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U.S. Supreme Court Justice Louis Brandeis famously called the states “laboratories of democracy.” In those laboratories, Iowans shape Iowa’s laws, Missourians make Missouri’s laws, and New Yorkers establish New York’s laws. That is a core tenet of federalism — a structural part of our nation’s Constitution that allows for great variation and competition between the states. What a state can’t do, however, is lay claim to the entire country as its laboratory.
That’s exactly what New York is trying to do. Its new greenhouse gas reporting rule requires “fuel suppliers” throughout the nation to register with New York and report information related to greenhouse gas emissions. But the rule doesn’t just concern companies doing business in the Empire State. New York has made clear that its new regulation applies to any ethanol and biodiesel producers whose product may, after being blended or sold by others, eventually end up in New York. In short, New York expects out-of-state producers and distributors to comply with its civil and criminal rules, even if the connection to the state is extremely remote or hypothetical.
This includes producers and distributors in our states — Iowa and Missouri. Together, we represent the nation’s leading producers of ethanol and biodiesel. Our states’ energy economies support millions of farmers, workers, families, and communities. New York’s rule would impose significant compliance costs, reporting obligations, inspections, civil penalties, and even criminal liabilities on businesses operating far from the Empire State.
The issue is not whether New York can create environmental rules for itself: of course it may. Rather, it is whether one state can force citizens, farmers, manufacturers, and businesses in other states to abide by its regulatory program.
Our states have made different policy choices for greenhouse gas regulation. Iowa has not chosen to impose New York-style radical reporting mandates on every fuel producer or supplier. Missouri has similarly refrained from adopting extreme greenhouse gas reporting requirements. Those choices belong to our citizens and their elected representatives. New York may disagree with them, but it cannot override them.
If every state had the right to regulate all others, the result would not be federalism: It would be chaos. Imagine if Iowa sought to regulate how financial institutions operate in New York to counter downstream effects in Iowa, and Missouri sought to regulate technology companies in California for similar reasons.
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This sounds crazy, but such regulatory chaos has already started to seep into our federal system. California and Massachusetts regulate how hog farmers around the country operate. California has a greenhouse gas disclosure law requiring large companies doing business there to report emissions and climate-related information, including out-of-state operations and even emissions in the entire supply chain. New York and Vermont have enacted “climate superfund” laws seeking to charge companies for past contributions to alleged climate-related harms. And Boulder, Colorado, claims international energy companies Exxon and Suncor are liable for alleged harms stemming from worldwide greenhouse gas emissions — which the Supreme Court will hear arguments on this fall.
Together, these scenarios reflect a troubling trend: If a policy goal seems big enough, some states think they can reach beyond their borders to solve it.
The Supreme Court has long recognized that one state cannot govern the citizens of another state. Each state is equal under the Constitution, and none has special privileges over any other. That limitation is one of the basic conditions that makes our federal system possible, and New York cannot ignore it.
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Federalism protects individual rights. Among other benefits, individuals can remove elected officials who don’t respect their rights by expressing their preferences in legislative and gubernatorial elections — and influencing national laws through their representatives in Congress. And at the state level, federalism provides another powerful mechanism to check government excess. Anyone who doesn’t like a state’s laws and isn’t satisfied with their electoral recourse can move out of that state.
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But if New York officials impose costly and unwanted policies on Iowans and Missourians, we cannot vote New Yorkers out of office. Our residents cannot even “vote with their feet” to another state to escape this terrible nationwide policy. In short, we cannot hold New York accountable for its extraterritorial regulation. Empire State politicians seek local benefits for their performative actions but export the burdens to people who have no voice in making them.
With support from the Center for Individual Rights, Iowa, Missouri, and a free-market business association, AmFree, have teamed up to protect our liberties and our federal system. We’re challenging New York’s greenhouse gas reporting rule in federal court in Missouri to enforce a basic constitutional boundary: One state’s authority ends where another state’s sovereignty begins.
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Our lawsuit doesn’t turn on who cares the most about the environment. Iowans and Missourians care deeply. Our farmers, fuel producers, and agribusinesses have powerful incentives to use resources efficiently, innovate, and compete. Biofuels are an important part of America’s energy independence. New York can control its own policy, but not that of the rest of the nation.
This is federalism. It’s our American way and it is worth defending.
Catherine Hanaway is the Attorney General of Missouri.