In the 1907 case Hudson County Water Company v. McCarter, Attorney General of New Jersey, the U.S. Supreme Court ruled in favor of New Jersey's right to protect its natural resources from out-of-state exploitation. The Hudson County Water Company had been diverting water from a river in New Jersey for use in New York City and argued that this was protected under interstate commerce laws. However, the court disagreed and held that states have an inherent right to preserve their own natural resources for their citizens' use and enjoyment without interference by other states or private companies seeking commercial gain. This decision established important precedents regarding state sovereignty over local resources as well as environmental conservation law.

In the dissenting opinion for Hudson County Water Company v. McCarter, Justice Holmes argued that New Jersey's prohibition on exporting water from its state was not a violation of the Commerce Clause. He contended that while states cannot interfere with interstate commerce, they have the right to preserve their natural resources and prevent depletion or destruction caused by commercial exploitation. The majority ruling viewed this as an unconstitutional burden on interstate commerce, but Holmes disagreed, asserting that it is within a state's power to protect its own resources for future use by its citizens. Therefore, he believed New Jersey had every right to enact legislation preventing companies like Hudson County Water Company from diverting water out of state.