Interstate Compacts

The creation of the Port Authority of New York and New Jersey in 1922 through an interstate compact signaled a significant shift in the use and application of interstate compacts. For the first time states began using compacts to establish regulatory agencies with the authority to act on the state’s behalf. Known as administrative compacts, these agreements frequently allow for a sophisticated governing structure that possess the authority to pass rules, draft bylaws, form committees, and hire staff to carry out the daily operations of the compact.  

Interstate compacts often are viewed as a way for states to work cooperatively to avoid federal intervention or a federally mandated solution. While that is an accurate statement, it does not mean the federal government does not play a role in the compact process. In fact, federal officials are active in a number of compacts, with participation ranging from congressional consent to direct federal involvement.

While the use of interstate compacts dates back to the founding of the nation, this tool has become increasingly popular for state policymakers seeking ways to address interstate policy challenges short of federal intervention. This webinar, the first in a series, focused on the background, history and modern use of interstate compacts, with insights shared by Rick Masters, legal adviser to three national interstate compact commissions affiliated with CSG.

Delaware Gov. Jack Markell and Nevada Gov. Brian Sandoval signed the country’s first online gambling compact late Tuesday afternoon.  The bill allows poker players physically located in either Nevada or Delaware to compete online against one another.  Both Governors expressed hope that other states would also join the compact, but to date New Jersey is the only other state in the country to offer online gambling.

A June ruling by the U.S. Supreme Court is being hailed as a significant victory for interstate compacts.  At issue in the case was whether the Tarrant Regional Water District, located in Texas, could access water from the Red River in Oklahoma pursuant to the terms of the Red River Compact. In the ruling the Court concluded that Tarrant was not entitled to the water in question based on the terms of the compact.

By Rick Masters, Special Counsel to CSG’s National Center for Interstate Compacts

On Thursday, June 13, 2013 the U.S. Supreme Court again upheld the bedrock principle that compacts are contracts and reiterated the immutable rule that “Because interstate compacts are construed under contract law principles, see Texas v. New Mexico, 482 U. S. 124, 128, the Court begins by examining the Compact’s express terms as the best indication of the parties’ intent.”  See Tarrant Regional Water District v. Herrmann, et p.11.  In the Tarrant case the Court was called upon to interpret the provisions of the Red River Compact which is a congressionally sanctioned agreement that allocates water rights within the Red River basin among the States of Oklahoma, Texas, Arkansas, and Louisiana. 

The U.S. Supreme Court will hear oral arguments in April 2013, in the matter of Tarrant Regional Water District v. Herrmann. While the specifics of the case pertain to a dispute between Texas and Oklahoma over water from the Red River, the court’s ruling will be watched closely by the numerous interstate compacts that regulate shared bodies of water. 

Crady deGolian, Director of CSG's National Center for Interstate Compacts, outlines the top 5 compacts to watch in 2013, including those dealing with the siting of electricity transmission lines, surplus insurance lines, interstate reciprocity regarding online education, and EMS licensing.  

Water is critically important to Michigan. “If you ask most people in Michigan about the importance of water, they would say, ‘it’s the essence of our being’ or ‘it’s the essence of our living’ or ‘it’s the essence of our life,'” said Patty Birkholz, a former state senator and current director of the Michigan Office of the Great Lakes. Just look at the state—it touches four of the five Great Lakes and is almost completely surrounded by water. Agriculture, manufacturing and tourism—the state’s three largest industries—depend on the Great Lakes.

A California court ruling is being hailed as a significant victory for states and the interstate compact mechanism. At issue in the case of The Gillette Company v. The Franchise Tax Board was California’s method of collecting and allocating tax dollars from companies that do business across state lines. More broadly, however, the case brought into question a state’s ability to unilaterally amend the terms of a compact it has joined. 

Crady deGolian, Director of the National Center for Interstate Compacts, discusses the importance of this ruling.  For more information, please see "A Victory for Interstate Compacts."