States Rush in Where the Feds Fear to Tread

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By Cindy Skrzycki
Tuesday, September 13, 2005

Even before Hurricane Katrina brought into high relief the sometimes rocky relations between the federal government and the states, it has become increasingly routine for states and localities to go their own way on the regulatory front, either making their own rules or filing lawsuits to shape regulatory policy.

State legislatures, attorneys general and regulators are intervening in areas, especially affecting the environment, where they don't think federal standards are stringent enough. The activist stance taken by New York Attorney General Eliot L. Spitzer against securities and brokerage firms, for instance, resulted in Congress and regulators at the Securities and Exchange Commission being more interested in tuning up federal rules.

Just last week, 15 states and New York City sued the Department of Energy over rules that are behind schedule -- up to 13 years behind schedule. Coming in the midst of record high gasoline prices, the states said DOE had failed to issue energy-efficiency standards for 22 appliances and had not issued any new standards since 2001.

A DOE spokesman said issuing updated efficiency standards for products such as water heaters and furnaces is a "comprehensive and arduous process."

Ironically, the regulatory activism on the local front grows, in part, from Republican-backed shifting of authority to the states and the deregulation of large industries. The result, because some of the state regulation is grounded in litigation, has been huge settlements involving large industries, most notably tobacco, as well as more localized control.

"You see spontaneous state cartels. It's a parallel national government," said Michael S. Greve , director of the Federalism Project at the American Enterprise Institute . In one of his writings, he calls it preempting the national government, or "federalism upside-down."

States like California and New York traditionally have been activist regulators, but now "model rules" developed by state associations and individual initiatives are being pursued throughout the country.

"We have a mantra. Where the federal government is unable or unwilling to address an important air pollution problem, the states and localities will step in and fill that gap," said S. William Becker , executive director of state and local air pollution associations.

Becker's group is working on a model rule to curb mercury emissions from power plants because it thinks the recently issued federal mercury rule is weak and takes too long to implement. It also developed a "menu" of alternatives that states can use to beef up changes the Environmental Protection Agency made to address how expanded industrial facilities must control their pollution. And it has a model rule -- which nine states have adopted -- for states to reduce truck diesel emissions.

In another initiative, nine Northeast and mid-Atlantic states have banded together to form the Regional Greenhouse Gas Initiative to address global warming by using a state trading system to control emissions.

"We need to protect our citizens and forests," said Peter Lehner, chief of the Environmental Protection Bureau for Spitzer's office. Lehner said the federal government has not acted to adequately regulate interstate transport of pollutants, so Spitzer has sued six New York power plants and 22 out-of-state facilities.

Becker said the Clean Air Act allows states to set standards of their own, but, in some cases, the Bush administration has tried to limit the effect states can have regulating industry. He said the administration's Clear Skies Initiative, which didn't pass, would have preempted states from taking action against industry.

Eryn Witcher , EPA spokeswoman, said the agency has worked closely with states to reduce pollution and that emissions continue to decline. "We need to ensure if a state adopts an alternative approach, it will fit in and work well with the broader national program that is being implemented by the rest of the country," Witcher said.

On another front, the administration's proposal to increase the strength of vehicle roofs to protect occupants in case of a rollover preempts states from issuing their own rules. It also eliminates the possibility of court cases if automakers meet the federal standard.

John Graham , the Bush administration's regulatory overseer at the Office of Management and Budget , said the role of states in setting regulatory policy has to be considered on a case-by-case basis.

"The Administration generally respects the Jeffersonian view that states should be given leeway to shape regulatory policies in ways that respond to state needs and preferences. However, we also respect the Hamiltonian view that, in some situations, a proliferation of conflicting state policies can frustrate national policy or interfere with interstate commerce and economic development," said Graham in a statement.

Business is uneasy with the states' "regulation by litigation."

"As much as people bash the federal agencies, we would rather have them set the standards and then determine where there should be more flexibility. Attorneys general are not necessarily the right people to set regulatory policy -- even in their own states," said Lawrence Fineran , vice president for regulatory and competition policy at the National Association of Manufacturers .

Paul Ferber , political science professor at the Rochester Institute of Technology , said no one should be surprised that activist states have grabbed the regulatory reins. "When you push authority onto the states, you shouldn't be shocked when they actually do something," he said.


© 2005 The Washington Post Company

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