Dynamic Energy Federalism

U.S. energy law and the scholarship analyzing it are deeply fragmented. Each source of energy has a distinct legal regime, and limited federal regulation in some areas has resulted in divergent state and local approaches to regulation. Much of the existing energy law literature reflects these substantive and structural divisions, and focuses on particular aspects of the energy system and associated federalism disputes. However, in order to meet modern energy challenges — such as reducing risks from deepwater drilling and hydraulic fracturing, maintaining the reliability of the electricity grid in this period of rapid technological change, and producing cleaner energy — we need a more dynamic, holistic understanding of energy law. Examining the energy system as a whole reveals patterns across substantive areas and allows them to learn from one another. This Article provides the first systematic account of energy federalism, proposing a novel model for understanding the energy system and its federalism dynamics. It begins by describing the U.S. energy system as comprised of interacting physical, market, and regulatory dimensions. The Article next explains why this complex system requires a federalism model that moves beyond disputes over federal versus state authority; it describes the many vertical interactions (those across levels of government, from the local to the international) and horizontal interactions (those among actors within the same level of government) within different types of energy regulation. The Article then considers the governance challenges created by these interactions, with a focus on inadequate regulatory authority, simultaneous overlap and fragmentation of regulation and institutions, and the difficulties of including key public and private stakeholders while avoiding inappropriate regulatory capture, such as when powerful utilities or oil companies gain control of regulatory processes to protect their private interests at the expense of the public. The Article concludes by proposing dynamic federalism principles for designing institutions that are responsive to these governance challenges through (1) creating needed authority; (2) reducing fragmentation; and (3) allowing for high levels of involvement from key public and private stakeholders that allow for meaningful input without capture. It also introduces our companion article, Hybrid Energy Governance, which applies these principles through detailed case studies to assess institutional innovation in areas critical to energy transformation.