Welcome. This evening I would like to trace for you the genesis and development of this program and then reflect on the issue with which it deals—federalism.

Why Discuss Federalism Here

It was clear last year, when planning for the Airlie House conference began, that the Reagan Administration intended to restructure the federal/state relationship. Federalism was chosen as the conference topic because environmental law is, for a number of reasons, a good vehicle for examining the relationship between the state and federal governments.

First, that relationship raises important public issues in the environmental law context. Second, there is already a careful, complex division of responsibility between the state and federal governments in most of the environmental statutes. And we now have ten years' experience with several of the statutes, watching how that division works in practice. Third, there is a wide selection of federal/state structures to be examined in environmental law, ranging from the extensive "delegation" of statutes such as the Clean Water Act and the Clean Air Act at one extreme, to statutes like the Toxic Substances Control Act, which is primarily a federal program, at the other. Fourth, there was a felt need by many for change in federal/state relations in environmental areas, a need reflected, for example, in the Sagebrush Rebellion on water and natural resource issues out west. Fifth, in some areas of environmental law, the existing relationship between the state and federal governments was already being reexamined. One example is the Clean Air Act litigation to force development of NESHAP rules for radiological air pollutants, where the result may be that, as a practical matter, states take over from the Nuclear Regulatory Commission regulation of nuclear power plant airborne emissions. Sixth, environmental law allows examination of the funding question—who has how much money and from what source—and how funding, or a lack of it, affects performance whatever the formal, structural relationships between state and federal governments.

The federalism issue fit nicely into the Airlie House tradition. These Airlie House conferences were originally conceived as an opportunity for all sides on environmental issues to get together and discuss, in a reasoned, professional atmosphere, issues that were being debated quite hotly in the early 1970s in forums in which the two or more sides frequently were talking past each other. Airlie was intended to foster a frank interchange of ideas and to advance understanding and analysis of the issues, raising, we hoped, the level of the debate.

I think it has succeeded in doing that over the years. It has largely retained its character as a forum for raising basic issues and for engaging in reflective thought, from the floor as well as from the podium.

In designing this year's program, the Committee wanted to reinforce this tradition. Thus, it chose the basic issue of federalism. It did not wish to compete with others who treat the "how-to" issues or who offer technical/legal "updates." Rather, the Committee wanted to attract some of the best minds in the field to deal with a fundamental issue on a professional basis, and to do so in a detailed, careful and sophisticated fashion. Thus, it has required prepared papers and has provided those papers and other background materials to all the participants. By doing so, it hopes to promote real consideration of the issues and active participation by persons attending the conference.

Reflections on Federalism

I turn now to some reflections about federalism that result in large part from a perusal of the papers to be delivered by our speakers.

What Is the "New" Federalism?

First, what is the "new" federalism? The President, of course, proposes a broad new fiscal approach to federalism. And the Environmental Protection Agency proposes a basic change in attitude about federal/state relations that John Daniel will discuss. These two initiatives are clearly the heart of the matter.

But federalism issues have been central to environmental law since its inception. And environmental law has been an important proving ground for new ideas. When the Clean Air and Water Acts were first enacted, for example, they contained a complex balancing of functions between state and federal governments, a cooperative relationship that was then referred to as a "new federalism."

Further, there is a present ferment in federal/state relations in environmental law—a ferment that would exist, and will continue, regardless of the broader Reagan fiscal and regulatory initiatives mentioned above. Examples from many areas can be cited. The regulation of air emissions from nuclear power plants is one; the regulation of high level radioactive waste transport and disposal is another. Interstate transport of air pollutants and the associated "spillover" effects between states, particularly the acid rain issue, is a third. How hazardous waste victims should be compensated, and whether under federal law, state law, through a court system, or through an administrative system, is a fourth, recently examined by the Superfund § 301 Study Commission.¹

All of this proves, I think, that all federalism issues are "new," even if debated since the founding fathers' time. As Woodrow Wilson once said: "The question of the relation of the states to the Federal Government cannot indeed be settled by the opinion of any one generation, because it is a question of growth, and every successive stage of our political and economic development gives it a new aspect, makes it a new question."²

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So I conclude that federalism questions are always new because they are always arising in new contexts. In short, it is not useful to dwell on defining the "new" federalism. Any federalism issue we now face is "new" enough to be a proper subject for discussion here.

Areas of Consensus on Federalism

Much to my surprise, I found important areas of consensus in the conference papers. Of course, where both the costs and benefits of an issue are national in scope, there is little question that federal decision-making is in order. Where the costs and the benefits are both local or statewide in scope, again, there is little question. It is where the costs are all borne, or are largely borne, by a small group of people in one area while the benefits are nationwide, or vice versa, that the real problems lie. In such cases, which level of government should decide, why, and using what principles? Even here, there seems to be a surprising level of consensus. In short, Congress to seems to have done a better job than I would have expected. Let me outline the areas of rough consensus which I see.

There seems to be consensus that the federal government should handle interstate pollution and areas with economies of scale, such as training and research and development. There seems consensus also that the federal government has a role where national uniformity or preemption is needed, as in the following cases: first, so as to avoid burdens on commerce; second, so as to have uniform health standards; third, so as to avoid competition among states through use of minimum technology-based requirements a; and finally, so as to preempt parochial vetoes of projects where important national interests are involved, as with hazardous waste disposal and nuclear power facilities.

There is also consensus about many aspects of the proper state role. First, obviously, that it is a residual role that occupies whatever ground the federal government does not. Second, that the states should be the primary implementers and enforces in most of the regulatory schemes. Third, that the states are important laboratories for experimentation,³ a role which EPA's emissions trading policy relies on, for example, in helping to develop an extraordinarily complicated decentralization effort. Fourth, that decision-making should be decentralized in the interest of efficiency, when possible. Finally, that the states should—and in fact do under most of the environmental statutes—always have the right to regulate more stringently, except where preempted by an overriding federal interest.

Constitutional Limits to Federal Action

My next reflection is that there are important constitutional limits to federal action. In short, states cannot be forced to legislate or to regulate—such direct coercion is prohibited. But indirect coercion is allowed.

Attitudes Are As Important as Structure

Attitudes about federal/state relations may be fully as important as structure. For example, what is true of individuals seems to me equally true of organizations: one gets what one expects. If EPA constantly criticizes the states as incapable of regulating, the expectation is set and the agency is indeed likely to get poor performance. On the other hand, if more is expected, improved performance may result. Thus, the federal attitude toward the states is important.

Implementation Is as Important as Structure

It seems to me that the way any particular federal/state structure is implemented is as important as the nature of the structure itself. For example, the Clean Water Act requires EPA oversight of state national pollutant discharge elimination system permit issuance. As the system is now implemented, EPA reviews most NPDES permits. Certain EPA staff have suggested that EPA reverse this practice, to review only selected permits. Such a change in oversight practices might well be far more important than more formal changes in the regulatory provisions governing EPA review.

Another aspect of implementation that comes to mind also has important practical consequences. As more implementation of federal environmental law is delegated to the states, much pressure is put on state administrative law. Federal administrative law, whatever its problems, is a fairly coherent and well-developed body of law. The same cannot be said, however, for much of state administrative law. State administrative law may provide no right of intervention, of judicial review, or of other fundamental procedural protections that a federal environmental lawyer takes for granted. When one considers that environmental licensing allocates rights to the limited assimilative capacity of valuable air and water resources, without which many forms of highly profitable economic activity cannot proceed, the possibilities for abuse and arbitrary decision-making at the state level are apparent.

Funding Is As Important as Structure

Perhaps a corollary to the implementation point, funding may well be the most important practical federalism question today, as the Reagan Administration attempts to transfer more work to the states while proposing cuts in federal funding. The mechanics of funding have clearly affected the balance of federal and state power in the past. Federal funds have facilitated much of what state environmental agencies have been able to do, but potential withdrawal of funds has also been used as a club by EPA. Can EPA really simplify the regulatory system enough that the states can afford to take on new tasks?

Are Views on Federalism a Matter of Principle?

Many view federalism as a question of principle, particularly when they wrap themselves in a states' rights mantle. Note, however, how people change sides on the federalism issue, depending upon where their interests lie. Industry is normally in favor of state-level regulation, except—for example—where a uniform manifest system would avoid the need to deal with fifty different manifests as hazardous waste is shipped interstate. And environmental groups favor a strong EPA override, in the case of transportation control plans or of local delay on actions they believe needed to meet ambient air quality standards in [12 ELR 15069] large cities. But in siting nuclear power plants or hazardous waste facilities, they support local or state veto rights.

Unexplored Horizons in the Present Structure

Many implications of the federal/state relationships in present environmental statutes are as yet unexplored. Let me give you three examples.

The first is illustrated by a case in the Ninth Circuit,⁴ in which EPA was collaterally estopped by action of a state agency in state court on the grounds that EPA was a privy of the state agency—an interesting principle with widespread implications in a system where many types of actions can be taken either by EPA or by the state.

Second, a matter that should be simple—the administrative and judicial review of NPDES permit issuance—is a terrible procedural mess. There has been difficulty under the Clean Water Act about the division of authority during and after the delegation process, and as to where and when judicial review of the various actions taken by EPA and the states is to be had. Congress drafted the Water Act so that a number of its variances can only be granted by EPA, even when the state is issuing the permit. As a result, one needs to invent procedures by which EPA can rule on an issue central to the state's permit issuance proceeding. Once that is done, one must decide how to review this permit judicially, where part of it is a result of state action and part a result of federal action.

A third unexplored implication is the dual status of much law under the Clean Air and Water Acts. To illustrate, a dichotomy has developed between the legal status of a state implementation plan and the legal status of a state water quality standard. To my knowledge, that distinction rests only on one ancient EPA Office of General Counsel memorandum. With the first branch of the distinction, you can have a rule that is in effect under federal law as well as under state law, and even if thereafter invalidated under state law by a state court, it remains in effect under federal law and is enforceable by EPA.

The Universal Nature of Federalism and its Problems

Finally, in dealing with federalism, we struggle with generic structural and functional problems. Our discussions center, of course, on our own particular constitutional and historical context. But many of the analytical insights we come to may be useful to those who face similar problems in other legal systems involving the proper division of authority and responsibility between central and regional governments.

* * *

I hope this conference will illuminate some of these issues and clarify their analysis. If it does so, the Committee will have accomplished its objective.

1. Note also, for example, the uniform hazardous waste manifest rules that EPA is developing and the EPA "emissions trading policy" that would allow states to develop bubbles and other trading arrangements under state law once they had a generic rule in place, without having to take each transaction through the state implementation plan review process. These are practical but fundamental proposals.

2. T. Woodrow Wilson, CONSTITUTIONAL GOVERNMENT IN THE UNITED STATES 173.

3. To illustrate this, we included in the conference reading materials David Currie's article on various state approaches to environmental regulation. Currie, State Pollution Statutes, 48 U. CHI. L. REV. 27.

4. U.S. v. ITT Rayonier, Inc., 627 F.2d 996, 10 ELR 20945, 16 ERC 1091.

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