Following is a link for United States Code, Title 15, Chapter 6, Subchapter IX, that provides DOT the authority to adjust the time zones.
http://tycho.usno.navy.mil/260.html
Until today, I had primarily viewed the U.S. Code at this page.
I went looking further today and found out that this is sort of a "Reader's Digest Condensed Version".
The version at the following link is quite a bit more comprehensive, giving some interesting history about when various facets of Subchapter IX were enacted.
http://www.access.gpo.gov/uscode/title15/chapter6_subchapterix_.html
One thing I noticed for the first time is that the enforcement provision in Section 260a appears to apply only to that section, which deals with the dates of beginning and ending DST, not the other Subchapter IX sections.
Also in 260a, I don't remember anyone ever pointing out the following clauses before:
"Ex. Ord. No. 11751, Dec. 15, 1973, 38 F.R. 34725, ... The Secretary of Transportation... is hereby designated and empowered... to grant an exemption from section 3(a) of the Act (which establishes daylight saving time as standard time), or a realignment of a time zone limit, pursuant to a proclamation of a Governor of a State finding that the exemption or realignment is necessary to avoid undue hardship... in the State or a part thereof...
"In deciding to grant or deny an exemption or realignment, the Secretary shall consider, among other things, ... the convenience of commerce, as well as ... undue hardship to large segments of the population..."
I did not hear the DOT even mention this "undue hardship" clause in its description of the criteria it considered for its recent ruling, nor did I hear anything about the governor's power to issue a proclamation of the hardship that falls on Hoosiers due to our being less than half as wide as all of the other states that are split between two time zones.
Also, I think I may have previously opined on Section 262, which deals with "Duty to observe standard time of zones", that it appears to technically only apply to interstate and international common carriers, federal government employees and offices, and legal contracts. Unlike Section 260a, Section 262 has no section on penalties and enforcement for non-compliance.
This could be picking nits, but it might help explain why the federal and state governments never seemed to be much concerned about the five counties which observed eastern daylight saving time for so many years without any official state or federal sanction or authorization.
It might also have a bearing on the success of any attempted "home rule" by counties who prefer to be in a different zone than that assigned by the DOT -- particularly any eastern counties which might prefer central time.
It's interesting that Section 265 actually provides for a couple of specific Texas counties to decide their own time zone just by making a written request.
INDIANA CODE ON HOME RULE
On another subject, I also dug up the section of Indiana Code (36-1-3) that has to do with home rule (it is actually called that).
http://www.in.gov/legislative/ic/code/title36/ar1/ch3.html
Somewhat interesting reading. One thing that particularly caught my eye is that in 1980 the legislature changed the default from the assumption that the local body does not have a particular power to the assumption that it does -- strengthening the hand of local officials in any areas that might be considered "gray areas" of the law.
"A unit has: (1) all powers granted it by statute; and (2) all other powers necessary or desirable in the conduct of its affairs, even though not granted by statute... the omission of a power from such a list does not imply that units lack that power... State and local agencies may review or regulate the exercise of powers by a unit only to the extent prescribed by statute."
If I read it correctly, the term "unit" refers to any governmental entity smaller than the state as a whole.
Looks to me like the feds might be hard-pressed to justify suddenly beginning to take enforcement seriously after 40-some years of effectively condoning violation by the five counties near Cincinnati and Louisville.