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Unpublished Paper
Handshake Deals: The Future of Informal State Agreements and the Interstate Compacts Clause
ExpressO (2011)
  • Todd J Hartley

On January 1, 2012, the Western Climate Initiative (“WCI”) will begin regulating businesses in twenty-seven different North American states and provinces when it implements a cap and trade program to control greenhouse gas emissions. Though the WCI will regulate almost a third of the North American economy, it was formed with little more than a handshake in 2007 by five state governors. Neither Congress nor any other federal entity has approved the organization. States increasingly use informal agreements like the WCI to enact social policies; however, these agreements often are unconstitutional under the Interstate Compacts Clause (“ICC”). The ICC states that “[n]o State shall, without the consent of Congress, . . . enter into any agreement or compact with another State, or with a foreign power . . . .” This article addresses the constitutionality of the WCI and other informal state agreements under the ICC. Three questions must be answered to determine whether the WCI is constitutional under the ICC.

First, is the WCI a “compact”? Traditionally, courts have looked to whether a contract exists between states and to whether certain circumstantial “indicia” of a compact exists to determine whether state action is a compact. Informal state coordination like the WCI, however, requires a new test because the WCI was purposefully crafted in a way to avoid the appearance that the member governments are working together. Thus, I apply the test from antitrust law used to find whether a “contract, combination, or conspiracy” exists between business entities to determine whether state coordination like the WCI creates a compact. Here, the WCI is a compact because an arrangement similar to a “contract, combination, or conspiracy” exists between the WCI members.

Second, does the WCI compact raise federal concerns and, thus, require congressional consent? Only compacts which impact the federal system by increasing the compacting states’ power, by superseding or conflicting with federal law, or by placing severe economic pressure on noncompacting states require congressional consent. Here, the WCI requires congressional consent because it impacts the federal system by increasing the WCI members’ power over international environmental regulation.

Third, if the compact raises federal concerns, has Congress consented to the compact? While Congress can consent in many ways, Congress has not yet consented to the WCI because it never requested that the WCI members form an agreement, has not expressly ratified the WCI, has not endorsed the WCI implicitly by passing similar legislation, and did not encourage the WCI members to compact in any other way.

The WCI was formed with little more than a handshake. Five governors sat down together and decided to address greenhouse gas emissions and climate change while Congress sat on its hands. For all their good intentions, handshake deals like the WCI which establish sufficiently weighty regulatory schemes are simply not constitutional without federal approval.

  • Interstate Compacts Clause,
  • Western Climate Initiative,
  • Federalism
Publication Date
February 3, 2011
Citation Information
Todd J Hartley. "Handshake Deals: The Future of Informal State Agreements and the Interstate Compacts Clause" ExpressO (2011)
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