Constitutionality of Proposed Energy Mobilization Board Legislation

July 24, 1979
79-55 MEMORANDUM OPINION FOR THE
ASSISTANT TO THE PRESIDENT FOR
DOMESTIC AFFAIRS & POLICY
Constitutional Law—Commerce Clause (Article I,
Section 8, Clause 3)—Constitutional Aspects of the
Proposed Energy Mobilization Board Legislation
The purpose o f this m em orandum is to expand on and to memorialize
this Office’s legal advice to your staff regarding the A dm inistration’s pro­
posal to create an Energy Mobilization Board (Board).
The Board, to be established in the Executive Office o f the President,
would have three members appointed by the President with the advice and
consent o f the Senate. The B oard’s central purpose would be to expedite
the completion o f designated “ critical energy facilities” —projects in­
tended to reduce the N ation’s reliance on imported oil.
Expedition would be achieved by the B oard’s establishment o f a Project
Decision Schedule (Schedule), setting a timetable for all Federal, State,
and local decisionmaking required for the completion and operation o f a
critical energy facility (CEF). Should any agency fail to render a decision
within the set time, the Board itself would then make the decision, apply­
ing the Federal, State, or local law that the supplanted agency would have
applied. In establishing the Schedule, the Board would be authorized to
waive any Federal, State, and local procedural decisionmaking re­
quirements, such as those relating to the methods of decisionmaking and
timing. While no substantive environmental and other standards could be
changed, the Board would be authorized to either (1) designate a lead
agency to prepare a single comprehensive environmental impact statement
(EIS) for a CEF, or (2) waive Federal, State, and local EIS requirements
and adopt another m ethod o f evaluating the environmental impact o f a
CEF. The Board would also be authorized to waive Federal, State, and
local laws and regulations enacted or promulgated after the commence­
ment o f construction o f a critical energy facility if the new requirement
hindered its expeditious completion and if grant o f a waiver would not u n ­
duly endanger public health or safety.
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The A dm inistration’s proposal also seeks to expedite the completion of
CEFs by limiting and expediting judicial review, because the Board deci­
sion designating CEFs and establishing Schedules would not be subject to
review. All other actions would be subject to review only in a Federal court
o f appeals. Parties challenging agency action would have 60 days from the
completion o f the permit process to bring suit unless the Board determines
that earlier review is necessary in order to expedite completion o f the proc­
ess or to ensure fairness. In reviewing Board and agency decisions, the
courts o f appeal would apply the appropriate Federal, State, and local
substantive law.
The proposal raises constitutional questions o f first impression, and our
mem orandum addresses these issues.
I. The B oard’s Decisionmaking Authority
The purpose o f the legislation is to expedite completion o f energy proj­
ects designed to reduce national dependence on foreign sources o f oil. Ef­
fectuation o f the im portant national interests o f reducing oil imports and
increasing domestic energy production is within Congress’ broad power
under the Commerce Clause o f the Constitution, Article I, Section 8,
Clause 3. The Supreme C ourt has, however, recognized limits on the exer­
cise o f congressional power under the Commerce Clause when legislation
interferes with traditional state functions. See, National League o f Cities
v. Usery, 426 U.S. 833 (1976). The proposal is subject to challenge on this
ground because it empowers the Board to: (1) set decision schedules bind­
ing on State and local agencies; (2) waive State and local procedural
decisionmaking requirements; and (3) supplant State and local decision­
makers. We treat these questions seriatim.
A. Scheduling
U nder the proposal, all State and local agencies would be required to
forward to the Board a proposed timetable for actions related to approval
o f a CEF and the Board then sets a deadline for each decision. In cases of
“ exceptional national need,” this deadline could be shorter than the one
set by State or local law.
It could be argued that Congress would exceed its power under the
Commerce Clause by authorizing a Federal agency to make a decision.
This argument takes on force when one considers the possibility that such
decisions may be made by local units o f government—e.g., town councils.
In National League o f Cities v. Usery, supra, the Court invalidated ex­
tension o f the Fair Labor Standards A ct’s (FLSA) minimum and max­
imum hour standards to State and local governments. The C ourt’s opin­
ion, written by Mr. Justice Rehnquist, held that the Federal requirements
had a significant impact upon the functioning o f State and local govern­
ments, compelling them to forego governmental activities and displacing
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local policies regarding the manner in which governmental services would
otherwise be supplied. Id., at 847-48. Thus, the extension was found to
“ impermissibly interfere with the integral governmental functions” of
States and localities. The Court concluded that “ insofar as the challenged
amendments operate to displace the States’ freedom to structure integral
operations in areas o f traditional governmental functions, they are not
within the authority granted Congress by Art. I, § 8, cl. 3 .” Id., at 852.
The reasoning o f the C ourt provides the framework for analysis o f the
constitutionality o f the Adm inistration’s proposal. It could be forcefully
argued that local decisions on land use, health, and safety are traditional
State functions and that Federal imposition o f deadlines is an impermissi­
ble intrusion in the decisionmaking process that “ may substantially
restructure traditional ways in which local governments have arranged
their affairs.” 426 U .S., at 849.
Notwithstanding such contentions, we believe that the scheduling man- '
date o f the Board is not contrary to the holding in National League o f
Cities. First, the Court stressed the financial burden imposed by FLSA on
States and localities. Here, Congress would not be imposing a burden,
altering fiscal policies, curtailing traditional State and local activities, or
regulating the provision o f traditional services. The Federal Government
would not be directing local governing bodies to decide a matter in a par­
ticular way; localities would be free to grant or deny permits and licenses
pursuant to State and local standards. Nor would the Board require
localities to perform a new function; it would simply set a deadline for a
decision that would otherwise be made at some time. Analytically, State
and local decisionmakers and procedures would not be displaced because
there is no power in the Board to require such agencies to follow the
Schedule. The Board could not, for example, seek injunctive relief to re­
quire a State agency to meet the Schedule. Rather, the situation here is
analogous to several complex Federal regulatory programs, such as the
Clean Air Act discussed below, which set specific ground rules for State
action and which provide for preemption by Federal agencies o f the State
role if those rules are not followed. Such programs have been sustained
against constitutional challenges similar to those that we may anticipate
would be leveled against a statute enacting the A dm inistration’s program.
We therefore believe that the Board may be empowered to set reasonable
deadlines for local decisions.
Moreover, it should be noted that Mr. Justice Blackmun jointed the
C ourt’s opinion in National League o f Cities because it “ adopts a balanc­
ing approach, and does not outlaw federal power in areas such as environ­
mental protection, where the federal interest is demonstrably greater and
where state facility compliance with imposed federal standards would be
essential.” 426 U.S. at 856.
We believe that the balancing approach suggested by Mr. Justice
Blackmun would sustain the authority o f Congress to empower the Board
to determine State and local deadline. The seriousness o f the energy crisis
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is apparent, and its impact on foreign policy, national security, and inter­
national monetary policy will, we assume, be the m ajor focus o f congres­
sional deliberation concerning this proposal. A CEF may be designated
only if a project has been determined “ to be critical in contributing to the
reduction o f the nation’s dependence upon imported oil or petroleum
products;” and State and local deadlines may be shortened only “ [i]n cir­
cumstances o f exceptional national need.” We are persuaded that these in­
terests will be sufficient to override a local agency’s interest in deciding
when to decide. The national interest in expedition seems strong enough to
overcome State and local decisionmaking processes that, Congress finds,
delay decisions necessary to the expeditious completion o f CEFs.
B. Waiver o f State Procedures
For the reasons discussed above, we believe that the authority o f the
Board to waive State and local procedural requirements passes constitu­
tional muster. Since substantive standards such as those regarding the en­
vironment, land use, health, and safety are specifically excluded from a
waiver, there is no threat to the provision o f traditional State and local
services. Waivers impose no financial burden on the States or localities; if
anything, they are likely to conserve State and local resources. Again, we
believe that the critical national interest at stake outweighs State or local
interest in any particular decisionmaking procedures. O ur conclusion,
however, is subject to two qualifications. First, the waiver power o f the
Board is subject to due process limitations. Since it is likely that private
rights will be at stake when property is taken or a particular land use is per­
mitted, wholesale waiver o f procedures could deny injured persons due
process protection. Second, wholesale waiver may obstruct a local
agency’s ability to make a rational decision or to carry out a traditional
function. For example, total waiver o f State and local environmental im­
pact requirements might make it impossible in particular cases for a State
to evaluate adequately the environmental impact o f a facility and thus
could hinder its rational function o f protecting the public health and
safety.' But these are problems o f degree, not kind. The possibility that a
court might find that a particular instance o f waiver denied constitutional
rights or unconstitutionally interfered with a State’s performance of its
sovereign functions would not void the waiver provision as a whole. So
long as the Board applied a procedural waiver reasonably and “ in cir­
cumstances o f exceptional national need,” we believe such action would
be constitutional.
'This problem is mitigated by the proposal’s requirement that “ in each case o f waiver, the
Board shall establish alternative procedures for the assessment o f environm ental impacts of
the facility.”
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C. Displacement o f State and Local Decisionmaking
The proposal provides that if a State or local agency fails to meet a
deadline established by the Schedule, the Board may make the decision in
lieu o f the agency, thus intruding on authority exercised by State and local
officials. It could be argued that supplanting decisionmaking strikes at the
heart o f State and local sovereignty, an integral governmental function.
However, the constitutional power o f Congress to supplant local
decisionmakers is already well established. U nder the Commerce Clause,
Congress may preempt local decisionmaking altogether and it may deprive
local government totally from exercising its sovereign powers. Preem ption
o f State and local laws that interfere with Federal energy policy is com ­
monplace. See, e.g., § 6(b) o f the Emergency Petroleum Allocation Act,
15 U.S.C. § 755(b).
The critical distinction under the case law is between removing decision­
making from the State and local authorities on the one hand and forcing
State and local authorities to implement Federal programs on the other.
This distinction is made clear by the courts o f appeal decisions that con­
sidered constitutional challenges to the Clean Air Act, 42 U .S.C . § 7401 et
seq., and the Environm ental Protection Agency’s (EPA) implementing
regulations. T hat Act gives States the opportunity to establish plans im­
plementing Federal air pollution standards. If a State fails to develop an
adequate plan, the EPA is authorized to promulgate a plan for the State.
42 U.S.C. § 7410(c)(1).2 The EPA adopted regulations that would have
subjected States to an injunction or criminal penalties for failure to imple­
ment the EPA-prom ulgated plan. The States challenged the constitution­
ality o f the regulations, claiming that Congress would not authorize the
EPA to compel State enforcement o f Federal programs. Three courts o f
appeal suggested that E P A regulations exceeded Congress’ power under
the Commerce Clause by invading State sovereignty. Brown v. EPA, 521
F.(2d) 827, 834-40 (9th Cir. 1975); District o f Columbia v. Train, 521
F.(2d) 971, 992-94 (D.C. Cir. 1975); Maryland v. EPA, 530 F.(2d) 215,
225-28 (4th Cir. 1975).3 The courts distinguished a constitutional dif­
ference between Federal regulation o f commerce and Federal regulation o f
State action in the commerce field. To the extent that E P A regulations
forced State legislatures to enact laws or be subject to penalties, those
regulations impermissibly intruded upon State sovereignty. The District o f
Columbia C ourt o f Appeals held that the EPA was “ attem pting to com ­
mandeer the regulatory powers o f the states, along with their personnel
and resources, for use in administering and enforcing a federal regulatory
'T he Federal W ater Pollution C ontrol A m endm ents, 33 U .S.C . § 1313(b), contain a
similar provision.
‘The judgm ents o f the three courts o f appeal were subsequently vacated and rem anded by
the Supreme C ourt based on an E PA concession that its regulations went beyond the power
granted to it by the Clean Air Act. See, EPA v. Brown, 431 U.S. 99 (1977).
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program * * * ” 521 F.(2d), at 992. The court stated that EPA could
seek State cooperation. Absent cooperation, the “ recourse contemplated
by the Commerce Clause is direct federal regulation o f the offending ac­
tivity and not coerced state policing o f the details o f an intricate federal
plan under threat o f federal enforcement proceedings.” Id., at 993.
Similarly, the Fourth Circuit noted the difference between inviting a State
to administer regulations and compelling administration under threat of
injunction and criminal sanctions. While questioning the constitutionality
o f E PA regulations, the court had no problem with the “ time honored and
constitutionally approved device o f threat and promise * * * . The
threat is a federally imposed regulation with federal administration; the
promise is the invitation for Maryland to enact a suitable implementation
plan and administer it with state employees, thus avoiding federal interfer­
ence.” 530 F.(2d) at 228. None o f the courts o f appeal suggested that the
authority o f EPA to promulgate compliance plans for States that failed to
comply was unconstitutional.
The distinction drawn by these cases strongly supports the constitu­
tionality o f the proposed Board procedures. We believe that Congress on
an adequate record can preempt all State and local law that interfered with
the construction o f a critical energy facility. The A dm inistration’s EMB
proposal, however, does not go so far; it seeks to achieve State and local
cooperation without altering State and local law. The proposal sets a
deadline for State action, inviting the States to act; if that deadline passes,
the Board is empowered to make the decision. There is no conscription of
State or local personnel or services; there is no compulsion o f State or
local action. States and localities are given the opportunity to act within a
certain time before they lose their ability to act. Such a scheme clearly
seems to fit within the “ time honored and constitutionally approved
device o f threat and prom ise.” Maryland v. EPA, supra, 530 F.(2d), at
228. In fact, this proposal is less intrusive than a scheme o f total preemp­
tion because the Board will apply the substantive law o f the States and
localities4 and its decisions will be subject to judicial review under the rele­
vant State and local standards.
II. Judicial Review o f State and Local Decisions
As outlined above, review o f Board actions and decisions by Federal,
State, and local agencies under the Schedule would be lodged exclusively
in the Federal courts o f appeal. The reviewing court would apply the
Federal, State, or local law governing the challenged decisions. This raises
the questions whether Congress may oust State courts o f jurisdiction and
whether Federal courts are capable o f receiving such jurisdiction under
Article III o f the C onstitution.
‘The incorporation o f State and local laws as the Federal standards for decisions m ade by
the Board in lieu o f State and local decisionmakers is not novel. In the area o f Federal taxa­
tion, the Internal Revenue Service routinely interprets and applies State laws establishing
property rights in determ ining Federal tax liability. See, e.g., Morgan v. Commissioner, 309
U.S. 78 (1940).
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A. Divesting State Court Jurisdiction
Congress has clear authority to vest in the Federal courts exclusive
jurisdiction of cases within the purview o f Article III o f the Constitution.
Bowles v. Willingham, 321 U.S. 503, 511-512 (1944); The Moses Taylor,
71 U.S. (4 Wall.) 411, 429-30 (1867). And Federal courts may entertain
State matters, applying controlling State law, if Congress so provides. The
Mayor v. Cooper, 73 U.S. (6 Wall.) 247 (1867) (civil removal); Tennessee
v. Davis. 100 U.S. 257 (1879) (criminal removal). Nor is it unusual for
Federal courts to apply and interpret State law. Since Erie RR. Co. v.
Tompkins, 304 U.S. 64 (1938), Federal courts sitting in diversity have ap­
plied substantive State law. Federal courts also apply State criminal law
under the Assimilative Crimes Act, 18 U .S.C . § 13, and under removal
statutes. See, Tennessee v. Davis, 100 U.S. at 271-72; Miller v. Kentucky,
40 F.(2d) 820 (6th Cir. 1930). And cases brought under the Federal Torts
Claim Act are governed by State tort liability standards. 28 U .S.C
§ 1346(b).
Thus, we see no constitutional impediment to vesting exclusive jurisdic­
tion in Federal courts or in having those courts apply the appropriate State
o r local law. The question that remains, however, is whether the courts o f
appeal are constitutionally empowered to decide such cases—that is,
whether challenges to State and local permit decisions come within
Article III.
B. Jurisdiction in the Courts o f Appeal
Under the A dm inistration’s proposal, decisions made by the Board in
lieu of State and local decisions may be subject to review in the courts of
appeal. A suit challenging a Board decision falls within Federal jurisdic­
tion, because the United States is a party to the suit.
If, however, a State or local agency renders a decision within the time
limit prescribed by the Schedule, the basis for jurisdiction o f a Federal
court o f appeals is less certain.5 In such a situation, the question is whether
these cases would “ arise under” Federal law, and thus whether they may
be made subject to Federal jurisdiction under Article III.
In order to examine the proposed basis on Federal court jurisdiction to
review State actions, we believe it would be useful to define the context in
which such litigation may arise.
’We note that parties to the State or local agency proceeding may raise before an agency or
before a Federal court certain Federal constitutional issues related to the agency’s action,
adequate to vest jurisdiction in the court over those issues. State claims would then be
cognizable in the Federal courts under the doctrine o f “ pendent” jurisdiction. See generally,
United Mine Workers v. Gibbs, 383 U.S. 715 (1966).
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First, State court jurisdiction is being preempted because o f the critical
need for expeditious judicial review o f State and local decisions affecting
the planning, construction, and operation o f CEFs. This judgm ent,
necessarily reflects a belief that State courts cannot be relied on to reach
decisions as prom ptly as required in order to meet the national objectives
established for CEFs.
Second, the Energy Security C orporation would be a governmentally
sponsored enterprise with a broad range o f powers to shape the overall
development o f CEFs involved in the sponsorship o f CEFs through direct
grants or loans, or through construction o f a limited num ber o f CEFs.
More importantly, the decision to bring a specific energy project under the
Federal umbrella by designating it as a CEF triggers a range o f actions
open to the Board, which further illustrates the Federal interest present in
any approval decision by a State or local agency.
Third, judicial review o f most decisions made by State and local agen­
cies may present at least some substantial Federal questions. W here, for
example, the Board has granted a waiver o f State procedural requirements
to a State agency in order to enable it to meet its deadline for decisions
prescribed by the Schedule, the Federal question whether the waiver power
was exercised arbitrarily by the Board and whether the State agency’s pro­
cedure com ported with Federal constitutional requirements might well be
part o f the litigation.
The Adm inistration’s proposal, as presently drafted, provides neither
for any overriding principle o f Federal law to control the interpretation o f
State substantive law nor specifically for incorporation o f State law as a
Federal standard to be administered by State or local decisionmakers as
Federal law. Thus, when either the Board or State and local agencies make
approval decisions pursuant to State substantive law, they are applying
that law qua State law. If Congress expressly incorporated State law as the
Federal rule o f decision, suits challenging those decisions would “ arise
under” the laws o f the United States. See, M acomber v. Bose, 401 F.(2d)
545 (9th Cir. 1968); Stokes v. Adair, 265 F.(2d) 662 (4th Cir. 1959), cert,
denied, 361 U.S. 816 (1959); Quadrini v. Sikorsky Aircraft Division,
United Aircraft Corp., 425 F. Supp. 81, 87 (D. Conn. 1977); Textile
Workers Union v. American Thread C o., 113 F. Supp. 137, 140 (D. Mass.
1953). The decisions establish that Congress may incorporate State law as
the Federal standard and also that it may leave to the States the authority
to amend the substance o f the State laws on the books when the Federal
statute effecting such incorporation is enacted. See, e.g., United States v.
Sharpnack, 355 U.S. 286 (1958).6
‘Incorporation would permit Congress to freeze State law standards as presently in force.
The A dm inistration’s proposal, however, does not seek to freeze standards as they may
evolve, which suggests that there are no significant policy reasons to have State law directly
incorporated, except to the extent that incorporation brings actions relating to a CEF within
the purview o f Article III.
(Continued)
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Assuming, however, that there is at least some symbolic reason to allow
State decisionmakers to continue to apply State law qua State law, we
believe that Federal court jurisdiction under the so-called “ protective
jurisdiction” theory would be available.
In International Brotherhood o f Teamsters v. W.L. Mead, Inc., 230
F.(2d) 576 (1st Cir. 1956), the court o f appeals upheld the constitutionality
o f § 301 o f the Taft-Hartley Act on the theory o f “ protective juris­
diction.” Under that theory, Congress is not required to displace totally
(or presumably to incorporate) all otherwise applicable State law in its
comprehensive regulation of a specific area o f activity. Rather, Congress
may leave issues to be decided by reference to State law but place litigation
over those issues and others in Article III courts. 230 F.(2d), at 580-81.
In reaching its conclusion, the court relied on Williams v. Austrian, 331
U.S. 642 (1947), a case in which Federal jurisdiction was found in a
bankruptcy suit in which only State law would be applied by a Federal
co urt.7 The decision appears to suggest that some limits on “ protective
jurisdiction” might be derived from Article III, one such being the re­
quirement o f a high degree o f overall Federal regulation o f an area before
Federal “ protective” jurisdiction could be established. We think that the
Administration’s overall CEF proposal would clearly meet that threshold
test. We would add that the court’s analysis received the explicit approval
o f Justices Burton and Harlan in Textile Workers Union v. Lincoln Mills,
353 U.S. 448 (1957), where the Court upheld the constitutionality o f § 301
o f the Taft-Hartley Act on other grounds.
Although we conclude that Federal jurisdiction consistent with Article
Ill’s “ arising under” requirement m ay be conferred under either an “ in­
corporation” or “ protective jurisdiction” rationale, we would note that
such jurisdiction could also be established by empowering the Board to in­
tervene as a party in any case brought in a court o f appeals challenging an
approval decision made by a State or local agency. In these circumstances,
jurisdiction would be established as an Article III m atter by virtue o f the
United States or one o f its instrumentalities being a “ party” to the suit,
see, United States v. San Jacinto Tin C o.,, 125 U.S. 273 (1888), having a
judicially cognizable interest in its subject matter.
(Continued)
At least in theory, there might be a T enth Am endment objection to federalizing the State
law to be applied by State agencies, even though Federal law is substantively identical to the
displaced State law. The objection would be that the State or local agency has, in effect, been
instructed with regard to the law to be applied by it and is therefore required to administer a
Federal program w ithout having any freedom to decline to do so. See, Maryland v. EPA,
supra.''See Also, Schumacher v. Beeler, 293 U .S. 367 (1934). See generally Mishkin, “ The
Federal ‘Question’ in the District C ourts,” 53 Columbia L. Rev. 157, 195 (1953).
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III. Conclusion
We conclude that constitutionally the Board may be granted authority
to subject State and local agency decisonmaking to the Schedule; to waive
nonconstitutional procedural requirements imposed on those agencies by
State law; and to act in the place o f such agencies when they fail to meet
the Schedule. If the Schedule is met, then State sovereignty is respected; if
the Schedule is not met, then decisionmaking power passes to the Board.
We reach these conclusions acknowledging that these are constitutional
law questions with no direct precedent either in judicial decision or
historical experience.
We also believe that jurisdiction may be vested in the Federal courts to
hear all challenges to approval decisions made by State and local agencies
even in cases involving questions o f substantive State law, that the Board
may be made a party to any such action in order to ensure that the interests
o f the United States are adequately represented, and that the requirements
o f Article III are met.
John M . H arm on
Assistant A ttorney General
Office o f Legal Counsel
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