Because Compacts are statutes and contracts, courts interpret interstate Compacts in the same manner as interpreting ordinary statutes and by applying contract law principles.

When determining whether a state or Compact agency applied the Compact in a permissible manner, courts generally apply a statutory construction approach. See, e.g., Friends of the Columbia Gorge v. Columbia River Gorge Comm’n, 213 P.3d 1164, 1170–74 (Or. 2009) As noted in section 1.4.2 above, for Compacts with consent, courts apply federal law, including federal decisional law unless the consent statute or Compact specifically makes state statutory, regulatory, or decisional law applicable. For Compacts that do not have consent, courts apply state law.

When interpreting a Compact to determine whether a party state is in breach of the Compact, courts typically apply principles governing the interpretation of contracts. Where there is an ambiguity, courts apply contract interpretation principles such as negotiating history (Oklahoma v. New Mexico, 501 U.S. 221, 235 n.5 (1991)); course of performance (Alabama v. North Carolina, 560 U.S. 330, 346 (2010)); and usage of trade (Id. at 341–42 (considering Compacts that received contemporaneous consent); Tarrant Reg’l Water Dist. v. Herrmann, 569 U.S. 614, 633 (2013) (considering Compacts of the same subject matter, but not receiving consent contemporaneously)). In applying contract law principles, courts recognize that a Compact represents a political compromise between “constituent elements of the Union” in contrast with a commercial transaction. For example, the Eighth Circuit states in one case:

While a common law contract directly affects only the rights and obligations of the individual parties to it, an interstate Compact may directly impact the population, the economy, and the physical environment in the whole of the Compact area. A suit alleging that a state has breached an obligation owed to its sister states under a congressionally approved interstate Compact also raises delicate questions bearing upon the relationship among separate sovereign polities with respect to matters of both regional and national import.

Entergy Arkansas, Inc. v. Nebraska, 358 F.3d 528, 541–42 (8th Cir. 2004). Consequently, the right to sue for breach of the Compact differs from a right to sue for breach of a commercial contract; it arises from the Compact, not state common law.

Courts generally strive to interpret and apply a Compact uniformly throughout the states where the Compact is effective. See, e.g., In re C.B., 116 Cal. Rptr. 3d. 294, 295 (2010) (stating, “One of the key elements of any interstate Compact is uniformity in interpretation.”). To achieve a uniform interpretation, courts commonly look to other courts decisions; however, there is often no uniformity. E.g., id. at 294–95 (looking at a dozen other state and federal court decisions and finding no uniformity); State v. Springer, 406 S.W.3d 526 (Tenn. 2013) (same).