Legal Intelligencer
(by Morgan Madden and Steve Antonelli)
In the ever complex and evolving landscape of employment law, some of the most effective compliance tools are not found in case law or federal regulations but in routine and consistent documentation. Job descriptions, performance evaluations, and disciplinary writings are three foundational tools that can play a crucial yet often underestimated role in shaping and defending employers’ decisions. These documents are not standalone checkboxes, rather their effectiveness lies in their interconnectedness. Job descriptions lay the groundwork for expectations, performance evaluations track whether and how those expectations are met, and disciplinary writings memorialize any shortcomings or failures to meet them.
The proper use and maintenance of these documents can bolster compliance with key employment statutes. In the event of litigation, these records almost always become central to the body of evidence considered by a factfinder. Employers that use them regularly and consistently are often in a far stronger position to defend against claims and to demonstrate legitimate, nondiscriminatory reasons for adverse employment actions.
Job Descriptions: The Foundation of Employment Expectations
Job descriptions are more than administrative formalities—they define the who, what, and why of a role. A well-crafted job description outlines an employee’s essential functions, required qualifications, and reporting relationships. As an employer’s expectations change, so too should corresponding job descriptions. For example, how many employers allowed remote/hybrid work before March 2020?
Accurate and up to date job descriptions benefit both employers and employees because they help guide hiring decisions, compensation structures, and employee development. They can also play a pivotal role in litigation. They help delineate essential job functions and impact whether an employee’s accommodation request is reasonable in an ADA case, and they have a significant bearing on whether a position is exempt from overtime laws in a wage and hour case, to name a few examples.
To be legally useful and operationally effective, job descriptions should: (1) use objective, clear language that describes observable duties and requirements; (2) align with actual work performed, not just idealized roles or inherited templates; and (3) be updated regularly to reflect pertinent changes in the role.
Written Performance Evaluations: The Roadmap of Employee Progress
Performance evaluations are the primary method by which employers track and communicate an employee’s progress toward fulfilling the expectations set forth in the job description. Just as is the case with job descriptions, specificity and consistency in evaluations and performance reviews are critical.
Evaluations that praise (or criticize) an employee in vague or overly broad terms can create problems later when and if disciplinary action becomes necessary. Specific feedback about an employee’s performance is worth far more than general qualifiers – both in terms of employee engagement and success, and potential claim defensibility. For example, if a performance review simply states that an employee is “exceeding” or even “meeting” expectations, it could become difficult to justify a subsequent adverse employment action absent a clear record of interim performance problems. Instead of general praise, or criticism, employers should aim to evaluate performance as specifically as they can.
While formal performance reviews occur periodically (often annually), evaluation of employees’ performance should be fluid and ongoing. Informal or interim reviews, which can provide a more dynamic view of performance, are particularly useful when issues arise mid-year. It is possible for an employee to have a strong annual review followed by a drop in performance, and employers should refrain from waiting for the balance of the year to address the regression. An informal or interim review (and documentation thereof) can help right the proverbial ship by helping the employee to address the shortcoming and improve their performance and by putting the employer in position to support a negative review or defend an adverse employment action that follows a positive formal review.
In litigation, inconsistent performance evaluations can damage an employer’s credibility and can even allow a plaintiff to argue that an employer’s stated reason for an adverse employment action is pretextual.
To ensure evaluations serve both legal and operational goals, employers should: (1) tie evaluation criteria to the duties in the job description; (2) train managers on how to write effective evaluations that are honest, objective, and constructive; and (3) complete evaluations promptly and review them for consistency with other employment records.
Disciplinary Records: The Anchor of Employment Decisions
In the event of litigation, whether before a judge or an arbitrator, disciplinary documentation is often the most scrutinized aspect of the employment record with exceedingly high evidentiary value. It serves as the employer’s front-line defense as to both the explanation for and timing of the adverse employment action, as well as the evidence of any prior notices and opportunities to improve. Disciplinary records can also play a key role in other adversarial proceedings such as unemployment compensation hearings and union grievances, where the employer may have to justify that a termination or suspension was for either willful misconduct or just cause, respectively. In those settings, disciplinary records should be especially robust and involve specific language and allowances as the supporting documentation often serves as the tipping point in these matters.
Progressive discipline policies are an excellent tool in guiding disciplinary decisions. They allow employers to document each step taken – verbal warnings, written warnings, improvement plans, and suspensions – to demonstrate fair and consistent disciplinary actions.
Effective disciplinary documents should follow some basic principles. They should be issued promptly following the performance shortcoming or incident giving rise to the discipline. They should also: (1) refer to expectations set forth in the job description and/or previous performance evaluations; (2) contain details and be free from emotional or subjective language; and (3) demonstrate consistency across employees in similar circumstances.
Each of these three tools – job descriptions, performance evaluations, and disciplinary records – serves a distinct purpose. When aligned, they form a comprehensive and cohesive employment record that benefits both employers and employees by setting expectations, tracking performance, and documenting corrective actions. Strategically aligning these tools establishes a fair and transparent employment framework. For employees, it promotes understanding of expectations and how performance is measured. For employers, it builds a documented history that is invaluable both in day-to-day management of an operationally effective workforce, and in the event of litigation.
Employers should not wait for a lawsuit to evaluate their HR documentation practices. Instead, they should regularly review their job descriptions and align those documents with current duties and expectations so that performance evaluations can be conducted consistently.
By treating these basic HR documents as a strategic defense rather than administrative chores, employers can significantly reduce legal exposure while promoting a culture of clarity, fairness, and accountability.
Morgan M. Madden is an associate in Babst Calland’s Public Sector, Energy and Natural Resources, and Employment and Labor groups and focuses her practice on land use, zoning, planning, labor and employment advice, and litigation. Contact her at mmadden@babstcalland.com.
Stephen A. Antonelli is a shareholder in the Employment and Labor and Litigation groups of Babst Calland. His practice includes representing employers of all sizes, from Fortune 500 companies and large healthcare organizations to non-profit organizations and family-owned businesses. He represents clients, in all phases of employment and labor law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling. Contact him at santonelli@babstcalland.com.
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Reprinted with permission from the June 5, 2025 edition of The Legal Intelligencer© 2025 ALM Media Properties, LLC. All rights reserved.
Babst Calland announced that Attorney Natalie Baughman has joined the firm’s Washington, DC office as a shareholder and member of its Environmental practice group.
Natalie Baughman has a deep expertise in CERCLA site remediation, particularly in complex, multi-party cleanups involving decades of contamination. Her practice also includes representing clients in enforcement actions, environmental litigation, and permitting and compliance matters arising under the Clean Water Act, Safe Drinking Water Act, and state environmental laws.
Prior to joining Babst Calland, Ms. Baughman worked in the U.S. Department of Justice’s Environmental Enforcement Section and the District of Columbia’s Department of Energy and Environment, where she oversaw the agency’s work on the CERCLA cleanup of the Anacostia River and numerous other contaminated sites. Ms. Baughman has represented clients in administrative and civil judicial enforcement cases in both government positions.
Ms. Baughman earned her B.S. from Northwestern University in 2002. She received her J.D. from the University of Maryland School of Law in 2009.
Ms. Baughman is admitted to practice in the District of Columbia and Maryland.
The Wildcatter
(by Nikolas Tysiak)
Cavallo Mineral Partners LLC v. EQT Production Company, 2025 WL 800433 (Pa. Super., March 13, 2025). In this case, landowner Des Moine Field conveyed his 200 acre tract in Washington Twp., Greene County, PA to the McChesneys in 1990, using the following language: “ALSO EXCEPTING AND RESERVING, for the benefit of Grantees, his heirs and assigns, all oil and gas not previously excepted, reserved or conveyed, together with the right to mine and operate for the same . . .” (emphasis added). Field eventually purported to convey his oil and gas rights to Cavallo Mineral Partners. The McChesneys leased their oil and gas rights to EQT, which eventually included these interests in an oil and gas production unit. Cavallo eventually brought a quiet title declaratory action suit, alleging ownership of the oil and gas rights. EQT (and other co-defendants) eventually won on procedural grounds following competing motions for summary judgment, and the suit was dismissed without prejudice. In that decision, the court pointed out that Cavallo still had claims that could be made regarding the apparent Scrivener’s Error regarding the use of the term “grantees” in the reservation, and Cavallo was instructed to amend its complaint accordingly, which it failed to timely do. Instead, it further appealed the underlying case on procedural grounds. The Superior Court found that Cavallo could only succeed on its procedural claims if it were likely to succeed on the merits of its case. The court determined, based on the existing claims and record, that Cavallo was unlikely to succeed on the merits because the deed from Fields to the McChesneys did not properly except or reserve the oil and gas rights for the benefit of Fields or his heirs, successors and assigns. The attempted appeal was therefore quashed, but it appears that Cavallo is still able to amend its complaint to argue for a scrivener’s error reformation of the 1990 deed.
Antero Resources Corporation v. Pike, 914 S.E.2d 757 (W. Va. Inter. Ct., 2025). In this case, landowners excepted and reserved oil and gas from under 2 tracts, totaling 97 acres, in 1895. By 1942, the oil and gas became divided as follows: Rufus G. Fordyce, Edna L. Fordyce and Margaret Fordyce Pike (as joint tenants with the right of survivorship) – ½ interest; Daisy G. Broadwater – ½ interest. In 1949, Rufus, Edna and Daisy conveyed their interests in the 97 acres to Dora Jewell. The 1949 deed makes no reference to the interest of Margaret F. Pike, or to the deed where she acquired her interest. In 1976, successors to Jewell leased the oil and gas under the land, which eventually came into the possession of Antero Resources. Various wells were apparently timely drilled under the terms of the lease. Antero brought suit in 2019, seeking a declaratory judgment, asking the court to find that the successors to Jewell had effectively adversely possessed the 97 acres as against the potential interests of Margaret Fordyce Pike and her heirs at law. The Pike heirs counterclaimed, alleging intentional trespass, conversion, and demanding forfeiture of Antero’s oil and gas infrastructure. The trial court found Antero had not established that the non-Pike heirs and successors had successfully adversely possessed the Pike heirs’ oil and gas rights, as the requirements of ouster, specifically the right under ouster to receive actual notice of such ouster, had been fulfilled. The Intermediate court disagreed with this, citing caselaw indicating that actual notice of an ouster is not affirmatively required, but instead constructive notice can be relied upon IF the adverse possession is clearly in opposition and detriment to the rights of party to be deemed ousted (i.e., clear exclusive possession in an open, hostile and notorious manner). The intermediate court therefore overturned the trial court decision and remanded the case for additional proceedings in the trial court.
Miller v. Bunting, 2025 Pa. Super. 80 (April 8, 2025). This involves a suit where the plaintiff claimed ownership of coal rights under a tract of land containing 14.1219 acres pursuant to a deed that purportedly clearly excepted and reserved such coal rights. The Superior Court noted that the language of the deed clearly reserved such coal rights. In addition, the court produced a lengthy analysis of the intent of the parties regarding the coal rights and further concluded that the plaintiffs’ claims to the coal were “without merit.” Later, the court entertained the plaintiffs’ claim regarding Doctrine of Merger argument, where it was claimed that the coal estate and the surface estate merged under the ownership of the plaintiffs’ grantors, causing the plaintiffs’ to receive such coal rights by their deed. The court rejected this argument, pointing out that the Doctrine of Merger in Pennsylvania “is now practically extinct,” and can only occur under equitable grounds as necessary to prevent injustice. In other words, the parties involved must intend for a merger of titles to occur. The court further pointed out that traditionally, merger involves a greater estate subsuming a lesser estate. In this case, the two estates involved, covering the surface and the coal rights, were both for “fee simple” and neither estate could be construed as greater or lesser than the other. Finally, the court found that “expert reports” on interpretation of deeds is irrelevant as an issue of fact, because the meaning of deeds is strictly a matter of law for a court to decide. The orders granting summary judgment for the defendants below were affirmed.
Golden Eagle Resources II, LLC v. EQT Production Company, 2025 WL 874413 (Pa. Super. Ct. March 20, 2025). This suit involves the interpretation of competing clauses in an oil and gas lease regarding settling disputes. The lease from Golden Eagle to EQT’s predecessor included a clause requiring arbitration of disputes. However, the associated addendum to the lease allowed the parties to bring suit in any appropriate court. In addition, the addendum indicated that any conflict between the lease document form and the addendum should be settled in favor of the addendum. Golden Eagle made several arguments regarding the interplay of these clauses, but ultimately the court determined that the language of the addendum controlled, and no arbitration could be compelled. The court was particularly influenced by the fact that Golden Eagle had instigated the suit, implying that the more appropriate time to seek arbitration would have been before the filing of their lawsuit, and not on appeal.
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Reprinted with permission from the MLBC June 2025 issue of The Wildcatter. All rights reserved.
Environmental Alert
(by Robert Stonestreet)
Through a unanimous 8-0 decision, the Supreme Court of the United States addressed what it described as “continuing confusion and disagreement in the Courts of Appeals” over the scope of judicial review for claims asserting violations of the National Environmental Policy Act (NEPA). Seven County Infrastructure Coalition v. Eagle County, No. 23-975 (May 29, 2025). In doing so, the Supreme Court clarified that decisions by federal agencies under NEPA are entitled to substantial deference, and courts should not be in the business of second-guessing how agencies weigh competing considerations under NEPA. “The bedrock principle of judicial review in NEPA cases can be stated in a word: Deference.” Additionally, the Supreme Court ruled that NEPA does not compel federal agencies to address the environmental effects of projects separate in time or place from the construction and operation of the proposed project at issue.
Justice Kavanaugh authored the main opinion joined by Justices Alito, Thomas, and Barrett along with Chief Justice Roberts. Justice Sotomayor penned a separate concurring opinion joined by Justices Kagan and Jackson. Justice Gorsuch did not participate in the case.
Rail Project at Issue
In December 2021, the federal Surface Transportation Board approved an application to construct an 88-mile rail line in Utah’s Uinta Basin that would primarily transport crude oil to interstate rail lines and ultimately to refineries along the Gulf Coast.
NEPA required the Board to evaluate environmental impacts of the proposed project and consider potential alternatives to the project that would avoid or minimize those impacts. The Board’s NEPA evaluation was reflected in an Environmental Impact Statement (EIS) spanning more than 3,600 pages. Several non-governmental organizations and a local county filed a legal challenge under NEPA in the District of Columbia Circuit Court of Appeals, alleging that the Board failed to adequately consider the impacts of certain “upstream and downstream” activities that are separate from the proposed rail line. Specifically, the Board did not perform a detailed analysis of (1) increased crude oil development that may occur in the Uinta Basin once the rail line goes into service; or (2) air emissions at refineries along the Gulf Coast associated with processing crude oil extracted from the Uinta Basin.
Court of Appeals Decision
Finding in favor of the challengers, the D.C. Circuit agreed that future crude oil development and refining were “reasonably foreseeable impacts” that the Board should have evaluated. The D.C. Circuit rejected the Board’s position that those effects arose from other projects that were separate in time and space from the rail line and were also beyond the jurisdiction of the Board, which does not regulate crude oil extraction or refining.
Kavanaugh Opinion
The main court opinion makes clear that judicial review under NEPA involves affording substantial deference to the decisions by the federal agencies involved. That is because assessment of environmental effects and feasible alternatives involves “a series of fact-dependent, context-specific, and policy-laden choices.” Thus, courts “should afford substantial deference and should not micromanage those agency choices so long as they fall within a broad zone of reasonableness.” Nevertheless, Justice Kavanaugh observed that “[s]ome courts have strayed and not applied NEPA with the level of deference demanded by the statutory text and this Court’s cases.” In doing so, “NEPA has transformed from a modest procedural requirement into a blunt and haphazard tool employed by project opponents (who may not always be entirely motivated by concern for the environment) to try to stop or at least slow down new infrastructure and construction projects.”
Kavanaugh’s opinion wholly rejects the notion that NEPA requires federal agencies to consider other existing or potential future projects that are separate in space and time from the proposed project under consideration. The opinion observes that NEPA’s focus is the “project at hand – not other future or geographically separate projects that may be built (or expanded) as a result of or in the wake of the immediate project under consideration.” Consequently, “NEPA does not require the agency to evaluate the effects of that separate project.” The Board was therefore “[a]bsolutely correct” in concluding that it need not perform a detailed analysis of the potential for future crude oil development in the Uinta Basin and refining activities along the Gulf Coast.
Lastly, Kavanaugh observed that NEPA litigation should not be a forum for project opponents “to air their policy objections to proposed federal actions.” “Citizens may not enlist the federal courts, ‘under the guise of judicial review’ of agency compliance with NEPA to delay or block agency projects based on the environmental effects of other projects separate from the project at hand.”
Concurring Opinion
The concurring opinion authored by Justice Sotomayor and joined by Justices Jackson and Kagan observes that the Board lacked jurisdiction over potential future crude oil development and refinery activities, and lacked authority to restrict transportation of crude oil on the proposed rail line. Therefore, there was no need for the Board to consider impacts of those activities.
What’s Next?
NEPA has been called one of the most litigated environmental statutes in the United States. This decision should set a higher bar for project opponents to succeed on NEPA claims. The Court made clear that the judiciary should afford substantial deference to how federal agencies weigh the respective impacts and benefits of a proposed project. Whether this pronouncement will prompt developers to move forward with additional projects, and how much deference will actually be afforded by the lower courts, remains to be seen. This decision does not directly affect the legal landscape for challenges brought under substantive environmental statutes like the Clean Water Act, Clean Air Act, or Endangered Species Act, although actions challenging major projects that allege violations of these statutes are often paired with a NEPA claim.
If you would like to discuss this decision or NEPA in general, please contact Robert M. Stonestreet at rstonestreet@babstcalland.com or 681.265.1364.
Pittsburgh Business Times
(by Moore Capito featuring Matt Smith)
With the surge of artificial intelligence, the demand for data centers to support that computing power is growing fast. “One of the challenges is that we as human beings and as businesses require so much more computing power than we ever have,” said A.A. Moore Capito, a shareholder specializing in energy and emerging technologies with the law firm Babst Calland. “That growth has continued consistently over the past 50 years, but at this current moment, we are seeing an exponential increase in demand.”
Yet, with this rapid growth comes significant challenges as businesses compete for power and land. With a wealth of energy resources, affordable land, and proximity to densely populated areas, this region is right in the thick of the trend.
Capito recently joined Allegheny Conference on Community Development Chief Growth Officer Matt Smith in the Pittsburgh Business Times offices for a conversation about the opportunities and challenges for the region, when it comes to data center growth.
Surging demand for power
Data centers are energy giants. They require a massive amount of power to process information, particularly as artificial intelligence capabilities expand. In February, Goldman Sachs Research predicted global power demand from data centers will increase 50 percent by 2027 and up to 165 percent by the end of 2029.
This spike in demand is forcing businesses and industry to rethink how to power their operations. Traditional reliance on the energy grid alone may no longer suffice.
“What I would consider the biggest challenge today is providing the power to sustain the growth that we need,” Capito said.
“A lot of these folks in the tech sector are saying we can’t rely on the grid anymore. We have to find alternative ways to power these very necessary components of our business and life, frankly, in today’s age.”
Because it offers several alternatives to the power issue, the region is positioned to attract data center projects, Smith and Capito said.
“Interestingly, we do a lot of work in our region with nuclear companies that are really at the cutting-edge of small modular reactors (SMRs), micro reactors, some even larger,” said Smith, noting how nuclear and natural gas combined can solve our energy shortage.
In a move that made international headlines, Constellation Energy and Microsoft announced plans last fall to restart a unit of the Three Mile Island nuclear plant to power the tech company’s data center use for 20 years. And Amazon Web Services is reported to be buying a data center campus in Salem Township in Westmoreland County that is collocated with a nuclear power generation plant.
Nuclear is far from the only option. Capito said Pennsylvania, West Virginia and Ohio’s rich natural gas resources have been underleveraged in data center planning so far.
“A lot of these developers see it as a nuclear play, but we know that doesn’t happen fast,” he said, which means they need an energy source to bridge that gap. “It’s got to be natural gas, and that is why we have an incredible opportunity here.”
There are a number of collaborative projects in play that lean on the region’s natural gas resources, Smith said.
In April, for example, Homer City Redevelopment and Kiewit Power Constructors Co. announced plans to turn what had once been the largest coal-burning power plant in Pennsylvania into a natural gas-powered data center campus. The new Homer City Energy Campus will deliver up to 4.5 gigawatts of power to support AI-driven hyperscale data centers.
Similarly, Liberty Energy Inc., Imperial Land Corp. and Range Resources have created a strategic alliance to support the development of a power generation facility within the Fort Cherry Development District in Washington County to serve data centers, industrial facilities and other high-energy-use businesses in Pennsylvania.
Finding ready-to-go sites
To attract AI and data center developers, this region doesn’t just offer abundant energy that can be drawn upon; it also has “ready-to-go” sites where projects can start quickly and operate efficiently, unique higher education assets like Carnegie Mellon University and the University of Pittsburgh, and access to key North American markets.
“It’s like walking into a hotel room,” Capito said. “You want the bed made. You want the towels on the rack, and you want the remote right beside you. You want it ready to go. And that’s the same way that developers want it.”
Our industrial legacy is serving us well in this regard. Southwestern Pennsylvania is already home to ample industrial sites tied to the power grid. These well-connected locations offer developers the infrastructure they need to hit the ground running.
“Because of our rich legacy of manufacturing and industrial strengths in Southwestern Pennsylvania, we have a lot of sites, we have abundant energy resources, and we have a highly skilled workforce,” Smith said. “We also have a lot of those sites specifically tied into the grid. This region will lead the way in ensuring our nation is energy dominant.”
Another example of seizing our region’s opportunity is the recent request by the Allegheny Conference and more than 20 organizations to the U.S. Department of Energy’s Office of Policy for using DOE land for AI infrastructure that would support data center demand and the administration’s goals.
We’re seeing the attractiveness of the region’s assets in recent moves by manufacturers that support the energy industry’s supply chain, Smith and Capito said.
Mitsubishi Electric Power Products Inc., for example, is building an $86 million manufacturing facility and testing lab in Beaver County, where it will make gas-insulated and vacuum circuit breakers, an important component for modernizing electric grids.
And the Switzerland-based power grid technology company Hitachi Energy has announced a $70 million expansion of its three manufacturing facilities in Westmoreland County. It makes high-voltage technologies, including switchgears, circuit breakers, generator circuit breakers and other products needed in power grids. Pennsylvania is supporting the expansion with a $184,000 Pennsylvania First grant and a $145,000 WEDnetPA grant to train employees.
That’s good news for the industry, which will need a steady, reliable supply of parts, Smith said.
“The reason you’re seeing this is that there is a huge power generation demand coming and large-scale investment is needed to meet that demand. Southwestern Pennsylvania is positioned to address that looming demand for power,” he said. “We stand at the center of energy resources and building the component parts that are essential to the grid supply chain.”
Cutting red tape
Business-friendly regulation is also giving this region an edge, Smith and Capito said.
Dealing with the regulatory environments and local, state and federal government to navigate those regulations can be very difficult, said Capito.
The PA Permit Fast Track Program, for example, has streamlined permitting for large economic development and infrastructure projects that require multiple permits from different agencies. And in March, Gov. Josh Shapiro proposed a state energy siting board to reduce red tape even further.
“One of the things that is of the utmost importance, if not the most important, for AI and data centers is speed,” Smith said. “Developers want to get the projects started quickly and want to get the projects done fast.”
Capito said he sees things speeding up at the federal level, too, thanks to President Donald Trump’s desire to invest heavily in AI.
“This is a critical industry,” Capito said. “It is a big national security component, managing the information flow of all of these systems that we have running that control essentially everything that you see and touch and feel every single day.”
Moore Capito is a shareholder at Babst Calland, where he represents clients in all phases of complex corporate, commercial and real estate transactions, and entity, joint venture, and partnership structuring and formation, and general business matters. His practice also focuses on counseling energy clients in various transactional matters of natural gas assets, joint developments, leasing, and operations. Moore also assists companies in navigating the complex legal landscape of emerging technologies, including data center development, ensuring projects are compliant with relevant laws and regulations.
Matt Smith serves as Chief Growth Officer of the Allegheny Conference on Community Development. In this role, Matt leads the Conference’s economic development efforts with a focus on growth of the regional economy through the attraction and retention of business investment and talent. He is also responsible for the organization’s local, state and federal policy and advocacy efforts, which are strategically oriented toward increasing economic competitiveness and accelerating growth opportunities regionwide.
Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
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The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(by Joe Reinhart, Sean McGovern, Matt Wood and Alex Graf)
On April 8, 2025, the Pennsylvania Environmental Quality Board (EQB) tabled consideration of the Clean Air Council (CAC) and Environmental Integrity Project’s (EIP) petition for a rulemaking seeking to amend 25 Pa. Code ch. 78a to increase required minimum setbacks from unconventional oil and gas wells from 500 feet to 3,281 feet. During the meeting, Public Utility Commission (PUC) Commissioner Kathryn Zerfuss moved to table the petition, stating that the members of the EQB need more time to consider materials submitted by industry members and others prior to the meeting, which the EQB approved. Tabling the petition followed a Pennsylvania Department of Environmental Protection (PADEP) presentation recommending that the EQB accept the petition for further study, with the caveat that the recommendation was not an indication of PADEP’s substantive position on the petition. See PowerPoint Presentation, PADEP, “Petition for Rulemaking: Unconventional Gas Well Setbacks” (Apr. 8, 2025). CAC and EIP also presented their argument for why the EQB should accept the petition for further study at the meeting, which largely focused on the positions taken in their petition regarding potential adverse health and environmental consequences to people and resources located near unconventional oil and gas wells.
Procedurally, an EQB member would have to motion to un-table the petition to advance the petition for consideration, which could occur at the earliest at EQB’s next regularly scheduled meeting, currently set for June 10, 2025. The April meeting featured much debate by the EQB as to the exact timeline of events if the petition is un-tabled and considered during the June meeting. Ultimately, if the petition is considered, the EQB will vote on whether the petition should be further studied by PADEP. The EQB may refuse to accept a petition for further study if it determines that the EQB has considered the issue in the past two years as part of a rulemaking, the requested action is currently in litigation or is not appropriate for rulemaking due to policy or regulatory considerations, or the petition involves an issue previously considered by the EQB and does not contain new or different information to warrant reconsideration. 25 Pa. Code § 23.5. If the EQB accepts the petition, notice of acceptance will be published in the Pennsylvania Bulletin within 30 days. Id. § 23.6.
Upon publication of the acceptance in the Pennsylvania Bulletin, PADEP has 60 days to prepare a report evaluating the petition, but may take additional time if necessary. Id. The report includes a recommendation on whether the EQB should approve the action requested in the petition. Id. This report must identify the anticipated date the EQB will consider a proposed rulemaking in the report if it contains any regulatory amendments. Id. CAC and EIP are entitled to receive the report and make comments that will inform PADEP’s ultimate recommendation. Id. §§ 23.7–.8. Following the report, if PADEP recommends regulatory amendments, it will prepare a proposed rulemaking within six months of sending the report to CAC and EIP. Id. § 23.8. If no regulatory amendments are recommended, PADEP will present at the EQB meeting at least 45 days after it mailed its report to CAC and EIP. Id.
CAC and EIP filed their petition on October 22, 2024. See Clean Air Council and Environmental Integrity Project Petition (Oct. 22, 2024) (Petition). To support their arguments, they cite to the 2020 43rd Statewide Investigating Grand Jury Report (43rd Grand Jury Report) published under then-Attorney General Josh Shapiro, now Governor, which concluded in part that the commonwealth “take action to expand the no-drill zone between fracking and homes from 500 to 2,500 feet and to adopt a more protective no-drill zone of 5,000 feet for schools and hospitals.” Petition at 2 (citing the 43rd Grand Jury Report at 93–94). The petition also alleges that people residing near unconventional oil and gas wells experience negative health consequences, that the wells release dangerous pollution, and that the wells contaminate surface and groundwater, and for these reasons, the EQB should increase minimum setbacks to protect public health and public resources. See generally id. On November 21, 2024, the Pennsylvania Department of Environmental Protection (PADEP) informed CAC and EIP that the petition complied with the EQB petition policy. Letter from PADEP (Nov. 21, 2024). Information and materials for the EQB’s June meeting will be posted to PADEP’s website.
PADEP Issues General Permit for Gaseous Fuel-Fired Spark Ignition Internal Combustion Engines
On April 5, 2025, the Pennsylvania Department of Environmental Protection (PADEP) issued the General Plan Approval and/or General Operating Permit for Gaseous Fuel-Fired Spark Ignition Internal Combustion Engines (BAQ-GPA/GP-16). 55 Pa. Bull. 2680 (Apr. 5, 2025).
A General Permit is a plan approval and operating permit for a specific category of sources that PADEP has determined can be adequately regulated under standardized conditions. Section 6.1(f) of the Air Pollution Control Act (35 Pa. Stat § 4006.1(f)) and 25 Pa. Code ch. 127, subch. H (relating to general plan approvals and operating permits) authorize PADEP to develop General Permits.
PADEP is also authorized to require new sources to control air pollution through the use of best available technology (BAT) under section 6.6 of the Air Pollution Control Act. In developing General Permits, PADEP establishes BAT for new sources, which can include equipment, devices, methods, or techniques to control air emissions to the maximum degree possible utilizing technologies that are available or may be made available. 25 Pa. Code § 121.1.
GP-16 sets BAT emission limits for certain new gaseous fuel-fired spark ignition internal combustion engines that are more stringent than the applicable New Source Performance Standards for these engines in 40 C.F.R. pt. 60, subpt. JJJJ, and 40 C.F.R. pt. 63, subpt. ZZZZ. GP-16 includes standardized requirements related to BAT and additional terms including recordkeeping and reporting requirements, a compliance certification, source testing requirements, and compliance with applicable New Source Performance Standards. The use of the GP-16 is restricted to facilities that are minor sources.
Prior to the issuance of this General Permit, sources seeking to install and operate spark ignition engines were either required to meet certain exemption criteria or go through the full plan approval process to permit these sources. GP-16 will streamline the permitting process for owners and operators who wish to install spark ignition engines at their facilities in Pennsylvania.
A copy of the General Permit, application instructions, the comment and response document, and technical support document can be found on PADEP’s website here.
PADEP Settles with Industry Groups on Control of VOC Emissions from Conventional Oil and Gas Sources
On March 31, 2025, the Pennsylvania Department of Environmental Protection (PADEP) entered a settlement agreement with the Pennsylvania Independent Oil & Gas Association (PIOGA), PA Independent Petroleum Producers (PIPP), and PA Grade Crude Oil Coalition (PGCC) (collectively, Petitioners) pertaining to the Control of VOC Emissions from Conventional Oil and Natural Gas Sources pursuant to 25 Pa. Code ch. 129.
The settlement arises out of a December 5, 2022, petition for review of the emergency-certified final-omitted Control of VOC Emissions from Conventional Oil and Natural Gas Sources by the Petitioners in the Commonwealth Court of Pennsylvania. PIOGA, PIPP and PGCC Petition (Dec. 5, 2022) (Petition). Petitioners challenged the rule on the grounds that (1) the regulation did not meet the requirements to be issued as a final omitted rulemaking; and (2) PADEP did not develop the regulation for conventional oil and gas wells separately and independently from those regulations developed for unconventional oil and gas wells, as required by Act 52 of 2016. The rule was adopted by the Environmental Quality Board (EQB) through an emergency certified final-omitted rulemaking approved by the Governor, without notice and comment, which adopted reasonable available control technology standards (RACT) to control volatile organic compound (VOC) and methane emissions from existing and future conventional oil and gas operations and unconventional oil and gas operations, respectively. PADEP contended that the emergency certified final-omitted rulemaking process was appropriate pursuant to the PA Commonwealth Documents Law because notice and comment from the public was unnecessary, impractical, and contrary to the public interest.
In resolution of the petition for review of the rule, the parties agreed to a settlement that stipulates that for the leak detection and repair (LDAR) monitoring threshold, a separate tank battery surface site is not aggregated with the well or wells that supply the tank battery. See PIOGA v. DEP Settlement Agreement FAQ (Mar. 31, 2025). Further, if the well that supplies the separate tank battery surface site is subject to LDAR on its own due to the barrel of oil equivalent produced per day, the separate tank battery surface site is not automatically also subject to LDAR. PADEP did not conduct a separate RACT analysis for a conventional oil and gas separate tank battery surface site. LDAR will be required at a separate tank battery site if: (1) the separate tank battery surface site receives more than 15 barrels of oil or the equivalent amount of natural gas per day, and (2) one or more of the wells supplying the separate tank battery surface site produced five or more barrels of oil or the equivalent amount of natural gas per day.
Additionally, the settlement explains how PADEP calculated the 2.7 tons per year trigger for controlling VOC emissions from a storage vessel and states that VOC recovery and control requirements are not impacted by the number of wells connected to a particular tank. The recovery requirement is not impacted by how much methane is emitted from a tank, it instead relates to the collection of VOC emissions. VOC recovery and control requirements are also not impacted by the number of wells connected to a particular tank. The settlement also requires that for 10 years, rulemakings under the Air Pollution Control Act, 35 Pa. Stat. §§ 4001–4106, concerning conventional oil and gas well operations shall be undertaken separately and independently from unconventional wells.
Shapiro Administration Launches Permit Application Tracking Webpage
On January 14, 2025, the Pennsylvania Department of Environmental Protection (PADEP) launched a new webpage to track the progress of permit applications. See Commw. of Pa., “Track Your Permit Application” here (Permit Tracker). The Permit Tracker allows interested parties to search permits by program area (e.g., oil and gas, by county, permit type, and other details). Applicants can also check the status of a permit application, including which step of the review process the permit is in, the target date for completing that step, and contact information for the permit reviewer.
According to an accompanying press release, PADEP co-developed the Permit Tracker with the Commonwealth Office of Digital Experience (CODE PA) to modernize the permitting process, and in response to requests from the business community. Press Release, PADEP, “Shapiro Administration Launches New Permit Tracker; Businesses Applying for DEP Permits Can Now See Progress in Real-Time” (Jan. 16, 2025). PADEP said that it continues the agency’s “commitment to transparency and improving the user experience for applicants working with us to build a better Pennsylvania.” Id. In addition to PADEP’s efforts to reduce its permit application backlogs, the agency said the Shapiro administration has been hiring staff to improve operational efficiency. Id.
Implementation of the Permit Tracker follows CODE PA’s October 2024 launch of another website to educate stakeholders about state grant opportunities and assist applicants through the application process. That tool, available here, covers multiple grant categories, including energy and oil and gas. More information about CODE PA’s other efforts can be found on its website here.
PADEP Begins Accepting Grant Applications for Industrial Decarbonization Program
On February 26, 2025, the Pennsylvania Department of Environmental Protection (PADEP) announced it had begun accepting grant applications for the Reducing Industrial Sector Emissions in Pennsylvania (RISE PA) Program. See Press Release, PADEP, “Shapiro Administration Launches RISE PA Initiative to Create Energy Jobs, Cut Costs, Grow Pennsylvania’s Energy & Manufacturing Industries, and Lower Toxic Air Pollution” (Feb. 26, 2025). The RISE PA Program is funded by a $396-million award under the 2022 Inflation Reduction Act for projects that will reduce carbon emissions from the industrial sector, including from fuel combustion, industrial process emissions, natural gas and oil systems, coal mining, and other electricity usage.
As previously reported in Vol. 42, No. 1 (2025) of this Newsletter, President Trump’s Executive Order No. 14,154, “Unleashing American Energy,” created uncertainty around RISE PA’s future by pausing clean energy and climate-related funding under the Inflation Reduction Act. Exec. Order No. 14,154, § 7, 90 Fed. Reg. 8353 (Jan. 20, 2025). The Shapiro administration, however, sued the federal government and the funds were unfrozen on February 24, 2025.
The RISE PA Program awards are tiered based on project size: up to $40 million for small-scale projects; up to $100 million for medium-size projects; and up to $220 million for large-scale projects. Small-scale awards are administered by the Pennsylvania Technical Assistance Program (PennTAP), while medium- and large-scale awards are administered by PADEP.
The Shapiro administration offered examples of eligible projects, including, “installing energy-efficient heat recovery systems to reduce the energy required to heat or cool an industrial facility, electrifying an industrial plant by swapping out diesel-powered generators with equipment that runs on electricity, and capturing coal mine methane from mining operations.” Press Release, supra. The program also includes bonus award opportunities based on taking one or more additional actions and depending on the size of the project. These include a Community Benefits Bonus (for projects in low-income and disadvantaged communities that include a Community Benefits Plan; up to 10% of total project cost), a Fair Labor Bonus (committing to one or more labor-related requirements, based on project size; up to 10% of total project cost), and a GHG Emissions Reduction Bonus (available to medium- and large-scale projects based on the percentage reduction of GHG emissions; up to 10% of total project cost).
The RISE PA website includes step-by-step instructions for applying online, mock project application answers and budgets, and other guidance to assist applicants, as well as a form to submit public feedback about the program. PADEP is currently accepting applications for medium- and large-scale projects, with an application deadline of August 29, 2025, and first award announcements in fall 2025. All projects must be completed by April 1, 2029.
Copyright © 2025, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Mining
(by Joe Reinhart, Sean McGovern, Christina Puhnaty and Ethan Johnson)
In a February 25, 2025, Mining and Reclamation Advisory Board and Aggregate Advisory Board Joint Regulation, Legislation, and Technical Committee Meeting, the Pennsylvania Department of Environmental Protection (PADEP) presented its plans to rescind two technical guidance documents (TGDs) and revise two others due to the TGDs being inaccurate and out of date after changes to Pennsylvania’s coal regulations and noncoal regulations. See PowerPoint Presentation, PADEP, “Water Supply Replacement TGDs” (Feb. 25, 2025).
PADEP plans to rescind its Water Supply Replacement and Permitting TGD (TGD 562-4000-101) but to convert some of its sections into standard operating procedures. PADEP also plans to rescind the Insurance Requirements and Water Supply Replacement Assurance TGD (TGD 562-2500-702) due to its inaccuracy following PADEP’s 2023 revisions to 25 Pa. Code ch. 77 regarding liability insurance rates. Any information still needed from the WSR and Permitting TGD and the Insurance Requirements and Water Supply Replacement Assurance TGD will be incorporated into a revised Water Supply Replacement and Compliance TGD (TGD 563-2112-605).
PADEP plans to make minor revisions to its Increased Operation and Maintenance Costs of Replacement Water Supplies (on All Coal and Surface Noncoal Sites) TGD (TGD 562-4000-102). PADEP will also revise its Water Supply Replacement and Compliance TGD (TGD 563-2112-605), which PADEP will rename as Water Supply Replacement, Permitting, and Compliance. In the revised TGD, PADEP will incorporate background information from the rescinded Water Supply Replacement and Permitting TGD (TGD 562-4000-101), remove requirements that are now in regulations, remove attached forms, and include relevant information from the rescinded Insurance Requirements and Water Supply Replacement Assurance TGD (TGD 562-2500-702). PADEP also announced its intention to remove statements regarding de minimis maintenance or treatment costs, which are no longer addressed in 25 Pa. Code chs. 87 and 88.
PADEP expects the revised TGDs to be published for public comment in fall 2025. PADEP’s mining TGDs are available here.
PADEP Announces Bond Rate Guidelines for the Calculation of Land Reclamation Bonds on Coal Mining Operations and Bond Schedule for Noncoal Mining Operations
The Pennsylvania Department of Environmental Protection (PADEP), on March 22, 2025, announced the 2025 land reclamation bond rate guidelines for coal mining operations, and on March 29, 2025, announced the land reclamation bond schedule for noncoal mining operations. The coal mining operations bond rate guidelines became effective on April 1, 2025, and are available at 55 Pa. Bull. 2392 (Mar. 22, 2025). The noncoal mining operations bond schedule became effective March 29, 2025, and is available at 55 Pa. Bull. 2576 (Mar. 29, 2025).
PADEP Announces Rates to Be Used for Calculating Long-Term Operation and Maintenance Bonds for Water Supply Replacement
On February 15, 2025, the Pennsylvania Department of Environmental Protection (PADEP) announced that the inflation rate for calculating anthracite and bituminous coal and industrial mineral mining water supply operation and maintenance bond amounts for replacement water supplies will be 3.80% and the interest rate for the 20-year Treasury bill will be 3.08%. 55 Pa. Bull. 1603 (Feb. 15, 2025). The rates became effective on April 1, 2025, and will be in effect until the new rates are published in February 2026.
Copyright © 2025, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
West Virginia Executive
(by Moore Capito)
As the “backbone” of digital infrastructure, data centers are becoming more and more critical in meeting the demands of the modern digital world. With advances in artificial intelligence (AI) and the increased reliance on computing by people all over the world, demand for data centers is outpacing supply.
We are in a global modern-day gold rush to build data centers. And just as the 49ers faced infrastructure challenges of the day, data center developers are facing a critical infrastructure obstacle: energy.
A data center is a physical facility that houses servers that manage, store, and process data. There are several types of data centers, and while all do not require the same prerequisites to develop, they all require vast amounts of electricity. According to the United States Department of Energy, data centers account for two percent of the electricity usage in the country consuming 10 to 50 times more electricity per floor space than a typical commercial structure.
The electricity required to power data centers is adding stress on grids that are already pushing the limits. Utilities are having difficulty guaranteeing the level of power required to sustain current demand and meet projected future demand. As a result, developers are evaluating alternative ways to power their projects.
Recently, Amazon Web Services (AWS) purchased Talen Energy’s 1,200 acre data center campus which provides direct power from the Susquehanna Steam Electric Station. Tech companies and developers are no longer waiting on the utilities and are trending toward establishing dedicated power sources. This trend provides energy rich states an incredible opportunity.
Energy companies are actively exploring how to provide direct power ranging from laying additional pipelines to evaluating construction of new power plants dedicated to powering data centers. As evidenced by the recent energy deals, states like West Virginia offer an attractive proposition to data center developers – access to vast amounts of energy sources. Additionally, West Virginia boasts incredible research and development institutions, including West Virginia University and Marshall University. As a result, this region is well positioned to be the next hub for data center development.
Of course, there are challenges. Navigating the regulatory environment, finding suitable property, and identifying partners with available energy supply are just a few. Our firm, Babst Calland, specializes in environmental, energy, and emerging technologies law. As such, we are perfectly situated to connect those pieces because we understand each geographic footprint and tailor legal strategies accordingly, with a deep knowledge of state regulation and local jurisdictions. We provide the cross-disciplinary legal team to address these challenges and support regional and national data center projects.
The demand for data centers is growing and projected to grow even faster. We know the greatest challenge is meeting the electricity requirements. West Virginia has an abundant supply of natural resources, affordable land, artificial intelligence research and development, and proximity to densely populated areas. Now is the time to leverage those strengths. If we do so, our region is poised to benefit greatly from this rush for data centers.
With increased demand for complex data center development, whether navigating potential legal challenges related to financing, project siting, land acquisition, zoning, or regulatory compliance, Babst Calland is prepared to address the region’s most pressing concerns.
Moore Capito is a shareholder in the Corporate and Commercial, Emerging Technologies, and Energy and Natural Resources groups of Babst Calland. He has substantial experience in all phases of complex corporate, commercial and real estate transactions. He routinely counsels clients in entity, joint venture and partnership structuring and formation, and general business matters. For more information, please contact Moore Capito at (681) 205-8953 or mcapito@babstcalland.com or visit babstcalland.com.
Reprinted with permission from the Spring 2025 edition of WV Executive.
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TEQ Hub
(by Kristen Petrina)
On May 19, 2025, President Trump signed into the law the “TAKE IT DOWN Act (the “Act”). The Act includes data privacy, digital protections, and AI governance requirements of companies to remove deepfakes from “covered platforms”, particularly with a focus on nonconsensual intimate imagery (“NCII”).
The Act, whose acronym stands for “Tools to Address Known Exploitation by Immobilizing Technological Deepfakes on Websites and Networks Act” includes both criminal and civil elements; however, it does not create a new private right of action, rather provides the Federal Trade Commission with the enforcement authority over failures to comply with the notice and removal obligations, which would constitute an unfair or deceptive act or practice under the Federal Trade Commission Act.
Criminal and Civil Liability
The Act criminalizes the publication of an authentic or computer-generated NCII and outlines penalties for when the images of “intimate visual depiction” as defined in 15 USC 6851(5)(A), of an adult or minor and imposes new obligations on social media and online platforms to respond to requests to promptly remove unlawful NCII. Synthetic or computer-generated NCII, includes the term “digital forgery” meaning “any intimate visual depictions of an identifiable individual created through the use of software, machine learning, artificial intelligence, or any other computer generated or technological means, including by adapting, modifying, manipulating, or altering an authentic visual depiction, that, when viewed as a whole by a reasonable person, is indistinguishable from an authentic visual depiction of the individual.” An identifiable individual includes someone “(i) who appears in whole or in part in an intimate visual depiction; and (ii) whose face, likeness, or other distinguishing characteristic (including a unique birthmark or other recognizable feature) is displayed in connection with such intimate visual depiction.”
Criminal Liability for “Knowingly” Publishing NCII
- Involving Adults. The Act prohibits the use of an interactive computer service to knowingly publish an intimate visual depiction of an adult identifiable individual, who is not a minor, if (i) the intimate visual depiction was obtained or created under circumstances in which the person knew or reasonably should have known the identifiable individual had a reasonably expectation of privacy; (ii) what is depicted was not voluntarily exposed by the identifiable individual in a public or commercial setting; (iii) what is depicted is not a matter of public concern; and (iv) publication of the intimate visual depiction is intended to cause harm or causes harm, including psychological, financial or reputational harm, to the identifiable individual. For synthetic or computer-generated digital forgeries, the test is similar, except to establish criminal liability, the depiction would have to be published without consent of the identified individual.
- Involving Minors. Under the Act, NCII involving minors, defined as anyone under the age of 18 years, sets forth stricter prohibitions making it unlawful to publish NCII of an identifiable individual who is a minor with the intent to (i) abuse, humiliate, harass, or degrade the minor; or (ii) arouse or gratify the sexual desire of any person.
- Consent, Disclosure and Disclosure Exceptions. The Act recognizes that the consent to create an image is not the same as consent to publication, stating that the fact that (i) an identifiable individual providing consent for the creation of an image; or (ii) the identifiable individual disclosure of the intimate visual depiction to another individual does not establish or constitute consent to publication. However, certain exceptions apply to allow for disclosure to law enforcement, professional obligation reporting requirements, or publication of an individual’s own images.
Civil Liability for Failure to Comply with Notice and Removal Requirements
The criminal provisions of the law went into effect immediately, the Act provides, “covered platforms” a year after the date the law went into effect, to develop a process for notice and removal of NCII identified from their platforms within 48 hours of receiving a valid request from an identifiable individual or someone authorized to act on the individual’s behalf. A covered platform means “a website, online service, online application, or mobile application that (i) serves the public or (ii) for which it is the regular course of business of trade or business of the website, online service, online application, or mobile application to publish, curate, host or make available content of nonconsensual intimate visual depictions.” Covered platforms do not include ISPs, email providers, online services that consist primarily of not user generated content, or services for which chat, comment or interactive functionality is directly related to the provision of not user generated content.
A covered platform must provide a clear, easy to understand and conspicuous policy which shall include valid removal request requirements, how to submit a removal request and the removal responsibilities of the platform. A valid removal request must be in writing, with a physical or electronic signature, and include (i) enough information to locate the depiction; (ii) a statement of the individuals’ good faith belief that the depiction was not consensual; and (iii) the requester’s contact information.
Within 48 hours of a valid removal request, the covered platform must remove the intimate visual depiction and make reasonable efforts to identify and remove any known identical copies of such depiction.
The Act gives covered platforms liability protections from claims from content posters based on the covered platforms good faith removal, disabling access to, or removal of, material claimed to be NCII, regardless of whether the intimate visual depiction is ultimately determined to be unlawful or not.
Covered Platform Next Steps
While the removal obligations will not take effect until May of 2026, covered platforms face significant obligations to confirm compliance. Knowledge of the Act allows companies to develop a business model to aid in immediate removal of NCIIs as it must occur with 48 hours. Therefore, companies that host user generated content, should prepare to take the following steps to determine if and how they would need to comply:
- Determine if you or your company would be a covered platform.
- Determine whether your company has enough resources, proper operating and escalation procedures, and training to implement the Act’s requirements.
- Establish a notice process and policy.
- Review your data privacy, AI, cybersecurity, document retention and digital governance policies.
- Consider engaging professional support to confirm that your company is prepared to comply with the Act’s requirements.
Kristen Petrina is an associate in the Corporate and Commercial and Emerging Technologies groups of Babst Calland. She represents domestic and international clients on a broad range of general corporate and commercial law matters and advises businesses on data privacy and protection and security compliance.
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Environmental Alert
(Sloane Wildman and Jessica Deyoe)
On May 14, 2025, less than three weeks after the U.S. Environmental Protection Agency (EPA) released its strategy to address per and polyfluoroalkyl substances (PFAS), the EPA announced its intent to retain the existing drinking water standards for the two most common PFAS (perfluorooctanoic acid (PFOA) and perfluorooctane (PFOS)). At the same time, EPA stated it would rescind and “reconsider” the regulation of the four other PFAS compounds included in the previous rule (perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA, commonly known as GenX chemicals), perfluorohexane sulfonic acid (PFHxS) and perfluorobutane sulfonic acid (PFBS)). For more information on the prior rule, see our April 2024 Alert, available here and for more information on EPA’s strategy to address PFAS, see our April 2025 Alert, available here.
In addition to limiting the number of PFAS compounds subject to regulation under the Safe Drinking Water Act, EPA stated it would extend compliance deadlines for PFOA and PFOS from 2029 to 2031, create a framework for federal exemptions for passive receivers of PFAS (consistent with its goal to “hold polluters accountable”), and establish a new “PFAS OUTreach Initiative” (PFAS OUT). According to EPA Administrator Lee Zeldin, with its particular emphasis on water systems in rural and small communities, PFAS OUT will “connect with every public water utility known to need capital improvements to address PFAS in their systems” by sharing resources, tools, funding, and technical assistance to help utilities meet the federal drinking water standards.
Babst Calland’s Environmental Practice Group is closely tracking EPA’s PFAS actions, and our attorneys are available to provide strategic advice on how developing PFAS regulations may affect your business. For more information or answers to questions, please contact Sloane Wildman at (202) 853-3457 or swildman@babstcalland.com, Jessica Lynn Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com, or your Babst Calland relationship attorney.
Environmental Alert
(by Sloane Wildman, Jessica Deyoe and Ethan Johnson)
On April 28, 2025, U.S. Environmental Protection Agency Administrator Lee Zeldin announced “major EPA actions to combat PFAS contamination.” Few details have been provided yet, but in emphasizing EPA’s goals in “strengthening the science,” “fulfilling statutory obligations and improving communication,” and “building partnerships” with states and Tribes, EPA signals that it may take a different regulatory approach to PFAS (per- and polyfluoroalkyl substances) than the prior administration.
The announcement does not expressly discuss the two major PFAS regulatory actions from the Biden administration – the designation of two PFAS compounds as hazardous substances under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and the promulgation of enforceable Maximum Contaminant Levels (MCLs) and non-enforceable health-based Maximum Contaminant Level Goals (MCLGs) for six PFAS compounds under the Safe Drinking Water Act (SDWA). Both rules are currently subject to judicial challenges (CERCLA challenge opening brief here; SDWA challenge opening brief here). However, in an implicit acknowledgment of concerns regarding the CERCLA rule raised by “passive receivers” of PFAS, including water utilities, EPA states that it will work with Congress and industry to establish a liability framework that operates on a “polluter pays” principle, to provide “certainty” to these passive receivers. This will require Congressional action, as only Congress, and not EPA, has the authority to shield passive receivers such as local water utilities from CERCLA liability.
The announcement further suggests EPA may take a more industry-friendly approach with respect to some of the proposed PFAS actions that were initiated during the Biden administration. For example, while it does not expressly reference regulations proposed under the Resource Conservation and Recovery Act (RCRA) to add 9 PFAS (including their salts and structural isomers) to the list of “hazardous constituents” in Appendix VIII of 40 C.F.R. Part 261 and to clarify that emerging contaminants – including PFAS – can be addressed under RCRA’s Corrective Action Program, EPA states that it will determine how to “better use RCRA” to address releases. EPA’s announcement also references the development of Effluent Limitations Guidelines (ELGs) under the Clean Water Act for PFAS manufacturers and metal finishers, and the evaluation of whether ELGs are necessary for other industries but does not provide concrete plans for such regulatory developments.
EPA’s announcement does not provide a timeline for any of its intended PFAS actions, and it is unclear how quickly EPA expects to implement them.
The full list of PFAS actions included in EPA’s announcement is below. EPA also stated that this list “is the first, not the last, of all decisions and actions EPA will be taking to address PFAS over the course of the Trump administration.”
Strengthening the Science
- Designate an agency lead for PFAS to better align and manage PFAS efforts across agency programs
- Implement a PFAS testing strategy under Toxic Substances Control Act (TSCA) Section 4 to seek scientific information informed by hazard characteristics and exposure pathways
- Launch additional efforts on air related PFAS information collection and measurement techniques related to air emissions
- Identify and address available information gaps where not all PFAS can be measured and controlled
- Provide more frequent updates to the PFAS Destruction and Disposal Guidance—changing from every three years to annually—as EPA continues to assess the effectiveness of available treatment technologies
- Ramp up the development of testing methods to improve detection and strategies to address PFAS
Fulfilling Statutory Obligations and Enhancing Communication
- Develop effluent limitations guidelines (ELGs) for PFAS manufacturers and metal finishers and evaluate other ELGs necessary for reduction of PFAS discharges
- Address the most significant compliance challenges and requests from Congress and drinking water systems related to national primary drinking water regulations for certain PFAS
- Determine how to better use RCRA authorities to address releases from manufacturing operations of both producers and users of PFAS
- Add PFAS to the Toxic Release Inventory (TRI) in line with Congressional direction from the 2020 National Defense Authorization Act
- Enforce Clean Water Act and TSCA limitations on PFAS use and release to prevent further contamination
- Use Safe Drinking Water Act authority to investigate and address immediate endangerment
- Achieve more effective outcomes by prioritizing risk-based review of new and existing PFAS chemicals
- Implement section 8(a)7 to smartly collect necessary information, as Congress envisioned and consistent with TSCA, without overburdening small businesses and article importers
- Work with Congress and industry to establish a clear liability framework that operates on polluter pays and protects passive receivers
Building Partnerships
- Advance remediation and cleanup efforts where drinking water supplies are impacted by PFAS contamination
- Work with states to assess risks from PFAS contamination and the development of analytical and risk assessment tools
- Finish public comment period for biosolids risk assessment and determine path forward based on comments
- Provide assistance to states and tribes on enforcement efforts
- Review and evaluate any pending state air petitions
- Resource and support investigations into violations to hold polluters accountable
Babst Calland’s Environmental Practice Group is closely tracking EPA’s PFAS actions, and our attorneys are available to provide strategic advice on how developing PFAS regulations may affect your business. For more information or answers to questions, please contact Sloane Wildman at (202) 853-3457 or swildman@babstcalland.com, Jessica Lynn Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com, Ethan Johnson at (202) 853-3465 or ejohnson@babstcalland.com, or your Babst Calland relationship attorney.
The Legal Intelligencer
(by Michael Korns and Anna Jewart)
Pennsylvania municipalities are empowered not only to adopt ordinances and enforce them but to establish fines and penalties for violations of the same. However, municipalities are creatures of statute and authorized only to act within the bounds of the powers granted to them by the General Assembly. The various municipal enabling statutes, such as the First Class Township Code, as well as other statutes such as the Pennsylvania Municipalities Planning Code, all include express authorizations for municipalities to prescribe fines and penalties for violations of municipal ordinances and also establish restrictions on the upper limits of those fines or civil penalties per violation. Typically, these statutes also expressly establish that a municipality may, by ordinance, provide that a separate violation shall arise for each day of violation and for each applicable section of the ordinance. Consequently, municipalities, generally, are permitted to seek cumulative fines which grow each day a violation persists. Both the Pennsylvania State Constitution, article I, section 13, PA. CONST. art. I §13, and the Eighth Amendment of the United States Constitution, U.S. CONST. amend. VIII, (as made applicable to the states through the Fourteenth Amendment, U.S. CONST. amend. XIV) prohibit excessive fines, providing in relevant part that “[e]xcessive bail shall not be required, nor excessive fines imposed…” On April 2, 2025, the Commonwealth Court explored whether a cumulative municipal fine imposed under the Philadelphia Code, as authorized by the First Class City Home Rule Act, 53 P.S. §13101 et seq., was unconstitutionally excessive.
In City of Philadelphia v. Epstein, No. 515 C.D. 2024, 2025 WL 981892 (Pa. Cmwlth. April 2, 2025)[1] the Court reviewed the outcome of a longstanding enforcement action by the City of Philadelphia originating from a 2018 enforcement notice and 2019 complaint seeking a permanent injunction and fines regarding violations of the City Code. An order of the Court of Common Pleas of Philadelphia County directed remedial action and indicated that a $2,300 daily fine would be imposed if the defendant did not comply with the order, beginning to accumulate on April 7, 2020. During the course of proceedings prolonged due to the COVID-19 pandemic, defendant failed to remedy the violations originally cited by the City. On February 6, 2023, the common pleas court issued a final order which assessed a statutory fine of $65,333.33 but noted that the total statutory amount of accrued fines to which the City was entitled (as of November 8, 2022) was $3,456,900.00. The defendant filed a post-trial motion seeking a reduction of the statutory fine, in part, on the grounds that it was excessive and punitive in violation of the First Class City Home Rule Act, the Pennsylvania State Constitution, and the Eighth Amendment of the U.S. Constitution. The common pleas court denied the motion, and the defendant appealed to the Commonwealth Court.
Section 17 of the Home Rule Act and the City Home Rule Charter both authorized the city to impose fines and penalties for violation of City ordinances “not exceeding … $2,300…”. The Home Rule Act further provides that “a city of the first class may increase any fine… or penalty… provided that the increase does not exceed… $400… in any calendar year and the total amount of the fine…or penalty does not exceed two thousand dollars.” The defendant alleged that the City could only seek a maximum fine of $2,300 for each of the violations issued against the property plus a $400 increase per year, amounting to a total of $7,800 maximum. She also argued that regardless, the fine imposed was excessive and punitive, in part because she had trusted her now estranged husband to bring the property into compliance. The City countered that the Court had already rejected the argument that the Home Rule Act and City’s Home Rule Charter capped fines at $2,300 per violation plus $400 per year in City of Philadelphia v. Neely, No. 480 C.D. 2022 (Pa. Cmwlth. Mar. 25, 2024), and that the City was statutorily authorized to impose daily fines. It further argued that the $65,000 fine at issue was not violative of the constitutional restrictions on excessive fines.
The Court first reviewed the relevant statutory authority applicable to Philadelphia, as well as the City Code, noting that it expressly states that “[e]ach day that a violation continues after issuance of a notice or order shall be deemed a separate offense.” The defendant argued that this provision conflicts with the Home Rule Act and Home Rule Charter, but the Court disagreed. It concluded the plain language of the Act and Charter did not prohibit the imposition of a fine or penalty for each offense as defined by the Code. Further, while Section 17 of the Act limited the penalty the City may impose for each individual violation, it did not limit the City’s ability to define what constitutes a violation or offense through an ordinance. As the Court stated, the objective behind cumulative fines for each day a property remains in violation is to encourage property owners to expeditiously remedy ongoing violations, and for those reasons, the Court has generally upheld cumulative or aggregate assessments for continuing violations that remain uncorrected for extended periods. It therefore refused to overturn the imposition of the fine by the common pleas court on those grounds, noting the 1,503 day period over which the defendant had failed to correct the relevant violations.
The Court then turned to the topic of more interest to the remainder of the state – the impact of the Excessive Fines Clauses of the Pennsylvania and U.S. Constitution, which limits the government’s powers to extract payments as punishment for an offense. The Court noted that since fines serve not only as a punishment but as a deterrent, the amount of a fine can be raised to whatever sum is necessary to discourage future or continued violations, subject to any restriction imposed on the amount of the fine by the enabling statute or the Constitution. There need not be strict proportionality between the harm resulting from the offense and the penalty imposed, but a fine may be deemed unconstitutionally excessive where the amount is so great as itself to be confiscatory and beyond the bounds of all reason and justice. Defendant argued that the fine was grossly excessive and disproportionate to the wrong committed as well as to the value of the property, and that the property owner would be unable to pay the fine. The Court rejected these arguments, noting that neither the value of the noncompliant property nor the inability to pay are factors in determining if a fine is unconstitutionally excessive. The Court reasoned that the fine imposed was the result of ongoing violations for a 1,503-day period and fell within the statutory parameters of the Code. Finally, comparing the statutory maximum ($3,345,900) to the fine imposed, the Court noted that the common pleas court had provided a 98% reduction which it found to be a “lenient sum” in comparison. The Court therefore agreed with the court of common pleas that the fine was not unconstitutionally excessive.
As with any other authority, the power of a municipality to seek fines and penalties is not only limited by the state statute that authorizes it but confined by the protections of the state and U.S. Constitution. The Court’s decision in Epstein suggests that constitutional limits will not automatically serve to disrupt cumulative fines that are otherwise levied within the boundaries of state law and perceived to be in furtherance of the dual goals of punishment and deterrence.
Michael T. Korns is senior counsel in the public sector, and energy and natural resources groups of Babst Calland. Anna S. Jewart is an associate in the public sector, and energy and natural resources groups of Babst Calland and focuses her practice on land use, zoning, and general municipal matters.
To view the full article, click here.
Reprinted with permission from the April 24, 2025 edition of The Legal Intelligencer© 2025 ALM Media Properties, LLC. All rights reserved.
____________
[1] Opinion reported and pending official citation.
TEQ Hub
(by Jenn Malik and Anna Hosack)
Regardless of party affiliation, the one issue that most Americans seem to be able to agree about in 2025 is that we all are sick of our healthcare system. Healthcare reform is no stranger to the American political discourse, but recent public sentiment at the expense, difficulty, and confusion inherent in navigating the American healthcare is at an all-time low. Americans’ dissatisfaction with the current state of the healthcare industry is unsurprising when between 2008 and 2022, the per enrollee cost of private health insurance has grown by 61.6% according to a study by the Kaiser Family Foundation.¹ Despite rising costs, rates for denials of coverage have increased nationally with a current average of around 19%.² Add to these statistics the change of administration and corresponding anticipated changes in healthcare benefits policy, along with increased litigation against Plan Sponsors reminiscent of the retirement plan litigation in the late 2000s, and we are all left scratching our heads with how to provide healthcare coverage to employees at an affordable cost – especially when, according to a recent study by Forbes, two-thirds (2/3) of American employees name employer-covered healthcare as the most important benefit in considering whether to take a job.³ Below are key issues for employers to watch in the healthcare benefits space this year to guide in planning your organization’s healthcare benefits and to budget accordingly:
Challenge to Affordable Care Act’s Preventive Care Coverage
Currently, the Patient Protection and Affordable Care Act (ACA), also known as Obamacare, mandates that most health insurance plans must cover certain preventive services at no cost share to patients.⁴ These services include benefits such as an annual wellness visit, maternity care, STD testing, certain immunizations for adults and children, cancer screenings, and well-baby/well-child visits.⁵ The United States Preventive Services Task Force (USPSTF)⁶, the Health Resources and Services Administration (HRSA), and the Advisory Committee on Immunization Practices (ACIP) are various agencies tasked with recommending what benefits must be covered at no cost share under the preventive care mandate.⁷ Proponents of the mandate argue that covering these benefits at no cost-share leads to earlier detection of serious medical conditions, earlier medical intervention, and more positive patient outcomes which can decrease the number of high-cost claims in the population and deter costs, while critics oppose the increased costs to employers/plan sponsors and may also oppose certain preventive services on religious grounds, such as the requirement to cover pre-exposure prophylaxis for HIV (PrEP) or birth control.
This April, SCOTUS is set to hear a challenge brought by Braidwood Management, Inc., and other employers to the mandate on the basis that the USPSTF, in its role as an administrative body that recommends what services are covered at no cost share, are “principal officers” who must be nominated by the U.S. President and confirmed by the Senate in accordance with the Constitution’s Appointment’s Clause.⁸ These employers also challenged the mandate on religious grounds, arguing that the ACA’s requirement that plans cover medication for HIV prevention violated the Religious Freedom Restoration Act (RFRA). In 2022, a Texas District Court agreed with the employers, holding that the USPSTF’s recommendations are unconstitutional because its members are officers of the United States that were not appointed in accordance with the Appointments Clause.⁹ The District Court held that because the members were unconstitutionally appointed, all recommendations implemented by the USPSTF after March 23, 2010 (the effective date of the ACA) must be vacated and issued a nationwide injunction blocking enforcement of the ACA’s preventive care mandate. The District Court also held that the USPSTF’s recommendation to cover PrEP at no cost share violated the RFRA.
On appeal, the Fifth Circuit Court of Appeals affirmed the District Court decision that the USPSTF members were unconstitutionally appointed; however, the Fifth Circuit held that the District Court had erred in vacating all agency actions to implement and enforce the USPSTF’s preventive care requirements and erred by enjoining enforcement nationally.¹⁰ The Fifth Circuit limited the remedy of enjoining enforcement to the particular plaintiffs and those similarly situated in lieu of a national injunction. The Fifth Circuit also declined to issue similar decisions against ACIP and the HRSA and issued a remand to address whether the Secretary of Health and Human Services properly ratified the recommendations of those agencies.
SCOTUS granted certiorari and will specifically review whether USPSTF members are “inferior officers” of the United States, meaning their appointment was constitutional, and whether the District Court failed to sever the allegedly unconstitutional provision. SCOTUS denied certiorari on the Plaintiff’s cross-petition for review of whether all ACA preventive care requirements violated the non-delegation canon; consequently, all ACA preventive care requirements recommended prior to March 23, 2010 are preserved.
What employers should consider for 2025:
Until SCOTUS renders an opinion, employers subject to the ACA should continue to cover the preventive services recommended by the USPSTF at no cost-share to their employees. If the challenge is successful, employers may be able to impose cost sharing for certain preventive services and/or benefits which may initially reduce healthcare costs. However, it is important to remember that federal law sets the floor, and not the ceiling for required covered benefits – and that while imposing cost-sharing on employees may have an immediate financial gain in the short-term, shifting costs to employees can cause delays in care, which can lead to later medical interventions, higher cost claims, and ultimately, a sicker workforce.
Financial Impact of Prescription Drug Developments
Prescription drug costs are skyrocketing with prescription drug cost trends outpacing medical cost trends in 2025: according to a Segel Health Plan Cost Survey, prescription drug costs grew by 11.4% and medical costs increased by 8%. This trend is heavily influenced by the emergence of glucagon-like peptide-1 receptor agonists (commonly known as GLP-1s) used to treat type 2 diabetes and obesity. While the monthly cost of these drugs is low compared to some other medications, typically ranging from $900 – $1300 per month per patient, their widespread utilization by the public has left employers and health insurers scrambling with how to maintain costs. The financial impact of GLP-1s has been so staggering that many insurers have begun to offer buy-up options to employers if they choose to include GLP-1s on their covered medications list (i.e. Formulary) for weight loss. Proponents of GLP-1s argue that inclusion of the medications on Formulary greatly reduces other costly medical interventions such as gastric bypass surgery, and likewise reduces cardiovascular conditions such as heart attack, and stroke. Those against coverage of GLP-1s argue that there is a lack of independent studies on the impact of long-term usage of GLP-1s, that the costs have significant negative fiscal impacts to the healthcare system, and that the side effects cause even more high-cost claims. Big Pharma continues to seek approvals from the FDA for expanded indications of GLP-1s including for the treatment of sleep apnea, kidney disease, and liver disease.
Additionally, the financial savings that were anticipated when biosimilars, or biologic drugs that are highly similar to an already FDA-approved biologic product, hit the market as many brand medications began to lose their patent protection has been underwhelming. Biosimilar adoption has been slow due to concerns about safety and efficacy among healthcare providers and patients, complex Formulary and reimbursement structures that favor brand drugs over biosimilars, and lack of patient and provider education despite the significantly decreased price tag.
Specialty medications, which on average account for 50% of prescription drug spend, continue to be developed and while these medications offer life altering treatments for patients living with severe illnesses – they also come with a hefty price tag. For example, a new treatment to cure Hemophilia B, a lifelong debilitating bleeding disorder, comes at a price tag of $3.5 Million per treatment. While many balk at the cost, consider on average that an individual with Hemophilia averages $700,000-$800,000 in medical costs per year – so in theory the treatment would pay for itself in 4-5 years. However, for employer-sponsored plans, a single claim of $3.5 million would have an extreme impact on renewals.
Finally, the Trump Administration announced on April 8, 2025 that his administration would soon announce tariffs on pharmaceutical imports. While it is uncertain how Big Pharma will respond to such tariffs, it is certain that if such tariffs come into effect, they will very likely cause significant increases to how much consumers – and specifically plan sponsors/employers will spend on prescription medications. For reference, the U.S. imported over $210 Billion in pharmaceuticals in 2024.
What employers should consider for 2025:
Employers should anticipate prescription drug costs to continue increasing and budget accordingly as GLP-1s are here to stay and increased indications for GLP-1 drugs continue to be considered by the FDA. Employers looking to reduce costs should consider whether to cover GLP-1s for weight loss only. Likewise, employers should speak to their carriers and pharmacy benefits managers (PBMs) about their biosimilar strategy as a means to reduce cost. Employers should investigate copay accumulator programs as a means to leverage drug manufacturer coupon dollars to lower costs of specialty medications and consider plan design changes to their prescription benefits. Finally, employers should prepare for the impact of tariffs on their plans’ prescription drug spends.
Challenge to Mental Health Parity and Addiction Equity Act
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) generally requires health plans to cover mental health and substance use disorder benefits similarly to medical and surgical benefits. Since MHPAEA’s enactment, complex federal regulations have been published to determine whether a health plan treats these benefits in parity which has led to significant difficulty for issuers and plan sponsors in determining whether a health plan is in compliance. In late 2020, Congress enacted the Consolidated Appropriates Act (CAA) which requires group health plans and health insurers to conduct comparative analyses to demonstrate that both quantitative treatment limitations (QTLs), or treatment limitations that are numerical in nature such as visit limits and copays, and non-quantitative treatment limitations (NQTLs), i.e. non-numerical limitations such as network access to providers, are no more stringently applied to mental health/substance abuse benefits than medical/surgical benefits. Since 2021, plans and insurers have been required to make these comparative analyses available to the Department of Labor, HHS, and Department of Treasury (Departments), upon request – but due to the complexity of the rules, enforcement has been challenging and many plans have been found to be out of compliance.
This led to the Departments eventually publishing final rules amending the longstanding 2013 rules on September 23, 2024 (2024 Final Rules). The 2024 Final Rules establish new NQTL standards, bolster the comparative analysis requirements that were added by the CAA, and prohibit plans and issuers from using discriminatory information, evidence, sources, or standards that systematically disfavor or are specifically designed to disfavor access to mental health/substance use disorder benefits as compared to medical/surgical benefits when designing NQTLs.¹¹ Some of these regulations are already in force while others begin on or after January 1, 2026.
Earlier this year, the ERISA Industry Committee (ERIC) filed suit against the Departments in the U.S. Court of Appeals for the D.C. Circuit seeking to invalidate the 2024 Final Rules, or at a minimum, invalidate key provisions and prohibit the Departments from implementing or enforcing the new rules, asserting that the 2024 Final Rules violate the U.S. Constitution and the Administrative Procedure Act and impose vague and burdensome requirements on health plans.¹² That same day, the Departments released a report to Congress indicating that employers had made progress on complying with MHPAEA but still fell short. The executive director of the ERIC Legal Center asserted that the new regulations “threaten the ability of employers to offer high quality, affordable coverage for the mental health and substance use disorder needs of employees and their families.”¹³
Prior to the establishment of the 2024 Final Rules, compliance with the MHPAEA caused significant financial strain on health plans and health insurers alike, and by extension drive up compliance costs associated with healthcare benefits coverage. If the additional requirements under the 2024 Final Rules pass constitutional muster, health insurers and plans will incur additional monitoring and reporting costs. Additionally, though MHPAEA enforcement was a top priority for the Biden administration, it is unclear what the Trump administration’s position will be – or what impact the recent workforce cuts at the DOL and HHS will have on the enforcement of MHPAEA going forward.
What employers should consider for 2025:
The 2024 Final Rules may not be here to stay between budget constraints, federal staffing constraints, and the ERIC lawsuit targeting the 2024 Final Rule. In the meantime, employers should monitor updates and budget accordingly for the additional requirements in the 2024 Final Rules to ensure continued compliance with MHPAEA as applicable.
Jenn Malik is a shareholder and Anna Hosack is an associate in the public sector services group of the Pittsburgh law firm of Babst Calland, Clements & Zomnir. Malik focuses her practice on healthcare benefits administration, insurance coverage, and appellate law. Hosack focuses her practice primarily on municipal law, land use, and healthcare benefits law. Contact them at jmalik@babstcalland.com and ahosack@babstcalland.com.
________________
[1] Amin, K., Cox, C., Ortaliza, J. & Wager, E., Health Care Costs and Affordability, Kaiser Family Foundation, (May 28, 2024) https://www.kff.org/health-policy-101-health-care-costs-and-affordability/.
[2] Lo, J., Long, M., et al, Claims Denials and Appeals in ACA Marketplace Plans in 2023, Kaiser Family Foundation, (Jan. 27, 2025) https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans-in-2023/#:~:text=Key%20Takeaways,by%20insurer%20and%20by%20state.
[3] O’Reilly, Dennis, Best Employee Benefits, Forbes (October 30, 2024) https://www.forbes.com/advisor/business/best-employee-benefits/#:~:text=More%20than%20half%20of%20American,as%20the%20most%20important%20benefit.
[4] 42 U.S.C. § 300gg-13(a)(1).
[5] Preventive Services Covered by Private Health Plans Under the Affordable Care Act, Kaiser Family Foundation (Feb. 28, 2024) https://www.kff.org/womens-health-policy/fact-sheet/preventive-services-covered-by-private-health-plans/#:~:text=The%20services%20required%20to%20be,is%20published%20or%20otherwise%20released.
[6] The USPSTF determines what preventive services must be covered at no cost share by reviewing scientific evidence related to the effectiveness, appropriateness, and cost-effectiveness of clinical preventive services for the purpose of developing recommendations for the health care community, and updating previous clinical preventive recommendations. 42 U.S.C. § 299b-4(a)(1).
[7] The USPSTF recommends what services must be provided at no cost-share, while ACIP recommends which immunizations must be covered, and the HRSA determines what contraceptives require coverage.
[8] Petition for a Writ of Certiorari, Becerra et al. v. Braidwood Management, Inc. et al., No. 24-316 (Sept. 19, 2024).
[9] Memorandum Opinion & Order, Braidwood Mgmt. v. Becerra, 627 F. Supp. 3d 624 (N.D. Tex. 2022)
[10] Braidwood Management, Inc. v. Becerra et al., No. 23-0326 (5th Cir. 2024).
[11] Fact Sheet: Final Rules Under the Mental Health Parity and Addiction Equity Act (MHPAEA), U.S. Department of Labor (last visited Apr. 1, 2025) https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rules-under-the-mental-health-parity-and-addiction-equity-act-mhpaea.
[12] See Complaint, Erisa Industry Committee v. Department of Health and Human Services et al., No. 1:25-cv-00136 (D.D.C. 2025).
[13] Kellie Mejdrich, Trade Group Sues to Stop Federal Mental Health Parity Regs, LAW360 (Jan. 17, 2025) https://www.law360.com/articles/2286079.
There’s no doubt that the energy sector has seen a recent surge in tech-driven initiatives. As economic pressures continue to drive companies to develop and deploy advanced technologies, the industry must also navigate the complex landscape of technology innovation and sustainability to continue to meet regulatory requirements, protect intellectual property, and manage risks associated with the rapidly changing legal and market conditions.
Whether it’s dealing with energy transition, technology onboarding and integration, or AI and automation, Babst Calland is prepared to support energy clients in handling the unique challenges and opportunities surrounding the use of emerging technologies.
For more information, click here. Reach out to Justine Kasznica at jkasznica@babstcalland.com or 412.394.5684 or your Babst Calland contact if you have questions.
Perspective
(by Jenn Malik and Anna Hosack)
Regardless of party affiliation, the one issue that most Americans seem to be able to agree about in 2025 is that we all are sick of our healthcare system. Healthcare reform is no stranger to the American political discourse, but recent public sentiment at the expense, difficulty, and confusion inherent in navigating the American healthcare is at an all-time low. Americans’ dissatisfaction with the current state of the healthcare industry is unsurprising when between 2008 and 2022, the per enrollee cost of private health insurance has grown by 61.6% according to a study by the Kaiser Family Foundation.¹ Despite rising costs, rates for denials of coverage have increased nationally with a current average of around 19%.² Add to these statistics the change of administration and corresponding anticipated changes in healthcare benefits policy, along with increased litigation against Plan Sponsors reminiscent of the retirement plan litigation in the late 2000s, and we are all left scratching our heads with how to provide healthcare coverage to employees at an affordable cost – especially when, according to a recent study by Forbes, two-thirds (2/3) of American employees name employer-covered healthcare as the most important benefit in considering whether to take a job.³ Below are key issues for employers to watch in the healthcare benefits space this year to guide in planning your organization’s healthcare benefits and to budget accordingly:
Challenge to Affordable Care Act’s Preventive Care Coverage
Currently, the Patient Protection and Affordable Care Act (ACA), also known as Obamacare, mandates that most health insurance plans must cover certain preventive services at no cost share to patients.⁴ These services include benefits such as an annual wellness visit, maternity care, STD testing, certain immunizations for adults and children, cancer screenings, and well-baby/well-child visits.⁵ The United States Preventive Services Task Force (USPSTF)⁶, the Health Resources and Services Administration (HRSA), and the Advisory Committee on Immunization Practices (ACIP) are various agencies tasked with recommending what benefits must be covered at no cost share under the preventive care mandate.⁷ Proponents of the mandate argue that covering these benefits at no cost-share leads to earlier detection of serious medical conditions, earlier medical intervention, and more positive patient outcomes which can decrease the number of high-cost claims in the population and deter costs, while critics oppose the increased costs to employers/plan sponsors and may also oppose certain preventive services on religious grounds, such as the requirement to cover pre-exposure prophylaxis for HIV (PrEP) or birth control.
This April, SCOTUS is set to hear a challenge brought by Braidwood Management, Inc., and other employers to the mandate on the basis that the USPSTF, in its role as an administrative body that recommends what services are covered at no cost share, are “principal officers” who must be nominated by the U.S. President and confirmed by the Senate in accordance with the Constitution’s Appointment’s Clause.⁸ These employers also challenged the mandate on religious grounds, arguing that the ACA’s requirement that plans cover medication for HIV prevention violated the Religious Freedom Restoration Act (RFRA). In 2022, a Texas District Court agreed with the employers, holding that the USPSTF’s recommendations are unconstitutional because its members are officers of the United States that were not appointed in accordance with the Appointments Clause.⁹ The District Court held that because the members were unconstitutionally appointed, all recommendations implemented by the USPSTF after March 23, 2010 (the effective date of the ACA) must be vacated and issued a nationwide injunction blocking enforcement of the ACA’s preventive care mandate. The District Court also held that the USPSTF’s recommendation to cover PrEP at no cost share violated the RFRA.
On appeal, the Fifth Circuit Court of Appeals affirmed the District Court decision that the USPSTF members were unconstitutionally appointed; however, the Fifth Circuit held that the District Court had erred in vacating all agency actions to implement and enforce the USPSTF’s preventive care requirements and erred by enjoining enforcement nationally.¹⁰ The Fifth Circuit limited the remedy of enjoining enforcement to the particular plaintiffs and those similarly situated in lieu of a national injunction. The Fifth Circuit also declined to issue similar decisions against ACIP and the HRSA and issued a remand to address whether the Secretary of Health and Human Services properly ratified the recommendations of those agencies.
SCOTUS granted certiorari and will specifically review whether USPSTF members are “inferior officers” of the United States, meaning their appointment was constitutional, and whether the District Court failed to sever the allegedly unconstitutional provision. SCOTUS denied certiorari on the Plaintiff’s cross-petition for review of whether all ACA preventive care requirements violated the non-delegation canon; consequently, all ACA preventive care requirements recommended prior to March 23, 2010 are preserved.
What employers should consider for 2025:
Until SCOTUS renders an opinion, employers subject to the ACA should continue to cover the preventive services recommended by the USPSTF at no cost-share to their employees. If the challenge is successful, employers may be able to impose cost sharing for certain preventive services and/or benefits which may initially reduce healthcare costs. However, it is important to remember that federal law sets the floor, and not the ceiling for required covered benefits – and that while imposing cost-sharing on employees may have an immediate financial gain in the short-term, shifting costs to employees can cause delays in care, which can lead to later medical interventions, higher cost claims, and ultimately, a sicker workforce.
Financial Impact of Prescription Drug Developments
Prescription drug costs are skyrocketing with prescription drug cost trends outpacing medical cost trends in 2025: according to a Segel Health Plan Cost Survey, prescription drug costs grew by 11.4% and medical costs increased by 8%. This trend is heavily influenced by the emergence of glucagon-like peptide-1 receptor agonists (commonly known as GLP-1s) used to treat type 2 diabetes and obesity. While the monthly cost of these drugs is low compared to some other medications, typically ranging from $900 – $1300 per month per patient, their widespread utilization by the public has left employers and health insurers scrambling with how to maintain costs. The financial impact of GLP-1s has been so staggering that many insurers have begun to offer buy-up options to employers if they choose to include GLP-1s on their covered medications list (i.e. Formulary) for weight loss. Proponents of GLP-1s argue that inclusion of the medications on Formulary greatly reduces other costly medical interventions such as gastric bypass surgery, and likewise reduces cardiovascular conditions such as heart attack, and stroke. Those against coverage of GLP-1s argue that there is a lack of independent studies on the impact of long-term usage of GLP-1s, that the costs have significant negative fiscal impacts to the healthcare system, and that the side effects cause even more high-cost claims. Big Pharma continues to seek approvals from the FDA for expanded indications of GLP-1s including for the treatment of sleep apnea, kidney disease, and liver disease.
Additionally, the financial savings that were anticipated when biosimilars, or biologic drugs that are highly similar to an already FDA-approved biologic product, hit the market as many brand medications began to lose their patent protection has been underwhelming. Biosimilar adoption has been slow due to concerns about safety and efficacy among healthcare providers and patients, complex Formulary and reimbursement structures that favor brand drugs over biosimilars, and lack of patient and provider education despite the significantly decreased price tag.
Specialty medications, which on average account for 50% of prescription drug spend, continue to be developed and while these medications offer life altering treatments for patients living with severe illnesses – they also come with a hefty price tag. For example, a new treatment to cure Hemophilia B, a lifelong debilitating bleeding disorder, comes at a price tag of $3.5 Million per treatment. While many balk at the cost, consider on average that an individual with Hemophilia averages $700,000-$800,000 in medical costs per year – so in theory the treatment would pay for itself in 4-5 years. However, for employer-sponsored plans, a single claim of $3.5 million would have an extreme impact on renewals.
Finally, the Trump Administration announced on April 8, 2025 that his administration would soon announce tariffs on pharmaceutical imports. While it is uncertain how Big Pharma will respond to such tariffs, it is certain that if such tariffs come into effect, they will very likely cause significant increases to how much consumers – and specifically plan sponsors/employers will spend on prescription medications. For reference, the U.S. imported over $210 Billion in pharmaceuticals in 2024.
What employers should consider for 2025:
Employers should anticipate prescription drug costs to continue increasing and budget accordingly as GLP-1s are here to stay and increased indications for GLP-1 drugs continue to be considered by the FDA. Employers looking to reduce costs should consider whether to cover GLP-1s for weight loss only. Likewise, employers should speak to their carriers and pharmacy benefits managers (PBMs) about their biosimilar strategy as a means to reduce cost. Employers should investigate copay accumulator programs as a means to leverage drug manufacturer coupon dollars to lower costs of specialty medications and consider plan design changes to their prescription benefits. Finally, employers should prepare for the impact of tariffs on their plans’ prescription drug spends.
Challenge to Mental Health Parity and Addiction Equity Act
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) generally requires health plans to cover mental health and substance use disorder benefits similarly to medical and surgical benefits. Since MHPAEA’s enactment, complex federal regulations have been published to determine whether a health plan treats these benefits in parity which has led to significant difficulty for issuers and plan sponsors in determining whether a health plan is in compliance. In late 2020, Congress enacted the Consolidated Appropriates Act (CAA) which requires group health plans and health insurers to conduct comparative analyses to demonstrate that both quantitative treatment limitations (QTLs), or treatment limitations that are numerical in nature such as visit limits and copays, and non-quantitative treatment limitations (NQTLs), i.e. non-numerical limitations such as network access to providers, are no more stringently applied to mental health/substance abuse benefits than medical/surgical benefits. Since 2021, plans and insurers have been required to make these comparative analyses available to the Department of Labor, HHS, and Department of Treasury (Departments), upon request – but due to the complexity of the rules, enforcement has been challenging and many plans have been found to be out of compliance.
This led to the Departments eventually publishing final rules amending the longstanding 2013 rules on September 23, 2024 (2024 Final Rules). The 2024 Final Rules establish new NQTL standards, bolster the comparative analysis requirements that were added by the CAA, and prohibit plans and issuers from using discriminatory information, evidence, sources, or standards that systematically disfavor or are specifically designed to disfavor access to mental health/substance use disorder benefits as compared to medical/surgical benefits when designing NQTLs.¹¹ Some of these regulations are already in force while others begin on or after January 1, 2026.
Earlier this year, the ERISA Industry Committee (ERIC) filed suit against the Departments in the U.S. Court of Appeals for the D.C. Circuit seeking to invalidate the 2024 Final Rules, or at a minimum, invalidate key provisions and prohibit the Departments from implementing or enforcing the new rules, asserting that the 2024 Final Rules violate the U.S. Constitution and the Administrative Procedure Act and impose vague and burdensome requirements on health plans.¹² That same day, the Departments released a report to Congress indicating that employers had made progress on complying with MHPAEA but still fell short. The executive director of the ERIC Legal Center asserted that the new regulations “threaten the ability of employers to offer high quality, affordable coverage for the mental health and substance use disorder needs of employees and their families.”¹³
Prior to the establishment of the 2024 Final Rules, compliance with the MHPAEA caused significant financial strain on health plans and health insurers alike, and by extension drive up compliance costs associated with healthcare benefits coverage. If the additional requirements under the 2024 Final Rules pass constitutional muster, health insurers and plans will incur additional monitoring and reporting costs. Additionally, though MHPAEA enforcement was a top priority for the Biden administration, it is unclear what the Trump administration’s position will be – or what impact the recent workforce cuts at the DOL and HHS will have on the enforcement of MHPAEA going forward.
What employers should consider for 2025:
The 2024 Final Rules may not be here to stay between budget constraints, federal staffing constraints, and the ERIC lawsuit targeting the 2024 Final Rule. In the meantime, employers should monitor updates and budget accordingly for the additional requirements in the 2024 Final Rules to ensure continued compliance with MHPAEA as applicable.
Jenn Malik is a shareholder and Anna Hosack is an associate in the public sector services group of the Pittsburgh law firm of Babst Calland, Clements & Zomnir. Malik focuses her practice on healthcare benefits administration, insurance coverage, and appellate law. Hosack focuses her practice primarily on municipal law, land use, and healthcare benefits law. Contact them at jmalik@babstcalland.com and ahosack@babstcalland.com.
________________
[1] Amin, K., Cox, C., Ortaliza, J. & Wager, E., Health Care Costs and Affordability, Kaiser Family Foundation, (May 28, 2024) https://www.kff.org/health-policy-101-health-care-costs-and-affordability/.
[2] Lo, J., Long, M., et al, Claims Denials and Appeals in ACA Marketplace Plans in 2023, Kaiser Family Foundation, (Jan. 27, 2025) https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans-in-2023/#:~:text=Key%20Takeaways,by%20insurer%20and%20by%20state.
[3] O’Reilly, Dennis, Best Employee Benefits, Forbes (October 30, 2024) https://www.forbes.com/advisor/business/best-employee-benefits/#:~:text=More%20than%20half%20of%20American,as%20the%20most%20important%20benefit.
[4] 42 U.S.C. § 300gg-13(a)(1).
[5] Preventive Services Covered by Private Health Plans Under the Affordable Care Act, Kaiser Family Foundation (Feb. 28, 2024) https://www.kff.org/womens-health-policy/fact-sheet/preventive-services-covered-by-private-health-plans/#:~:text=The%20services%20required%20to%20be,is%20published%20or%20otherwise%20released.
[6] The USPSTF determines what preventive services must be covered at no cost share by reviewing scientific evidence related to the effectiveness, appropriateness, and cost-effectiveness of clinical preventive services for the purpose of developing recommendations for the health care community, and updating previous clinical preventive recommendations. 42 U.S.C. § 299b-4(a)(1).
[7] The USPSTF recommends what services must be provided at no cost-share, while ACIP recommends which immunizations must be covered, and the HRSA determines what contraceptives require coverage.
[8] Petition for a Writ of Certiorari, Becerra et al. v. Braidwood Management, Inc. et al., No. 24-316 (Sept. 19, 2024).
[9] Memorandum Opinion & Order, Braidwood Mgmt. v. Becerra, 627 F. Supp. 3d 624 (N.D. Tex. 2022)
[10] Braidwood Management, Inc. v. Becerra et al., No. 23-0326 (5th Cir. 2024).
[11] Fact Sheet: Final Rules Under the Mental Health Parity and Addiction Equity Act (MHPAEA), U.S. Department of Labor (last visited Apr. 1, 2025) https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rules-under-the-mental-health-parity-and-addiction-equity-act-mhpaea.
[12] See Complaint, Erisa Industry Committee v. Department of Health and Human Services et al., No. 1:25-cv-00136 (D.D.C. 2025).
[13] Kellie Mejdrich, Trade Group Sues to Stop Federal Mental Health Parity Regs, LAW360 (Jan. 17, 2025) https://www.law360.com/articles/2286079.