Breaking News: SEC Withdraws Its Defense of Climate Disclosure Regulations
On March 27, the US Securities and Exchange Commission (SEC) announced that it will no longer defend Biden-era regulations requiring large corporations to disclose the impacts of climate change on their businesses. This announcement follows a vote by the SEC’s three-member governing body to end its defense of the rule and comes amid industry complaints that the rule was an overstep of the SEC’s authority.
Read the press release here.
This news follows significant shifts in the United States’ approach to climate change under the Trump Administration, including the deregulation of the US Environmental Protection Agency as discussed in our prior alert. The SEC’s acting chair described the climate disclosure mandates as “costly” and “unnecessarily intrusive.”
The Enhancement and Standardization of Climate-Related Disclosures for Investors (the Rule) was the first federal sustainability disclosure requirement in the United States and sought to inform investors by requiring registrants to provide information on greenhouse gas emissions, severe weather-related financial statement disclosures, and climate-related governance, targets, and risks disclosures. Among other mandates, the Rule required publicly traded companies to discuss climate-related risks that materially impacted, or were reasonably likely to materially impact, their companies when filing registration statements and annual reports.
However, the Rule never saw the light of day as it was quickly challenged and stayed following its adoption in March 2024, and has since been the subject of ongoing litigation consolidated in the Eighth Circuit.[1] In February, the SEC indicated its reluctance to defend the Rule before the Eighth Circuit, with the acting chairman calling it “deeply flawed.”
Though publicly traded companies will have less compliance burdens related to climate change as a result of the SEC’s decision, companies and investors alike should bear in mind the growing awareness of how climate impacts investment performance on a global level. In addition, the California climate disclosure laws (discussed here) and the European Union’s Corporate Sustainability Reporting Directive (though proposed to be pared back) will continue to drive disclosure of climate-related information for the time being.
Our team will continue to monitor developments and provide updates as they become available.
[1] Iowa v. Securities Exchange Commission, No. 24-1522 (8th Cir.)
Additional Authors: Jeffrey J. Kennedy and Maria Ortega Castro
ESG Update: Corporate Directors May Be Obligated to Assess Political Risk
Right now, much about the world is uncertain. Risks posed by political changes dominate the headlines and also weigh heavily on many decisions made by corporations, their advisors, and their stakeholders.
Businesses, of course, want to succeed even in chaotic environments. Success requires appropriate planning, and planning can help lead to predictability. Good corporate governance — making sure directors have appropriate information to timely assess compliance with legal obligations and fulfill duties they owe to the business, its employees, and stakeholders — can help mitigate downside impacts to businesses.
Delaware law obligates corporate directors to, among other things, take steps sufficient to assess corporate legal compliance. What has come to be known as “Caremark liability” attaches when directors fail to adequately oversee the company’s operations and compliance with the law. Below we frame out what Caremark liability is, how it applies to evaluating a politically uncertain environment, and outline six steps companies can take to appropriately manage risk.
Caremark Liability Defined
Caremark liability takes its name from the 1996 decision In re Caremark International Inc. Derivative Litigation, which established that directors of a Delaware corporation have a duty to ensure that appropriate information and reporting systems are in place within the corporation.
Caremark stems from an action where shareholders of Caremark International alleged that they were injured when Caremark employees violated various federal and state laws applicable to health care providers, resulting in a federal mail fraud charge against the company. In a subsequent plea agreement, Caremark agreed to reimburse various parties approximately $250 million. Caremark shareholders filed a derivative action against the company’s directors alleging that the directors breached their duty of care to shareholders by failing to actively monitor corporate performance.
Key points of Caremark liability under Delaware law include:
Duty of Oversight: Directors must make a good faith effort to oversee the company’s operations and ensure compliance with applicable laws and regulations.
Establishing Systems: Directors are expected to implement and monitor systems that provide timely and accurate information about the corporation’s compliance with legal obligations.
Breach of Duty: To establish a breach of Caremark duties, plaintiffs must show that directors either utterly failed to implement any reporting or information system or controls, or, having implemented such a system, consciously failed to monitor or oversee its operations.
High Threshold for Liability: Proving a breach of Caremark duties requires evidence of bad faith or a conscious disregard by directors of their duties.
Good Faith Effort: Directors are generally protected if they can demonstrate that they made a good faith effort to fulfill their oversight responsibilities, even if the systems in place were not perfect.
Caremark liability emphasizes the importance of proactive and diligent oversight by directors to prevent corporate misconduct and to demonstrate that directors are acting in good faith. Cases following Caremark emphasize that liability only attaches when directors disregard their obligations to companies, not when their business decisions result in “unexceptional financial struggles.”
Caremark claims remain difficult to plead but remain viable and, therefore, may lead to significant defense costs.
Is Caremark “ESG litigation”?
Yes. Since the November 2024 election, discussions of environmental, social, and governance (ESG) activities have been commonplace, with discussions of whether corporations should walk back prior commitments dominating the headlines. Caremark claims are distinct from claims frequently lumped together as “ESG litigation.” These “ESG litigation” claims typically involve either “greenwashing”-style product marketing claims (for examples, see here and here) or claims that investment managers, by factoring in ESG investment criteria, deprived investors of appropriate returns (two recent decisions are here and here). Caremark focuses on the “G” in ESG; it speaks directly to corporate governance and directors’ duties to monitor and oversee in good faith a corporation’s compliance with laws.
While the nomenclature of corporate governance may be shifting away from “ESG,” corporate officers remain obligated to oversee corporate operations and ensure compliance with the law. Caremark claims can be used to assess their efforts.
Corporate Governance and Political Risk
Political uncertainty in the United States is affecting regulated entities ranging from Fortune 100 corporations to law firms and from mom-and-pop importers to universities. Recent US Supreme Court decisions including Trump v. United States and Loper Bright v. Raimondo have fundamentally reshaped relations both between the branches of government and between the government and the regulated community.
Over time, members of the regulated community have increasingly faced pressure not just to comply with the law but also to take positions on political issues outside their immediate economic environment. While corporations may have systems in place to monitor risk incident to product liability or supply chain issues, they may not be monitoring risks related to the whipsawing of political positions on issues such as diversity, equity, and inclusion (DEI), the challenges posed by a dramatically slimmed (and thus less responsive) bureaucracy, or recissions of expected government funding.
These political issues can generate corporate risk. Good corporate governance practices can help cabin new corporate risks, thereby minimizing the potential for financial impacts on the corporation. Practices which could be evaluated include:
Ensure appropriate data-gathering and compilation. Political policies do not arise in a vacuum. Internal and external policy advisors, trade associations, and business contacts can help track potential political risks.
Review and assess policy positions and evaluate whether they continue to be appropriate on a regular basis. At the federal level, we have seen DEI-related activities move from being universally lauded to potential reasons for imposition of federal civil or criminal liability. Executive Order 14173, issued on January 21, directed the US Attorney General to develop an enforcement plan to target private sector DEI programs believed to be unlawful. Actions like designating corporate personnel tasked with understanding points of emphasis in government enforcement and mapping them across a corporate footprint may be appropriate.
Evaluate what corporate efforts are appropriate to use in marketing efforts in the current political environment. Recent years have seen sustainability reports become key tools to influence stakeholders ranging from consumers to employees. Businesses which previously leaned into social issues or community involvement in the ESG-era may want to deemphasize aspirational goals and/or provide additional data on their factual conclusions, practices, and achievements.
Review and assess places where rollbacks in federal, state, or local government spending could impact the viability of business operations. Investments reliant on federal grants or subsidies need to be reviewed.
Review corporate compliance programs in light of federal priorities. The US Department of Justice has listed initial federal compliance priorities including terrorism financing, money laundering, and international restraints on trade. As above, taking a systematic approach to understanding and evaluating points where corporate activities could be impacted by enforcement priorities may be appropriate.
Finally, the regulated community should conduct a thorough census of regulations or statutory laws that have the potential to negatively impact corporate operations. They should assess whether any impediments can be addressed through a forward-looking government relations strategy, especially given current efforts to streamline regulations and government operations, particularly related to environmental and energy issues. (For more, see here and here.)
When directors fail to consider and weigh political factors and shifts in governmental initiatives and program enforcement such as those listed above, stakeholders may ask why the board made no effort to make sure it was informed about an issue so intrinsically critical to the company’s business operation.
Maine Board of Environmental Protection Will Consider Proposed PFAS Rule at Its April 7, 2025, Meeting
The Maine Board of Environmental Protection (MBEP) will consider the Maine Department of Environmental Protection’s (MDEP) December 2024 proposed rule regarding products containing per- and polyfluoroalkyl substances (PFAS) during its April 7, 2025, meeting. As reported in our December 31, 2024, memorandum, on December 20, 2024, MDEP published a proposed rule that would establish criteria for currently unavoidable uses (CUU) of intentionally added PFAS in products and implement sales prohibitions and notification requirements for products containing intentionally added PFAS but determined to be a CUU. MBEP’s meeting agenda includes links to the following new documents:
Staff memo: According to the staff memo, MDEP received and reviewed 57 comments on its December 2024 proposed rule, totaling 419 pages. Based on comments received, MDEP amended the draft rule to correct typos, eliminate superfluous language, and add clarifying language. MDEP notes that “[n]one of these changes are significant”;
Chapter 90 proposed rule mark-up;
Chapter 90 proposed rule clean;
Chapter 90 written comments received; and
Chapter 90 draft basis statement and response to comments.
According to the meeting agenda, MBEP will accept and consider additional oral public comment on the proposed rule at its April 7, 2025, meeting, “only if the additional public comment is directly related to comments received during the formal rulemaking comment period or is in response to changes to the proposed rule.”
SEC Ends Defense of Climate Disclosure Rules
In March of 2024, we reported on the US Securities and Exchange Commission’s adoption of a comprehensive set of rules governing climate-related disclosures. The rules would require public companies to disclose climate-related risks, including their impact on financial performance, operations, and strategies, along with greenhouse gas emissions data, governance structures and efforts to mitigate climate impacts. To no one’s surprise, the adopted rules were met with a flurry of court challenges from states and private parties, which led the SEC to issue a stay of the rules pending resolution of the litigation.
Also unsurprisingly, on March 27, 2025, the SEC, under the new administration, voted to end its defense of the climate-related disclosure rules in court. SEC Acting Chairman Mark T. Uyeda stated, “The goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”
The SEC’s decision to end its defense of the rules very likely means that companies will never be required to comply with the rules. Despite this decision, however, the rules will remain in effect until a court rules them invalid or the SEC rescinds them through the rulemaking process (although the stay remains in effect for now). For that reason, there is currently some uncertainty regarding the rules’ future, and we will continue to follow developments. But, in any case, given the SEC’s recent statements, it seems unlikely that the SEC and its staff would seek to enforce compliance with the rules while they remain in effect.
Although it probably is safe for public companies to assume that they do not need to continue planning for compliance with the climate-related disclosure rules adopted in 2024, companies should remember that climate-related disclosures may be required under other SEC rules and guidance and, in certain cases, climate disclosure requirements of states or non-US jurisdictions. In particular, the SEC’s 2010 guidance on climate-related disclosures remains in effect, requiring public companies to report the impact of climate change on their financial performance, operations, and risks, particularly when such factors are material. While it remains unclear to what extent the SEC under the current administration will enforce, or perhaps even revise, this guidance, companies would be well-advised to be consistent with their climate-related disclosures from period to period.
Additionally, companies may still be required to disclose climate-related risks and greenhouse gas emissions in other jurisdictions, such as California or the European Union, where climate-related disclosure rules are already in place. Other states are also considering similar regulations, potentially expanding the scope of companies subject to such disclosure requirements. Notwithstanding the SEC’s recent action, climate-related disclosures appear to be here to stay.
The SEC Effectively Ends Climate Disclosure Requirements Under Trump Administration
On Thursday, March 27, 2025, the U.S. Securities and Exchange Commission announced via letter to the U.S. Court of Appeals for the Eighth Circuit that SEC attorneys would no longer defend its climate change disclosure rules. These disclosure obligations were established by the SEC’s “Enhancement and Standardization of Climate-Related Disclosures for Investors” Rule, adopted by the Commission on March 6, 2024.
According to the SEC’s current acting chair, Mark Uyeda, the disclosure requirements are “costly and unnecessarily intrusive.”
Disclosure Rule Background
The Disclosure Rule targeted material risks that companies face related to climate change and how those companies are managing that risk. The Disclosure Rule required companies to disclose certain climate-related information in their registration statements and annual reports including:
Climate-related risks that have or may impact business strategy, results of operation, or financial condition;
Actions to mitigate or adapt to material climate-related risks;
Management’s role in assessing and managing material climate-related risks;
Processes used by the company to assess or manage these risks;
Any targets or goals that have materially affected or are likely to affect the company’s business; and
Financial statement effects of severe weather events and other natural conditions, including costs and losses.
Following multiple petitions seeking review of the final Rule, the SEC stayed the Disclosure Rule pending judicial review before the Eight Circuit. In February, Uyeda provided some indication that its position was changing when he directed staff to notify the court not to schedule the case for argument to provide the Commission time to deliberate and determine appropriate next steps. The reason cited for the notice was “changed circumstances.” As such, the March 27 announcement is not all that surprising.
Impact of SEC Announcement
While the SEC has not officially repealed the Disclosure Rule, by no longer defending the Rule, the SEC will allow the stay to continue indefinitely and/or allow the Eighth Circuit to remand the rule to the SEC. This sequence of events indeed creates “changed circumstances,” as it means the SEC will likely take no further action to effectuate a new Rule. As a result, the March 27, 2025, announcement by the SEC effectively terminates the Disclosure Rule.
What Does this Development Mean for You?
While the SEC’s announcement means that public companies operating in the United States are not required to make publicly available disclosures concerning greenhouse gas emissions and climate-change risks and impacts, the impact of this action may be quite limited in reality. Many U.S. companies already report climate-related risks voluntarily in response to investor demand and this action has done nothing to change the requirements imposed by individual states like California or elsewhere around the globe. And, despite this limited reprieve, companies should consider potential changes to SEC rules under future administrations. While the “pendulum” of regulatory focus has swung wide under the Trump administration, there is a strong possibility that there will be a reciprocal swing in the future. As a result, companies should consider maintaining documentation of climate-related risks and management strategies should a similar rule be promulgated.
These events are developing rapidly and will continue to move at a fast pace.
APHIS Evaluates Petitions Reviewed under 2012 Process, Will Use Process Consistent with USDA Biotechnology Regulations Going Forward
The U.S. Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS) announced on March 27, 2025, that it will no longer use the process it outlined in 2012 for reviewing petitions seeking a determination that a modified plant should not be subject to the regulations for the introduction of organisms altered or produced through genetic engineering (modified organisms) that are plant pests or that there is reason to believe are plant pests. On March 6, 2012, APHIS announced that it would publish two separate Federal Register notices for petitions for which it prepares an environmental assessment. 77 Fed. Reg. 13258. The first notice would announce the availability of the petition, and the second notice would announce the availability of APHIS’ decision-making documents, providing two opportunities for public comment. According to APHIS’ March 2025 announcement, at the time, APHIS anticipated that enabling earlier public engagement on the petition would help scope the subsequent analyses, including whether the petition raised substantive new issues. After evaluating the 34 petitions reviewed under the 2012 process, APHIS states that it “found that the first comment period has not yielded comments that significantly impacted the scoping for APHIS’ evaluation.” Given this experience, APHIS will institute the following process consistent with USDA’s biotechnology regulations:
Once APHIS deems a petition to be complete, it will publish a Federal Register notice that will begin a 60-day comment period on the petition and APHIS’ draft evaluation documents; and
After the comment period closes, APHIS will review the comments and any other relevant information it receives during the comment period, complete its evaluation documents, and make a final determination. APHIS will either approve or deny the petition and publish a Federal Register notice announcing the regulatory status of the modified plant and the availability of the regulatory determination and final supporting documents.
Trump Administration Launches Comprehensive Review of Clean Water Act Definition for “Waters of the United States” (WOTUS)
On March 24, 2025, the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (the “Army Corps”) (collectively the “Agencies”) announced a comprehensive stakeholder engagement process to revise the definition of “waters of the United States” (WOTUS), a phrase that defines the geographic scope of regulatory jurisdiction under the Clean Water Act (CWA). In a formal notice published in the Federal Register, the Agencies stated that they intend to use stakeholder feedback from this process to “inform future administrative actions” on the WOTUS definition, including rulemaking.
This initiative follows decades of WOTUS litigation and shifting WOTUS rules promulgated by the Agencies during the Obama, Biden, and Trump administrations, and it responds to ongoing challenges in implementing the Supreme Court’s landmark decision in Sackett v. EPA, issued in 2023, which significantly narrowed federal jurisdiction over wetlands.
The Sackett Decision and Ongoing Regulatory Challenges
The Sackett case was a dispute over wetlands, but the Supreme Court’s holding is also relevant to other water bodies:
As to wetlands, Sackett held that CWA jurisdiction covers “only those wetlands with a continuous surface connection to bodies that are [WOTUS] in their own right, so that they are indistinguishable from those waters.” The Court rejected EPA’s position that jurisdiction extended to wetlands that are “separated from [WOTUS] by dry lands.”
As to streams, lakes, and other water bodies, Sackett held that CWA jurisdiction covers only those waters that are “relatively permanent, standing or continuously flowing.”
Scope of “Relatively Permanent” Waters: To date, the Supreme Court has not clearly defined “relatively permanent” waters. This category includes certain streams and other water conveyances. In Sackett, the Court held that jurisdiction is not cut off by “temporary interruptions in surface connection” that “may sometimes occur because of phenomena like low tides or dry spells.” Sackett also adopted Justice Scalia’s plurality opinion from Rapanos v. United States, issued in 2006. In that opinion, the plurality confirmed that “intermittent” and “ephemeral” streams do not fall within the scope of CWA jurisdiction. Besides saying CWA jurisdiction could potentially extend to a hypothetical “seasonal river” that flowed continuously for 290 days per year, the plurality declined to spell out “exactly when the drying-up of a streambed is continuous and frequent enough” to cut off jurisdiction.
Jurisdiction over Ditches: The Rapanos plurality also analyzed the contentious issue of CWA jurisdiction over ditches. The Agencies have historically treated ditches as a type of jurisdictional “tributary” unless exempted by regulation, but the Rapanos plurality suggested that most ditches are not jurisdictional because the CWA defines ditches as “point sources” rather than “navigable waters” and because ditches typically convey “intermittent” flow. Sackett’s majority opinion did not directly analyze CWA jurisdiction over ditches, but a concurring opinion in Sackett stated that a roadside ditch at issue in that case was not a jurisdictional “tributary”—because the ditch “is not, has never been, and cannot reasonably be made a highway of interstate or foreign commerce.”
The 2023 “Conforming Rule” and Agency Interpretations: In 2023, the Biden administration adopted a rule that attempted to conform the regulatory definition of WOTUS to Sackett (the “2023 Conforming Rule”). In the 2023 Conforming Rule, the Agencies took a minimalistic approach to the task at hand: they removed language that was clearly inconsistent with Sackett, but did not attempt to clarify the meaning of “continuous surface connection” or “relatively permanent” waters.
In part because the 2023 Conforming Rule left room for interpretation by the Agencies, the WOTUS definition remains controversial. In the March 24 notice, the Agencies noted stakeholder concerns that the Conforming Rule does not “adequately comply with the Sackett decision” on its face. The Agencies also noted concerns about how the Agencies have interpreted and applied to 2023 Conforming Rule in particular cases, raising questions such as: which features are “connected to” waters that are “relatively permanent” WOTUS; which waters as “relatively permanent” in the first place; how to implement the “continuous surface connection” requirement; and “which ditches are properly considered to be [WOTUS].”
These concerns have sometimes played out in court, where the Agencies have argued that ditches and channels with “intermittent” flow can still be WOTUS after Sackett. At least one district court has agreed, holding that a channel conveying only “intermittent” flow was jurisdictional because it conveyed flow “continuously during certain times of the year.” As a result of the 2023 Conforming Rule’s ambiguity and the continuing WOTUS litigation, the regulated community continues to face significant uncertainty.
March 12 Announcement and Policy Memo on “Abutting” Wetlands: The March 24 notice follows a March 12 announcement by EPA Administrator Zeldin of the WOTUS stakeholder engagement effort. The March 12 announcement included an unpublished preview of the March 24 notice. As part of the announcement, EPA also issued a new policy memorandum discussing “abutting” wetlands. The memo provides guidance on how to distinguish non-jurisdictional wetlands that are near but separated from jurisdictional waters by a berm, a dike, uplands, or a similar feature, from jurisdictional wetlands (which “directly abut” and have a “continuous surface connection” to jurisdictional waters).
Comprehensive Stakeholder Engagement Strategy
The Agencies will conduct a multi-pronged approach to gather input on the WOTUS definition through listening sessions and written comments, as follows:
Listening sessions: Six targeted listening sessions will be held in April and May 2025. Two sessions will be open to all stakeholders, and one session held for each of the following: industry and agricultural stakeholders; States; environmental and conservation groups; and Tribes. Oral comments will be accepted on a first-come, first-serve basis.
Written comments: Comments are due by April 23, 2025, and can be submitted through the Federal eRulemaking Portal, via email, or by mail or hand delivery.
Specific topics for input: The Agencies are seeking stakeholder input on key WOTUS implementation issues that impact a wide range of private and public stakeholders, including:
The geographic scope of “relatively permanent” waters;
The meaning of “continuous surface connection” and related issues, including the Sackett court’s statement that ‘temporary interruptions in surface connection may sometimes occur because of phenomena like low tides or dry spells’”; and
How to determine the jurisdictional status of ditches and related issues, including whether the Agencies should consider factors such as flow regime (“e.g., relatively permanent status or perennial or intermittent flow regimes”), physical features, “excavation in aquatic resources versus uplands,” “type or use of the ditch (e.g., irrigation and drainage), or “biological indicators like the presence of fish.”
Implications for the Regulated Community
This initiative represents a critical opportunity for stakeholders in the regulated community to influence the future interpretation of WOTUS by the Agencies and the courts. The Trump Administration and the Agencies have emphasized their commitment prioritizing “practical implementation approaches” and seeking to provide durability, stability, and more efficient regulatory processes. This suggests that the Agencies will be especially receptive to comments from the regulated community.
After reviewing the full Federal Register notice, stakeholders impacted by WOTUS issues should consider submitting comments. In the past, many WOTUS commenters have provided detailed descriptions of their own properties, operations, infrastructure, and projects, along with examples of particular local waters. These kinds of comments can help the Agencies better understand how the WOTUS definition impacts different stakeholders “on the ground.” The most effective comments will also include arguments explaining how particular waters fit within the Sackett-Rapanos legal framework discussed above.
EPA Argues for Remand of Final Rule Amending Risk Evaluation Framework
On March 21, 2025, the U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in a case challenging the U.S. Environmental Protection Agency’s (EPA) May 3, 2024, final rule amending the procedural framework rule for conducting risk evaluations under the Toxic Substances Control Act (TSCA). United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) v. EPA, Consolidated Case No. 24-1151. If you have a couple of hours to spare, listening to the argument is well worth the time. The court was uniquely curious about the litigants’ request for a remand and probed deeply into the difference between a remand and a vacatur. Judge Rao bluntly questioned on what authority the court could rely to remand the case. An answer was not forthcoming, fueling speculation the court will rule on the merits.
As reported in our May 14, 2024, memorandum, EPA’s final rule revised certain aspects of the procedural framework for conducting risk evaluations to, according to EPA, align better with the statutory text and applicable court decisions, reflect its experience implementing the risk evaluation program following the 2016 Frank R. Lautenberg Chemical Safety for the 21st Century Act (Lautenberg) TSCA amendments, and allow for consideration of future scientific advances in the risk evaluation process without the need to amend the procedural rule further. After EPA issued the final rule in May 2024, industry and non-governmental organizations (NGO) filed multiple challenges. USW, the International Association of Machinists and Aerospace Workers (IAM), and Worksafe challenged EPA’s authority to consider the use of personal protective equipment (PPE) when evaluating the risk posed by a chemical to workers. The Texas Chemistry Council (TCC) and the American Chemistry Council (ACC) maintained that EPA’s position that TSCA requires review of every possible use of a chemical and that risk determinations must be based on the chemical as a whole means that EPA is more likely to find unreasonable risk. TCC and ACC also argued that EPA’s failure to consider compliance with PPE requirements leads to faulty conclusions on chemical exposure.
On February 5, 2025, EPA filed a motion to postpone the oral argument scheduled for March 21, 2025, and to hold the case in abeyance for 90 days. The court denied EPA’s motion on February 6, 2025. On March 10, 2025, EPA filed a motion for voluntary remand and a renewed motion to hold the case in abeyance. According to EPA, it has determined that it wishes to reconsider the 2024 rule “by initiating notice-and-comment rulemaking as soon as possible.” EPA states that remand will allow it to:
Reconsider the Agency’s approach of making a single risk determination on the chemical substance, “rather than determining unreasonable risk on a condition-of-use by condition-of-use basis”;
Reconsider the Agency’s approach of requiring inclusion of all conditions of use (COU) in each TSCA risk evaluation;
Reevaluate how it considers PPE when making risk determinations; and
Assess its decision to include “‘overburdened communities’ in the definition of ‘potentially exposed or susceptible subpopulations’ and to consider whether no examples, or additional examples, should be included in the regulatory definition.”
On March 10, 2025, EPA also issued a press release announcing its intent to reconsider the final rule. According to the press release, EPA will initiate a rulemaking “that will ensure the agency can efficiently and effectively protect human health and the environment and follow the law.” More information on EPA’s announcement is available in our March 14, 2025, memorandum.
During oral argument, the court asked why it should grant EPA’s request that the final rule be remanded. According to EPA, the court should not rule on the case when the Agency plans to revise and issue a new final rule by April 2026. The court expressed skepticism that EPA can complete a rulemaking so quickly. The court also questioned when TSCA requires that COUs be identified, whether making a single risk determination for a chemical is consistent with TSCA, and whether USW has standing to challenge the May 2024 rule’s provisions regarding PPE.
Commentary
The oral argument seemed not to go according to plan. The much-anticipated exchange focused on a variety of issues, including, surprisingly, whether the court had authority to send the rule back to EPA in the absence of a dismissal of the lawsuit or EPA conceding error of some sort. For non-litigators, the exchange was a refreshingly candid consideration of questions that intuitively came to mind in reading the briefs. The gist of the exchange seemed to reflect the panel’s discomfort with remand and a desire to rule on the merits of at least some of the key issues before the court, including the legitimacy of a single risk determination and whether EPA must consider all COUs in a risk evaluation. The ripeness of the rule as it applies to allowing EPA not to consider PPE in risk evaluation was noted, but not explained. For TSCA buffs, the hearing had all the makings of a Netflix drama. Now we wait for more episodes to drop.
The SEC Votes to “End its Defense” of Climate Change Rules
As previously reported, SEC Asks Court to Put Climate Change Litigation on Hold, the SEC had asked the court to suspend litigation in the U.S. Court of Appeals for the 8th Circuit challenging its new climate change disclosure rules. Last week, the Commission announced that it had voted to “end” its defense of the rules. It is unclear what its action will ultimately mean.
While it seems unlikely that the court will issue a ruling, it could simply dismiss the case once the Commission formally withdraws its rules. Once the new SEC Chairperson is confirmed, which should occur very shortly, he may in due course consider replacing the current climate change rules with a scaled-down version, or more detailed interpretive guidance for companies significantly impacted by climate change.
Climate disclosure rules in California remain on schedule, and other states such as New York are considering the adoption of similar rules, and of course the EU rules are also still on the books. Climate Reporting in 2025: Looking Ahead.
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.