Preemption Watch

 January 2005

“Eternal vigilance is the price of liberty” -- Wendell Phillips

New Rules focuses on what communities can do to defend their quality of life and local economies.  We believe in the maxim, “where there’s a will there’s a way”.   Local governments, and certainly state governments, possess sufficient authority to develop and implement rules that can help extract the maximum value from their local resources—human, financial and natural.

While we accentuate the positive, we recognize the negative:  the disturbing and seemingly accelerating tendency by the federal government to undermine and even to preempt local and state initiatives. 

Preemption Watch reports on these developments. We believe that federal preemption often violates both conservative and liberal values and agendas.  We hope that in the coming months, blue states and red states, blue communities and red communities can work together to demand that they be given the authority to protect their futures.

Preemption Watch will be updated regularly.  Since this is our first issue, it will discuss some of the major decisions made in the last few years. 

For an excellent backgrounder and overview of recent federal preemption initiatives, see Alison Cassady, Tying the Hands of States. National Association of State PIRGs.

For a well-documented critique of federal preemption see Roderick M. Hills, Jr.  Against Preemption:  How Federalism Can Improve the National Legisaltive Process.  University of Michigan Law School.

A number of other groups cover the federal preemption issue more broadly, more deeply and more often than we will. We urge you to visit their sites.  These include: Electronic Privacy Information Center, National Conference of State Legislatures, National Consumer Law Center , Public Citizen.

While many issues at the forefront right now involve federal preemption of state governments, states also preempt local authority.  At New Rules, we believe that to the maximum extent possible, authority and responsibility should go hand in hand.  As a consequence, Preemption Watch will cover state, as well as federal preemption.

Federal Preemption

Energy:

• LNG Permitting Authority In November 2004, in Conference Committee, Congress added new language to the FY 2005 Omnibus Appropriations Bill regarding federal authority over the siting of liquefied natural gas (LNG) facilities.  The provision, inserted by Sen. Pete Domenici (R-NM), states that "LNG terminals are engaged in foreign commerce and, as such, fall clearly within the authority granted to the FERC under ... the Natural Gas Act of 1938."[1]  This language affirms the position taken by FERC (Federal Energy Regulatory Commission) in March 2004 that the Natural Gas Act preempts state authority to approve and site LNG facilities.  The language may influence a pending lawsuit by the California Public Utilities Commission filed in July 2004 against FERC’s March decision.   The language does not have the weight of law behind it, however.  Appropriations report language is only in effect for one year and serves as an opinion or advice directed towards federal agencies.

• Greenhouse Gas Controls. In August 2004, a lawsuit was filed by the Alliance of Automobile Manufacturers and several Central Valley car dealerships, asking that the court overturn California legislation that restricts greenhouse gas emissions from vehicles, starting in 2009 (AB 1493).  The manufacturers argue that the only way to reduce greenhouse gasses is to raise fuel efficiency, and federal law (specifically, the 1975 Federal Energy and Conservation Act) preempted states from regulating fuel efficiency.    

• Vehicle emissions standards. Automobile manufacturers won a similar lawsuit nearly two years ago over California’s electric vehicle initiative. In 1990, California introduced its Zero Emission Vehicle (ZEV) program.  Car dealers were required to have an increasing percentage of their cars sold in California be ZEVs.  In January 2002, GM, Daimler Chrysler and several local California dealerships filed a lawsuit against the California Air Resources Board (CARB) alleging that the 1975 Federal Energy and Conservation Act preempted the ZEV rules.  On June 11, 2002 a federal judge issued a preliminary injunction, preventing CARB from enforcing the 2001 ZEV regulations for model years 2003 and 2004.[2]

Health

• Managed Care In June 2004, the U.S. Supreme Court unanimously rejected states’ efforts to give patients in HMOs the right to sue managed care companies when they refuse to cover treatments that a doctor has deemed medically necessary. [3]   The court ruled that the 1974 federal Employee Retirement Income Security Act (ERISA) preempts the “right to sue” laws of Arizona, California, Georgia Maine, New Jersey, North Carolina, Oklahoma, Texas, Washington and West Virginia.[4]

Finance

• Opting In, or Out In June 2004 a federal judge upheld California’s bank privacy law (SB1), which was signed into law in August 2003 and went into effect July 1^st.[5]  Among other things, the law requires an opt-in for bank customers willing to have their data shared.  The federal law provides only for an opt-out option.  The judge’s decision contradicted a July 2003 ruling by another district judge, who ruled that California’s law was preempted by the federal law.   The American Banking Association and other parties have appealed.

• Credit Reports The Fair Credit Reporting Act preempted state authority in certain areas.  FCRA was due to expire in January 2004.  In December 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACT Act), which amended FCRA in several areas.  The new law includes a permanent extension of FCRA’s state preemptions, and an expansion of the kinds of state actions that are prohibited.

• Banking In January 2004, the Office of the Comptroller of the Currency (OCC) issued a sweeping rule that would prevent most state consumer protection laws from applying to nationally chartered banks. New York State Attorney General Eliot Spitzer commented that the rule will “entice state-chartered banks to obtain a national charter and seek the immunity that the OCC is offering.  By giving banks a safe harbor, the OCC has a chilling effect on state laws.”[6]   As of this writing, the OCC has not issued its final rule.

• Credit Cards In 2002, banks successfully sued to overturn a new California state law requiring credit card companies to disclose on their monthly statements information about how long it would take consumers to pay off their balances if they only made the requested minimum payment.  No federal law requires such a disclosure.  American Bankers Association vs. Bill Lockyer.  2002.

• ATM Surcharges In 1999 Wells Fargo and Bank of America sued the cities of San Francisco and Santa Monica for banning ATM surcharges.[7]  In October 2002 the 9^th Circuit Court of Appeals ruled that the National Banking Act preempted local governments from enacting such bans.[8]

State Preemption

• Living Wage In March 2004, Michigan House Bill 4160 was enacted. It prohibits local governments from imposing a “living wage” requirement on private sector employers that is greater than the state minimum wage. Local governments would not be prohibited from imposing “living wage” requirements on a private vendor who provides goods or services to the local government. See Michigan House Bill 4160.

• Wind Turbines In October 2001, California AB 1207 became law.  It orders California cities and counties (excluding some densely populated areas) to enact ordinances allowing wind turbines towers of at least 65 feet on any property sized an acre or more - and at least 80 feet on 5-acre or larger properties.  If cities and counties fail to enact ordinances by July 1, 2002, AB 1207 specifies that small wind turbines become a "use by right" and will receive a building permit by default, provided they meet the state’s minimum specified requirements. See:  California Small Wind Energy Siting Bill

• Feedlots In April 2004 the Wisconsin legislature passed Act 235, also know as the Livestock Facilities Siting Standards Law, creating a state-level panel with the authority to overturn local decisions on zoning and permits for livestock operations. The panel will set standards that local governments must use when considering new feedlots or expansions of existing operations, overriding local planning and land use regulation. See:  Wisconsin Act 235