Tensions between the federal government and the states over environmental regulation are rising sharply as the Trump administration pursues an aggressive deregulatory agenda. At the center of the storm is the U.S. Environmental Protection Agency (EPA), which, under administrator Lee Zeldin, is rolling back climate-related policies and reasserting federal supremacy in areas historically shaped by cooperative federalism.

Meanwhile, states on both ends of the political spectrum are responding with legislation, litigation and coalitions designed to preserve or expand their environmental authority.

The resulting conflict is playing out in courtrooms, statehouses and regulatory agencies across the country. It’s grounded in constitutional questions of federal preemption, the commerce clause and Tenth Amendment state sovereignty. The outcomes could reshape the legal framework for environmental governance for years to come.

Deregulation by Design

Since early 2025, the EPA has taken a series of high-profile steps to scale back environmental regulations. On March 12, 2025, Zeldin declared, “Today is the greatest day of deregulation our nation has seen. We are driving a dagger straight into the heart of the climate change religion.” His remarks, delivered at a press conference announcing the reconsideration of multiple energy-related regulations, signaled a clear shift in the agency’s priorities. Zeldin’s approach aligns closely with the Trump administration’s energy strategy, which emphasizes fossil fuel production over climate mitigation.

In support of this agenda, President Donald Trump issued an executive order titled "Protecting American Energy from State Overreach," which asserts that state-level climate initiatives threaten “American energy dominance” and national security. The order directed federal agencies to challenge state and local laws that could hinder fossil fuel development.

Federal Lawsuits Target State Climate Initiatives

Acting on the executive order, the U.S. Department of Justice filed lawsuits this spring against New York, Vermont, Hawaii and Michigan. The complaints against New York and Vermont challenge those states’ newly enacted climate Superfund laws, which impose strict, joint and several liability on fossil fuel companies for climate-related damages and require payments into mitigation funds. Modeled loosely on CERCLA, these laws are among the most ambitious state efforts to hold fossil fuel producers financially accountable for impacts from climate change. The DOJ lawsuits allege that the laws are unconstitutional, preempted by federal statutes, and infringe on federal authority over interstate commerce and foreign affairs. The DOJ suits against Hawaii and Michigan are intended to prevent those states from filing lawsuits against fossil fuel companies seeking damages for climate change impacts in the state. The states had signaled their plans to file such suits, and the DOJ complaint, preemptive in nature, asserts that the suits would stand in the way of national efforts to secure reliable sources of domestic energy.

Congress has also stepped into the fray. In May 2025, lawmakers passed a resolution pursuant to the Congressional Review Act (CRA) disapproving of EPA waivers that allowed California’s regulation requiring all new passenger vehicles sold in the state to be zero-emission by 2035. The move was widely seen as an effort to undercut California’s leadership in setting stricter-than-federal emissions standards. California’s Attorney General and the attorney general of nine other states immediately filed suit challenging the action.

EPA Budget Cuts and Regulatory Retreats

In June 2025, the EPA proposed a rule repealing greenhouse gas (GHG) emission standards for fossil fuel-fired power plants. The agency justified its decision by asserting that such emissions “do not contribute significantly to dangerous air pollution” and that fossil fuel-based energy production is essential to public welfare and national independence. The proposal also stated that cost-effective emissions controls are not “reasonably available.” Both are key findings for weakening the regulatory obligations.

Simultaneously, the EPA’s proposed 2026 budget includes significant cuts to funding streams that support state-level environmental work. Most notably, the agency proposed reducing the state revolving fund—used primarily for water infrastructure projects—by $2.46 billion, and cutting $1 billion from the categorical grant program, which supports state-run environmental initiatives. According to EPA budget officials, these cuts are intended to “reflect a renewed emphasis on federalism, removing the overhead lost with the federal government acting as a passthrough.”

States Push Back

States have responded with both legal challenges and public opposition. Leaders from Republican and Democratic administrations have criticized the proposed budget cuts. Officials from Mississippi, South Carolina, Oregon and New Mexico raised concerns about the EPA budget cuts and warned that the loss of categorical grants would incapacitate their environmental programs and hinder economic development.

Fourteen states—including Michigan, California, Hawaii and New Mexico—filed suit to challenge the influence of the Department of Government Efficiency on federal agency appointments. The lawsuit, which alleges a violation of the Constitution’s appointments clause, was allowed to proceed by a federal judge in the District of Columbia on May 27, 2025.

Meanwhile, the governors of 11 states announced the formation of the Affordable Clean Cars Coalition in late May. The coalition, composed of states including New York, Washington and New Jersey, aims to preserve state authority over vehicle emissions and promote the transition to cleaner transportation. The effort was widely viewed as a direct response to federal attempts to strip states of their regulatory power over mobile sources of pollution.

The California Flashpoint

No state has found itself more at odds with the federal government than California. The state’s Climate Disclosure Laws—SB 253 and SB 261—are slated to take effect in 2026, despite the absence of final implementing regulations. These laws will require covered companies to report detailed climate-related risks and emissions data, including indirect (Scope 3) emissions.

California’s carbon trading program has also drawn sharp criticism from federal officials. Trump’s executive order singled out the program, stating that it “punishes carbon use by adopting impossible caps … forcing businesses to pay large sums to ‘trade’ carbon credits.” In response, Gov. Gavin Newsom vowed that California will “double down” on the program.

California Sen. Alex Padilla, has raised concerns about the direction of the EPA and the confirmation of key appointees. Despite opposition, the Senate confirmed David Fotouhi as EPA deputy administrator on June 10, 2025, by a largely party-line vote of 53–41.

A Fragile Model of Cooperative Federalism

At its core, environmental law in the United States is built on a model of cooperative federalism. Congress sets national policy through legislation; the EPA issues implementing regulations; and states may enforce those rules or in some cases, go further within their borders. Many federal statutes, including the Clean Air Act and Clean Water Act, provide mechanisms for states to seek delegated authority to run their own programs.

That structure has always been subject to tension. In McCulloch v. Maryland (1819), the U.S. Supreme Court famously held that Congress had implied powers to establish a national bank, and that a state did not have the authority to tax that bank.

Recent court decisions reflect the evolving balance. In West Virginia v. EPA (2022), the court limited the EPA’s authority to regulate GHG emissions in ways that implicate the major questions doctrine, opening the door for state action in areas where the federal government may now be constrained. Similarly, in Dobbs v. Jackson Women’s Health Organization (2022), the court emphasized the role of states in crafting policy “in accordance with the views of its citizens,” even as it dramatically curtailed federal protections in a different arena.

But other cases have reaffirmed federal supremacy. In Coventry Health Care of Missouri v. Nevils (2017), the court held that the Federal Employees Health Benefits Act preempted conflicting state insurance laws. And in Parker Drilling v. Newton (2019), the court unanimously ruled that state wage-and-hour laws could not override federal statutes governing employment on the Outer Continental Shelf.

Looking Ahead

With litigation pending on multiple fronts, and more likely on the way, the coming months will test the outer limits of federal and state authority over environmental regulation. While the current Supreme Court leans conservative, nearly 46% of its decisions in the 2023–24 term were unanimous, suggesting a more complex calculus than party affiliation alone.

As the courts work through these questions, it’s clear that the regulatory landscape is in flux and the old rules no longer apply without challenge. The conflict between federal environmental rollback and state-level resilience is more than a legal skirmish; it’s a structural reckoning. Expect turbulence and hold on because it’s likely to be a wild ride.

Reprinted with permission from the July 22, 2025 issue of The Legal Intelligencer© 2025 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.