A New Alice Plot Twist – Can a Composition of Matter Be an Abstract Idea?
Federal Circuit Holds that “Polycrystalline Diamond Compact” Claims Are Not Directed to an Abstract Idea
The patent world tends to think that the Supreme Court’s framework in Alice1 is a template for determining the eligibility of software and business method inventions2. Under 35 U.S.C. § 101, abstract ideas are not eligible for patent protection.3 Ineligible abstract ideas have included claims directed to mathematical equations, certain business methods, and mental processes.4 Interestingly, the Federal Circuit recently evaluated claims directed to a diamond compact and determined that they were not directed to an ineligible abstract idea under § 101. While these composition of matter claims survived, we see implications for patent practitioners in the chemical and materials arts.
On February 13, 2025, the Federal Circuit reversed a ruling from the ITC holding claims directed to a polycrystalline diamond compact (PDC) from U.S. Patent No. 10,508,502 invalid as directed to an abstract idea.5 The PDC claims comprise “a polycrystalline diamond table . . . including: a plurality of diamond grains . . . and a catalyst including cobalt;” and “a substrate bonded to the polycrystalline table.” The claims also recite certain magnetic property ranges. The specification of the patent explains that these magnetic properties correlate to low levels of cobalt in the PDC, and low levels of cobalt are associated with stronger PDCs.6
At the ITC, the presiding ALJ applied the two-step framework of Alice7 to the claims at issue. The ALJ found that the claims recited some structural features (grain size and a catalyst), and the magnetic properties were “side effects.” The ALJ further reasoned that “[t]here may be some causal connection” between the recited magnetic properties and structures, but it “is so loose and generalized” that the “claimed limitations appear to be little more than side effects.”8 The ITC largely agreed and determined that the magnetic properties were merely the “the result of sintering conditions and input materials that went into manufacturing the PDC.”9
The Federal Circuit held that the “claims are directed to a specific, non-abstract composition of matter—a PDC—that is defined by its constituent elements . . ., particular dimensional information . . ., and quantified material properties . . . .”10 The court disagreed with the ITC’s reliance on the patent specification’s use of “may” to support its position that the correlation between the magnetic properties and structural features is “too weak and equivocal.” Rather, the paragraphs employing “may” also have sentences that unequivocally use “indicates” to establish the correlation.11 Further, the patent includes several working PDC table examples illustrating that the claimed magnetic properties are indicative of low levels of cobalt in comparison to prior art PDC tables.12 Ultimately, “no perfect proxy” is required to tie the recited properties to the recited structure.13
US Synthetic offers takeaways for patent practitioners who draft composition of matter claims. There is at least some risk that a recited property in a composition of matter claim could be held an ineligible abstract idea under § 101. One can substantially reduce this risk by working with inventors to draft patent applications that: (a) identify actual examples and comparative examples that illustrate a relationship between the recited properties and structure; (b) include specification passages that discuss proven or believed relationships between each of the claimed properties and structure; (c) avoid the use of the term “may” in the patent specification when correlating properties to structure; and (d) avoid equivocation when supporting claimed elements in the specification. At the same time, patent drafters should avoid couching these property/structure connections as the invention or as being critical to the invention because these constructions might be construed by a court as limitations in claims that do not expressly recite these properties and/or structures.
If you have any questions about the impact of US Synthetic or patent issues more generally, please contact your Miller Canfield attorney or the authors of this alert.
Footnotes
1 Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).
2 See generally U.S.P.T.O. Manual of Patent Examining Procedure (MPEP) § 2106.04(a).
3 E.g., Diamond v. Diehr, 450 U.S. 175, 185 (1981).
4 See MPEP § 2106.04(a).
5 US Synthetic Corp. v. Int’l Trade Comm’n, __ 4th__, 2025 WL 478762, No. 2023-1217 (Fed. Cir. Feb. 13, 2025).
6 Id. at *1-4.
7 In the first step, the court must assess the claims in their entirety to determine “whether their character as a whole is directed to excluded subject matter.” Alice, 573 U.S. at 218. If the claims are directed to an abstract idea, step two requires the court to assess “the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.” Id. at 217.
8 US Synthetic, 2025 WL 478762, at *4.
9 Id. at *5.
10 Id. at *6.
11 Id. at *7.
12 Id. at *8.
13 Id. at *7.
Expanded Interpretation of Price-Anderson Act Is Another Positive Sign for Commercial Nuclear Development in the United States
On 10 February 2025, the US Court of Appeals for the Federal Circuit (Federal Circuit) issued a decision in Cotter Corp. v. United States that solidified a broad interpretation of the applicability of contractual and statutory indemnity under the Price-Anderson Act (PAA) for nuclear accidents.1 The Federal Circuit’s decision is a positive development for the commercial nuclear industry because it takes a broad view of when a noncontracting party can take advantage of an indemnification issued under a government contract.
Originally enacted in 1957, the PAA was designed to address the risk of substantial liability following a nuclear incident, as such liability was viewed as a major disincentive to private industry investment in nuclear power generation. The PAA authorized the federal government to “make funds available for a portion of the damages suffered by the public from nuclear incidents and to limit the liability of those persons liable for such losses.”2 The PAA also added several provisions concerning government indemnification of persons liable for harm from nuclear incidents, authorizing the federal government “to enter into agreements of indemnification with its contractors for the construction or operation of production or utilization facilities or other activities under contracts for the benefit of the United States involving activities under the risk of public liability for a substantial nuclear incident.”3
Cotter Corporation (N.S.L.) (Cotter), which conducts mining and milling, incurred liability through a settlement based on allegations that it injured members of the public in the St. Louis area by releasing, between 1969 and 1973, radioactive materials and residues originally produced by another company, Mallinckrodt, pursuant to a contract with the federal government. That contract, to which Cotter was not a party, obligated the government to indemnify Mallinckrodt for nuclear accidents. Cotter filed a claim against the United States for statutory and contractual indemnification seeking the benefit of this indemnity.
In 2023, the US Court of Federal Claims dismissed Cotter’s claims.4 The Claims Court interpreted the PAA narrowly, effectively requiring “(a) a contemporaneous relationship between the liability-generating acts of the non-contractor indemnity claimant (Cotter) and the performance of the contract (by Mallinckrodt or the government) and, seemingly, (b) that the indemnity claimant’s activities (generating liability to others) were related to the contractual activities in the particular sense of contributing to the performance of the contract.”5 According to the Claims Court, Cotter’s activities occurred years after the contract at issue was terminated and did not sufficiently relate to the performance of the government contract.6 “[M]ere later ownership and possession of radioactive material that resulted from [such a] Contract” was not sufficient to claim indemnity, according to the Claims Court.7
Cotter appealed the decision to the Federal Circuit, which rejected this narrow interpretation, holding that “‘persons indemnified’ [under the PAA] is defined broadly to cover not just the contractor but ‘any other person who may be liable for public liability.’”8 The Federal Circuit further held that “[p]ublic liability, in turn, broadly reaches the public by embracing ‘any legal liability arising out of or resulting from a nuclear incident,’… and that] ‘nuclear incident’ covers ‘any occurrence within the United States causing bodily injury… arising out of or resulting from the radioactive, toxic, explosive, or other hazardous properties of source, special nuclear, or byproduct material.’”9
The Federal Circuit concluded that none of the statutory definitions “limit indemnity to the period before the government contract ended or includes a requirement that the indemnity claimant’s (exposure-causing) activity was contributing to the contracting parties’ performance.”10 Instead, the Federal Circuit held that the statutory scheme is “focused simply on the hazard from the material—a hazard that is not limited in time to the period of performance of a particular contract and may be long lasting, for at least some of the covered nuclear materials.”11 The Federal Circuit concluded that “a contract-termination temporal limit (i.e., excluding government compensation if and when harm occurred after termination) would undermine the declared statutory purposes ‘to protect the public’ and remove an important deterrent to private investment in nuclear energy.”12
The Federal Circuit concluded that causation was a requirement for indemnity purposes and that there needed to be a sufficient causal connection between the contract containing the indemnity and the claim. However, because the contract here dealt with the creation of the hazardous material that was the source of the damages—a radioactive release—the Federal Circuit found sufficient causation.
With the relatively recent renewed focus on nuclear power as a reliable baseload power solution (particularly to power data centers), the Cotter Corp. decision clarifies the expansive nature of indemnification under the PAA and will likely further encourage nuclear projects underway in the United States.
Footnotes
1 No. 1:22-cv-00414-DAT, 2025 U.S. App. LEXIS 2969 (Feb. 10, 2025), https://www.cafc.uscourts.gov/opinions-orders/23-1826.OPINION.2-10-2025_2465769.pdf.
2 Id. at *6–7.
3 Id.
4 Cotter Corp. (N.S.L.) v. United States, 165 Fed. Cl. 138 (Fed. Cl. 2023).
5 Cotter Corp., 2025 U.S. App. LEXIS 2969, at *28.
6 Id. at *21.
7 Id. at *29.
8 Id. at *30.
9Id. at *32.
10 Id. at *31–32.
11 Id.
12 Id.
Removal of NEPA Implementing Regulations to Alter Landscape of Federal Environmental Review
On February 25, 2025, the Council on Environmental Quality (CEQ), the advisory agency within the Executive Office of the President meant to assist and advise the President on certain environmental matters including the administration of the National Environmental Protection Act (NEPA’), issued an interim final rule removing all of CEQ’s NEPA implementing regulations from the Federal register. This rule goes into effect on April 11, 2025, and has a public comments period running until March 27, 2025. This comes in response to two court rulings and two executive orders (E.O.s) that have challenged CEQ’s regulatory authority in the past few months.
NEPA
NEPA requires federal agencies to review the environmental impact of “Major Federal actions” such as issuing permits, providing federal funding, and issuing regulations. In 1978, in response to an executive order issued by President Carter, the Council on Environmental Quality issued regulations that created a system that required all federal agencies to complete an environmental impact statement, an environmental assessment, or to determine that the action qualifies for a “categorical exclusion” whenever undertaking a of “Major Federal actions.” This system has
Backdrop
On November 12, 2024, the D.C. Circuit Court of Appeals ruled in Marin Audubon Society v. Federal Aviation Authority t that CEQ’s NEPA implementing regulations are beyond the scope of their powers because the agency lacks congressional authorization to promulgate binding regulations. On February 3, 2025, the District Court for the District of North Dakota decided Iowa v. CEQ, adopting the reasoning of Marin Audubon Society found that CEQ lacks statutory authority to promulgate binding rules implementing NEPA.
Further, the Trump administration signed E.O. 14154, Unleashing American Energy, which revoked prior E.O.s dating back to the Carter administration granting CEQ authority to promulgate regulations to implement procedures for the NEPA process and directed CEQ to issue guidance on implementing NEPA and to propose rescinding the NEPA implementing regulations.
Finally, on February 19, 2025, CEQ issued a new Memorandum on the Implementation of NEPA to all federal departments and agencies pursuant to E.O. 14154’s directive to issue new guidance “expedit[ing] and simplify[ing] the permitting process” and the NEPA process.
Effects
The Memorandum on the Implementation of NEPA “encourages” agencies to use the CEQ regulations issued during the first Trump Administration as “an initial framework” or “consider voluntarily relying” on CEQ regulations for ongoing NEPA reviews and lawsuits on NEPA reviews completed while the regulations were still in effect until agencies individually revise or establish their own NEPA implementing procedures by February 19, 2026. This lack of concrete guidance on whether an agency should voluntarily follow the 2020 CEQ NEPA regulations or rely on the statutory text and any agency-specific NEPA regulations as the basis for their NEPA reviews combined with the differences between the level of detail in individual agency NEPA regulations, could result in inconsistent approaches across agencies.
Similarly, that uncertainty will likely provide additional grounds for challenges to forthcoming NEPA reviews and the validity of the Interim Final Rule itself. Until courts establish a new regime of NEPA review in the post-CEQ NEPA regulations world, the future for NEPA lawsuits will likely be fact and court-specific, potentially leading to greater uncertainty.
Additionally, while CEQ’s Memorandum expressly states that “[a]gencies should not delay pending or ongoing NEPA analyses while undertaking these revisions,” the removal of a regulatory structure that has been in place for nearly 50 years may cause delays in the NEPA review process in the short-term.
ECHA Updates Annual Evaluation Statistics and Recommendations to Registrants on Improving Dossiers
The European Chemicals Agency (ECHA) announced on February 26, 2025, that it has updated its annual statistics on evaluation progress. According to ECHA, between 2009 and 2024, it checked the compliance of 15,500 Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation registrations, representing 23 percent of all submitted registration dossiers and covering 3,200 substances. For high-volume chemicals registered at quantities of 100 metric tons or more per year, ECHA has checked 34 percent of the registrations. ECHA notes that based on the evaluations, it updated its recommendations to registrants on how to improve their dossiers.
In 2024, ECHA carried out 313 compliance checks, covering almost 2,000 registrations and addressing 272 individual substances. ECHA notes that these checks focused on those registration dossiers that may have data gaps. As a result, ECHA sent 208 decisions to companies, requesting additional data to clarify long-term effects of chemicals on human health or the environment. ECHA states that it also examined 161 testing proposals and sent out 92 decisions, addressing the tests proposed by industry to ensure the safe use of the substance.
To follow up information requests sent to companies, ECHA states that it checks whether the provided information complies with the REACH requirements. In 2024, ECHA concluded this evaluation for 241 substances. According to ECHA, in about 70 percent of the cases, companies provided the requested information. ECHA notified the remaining 30 percent to European Union (EU) member states for enforcement and will follow up. ECHA also adopted three substance evaluation decisions prepared by EU member states, requesting further information to assess the safety of substances of potential concern.
EPA Will Extend Deadline for Reporting Health and Safety Data for 16 Chemicals
The U.S. Environmental Protection Agency (EPA) announced on March 6, 2025, that it plans to issue a rule “soon” to extend the reporting deadline for a rule under Section 8(d) of the Toxic Substances Control Act (TSCA) requiring manufacturers (including importers) of 16 chemicals to report data from unpublished health and safety studies to EPA. The rule applies to manufacturers in the North American Industrial Classification System (NAICS) codes for chemical manufacturing (NAICS code 325) and petroleum refineries (NAICS code 324110) that are currently manufacturing (including importing) a listed chemical substance (or will do so during the chemical’s reporting period), or that have manufactured (including imported) or proposed to manufacture (including import) a listed chemical substance within the last ten years. EPA states that the health and safety studies will help inform EPA’s prioritization, risk evaluation, and risk management of chemicals under TSCA. The current reporting deadline is March 13, 2025. EPA intends to extend the reporting deadline by 90 days to June 11, 2025, for vinyl chloride, and 180 days to September 9, 2025, for the other chemicals covered under the rule:
4,4-Methylene bis(2-chloraniline);
4-tert-octylphenol(4-(1,1,3,3-Tetramethylbutyl)-phenol);
Acetaldehyde;
Acrylonitrile;
Benzenamine;
Benzene;
Bisphenol A (BPA);
Ethylbenzene;
Naphthalene;
Styrene;
Navigating Houston’s Unique Port, Rail, and Industrial Distribution Market: A Legal Perspective
Houston, Texas, is a powerhouse of industrial distribution, boasting one of the most dynamic logistics and transportation infrastructures in the United States. The city’s strategic location, access to global markets, and robust regulatory framework make it a critical hub for businesses involved in trade, shipping, and industrial operations. As the Port of Houston, extensive rail networks, and inland logistics infrastructure continue to fuel economic growth, the region presents unparalleled opportunities for developers, investors, and businesses seeking to optimize their supply chains and expand market reach.
However, Houston’s unique characteristics—marked by rapid growth, a diverse logistics ecosystem, and the absence of traditional zoning laws—also pose distinct legal challenges. Navigating this evolving landscape requires a comprehensive understanding of the city’s regulatory environment, environmental compliance requirements, and the increasingly complex negotiations surrounding land transactions and leases.
Notably, as land scarcity intensifies and transaction volume begins to moderate, legal practitioners have observed a significant increase in the length and complexity of negotiations. With greater competition for prime sites and heightened regulatory scrutiny, meticulous legal planning has become more essential than ever for achieving sustained success in Houston’s dynamic industrial market.
Current Market Trends and Legal Impacts
Shifting Construction DynamicsThe recent surge in industrial construction has given way to a more balanced market. Reports from industry sources indicate a slowdown in new project starts. This shift is prompting more detailed negotiations around project timelines, self-help rights, and liquidated damages provisions, particularly as developers and tenants seek to mitigate risks associated with supply chain disruptions. Force majeure clauses and escalation provisions have also taken on heightened importance as parties attempt to allocate risks arising from unforeseen delays. Careful drafting and negotiation of these provisions are critical to avoiding disputes and preserving project viability.
Port of Houston: A Hub of Opportunity and Regulatory ComplexityThe ongoing expansion of the Port of Houston continues to fuel demand for logistics hubs and intermodal facilities. As one of the busiest ports in the United States, the Port handled a record‑breaking 53.07 million tons of cargo in 2024, a 6% increase over 2023. Its diverse cargo mix—including bulk commodities, breakbulk, and containerized goods—gives Houston a competitive edge over ports like Los Angeles, which primarily handle containerized shipments.
However, port-related development requires navigating a complex web of environmental regulations, including wetlands protections, air quality standards, and stormwater management requirements. Developers must engage experienced legal counsel to ensure compliance and mitigate potential liabilities.
E-Commerce and Last-Mile Logistics: Urban Planning ConsiderationsThe rise of e-commerce continues to drive demand for last-mile distribution centers, particularly in densely populated urban areas. However, the siting of these facilities presents unique legal challenges. Local ordinances, traffic flow considerations, and community impact assessments all play a crucial role in project feasibility.
Compared to markets like Los Angeles and Chicago, Houston benefits from fewer regulatory constraints and lower development costs. However, developers must conduct thorough due diligence to secure necessary permits and address potential community opposition.
Vacancy Rates and Lease Agreements: The Art of NegotiationHouston’s industrial sector experienced a continued decrease in overall vacancy rates in Q4 2024, falling to 5.6%. This tightening market is reshaping lease negotiations, with landlords seeking longer lease terms, higher rents, and more stringent indemnity provisions. At the same time, tenants are pushing for greater flexibility through termination rights, rent abatement clauses, and detailed service level agreements.
As land becomes more scarce, parties are also placing greater emphasis on access easements, shared infrastructure agreements, and self-help provisions—further contributing to the increasing length and complexity of negotiations.
Investment Sales: The Importance of Comprehensive Due DiligenceDespite market fluctuations, industrial property sales remain a significant component of Houston’s real estate market. However, in a shifting economic climate, thorough due diligence is more critical than ever. Title examinations, environmental assessments, and reviews of existing encumbrances are essential to identifying potential legal risks.
With competition intensifying for prime sites near logistics hubs, investors are spending more time negotiating detailed representations, warranties, and indemnity provisions—adding further complexity to transaction timelines.
Legal Considerations in Houston’s Industrial Development
Navigating Houston’s industrial real estate landscape requires a keen understanding of the city’s unique regulatory environment.
Absence of Traditional Zoning LawsHouston distinguishes itself from other major markets by operating without traditional zoning laws. Instead, development is governed by a combination of subdivision regulations, deed restrictions, and local ordinances. This unique framework requires developers to take a more proactive approach to site selection, easement negotiation, and community engagement.
Environmental and Community ConsiderationsEnvironmental considerations remain paramount, particularly for projects near the Port of Houston or in environmentally sensitive areas. Recent disputes underscore the importance of thorough environmental compliance and community engagement. Developers must work closely with legal counsel to obtain necessary permits, mitigate community concerns, and ensure compliance with federal and state environmental regulations.
Permitting ProcessThe Houston Permitting Center oversees commercial plan reviews and permitting processes for new industrial developments. Developers must navigate these processes carefully to avoid delays and ensure projects comply with applicable building codes and safety standards.
Proactive Strategies for Sustained Success
To effectively navigate Houston’s evolving industrial and logistics landscape, developers and investors should adopt the following strategies:
Engage Experienced Legal CounselCollaborating with legal professionals who understand Houston’s unique regulatory environment is essential to navigating permitting processes, negotiating contracts, and ensuring compliance.
Conduct Comprehensive Due DiligenceThorough investigations of potential development sites, including title examinations, environmental assessments, and existing encumbrances, can help preempt future challenges.
Prioritize Environmental ComplianceEngaging environmental experts and legal counsel early in the development process can mitigate legal risks and foster positive community relations.
Leverage Economic IncentivesHouston offers various economic incentives, including tax abatements and grants, to attract industrial development. Legal counsel can assist in identifying and securing these incentives.
Conclusion
Houston’s industrial and logistics market presents unparalleled opportunities for developers, investors, and businesses seeking to optimize supply chains and expand market reach. However, as land becomes more scarce and regulatory scrutiny intensifies, legal negotiations have grown increasingly complex.
By proactively addressing zoning, environmental, and contractual considerations—and engaging experienced legal counsel—stakeholders can position themselves for sustained success in this dynamic market.
President Trump Touts America First Energy Dominance Agenda to Congress
On 4 March, President Donald J. Trump touted his America First energy dominance agenda in an address to a joint session of Congress. He promised “swift and unrelenting action” and noted that within his first 43 days in office, he signed nearly 100 executive orders and took more than 400 executive actions.1 He highlighted several actions impacting energy, environmental, and natural resources policies that will have wide-ranging consequences for companies operating in those sectors.
President Trump announced his intention to boost the economy and fight inflation by “rapidly reducing the cost of energy.” He promoted his “drill, baby, drill” strategy for restoring robust oil and natural gas production in the United States as a primary mechanism for achieving this goal. He simultaneously promised aggressive deregulation of the energy sector, noting that he imposed “a freeze on all new federal regulations,” ended Biden-era environmental restrictions, and directed that “for every one new regulation, 10 old regulations must be eliminated.”
President Trump claimed credit for withdrawing from the Paris climate agreement, terminating the Biden administration’s “electric vehicle mandate,” and working on a natural gas pipeline in Alaska that is “all set to go” and “among the largest in the world, where Japan, South Korea and other nations want to be our partner with investment of trillions of dollars each.” The natural gas pipeline is a key component of a larger project being prioritized by President Trump to produce and ship liquified natural gas (LNG) from Alaska to Japan and other Asian allies.
President Trump teased that “later this week,” he will “take historic action to dramatically expand production of critical minerals and rare earths here in the USA.” He read a letter he received earlier in the day from President Zelensky stating that Ukraine is “ready to sign” an agreement on minerals and security “at any time that is convenient.” He also repeated his interest in acquiring or otherwise partnering with Greenland, which he described as “very important” for military, national, and international security, and which offers a wealth of critical minerals.
The America First energy dominance agenda portions of President Trump’s address continued to build on the foundation he began to lay on the day of his inauguration with the following executive orders and memoranda:
Unleashing American Energy
Declaring a National Energy Emergency
Ensuring Accountability for All Agencies
Temporary Withdrawal of All Areas of the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects
Unleashing Alaska’s Extraordinary Resource Potential
Unleashing Prosperity through Deregulation
Establishing the National Energy Dominance Council
These executive orders and executive actions establish specific directives that the Department of Energy, the Department of the Interior, the Environmental Protection Agency, and other agencies are tasked with implementing in service of President Trump’s America First energy dominance agenda. As President Trump did in his address to Congress, his executive orders and executive actions similarly focus on elevating domestic oil and natural gas production, reducing regulations impacting energy production, and prioritizing critical minerals. In addition, they encourage energy production on federal lands, direct agencies to use emergency authorities to produce energy and build energy infrastructure, make permitting processes more efficient, reconsider what is required and permissible in environmental reviews, and review funding and contracts associated with implementation of the Infrastructure Investment and Jobs Act and Inflation Reduction Act.
President Trump has already begun to implement these executive orders and memoranda. He has established the National Energy Dominance Council, conditionally approved a project to export liquefied natural gas (LNG) to allies overseas, and lifted the previous administration’s ban on oil and gas development on 625 million acres in federal waters. President Trump’s executive actions will be further supported by Republicans in Congress who will seek to use their legislative power, oversight and investigations prerogatives, and control of the gavel at committees to support the President’s America First energy dominance agenda.
There is much more to come—and if the last few weeks are any guide, change will continue to come fast and furious. The firm would be delighted to help you navigate opportunities and challenges in legal, regulatory, and policy matters in Washington, D.C., as they reshape the energy, environment, and natural resources sectors for the foreseeable future.
FOOTNOTES
1 President Donald J. Trump, Transcript of President Donald Trump’s speech to a joint session of Congress, March 4, 2025, as transcribed and published by the Associated Press on March 5, 2025 at 10:05 AM EST at https://apnews.com/article/trump-speech-congress-transcript-751b5891a3265ff1e5c1409c391fef7c
A Divided SCOTUS Invalidates Common Provisions of Clean Water Act Permits
In the US Supreme Court’s first post-Chevron decision involving the US Environmental Protection Agency (EPA) the Supreme Court found against EPA, invalidating ‘end result’ NPDES permit requirements.
The decision, issued on March 4, in City and County of San Francisco v. EPA makes it clear that National Pollutant Discharge Elimination System (NPDES) permit provisions which state a goal must also advise the permittee how to achieve it.
Background
The City and County of San Francisco asserted that EPA exceeded its statutory authority under the Clean Water Act (CWA) when it issued an NPDES renewal permit, which included two “end-result” requirements, i.e., permit terms that don’t spell out what a permittee must do or not do but instead make a permittee responsible to achieve an outcome. The specific ‘end-result’ permit terms at issue respectively prohibited discharges that “contribute to a violation of any applicable water quality standard” or “create pollution, contamination, or nuisance as defined by California Water Code section 13050.” Similar end-result provisions are common within NPDES permits across the nation.
Eight Justices Reject San Francisco’s Primary Argument
Justice Samuel Alito’s majority opinion begins by addressing plaintiff’s principal claim; the two end-result provisions were not “effluent limitations” and were hence not authorized because CWA Section 1311(b)(1)(C)[1] only authorizes the permitting authority to issue “effluent limitations” in NPDES permits. In assessing that argument and finding against the City, the Court primarily relied on the presumption that Congress acts intentionally in the disparate inclusion or exclusion of a term. Specifically, the Court noted that the plain language of 1311(b)(1)(C) refers to “limitation,” while the immediately preceding Sections, 1311(b)(1)(A) and (B), refer to “effluent limitations.” In other words, the fact that Congress used “effluent limitation” at other points within Section 1311 demonstrates that Congress meant for “limitation” in Section 1311(b)(1)(C) to mean something different. A total of eight justices (everyone but Justice Neil Gorsuch) agreed with this conclusion.
Five Justices Determine That End-Result Provisions Are Improper
Having determined that 1311(b)(1)(C) is not confined to effluent limitations, the majority then turned (without affording deference to EPA’s interpretation as it might have prior to Loper-Bright) to a dictionary meaning to conclude that “limitation” refers to a “restriction or restraint imposed from without.” Using that definition, the Court reasoned as follows that the end-result restrictions fail as being from within.
A provision that tells a permittee that it must do certain specific things plainly qualifies as a limitation. Such a provision imposes a restriction “from without.” But when a provision simply tells a permittee that a particular end result must be achieved and that it is up to the permittee to figure out what it should do, the direct source of restriction or restraint is the plan that the permittee imposes on itself for the purpose of avoiding future liability. In other words, the direct source of the restriction comes from within, not “from without.”
The majority also assessed dictionary meanings of two additional terms of 1311(b)(1)(C), “implement” and “meet.” Respectively, these terms were found (using different dictionaries) to mean “to give practical effect to and ensure of actual fulfillment by concrete measures” and “to comply with; fulfill; satisfy.” The decision explains that the end-result requirements are neither concrete (because they state a desired result without implementing them) nor do they set out actions for the permittee to fulfill. The majority went on to explain that its decision is supported by the CWA’s history, the broader statutory scheme, and application of the CWA’s permit shield.
Justice Barrett Leads the Dissent
The dissent, authored by Justice Amy Coney Barrett, suggests that the legal theory of five-vote majority decision was largely of the Court’s own making and contends that its narrow interpretation of “limitation” is unsubstantiated and “wrong as a matter of ordinary English.” It offers the following examples to rebut the majority’s conclusion.
A company could impose spending “limitations” by requiring each branch to spend no more than its allotted budget, while still leaving branch managers flexibility to determine how to allocate those funds.
A doctor could impose a “limitation” on a patient’s diet by telling the patient that she must lose pounds over the next six months, even if the doctor does not prescribe a specific diet and exercise regimen.
An airline could impose a “limitation” on the weight of checked bags, even though it does not tell passengers what items to pack.
Implications
While it seems clear that NPDES permit provisions that state only an end result are no longer valid (unless authorized by state law), the decision doesn’t speak to the extent of direction/specificity an NPDES provision must give in order to avoid becoming an improper end-result provision. Must an NPDES requirement state detailed directions to achieve each end result or might general guidance be sufficient? The answer to that question seems likely to determine whether the decision’s impact on future NPDES permits is modest or more dramatic. Consider, for example, whether the below-stated provision of EPA’s current stormwater general permit avoids being an improper end-result requirement simply by providing examples of ways the permittee could chose to accomplish the provision’s goal.
2.4.3 The discharge must not cause the formation of a visible sheen on the water surface, or visible oily deposits on the bottom or shoreline of the receiving water. Use an oil-water separator or suitable filtration device (such as a cartridge filter) designed to remove oil, grease, or other products if dewatering water is found to or expected to contain these materials.
For existing NPDES permits, the decision means that permitting authorities will not be unable to enforce existing end result provisions based on the Clean Water Act. But, given that allegations regarding violations of end result provisions are often add-ons (rather than the primary basis of) to enforcement cases, the enforcement impact of the decision may not be significant in many instances.
[1] In relevant part, Section 1311(b)(1)(C) gives the NPDES permitting authority the ability to establish “any more stringent limitation, including those necessary to meet water quality standards, treatment standards, or schedules of compliance, established pursuant to any state law or regulations [] or any other federal law or regulation, or required to implement any applicable water quality standard established pursuant to this chapter.”
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Green, But Lean: EU Eases Sustainability Rules Without Ditching Climate Goals
On 26 February 2025, the European Commission published the Omnibus Simplification Package, a set of proposals designed to streamline key EU sustainability regulations, eliminate redundancies, and reduce administrative burden and compliance costs for companies — while preserving the EU’s ambitious environmental objectives.
If adopted in the currently proposed form, companies will have more time to comply with the CSRD reporting requirements and the CSDDD supply chain due diligence obligations. In fact, the Omnibus Simplification Package proposes postponing by two years the entry into application of the CSRD reporting requirements for companies that have not yet started implementing the CSRD (i.e. large companies and listed SMEs), while the new CSDDD framework is postponing by one year the transposition deadline (to 26 July 2027) and the first phase of the application of the sustainability due diligence requirements covering the largest companies (to 26 July 2028).
The Omnibus Simplification Package also proposes to revise the scope of the CSRD and the CSDDD. The reporting requirements under CSRD would only apply to large undertakings with more than 1,000 employees (i.e. undertakings that have more than 1,000 employees and either a turnover above €50 million or a balance sheet total above €25 million) and the CSDDD due diligence obligations would be significantly narrowed down, in particular by limiting them to direct contract partners.
While many businesses welcome the reduced regulatory burden as well as its postponement, some critics argue that it weakens corporate accountability and dilutes transparency efforts. In any event, the Omnibus Simplification Package is still at a proposal stage and is set to spark intense debate in the EU Parliament and Council, with global stakeholders—including the U.S.—closely monitoring the developments and trying to influence them to meet their own goals.
This alert provides insights into the most relevant proposed changes to CSRD and CSDDD and what those mean for businesses operating under the EU’s evolving sustainability framework.
The Omnibus Simplification Package presented by the European Commission includes:
A proposal for a Directive, the sole content of which is to postpone the application of reporting requirements in the CSRD for certain groups of companies and the transposition deadline as well as the first wave of application of the CSDDD (Omnibus Directive I).
A second proposal for a Directive amending the actual content of and obligations under the CSRD and the CSDDD (Omnibus Directive II).
A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts subject to public consultation.
A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation.
A proposal for a Regulation amending the InvestEU Regulation.
Proposed changes to the CSRD
Postponement of the Starting Date for Reporting for Certain Companies
The Omnibus Directive I proposes a two-year postponement of the implementation of reporting requirements for companies in the second and third waves (see table below) This is to allow the European co-legislators to find agreement on the Commission’s proposal for substantive changes as provided in the Omnibus Directive II.
This postponement is intended to give companies some legal certainty and prevent a scenario where companies would be required to report for the financial year 2025 (second wave) or 2026 (third wave), only to be later relieved from reporting duties if and when the Omnibus II Directive with its higher thresholds is approved. No amendments to the timeline have been proposed for wave four non-EU ultimate parent companies; as a result, those companies continue to be required to report for the first time in 2029 for financial year 2028 (but may opt to report on a consolidated group basis before). Companies already covered in the first wave seem to have to continue reporting on the basis of the existing CSRD – the Omnibus Proposal does not mention any postponement of their duties.
According to Article 3 of the proposed text of the Omnibus Directive I, Member States shall implement the provisions of the Directive by 31 December 2025 at the latest. This indicates that the Commission is assuming that the Omnibus Directive I will be approved quickly by the European legislators – while the content-related Omnibus Directive II may well take considerably longer to get through the legislative process.
In this framework, wave 2 companies currently required to report in 2026 for FY 2025 will have to consider the timing of their preparations for CSRD readiness: once the Omnibus I Directive is approved the postponement will still need to be transposed into national laws to become effective, but (a) we expect Member States to be fairly quick since there seems to be broad agreement about the postponement (in contrast to the content related proposals of the Omnibus Directive II) and (b) we would argue that the postponement would have a pre-effect, which would make it very difficult for Member States to implement current CSRD obligations and impose fines before the new starting date.
New Scoping Thresholds
According to the proposed text of the Omnibus Directive II, only large companies or parent companies of large groups with more than 1,000 employees (individually or in the case of a holding company on a consolidated basis) will be required to prepare sustainability reports under Article 19a and 29a of the Accounting Directive.
That change in itself would reduce the number of undertakings subject to mandatory sustainability reporting requirements by about 80%. In comparison to the current requirements (see table below for details), the new employee threshold would lead to some of the undertakings in the first and second wave and all undertakings in the third wave (listed SMEs) falling out of the scope of the CSRD should Omnibus Directive II be approved.
In addition, the threshold for EU turnover for non-EU parent companies has been raised from €150 to €450 million, and the threshold for an EU branch from €40 to €50 million. These amendments in the reporting thresholds are meant to more closely align the CSRD with the CSDDD, which already only applies to companies above the 1,000 employee and €450 turnover threshold.
Wave
Type of company
Current thresholds and due date for reporting
Proposed thresholds
1(Current kick-off date for reporting: 2025 for FY 2024 – not changed by the postponement proposal in Omnibus Directive I)
Public interest entities (e.g. credit institutions, insurance undertakings and others) already subject to the NFRD
More than 500 employees
With average 1,000 employees
2(Current kick-off date for reporting: 2026 for FY 2025 – may be postponed by Omnibus Directive I to 2028 for FY 2027)
EU companies/parent companies of a groupCompanies (EU or non-EU) with securities listed on EU regulated markets
Exceeding at least two of the following three thresholds (on a consolidated basis at a group level):
Balance sheet total: > €25 million
Net turnover: > €50 million
Average number of employees: > 250
With average 1,000 employees and exceeding one of the following two thresholds (on a consolidated basis at a group level):
Balance sheet total: > €25 million
Worldwide net turnover: > €50 million
3(Current kick-off date for reporting: 2027 for FY 2026, with opt-out option for two years – may be postponed by Omnibus Directive I to 2029 for FY 2028)
SMEs with securities listed on an EU regulated market
Below the thresholds for the second wave companies (see above).
Reporting in 2027 for financial year 2026, with the possibility to opt out for a further twoyears.
Out of scope
4(Current kick-off date for reporting: 2029 for FY 2028 – not changed by the postponement proposal in Omnibus Directive I)
Non-EU ultimate parent companies
Generating a net EU turnover of at least €150 million (at group level) and with
at least one large subsidiary in the EU (i.e., exceeding two out of three of: balance sheet of €25 million and/or turnover of €50 million and/or 250 employees) or
a branch in the EU that generated a net turnover of €40 million
Generating a net EU turnover of at least €450 million (at group level) and with
at least one large subsidiary in the EU (as defined in the Accounting Directive, i.e., exceeding two out of three of: balance sheet of €25 million and/or turnover of €50 million and/or 250 employees) or
a branch in the EU that generated a net turnover of €50 million
Reducing the Trickle-Down Effect by Limiting the Information That Companies Within Scope May Request From Smaller Companies in Their Value Chain
The CSRD requires undertakings to report value-chain information to the extent necessary for understanding their sustainability-related impacts, risks and opportunities.
The current CSRD establishes a so-called value-chain cap, which states that the European Sustainability Reporting Standards (ESRS) may not contain mandatory reporting requirements that would require undertakings to obtain information from SMEs in their value chain that exceeds the information to be disclosed under the proportionate standard for listed SMEs.
The proposed Omnibus Directive II extends this value chain cap from SMEs to companies up to 1,000 employees. In turn the Commission is proposing to adopt simplified standards for voluntary use by out of scope companies having fewer than 1,000 employees, based upon the current simplified standard prepared for non-listed SME by EFRAG, that such companies can use as a shield to limit their response to information requests from banks, large companies and other stakeholders in scope of the CSRD.
Revision of the ESRS
The range of sustainability topics covered by the current ESRS is not changed by the proposed Omnibus Directive II and, despite speculation, the double materiality requirement is not removed. The Commission has proposed to revise the delegated regulation (EU) 2023/2772 establishing the ESRS with the aim to reduce the number of mandatory ESRS datapoints, by removing those deemed least important for general purpose sustainability reporting and further distinguishing between mandatory and voluntary datapoints, and to further enhance the already very high degree of interoperability with global sustainability reporting standards.
According to the text of the Omnibus Directive II, the Commission will adopt the revised ESRS delegated act in time for those undertakings in wave 2 – which according to the proposed new timelines would be required to start reporting under the CSRD in 2028 for FY 2027 – to apply the revised standards.
Deletion of Sector Specific Standards
The Omnibus Directive II proposes to delete the empowerment for the Commission to adopt sector-specific reporting standards (currently due on 30 June 2026) to avoid a further increase in the number of prescribed datapoints that undertakings should report on and facilitate the reporting process. Should undertakings require additional guidance to report on sustainability matters common to the specific sector in which they operate, the Commission specifies that they may have recourse to existing international sustainability reporting standards and sectoral sustainability reporting initiatives.
No Move to Reasonable Assurance
The Commission is currently mandated to adopt reasonable assurance standards by October 1, 2028, based on an assessment of their feasibility for companies. However, the draft of Omnibus Directive II is intended to eliminate this requirement, ensuring that no reasonable assurance standards are introduced and that assurance over CSRD reports remains at the limited assurance level.
Since the amount of work for a limited assurance engagement is significantly less than for a reasonable assurance engagement, this is designed to save companies cost and time: a limited assurance engagement is usually provided in a negative form (stating that no matter has been identified by the assurance provider to conclude that the subject matter is materially misstated) while the conclusion of a reasonable assurance engagement would have to be provided in a positive form (providing an opinion on the measurement of the subject matter against previously defined criteria). In addition, the Commission committed to issue targeted assurance guidelines by 2026.
Voluntary Taxonomy and Partial Taxonomy-Alignment Reporting Option
By virtue of Article 8 of the Taxonomy Regulation undertakings reporting under the CSRD also publish information about the eligibility and alignment of their economic activities with the EU Taxonomy. The proposed provisions in the Omnibus Directive II create a derogation for companies with more than 1,000 employees and an EU turnover below EUR 450 million by making the Taxonomy reporting voluntary. However, companies that have made progress toward sustainability targets but only partially meet EU Taxonomy requirements may choose to voluntarily report their partial alignment. This allows them to showcase their efforts, demonstrate progress toward full compliance, and gain recognition for their commitment to sustainability.
Proposed changes to the CSDDD
Postponement of Applicability of CSDDD and Scope
With respect to CSDDD, the Omnibus Directive I proposes to postpone the transposition deadline by one year to 26 July 2027 (instead of 2026). The Omnibus Directive I also postpones the compliance deadline for the first wave of companies (i.e. those that have more than 5,000 employees and report a net annual worldwide turnover of more than €1.5 billion), which would therefore have to comply with the CSDDD from 26 July 2028 onwards. There is however no change regarding companies that were already meant to comply with the CSDDD from 26 July 2028, or later from 26 July 2029. In addition, the Commission proposes to bring forward the publication of its guidelines for compliance with due diligence obligations under the CSDDD to July 2026, instead of January 2027.
Indirect Business Partner Assessment No Longer Required and Suspension of the Business Relationship as Last Resort
The Omnibus Directive II limits the due diligence measures to the companies’ own operations, those of their subsidiaries and, where related to their chains of activities, those of their direct business partners thus excluding the assessment at the level of indirect business partners.
However, such assessments of indirect business partners will still be required if the company has plausible information that suggests that adverse impacts have arisen or may arise at the level of the operations of an indirect business partner. According to the recitals of the Omnibus Directive II, ‘plausible information’ means information of an objective character that allows the company to conclude that there is a reasonable likelihood that the information is true, for example if it has received a complaint or is in the possession of information, notably via credible media or NGO reports about harmful activities at the level of a business partner, reports of recent incidents, or where the company through its business contacts knows about problems at a certain location (e.g., conflict area).
In addition, the proposal Omnibus Directive II removes the duty to terminate the business relationships in the case of both actual and potential adverse impacts. Should a company assess that the business operations of such a supplier are linked to severe adverse impacts, for instance child labour or significant environmental harm, and the company has unsuccessfully exhausted all due diligence measures to address these impacts, as a last resort the company should suspend the business relationship while continuing to work with the supplier towards a solution, where possible using any increased leverage resulting from the suspension. Irrespective of the termination duty being removed, companies can of course still decide to terminate for severe breaches.
Extended Interval for Periodic Assessments and Updates
In order to reduce the burden on companies and their business partners (which are often SMEs), the Omnibus Directive II proposes to extend to five years (instead of each year) the requirement that companies carry out a periodic assessment of their (and their business partners’) operations and measures to assess the adequacy and effectiveness of due diligence measures.
However, companies will still be required to conduct such assessments ad hoc whenever there are reasonable grounds to believe that the measures are no longer adequate or effective, or that new risks of occurrence of adverse impacts may arise.
Reduced Requirements for Climate Change Mitigation Plans
As a result of the Omnibus Directive II, while companies will still be required to adopt a climate change mitigation plan, such a plan would no longer have to be “put into effect” as required by the CSDDD but rather include an “outline of implementation actions planned and taken”.
Reducing the ‘Trickle-Down’ Effect on SMEs
To avoid unnecessary burdens on SMEs, the Omnibus Directive II intends to limit the information that companies may request in the context of their risk-mapping obligations from their direct business partners with fewer than 500 employees, to the information covered by the voluntary sustainability reporting standards (VSME) set out under the CSRD.
Extension of Maximum Harmonization Requirements
In order to ensure a more uniform transposition of the CSDDD, the Omnibus Directive II extends the scope of maximum harmonization of the CSDDD to several additional provisions that regulate the core aspects of the due diligence process. In practice, this means that Member States will be prohibited from enacting diverging national provisions regarding certain key requirements, including the identification duty, the duties to address adverse impacts that have been or should have been identified, and the duty to provide for a complaints and notification mechanism.
Changes to the Civil Liability Provisions
The Omnibus Directive II proposes to remove the specific EU-wide civil liability regime provided in the CSDDD, including the obligation for Member States to allow representative actions by trade unions or NGOs. Instead, under the Omnibus Directive II, Member States would remain free to provide such rules in their national laws.
Financial Penalties
The Omnibus Directive II removes the minimum cap for financial penalties (5% of net worldwide turnover in the preceding financial year) currently stated in the CSDDD and the requirement that the fine be assessed based on the company’s net worldwide turnover. The Commission will issue guidance to assist Member States’ supervisory authorities to set the appropriate level of penalties to be imposed, provided that Member States are prohibited from setting maximum limits of penalties that would prevent the imposition of penalties in accordance with the principles and factors set out in the CSDDD.
Deletion of the Review Clause for Financial Services
The Omnibus Directive II proposes to remove the CSDDD’s financial services review clause, which currently commits the Commission to submit by 26 July 2026 a report to the European Parliament and to the Council on the necessity of setting up due diligence requirements for the financial services sector. Indeed, according to the European Commission, this review clause did not leave enough time to take into account the experience on the general due diligence framework under the CSDDD.
Omnibus Directive II and policy considerations on the future of simplification measures
With respect to all the simplification measures and changes proposed in the Omnibus Directive II, which would substantially impact the scope and way of reporting under the CSRD and conducting due diligence under the CSDDD as explained above, Article 5 of the current proposal text provides for a deadline of 12 months for Member States to implement the directive into national law once the Directive enters into force. However, the European Commission’s publication of the proposal initiates a complex and lengthy process involving negotiations, amendments, and further discussions across multiple EU institutions, which creates uncertainty around the legislative timeline.
In particular, the proposal will need to be debated and approved by Members of the European Parliament and Member States at the Council of the EU. The political landscape in Europe has deeply changed since CSRD and CSDDD were adopted (respectively, November 2022 and May 2024), and there is a much stronger focus on competitiveness, economic growth, and simplification.
In the European Parliament, the majority center-right European People’s Party welcomed the Omnibus Proposal and supports the process of cutting regulatory burdens on companies. Members of the second largest group, the Socialists&Democrats, oppose significant rollbacks of sustainability regulations, emphasizing the importance of environmental protection and corporate accountability. In particular, Lara Wolters, CSDDD rapporteur, stated that the group “cannot accept the watering down of sustainability, labour and human rights standards in the CSDDD and CSRD”. The debate in the European Parliament is likely to be lengthy and heated.
In Council, most of the Member States are aligned with the Commission’s approach of simplifying EU regulations. Germany and France have previously advocated for delaying and easing the implementation of the rules, calling for a concrete postponement of CSRD and suggesting increasing thresholds for company size and turnover in both CSRD and CSDDD. In contrast, Spain supports maintaining robust environmental reporting standards, underlining the importance of due diligence requirements: while the Spanish government support delaying the application of CSRD, it insists that these rules become mandatory for all companies eventually. Italy has also shown limited opposition to the proposed amendments, suggesting that rules should immediately apply to larger companies and delays and more favorable requirements should be adopted for smaller businesses. However, and given Council’s position on CSDDD in the previous legislative term, it is possible that Member States will adopt a negotiating mandate in line with the Commission’s proposal.
European policymakers will inevitably need to keep an eye on the potential actions of the U.S. government. Twenty-six U.S. states have sent a letter to President Trump urging retaliatory measures against the CSDDD due to its extraterritorial impact beyond Europe. The letter calls on the United States Trade Representative to launch an investigation under Section 301 of the Trade Act of 1974 to assess whether the CSDDD constitutes an unreasonable or discriminatory measure that burdens or restricts U.S. commerce.
Additionally, another letter sent to Congress urges U.S. officials to push for an indefinite suspension of the directive’s implementation based on the following argumentation lines: The directive mandates extensive supply chain due diligence based on UN and OECD principles, which have not been ratified by the U.S. Congress. It also disregards U.S. corporate governance standards. Finally, US companies are not bound by net zero transition plans akin to those imposed on the UE companies, as requested under the CSDDD.
Gabriela da Costa and Edoardo Crosetto contributed to this article
San Francisco v. EPA: Supreme Court Strikes Down EPA’s “End-Result” Permit Requirements
On March 4, 2025, the U.S. Supreme Court issued a 5-4 decision in City and County of San Francisco v. Environmental Protection Agency, narrowing the Environmental Protection Agency’s (EPA) authority under the Clean Water Act (CWA) to impose outcome-based permit conditions—termed “end-result” requirements by the Court—on entities discharging pollutants into U.S. waters. The majority held that the CWA does not authorize the EPA or states to enforce permit provisions that make permittees responsible for the quality of receiving waters absent specific, quantifiable effluent limitations. This decision has immediate implications for the National Pollutant Discharge Elimination System (NPDES) permitting framework, particularly regarding the enforceability of narrative water quality standards.
Legal Background
Enacted in 1972, the CWA establishes a comprehensive framework for regulating the discharge of pollutants into U.S. waters, primarily through the NPDES permitting program. Under the CWA, EPA and authorized state agencies issue permits that impose “effluent limitations”—specific, quantifiable restrictions on the “quantities, rates, and concentrations” of pollutants discharged by permit holders. These permits also typically include monitoring, recordkeeping, and reporting requirements, as well as best management practices designed to minimize pollution. Notably, the CWA’s “permit shield” provision protects permittees from liability under the Act, provided they comply with their permit terms.
This case addressed the validity of “end-result” requirements, which condition a permittee’s compliance on the quality of the receiving water rather than on adherence to specific effluent limitations. These provisions effectively impose liability for water quality standard exceedances whether or not a permittee’s discharge is the proximate cause of a violation.
Factual and Procedural Background
San Francisco operates two combined sewer systems: the Bayside facility, which discharges into San Francisco Bay, and the Oceanside facility, which empties into the Pacific Ocean. The Oceanside facility occasionally overflows during heavy rainfall, releasing untreated wastewater, including raw sewage, into the ocean. In 2019, the EPA incorporated two end-result requirements into the Oceanside facility’s NPDES permit: (1) a prohibition on discharges that “contribute to a violation of any applicable water quality standard,” and (2) a ban on discharges that “create pollution, contamination, or nuisance” as defined by California law. San Francisco challenged these provisions, arguing that they imposed vague and unattainable obligations, exposing the city to enforcement actions for water quality standard exceedances beyond its control.
San Francisco appealed these provisions to the EPA’s Environmental Appeals Board, which upheld them, and then petitioned for review in the U.S. Court of Appeals for the Ninth Circuit. A divided panel of the Ninth Circuit deferred to the EPA’s interpretation of the CWA, holding that Section 301(b)(1)(C) authorizes the agency to impose “any” limitations necessary to achieve water quality standards. The Supreme Court reversed.
The Court’s Opinion
Writing for the majority, Justice Samuel Alito, joined by Chief Justice Roberts and Justices Thomas, Kavanaugh, and, in part, Neil Gorsuch, held that the CWA does not authorize the EPA to impose end-result requirements. The Court’s analysis rested on the statutory text, legislative history, and the overall regulatory framework. The Court focused on Section 301(b)(1)(C), which authorizes “any more stringent limitation” necessary to meet water quality standards, concluding that this provision requires EPA to include specific, quantifiable effluent limitations in discharge permits rather than open-ended directives tied to ambient water quality. Justice Alito reasoned that end-result requirements undermine the CWA’s objective of providing clear, ex ante compliance obligations by exposing permittees to liability for conditions beyond their control, such as pollution from upstream sources.
The Court also examined the evolution of federal water pollution regulation, noting that Congress deliberately rejected the pre-1972 framework, which held permittees liable for water quality exceedances, in favor of a discharge-based regulatory system. The majority concluded that end-result requirements effectively reintroduced the discarded approach Congress sought to eliminate. Finally, the Court identified two structural features of the CWA that conflict with end-result requirements: (1) the permit shield provision, which would be rendered ineffective if permittees could be held liable for water quality violations despite full compliance with permit terms, and (2) the absence of a statutory mechanism for apportioning liability among multiple dischargers contributing to water quality exceedances.
Justice Amy Coney Barrett, joined by Justices Sotomayor, Kagan, and Jackson, dissented. While acknowledging the importance of regulatory specificity, Barrett defended the EPA’s use of narrative standards as a necessary “backstop” when precise effluent limitations alone fail to protect water quality. She cautioned that the majority’s decision could constrain the EPA’s ability to craft effective permits, particularly in cases where permittees fail to disclose critical discharge data.
Implications
The ruling has significant implications for the EPA, regulated entities, and broader water quality enforcement efforts. Industry groups and municipal authorities hailed the decision as a win for regulatory certainty, as it requires the EPA to establish clear, quantifiable permit conditions rather than ambiguous, outcome-based standards. This shift may mitigate compliance risks and reduce regulatory exposure for businesses and municipalities. Conversely, environmental advocates have expressed concerns that the decision could weaken the CWA’s ability to protect water quality, particularly in complex, multi-discharger scenarios. The ruling could also lead to delays in the permitting process, as EPA will need to compile more detailed discharge data to establish specific effluent limitations.
Looking ahead, the EPA and delegated states must replace vague “don’t violate water quality standards” directives in CWA permits with specific technologies and conditions necessary to meet water quality standards during the five-year permit renewal cycle. Whether the EPA can muster the resources for this demanding task remains unclear. Entities with NPDES permits should examine their permits to identify any problematic “end-result” provisions.
Regulation Round Up: February 2025
Welcome to the Regulation Round Up, a regular bulletin highlighting the latest developments in UK and EU financial services regulation.
Key developments in February 2025:
28 February
FCA Handbook Changes: The Financial Conduct Authority (“FCA”) published Handbook Notice 127, which sets out changes to the FCA Handbook made by the FCA board on 30 January and 27 February 2025.
27 February
Economic Growth / Consumer Duty: The FCA published a speech on, among other things, how the FCA is working to support growth initiatives in the economy and its approach to the Consumer Duty.
FCA Regulation Round‑up: The FCA published its regulation round‑up for February 2025. Among other things, it covers the launch of a new companion tool to the Financial Services Register and future changes to the pre‑application support services the FCA offers.
26 February
Reserved Investor Funds: The Alternative Investment Funds (Reserved Investor Fund) Regulations 2025 (SI 2025/216) were published, together with an explanatory memorandum. The Reserved Investor Fund is a new UK‑based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme.
ESG: The European Commission proposed an Omnibus package on sustainability (here and here) to amend the sustainability due diligence and reporting requirements under the Corporate Sustainability Due Diligence Directive ((EU) 2024/1760) and the Corporate Sustainability Reporting Directive ((EU) 2022/2464). Please refer to our dedicated article on this topic here.
ESG: The European Commission published a call for evidence on a draft Delegated Regulation amending the Disclosures Delegated Act ((EU) 2021/2178) (Ares (2025) 1532453), the Taxonomy Climate Delegated Act (Commission Delegated Regulation (EU) 2021/2139) and the Taxonomy Environmental Delegated Act (Commission Delegated Regulation (EU) 2023/2486).
FCA Asset Management / Alternatives Supervision: The FCA published a portfolio letter explaining its supervision priorities for asset management and alternatives firms.
Cryptoassets: ESMA published the official translations of its guidelines (ESMA35‑1872330276‑2030) on situations in which a third‑country firm is deemed to solicit clients established or situated in the EU and the supervision practices to detect and prevent circumvention of the reverse solicitation exemption under the Markets in Crypto Assets Regulation (EU) 2023/1114 (“MiCA”).
24 February
Artificial Intelligence: The FCA published a research note on AI’s role in credit decisions.
Suitability Reviews / Ongoing Services: The FCA published a webpage and press release containing the findings of its multi‑firm review of suitability reviews and whether financial advisers are delivering the ongoing services that consumers have paid for.
21 February
Cryptoassets: The Financial Stability Board published summary terms of reference for its thematic peer review on its global regulatory framework for cryptoasset activities.
20 February
PRA Policy: The Prudential Regulatory Authority (“PRA”) published a policy statement (PS3/25) on its approach to policy.
Digital Operational Resilience: Two Commission Regulations supplementing the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (“DORA”) were published in the Official Journal of the European Union (here and here).
17 February
Cryptoassets: ESMA published a consultation paper (ESMA35‑1872330276‑2004) on guidelines for the criteria to assess knowledge and competence under MiCA.
14 February
ESG: The FCA updated its webpage on its consultation paper on extending the sustainability disclosure requirements (“SDR”) and investment labelling regime to portfolio managers. Please refer to our dedicated article on this topic here.
ESG: The City of London Law Society published its response to HM Treasury’s November 2024 consultation on the UK green taxonomy.
Authorised Funds: The FCA published a document setting out its expectations on authorised fund applications.
Financial Sanctions: The Office of Financial Sanctions Implementation published a threat assessment report covering financial services.
13 February
Financial Regulatory Forum: HM Treasury published a statement following the third meeting of the joint UK‑EU Financial Regulatory Forum on 12 February 2025.
12 February
EU Competitiveness: The European Commission adopted a Communication setting out its vision to simplify how the EU works by reducing unnecessary bureaucracy and improving how new EU rules are made and implemented to make the EU more competitive.
European Commission 2025 Work Programme: The European Commission published a communication outlining its work programme for 2025 (COM(2025) 45 final).
10 February
Artificial Intelligence: The European Commission published draft non‑binding guidelines to clarify the definition of an AI system under the EU AI Act.
5 February
ESG: The EU Platform on Sustainable Finance published a report setting out recommendations to simplify and improve the effectiveness of taxonomy reporting. Please refer to our dedicated article on this topic here.
3 February
Payments: The FCA published a portfolio letter sent to payments firms setting out its priorities for them and actions it expects them to take.
Artificial Intelligence: The House of Commons Treasury Committee launched an inquiry into AI in financial services and published a related call for evidence.
Sulaiman Malik and Michael Singh contributed to this article
National Energy Emergency Declaration May Accelerate Traditional Energy Infrastructure Projects
On Jan. 20, 2025, President Donald Trump issued an executive order (EO) declaring a National Energy Emergency, aiming to enhance domestic energy resource development and critical minerals capacity. The EO could expedite federal permitting and approval processes for a variety of energy infrastructure projects, although the definition of “Energy” and “Energy Resources” excludes certain renewable energy sources like solar, wind, and hydrogen, from its scope.
Scope and Objectives
The EO cites high energy costs and an unreliable energy grid as threats to national security and economic prosperity. It defines “energy” and “energy resources” broadly to include traditional resources such as crude oil, natural gas, coal, uranium, biofuels, critical minerals, lease condensates, refined petroleum products, geothermal heat, and the kinetic movement of flowing water. However, this list of energy resources notably excludes solar, wind, and hydrogen.
The order directs federal agencies to identify and use lawful authorities to accelerate the leasing, production, transportation, refining, and generation of domestic energy resources. This includes leveraging emergency permitting provisions under the Army Corps of Engineers and specific regulatory frameworks like the Clean Water Act and the Endangered Species Act (ESA), section 10 of the Rivers and Harbors Act of March 3, 1899, and section 103 of the Marine Protection Research and Sanctuaries Act of 1972. A resolution against the EO has been rejected by the U.S. Senate in a 52-47 vote.
Key Directives
1.
Permitting Processes: Agencies are instructed to maximize the use of emergency permitting measures to facilitate energy infrastructure development.
2.
Defense Production and Eminent Domain: If deemed necessary, agencies may submit recommendations for employing federal eminent domain or the Defense Production Act to advance projects.
3.
Endangered Species Act Compliance: The Secretary of the Interior must streamline ESA-related reviews, convening the Endangered Species Act Committee quarterly to resolve applications for exemptions under strict timelines.
Implications for Energy Developers
While the EO presents significant opportunities for traditional energy resource projects – particularly those involving petroleum, natural gas, and critical minerals – it remains unclear whether solar, wind, and hydrogen developers will benefit. Projects in these sectors may not see direct support under the emergency framework.
Next Steps
Developers and stakeholders in the energy sector are encouraged to monitor announcements from federal agencies related to expedited actions and processes under the EO. These developments may present unique opportunities to advance qualifying projects in the evolving regulatory environment.