Regulatory Developments, Sustainability

2022 Regulatory Watchlist

Political pressure is heating up for the Biden administration to make changes to achieve climate change goals through regulatory action. Unfortunately for President Joe Biden, his Build Back Better (BBB) bill, the centerpiece for his domestic policy plan, is in trouble after Senator Joe Manchin, D-W.Va., said he would not vote for the bill in an interview on Fox News.

“The success of Biden’s presidency and the likely outcome of the 2022 midterms rests in part on whether BBB’s policies can be brought back from the dead,” states an opinion piece by The Hill. “This is no trifling domestic political debacle among Democrats: Achieving global climate change goals depends on the U.S. starting to implement Biden’s net-zero carbon emissions plan today — not two (or God forbid), four or more years from now. We have no extra time.”

To date, the Biden administration has made progress by reversing a number of Trump administration policies to pave the way for stricter environmental regulations.

There are four big environmental battles on the 2022 fight card that industry is well advised to closely follow:

Oil and Gas Drilling on Federal Waters and Lands

Whether drilling leases will continue and, if so, how exactly these leases will be structured are huge unknowns at the moment. The Biden administration previously declared a moratorium on new oil and gas leasing through Executive Order (EO) 14008, issued January 27, 2021.

However, the “first drilling lease sale held under the Biden administration, which offered up 80 million acres for auction in the Gulf of Mexico, was at the center of several major battles,” The Hill says.

The administration’s attempt to delay the lease sale was thwarted when U.S. District Judge Terry Doughty in Louisiana ordered that the lease sales be resumed in response to a lawsuit filed in March 2021 by Louisiana Attorney General Jeff Landry and joined by 12 other states, reports NPR. The lawsuit said the Biden administration had failed to observe required comment periods and other required regulatory steps. Doughty’s ruling said the order applied nationwide.

The end result was that the lease sale in the Gulf of Mexico was finalized, which infuriated environmental groups.

“The enormous sale, which took place just four days after crucial UN climate talks in Scotland, represented a spectacular about-turn from Joe Biden’s previous promise to halt offshore drilling and was denounced by outraged environmental groups as a ‘huge carbon bomb,’” says The Guardian.

Earthjustice challenged the sale by filing suit in the D.C. District Court on behalf of Healthy Gulf, Sierra Club, Friends of the Earth, and the Center for Biological Diversity (CBD). “This lease sale is deeply disappointing. The Biden administration has folded to the oil industry based on its campaign of disinformation and political pressure, ignoring the worsening climate emergency we face,” says Brettny Hardy, an attorney with Earthjustice, in a CBD press release. “Our planet cannot handle more stress from oil and gas production and yet the Biden administration is plowing ahead with a lease sale that will have impacts for decades into the future.”

To confuse things a bit more, The Guardian says that a memo filed by the U.S. Department of Justice “acknowledges that [Doughty’s] judgement does not force the government to auction off drilling rights to the gulf.”

The next parcels up for bid are some ocean parcels off the Alaskan coast and lands in New Mexico.

The Biden administration has appealed Doughty’s ruling but to what end?

“Interior’s announcement that it plans to fight the judge’s ban on the moratorium irked the Congressional Western Caucus, whose members accused Biden of ‘failing the nation’ for the leasing freeze after recently asking OPEC to increase oil production to depress gasoline prices,” reports E&E News.

“Challenging this injunction demonstrates yet another failure,” says Representative Dan Newhouse, R-Wash., the Western Caucus chairman, “and the American people deserve far better.”

“Oil allies weren’t the only ones who were upset,” adds E&E News. “For many environmentalists, Interior’s announcement that it would continue leasing represented a capitulation on the one firm action Biden had taken to curb federal drilling.”

“With the climate crisis smacking us in the face at every turn, it’s hard to imagine a worse idea than resuming oil and gas drilling on federal lands,” Robert Weissman, president of Public Citizen, said in a statement.

“Others focused on the White House’s decision to appeal as a sign that it was still hoping to block or limit new leasing for as long as it could. And some looked to Capitol Hill, where Democrats were already weighing potential oil reforms via a budget reconciliation process.”

From the outside looking in, nothing is clear regarding the Biden administration’s mixed and confusing actions toward domestic oil and gas leasing sales.

The administration has been reluctant to offer details on future lease sales.

Regulating Power Plant Emissions

The skirmish over power plant emissions has more twists and turns than a long and winding country road. In what looked like a win for the incoming Biden administration’s climate change agenda, a D.C. Circuit Court of Appeals struck down the Trump administration’s Affordable Clean Energy (ACE) rule in September 2020.

“The ACE rule was promulgated under Section 111(d) of the Clean Air Act, which grants EPA the authority to regulate existing sources of air emissions if EPA has already promulgated a standard for that industry under Section 111(b) of the statute. The ACE rule established [greenhouse gas (GHG)] emission standards that could be achieved at an individual facility level. It also included the repeal of EPA’s predecessor 111(d) rule, the Clean Power Plan, which would have required the industry to shift electricity generation to cleaner resources in order to comply,” reports Troutman Pepper’s Environmental Law and Policy Monitor blog.

The appeals court decision did not reinstate the 2015 Obama administration’s Clean Power Plan, which sent the EPA back to the drawing board for setting emissions standards for power plants.

The continuous rule changes leave industry in a difficult position.

“Alex Flint, executive director of the Alliance for Market Solutions, a conservative group that advocates for a carbon tax, said the ruling created ‘a mess’ for the owners of power plants, steel mills, cement kilns and other polluting industries,” says The New York Times.

“One administration pushes rules in one direction, and the next pushes them in the other. Then, a court throws out the rules. It is impossible to make efficient long-term decisions,” he notes.

“He called for Congress to put a price on emissions ‘so that polluters can decide whether to continue operations and pay the cost of doing so or change their operations.’”

The EPA is expected to propose new rules in 2022 for both existing and new power plants. Industry is already concerned about the upcoming changed regulations due to the accompanying expensive price tag expected to achieve compliance.

And, just to keep it interesting, the conservative U.S. Supreme Court (SCOTUS) has agreed to hear a case this year seeking a reversal of the appeals court ruling striking down the ACE rule. The suit was brough by West Virginia, North Dakota, the North American Coal Corporation, and Westmoreland Mining Holdings LLC.

The suit asks SCOTUS to determine the following:

“Does Section 111(d) of the Clean Air Act allow EPA to pass a rule so far reaching that it would regulate the way an entire industry operates, or is EPA’s authority under that section limited to standards that can be achieved by individual sources? Essentially, the petitioners are asking the Supreme Court to weigh in on what model EPA may use under Section 111(d) to reduce GHGs from existing power plants — the ACE rule, the Clean Power Plan, or something in between.

“The petitioners are hopeful the Court will issue a decision in the ACE case limiting EPA’s reach under 111(d),” states the Troutman Pepper blog. “Their hope is not far-fetched, given that the Court already weighed in on the Clean Power Plan in 2016, issuing an unprecedented stay of the rule while the case made its way through the courts. However, the breadth of the eventual decision may be somewhat limited, as the Court has only been asked to weigh in on the scope of Section 111(d). The Court also declined to hear an additional question posed by one petitioner regarding whether power plant regulations already adopted under Section 112 of the Clean Air Act preclude EPA from regulating the industry under Section 111(d). A decision is expected in summer 2022.”

WOTUS

The waters of the United States (WOTUS) definition has been a battlefield for many years.

The Clean Water Act (CWA) was enacted by Congress in 1972 to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” The only problem was the “Nation’s waters” was not defined, and that definition has been one of the most fiercely contested and misunderstood definitions under the EPA’s jurisdiction. And, to make it even more confusing, that jurisdiction is shared with the Army Corps of Engineers (Corps).

The Obama administration attempted to define WOTUS by expanding its definition to clarify which bodies of water are automatically covered by the CWA and which must still be dealt with on a case-by-case basis. That rule defined “automatically protected waterways” as any that have a bed, a bank, and a high-water mark, according to VOX. These included many streams that remain dry part of the year.

The Trump administration’s definition made a clear distinction between federally protected wetlands and state-protected wetlands. Its definition of WOTUS pulled “back federal oversight of at least 51 percent of wetlands and 18 percent of streams — many of which had been protected since the Reagan administration,” according to E&E News.

For many, the Obama administration’s definition was overreaching, and the Trump administration’s definition did too little.

Both Obama’s and Trump’s WOTUS definitions were extremely controversial and the subject of multiple court battles.

On December 7, 2021, the EPA and the Corps posted proposed updates to the WOTUS definition:

  • Traditional navigable waters, interstate waters, and the territorial seas and their adjacent wetlands;
  • Most impoundments of WOTUS;
  • Tributaries to traditional navigable waters, interstate waters, the territorial seas, and impoundments that meet either the relatively permanent standard or the significant nexus standard;
  • Wetlands adjacent to impoundments and tributaries that meet either the relatively permanent standard or the significant nexus standard; and
  • “Other waters” that meet either the relatively permanent standard or the significant nexus standard.

An analysis of the proposed rule in Lexology by Thompson Hines LLP predicts the proposed rule will result in “an uptick in agency case-by-case analyses, as the agencies seek to apply the multiple standards set forth in the new definition.”

“EPA Administrator Michael Regan has pledged to not return ‘verbatim’ to the Obama-era rule, saying that both it and the Trump rule ‘did not necessarily listen to the will of the people,’” says The Hill. “But opponents of the rules are likely to sue. A challenge could come from Republicans; and if environmentalists don’t think the rule goes far enough, they could challenge them as well.”

U.S. Paris Agreement NDCs

The Paris Agreement’s goals call for countries to periodically ratchet up their nationally determined contributions (NDCs) to reduce GHG emissions. In 2021, at Glasgow, participating countries were asked to revisit their NDCs at the end of 2022. 

The United States has already indicated it is uncertain as to whether it will commit to an increased NDC, The Hill notes. “You don’t automatically have to come back with a new NDC,” climate envoy John Kerry told reporters in November. “You have to review it, and, as necessary, you make a judgment about it.”

With the BBB plan on the ropes and the EPA’s GHG emissions authority under fire in SCOTUS, the 2022 regulatory path is anything but certain. Stay closely tuned as events unfold.