What Employers and Nonprofits Should Know About Trump’s Executive Order Banning Diversity Preferences
Following his inauguration on January 20, President Trump signed a slew of executive orders, including a handful related to Diversity, Equity, and Inclusion (DEI) initiatives.
On January 21, President Trump signed an executive order (EO) entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (DEI EO), which aims to end DEI preferences in both the public and the private sectors, including nonprofits. Section 4 of the DEI EO tasks all federal agency heads with “encouraging” private sector companies to end DEI preferences, in part by threatening legal action against them.
Executive orders[1] are directives from the President and have the force of law. Because they are not legislation, they do not require approval from Congress, and Congress cannot directly overturn them, though it does have ways to affect their implementation. And, affected parties can challenge executive orders in court.
The DEI EO, taken together with the US Supreme Court’s ruling in Students for Fair Admissions v. President and Fellows of Harvard College, which found that Harvard University’s and the University of North Carolina’s race-based admissions systems violated the equal protection clause of the 14th amendment, may portend an end to private sector and nonprofit DEI programming and initiatives as we have come to know them. Even if the DEI EO is successfully challenged, employers in the public and private sectors should be prepared for increased scrutiny of any DEI initiatives and programming.
An Overview of the Executive Order
The DEI EO begins with the premise that longstanding civil rights laws designed to protect against discrimination have been used by institutions to adopt “dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA)” which could violate those laws. According to the executive order, these actions “diminis[h] the importance of individual merit, aptitude, hard work, and determination when selecting people for jobs and services…”
The executive order mandates the following at the federal government level:
The termination of all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements” in any executive department or agency.
The revocation of five executive orders from 1965, 1994, 2011, 2014 and 2016[2] focused on equal employment opportunities and promotion of diversity for the federal government and federal contractors.
That the Office of Federal Contract Compliance Programs (OFCCP) within the US Department of Labor immediately cease (1) promoting diversity, (2) holding federal contractors or subcontractors responsible for affirmative action, and (3) allowing workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
The executive order also provides the following with respect to private sector employers:
The heads of all federal agencies must take action to advance in the private sector “the policy of individual initiative, excellence, and hard work.”
Most notably, within 120 days, the US Attorney General, in consultation with the heads of relevant agencies and in coordination with the Director of the Office of Management and Budget (OMB), must submit a report containing “recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The report should contain a proposed strategic enforcement plan identifying: “(1) key sectors of concern within each agency’s jurisdiction; (2) the most egregious and discriminatory DEI practitioners in each sector of concern; (3) a plan of specific steps or measures to deter DEI “programs or principles” (whether specifically denominated “DEI” or otherwise) that constitute illegal discrimination or preferences.
As part of this plan, each agency is required to identify up to nine potential civil compliance investigations of:
Publicly traded corporations.
Large nonprofit corporations or associations.
Foundations with assets of $500 million or more.
State and local bar and medical associations.
Institutions of higher education with endowments over $1 billion.
In addition, within 120 days, the Attorney General and the US Secretary of Education must jointly issue guidance to all state and local educational agencies that receive federal funds, as well as all institutions of higher education that receive federal grants or participate in the federal student loan assistance program regarding the measures and practices required to comply with the principles set forth in the Supreme Court’s Students for Fair Admissions decision.
What Should Private Sector Employers (Including Nonprofits) Do Now?
The executive order raises significant questions regarding private sector use of DEI preferences and even calls into question the ability of a company to sustain or encourage an internal culture that celebrates or seeks out diversity. Because the executive order does not define “illegal discrimination or preferences,” it can be difficult to determine whether a specific practice is likely to be the target of negative government attention.
Notably, nothing in the executive order suggests that employers may not take action to seek out a diverse candidate pool, so long as ultimate hiring decisions are based on qualifications alone and do not involve illegal preferences. Therefore, to lower the risk of enforcement action by the federal government, private sector employers (including nonprofit organizations) may choose to recruit across a broader spectrum and prioritize seeking out a wide range of diverse characteristics, rather than just focusing on protected characteristics like race or sex.
At a minimum, employers who fall into one or more of the five categories to be scrutinized for potential civil compliance investigations may wish to assess their risk-tolerance and consider whether suspending affirmative action plans or DEI initiatives is in line with their company’s priorities. But, even for employers who are not the target of civil compliance investigations, these executive orders may embolden employees and applicants who feel they have been mistreated as a result of diversity initiatives to bring private claims of discrimination against their employers.
What Should Government Contractors Do Now?
Significantly, the DEI EO’s revocation of Executive Order 11246, first issued in 1965 (one year after President Johnson signed the Civil Rights Act of 1964) (EO 11246) reflects a sea change in the affirmative action obligations of government contractors. Under EO 11246, federal contractors were required to analyze workforce data and engage in good faith efforts to provide equal employment opportunities for women and minorities, but they were not required to apply quotas or preferences for those groups. President Trump’s revocation of this longstanding requirement potentially eliminates entirely the requirements that government contractors develop and certify annually their affirmative action plans.
The DEI EO permits federal contractors to operate under current rules for 90 days while they await further guidance from the government on new requirements. We anticipate that private plaintiffs will be exploring their options in terms of legal remedies in response to the revocation.
Potential Implications for Nonprofits Beyond Employment Matters
DEI principles are integral, and in some cases central, to the mission of many nonprofits. The DEI EO is drafted broadly and could encompass programmatic activities in addition to employment-related or contractual matters. As a result, while some organizations may be more risk averse and may elect to change or terminate certain programs, other organizations may decide to stay the course and continue to pursue programs that could draw the attention of the Administration, Attorney General, or relevant agencies. The decision will depend in part on the organization’s specific priorities and level of risk aversion. If an organization ultimately seeks to terminate programs or make fundamental changes to their mission, there may be other legal impediments that could arise under the federal tax law and state nonprofit laws, particularly those that apply to charitable organizations.
[1] (1) Initial Rescissions Of Harmful Executive Orders And Actions; (2) Ending Radical And Wasteful Government DEI Programs And Preferencing; (3) Reforming The Federal Hiring Process And Restoring Merit To Government Service
[2] (1) Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity), (2) Executive Order 12898 of February 11, 1994 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations); (3) Executive Order 13583 of August 18, 2011 (Establishing a Coordinated Government-wide Initiative to Promote Diversity and Inclusion in the Federal Workforce); (4) Executive Order 13672 of July 21, 2014 (Further Amendments to Executive Order 11478, Equal Employment Opportunity in the Federal Government, and Executive Order 11246, Equal Employment Opportunity); and (5) The Presidential Memorandum of October 5, 2016 (Promoting Diversity and Inclusion in the National Security Workforce).
Additional Authors: Lauren C. Schaefer and Brian D. Schneider
DEI Changes from the Start: Key Executive Orders Signed on Trump’s First Day
On January 20, 2025, Donald J. Trump was sworn in as the 47th President of the United States. Fulfilling one of his major campaign promises, he issued a series of executive orders on his first day in office. Two of these orders represent a significant shift regarding gender and diversity, equity, and inclusion (DEI) initiatives.
One order declares that the federal government only recognizes two immutable sexes: male and female. This Order, entitled, “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” rejects “gender identity” as a basis for policy decisions and emphasizes that sex is a fixed biological characteristic. It directs federal agencies to use clear, sex-based language in all official documents and communications, and seeks to ensure that facilities and programs meant for one sex are not accessed based on gender identity. Specifically, the Order requires government-issued identification documents, including passports, visas, and Global Entry cards, to reflect the holder’s sex assigned at birth. The Order also calls for revisions to policies concerning women’s spaces, healthcare, and legal protections, aiming to uphold sex-based rights.
Another order, entitled, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” aims to end what President Trump deems “discriminatory” DEI initiatives implemented by the Biden administration. In this Order, federal agencies are mandated to terminate these initiatives, including terminating DEI-related positions, training, and programs, under whatever name they appear (including in relation to “environmental justice”). Federal agencies are directed to revise employment practices to focus solely on merit, performance, and skills, without considering DEI factors. The aim of this Order is to ensure equal treatment for all Americans, reducing federal spending on what the Order labels “wasteful” and “discriminatory” policies.
President Trump also issued an order that reverses several executive orders from the Biden administration. The Order highlights a commitment to undoing practices deemed to have harmed the nation, particularly focusing on issues of DEI, border control, and climate-related regulations. The Order asserts that these policies from the Biden administration created divisiveness, inflated costs, and strained public resources. Among the revoked prior orders are:
Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government;
Executive Order 13988, Preventing and Combatting Discrimination on the Basis of Gender Identity or Sexual Orientation;
Executive Order 14091, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government; and
Executive Order 14069, Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.
Additionally, this Order creates a broad review process, wherein the Domestic Policy Council and National Economic Council have been tasked with reviewing federal actions from the Biden administration to determine which additional policies should be rescinded or amended to “increase American prosperity.”
Yesterday’s wave of executive orders marks just the beginning of what is expected to be a series of significant policy shifts under President Trump’s administration. As these changes unfold, they will likely have widespread impacts on everything from federal regulations to national security. With more orders likely on the horizon, it is crucial to stay informed and to prepare to accommodate the evolving policy landscape.
EPA Administrator Nominee Advances to Senate for Confirmation Vote: Nomination Hearing Highlights
The Senate Committee on Environment and Public Works (EPW) on January 23, 2025, advanced the nomination of Lee Zeldin to the full Senate for a vote to confirm him as the next Administrator of the U.S. Environmental Protection Agency (EPA). The 11-8 vote to advance the nomination was largely along party lines, with Senator Mark Kelly (D-AZ) as the only Democrat to vote in favor of advancing Zeldin’s nomination. Zeldin is expected to be confirmed by the Senate.
EPW held a hearing on the nomination of Lee Zeldin to be Administrator of EPA on January 16, 2025. The hearing provided insights into the issues of highest interest and concern to EPW members. Chairman Shelly Moore Capito (R-WV) noted several issues on which she hoped EPA would focus, including cleaning up brownfields and Superfund sites, addressing “legacy [per- and polyfluoroalkyl substances] PFAS contamination,” and reliability and affordability of electricity. Senator Sheldon Whitehouse (D-RI), ranking Democrat on EPW, stated that climate change is the number one issue for him.
Republicans raised a range of issues both for awareness and for Zeldin to focus on at EPA. Of particular interest, newly elected Senator John Curtis (R-UT) mentioned the low approval rate for new chemicals under the Toxic Substances Control Act (TSCA). Senator John Boozman (R-AR), who also Chairs the Senate Committee on Agriculture, Nutrition, & Forestry, spoke about pesticides and the need for a “predictable, science-based system.” PFAS was identified as an important issue from several perspectives, including cleanup, ongoing critical uses (e.g., defense), and the need to protect “passive receivers.” Several Republicans highlighted “cooperative federalism” as an issue.
Most Democrats emphasized climate change as a top priority issue with Zeldin. Other issues raised by Democrats included problems with cross-border pollution (both air and water), potential cuts to EPA budget and personnel, and lead in drinking water, and they flagged concerns about Clean Air Act attainment due to ongoing wildfires.
Both Republican and Democratic Senators mentioned plastics, but from differing perspectives. Senator Jeff Merkley (D-OR) stated his strong opposition to “thermal melting of plastics.” Senator Dan Sullivan (R-AK) talked about the need to clean up ocean plastics and stated that he is working on “Save Our Seas 3.0.”
Rescinded Biden Immigration Executive Orders: What Employers Need to Know
As many expected, President Donald Trump has not only issued Executive Orders (EOs), but he has also rescinded many EOs issued by the Biden Administration concerning immigration, including the following: “The Restoring Faith in Our Legal Immigration Systems and Strengthening Integration and Inclusion Efforts for New Americans” EO which particularly affects business immigration. This EO formed the basis of policy guidance that, for example, streamlined the naturalization process, led to a reduction in the number of visa denials and Requests for Evidence (RFEs) that had been issued during the first Trump Administration, and reinstated the USCIS policy of deferring to prior approvals. Immigration advocates have been predicting the loss of these benefits under the new Trump Administration. Employers should expect a return to the days of costly RFEs and slower adjudications.
Other Biden-era EOs regarding immigration that have been rescinded include:
EO 13993 – “Revision of Civil Immigration Enforcement Policies and Priorities.” This EO prioritized enforcement on the grounds of national security, border security, and public safety and required notification to state and local authorities of at-large enforcement actions. Based upon the new Trump EOs, enforcement in all areas of business immigration, including I-9s audits and workplace enforcements (colloquially referred to as ICE Raids), will be expanded.
EO 14010 – “Creating a Comprehensive Regional Framework to Address the Causes of Migration, to Manage Migration Throughout North and Central America, and to Provide Safe and Orderly Processing of Asylum Seekers at the United States Border.” This EO called for the United States to address the root causes of migration, expand asylum protection in other countries, create more paths for lawful migration to the United States, and strengthen U.S. asylum policies. The Trump Administration is closing the border and has already shut down the CBP One App for asylum applicants.
EO 14011 – “Establishment of Interagency Task Force on the Reunification of Families.” This EO ended the child separation policy and created a task force to facilitate reunification. According to reporting, there are still many children who have yet to be reunited with their families.
EO 14013 – “Rebuilding and Enhancing Programs to Resettle Refugees and Planning for the Impact of Climate Change on Migration.” This EO called for minimizing delays in resettlement, reunifying families, restoring and expanding USRAP, and protecting Afghans and Iraqi Special Immigrants. Since Jan. 20, 2025, Afghans have been prohibited from boarding flights to the United States.
Whether rescinding a Biden EO effectively resurrects a prior Trump EO is still an open question.
What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part II): The Implications of President Trump’s “America First Trade Memorandum”
During his campaign, President Trump often stated that he would be implementing an “America First” international trade policy, which he said explicitly would include higher tariffs, potentially on imports from the entire world. On January 20, President Trump issued a presidential memorandum taking the first steps toward implementing this agenda. This “America First Trade Policy” memorandum directs that multiple federal agencies report back to him by April 1, 2025, on a number of potential measures designed to help implement “a robust and reinvigorated trade policy that promotes investment and productivity, enhances our nation’s industrial and technological advantages, defends our national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
While the memorandum mostly is cast as a request for informational trade reports, the best way to view this memorandum is as a potential roadmap to the international trade priorities of the new administration. The wide range of issues covered, including the causes of the U.S. annual trade deficits in goods, the economic and national security implications and risks of such deficits, a specific focus on all aspects of trade with China, and an evident desire to reshore significant amounts of goods produced abroad by U.S. companies indicate that nearly all aspects of U.S. international trade are under scrutiny.
As detailed in Part I of our three-part series on Managing Import Risks Under the New Trump Administration, many multinational companies are actively engaged in risk planning the potential impact of the new administration on their international supply chains. The issuance of this new memorandum underscores the urgency of proceeding along these lines. Thus, a thorough understanding of the potential implications of this new memorandum is essential for risk planning a response. Below we list the implications of each of the ordered study items:
“Addressing Fair and Unbalanced Trade”
The memorandum directs an investigation of the “causes of our country’s large and persistent annual trade deficits in goods,” as well as the national security implications of the same. This, as well as the other actions indicated in this section, calls on agencies to address unfair and unbalanced trade by investigating trade deficits, unfair practices, and currency manipulation, and to recommend appropriate measures to combat the same. The most likely implication of this report will be to start establishing a basis for increasing tariffs, potentially on many or all global trading partners.
The memorandum directs an assessment of the feasibility of establishing, and recommendations regarding the “best methods for designing, building, and implementing, an External Revenue Service to collect tariffs, duties, and other foreign trade-related revenues.” In other words, Trump is seeking guidance on the best way for the U.S. government to collect external trade revenue, including tariffs. While many commentators expressed puzzlement regarding the purpose of this new way of collecting tariffs — since Customs & Border Protection already is set up to collect these tariffs — it is possible that this request expresses dissatisfaction with CBP oversight of the use of Chinese parts and components for third-country assembly, which the new administration reportedly has viewed as an end-run around the Section 301 tariffs. It also could open the way to other ways of taxing non-U.S. companies that would fall outside of the collection of tariffs.
The memorandum directs early preparations for the trilateral United States-Mexico-Canada Agreement (USMCA) review, including an assessment of the “the impact of the USMCA on American workers, farmers, ranchers, service providers, and other businesses.” The focus on the USMCA raises questions about how these potential changes may impact U.S.-Mexico economic relations and Mexico’s role as an essential U.S. trading partner. If the U.S. finds Mexico’s trade practices to be noncompliant with the terms of the USMCA or unfairly advantageous, Mexican goods may be subject to new tariffs. Further, with President Trump elsewhere promising new 25 percent duties on Canada and Mexico as retaliation for a perceived lack of urgency regarding immigration and fentanyl exports to the United States, there is a strong possibility that changes could upend trade within the USMCA region on a far quicker timeframe.
The memorandum directs an investigation of exchange rate policies of trading partners. Here, Trump is seeking an assessment of any potential currency manipulation or misalignment that prevents effective balance of payment adjustments or that provides trading partners with an unfair competitive advantage in international trade. Trump also calls for the identification of any countries that should be designated as currency manipulators, which almost certainly is directed at countries that maintain large trade deficits with the United States, particularly China. This could mark the end of the longstanding “strong dollar” informal trade policy of the United States, which dates back to the Clinton administration and could mark a return to Reagan-era intervention in currency markets on a multi-country basis to lower the value of the dollar.
The memorandum directs a review of all current free trade agreements, as well as countries “with which the United States can negotiate agreements on a bilateral or sector-specific basis to obtain export market access.” In other words, Trump is calling for a review, and potential revision, of all of America’s free trade agreements, with a view toward obtaining reciprocal and mutually advantageous concessions.
The memorandum directs a review of policies and regulations regarding the application of antidumping and countervailing duty laws, including with regard to transnational subsidies, cost adjustments, affiliations, and zeroing. The United States already maintains a record inventory of antidumping and countervailing duty orders, which could effectuate any changes to calculation methodologies in annual administrative reviews. Changes designed to increase calculated margins also could encourage more industries to file new antidumping and countervailing duty petitions, particularly against China (the most frequent target of such actions by far).
The memorandum directs an assessment of the “loss of tariff revenues and the risks from importing counterfeit products and contraband drugs” that result from the current implementation of the de minimis exemption, as well as any necessary modifications to that exemption. This provision, among others, signals the Trump administration’s attention toward the flow of fentanyl and counterfeit goods across U.S. borders, including those originating from or passing through Mexico. Depending on the outcome, this could cause significant economic challenges for Mexico’s largely export-driven economy and severely impact U.S.-Mexico trade relations, particularly because it is impossible to divorce this issue from the upcoming trilateral review of the USMCA.
The memorandum directs an investigation into whether any foreign country subjects U.S. citizens or corporations to discriminatory or extraterritorial taxes. Given the expansive use of Section 301 in the first administration, such reports could serve as a basis for expansive action in return, much as the Section 301 investigation into Chinese intellectual property practices morphed into a decision to raise tariffs on more than half of all imported Chinese goods.
The memorandum directs a review of all trade agreements on “the volume of Federal procurement” related to the Buy American and Hire American executive orders. By calling for recommendations to ensure such agreements are being implemented in a manner that favors domestic workers and manufacturers, Trump indicates potential restrictions on the use of foreign firms that supply the U.S. government.
“Economic and Trade Relations with the People’s Republic of China”
The memorandum directs a review of the Economic and Trade Agreement Between the U.S. and the Government of the People’s Republic of China (PRC) to determine whether the PRC is acting in accordance with this agreement. By seeking recommendations on appropriate actions to be taken based on the findings of this review, “up to and including the imposition of tariffs or other measures as needed,” Trump is signaling that new tariffs may be imposed on Chinese goods if the U.S. finds the PRC is not acting in compliance with the agreement.
The memorandum directs an examination of potential additional modifications to the Section 301 tariffs on China, particularly with respect to industrial supply chains and circumvention through third countries. It is widely viewed that China failed to act in accordance with the earlier, partial settlement of certain Section 301 tariffs, which were suspended in the first Trump administration. It is likely this review will be used as a basis for further increasing the Section 301 tariffs on many Chinese products.
The memorandum directs an investigation into other acts, policies, and practices by the PRC that may be unreasonable or discriminatory and that may burden or restrict U.S. commerce, and recommendations regarding appropriate responsive actions. Again, Trump here is signaling that changes to the U.S.-PRC trading landscape are imminent if the U.S. finds the PRC is engaging in discriminatory acts that restrict U.S. commerce. The likely endpoint is an expansion of earlier Section 301 tariffs based on a far wider-ranging set of grievances with Chinese trading practices.
The memorandum directs a study of legislative proposals, and any needed changes to them, regarding permanent normal trade relations status for imports from China. There is bipartisan agreement in Congress regarding taking a skeptical approach to China, in matters of trade and otherwise. In addition to telegraphing a desire to permanently enshrine restrictions on trade with China into U.S. law (which would be much more difficult for a future administration to reverse), these efforts could reach related trade issues such as further restrictions on trade with China based on the treatment of the Uyghur people and their role in producing products intended for sale in the United States.
The memorandum directs an assessment of the status of U.S. intellectual property rights such as patents, copyrights, and trademarks conferred upon PRC persons. In other words, changes may be implemented to “ensure reciprocal and balanced treatment of intellectual property rights with the PRC.”
“Additional Economic Security Matters”
The memorandum directs a full economic and security review of the U.S. industrial and manufacturing base to assess whether to initiate investigations to adjust imports that threaten national security. This review of U.S. manufacturing and industrial vulnerabilities will inform new policies aimed at insulating domestic industries from reliance on imports. There is a high likelihood that this could lead to further revisions to CFIUS (Committee on Foreign Investment in the United States) reviews, which were considerably tightened in recent years.
The memorandum directs an assessment of the effectiveness of the exclusions, exemptions, and other import adjustment measures on steel and aluminum in responding to threats to the national security of the United States. This provision, like the above, illustrates Trump’s goal of safeguarding domestic industrial and manufacturing industries from relying on imports.
The memorandum directs a review of the U.S. export control system and advice regarding necessary modifications in light of developments involving strategic adversaries or geopolitical rivals, as well as all other relevant national security and global considerations. With an eye toward “identifying and eliminating loopholes in existing export controls, especially those that enable the transfer of strategic goods, software, services, and technology to strategic rivals and their proxies,” this provision implicates potential changes to the U.S. export control landscape, with the technology sector being most vulnerable to such changes. Trump’s call for recommendations of “enforcement mechanisms to incentivize compliance by foreign countries, including appropriate trade and national security measures,” illustrates the administration’s inclination to use trade measures as negotiation tools.
The memorandum directs a review of the rulemaking by the Office of Information and Communication Technology and Services (ICTS) on connected vehicles, and consideration of expanding the controls. In other words, this provision marks the potential expansion of controls on ICTS transactions to connected products other than vehicles.
The memorandum directs a review of the legal landscape regarding U.S. investments in certain national security technologies and products in countries of concern. If the U.S. finds this legal landscape does not contain sufficient controls to address national security threats, changes may be implemented, including potential modifications to the Outbound Investment Security Program.
The memorandum directs an assessment of any distorting impact of foreign government financial contributions or subsidies on U.S. federal procurement programs. In other words, Trump is seeking guidance, regulations, or legislation to combat any such distortion to protect federal procurement programs from unfavorable impacts of foreign governments.
The memorandum directs an assessment of the “unlawful migration and fentanyl flows from Canada, Mexico, the PRC, and any other relevant jurisdictions” and seeks recommendations of appropriate trade and national security measures “to resolve that emergency.” This provision raises the prospect that new tariffs or other measures may be imposed to pursue Trump’s broader policy goals of combating unauthorized migration and fentanyl flows from other countries, with the focus being on Canada, Mexico, and the PRC. Elsewhere, Trump has promised 25 percent tariffs to incentivize solving these concerns, beginning potentially as soon as February 1, 2025.
Implications
While the memorandum outlines a vast series of reviews of U.S. trade policy and investigations of trade imbalances and unfair practices, it is not yet clear how this very broad laundry list of international trade objectives will play out. Potential outcomes range from using the threat of tariffs to accomplish other goals (e.g., immigration, fentanyl) to setting up renegotiations of Free Trade Agreements on more favorable terms (particularly for the USMCA), to the establishment of permanently higher tariffs. Notably, the memorandum raises questions as to the future of U.S.-Mexico trade relations, a focus that takes on increased urgency given the impending trilateral review when combined with President Trump’s focus on immigration and fentanyl from Mexico and Canada. The focus on revisiting the USMCA threatens increased restrictions or provisions that may disadvantage Mexico’s export-driven economy and impact Mexico’s role as a key U.S. trading partner, with particularly strong implications for the U.S. automotive sector.
Given these concerns, Part III of this series will focus on concrete steps that multinational companies can take to risk plan for potential major changes in the international trade environment, particularly with regard to the topics of potential changes to tariff rates, potential changes to the USMCA, and potentially greater scrutiny of supply chain integrity requirements, particularly as they relate to China and imports using Chinese parts and components.
Mr. Robot Goes To Washington: The Shifting Federal AI Landscape Under the Second Trump Administration
President Trump’s inauguration on January 20, 2025, has already resulted in significant changes to federal artificial intelligence (AI) policy, marking a departure from the regulatory frameworks established during the Biden administration. This shift promises to reshape how businesses approach AI development, deployment, governance, and compliance in the United States.
Historical Context and Initial Actions
The first Trump administration (2017–2021) prioritized maintaining US leadership in AI through executive actions, including the 2019 Executive Order (EO) on Maintaining American Leadership in Artificial Intelligence and the establishment of the National Artificial Intelligence Initiative Office. This approach emphasized US technological preeminence, particularly in relation to global competition.
For its part, the Biden administration’s approach to AI development emphasized “responsible diffusion” — allowing AI advances and deployment while maintaining strategic control over frontier capabilities.
In a swift and significant move, President Trump revoked President Biden’s October 2023 Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence on his first day in office. This action signals a clear pivot toward prioritizing innovation and private sector growth and development over regulatory oversight and AI safety (or at least a move away from government mandates and toward market-driven safety measures).
Emerging Policy Priorities
Several key priorities have emerged that will likely shape AI development under the second Trump administration:
Focus on National Security: The Trump administration EO framed AI development as a matter of national security, particularly with respect to competition with China. This is an area where the administration is likely to enjoy bipartisan support.
Energy Infrastructure: The Trump administration’s declaration of a national energy emergency on his first day in office highlights the administration’s recognition of AI’s substantial computational and energy demands. And on his second day in office, President Trump followed the declaration with the announcement of a private-sector $500 billion investment in AI infrastructure assets code-named “Project Stargate,” with the first of the project’s data centers already under construction in Texas.
Defense Integration: Increased military spending on AI capabilities and the administration’s focus on military might indicate an emphasis on accelerated development of defense-related AI applications.
Regulatory Shifts and Business Impacts
The new administration’s approach signals several potential changes to the AI regulatory landscape:
Federal Agency Realignment: Key agencies like the Federal Trade Commission may relax their focus on consumer protection to allow more free market competition and innovation.
Preemption Considerations: The administration might pursue federal legislation to create uniform standards that preempt the current patchwork of state and local AI laws and regulations.
International Engagement: Restrictions on international AI collaboration and technology sharing, particularly regarding semiconductor exports used for AI (which had already been tightened under the Biden administration), are likely to be enhanced.
Strategic Planning Considerations
The AI policy shift creates new imperatives for business leaders, including:
Multi-jurisdictional Compliance: Despite potential reduced federal oversight, businesses must maintain compliance with any applicable federal, state, and local regulations and international requirements, including the EU AI Act for those organizations doing business in EU countries.
Investment Strategy: Changes in federal policy and potential international trade restrictions could transform AI development costs, investment patterns, and technology budgets.
Risk Management: Businesses should maintain robust internal governance frameworks regardless of regulatory requirements, particularly considering the ongoing operational and reputational risks.
Looking Ahead
While specific policy developments remain in flux, the Trump administration’s emphasis on technological leadership and reduced regulatory oversight suggests a significant departure from previous approaches. The continued integration of AI into critical business functions, however, necessitates continued attention to responsible development and deployment practices, even as the regulatory landscape evolves.
Businesses should stay informed of policy developments while maintaining robust AI governance and compliance frameworks that can adapt to changing federal priorities while ensuring compliance with any applicable legal and regulatory obligations and standards.
New York State Proposes Bill That Would Place Restrictions Noncompetes and Other Restrictive Covenants
With the Federal Trade Commission’s Noncompete ban essentially dead, state legislatures, as expected, are taking restrictive covenant lawmaking into their own hands.
We previously reported that in 2023, while the FTC Noncompete ban was pending, New York Governor Kathy Hochul vetoed a bill that sought to ban all noncompetes in the State of New York, stating that a “balance” was needed instead of a strict ban on all noncompetes. On January 9, 2025, the New York State Assembly introduced NY A01361 (the “Bill”) to the Assembly Labor Committee that, if passed, would allow “employers to request or require a prospective or current employee to execute a restrictive covenant not to engage in specified acts in competition with the employer after termination of the employment relationship as a condition of employment, continued employment, or with respect to severance pay,” but only subject to certain requirements (discussed below).
The Bill would amend New York Labor Law to add Section 191-d: “Restrictive covenants.” Under this section, an Employee is defined as “any person employed for hire by an employer in any employment,” including “in a supervisory, managerial, or confidential position.” An Employer includes “any person, corporation, limited liability company, or association” as well as “the state[,] . . . political subdivisions, governmental agencies, public corporations, and charitable organizations.” The Bill also defines restrictive covenant as an agreement between an employee and an employer concerning existing or prospective employment, or an agreement between employee and employer with respect to severance pay.
The Bill outlines that for a restrictive covenant to be enforceable it must meet the following requirements:
If the covenant is a condition to commence employment, the employer must disclose the terms and conditions of the covenant in writing at the time of offer or thirty days prior to commencement of employment;
If the covenant is a condition to existing employment or severance pay, the terms and conditions must be disclosed in writing at least thirty days before covenant takes effect;
The agreement, whether a condition to commence or continue employment or for severance pay, must be signed in writing by both parties and must expressly state that employee has the right to counsel prior to signing;
The agreement cannot be more restrictive than necessary to protect an employer’s “legitimate business interests” and “shall be limited to protecting the employer’s trade secrets;”
The agreement must be reasonable in scope and limited to the services provided by the employee within the last two years of service; and
The agreement does not waive other legal rights under any other law, rule, regulation, or common law, and does not penalize an employee for challenging the validity or enforceability of the agreement.
Furthermore, the Bill would also bar non-service agreements, including agreements that prohibit employees from accepting business from clients or providing services to clients without solicitation by the employee. The Bill would also prohibit agreements that restrict employees from working with former colleagues, whether through use of no-hire agreements or other related restrictions.
In addition to the above-outlined requirements, the Bill provides that for the restrictive covenant to remain enforceable, an employee must voluntarily resign his or her employment or be terminated for good cause, defined as “a reasonable basis related to an individual employee for termination of the employee’s employment in view of relevant factors and circumstances.” A written document outlining what constitutes good cause must be provided to all employees. Should an employer violate any provisions of the section, the Commissioner of Labor can impose a civil fine up to $5,000.
While it is too early to tell if this Bill will advance, its introduction shows that there is still interest in the New York State legislature (as there is in other state legislatures) in regulating the use of noncompetes and other restrictive covenants.
The 2025 Bill on the state level follows at least three bills introduced in the New York City Council in 2024 that seek varying restrictions on noncompetes, from a complete ban on noncompetes to a ban on the use of noncompetes for low-wage earners only. The New York City Council bills were all referred to the Committee on Consumer and Worker Protection (the “Committee”) and have remained in the Committee without further action.
We will continue to monitor and provide updates on this topic.
Gianna Dano, a Law Clerk in Epstein Becker & Green’s Newark Office (not admitted to practice), contributed to the preparation of this piece.
Does President Trump’s Emergency Declarations Trigger California Price Controls?
As discussed in yesterday’s post, California’s anti-price gouging statute, Penal Code Section 396, is triggered upon the proclamation of a state of emergency by either the President of the United States or the Governor. Immediately following his second inauguration, President Donald Trump proclaimed a national emergency at the southern border and a national energy emergency.
Do either of these proclamations trigger the application of Section 396? Neither proclamation refers specifically to California. However, Section 396 is also not limited to emergencies located in California. Thus, it is seemingly possible for California’s price control statute to be triggered by a presidential declaration that is not specifically related to California.
California DOC Alumnus Is New Acting Chairman!
Over the years, several alumni of the California Department of Financial Protection & Innovation (nka the Department of Corporations) have moved on to work at the U.S. Securities & Exchange Commission. As a DOC alumnus, I was pleased to see that President Donald Trump has designated Mark T. Uyeda as acting Chairman of the SEC. Below is an excerpt from the SEC’s press release announcing the appointment:
Acting Chairman Uyeda was first sworn into office as a Commissioner on June 30, 2022, after being confirmed by the U.S. Senate. He was subsequently re-nominated and confirmed for a five-year term expiring in 2028. During President Trump’s first term, he served on detail to senior leadership at the U.S. Department of the Treasury and to Secretary Eugene Scalia at the U.S. Department of Labor. He has also served on detail to the U.S. Senate Committee on Banking, Housing, and Urban Affairs. At the SEC, he has served as Senior Advisor to Chairman Jay Clayton, Counsel to Commissioners Michael S. Piwowar and Paul S. Atkins, and Assistant Director and Senior Special Counsel in the Division of Investment Management.
Before joining the SEC, Acting Chairman Uyeda was appointed by Governor Arnold Schwarzenegger to serve as the Chief Advisor to the California Corporations Commissioner, the state’s securities regulator. Earlier in his career, he worked as a corporate and securities attorney at Kirkpatrick & Lockhart in Washington, D.C., and O’Melveny & Myers in Los Angeles.
Originally from Orange County, California, Acting Chairman Uyeda earned his bachelor’s degree in business administration from Georgetown University in 1992 and his law degree with honors from Duke University in 1995, where he was a member of the Duke Law Journal. He is a past president of the Asian Pacific Bar Association of the Greater Washington, D.C. Area and a 2023 recipient of the Daniel K. Inouye Trailblazer Award from the National Asian Pacific American Bar Association.
Chairman Uyeda has already announced formation of a new Crypto task force.
President Trump Issues Sweeping Executive Orders Aimed at DEI
In his inaugural address on Monday, January 20, 2025, President Trump declared, “We will forge a society that is colorblind and merit-based.” In the days that followed, President Trump has proceeded to issue a series of executive orders in quick succession, many of which specifically seek to eliminate diversity, equity, and inclusion (“DEI”) initiatives in both the private sector and the federal government. In addition, President Trump rescinded nearly 80 executive orders issued by President Biden, many of which relate to DEI.
Below is an overview of some of President Trump’s and his appointees’ recent actions that employers should be aware of when reviewing and evaluating their own policies and practices pertaining to DEI:
Ending Radical and Wasteful Government DEI Programs And Preferencing
Within hours of his taking office, President Trump issued an Executive Order entitled “Ending Radical and Wasteful Government DEI Programs and Preferencing.” The Order specifically takes aim at Executive Order 13985 (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), issued by President Biden, which in turn repealed Trump’s 2020 ban on racial bias trainings for federal agencies and contractors.
The new Executive Order mandates the Director of the Office of Management and Budget (“OMB”), in conjunction with the Attorney General and the Director of the Office of Personnel Management (“OPM”), to terminate all “illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities” within the federal government. The Order also directs each federal agency to terminate all DEI, DEIA, and environmental justice offices and positions, and all “equity-related” grants or contracts. As a result, federal contractors and/or grantees engaged in such “equity-related” work should expect such contracts or grants to be terminated in short order. In addition, the Order calls for the termination of “all DEI or DEIA performance requirements for employees, contractors, or grantees.”
The Acting Director of the OPM wasted no time issuing initial guidance pursuant to the Executive Order in a memorandum published late on Tuesday, January 21, 2025. According to the memorandum, by 5 p.m. EST on Wednesday, January 22, 2025, all agency heads must: (i) issue an agency-wide notice to employees informing them that all DEIA offices are closing and asking them “if they know of any efforts to disguise these programs by using coded or imprecise language,” (ii) notify all employees of such DEIA offices that they are being placed on paid administrative leave effective immediately, and (iii) take down all outward facing media (i.e., websites, social media accounts) of DEIA offices. Additional action and guidance pursuant to this Executive Order is anticipated.
Ending Illegal Discrimination And Restoring Merit-Based Opportunity
On Tuesday, January 21, 2025, President Trump issued another Executive Order pertaining to DEI, entitled “Ending Illegal Discrimination And Restoring Merit-Based Opportunity.” This Order instructed all executive departments and federal agencies to “terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements” and further ordered all federal agencies “to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Notably, the Order provides that federal and private-sector employment and contracting preferences for U.S. military veterans can continue.
Section 4 of the Executive Order, titled “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences,” calls on the Attorney General, in consultation with relevant agency heads and the Director of OMB, to submit a report to the Assistant to the President for Domestic Policy with recommendations for “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” According to the Order, the report must contain the following:
Key sectors of concern within the agency’s jurisdiction;
The most egregious and discriminatory DEI practitioners in each sector of concern;
A plan of specific steps or measures to deter DEI programs or principles that constitute illegal discrimination or preferences;
Other strategies to encourage the private sector to end illegal DEI discrimination and preferences and comply with all federal civil-rights laws;
Litigation that would be potentially appropriate for federal lawsuits, intervention, or statements of interest; and
Potential regulatory action and sub-regulatory guidance.
As part of this report, each agency must “identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.” Moreover, the Executive Order also requires the Attorney General and the Secretary of Education to issue guidance to “all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program” regarding the practices that are required to comply with the Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College.
Lastly, the Executive Order also revoked several prior executive orders, including Executive Order 11246 signed by Lyndon B. Johnson in 1965, which established non-discriminatory hiring practices for federal contractors. More on this revocation on our Government Contractor Compliance & Regulatory Update blog here.
Statement by Newly Appointed EEOC Acting Chair Andrea R. Lucas
In addition to the executive orders issued by President Trump, on Tuesday, January 21, 2025, newly appointed EEOC Acting Chair Andrea R. Lucas issued a statement setting forth her enforcement priorities. In the statement, Lucas said that her enforcement priorities will include:
Rooting out unlawful DEI-motivated race and sex discrimination;
Protecting American workers from anti-American national origin discrimination;
Defending the biological and binary reality of sex and related rights, including women’s rights to single‑sex spaces at work;
Protecting workers from religious bias and harassment, including antisemitism; and
Remedying other areas of recent under-enforcement.
Other Notable Executive Actions
On Monday, January 20, 2025, President Trump issued an Executive Order entitled, “Reforming the Federal Hiring Process And Restoring Merit to Government Service.” The Executive Order calls for the prioritization of “merit” and “skill” in federal hiring. The Order states:“Federal hiring should not be based on impermissible factors, such as one’s commitment to illegal racial discrimination under the guise of ‘equity,’ or one’s commitment to the invented concept of ‘gender identity’ over sex.” The Order instructs the Assistant to the President for Domestic Policy to send to all agency heads a federal hiring plan, which, among other things, “prevent[s] the hiring of individuals based on their race, sex, or religion.”
On Wednesday, January 22, 2025, Presidential Trump signed a Presidential Memorandum entitled “President Donald J. Trump Ends DEI Madness and Restores Excellence and Safety Within The Federal Aviation.” The memorandum orders the Secretary of Transportationand the Federal Aviation Administration (FAA) Administrator to “immediately stop Biden DEI hiring programs and return to non-discriminatory, merit-based hiring” for FAA employees.
Takeaways
President Trump’s series of executive orders and actions, as well as Acting Chair Lucas’ statement of enforcement priorities, make clear that the Trump Administration and federal agencies tasked with enforcing civil rights laws plan to focus their enforcement efforts on corporate DEI programs. Employers should carefully evaluate their current DEI-related and recruiting/hiring policies and practices in light of these developments. We anticipate further updates in this area and will continue to monitor and report on these updates.
What to Expect from The 119th Congress — A Conversation with Mark Washko
This week I discuss with my colleague, Mark Washko, Senior Government Affairs Advisor for B&C and The Acta Group, our consulting affiliate, the new 119th Congress and what might be key legislative actions our listeners should look for. The new Congress reflects many new members, new staffs, and a new Republican majority in both chambers. What can we expect? Will Congressional Review Act measures un-do key Biden initiatives? What might we expect in terms of a budget reconciliation package? These issues and a whole lot more are the subject of my conversation with Mark.
Tracking the New Administration’s Executive Actions Changes
With President Donald Trump commencing his second term, significant changes are anticipated across global industries. His series of sweeping executive actions have already sparked pushback and legal challenges.
To assist companies in navigating these changes, Sheppard Mullin has developed an Executive Actions Tracker. We are continuing to update the tracker as new actions are released and new analysis becomes available. This resource includes:
Links to the full text of each executive action
Summaries of each, organized by subject area
In-depth analysis of the implications
Links to court challenges that have been filed
Links to Sheppard Mullin blogs discussing the actions
Areas Covered by the Tracker
Our comprehensive tracker spans multiple areas and industries, including:
Border/Immigration
National Security
Environment/Energy
Technology
Justice
Federal Employees
DEI/Social Issues
Trade
Economy
Foreign Affairs
Health
Sidney Howe also contributed to this article.
What President Trump’s Energy Plan Means for the State Regulatory Environment, the Generation Mix and Electric Transmission
Signaling the prioritization of energy, President Donald Trump declared a national energy emergency on inauguration day. He issued several Executive Orders (EO) and Presidential Memoranda either unwinding the Biden administration’s energy policies or entering his own Orders to address what he described as inadequate energy supply in the United States and to encourage the expedient development of fossil fuel resources. Here, we will outline the key Orders and what they mean for the state regulatory environment, generation mix and electric transmission construction.
The Rescissions
Let’s start with the rescissions. President Trump revoked most of President Biden’s EOs and Presidential Memoranda on energy matters, some of which were entered in the weeks before he left office. The following is a summary of the key rescissions:
EO 13990 of January 20, 2021 (Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis) entered on President Biden’s first day in office. The Order revoked the permit for the Keystone XL pipeline, established an Interagency Working Group on the Social Cost of Greenhouse Gases and directed federal agencies to support a transition to clean energy.
EO 14008 of January 27, 2021 (Tackling the Climate Crisis at Home and Abroad) that paused “new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.”
EO 14057 of December 8, 2021 (Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability) setting forth the policy of achieving a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by no later than 2050.
EO 14082 of September 12, 2022 (Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022) establishing funding to implement the IRA in the energy sector and creating the Office on Clean Energy Innovation and Implementation.
Presidential Memorandum of March 13, 2023 (Withdrawal of Certain Areas off the United States Arctic Coast of the Outer Continental Shelf from Oil or Gas Leasing) withdrawing areas in the Beaufort Sea from future oil and gas leasing, which completed protections for the entire U.S. Arctic Ocean.
Presidential Memorandum of January 6, 2025 (Withdrawal of Certain Areas of the United States Outer Continental Shelf from Oil or Natural Gas Leasing) protecting the East Coast, the eastern Gulf of Mexico, the Pacific off the coasts of Washington, Oregon and California and additional portions of the Northern Bering Sea in Alaska from future oil and natural gas leasing.
Energy-Focused Executive Orders
President Trump also issued several EOs and Presidential Memoranda focused on the energy sector following up on the President’s inaugural speech suggesting support for oil, gas and nuclear energy and an end to federal policies favoring clean energy, including wind and solar. Outlined below are the Trump administration’s energy-related EOs.
Unleashing American Energy
The Unleashing American Energy EO intends to encourage energy production and exploration on Federal lands and waters, to increase production of non-fuel minerals and to eliminate the electric vehicle (EV) mandate, among other policies. The order calls for:
federal agencies to review, revise and/or rescind all regulations that impose an undue burden on domestic energy production and use, specifically for “oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy resources.”
the Council on Environmental Quality to provide guidance on implementing the National Environmental Policy Act (NEPA) with the goal of expediting permitting approvals and rescinding certain NEPA regulations related to the national environmental policy put in place during the Biden administration.
federal agencies to make every effort to expedite the permitting process.
the National Economic Council and the Director of the Office of Legislative Affairs to prepare recommendations to Congress that will expedite the permitting and construction of interstate energy transportation and other critical energy infrastructure projects, such as pipelines, particularly in regions lacking such development in recent years.
the federal permitting process to adhere to only relevant laws for environmental considerations without using arbitrary or ideologically motivated methodologies.
the resumption of the review of applications for liquified natural gas export projects.
National Energy Emergency
To start, President Trump’s National Energy Emergency EO defines energy as “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals” with wind and solar energy missing from the list. The Order is designed to expedite the permitting process for energy projects, reduce environmental regulations and promote fossil fuel development, particularly in regions like Alaska. Executive departments and federal agencies are directed to use their emergency authority or any other authority they may possess to facilitate the identification, leasing, siting, production, transportation, refining and generation of domestic energy resources, including resources on Federal lands. The U.S. Environmental Protection Agency (EPA) and the Secretary of Energy are given broad authority to increase oil and gas production.
Unleashing Alaska’s Extraordinary Resource Potential
This EO tracks the inaugural remarks made by President Trump to “drill, baby drill.” The Order directs agencies to expedite the permitting and leasing of energy and natural resource projects in Alaska, including liquefied natural gas projects, and end related environmental restrictions that would derail such efforts.
Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects
The title of the Memorandum speaks for itself, but it also pauses federal permitting, approvals and loans for all “new” onshore and offshore wind projects. The emphasis on the word “new” suggests that any project that has received a Record of Decision (ROD) from the Bureau of Land Management or the Bureau of Ocean Energy Management (BOEM) should be able to proceed with their project. However, the Memorandum calls out the Lava Ridge Wind Project, which received an ROD, and directed the Department of the Interior to place a temporary moratorium on it and “conduct a new comprehensive analysis of the various interests implicated by the Lava Ridge Wind Project and the potential environmental impacts.” The Memorandum also directs federal agencies to investigate “defunct and idle windmills” and recommend authorities to require their removal.
Anticipated Impacts on the State Regulatory Environment
The Trump administration’s energy policy and declaration of a national energy emergency will have varied impacts on state agencies involved in energy regulation, such as public utility commissions. By prioritizing fossil fuels and curtailing support for renewable energy, these Orders may require adjustments at the state level.
The Orders are anticipated to have a significant impact on states like New Jersey and New York, which have been investing in offshore wind to meet their decarbonization goals. New Jersey’s goal is to generate 11,000 MW of electricity from offshore wind by 2040 and transition to 100% clean energy by 2035. New Jersey has approved solicitations from three offshore wind developers with only one project receiving a ROD from BOEM. The New Jersey Board of Public Utilities issued a fourth solicitation in early 2024 which has not yet been awarded. A fifth solicitation slated for Q2 2025 may be off the table given the Trump administration’s Memorandum on offshore wind. States like New Jersey may need to reassess their energy portfolios and may struggle to get renewable projects that rely on federal approvals off the ground, like offshore wind in federal waters.
The Trump administration’s support for fossil fuels is less impactful on the state regulatory environment due to preexisting market forces. While the Trump administration will want to take credit, the fact is that natural gas plants are already on the rise due to strong demand from data centers. In May 2024 (well before the election), S&P Global Market Intelligence reported that U.S. utilities and investors plan to add 133 new natural gas-fired power plants to the nation’s grid over the next few years. These same market forces are delaying the closure of coal plants. Accordingly, strong demand will bolster gas and coal generation more than the administration’s Orders and Memorandum. State regulatory agencies are already seeing the impact of dramatically increasing demand, as utilities make significant changes to generation resource plans and capital outlays to provide for new gas plants and continued operation of coal plants. Similarly, the U.S. became the world’s largest crude oil producer in 2018 and has maintained that status ever since, breaking records for oil projection in 2024.
Areas to Watch Related to Onshore Wind Projects
While the federal government holds the keys to offshore wind leases, onshore projects do not rely as heavily on approvals, rights of way, permits, leases or loans from the federal government. On the other hand, the Trump administration’s Memorandum could be interpreted to apply to permits such as an endangered species permit from the U.S. Fish and Wildlife Service or a Determination of No Hazard from the Federal Aviation Administration. If so interpreted, it would cause massive disruption to new onshore wind projects. However, the Orders and Memorandum do not impact the Investment or Production Tax Credits, which are determined by Congress.
Potential Impacts on Transmission
Another area of interest for state regulatory commissions is electric transmission. Regional Transmission Organizations have identified hundreds of miles of new transmission projects, and these projects may have additional momentum because of the EO declaring a national energy emergency. That Order calls on federal agencies to identify and exercise all lawful authorities they may possess to “facilitate the identification, leasing, siting, production, transportation, refining, and generation of domestic energy resources.” The term “transportation” means the physical movement of energy, including through, but not limited to, pipelines. This includes electric transmission. Accordingly, state regulatory agencies should expect an uptick in applications for certification and siting of electric transmission lines. Interstate pipelines, on the other hand, are certificated and sited by the federal government.
If Past is Prologue
As we look forward to the current administration, we can look back at President Trump’s previous efforts in the energy sector. In 2018, the EPA under the Trump administration announced the replacement of the Obama administration’s Clean Power Plan with the Affordable Clean Energy Plan (ACE). ACE altered the New Source Review under the Clean Air Act, allowing new investment in older coal plants that would not have passed previously. ACE was disallowed by the D.C. Circuit in 2021, but that D.C. Circuit decision was overturned by the U.S. Supreme Court in June of 2022. With the change in energy demand and slower decommissioning of coal fired generation, it is unclear whether there is a need or desire for something like ACE. However, with the 2022 Supreme Court ruling, it may be available.
The other act that caused significant concern in the energy industry during the previous Trump administration was in 2018 when President Trump ordered Energy Secretary Rick Perry to take steps to keep struggling coal and nuclear plants open. The plan called for the use of the Federal Power Act and Defense Production Act and would have required regional grid operators to buy coal and nuclear generated power and provide guaranteed profit. The cost impact and market disruption would have been immense, and the plan was rejected by the Federal Energy Regulatory Commission.