was unconstitutional under the Commerce Gause. The company asserted two arguments.
First, it contended the state Act itself was invalid under the negative restrictions of the Commerce Gause. Second, it argued that Congress could not ex-
'''hi. at 635.
'''15 U.S.c. §§ 1011 erseq. (1982).
"'328 U.S. 408 (1946).
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ercise its plenary power under the Commerce Clause in such a manner as to
remove the negative restrictions of that clause from state regulation.
The Court first rejected the argument that the inherent negative limitation of the Commerce Clause applied to insurance business to limit the state's
action. The Court noted that this was not a situation in which the congressional commerce power was dormant. Rather, Congress had acted, and the
question was the effect of its enactment. Hence, prior cases that had declared
discriminatory state taxes unconstitutional under the inherent negative
limitation of the Commerce Clause did not apply because they predated any
federal exercise of the Commerce Clause with respect to interstate insurance
business.
The Court then rejected the company's argument that Congress lacked
the authoritYllnder the Commerce Clause to delegate through the McCarren
Act regulatory authority that otherwise would be limited by the negative
restrictions of the Commerce Clause. The Court characterized this argument
as saying that the affirmative congressional authority under the Commerce
Clause was limited by the same restrictions on the state power to regulate
commerce in the absence of congressional action. The Court stated that that
simply was not the case, concluding that Congress had the authority to
legislate fully in the area of interstate commerce.
According to the Court, the only limitation on the congressional power is
what constitutes commerce and whether the regulations significantly affect
it. The Court noted that that limitation on the congressional power is totally
independent and different from any negative limitations on state power to
regulate commerce.
The one limitation bounds the power of Congress. The other confines only the
powers of the states. And the two areas are not coextensive. The distinction is not
always clearly observed, for both questions may and indeed at times do arise in
the same case and in close relationship. But to blur them and thereby equate the
implied prohibition with the affirmative endowment is altogether fallacious.
There is no such equivalence. 13 "
The Court went on to conclude that it did not have to considerJhe validity of the South Carolina tax in the absence of the enactment of the McCarren
Act by Congress. The Court examined the McCarren Act and concluded that
its purpose was to support then existing and future state systems for regulating and taxing the business of insurance. Congress accomplished this by removing any impediment caused by its own power over interstate commerce,
whether dormant or exercised, and also by expressly authorizing the states
to continue regulation and taxation of the insurance business in the public interest.
The Court further held that the Commerce Clause does not prohibit
Congress from discriminating against interstate trade in favor of local trade.
""d. at 423 (footnotes omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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The Commerce Clause authorizes Congress to exercise its power in a manner
that will promote some and prohibit other interstate trade.
This broad authority Congress may exercise alone, subject to those limitations, or
in conjunction with coordinated action by the states, in which case limitations imposed for the preservation of their powers become inoperative and only those
designed to forbid action altogether by any power or combination of powers in
our governmental system remain effective. In
The Supreme Court in Southern Pacific Co. v. Arizona '38 concisely
stated this distinction between the negative limitations of the Commerce
Clause on state legislation and the affirmative aspects of the Commerce
Clause for congressional legislation.
Although the commerce clause conferred on the national government power to
regulate commerce, its possession of the power does not exclude all state power
of regulation . . . . [I)t has been recognized that, in the absence of conflicting
legislation by Congress, there is a residuum of power in the state to make laws
governing matters of local concern which nevertheless in some measure affect interstate commerce or even, to some extent, regulate it. ... Thus the states may
regulate matters which, because of their number and diversity, may never be
adequately dealt with by Congress . . . . When the regulation of matters of local
concern is local in character and effect, and its impact on the national commerce
does not seriously interfere with its operation, and the consequent incentive to
deal with them nationally is slight, such regulation has been generally held to be
within state authority . . . . ".
The Southern Pacific Court continued,
Congress has undoubted power to redefine the distribution of power over interstate commerce. It may either permit the states to regulate the commerce in a
manner which would otherwise not be permissible ... or exclude state regulation even of matters of peculiarly local concern which nevertheless affect interstate commerce. '40
Thus, it seems clear that Congress has the power to exercise its authority
over interstate commerce in a manner that enables states to regulate to the
same and even a greater extent than Congress. For example, in Prudential,
the state was able to apply a discriminatory tax in favor of residents, whereas
the federal government under article I of the Constitution is limited in its taxing authority to apply taxes uniformly and nondiscriminatorily.
H. Statutory Preemption: The Federal Common
Law of Nuisance
An area that does not present directly Commerce Clause issues, but is related
to enforcement and other activities under cooperative programs, is the federal
common law of nuisance. The federal common law of nuisance was first rec-
"'/d. at 434-35 (footnotes omitted).
\J8 325 U.S. 761 (1945).
'''Id. at 766-67 (citations omitted).
"o/d. at 769 (citations omitted).
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ognized by the United States Supreme Court in 1972. Illinois v. Milwaukee'4I
applied the nuisance doctrine to interstate water pollution and allowed the
citizens of one state to sue another state. Part of the importance of that case is
that the federal common law of nuisance provides new enforcement means in
addition to statutory or state remedies already available.
The signi ficance of the federal common law of nuisance is that it enables
federal courts to develop a body of federal law to apply to interstate pollution
situations. Several problems have been raised, but unanswered, concerning
the remedy. For example, questions have been raised whether the doctrine requires that a public nuisance be involved, '42 whether an interstate situation
has to be involved, '43 and whether private parties or states may enforce it, '44
among others. In addition, the federal courts are able to develop a body of
relief in the form of damages and injunctions independent of state law or state
or federal standards. And the federal courts have been able to determine appropriate standards under federal law . '45
For example, on remand in Milwaukee v. IIIinois'46 the trial court had
found that Milwaukee was creating a public nuisance by discharging untreated raw sewage into Lake Michigan. It also determined that the
discharge endangered the health of citizens and property in Illinois. The
court then found that the federal common law action for interstate water
pollution was not preempted by either the 1972 or 1977 Amendments to the
Federal Water Pollution Control Act (commonly referred to as the Clean
Water Act or CWA). It also found that in fashioning a remedy it could use
stricter standards than those applicable under the federal statute or applicable under Illinois state law.
The Seventh Circuit had affirmed the trial court's findings and most of
its results. '47 However, it disagreed with the trial court's standards, holding
that although it was not bound by the CW A, it should be guided closely by effluent limitations set by the EPA under that Act. The Seventh Circuit concluded that before using more stringent standards than either the federal Act
or state law would require for municipal facilities in Illinois, the trial court
"'406 U.S. 91 (1972).
'''Committee for the Consideration of the Jones Fall Sewage System v. Train, 539 F.2d
1006 (4th Cir. 1976).
'''See Board of Supervisors v. United States, 408 F. Supp. 556 (E.D. Va. 1976).
'''See 1I1inois v. Outboard Marine Corp., 619 F.2d 623 (7th Cir. 1980), "acaled, 453 U.S.
917 (1981). The United States Supreme Court remanded the case for further consideration in
light of City of Milwaukee v. 1I1inois, 451 U.S. 304 (1981). On remand, the Seventh Circuit
adhered to its earlier ruling that the State of 1I1inois had the right to intervene in an action by
the United States regarding discharge of pollutants into navigable waters. ll1inois v. Outboard
Marine Corp., 680 F.2d 473 (7th Cir. 1982). C/.. City of Evansville v. Kentucky Liquid Recycling, Inc., 604 F.2d 1008 (7th Cir. 1979) (no implied private cause of action under CW A); Middlesex County Sewage Authority v. National Sea Clammers Ass'n, 435 U.S. I (1981) (same
under CW A and Marine Protection, Research, and Sanctuaries Act).
'''See Milwaukee v. 1I1inois, 599 F.2d 151 (7th Cir. 1979).
'''451 U.S. 304 (1981), reversing 599 F.2d 151 (7th Cir. 1979).
'''599 F.2d 151 (7th Cir. 1979), rev'd, 451 U.S. 304 (1981).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
575
must make a specific finding of endangerment to the health of the people of
Illinois. It concluded that the record did not support such a finding and
hence overruled the more stringent standards imposed by the trial court.
On appeal to the United States Supreme Court in Milwaukee v.
J/linois, '48 the Court restricted the application of the federal common law of
nuisance to a "gap filling" function. The Court discussed elaborately the
legislative history of the Federal Water Pollution Control Act, particularly its
1972 Amendments. The Court concluded that when Congress has enacted a
comprehensive and extensive program for addressing water pollution, including interstate pollution, that statutory program preempts the federal
common law of nuisance. According to the Court, the federal common law of
nuisance was originally developed to fill gaps in existing law. If Congress has
occupied the field through a comprehensive, regulatory federal program,
then gaps no longer exist and the federal remedy of nuisance is not needed.
Hence, the Court reversed the Seventh Circuit and dismissed the complaint.
It thus left enforcement to federal or state officials pursuant to the Clean
Water Act.
I. PREEMPTION BY THE CLEAN WATER ACT
The status of state nuisance actions for interstate water pollution was clouded
by the Supreme Court's holding in Milwaukee v. J/linois. The problem
stemmed from a footnote in the Seventh Circuit's opinion in the second
Milwaukee case. There, the Seventh Circuit stated that federal common law,
not state law, governs an interstate pollution case.'49 The Seventh Circuit
relied on its earlier opinion in Evansville v. Kentucky Liquid Recycling, 150 in
which the court held that the state's exclusive remedy for interstate pollution
was under federal law. Those cases, however, predated the Supreme Court's
second opinion in Milwaukee in which it concluded the federal common law
of nuisance for interstate pollution was preempted by the CW A.
The preemptive effect of the Milwaukee ruling on nuisance claims
against out-of-state polluters based on state law was raised in two other
cases. In the Hammond's, cases, the district court had concluded that the Illinois law of nuisance could be applied to a discharger in Indiana. The
district court noted that the Supreme Court had denied certiorari to a cross
petition by the state in Milwaukee to review the Seventh Circuit's ruling that
federal law provided the exclusive remedy for interstate pollution cases. The
district court found that the Seventh Circuit's statement was made in the
context of the continuing vitality of the original federal common law nuisance
action under J/linois v. Milwaukee. Because that action no longer existed, the
'''451 U.S. 304 (1981).
'''Milwaukee v. Illinois, 599 F.2d 151, 177 n.S3 (7th CiT. 1981).
'''604 F.2d 1008 (7th CiT. 1979).
"'Illinois v. Sanitary District of Hammond, 498 F. Supp. 166 (N.D. 111.1980); Scott v.
City of Hammond, 519 F. Supp. 292 (N.D. III. 1981).
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district court concluded the issue of a state remedy was unresolved in the
Seventh Circuit. It then proceeded to conclude that the federal CW A did not
preempt the state nuisance action for interstate pollution. I 52
The Seventh Circuit had to reconsider the issue of the application of state
law to interstate pollution in Milwaukee v. Illinois on remand from the
Supreme Court. It consolidated the Hammond cases and dismissed the claims
based on the Illinois law of nuisance. The Seventh Circuit adhered to its
previous ruling that federal law provided the exclusive remedy for interstate
pollution situations. In a lengthy opinion, it went further to hold that this
result was consistent with the Supreme Court's holding in Milwaukee v. Illinois. The court concluded that applying the injured state's nuisance law to a
discharger in another state would interfere with the uniform standards and
the comprehensive program for handling interstate water pollution that was
developed by Congress under the CW A. Importantly, the court noted that its
holding did not prohibit the injured state or its citizens from suing on an action based on the law of the state where the discharger was located. I 5 J
The aftermath of the second Milwaukee opinion is still being felt. The
courts in different areas must evaluate the comprehensive nature of federal
schemes and determine to what extent, if any, they preempt the federal common law of nuisance in interstate pollution situations. Several cases have addressed that issue.
Illinois v. Outboard Marine Corp., Inc. 154 involved a claim for federal
common law of nuisance for discharges which occurred prior to the 1972
Amendments to the CW A. The Seventh Circuit concluded that the 1972
Amendments also preempted the federal common law action based on activities predating those Amendments. The court noted that the pre-1972
discharges were not directly addressed in the 1972 Amendments, but an ongoing research and cleanup program for existing situations was established.
The court refused to read Milwaukee v. Illinois narrowly to require that the
comprehensive scheme expressly addressed the problem under consideration.
It found that there was no gap and no room for judge-made law for pre-1972
discharges.
The Second Circuit reached a similar conclusion with respect to claims
based upon maritime tort. In In re Oswego Barge Corp., I 55 a claim for
cleanup costs incurred by the government for an oil spill was asserted by the
United States based on federal common law and maritime tort. The Second
Circuit concluded that the claims were preempted under the reasoning of
Milwaukee v. Illinois. It refused to distinguish between claims by the federal
government and those by states or private citizens. The Second Circuit said
that Milwaukee v. Illinois created a presumption that the common law ac"'Scott v. City of Hammond, 519 F. SliPI'. 292, 298 (N.D. III. 1981).
"'Id. at 293, n.1.
'''680 F.2d 473 (7th Cir. 1982).
"'673 F.2d 47 (2d Or. 1982).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
577
tions within the subject matter of the legislation have been preempted.
Under the CW A, elaborate provisions for recovery of cleanup costs are provided and hence preempted.
Notably, the Second Circuit allowed the claims based on federal common law of nuisance for pollution of Canadian waters to stand. Claims
based on pollution of international waters are not within the statutory
scheme of the CW A; therefore, cleanup costs may be recovered under the
federal common law.
2. PREEMPTION BY THE CLEAN AIR ACT
The cases that have considered the preemptive effect of the Clean Air
Act (CAA) on the federal common law action for nuisance in interstate air
pollution have been careful to avoid giving a broad preemptive effect to the
Act. New England Legal Foundation v. Costle'S6 dealt with a power company that was burning high sui fur oil at one of its plants pursuant to a
variance which had been approved as a revision to the New York State Implementation Plan (SIP) by the EPA. The plaintiffs argued that the use of
the high sulfur fuel violated both the CAA and the federal common law of
nuisance.
The Second Circuit held that the common law action was preempted
by the CAA. It was not willing to conclude that the CAA generally had
preempted any common law actions in nuisance. But the court concluded
that the nuisance action was preempted when the alleged violation was conduct specifically authorized by the EPA under the Act.
In another case arising out of the same fact situation as in Cost Ie, the
common law nuisance action also was held preempted. In Connecticut v.
Long Island Lighting Company'S7 the company had operated its plant for sixteen months in violation of the SIP while its application for a renewal for its
variance was pending. The renewal was finally granted. The state sought
monetary damages or use of a lower sulfur fuel for an equivalent time under
a federal common law of nuisance theory.
The federal district court denied the state any relief by concluding
that the CAA did not authorize an award of monetary damages. And it concluded further that the nuisance action was preempted because the CAA
had other provisions for review of variances. Hence, for statutory preemption purposes, the field was occupied by the CAA and a judicial remedy for
nuisance was not available.'ss
"'666 F.2d 30 (2d Cir. 1981).
"'535 F. Supp. 546 (E.D.N.Y. 1982).
'''See a/so, United States v. Kin-Buc. Inc., 532 F. Supp. 699 (D.N . .!. 1982), where the
court rejected the argument that the federal act would have preemptive effect on the common
law nuisance action only if the statute was in direct conflict with federal common law remedy_
The Kill-Buc court, adhering to the position of the earlier cases, said that the "proper test ...
is whether the scope of the legislative scheme established by Congress is sllch that it addresses
the problem formerly governed by federal common law." fd. at 702.
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3. PREEMPTION BY THE RESOURCE CONSERVATION
AND RECOVERY ACT AND THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION,
AND LIABILITY ACT OF 1980
The statutory preemption issue has also been raised in conjunction with the
Resource Conservation and Recovery Act (RCRA). The Justice Department
had been combining enforcement of RCRA under the "imminent hazard"
provisions of section 7003 with a public nuisance cause of action under the
federal common law. I 59 This practice short-circuits the procedural/substantive dispute ongoing among federal district courts about the effect of section 7003. 160
United States v. Diamond Shamrock Corp. 161 is the first decision by a
federal district court considering a section 7003 and federal common law of
nuisance action after the Supreme Court's decision in Milwaukee v. Illinois.
Relying on that opinion, the district court dismissed the federal common
law cause of action. The court concluded, however, that relief was proper
under the "imminent hazard" provisions of section 7003.
Subsequently, another federal district court rejected a federal common
law nuisance action concerning a disposal site in New Jersey. The court in
United States v. Price l62 rejected the federal common law nuisance theory
when the activity was strictly intrastate and the situation did ~ot involve
a federal uniform rule. The court generally observed the RCRA and
CERCLA preempted any common law action which may have existed
because of the comprehensive program established by Congress under those
statutes.
I. Summary
Examination of Commerce Clause cases before the Supreme Court involving natural resources aptly illustrates the purposes and applications of the
Commerce Clause. The Court has consistently maintained that a primary
purpose of the Commerce Clause is to establish a free flow of goods in interstate commerce. The clause operates as an affirmative grant of plenary
power to Congress to regulate interstate and foreign commerce. Thus Congress has broad authority to legislate in areas involving subjects in interstate
commerce and affected by the regulations. The congressional determination
of both of those issues is almost conclusively presumed correct and not subject to review by the court.
The Commerce Clause also has its negative implications. It operates to
restrict a state's power to regulate interstate commerce. Thus, the Com-
'''E.g., United States v. Solvents Recovery Service of New England, 496 F. Supp. 1127
(D. Conn. 1980).
''"See United States v. Vertac Chemical Corp., 489 F. Supp. 870 (E.D. Ark. 1980); United
States v. Midwest Solvent Recovery, Inc., 484 F. Supp. 138 (N.D. Ind. 1980).
"'Civil Action No. C-80-1853 (N.D. Ohio, filed Oct. 7,1980), 17 E.R.C. 1329.
'''523 F. Supp. J055 (D.N.J. 1981).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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merce Clause, even if Congress has not acted or preempted a field, will
restrict any state legislation that interferes with or unreasonably burdens interstate commerce. This negative restriction will apply to state regulation
prohibiting commerce, favoring in-state residents over out-of-state residents, or taxing interstate commerce.
When there is a conflict between the national interest in the free flow of
interstate commerce and state regulation to protect state interests, the Court
has developed several tests. If Congress has affirmatively acted, an initial
question is whether Congress has preempted the field from state regulation.
If Congress has not expressly preempted the area, then it might impliedly do
so. The Court examines whether it is impossible to comply with the state
and federal regulation, the extent and comprehensive nature of the federal
program, and the need for uniform regulations of the area. If the regulations are in direct conflict, if the federal program is extensive and elaborate,
and if the area is one requiring uniformity to avoid undermining the federal
objectives, preemption may be implied and the state regulation invalidated.
In the situations when Congress has not affirmatively acted, the Court
has developed different rules. State legislation in those instances is subject
to a four-prong test. That test examines whether the statute operates
evenhandedly to carry out a legitimate local purpose, whether the effects of
the statute on interstate commerce are only incidental, whether the burden
on interstate commerce is not excessive in relation to the local interest
asserted, and whether less onerous alternatives are available to the state.
Another rule has evolved in the negative Commerce Clause cases. If the
statute is for the purpose of economic protectionism, a per se invalidity rule
applies.
In Commerce Clause cases involving state taxes on interstate commerce, another test has been developed to determine their validity. In order
to sustain the tax a court must find that the state has a substantial nexus
with the activity being taxed, the tax must be fairly apportioned, it must not
discriminate against interstate commerce, and it must be fairly related to the
services provided by the state. The Court has rejected an earlier approach in
taxing cases which permitted taxes based on ownership of the resources or
taxing prior to the state-owned resource entering into interstate commerce.
The ownership test and the fiction of being an intrastate activity was rejected primarily because in the natural resources area the resources are normally destined for interstate commerce. Hence, the four-prong test has been
used as a means of accommodating the conflicting national interest with the
local interest.
The Supreme Court also has developed special rules when the state is a
market participant. The Court has generally upheld state statutes providing
subsidies or incentives to businesses within the state or to state-owned
businesses restricting their trade with in-state residents as well as other
statutes using state lands or businesses. The Court's approach has been to
treat these types of activities as not within the reach of the Commerce
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Clause because the state is not acting in a regulatory capacity. However, in
acting in a proprietary capacity, the state's power is not absolute. If the
regulation unduly burdens or discriminates against interstate commerce, as
the Alaska Hire Statute, then it may violate the Privileges and Immunities
Clause as well as the Commerce Clause.
It is also clear that Congress, in exercising its power over interstate
commerce, may delegate some or all of that authority to the states. If Congress delegates all of the authority that it has over interstate commerce to
the states, then the states are virtually unlimited by the Commerce Clause in
regulating the delegated commerce. Thus, the negative restrictions of the
Commerce Clause that otherwise would apply to a state do not apply if
Congress has affirmatively acted to grant its plenary power to the state.
Serious problems remain in the conflict between state and federal interests and the appropriate accommodation of those under the Commerce
Clause. In developing natural resources, the national interest in rapid
development and preference for some resources over others often conflicts
with state programs and state environmental and land use policies. In
developing nuclear resources, for example, the states regularly try to adopt
statutes regulating or restricting the use of nuclear energy within the state. 163
The extent and scope of the preemption in the nuclear energy field remains
an open question since the court's decision permitting states to regulate
nonradiological or safety matters relating to nuclear power plants. 164
The Supreme Court's upholding the Montana coal Severance tax as a
general revenue measure may prompt natural resource states to reevaluate
their severance taxes. It is possible that severance taxes may be increased
and other tax relief be given to residents. Similarly, the recently enacted
Texas statute authorizing licensing the disposal on state-owned lands of
nuclear waste generated in Texas probably will be constitutionally valid. 165
The Supreme Court has been particularly sensitive where the state acts as a
proprietor or market participant to preserve its sovereign right to determine
how its revenues will be spent or its governmental functions conducted.
The Texas natural gas statute, 166 however, may be constitutionally infirm.167 That statute requires that oil and gas leases of state land contain
'''See, e.g., Washington State Building & Construction Trade Council v. Spellman, 518
F. Supp. 928 (E.D. Wash. 1981), afj'd, 684 F.2d 627 (9th Cir. 1982), cen. denied, IOJ S. Ct.
1891 (1983) (statute banning disposal of all out-of-state nonmedical radioactive waste invalid
under the Supremacy and Commerce Clauses).
"'See Pacific Gas & Electric Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190 (1983), discussed at text accompanying note 72 supra.
'''Radioactive Materials and By-products-Licensing and Regulation, Vernon's Texas
Session Laws ch. 155 (May 20, 1981), codified a/ TEX. REV. Ctv. STAT. art. 4590f (Vernon
Supp. 1984).
'''TEX. NAT. RES. CODE ANN. §§ 52.291-295 (Vernon 1978).
'''Anson & Schenkkan, Federalism, The Dorman/ Commerce Clause and S/a/e-Oll'ned
Resources, 59 TEXAS L. REV. 71,93 (1980) (Texas statute imposes improper "downstream"
restrictions in state land, oil, and gas leases).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
581
provisions prohibiting sale to out-of-state consumers if any in-state consumers require the natural gas to meet existing needs. Under the state proprietary theory this may be closely analogous to the Alaska Hire Statute
that was declared invalid. 168 The provisions of the act authorizing the sale of
the lease and putting restrictions on those sales to in-state residents may be
permissible under Reeves for oil and gas on state lands. However, imposing
restrictions preference for in-state users after the lease is granted is analogous to the Alaska Hire Statute which applied not only to pipelines constructed on the state-owned lands but also to contractors, suppliers, and
others who were removed from the direct activity occurring on the state
lands.
II.
EQUAL PROTECTION
Many cases that involve state regulation on interstate commerce also raise
questions under the Equal Protection Clause. The equal protection issue
arises from the discrimination of the state regulation. The discrimination
can be in the form of a direct perference of in-state over out-of-state persons or through a classification scheme that gives benefits to one group
which are not available to another. The Fourteenth Amendment prohibits a
state from denying equal protection of its laws to citizens of the United
States.
In 1981, the United States Supreme Court had occasion to review a
Minnesota statute challenged under both the Equal Protection Clause and
the Commerce Clause. A1innesota v. Clover Leaf Creamery Co. 169 involved
a Minnesota statute that banned the retail sale of milk in plastic, nonreturnable, nonrefillable containers, while permitting its sale in other nonreturnable, nonrefillable containers such as paperboard containers.
The state defended the statute as a resource conservation measure. The
legislature relied on studies and information that showed a developing trend
towards the use of the plastic milk containers. The legislature sought to
avoid solid waste disposal problems and to conserve energy by halting the
trend before it was firmly established in the state. At the time of the legislation only one dairy had equipment for making plastic, nonreturnable milk
jugs. The Minnesota Supreme Court held the statute unconstitutional under
the Equal Protection Clause without reaching the Commerce Clause issue.
The Minnesota Supreme Court concluded that the act was not rationally
related to its stated objectives.
The United States Supreme Court reversed the Minnesota Supreme
Court. It agreed that for equal protection purposes the appropriate test to
determine the validity of the state statute was the rational basis test.
''"Hicklin v. Orbeck, 437 U.S. 518 (1978). See text accompanying note 102, supra, for a
detailed disclission of Orbed.
'''449 U.S. 456 (1981), reh'g denied, 450 U.S. 1027.
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However, the Court concluded that the opponents of the statute
demanded an empirical connection between the statute and its objectives,
not merely a theoretical one. They also argued that the use of paperboard
cartons would create more environmental problems and use more energy.
Under the rational basis test, the Court held that the legislature must make
the judgment about the appropriate means to resolve the stated problem. It
concluded that where, as here, the issue is a debatable one, the legislative
judgment must prevail.
But this determination that the legislative approach was rational did
not end the equal protection argument. The Minnesota Supreme Court had
analyzed the statute on its own and determined that it was invalid under the
federal Equal Protection Clause. Thus, Minnesota argued that the state
court improperly substituted its judgment for that of the legislature. The
Supreme Court had to consider whether in equal protection cases, a state
supreme court can review the legislative findings to determine the validity of
the statute under the Equal Protection Clause.
The state in Clover Leaf Creamery justified the statute in four ways. It
argued that eliminating nonreturnable plastic jugs would encourage the use
of environmentally superior containers and allow the state time while alternatives are being developed and promoted. Second, the state contended that
by not banning all nonreturnables it avoided disrupting the milk industry.
The milk industry currently was accustomed to using cardboard cartons and
would have not have to incur immediate expense and transition to adapt
their plants for the use of refillable bottles or other containers. Third, the
state argued that banning the plastic containers saves energy because they
are made from an oil and gas derivative, whereas the cardboard containers
are made from a renewable resource. Last, the legislature justified the act as
a solid waste measure because of the landfill .and solid waste disposal problems connected with plastic jugs.
The Minnesota Supreme Court had rejected each of these justifications, asserting that the state was engaging in illusory speculation in saying
that more environmentally superior containers would be used if plastic jugs
were banned. The state supreme court disagreed with the legislature on the
facts concerning the conservation of energy. The court concluded that the
production of plastic nonrefillable jugs requires the use of less energy than
the production of paperboard cartons. Similarly, the Minnesota Supreme
Court found that the plastic jugs take up less space in sanitary landfills than
paperboard cartons.
The United States Supreme Court held that the Minnesota Supreme
Court was in error in reviewing the legislative judgments in this manner.
The Court concluded that a state legislature for equal protection purposes
does not have to eliminate an entire problem but can use a piecemeal approach. According to the Court, the issue was not whether in fact the act
would accomplish its objective, but whether the legislature reasonably decided that its ban of plastic jugs might foster greater use of environmentally
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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superior containers. The Court also sustained the legislative objective of
minimizing the economic consequences of changing to more superior containers. Under prior decisions, the Court has allowed a state to grandfather
in use of existing equipment while banning others of more recent vintage.'7o
The Court believed the statute was a reasonable means to address new entrants into the market while preserving those that were already in existence
and well established.
The United States Supreme Court also disagreed with the Minnesota
Supreme Court's judgment on the conservation of energy. The Court stated
that the test was whether the legislature could reasonably conclude that the
act could conserve energy. The state court should not substitute its judgment for that of the legislature. When the issue is reasonably debatable, as
the evidence here suggests, the legislative judgment must be sustained.
For the same reason, the Court rejected the Minnesota Supreme
Court's determination about the solid waste disposal problems. It again
concluded the state court substituted its judgment for that of the legislature,
which was impermissible under the federal Equal Protection Clause.
Because the Court concluded that the statute bears a reasonable relation to
the objectives, it was sustained under the Equal Protection Clause.
The Court next addressed the Commerce Clause issue, because the
state district court had found that the statute also imposed an undue burden
on commerce and was therefore unconstitutional. The Supreme Court
disagreed. Applying the Pike v. Bruce Church, Inc.' JI test, the Court first
considered whether the statute operates evenhandedly and only incidentally
affects interstate commerce. It concluded that the statute did operate
evenhandedly because it prohibited all milk retailers from using the
nonreturnable, nonrefillable plastic jugs. It did not discriminate based on
whether the milk, containers, or retailers are within or out of the state.
Hence the statute did not discriminate between interstate and intrastate
commerce.
Next the court had to consider whether the incidental burden on commerce is clearly excessive in light of the local interest. The Court concluded
that the impact on the interstate trade of milk would be slight. Milk could
move freely across the state's borders, and most milk producers used several
different kinds of containers. Hence the effect would be minimal.
The Court had slightly more trouble with the effect of the statute on
out-of-state plastic producers and the in-state pulpwood industry which
made cardboard cartons. The Court noted the possibility that the plastics
industry might be more heavily burdened and the pulpwood industry
somewhat favored. However, the plastics industry still would supply
plastics for the production of plastic returnable bottles and the paperboard
"·See. e.g., New Orleans v. Dukes. 427 U.S. 297 (1976).
397 U.S. 137 (1970). See text accompanying note 39, supra, for detailed discussion of
171
Pike.
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itself. Moreover, some out-of-state pulpwood companies may participate in
the business generated by the act.
Nonetheless, the Court concluded that "this burden [on the plastics industry] is not 'clearly excessive' in light of the substantial state interest in
promoting conservation of energy and other natural resources and easing
solid waste disposal problems .... " 172 It also found that there were not any
less burdensome alternatives available to achieve the same objectives. Thus
the Court concluded that the act did not violate the Commerce Clause.
Justice Stevens wrote a strong dissenting opinion. He basically
disagreed with the Court's approach to the equal protection problem.
Justice Stevens believed that in evaluating equal protection claims under the
Constitution the state is not limited in the same manner as is the federal
government. Thus, according to the dissenting opinion, the state court is
free to reevaluate its legislature's determinations even though the same action would not be permissible for a federal court evaluating federallegislation. He believed that the majority opinion was an improper intrusion into
the legislative and judicial decision-making process of Minnesota.
Baldwin v. Montana Fish & Game Comm 'n 17J also raised an equal protection challenge to the state's elk hunting license program. Nonresidents
had to pay seven and one-half times as much as residents for an elk hunting
license.
The Court in Baldwin upheld the statute. It determined the state provided special services for parks, fire protection, wildlife preservation,
police, and game officers that benefit residents and nonresidents. Moreover, the Court noted the high increase in out-of-state big game hunters was
threatening overkill of big game. Hence, the Court concluded the state
license program was reasonably related to a legitimate state objective of
conserving a finite resource.
III. SELECTED COOPERATIVE FEDERALISM PROGRAMS
A. The Clean Air Act
The federal Clean Air Act (CAA)'74 is a classic example of Congress' use of
a carrot and stick approach to the problem of air pollution. The carrot part
of the program is extensive financial aid to states that adopt programs implementing the federal standards and the federal CAA. The stick part of the
program is that for states which do not adopt their own programs, the federal government will establish a program for them. Thus, if the state wishes
to set air quality standards, enforce them, and otherwise carry out the
CAA, it must adopt a state implementation plan (SIP).
'''449 U.S. at 473.
173 436 U.S. 371 (1978). See text accompanying note 113, Slipra, for discussion of the case.
17442 U.S.c. §§ 7401 el seq. (1982). For a brief history of the federal air pollution program, see F. SKILLERN, ENVIRONMENTAL PROTECTION: THE LEGAL FRAMEWORK 85-87 (1981).
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Under the CAA the federal government is responsible for promulgating ambient air, 175 stationary source,176 hazardous pollutant, 177 and
other standards for programs such as the prevention of significant
deterioration (PSD)178 or nonattainment areas.179 The state then has the
responsibility of adopting an implementation plan that meets certain
criteria set forth in the act. If the state plan meets the statutory criteria, the
Environmental Protection Agency (EPA) must approve the SIP. 180
The SIP must, after the 1977 Amendments, include provisions for implementing the PSD and nonattainment area programs. '8' The PSD program is intended to protect pristine or clean air areas from pollution. PSD
areas are those areas which are below, i.e., meet, the applicable national
ambient air quality standard. Under the PSD program the state has the
authority to designate so-called clean air areas which, according to an area's
designation, allows development and growth that can cause additional
pollution in stated amounts. The increased pollution, however, may not exceed the national standards. 182
The nonattainment area program deals with those areas in a state, particularly the industrial metropolitan areas, where the national standards
have not yet been attained. Under the nonattainment program a new source
must offset or decrease the existing emission of a pollutant that it will emit
before the source can come into the area. Thus, a source desiring to come
into a nonattainment area must, through purchase, plant modification, or
other offset, reduce the emission in the area of pollutants that it also will be
"'42 u.s.c. § 7409 (1982).
''Old. § 7411 (NSPS). See ASARCO, Inc. v. EPA, 578 F.2d 319 (D.C. Cir. 197R) (disapproving use of the "bubble concept" in NSPS). See also Chevron, U.S. A. v. N RDC, 104 S. Ct.
277R (1984) (bubble policy allowed for nonattainment area program).
'''42 U.s.c. § 7412 (1982).
'''Id. §§ 74701'1 seq. (PSD). See also Alabama Power Co. v. Cost Ie, 606 F.2d 1068 (D.C.
Cir. 1979); see C.A.R.E. v. EPA, 643 F.2d 183 (4th Cir. 1981) (EPA approval of PSD and
nonattainment area permits upheld).
'''42 U.s.c. §§ 7501-08 (1982) (nonattainment program). See Chevron, U.S.A. v. NRDC,
104 S. Ct. 277R (19R4) (bubble policy permissible in nonattainment area program), and
§ 7502(a) and § 7502(b)(II)(B). See also Nat'l Steel Corp. v. Gorsuch, 700 F.2d 314 (6th Cir.
1983) (EPA is not required to unquestioningly accept state's data and is free to use its own acquired knowledge); bUI see C.A.R.E. v. EPA, 643 F.2d 183 (4th Cir. 1981) (EPA approval of
PSD and nonattainment area permits upheld).
'"°42 U.S.c. § 7410 (1982). See also Train v. NRDC, 421 U.S. 60 (1975); Connecticut v.
EPA, 696 F.2d 147 (2d Cir. 1982) (state seeking review of another state's SIP); Connecticut v.
EPA, 656 F.2d 902 (2d Cir. 1981) (proper inquiry is whether revision to state implementation
plan would fail to meet federal statutory standards). Conlra, New Eng. Legal Found. v. Cost Ie,
475 F. Supp. 425 (D. Conn. 1979), a/I'd, 666 F.2d 30 (2d Cir. 1981 )(EPA has no duty to enforce
pre-1977 findings that a state's clean air plan was inadequate); Connecticut Fund for Env't v.
Envt'l Protection Agency, 672 F.2d 998 (2d Cir.), cerl. denied, 103 S. Ct. 445 (I982)(firm
assurance by a state to remedy minor deficiencies in its antipollution plan is su fficient to avoid its
rejection and having a federal one promulgated).
"'42 U.S.c, at §§ 7410(a)(2)(I) & (J) (1982).
'''See generally 45 Fed. Reg. 52,676 (1980), codified al 40 C.F.R. § 52.14 (1983).
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emitting and for which the area is classified nonattainment, in order to
begin operation.
Even when the state has an approved SIP under the CAA, the federal
government is not removed from the picture. The CAA provides that if a
source is violating a standard of an implementation plan or a national standard, the federal government must notify the state of the violation. If the
state does not enforce the provisions of the CAA within a certain time, the
EPA may undertake either civil or criminal enforcement action against the
source. 183 Moreover, if the EPA determines that a state is regularly and consistently not enforcing the CAA or its implementation plan against
violators, a period of "federally assumed enforcement" may be undertaken. 184 In that case the federal government will enforce the state plan or a
federal program for the state until the state again complies with the requirements for SIP approval and undertakes its own enforcement of the
Act. One case allowed the EPA to sue the state for a violation of the EPA's
inspection and maintenance program for that state. 18'
If a state is enforcing the CAA, the federal government cannot do so.
Thus, under an approved SIP a state agency may enforce state law against
its residents in carrying out the SIP without federal involvement. However,
under the Act state or federal enforcement actions, compliance orders, and
civil suits are subject to review by the courts at the instigation of private individuals under the citizen suit provisions. 186 Those provisions, however, require that the state or federal government be notified of the pending action
to give it an opportunity to sue a violator. If the state does not bring an enforcement action, a private individual may do so.
The CAA also has expressed preemption provisions. The Act requires
the EP A to establish appropriate standards for aircraft and new motor vehicle emissions. 187 Subject to certain exceptions, the states are precluded from
"'42 U.S.c. § 7413 (1982); Citizens for a Better Env't v. Cost Ie, 515 F. Supp. 264 (N.D.
Ill. 1981) (district court has jurisdiction to compel EPA to determine whether implementation
policies in Illinois and Indiana were adequate).
"'42 U.S.c. § 7413(a)(2) (1982). See United States v. Kin-Buc, Inc., 532 F. Supp. 699
(D.N.J. 1982) (the Clean Air Act preempted actions for damages under the federal common
law of nuisance).
"'United States v. Ohio Dep't of Highway Safety, 635 F.2d 1195 (6th Cir. 1980), cerl.
denied, 451 U.S. 949 (1981).
'''42 U.S.c. § 7604 (1982); see Citizens for a Better Env't v. Costle, 515 F. Supp. 264
(N. D. Ill. 1981) (district court has jurisdiction to compel EPA to determine whether implementation policies in Illinois and Indiana were adequate); see also Nat'l Steel Corp. v. Gorsuch,
700 F.2d 314 (6th Cir. 1983) (states have primary responsibility for maintaining air quality and
the EPA's role is secondary); Delaware Valley Citizens Council for Clean Air v. Pennsylvania,
533 F. Supp. 869 (D. Pa. 1982), aff'd, 678 F.2d 470 (3d Cir.), cerl. denied, 103 S. Ct. 298
(1982)(state's statute prohibiting expenditure of public funds to inspect and maintain clean air
program cannot be invalidated because of principles of federalism and powers reserved to the
states in the U.S. Constitution).
81
'
42 U .S.C. § 7573 (aircraft emissions); § 7543 (1982) (new motor vehicle or vehicle engine
emissions). Bul see California v. Department of Navy, 624 F.2d 885 (9th Cir. 1980) (state standards can apply to building in which aircraft are tested).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
587
setting any standards concerning those matters. In the area of standards
under the Act generally, however, the states are expressly authorized to
establish more stringent standards than the federal ones. ISS However, the
states cannot have less strict standards than the federally established ones.
In granting permits under the PSD and nonattainment area programs the
federal government also reviews state permits. If a state is granting a permit
under its SIP for development in a PSD or nonattainment area, the federal
government must be notified of the application for a permit and may review,
and if necessary, veto or object to the state issuance of a permit. \89
B. The Clean Water Act
Under the 1972 and 1977 Amendments to the Federal Water Pollution Control Act,190 commonly known as the Clean Water Act (CW A); the federal
government again sought to induce more active state involvement in the
problem of water pollution. 191 Under the CWA the EPA has the authority
to promulgate effluent limitations for point sources of pollution. 192 The
EP A also issues effluent limitations for toxic and other pollutants under the
Act. 193 As under the CAA, the state may adopt an implementation plan giving it the authority to enforce the CW A. 194 The state also is authorized
under the CW A to issue water quality standards. 195 If the state fails to issue
those standards, the federal government will do so for them.
There are several other programs under the CW A for which the state
can be responsible. One is the national pollutant discharge elimination
system (NPDES). 196 Under the NPDES, a permit is required from the EPA
or state to discharge into the waters of the United States. The permit must
require the discharger to satisfy the effluent limitations, water quality, or
"'42 U.S.c. § 7416 (1982). See also Union Electric Co. v. EPA, 427 U.S. 246 (1976), reh'g
denied, 429 U.S. 873.
"'42 U .S.c. §§ 7475(d) & 7502 (1982).
"°33 U.S.c. §§ 1251 el seq. (1982). See generally F. SKILLERN, ENVIRONMENTAL PROTEC·
TION: THE LEGAL FRAMEWORK, ch. 4 (1981 and Supp. 1984).
'''Cf., Riverside Irrigation Dist. v. Andrews, 568 F. Supp. 583 (D. Colo. 1983) (Congress
had authority to enact this chapter even though its provisions are inconsistent with its approval
of an interstate navigable waterway compact); Nat'l Wildlife Fed'n v. Gorsuch, 693 F.2d 156
(D.C. Cir. 1982) (assertion by the EPA of legitimate water quality considerations contrary to
state objectives will be upheld despite language in § 1251 that the CW A shall not supersede,
abrogate, or otherwise impair state authority to allocate quantities of water within its jurisdiction).
'''33 U.S.c. § 131 J (1982).
"'/d. § 1317.
'''/d. § 1313. Congress added § 1313a in late 1981. It reads: "The review, revision, and
adoption or promulgation of revised or new water quality standards ... shall be completed by
lDecember 29,1984]. No grant shall be made under title II of the Federal Water Pollution Control Act after [December 29, 1984] until water quality standards are reviewed and revised ... ,
except where the State has in good faith submitted such revised water quality standards and the
Administrator has not acted to approve or disapprove such submission within 120 days after
receipt." Act of Dec. 29, 1981, Pub. L. No. 97-117, codified al 33 U.S.c. § 1313a (1982).
'''33 U.S.c. § 1312 (1982) (state water quality standards).
'''Id. § 1342.
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other applicable standards for the (receiving waters. 197 The NPDES or section 402 program under the CWA can be carried out by the state. Under section 402, a state may have a program approved by the EPA if it meets the
statutory criteria. 198 Those criteria relate to establishing the permit system,
providing for hearings and appropriate procedures, giving notice to the
EP A of application for permits, and including appropriate enforcement
authority. If the EPA approves the state program, then the section 402 permit program is conducted according to state law.
However, under the section 402 program the EPA always retains a
review authority under any NPDES permit. 199 The state must notify the
EPA of an application and the granting of a permit. The EPA has a
stipulated amount of time to either approve, not comment, or veto the state
permit.
Another program under the CW A that allows substantial state involvement is the section 404 program. Section 404 adopts a different approach
from the effluent limitations approach that is applied to point sources. Section 404 is concerned about discharges of fill and dredged materials in
waterways, rather than with effluent discharges and runoffs into waters that
the effluent limitation standards and water quality standards address. 200
The section 404 program authorizes the Corps of Engineers and the EPA,
through a permit program, to regulate the discharge of dredged and fill
materials to the waters of the United States. The Corps has promulgated
regulations for granting permits for discharges of dredged and fill
materials. 20 I
The Corps is primarily responsible for issuing permits. The disposal
site must be specified in the permit allowing the discharge. Interagency
coordination with the EPA, though, is necessary because the EPA develops
the application guidelines for the designation of disposal sites. On certain
findings the EPA may propose designation of an area as a disposal site or
revoke a designation previously made. 202 This type of site designation veto
by EPA must be preceded by consultation with the Corps.
The 1977 Amendments authorized qualified state programs to replace
the Corps' permit program in certain areas. 203 States now may issue section
404 permits for discharges into nonnavigable waters within their jurisdictions. 204 This authorization, however, is limited. It does not extend to
'''Id. § 1342(b)(I).
'''Id. § 1342(b).
'''Id. § 1342(d)(2). See Crown Simpson Pulp Co. v. Costle, 445 U.S. 193 (1980).
20°33 U.S.c. § 1344 (1982). See also B1umm, The Clean WaleI' ACI's Seclion 404 Perlllil
Program EllIers lIs Adolescence: An InSlill/lional and Program malic Perspeclil'e, 8 ECOLOGY
L.Q. 409 (1980) [hereinafter cited as B1umm, Seclion 404 Pel'lnil Program Per!'peclil'e).
'''33 C.F.R. pI. 326 (1983). See also id. at 320.
'''33 U.S.c. § I 344(c) (1982). See Avoyelles Sportsman's League v. Marsh, 715 F.2d 897
(5th Cir. 1983) (conflict between Corps and EPA wetlands determination).
2Ol/d. §§ I 344(g) & (h) (1982).
'''Id.
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
589
waters that are navigable under traditional definitions of navigability nor to
wetlands adjacent to navigable waters. 20S
In addition, under the section 401 certification process states can veto
Corps-issued permits under certain circumstances. For example, a permit
applicant must include with an application the appropriate certification of
compliance with such water quality standards or with a state coastal zone
management program. 206 By not issuing the certification, a state may, in effect, veto a permit. Moreover, it is important to note that the Corps, under
its "public interest review" considers state opinions concerning the issuance
of permits. 207 Hence, the states may have significant impacts on section 404
programs.
An additional influence by the state on a section 404 program occurs
from the consultation between federal agencies and a state under the Fish
and Wildlife Coordination Act. 208 That Act requires that wildlife conservation be considered equally with other factors in planning water resource
development projects. Under the Act the department or agency undertaking
or approving a water resources development program must consult with the
state official in charge of wildlife in the state in which the project is being
constructed.
The Corps has implemented this consultation requirement by regulations. These regulations require that an agency planning to "control or
modify any body of water" first consult with the proper state official in the
affected state. 209 Specifically, Corps officials in granting permits will consult with the United States Fish and Wildlife Service, as well as with the appropriate state official "with a view to the conservation of wildlife
resources by prevention of their direct and indirect loss and damage due to
the activity proposed in a permit application. They will give great weight to
these views on fish and wildlife considerations in evaluating the
application. 210 Any permit granted may be conditioned on the permit using
mitigating or other measures to conserve fish and wildlife.
By providing information on the effect of a project on fish or wildlife
and on how to mitigate or avoid the harm and to maximize conservation a
state fish and wildlife agency can affect decisions on section 404 or other required permits for federal water resource development projects within its
jurisdiction. The state input may result in project modifications or permit
lO'ld. § 1344(g)(I).
lO'Sed3 C.F.R. §§ 320.3(a) & (b), 325.2(a)& (b) (1984). See a/so 33 U.s.c. § 1341 (1982).
107
33 C.F.R. § 320.4(a) (1984). The history and development of public interest review and
state involvement is discussed in Blumm, Section 404 Permit Program Perspective, note 200
Sllpra, at 432-35.
7·'16 U.S.c. §§ 661 et seq. (1982). See Zabel v. Tabb, 430 F.2d 199 (5th Cir.) (Corps may
deny fill permit for environmental, not merely navigational factors), cerl. denied, 401 U.S. 910
(1970).
7·'33 C.F.R. § 320.3(e) (1983).
2O·ld. § 320.4(c).
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conditions that will assure maximum protection of fish and wildlife
resources.
The 1977 Amendments to the FWPCA authorize state section 404 programs that apply to nonnavigable waters within the state. This jurisdictional
limitation is important. It means that even with an approved state section
404 program, the federal section 404 program will exist for permits in traditionally navigable waters and adjacent wetlands. 21 I
The states also have the authority to adopt a regulatory program for all
waters, including navigable ones, within the state. 212 The 1977 Amendments
did not preempt the state from adopting a program for navigable waters
also. In that case, however, for a discharge into navigable waters two permits are needed: the federal section 404 permit and one under the state
program. The state program, though, might be broader than the federal section 404 program. It may cover agricultural, silvicultural, and ranching activities, as well as certain federally approved projects which are statutorily
exempted from the Corps' section 404 program. 213
Once approved, state section 404 programs are subject to review by the
EPA in a manner similar to that used for NPDES permits.214 States must
allow the EPA an opportunity to review permit applications and general
and individual permits. The EPA may veto any permit that does not comply
with section 404 requirements. However, the EPA is authorized to waive
federal review of certain state permits by regulation or by individual memorandum of agreement with a state. The second way the EPA is involved in a
state-approved program is through its ability to enforce violations of permit
conditions or unauthorized discharges by permittees. lIS If the violations of
the approved program are so widespread that the state program is effectively no longer operating, the EPA may enforce the entire program. Lastly, the
EPA has the authority to withdraw its approval of a state section 404 program if it determines that the state program does not meet the requirements
of the CWA.216
State section 404 program have advantages other than being broader
than the federal one. Under the 1977 Amendments a qualified state program can exempt categories of minor discharges from the permit requirements of section 404 by establishing and implementing the statewide
regulatory programs under section 208. 217 Section 208 programs apply best
'" 33 U.S.c. §§ 1344(h)(2)(A) & (3) (1982).
'''Id. § 1344(t). See also Blumm, Section 404 Permit Program Perspective, note 200sllpra,
at 454-55.
"'33 u.s.c. §§ I 344(f)(A)-(E) (exempts specific activities) and § I 344(r) (1982) (exempts
certain federally approved projects). See also Blumm, Section 404 Permit Program Perspective, note 200 supra, at 453-60.
'''33 U.S.c. § 1344(j) (1982).
21 'id. § 1344(i).
"'Id.
"'Id. § 1344(f)(I)(F). See also Blumm, Section 404 Permit Program Perspective, note 200
supra, at 461-63, for a discussion of the interrelationship of state-approved section 404 and
section 208 programs.
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management practices (BMPs) to discharges rather than using the elaborate
permit conditions under section 404. The section 404 permit is designed for
a one-time-only discharge. Its emphasis is to focus on alternatives to avoid
or minimize the environmental harm. It thus differs from the NPDES permit which focuses on allowing a discharge with a view toward reducing,
over time, the amount of pollution in the receiving waters. The section 208
program also is broader in scope than an approved state section 404 program. A state section 208 program is not restricted to nonnavigable waters
as is the state section 404 program.
Use of a section 208(b)(4) program has other advantages. The section
208 BMP standards can avoid the time delays associated with the review of
individual activities. Also the section 208 program is not subject to the same
extensive review as the state section 404 program. The section 208 program
basically is limited to EPA review only to determine if it substantially complies with the requirements of the CW A. It does not entail review of each individual activity. This would allow a state an opportunity to gain control
over some activities that would otherwise be subject to the federal program.
Another reason in favor of adopting a section 208 program is that it does
not have to comprehensively reach all activities. It can be selective in the
category or class of activities which it regulates. Another incentive to a state
adopting a section 208 program to use in conjunction with an approved section 404 program is that the federal government has provided funding and
technical assistance to help states implement BMP programs.
One reason that the section 208 and 404 programs can work in tandem
is evident in the requirements for a section 208 program. To establish a section 208(b)(4) program that includes authority over dredge and fill permits a
state must first have an approved section 404 program. The other major requirement for a section 208 BMP program is that it be a statewide program
for control of nonpoint sources of pollution.
C. The Coastal Zone Management Act
The federal Coastal Zone Management Act (CZMA)21S uses a cooperative
approach, but without the coercive aspects of the CW A and CAA. Under
the CZMA, the federal government encourages states to adopt programs to
control and regulate growth and development in their coastal zone. The Act
provides funding and technical assistance to states in developing coastal
zone management programs.219 The CZMA also sets forth specific requirements that a state plan must satisfy to be approved. Approval of the plan is
by the National Oceanic and Atmospheric Administration (NOAA) of the
Department of Commerce. Under the CZMA a planning, rather than a reg-
"'16 U.S.c. §§ 1451 el seq. (1982), as amended by Coastal Zone Management Act
Amendments of 1978,90 Stat. 1013, Pub. L. No. 94-370 (1978).
'''16 U.S.c. §§ 1454-55 (1982).
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ulatory, approach is used to handle the adverse impacts of premature development or poorly planned development in coastal regions. To be approved,
state plans must provide the states with adequate legal authority to permit
or regulate growth and development in coastal zones. 220 States also must
have adequate legal authority to acquire interests in sensitive or critical
areas demanding special protection.
The greatest incentive for states seeking approval of a coastal zone program is section 307 of the CZMA. 221 Section 307 is the so-called federal consistency provision. Under it, all federal activities occurring in or affecting the
coastal zone must be done in a manner that is consistent with an approved
state coastal zone management plan. Thus a state with a qualified plan under
the consistency provisions, if liberally construed, could have, in effect, a veto
power over federal activities. 222
D. The Federal Surface Mining Control
and Reclamation Act
The Federal Surface Mining Control and Reclamation Act (FSMCRA)223
combined several of the features of the CWA and CAA. Under the
FSMCRA the newly created Office of Surface Mining (OSM) is responsible
for establishing interim standards pending development of state programs. 224 The states are given a period of time in which to develop and submit an implementation program to carry out the performance and environmental standards under the Act. 225 Those standards include establishing a
permit system, a bond requirement, reclamation requirement, and mining
plan provisions. In addition, states must submit plans that include provisions with legal authority to enforce the program, including access for inspecting and monitoring an activity, Moreover, provisions must be included
for appropriate planning. The planning provisions have to include designations of areas within the state unsuitable for surface mining,226
"'Id. §§ 1455(c)-(e).
"'Id. § 1456(c). See Conservation Law Found. v. Watt, 560 F. Supp. 561 (D. Mass.),
aJl'd, 716 F.2d 946 (1st Cir. 1983) (burden of establishing compliance with the state program is
on the federal agency proposing the contemplated action-Congress intended to cede some
authority in matters of coastal development to affected states to achieve cooperat ive and coor·
dinated development of scarce natural resources).
"'See Blumm & Noble, The Promise oj Federal Consisleney Under Seclion 307 oj the
Coastal Zone Managelllenl Act [1976]6 ENvrL L. REP. (ELl) 50,047. See Cape May Greene,
Inc. v. Warren, 698 F.2d 179 (3d Cir. 1983) (congressionally mandated consistency requirement is especially compelling where a federal agency seeks to reach beyond the local activity it
is funding to impose a federal standard on private activity traditionally subject only to state
and local regulation). Bul see Secretary of the Interior v. California, 104 S. Ct. 656 (1984)
(CZMA consistency review does not apply § 1456 to OCS oil and gas leases sales).
"'30 U.S.c. §§ 1201 et seq. (1982).
"'Id. § 1251.
"'Id. § 1253.
'" Id. § 1253(a)(5) (unsuitability designations in state plans). Section 1272 provides the
planning process and standards for the unsuitability designation. Id. § 1272. See Utah Int'l,
Inc. v. Dep't of Interior, 553 F. Supp. 872 (c. D. Utah 1982) (the sixty-day period within which
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As with the CAA and the CW A, FSMCRA preempts only state law not
as stringent as the federal law . 227 Under the Act, states can have more stringent, but not more lenient, standards than the federal ones.
Enforcement of FSMCRA is done by the state under an approved plan.
However, if a state refuses to submit or submits an inadequate plan, then a
federal program will be enforced by OSM. 228 If the state fails to enforce, or
if it is determined that widespread violations of the Act exist and are not being enforced, then a period of federally assumed enforcement can be undertaken by OSM. 229
The approved state program is subject to oversight by the OSM. The
agency has the authority to evaluate administration of the state programs,
to implement a federal program, and to assure compliance with the
FSMCRA.
Several provisions of FSMCRA are similar to those in the CAA and
CW A. All three acts have citizen suit provisions which authorize persons
having an interest that is adversely affected to sue to enforce a violation of
the appropriate statute. 23O Similarly, they may sue for failure of the administrator to perform nondiscretionary actions required under the Act. 2JI
And individuals may be sued for violations of the Act, a state or federal
program, or a permit. Under all three statutes state environmental quality
acts remain in effect. In addition, each of these federal acts preserves all the
remedies, including private rights, that exist under state or common law. 232
The FSMCRA has come under extensive constitutional challenge. 233
Industry groups have contended the Act imposes an undue and
discriminatory burden on interstate commerce in violation of the Commerce Clause. They also have argued that the FSMCRA infringes basic
a decision to declare an area unsuitable for surface coal mining is not mandatory and the Secretary of the Interior did not have to delay a ruling until a federal-state cooperative agreement
was adopted).
"'30 U.S.c. ~ 1255(b) (1982).
""fd. ~ 1254(a).
"'fd. § 1254(b). See a/so id. § 127I(b) (inadequate state enforcement).
210
42 U.S.c. § 7604 (1982) (Clean Air Act). See Friends of the Earth v. Potomac Elec.
Power Co., 546 F. Supp. 1357 (D.D.C. 1982) (Congress intended courts to enforce mandated
air quality plans where the EPA has failed to act). Bill see Connecticut v. Long Island Lighting
Co., 535 F. Supp. 546 (E.D.N.Y. 1982) (state's suit to enforce New York's implementation
plan); 33 U.S.c. § 1365 (1982) (Clean Water Act). See Montgomery Envt'l Coalition v. Costle,
646 F.2d 568 (D.C. Cir. 1980) (citizens had standing to seek judicial review of EPA decision
approving terms of permits of sewage treatment plants that discharge pollutants into the Potomac River); 30 U.s.c. § 1270 (1982) (FSMCRA).
"'See 42 U.S.c. § 7607 (1982) (Clean Air Act). See Action for Rational Transit v. West
Side Highway Project, 699 F.2d 614 (2d Cir. 1983) (courts of appeals have exclusive jurisdiction to review state implementation plans approved by the EPA); 33 U.S.c. § 1369 (1982)
(Clean Water Act); 30 U.S.c. § 1276(a) (1982) (FSMCRA).
"'See 42 U .S.c. § 7604(e) (1982) (Clean Air Act); 33 U.S.c. § 1365(e) (1982) (Clean Water
Act); 30 U.S.c. § I 270(e) (1982) (FSMCRA).
"'See, e.g., Hodel v. Indiana, 452 U.S. 314 (1981) and Hodel v. Virginia Surface Mining
& Reclamation Ass'n, Inc., 452 U.S. 264 (1981). See text accompanying note 279, infra, for a
discussion of these two cases.
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governmental functions inherent in the sovereignty of a state contrary to
National League of Cities v. Usery. 234 In addition, they have argued that the
inspection, reporting, and access requirements, as well as the bond requirements for review of a permit denial constitute violations of procedural
and substantive due process. Opponents to the Act also have contended that
FSMCRA infringes the reserved police power of the state under the Tenth
Amendment by being basically a land-use law which is of local interest and
subject to local control. As part of their Commerce Clause complaint, the
opponents also contended that the purpose of the Act was to regulate
private lands, rather than interstate commerce and mining.
E. The Resource Conservation and Recovery Act
In 1976 Congress amended the Solid Waste Disposal Act 231 with the Resource Conservation and Recovery Act (RCRA)236 to establish a new regulatory program for hazardous and solid waste disposal. Under RCRA the federal government by regulation is to conduct so-called cradle-to-grave management of hazardous waste materials. The EPA is to promulgate standards
for generators, transporters, and disposers of hazardous wastes. 217 Under
RCRA the federal regulations are enforced by the EPA. The principal
means of regulating hazardous waste is through a permit process. The permits are issued by the EPA.
Under the Act, states may develop hazardous waste management programs that can be approved by the EPA.238 The state program must be approved by the EPA if it is equivalent to the federal program or consistent
with federal and state programs applicable in other states, and provides adequate enforcement of compliance with the requirements of RCRA. If the
EPA approves a state hazardous waste management program, the state program is in lieu of the federal one. The state then is authorized to enforce the
Act and grant permits. Any state-granted permit has the same effect as a
federally granted permit under the RCRA.
The approved state program is subject to review by the EPA. 239 If the
adminstrator of the EPA determines that the state is not administering and
enforcing a program authorized under the RCRA, the administrator must
so notify the state. If the state does not rectify the situation within ninety
days, the administrator may withdraw the authorization for the state pro'''National League of Cities v. Usery, 426 U.S. 833 (1976). See text accompanying note
22, supra, for a discussion of Usery.
"'Solid Waste Disposal Act of 1965, 79 Stat. 997, Pub. L. No. 89-272, as amended by Resource Recovery Act of 1970, 84 Stat. 1227, Pub. L. No. 91-512.
1)'42 U.S.c. §§ 6901 el seq. (1982), as amended by 92 Stat. 3081, Pub. L. No. 95-609
(1978).
"'Id. §§ 6922 (generators), 6923 (transporters), and 6924 (storers or disposers).
Id. § 6926. State statutes passed under this RCRA preempt local legislation; thus, a
town's ordinance requiring popular referendum before hazardous waste facility could be built
was invalid. Stablex Corp. v. Town of Hooksett, 122 N.H. 1091,456 A.2d 94 (1982).
"'42 U .S.c. § 6926(e) (1982).
1),
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gram. Any withdrawal of authorization by the administrator must be
preceded by notice, a public hearing, and a written statement of reasons for
the withdrawal.
In neither the hazardous waste nor the solid waste provisions of the Act
did Congress intend to preempt state actions.240 Under the RCRA the state
must impose standards at least as stringent as the federal ones, but may require stricter ones.
The RCRA also contains provisions encouraging states to develop solid
waste disposal programs. 24I The Act encourages the development of state
programs for the elimination of open dumps and the expanded use of
sanitary landfills for solid waste disposal. The RCRA sets forth the requirements for approval of a state plan. If a state meets the statutory
criteria, the EPA must approve the state plan within six months of its submission.
After approval, the state is responsible for carrying out its plan. The
EPA's role is similar to that it has under the hazardous waste management
program. It must review the state plan periodically to be sure that it is being
carried out and revised as necessary to meet the federal regulations. If it is
not, the EPA administrator can, after notice and an opportunity for public
hearing, withdraw approval of the state solid waste plan.242
Thus, under RCRA, basically two different programs are used. For
hazardous waste the federal government will establish a regulatory program. A state may submit a hazardous waste management plan to be
authorized by the administrator in lieu of the federal program. If so
authorized, the state program effectively replaces the federal one for enforcement and permit purposes. The state program does remain subject to
review and ultimate withdrawal of authorization if the state does not carry
out its plan.
In the solid waste area, however, Congress uses a different approach.
The RCRA does not provide for any federal plan. Rather, federal guidelines
are provided to states for developing solid waste plans that will achieve the
objectives of the Act. 243 The objectives of the RCRA are to foster environmentally sound disposal of solid waste and encourage resource conservation. These objectives are achieved through federal funding and technical
assistance to states with approved solid waste plans that satisfy the federal
'''Id. § 6929. See General Elec. Co. v. Flacke, 461 N.Y.S.2d 138, 118 Misc. 2d 729 (Sup.
C!. 1982) (there is no requirement that New York State regulations concerning discarding waste
material be either identical to or consistent with federal regulations). See also City of Philadelphia v. New Jersey, 437 U.S. 617 (1978).
"'42 U.S.c. §§ 6947-6949 (1982) (federal assistance).
"'Id. at § 6947(a). BI/(, c/., City of Gallatin v. Cherokee County, 563 F. Supp. 940 (E.D.
Tex. 1983) (act provides for enforcement by the EPA through the "power of the purse" or
through the enforcement powers, or through citizens suits against the EPA or the relevant state
agency for failure to perform nondiscretionary duties).
"'45 Fed. Reg. 73,440 (Nov. 4, 1980). See also 42 U .S.c. §§ 6943-44 (1976).
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guidelines and requirements. But there is no federal program to operate if a
state does not act, nor is there any coercion on a state to force it to adopt
any particular program for solid waste management and resource recovery.
F. Litigation under Cooperative Programs
A study of selected cases under different cooperative programs established
by Congress will illustrate some of the federalism issues that arise. The cases
also will show how some of these issues have been resolved judicially. As
might be predicted, the cases involve sensitive areas such as enforcement,
standard-setting, the effect of compliance with state law, and what constitutes state action. These areas probably raise serious conflict concerning the
respective roles of the state and federal government under cooperative programs. The conflicts raised typically are the more difficult ones to resolve.
I. CLEAN AIR ACT
Several recent cases clarify responsibility for enforcement of the CAA in different types of situations. Gardeski v. Colonial Sand & Stone Co. 244 raised the
question whether a citizen suit could be brought if a state had tried to bring a
violator into compliance with the Act. In Gardeski the state had unsuccessfully tried to negotiate voluntary consent orders and sought to persuade the
plant to refrain from violating these consent orders. Citizens in the area who
were adversely affected sued to enforce the federal Clean Air Act and the New
York state law.
The district court allowed the citizens to bring the suit because of its conclusion that state efforts were not diligent within the meaning of section 304
citizen suit provision. 245 The court also rejected the argument that the citizen suit undermines agency enforcement policy. The court acknowledged
that citizen suits could disrupt agency proceedings, but the agency remains
free to choose different courses of action and to pursue them diligently
under the Act.
In another area of enforcement and inspections under the CAA, the
federal courts have reached conflicting results. In Stauffer Chemical Co. v.
EPA 246 the issue was whether an employee of a private contractor with the
EP A was an "authorized representative" under section 114(a)(2) of the
CAA 247 to enter and inspect the premises. The Tenth Circuit reviewed the
legislative history of the Act and concluded that the language of the CAA
and the legislative history were unclear. It resolved the issue by holding that
the statutory phrase, authorized representative, did not include a private in'''SOl F. Supp. 1159, 15 E.R.C. 1328 (S.D.N.Y. 1980).
"'42 U.S.c. § 7604 (1982) (citizen suit authorized ifstate "not diligent" in prosecuting ac·
tion). See Friends of the Earth v. Potomac Elec. Power Co., 546 F. Supp. 1357 (D.D.C. 1982)
(Congress intended courts to enforce mandated air quality plans irrespective of EPA's failure
to do so).
'''Stauffer Chemical Co. v. EPA, 647 F.2d 1075 (10th Cir. 1981).
'''42 U.S.c. § 7414(a)(2) (1982) (section 142(a)(2) of the CAA).
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dividual hired by the EPA. Hence, those individuals were properly enjoined
from carrying out an administrative search warrant.
The opposite result was reached by a federal district court in In re
Clean Air Act Inspection of Bunker HiII.248 The Bunker Hill court concluded the "authorized representative" was any person authorized by the
EPA administrator to perform the tasks under the CAA. This interpretation could reach private individuals. Hence the district court in Bunker Hill
upheld the administrative search warrant and the use of a private individual
authorized by the EPA to conduct the on-site inspection of the premises
under section 114(a).
Illinois v. Celotex Corp.'49 raised other issues concerning enforcement
of a SIP. In Celotex Corp. the state and federal EPA sought to enforce the
Illinois SIP against an alleged violator. The two actions were consolidated
before the federal district court in Illinois, and based on violations of state
rules that had been declared invalid by the state supreme court for procedural defects in their adoption. Although the rules had been approved by
the federal EPA as part of the Illinois SI P, the state had not corrected or
revised them sufficiently to overcome the state court deficiencies.
The federal court dismissed both complaints. It agreed with the company that the invalidation by the state had left no rules to be enforced. It rejected the argument that the regulations remained part of federal law which
could be enforced by either state or federal government. It also rejected the
EPA's argument that the state court action was, in effect, a revision to its
SIP which was not effective until approved by the EPA. The court noted
that the rules would be unenforceable in state court and that it would be unfair to allow their enforcement in federal court. It noted also that the
federal government could promulgate and enforce new rules.
The Celotex opinion is at odds with and expressly rejects the result in
an earlier case in the northern district of Illinois. In Illinois v. Commonwealth Edison CO.250 the district court allowed enforcement of the same
state rules involved in Celotex. The Commonwealth Edison court reasoned
that the state plan had been submitted and approved by the federal EPA
prior to the procedural invalidation by the state court. The court concluded
that the approved SIP was subject to federal enforcement. It remains intact
until revised with the approval of the EPA. Hence, it provided regulations
that could be enforced by a citizen suit.
Moreover, the Commonwealth Edison court rejected the argument the
federal EPA was collaterally estopped by a state-granted variance. The
court held the issue was whether the variance was a revision to the regula-
"'15 E.R.C. 1063 (D. Idaho 1980). Accord. 111 re Aluminum Co. of America, 15 E.R.C.
1116 (M.D.N.C. 1980) (Congress intended EPA administrator could delegate inspection
authority).
"'516 F. Supp. 716 (C.D. Ill. 1981).
"'490 F. Supp. 1145 (N.D. Ill. 1980).
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tion plaintiff sought to enforce. Because it had not been approved by the
federal EPA as a revision to the Illinois SIP, the variance was ineffective to
change the regulation in the approved SIP.
On balance, the Commonwealth Edison court seems better supported
by the CAA and prior cases. Once a state plan has been approved by the
EP A, it provides a basis for enforcement by the federal or state government
or citizens. The CAA allows changes only by properly adopted and approved revisions to the SIP. Under the Celotex reasoning, a state could
unilaterally alter and delay attainment of national standards due to state
law. Arguably, this is inconsistent with the federal approval of SIP, revision, and enforcement provisions of the CAA.
In United States v. Ohio Department of Highway Safety. 251 the federal
government sought to enforce an inspection and maintenance program
issued by the EPA after the state failed to design one. The state refused to
deny automobile registration to owners of vehicles which failed to pass the
required inspection. The Sixth Circuit held that the federal government can
sue the state directly as a violator of a federally promulgated SIP. It rejected, among others, the state's argument based on Usery.
2. CLEAN WATER ACT
The Corps of Engineers section 404 permit program was recently involved
in litigation. In Deltona Corp. v. Alexanderm the Corps had denied a
dredge and fill permit in two wetland areas. The denial occurred notwithstanding the fact that the state had certified that the issuance of the permit
would not result in violations of state water quality standards. The plaintiffs contended that the Corps violated the Administrative Procedure Act
(AP A) and had acted arbitrarily and capriciously in denying the permit by
considering irrelevant factors.
The federal district court upheld the Corps' authority to deny the permit. It noted that the appropriate standard for review is the "arbitrary and
capricious" one under the AP A 2S3 and that a court should not substitute its
judgment for that of the the administering agency. The court found that the
Corps had adhered to its wetlands regulations in determining that the permits involved should be denied. Hence the Corps' action was upheld.
The district court rejected the plaintiff's argument that the government
sought to deny the permit based on actions by federal officials. The court
noted that the consent of individual officials to undertake activities does not
estop the United States from asserting the public interest. The court noted
that the allegations here did not reach the level of affirmative misconduct.
"'635 F.2d 1195 (6th Cir. 1980). cerl. denied. 451 U.S. 949 (1981).
2>2504 F. Supp. 1280 (M.D. Fla. 1980), a/I'd, 682 F.2d 888 (11th Cir. 1982). For discussion
of related section 404 cases, see F. SKILLERN, ENVIRONMENTAL PROTECTION: THE LEGAL
FRAMEWORK. § 4.20 (1981 and 1984 Supp.).
2"5 U.S.c. § 706(2)(A) (1982). See also Citizens to Preserve Overton Park, Inc. v. Volpe,
401 U.S. 402 (1971).
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Moreover, in another action pending in the federal Court of Claims, the
issue of whether the application of the wetlands regulations operated as a
taking or inverse condemnation of the lands in issue was being adjudicated.
That, according to the court, is a more appropriate forum to resolve the
Fifth Amendment issue.
In Chesapeake Bay Village, Inc. v. Costle,2S4 the court had to consider
whether the CW A provided a basis for an implied private cause of action to
sue for the review of the denial by the EP A of a construction grant under section 208. 2SS In Chesapeake Bay Village the plaintiffs alleged that the EP A and
state had approved a construction grant permit for the county in which land
the plaintiff owned was located. That land, however, was on a peninsula that
plaintiff wanted to develop into a residential district. The sewage treatment
facility that was approved would not be large enough to handle the anticipated
residential development on the peninsula in the county.
The court noted the CW A does not directly provide a cause of action to
review the EPA's approval or denial of a section 208 construction grant.
The court considered whether the citizen suit provisions in section 505 216
created a right of action in private individuals to challenge construction
grants. The court concluded that section 208 actions were not among the
ones enumerated as reviewable in section 505, and hence not embraced
within the Act.
The court then considered whether the construction grant program
provisions contained any support for the contention that it created private
rights. The court relied on Cort v. Ash 2s7 to ascertain the standard for implying private rights of action. According to the Cort test a court must first
consider whether Congress expressly or impliedly intended to create a cause
of action. That is to be determined by reviewing the statutory language, the
legislative history, and the purposes of the Act.
The court noted that two prior courts of appeal had considered whether a cause of action could be implied under the CW A. The Seventh Circuit
in City of Evansville v. Kentucky Liquid Recycling 2s , determined that the
Act did not. The Seventh Circuit limited private causes of action to those
enumerated in section 505. It considered any other alternative would undermine public participation in the Act through the various means provided.
The Third Circuit in National Sea Clammers Ass'n v. City of New York 2s9
"'495 F. Supp. 1229 (M.D. Md. 1980).
"'33 U.S.c. § 1288 (1982). See Nat'l Wildlife Fed. v. Gorsuch, 693 F.2d 156 (D.C. Cir.
1982) (provisions of section 1288 were intended to prevent water quality goals from interfering
with state water allocation plans).
'''33 U .S.c. § 1365 (1982). See Middlesex County Sewage Authority v. Nat'l Sea Clammers Ass'n, 453 U.S. I (1981) (citizen suit provisions of § 1365 apply only to persons who can
claim some injury).
"'422 U.S. 66 (1975).
"'604 F.2d 1008 (7th Cir. 1979).
"'616 F.2d 1222 (3d Cir. 1980), rev'd sub nOIll., Middlesex County Sewage Authority v.
Nat'l Sea Clammers Ass'n, 453 U.S. 1(1981).
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had reached the opposite conclusion. The Third Circuit applied the Cort
factors and held a private cause of action could be implied under the CW A
even though it was not an action enumerated in section 505.
The Chesapeake Bay Vii/age court disagreed with both the Seventh and
Third Circuits. It reviewed the statutory language, the legislative history,
and the purpose and concluded that a private cause of action to review construction grants could not be implied from the Act. On the one hand, the
district court concluded that the Seventh Circuit's test was too narrow
because it con fined its considerations almost exclusively to section 505. On
the other hand, it found the Third Circuit's approach too broad because it
would find an implied cause of action for almost anyone who could allege
injury from activities under the Act. The district court viewed the matter
principally as one of statutory construction. Review of the statutory
language and legislative history resulted in its conclusion that no private
cause of action arose. It noted the construction grant provisions had no provision conferring any rights, nor providing or prescribing any conduct.
Hence a private cause of action could not be implied.
The National Sea Clammers Ass'n case was subsequently reviewed by
the United States Supreme Court. In Middlesex County v. National Sea
Clammers Ass'n, 260 the Supreme Court reversed the Third Circuit's holding
that an implied cause of action exists under the CW A. The court emphasized the focus should be the intent of the legislature. It reiterated its concern over the statutory language and legislative history and conduded that
no basis was provided for an implied cause of action to sue for money
damages for discharges and ocean dumping. The plaintiffs sought to
recover damages under an implied cause of action in the CW A for harm to
their traditional fishing grounds.
The Supreme Court also overruled the Third Circuit's holding that the
association had asserted a sufficient federal cause of action in nuisance. The
Court adhered to its prior holding in Milwaukee v. lIIinois26 I that the comprehensive legislative scheme in the 1972 Amendments to the FWPCA completely preempted the federal common law of nuisance for interstate water
pollution.
The EPA's review of NPDES permits also have been subject to frequent litigation. In District of Columbia v. Schramm 262 the District sought
to have the state and EPA, which issued the NPDES operating permit under
question, revoke that permit because the waste discharge caused harm to the
District which was downstream from the discharger. The court stated the
issue as whether a state NPDES permit not vetoed by the EPA is subject to
judicial review.
200453 U.S. 1 (1981).
"I Milwaukee v. Illinois, 451 U.S. 304 (1981). See also tcxt accompanying notc 141, supra,
for discussion of the Milwaukee case.
2"District of Columbia v. Schramm, 631 F.2d 854, 15 E.R.C. 1102 (D.C. Cir. 1980).
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The court first examined the Maryland NPDES permit program. The
state and EPA had a memorandum of agreement giving primary responsibility for the NPDES program to the state. Under the agreement the EPA
basically provides financial and technical assistance to the state. The state
and EPA also had a joint review program for some permits. In those instances the permits were sent to the EPA for review, and the regional administrator must concur in the effluent limitations and other conditions included in the state permit. After the permit is issued, however, the role of
regional administrator is advisory only.
The District was challenging in Schramm the failure of the EPA to
deny the Maryland permit. The court first considered whether it could
review that determination. It concluded the EPA's issuance, denial, or objection to a state permit clearly is subject to review in the courts of appeals.
It cited Crown Simpson Pulp Co. v. Cost/e263 where that conclusion had
been reached by the United States Supreme Court. However, the district
court noted the difference between a decision by the EPA not to veto a state
permit and a situation in which the EPA has acted. If the EPA has decided
not to veto a state permit, no record is available as there would be when the
agency lawyer issues or denies a permit.
The court reviewed the statutory provisions to determine whether Congress intended a federal district court to review the EPA's refusal to veto a
state-issued NPDES permit. The court concluded that the decision not to
veto was nonreviewable. According to the court, the CW A establishes a
legislative scheme designed primarily to have state implementation of the
NPDES program. The EPA assumes primarily a supervisory role. The court
noted the Act allows the EPA to waive responsibility for objecting to state
permits, even if they do not comply with the requirements of the Act. In addition, the EPA can waive the requirements of the Act that the state notify
the EPA of its NPDES permit applications. Thus, the court concluded that
Congress intended the state to have the primary responsibility for the
NPDES permit program, and granted the agency wide discretion in conducting its supervision and review of state-issued permits.
Next, the court had to consider the District's argument that it had an
implied cause of action to seek review of state decisions on NPDES applications. The District unsuccessfully argued that under the CW A it had a
federally created cause of action implicit in the CWA. The court found no
evidence of any such intent of Congress in the statutory language nor the
legislative history. The court stated that the Act argues "strongly against
implying a federal cause of action. In authorizing the creating of state
NPDES permit programs, Congress made clear that state permits would be
issued 'under state law [and] would be State, not Federal, actions.
' "264
"'445 U.S. 193, 14 E.R.C. 1151 (1980).
'''IS E.R.C. al 1109 (foolnoles and cilalions omilled).
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Further the court noted for an approved program the state must have adequate legal authority to administer and enforce its program. According to
the court, "[b]y requiring states to maintain or create sufficient legal and
equitable rights and remedies to deal with violations of state permits in
order to exercise permit-granting powers under the Act, Congress must have
intended that states apply their own law in deciding controversies involving
state permits.' '265 Because of the adequate state remedies and the strong emphasis on federalism in the CW A, the court refused to imply a federal cause
of action in the district to review the state-issued NPDES permit.
United States v. ITT Rayonier, Inc. 26.6 raised again the interrelationship
between the state and federal government in issuing NPDES permits. The
problem in Rayonier arose primarily because of delays by both parties in
developing effluent limitations. In Rayonier, the Washington NPDES permit program was approved by the EPA, which transferred the permit issuing authority to the state Department of Ecology. 267
Following that approval, the company and the state agency negotiated
an NPDES permit that was based on effluent discharge limitations from
prior laws. The EPA had not yet issued federal effluent limitations for the
discharge involved. The problem arose because of a footnote in the stateissued permit which provided:
The biochemical oxygen demand, suspended solids, and pH limitations will
be modified to be consistent with the applicable final effluent guidelines when
promulgated by the EPA in the Federal Register, or as thereafter modified by
final action consequent upon any appeal from such guidelines.'"
After issuance of the permit the EPA notified the state that the company was a likely candidate for violation of effluent limitations for pulp
mills. The state agency issued a compliance order, which was appealed to a
state hearing board. The EPA then issued federal effluent limitations for
pulp mills. Rayonier and other affected firms challenged those standards in
federal court.
The company argued to the state hearing board that the footnote in its
permit effectively extended the date of its compliance while the federal
guidelines were being challenged judicially. The state hearing board
disagreed. Rayonier appealed that board action to the appropriate state
court. The EPA then issued a notice of violation (NOV) to the state agency
and the company. Three weeks after the NOV, the state appellate court
reversed the hearing board and agreed with the company's interpretation of
the footnote in its NPDES permit.
The state then appealed to the state supreme court and informed the
,,, [d.
26'627 F.2d 996 (9th Cir. 1980).
26'39 Fed. Reg. 26,061 (1974).
268 16 E.R.C. at \092-93.
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EPA that it could not proceed with its enforcement action. The EPA filed
its enforcement suit in a federal court seeking injunctive relief and civil
penalties.
The federal district court hearing the enforcement action granted the
EPA's motion for summary judgment. It determined the footnote related
only to substituting or changing standards, not to modifying the compliance
schedule.
Subsequent to the federal enforcement action, the EPA's effluent
guidelines were basically upheld by the District of Columbia Court of
Appeals. Then the Washington Supreme Court affirmed the company's
position in the state court lawsuit. And under the federal district court's
compliance order, the company proceeded to install equipment that was
provisionally approved by the EPA. However, because the district court
had determined liability and retained jurisdiction to determine penalties, the
court of appeals proceeded to decide the merits of the district court decision.
The court had to address the issue of whether collateral estoppel applied to the Washington Supreme Court's judgment. The EPA argued that
there was no privity between the state agency and itself because of section
1342(i) that provided: "Nothing in this section [pertaining to NPDES] shall
be construed to limit the authority of the [EPA] Administrator to take [enforcement] action .... "269
The court noted the provision did not preclude res judicata principles.
The provision, according to the court, establishes dual and concurrent
jurisdiction for enforcement in the federal government. It preserves the
right for the federal government to bring enforcement actions. However,
that does not preclude situations in which prior actions by the state should
not be preclusive in a federal action on the same issues. 27o
The court concluded that the real issue was the close relationship between the state and federal government. It stated that the CW A and res
judicata principles seek to provide harmony, not conflict, between state and
federal government. That harmony and uniformity is not satisfied by conflicting decisions in a state and federal court.
The court also dealt with the issue of federal delegation of authority to
the state.
Congress has stated FWPCA does not involve a "delegation" of federal
authority .... Although the NPDES state permit program is established under
state law and functions "in lieu" of federal authority, the source of the
federal/state "partnership" can be traced to a single act of Congress
'''Id. at 1094.
"·United States v. Pcnnsyh'ania Envt'l Hearing Board, 584 F.2d 1273. 1276 n.IS (3d Cir.
1978) (implying earlier state administrative determination under NPDES has resjlldicalacffect
in federal court section); Reserve Mining Co. v. EPA, SI4 F.2d 492,534 (8th Cir. 1975) (nonfinal decision in state enforcement action is not a bar to federal action· under FWPCA).
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[FWPCA). Regardless whether the state's enforcement pOSitIOn can be accurately described as a "delegee" of powers, its authority vis-I'-I'is NPDES permits is derived from FWPCA and is revocable by the EPA.'"
Thus the court concluded that the Act did not abrogate the principles of collateral estoppel and res judicata.
The court went on to find that requisite privity between the EPA and
state board. It noted that the same dispositive, operative facts gave rise to
both causes of action. Although the parties were different, the court concluded that the state agency was the virtual representative of the EPA: the
interests of the state and federal agencies were virtually identical in both actions. Although the court noted that the relationship between the state and
federal agency remains unclear under the Act, at a minimum it is not an
agency relationship. Nonetheless, the court concluded that in this context
the relationship was sufficiently close to apply the principles of collateral
estoppel. Hence the district court's judgment was reversed, and the federal
enforcement action dismissed.
United States v. Cargill, Inc.272 presented a problem similar to that in
Rayonier. The EPA in Cargill brought an action to enjoin further violation
of the NPDES permit and to recover civil penalties against the corporation.
The company responded by stating that an action was pending in state court
by the Delaware state agency seeking the identical relief. Delaware was
operating under an approved NPDES system by which the EPA had
delegated the authority to administer the program.
The court reviewed the statutory scheme for the dual role of the state
and EPA in issuing permits and enforcement. It noted particularly the requirement of a state plan that it be able to appropriately enforce and seek
appropriate relief for violations of the Act. The court found that under the
statute Congress emphasized the state's primary role, when under an approved plan, to issue and enforce permits. The EPA operates in a supervisory capacity with respect to reviewing and enforcing permits in cases
where a state does not do so.
The court, after reviewing the facts and the circumstances of the case,
determined first that it was inappropriate for it to abstain or dismiss the suit
on grounds of abstention. Abstention is to be used only in exceptional circumstances which the court did not feel were present here. The court finally
determined that a stay pending completion of the state enforcement action
would be appropriate. In addition, the avoidance of federal-state friction,
the familiarity of the state with the factual background of the case, the
state's interest in enforcement of its own laws and regulations, and the
presence of an existing state lawsuit and regulatory authority were some of
the reasons cited by the court to support a stay of its action. Hence, the
court entered a stay conditioned on the company submitting a revised
'" 16 E.R.C. at 1095-90.
"'50R F. Supp. 734 (D. Del. 19R I).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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schedule for the construction of the additions to its waste water treatment
system and for filing appropriate progress reports. If it failed to give those
documents to the EPA timely, the court would consider dissolving the stay
of the enforcement proceeding.
The court noted that the cause did not resolve the collateral estoppel
problem raised in Rayonier. In this instance the interests of the state and the
federal government were not the same because the federal government was
seeking higher civil penalties against the company. Thus the parties may not
be in virtual representation and the federal government may not later be collaterally estopped or bound by the state settlement.
The relationship between the state and federal EPA over state water
quality standards also has been litigated. In Mississippi v. Cost/e27J when
the state water quality standards were due for their three-year review, they
did not meet the EPA-promulgated water quality criteria. The EPA sought
to negotiate with Mississippi to upgrade its standards, but Mississippi decided the state standard was in the public interest.
The EPA did not accept the Mississippi action. It proceeded to hold appropriate hearings and promulgate its own rule for water quality. The EPA
promulgated a new water quality standard for the state. The state then filed
suit to enjoin enforcement to the EPA standard.
The court, in upholding the EPA's action, rejected the state's argument that the EPA's action offset the balance between the state and federal
government under the CW A. The court acknowledged the state has the
primary responsibility for establishing water quality standards, but that
responsibility is subject to EPA review to assure that the criteria of the Act
are met. Hence the Act anticipates that the EPA can veto a state water
quality standard, and if it is not revised to correct a deficiency, can promulgate one for the state. Moreover, the power to review the state standard,
coupled with the express authority to establish criteria and guidelines for
water quality standards, amply sustain the EPA's disapproval of the
Mississippi water quality standard. The court then reviewed the record and
concluded that substantively and procedurally the EPA had acted correctly
in promulgating a new standard.
United States v. City of Hopewell'74 concerned the issue whether the
state or city should be a party to an enforcement action by the EPA. In
Hopewell the EPA began an enforcement action against the city. The state
then moved to be joined as a party plaintiff in the action. Under section
J3J9(e) of the CW A, 27l the state is required to be joined as a party when the
United States brings an enforcement action against a subdivision of a state.
The court noted the Act seems clear that the state would be joined as a party
'''Mississippi v. Costle, 13 E.R.C. IRRO (D. Miss.), ,(({,d, (;25 F.2d 12(;9 (5th Cir. 19XI).
'''50H F. Supp. 52(; (E. D. Va. 19RO).
'''33 U.S.c.
1319(c) (19R2).
*
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defendant because the CW A makes the state liable for penalties against its
subdivisions.
In Hopewell, however, Virginia sought to be joined as a plaintiff to
take punitive action against its subdivision. The court rejected Virginia's effort and stated that its interests would be as a party defendant. It could not
thus choose sides that may be more politically desirable.
The court also rejected Virginia's effort to be joined as a party plaintiff
under the citizen suit provisions of the CW A. The court concluded that the
citizen suit provision, although defining a "citizen" as a person while the
Act defines a "person" as including a state, was not intended to reach
states. The use of the word "person" in the citizen suit provision, anticipates that the state would be a party defendant. The court noted that the
option of the state is initially to bring the action itself as plaintiff.
Lastly, the state requested that the court abstain from hearing the
federal action until the state had pursued its appropriate remedies against
the city in an appropriate state court. The court said that abstention would
be inappropriate. Here under the Act the enforcement properly lies with the
EP A and the objective of clean waters within the state are not solely within
the state's purview. The EPA may protect the federal interest.
3.
COAST AL ZONE MANAGEMENT ACT
The severity of the national need for developing energy resources in the
OCS and the state's desire to regulate its coastal management came to a
head in American Petroleum Institute (API) v. Knecht. 276 In that case the
API and oil producers sought to review NOAA's approval under the federal
CZMA of the California coastal zone management plan. The API contended that the California plan was not in fact a management program, but
rather a process. Moreover, it contended that there was no statewide
authority for making decisions about coastal development. In addition, it
argued that the state through various referendums and statutes had effectively imposed a moratorium on any development on the coastal zone. This,
it contended, was inconsistent with the CZMA and the need for development of energy resources to satisfy the national energy demand.
In Knecht the court upheld the approval of the California state program. After thoroughly reviewing the California program, the court concluded that the administrator of NOAA reasonably could conclude that the
statutory criteria for plan approval had been satisfied. The court also noted
that the California program did satisfy the statutory requirements.
However, the court left some of the contentions of the API unanswered. It noted that particular actions taken under the California program
might raise substantial questions whether the program was intended to accommodate the federal and state interest in the coastal region. In particular,
'''609 F.2d 1306 (91h Cir. 1979) (California plan).
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the court observed that if the state, without adequate justification, never
allowed any development, substantial legal issues would be raised to be
resolved at a later time. The court concluded, however, that these issues
were premature before any permit had been sought under the Caifornia program and any denial or other action taken by the state board.
The responsibility of the federal government in selling leases for oil and
gas on the OCS has frequently been litigated. In 1984 the Supreme Court
concluded that the consistency provisions of the CZMA do not apply to
OCS lease sales.277 The Court reasoned that the consistency review is only
required for federal activities conducted in or done on federal lands located
in the coastal zone. Hence, activities outside the coastal zone which may impact it do not necessitate a consistency review with a coastal state's management plan. 278
4. FEDERAL SURFACE MINING CONTROL
AND RECLAMATION ACT
In 1981 the Supreme Court in two separate opinions sustained the validity
of the Federal Surface Mining Control and Reclamation Act against several
constitutional challenges. First, in Hodel v. Virginia Surface Mining &
Reclamation Ass'n 279 the court rejected Commerce Clause challenges to the
Federal Surface Mining Control and Reclamation Act (FSMCRA). It concluded that deference had to be given to the congressional determination
that surface mining adversely affects interstate commerce. The Court accepted the congressional conclusion that it did. After reviewing the
legislative history, the Court determined the congressional findings were
abundantly supported by the evidence. According to the Court, FSMCRA
was a reasonable means to remedy the problems Congress had identified.
Hence, the Act was constitutional under the "rational basis" test.
The Court also rejected the argument that the Act dealt with local land
use problems and, therefore, was not affecting interstate commerce. It
upheld the congressional determination that interstate commerce was affected by surface mining. If interstate commerce is affected, Congress can
select the appropriate means to handle problems caused by surface mining,
even if they affect local issues, including land use. Moreover, the Court
noted Congress found a need for uniformity of regulations and standards
among the states concerning surface mining to avoid individual states from
imposing disparate, and perhaps, inadequate mining standards on coal
"'Secrelary of Ihe Inlerior v. California. __ U.S. __ , 104 S. C! 656 (1984). Accord,
California v. Wall, 712 F.2d 584 (D.C. Cir. 1983). See generally Miller, Offsilore FederalislII:
EI'oil'ing Federal·Sra/e Rela/ions ill Offsilore Oil alld Gas Del'eloplllel1l, II ECOLOGY L.Q. 401
(1984).
"'See also cases ciled in nOles 221-22 supra.
"'452 U.S. 264 (1981). The courl rejecled I he olher claims based on Ihe Commerce Clause
and Nalional League of Cilies v. Usery. See leXI accompanying nOle 24 supra. See NOle, 10
ECOl.OGY L.Q. 69 (1982).
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operations in their states. As the Court noted, the congressional power
under the Commerce Clause is extensive enough to permit federal regulation of activities causing air, water, or other environmental hazards that
have effects in more than one state.
The Court next considered the challenges that the steep slope provisions
and the prohibitions on mining in certain areas violate the just compensation
provisions of the Due Process Clause. The district court had concluded that it
would be almost impossible to return steep slopes to their "approximate original contour," as required by FSMCRA. And even if done, the land would be
rendered almost worthless. Relying on Pennsylvania Coal Co. v. Mahon, 280
the district court believed that the prohibition on mining in certain areas was a
direct taking of a person's property by depriving them of the right to mine it.
The Court rejected these due process arguments because they arose in
the context of a facial challenge to the constitutionality of the statute. The
Court noted that the companies did not allege that specific land or property
had been taken by the Act. The test the Court applied to determine facial
validity was whether the Act operated as a regulation of use. The Court concluded the Act did not prevent the beneficial use of coal lands. Moreover, it
noted that the Act regulates how the lands shall be mined rather than prohibiting any mining. Nor does the FSMCRA regulate alternative uses to
which the coal lands could be put. Hence the Court concluded that the Act
on its face did not constitute a taking in violations of the Due Process
Clause.
Next, the Virginia Surface Mining Court upheld the Act's enforcement
provisions against challenges under the Due Process Clause. The district court
had invalidated provisions in FSMCRA authorizing the Office of Surface
Mining to order an immediate total or partial cessation of surface mining
operations if, after a federal inspection, there is a finding that the operation
violates either the Act or permit conditions. The cessation order could be
given if the operation' 'creates an immediate danger to the health or safety of
the public, or is causing, or can reasonably be expected to cause significant,
imminent environmental harm to land, air, or water resources .... "281 The
Act then provides for review of the cessation order and an administrative
hearing within five days. The district court believed the immediate cessation
order violated the Fifth Amendment by not providing sufficient objective
criteria for the administrative ation.
The Court disagreed with the district court and upheld the administrative provisions. The Court noted that although some kind of a hearing is normally required for procedural due process, there are exceptions in
cases of emergency. The Court noted that the immediate cessation provisions were an effort by Congress to protect the public's health from mining
disasters. The Court found that this was a reasonable accommodation be'""260 U.S. 393 (1922).
'"'16 E.R.C. at 1041 (footnotes omitted).
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tween the desires of the company to be heard before submitting to the administrative regulation and the governmental interest in protecting the
public health and safety and environment from imminent danger. "Protection of the health and safety of the public is a paramount governmental interest which justifies summary administrative action. "282 The Court then
disagreed with the district court's finding that there was not sufficient objective criteria to determine the emergency situation. The Court found that
the statute was clear and explicit in the types of matters to be considered
prior to issuing the immediate cessation order.
The Court held premature the challenge of the FSMCRA's requirement
that a fine to be paid in escrow before a hearing on a notice of violation. In
Virginia Surface Mining, there had been no notice of violation, and none of
the appellees had had to pay the fine in order to have a hearing. In this
posture the Court found that the challenge was premature.
In a companion case, Hodel v. Indiana,283 the Court had to consider
other challenges to the FSMCRA. In Indiana the prime farmland,284 the
land restoration,28s and the separation and preservation of topsoil'8. provisions were all challenged. Other provisions of the FSMCRA being challenged included the requirement of reclamation plans to obtain a coal mining permit and the provisions for determining which lands are unsuitable
for surface mining.287 The lower court had concluded that the approximate
original contour and other administrative provisions violated the Commerce Clause. It determined that those provisions had an infinitesimal, if
any, effect on interstate commerce. Thus, according to the district court,
the Act was not rationally related to interstate commerce, and hence,
beyond the power of Congress under the Commerce Clause.
The Supreme Court disagreed. Congressional enactments begin with a
presumption of constitutionality. According to the Court,
A court may invalidate legislation enacted under the Commerce Clause only if
it is clear that there is no rational basis for a congressional finding that the
regulated activity affects interstate commerce, or that there is no reasonable
connection between the regulatory means selected and the asserted ends.288
'"'fd. al 1042.
"'452 U.S. 314 (19RI).
'"'30 U.s.c. 1265(b)(7) (19R2). These prcwisions require a permil for surface mining on
areas designaled as prime farmland. They also require Ihe operalor 10 relurn Ihe land 10 Ihe
same or a higher level of yield in effeci when Ihe mining commenced. fd.
"'The acl requires Ihe mineral land he relurned 10 ils "original approximale conlour." fd.
al
I 265(b)(3). and (d)( I) & (2).
'"'Topsoil mUSI be separaled during mining operalions and replal'ed in Ihe backfill for
laler redamalion of Ihe mined land. 30 U.s.c.
I 265(b)(5) & (6) (19R2).
'"'30 U.s.c. 125R (19R2) (rec1amalion plan requircmenl); id. 1257 (unsuilabilily delerminalion requiremenls).
'"'452 U.S. al 323.324 (cilalions omilled). The Co uri relied on ils earlier holding in Virginia Surfa('e Mining 10 rejeci Usen' and Fiflh Amendmenl argumenls raised in Ihe fndiana
*
**
*
**
*
casco
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With respect to the prime farmland provisions, the Court noted that Congress could reasonably conclude surface mining on prime farmland might
directly affect interstate commerce in agricultural products. The Court further held that the challenged provisions were reasonably related to the objectives of overcoming adverse effects attributable to surface coal mining.
The Court believed the district court inaccurately attributed to the
FSMCRA the objectives of remedying problems of air and water pollution.
The Court noted that the Act is much broader and intended to preserve the
productive capacity of mined land and protect the public from the health
and safety hazards of surface coal mining. According to the Court, all of
the challenged provisions are reasonably calculated to achieve those ends.
The Act also was challenged as violating the Due Process and Equal
Protection Clauses. The district court was concerned that the variance and
other provisions in FSMCRA were arbitrary and discriminatory as applied
to western and eastern coal mining operations. The district court believed
the prime farmland and approximate original contour provisions, without
allowing any variances, operated arbitrarily in areas such as the Midwest
where most of the coal is under prime farmland or in areas where steep
slope mining is involved.
The Court rejected these judgments because it felt the district court
substituted its judgment for that of the legislature. The Court noted that no
instances had been cited in which the challenge provisions were applied arbitrarily or discriminatorily. But even if such a situation existed, the Court
stated that that would not render the Act unconstitutional. "A claim of
arbitrariness cannot rest solely on a statute's lack of uniform geographic
impact. 289 The Court further noted that there would be obvious geographical differences in coal mining, depending on where it is being done. It concluded that Congress may have had valid reasons for allowing variances
from the steep slope provisions while not allowing time from the prime
farmland provisions. As an example, the Court suggested Congress may
have seen a variance provision from the prime farmland provision as undermining its objective of preserving the productivity of the land. The Court
concluded that these distinctions were rational and valid.
Lastly, the Court rejected the taking issues under the provisions of
FSMCRA. Relying on its decision in Virginia Surface Mining, the Court
noted that none of the claims related to any particular properties or interests
to which the challenged provisions had been applied. Moreover, there was
no finding of a taking with respect to a particular piece of property or denial
of a permit for mining on prime farmland by any of the challengers. Thus
the Court treated these challenges as it had in Virginia Surface Mining as a
facial attack on the statute. The Court upheld the statute by concluding that
the Act on its face merely regulates the conditions under which the activity
'"'frl. at 23R7 (citations omitted).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
611
may be conducted and did not constitute a taking. Thus the Court sustained
FSMCRA against all of the constitutional challenges.
5. SOLID WASTE
Several solid waste cases illustrate the problem with Due Process and Commerce Clause challenges to local ordinances involving solid waste disposal.
In Glenwillow Landfill, Inc. v. City of Akron 290 the city had built a recycle
energy system. It adopted an ordinance that required all licensed private
waste disposal firms in the city to dispose of their waste at a single site in the
city. The private firms challenged this on several grounds, inter alia, the ordinance violated Due Process and the Commerce Clauses. The city justified
the recycle energy system as a means to solve solid waste disposal problems.
It argued that bond underwriters required the single site disposal to assure a
supply of waste to make the system successful and to market the bonds.
The federal district court held that the Akron ordinance did not violate
the Commerce Clause. It noted that the ordinance applied only to waste collected within the City of Akron. The ordinance treats all other waste,
whether originating within or outside Ohio, the same. Thus, the court concluded that the ordinance directly affected only interstate activities, not interstate commerce. It distinguished cases such as City of Philadelphia,
Hughes, and Pike, 29 1 where the challenged statutes treated in-state and outof-state parties differently. The court also concluded that the ordinance
served a legitimate local purpose and that there were no alternatives
available that would have less adverse effect on interstate commerce. That
effect here, however, was insigni ficant according to the court.
The district court also had to deal with due process claims. Those
claims rested on assertions that the ordinance was not closely related to
legitimate government purposes, and if so, it constituted a taking of plaintiff's property. The court held that the ordinance was within the police
power of the state to act for the health and safety of its citizens. It noted
that the ordinance was closely tied into the cooperative agreement which
was responsible for developing the resource energy systems. Thus it was not
intended to benefit private financial interests.
The court also rejected the taking argument. The court concluded that
the collection of waste was not an ownership interest that had been taken by
the ordinance. The court found that the ordinance was a regulation, a proper
exercise of the police power, and hence not a taking.
"'485 F. Supp. 671 (N.D. Ohio 1979), ofI'd sub 110111., Hybud Equipment Corp. v.
Akron. 654 F.2d 1187, 16 E.R.C. 1320 (6th Cir. 1981), vacated, 455 U.S. 931 (1982). The U.S.
Supreme Court remanded the case to the Sixth Circuit for further consideration in light of
Community Communications Co. v. City of Boulder, 455 U.S. 40 (1982), holding that a moratorium ordinance preventing a cable television company from expanding its service area for
three months was subject to antitrust scrutiny even though it was "state action."
"'See text accompanying note 39. supra. for discussion of these cases.
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In two other cases a state statute and a city ordinance were declared unconstitutional in violation of the Commerce Clause. In Hardage v. Atkins
(Hardage II),292 the federal appeals court invalidated the Oklahoma Waste
Disposal Act under the Commerce Clause. In Hardage the Oklahoma
statute prohibited the importation of industrial waste, "unless the state of
origin has enacted substantially similar standards, "293 or "has entered into
a reciprocity agreement with the State of Oklahoma. "294 The Tenth Circuit
in an earlier opinion, Hardage v. Atkins (Hardage 1)295 had declared the
same statute unconstitutional in light of City of Philadelphia. 296 In the
earlier opinion, the Tenth Circuit concluded the same statute violated the
Commerce Clause and was merely economic protectionism. It held that the
statute was on all fours with City of Philadelphia.
In Hardage II the Tenth Circuit had to deal with the state's argument
that two separate standards for importation of out-of-state waste applied.
The state argued that the earlier opinion had not held the "substantially
similar standards" provisions unconstitutional. The state argued that that
provision did not impose an undue burden on commerce.
The Tenth Circuit, however, concluded that its prior decision had
reached both provisions. It acknowledged that the state has sufficient local
interest in handling industrial local hazardous waste to legislate in the area.
However, the court concluded that it would not be consistent with the Commerce Clause for one state to be able to force another to adopt similar standards or regulations that another chooses to en force. According to the
court, the similar standards and the reciprocity agreement basically were
mandatory schemes that violate the Commerce Clause. Hence, they are unconstitutional.
The federal district court in One- Way Disposal, Inc. v. City of
Portland297 had to review a municipal ordinance. The City of Portland had
enacted an ordinance that barred out-of-state garbage haulers from using
landfills within the city. The ordinance allowed the only public landfill to be
used for waste collected within the metropolitan service district which did
not include the state of Washington. The plaintiff was a Washington-based
corporation that collects garbage in Vancouver, Washington, and had,
prior to the ordinance, used the Portland landfill.
The federal district court summarily declared the ordinance unconstitutional. It held that the ordinance was on all fours with City of Philadelphia.
Under the negative limitations of the Commerce Clause, the ordinance was
impermissible. The court rejected the city's argument that the impact of the
ordinance was principally on intrastate waste. It noted that the practical ef"'619 F.2d R71 (10th Cir. 19RO).
"'Id.
'" Id.
"'5R2 F.2d 1264, 12 E.R.C. 1043 (10th Cir. 197R).
"'See text accompanying note 43, SlIpra, for discussion of rill' ()( Phiiadeil)/7ia.
"'14 E.R.C. 1577 (D. Ore. 19RO).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
613
fect was only to bar three Washington garbage collectors from using the
Portland dump. Hence, it directly affects interstate commerce. The court
also distinguished the Glenwillow Landfill case. The court noted in Glenwillow Landfill, the city had a valid justification for its ordinance which
was designed to serve a legitimate local public interest. Moreover, the court
noted that the impact of the Akron ordinance was on intrastate, not interstate, commerce. Any effect on interstate commerce in Glen willo w Landfill was only indirect.
In Hybud Equipment Corp. v. City of Akron,2" the Sixth Circuit
Court of Appeals recently affirmed the result in Glenwillow Landfill.
6.
PREEMPTION-BURDEN ON INTERSTATE COMMERCE
In National Agriculture Chemical Ass 'n v. Rominger,299 the federal district
court was confronted with a challenge to state regulations under its pesticide
act. Under the California state law information was required of pesticide
manufacturers in addition to that required under the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA).300 The association argued that
FIFRA preempted the state regulation.
The district court disagreed. It held that FIFRA did not preempt state
regulation, but rather was a congressional grant of authority to states to
adopt pesticide regulations. Hence, the state could adopt regulations that
required more data and information than would be required under the federal regulations.
The court also concluded that by authorizing the states to have this
power, an undue burden was not imposed on commerce. The court noted
that the state's power under FIFRA was limited. The regulations adopted
by a state had to be more stringent than those applied by the federal government. By granting this power to the states, according to the courts, Congress gave the states a right to impose burdens on interstate commerce.
Relying on Prudential Insurance Co. v. Benjamin,301 the court concluded
the congressional authorization was not unreasonable nor unconstitutional.
In 1981, a federal district court upheld an ordinance against claims of
preemption under the federal Toxic Substances Control Act (TSCA).302
SED, Inc. v. City of Dayton involved an ordinance that prohibited the
storage of PCBs within the city limits. The ordinance declared PCB storage
a public nuisance, and imposed civil and criminal penalties. The company
operated a chemical warehouse in Dayton where PCBs were stored. The city
filed a civil action against the company. The company, in turn, sued in
"'Hybud Equipment Corp. v. Akron. 1154 F.2d IIR7. III E.R.C. 1320 (11th Cir. 19RI).
I'((('aled. 455 U.S. 931 (19R2). See note 290slIp/'{/.
'''500 F. Supp. 4115.15 E.R.C. IOJ9 (E.D. Cal. 19RO).
**
'007 U.s.c.
UI1 1'1 s('{l. (19R2).
'''J2R U.S. 408 (19411). See als() text accompanying note UI1.
case.
"'15 U.S.c.
** 21101
1'1
SIII'/'{/.
for discussion of this
seq. (1982).
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federal court to enjoin the state lawsuit. The injunction was denied under
the federal Anti-injunction Statute. 303 On the merits of the preemption
claim, the district court upheld the ordinance. It concluded that the ordinance was enacted to protect water quality pursuant to the federal CW A.
Hence, it was not preempted by TSCA. 304
7.
STATE ACTION
Another federalism problem arises when the federal government delegates
or assigns responsibilities to a state. The problem is whether, for purposes
of other statutes or equal protection, an act by the state pursuant to the delegation or assignment is considered state or federal action. Clearly, state
regulation of interstate commerce is "state action" for purposes of the
Fourteenth Amendment. 30S Thus the state, by enacting laws pursuant to a
federal program, may violate the Equal Protection or Due Process Clauses
of the Fourteenth Amendment upon appropriate findings.
The issue, however, is more difficult when the action involved is the
state issuing permits under a federal cooperative program. Whether a stateissued permit is deemed state or federal action may be critical for purposes
of other statutes such as the National Environmental Policy Act of 1969
(NEPA).306 NEPA requires preparation of an "environmental impact statement" (EIS) on "major federal actions significantly affecting the quality of
the human environment. "307 That requirement can impose an often burdensome and time-consuming obligation on the federal agency.
In some instances it is relatively clear when the state is involved with the
federal government in a project such that an EIS would be required. Cases
have held that when there is a virtual partnership between the federal and
state governments, 308 or when the state has instigated federal involvement in
a project,l°9 the action remains federal action requiring an EIS.
'"'16 E.R.C. 1217 (S.D. Ohio 1981).
'''Id. at 1223. See also Exxon Corp. v. Hunt, 20 ERC 1974, __ A.2d __ (N.J. Sept.
19, 1984). The Supreme Court of New Jersey held that the "Spill Fund" tax imposed on five
petroleum and chemical companies is not preempted by the federal government's imposition of
the "Superfund" tax insofar as the Spill Fund is used to compensate hazardous-water cleanup
costs and related claims not covered or not actually paid under Superfund. For a discussion
concerning Minnesota's reform law for hazardous waste cleanup and victim compensation, see
Espel, The Minnesota Environmental Response and Liability Act, 16 NAT. RES. LAW. 407
(1983). Espel explains that the act (MERLA) imposes significant generator taxes and fees on
more than twenty-eight hundred generators of hazardous wastes in Minnesota. And while
MERLA does not abolish a person's right to bring an action under any other law, double
recovery is not allowed. Id. at 438. See also supra note 8 and accompanying text.
)0' See text accompanying note 166 supra.
30'42 U.S.C. §§ 4321 et seq. (1982). See generally F. SKILLERN, ENVIRONMENTAL PROTEC·
TION: THE LEGAL FRAMEWORK, ch. 2 (1981 & Supp. 1984).
'°'42 U.S.c. at § 4332(2) (C) (1982).
)O'E.g., Silva v. Lynn, 482 F.2d 1282 (1st Cir. 1973).
"'See, e.g., Named Ind. Members of San Antonio Consv'n Soc'y v. Texas Hwy. Dep't,
446 F.2d 1013 (5th Cir. 1971).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
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District of Columbia v. Schramm 3 10 dealt with the question of a stateissued NPDES permit for a waste water treatment plant. In Schramm the
state of Maryland issued the permit, and the EPA did not exercise its
veto power. One argument by the plaintiff District in that case was that
the Clean Water Act requires that the EPA prepare an EIS.
The District of Columbia Circuit disagreed. It noted that the Clean
Water Act provides that some state-issued permits may constitute federal
action and thus require an impact statement. In Schramm the EPA determined not to veto the state-issued NPDES permit for the waste water treatment plant. The court held the failure to veto was not major federal action
within the meaning of NEPA. Hence it was state, not federal action, and no
impact statement was required.
Another recent case also dealt with the state action issue in the context
of NEPA. In California Tahoe Regional Agency v. Sahara Tahoe Corp.,l"
the issue was whether actions of the commission were "federal" ones that
would require a NEP A impact statement. The Tahoe Regional Planning
Agency was established by an interstate compact to handle land use planning and development issues in the California/Nevada/Tahoe region. The
Agency decided to grant the corporation a permit to develop a new parking
garage. California argued that the Tahoe Regional Planning Agency is a
federal agency for purposes of NEPA. Hence, its granting a permit for the
construction of the garage was major federal action within the meaning of
NEPA.
The court rejected California's argument. The court reviewed several
decisions and prior cases which had held that congressional approval of this
interstate compact and appointment of members by the President did not
make the Tahoe Regional Planning Agency an agency of the federal government. In addition, the court relied on a decision by the United States
Supreme Court, Lake County Estates, Inc. v. Tahoe Regional Planning
AgencY,312 where the Court held that the Agency acts under color of state
law for purposes of 42 U.S.c. § 1983. The district court concluded that if
th~ Agency's actions were state action for purposes of section 1983, they
should be state action for purposes of other federal statutes such as NEP A.
The court also rejected the idea that the Agency had such a close nexus
with the federal government that it constituted federal action. The fact that
the federal government provides funds and different kinds of assistance to
many different agencies does not automatically make the acts of those agencies federal action. Hence, a NEPA impact statement was not required.
". 15 E. R.C. 1102 (D.C. Cir. 1980). See text accompanying note 263, supra, for discussion
of this case.
)0'15 E.R.C. 1144 (D. Nev. 1980).
J "440 U.S. 391 (1979).
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VOL. XVII, NO.4
CONCLUSIONS
This review of selected cases illustrates some of the characteristics and ramifications of a state participating in a federal cooperative program. The state
involvement usually will be "state action" for purposes of applying the
Fourteenth Amendment. It also may be deemed state, not federal action,
for purposes of other federal statutes.
This question about the nature of the action is important so that a state
may proceed by applying state law and not be constrained by the demands
of federal laws such as NEPA or the Fish and Wildlife Coordination Act 313
that apply to federal agencies. The question probably cannot be answered
solely by the language used. For example, if a memorandum of understanding "delegates" federal responsibilities to a state or allows a state to
"assume" that authority, it may be evidence of how the parties consider the
action should be characterized. However, language alone may not be conclusive.
For one thing, the language often is ambiguous. If an arrangement
"assigns," "transfers," "delegates," or otherwise gives federal responsibilities to a state, the state in fulfilling those duties may be acting on behalf
of the federal government. Likewise, if the agreement has a state "assume"
what are otherwise federal responsibilities, the state may be deemed merely
a substitute for the federal one.
Contrariwise, if a state is to establish its own program using federal
criteria as guidelines (not requirements) in developing a program, state activities implementing the program may be considered enforcement of state
law. Or if the agreement has a state preparing a plan that meets certain
federal requirements, enforcement of the plan may be state action if the
plan replaces or is in lieu of a federal one. State implementation of a program is more likely to be considered state rather than federal action where
the federal government only has an advisory or limited review role relating
to state activities under the program.
The ultimate resolution of the problem turns in part on other factors
than merely the language used. The intent of the state and federal government is important, and that intent is determined by the language of the
agreement itself. Other relevant questions must be considered. Is an independent program being created and enforced-under state law? Or is the
state program basically a substitute for a federal one? In addition, congressional intent as gleaned from the statutory language and legislative history is
significant. If the statute and its legislative history shows Congress intended
a program be established meeting federal standards but carried out by the
state, then all activities may be deemed state action. If, however, Congress
considered the program as supplemental to and necessary to fulfill federal
objectives, it may be deemed a "partnership" type of arrangement, and
thus federal action.
"'16 U.S.C. §§ 661 el seq. (1982). See also text accompanying note 208 slipra.
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
617
A question remains unanswered about the use of quarantine type laws
to regulate hazardous, toxic, and possibly nuclear wastes. Quarantine laws
typically ban importation of diseased or contagious animals into the states.
They usually require that all of the imported group (such as cattle) be inspected and certified before entry into a state. These laws have been sustained as not violating the dormant Commerce Clause because they do not
bar shipment of nondiseased animals. The laws also are deemed a reasonable exercise of the police power to protect the public health and welfare.' 14
New Jersey, in City of Philadelphia, tried to analogize its ban on the
importation of wastes to quarantine laws. The Court refused to treat the
New Jersey statute as a quarantine law. 311 The City of Philadelphia Court
viewed the New Jersey statute as protectionistic and per se invalid. It was
not a proper quarantine law, according to the Court, because the public
health objective did not relate to the transportation of the wastes, but rather
their disposal.
Notwithstanding the result in City of Philadelphia, state or local laws
may be considered that treat particular wastes as inherently dangerous to
the public health and ban them regardless of their origin. 316 Likely candidates would include hazardous, toxic, nuclear, or carcinogenic wastes or
specific substances such as polychlorinated biphenyls (PCBs). The constitutional validity of this type of state regulation in light of dormant Commerce
Clause principles is not certain for several reasons.
First, and most obvious, is that most wastes previously have been considered subject to safe use and transportation. Hence, it is not clear they are
inherently dangerous in the sense they must be banned and eliminated. Second, the existence of federal laws for developing federal standards for the
generation, transportation, and disposal of some of these wastes'l7 poses
Supremacy Clause issues about the extent of a state's quarantine power.
Those federal laws also raise an issue of preemption of any state laws inconsistent with the federal ones.
Nonetheless, the quarantine exception may deserve special attention by
states seeking to control various dangerous substances. Quarantine regulation should be preceded by appropriate legislative findings and supporting
data. Legislation addressed to specific substances rather than groups or
categories would seem less objectionable than an outright ban on transportation of all wastes. In addition, any quarantine regulation must operated
'''E.g., Reid v. Colorado, 187 U.S. 137 (1902) (ban on importing cattle without state inspection); Asbell v. Kansas, 209 U.S. 251 (1908) (same, except state or federal inspection);
Mintz v. Baldwin, 289 U.S. 346 (1933) (cattle inspection for Bang's disease).
'''See text accompanying note 43, supra, for discussion of City oj Philadelphia.
'''E.g., SED, Inc. v. City of Dayton, 515 F. Supp. 737,16 E.R.C. 1223 (S.D. Ohio 1981)
(city ban on storing PCBs upheld).
'''See Resource Conservation and Recovery Act, 42 U.S.c. §§ 6907 et seq. (1982), as
amended by Pub. L. No. 95-609, 92 Stat. 3081 (1978); Hazardous Materials Transportation
Act, 49 U.S.c. §§ 1801 et seq. (1982); Atomic Energy Act of 1946, 42 U.S.c. §§ 2011 et seq.
(1982); Nuclear Waste Disposal Act of 1982, 42 U.s.c. §§ 10101 et seq. (1982).
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evenhandedly on in-state and out-of-state products. The regulation must
relate to public health. The restrictions should be related to the evil the
legislature seeks to cure and should do so with the minimum impact on interstate commerce.
Another issue that is likely to recur with greater frequency is the problem of estoppel effects, if any, to be given state enforcement proceedings in
subsequent federal actions. This issue is even more troublesome with the
possibility of citizen enforcement, in addition to state or federal enforcement under several acts. The policies underlying res judicata-to avoid
multiple lawsuits, to give finality to decisions, and to reduce the judicial
caseload-apply equally to situations where state and federal agencies have
concurrent en forcement powers. This situation exists under several
regulatory programs.
Collateral estoppel principles should apply in certain situations to
subsequent enforcement proceedings, whether brought by a federal or state
agency. Application of the doctrine of collateral estoppel may be justified if
the defendant in the second action is the same as in the first one and if the
factual or legal issues are identical in both proceedings. In that case, if the
parties initially had a full and fair opportunity to be heard, present evidence, and cross-examine witnesses, subsequent litigation would seem duplicative. The fact that the enforcing agency is not the same in the second
proceeding should not, by itself, prevent giving preclusive effect to the
earlier proceeding.
However, if the agency seeking the subsequent enforcement can
establish that its interests were not adequately represented in the first action
or that it seeks different enforcement measures or is raising different factual
or legal issues, then the prior action should not bar the subsequent enforcement suit. These results would be compatible with traditional principles of
collateral estoppel and res judicata effects of administrative or judicial
hearings. 318
In other areas the relationship between the federal and state government is clarified by statute. The review of state water quality standards and
state NPDES permits under the CW A are two examples. When Congress
expressly makes the state action subject to EPA approval, then the state action is not final until the review process has ended. And if the state disagrees
with the EPA action, the EPA may proceed irrespective of the state determination. However, the EPA must consider the state findings and public interest through appropriate public notice and hearings.
IV.
CONCLUDING OBSERVATIONS
The problem of determining the appropriate role of the state and federal
government in the development of various energy sources will continue.
) "Bill see Thomas v. Washington Gas Light Co., 448 U.S. 261 (1980).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
619
Few existing federal programs clearly, expressly preempt state regulation.
Many federal regulatory programs encourage and authorize state participation through "cooperative federalism." Unfortunately, the statutes
establishing the cooperative federalism program are not always clear on the
precise limits of state authority.
It seems likely that the states will continue to be more and more involved in regulatory programs affecting the development or use of different
energy sources. Those regulations typically are intended to protect the
public health or natural environment. State regulations are likely to increase
in number, in part, because of the movement by the federal government
away from control in favor of state responsibility in the natural resources
and environmental areas generally.
Examples of recent state efforts are varied. An initiative was adopted
by Washington which would regulate the transportation and storage of
radioactive waste in the state. It was declared invalid in August 1981 by a
federal district court. The Washington law would have banned the storage
of nonmedical radioactive waste generated in other states. The court concluded the Washington initiative was preempted by the federal Atomic
Energy Act, the Low-Level Radioactive Waste Policy Act, and the Hazardous Materials Transportation Act. The district court also held this law
violated the Supremacy and Commerce Clauses.319
The Clean Air Act Amendments of 1977 added a new provision for the
control of unregulated pollutants, including radioactive ones. 320 The
legislative history of the new section 7422 indicates the change was intended
to authorize states to regulate emissions from nuclear power plants. 321 This
type of regulation was expressly denied states in the Northern States Power
case. 322 The Michigan attorney general has ruled that that state may regulate
radioactive air pollution.323 Obviously, serious preemption issues may be
raised if the state regulation is stricter than the Nuclear Regulatory Commission's (NRC), particularly if the state standards require special modification in plant design. The NRC is responsible for licensing the construction
"'Washington State Bldg. & Const. Trades Council AFL-CIO v. Spellman, 518 F. Supp.
928 (E.D. Wash. 1981), a/i'd, 684 F.2d 627 (9th Cir. 1982), cerl. denied, 103 S. Ct. 1891 (1983),
as reponed in CCH POLLUTION CONTROL GUIDE, No. 411, p. 410 (Sept. 15, 1981). See also, accord, Illinois v. General Elec. Co., 683 F.2d 206 (7th Cir. 1983), cen. denied sub. nom. Hartigan
v. General Elec. Co., 103 S. Ct. 1891 (1983) (Illinois spent nuclear fuel act invalidated).
"'42 U.S.c. § 7422 (1982).
"'See Comment, California's Nue/ear Power Plant Siting Legislation: A Preemption
Analysis, 52 S. CAL. L. REv. 1189, 1223 (1979).
"'See text accompanying note 66, supra, for discussion of Nonhern Slates Power. But see
Pacific Gas and Electric Co. v. State Energy Resources Conservation and Development
Comm'n, 103 S. Ct. 1713 (1983).
"'CCH NUCLEAR REG. REPORTS, No. 319, p. I (Aug. 31, 1981). See Illinois v. General
Elec. Co., 683 F.2d 206, 214-15 (7th Cir. 1982) (rejecting argument that § 7602(g) of the CAA
gave states the authority to ban nuclear waste from other states), noted at 1982 So. ILL. L.J.
575.
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and operation of nuclear power plants, including approval of their design.
North Carolina also has enacted laws relating to siting and disposing of
particular wastes. One law reportedly prohibits disposing of radioactive
waste "in Anson County unless the water table at the disposal site is at least
75 feet below the surface. "324 Even if intended as a public health measure,
the law presents serious preemption and Commerce Clause questions.
Another North Carolina law addresses the problem of local opposition
to hazardous waste facilities. The state law repeals all city, county, or local
ordinances or regulations prohibiting the transportation, storage, or disposal of hazardous or low-level radioactive waste. That problem is placed
exclusively at the state level, and the state is given eminent domain power to
obtain appropriate sites for hazardous or nuclear waste.
The Texas Low-Level Radioactive Waste Disposal Authorit y 3" uses a
different approach to deal with the radioactive waste disposal problem. The
Act creates the Texas Low-Level Radioactive Waste Disposal Authority
which is responsible for developing criteria and evaluating proposed sites.
The Authority then is to select a site, acquire title to it, and construct and
operate the facility.
The Texas statute is not likely to run afoul of the Commerce Clause. By
using state lands, even limiting use of the site for state-generated wastes, the
Act is similar to those Commerce Clause cases 326 in which the state acts as
proprietor or market participant. In those instances the courts tend not to
view the regulation as affecting interstate commerce, and hence, not subject
to the negative limitations of the Commerce Clause.
There are several other areas that states may wish to examine to facilitate development of resources. One method is for the state to produce the
resource itself. The dormant Commerce Clause cases 327 indicate that a state
can enter the marketplace and have flexibility in the use of the resource. For
example, the state may be able to restrict use to state residents, at least during periods of shortages. Narrowly drafted statutes might achieve similar
results by subsidizing private companies.
The recent validation of the Montana coal severance tax suggests that
states may wish to consider their own severance tax policy. States now clearly have the authority to use severance taxes for general revenue purposes. It
'''Id., No. 319, p. 3 citing ch. 718, Laws of 1981 (N.C. June 29, 1981).
"'TEX. REV. Clv. STAT. ANN. art. 4590f-1 (Vernon 1984 Supp.).
J26S ee text accompanying 84 note supra. See also Texas Low-Level Radiation Waste Disposal Authority Act, TEx. REv. Civ. STAT. ANN. art. 4590f-1 (Vernon 1984 Supp.). This Act
also raises potential preemption issues under the federal Low-Level Radioactive Waste Policy
Act of 1981,42 U.S.c. §§ 2021b-2021d (1982). See Mathews, Low-Level Radioactive Waste
Disposal: Texas Goes It Alone, in Proceedings of Conference on Wastes, sponsored by the Environmental and Natural Resources Law Section of the Texas State Bar, 1984.
J27 See cases discussed in text accompanying notes 36-62, supra. For discussion and proposals for reassessment of the dormant Commerce Clause, see Eule, Laying the Dormant
Commerce Clause 10 Rest, 91 YALE L.J. 425 (1982) and Tariock, National Power, State
Resource Sovereignty and Federalism in the 1980s: Scaling America's Magic Mountain, 32
KAN. L. REv. III (1983).
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FEDERALISM ISSUES IN THE DEVELOPMENT OF ENERGY RESOURCES
621
may be possible for a state to establish severance taxes on new resources or
to increase existing taxes and, in the process, allow other tax relief to its
residents.
States might wish to consider reviewing their natural resources statutes
to see that they are not economically protectionistic or provide unfair advantages to state residents. In particular, in states like Texas, where a lot of
the resources are on state-owned land, the statutes should be reviewed to
determine whether any tax or regulation is imposed other than on the extraction of the mineral or the granting of leases to extract those resources. If
the laws impose further limitations on persons other than parties to the
leases or activity, such as the ultimate consumers or users, the restrictions
may be impermissible burdens on interstate commerce. To justify these socalled downstream impacts, a state must establish a substantial local interest
that is being protected and that no alternative means less burdensome on interstate commerce are available to achieve those objectives. 328
Other action is available to states to simplify and expedite the
regulatory process in certain programs. Greater state control over federal
programs can be achieved by states· submitting requisite plans for approval.
Arguably, greater flexibility in permitting and enforcement is achieved
through state-administered programs. These programs, though, must be in
lieu of the federal ones.
One area where the decisionmaking could be simplified is under the
Clean Water Act. By getting approved programs for section 208, NPDES,
and section 404, a state can develop and clarify a planning process for the
whole state. The interrelationship between the programs and their objectives can be identified. These can be more easily achieved through a coordinated planning process by a state rather than using ad hoc regulation
under different programs at the federal and state level.
An additional incentive for state-approved programs is that enforcement and permitting by a state under an approved program constitutes state
not federal action. This result seems clearer when the state is acting under a
program or a memorandum of understanding with the appropriate federal
agency that supplants a federal program.
States also may wish to propose amendments to congressional acts as a
means of simplifying the decision process concerning energy development.
For example, states may wish to urge Congress to amend the Clean Water
Act to extend state jurisdiction over waters to navigable as well as nonnavigable waters under section 404. Not only would this change comport
"'In 1984 the Supreme Court again considered what type of regulation is permissible if a
state acts as a market participant. The Court invalidated regulations imposed by the State of
Alaska on purchasers of state-owned timber requiring them to process it in Alaska. Noting that
"downstream restrictions have a greater regulatory effect than do limitations on the immediate
transaction," the Court concluded that the state was acting more as a market regulator than as
a market participant. South-Central Timber Development, Inc. v. Wunnicke, 104 S.Ct. 2237,
2246 (1984).
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with section 402 and the NPDES permit program, but it would help the
states in coordinating their land use planning programs. Such a change also
would enable comprehensive land use planning decisions, and a state's
coastal zone management program could be integrated into its wetlands
preservation program. An alternative modification to the section 404 program is for Congress to allow states to assume control of wetlands adjacent
to navigable waters while leaving permit authority for navigable waters in
the federal government.
To alleviate some of the problems under NEPA, a state may wish to
consider adopting a mini-NEPA statute 329 or other environmental quality
statute. Under the Council on Environmental Quality Final Regulations for
the Implementation of NEP A, 330 the federal agencies are allowed to use
state-prepared impact statements if the state requirements are basically the
same as the federal ones. In many instances this type of coordination could
expedite the project and could avoid time-consuming litigation. The CEQ
Final Regulations on the Implementation of NEP A also encourage far
greater participation by the state in NEP A actions and urge joint work between the state and federal government on projects that require a NEPA
statement. States with NEP A-type statutes or similar environmental quality
statutes have an advantage in carrying out this joint enterprise with the
federal agency in preparing the NEP A environmental impact statement.
"'See generally F.
SKILLERN, ENVIRONMENTAL PROTECTION: THE LEGAL FRAMEWORK
§§ 7.04-05 (1981).
330
40 C.F.R. pt. 1500 (1983).
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