Appeals Court Shines Light on Solar Panel Protections
Kearsarge Walpole LLC v. Zoning Board of Appeals of Walpole involved a dispute over where a large-scale solar array could be placed in Walpole, Massachusetts. In Kearsarge, a solar developer (Kearsarge), along with Norfolk County Agricultural High School (Norfolk Aggie), and Norfolk County, entered into an agreement to construct a solar facility on the Norfolk Aggie campus, which is located in Walpole’s rural residential zoning district.
Kearsarge applied to the Walpole building commissioner for a building permit. The commissioner denied the permit, deeming the project a nonconforming use under Walpole’s zoning bylaw. The Walpole Planning Board upheld the commissioner’s decision, finding that the project was a nonconforming use and did not qualify for any exception from the Walpole zoning bylaw, which established that large-scale solar facilities be located within certain overlay districts. Kearsarge appealed to the Land Court, arguing that the project was exempt from Walpole’s restrictions pursuant to the “Solar Energy Provision” of G. L. c. 40A, § 3.1 Kearsarge also argued that the project was exempt under the “Education Provision” of G. L. c. 40A, § 3.2
The Land Court granted summary judgment in favor of Kearsarge, reasoning that the board’s decision indeed violated the Solar Energy Provision. However, the Land Court rejected Kearsarge’s assertion that the project constituted an educational use.
The Appeals Court affirmed the Land Court, applying the doctrine set forth in Tracer Lane II Realty, LLC v. Waltham, 489 Mass. 775, 781 (2022). Under Tracer Lane, the Court’s determination hinged on “whether the interest advanced by the ordinance or bylaw outweighs the burden placed on the installation of solar energy systems.” In Tracer Lane, the Court of Appeals ruled that Waltham’s near total ban on solar facilities (except in “one to two” percent of the city’s land area) constituted a violation of the Solar Energy Provision.
Here, Walpole argued that its zoning bylaw (which also restricted solar facilities to less than 2% of the town) was different than Waltham’s law given that the Waltham bylaw amounted to a blanket ban on solar facilities while the Walpole law allowed for expansion of the overlay districts wherein solar facilities were permitted. The Court rejected this argument holding that a town need not impose a blanket ban on solar facilities to violate the Solar Energy Provision. Rather, the Solar Energy Provision prohibits local ordinances that “unduly restrict . . . solar energy systems.” Walpole’s bylaw, by requiring “discretionary zoning relief” in order to construct solar facilities in all but 2% of the city constituted such an undue restriction – especially where expansion of the overlay districts would require an applicant to “petition to amend the Walpole zoning bylaws [by] submit[ing] their proposed amendment to a public hearing and town vote.” This, in the Court’s view was “a significant hurdle.” The Court also rejected Walpole’s argument that the interests advanced by its bylaw (protecting agriculture) promoted public health, safety, and welfare sufficient to justify that significant burden on solar development. According to the Court, “[t]he record . . . [did] not support a conclusion that a bylaw this stringent is necessary to protect the public health, safety, or welfare interests that Walpole seeks to promote.”
Kearsarge is another instance where the Appeals Court makes clear that Massachusetts courts will not hesitate to reign in local authority in the interest of enforcing the Solar Energy Provision.
1 Pursuant to Mass. Gen. Laws Ann. c. 40A, § 3, Ninth Paragraph, “[n]o zoning ordinance or by-law shall prohibit or unreasonably regulate the installation of solar energy systems or the building of structures that facilitate the collection of solar energy, except where necessary to protect the public health, safety or welfare.”
2 Under Mass. Gen. Laws Ann. c. 40A, § 3, Second Paragraph, “[n]o zoning ordinance or by-law shall regulate or restrict the interior area of a single-family residential building nor shall any such ordinance or by-law prohibit, regulate or restrict the use of land or structures for religious purposes or for educational purposes . . .”
New Extended Producer Responsibility Requirements for Companies Selling Tobacco and Nicotine Products in Single-Use Packaging
A wave of new “Extended Producer Responsibility” or “EPR” programs is beginning to impact companies placing packaged products, including tobacco products, on the market in U.S. states, including California, Colorado, Maine, Minnesota, and Oregon.
The five EPR programs for packaging enacted thus far have different facets. However, at their core, each of the EPR programs requires companies that sell packaged products (with some limited exceptions) to join a newly formed, state-recognized organization (typically called a “Producer Responsibility Organization” or “PRO”) and pay annual dues based on the amount and type of packaging placed on the market in that state. California’s PRO, for one, must collect $500,000,000 annually from producers of covered products, like single-use packaging. Producers also will need to eventually meet certain sustainability goals for single-use packaging, such as ensuring compostability or recyclability of packaging or meeting minimum post-consumer recycled content targets. What is more, the EPR programs encompass not just primary packaging that directly contacts a good, but often shipping and display packaging as well.
As noted above, the EPR program obligations typically fall on the “producer” of the covered product. In the case of single-use packaging, the states have generally defined producer to mean the brand owner that places a packaged good on the market. For example, an e-cigarette or nicotine pouch company that sells or distributes its branded (tobacco-flavored) e-cigarette or pouch in California would be considered the “producer” of any single-use packaging associated with the finished product, even if the e-cigarette or pouch company did not manufacture the packaging itself. Accordingly, it is the companies marketing the finished products, not packaging companies, that will need to register as producers of tobacco product packaging in the states with packaging EPR programs.
Certain state EPR programs – including Colorado’s and Minnesota’s – also include “paper products” as a covered product. While tobacco companies making roll-your-own (RYO) papers and other such paper-based products may be able to avail themselves of certain exemptions, they must assess this on a case-by-case basis.
In this regard, the state EPR programs include various exemptions for producers and covered products, such as exemptions for small-volume producers and exemptions for certain types of packaging, like infant formula packaging. However, the existing EPR laws do not include any explicit exemptions for tobacco product packaging or paper used in tobacco products. Accordingly, absent another applicable exemption, tobacco product manufacturers are likely to meet the producer definition under the state EPR laws, and thus will need to register with applicable state PROs, pay dues based on the product packaging sold in the state, and eventually meet certain goals for the packaging.
In complying with the state EPR schemes, the tobacco and nicotine product industries can expect to face not only supply chain challenges (e.g., the availability of post-consumer recycled content), but also possibly significant regulatory hurdles under the Family Smoking Prevention and Tobacco Control Act. Under the EPR programs, producers may need to make changes to product packaging to meet sustainability targets. Changes to the container-closure system for a legally marketed tobacco product may well require a new premarket authorization from the U.S. Food and Drug Administration (FDA), which can be a costly and timely endeavor.
In terms of implementation timelines, the states will be rolling out their EPR requirements on differing schedules. The deadline for producers to register with Colorado’s PRO occurred on October 1, 2024, while in California, a deadline to register with the PRO has not been established, but the state has proposed a rule that would require producers to register with CalRecycle later this year. Eventually, producers of covered products will be prohibited from selling in states with EPR programs unless they are registered and participating in the programs.
EPR programs for packaging are likely to spread. Numerous other states have considered or are now considering EPR bills, including New York and New Jersey.
Biden Administration Releases Executive Order Advancing Artificial Intelligence
Highlights
The Biden administration’s latest executive order represents a transformative step in the U.S.’ approach to AI, integrating innovation with sustainability and security
Businesses will have an opportunity to align with this strategic vision, contribute to an ecosystem that will sustain U.S. leadership, and encourage economic competitiveness
The principles outlined in the executive order will guide federal agencies to ensure AI infrastructure supports national priorities while fostering innovation, sustainability, and inclusivity
On Jan. 14, 2025, President Biden issued an executive order on advancing the United States’ position as a leader in the creation of artificial intelligence (AI) infrastructure.
AI is a transformative technology with critical implications for national security and economic competitiveness. Recent advancements highlight AI’s growing role in industries and areas including logistics, military capabilities, intelligence analysis, and cybersecurity. Developing AI domestically could be essential in preventing adversaries from exploiting powerful systems, maintaining national security, and avoiding reliance on foreign infrastructure.
The executive order posits that to secure U.S. leadership in AI development, significant private sector investments are needed to build advanced computing clusters, expand energy infrastructure, and establish secure supply chains for critical components. AI’s increasing computational and energy demands necessitate innovative solutions, including advancements in clean energy technologies such as geothermal, solar, wind, and nuclear power.
The executive order notes:
National Security and Leadership
AI infrastructure development should enhance U.S. national security and leadership in AI, including collaboration between the federal government and the private sector; ensuring safeguards for cybersecurity, supply chains, and physical security; and managing risks from future frontier AI capabilities.
The Secretary of State, in coordination with key federal officials and agencies, will create a plan to engage allies and partners in accelerating the global development of trusted AI infrastructure. The plan will focus on advancing collaboration on building trusted AI infrastructure worldwide.
Economic Competitiveness
AI infrastructure should also strengthen U.S. economic competitiveness by fostering a fair, open, and innovative technology ecosystem by supporting small developers, securing reliable supply chains, and ensuring that AI benefits all Americans.
Clean Energy Leadership
The U.S. aims to lead in operating AI data centers powered by clean energy to help ensure that new data center electricity demands do not take clean power away from other end users or increase grid emissions. This involves modernizing energy infrastructure, streamlining permitting processes, and advancing clean energy technologies, ensuring AI infrastructure development aligns with new clean electricity generation.
The Department of Energy, in coordination with other agencies, will expand research and development efforts to improve AI data center efficiency, focusing on building systems, energy use, cooling infrastructure, software, and wastewater heat reuse. A report will be submitted to the president with recommendations for advancing industry-wide efficiency, including innovations like server consolidation, hardware optimization, and power management.
The Secretary of Energy will provide technical assistance to state public utility commissions on rate structures, such as clean transition tariffs, to enable AI infrastructure to use clean energy without raising electricity or water costs unnecessarily.
Cost and Community Considerations
Because building AI in the U.S. requires enormous private-sector investments, the AI infrastructure must be developed without increasing energy costs for consumers and businesses. Companies participating in AI development, clean energy technology, and grid and semiconductor development can work with federal agencies to strategically further these initiatives that align with broader ethical and operational standards.
The Secretaries of Defense and Energy will each identify at least three federally managed sites suitable for leasing to non-federal entities for the construction and operation of frontier AI data centers and clean energy facilities. These sites should aim to be fully permitted for construction by the end of 2025 and operational by the end of 2027.
Priority will be given to locations that 1) have appropriate terrain, land gradients, and soil conditions for AI data centers; 2) minimize adverse impacts on local communities, natural or cultural resources, and protected species; and 3) are near communities seeking to host AI infrastructure, supporting local employment opportunities in design, construction, and operations.
Worker and Community Benefits
AI infrastructure projects should uphold high labor standards, involve close collaboration with affected communities, and prioritize safety and equity, ensuring the broader population benefits from technological innovation.
The Director of the Office of Management and Budget, in consultation with the Council on Environmental Quality, will evaluate best practices for public participation in siting and energy-related infrastructure decisions for AI data centers. Recommendations will be made to the Secretaries of Defense and Energy, who will incorporate these into their decision-making processes to ensure effective governmental engagement and meaningful community input on health, safety, and environmental impacts.
Relevant agencies will prioritize measures to keep electricity costs low for households, consumers, and businesses when implementing AI infrastructure on Federal sites.
Takeaways
The U.S. is committed to enabling the development and operation of AI infrastructure, including data centers, guided by five key principles: 1) national security and leadership; 2) economic competitiveness; 3) leadership in clean energy; 4) cost and community consideration; and 5) workforce and community benefits.
The Biden administration’s latest initiative aims to foster a competitive technology ecosystem, enable small and large companies to thrive, keep electricity costs low for consumers, and ensure that AI infrastructure development benefits workers and their local communities.
How Employers Can Aid Employees Impacted by the Los Angeles Wildfires
Over the past two weeks, wildfires have caused substantial loss and damage to homes and communities in Los Angeles, California, and the surrounding areas. In the wake of such devastation, employers may seek opportunities to provide financial assistance to impacted employees. Fortunately, the Internal Revenue Service (IRS) has outlined various ways for employers to provide much-needed assistance to employees impacted by natural disasters like the wildfires, including tax-free qualified disaster relief payments, leave donation programs, and other tax-efficient options.
In Depth
QUALIFIED DISASTER RELIEF PAYMENTS
Generally, payments made by an employer to, or for the benefit of, an employee must be included in the employee’s taxable gross income unless excluded under another provision. One such exclusion is “qualified disaster relief payments” under Section 139 of the Internal Revenue Code. Employers can make “qualified disaster relief payments” to employees who are victims of many disasters, including the Los Angeles wildfires, on a tax-free basis.
Qualified disaster relief payments include both reimbursements and cash advances and are not treated as taxable income/wages subject to payroll taxes (e.g., Federal Insurance Contributions Act and Federal Unemployment Tax Act) for employees. In addition, employers can deduct these payments as ordinary and necessary business expenses.
A payment qualifies as a “qualified disaster relief payment” if the following requirements are satisfied:
There has been a “qualified disaster” (e.g., a federally declared disaster issued by the president of the United States).
The payment is intended to cover reasonable and necessary personal, family, living, or funeral expenses, or reasonable and necessary expenses incurred for repairing or replacing a personal residence or its contents, provided the expenses were incurred as a result of the qualified disaster and are not covered by insurance or other resources.
The payment is not income replacement (i.e., a payment for lost wages, lost business income, or unemployment benefits).
Qualified disaster relief payments do not need to be paid pursuant to a plan document. In fact, a formal written plan document is not required or recommended. Nevertheless, given the benefits of tax-free status for qualified disaster relief payments, employers that choose to provide such payments should consider adopting an administrative process to validate such payments meet the necessary legal requirements. Such a process can include a short application form for assistance that validates the disaster for which relief is sought, contains an affirmative statement from the employee that the requested funds are necessary for expenses associated with the Los Angeles wildfires, and confirms that such expenses are not reimbursable by insurance.
In addition, employees are not required to account for actual expenses in order to qualify for the exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred. Although substantiation is not required, a simple application/attestation statement from the employee is recommended to provide the employer with assurance regarding its compliance with the legal requirements for offering these payments on a tax-free basis.
LEAVE DONATION PROGRAMS
Since the wildfires have been federally declared a natural disaster, an employer may establish “leave banks” for employees to donate accrued but unused leave to other employees who may be affected by the wildfires. Employees who donate their accrued leave are exempt from taxes on those amounts, but those who receive the leave will incur payroll and income taxes for the time given. Employer-sponsored leave banks programs must be written and must meet certain requirements under IRS Notice 2006-59 to receive favorable tax treatment for both the donor and recipient employee.
RETIREMENT PLAN OPTIONS
An employer-sponsored defined contribution retirement plan can provide additional relief to “qualified individuals” impacted by a qualified disaster. A “qualified individual” is an individual whose principal residence during the incident period of any qualified disaster is in the qualified disaster area and the individual has sustained an economic loss by reason of that qualified disaster. Employer-provided retirement plans can provide the following options:
Distributions up to $22,000 per federally declared disaster, with no early withdrawal penalty. Such distributions must be taken within 180 days of the date the disaster was declared.
Increased maximum loan amounts equal to 100% of a participant’s account balance, up to $100,000.
Extended repayment period of one year for current outstanding loans (as of date such natural disaster was declared). In this case, employers can extend repayment of loans to January 8, 2026.
Employers will need to amend their retirement plans if their plans do not already have such disaster-related provisions. Such amendments must be made by the end of this year for employees to take advantage of these provisions.
SUMMARY
Employers seeking to provide financial assistance to employees should consider the various tax-advantaged programs made available by the IRS. Since the requirements of each program vary, it is important that employers properly structure these programs to comply with the necessary legal requirements.
Climate Reporting in 2025: Looking Ahead
In this alert, we reflect on recent climate reporting updates and analyze expectations for 2025 that are relevant for international businesses.
The global landscape is becoming increasingly uncertain in relation to climate reporting following litigation and a change of management at the SEC in the U.S., an expected rise of Blue State climate reporting requirements, combined with the UK and other jurisdictions’ adoption of the global standard setter ISSB’s climate reporting standards and the EU’s implementation of the Corporate Sustainability Reporting Directive (“CSRD”), amongst other initiatives. A worldwide rollout of climate change disclosure requirements has always been uneven, but these uncertainties create the potential for even greater fragmentation.
Businesses should carry out regular horizon scanning to keep abreast with the range of legislation and regulation that could impact them.
California Climate Disclosure Law 2024 Year End Developments
As we noted in detail in our prior Client Alerts, California Climate Disclosure Laws – New Developments, Old Timelines and California – First State to Enact Climate Reporting Legislation, the California climate disclosure laws (SB 253 and SB 261) were passed in October 2023 and amended by SB 219 in September 2024. SB 253 requires covered entities to disclose their Scope 1 and Scope 2 greenhouse gas (GHG) emissions by an unspecified date in 2026 for the prior fiscal year and by an unspecified date in 2027 for Scope 3 emissions, and SB 261 requires covered entities to report on their climate-related financial risks on or before January 1, 2026. California Air Resources Board (CARB) is required to promulgate regulations by July 1, 2025, to implement SB 253 (but is not required to promulgate implementing regulations for SB 261).
On December 5, 2024, CARB issued an enforcement notice to advise entities required to comply with SB 253 that CARB will exercise its enforcement discretion for the first reporting cycle in 2026 if the reporting entity demonstrates good faith efforts to comply with the requirements of SB 253. More specifically, a covered entity may disclose its Scope 1 and Scope 2 GHG emissions based on information the entity already possesses or is already collecting and CARB will not take enforcement action against any entity that makes incomplete Scope 1 and Scope 2 GHG emissions disclosures in 2026 if the entity makes a good faith effort to retain all data relevant to its GHG emissions reporting for its prior fiscal year.
To better inform CARB’s implementation of SB 253 and SB 261, on December 16, 2024, CARB issued a solicitation to gather responses from stakeholders to 13 questions. CARB’s questions cover applicability, including what should constitute “doing business in California,” how to minimize duplication of reporting efforts for entities required to report under other programs, whether to standardize certain aspects of Scope 1, 2 and 3 reporting under SB 253 and what is an appropriate timeframe within a reporting year for biennial reporting under SB 261, among others. CARB also expressly opened the solicitation to any additional feedback that should be considered by CARB in its implementation of SB 253 and SB 261. The comment period is open until February 14, 2025 and comments can be submitted to CARB here.
SEC Developments
It is no secret that the incoming Republican Administration has been skeptical of the federal government’s climate change measures, which brings further uncertainty to the SEC’s new climate change rules. To be sure, there was already uncertainty surrounding litigation in the U.S. Court of Appeals for the 8th Circuit over the rules’ validity.
The new SEC rules for many companies were scheduled to take effect for their 2025 fiscal years, resulting in disclosure in annual reports on Forms 10-K and 20-F filed in 2026. The SEC has voluntarily stayed the effectiveness of its new rules in light of the litigation. Since certain U.S. filers will be subject to the rules based on their operations this year if the stay is lifted, the SEC will undoubtedly announce a delay in the rules’ effective dates of at least one year even if the SEC is successful in the 8th Circuit.
The new Administration will have a few options. For example:
it can await the outcome of the litigation before deciding what, if anything, to do with the rules;
it could decide to leave the rules intact in light of domestic and international pressure. As the SEC clarified in adopting the rules that disclosure is triggered only by “material climate risks,” many U.S. public companies may not have to provide disclosure under the new rules;
it could modify the rules to eliminate more controversial elements but otherwise leave the rules intact; or
the new Administration could decide to vacate the rules.
The President-Elect had been critical of climate change measures in his campaign, but not all members of his team are necessarily against all climate change measures, there is international pressure to have some level of disclosure, and therefore it is challenging to make any general, sweeping prediction. We will potentially see some additional color on the President-Elect’s plans when the nominee for SEC Chairman testifies at Senate confirmation hearings.
We recommend that companies continue to prepare for the new requirements, perhaps at a slower pace. Even if the courts invalidate the SEC’s rules, or the SEC vacates them, certain states in addition to California are likely to ramp up their own requirements in order to fill the gap, and institutional investors may strengthen their proxy voting guidelines on the subject. Companies with operations in the EU may be subject to those disclosure requirements, which overlap significantly with the SEC’s requirements.
EU Unrest on Corporate Sustainability Reporting
The first reports under the CSRD will be published in 2025. There is a phased scoping of CSRD and the first reports, predominantly by EU companies that had been subject to the Non-Financial Reporting Directive, will be read with great interest to review how they have approached the CSRD’s complex double materiality assessment and the number of sustainability topics reported on, which businesses in scope of later phases of CSRD may be able to leverage before making their own reports. Challenges remain with CSRD reporting as further guidance and expectations are published on a piecemeal basis, and national transposing law of CSRD remains incomplete in a number of EU jurisdictions.
Businesses with international headquarters that may be subject to the 2028 year CSRD reporting (to be reported on in 2029) should be aware that there is a consultation expected imminently in 2025 on the global standards for such reporting. The signals sent so far suggest the potential availability of an opt-out mechanism for global businesses, enabling them to focus disclosures on the EU footprint of products and services, rather than on global operations. For further information, please see here: A Step Closer to CSRD’s Non-EU Group Reporting Standards.
There is also political turmoil in the EU that could impact climate reporting requirements in the EU; for example, the German Chancellor, Olaf Scholz, has called for a two-year delay to CSRD (despite the timeline having already been triggered). Furthermore, there have been calls for a simplification of corporate sustainability obligations for EU businesses, with the EU currently considering simplifying various existing sustainability-related regulations into a “single omnibus regulation” (“Omnibus Regulation”). This is being led by the European Commission President, Ursula von der Leyen, after criticism that the sustainability legislation is impacting the EU’s competitiveness. Proposals on the Omnibus Regulation, alongside other streamlining proposals for businesses, are expected to be proposed by the European Commission by mid-2025.
Businesses are recommended to keep careful track of CSRD developments and how it may shape their own approach to reporting or trigger the need to re-visit key areas.
UK – and Global – Momentum Towards ISSB
The UK government has been openly supportive of the International Sustainability Standards Board (“ISSB”) International Financial Reporting Standards (“IFRS”). On 18 December 2025, the UK’s Sustainability Disclosure Technical Advisory Committee published final recommendations to the UK government to endorse the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures for used in the UK, with some minor amendments.
A consultation is expected in Q1 2025, with any eventual roll out of the ISSB standards likely to mirror the phased implementation of TCFD, with UK-listed companies being subject to the requirements first.
There is broader global momentum towards ISSB adoption – including in Canada, Hong Kong and Japan. With the fragmented political landscape on ESG and competing sustainability regulatory requirements, it is likely that 2025 sees the continued rise of ISSB and it increasingly establishing itself as a common global standard following it subsuming responsibility for TCFD in 2023.
Biden Administration Issues Sweeping Salvo of Sanctions Against the Russian Energy Sector
On January 10, 2025, in a final action to, among other things, deter Russian aggression on the international stage, the US Department of the Treasury enacted sweeping new sanctions on the Russian energy sector. Specifically, the sanctions package includes:
Determination authorizing sanctions on any person to operate or have operated in Russia’s energy sector;
Determination banning provision of US petroleum services to Russia and
Imposition of blocking sanctions against major players in the oil and gas markets, vessels in the so-called “shadow fleet,” certain traders of Russian oil, Russian maritime insurers and Russian oilfield service providers.
Below we explain these actions and how they substantially increase the sanctions risks associated with Russian energy both for and beyond the directly impacted entities, as well as the General Licenses (GLs) that accompany the sanctions.
Russian Sanctions Regime Overview
On April 15, 2021, President Biden issued Executive Order (E.O.) 14024, “Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation,” which established a national emergency by which Treasury’s Office of Foreign Asset Controls (OFAC) could impose sanctions against individuals and entities furthering specified harmful foreign activities of Russia, with a focus on national security. This national emergency is separate from that related to the crisis in Ukraine, which is addressed in E.O. 13660 and its progeny.
Section 1(a)(i) of E.O. 14024 authorizes sanctions on certain sectors of the Russian economy as determined by Treasury and the State Department. Over the past four years, OFAC has used this authority to sanction numerous sectors of the Russian economy, such as the technology and defense sectors. However, concerns about disruptions to energy prices worldwide, and particularly in relation to European allies, has caused OFAC to stop short of sanctioning the entire Russian energy sector. Until now.
Energy Sector Sanctions (Energy Sector Determination)
Under the Energy Sector Determination OFAC has authority to sanction any party that it determines to operate or to have operated in the Russian energy sector. This determination, which took effect on January 10, 2025, exposes all persons in the energy sector to sanctions risk but it does not automatically impose sanctions on all such entities. FAQ 1214.
OFAC will, in the coming days, issue regulations defining impacted activities in Russia’s oil, nuclear, electrical, thermal and renewable sectors. FAQ 1213. This definition will be similar to the energy sector definition set forth under the Ukraine/Russia-Related sanctions in 31 CFR 589.311 but includes additional language identifying specific activities and petroleum products, reflecting developments since the Department of the Treasury issued the relevant determination on that issue pursuant to E.O. 13662 in 2014.
Prohibition on Petroleum Services to Russia (Services Determination)
The Services Determination, which comes into effect on February 27, 2025, prohibits US persons from providing, directly or indirectly, most petroleum services to Russia. OFAC plans to issue regulations defining “petroleum services” to include those related to oil exploration, production, refining, storage, transportation, distribution and marketing, among others. Significantly, however, OFAC confirmed this determination does not ban all US services for maritime transportation of Russian oil, provided services comply with applicable price caps and do not involve blocked parties. FAQ 1217.
Blocking Sanctions
In addition to these sectoral sanctions determinations, OFAC imposed blocking sanctions on numerous entities by adding them to the Specially Designated Nationals (SDN) list. Blocking sanctions freeze assets or other property of the SDN, and immediately impose a blanket prohibition against US entities, directly or indirectly, transacting with or for the benefit of the assets. This prohibition extends to entities owned more than 50 percent by SDNs. Further, US law makes it a crime to “violate, attempt to violate, conspire to violate, or cause a violation of any” US sanction, and US regulators interpret this language broadly to encompass any transaction in which a non-US entity causes the sanctioned funds of an SDN to pass through the US banking system by simply transacting in US dollars.
Notable new SDNs include:
183 vessels in the so-called “shadow fleet” that has been helping Russia evade sanctions, including vessels owned by Sovcomflot that had previously been protected by GL 93, which OFAC revoked as part of this sanctions package. In December 2024, the United Kingdom Office of Sanctions Implementation (OFSI) added 20 ships to its sanctions list, bringing the number of shadow fleet vessels sanctioned by the UK to 93.
Two of Russia’s biggest oil producers and exporters, Gazprom Neft and Surgutneftegas, and numerous subsidiaries. OFSI simultaneously imposed sanctions on these producers, on the same day that OFAC and OFSI signed a Memorandum Of Understanding outlining a framework for collaboration in the sanctions space.
A network of traders of Russian oil that are either linked to the Russian government or have otherwise suspicious ownership.
More than 30 Russian oilfield services providers.
Russian maritime insurers Ingosstrakh Insurance and Alfastrakhovanie.
Secondary Sanctions Risk
The impact of these determinations and updates to the SDN list, themselves sweeping, extend even beyond the impact described above through secondary sanctions, which are measures meant to deter third parties from transacting with directly sanctioned entities. Secondary sanctions impose penalties on entities that engage in the same dealings prohibited under primary sanctions, even when there is nothing in the transaction that triggers a US nexus, such as the involvement of a US person or US dollars. These sanctions are typically triggered upon a determination that a non-US entity has “knowingly” engaged in a “significant transaction” with an SDN. Secondary sanctions can range from denial of an export license or loans from US financial institutions to designating the third party an SDN in their own right, depending on the severity of the conduct.
General Licenses
In recognition of the significant impact of this raft of sanctions, OFAC issued several GLs in connection with these measures, mostly creating wind-down periods.
GL 8L authorizes wind down activities transactions with 12 enumerated financial institutions for a “any transaction related to energy” until March 12, 2025.
GL 115A authorizes wind down activities transactions with 12 enumerated financial institutions for transactions “related to civil nuclear energy” until June 30, 2025.
GL 117 authorizes the wind down of transactions involving Gazprom Neft, Surgutneftegas, and certain additional entities until February 27, 2025.
GL 118 authorizes certain transactions related to debt or equity of, or derivative contracts involving, Gazprom Neft, Surgutneftegas, and certain additional entities until February 27, 2025.
GL 119 authorizes certain transactions involving Gazprom Neft related to diplomatic and consular mission operations outside of Russia until February 27, 2025.
GL 120 authorizes limited safety and environmental transactions and the unloading of cargo involving certain newly sanctioned persons and vessels until February 27, 2025.
GL 121 authorizes provision of petroleum services for three projects until June 28, 2025: the Caspian Pipeline Consortium, Tengizchevroil, and Sakhalin-2.
Ultimate Impact
The effectiveness of these sanctions will ultimately be determined by the Trump administration, which will be responsible for either enforcing them or rolling them back. While the incoming administration has indicated an intent to roll back many Biden-era policies, it is impossible to predict to any degree of utility if and when these particular measures will be reversed. This is a fluid area, and companies potentially impacted by the sanctions should remain on high alert. At a minimum, any company that transacts in any way with the Russian energy sector should immediately evaluate their exposure and prepare for the sanctions to be enforced in full.
PHMSA Suggests Tighter CO2 Pipeline Safety Regulations Amid Growing Infrastructure for Carbon Capture
On January 15, 2025, the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation released a pre-publication version of a notice of proposed rulemaking (NPRM) that would propose new safety regulations for pipelines that transport carbon dioxide (CO2). The NPRM would extend PHMSA’s regulatory oversight to pipelines transporting CO2 in all phases, to include the first-ever safety requirements for pipelines transporting CO2 in gas and liquid-phase, while also reinforcing existing standards for transporting CO2 in its supercritical phase. This much-anticipated NPRM introduces several significant and targeted proposals that would create a uniform nationwide set of safety regulations for CO2 transportation by pipeline. Comments on the proposal will be due 60 days after the NPRM is published in the Federal Register.
Background on CO2 Pipelines
The U.S. Department of Energy (DOE) has projected a major expansion of the nation’s CO2 pipeline network, driven by global efforts to capture and store excess CO2. According to a December 2023 Congressional Budget Office report, the number of carbon capture and storage (CCS) projects is expected to increase nearly tenfold by 2050. A substantial increase in commercial development of CO2 pipelines has occurred in the past several years and is expected to continue.
Although CO2 pipelines historically have a clean safety record, a major incident, coupled with the expanding CO2 pipeline infrastructure, prompted PHMSA to revisit the need for targeted safety regulations for pipelines transporting all phases of CO2.
PHMSA’s Proposed Rule
While PHSMA has long regulated pipelines transporting CO2 in a supercritical phase (at a 90% or more concentration of CO2 in the product stream), PHMSA’s proposed rule expands its authority over CO2 pipelines significantly, in part to address the growing need for expanded carbon capture and storage (CCS) infrastructure, driven by significant new incentives from the President’s Bipartisan Infrastructure Law and the Inflation Reduction Act. If adopted, the rule will introduce several key changes, including:
The first-of-its-kind requirements for the design, installation, operation, maintenance, and reporting of CO2 gas and liquid-phase pipelines.
New guidelines for operators converting existing pipelines to transport CO2 in different phases.
Mandates for CO2 pipeline operators to train emergency responders and ensure access to CO2 detection equipment for effective emergency management.
Enhanced public communication protocols during emergencies.
Detailed vapor dispersion analysis requirements to safeguard public health and the environment in the event of a pipeline failure.
First-of-its-kind Requirements
The proposed rule will enhance safety standards for newly constructed, replaced, relocated, or converted CO2 pipelines through the introduction of updated fracture control requirements. Among the key provisions, operators would be required to evaluate and adjust pipeline toughness based on operating conditions, ensuring fracture arrest within specific pipe lengths (320 feet for 99% probability and 200 feet for 90%), conduct toughness tests per industry, and meet toughness requirements outlined in API Specification 5L, which could lead to mandated crack arrestors.
The proposed rule also seeks to add several new sections; §§ 195.263 (Fixed vapor detection and alarm systems), 195.309 (Spike hydrostatic pressure test), 195.429 (Maintenance and testing of fixed vapor detection and alarm systems), and 195.456 (Vapor dispersion analysis). Each of these proposed new regulatory sections introduce new concepts that are prescriptive in nature and may raise practical considerations that are ripe for comment and discussion with PHMSA as the rulemaking process progresses.
Operational Guidelines
PHMSA proposes enhanced requirements for pipelines converted to CO2 and hazardous liquid service under part 195. Operators seeking to convert a pipeline to CO2 transportation would need to meet design and construction standards from subparts C and D. Specifically, pipelines converted to CO2 service must undergo a spike hydrostatic pressure test before being placed into service. Additionally, operators would be required to conduct in-line inspections within 12 months and close-interval and coating surveys within 15 months of the service initiation. These measures are designed to ensure the integrity and safety of converted pipelines by identifying and addressing any defects or issues early on.
Training Key Individuals
PHMSA’s proposed rule includes three key safety improvements for CO2 and hazardous liquid pipelines. First, it calls for enhanced training for emergency responders, ensuring they have the necessary equipment and expertise to handle pipeline emergencies, particularly asphyxiation risks. Second, the proposal mandates additional safety equipment for operators, including tools to detect hazardous vapor and gas concentrations in excavated areas. Lastly, it requires pipeline operators to communicate with affected entities and the public during emergencies, ensuring clear and consistent messaging and coordination with emergency response organizations.
Enhanced Public Communication Protocols
PHMSA’s NPRM proposes enhanced emergency response plans for CO2 pipelines, building on the Valve Rule to address safety risks. The proposal includes additional training for emergency responders, requiring operators to provide equipment and training on CO2-related emergencies, including asphyxiation risks. It also mandates the provision of safety equipment in excavated trenches and tools for detecting hazardous vapor and gas concentrations. Lastly, operators would be required to communicate with affected entities, including the public, using population density data to ensure clear, coordinated messages during emergencies. These changes aim to improve emergency response effectiveness and public safety, but details surrounding the level of training and type of equipment provided to first responders remains unclear and will need to be flushed out in comments and public meetings as the rulemaking matures.
Detailed Vapor Dispersion Analysis
PHMSA is proposing new requirements for vapor dispersion analyses for hazardous liquid and CO2 pipelines. Operators would be required to update their models every 15 months, or at least once a year, to reflect updates to software and changes in relevant factors. These updates aim to ensure that operators’ assessments of pipeline segments potentially affecting High Consequence Areas (HCAs) are accurate and based on the latest science. However, recognizing potential resource challenges, PHMSA proposed to allow operators the option to use a default 2-mile radius on either side of the pipeline as a basis for determining impacts on high consequence areas. This proposal aims to improve pipeline safety by ensuring up-to-date risk assessments and enhancing regulatory oversight.
The Big Picture
About 5,000 miles of CO2 pipelines exist in the United States, and their main purpose is to improve oil drilling operations. However, according to a 2020 Princeton research study, 65,000 miles of CO2 pipes will be required by 2050 to achieve net-zero emissions targets. As a result of worldwide CO2 collection and storage initiatives, the DOE has also predicted a large growth of the CO2 pipeline network. According to a Congressional Budget Office assessment released in December 2023, the number of CCS projects might nearly double, and by 2050, the length of CO2 pipelines could increase by 10 times their current size.
New York Courts Provide Additional Guidance on Implementation of Green Amendment
Based on recent decisions, judicial interpretation of New York’s Environmental Rights Amendment (also called the Green Amendment) continues to evolve. The Green Amendment guarantees New Yorkers a “right to clean air and water, and a healthful environment.” N.Y. Const., Art. 1, Sec. 19. Because relatively few courts have interpreted the Green Amendment since it took effect in 2022, its full impact remains uncertain. However, recent decisions suggest that courts are willing to limit the types of legal claims that may be maintained under the Green Amendment.
Green Amendment Not Retroactive and Requires a Significant Contribution to Environmental Harm
Addressing the standard for maintaining a Green Amendment claim, an Erie County Supreme Court (located in the Appellate Division’s Fourth Department) recently held that the amendment did not provide a basis for enjoining a highway redevelopment project. W. N.Y. Youth Climate Council v. NYS Dep’t of Transp., 2024 WL 5050061 (Sup. Ct. Erie Cty. Nov. 15, 2024). The court found that the operation and maintenance of a highway, which had existed for almost 60 years, did not violate the Green Amendment because the amendment did not apply retroactively. Adopting the State of New York’s position that plaintiffs must show that the project would “significantly contribute” to unclean air or water or an unhealthful environment, the court also found that the allegations did not rise to this level.
Green Amendment Does Not Alter the Regulatory Framework
A decision in the Southern District of New York has taken a more restrictive view. Chan v. U.S. Dep’t of Transp., 2024 WL 5199945 (S.D.N.Y. Dec. 23, 2024). The court denied a request to enjoin congestion pricing in New York City because plaintiffs were unlikely to succeed on their Green Amendment claim. The court found that the amendment did not create a “self-executing substantive right” to environmental standards beyond those in existing regulations. Rather, the court explained that the Green Amendment guarantees only a baseline level of clean air and water and a healthful environment, and plaintiffs must show that this constitutional minimum is not being met to have a claim. The reasoning of the Chan decision, if broadly embraced, could severely limit the availability of a private right of action under the Green Amendment.
Green Amendment Cannot Compel Discretionary Agency Action
In a suit targeting government enforcement discretion, the Albany County Supreme Court (located in the Third Department) dismissed a Green Amendment claim brought against the State of New York and the New York Department of Environmental Conservation (NYSDEC). See People v. Norlite, LLC, No. 907-689-22, Doc. No. 369 (Sup. Ct. Albany Cty. Dec. 30, 2024). Plaintiffs alleged that NYSDEC violated the Green Amendment by issuing a permit for and allowing the operation of a manufacturing facility. Relying on the Fourth Department’s July 2024 decision in Fresh Air for the Eastside, Inc. v. State of New York, the trial court concluded that this claim, while styled as a request for declaratory relief, actually sought to compel agency action. Because the Green Amendment claim challenged NYSDEC’s statutory discretion, the court held that it did not have the authority to grant the relief sought and dismissed the claim.
***
While these decisions are not binding in other cases, they indicate that courts tend to interpret the reach of the Green Amendment narrowly and limit the types of claims they consider permissible under it. Regulated entities in New York should continue to monitor new litigation surrounding the Green Amendment and other decisions interpreting the reach of this state constitutional provision.
State and Local Executive Orders Suspend Time-Consuming Permitting and Review Requirements for Rebuilding Los Angeles
In light of the ongoing devastation wrought by the numerous wildfires plaguing Los Angeles County, California Governor Gavin Newsom has declared a state of emergency[1] and taken immediate action in an attempt to allow Angelenos to rebuild efficiently and effectively. One such action was the issuance of Executive Order (EO) N-4-25 on January 12th to temporarily suspend two time-intensive environmental laws.[2] In response, the City of Los Angeles Mayor Karen Bass issued her own executive order (Emergency Executive Order No. 1 [LA EEO1]) just one day later to “clear the way for Los Angeles residents to rapidly rebuild the homes they lost.”[3]
EO N-4-25 will, in short, suspend the permitting and review requirements under the California Environmental Quality Act (CEQA) and Coastal Act for victims of the recent fires in Los Angeles County in order to promote the restoration of homes and businesses. In addition to confirming the waiver of CEQA review, LA EEO1 waives local discretionary review processes. These fires, which – as of the date of publication – have resulted in the destruction of more than 12,000 structures, in the midst of an undeniable housing crisis in California. These executive orders are a step in the right direction to recoup the housing stock lost over the past two weeks.
EO N-4-25
The executive order issued by Governor Newsom:
Suspends CEQA review and Coastal Act permitting related to the reconstruction of properties substantially damaged or destroyed in the wildfires. The structures eligible for this suspension must be in the substantially same location and shall not exceed 110% of the footprint and height of properties and facilities that were legally established and existed immediately before the fires.
This suspension means that applications to rebuild homes, businesses, and other structures will not have to comply with laws that are notorious for extensive approval timelines, restricting land development and proposed uses, and subject to appeals and litigation, all of which could tie up a project indefinitely.
Directs state agencies to identify additional permitting requirements, including provisions of the California Building Code, that can safely be suspended or streamlined to accelerate rebuilding and make it more affordable.
These state agencies, including Department of Housing and Community Development (HCD), the Office of Land Use and Climate Innovation, the Office of Emergency Services (OES), and the Department of General Services (DSG), need to report to the Governor within 30 days on other permitting requirements that could “unduly impede” efforts to rebuild properties damaged in the fire, updating the report every 60 days to identify other requirements acting as barriers.
HCD will coordinate with local governments to recommend procedures to establish rapid permitting and approval processes to expedite the reconstruction or replacement of residential properties, with the ultimate goal of issuing all necessary permits and approvals within 30 days.
Extends protections against price gouging under Penal Code section 396(b)-(c) on building materials, storage services, construction, emergency clean-up and other essential goods and services associated with repair and reconstruction to January 7, 2026, in Los Angeles County.
Commits the executive branch to working with the Legislature to identify statutory changes that can help expedite rebuilding while enhancing wildfire resilience and safety.
Allows property owners to transfer the base year value of property that is substantially damaged or destroyed by the disaster to the rebuilt property, which could offer a significant tax savings.
While EO N-4-25 has been heralded as “really positive” and “as an admission we can safely build housing without [the constraints of these two intensive environmental laws]” by industry leaders, including the California Building Association,[4] questions regarding the implementation of this order remain. For example, the order states that eligible projects must be substantially the same size and location, but leaves the door open as to whether the use can change. Would the order still apply if the redevelopment changed the use from single-family to a single-family home with an accessory dwelling unit (ADU) or denser residential or commercial uses?
Additionally, EO N-4-25 is silent on the rebuilding or repair of infrastructure supporting the projects eligible for application of the executive order. If infrastructure cannot be installed quickly to support the other redevelopment, it is possible the success of such eligible redevelopment is hindered by the inability to utilize the new structures due to lack of services and access. Moreover, redevelopment projects under EO N-4-25 will still need to comply with local zoning and permitting ordinances. Therefore, redevelopment projects may still need to obtain discretionary approvals (i.e., conditional use permit, coastal development permit, site plan review), which are time- and resource-consuming even without the application of CEQA or the Coastal Act. Lastly, the state executive order creates a tension with Local Coastal Programs (LCP) for applicable areas (i.e., Malibu), which are at risk of being decertified by the California Coastal Commission if the local governments approve building plans contrary to approved LCPs.
Additionally, as of late, one of the most popular issues subject to CEQA challenges has been wildfire danger. EO N-4-25 will likely be at odds with recent case law that sets the requirements for analyzing a project’s impacts on evacuation routes and wildfire risk, including People of the State of California ex rel Rob Bonta Attorney General v. County of Lake (2024) __ Cal.App.5th __. Given CEQA’s requirements for a fire risk analysis and the trend of recent caselaw, local governments – in order to avoid liability imposed by the courts – may be hard-pressed to approve projects without some sort of discretionary consideration given to the redevelopment’s impacts on fire risk and evacuation routes.
Only time will tell if the Governor’s Office will issue clarifications to EO N-4-25 that address these and other uncertainties.
LA EEO1
The executive order issued by Mayor Bass will:
Coordinate debris removal from all impacted areas, mitigates for wet weather.
This will create task forces to develop a streamlined program for debris removal and mitigate risks from rain storms, uniting with the OES and other City, County, state and federal agencies.
Clear the way to rebuild homes as they were.
This will establish a one-stop-shop to swiftly issue permits in all impacted areas, directs City departments to expedite all building permit review/inspections, bypasses state CEQA discretionary review, allows rebuilding “like for like” and waives City discretionary review processes. The City has already established a Disaster Recovery Center to serve individuals and families impacted by the fire in the Pacific Palisades, which is open 7 days a week from 9 a.m. to 8 p.m. at: 10850 Pico Boulevard, Los Angeles, California 90064
Make 1,400 units of in progress housing units available.
LA EEO1 directs the Department of Building and Safety to issue temporary certificates of occupancy for 1,400 housing units currently in the pipeline across the City.
Establish a framework to secure additional regulatory relief and resources.
This instructs all City departments to report back in one week with a list of additional relief needed from state and federal regulations and requirements, as well as state and federal funding needed for recovery.
Expedite permit review and eliminate the discretionary review and other processes for “eligible projects.” An eligible project is defined as one that repairs, restores, demolishes, or replaces a structure or facility substantially damaged or destroyed by wildfires that meets certain criteria, including: (i) the structure or facility is in substantially the same location as the original structure or facility; (ii) the structure or facility does not exceed 110% of the floor area, height, and bulk of the original structure or facility; (iii) maintaining the same use, intensity, and density of the original structure or facility, i.e., no new ADUs or changes of use; and (iv) obtaining building permits for repair or reconstruction within 7 years from the date of the order.
Building permit review timelines by all City departments (including Department of Water and Power) must be completed in 30 days from the submission of a “complete application.”
Discretionary review processes are waived for eligible projects, including, but not limited to the Pacific Palisades Village Specific Plan and Pacific Palisades Village Design Review Board Guidelines. The City must review applications submitted using the streamlined ministerial review processes under Senate Bill 35 (SB 35) (Govt. Code § 65913.4). While ambiguous, it appears that while Mayor Bass is technically waiving discretionary permitting requirements, applicants may still have to file applications with the Planning Department and go through a “streamlined” entitlement process. In other words, the discretionary approvals would be processed ministerially and have the statutory review timelines for SB 35 projects, which would be 90 days from date of submittal for approval for projects less than 150 units and 180 days for projects greater than 150 units. In practice, these timelines are much longer given tribal notification requirements and preapplication forms and processes.Haul routes for eligible projects shall be approved ministerially without noticing, hearings, findings, or appeals.Clarifies that eligible projects are exempt from requirements to obtain a Coastal Development Permit under Coastal Act section 30610(g).Application of the All-Electric Building Code (Ordinance No. 187714) does not apply to eligible projects.Demolition permits are not required for structures, improvements, or facilities substantially damaged or destroyed by the wildfires.
Tiny homes, modular structures and mobile homes, are permitted for up to 3 years on the site during rebuilding.
Similar to the fires, State and local response to recent events is rapidly evolving. Sheppard Mullin will continue to provide updates as available. For more information or assistance, please contact us. Together, we can navigate this challenging period responsibly.
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FOOTNOTES
[1] Such proclamation triggers, among other things, the enforcement of price-gouging restrictions. Please see here for an article with more information.
[2] Government Code § 8571 authorizes the Governor to suspend regulatory statutes during a state of emergency upon determining that strict compliance “would in any way prevent, hinder, or delay the mitigation of the effects of the emergency.”
[3] LA EEO1 will only apply to projects within the City of Los Angeles, but not those destroyed outside the City’s jurisdictional boundaries like those destroyed by the Eaton Fire in Altadena.
[4] Pat Maio, Newsom suspends 2 environmental laws to jumpstart rebuilding in fire-damaged L.A. communities, Los Angeles Daily News, January 12, 2025, accessible here.
EPA and OSHA Sign MOU for Implementation of TSCA Section 6
The U.S. Environmental Protection Agency (EPA) announced on January 13, 2025, that it signed a long-awaited memorandum of understanding (MOU) with the Occupational Safety and Health Administration (OSHA) formalizing coordination on EPA’s work to assess and manage existing chemicals under Section 6 of the Toxic Substances Control Act (TSCA). According to EPA’s press release, “EPA and OSHA anticipate that better coordination under this MOU will result in improved workplace health and safety protections for workers using existing chemical substances under TSCA and the Occupational Safety and Health (OSH) Act and allow for effective implementation of our national workplace and environmental protection statutes.”
EPA states that continuing the existing collaboration between EPA and OSHA on workplace exposures as part of EPA’s prioritization, risk evaluation, and risk management of existing chemicals, the MOU will further facilitate information sharing in the form of notification, consultation, and coordination where appropriate. According to EPA, the agencies will share information on:
TSCA Section 6 prioritization, risk evaluation, rulemaking, and implementation efforts as it pertains to chemical hazards in the workplace;
Outreach and communication materials for stakeholders about EPA rules and OSHA requirements, including TSCA Section 6 and OSHA rules that regulate the same chemical hazards;
Inspections and enforcement activity such as each agency’s areas of focus, complaints, inspections, and potential violations where mutual interest exists; and
Protocols to ensure that confidential information is being properly exchanged between the agencies when carrying out law enforcement actions or otherwise protecting health or the environment.
EPA notes in the press release that the 2016 amendments to TSCA expanded EPA’s authority and responsibility to protect workers, requiring EPA to consider potentially exposed and susceptible subpopulations in chemical risk evaluations, a category that explicitly includes workers. According to EPA, the agencies together have the statutory responsibility to ensure the safety and health of the public and the nation’s workforce through the timely and effective implementation of federal laws and regulations, including TSCA and the OSH Act. EPA states that the chemical rules that OSHA promulgates under the OSH Act and that EPA promulgates under TSCA Section 6(a) share a broadly similar purpose, and the control measures OSHA and EPA require to satisfy the objectives of their respective statutes may overlap or coincide.
According to EPA, TSCA differs from the OSH Act in several respects, however, including jurisdiction: TSCA regulates the use of chemicals more broadly, while the OSH Act regulates health and safety in the workplace. TSCA also covers a wider range of workers that are not covered under the OSH Act, such as volunteers, self-employed workers, and some state and local government workers. As a result, EPA states that its findings and occupational risk mitigations may differ from OSHA’s. For example, while OSHA has set regulatory exposure limits for some chemicals, OSHA set most of these limits shortly after the adoption of the OSH Act in 1970. EPA notes that by contrast, the exposure limits it is establishing as part of current risk management rules “are derived from current scientific review.”
EPA notes that “[r]equirements set under TSCA must use the best available science to address unreasonable risk — identified without consideration of cost or other non-risk factors; whereas standards set under the OSH Act are constrained by requirements that OSHA prove proposed controls are economically and technically feasible.” EPA states that although it considers non-risk factors such as the effect on the national economy and technological innovation when weighing options sufficient to address the unreasonable risk under TSCA, “the differences in statutory authorities can also lead to differences between the two agencies’ regulatory approaches.”
Commentary
While we are pleased that EPA is expanding upon its views of the ever unclear jurisdictional divide between its authority under TSCA and OSHA’s authority under the OSH Act, Bergeson & Campbell, P.C. (B&C®) was a bit disappointed with the revised MOU’s lack of substance. EPA has over the years shared with the regulated community that it was working on the MOU and aware of the need to clarify responsibilities considering Lautenberg’s enactment almost nine years ago. Despite the passage of time and the buildup, the MOU is remarkably devoid of specificity and anything truly “new.” The MOU can perhaps be best summarized as “EPA will talk to OSHA,” as it does routinely, and “EPA and OSHA will refer potential violations to each other.”
That EPA has different statutory authority under TSCA from OSHA’s statutory authority under the OSH Act is of course crystal clear. OSHA’s authority does not extend to certain types of workers (volunteers, self-employed, and some government employees). What is less clear is how the federal government toggles between its two grants of authority to ensure workers are adequately protected and suitably acknowledges the protective effects of compliance with the OSH Act, including the Hazard Communication Standard (HCS) and multiple OSHA Standards, and how EPA’s regulatory actions under TSCA are duplicative of or inconsistent with the HCS. These are the areas inviting the greatest uncertainty and on which the MOU’s provisions are most silent.
The agencies are urged to supplement their efforts in this regard in a few key areas. For example, the agencies should consider whether EPA or OSHA is better suited to promulgate workplace protective measures to ensure workers outside of TSCA authority are adequately protected and identify more precisely how best EPA and OSHA coordinate on hazard communication measures so that EPA does not require hazard statements on Safety Data Sheets (SDS) even though those hazards are well below the classification cutoffs under the HCS. This practice often leads to confusing or conflicting statements on an SDS, undermining the very purpose of the HCS.
The new Administration may wish to consider engaging in a more transparent public process to elicit stakeholder comments on ways to strengthen the interaction between EPA and OSHA. After all, the regulated community and other constituencies have much to contribute to identifying areas where greater clarity is needed.
December 2024 Bounty Hunter Plaintiff Claims
California’s Proposition 65 (“Prop. 65”), the Safe Drinking Water and Toxic Enforcement Act of 1986, requires, among other things, sellers of products to provide a “clear and reasonable warning” if use of the product results in a knowing and intentional exposure to one of more than 900 different chemicals “known to the State of California” to cause cancer or reproductive toxicity, which are included on The Proposition 65 List. For additional background information, see the Special Focus article, California’s Proposition 65: A Regulatory Conundrum.
Because Prop. 65 permits enforcement of the law by private individuals (the so-called bounty hunter provision), this section of the statute has long been a source of significant claims and litigation in California. It has also gone a long way in helping to create a plaintiff’s bar that specializes in such lawsuits. This is because the statute allows recovery of attorney’s fees, in addition to the imposition of civil penalties as high as $2,500 per day per violation. Thus, the costs of litigation and settlement can be substantial.
The purpose of Keller and Heckman’s latest publication, Prop 65 Pulse, is to provide our readers with an idea of the ongoing trends in bounty hunter activity.
In December of 2024, product manufacturers, distributors, and retailers were the targets of 394 new Notices of Violation (“Notices”) and amended Notices, alleging a violation of Prop. 65 for failure to provide a warning for their products. This was based on the alleged presence of the following chemicals in these products. Noteworthy trends and categories from Notices sent in December 2024 are excerpted and discussed below. A complete list of Notices sent in December 2024 can be found on the California Attorney General’s website, located here: 60-Day Notice Search.
Food and Drug
Product Category
Notice(s)
Alleged Chemicals
Fruits, Vegetables, and Mushrooms: Notices include farro porcini mushrooms, chopped spinach, capers, chili mango, flavored sunflower seeds, shiitake mushrooms, kale chips, flax seeds, artichoke quarters in brine, moringa, dried apricot, madras lentils, cactus chips, bamboo shoots, and stuffed manzanilla olives
38 Notices
Lead and Lead Compounds, and Cadmium and Cadmium Compounds
Prepared Foods: Notices include soup bowls, noodle bowls, salt & vinegar potato chips, bundt cake mix, flatbread mix, granola bars, crackers, nut butter, vegetable biryani, vegan chips, mushroom ravioli, gluten-free tortilla wraps, and plant-based ground meat
36 Notices
Lead and Lead Compounds, Cadmium, and Mercury
Seafood: Notices include Alaska pink salmon, tuna salad, mackerel in olive oil, sardines, seasoned squid, dried seaweed, fried anchovy, dried mackerel, ground shrimp, dried sea mustard seaweed, raw seaweed, and shrimp paste
32 Notices
Lead and Lead Compounds, Cadmium and Cadmium Compounds, and Mercury
Dietary Supplements: Notices include plant-based protein shakes, green powder superfood, greens, protein powder, electrolyte formula beverages, pre-workout beverages, ginkgo biloba powder and tea, and spirulina powder
26 Notices
Cadmium, Lead and Lead Compounds, Mercury and Mercury Compounds, and Perfluorooctanoic Acid (PFOA)
THC-containing Products: Notices include gummies, chocolates, soft gels, flavored beverages, and candies
13 Notices
Delta-9-tetrahydrocannabinol
Sauces: Notices include red mole, aged balsamic vinegar, sundried tomato paste, and basil pesto sauce
4 Notices
Lead and Lead Compounds
Packaged Liquids: Notices include vegetable stock and fruit-flavored beverages, and canned coconut water
4 Notices
Perfluorononanoic Acid (PFNA) and its salts, Perfluorooctanoic Acid (PFOA), and Bisphenol A (BPA)
Cosmetics and Personal Care
Product Category
Notice(s)
Alleged Chemicals
Personal Care Items: Notices include hair color, aloe vera lotions, skin toners, spot treatments, face masks, vitamin C serum, enzyme scrub, body cleaners, eye serums and creams, hair color treatments, hair gels, body wash and foaming cleansers, pain relief cream, body glow, and squirt blood
66 Notices
Diethanolamine
Cosmetics: Notices include mascara, cream makeup, matte lipstick, eyeliner pens, concealers, face primer, and cake makeup
36 Notices
Diethanolamine
Personal Care Products: Notices include shave gel, shave foam, and volumizing foam
3 Notices
Nitrous Oxide
Consumer Products
Product Category
Notice(s)
Alleged Chemicals
Plastic Pouches, Bags, and Accessories: Notices include children’s bags, beauty bags, bento bags, fanny packs, backpacks, wallets, picking bags, weight stabilizing bags, travel bags, rescuer guide packs, shoe covers, and cases for wheel sets
26 Notices
Di(2-ethylhexyl)phthalate (DEHP), Diisononyl phthalate (DINP), and Di-n-butyl phthalate (DBP)
Miscellaneous Consumer Products: Notices include orthodontic kits, keychains, back scratchers, safety flags, vinyl banners, engraved wax sealers, steering wheel covers, lamps, stethoscopes, salt and pepper shakers with PVC components, luggage tag, and vinyl roll holders
26 Notices
Di(2-ethylhexyl)phthalate (DEHP), Diisononyl phthalate (DINP), Di-n-butyl phthalate (DBP), and Lead
Hardware and Home Improvement Products: Notices include long handle hooks, garden hose splitters, coatings and paints, soldering wire, tools with PVC grips, pressure gauge, thermocouples, wing nuts, pop-up drains, propane tank adapter, and thread tape
23 Notices
Lead and Lead Compounds, Di(2-ethylhexyl)phthalate (DEHP), Diisononyl phthalate (DINP), and Perfluorooctanoic Acid (PFOA)
Clothing and Shoes: Notices include gloves made with leather, bucket hats, sandals with PVC components, golf gloves, weatherproof jackets, slides, fuzzy socks, and ski pants
22 Notices
Di(2-ethylhexyl)phthalate (DEHP), Chromium (hexavalent compounds), Perfluorooctanoic Acid (PFOA),
and Bisphenol A (BPA)
Glassware, Metals, and Ceramics: Notices include mugs, glass sets, blue multi-colored glass, metal and glass organizers, spoon rests, shakers, and soap dispenser/sponge holders
19 Notices
Lead and Lead Compounds
Miscellaneous Consumer Products: Notices include shower curtains, tablecloths, pillows, pet beds, athletic bandages, and outdoor cushions
10 Notices
Perfluorooctanoic Acid (PFOA)
Hobby Items: Notices include artist paste paints, art panels, lens mounts, pickleball paddles, jump rope, molding cream, and golf storage boot
8 Notices
Di(2-ethylhexyl)phthalate (DEHP), Di-n-butyl phthalate (DBP), Lead, Diethanolamine, and Perfluorooctanoic Acid (PFOA)
Coal Tar Epoxy
1 Notice
Bisphenol A (BPA), Epichlorohydrin, Ethylbenzene, soots, tar and mineral oils (coal tar)
There are numerous defenses to Prop. 65 claims, and proactive measures that industry can take prior to receiving a Prop. 65 Notice in the first place. Keller and Heckman attorneys have extensive experience in defense of Prop. 65 claims and in all aspects of Prop. 65 compliance and risk management. We provide tailored Proposition 65 services to a wide range of industries, including food and beverage, personal care, consumer products, chemical products, e-vapor and tobacco products, household products, plastics and rubber, and retail distribution.
Direct Employer Assistance and 401(k) Plan Relief Options for Employees Affected by California Wildfires
In the past week, devastating wildfires in Los Angeles, California, have caused unprecedented destruction across the region, leading to loss of life and displacing tens of thousands. While still ongoing, the fires already have the potential to be the worst natural disaster in United States history.
Quick Hits
Employers can assist employees affected by the Los Angeles wildfires through qualified disaster relief payments under Section 139 of the Internal Revenue Code, which are tax-exempt for employees and deductible for employers.
The SECURE Act 2.0 allows employees impacted by federally declared disasters to take immediate distributions from their 401(k) plans without the usual penalties, provided their plan includes such provisions.
As impacted communities band together and donations begin to flow to families in need, many employers are eager to take steps to assist employees affected by the disaster.
As discussed below, the Internal Revenue Code provides employers with the ability to make qualified disaster relief payments to employees in need. In addition, for employers maintaining a 401(k) plan, optional 401(k) plan provisions can enable employees to obtain in-service distributions based on hardship or federally declared disaster.
Internal Revenue Code Section 139 Disaster Relief
Section 139 of the Internal Revenue Code provides for a federal income exclusion for payments received due to a “qualified disaster.” Under Section 139, an employer can provide employees with direct cash assistance to help them with costs incurred in connection with the disaster. Employees are not responsible for income tax, and payments are generally characterized as deductible business expenses for employers. Neither the employees nor the employer are responsible for federal payroll taxes associated with such payments.
“Qualified disasters” include presidentially declared disasters, including natural disasters and the coronavirus pandemic, terrorist or military events, common carrier accidents (e.g., passenger train collisions), and other events that the U.S. Secretary of the Treasury concludes are catastrophic. On January 8, 2025, President Biden approved a Major Disaster Declaration for California based on the Los Angeles wildfires.
In addition to the requirement that payments be made pursuant to a qualified disaster, payments must be for the purpose of reimbursing reasonable and necessary “personal, family, living, or funeral expenses,” costs of home repair, and to reimburse the replacement of personal items due to the disaster. Payment cannot be made to compensate employees for expenses already compensated by insurance.
Employers implementing qualified disaster relief plans should maintain a written policy explaining that payments are intended to approximate the losses actually incurred by employees. In the event of an audit, the employer should also be prepared to substantiate payments by retaining communications with employees and any expense documentation. Employers should also review their 401(k) plan documents to determine that payments are not characterized as deferral-eligible compensation and consider any state law implications surrounding cash payments to employees.
401(k) Hardship and Disaster Distributions
In addition to the Section 139 disaster relief described above, employees may be able to take an immediate distribution from their 401(k) plan under the hardship withdrawal rules and disaster relief under the SECURE 2.0 Act of 2022 (SECURE 2.0).
Hardship Distributions
If permitted under the plan, a participant may apply for and receive an in-service distribution based on an unforeseen hardship that presents an “immediate and heavy” financial need. Whether a need is immediate and heavy depends on the participant’s unique facts and circumstances. Under the hardship distribution rules, expenses and losses (including loss of income) incurred by an employee on account of a federally declared disaster declaration are considered immediate and heavy provided that the employee’s principal residence or principal place of employment was in the disaster zone.
The amount of a hardship distribution must be limited to the amount necessary to satisfy the need. If the employee has other resources available to meet the need, then there is no basis for a hardship distribution. In addition, hardship distributions are generally subject to income tax in the year of distribution and an additional 10 percent early withdrawal penalty if the participant is below age 59 and a half. The participant must submit certification regarding the hardship to the plan sponsor, which the plan sponsor is then entitled to rely upon.
Qualified Disaster Recovery Distributions
Separate from the hardship distribution rules described above, SECURE 2.0 provides special rules for in-service distributions from retirement plans and for plan loans to certain “qualified individuals” impacted by federally declared major disasters. These special in-service distributions are not subject to the same immediate and heavy need requirements and tax rules as hardship distributions and are eligible for repayment.
SECURE 2.0 allows for the following disaster relief:
Qualified Disaster Recovery Distributions. Qualified individuals may receive up to $22,000 of Disaster Recovery Distributions (QDRD) from eligible retirement plans (certain employer-sponsored retirement plans, such as section 401(k) and 403(b) plans, and IRAs). There are also special rollover and repayment rules available with respect to these distributions.
Increased Plan Loans. SECURE 2.0 provides for an increased limit on the amount a qualified individual may borrow from an eligible retirement plan. Specifically, an employer may increase the dollar limit under the plan for plan loans up to the full amount of the participant’s vested balance in their plan account, but not more than $100,000 (reduced by the amount of any outstanding plan loans). An employer can also allow up to an additional year for qualified individuals to repay their plan loans.
Under SECURE 2.0, an individual is considered a qualified individual if:
the individual’s principal residence at any time during the incident period of any qualified disaster is in the qualified disaster area with respect to that disaster; and
the individual has sustained an economic loss by reason of that qualified disaster.
A QDRD must be requested within 180 days after the date of the qualified disaster declaration (i.e., January 8, 2025, for the 2025 Los Angeles wildfires). Unlike hardship distributions, a QDRD is not subject to the 10 percent early withdrawal penalty for participants under age 59 and a half. Further, unlike hardship distributions, taxation of the QDRD can be spread over three tax years and a qualified individual may repay all or part of the amount of a QDRD within a three-year period beginning on the day after the date of the distribution.
As indicated above, like hardship distributions, QDRDs are an optional plan feature. Accordingly, in order for QDRDs to be available, the plan’s written terms must provide for them.