The legal system in the United States is a part of a broader, federal political system. Like the policeman on the beat, the role of the federal courts and Congress in disputes between the states is as much to deter anti-social behavior as to intervene to impose order. One function of the legal, administrative and legislative processes is to give the disputants time to reconsider their positions and compromise their goals, to reflect upon their long-term interests, and to consider the wisdom of avoiding a clear-cut determination of winners and losers. In the context of energy severance taxes, these processes have permitted the dispute to be put into the larger perspective that only time and operation of the economic system can give. Although neither the federal courts nor Congress have been willing to act directly to arbitrate the sectional conflict over energy severance taxes, the power of these legal institutions to act has played an important part in permitting economic forces to adjust, albeit it painfully, the energy severance tax controversy. While the Montana and Jicarilla Apache taxes remain in place, their impact upon consumers is minimal and other states have not followed suit. Montana and the Apache Tribe are isolated, their economies staggered by high unemployment and low growth caused in part by the unwise exercise of their sovereign authority to tax. The system has worked to permit time and changed circumstances to defuse the energy severance tax controversy.
It is quite likely that state severance taxes will become a sectionalist issue sometime again in the future, for energy sectionalism is little more than a manifestation of the inherent tendency of human beings to take advantage of their neighbors (whom they may not trust anyway) when circumstances permit them to do so. However Commonwealth Edison v. Montana, Merrion v. Jicarilla Apache Tribe, and the response of Congress to the phenomena that caused those cases should give confidence that the system will once more weather the storm. The constitutional powers of the federal courts and Congress are sufficient to protect one group of states from economically predatory actions of other groups, if the courts or Congress choose to exercise them. That those powers exist makes the need for their exercise less likely.
Energy Law Journal
John S. Lowe, Severance Taxes as an Issue of Energy Sectionalism, 5 Energy L.J. 357 (1984)