How to free Elon Musk’s SpaceX from federal red tape

Tensions between SpaceX and its federal regulators have spilled into public view. The Federal Aviation Administration is seeking $633,009 in civil fines, alleging that the company neglected necessary paperwork for two 2023 launches. SpaceX has refuted those claims in a letter to Congress, arguing that the FAA is engaged in an arbitrary and politicized prosecution from an agency unable to keep up with the demands of commercial spaceflight. CEO Elon Musk has vowed to sue the FAA for “regulatory overreach.”

The issue underscores a larger problem: The FAA’s issuing a launch license to SpaceX constitutes a “major federal action” under the National Environmental Policy Act, requiring a full environmental review and often subsequent mitigation measures. For SpaceX programs alone, this has included monitoring the discomfort of the seal population outside what is now Vandenberg Space Force Base, funding “educational outreach” about a surrounding area’s “cultural heritage,” and ensuring that the company’s operations don’t disturb the wintering grounds of the piping plover.

Such provisions, however laborious for SpaceX, also impede the U.S. military’s deployment of important assets. The company’s Starship Super Heavy system, the most powerful rocket ever flown, is critical to our national defense. In the event of a conflict that damaged America’s satellite network, the Starship would offer a unique and rapid spacelift-launch system to restore pivotal navigation, communications and early-warning capabilities. Yet as global threats loom, the earliest the Space Force anticipates even finishing its environmental review process for the Starship Super Heavy to operate out of Cape Canaveral, Fla., is next autumn.

This problem isn’t unique to SpaceX. Aerospace firms have become inured to years of delays, budget overruns and anemic growth. NEPA, along with other federal regulatory delays, have restricted other startups, such as Blue Origin, Varda, and Boom Aerospace, while letting incumbents like Boeing slide to disastrous effect. These issues are also of a piece with those impeding necessary build-outs of semiconductor fabs, nuclear-power plants, electrical transmission lines, natural-gas pipelines and other critical infrastructure.

A growing bipartisan “Abundance Agenda” has seen recent successes in creating new categories of NEPA exemptions. Several passed the House last month, for Chips and Science Act projects and forest management. Yet tinkering at the edges likely won’t be enough to unshackle key industries from federal regulation.

There is another powerful alternative rooted in America’s tradition of federalism: the interstate compact. Although the Constitution limits the states’ pre-existing sovereignty, the Compact Clause permits them to create legally binding agreements among themselves. Its only limitation is that Congress must authorize any compact that encroaches on federal power or implicates federal concerns. Once the Legislature does so, as the Supreme Court clarified in Cuyler v. Adams (1981), such compacts take on the full force of federal law.

Most interstate compacts originally dealt with issues like state boundaries or water rights. Over time their use expanded to include problems states share but which require a different policy framework than they can pursue alone or via federal action. States have used compacts to create unified occupational-licensing regimes and to coordinate state taxes for multistate entities. Others have helped create well-known institutions—such as the Port Authority of New York and New Jersey and the Washington Metropolitan Area Transit Authority—which regulate interstate and international commerce in a way otherwise reserved for the federal government.

This vehicle is prime for states concerned about threats to American prosperity and sovereignty, including as relates to space development. Gulf Coast states have a particular interest in advancing American commercial spaceflight and stand to lose the most from FAA suffocation. They maintain some of the most important launch sites, training facilities and manufacturing plants, and they have tens of thousands of jobs connected to the space industry.

Texas, Louisiana, Mississippi, Alabama and Florida might therefore consider banding together to create a Space Coast Compact. The terms could establish the authorities, structure and governance of a Space Coast Launch Authority with the right to review plans and issue launch permits for aircraft and spacecraft operating in the signatory states. The new authority, an alternate to the FAA, would be accountable to the states’ governments, staffed by those who actually want to launch aircraft, and exempt from NEPA and other strictures that uniquely bind federal action.

The authority could still retain a consultative relationship with the FAA, but the compact would break the chokehold of federal bureaucracy. Because the compact would affect only its signatories, achieving a simple congressional approval would be much more realistic than a genuine overhaul of the FAA, which received its quinquennial reauthorization this year.

The ideal solution to our nation’s regulatory woes would be to reform America’s sclerotic federal institutions. But while we await fuller reform, states that want to forge a future for their residents should lean into interstate compacts to create zones of freedom where man can still boldly go where none has gone before.

Mr. Askonas is assistant professor of politics at the Catholic University of America and a senior fellow at the Foundation for American Innovation. Mr. Berry is managing partner of the law and strategy firm Boyden Gray PLLC.