CHAPTER 13 COOPERATIVE FEDERALISM UNDER THE CLEAN AIR ACT: NEW HORIZONS IN STATE REGULATORY AND ENFORCEMENT PRIMACY UNDER A TRUMP EPA

• Jurisdiction: United States

Air Quality Issues Affecting Oil, Gas, and Mining Development and Operations (Feb 2018)
CHAPTER 13
COOPERATIVE FEDERALISM UNDER THE CLEAN AIR ACT: NEW HORIZONS IN STATE REGULATORY AND ENFORCEMENT PRIMACY UNDER A TRUMP EPA
Colin G. Harris
Partner, Faegre Baker Daniels LLP
Boulder, CO
Travis Jordan
Associate, Faegre Baker Daniels LLP
Denver, CO

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COLIN G. HARRIS has proudly served the energy and natural resources industries in environmental, litigation, and pipeline safety matters for over 25 years. His deep air-quality experience includes compliance, permitting, policy, enforcement, and litigation. Colin's upstream and midstream experience includes complex and novel matters in North Dakota, Colorado, Utah, New Mexico and other states. His clients also operate in the refining and utility sectors. Colin is a recognized leader in the pipeline industry, which faces strong headwinds associated with new regulations and public opposition. He currently represents over six pipeline operators in various matters ranging from PHMSA counseling and administrative evidentiary hearings, to emergency response and litigation defense associated with major spill incidents to waters. Colin was co-appellate counsel in a 2017 precedent-setting case where the Fifth Circuit vacated much of a PHMSA order and penalty, disagreeing with the agency's interpretation of its own regulations, and ruling that it had failed to provide due process. ExxonMobil Pipeline Co. v. Department of Transportation, 867 F.3d 564 (5th Cir. 2017). Colin combines his energy industry expertise and regulatory knowledge with a strong litigation background. He has aggressively defended high-profile enforcement cases in pre-trial phases to achieve favorable consent decree terms. He has tried hearings and cases for energy industry clients involving pipeline safety and environmental issues, including a recent arbitration resulting in a significant settlement.

U.S. Environmental Protection Agency (EPA) Administrator, Scott Pruitt, published a memorandum on October 16, 2017 addressing 'sue and settle' tactics stating the Agency's commitment to embracing the principles of cooperative federalism.¹ Citing the Clean Air Act as an example environmental statute that empowers states to serve as stewards of their environments, Pruitt emphasizes the importance of EPA "working cooperatively with states to encourage regulations instead of compelling them and to respect the separation of powers."² The Agency's new commitment to empowering states through cooperative federalism came as no surprise to EPA watchers.

The presidential election of 2016 produced a new administration in Washington and expectations that states would play a stronger role in enforcing environmental standards. In June 2017, state environmental regulators announced their vision for recasting state roles in environmental protection by releasing their plan for Cooperative Federalism 2.0.³ EPA followed suit by identifying cooperative federalism as a primary goal in its Draft Fiscal Year 2018-2022 EPA Strategic Plan.⁴ Pruitt's early actions as Administrator and EPA's strategic planning make clear the Agency is pursuing a path of shifting the responsibility of environmental enforcement to state and tribal regulators. Although Administrator Pruitt stated this shift will not result in giving violators a free pass, some have noticed a significant reduction in enforcement actions

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during the early days of the Trump Administration compared to those filed in the same period during the previous two administrations.⁵

EPA's most recent shift also comes when scholars and legal commentators continue to debate the extent to which the cooperative federalism pendulum has swung and what it means for environmental enforcement going forward. While some rely on the Rehnquist Court's "new federalism" decisions that narrowed federal regulatory power to explain how cooperative federalism is alive and well, others argue that federal environmental laws unquestionably makes the federal government, acting through the powers delegated to the EPA, the primary authority for setting pollution controls.⁶ Because federalism issues derive from the Constitution's recognition that states are distinct sovereign entities from the federal government,⁷ institutional tension almost guarantees there will be no end to the cooperative federalism debate.

Environmental law provides illustrative examples of the federalism dynamic between states and the federal government in enforcing environmental protections. But the infusion of cooperative federalism into environmental law is not a novel concept. In place for a number of decades, federal and state regulators have consistently shared (and often competed) for authority over the regulatory landscape of natural resources. A unique consideration under the Pruitt-led EPA; however, is whether or not the regulatory rollback at the agency is genuinely returning the balance of power in cooperative federalism back to state regulators or whether it's a deliberate effort to starve resources for environmental enforcement.⁸

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This paper will first cover the basic constitutional elements that underpin cooperative federalism; then it will discuss how the relationship shapes environmental law. Specific attention is provided to cooperative federalism and the Clean Air Act and will outline some of the major enforcement controversies that have recently cropped up between EPA and states. Finally, the paper will discuss North Dakota's experience with cooperative federalism and offer an assessment of what state regulators and industry should expect on the horizon from the Pruitt Administration.

I. Cooperative Federalism in Brief

Federalism is based on the Framers' belief that freedom is enhanced by the creation of two governments--both a federal government and state governments.⁹ Cooperative federalism is the "[d]istribution of power between the federal government and the states whereby each recognizes the powers of the other while jointly engaging in certain governmental functions."¹⁰ As a form of federalism, the cooperative version recognizes that federal and state responsibilities overlap and interact.¹¹ Cooperative federalism is also distinct from the concept of dual federalism which is federal or state government acting independently with no overlap of authority.¹² In practice, cooperative federalism is typically a scenario where the federal government sets a requirement for enforcement or implementation; then state governments, with some flexibility, are provided the opportunity to implement the federal standard.

However, with cooperative federalism, federal courts are often faced with the task of defining, and at times limiting, the scope of federal power as it relates to state action. Justice Kennedy, writing on managing this balance notes:

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Of the various structural elements in the Constitution, separation of powers, checks and balances, judicial review, and federalism, only concerning [federalism] does there seem to be much uncertainty respecting the existence, and the content, of standards that allow the Judiciary to play a significant role in maintaining the design contemplated by the Framers....Our role in preserving the federal balance seems more tenuous. ¹³

Despite this struggle, federalism is designed to assign political responsibility, and as a result courts are often left with the last word, particularly when the roles of the two governments are obscured by the political process.¹⁴

Federalism questions are historically viewed by the Supreme Court in two ways.¹⁵ First, the Court has considered whether an Act of Congress is authorized as a legislative power delegated by Article I of the Constitution.¹⁶ In other cases, the Court will determine whether an Act of Congress encroached on a state's sovereignty as reserved by the Tenth Amendment.¹⁷ Regardless of the approach, the Court will typically rely on three sources of constitutional power when distinguishing the limits of state and federal authority.¹⁸

Broad construction is given to Congress' Commerce Clause powers and is a common basis for Courts to uphold legislative acts which regulate activities typically managed by states. The Commerce Clause provides Congress with the authority to regulate interstate commerce including intrastate activities which affect interstate commerce.¹⁹ However, the Supreme Court has notably outlined a limit as to what Congress may legislate under the Commerce Clause. In 1995, the Court struck down a federal gun statute which neither regulated a commercial activity

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nor contained a requirement that possession of the gun was connected to interstate commerce.²⁰ Despite this limit, the Commerce Clause remains the most common authority Congress relies on when enacting major federal environmental laws.

The second constitutional authority Congress may use is its power of inducement under the Spending Clause. Because the Constitution authorizes Congress "to pay the Debts and provide for the...general Welfare of the United States" it may "fix the terms on which [Congress] shall disburse federal money to States."²¹ While Congress may exercise its authority to condition the disbursement of federal highway funds based on whether a state has adopted a minimum drinking age, Congress cannot use its spending power in an overtly coercive manner.²²

Finally, the Supremacy Clause gives the federal government "a decided advantage in th[e] delicate balance" the Constitution strikes between state and federal power.²³ Once Congress expressly declares its intent to preempt state law, the Court will sustain preemption as long as the action is within otherwise applicable constitutional limits.²⁴

These constitutional authorities make up the carrots and sticks of cooperative federalism and define how the federal government can encourage states to enforce its...