Understanding the legal nature of an interstate Compact begins with this basic point: interstate Compacts are formal agreements between states that exist simultaneously as both (1) statutory law, and (2) contracts between states. The contractual nature stems from the reciprocal enactment and adoption of substantially and substantively similar laws by sovereign state legislatures. There is (1) an offer (the presentation of a reciprocal law to two or more state legislatures), (2) acceptance (the actual enactment of the law by two or more state legislatures), and (3) consideration (the settlement of a dispute or creation of a joint regulatory scheme). See MICHAEL L. BUENGER, JEFFREY B. LITWAK, MICHAEL H. MCCABE & RICHARD L. MASTERS,, THE EVOLVING LAW AND USE OF INTERSTATE COMPACTS 2d ed. 42–48 (ABA Publ’g 2016). However, if a unilateral alteration clause exists within Compact language, the agreement generally may not rise to the level of a Compact enforceable as a contract between the states. Ne. Bancorp v. Bd. of Governors of Fed. Reserve Sys., 472 U.S. 159, 175 (1985).
Interstate Compacts, federal statutes, and regulatory law are the only binding means of resolving interstate policy issues. Of those methods of resolution, an interstate Compact is the only formal mechanism that allows individual states to reach beyond their borders and collectively regulate the conduct of multiple states and their citizens. Compacts are also one of the only exceptions to the general rule that a sitting state legislature cannot irrevocably bind future state legislatures. BUENGER, ET AL., supra, at 48. Compacts regulate matters aptly described as subfederal, supra-state in nature. Id. at xxi. The binding nature of interstate Compacts comes from their contractual character and judicial recognition that Compacts must supersede conflicting state laws in order to be effective under applicable Constitutional law.