It will probably take government officials, developers, and the courts a while to determine exactly how far federal protection for wetlands and waters extends after the Supreme Court’s decision this week in Rapanos v. United States and a companion case, Carabell v. Army Corps of Engineers. Justice Kennedy’s controlling opinion requires that the federal government show a “significant nexus” between a wetland and a navigable lake, river, or stream before the government can prohibit the wetland’s destruction. This is a new requirement, and wetlands are linked to navigable waters in enough permutations that it will take years to determine how much, if at all, this ruling reduces the coverage of the Clean Water Act. But if the environmental impacts of the case are a bit fuzzy, the consequences for federalism are clear, and they are promising.

Under the leadership of Chief Justice Rehnquist, a closely divided Supreme Court reworked significant areas of constitutional law with the professed purpose of protecting the dignity and authority of the states, while frequently disregarding the views expressed by the states in these cases. Chief Justice Rehnquist and Justices Scalia, Thomas, Kennedy, and O’Connor were often called the “five friends of federalism” for their role in striking down federal laws that they thought infringed upon state prerogatives. Most notably, in an important 2000 ruling, these five justices struck down an important section of the Violence Against Women Act over the objection of 36 states, leading Justice Souter to quip in dissent that the states “will be forced to enjoy the new federalism whether they want it or not.” But this week in Rapanos and Carabell, two of the original five friends, Justices Scalia and Kennedy, split dramatically in their discussion of what federalism is all about. Justice Scalia’s plurality opinion would have taken the disregard for the views of the states to an absurd new level, while Justice Kennedy broke ranks and took the views expressed by the states to heart. For now, Justice Kennedy’s views will control the direction of the Court. That is a very good thing.

In establishing a federal system, the Framers sought to allocate government power in a way that best serves the needs of “we the people”: They wanted a federal government strong enough to solve problems that states could not adequately address on their own; and they also wanted to protect the role of states as a level of government closer to the people that could serve as an engine of governmental innovation. The Framers had the right idea. Over the years, for example, we have come to see that most land use planning and zoning decisions can and should be made at the state and local levels, but that the federal government must play a more central role in environmental protection.

Briefs filed by water pollution control officials and the attorneys general for 33 states and the District of Columbia in Rapanos explain why a strong federal role in protecting clean water is necessary. Water pollution is a classic example of a problem that bedevils states but that states cannot solve on their own. Just about every state sits downstream from another. New Jersey’s strict wetlands regulations cannot protect New Jersey’s rivers, lakes, and streams from pollution that originates in New York. Kansas City’s drinking-water supply originates in headwaters in Nebraska, far from the reach of Kansas legislators or regulators. And the Gulf states are powerless to stop runoff from fertilized fields in Indiana and Iowa from flowing down the Mississippi and creating a vast dead zone in the Gulf of Mexico.

In his plurality opinion in Rapanos and Carabell, Justice Scalia dismisses these arguments, and suggests rather nastily that the states are really trying to “shift to another entity controversial decisions disputed between politically powerful, rival interests.” In other words, the states simply want to avoid making hard decisions. But the briefs filed by the state attorneys general and water pollution officials explain in detail why each individual state can’t solve its pollution problems by acting alone. Justice Scalia simply ignores what these briefs have to say, declaring in the face of clear evidence to the contrary that “it is not clear that the state and local conservation efforts that the [Clean Water Act] explicitly calls for are in any way inadequate for the goal of preservation [of wetlands].”

But because the Court split 4-1-4 in Rapanos, it is Justice Kennedy’s opinion that represents the “law” that must be followed by lower courts. Fortunately, Kennedy rejects this head-in-the-sand approach to federalism. Kennedy endorses the argument that the “[Clean Water] Act protects downstream States from out-of-state pollution that they cannot themselves regulate.” The practical problems states face inform Kennedy’s legal analysis: “In most cases,” Kennedy writes, “regulation of wetlands that are adjacent to tributaries and possess a significant nexus with navigable waters will raise no serious constitutional or federalism difficulties.” He adds that “the possibility of legitimate Commerce Clause and federalism concerns in some circumstances does not require the adoption of an interpretation that departs in all cases from the Act’s text and structure.”

Kennedy’s Rapanos opinion, read in conjunction with his support of robust federal Commerce Clause power in last year’s Gonzales v. Raich case upholding federal drug laws (in which Kennedy joined Justice Stevens’s majority opinion), suggests that Justice Kennedy is distancing himself from the effort, led by the late Chief Justice Rehnquist, to impose strict new limits on congressional Commerce Clause authority. At the very least, his latest opinion indicates that he is willing to listen to the states to determine how to balance the need for federal power with the desire to encourage state innovation. In light of the direction that the Court was moving in during much of the Rehnquist era, this represents real progress.