DOE Set to Eliminate Presidential Permit Requirement for Cross-Border Transmission Facilities and Streamline Electricity Export Authorizations
On May 12, 2025, the U.S. Department of Energy (DOE) announced a proposal to streamline the application process for authorizations to transmit electricity from the United States to other countries (e.g., Canada and Mexico).[1] At the same time, DOE issued a “direct final rule” rescinding its regulations regarding applications for presidential permits “authorizing construction, connection, operation, and maintenance of facilities for transmission of electric energy at international boundaries.”[2] Taken together, these actions, if implemented as proposed, likely will make it faster, easier, and less expensive for companies to access cross-border markets and reduce their attendant regulatory obligations, including reporting requirements. Comments on the Proposed Rule will be due on or about July 15, 2025 (60 days from expected publication in the Federal Register). The Final Rule will take effect on the same date unless DOE receives “significant adverse comments”[3] within 30 days of publication.
These actions comprise part of what DOE calls its “largest deregulatory effort in history, proposing the elimination or reduction of 47 regulations that are driving up costs and lowering quality of life for the American people.”[4] DOE claims that, overall, the changes “will save the American people an estimated $11 billion and cut more than 125,000 words from the Code of Federal Regulations.”[5] Indeed, the Proposed Rule would reduce the relevant regulations from approximately 1,300 words spanning nine sections to just one 85-word section that would empower applicants to include only such information in their filings that they “deem[] relevant” to the requested authorization under the Federal Power Act (FPA), with DOE exercising a “strong policy in favor of approving applications, and doing so quickly and expeditiously.”[6]
Citing President Trump’s Executive Order (EO) 14154 (Unleashing American Energy) and EO 14192 (Unleashing Prosperity Through Deregulation), DOE states that it is rescinding the cross-border facility regulations and proposing to amend the export authorization regulations because they “impose economic, administrative and procedural burdens” that “impede private enterprise and entrepreneurship and run contrary to the President’s goal of unleashing American energy.”[7]
The export authorization regulations flow from Section 202(e) of the FPA, which provides that “no person shall transmit any electric energy from the United States to a foreign country without first having secured an order of [DOE] authorizing it to do so.”[8] It continues that DOE “shall issue” such approval orders “upon application unless, after opportunity for hearing, it finds that the proposed transmission would impair the sufficiency of electric supply within the United States or would impede or tend to impede the coordination in the public interest of facilities” subject to its jurisdiction.[9]
DOE proposes to amend those regulations “to reduce burden and remove out of date requirements while simultaneously bolstering American energy dominance by increasing [electricity] exports and subsequently the reliance of foreign nations on American energy.”[10] The amended regulations “will simply allow applicants to include information the applicant deems relevant to such an authorization for consideration by the DOE” under the FPA.[11] Specifically, 10 C.F.R. § 205.300 would be amended to read, in full: “To obtain authorization to transmit any electric energy from the United States to a foreign country, an electric utility or other entity subject to DOE jurisdiction under part II of the Federal Power Act must submit an application or be a party to an application submitted by another entity. The application shall include information the applicant deems relevant to DOE’s determination under section 202(e) in the Federal Power Act. DOE has a strong policy in favor of approving applications, and doing so quickly and expeditiously.”[12]
In the Final Rule, DOE states that because the authority for presidential permits for cross-border transmission facilities “rests in Executive Order, it is at the discretion of the Executive branch as to how the order is applied.”[13] Accordingly, DOE states, it is rescinding the relevant regulations for the same reasons—namely, to reduce burdens, remove outdated requirements, bolster American energy dominance by reducing barriers to constructing cross-border facilities, and increase exports and foreign reliance on American energy.[14]
DOE seeks comment from interested parties on “all aspects” of both issuances, including on the prior rules’ “consistency with statutory authority and the Constitution [and] national security, whether the prior rules are out of date, the prior [rules’] costs and benefits, and the prior [rules’] effect[s] on small business, entrepreneurship and private enterprise.”[15]
While DOE regularly grants export authorizations, the streamlined application and authorization process, if adopted as proposed, would make obtaining such authorizations easier and less expensive and could provide sellers seeking broader market opportunities greater access to markets in Canada and Mexico. Moreover, elimination of the presidential permit requirement for cross-border transmission facilities, if finalized as proposed, will reduce the administrative burden on entities seeking to develop such facilities, further enhancing access to foreign markets. The energy regulatory team at Foley will continue to monitor developments in this area. Please feel free to contact us with any questions.
[1] Application for Authorization to Transmit Electric Energy to a Foreign Country, 90 Fed. Reg. _____ (unpublished version dated May 12, 2025) (to be codified at 10 C.F.R. pt. 205) (the “Proposed Rule”).
[2] Application for Presidential Permit Authorizing the Construction, Connection, Operation, and Maintenance of Facilities for Transmission of Electric Energy at International Boundaries, 90 Fed. Reg. _____ (unpublished version dated May 12, 2025) (to be codified at 10 C.F.R. pt. 205) (the “Final Rule”).
[3] According to DOE, “significant adverse comments” are those that “oppose the rule and raise, alone or in combination, a serious enough issue related to each of the independent grounds for the rule that a substantive response is required. If significant adverse comments are received, notice will be published in the Federal Register before the effective date either withdrawing the rule or issuing a new final rule which responds to significant adverse comments.” Final Rule at 1.
[4] U.S. Dept. of Energy, Energy Department Slashes 47 Burdensome and Costly Regulations, Delivering First Milestone in America’s Biggest Deregulatory Effort, https://www.energy.gov/articles/energy-department-slashes-47-burdensome-and-costly-regulations-delivering-first-milestone (May 12, 2025) (“DOE Press Release”).
[5] Id.
[6] Proposed Rule at 10.
[7] Final Rule at 2.
[8] 16 U.S.C. § 824a(e) (2018). This authority moved to DOE from the Federal Energy Regulatory Commission under Sections 301(b) and 402(f) of the DOE Organization Act, 42 U.S.C. §§ 7151(b) and 7172(f).
[9] 16 U.S.C. § 824a(e).
[10] Proposed Rule at 3.
[11] Id.
[12] Id. at 10.
[13] Final Rule at 3.
[14] Id.
[15] Proposed Rule at 3; Final Rule at 3.
Ethylene Oxide Litigation: Your Company Has Been Sued- Now What?
Ethylene Oxide (EtO) is an industrial solvent widely used as a sterilizing agent for medical and other equipment that cannot otherwise be sterilized by heat/steam. EtO may also be used as a component for producing other chemicals, including glycol and polyglycol ethers, emulsifiers, detergents, and solvents. Allegations that exposure to EtO increases the risk of certain cancers has led to governmental regulation as well as private tort actions against companies that operate sterilization facilities that utilize EtO.
History of EtO Verdicts
There have now been a handful of verdicts in EtO trials and the results have been a mixed bag. We have seen some defense verdicts, but also some multimillion-dollar plaintiff verdicts. As we discussed in a posting last week, the most recent example of the latter was a plaintiff verdict for $20 million handed down last earlier this month in Georgia (punitive damages are still being determined).
The first ethylene oxide case to go to trial was the Kamuda matter, in which an Illinois jury awarded $263 million in September of 2022 against Sterigenics for ethylene oxide exposure from that company’s Willowbrook facility. A subsequent trial in the same jurisdiction against the same defendant resulted in a defense verdict. Ultimately, Sterigenics resolved its pending claims involving the Willowbrook plant in the amount of $408 million. In December of 2024, a Philadelphia Court of Common Pleas jury found the defendant B. Braun Manufacturing Inc. not liable on all counts. The plaintiff had alleged that her husband developed leukemia as a result of working at the defendant’s sterilization plant in Allentown, Pennsylvania for seven years. Notably, unlike the Illinois trials, the Philadelphia trial involved an employee at the sterilization facility as opposed to the Illinois plaintiffs who did not work at the Willowbrook plant but resided nearby.
In March of this year, a Colorado jury rendered a verdict in favor of defendant Terumo BCT Inc. (Isaacks et al. v. Terumo BCT Sterilization Services Inc. et al. in the First Judicial District of Colorado (docket number 2022CV031124). The plaintiffs are appealing. This was a bellwether trial lasting six weeks, and involved four female plaintiffs. The jury determined that the defendant was not negligent in its handling of emissions from its Lakewood plant. The plaintiffs had sought $217 million in damages for their alleged physical impairment and also $7.5 million for past and future medical expenses as well as punitive damages. In light of the fact that the six person jury found the defendant Terumo not negligent, it did not need to consider damages or causation. All of the plaintiffs alleged that they had developed cancer as a result of ethylene oxide emissions from the Terumo facility. One plaintiff alleged breast cancer as a result of 23 years of exposure from the plant, while another alleged breast cancer after almost 35 years of exposure (these two plaintiffs were neighbors). Another plaintiff alleged multiple myeloma while the fourth plaintiff alleged Hodgkin’s lymphoma. Notably, there remain hundreds more pending claims against Terumo in Colorado. In fact, plaintiffs’ counsel filed almost 25 more cases while the trial was in progress
Does Your Insurance Cover EtO Claims?
In light of multi million dollar verdicts in Illinois and Georgia, companies with potential EtO liability should determine if they have adequate coverage for defense and indemnity should they be sued. KCIC recently issued a report on insurance coverage for EtO claims: (kcic.com/trending/feed/eto-an-emerging-and-evolving-risk/#msdynttrid=wne5D5mhUe8x_gvUuI0Hn9FqKuJPpR3wOfwvnUj8MyE). As the article points out, companies facing EtO claims may be able to tap their pollution liability policies or pollution coverage as part of their commercial general liability (CGL) policies. As KCIC notes, one option for companies is to cite to their “permitted emissions” exception which stems from the 1997 Illinois Supreme Court decision in American States Insurance Co. v. Koloms in which the court noted that if the pollution exclusion was too literally interpreted, it could have such limitless applications that it could essentially negate all coverage.
Therefore, Koloms concluded that pollution exclusions be limited to traditional environmental contamination — which includes industrial emissions of pollutants into the environment. In 2011, in Erie Ins. Exch. v. Imperial Marble Corp, the Illinois appellate court cited the Koloms case and found that when the industrial emissions were at levels that were within regulatory permissions, the pollution exclusions are arguably ambiguous and should not negate the duty to defend. The theory was that emissions authorized by law may not constitute traditional environmental pollution, and therefore the court found that the insurer had a duty to defend against claims that arose from permitted emissions. In contrast, though, a recent decision in the federal district in Pennsylvania determined that a pollution exclusion in a CGL policy barred coverage for EtO liabilities under Pennsylvania law (for more detail refer to the KCIC report).
So, Will Your Insurer Cover Your EtO Claims?
Well, maybe. This depends on what state’s law controls as well as the language of your policy. If you have existing policies, it is advisable to have them reviewed to determine if there is coverage for EtO claims. Consultation with your broker is advisable. To the extent you will be in the market for new coverage in the near future and you think it possible your company might face EtO claims, discuss this with your broker to make sure that you will be covered. In light of the recent Georgia verdict, coupled with the Illinois verdict from a few years ago, the EtO litigation seems poised to expand to other states. Be prepared.
High-Level Overview of Certain Provisions Impacting Renewable Energy Incentives in “The One, Big, Beautiful Bill” Draft Legislation
Yesterday, the House Ways and Means Committee released a package of tax provisions (the “Bill”) (which may be found here) that includes claw backs of certain provisions of the Inflation Reduction Act. Note that this Bill is a draft only, has not been passed by the House or the Senate (or any committee thereof), or signed by the President, all of which would need to occur before the Bill becomes law. The provisions described below are therefore subject to change and may not become law at all. However, the Bill provides some insight on how House Republicans are thinking about amending current energy-related tax credits.
The Bill includes accelerated phaseouts for the clean electricity investment credit under Section 48E, the clean electricity production credit under Section 45Y, and the advanced manufacturing production tax credit under Section 45X. For the credits available under Sections 48E and 45Y (which this year replaced the old ITC and PTC, respectively), the phaseout would begin for otherwise eligible projects that are placed in service starting in 2029, which is at least a few years before these credits are set to phase out under current law. In the Bill, these credits would phase down to 80% of the current credit level for projects placed in service in 2029, 60% for those placed in service in 2030, 40% for those placed in service in 2031, and 0% for those placed in service in 2032 and beyond. For the Section 45X advanced manufacturing production tax credit, the phaseout in the draft Bill would begin one year earlier than under current law, except that the Bill would make ineligible any wind energy components sold after December 31, 2027. Separately, the Bill would terminate the Section 45V clean hydrogen production tax credit for facilities on which construction does not begin by December 31, 2025.
The Bill would also repeal transferability for the clean electricity investment credit under Section 48E, the clean electricity production credit under Section 45Y, and the advanced manufacturing production tax credit under Section 45X under Section 6418, as well as other credits, but that repeal would not take effect for several years.
Finally, the Bill contains new restrictions on energy tax credits apparently aimed at limiting certain foreign entities from taking advantage of the value of these credits.
EPA Extends Submission Dates for the PFAS Reporting Rule
The EPA published an interim final rule in the Federal Register today (May 13, 2025) which extends the submission deadlines for the PFAS Reporting Rule. The revised deadlines to submit required PFAS reporting information will now start on April 13, 2026, and end on Oct. 13, 2026. The previous submission deadline was to start on July 11, 2025. Public comments on the reporting extension are due June 12.
EPA states that this submission extension will allow the agency to further develop and test the software being used to collect the data from manufacturers, thereby providing critical feedback to EPA, including what additional guidance would be useful for the reporting community.
Consistent with the Administration’s deregulation agenda and Executive Order 14219: Unleashing Prosperity Through Deregulations, the May 13, 2025, interim final rule also includes an advisory statement that EPA is separately considering reopening certain aspects of the original rule to public comment in the future.
Under section 8(a)(7) of the Toxic Substances Control Act (TSCA), EPA finalized a rule in October 2023 requiring anyone who has manufactured (including imported) a PFAS in any year from 2011 through 2022 to submit information to EPA regarding manufacturing, use, disposal, byproducts, worker exposures, and environmental and health effects of those PFAS.
In addition to the unprecedented look-back period, the PFAS Reporting Rule requires companies to conduct a diligent inquiry into the presence of PFAS at their facilities and supply chains, assessing information that is “known or reasonably ascertainable” from upstream suppliers and downstream customers. Both internal and external inquiry are required.
Notably and separate from federal regulatory action, many states are imposing PFAS reporting requirements on manufacturers and marketers. Importantly, some states are restricting or outright prohibiting the use of PFAS in various product categories.For additional information regarding the PFAS Reporting Rule, please see our Alert “PFAS Reporting Requirements Persist Amid EPA Deregulation” dated March 25, 2025.
EPA Receives TSCA Section 21 Petitions Seeking Reconsideration of Exemption Conditions in Final Trichloroethylene Rule
The U.S. Environmental Protection Agency (EPA) recently updated its website to include two petitions submitted under Section 21 of the Toxic Substances Control Act (TSCA) that seek reconsideration of exemption provisions of EPA final risk management rule for trichloroethylene (TCE). On March 24, 2025, PPG Industries, Inc. (PPG) submitted a petition seeking an amendment to the December 2024 final rule’s exemption for the industrial and commercial use of TCE as a processing aid for specialty polymeric microporous sheet materials manufacturing that would allow PPG to meet an interim existing chemical exposure limit (ECEL) of five parts per million (ppm) and an action level of 2.5 ppm. According to the petition, “[o]ne of PPG’[s] specialty materials is the Teslin substrate, a unique polymeric microporous sheet material that is a fundamental component of a wide range of products used in everyday life.” PPG notes that although EPA “granted a 15-year TSCA Section 6(g) exemption for Teslin on the basis that PPG’s use of TCE in the Teslin manufacturing process is a critical and essential use for which no technically and economically feasible safer alternative is available in accordance with TSCA Section 6(g)(1)(A),” the final rule “also imposes an unachievable interim ECEL of 0.2 ppm on PPG during the exemption period, as well as an action level of 0.1 ppm.” EPA’s May 9, 2025, letter acknowledging receipt of the petition states that it will either grant or deny the portions of the petition eligible for TSCA Section 21 within 90 days of the date the petition was received (i.e., by June 22, 2025).
On April 30, 2025, the Alliance for a Strong U.S. Battery Sector (Alliance) and Microporous, LLC (collectively, Petitioners) submitted a TSCA Section 21 petition for reconsideration of and revisions to the final TCE rule. According to the petition, because there is no feasible alternative to TCE in manufacturing lead-acid battery separators, EPA determined that banning the use would “significantly disrupt national security and critical infrastructure.” While the final rule granted U.S. battery-separator manufacturers a 20-year exemption from the TCE ban, the exemption “includes such onerous conditions on the continued use of TCE that it effectively functions as a total ban.” To continue using TCE, battery-separator manufacturers must either reduce TCE exposure levels to the interim ECEL of 0.2 ppm, “a level roughly 30 times below what European regulators allow and what can be achieved using state-of-the-art engineering and administrative controls — or else equip exposed workers in respiratory personal protective equipment (“PPE”) that EPA admits creates health and safety hazards and that the record demonstrates cannot feasibly be worn all day, every day by employees in these manufacturing settings.” Petitioners request that EPA revise the final rule to increase the interim ECEL to six ppm and extend the length of the duration from 20 to 25 years to account for the time required to research, develop, test, and obtain approvals for any alternative to TCE in battery-separator manufacturing. EPA’s May 9, 2025, letter acknowledging receipt of the petition states that it will either grant or deny the portions of the petition eligible for TSCA Section 21 within 90 days of the date the petition was received (i.e., by July 30, 2025).
Beyond the Forest: Navigating the EU’s Deforestation Rules
On 15 April 2025, the European Commission (the “Commission”) released new simplification measures relating to the EU Deforestation Regulation (“EUDR”) with the promise of ensuring a “simple, fair and cost-efficient implementation”. This is part of the Commission’s broader agenda for economic competitiveness and to reduce reporting burdens on businesses.
We recap in this alert what the EUDR is, its journey so far and the latest simplification proposals.
What is the EUDR?
The EUDR formerly replaced the EU Timber Regulations on 29 June 2023, broadening the scope of commodities and obligations that would be placed on companies that operate within these markets. The EUDR now covers the regulation of commodities ranging from cattle, cocoa, coffee, palm oil, soya, rubber and wood. The obligations also extend to products that are derived from these commodities, such as beef, chocolate, printed paper, furniture and other derivative products.
Which companies are in scope?
The EUDR applies to both EU and non-EU companies that import to, place on, make available or export within the EU market relating to the specific commodities described under the EUDR.
The current thresholds for companies to be in scope of this regulation include:
Larger companies – Those with 250 employees or more and/or an annual turnover of more than €50 million, and/or a balance sheet total of more than €25 million.
Smaller companies – Those with fewer than 50 employed and either a turnover or balance sheet of less than €10 million.
The expected deadline for compliance is currently 30 December 2025 for larger companies and 30 June 2026 for smaller companies.
What is the legal framework around EUDR?
The EUDR is a directly applicable Regulation that does not need to be transposed. The EUDR itself currently sets extensive due diligence requirements for companies to ensure compliance with the Regulation. Following feedback from regulators and stakeholders, the Commission published updated guidance annexed to the EUDR (detailed below) on 15 April 2025, in addition to a draft of the Delegated Act and Implementation Regulation to accompany EUDR. It is expected that these will be introduced by 30 June 2025. The purpose of this additional layer of regulation is to allow for consistent implementation of EUDR across all EU Member States and to address the specific needs of different stakeholders, including businesses and regulatory authorities with respect to the application of EUDR.
What are the key requirements for companies under EUDR?
In-scope companies are obligated to submit electronic due diligence statements to an EUDR Information System (a digital platform) which are then checked internally by a registry, Member States and regulatory authorities. Key information to be captured in the due diligence statements that are submitted range from confirmation of the deforestation-free status of their products to demonstrating compliance with the applicable legal frameworks in the country of origin. Additionally, they must conduct and document comprehensive risk assessments outlining the measures taken to mitigate deforestation risks within their supply chains, and ensure full transparency by tracing all products to their precise location of production.
How will companies evidence this with due diligence?
Companies will be expected to collect extensive data to demonstrate their compliance with EUDR. The relevant data will extend from geolocations, relevant commodity information, traceability of products to description of the suppliers and goods being produced.
A risk assessment will need to be conducted for each product to evaluate the likelihood of non-compliance with the EUDR. Based on the outcome, companies are expected to implement appropriate risk mitigation measures, which may include commissioning independent audits, collecting supplementary documentation, or collaborating with suppliers to address capacity gaps and ensure the necessary steps are taken to achieve compliance.
What are the potential sanctions for companies that are non-compliant?
Penalties will include fines of at least four percent of EU-derived turnover, temporary exclusion from public procurement and public funding, confiscation of noncompliant products and associated revenues. There could be one or a combination of these penalties. Where there are instances of repeated offences of non-compliance, this could result in prevention of marketing/exporting the relevant commodities and prohibition of the use of the EUDR simplification measures.
What are the new EUDR simplification measures?
The recent simplification measures from the European Commission provide further guidance on the application and compliance in respect of the scope of the EUDR. The Commission noted that these new guidelines address commercial concerns of application and adherence as well as administrative burdens which could see an estimated 30% reduction in the costs of complying with EUDR.
Under the new guidance, the simplification measures include:
large companies can reuse existing due diligence statements relating to goods previously placed on the EU market that are reimported;
authorised representatives can submit a due diligence statement on behalf of a group set of companies; and
companies will be allowed to submit due diligence statements annually (instead of for every shipment or batch placed on the EU market).
The simplifications in the guidance are accompanied by a draft Delegated Act, with the feedback window ending on 13 May 2025.
What should companies do now to align to the new EUDR standards?
As a pre-emptive measure, companies within these markets are recommended to consider a range of actions such as to map their supply chains to identify high-risk areas, implement traceability systems, prepare their due diligence documentation, and continue to monitor further updates from the Commission including country specific risk clarifications.
DOJ Moves for Voluntary Dismissal of Its Appeal of Decision Finding that Section 230 Offers Immunity to Online Retailers
On April 24, 2025, the U.S. Department of Justice (DOJ) filed an unopposed motion in the U.S. Court of Appeals for the Second Circuit for voluntary dismissal of its appeal of an October 2024 decision finding that eBay is immune from liability under Section 230 of the Communications Decency Act. USA v. eBay, No. 24-3104. As reported in our September 28, 2023, memorandum, in September 2023, DOJ, on behalf of the U.S. Environmental Protection Agency (EPA), filed a complaint in the U.S. District court for the Eastern District of New York against eBay “for unlawfully selling, offering for sale, causing the sale of, and distributing hundreds of thousands of products” in violation of the Clean Air Act (CAA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxic Substances Control Act (TSCA). USA v. eBay, No. 23-CV-7173. According to EPA, the complaint seeks a ruling that eBay’s business practices as an e-commerce retailer violated the CAA, FIFRA, and TSCA and injunctive relief to enjoin eBay from further violations of these laws, as well as civil penalties for violations of the CAA. On September 30, 2024, the court granted eBay’s motion to dismiss the case, finding that:
eBay did not sell, offer for sale, or cause the sale or offer for sale of aftermarket defeat devices in violation of the CAA;
eBay did not distribute or sell pesticides in violation of FIFRA;
EPA pled facts sufficient to allege that eBay introduces methylene-chloride containing products into commerce, thus distributing them in violation of TSCA and the methylene chloride rule; and
Section 230 of the Communications Decency Act independently bars EPA’s claims.
The lower court notes that although eBay’s motion to dismiss fails under TSCA, because the court agrees with eBay’s argument that Section 230 applies, it granted eBay’s motion to dismiss. Under the Biden Administration, EPA filed a notice of appeal in the U.S. Court of Appeals for the Second Circuit on November 26, 2024.
The Renaissance of HVDC for a Low Carbon Future: Part 2
As we discussed in Part 1 of this series of Articles, there is likely to be significant future increased demand for low loss, long-distance interconnectors. While the concept of transmitting large amounts of energy with relatively low losses over long distances (e.g., from solar farms in North Africa to Europe) might be attractive in principle, significant political, economic and legal challenges face potential investors and lenders, particularly in developing jurisdictions.
We will explore below the key models for structuring and financing transmission infrastructure, including the integrated grid model, merchant investment and independent power transmission (IPT) projects.
Integrated grid model
Power transmission has traditionally been considered a natural monopoly. Globally, transmission assets are most commonly owned and/or operated by a transmission utility as part of an integrated grid. The transmission utility may be state-owned, privately owned or operating under a concession granted by the government. Under this model, investment in transmission lines is typically financed using the utility’s balance sheet and recovered through a regulated tariff. This tariff is charged to consumers as part of the overall retail electricity price. However, in countries where the transmission infrastructure is publicly owned, this model can strain public finances, particularly when governments and state-owned utilities face fiscal constraints. This often results in underinvestment in transmission infrastructure and delays to necessary upgrades.
Merchant investment
The merchant investment model is a privately funded approach to developing transmission lines where revenue is primarily derived from price differentials between two markets or zones creating arbitrage opportunities. This makes it particularly suited for cross-border interconnections or countries with an unbundled power market and multiple wholesale price zones. Many interconnection projects[1] to date have used the merchant investment model in which the investor builds and operates a transmission line. This model is typically for standalone assets—either a single line or a bundle of lines. A technical requirement for the merchant model is the ability to control and measure electricity flows, as the operator profits from directing power where it is most valuable. As such, this model is more suited for DC lines.
However, the revenue uncertainty of this model makes it more difficult to finance using project finance techniques, which require predictable revenue streams. To mitigate this risk, governments have sometimes intervened to support merchant lines. One example is the NeuConnect interconnector between the UK and Germany, which operates under a cap and floor mechanism. This reduces revenue uncertainty, improving bankability while still allowing private investors to benefit from price differentials. See below for further discussion on the NeuConnect project.
The merchant investment model is not generally viable in countries without liberalised wholesale electricity markets. This is the case for many emerging markets with a vertically integrated, state-owned power sector. The lack of a competitive wholesale market and transparent, market-based price signals limits the potential for price differentials and reduces opportunities for price arbitrage between different markets or zones that are essential for a merchant line’s revenue model.
IPT Projects
Another model which can facilitate private investment in transmission assets is independent power transmission (IPT). In essence, it involves the government (or the state-owned utility) tendering a long-term contract whereby the IPT (the winning bidder) will be responsible for building and operating a transmission line in exchange for contractually defined payments dependent upon the availability of the line.
A recent example of an IPT project, although not HVDC, is the 400 kV Lessos–Loosuk and 220 kV Kisumu–Musaga transmission lines in Kenya. This project involves the development, financing and construction of the transmission lines under a public-private partnership framework by Africa50 and the Power Grid Corporation of India Limited. The project is set to become Kenya’s first IPT and a pioneering example in Africa.
IPT projects have been adopted in many countries, albeit mostly for in-country transmission. Adopting the same model for international interconnectors is likely to be more complex, not least due to the need to coordinate between the governments of the relevant countries.
Also in the African context, the Côte d’Ivoire-Liberia-Sierra Leone-Guinea (CLSG) interconnection project, financed by the AfDB, EIB, KfW, World Bank and its member countries and completed and commissioned in 2021, illustrates one way forward. It involved the construction of a 1,300 km long 225 kV AC transmission line and associated substations connecting four participating countries’ energy systems into the WAPP. The project was implemented through a regional special purpose company (Transco), jointly owned by the national utilities of those countries, and responsible for the financing, construction, ownership and operation of the project assets.
To encourage the use of the CLSG transmission line, an open access policy was adopted. Power purchase agreements (PPAs) were signed between Côte d’Ivoire’s national utility and those of the other three countries, with each also entering into a transmission service agreement with Transco. The transmission tariff was set using the “postage-stamp” methodology rather than an availability-based tariff, so that transmission costs are effectively charged to the power purchasers based on their relative shares of trade through the transmission line. To mitigate the risk of a funding shortfall owing to low trading volumes, Transco’s shareholders agreed to cover any shortfall from trading revenue. This pricing methodology ensures cost recovery whilst facilitating trade through the transmission line.
While the CLSG project structure does not involve any private investment, in principle a similar structure could be adopted to implement the IPT model; for example, by replacing government-owned shareholders of Transco with private sector sponsors.
To a limited extent this was the structure adopted by the Central American Electricity Interconnection System (SIEPAC) which was taken into account in structuring the CLSG project. The SIEPAC transmission company (EPR),owns the 1,793 km interconnector (230 kV) linking the power grids of six Central American countries. EPR is owned by eight national utilities or transmission companies together with a private company (ENDESA of Spain) which is responsible for managing EPR. During the project design stage, the option of relying entirely on private investment was considered, but it was ultimately decided that there might not be sufficient interest from the private sector due to perceived project risks and the natural monopoly nature of transmission. Nevertheless, there seems to be no reason why, through proper risk management and with adequate financial incentives, such a structure could not be adopted with entirely private ownership.
Regulatory and legal challenges
In many developing countries, the electricity sector remains vertically integrated with monopoly networks. Although full “unbundling” is not a necessary pre-condition for IPT projects, existing legislation and regulation will need to be reviewed and may need to be revised to enable an IPT project to operate alongside the national utility. In particular, the grid code will likely need to be modified to include operating procedures and principles. In the context of an interconnection project, this will need to be done for each country to which it connects and could be cumbersome and result in a long development period.
This challenge was highlighted by the North Core Interconnector Project (a 330 kV AC transmission line connecting Nigeria, Niger, Benin and Burkina Faso). According to the ECOWAS Master Plan, the SPV structure adopted in the CLSG project was originally considered for the North Core project but was ultimately not adopted owing to concerns over the delay that could be caused by the need to make adjustments to national legal frameworks.
In civil law jurisdictions, specific enabling legislation may also be required to implement interconnector projects. Conflicts of law and policy questions may also arise where cross-border agreements are entered into; for example, some provisions of law may have mandatory application in certain jurisdictions; and where state-owned entities are involved, legal or policy requirements may dictate a choice of a particular governing law or dispute resolution arrangement.
“Project-on-Project” risk
For a cross-border interconnector, separate SPVs (or “sub-projects”) may be established in each relevant jurisdiction. This approach offers several benefits, including ring-fencing national risks, aligning with local licensing requirements and facilitating construction delivery management. However, it also introduces a high degree of interdependency, as each project segment must be successfully completed for the overall project to function. This creates challenges in managing interface risks, project delivery alignment and providing certainty for stakeholders in each sub-project that the other sub-project(s) will be delivered as planned.
To address these risks, risk allocation between project sponsors and other contract parties must be carefully calibrated to ensure that risk levels are acceptable to all stakeholders while achieving the bankability of the project.
Financial viability
The CLSG project provided an example of how transmission tariffs can be set to meet minimum revenue requirements. Investors, however, need confidence that contractual payments will be received from the transmission line users, which are likely to be national utilities, who may be in poor financial health. Many developing countries have experience in addressing this question in the context of independent power projects (IPPs), which may provide valuable lessons for developing IPT projects. For example, credit support may be provided through the use of escrow accounts to prioritise payments to private sector market participants. Where this is insufficient, governments may provide sovereign guarantees (or other government support) for payment obligations to IPTs. Additional security may also be provided by development finance institutions (DFIs).
EPC contract questions
The structuring of an interconnector project may present challenges in negotiating an EPC contract. For example, where multiple procuring parties decide to use a single entity (e.g., a special purpose vehicle company) to act as the employer under an EPC contract, with assets transferred to them as third party owners, particular concerns may arise for both the procuring parties and the contractor under the EPC contract, including in respect of risk allocation, indemnities, insurance and ensuring that the asset owners obtain the full benefit of rights under the EPC contract whilst the EPC contractor maintains adequate recourse against parties of sufficient financial substance; and bespoke amendments are likely to be required to standard construction contracts, e.g., those based on FIDIC forms.
The European interconnector experience and project revenue support regimes
The European market offers examples of successful privately financed submarine HVDC interconnector projects, underpinned by revenue support arrangements to make investment sufficiently attractive to sponsors and risks more palatable to prospective lenders.
The NeuConnect interconnector will create the first direct power link between Germany and the UK, two of Europe’s largest energy markets, and allowing trading of electricity between them. Construction of the pair of 725 km long terrestrial and subsea 525 kV HVDC cables is in progress and will create 1.4 GW of transmission bi-directional transmission capacity, sufficient to power 1.5 million homes.
The project has a capital cost of around £2.4 billion and achieved financial close in 2022, involving Meridiam, Allianz Capital Partners, Kansai Electric Power Grid and TEPCO Power Grid as sponsors and a consortium of more than 20 major banks and financial institutions as lenders (including EIB and JBIC). NeuConnect Britain Ltd. (NBL), incorporated in England, is responsible for all aspects of the project in the UK (as well as construction works in Dutch waters) while NeuConnect Deutschland GmbH & Co. KG, incorporated in Germany, is responsible for all aspects of the project in Germany.
NeuConnect states that it will facilitate non-discriminatory, fair and transparent access to capacity through a range of standardised auctioned products, detailed in Access Rules which are compliant with relevant regulations. The project however takes limited merchant risk as its revenues are underpinned by a 25 year cap and floor regime in the UK, which broadly covers 50% of project costs and 50% of the total revenues earned by the interconnector. Under this scheme, the project is entitled to a minimum revenue (the “notional floor”) but in return agrees to a defined cap above which all revenues will in effect be paid back to the electricity consumers. This mechanism is intended to ensure that end-consumers obtain value for money by capping investment returns if the project outperforms revenue expectations in exchange for the protection granted through the floor, with an element of commercial risk for the project in between, thereby providing an incentive for private investors to develop interconnector projects, as compared with other regimes where revenues are purely regulated and return on equity is generally insufficiently attractive.
Ofgem approved regulatory changes to the pre-existing UK cap and floor regime to allow the project to go ahead. Meanwhile, in Germany, legislative change was needed to accommodate the project. Pre-existing German legislation (the EnWG law) did not cover interconnector assets that were not owned by a German TSO, requiring an amendment to extend the German StromNEV regime to NeuConnect. Under this regime, the project receives statutory revenues based on its assessed cost base, including depreciation of the RAB and return on such RAB (differentiated between equity and debt). NeuConnect receives its regulatory revenues from TenneT TSO GmbH, the local transmission system operator in northern Germany.
In both jurisdictions, it is understood that the revenue support arrangements are adjusted based on the level of availability of the interconnector in order to incentivise the project to maximise availability.
Threats
Recent geopolitical events have highlighted the vulnerability of subsea data cables, gas pipelines and submarine electricity cables to deliberate sabotage or damage from ships’ anchors. It seems unlikely that insurance will be available for such risks and unless governments are willing to underwrite remediation costs and lost revenues, future private investment in submarine HVDC cables may be thrown into doubt in vulnerable areas of the world.
Conclusions
While AC power transmission and distribution systems are likely to remain for many years to come and may never be entirely replaced, HVDC is certain to play a vital role in providing backbone infrastructure to support a low carbon future. Investors, lenders, utilities, regulators and policymakers alike will be taking a keen interest in this exciting technology.
Endnote
[1] Outside Europe, where interconnectors are subject to regulation unless they are formally exempted. Even in the latter case, conditions may be placed on the exemption, such as an overall IRR cap.
Healthcare Preview for the Week of: May 12, 2025 [Podcast]
Reconciliation Text Is Here
Late Sunday night, May 11, 2025, the House Committee on Energy and Commerce released the much-anticipated budget reconciliation bill text ahead of its scheduled markup on May 13, 2025.
While the Congressional Budget Office (CBO) has not yet released a score, we expect that it will do so before the markup. In the meantime, CBO provided a letter to Energy and Commerce Chairman Guthrie confirming that the committee exceeds the $880 billion in federal savings that the House budget resolution instructed the committee to find. The vast majority of the bill’s policies and savings are in the Medicaid program, some of which were expected, including:
Establishing new work requirements in Medicaid (called “community engagement requirements” in the legislative language)
Repealing the Biden-era eligibility rules and nursing home staffing rule
Additional Medicaid policies include:
Prohibiting gender transition procedures, focused on minors
Restricting coverage of undocumented immigrants by reducing the federal match for the expansion population to 80% if the state covers undocumented immigrants with state-only funds, and checking immigration status sooner than 90 days
Implementing new cost-sharing requirements and verifying eligibility every six months for the expansion population
Banning spread pricing by pharmacy benefit managers (PBMs) and prohibiting PBM compensation based on the price of a drug as a condition of entering into a contract with a prescription drug plan in Medicare
The legislation also includes versions of policies that remain highly contested among many stakeholders, including:
Implementing a moratorium on new state directed payments (SDPs) that exceed the Medicare rate, as opposed to adjusting existing SDPs that go up to the average commercial rate
Introducing a moratorium on new or increased provider taxes, as opposed to reducing or removing existing provider taxes
Closing the managed care organization (MCO) provider tax “broad based” loophole, which is expected to impact seven of the 20 states that use MCO provider taxes (California, Illinois, Massachusetts, Michigan, New York, Ohio, and West Virginia)
You can brush up on these policies and more in our Medicaid Restructuring Options document.
The bill includes additional provisions outside of Medicaid. For example, it would codify the March 2025 Affordable Care Act program integrity proposed rule, which includes provisions to roll back certain special enrollment periods, impose new premium payments for certain individuals, prohibit states from providing coverage for sex-trait modification as an essential health benefit, and exclude Deferred Action for Childhood Arrivals recipients from the definition of “lawfully present.” It proposes a short term “doc fix,” which would establish a single conversion factor for clinicians who are qualifying participants in Advanced Alternative Payment Models and those who aren’t, and would set the update to the single conversion factor at 75% of the Medicare Economic Index (MEI) in calendar year (CY) 2026 and at 10% of the MEI for CY 2027 and future years. The bill would also prevent disproportionate share hospital payment cuts until 2029.
This bill is still in the early stages of committee processes, and we still need to see CBO estimates for federal savings and coverage changes (likely decreases). The committee markup will likely last well into the evening on Tuesday, with Democrats offering amendments and critiques. Assuming the bill passes committee, it will then need to be stitched together with the other bills that make up reconciliation for consideration on the House floor.
We are also waiting for additional language and official notice of a markup from the House Committee on Ways and Means, which has jurisdiction over the Medicare program. Its early release of language was incomplete. House Speaker Mike Johnson has indicated a desire to get the reconciliation package through the House by the Memorial Day recess.
Outside of reconciliation, the Senate Committee on the Judiciary will hold a hearing on PBMs, and the House Committee on the Judiciary, Subcommittee on Administrative State, Regulatory Reform, and Antitrust will hold a hearing on graduate medical education and evaluating the medical residency antitrust exemption.
US Department of Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. will testify on Wednesday, for the first time as the HHS Secretary, before the House Appropriations Committee and the Senate Committee on Health, Education, Labor, and Pensions on the president’s fiscal year 2026 proposed HHS budget.
Secretary Kennedy along with Centers for Medicare & Medicaid Services Administrator Mehmet Oz participated in a press conference on Monday morning as President Trump signed a new executive order requiring the establishment of “most-favored-nation” pricing for prescription drugs.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the released text of the House Energy and Commerce Committee’s reconciliation language and what comes next.
EPA Postpones TSCA PFAS Reporting Period to April 2026
The U.S. Environmental Protection Agency announced on May 12, 2025, an interim final rule that would extend the dates of the reporting period for data submitted on the manufacture of perfluoroalkyl or polyfluoroalkyl substances (PFAS) under the Toxic Substances Control Act (TSCA). Under the interim final rule, the data submission period would begin April 13, 2026, and end October 13, 2026. Small manufacturers reporting exclusively as article importers would have until April 13, 2027, to report. According to EPA, the extension will allow it to develop and test further the software being used to collect data from manufacturers, “thereby providing critical feedback to EPA, including what additional guidance would be useful for the reporting community.” A pre-publication version of the interim final rule, which is scheduled to be published on May 13, 2025, has been posted. Publication of the interim final rule in the Federal Register will begin a 30-day comment period.
According to the interim final rule, the current reporting start date of July 11, 2025, does not allow EPA time to conduct industry beta testing of the Central Data Exchange (CDX) application and incorporate feedback prior to the start of the submission period. EPA states that “[w]ithout a period of industry beta testing as previously planned, the current reporting timeline is no longer tenable, and maintaining that timeline would require entities to submit data before EPA has sufficiently verified that the technological capacity is in place to accept that data. This would negatively impact EPA’s ability to collect, organize, and make the collected data available to the public, which is the underlying objective of the regulation as well as the Congressional direction that required its promulgation.”
According to the interim final rule, EPA is separately considering reopening certain aspects of the rule to public comment. EPA states that the delayed reporting date ensures that it has adequate time to consider the public comments and propose and issue any final modifications to the rule before the submission period begins. EPA notes that at this time, however, it “is not reopening or reconsidering any provisions of the underlying reporting rule other than the submission period dates.” As reported in our May 4, 2025, blog item, on May 2, 2025, a coalition of chemical companies submitted a TSCA Section 21 petition seeking “the typical TSCA 8(a) reporting exemptions (e.g., by-products, impurities, articles, [research and development (R&D)] materials, and a production volume threshold)” that apply in other TSCA Section 8(a) reporting rules.” EPA’s April 28, 2025, announcement outlining upcoming Agency actions to address PFAS includes implementing TSCA Section 8(a)(7) “to smartly collect necessary information, as Congress envisioned and consistent with TSCA, without overburdening small businesses and article importers.” More information on EPA’s reporting rule is available in our October 3, 2023, memorandum.
Commentary
It has been widely speculated that the Trump Administration would delay the PFAS reporting requirements and/or substantively amend the rule to relieve the reporting burden. This forthcoming Federal Register notice answers the first question and states that EPA is considering “reopening certain aspects of the rule to public comment.” While it remains unclear what EPA may be considering revising, should EPA reopen the rule for comment more broadly, it is certain EPA will get an earful during the comment period on what EPA should do to right side the rule.
House Bill 47 Delays Effective Date for North Carolina’s New Building Code
Recent media coverage of the Hurricane Helene Mountain Recovery Bill left out a critical piece of news for construction industry stakeholders.
House Bill 47 (“H47”) was signed into law (Session Law 2025-2) by Governor Stein on March 20. The bill’s official name is the Disaster Recovery Act of 2025–Part I, but it is more commonly known as the Hurricane Helene Mountain Recovery Bill.
The new law appropriates $524 million to fund homebuilding, agricultural recovery, and infrastructure repairs in the mountains related to the storm damage. It also sends a much-delayed $217 million to Eastern North Carolina for use in home replacement and other infrastructure repairs needed as a result of Hurricane Florence and other storms.
That’s what the media has covered.
New Building Code Delayed
Another key provision—largely absent from media coverage—involves a change to the building code that is particularly relevant to construction companies, developers, and local governments.
Senator Tim Moffit (R-Henderson, Polk, and Rutherford Counties) marshaled support for an amendment to H47 that would pause new building code regulations. The relevant provisions begin at Section 5.12 (page 21).
The takeaway is that the 2024 North Carolina State Building Code (“New Code”), scheduled for implementation this year, has been delayed by at least 12 months. North Carolina was set to adopt the New Code standards on July 1, 2025.
H47 moves that date into 2026.
The new law delays the implementation to a date 12 months after the State Fire Marshal (a) certifies that the New Code has been published and distributed to specified state and local officials and made available for purchase by members of the general public and (b) certifies that the Residential Code Council has been fully formed and organized.
In an April 7 press release, the Office of the State Fire Marshal forecasted that the new building code would be available for distribution to state and local officials by July 31, 2025, but noted that the formation of the Residential Code Council was outside of its control and depends on appointments made by the Governor and the General Assembly.
Accordingly, the earliest effective date for the New Code appears to be July 31, 2026.
With the delay, the 2018 North Carolina State Building Code remains in effect. However, as noted by the Office of the State Fire Marshal, the 2024 Code may still be used as an alternative method of construction if requested by the building owner or their agent.
Changes Can Still Occur
Whether the delay will allow the Building Code Council time to revise the New Code remains to be seen. As a result of H47, those monitoring code changes should not expect updates this year.
This delay is likely just one part of the broader building code review process, and additional changes may emerge between now and July 2026. We will continue to monitor and share updates as they become available.
White House Council on Environmental Quality Releases Draft NEPA Template Following CEQ’s Rescission of Longstanding Regulations
Last week, several news outlets reported that the White House Council on Environmental Quality (CEQ) circulated a draft template dated April 8, 2025 among federal agencies to assist in updating their procedures for implementing the National Environmental Policy Act (NEPA). CEQ included a cover letter with the template clarifying that federal agencies may adopt, modify, or disregard the suggested procedures, which do “not establish new requirements, create legal obligations, or represent CEQ’s final position on how agencies should implement NEPA.”
Nonetheless, the draft template includes notable potential departures from NEPA practice under CEQ’s previous regulations — originally adopted in 1978 — and appears to prioritize shorter environmental review periods and greater adherence to statutory time limits, while narrowing opportunities for public input.
Background: CEQ Authority and Recent NEPA Developments
Since the late 1970s, CEQ’s authority to issue binding NEPA regulations has been widely accepted, but as we reported last November and February, that assumption has recently been challenged. In 2024, several federal courts issued rulings finding that CEQ’s regulatory authority was insufficient to permit CEQ to issue binding regulations. And in January 2025, President Trump issued Executive Order 14154 (Unleashing American Energy), expressly directing CEQ to rescind all of its NEPA regulations.
In turn, starting in February 2025, CEQ initiated a process to rescind its longstanding NEPA regulations, and the regulations’ recission became final on April 11, 2025. During the preceding 30-day comment period, CEQ reportedly received more than 90,000 comments, for which it is currently formulating responses. CEQ is now working with federal agencies to realign their NEPA implementing procedures with the NEPA statute and the directives in the Executive Order; CEQ’s April 8, 2025 draft template is part of this effort.
Key Elements of the Draft Template
CEQ describes the draft template as preliminary and subject to further revision, but it nonetheless includes provisions that could reconceptualize how federal agencies conduct NEPA reviews. Key elements include:
Definition of “Major Federal Action.” Agencies are encouraged to adopt a “presumptive (but nonbinding) monetary threshold,” based on project cost of economic impact, above which an action would be deemed “major” for NEPA purposes. Under the recently rescinded CEQ NEPA regulations, a “Major Federal Action” referred to an activity or decision subject to substantial Federal control or responsibility and was generally defined to include certain categories of projects, such as grants of permits or adoption of polices, plans, or programs, or where the Federal agency was “[p]roviding more than a minimal amount of financial assistance” and had the authority to deny that assistance.
Optional Public Comment and Draft Publication. Agencies are required to solicit input only from other federal, state, tribal, and local agencies with jurisdiction or special expertise, and “may” request public comments. Agencies “may” release a pre-decisional draft environmental document for public comment but are not required to do so. Further, agencies are only required to solicit public feedback during the “scoping” stage of the action. This is a departure from a longstanding requirement under the NEPA regulations to publish a draft analysis and solicit public comment on the draft before preparing the final document.
Strict Adherence to Statutory Timeframes. The template emphasizes that an Environmental Assessment (EA) (i.e., shorter analyses for actions that do not have reasonably foreseeable impacts on the environment, or for which impacts are unknown) should be completed in one year, and an Environmental Impact Statement (EIS) (i.e., full analyses for actions that have reasonably foreseeable impacts) should be completed in two years. Agencies are instructed to issue the analyses “in as substantially complete form as is possible” at the end of the applicable timeframe unless they secure a deadline extension. This provision reasserts the statute’s requirements as reflected in 42 U.S.C. § 4336a(g)(1). However, in contrast to the prior NEPA regulations, the draft template reduces the bases under which an agency may extend the completion timeframe.
Page Limits.The template recommends that EAs not exceed 75 pages and EISs be limited to 150 pages (with extensions up to 300 pages where justified). Agencies are expected to certify that the analyses reflect a good faith effort to balance NEPA’s key considerations with the recommended page limits. This provision reiterates the statute’s page limits as reflected in 42 U.S.C. § 4336a(e).
Implications and Next Steps
The proposed approach marks a departure from four decades of NEPA practice, especially regarding the timing and circulation of draft environmental documents and formal opportunities for public comment.
At this stage, it is unclear whether federal agencies will incorporate the template’s recommendations into their respective, revised agency procedures. CEQ has characterized the draft template as a preliminary document, and further modifications may follow as agencies provide feedback.