As I wrote recently, Indeck Corinth, L.P. has filed suit against the Governor of New York, the NY Department of Environmental Conservation and other agencies, challenging that state’s participation in the Regional Greenhouse Gas Initiative (RGGI). According to the complaint Indeck, a power generating company, alleges the state’s participation in RGGI is illegal for multiple reasons. The most interesting of these claims is that RGGI, itself, is “unconstitutional.” Indeck alleges that RGGI is an interstate compact that, under the Unites States Constitution, requires the consent and approval of Congress. Specifically under Art. 1, §10 Cl. 3 of the Constitution provides:
No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a Foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.
Indeck alleges RGGI is an interstate agreement or company but which has not been approved by Congress , is, in fact, illegal. The complaint also provides that:
Congress has the power to regulate emissions and establish interstate emission limits, which it has expressly chosen not to do. RGGI’s supplemental regulations are stricter than Federal regulations promulgated by the United States Environmental Protection Agency and thus, impermissibly encroach on Federal supremacy and interfere with the Federal interest in climate policy and Federal interest in regulating a national and international pollutant.”
One would think that after 200 plus years of having a constitution, one of the earliest portions of that constitution would have a clear and easy answer to this question. As with many things in law, however, there is no easy answer. Having said that, a review of the case law and commentary would seem to suggest that RGGI can operate legally – without obtaining Congress’ approval. In the last 100 years, caselaw dealing with this issue clearly demonstrates that that there are interstate compacts that require congressional approval and there are those that do not. The question seems to hinge on whether the interstate compact could/would have the potential to increase the political power of the states over the federal government.
The leading case in this area of the law is: United States Steel Corp. v. Multistate Tax Commission, 434 U.S. 452 (1978). In Multistate Tax Commission the Court indicated that, if read literally, the Compact clause would prevent any grouping of states from entering into any kind of agreement no matter how trivial and short in duration. The Court did not believe that this was the result the constitutional framers would have desired. The Court then reaffirmed the “test” from an earlier case that limited the need for Congressional approval to “formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.” The Court also looked to see how the compact acted against these four questions:
· did the compact give the states or the multistate agency powers it did not already have?
· did the States delegate their sovereign power to the agency?
· did the state’s have the freedom to reject or accept the model rules and?
· could the States withdraw if they wanted?
In Multistate Tax Commission, the plaintiffs were challenging the creation of a multistate agency by several states to deal with the taxation of businesses with locations in multiple member states. The Court ultimately rejected the challenge by United States Steel under the compact clause. One of the reasons the Court gave was that, by joining together, the States were not doing anything that they could not have done on their own. Therefore, the answer to the first question is “no,” The multistate compact did not give the States power they did not already have.
The situation with RGGI is very similar to Multistate Tax Commission. Each State has the power to regulate air pollution independently of one another (note that GHGs are considered air pollution and can be regulated under the Clean Air Act – but that is a topic for another post.) It is conceivable that each State could independently regulate GHG emissions and create their own auctions for allowances. Each power generator in each state would then have to buy allowances from that state. Multistate generators would have to buy allowances in each state in which they had power plants. The multistate generators would not be able to transfer a NJ allowance to NY if they need to emit additional GHGs in NY. This system would be inefficient and might even cause more leakage than what is already occurring. RGGI is only improving the efficiency of a cap and trade system - it is not increasing the state power or RGGI’s power and, therefore, should pass muster on this requirement.
As to the second question, the Memorandum of Understanding signed by the RGGI explicitly states that RGGI has no regulatory or enforcement authority and that authority is reserved to the States. Therefore, the answer to that question is clearly “no.”The States did not give up any of their sovereign authority to RGGI.
As to the third question, there is nothing in the MOU that explicitly requires a State to adopt all portions of the Model Rule. Also, if I recall correctly, the model rule provides for various options that the State could adopt.
Lastly, in regards to the fourth question, the MOU also provides that any State can withdraw from RGGI with 30 days notice.
Based on the Court’s test RGGI will likely prevail against Indeck’s challenge under the Compact Clause. There may be other constitutional challenges, for example under the Commerce Clause, which may be of concern. Also, proposed Federal law would supplant RGGI for several years. But for now RGGI will be with us.