Clean Air Post-Healthcare: The Federalism Limits of the Spending Power and the Future of Environmental Regulation

Modern environmental regulation was born in the 1970s, at a time when federalism limits to congressional power were essentially an afterthought. Since then, U.S. constitutional law has undergone a federalism revival as Justices of the Rehnquist and Roberts Courts have sought to articulate principled limits to the federal power that ballooned during and after the New Deal. Because of federal environmental law’s expansive scope, many commentators have predicted that this growing revolution could soon change the face of federal environmental regulation.

Emblematic of federalism’s shifting landscape is the Supreme Court’s decision in National Federation of Independent Business v. Sebelius, the politically charged controversy challenging the constitutionality of President Barack Obama’s healthcare reform package, the Patient Protection and Affordable Care Act (“PPACA”). While the majority of headlines about the case reported the Court’s dramatic split over whether the controversial “individual mandate” provision was permissible under the Commerce Clause, the less discussed yet perhaps more significant holding concerned the constitutionality of the “Medicaid expansion” and the scope of the Spending Clause. This new gloss on the Spending Clause could “seriously threaten the constitutionality of a broad swath of federal spending legislation,” including environmental laws.

At the top of the endangered statutes list is the Clean Air Act (“CAA”). The CAA, like many environmental statutes, employs a “cooperative federalism” structure that requires states to take responsibility for administering a federal regulatory program. As “Congress’s most aggressive effort to induce state regulation through the use of conditional spending,” the CAA is considered the most vulnerable environmental statute—and perhaps the most vulnerable statute period—to a federalism challenge post-Sebelius. Just as the PPACA conditioned the receipt of existing Medicaid funds on adopting an expanded Medicaid program, the CAA conditions the receipt of some federal highway funds on the implementation of an air pollution control program tightly managed by the Federal Environmental Protection Agency (“EPA”). This “leveraging” of funds from one program to secure compliance for another was a major factor in the Sebelius majority’s conclusion that the PPACA’s Medicaid expansion was unconstitutional. And although federal highway funds make up a much smaller portion of state budgets than does Medicaid assistance, which might indicate less potential for impermissible “coercion,” federal funds do make up a large proportion of states’ transportation budgets.

EPA’s recent greenhouse gas (“GHG”) rulemakings are a prime example of how the CAA may be vulnerable to a Spending Clause challenge. Chief Justice Roberts’s majority opinion in Sebelius pictured conditional spending as a contract with states, suggesting that Congress exceeds the scope of its Spending Clause power when the terms of that contract—of how states participate in the federal program—change drastically in contravention of states’ reasonable expectations. Although the requirements of the CAA are always in flux as EPA crafts national air pollution control policy to conform to new science and changing environmental priorities, the GHG rulemakings represent the largest nonstatutory change in the Act’s scope in its forty-year history.

This Note will explore the implications of the new Spending Clause jurisprudence for the CAA and how the doctrinal trajectory signaled by the Sebelius decision can undermine both the goals of federal environmental policy and those of our system of federalism itself. Many scholars have already offered assessments of the constitutionality of the CAA after Sebelius, and most have concluded that the Act will stand. While this Note will concur with this conclusion, I hope to offer a more detailed look into the operation and effect of the highway funding sanction in Section 179 of the Act and apply Sebelius in the context of EPA’s controversial GHG rulemaking. Most importantly, this Note will point out the danger of injecting a stronger brand of Tenth Amendment federalism into the Court’s Spending Clause jurisprudence and will discuss how Sebelius might signal a dangerous trajectory for environmental policy and cooperative federalism regulatory schemes in general.

The argument will proceed in four parts. Part I will summarize the structure of the CAA and the importance of cooperative federalism within that structure. Part II will then dissect the Court’s Spending Clause precedents in South Dakota v. Dole and Sebelius, and will dig deeper into the concept of “coercion” from those cases. Part III will apply the new Sebelius test to the CAA and EPA’s GHG rulemaking. Finally, Part IV will discuss why this episode in the Court’s federalism revival may hurt environmental policymaking—and may actually marginalize rather than elevate the power of states in our federal system.