Federalism ‘Collisions’ in Energy Policy

Originally published in The Regulatory Review. Reprinted with permission.

Like many areas of law, energy policy in the United States is both national and local. The boundary lines delineating federal and state authority are not always clear, leading to tension and disagreement between federal and state authorities. When tensions get too high, Congress can, and often has, stepped in to override state control in order to promote national interests. But when Congress faces partisan gridlock, an increasing number of disputes are resolved in the courts.

Over the past century, Congress has slowly carved out significant swaths of energy policy for federal control: oil and natural gas exports; automobile fuel economy standards; interstate transmission of electricity; permitting approval and eminent domain for interstate natural gas pipelines; and permitting approval for hydropower facilities and nuclear facilities. But much activity remains under state control: approval of interstate and intrastate oil pipelines and electric transmission lines; retail electricity and natural gas sales; approval of electric power generation facilities other than hydropower and nuclear, like wind farms, solar farms, coal plants, and natural gas plants; mandates on electric utilities to generate or purchase power from renewable energy resources; and standards for oil and gas drilling off of federal lands.

Legislation related to electricity and natural gas provides an example of how Congress has expanded federal jurisdiction in response to conflicts with states and between states. In the 1930s, Congress enacted the Natural Gas Act and Part II of the Federal Power Act, which created broad federal authority over the interstate movement and wholesale sales of natural gas and electricity. In these laws, Congress responded to market power concerns as well to the inherent limits on states' ability to regulate interstate energy markets.

Over 70 years later, in 2005, Congress again expanded federal authority over energy transportation, this time in response to conflicts with states over the import and export of liquefied natural gas. In the early 2000s, industry and energy experts expressed concern that the United States would soon run out of domestic natural gas and would need to import increasing amounts of liquefied natural gas across oceans to heat homes and to generate electricity. When California attempted to block a proposed liquefied natural gas import terminal in the early 2000s, the Federal Energy Regulatory Commission (FERC) contended that it had sole approval authority, and litigation ensued. Before the litigation could be resolved, however, Congress intervened and gave exclusive federal permitting authority for liquefied natural gas import and export terminals to FERC in the Energy Policy Act of 2005.

Notably, only three years later, the fracking revolution was well underway and the fears of natural gas shortages disappeared. As a result, the federal permitting authority Congress created in 2005 was then used to approve an increasing number of proposed natural gas export facilities to capitalize on the nation's now ample supply of natural gas. What is notable about this example is not that Congress acted in the case of a perceived crisis, but how seldom Congress acts in this way notwithstanding the inevitable and longstanding policy differences between particular states and the federal government over the direction of energy policy.

Since the start of the Trump administration, the gap between federal energy policy and many states' policies has widened considerably. The Obama administration's more inclusive "all of the above" energy policy has been replaced by the Trump administration's policy of "energy dominance," coupled with a strong preference for fossil fuel development and hostility to renewable energy.

These strong policy positions have increased energy-related conflicts between the states and the federal government, including with states that otherwise support a broad range of Trump Administration policies. For instance, lawmakers from Florida and South Carolina have expressed vehement opposition to the Trump administration's proposal for expanded oil and gas development in federal waters off of their shores. Policymakers in Iowa favor increased wind energy development. Oil and gas states are wary of the Trump administration's proposed subsidies for coal.

Then, of course, there is California, where the state government is ready and able to go to battle against the Trump administration to protect its own energy policies, including its Zero Emission Vehicle Program and related clean car programs. On the east coast, New York has made it clear that fossil fuel pipelines are not welcome in the state and Governor Andrew M. Cuomo (D) has used his authority under the Clean Water Act to block these projects at every turn. Likewise, policymakers in Washington, Oregon, and Maine have rejected coal and oil export terminals that are critical to President Trump's "energy dominance" policy.

Certainly, Congress could resolve these disputes in favor of increased federal authority. It could, for example, eliminate California's preemption waiver under the Clean Air Act for auto emissions, reduce or eliminate the ability of states to impose water quality standards on federally approved pipeline projects, and create federal permitting authority for coal and oil export facilities like it did for liquefied natural gas import and export facilities. But such actions seem unlikely in the face of a fiercely divided Congress with a preference for states' rights. Thus, many of these federalism disputes will be resolved in the courts using familiar legal tools provided by the Supremacy Clause of the U.S. Constitution.

The Supremacy Clause will loom large in ongoing environmental- and energy-related disputes between states and the federal government. For instance, as noted above, the Trump administration has declared virtually all federal waters open to offshore oil and gas drilling, angering not only states like California and Massachusetts but also states in the southeast that otherwise favor many of the Trump administration's other policies. If the U.S. Department of Interior goes forward with its plan to issue leases for offshore drilling in the Atlantic Ocean, there will undoubtedly be litigation over the extent of federal authority under the Outer Continental Shelf Lands Act and the ability of states to impose their own environmental protection policies under the Coastal Zone Management Act.

Likewise, the Trump administration's proposal to freeze fuel economy and vehicle emissions standards at 2020 levels and revoke California's preemption waiver to set stricter standards will result in courts determining, among other issues, the extent of federal preemptive authority under the Clean Air Act and the Energy Policy and Conservation Act of 1975. As environmental law professor Ann E. Carlson has explained, the Trump administration's efforts could severely diminish California's "role as a green technology innovator" and as a global leader in reducing greenhouse gas emissions. A May 2018 report by the Congressional Research Service, however, noted that major auto manufacturers may still adopt strict emissions standards similar to California's in an effort to remain competitive in a global market that is moving toward more stringent standards.

As states continue to enact policies to promote clean energy and to block fossil fuel transport projects, federalism tensions will only increase. The courts will be busy.