Firm Alert
(by Ben Clapp, Gary Steinbauer and Christina Puhnaty)
Among the flurry of executive orders that President Trump issued in the hours following his inauguration on January 20th was a memorandum titled Regulatory Freeze Pending Review (2025 Trump Regulatory Freeze Memorandum), which directs agencies to:
- Refrain from proposing or issuing any rule[1] in any manner until a President Trump-appointed agency head reviews and approves the rule;
- Immediately withdraw any rules that have been sent to the Office of Federal Register (OFR) but not published in the Federal Register so that they can be reviewed and approved by a President Trump-appointed agency head; and
- Consider[2] postponing for 60 days the effective date for any rules that have been published or issued but have not taken effect, for the purpose of reviewing any questions of fact, law, and policy that the rules may raise.
This memorandum closely mirrors regulatory freeze memoranda issued by the first Trump administration in 2017 (2017 Trump Regulatory Freeze Memorandum) and the Biden administration in 2021, but the immediate impact of the memorandum will likely be different from what we have seen in the past. Six days after the Trump administration issued the 2017 Trump Regulatory Freeze Memorandum, EPA published in the Federal Register a final rule delaying the effective date of 30 final EPA regulations that the agency had published between October 28, 2016 and January 17, 2017. 82 Fed. Reg. 8499 (Jan. 26, 2017). These rules had original effective dates after January 20, 2017, the date that President Trump issued the 2017 Trump Regulatory Freeze Memorandum. Several agencies in the Biden administration, however, including EPA, appear to have been prepared for a regulatory freeze memorandum and avoided issuing final regulations at the end of 2024 that would go into effect after President Trump’s inauguration. For example, EPA’s rule implementing the requirements of the Waste Emissions Charge in the Clean Air Act’s Methane Emissions Reduction Program, enacted as part of the Inflation Reduction Act, went into effect on January 17, 2025. 89 Fed. Reg. 91094 (Nov. 18, 2024).
Nonetheless, some environmental and energy-related regulations may be affected by the freeze. For example, on January 21st, EPA’s final rule regarding Revisions to the Air Emission Reporting Requirements and proposed rule regarding Clean Water Act Effluent Limitations Guidelines and Standards for PFAS Manufacturers Under the Organic Chemicals, Plastics and Synthetic Fibers Point Source Category were both identified on the White House’s Office of Management and Budget’s (OMB) website as under review, but as of January 22nd are no longer identified as under OMB review and do not appear on OFR’s website. EPA may have withdrawn these rules from OMB’s consideration in accordance with the 2025 Trump Regulatory Freeze Memorandum, but their status remains unclear.
In addition, the Pipeline and Hazardous Materials Safety Administration (PHMSA) made available on its website pre-publication versions of proposed and final rules that have been submitted to the OFR but are not yet available for public inspection or published in the Federal Register. See Proposed Rule: Safety of Carbon Dioxide and Hazardous Liquid Pipelines; Final Rule: Gas Pipeline Leak Detection and Repair. These proposed and final rules are subject to the regulatory freeze in accordance with the memorandum’s directive that agencies “[i]mmediately withdraw any rules that have been sent to the [OFR] but not published in the Federal Register” so that they can be reviewed and approved by a President Trump-appointed agency head. Both of these rules appear to have been withdrawn from publication in the Federal Register. However, we also note that EPA published a proposed rule on January 22nd that was seemingly subject to the freeze. See National Emission Standards for Hazardous Air Pollutants: Chemical Manufacturing Area Sources Technology Review, 90 Fed. Reg. 7942 (Jan. 22, 2025). In sum, there appears to be some open questions on the status of certain rules not yet published in the Federal Register.
Lastly, final environmental regulations that have been published in the Federal Register as final but that have not yet gone into effect include the following EPA final rules:
- Review of the Secondary National Ambient Air Quality Standards for Oxides of Nitrogen, Oxides of Sulfur, and Particulate Matter, 89 Fed. Reg. 105692 (Dec. 27, 2024) (eff. Jan. 27, 2025);
- Integrating e-Manifest With Hazardous Waste Exports and Other Manifest-Related Reports, PCB Manifest Amendments, and Technical Corrections, 89 Fed. Reg. 60692 (Sept. 26, 2024) (eff. Jan. 22, 2025); and
- Hazardous Waste Generator Improvements Rule, the Hazardous Waste Pharmaceuticals Rule, and the Definition of Solid Waste Rule; Technical Corrections, 89 Fed. Reg. 99727 (Dec. 11, 2024) (eff. Feb. 10, 2025).
Per the 2025 Trump Regulatory Freeze Memorandum, EPA is to consider postponing for 60 days the effective date of these rules for the purpose of reviewing any questions of fact, law, and policy that the rules may raise.
How quickly agencies will be able to initiate review and approval of these regulations depends on the Trump administration’s immediate priorities and how quickly agency roles are filled with President Trump appointees.
As always, Babst Calland attorneys are available to provide guidance on how these actions affect your business. For more information on the actions discussed in this Alert or related matters, please contact Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com, Gary Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Christina Puhnaty at (412) 394-6514 or cpuhnaty@babstcalland.com, or your Babst Calland client relationship attorney.
To view other “Day One” Executive orders issued by the Trump administration affecting energy and environmental policy, please click here.
_______________
[1] The 2025 Trump Regulatory Freeze Memorandum defines “rule” to include both final rules and “any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.”
[2] The use of the word “consider” is one notable difference between the 2017 and 2025 memoranda issued by the Trump administration. The postponement directive in the 2017 Trump Regulatory Freeze Memorandum was not optional.
Firm Alert
(by Ben Clapp and Gary Steinbauer)
President Trump’s first-day executive actions prioritize the development of a wide-range of domestic energy resources and take direct aim at the climate initiatives and environmental justice priorities of the Biden administration. With the declaration of a national energy emergency, President Trump has required the U.S. Environmental Protection Agency (EPA) and other federal agencies to review numerous agency actions and authorities with the goal of “unleashing American energy.” These first-day executive actions do not themselves implement the desired changes, but the environmental ripple effects and legal challenges stemming from these initial actions will unfold in the weeks, months, and years ahead and are likely to involve nearly every major federal environmental law. In this Alert, we summarize key federal environmental regulatory, permitting, and enforcement implications from President Trump’s initial executive actions.
- Review of Existing Regulations and Regulatory Freeze. EPA and other federal regulatory agencies are ordered to review and identify existing regulations and policies that unduly burden domestic energy resources and develop and begin implementing plans to expeditiously suspend, revise, or rescind the identified regulations and policies. The universe of agency actions that must be reviewed include those related to the production of oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy resources.[1] Regulations and policies that unduly burden domestic mining and processing of non-fuel minerals are also covered by this mandate.[2] As is customary for a new administration, President Trump has issued a regulatory freeze designed to pause certain types of pending regulatory actions until new leadership at EPA and other agencies have an opportunity to review such actions.[3] More information regarding potential EPA rules that may be subject to the regulatory freeze can be found in this separate Alert.
- Environmental Regulatory Litigation and Enforcement Implications. President Trump directed EPA and other agencies to identify unduly burdensome agency actions that are the subject of pending litigation and notify the Attorney General of these actions so that the Attorney General can seek to stay or otherwise delay these lawsuits until challenged regulations can be suspended, revised, or rescinded as ordered.[4] President Trump also ordered EPA to review and identify existing settlements and consent orders that impose an undue burden on identification, development, and use of domestic energy resources. EPA will have 30 days to report any settlements and consent orders to the Office of Management and Budget (OMB).[5] Lastly, federal agencies are directed to assess whether enforcement discretion can be utilized to advance the Trump administration’s domestic energy policy.[6]
- Emergency Authorities and Streamlining Permitting for Domestic Energy Projects. President Trump has issued broad mandates to the EPA and other federal resource agencies to identify and use “lawful emergency authorities” to facilitate generation of non-wind domestic energy resources and related infrastructure, including emergency authorities under the Clean Water Act Section 404 permitting program and the Endangered Species Act.[7] President Trump revoked a 1970’s Executive Order giving the White House Council on Environmental Quality (CEQ) the authority to issue National Environmental Policy Act (NEPA) regulations and directed the CEQ to propose to rescind existing NEPA regulations to expedite and simplify permitting for energy projects.[8] EPA is directed to consider issuing emergency fuel waivers allowing for the year-round sale of E15 gasoline, and the review of applications for liquefied natural gas projects are to be restarted.[9]
- Climate-Related Regulatory Underpinnings and Considerations. President Trump revoked President Biden’s Executive Orders related to climate initiatives.[10] In addition to withdrawing from the Paris Climate Agreement,[11] President Trump directed EPA to abandon the consideration of the “social cost of carbon” in regulatory determinations and submit a recommendation on the fate of the 2009 finding under the Clean Air Act that greenhouse gases threaten public health and welfare, which serves as a necessary statutory prerequisite for EPA to implement greenhouse gas emission standards for motor vehicles and other sectors.[12] All federal agencies are directed to pause clean energy and climate-related funding under the Inflation Reduction Act and Infrastructure Investment and Jobs Act, and the Trump administration has pledged to “eliminate the ‘electric vehicle (EV) mandate.’”[13]
President Trump’s first-day executive actions set the stage for reshaping the federal environmental regulatory, permitting, and enforcement landscape. The actions EPA and other agencies take to implement these new directives will be closely watched and scrutinized.
As always, Babst Calland attorneys are available to provide guidance on how these actions affect your business. For more information on the actions discussed in this Alert or related matters, please contact Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com, Gary Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, or your Babst Calland client relationship attorney.
To view other “Day One” Executive orders issued by the Trump administration affecting energy and environmental policy, please click here.
_______________
[1] Executive Order: Unleashing American Energy, Section 3 (Jan. 20, 2025).
[2] Executive Order: Unleashing American Energy, Section 9(a) (Jan. 20, 2025).
[3] Memorandum: Regulatory Freeze Pending Review (Jan. 20, 2025).
[4] Executive Order: Unleashing American Energy, Section 3(b)-(d) (Jan. 20, 2025); see also Executive Order: Ending the Weaponization of the Federal Government (Jan. 20, 2025), Sec. 3(a) (requiring the Attorney General and heads of all departments and agencies to review civil and criminal enforcement activities over the last 4 years to identify instances where such authority was used to target perceived political opponents).
[5] Executive Order: Unleashing American Energy, Section 3(b) (Jan. 20, 2025).
[6] Executive Order: Unleashing American Energy, Section 7(c) (Jan. 20, 2025).
[7] Executive Order: Declaring a National Emergency, Section 2 (Jan. 20, 2025).
[8] Executive Order: Unleashing American Energy, Section 5 (Jan. 20, 2025).
[9] Executive Order: Declaring a National Emergency, Section 2(b) (Jan. 20, 2025); Executive Order: Unleashing American Energy, Section 8 (Jan. 20, 2025).
[10] Executive Order: Unleashing American Energy, Section 5 (Jan. 20, 2025).
[11] Executive Order: Putting America First in International Environmental Agreements, Section 4.
[12] Executive Order: Unleashing American Energy, Section 6 (Jan. 20, 2025).
[13] Executive Order: Unleashing American Energy, Sections 2(e) and 7 (Jan. 20, 2025).
Environmental Alert
(by Sloane Wildman, Joseph Schaeffer and Jessica Deyoe)
The final year of the Biden administration saw several significant developments related to the regulation of per- and polyfluoroalkyl substances, more commonly known as PFAS. These developments included the U.S. Environmental Protection Agency’s designation of the two most common PFAS compounds as hazardous substances under federal cleanup laws and its limitation of six PFAS compounds under federal drinking water regulations, among others. The past year also saw a growing number of PFAS-related lawsuits, which are currently in various stages of litigation. What could happen to all these developments in 2025? Can the Trump administration change these rules and policies? What about the numerous PFAS related lawsuits that have been filed in the past year? This update takes a look at some of the more significant PFAS-related developments from the past year and considers what might happen in 2025 and beyond.
What are PFAS and what were the prior administration’s PFAS priorities?
The term “PFAS” encompasses thousands of manmade chemicals. PFAS compounds have been widely used for decades in various applications, including manufacturing water-, stain-, and heat-resistant consumer products, e.g., waterproof clothing and food packaging, and as ingredients in aqueous film forming foams (known as AFFF) used to extinguish certain kinds of chemical fires. There is research indicating that exposure to certain PFAS, which are prevalent and persistent in the environment, may cause various health-related impacts. In an effort to address the impacts related to PFAS, in 2021, the Biden administration published a “PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024” identifying a number of regulatory priorities that the administration planned to take during its four-year term. The Strategic Roadmap and annual progress reports are available here.
What were some of the most significant federal regulatory developments in 2024?
Two of EPA’s more significant regulatory actions in 2024 occurred almost back-to-back in April with its designation of two PFAS compounds as hazardous substances under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and its rule imposing regulatory limits on six PFAS compounds under the Safe Drinking Water Act (SDWA). We reported on both of these developments in updates available here and here.
Specifically, in April 2024, the EPA published a final rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), and their salts and structural isomers, as “hazardous substances” under CERCLA, available here. As we reported previously, EPA’s designation of PFOA and PFOS as CERCLA hazardous substances was unprecedented and controversial because it was the first time the Agency used its statutory authority under CERCLA to designate a hazardous substance. Until that point, hazardous substances under CERCLA had only been defined by reference to other statutes (e.g., the Clean Water Act and the Resource Conservation and Recovery Act). Among other things, the rule requires parties to report unpermitted releases of PFOA and/or PFOS at or above the applicable “reportable quantity” (one pound or more within a 24-hour period) to federal, state, and local authorities. It also imposes certain obligations on federal agencies when selling and transferring federally owned real property. And most significantly, the rule provides the federal government with additional authority under CERCLA to address PFOA/PFOS contamination in the environment, allows private parties who conduct cleanups consistent with CERCLA’s National Contingency Plan to seek to recover PFAS cleanup costs from other potentially responsible parties (PRPs), and potentially affects closed sites with existing remedies. At the same time EPA published the final CERCLA rule, it issued a policy memorandum, “PFAS Enforcement Discretion and Settlement Policy Under CERCLA” summarizing the Agency’s intent to use its discretion to not “pursue entities where equitable factors do not support seeking response actions or costs under CERCLA . . . .” and generally focus on so-called “major PRPs” – parties who, in EPA’s view, “have played a significant role in releasing or exacerbating the spread of PFAS into the environment, such as those who have manufactured PFAS or used PFAS in the manufacturing process, and other industrial parties.” Some industries that would be protected under this Policy, including publicly owned treatment works and publicly owned/operated municipal solid waste landfills, expressed concern that the policy provides only discretionary rather than mandatory protection and that it does not prevent other PRPs from pursuing claims against them.
Also in April 2024, EPA published a National Primary Drinking Water Regulation establishing the first-ever national enforceable drinking water standards for six PFAS under the Safe Drinking Water Act (SDWA), available here. The rule sets enforceable Maximum Contaminant Levels (MCLs) and non-enforceable health-based Maximum Contaminant Level Goals (MCLGs) for PFOA and PFOS, and four additional PFAS compounds – perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA, commonly known as GenX chemicals), and perfluorohexane sulfonic acid (PFHxS). EPA set MCLs (the maximum concentrations allowed in drinking water that can be delivered to the users of a public water system) at 4.0 parts per trillion (ppt) for PFOA and PFOS and 10 ppt for PFNA, PFHxS and HFPO-DA. In addition, EPA set MCLGs at 0 parts per ppt for PFOA and PFOS and at 10 ppt (same as the enforceable MCL) for PFNA, PFHxS and HFPO-DA. Under the rule, public water systems are given until 2027 to complete initial monitoring of each of the six PFAS, followed by ongoing compliance monitoring, and until 2029 to implement solutions to reduce PFAS where MCLs are exceeded. After those five years, public water systems that exceed one or more of the MCLs must take action to reduce PFAS levels and provide notice to the public of the violation.
In 2024, EPA proposed other rules related to PFAS that have not yet been finalized. For example, in February 2024, EPA published two proposed rules to address PFAS and other emerging contaminants under the authority of the Resource Conservation and Recovery Act (RCRA). First, EPA proposed to add nine PFAS (including their salts and structural isomers) to the list of “hazardous constituents” in Appendix VIII of 40 C.F.R. Part 261 that would need to be considered in facility assessments and, where necessary, considered in any further investigation and cleanup through the corrective action. Second, EPA also proposed to clarify, by regulation, that emerging contaminants – including PFAS – can be addressed under RCRA’s Corrective Action Program. For more information about the proposed RCRA rules, see our previous update, available here.
What were some of the major developments in PFAS litigation?
Regulatory developments directly influenced litigation developments. While the regulated community pushed back, plaintiffs’ attorneys relied on the new regulations to identify new targets for litigation and prove the elements of their cases. Overall, the prior year signaled three major developments in PFAS litigation.
First, a variety of stakeholders pushed back at the Biden administration’s efforts to regulate PFAS. In American Water Works Association v. U.S. Environmental Protection Agency, No. 24-1188 (D.C. Cir. 2024), a coalition of industry and major water utilities challenged the EPA’s regulation of PFAS under the SDWA. They argue that the Agency set MCLs for six PFAS beyond what are technologically and economically feasible and, further, adopted an unprecedented “hazard index” approach to regulating two additional PFAS. And in Chamber of Commerce v. U.S. Environmental Protection Agency, No. 24-1193 (D.C. Cir. 2024), industry challenged the EPA’s designation of two PFAS as hazardous substances under CERCLA. Emphasizing that the Agency has never before invoked its statutory authority to directly designate hazardous substances under CERCLA, they argue that the Agency conducted an improper “substantial danger” analysis and failed to properly consider the costs and consequences of its regulation. Barring deregulatory action from the Trump administration, both cases are expected to be decided in 2025 and will have major implications for whether and how the EPA may regulate PFAS going forward.
Second, PFAS manufacturers cemented a significant victory when the U.S. Court of Appeals for the Sixth Circuit declined to revisit its opinion in Hardwick v. 3M Co., where it ruled that the district court erred by allowing a “class comprising every person residing in the State of Ohio” to bring claims against ten manufacturers of PFAS for allegedly contaminating their blood with PFAS. Hardwick v. 3M Co., No. 22-3765, at *2 (6th Cir. Nov. 27, 2023). Holding that the lead plaintiff lacked standing, the Court noted that he “does not know what companies manufactured the particular chemicals in his blood stream; nor does he know, or indeed have much idea, whether those chemicals might someday make him sick; nor, as a result of those chemicals, does he have any sickness or symptoms now.” Id. at *1. Given the ubiquity of PFAS in the environment, and the numerous potential sources of exposure, Hardwick’s legacy may be to raise the bar for standing, causation, and harm in cases alleging PFAS exposure.
And, third, enterprising plaintiffs’ attorneys avoided the standing issues raised in Hardwick by bringing false advertising claims against manufacturers of products alleged to contain PFAS. Relying frequently on state consumer protection laws, the plaintiffs in these cases allege that product manufacturers misled consumers and delivered products that are worth less than they would have been if the presence of PFAS had been disclosed. In one such case filed in late 2024, for instance, the plaintiff alleges that Samsung Electronics failed to disclose the presence of PFAS in bands used with its smart watches, thereby “causing [plaintiff] to overpay for Products” and “enjoy[ing] an unfair competitive advantage, receiving millions of dollars from consumers in ill-gotten proceeds while putting the health and welfare of millions of consumers and their families at risk ….” Class Action Complaint at ¶ 8, Gonzalez v. Samsung Electronics Am., Inc., No. 2:24-cv-11234 (C.D. Cal. filed Dec. 31, 2024). Expect these lawsuits to proliferate as government reporting obligations and third-party investigations lead to the discovery of PFAS in products where it was previously unknown to have been used.
What can happen to these rules and cases under the new administration?
On the regulatory front, the Trump administration is expected to deregulate at the federal level and take a less active approach to PFAS than the Biden administration. One major tool that can be used to rescind regulations is the Congressional Review Act (CRA). The first Trump administration liberally used the CRA to rescind regulations issued in the final days of the then-outgoing Obama administration. A “lookback” provision in the CRA allows a new Congress to review and overturn regulations issued during the final sixty legislative days of the prior session – for purposes of the incoming Trump administration, the “lookback” period of the CRA is August 2024. The Biden administration intentionally finalized many regulations, including the PFAS MCLs and designation of PFOA and PFOS as hazardous substances under CERCLA, prior to August 2024 to stay out of reach of the CRA.
Though these PFAS-related regulations are out of reach of the CRA “lookback period” for rescinding regulations, there are other tools for doing so. EPA can amend or overturn a rule through ordinary notice and comment rulemaking under the Administrative Procedure Act. The notice-and-comment rulemaking requires that EPA develop a legal record justifying the proposed change and undergo a lengthy public notice process on the proposed regulatory/deregulatory action. Although it would be time-consuming, the EPA can use this option to amend or overturn the designation of PFOA and PFOS as hazardous substances under CERCLA as well as the PFAS MCLs. Of course, the future of these rules could also be determined by the ongoing litigation discussed above.
Another tool that already has been used by the new Trump administration to direct regulatory action in numerous substantive areas is the issuance of executive orders (EOs). On the first day of his second term, President Trump signed several EOs affecting environmental policy established by the Biden administration, including an EO entitled “Initial Rescissions of Harmful Executive Orders and Actions,” which expressly rescinds a number of Biden administration EOs, including those addressing climate change and environmental justice. Proposed rules and guidance documents, such as the RCRA proposal discussed above, are now subject to President Trump’s EO entitled “Regulatory Freeze Pending Review” which requires that (1) no federal agency propose or issue any rule without review and approval of an agency head appointed or designated by President Trump, and (2) any rule submitted to the Federal Register that is not yet published must be withdrawn pending review. It is also possible that EOs will be issued to withdraw specific guidance documents inconsistent with the new administration’s goals and policies. For example, the EPA’s PFAS Strategic Roadmap could be shelved or rescinded.
These anticipated Trump administration regulatory actions could impact the trajectory of litigation challenging the Safe Drinking Water Act and CERCLA rules, especially if the EPA signals that it intends to withdraw or modify those actions. The private civil litigation, however, is expected to continue unabated.
As the new administration is expected to significantly alter the federal regulatory efforts to address PFAS across multiple program areas, potentially impacting both existing and yet-to-be-filed litigation, Babst Calland attorneys will track these developments and are available to assist you with these matters. For more information on the federal regulatory and litigation developments discussed in this update or related matters, please contact Sloane Wildman at (202) 853-3457 or swildman@babstcalland.com, Joseph Schaeffer at (412) 394-5499 or jschaeffer@babstcalland.com, Jessica Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com or any of our other environmental attorneys. For additional resources and more information on other PFAS developments, please visit Babst Calland’s PFAS Perspectives page, here.
Firm Alert
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
In recent weeks, significant developments have unfolded regarding the implementation of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements to the Financial Crimes Enforcement Network (FinCEN), which remain subject to a nationwide injunction.
As discussed in our previous Alert, on December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, et al., temporarily halting enforcement of the CTA and its BOI reporting requirements, including the January 1, 2025, filing deadline. The U.S. Department of Justice (DOJ) appealed, requesting a stay of the injunction or, alternatively, a narrowing of the injunction to apply only to the named plaintiffs and members of the National Federation of Independent Business.
In a flurry of year-end decisions, a panel of the Fifth Circuit Court of Appeals granted DOJ’s emergency motion on December 23, 2024, lifting the injunction. Three days later, a separate Fifth Circuit panel reversed the earlier decision, vacating the stay and reinstating the nationwide injunction. As a result, FinCEN again updated its guidance, stating that reporting companies may voluntarily submit BOI filings but are not required to do so during the pendency of the injunction.
On December 31, 2024, DOJ filed an emergency “Application for a Stay of the Injunction” with the U.S. Supreme Court, seeking to stay the injunction pending the Fifth Circuit’s review of the matter. Alternatively, DOJ invited the Court to “treat this application as a petition for a writ of certiorari before judgment presenting the question whether the district court erred in entering preliminary relief on a universal basis.”
The ongoing legal challenges have left the status of the BOI reporting requirement in flux. For the time being, unless the Supreme Court intervenes, the nationwide injunction is likely to remain in place through at least March 25, 2025, the scheduled date for oral arguments before the Fifth Circuit. Businesses that have not yet complied with the reporting requirements should remain alert to any changes. If the injunction is lifted, or if the Supreme Court grants a stay, reporting companies may be required to submit their beneficial ownership information promptly, subject to any deadline extensions provided by FinCEN. In the meantime, voluntary submissions of BOI reports to FinCEN are still accepted, but companies should be prepared to meet any new deadlines should the situation change. The next few months could prove critical for the future of the CTA and its enforcement.
Babst Calland will continue to closely monitor developments on this matter. Please reach out to fincenassist@babstcalland.com or your Babst Calland client relationship lawyer if you have any questions.
Firm Alert
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
As discussed in our previous Alert, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, et al., temporarily halting enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements, including the January 1, 2025, filing deadline. The ruling provided temporary relief to affected businesses, but a pending Department of Justice (DOJ) emergency motion to stay the injunction pending appeal has created further uncertainty.
On December 11 and December 13, 2024, the DOJ filed emergency motions with the District Court and the United States Court of Appeals for the Fifth Circuit respectively, requesting a stay of the District Court’s nationwide injunction. In its motion to the Court of Appeals, the government proposed an expedited briefing schedule, requesting “a ruling on this motion as soon as possible, but in any event no later than December 27, 2024, to ensure that regulated entities can be made aware of their obligation to comply before January 1, 2025.”
On December 17, 2024, the District Court denied the government’s motion, while the Court of Appeals decision remains pending and could be issued as early as December 20, 2024. If the Fifth Circuit grants the stay or narrows the scope of the injunction, the CTA’s reporting requirements, including the January 1, 2025 filing deadline, could be reinstated (unless the court or the Financial Crimes Enforcement Network (FinCEN) issues a deadline extension). FinCEN has already clarified that businesses are not required to file BOI reports while the injunction is in effect, but that they may voluntarily submit reports during this time.[1]
If the Fifth Circuit stays the injunction, reporting companies which have not already submitted their filings should be prepared to finalize their BOI reports and file them promptly to meet the reinstated deadline. FinCEN has not indicated whether it plans to offer reporting companies an extension if the injunction is stayed or narrowed by December 27, 2024. Approximately 8 million of the estimated 32.6 million reporting companies subject to filing requirements have filed so far. In the event the January 1, 2025 deadline remains in place, FinCEN’s website is likely to be overwhelmed with filing attempts, which could lead to delays and technical issues. In light of this uncertainty, reporting companies should consider gathering the required filing information to avoid a potential race against the clock at year-end, or if your business has a conservative mindset, you should file the report now and enjoy the holiday season. Either way, doing nothing does not appear to be an option.
Babst Calland will continue to closely monitor developments on this matter. Please reach out to fincenassist@babstcalland.com or your Babst Calland client relationship lawyer if you have any questions.
[1] https://fincen.gov/boi
Environmental Alert
(by Kip Power)
The federal Environmental Protection Agency (EPA) recently proposed to approve the application of the State of West Virginia (through its Department of Environmental Protection (WVDEP)) to obtain primary authority (a.k.a., “primacy”) over the issuance of permits for Class VI underground injection wells located within its borders. 89 Fed. Reg. 93538 (Nov. 27, 2024). The federal rulemaking proposal may be found here. Comments on the proposed approval are due on or before December 30, 2024. On the same day, EPA will hold a public hearing on the proposal at the Charleston Marriott Town Center, 200 Lee Street East, in Charleston, West Virginia. Details regarding public participation in the rulemaking may be found here.
Class VI underground injection control (UIC) wells are those wells used for injecting carbon dioxide for the purpose of permanent geologic storage or “sequestration.” WVDEP’s rules for such permits are largely modeled on EPA’s detailed “Class VI” UIC regulations promulgated under the federal Safe Drinking Water Act. If approved, West Virginia will be just the fourth state to receive primacy over the Class VI UIC permitting program (joining North Dakota, Wyoming and Louisiana).
Should it be granted primacy over Class VI well permitting, the WVDEP will be able to issue such permits without following the lengthy (and oftentimes litigated) procedures required under the federal National Environmental Policy Act that applies to EPA-issued UIC permits. The WVDEP would also be in a better position to coordinate the issuance of such Class VI UIC wells with other West Virginia regulatory requirements for carbon dioxide injection projects, including the West Virginia Underground Carbon Dioxide Sequestration and Storage Act (W.Va. Code § 22B-1-1, et seq.). This would help facilitate the development of such projects by a variety of applicants, including those seeking to use underground carbon dioxide sequestration as a part of the production of so-called “blue” hydrogen (reforming fossil fuels to separate hydrogen and capture CO2) and those hoping to comply with proposed EPA rules mandating the use of carbon capture and injection technologies by certain natural gas and coal-fired power plants.
For questions about EPA’s proposal to grant primacy to West Virginia over the issuance of Class VI UIC wells or related issues, please contact Christopher B. (Kip) Power at (681) 265-1362 or cpower@babstcalland.com.
Employment and Labor Alert
(by Janet Meub)
In case you haven’t noticed the yard signs popping up like mushrooms, the constant barrage of television and radio advertisements, or the unsolicited text messages from unknown numbers, we are in the homestretch of election season. For those employers with questions on how to handle political speech in the workplace, especially during the last few days before (and hopefully not much beyond) Election Day, here is a refresher on the basics for private employers.
The First Amendment to the U.S. Constitution prevents the government from enacting laws to prohibit the free exercise of speech and assembly, among other liberties. It does not apply to private employers. Where there is no state action involved, there is no unfettered right to free speech in a private place of employment. Quite simply, a private employer can enact rules to keep political expression from its workplace. Some employers prohibit political speech in the workplace to avoid potential disruptions to business operations, customer relations, or employee morale.
If an employer adopts a policy concerning political expression and messaging, it must do so fairly and consistently, and it should be inclusive and consistent to avoid the perception of favoritism or discrimination. In other words, if an employer requires Meghan to remove her Kamala button, it should also direct Dennis not to wear his Trump t-shirt. Remote workers are still “in the workplace” when they participate in virtual meetings, so there are no separate rules for them.
When enacting rules about political expression and messaging in the workplace, private employers should of course remain aware of the National Labor Relations Act (NLRA), which applies to both union and non-union settings, and among other things protects employees’ ability to engage in concerted activity or to discuss the terms and conditions of their employment. Therefore, private employers must be mindful of a potential nexus or overlap between employees’ political speech and discussion of working conditions. Under the NLRA, for instance, employees may distribute information during non-working time about a candidate’s stance on a particular issue that may also constitute a complaint about the employees’ working conditions.
Regardless of whether a private employer takes steps to keep political speech from the workplace, they should always promote an atmosphere of civility and respect in the workplace. If you have questions about managing political speech in your workplace, please contact Janet Meub at (412) 394-6506 or jmeub@babstcalland.com or any of our other employment and labor attorneys.
Firm Alert
UPDATE: Babst Calland Stands Ready to Advise All Clients on FinCEN Matters
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
Following up on our May 2024 Alert, Babst Calland would like to remind you of the upcoming January 1, 2025 compliance deadline for the Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information Reporting Rule (the “Rule”). Although it is currently being challenged in the courts, the compliance requirements and deadlines remain in effect for the majority of entities at this time.
The Rule requires most business entities to disclose personal information to FinCEN about their “beneficial owners”: individuals who directly or indirectly own or control such entities. Most entities in the U.S. will likely be required to comply with the Rule, and FinCEN estimates approximately 32 million businesses will be required to make a filing. The Rule exempts 23 types of entities from reporting requirements, primarily large or regulated entities already subject to various reporting requirements, such as banks, SEC-reporting companies, insurance companies, and ‘large operating companies’, as well as wholly owned subsidiaries of the foregoing. Every entity organized under U.S. law or registered to do business in the U.S. will need to determine (i) whether it is exempt from reporting requirements and (ii) if not, what information it must report.
Babst Calland is ready to help with all aspects of compliance, from legal analysis of your reporting obligations or exemption therefrom, through the report preparation and filing process using our firm’s secure technology platform. We recommend beginning the process of analysis and information gathering well in advance to ensure compliance by the below deadlines:
- January 1, 2025, for existing entities formed or registered prior to January 1, 2024
- Within 90 calendar days after formation or registration for new entities formed or registered on or after January 1, 2024, and before January 1, 2025
Babst Calland will continue to monitor regulatory and judicial updates and inform you of any significant changes affecting your compliance obligations. Please reach out to fincenassist@babstcalland.com or your Babst Calland client relationship lawyer if you would like Babst Calland to assist you with your company’s compliance obligations under the Rule.
To be clear, Babst Calland will only provide advice related to Rule compliance when explicitly requested to do so. We look forward to servicing your needs on this developing area of the law.
Thank you for your continued trust and partnership.
Employment and Labor Alert
(by Alex Farone, Steve Silverman and Steve Antonelli)
A Texas federal district court has barred the Federal Trade Commission’s (FTC) ban on most non-competition agreements (“non-competes”) slated to take effect on September 4, 2024, as previously reported. This decision halts the quickly approaching requirement for employers to cease the use of most non-competes and notify workers of their unenforceability. At least for the immediate future, employers may continue to use non-competes as they did before the proposed ban.
The Court Decision
On August 20, U.S. District Judge Ada Brown granted summary judgment against the FTC in a suit brought by a tax company and the U.S. Chamber of Commerce, ruling that the non-compete ban exceeded the FTC’s statutory authority. In Ryan LLC, et al. v. Federal Trade Commission, the FTC argued that the Federal Trade Commission Act (the Act) permits it to promulgate rules prohibiting unfair methods of competition, but the court determined that the FTC’s power in this regard is limited to creating rules of agency procedure. The court held that the creation of substantive rules like the non-compete ban stretches beyond the Act, as evidenced by the fact that the Act contains no penalty provisions to allow the FTC to seek sanctions for unfair methods of competition.
The court further concluded that the non-compete ban is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation for the “one-size-fits-all approach with no end date.” The court noted that the FTC provided no evidence as to why it imposed a national, sweeping ban on nearly all non-competes rather than targeting “specific, harmful non-competes.” Further, the FTC did not adequately analyze whether there are alternative approaches that would have sufficiently addressed unfair competition other than the proposed broad, nationwide prohibition.
What this Means for Employers
The Ryan decision sets aside the non-compete ban nationally, meaning the ban cannot be enforced or take effect on September 4. All requirements of the FTC rule—including banning the use of new non-competes and notifying workers and former workers with existing non-competes of the unenforceability of those agreements, with few exceptions—are no longer in effect. Employers may continue to utilize non-competes, in the manner prescribed by state statutes and case law.
Any employer that proactively notified workers of the unenforceability of their non-competes in anticipation of the ban going into effect on September 4 should speak to its attorney promptly regarding the status of those non-competes. They may still be enforceable if the notices did not include a true invalidation or release, but legal counsel should evaluate any such notice on a case-by-case basis.
There is a reasonable likelihood of an appeal, in which case, there may be additional developments to follow. Babst Calland will continue to monitor this situation and will advise as to whether employers must take any action in the future.
If you have questions about the status of the now-barred FTC non-compete ban, use of non-competes under existing state law, or strategies to deal with the ever-changing landscape of non-competes, please contact Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com, Steven B. Silverman at 412-253-8818 or ssilverman@babstcalland.com, or Stephen A. Antonelli at 412-394-5668 or santonelli@babstcalland.com.
Environmental Alert
(by Kevin Garber, Gina Buchman and Sean McGovern)
On July 17, 2024, Governor Josh Shapiro signed the Carbon Capture and Sequestration Act into law, effective immediately. This comprehensive new statute positions Pennsylvania to join a growing list of states, including North Dakota, Wyoming, Indiana, and West Virginia, that promote underground storage of carbon dioxide.
The Act authorizes the underground injection and sequestration of CO2; confirms that the surface owner of real property owns the subsurface pore space; gives the Pennsylvania Department of Environmental Protection statutory authority to obtain primacy to issue injection permits; transfers title to stored carbon dioxide to the Commonwealth fifty years after injection ends; and establishes the Carbon Dioxide Storage Facility Fund to defray the Commonwealth’s long-term monitoring and management costs.
The Act has three key aspects – pore space ownership, permitting and operating an injection and storage facility, and liability and long-term responsibility for sequestered CO2.
Pore Space Ownership. The Act provides that the owner of the surface property interest owns the pore space beneath surface lands and waters of Pennsylvania. “Pore space” means subsurface strata, formations, cavities, or voids, whether natural or artificially created, that can be used to store CO2. Conveying surface ownership also conveys the pore space unless it is (or has been) excepted and reserved, similar to the conveyancing of oil, gas, and minerals. The Act does not change Pennsylvania law regarding dominance of the mineral estate. A notice regarding pore space, like the coal notice, is now required in property deeds.
If, through negotiations with pore space owners, a prospective operator obtains at least 75% of the ownership interest in pore space for a storage facility, the Environmental Hearing Board may include the remaining 25% in the proposed facility by issuing a “collective storage order” if the EHB finds that the operator satisfied the notice and other provisions of the Act. Other state statutes have different thresholds for pooling; for example, the threshold is 60% in North Dakota, 70% in Indiana, and 75% in West Virginia. Unless the landowner or manager agrees, the EHB may not approve a collective storage order for land owned by a governmental entity or by a charitable organization that is used to protect natural or scenic values or wildlife, or to preserve historical and cultural resources.
Permitting. The new law directs the Environmental Quality Board to promulgate permitting criteria and regulations. Although DEP is not specifically directed to apply to EPA for primacy to issue Class VI Underground Injection Control permits, the Act does provide authority for DEP to do so if it chooses, and DEP recently announced its intent to apply for primacy. Until primacy is obtained, EPA will issue UIC injection permits in Pennsylvania.
The EQB’s regulations must address several specific subjects for permitting injection wells and operating storage facilities, including community and cumulative impacts, environmental justice, and seismicity monitoring. A storage facility must be designed to isolate CO2 from coal, oil, gas, and other commercially valuable minerals. DEP may condition or deny a permit based on these considerations. We can expect the EQB to publish proposed regulations soon to implement the Act.
CO2 Ownership, Liability and Long-Term Responsibility. The storage operator is presumed to own the CO2 injected into a storage facility. The Act protects pore space owners from liability for the effects of injecting CO2 for sequestration based solely on their interest in the pore space and it protects storage operators from claims for damage or migration unless a claimant proves the injection or migration was performed without reasonable care and caused injury. DEP may issue a certificate of project completion 50 years after injection ends if the operator demonstrates that the injected CO2 will remain within its pore space boundary and does not threaten drinking water, human health, safety, or the environment. Thereafter, title to and responsibility for the injected CO2 passes to the Commonwealth and the storage operator is released from regulatory requirements regarding the facility. The Carbon Dioxide Storage Facility Fund will subsidize the Commonwealth’s cost to monitor and manage the closed storage facility. Other states (for example, North Dakota and West Virginia) have agreed to accept long-term responsibility for sequestered CO2.
Carbon capture and sequestration has been touted as a solution to reduce carbon emissions from fossil fuel-fired power plants[1] and a mechanism to generate valuable emission reduction credits for sale or trading. Pennsylvania did not have the statutory framework in place to compete with other states in this area until it adopted the Carbon Capture and Sequestration Act. Determining whether Pennsylvania has sufficient deep geology to make capture and sequestration economically attractive and developing the regulations to govern the industry are the next steps in this energy evolution.
For more information on the Carbon Capture and Sequestration Act, please contact Kevin J. Garber at (412) 394-5404 or kgarber@babstcalland.com, Gina Falaschi Buchman at (202) 853-3483 or gbuchman@babstcalland.com, or Sean M. McGovern at (412) 394-539 or smcgovern@babstcalland.com, or any of our other environmental attorneys.
[1] EPA’s latest iteration of regulations setting greenhouse gas emissions standards for power plants, which was published in May 2024, names CCS as best system of emission reduction for the longest-running existing coal units and most heavily utilized new gas turbines. The Carbon Capture and Sequestration Act could help power generators comply with the federal regulations regarding their carbon emissions. While the regulation is currently in litigation in the U.S. Court of Appeals for the District of Columbia Circuit, the court has declined to stay the rule while litigation is pending.
Firm Alert
Chevron is overruled; right to jury trial in many agency enforcement actions is guaranteed; and claim accrual date for Administrative Procedure Act claims are fixed.
(by Gary Steinbauer, Jess Deyoe and Joseph Schaeffer)
In the span of five days, the U.S. Supreme Court issued three decisions with the potential to significantly alter the future of federal administrative law. These decisions, Loper Bright Enterprises v. Raimondo, No. 22-451, 603 U.S. — (2024) (Loper Bright) and Securities and Exchange Commission v. Jarkesy, No. 22-859, 603 U.S. — (2024) (Jarkesy), and Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008, 603 U.S. — (2024) (Corner Post) are explained in more detail below. They are poised to have profound implications for federal agency regulatory and enforcement actions, particularly those involving federal agency actions under the major environmental and energy statutes.
In Loper Bright, the Supreme Court has overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), a four-decades-old and oft-cited Supreme Court decision that granted federal administrative agencies deference when interpreting ambiguous statutory provisions. More recently, Chevron deference and the familiar two-step test it established has come under increasing scrutiny, with the Supreme Court itself not invoking the test since 2016. The Court’s decision in Loper Bright Enterprises v. Raimondo is Chevron’s formal death knell.
Chevron, decided in 1984, evolved into a pillar of federal administrative law. Its two-step framework for resolving ambiguities in agency-administered statutes is familiar to many regulatory attorneys and judges. It required courts reviewing an agency’s statutory interpretations to ask, first, whether Congress had clearly spoken to the precise question at issue. If so, the Congressional intent controlled over any contrary agency interpretation. If not, Chevron’s second step required the court to defer to the agency so long as it offered a “permissible construction” of the statute, even if that construction was not the one the court would have reached on its own.
The petitioners in Loper Bright challenged an agency rule mandating that certain commercial fishing vessels pay for onboard observers. Prior to 2020, the federal government fully funded observer coverage, but federal funding later ceased, leading the petitioners to challenge the rule as unlawful. Both District Courts and Circuit Courts of Appeals ruled in favor of the federal agency, relying on Chevron deference after finding some ambiguity as to Congress’s intent and deferring to the agency’s “reasonable” interpretation of the underlying statute. The Supreme Court’s acceptance of the challenges addressed in Loper Bright all but confirmed Chevron’s demise. The sole question before the Supreme Court in Loper Bright was whether Chevron should be overruled or clarified.
Writing for the 6-3 majority, Chief Justice John G. Roberts Jr. issued a sharp rebuke of Chevron, laden with historical references and analysis. By requiring courts to defer to agency interpretation of ambiguous statutory enactments, the Court held that Chevron ran counter to the Congressional commandment in the Administrative Procedure Act (APA) for courts to “decide all relevant questions of law” and to Constitutional separation-of-powers principles. The Court held that it is a judge’s obligation to determine what the law is, including determining statutory meaning in the face of ambiguity. Chevron, according to the majority, “fosters unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.”
In overturning Chevron deference, the Court clarified that its decision in Loper Bright does not “call into question prior cases that relied on the Chevron framework.” According to the Court, a prior decision’s “mere reliance” on Chevron doctrine is not enough for a court to overrule in the future, without an additional “special justification.” The majority opinion also made clear that Chevron is survived by Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944), under which agency interpretations and opinions are entitled to respect consistent with “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”
Justice Elana Kagan, writing for the three Justices in dissent, denied any contradiction of the Chevron doctrine with the APA, arguing that the statute does not compel the de novo statutory review required by the majority opinion. The dissent also cautioned that statutes passed during the four-decades of Chevron doctrine were done under the expectation that Chevron would guide interpretative authority between agencies and courts and, similarly, that rules issued during this timeframe would presume statutory ambiguities were the agencies’ to reasonably resolve. Justice Kagan justified Chevron and emphasized the practical consequences (and in her opinion, significant problems) with having judges interpret ambiguous provisions in complex “scientific and technical” statutes, using several examples to support this view.
The Loper Bright decision represents a fundamental change in federal administrative law, particularly for stakeholders involved in federal environmental regulatory matters. This is particularly true when considered in conjunction with the Supreme Court’s decision the day before in Jarkesy, where Justice Roberts, again writing for the majority, held that the Seventh Amendment requires agencies to prosecute common-law forms of action in federal courts, where juries are available, instead of in administrative tribunals, where they are not. These twin decisions reset (some may argue upset) the balance of power between courts and federal agencies implementing regulatory statutes, like the major federal environmental laws. And given the Supreme Court’s decision in Corner Post, which held that an Administrative Procedure Act claim accrues when the injury occurs, many regulations once thought beyond challenge may become susceptible to attack.
The impact of the Loper Bright, Jarkesy, and Corner Post decisions on federal environmental and energy regulatory efforts will unfold in the coming months and years. But it seems assured that federal courts now are the sole arbiter of whether a federal agency’s action aligns with the underlying statute, without regard or deference to the federal agency’s interpretation of Congressional intent and while according “due” respect to the agency based on Skidmore.
If you have questions about the Loper Bright, Jarkesy, and Corner Post decisions or their implications for your business, please contact Gary E. Steinbauer 412-394-6590 or gsteinbauer@babstcalland.com, or Jessica Lynn Deyoe at 202-853-3489 or jdeyoe@babstcalland.com, at Joseph V. Schaeffer at 412-394-5499 or jschaeffer@babstcalland.com.
Firm Alert
Babst Calland Stands Ready to Advise All Clients on FinCEN Matters – Let Us Help Your Company Navigate the Current Uncertainty
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
As part of our commitment to keeping clients informed about regulatory changes that may impact their business, we want to draw your attention to the uncertainty surrounding the Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information Reporting Rule (the “Rule”) under the Corporate Transparency Act (CTA). By now, you have likely heard about this Rule from your accountant or business colleagues. If not, the Rule requires most entities to disclose information about individuals who directly or indirectly own or control such entities. The intended purpose of the Rule is to enhance transparency and combat financial crimes by requiring certain covered entities to report information about their beneficial owners to FinCEN. Most entities in the U.S. will likely be required to comply with the Rule but some might be exempt if your entity meets one of the 23 identified exemptions. Entities formed before January 1, 2024, have until 2025 to comply; entities formed in 2024 have a 90-day compliance period. Pretty straight forward, right? NOPE, NOT AT ALL. The Rule is currently being challenged in the courts on constitutional grounds, and reporting requirements have been paused for certain entities following an injunction issued by the Northern District of Alabama on March 1, 2024, which ruled the CTA unconstitutional. Babst Calland is closely following these evolving developments. What should your company do in the meantime?
Given the legal uncertainty, many law firms and accounting advisors are declining to advise their clients on their compliance obligations. Babst Calland is not one of those – we are ready to help with all aspects of compliance, from legal analysis of your reporting obligations or exemption therefrom, through the filing process using our firm’s secure technology platform. Given the uncertainty about the constitutionality of the Rule and future enforcement, we are currently advising our clients as follows:
- New entities formed or registered on or after January 1, 2024, and before January 1, 2025, should comply with the applicable reporting requirements and make their filings within 90 calendar days after formation or registration.
- Existing entities formed or registered prior to January 1, 2024, should wait until September 2024 to begin their compliance efforts. This will allow time for further legal challenges or administrative guidance to develop without prematurely expending resources in the event the Rule is modified or suspended. Babst Calland will continue to monitor any changes and will reach out with relevant updates as new guidance and decisions are issued. Beginning in September, barring any such changes, Babst Calland’s team is ready to support your compliance needs with plenty of time to make the filing in advance of the January 1, 2025 deadline.
Please reach out to fincenassist@babstcalland.com or your Babst Calland client relationship lawyer if you would like Babst Calland to assist you with your company’s compliance obligations under the Rule. To be clear, Babst Calland will only provide advice related to Rule compliance when explicitly requested to do so. We look forward to servicing your needs on this confusing and developing area of the law.
Thank you for your continued trust and partnership.
Environmental Alert
(by Kevin Garber)
On May 8, 2024, a large group of Democrat members of the Pennsylvania House of Representatives introduced H.B. 2275, the Pennsylvania Climate Emissions Reduction Act, into the General Assembly. The Shapiro administration announced PACER earlier this year as an approach to creating a Pennsylvania-specific carbon reduction program instead of joining the Regional Greenhouse Gas Initiative. The actual language of the bill unsurprisingly retains key aspects of the RGGI regulation that the Environmental Quality Board promulgated on April 23, 2022. The Commonwealth Court declared that regulation void on November 1, 2023 as being an unconstitutional tax and enjoined the Pennsylvania Department of Environmental Protection from enforcing it. However, the Court’s decision does not remove the regulation from existence.
As proposed, PACER directs DEP, within 120 days of enactment, to review the base CO₂ allowance budget of 78 million tons that DEP established in the RGGI regulation in 2022 (which declines to 58 million tons in 2030) and recommend revisions to that budget, if necessary, after considering the effect of a new base budget on jobs, consumers, and the environment. DEP is not given specific authority to consider how a revised CO₂ budget would affect the reliability of the PJM grid or the potential for emission leakage outside Pennsylvania.[1] These were two of the biggest industry objections to the RGGI regulation during its development.
After DEP develops a revised CO₂ budget, the EQB would promulgate a final base budget by adopting a final-omitted regulation (a procedure that removes otherwise applicable public notice and comment opportunities), after which DEP would conduct a Pennsylvania-run auction of CO₂ allowances using the procedure already established by the RGGI regulation.
The same “budget sources” (i.e., CO₂ emission sources) that were subject to RGGI in 2022 – i.e., fossil fuel-fired electricity generators (i.e., coal, natural gas, and waste coal generation stations) with a nameplate capacity of 25 MW or more – would be subject to PACER and must buy allowances equal to the tons of CO₂ emitted annually. The critical issue will be how many CO₂ allowances are established in a revised base budget. Even if a new base budget starts with the 78 million tons allocated in 2022, the cost imposed on generation – or, the revenue provided through PACER, depending on one’s perspective – could be significantly higher than the approximately $350 million projected in 2022 based on the multi-state RGGI trading price for allowances ($5.20/allowance in the 2019 baseline year compared to $16.00/allowance in 2024). The costs could be higher if a revised baseline budget has fewer allowances and/or declines more rapidly. Although PACER would preserve the waste coal set-aside and the combined heat and power allowance from the RGGI regulation, its total costs would fall most heavily on natural gas generation because gas now makes up significantly more generation than coal.
PACER would give DEP specific authority to enforce compliance with the carbon budget. That means, among other things, affected budget sources must apply for a permit to incorporate the CO₂ trading program and begin accumulating allowances based on three-year control periods.
Finally, PACER would specifically direct revenue from CO₂ allowance auctions into alternative energy and clean energy programs, which DEP’s 2022 RGGI regulation did not do. For example, grants may be awarded from a newly created Pennsylvania Energy Transformation Account and a new Workforce Enhancement Fund for carbon capture utilization and storage, clean hydrogen production, fuel switching, and renewable energy including solar, wind, battery storage, and geothermal projects. Thus, PACER would establish a carbon cap-and-trade program to reduce fossil fuel-fired electricity generation and direct a substantial portion of the revenue generated from the sale of CO₂ allowances to the development of alternative energy sources. The bill is currently before the House Committee on Consumer Protection, Technology and Utilities. No timeline for further consideration has been announced.
For more information on PACER, RGGI or other related matters, please contact Kevin Garber at (412) 394-5404 or kgarber@babstcalland.com or any of our other environmental attorneys.
[1] “Emission leakage” refers to an increase in greenhouse gas emissions in one state caused by stricter emission controls in another state.
Environmental Alert
(by Donald C. Bluedorn II, Gary E. Steinbauer, and Mackenzie M. Moyer)
On April 25, 2024, the U.S. Environmental Protection Agency (EPA) finalized changes to the coal combustion residuals (CCR) regulations to now regulate inactive surface impoundments at inactive electric utilities, known as legacy CCR surface impoundments. The Final Rule also imposes requirements on an additional, new category of CCR units, known as CCR management units, or CCRMUs. Regulated legacy CCR surface impoundments will need to comply with the requirements in Subpart D, as articulated in the Final Rule, beginning as early as six months after the date of publication of the Final Rule in the Federal Register and CCRMUs will need to comply with specified requirements beginning 21 months after publication.
The Final Rule is being promulgated in response to the August 21, 2018 opinion by the U.S. Court of Appeals for the District of Columbia Circuit in Utility Solid Waste Activities Group, et al. v. EPA, in which the Court vacated and remanded the provision of the 2015 CCR Rule that exempted inactive impoundments at inactive facilities from regulation. EPA is also expanding the CCR Rule to address CCRMUs due to the associated risks from the direct placement of CCR on the land; according to information obtained from EPA since 2015, these previously unregulated units are contaminating groundwater and pose risks similar to the risks associated with currently regulated activities. In the last year, EPA has focused on CCR Rule enforcement, adding “protecting communities from coal ash contamination” as one of EPA’s six National Enforcement and Compliance Initiatives for fiscal years 2024 through 2027. Every four years, EPA publishes a list of national initiatives to focus its enforcement efforts, and on August 17, 2023, EPA formally announced CCR issues as an enforcement priority for the next four years. With this Final Rule expanding the scope of the CCR Rule regulatory program, EPA has also increased the number of potential targets for enforcement.
A legacy CCR surface impoundment is defined in the Final Rule as “a CCR surface impoundment that no longer receives CCR but contained both CCR and liquids on or after October 19, 2015, and that is located at an inactive electric utility or independent power producer.” The Final Rule imposes all CCR requirements already applicable to inactive CCR surface impoundments at active facilities under Subpart D of 40 C.F.R. Part 257 on these so-called legacy CCR surface impoundments, with limited exceptions. EPA also finalized a change to the existing groundwater monitoring requirements for legacy CCR surface impoundments by combining the detection and assessment monitoring requirements and finalized two new requirements—applicability documentation and a site security requirement.
EPA estimates that there are 194 legacy CCR surface impoundments located at 85 facilities that are subject to the Final Rule. A list of potentially regulated surface impoundments can be found here. Given the extent of groundwater monitoring and other requirements that these previously unregulated facilities will need to undertake, the compliance deadline is short and affected facilities will need to devise and implement compliance programs quickly.
The Final Rule also imposes requirements on a new category of regulated CCR units, CCRMUs. A CCRMU is “any area of land on which any noncontainerized accumulation of CCR is received, is placed, or is otherwise managed, that is not a regulated CCR unit” and includes inactive CCR landfills and CCR units that closed prior to October 19, 2015. CCRMUs are subject to regulation under the Final Rule when they are located at “covered CCR facilities”: (1) facilities currently regulated under the 2015 CCR Rule; (2) inactive facilities with a legacy CCR surface impoundment; and (3) facilities that, on or after October 19, 2015, produced electricity for the grid but were not regulated under the 2015 CCR Rule because they had ceased placement of CCR in onsite CCR units and did not have an inactive CCR surface impoundment. The Final Rule imposes groundwater monitoring, corrective action, closure, and post-closure care requirements for all CCRMUs at regulated CCR facilities. EPA estimates there are 179 CCRMUs at 92 active facilities and 16 CCRMUs at 12 inactive facilities that are subject to the Final Rule. A list of potentially regulated CCRMUs at inactive facilities can be found here and at active facilities can be found here.
EPA continues to take action on CCR, focusing on CCR Rule regulatory and enforcement matters, and operators of CCR Rule-regulated units, now expanded by this recent Final Rule, should be prepared for continued oversight by EPA. Babst Calland attorneys continue to track these developments and are available to assist with CCR-related matters. For more information on this development and other waste matters, please contact Donald C. Bluedorn II at (412) 394-5450 or dbluedorn@babstcalland.com, Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Mackenzie M. Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other environmental attorneys.
Employment and Labor Alert
(by Alex Farone)
On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to publish its proposed final rule banning most noncompetition agreements, or “non-competes.” The final rule becomes effective 120 days after its date of publication in the Federal Register, but legal challenges to the FTC’s authority to issue this ban will likely result in a stay in enforcement of the ban until litigation is resolved.
As of the effective date, the final rule would ban new non-competes with employees, independent contractors, and volunteers nationwide, on the basis that non-competes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act, with one exception. The ban will not apply to a non-compete that is entered into pursuant to a bona fide sale of a business entity, the persona’s ownership interest in a business entity, or all or substantially all of a business entity’s operating assets.
The final rule will also void pre-existing non-competes, with two exceptions. First, existing non-competes for senior executives will remain enforceable after the effective date of the final rule. A “senior executive” is defined as a worker earning more than $151,164 annually who is in a policy-making position, meaning a company president, chief executive officer or equivalent, or any other person who has final authority to make policy decisions that control significant aspects of a business entity. Second, the ban will not apply where an existing non-compete has been breached and a cause of action accrued prior to the effective date.
The final rule will additionally require employers to provide “clear and conspicuous notice” to all workers, other than senior executives, with existing non-competes by the effective date stating that the non-compete will not be, and cannot legally be, enforced.
This final rule originates from the notice of proposed rulemaking the FTC issued in January 2023, which was subject to a 90-day public comment period. The FTC received more than 26,000 public comments prior to the April 23, 3024 vote. The following day, on April 24, 2024, the U.S. Chamber of Commerce along with three other business groups filed a lawsuit against the FTC in the U.S. District Court for the Eastern District of Texas seeking an injunction to stop the implementation of the ban.
As previously reported, there is a reasonable likelihood that legal challenges to the ban would be successful. In West Virginia v. EPA, 597 U.S. 697 (2022), the U.S. Supreme Court recently demonstrated skepticism of sweeping rulemaking from regulatory agencies, due to potential violation of the separation of powers doctrine. The Court adopted the major questions doctrine, which holds that in extraordinary cases of political and economic significance, where an agency makes “unheralded” use of its authority, the agency must be able to identify a clear statement from Congress authorizing that particular action. Given the broad scope of the final rule and the unchanged makeup of the Supreme Court, it is likely that a national non-compete ban would be considered an extraordinary case of political and economic significance, and would have to clear the major questions doctrine hurdle to survive.
Employers who use non-competes should think strategically about implementing stronger non-disclosure and/or confidentiality agreements in the event that we reach the effective date of the final rule without pending litigation resulting in a stay of enforcement of the ban. As the effective date is more than 120 days away and such legal challenges are already under way, employers should not jump to conclusions about the immediate or ultimate enforceability of the FTC’s non-compete ban.
If you have any questions about FTC’s non-compete ban and the impact on your business, please contact Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com.