Keeping cooperation in cooperative federalism

Some regulatory regimes are "cooperative federalism" regimes, under which the federal and state governments work together to achieve federal regulatory goals. Cooperative federalism regimes offer two substantial benefits: They improve federal-state relations by empowering states to act under federal law, and they allow society to reap the benefit of state innovation instead of having one federal law preempt the field. In short, cooperative federalism regimes are invaluable when they work well. Yet, in a part of the opinion that hasn't garnered much attention, the Supreme Court's April decision in Environmental Protection Agency v. EME Homer City Generation sheds light on a design flaw in the statute that most prominently features cooperative federalism — the Clean Air Act. The Clean Air Act may be structured, counterintuitively and unhelpfully, to discourage state participation.

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The Clean Air Act divides responsibility for implementation between the federal and state governments. In general, the federal government sets goals (both through statute and regulation), and the states are free to choose a regulatory approach so long as those goals are attained. If a state fails to submit a state implementation plan (SIP) that is designed to meet those goals, then the Environmental Protection Agency (EPA) can call for appropriate amendments, and — if such amendments do not materialize after a two-year period — institute its own federal implementation plan (FIP). The FIP option displaces state freedom of choice, and arises only where the state fails to fulfill its obligations on its own within the two-year period.

One application of cooperative federalism under the Clean Air Act is the implementation of the act's "good neighbor provision," under which "upwind" states that are producers of pollution are required to develop SIPs that protect "downwind" states from that pollution. In the years leading up to Homer, the EPA had found upwind states' SIPs inadequate, only to have the courts reject the EPA's proposed interpretation of the good neighbor provision. Then, in 2011, the EPA promulgated a new regulatory approach and simultaneously issued FIPs to implement that approach. The upwind states argued — and Justice Antonin Scalia's dissent agreed — that it was unfair for the EPA to issue a FIP at the very same time that it announced its revised interpretation of the relevant statute. Shouldn't the state be given an opportunity to comply with the newly announced federal interpretation before a FIP is issued? However, Justice Ruth Ginsburg's opinion for the court flatly held that EPA was within its rights.

One might think that the EPA correctly assessed that the upwind states in the Homer case had had a long time to come into compliance with the Clean Air Act's good neighbor provision, and the years of recalcitrance balanced the loss of a final opportunity to do what the act directed. However, the Supreme Court's holding goes beyond that: Since more than two years had elapsed since the original finding that the upwind states' SIPs were inadequate, the EPA was obligated to issue FIPs.

After Homer, then, it seems that the Clean Air Act affords the EPA no discretion to give states that have acted in good faith a window within which to comply with a newly announced federal standard when the original finding that the states were out of compliance is more than two years old. This makes little sense. While it seems logical to give the federal government the leeway not to provide a window for state compliance with a new standard where the federal government adjudges that a state has not acted in good faith, it nevertheless seems that the federal government should have the leeway to provide such a window where a state has acted in good faith and realistically could not guess what standard the federal government would in the end promulgate. Cooperative federalism should reward cooperative behavior, not punish it.

Cooperative federalism regimes rest on governmental cooperation. States won't waste the time to draft their own proposals if they expect the federal government to do what it wants in the end anyway. That's to no one's benefit: States lose a little sovereignty, while we all lose out on the benefits of state regulatory innovation. Cooperative federalism regimes should be designed to foster cooperation, not discourage it. Congress should amend the Clean Air Act to remedy this problem, and should consider the importance of fostering cooperation when it designs new cooperative federalism regimes.

Nash is professor of law at Emory University School of Law. He specializes in the study of courts and judges, federal courts and federal jurisdiction, legislation and regulation, and environmental law.