Interstate Compacts: An Overview

Interstate Compacts: An Overview

Legal Sidebari

Interstate Compacts: An Overview
Updated June 15, 2023
The Compact Clause (Article 1, Section 10, Clause 3) provides that “No State shall, without the Consent
of Congress, ... enter into Any Agreement or Compact with another State, or with a foreign Power.”
Although straightforward on its face, the Compact Clause serves multiple functions. It protects the
national interest by requiring Congress’s consent for interstate compacts while, at the same time,
empowering states to negotiate and use compacts as a tool to address problems that cross state lines.
Along with interstate compacts, the Compact Clause also requires congressional approval for any state
agreement “with a foreign Power” (i.e., a foreign government). States’ pacts with foreign governments
and other limits on states’ power to engage in foreign affairs are discussed in a separate Legal Sidebar.
The Compact Clause does not prescribe all elements of the compact-making process, and the Supreme
Court has not always interpreted the requirement that Congress consent to “any” interstate compact
literally. This Sidebar discusses the Supreme Court’s Compact Clause jurisprudence and provides an
overview of Congress’s approval practice for interstate compacts and agreements.
What Are Agreements and Compacts?
The Compact Clause requires congressional approval for “Agreements” and “Compacts” but does not
elaborate on the distinction between the terms. According to the Supreme Court, both terms refer to
contracts between state governments stipulating “the conduct or claims of the parties.” There is little
difference between the terms except that a compact may reflect a more “formal and serious engagement”
than an agreement. When Congress approves an agreement or compact, its consent transforms the pact
into federal law. As a result, interstate compacts have dual functions: They operate simultaneously as
contracts between states and, once approved by Congress, as federal law.
Purpose of Congressional Consent Requirement
The ability to form compacts with other governments is a defining characteristic of sovereignty, and the
Compact Clause is meant to balance federal and state control over this power. By allowing states to
negotiate compacts but requiring congressional approval, the Compact Clause adapts the traditional
compact-making power to the American constitutional system in which both the federal government and
the states possess sovereignty authority. The clause safeguards national interests by giving Congress the
ability to control matters that cross state borders but are not suitable for direct federal regulation. It also
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protects states’ interests by regulating an individual state’s ability to unilaterally form compacts that might
disadvantage other regional or state interests.
Subject Matter of Interstate Compacts
For much of American history, boundary disputes were the predominant subject of interstate compacts.
Beginning in the 1920s, states developed compacts as a tool for solving more complex regional problems.
States made compacts to apportion interstate water bodies and to manage interstate resources and
properties, such as oil and gas, fisheries, and parks. They also began to use compacts to carry out major
public undertakings and infrastructure projects, such as the Port of New York and New Jersey. Later in the
20th century, interstate compacts addressed an even wider range of issues, with Congress approving
interstate compacts on subjects as varied as education, urban planning, historical preservation, taxes,
emergency aid, fire prevention, transportation, sewage disposal, and radioactive waste management.
Some interstate compacts create administrative bodies and empower those bodies to implement the
compacts. For example, in West Virginia ex rel. Dyer vs. Sims, the Supreme Court addressed the Ohio
River Valley Sanitation Compact, which authorized an interstate commission to issue orders requiring
compliance with the compact’s sewage disposal restrictions. A West Virginia state court deemed the
compact invalid under the theory that it unlawfully delegated the state’s sovereign authority (known as its
police power) to a body outside the state. The Supreme Court, however, held that states could delegate
their police power to an interstate compact commission because the Framers of the Constitution intended
the Compact Clause to allow the states to resolve interstate problems in diverse and creative ways.
When Consent Is Required
One of the most common questions to arise under the Compact Clause is whether congressional consent
is required for a particular state commitment. A literal reading of the Compact Clause would require
congressional approval for any interstate compact, but the Supreme Court has not endorsed that approach
in interstate compacts cases. Instead, the Court adopted a functional interpretation in which only interstate
compacts that increase the political power of the states while undermining federal sovereignty require
congressional consent.
The Supreme Court first expressed doubt that Congress must approve every interstate compact in Virginia
v. Tennessee—an 1893 case about the constitutionality of a boundary settlement agreement. Congress had
not given express consent to the boundary-setting agreement in Virginia, but the Supreme Court held that
Congress had given its implied consent to the agreement by using the same boundary lines in later
legislation. Even without that implied consent, the Court in Virginia reasoned that congressional approval
was unnecessary in the first place. The Court saw no reason for congressional consent for compacts with
which the United States would have no objection or desire to interfere. Rather than require congressional
approval in every case, the Court in Virginia stated that interstate compacts need Congress’s consent only
if they could lead to an “increase of political power in the [s]tates, which may encroach upon or interfere
with the just supremacy of the United States.”
The Supreme Court repeated Virginia’s test for determining when congressional consent is necessary in
several later cases and clarified how the test applies to modern interstate compacts. For example, in U.S.
Steel Corp. v. Multistate Tax Commission, the Supreme Court held that a compact creating uniform rules
for state taxation of multistate corporations did not require congressional consent even though it increased
the states’ bargaining power in relation to the taxed companies. The Court explained that Virginia’s test
does not focus on whether the compact makes the states more influential in general but only whether it
could enhance the states’ power in relation to the federal government.

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The Supreme Court has also suggested that some engagements between states do not qualify as
agreements or compacts at all. In Northeast Bancorp, Inc. v. Board of Governors of Federal Reserve
System, the Supreme Court addressed a constitutional challenge to a system of reciprocal state legislation
that limited acquisition of banks in Massachusetts and Connecticut. The Court determined that
congressional consent was not required because the reciprocal state legislation scheme lacked four
“classic indicia of a compact,” which are:
1. Creation of a joint organization or body,
2. Conditioning one state’s action on the actions of other states,
3. Restricting states’ power to modify or repeal their laws unilaterally, and
4. A requirement for reciprocal constraints among all states.
The Court in Northeast Bancorp, Inc. also held that, even if it assumed a compact existed, the scheme was
authorized under existing federal banking law and therefore could not infringe federal supremacy under
the Virginia standard.
Viewed collectively, the Supreme Court’s interstate compact jurisprudence appears to establish a two-part
inquiry for determining whether congressional consent is necessary: (1) Is the arrangement at issue an
agreement or compact for constitutional purposes, and, (2) if so, does it belong in that class of compacts
described in Virginia that require congressional approval because it affects federal supremacy?
Methods for Congressional Consent
The Constitution does not define a process for when or how Congress should consent to a compact. The
Supreme Court has interpreted this silence to mean that Congress may use its wisdom and discretion to
choose the manner of authorization. According to the Court, Congress can consent to a compact in
advance or after the states have negotiated and joined in agreement. The Supreme Court has also held that
Congress’s consent need not be expressly stated and may be inferred from the circumstances.
In practice, Congress frequently approves specific compacts, but it has also given advance approval to
broad classes of compacts. Additionally, Congress has given consent for an indefinite period of time and
has provided an end date for its authorization. When approving a compact, Congress can impose
conditions on its consent provided the conditions are “appropriate to the subject” and do not exceed a
constitutional limitation, such as infringing individual rights or exercising an authority exclusively
assigned to another branch of government. Congress imposed a complex set of conditions, for example, in
its legislation authorizing regional interstate compacts for radioactive waste disposal.
Interpretation and Effect of Interstate Compacts
The Supreme Court has stated that it has final authority to interpret interstate compacts. The Court often
hears interstate compact cases under its authority in Article III, Section 2, clause 2, of the Constitution,
which gives the Supreme Court original jurisdiction over disputes between states. Original jurisdiction
cases go directly to the Supreme Court without proceedings in lower courts. For example, in April 2023,
the Court issued a unanimous opinion in an original action concerning whether New Jersey could
unilaterally withdraw from the Waterfront Commission Compact with New York, which Congress
approved in 1953. In 2018, New Jersey passed a state statute instructing its governor to carry out the
withdrawal process, but New York argued that only Congress could repeal a congressionally approved
compact. The Supreme Court held that New Jersey could unilaterally withdraw from the Waterfront
Commission Compact despite New York’s opposition.
The Supreme Court views its role in original jurisdiction cases as different from its more standard
disputes on appellate review. It approaches original jurisdiction cases in an “untechnical spirit” that

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allows the Court to mold the process in a way that “will best promote the purposes of justice.” When
private litigants are parties to interstate compact disputes, the cases do not fall under the Supreme Court’s
original jurisdiction but may be heard in a federal court (rather than in a state court), because
congressionally approved compacts, which are federal laws, raise federal questions.
As federal law, congressionally approved compacts can preempt inconsistent state law, and no court may
order relief inconsistent with a compact’s terms unless the terms violate the Constitution. Even though the
Supreme Court ordinarily defers to state courts’ interpretations of their own state law, the Supreme Court
held in West Virginia ex rel. Dyer vs. Sims that it is not required to defer to state courts’ views on whether
an interstate compact comports with state law and that those rulings do not bind the Supreme Court. In
that case, the Supreme Court declined to adopt the highest state court in West Virginia’s interpretation of
whether an interstate compact complied with the West Virginia state constitution.
Along with their status as federal law, interstate compacts function as contracts between states. As a
result, the Supreme Court has used contract law principles and remedies in some interstate compact cases.
For example, in Green v. Biddle, the Court held that interstate compacts fall under the protection of the
Contract Clause of the Constitution, which prohibits states from passing laws that impair contract rights.
In its April 2023 decision concerning New York and New Jersey, the Supreme Court drew upon contract
law principles in concluding that New Jersey could unilaterally withdraw from the Waterfront
Commission Compact. That compact did not expressly speak to withdrawal, but the Court concluded that
“background principles of contract law” allowed unilateral withdrawal from similar contracts and that this
default rule applied “in the silence of the [c]ompact.” At the same time, there are limits on how far the
Supreme Court will treat compacts as ordinary contracts. In Alabama v. North Carolina, the Court
declined to read an implied duty of good faith and fair dealing into an interstate compact even though the
Court acknowledged that every contract imposes that duty.

Author Information

Stephen P. Mulligan

Legislative Attorney

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