Implications of New “Secondary Tariff” Executive Order Targeting Importers of Venezuelan Oil
On 24 March 2025, the White House issued an Executive Order threatening to impose a 25% tariff on all goods imported into the US from any country that imports Venezuelan oil directly or indirectly through third parties. Effective on or after 2 April 2025, the tariff is in response to alleged actions of Venezuela’s Maduro government, in particular sending members of the Tren de Aragua gang (designated a foreign terrorist organization) and other criminals into the US and its involvement in kidnapping and violent attacks including the assassination of a Venezuelan opposition figure.
The 25% tariff—called a “secondary tariff” as it is analogous to “secondary sanctions” asserted against non-US entities for doing business with sanctioned parties and countries—will apply to “any country that imports Venezuelan oil, directly or indirectly, on or after 2 April 2025” as determined by the Secretary of State in consultation with the Secretaries of the Treasury, Commerce, and Homeland Security, and the US Trade Representative. Once imposed, the tariff would expire one year after a country ceases Venezuelan oil imports or earlier at the discretion of US officials. For countries already subject to other comprehensive import tariffs, the 25% tariff would be cumulative, so China, for example, could be subject to a 45% import duty including the 20% tariff that already applies.
The Order raises several questions, including the scope of products and transactions covered. “Venezuelan oil” is defined as “crude oil or petroleum products extracted, refined, or exported from Venezuela” regardless of the nationality of entities involved, and “indirectly” is defined to include purchases through intermediaries or third countries “where the origin of the oil can reasonably be traced to Venezuela.” This will put significant pressure to conduct and confirm the origin of petroleum products traded on the international market as a limited volume could trigger the tariffs. The Order also leaves the fate of refined and derivative products made from Venezuelan crude oil uncertain, suggesting that further processing and refinement in another country may still be subject to restriction. It is also unclear how Venezuelan oil commingled with oil from other countries would be treated. Presumably, such commingling would be assessed in the same manner as oil from embargoed countries under US sanctions regimes, where even a small amount of commingled product can taint an entire shipment. The Order leaves to Commerce responsibility to issue guidance on implementation of the measure.
Over half of Venezuelan oil exports are imported into China, with significant volumes purchased by France, India, Italy, and Spain under limited US authorizations that were previously granted. The tariff threat will lead to significant disruptions in these markets. The threat could also impact oil traders, shipping companies, and operators of storage facilities, with significant oil volumes becoming stranded without a viable buyer.
Nondelegation and Environmental Law
Earlier this week, the Supreme Court held oral argument in Federal Communications Commission v. Consumers’ Research.1 The case addresses the Federal Communications Commission’s Universal Service Fund programs aimed at providing funding to connect certain customers with telecommunications services. The challengers contend that Congress ran afoul of the nondelegation doctrine in authorizing the FCC to setup the Universal Service Fund programs and that these programs are therefore unlawful.
Although that issue might appear far removed from issues of environmental law, the case could have significant ramifications and could curtail Congress’s ability to authorize federal administrative agencies to issue binding regulations. That curtailment could reach to congressional enactments that authorize the Environmental Protection Agency to promulgate regulations in a variety of areas, including several major environmental statutes like the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act, to name a few.
What is the Nondelegation Doctrine and Why is it Important?
The nondelegation doctrine holds that Congress may not delegate lawmaking (i.e., legislative) authority to executive branch agencies. As some observers have put it, however, the nondelegation doctrine had only one good year, in 1935, when the Supreme Court struck down two federal laws authorizing the executive to take certain actions that were considered legislative in nature. The cases were A.L.A. Schechter Poultry Corp. and Panama Refining Co.
Besides those two cases, the Supreme Court has not struck down any other federal laws on nondelegation grounds. This is because, after 1935, the Supreme Court adopted a relatively permissive test of whether a statute runs afoul of the nondelegation doctrine. The test, referred to as the “intelligible-principle” test, looks to whether Congress has provided the administrative agency with some “intelligible principle” to follow in promulgating regulations pursuant to a congressional enactment.
Applying the intelligible-principle test, the Supreme Court has repeatedly, and over approximately eight decades, upheld congressional delegations of rulemaking power to administrative agencies.
However, in 2019, a dissenting opinion written by Justice Gorsuch in Gundy v. United States, called on the Court to abandon the intelligible-principle test and instead move toward a test where the Agency is not able to make policy decisions and instead is left to a role where it only “fills up the details” or makes factual determinations. Notably, the Gundy dissent was joined by Justices Roberts and Thomas, and Justices Alito and Kavanaugh elsewhere expressed support for the Gundy dissent’s approach. Gundy was also decided before Justice Barrett joined the Court. This has Supreme Court watchers asking whether the Supreme Court might inject more stringency in the nondelegation test in an appropriate case.
Enter Consumers Research. This is the first Supreme Court case to squarely raise nondelegation issues since Gundy. The challengers to the Universal Service Fund program argue that Congress gave the FCC unchecked authority to raise funds to be directed toward the goal of providing universal service from telecommunications services providers. The FCC (and intervenors) respond that the program “passes . . . with flying colors” and fits comfortably within past nondelegation cases because of the numerous restrictions that the statute places on the FCC. If the Supreme Court were to shift course by establishing a more stringent nondelegation test, that could significantly constrain Congress’s ability to delegate rulemaking powers to administrative agencies. Importantly, a more stringent test for nondelegation challenges could also impact numerous existing federal laws. We discuss just a sample of environmental laws that could be affected in the following section.
What Could it Mean for Environmental Law, and You?
One of the most obvious areas where a more stringent delegation test could impact environmental law is in the setting of air and water quality standards.
For example, the Clean Air Act directs the EPA to set air quality standards that apply nationwide. The Clean Air Act provides relatively loose guidance on how the EPA should go about that task, directing the EPA to promulgate standards “requisite to protect the public health” while “allowing an adequate margin of safety.” The Supreme Court upheld that delegation in Whitman v. American Trucking Associations, Inc., but if the Supreme Court were to take a more stringent approach to nondelegation like that in the Gundy dissent, the EPA may not be able to make the decision of what air standard is “requisite to protect the public health” because that could be viewed as a key policy determination and more than “fill[ing] up the details.”
Likewise, in the Clean Water Act, the EPA is also directed to review water quality standards set by individual states, again taking into account a relatively broad instruction from Congress “to protect the public health or welfare, enhance the quality of water and serve the purposes of this chapter” while also considering the waters’ “use and value for public water supplies, propagation of fish and wildlife, recreational purposes, and agricultural, industrial, and other purposes, and . . . their use and value for navigation.” Again, a more stringent nondelegation test could find that these instructions leave the EPA with too much of a policy-making role.
Finally, in the Safe Drinking Water Act, the EPA is directed to set maximum contaminant level goals “at the level at which no known or anticipated adverse effects on the health of persons occur and which allows an adequate margin of safety.” This direction to set a standard is potentially less at risk because it requires more fact finding (i.e., determining “known or anticipated adverse effects on” health), but the requirement to determine an “adequate” safety margin might be deemed to be too close to policymaking.
Although nondelegation challenges to these types of environmental regulations have been raised in the past, they have failed at least in part because of the relaxed intelligible-principle test. The outcome in Consumers’ Research could change that. The Environmental Team at Womble Bond Dickinson are well-suited to evaluate these specific questions of law with you.
Counting Noses in Consumers’ Research
For now, it appears that the current nondelegation test will live to see another day. Only Justices Thomas, Alito, and Gorsuch seemed readily willing to make the test more stringent. The Justices appointed by Democratic presidents (Sotomayor, Kagan, and Jackson) are sure “no” votes. As for the three Justices typically left in the middle, Chief Justice Roberts was unusually quiet during argument, while both Justices Kavanaugh and Barrett pushed back on counsel for Consumers’ Research in numerous instances. Given that the Universal Service Fund program enjoys continuing and broad bipartisan support, this may not be the case where any of the middle three Justices are willing to take on the nondelegation issue, especially after the Court has already issued decisions that reign in administrative agency authority through the major-questions doctrine and by overruling the Chevron deference regime.
Regardless, the Supreme Court’s opinion, which should issue by July 2025, will likely reveal where the Court is headed on nondelegation issues and could signal that a more searching nondelegation test is on the horizon.
1 Brief disclaimer: Michael Miller worked on this case in the earlier stages of litigation before it was brought before the Supreme Court. This update does not share any views on the merits of the case.
European Council Greenlights First Step of Omnibus – The ‘Stop-the-clock’ Proposal
On 26 March 2025, the European Council approved its position, known as a “negotiating mandate”, on a key element of the European Commission’s proposal to streamline corporate sustainability requirements which are captured in an “Omnibus”. Specifically, they approved a delay to the current timetable of the Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”), as proposed in a “Stop-the-clock” Directive, with the substantive changes to reporting requirements to be proposed in a separate Directive.
Specifically, EU Member States at the European Council have supported the European Commission’s proposal to postpone:
by two years the application of the CSRD requirements for large companies that have not yet started reporting, as well as listed SMEs. The effect is that companies expecting to prepare the first report for the financial year 2025, would instead have to prepare the first report for the financial year 2027, and
by one year the transposition deadline and the first phase of the application (covering the largest companies) of the CSDDD. As a result, companies would phase in from July 2028 rather than July 2027.
The support from the European Council to streamline the corporate sustainability reporting requirements has generally been enthusiastic. For example, Adam Szłapka, Minister for the European Union of Poland, said of the Stop-the-clock Directive, that “today’s agreement is a first step on our decisive path to cut red tape and make the EU more competitive”.
Now that the European Council’s negotiating mandate has been approved, interinstitutional negotiations can be entered into. The European Parliament is scheduled to vote on 1 April 2025 on the Stop-the-clock Directive which is being presented to Members of the European Parliament (“MEPs”) on an urgent procedure, requiring a simple majority of MEPs present to approve it. The overall expectation is that this vote is likely to pass, however, how the separate Directive that will cover the changes to the substantive requirements will progress well be hotly debated.
For U.S. companies in particular where there is a movement under a proposed PROTECT USA Act to prevent various U.S. entities from complying with “foreign sustainability due diligence legislation”, should the Stop-the-clock Directive be approved it would at least provide a reprieve. This would allow companies time to recalibrate their approaches to sustainability in the currently fractured political landscape.
SEC Abandons Climate Disclosure Rule
As expected, the SEC under the Trump Administration has abandoned the climate disclosure rule promulgated by the Biden Administration. Specifically, as stated in a court filing today, “the Commission has determined that it wishes to withdraw its defense of the Rules.” Further, the SEC has also informed the court that “Commission counsel is no longer authorized to advance the arguments presented in the Commission’s response brief.”
This decision by the SEC was widely anticipated–and, indeed, had previously been telegraphed by the Republican appointees at the SEC. It is significant nonetheless, as this reversal by the SEC not only provides further evidence of a withdrawal from the climate policies propounded by the Biden Administration but renders the rule less likely to survive legal challenge–and even less likely to be the subject of enforcement action should the courts uphold the rule.
Still, this is not the end of the litigation over the SEC rule. A number of states had intervened in defense of the rule (AZ, CO, CT, DE, DC, HI, IL, MD, MA, MI, MN, NV, NM, NY, OR, RI, VT, WA), and these states can continue to present arguments on behalf of the climate disclosure regulation to the Eighth Circuit. However, the odds that the climate disclosure regulation survives legal challenge when the SEC itself has abandoned it appear quite low.
The SEC will stop defending corporate emissions reporting requirements in court after the agency under President Joe Biden fought for months to save the rules. Securities and Exchange Commission lawyers are “no longer authorized to advance” arguments the agency had made in support of the 2024 regulations that require companies to report their greenhouse gas emissions, the SEC said in a filing with the US Court of Appeals for the Eighth Circuit on Thursday.
news.bloomberglaw.com/…
The Chapter 93A Hurdle: Mass. Court Rejects ‘Artificial Price Inflation’ Claims in Energy Marketing Lawsuit
In Ortiz v. Eversource Energy, a putative class action, plaintiffs brought suit against Eversource Energy alleging that Eversource knowingly marketed natural gas and related services as clean and safe for residential consumers and the environment despite knowing this was not true. Allegedly, Eversource knowingly issued communications that were purposefully misleading and inconsistent with scientific studies. Plaintiffs further allege that had they known the truth about the health and environmental risks associated with the natural gas, they would not have purchased the gas.
Plaintiffs sought (1) a declaration that defendant’s promotional and advertising of its natural gas contained unlawfully false, misleading, and/or deceptive statements; (2) an order enjoining defendant from promoting and marketing its natural gas using such unlawfully false, misleading, and/or deceptive statements; and (3) an order that defendant be required to make reasonable and regular corrective disclosures to plaintiffs and the putative class members that accurately describe the potential health and safety risks. Plaintiffs also sought monetary damages under Chapter 93A.
Defendant moved to dismiss the complaint for failure to state a claim. Paying for a product whose price was artificially inflated by deceptive advertising is a recognized economic injury cognizable under Chapter 93A; however, a plaintiff may not base the claim on speculative harm or risk of economic damages. Here, plaintiff did not allege that the natural gas they purchased from Eversource was functionally deficient or that they suffered any adverse health effects from the natural gas they purchased. To the contrary, plaintiffs claimed they were harmed when they had been misled regarding the environmental and health risks of the gas. In other words, plaintiffs paid too much for the gas they received. However, the Massachusetts Superior Court noted that pursuant to the current regulatory regime in Massachusetts, the Department of Public Utilities has the exclusive power to regulate operations, service, and rates. Thus, as the rates Eversource charged were not entirely within its control, the connection between the purported false statements and the costs plaintiff incurred was too attenuated to serve as a cognizable injury. Plaintiff was unable to establish that they would have paid a lower price for natural gas had it been honestly advertised.
States Take Action to Regulate and Limit PFAS in Industrial Effluent Despite Federal Inaction
On January 21, 2025, the U.S. Environmental Protection Agency’s (EPA) proposed rule seeking to set effluent limitation guidelines for certain per- and polyfluoroalkyl substances (PFAS) under the Clean Water Act (CWA) was withdrawn from Office of Management & Budget (OMB) review following President Trump’s Executive Order implementing a regulatory freeze. Federal action may be halted, but states are beginning to enact legislation that seeks to address PFAS contained in industrial effluent. These laws are currently sparse, with Maryland being the most recent state to establish a robust framework that requires industrial sources to limit PFAS in effluent. A handful of other states have laws establishing monitoring and reporting protocols for PFAS in industrial effluent, and other states have similar frameworks planned for future implementation. While these efforts are not yet widespread, heightened scrutiny of PFAS use suggests that more and more states will seek to monitor and limit PFAS in industrial effluent.
Maryland’s Framework
In May 2024, the Maryland legislature enacted the Protecting State Waters from PFAS Pollution Act. The Act charges the Maryland Department of the Environment (MDOE) with setting PFAS action levels and monitoring and testing protocols. MDOE appears behind schedule for rulemaking to promulgate these requirements, but a regulatory program is on the horizon. Once rulemaking is complete, certain industrial discharges of PFAS will be subject to a range of requirements seeking to monitor and reduce PFAS in effluent.
The Act only implicates discharges of PFAS from Significant Industrial Users (SIU), which MDOE was tasked with identifying by October 1, 2024. An SIU is defined under the Act as an industrial user that is:
subject to 40 C.F.R. Part 403.6;
discharges an average of 25,000 gallons per day to a publicly owned treatment works (POTW); and
contributes a certain percentage of processed wastewater at a POTW; or
is designated an SIU based on potential harm its discharges may cause or due to past violations.
The new monitoring and testing requirements apply only to SIUs “currently and intentionally using PFAS chemicals” that operate under a pretreatment permit.
Once the program is fully established, SIUs regulated under the program will be required to track and reduce the amount of PFAS contained in discharge. SIUs will be tasked with both initial and ongoing monitoring to determine the level of PFAS discharged to POTW and will need to report those monitoring results to MDOE. SIUs will also need to create plans to address PFAS in their effluent through identifying ways to reduce, move away from, and safely dispose of PFAS.
Limitation of PFAS in Industrial Effluent in Other States
Maryland is not the only state looking to limit discharges containing PFAS from industrial sources. New York and Massachusetts, for example, are pursuing monitoring and disclosure requirements for SIU. The New York legislature is currently considering S.B. 4574, which seeks to enact the “PFAS Discharge Disclosure Act” to create a monitoring protocol for “certain industrial dischargers” and for POTWs. The bill includes language requiring that monitoring results under this protocol be made public.
States such as Michigan have enacted compliance procedures to address PFAS discharged from industrial facilities to surface water or to POTWs. Under this guidance, both new and existing industrial facilities are evaluated to determine their potential to discharge PFAS. Facilities determined to have a reasonable potential to discharge PFAS are required to follow monitoring and sampling protocols. Facilities discharging PFAS above certain levels will be asked to enter into a compliance order to address and reduce the PFAS levels.
Other states, such as Colorado and Kansas, are in the beginning stages of studying the impact of discharges containing PFAS from industrial facilities to POTWs with the intention of limiting PFAS in industrial discharges in the future. Kansas has identified PFAS as an area of concern within industrial discharges and is conducting preliminary sampling at certain industrial facilities to learn more about PFAS contamination in the state.
Most of the effluent limitations and pretreatment requirements relate to state National Pollutant Discharge Elimination System (NPDES) programs, but some upcoming rules regarding SIUs and PFAS discharges may stem from other state and federal requirements. Virginia, for instance, plans to require facilities causing or contributing to exceedances of Safe Drinking Water Act (SDWA) levels for PFAS at Public Water Systems to pretreat and address effluent causing impacts to drinking water. Maryland contemplates adding requirements and limitations for SIUs under its groundwater and stormwater programs, as well.
Commentary
As Maryland and other states bring their programs online, additional states are likely to follow suit. This is especially likely if there is a perception of federal government inaction in this sphere, which is probable. Given that more and more states may take similar action as PFAS continues to be a hot topic, companies intentionally using or manufacturing products with PFAS should consider the implications of compliance moving forward. Reducing or eliminating use of PFAS and substances containing PFAS, when possible, may be a good policy decision as increasing disclosure requirements make the public aware of PFAS usage. Companies unable to move away from PFAS use should closely monitor the status of PFAS regulation in states where they manufacture and process materials and should prepare to address concern that may arise from public disclosure of their PFAS use.
Catherina D. Narigon also contributed to this article.
Court of Appeal Reaffirms Stance on Fiduciary Duties in Half-Secret Commission Cases
Some years it seems like there are no cases of any real importance. 2025 is not one of those years.
Last week a strong Court of Appeal doubled down on a key element of the landmark Johnson v FirstRand decision on secret commissions in motor finance (about to be heard before the Supreme Court). In Expert Tooling and Automation Ltd v Engie Power Ltd [2025] EWCA Civ 292 the Court held that an energy broker owed fiduciary duties not to accept half-secret commissions for broking an energy supply agreement without getting fully informed consent from its client.
Although the client was aware that the broker would be paid a commission, it was not told the amount (which was substantial) or that the commission would be funded by increasing the energy unit rate paid by the client (an arrangement not dissimilar to the discretionary commission agreement in Johnson).
The key findings were:
Fiduciary duty: the broker, as the client’s agent, owed strict fiduciary duties including not profiting from the relationship without fully informed consent. The Court held that the broker breached this duty by failing to disclose material facts about the commission structure.
Informed consent: The Court confirmed that a principal’s informed consent requires full disclosure of all material facts – not mere awareness that a commission would be paid. The fact that the client could have asked for more information did not excuse the lack of disclosure.
Accessory liability: the energy supplier, which was the party paying the commission, could only be liable for procuring the broker’s breach if it acted dishonestly. As the client had not pleaded dishonesty or run that case at trial, the claim failed on that procedural point.
Limitation: The Court held that the cause of action accrued upon payment of the commission, not entry into the underlying contract. The decision of the first instance judge that the claim in respect of the first energy supply contract was time-barred was therefore overturned.
With the Supreme Court about to have its say on the Johnson appeal, this decision underlines the clear line at Court of Appeal level that brokers will commonly owe strict fiduciary obligations requiring clear, proactive disclosure of commission arrangements that may be said to give rise to conflicts of interest. That disclosure needs to be fulsome in order to obtain informed consent.
More hopefully for half-secret commission payers (be they lenders or energy suppliers) the judgment also confirms that accessory liability in equity (where third parties are said to have induced a breach of fiduciary duty) requires proof of dishonesty, consistent with established principles in Brunei and Twinsectra. This issue will inevitably be a key battleground in the Johnson appeal and other cases targeting the payers of half-secret commission instead of the receiving brokers.
The decision may well be subject to further appeal given the pending Supreme Court consideration of Johnson.
SEC Abandons Defense of Brobdingnagian Climate Change Disclosure Rule
Three years ago, the Securities and Exchange Commission issued a nearly 500 page rule proposal that would require registrants to provide certain climate-related information in their registration statements and annual reports. At the time, I argued. albeit to no avail, that the sheer prolixity of the release militated against adoption of the rule. Two years later, the SEC adopted a final rule in a nearly 900 page adopting release.
Expectedly, the rule was challenged in court. National Legal and Policy Center v. Securities and Exchange Commission (8th Cir., Case No. 24-1685). The SEC previously stayed effectiveness of the rules pending completion of that litigation. Yesterday, the SEC through in the towel, announcing that it had voted to no longer defend the rules.
EPA Extends 2024 RFS Compliance Reporting Deadline
The U.S. Environmental Protection Agency (EPA) issued a final rule on March 14, 2025, extending the Renewable Fuel Standard (RFS) compliance reporting deadline for the 2024 compliance year. 90 Fed. Reg. 12109. As reported in our January 8, 2025, blog item, EPA published a proposed rule on December 12, 2024, that would partially waive the 2024 cellulosic biofuel volume requirement and revise the associated percentage standard under the RFS program due to a shortfall in cellulosic biofuel production. 89 Fed. Reg. 100442. As a result of this proposed change, EPA proposes to extend the RFS compliance reporting deadline for the 2024 compliance year. In its March 14, 2025, final rule, EPA does not make final the proposed partial waiver or most of the other proposed amendments to other RFS provisions, instead stating that it may address them in a later action. According to EPA, it expects that the effective date of the revised 2024 cellulosic biofuel standard will not occur until after the March 31, 2025, original 2024 RFS compliance reporting deadline. To provide obligated parties with sufficient time to carry out and adjust their compliance strategies once EPA issues the final revised 2024 cellulosic biofuel standard, it is extending the 2024 RFS compliance reporting deadline from March 31, 2025, to the next quarterly compliance reporting deadline after the effective date of the final rule establishing the revised 2024 cellulosic biofuel standard. EPA states that by operation of law, the 2024 attest engagement deadline would also be extended to the next June 1 annual attest engagement reporting deadline after the revised 2024 RFS compliance reporting deadline. EPA also made several minor amendments and technical corrections to other RFS provisions. The rule was effective March 13, 2025.
FERC’s Co-Location Conundrum: Balancing Grid Reliability with Data Center Development as PJM’s Tariff Faces Scrutiny
Key Points
FERC’s Order Signals Transformative Change While Navigating Jurisdictional Limits: While FERC recognizes the urgent need to address co-location arrangements (particularly given the AI/data center boom), the intricate interplay of federal and state authority means any solution must carefully navigate jurisdictional boundaries. The Order reflects FERC’s attempt to maximize its impact within the framework of the Federal Power Act’s cooperative federalism.
Cost Allocation and Reliability Concerns Drive Reform: FERC’s primary concerns center on preventing cost-shifting to other ratepayers and ensuring grid reliability. The current Tariff’s lack of clear provisions for ancillary services, different co-location configurations, and sudden load shifts poses risks that FERC seeks to address through this proceeding.
Industry Response Suggests High Stakes for Multiple Stakeholders: The approximately 100 intervention motions filed indicate that stakeholders view this proceeding as potentially industry-reshaping. The outcome will likely influence how data center developers approach power supply strategies and could affect the viability of co-location as a solution to grid connection challenges.
Last year, the Federal Energy Regulatory Commission (“FERC”) convened a technical conference to discuss issues related to large loads being co-located with generating facilities (Docket No. AD24-11-000), which we summarized in the following client alert. In a related development late last year, Constellation Energy Generation, LLC (“Constellation”) filed a complaint against PJM Interconnection, LLC (“PJM”) pursuant to Section 206 of the Federal Power Act (“FPA”), arguing that PJM’s Open Access Transmission Tariff is “unjust, unreasonable and unduly discriminatory” due to the absence of guidance on co-located configurations where the generating asset is completely isolated from the grid (Docket No. EL25-20-000).
The importance of this topic is underscored by nearly daily announcements of new data center projects, such as the $500 billion proposed investment on AI infrastructure by OpenAI, SoftBank and Oracle highlighted by President Trump on the day after his inauguration. The massive power demands from both training and inference applications of AI are anticipated to place significant strains on power grids, while grid operators are contending with lengthy interconnection queues and insufficient buildout of transmission networks. In order to secure power supply for their projects, many data center developers are exploring co-location opportunities with new and existing generating facilities.
On February 20, 2025, FERC issued an order (the “Order”) consolidating the two dockets mentioned above and instituting for cause proceedings under Section 206 of the FPA, finding that PJM’s tariff appears to be unjust, unreasonable, unduly discriminatory or preferential (Docket No. EL25-49-00). FERC ordered PJM and the relevant transmission owners to either:
“show cause as to why the Open Access Transmission Tariff, the Amended and Restated Operating Agreement of PJM, and Reliability Assurance Agreement Among Load Serving Entities in the PJM Region (the “Tariff”) remains just and reasonable and not unduly discriminatory or preferential without provisions addressing with sufficient clarity or consistency the rates, terms and conditions of service that apply to co-location arrangements; or
explain what changes to the Tariff would remedy the identified concerns if [FERC] were to determine that the Tariff has in fact become unjust and unreasonable or unduly discriminatory or preferential and, therefore, proceeds to establish a replacement Tariff.”
On March 24, 2025, PJM and the transmission owners filed their responses to the Order, with both PJM and a joint answer submitted on behalf of a significant majority of the transmission owners arguing that the Tariff remains just and reasonable. The transmission owners urged FERC to clarify that co-located load served by generation interconnected to the transmission or distribution system is network load for the purposes of the Tariff. PJM presented a number of different configurations under the existing Tariff, while noting jurisdictional concerns based on federal/state shared jurisdiction and differences in regulation among the states.
Interested parties are able to respond with comments by April 23, 2025. Approximately 100 such entities have filed motions to intervene, which is indicative of the significance industry players are placing on these proceedings and FERC’s ultimate resolution.
FERC’s Analysis
Although the Order relates specifically to the complaint initiated by Constellation under Section 206 of the FPA, FERC is clearly conscious of many policy considerations that need to be addressed in the context of co-located large load configurations.
Jurisdiction. Although FERC has indicated that it is aware of the nationwide importance of co-located large load configurations, particularly with respect to the national security interests identified in facilitating the rapid buildout of AI infrastructure, it is also plainly conscious of its jurisdictional limitations. The Order highlights that the FPA only allocates jurisdiction to FERC for transmission and wholesale sales of electricity in interstate commerce, whereas retail sales, intrastate transmission and wholesaling, as well as siting authority, are all subject to state jurisdiction. Accordingly, there are jurisdictional limits to how transformative FERC’s guidance can be on this issue. The Order invites comments on when and under what circumstances co-located load should be considered as interconnected to the transmission system in interstate commerce. Specifically, FERC poses the query of whether fully isolated load should be understood as being connected to the transmission system, and if so, what characteristics would result in such a determination.1
Tariff Provisions. The Order makes a determination that the Tariff is “unjust and unreasonable or unduly discriminatory or preferential” due to its lack of clarity and consistency regarding rates and terms of use. For example, FERC comments that the Tariff does not account for costs associated with ancillary services that the co-located generator would be unable to provide, such as black start capabilities and load following services. There is also significant discussion about how the Tariff does not account for different co-location configurations, and specifically, how those differences may impact overall costs. Due to the ambiguities in the Tariff, FERC seems to be acutely concerned with the potential for parties to a co-location arrangement to shift costs to other ratepayers.
Reliability and Resource Adequacy. The concerns raised in the Order with respect to reliability and resource adequacy were identified and thoroughly discussed at the technical conference. For example, in the event a generator co-located with a large load customer temporarily goes offline, the large load customer could suddenly be drawing from the grid, thus potentially impacting overall network performance. Grid operators would be better placed if they had the ability to model such scenarios. Further, concerns relating to the removal of existing generating assets from capacity markets, and thus increasing rates of other consumers (at least in the short-term), were raised by many participants to the technical conference and restated in the Order. On the other hand, FERC notes that many of the concerns raised by serving large load customers would be present even if the customer is treated as network load rather than in a behind-the-meter configuration.
Questions. The Order stipulates that PJM and the transmission owners must include responses to a number of questions relating to: 1) transmission service, 2) ancillary or other wholesale services, 3) interconnection procedures and cost allocation, 4) the PJM capacity market, reliability and resource adequacy, and 5) general and miscellaneous questions which do not fall under any of these headings. The responses to these questions will assist FERC in framing its analysis of how revisions can be made to the Tariff to ensure it is just, reasonable and not unduly discriminatory.
Final Thoughts
Electricity infrastructure is already being built out at a rapid pace in the United States. This trend is set to continue, particularly to meet the needs of increased electrification across numerous sectors such as industry and transportation, along with the anticipated expansion of the data center fleet. Developers have pursued co-located arrangements as a potential means of reducing time frames for getting projects online. FERC’s guidance will result in greater certainty for developers on the costs and timing associated with co-location, which should clarify the role of co-location in the ongoing data center build-out.
1 Key questions about jurisdiction, cost allocation, and reliability turn on what it means for load to be isolated from the grid. For example, in the Complaint, Constellation describes “Fully Isolated Co-Located Loads” as behind the meter load with system protection facilities designed to ensure power does not flow from the grid to the load, with the PJM transmission owners refer to “fully isolated” load where both load and generator serving the co-located load are islanded from the transmission and distribution systems. PJM saw the nuance of different co-location agreements as risking to introduce regulatory gaps in federal and state jurisdiction.
The Digital Chamber Publishes US Blockchain Roadmap
The Digital Chamber (TDC), a trade association focused on advancing blockchain adoption and regulatory clarity, has unveiled its U.S. Blockchain Roadmap, a plan aimed at enhancing America’s leadership in blockchain technology. The roadmap emphasizes blockchain’s potential in reshaping financial systems, global trade, and digital infrastructure. It argues that blockchain development could impact the United States’ economic growth, financial sovereignty, and technological competitiveness.
The roadmap outlines several priority areas and policy recommendations. These include integrating digital assets into the nation’s financial infrastructure, protecting decentralized networks, and establishing clear regulatory frameworks. It also examines Bitcoin mining’s potential role in strengthening U.S. energy security and recommends modernizing the banking system to adapt to the evolving digital economy. Additionally, the roadmap explores blockchain’s potential applications in government operations and fiscal oversight.
PFAS Reporting Requirements Persist Amid EPA Deregulation
While the Trump Administration’s deregulatory efforts create uncertainty regarding oversight of per- and polyfluoroalkyl substances (PFAS), EPA remains active in addressing these toxic chemicals.
Under the Biden Administration, EPA established regulatory frameworks for PFAS under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); Clean Water Act (CWA); Resource Conservation and Recovery Act (RCRA); Safe Drinking Water Act (SDWA); Toxics Release Inventory (TRI) (under EPCRA); and Toxic Substances Control Act (TSCA), among others. As of today, EPA has delayed a number of these PFAS rulemakings by extending comment periods.
Importantly, in a March 12 list of 31 deregulatory actions and a memorandum revising the National Enforcement and Compliance Initiatives (NECI), EPA offered direction in its push to pare back regulations. Notably, EPA did not list PFAS rulemakings in this list of deregulatory targets, nor did EPA revise the Biden-era PFAS and drinking water NECIs. This suggests that actions to revise or rescind recently promulgated PFAS requirements are possibly lower on the list of deregulatory priorities. This may change.
In the meantime, the TSCA PFAS Reporting Rule remains in full force and effect and its reporting deadlines are fast approaching. The PFAS Reporting Rule was mandated by Congress in the National Defense Authorization Act (NDAA) of 2020 that amended TSCA section 8(a)(7). 88 Fed. Reg. 70,516 (Oct. 11, 2023). EPA later promulgated a final rule establishing the reporting period to begin on July 11, 2025, and to conclude for most businesses on January 11, 2026; some small businesses can report on or before July 11, 2026. 89 Fed. Reg. 72,336 (Sept. 5, 2024).
The TSCA rule requires manufacturers and importers of PFAS to report various data looking back twelve years to 2011. The PFAS Reporting Rule applies to manufacturers of PFAS substances and mixtures, including PFAS in byproducts and impurities. The rule also requires importers to report PFAS substances and mixtures, including articles containing PFAS (e.g. components, materials and products).
In addition to the unprecedented look-back period, the PFAS Reporting Rule requires companies to conduct a diligent inquiry into the presence of PFAS at their facilities and supply chains, assessing information that is “known or reasonably ascertainable” from upstream suppliers and downstream customers. Both internal and external inquiry is required. The rule will require thousands of businesses that have never reported under TSCA to conduct diligent inquiries of this type.
Unless or until EPA acts additionally to extend the deadlines or revise the reporting requirements of the PFAS Reporting Rule, businesses are required to comply. There is still time to gather and process the necessary information. Even amid regulatory uncertainty, businesses are encouraged to be prepared and avoid possible noncompliance risks. Also, several states have enacted or proposed reporting for PFAS in products, including some restrictions or outright prohibitions. States may also petition EPA to regulate PFAS further; some are already doing so regarding PFAS air emissions.
Businesses are urged to use the TSCA diligence and information gathering process to both collect information to comply with federal and state PFAS regulatory requirements and to establish an in-house knowledge base. Liabilities from PFAS exposures and contamination from third-party and governmental enforcement actions, distinct from reporting requirements, are expected to only amplify in the coming years.