Environmental, Energy & Resources – Page 7

DOJ Plans Sweeping Reorganization of ENRD

The US Department of Justice (DOJ) is planning a major reorganization of the Environment and Natural Resources Division (ENRD) that includes consolidating several sections within the division into other DOJ divisions, as well as eliminating field offices.

The DOJ’s reorganization plan is outlined in a March 25 memorandum from Deputy Attorney General Todd Blanche entitled “Soliciting Feedback For Agency Reorganization Plan and RIF.” The memo summarizes the DOJ’s March 13 report to the Office of Personnel Management and Office of Management and Budget about potential reorganizations and reductions in workforce (RIF) and solicited feedback from heads of department components by April 2. While the memo discusses proposals for reorganizing several offices, this post focuses on its impact on ENRD.
We previously reported about significant senior leadership changes among career civil service managers within various sections housed within ENRD, specifically the chiefs of the natural resources, environmental enforcement, environmental crimes, and appellate sections (see here). Those managers were offered new duties related to sanctuary city immigration work, though some chose to resign rather than accept the new duties. This new proposal moves towards more significant changes.
According to the memo, the plan would include consolidating civil appeals work currently performed within the ENRD’s civil appeals section into the DOJ Civil Division, and criminal appellate work currently within ENRD would be transferred to the US Attorneys’ Offices. The duties currently performed within the ENRD Law and Policy Section would be transferred into the DOJ Office of Legal Policy. The memo does not address changes specific to the enforcement, defense, or natural resources sections within ENRD. Nevertheless, these proposed changes represent the first significant restructuring of ENRD in decades, as various duties currently performed within ENRD are stripped away and performed elsewhere.
Regarding the field offices, those housing ENRD attorneys that would be closed under the proposal include Denver, Colorado, Sacramento, California, Seattle, Washington, and San Francisco, California. It is unclear if ENRD attorneys currently assigned to those offices would have the option of reassignment to another duty station.
It is also unclear from the memo if and when these various proposals would ultimately result in RIF. Nor is it apparent which of these proposals under consideration will ultimately occur.

EPA Environmental Appeals Board Halts Atlantic Shores Offshore Wind Project

A decision from the Environmental Protection Agency’s (EPA) Environmental Appeals Board (Board) remanded a final permit for the Atlantic Shores Offshore Wind project (Atlantic Shores Project or Project). The Project, located off the coast of New Jersey, had obtained its final construction permit from the US Bureau of Ocean Energy Management (BOEM) and its Outer Continental Shelf (OCS) Clean Air Act permit from the EPA. In February of this year, the EPA Region 2 filed a motion for voluntary remand, asking the Board to return the permit to the agency so that it could evaluate the Project as part of a comprehensive review required by President Donald Trump’s January 20 Memorandum, which paused all offshore wind leasing on the OCS. This decision is the first permit remand halting an offshore wind project in the late-state permitting phase, resulting in precedent that may affect future offshore wind projects.
Atlantic Shores Project is a joint venture originally between Shell and EDF Renewables, and it holds a lease block off the coast of New Jersey.[1] EPA Region 2 issued a final OCS Clean Air Act Permit in September 2024,[2] and BOEM approved the Project in October 2024.[3] Shortly thereafter, Save Long Beach Island, Inc. (SLBI), a group opposing the Project, filed a petition for review of the September 2024 EPA permit decision.[4]
While SLBI’s permit appeal was pending with the Environmental Appeals Board, President Trump issued a memorandum on January 20 that paused offshore wind leasing on the OCS and mandated a review of the federal government’s wind project leasing practices.[5] It requires the Secretary of the Interior, the Secretary of Agriculture, the Secretary of Energy, the Administrator of the EPA, and the heads of all other relevant agencies to conduct a comprehensive assessment and review of federal wind leasing and permitting practices. They must consider environmental impacts of onshore and offshore wind on wildlife, the economic costs associated with electricity generation, and the effect of subsidies on the wind industry.
EPA Region 2 then filed a motion for voluntary remand, requesting that the Board remand the OCS permit back to the region so that it could reevaluate the Atlantic Shores Project and its environmental impacts in light of President Trump’s memorandum.
The Board granted the motion for remand, returning the permit to the region. The Board concluded that remand was appropriate because no final decision on the OCS permit had occurred, and the Board generally has “broad discretion” to grant a permit issuer’s voluntary remand. It explained that the OCS permit, granted in September 2024, was not a final permit because SLBI filed a petition challenging the permit. At the time the region filed the motion for remand, Atlantic Shores Project did not have its OCS permit. It further reasoned that the agency’s final action does not occur until the regional administrator issues a subsequent final permit decision after all administrative review proceedings have been exhausted. The Board reasoned that regulations state that an applicant is without a permit for a proposed project pending final agency action. Therefore, only after completion of any remand proceeding and final permit decision from the region would Atlantic Shores Project hold a permit. It further supported its decision by explaining that administrative and judicial efficiency favored remand because adjudicating a permit decision that the EPA intends to reconsider “would be at the height of administrative inefficiency” and that issuing an opinion on the merits before the region reevaluated the permit decision would be an advisory opinion, which the Board cannot do.
The Board rejected Atlantic Shores Project’s argument that the region lacked “good cause” for remand because it had not identified any condition precedent in the permit that it sought to reconsider. However, the Board rejected this argument, explaining that it generally treats requests for voluntary remand liberally when the region provides “specific substantive changes” to a final permit or “specific elements of the permit” it wishes to reconsider.
Finally, the Board rejected Atlantic Shores Project’s argument that moving forward with a voluntary remand “without good cause” has the effect of circumventing the permitting time requirements in the Clean Air Act, which require all permit decisions be made within one year. It explained that nothing in the Clean Air Act’s time requirements prohibits the Board from granting a motion for voluntary remand. Additionally, it reasoned that whether any challenges to the statutory time frames are valid is “beyond the scope of Board review.”
The Board granted the region’s motion for voluntary remand and dismissed SLBI’s appeal. Upon completion of the region’s remand proceedings, the permit decision becomes a final agency action subject to judicial review. The Board concluded its decision by stating that it will not require or accept any further appeals on the final permit decision following the region’s remand.
The Board’s decision involving the Atlantic Shores Project may be a limited circumstance because of the specific challenges involved with the permit decision. However, all stakeholders for offshore wind projects should carefully consider the status of their permits and monitor federal review and challenges to their projects’ permits, as well as similarly situated projects’ permits.

[1] Adnan Memija, EPA Withdraws Permit for Atlantic Shores Offshore Wind Project, Offshore Wind (March 17, 2025), available at offshorewind.biz/2025/03/17/epa-withdraws-permit-for-atlantic-shores-offshore-wind-project/; Shell exited the project in February 2025 because of “increased competition, delays, and a changing market,” and EDF also exited later that month. Bruce Beaubouef, Shell Exits Atlantic Shores Offshore Wind Project, Offshore (Feb. 5, 2025), available at offshore-mag.com/renewable-energy/news/55265936/shell-exits-atlantic-shores-offshore-wind-project.
[2] Region 2, US EPA, OCS Air Permit Issued to Atlantic Shores Offshore Wind Project 1, LLC for the Atlantic Shores Project 1 and Project 2, EPA Permit No. OCS-EPA-R2 NJ 02, at 1 (Sept. 30, 2024) (A.R. A.2).
[3] Memija, supra note 1.
[4] Environmental Appeals Board, US EPA, In re Atlantic Shores Offshore Wind, LLC, Permit No. OCS-EPA-R2 NJ 02, Order Granting Motion for Voluntary Remand, at 1 (March 14, 2025), available here at yosemite.epa.gov/oa/eab_web_docket.nsf/9C7B7CF33923032185258C4D0058F4A7/$File/Atlantic%20Shores%20Order%20Granting%20Motion%20for%20Voluntary%20Remand,%20FINAL.pdf (hereinafter EPA Order Granting Remand).
[5] Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects, 90 Fed. Reg. 8363 (Jan. 20, 2025), available whitehouse.gov/presidential-actions/2025/01/temporary-withdrawal-of-all-areas-on-the-outer-continental-shelf-from-offshore-wind-leasing-and-review-of-the-federal-governments-leasing-and-permitting-practices-for-wind-projects/.

March 2025 ESG Policy Update—Australia

Australian Update
Resistance to Australian Securities Exchange Corporate Governance Council’s Diversity Reforms Signals Decline in Environment, Social and Governance Commitment
The recent decision by the Australian Securities Exchange (ASX) Corporate Governance Council to close consultation and halt its proposed update to the fourth edition of the ASX Corporate Governance Principles and Recommendations has sparked significant debate within the investment community, particularly concerning environmental, social and governance (ESG) criteria. Institutional investors had supported the proposed changes, which aimed to enhance diversity and inclusion within corporate boards by requiring them to report their diversity characteristics beyond gender to include sexuality, age, Indigenous heritage and disability. However, resistance from major business groups led to the plan’s rejection, highlighting a divide between regulatory ambitions and industry readiness.
The proposed update included measures to improve document accessibility, strengthen shareholder relationships and promote diversity. Despite broad and extensive consultation since February 2024, the initiative was ultimately shelved due to concerns about increased regulatory burdens and the lack of a cost-benefit analysis, thwarting achieving consensus. This decision underscores the challenges ESG initiatives face, even as investors increasingly recognise the value of diversity in driving long-term value.
The debate reflects broader tensions in the ESG landscape, where efforts to integrate social and governance factors into investment strategies often encounter resistance. As the investment community continues to push for meaningful ESG integration, the need for clear, consistent and practical guidelines remains critical. The halted update serves as a reminder of the ongoing struggle to balance regulatory requirements with industry capabilities and appetites and the balance required to pursue sustainable, inclusive growth for all stakeholders.
Financial Bodies Endorse Australian Government’s Bipartisan Commitment to Paris Agreement Goals Towards Positive Investment Outcomes
Twelve peak financial bodies have issued a joint statement voicing their commitment to the climate goals of the Paris Agreement, noting that joint support and actions to limit climate change make “good financial sense”. The statement of commitment comes at a turbulent time for global ESG efforts, with the newly appointed Donald Trump administration withdrawing the United States from the Paris Agreement. This move has brought about further uncertainty with news of global businesses scaling back net-zero commitments and ESG-focused initiatives.
The bodies reiterate and remind the investment industry of the potential financial upside of a net-zero economy—citing mid-range estimates which indicate global gross domestic product (GDP) being 7% higher in 2050 if emissions fall steadily to net zero when compared to a scenario in which current climate policies remain unchanged, with other estimates suggesting a 50% global GDP benefit by 2090.
The world’s push towards a net-zero economy has created financial opportunity, with global investment in the net-zero transition reaching AU$3.3 trillion in the last year.
The bodies have called for all levels of Australian government to continue supporting Australia’s transition to a clean, competitive, resilient and prosperous net-zero economy and made it clear that doing so will allow Australia to reap the financial rewards.
AU$2 Billion Investment in Clean Energy Finance Corporation
The Future Made in Australia (Production Tax Credit and Other Measures) Act 2024 (Legislation) was passed into law on 14 February 2025.
The Legislation, reported on previously by K&L Gates here, establishes two tax incentives:

Hydrogen Production Tax Offset (HPTI): a refundable tax offset of AU$2 per kilogram of eligible hydrogen which is produced from eligible facilities; and
Critical Minerals Production Tax Incentive: a refundable tax offset of 10% for eligible expenditure, incurred in the processing and refining of designated critical minerals, such as lithium and nickel.

These can be claimed for up to 10 years, for eligible minerals produced between 1 July 2027 to 30 June 2040. In relation to the HPTI, there is no cap on the amount a company can receive, although it will only be available for the specified period.
The incentives are available to companies that satisfy the eligibility requirements, which broadly includes, among other things, being a constitutional corporation, satisfying the relevant residency requirements, and meeting the community benefit principles implementation requirements.
They form part of the Government’s Future Made in Australia Policy (Policy), which was allocated AU$22.7 billion as part of the 2024–25 Budget, and a further AU$3.2 billion in the 2025–26 Budget. The Policy is aimed at enabling Australia to meet its international commitment to emission reductions and supporting the growth of a competitive renewable hydrogen industry, and other clean energy assets in Australia.
Superannuation Trustee Ordered to Pay AU$10.5 Million Penalty for Greenwashing Misconduct
On 18 March 2025, the Federal Court of Australia (Federal Court) imposed a penalty of AU$10.5 million against a superannuation trustee (Trustee) for greenwashing misconduct following a court action brought by the Australian Securities and Investments Commission.
The Federal Court found that the Trustee contravened the law by investing in securities that had been marketed as eliminated or restricted by its ESG investment screens.
The Trustee claimed it had eliminated investments that posed too great a risk to the environment and community, including gambling, coal mining and oil tar sands. The Trustee also represented that it would no longer partake in Russian investments following the invasion of Ukraine.
However, the Trustee was found to have held direct and indirect investments in a Russian entity, as well as gambling, oil tar sands and coal mining companies.
His Honour, Justice O’Callaghan, found that the Trustee:
“benefitted from misleading conduct by misrepresenting the ethical nature of a significant part of its investments, which on any view enhanced its ability to attract investors and enhanced its reputation as a provider of investment funds with ESG characteristics”.

Aggravating factors included that the conduct occurred over a two-and-a-half-year time period, the investments were substantial, the misconduct was likely to lead to a loss of confidence from investors in ESG programs, and there was a failure to have properly functioning systems and processes in place to prevent false or misleading representations.
Australian Competition and Consumer Commission Agrees to AU$8.25 Million Penalty Against Cleaning Product Manufacturer for Alleged Greenwashing Conduct
On 7 February 2025, the Australian Competition and Consumer Commission (ACCC) and a large multinational manufacturer of cleaning products (Company) agreed to a penalty of AU$8.25 million for making misleading representations that certain kitchen and garbage bags were made with “50% Ocean Plastic” or “50% Ocean Bound Plastic”. The ACCC further contended that wave imagery and the use of blue-coloured bags supported this impression.
Instead, the bags were partly made from plastic bags collected from Indonesian communities up to 50 kilometres from a shoreline, and not from the ocean.
In April 2024, the ACCC commenced Federal Court proceedings against the Company for greenwashing.
ACCC Chair, Gina Cass-Gottlieb, said the alleged conduct
“deprived consumers of the opportunity to make informed purchasing decisions and may have put other businesses making genuine environmental claims at an unfair disadvantage.”

The ACCC alleged that the conduct affected approximately 2.2 million customers.
The ACCC accepted that the conduct was not part of a deliberate strategy; however, senior management of the Company was aware of the potential issue.
The imposition of the penalty is subject to Federal Court approval.
This case underscores the ACCC’s commitment to combatting greenwashing and highlights the need for entities to scrutinise the legitimacy of their green claims.
View From Abroad
European Commission Amends Rules on Sustainability
On 26 February 2025, the European Commission published its sustainability omnibus proposals to amend the following European Union rules:

The Corporate Sustainability Reporting Directive (CSRD);
Delegated acts published under the Taxonomy Regulation (Taxonomy Regulation); and
The Corporate Sustainability Due Diligence Directive (CSDDD).

The European Commission believes the proposed changes will encourage a more favourable business environment by ensuring that companies “are not stifled by excessive regulatory burdens” and continue to have access to sustainable finance for their clean energy transition.
Notable changes include:

Removing 80% of companies from the scope of CSRD where mandatory reporting obligations would only be applicable to large companies with more than 1,000 employees and companies with a turnover of above AU$50 million;
Postponing by two years (until 2028), the reporting obligations of companies that fall within the new scope of CSRD;
Revising and simplifying the sustainability reporting templates that must be used to report information under the CSRD;
Introducing an option to report on activities that are aligned with the Taxonomy Regulation to emphasise finance transition;
Simplifying due diligence obligations of companies that fall within the scope of CSDDD to avoid unnecessary complexities and costs;
Postponing by one year (to 26 July 2028), the application of the sustainability due diligence requirements for in-scope companies; and
Limiting the amount of information that may be requested by large companies in relation to their value chain mapping activities to reduce the trickle-down effect and to protect small-to mid-sized enterprises.

It is estimated that the adoption of the sustainability omnibus proposals will save a total of €6.3 billion in annual administrative costs. However, although the proposals can potentially save costs and unlock more investment opportunities in the future, there is a risk that fund management companies and other financial market participants will experience data challenges if the proposed changes in the CSRD and Taxonomy Regulation reporting requirements are implemented.
The proposed changes will now be submitted to the European Parliament and the Council of the European Union. The European Commission currently invites its co-legislators to prioritise the consideration and adoption of the sustainability omnibus proposals.
President Donald J. Trump Presents America-First Energy Policy Agenda to Congress
On 4 March, President Trump presented his “America First” energy policy agenda (Agenda) in an address to US Congress. President Trump asserted that the Agenda would have wide-ranging impacts on companies operating in energy, environmental and national resources sectors.
A key motivation of this Agenda is to rapidly reduce the cost of energy in an attempt to boost the economy and reduce inflation rates by extensive deregulation.
The Agenda follows the United States’ withdrawal from the Paris Agreement and plans to develop a natural gas pipeline in Alaska to support liquefied natural gas exports to Asia, as well as the numerous executive orders and memoranda signed by President Trump shortly following his inauguration and titled as follows:

Unleashing American Energy;
Declaring a National Energy Emergency;
Ensuring Accountability for All Agencies;
Temporary Withdrawal of All Areas of the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects;
Unleashing Alaska’s Extraordinary Resource Potential;
Unleashing Prosperity through Deregulation; and
Establishing the National Energy Dominance Council.

For further information on the Agenda, please see the Policy and Regulatory Alert written by our colleagues in the United States here.
The authors would like to thank graduate Aibelle Espino for her contributions to this alert.
Additional Authors: Nathan Bodlovich, Cathy Ma, Daniel Nastasi, Katie Richards, Daniel Shlager, Bernard Sia, and Natalia Tan

EPA Launches Historic Deregulatory Initiative: Key Legal Risks and Strategic Takeaways

On March 12, 2025, EPA Administrator Lee Zeldin announced the agency’s intention to reconsider 31 environmental regulations, describing the effort as the “single most impactful day of deregulation in EPA history.” While the scope of this initiative spans air, water, and climate regulations, the most consequential actions—legally and practically—center on a handful of cross-cutting programs and sector-specific rules.
Although the EPA’s announcement is styled as a deregulatory roadmap, none of the targeted rules are rescinded yet. Each proposed rollback will require full notice-and-comment rulemaking under the Administrative Procedure Act (APA), and legal challenges are inevitable. This GT Alert summarizes seven of the most significant rulemakings to watch and highlights the legal and procedural headwinds the EPA is likely to face.
Cross-Sectoral Rollbacks
Greenhouse Gas Endangerment Finding (2009)
The EPA’s plan to reconsider the 2009 Endangerment Finding (the “Finding”) threatens to upend the legal basis for regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA).1 The Finding, issued following the Supreme Court’s decision in Massachusetts v. EPA, required the EPA to determine whether GHGs “may reasonably be anticipated to endanger public health or welfare,” leading to regulation of CO₂ and other GHGs from mobile sources.2 The Finding concluded that six greenhouse gases, individually and in combination, contribute to climate change and pose a danger to public welfare.3 The EPA then applied the Finding more broadly to numerous stationary sources under its various CAA authorities.
Any move to revoke or materially alter this determination will face high procedural and evidentiary hurdles under controlling case law; any reversal must be supported by a well-reasoned explanation and contend with extensive factual records supporting both the original Finding and numerous other EPA rulemakings.4 In other words, it is likely to take EPA a fair amount of time to develop a package supporting a revocation of this finding.
Social Cost of Carbon (SCC)
The SCC, a key metric in regulatory cost-benefit analyses, has long been a focal point of legal and policy debate. The Biden administration set the SCC at $190 per metric ton of CO₂, significantly increasing the estimated benefits of GHG regulation and the costs of carbon-based sources of energy. The EPA now proposes to overhaul or potentially abandon the SCC, which could weaken the justification for existing and future climate-related rules.
This proposed shift, if implemented, could make it more challenging for agencies to justify the benefits of greenhouse gas regulations or mitigation measures required via Environmental Impact Statements (EISs). Plaintiffs may challenge the revision on grounds that it arbitrarily discounts intergenerational or global harm.5 Recent case law, including Missouri v. Biden, has addressed standing and the sufficiency of reasoning behind SCC-related decisions, suggesting courts are increasingly attentive to agencies’ cost-benefit frameworks.6 The SCC’s reevaluation also resonates with broader post-Loper Bright developments, requiring agencies to justify economic assumptions without the level of deference previously enjoyed.7
Enforcement Discretion and Termination of Environmental Justice (EJ) Programs
The EPA announced the closure of all “Environmental Justice and Diversity, Equity, and Inclusion arms of the agency” and a new posture on enforcement discretion—declining to prioritize actions not clearly tied to statutory mandates.8 Prior administrations have used enforcement actions to impose requirements via administrative consent orders that exceed regulatory requirements and to focus on enforcement of certain sectors. Although this aspect of EPA’s announcement is without much detail, the administration is likely to review and potentially change past enforcement practices and priorities.
Sector-Specific Rollbacks
Clean Power Plan Replacement (GHG Standards for Power Plants)
The EPA’s recent rule governing GHG emissions from existing power plants identifies carbon capture and storage (CCUS) as the “best system of emission reduction” (BSER) under Section 111 of the CAA.9 Reconsideration of the rule may focus on whether CCUS is “adequately demonstrated,” a required element of the BSER standard. Legal challenges could also invoke the Supreme Court’s decision in West Virginia v. EPA,10 which applied the major questions doctrine to restrict EPA’s authority to impose system-wide generation-shifting measures—raising questions about whether the Biden administration’s rule improperly shifted how electricity may be generated.
New Source Performance Standards for Oil & Gas (OOOOb/OOOOC)
These methane-centric rules apply to both new, and for the first time, existing oil and natural gas facilities.11 If the GHG Endangerment Finding is revoked or narrowed, the legal foundation for these rules could be undermined. Subpart OOOOc, which governs existing sources, establishes emission guidelines that specifically target methane, the primary greenhouse gas regulated under the rule. Although EPA currently limits the regulation to methane, its authority to do so derives from the broader Finding. If that Finding is reversed or weakened, Subpart OOOOc could be subject to legal challenge or rollback. A rollback could leave emissions regulation for a substantial portion of up- and midstream oil and gas infrastructure to individual states, creating a fragmented regulatory landscape.12
Subpart W – GHG Reporting Program
EPA’s greenhouse gas reporting requirements for oil and gas sources are closely tied to the Inflation Reduction Act’s methane fee, which remains a statutory requirement (although Congress voided EPA’s 2024 Waste Emissions Charge rule via the Congressional Review Act).13 Revisiting this (and other Greenhouse Gas Reporting Program requirements for other sectors) has already resulted in a legal challenge and raises uncertainty for obligated reporters.14 For example, on March 21, 2025, the Environmental Defense Fund filed a lawsuit challenging EPA’s extension of the Greenhouse Gas Reporting Program’s reporting deadline for 2024 data.15 EDF argues that the EPA unlawfully delayed the reporting requirements without public notice and comment, undermining the program’s role in providing vital information about pollution from major sources nationwide.
PM2.5 NAAQS and the Good Neighbor Plan
EPA’s reconsideration of the 2023 fine particulate matter (PM2.5) standards would have cross-industry implications, particularly for manufacturers and energy generators.16 The Good Neighbor Plan’s proposed reconsideration raises key issues for numerous industries and states dealing with cross-border ozone challenges, particularly given the most recent plan’s extension to non-power sector emissions.
This proposed reconsideration also coincides with ongoing litigation17 concerning CAA venue questions.18 On March 25, 2025, the Supreme Court heard oral arguments in Oklahoma v. Environmental Protection Agency, No. 23-106719, a case addressing whether challenges to the EPA’s disapproval of state implementation plans under the CAA’s “Good Neighbor” provision should be adjudicated in regional circuit courts or centralized in the U.S. Court of Appeals for the District of Columbia Circuit.
Oklahoma and other petitioners argued that the EPA’s disapproval of their state plans – designed to address interstate air pollution – should be reviewed in their respective regional circuits, as these actions were specific to individual states and localized regions. In contrast, the EPA asserted that because it used a uniform analytical approach and published the disapprovals collectively in a single Federal Register notice, the actions were nationally applicable and thus fell under the exclusive jurisdiction of the D.C. Circuit.
The Court’s decision in this case is expected to clarify the appropriate judicial venue for such challenges, which could impact how states and industries address issues and frame arguments on reconsideration of the Good Neighbor Plan.
GT Insights
While EPA’s announcement carries no immediate legal effect, its significance lies in the number and breadth of proposed changes and the foundational rules it seeks to reconsider. Each reconsideration will be subject to APA requirements, including proper scientific and economic justification, public comment, and interagency review, all of which will take time to undertake. Moreover, litigation is almost inevitable. Courts may apply heightened scrutiny notwithstanding Loper, particularly where the EPA departs from prior factual findings or statutory interpretations.20
Regulated entities should prepare for a prolonged period of legal and regulatory uncertainty at the federal level. Active participation in the reconsiderations’ public comment processes, submission of technical and economic data, and strategic litigation positioning will be essential in shaping the next phase of environmental policy.

1 42 U.S.C. § 7521(a)(1). See also 42 U.S.C. §§ 7470–7492, 7661–7661f (provisions for the PSD and Title V permitting programs).
2 Massachusetts v. EPA, 549 U.S. 497 (2007).
3 Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66,496 (Dec. 15, 2009).
4 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983). See also Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir. 1976) (en banc) (discussing precautionary principles in environmental regulation); Chevron U.S.A. Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984).
5 EPA, Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide – Interim Estimates (Feb. 2024).
6 Massachusetts v. EPA, 549 U.S. 497 (2007).
7 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983). See also Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir. 1976) (en banc) (discussing precautionary principles in environmental regulation); Chevron U.S.A. Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984).
8 See Missouri v. Biden, 576 F. Supp. 3d 622, 635 (E.D. Mo. 2021) (addressing standing to challenge SCC metrics).
9 Heckler v. Chaney, 470 U.S. 821, 831–32 (1985).
10 Control of Air Pollution From Existing Stationary Sources: Electric Utility Generating Units, 88 Fed. Reg. 33,692 (May 23, 2023).
11 West Virginia v. EPA, 597 U.S. ___, 142 S. Ct. 2587 (2022).
12 Standards of Performance for Crude Oil and Natural Gas Facilities for Which Construction, Modification, or Reconstruction Commenced After November 15, 2021, and Emissions Guidelines for Crude Oil and Natural Gas Facilities for Which Construction, Modification, or Reconstruction Commenced On or Before November 15, 2021, 88 Fed. Reg. 74,406, 74,408–10 (Nov. 29, 2023) (to be codified at 40 C.F.R. pts. 60, 62) (“EPA is finalizing GHG emission guidelines for methane from existing sources … These actions are based on the 2009 Endangerment Finding for greenhouse gases.”); Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66,496 (Dec. 15, 2009).
13 42 U.S.C. § 7411(d).
14 26 U.S.C. § 136(f)(5) (Inflation Reduction Act methane fee).
15 Environmental Defense Fund v. U.S. Environmental Protection Agency, No. 25-1056 (D.C. Cir. filed Mar. 21, 2025).
16 42 U.S.C. § 7414(a).
17 See 42 U.S.C. § 7607(b)(1) (CAA venue provisions).
18 National Ambient Air Quality Standards for PM2.5, 89 Fed. Reg. 12,844 (Feb. 7, 2024).
19 Transcript of Oral Argument, Oklahoma v. Envtl. Prot. Agency, No. 23-1067 (U.S. Mar. 25, 2025).
20 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983). See also Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir. 1976) (en banc) (discussing precautionary principles in environmental regulation); Chevron U.S.A. Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984).

Plaquemine Parish Awarded $740 Million in Landmark Case

Jurors found that energy giant Texaco, acquired by Chevron in 2001, had for decades violated Louisiana regulations governing coastal resources by failing to restore wetlands impacted by dredging canals, drilling wells, and billions of gallons of wastewater dumped into the marsh.
The jury awarded $575 million to compensate for land loss, $161 million to compensate for contamination, and $8 million for abandoned equipment.
The case will signal how juries will respond in the 40 other landmark lawsuits that were brought to hold oil and gas companies liable for Louisiana’s coastal land loss.
Jurors found that energy giant Texaco, acquired by Chevron in 2001, had for decades violated Louisiana regulations governing coastal resources by failing to restore wetlands impacted by dredging canals, drilling wells and billions of gallons of wastewater dumped into the marsh. The jury awarded $575 million to compensate for land loss, $161 million to compensate for contamination and $8 million for abandoned equipment.
www.wwltv.com/…

McDermott+ Check-Up – April 4, 2025

THIS WEEK’S DOSE

Reconciliation Moves Forward with Senate Introduction of Concurrent Budget Resolution. This move initiates the next stage in the reconciliation process, which requires House and Senate passage of a unified budget resolution.
Senate Confirms CMS Administrator. By a vote of 53 – 45, Mehmet Oz, MD, was confirmed as administrator of the Centers for Medicare & Medicaid Services (CMS).
Senate Judiciary Committee Holds Drug Legislation Markup. All six bills were passed by voice vote.
Senate Homeland Security and Governmental Affairs Committee Holds OPM Director Nomination Hearing. The hearing for Office of Personnel Management (OPM) director nominee Scott Kupor largely focused on the federal workforce.
House Energy and Commerce Health Subcommittee Holds Hearing on OTC Monograph Drugs. The hearing focused on the development of over-the-counter (OTC) sunscreen products.
House Energy and Commerce Oversight and Investigations Subcommittee Holds Hearing on Cybersecurity for Medical Devices. Witnesses advocated for increased cyber resilience of medical devices.
House Education and Workforce Health, Employment, Labor, and Pensions Subcommittee Holds Hearing on Employer-Sponsored Healthcare. The subcommittee sought to better understand the current landscape of employer-sponsored healthcare and discuss potential improvements.
HHS Begins Implementing Dramatic Restructuring, Cutting Agency Workforce and Consolidating Divisions. The US Department of Health and Human Services’ (HHS’s) initiative will eliminate or merge many divisions and offices, close five of the 10 regional offices, and create unprecedented changes that will have far-reaching consequences.
Laboratory-Developed Test Final Rule Struck Down. A federal court ruled that the US Food and Drug Administration could not regulate laboratory-developed tests as medical devices.
HHS Faces Legal Challenges to Rescinded Funding. Democratic attorneys general and governors in 23 states and Washington, DC, filed a lawsuit against HHS regarding the recent cancellation of $12 billion in state infectious disease and substance use grants.

CONGRESS

Reconciliation Moves Forward with Senate Introduction of Concurrent Budget Resolution. This move initiates the next stage in the reconciliation process, which requires the Senate and House to pass a unified budget resolution. Rather than resolving the different approaches of the previously passed resolutions in the two chambers, the resolution unveiled in the Senate this week takes the unusual, but permitted, approach of having the Senate and House stick with their preferred policies and funding levels. This would defer the tough decisions – including agreements on the level of spending cuts, tax extensions, and raising the debt limit – until later in the process.
In the healthcare space, this would mean that the House maintains its instruction to the Energy and Commerce Committee to cut $880 billion, much of which is anticipated to come from Medicaid, while the Senate instructs the Finance Committee (which has jurisdiction over Medicaid) to achieve a minimum of $1 billion in spending cuts.
The Senate cleared a procedural hurdle on the budget resolution and is moving toward advancing the measure by this weekend. President Trump met with Members and threw his strong support behind the effort. If the Senate passes the resolution, the House plans to advance it next week, which would likely require the intervention of the president, as near-unanimity among House Republicans would be necessary. Some conservative members of the House, including House Budget Committee Chair Arrington (R-TX), have come out in opposition to the Senate budget resolution, fearing that it would ultimately lead to a final reconciliation bill that does not achieve the level of spending cuts included in the House’s preferred plan.
Senate Confirms CMS Administrator. The full Senate confirmed Mehmet Oz, MD, as CMS administrator by a party-line vote of 53 – 45. Oz’s tenure begins amid significant restructuring and workforce reductions occurring at CMS and HHS.
Senate Judiciary Committee Holds Drug Legislation Markup. The six bipartisan bills listed below were all advanced out of the committee by voice vote. In the markup, senators emphasized the importance of lowering prescription drug prices.

S. 527, the Prescription Pricing for the People Act of 2025, would require the Federal Trade Commission (FTC) to study the role of intermediaries in the pharmaceutical supply chain.
S. 1040, the Drug Competition Enhancement Act, would prohibit product hopping.
S. 1041, A Bill to Amend Title 35, United States Code, to Address the Infringement of Patents That Claim Biological Products, and for Other Purposes, would address patent thickets.
S. 1097, the Interagency Patent Coordination and Improvement Act of 2025, would establish an interagency task force between the US Patent and Trademark Office and the US Food and Drug Administration (FDA) for patent-related information sharing and technical assistance.
S. 1095, the Stop STALLING Act, would enable the FTC to deter filing of sham citizen petitions.
S. 1096, the Preserve Access to Affordable Generics and Biosimilars Act, would prohibit pay-for-delay deals.

Senate Homeland Security and Governmental Affairs Committee Holds Nomination Hearing for OPM Director. In addition to considering OPM director nominee Scott Kupor, the hearing considered Eric Ueland’s nomination for deputy director of the Office of Management and Budget. Republican senators asked both nominees how they would address the federal government’s increasing size, as well as its hiring and firing processes. Democratic senators asked the nominees if they support the reduction of federal employees.
House Energy and Commerce Health Subcommittee Holds Hearing on OTC Monograph Drugs. During the hearing, witnesses urged the committee to improve FDA’s ability to develop safe and effective sunscreen products that can reduce the rates of skin cancer in the United States. Republican Members focused their questions on the regulation of OTC monograph drugs and how the United States can improve its clinical ability to produce sunscreens similar to those in other countries that have lower rates of skin cancer. Given the timing of the hearing, Democratic Members focused their questions on how the reorganization of HHS, specifically the FDA, will hinder the agency’s role to regulate and approve the efficiency and safety of OTC drugs and medical devices.
House Energy and Commerce Oversight and Investigations Subcommittee Holds Hearing on Cybersecurity for Medical Devices. In the hearing, witnesses emphasized the need for increased cyber resilience of medical devices and suggested various solutions, including improved coordination between stakeholders and the government and increased cybersecurity training and education. Democrats focused their comments on the ongoing HHS reorganization and reduction in force, and changes made to National Institutes of Health (NIH) funding. They expressed concerns about how those actions will affect medical device research, review, and regulation. Republicans focused on the potential for cyberattacks from foreign countries, including China, the risk of backdoor attacks, and barriers to cybersecurity faced by rural hospitals.
House Education and Workforce Health, Employment, Labor, and Pensions Subcommittee Holds Hearing on Employer-Sponsored Healthcare. Subcommittee members and witnesses discussed the current landscape of employer-sponsored healthcare and potential improvements. Republicans emphasized the importance of association health plans for small businesses and self-employed individuals, highlighting their potential to provide affordable and comprehensive health coverage by allowing small businesses to band together and negotiate better rates. Democrats expressed concerns about budget cuts to Medicaid and the layoffs occurring at HHS, stressing that they could potentially hurt small businesses and employer-sponsored insurance coverage.
ADMINISTRATION

HHS Begins Implementing Dramatic Restructuring, Cutting Agency Workforce and Consolidating Divisions. Following last week’s announcement of HHS’s “dramatic restructuring” that includes the elimination of 10,000 employees, the consolidation of 28 divisions into 15, the elimination of five of the agency’s 10 regional offices, and the creation of a new Administration for a Healthy America subdivision, HHS employees began to receive layoff notices this week. According to last week’s HHS announcement and subsequent anecdotal reports this week, significant workforce reductions are underway at FDA, NIH, CMS, and the Centers for Disease Control and Prevention, among others.
The action sent shockwaves across Capitol Hill and the healthcare sector. In Congress, Democrats swiftly expressed deep concerns, along with some Republicans. Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Cassidy (R-LA) and Ranking Member Sanders (I-VT) formally invited HHS Secretary Kennedy to testify at a hearing on April 10, 2025, to update the committee on these actions. In the letter of invitation, they noted that during the confirmation process, Secretary Kennedy committed to coming before the committee quarterly, and that this is the first such invitation. While House Energy & Commerce Chair Guthrie (R-KY) and Health Subcommittee Chair Carter (R-GA) released a supportive statement, Chair Guthrie also requested a bipartisan staff briefing for HHS to explain the actions. Ranking Member Pallone (D-NJ) and Health Subcommittee Ranking Member DeGette (D-CO) called that action too little and wrote to Chair Guthrie, asking him to conduct oversight and hold hearings, including with Secretary Kennedy.
Democrats also sent multiple letters to Secretary Kennedy seeking more transparency:

Senate Finance Committee Ranking Member Wyden (D-OR), Senate HELP Committee Ranking Member Sanders, Senate Democratic Leader Schumer (D-NY), and Senator Warner (D-VA) led 34 Democratic senators in a letter requesting information about the fired employees by April 4, 2025, along with a detailed, staff-level briefing on the reduction in force plan.
House Energy and Commerce Committee Ranking Member Pallone, Health Subcommittee Ranking Member DeGette, and Oversight and Investigations Subcommittee Ranking Member Clarke (D-NY) sent a letter requesting documents and answers to a series of questions by April 15, 2025.
Lead Democratic appropriators from both sides of the Capitol sent a letter requesting specific information about HHS’s organizational structure by April 4, 2025.

No further details on the restructuring have been released as of the publication of this Check-Up, and Members of Congress are learning of the specific impacts only anecdotally through reports of specific terminations. Still unknown is the impact on HHS operations, the timing of regulations and agency guidance, and daily operations. We will continue to provide updates as we learn more.
COURTS

Laboratory-Developed Test Final Rule Struck Down. The US District Court for the Eastern District of Texas struck down the FDA’s final rule on laboratory-developed tests (LDTs), under which FDA would have started regulating LDTs as medical devices, with the initial phase starting May 6, 2025. Citing the new Loper Bright standard that has replaced the Chevron doctrine, the court concluded that the LDT final rule exceeded FDA’s authority under the Food, Drug, and Cosmetic Act, stating that FDA’s authority to regulate “devices” extends to tangible, physical products that are commercially distributed – not professional services that use such products.
HHS Faces Legal Challenges to Rescinded Funding. Last week, HHS canceled $12 billion in state infectious disease and substance use grants. Democratic attorneys general and governors in 23 states and Washington, DC, have filed a lawsuit against HHS seeking a temporary restraining order and injunctive relief to halt the funding cuts, stating that the cuts were unlawful and harmful. As legal challenges continue, it is being reported that the Trump administration is withholding tens of millions of dollars from Planned Parenthood clinics, claiming the clinics have violated Trump’s executive order on diversity, equity, and inclusion. In related news, the US Supreme Court heard oral arguments this week on South Carolina’s effort to exclude Planned Parenthood from its Medicaid program.
QUICK HITS

President Imposes Higher Tariffs. President Trump announced his plan to impose higher tariffs, including a 10% universal tariff on all goods imported into the United States, beginning April 5, 2025, and higher reciprocal tariffs on certain jurisdictions, including China, Japan, and the European Union, beginning April 9, 2025. The plan comes with certain exemptions, including pharmaceutical products, although that could change as the administration considers and advances additional trade policies.
CBO Releases Long-Term Budget Outlook. The Congressional Budget Office (CBO) predicts that the Medicare Hospital Insurance Trust Fund will run out of funds in 2052, which is 17 years later than previously estimated. According to CBO, expenditures from the trust fund are projected to be smaller and income to the trust fund is projected to be greater than projected last year because Part A spending was less than anticipated in 2024, payments to hospitals are expected to grow more slowly than they did in 2024, and modeling of federal payments to insurers in the Medicare Advantage program has been updated. Read the full report here.
NIH, FDA Nominees Sworn In. Jay Bhattacharya, MD, PhD, was sworn in as NIH director, and Martin Makary, MD, MPH, was sworn in as FDA commissioner.
ONDCP Releases Drug Policy Priorities. The White House Office of National Drug Control Policy (ONDCP) outlined six priorities for the Trump Administration:

Reduce the number of overdose fatalities, with a focus on fentanyl
Secure the global supply chain against drug trafficking
Stop the flow of drugs across borders and into communities
Prevent drug use before it starts
Provide treatment that leads to long-term recovery
Innovate in research and data to support drug control strategies

BIPARTISAN LEGISLATION SPOTLIGHT

Sens. Schatz (D-HI), Wicker (R-MS), Warner (D-VA), Hyde-Smith (R-MS), Welch (D-VT), and Barrasso (R-WY) reintroduced the CONNECT for Health Act this week. The bipartisan bill would make permanent the current Medicare flexibilities that are scheduled to expire on September 30, 2025, without further congressional action. The bill has a total of 59 original cosponsors. A press release from Sen. Schatz can be found here. Companion legislation in the House is expected imminently from Reps. Thompson (D-CA), Schweikert (R-AZ), Matsui (D-CA), and Balderson (R-OH).

NEXT WEEK’S DIAGNOSIS

The Senate and House will be in session next week, as Republican leaders continue efforts to advance the partisan budget reconciliation process. Hearings and markups of note next week include the following:

The House Energy and Commerce Committee will hold a markup that was postponed this week after Speaker Johnson abruptly cancelled votes for most of the week. The broadly bipartisan markup will include several health-related bills.
A Senate HELP Committee markup will include a pediatric cancer bill.
The House Ways and Means Health Subcommittee will hold a hearing on biosimilars.

House Energy and Commerce Chairman Guthrie stated that HHS Secretary Kennedy has agreed to a bipartisan briefing to answer questions about the HHS reorganization, but we are awaiting official confirmation. It is not yet known whether Secretary Kennedy will accept the Senate HELP Committee’s invitation to testify on April 10, 2025. We are also watching for the IPPS proposed rule and Medicare Advantage and Part D final rule, which are both pending release.

What Should Contractors and Grant Recipients do in Response to the DEI Executive Orders?

In Part 1 of our blog series, we outlined the Trump Administration’s new Executive Orders (“EOs”) on Diversity, Equity, Inclusion (“DEI”) and Diversity, Equity, Inclusion, and Accessibility (“DEIA”) programs, and the current legal status of those EOs. In this second part, we provide several observations on what actions federal contractors and grant recipients might want to consider taking in response to these EOs to ensure compliance and mitigate risks.

Review and catalog your various DEI and DEI‐related programs and initiatives. The EO directs agencies to terminate all federal DEI programs, and further directs the Office of Personnel Management (“OPM”), Office of Management and Budget (“OMB”), and the Department of Justice (“DOJ”) to work together to ensure this happens. The forthcoming FAR clause will require contractors to certify to the same. The EO also emphasizes that the Government will be looking for agencies and contractors disguising their DEI programs under other names, and directs the termination of such programs “under whatever name they appear.” Having identified all such programs will prepare you to be ready to take action quickly.
Catalog and re‐assess your diversity‐based alliance initiatives. To be clear, we are not recommending at this point terminating all vendor diversity initiatives. We think it highly likely, however, the Government will view such programs as contrary to the spirit, if not the letter, of the EOs. While the EOs do not explicitly refer to corporate programs designed to promote disadvantaged businesses by giving them a preferential path to becoming a subcontractor or supplier, it may be hard to identify a meaningful distinction between internal DEI programs and subcontractor preference programs.
Review your Code of Conduct, your Environmental, Social, and Governance (“ESG”) reports, your hiring materials, and your website to identify and remove language (and programs) contrary to the EOs. The EOs are very clear that they are intended to end “dangerous, demeaning, and immoral race‐ and sex‐ based preferences under the guise of so‐called ‘diversity, equity, and inclusion’ (DEI).” The Government will be looking for companies continuing to promote DEI, and especially for companies that appear to have changed the names of their programs in an eﬀort to, in the words of the OPM, “obscure their connection to DEIA programs.” But remember, you must ensure your programs that focus on Title VII of the Civil Rights Act (which prohibits discrimination, harassment, and retaliation), the Equal Pay Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act are not identified for termination because the EOs do not eliminate the equal opportunity requirements of those laws.
Consider terminating DEI programs that run afoul of the law, and rethinking DEI-related aﬃliations, sponsorships, speaking engagements, and marketing materials that are arguably covered by the EOs. You probably remember the urge to slow-roll the internal implementation of prior EOs (e.g., the COVID 14042 EO), but the recent DEI EOs are different in light of their specificity, the clear intent to unleash the DOJ to take action against contractors dragging their feet, and the near-term introduction of a new certification. Again, as noted above, this does not mean contractors must cease their legal eﬀorts to make holistic hiring and promotion decisions. Just keep in mind, this is a fine line to walk and one that may come under intense Government scrutiny.
Be careful not to over‐correct in a manner that creates collateral risks – retain programs focused on non‐discrimination. Although the EOs are clear and authoritative in many ways, they do not override existing federal nondiscrimination, non‐harassment, and anti‐retaliation obligations of Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Age Discrimination in Employment Act, or the Americans with Disabilities Act (as amended). These laws protect employees from discrimination, harassment, and retaliation on the basis of race, color, gender, sexual orientation, sexual preference, pregnancy, religion, national origin, age, and disability. Similarly, while inconsistent state laws likely will fall prey to the Preemption Doctrine (the general rule that federal laws trump inconsistent state laws), state laws that are not inconsistent with the EOs likely remain operative, and contractors will be held accountable for compliance with those laws.
Review and catalog contracts and grants that incorporate DEI performance requirements. The EOs contemplate the termination of all DEI (actually, DEIA) performance requirements “for employees, contractors, and grantees” within 60 days. To facilitate implementation of this directive, the EOs instruct agencies to recommend actions to align programs, including contracts and set‐aside contracts, with the EO. Additionally, the White House’s Fact Sheet describes the EOs as expanding “individual opportunity by terminating radical DEI preferencing in federal contracting and directing federal agencies to relentlessly combat private sector discrimination.” Finally, the EOs instructs agencies to inform the White House of programs that may have been “mislabeled” to conceal their true purpose.
If you have a contract that could be suspended or terminated (e.g., providing DEI training to federal agencies, supporting foreign aid programs, etc.), take immediate steps to record and track all costs incurred relating to the stop work, suspension, or termination. The Government already has begun taking steps to pause contracts, primarily in the foreign aid space. Such pauses, whether eﬀected pursuant to the Changes Clause, the Suspension of Work Clause, the Stop Work Order Clause, or the Terminations Clause, will create significant risks to contractors. Beyond obvious cost risks, such Government actions could create risks of disputes between primes and impacted subcontractors and suppliers.
Prepare for the elimination of EO 11246‐based Aﬃrmative Action obligations. The new EOs revoke EO 11246 to, among other things, ensure “the employment, procurement, and contracting practices of Federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.” As EO 11246 also is an EO, the deletion is self‐executing. In other words, EO 11246 is terminated. The EOs also direct OFCCP from taking any enforcement action and to stop promoting diversity, holding contractors accountable for aﬃrmative action, and workplace balancing.
If you are involved in pending audits or investigations relating to EO 11246 or DEI matters, consider reaching out to the investigating agency to confirm whether they will be terminating their activities. The EOs specifically direct Federal agencies to “terminate all . . . enforcement actions.” Moreover, the Office of Federal Contract Compliance Programs (“OFCCP”) guidance states that the agency shall immediately cease “holding Federal contractors and subcontractors responsible for taking ‘aﬃrmative action.’” Thus, it is likely that all ongoing OFCCP investigations relating to the employment of women or minorities are over.
Ensure your internal aﬃnity groups are not aﬀorded privileges unavailable to non‐members. There is nothing in the EOs that prelude the existence of aﬃnity groups within an organization. Likewise, there is nothing in the Supreme Court’s decision in Students for Fair Admission v. Harvard that precludes such groups. That said, if certain aﬃnity groups are aﬀorded special treatment unavailable to other groups, it is likely the Government will view them as illegal DEI programs. In early February, OPM issued guidance that helps shed some light on what kind of employee groups violate the EOs. The memorandum states that employee resource groups (“ERGs”) “that . . . advance recruitment, hiring, preferential benefits (including but not limited to training or other career development opportunities), or employee retention agendas based on protected characteristics” are prohibited. Additionally, ERGs that are open only to “certain racial groups but not others, or only for one sex, or only certain religions but not others” and events that limit attendance to only members of an ethnic group, or discourage attendance from those outside the group are prohibited. In contrast, the guidance states the following is not illegal: Affinity/resource group events that allow “employees to come together, engage in mentorship programs, and otherwise gather for social and cultural events.”

The Memorandum cautions, however, that discretion must be exercised to ensure such events do not cross the line into “illegal DEI.” The Memorandum offers this specific warning to Government officials: “When exercising this discretion, agency heads should consider whether activities under consideration are consistent with the [EOs] . . . and the broader goal of creating a federal workplace focused on individual merit.” The Memorandum warns that, for any activities that are retained, “agencies must ensure that attendance at such events is not restricted (explicitly or functionally) by any protected characteristics, and that attendees are not segregated by any protected characteristics during the events.”

Keep a close eye on your inbox for CO/GO notices regarding modifications to your contracts and grants. The EOs require the inclusion in every contract of a certification that the contractor does not operate any program promoting DEI that violates any federal anti‐discrimination laws. Only a few weeks after the EO was issued, certain federal agencies began including such certifications in their contracts, even before a FAR deviation was issued. On February 19, GSA issued a class deviation directing all GSA COs to remove DEI and affirmative action related FAR clauses from contracts and solicitations, however, it does not add a new FAR clause or certification requirement (yet). Relatedly, the EOs give the requirements teeth by adding a related clause that acknowledges that compliance with all anti‐discrimination laws is material to the Government’s decision to pay all invoices for purposes of the civil False Claims Act. This clause will make it much easier for the Government and whistleblowers to bring False Claims Act cases against contractors who they believe have not fully implemented the new requirements. The EOs are very clear that OMB and the DOJ must take action to implement the EOs and to excise all DEI elements of process, programs, contracts, grants, etc.
Once your federal agreements are modified, be sure to modify your subcontracts. Remember, the goal of these EOs is “to encourage the private sector to end illegal discrimination and preferences, including DEI.” By continuing to require your subcontractors to comply with these “illegal” FAR/DFARS/Uniform Guidance (for grants) clauses, you could be viewed as running afoul of the prohibition. When your prime agreement (or higher‐tier subcontract agreement) is modified, it’s important to do the same for your subcontractors.
Keep your Corporate Governance team in the loop. Companies should review their public disclosures (e.g., statements in the 10-Ks and 10-Qs, proxy statements, etc.) to ensure they reflect any material changes to the company’s DEI programs, including any such changes undertaken in an effort to maintain compliance with the current state of the law. Publicly traded companies are often targets of shareholder litigation related to governance matters. Companies may see a material increase in shareholder litigation as a result of the new EOs. Even where a company thoughtfully maintains legal elements of its DEI program (recall, the EOs talk only about “illegal DEI”), shareholder plaintiffs could still claim decision-makers did not adequately disclose these remaining DEI programs and/or exposed the company to needless litigation and reputational risk and/or failed to disclose such risks to the investing public regardless of the company’s response to the EOs and related caselaw.
Ensure your internal reporting and investigation plans are up to date. In addition to the direction to the DOJ to be vigilant in pursuing contractors (and non‐contractors) that act in a manner inconsistent with the new rules, employees, competitors, and members of the general public have been incentivized to take advantage of the FCA to bring suits against contractors. We believe the DOJ will pursue contractors that do not comply with the EOs. We likewise well recognize the forthcoming contract modifications that will make it easier for whistleblowers to bring FCA cases. In fact, the Equal Employment Opportunity Commission (“EEOC”) issued two documents designed to inform workers of their rights if they believe they have experienced “discrimination related to DEI at work.” These documents could further motivate potential whistleblowers to raise allegations against their employers. It is against this background that we recommend taking a moment to ensure your hotlines, your internal investigations plans, your Mandatory Disclosure Rule policies, and your related programs and tools are up to date (including those flowing from the DOJ published guidance for corporate compliance programs).

Contractors must navigate a complex legal landscape in response to the DEI Executive Orders. By proactively adjusting DEI programs, preparing for certifications, and staying informed on legal developments, contractors can mitigate risks and ensure compliance with federal mandates.

Regulation Round Up: March 2025

Welcome to the Regulation Round Up, a regular bulletin highlighting the latest developments in UK and EU financial services regulation.
Key developments in March 2025:
31 March
Securitisation: The Joint Committee of the European Supervisory Authorities (“ESAs”) published a report on the implementation and functioning of the Securitisation Regulation (2017/2402)
27 March
FCA Handbook: The Financial Conduct Authority (“FCA”) published Handbook Notice 128 which sets out changes in respect of the following areas: application and periodic fees, client asset: auditors, corporate governance code, the FSCS management expenses levy limit, digital securities depositories and the handbook administration.
26 March
ESG: The Council of the European Union agreed its negotiating mandate on the European Commission Omnibus proposal for postponing application dates in relation to the Corporate Sustainability Due Diligence Directive ((EU) 2024/1760) and the Corporate Sustainability Reporting Directive ((EU) 2022/2464). Please refer to our dedicated article on this topic here.
ESG: The EU Platform on Sustainable Finance published its response to the European’s Commission’s call for evidence on a draft delegated regulation amending the Taxonomy Delegated Acts. Please refer to our dedicated article on this topic here.
25 March
FCA Regulation Round‑Up: The FCA published its regulation round‑up for March 2025. Among other things, it covers the launch of “My FCA” and a new form relating to the financial information that wholesale firms need to submit with an application for authorisation.
Consumer Duty: The FCA published a feedback statement (FS25/2) on immediate areas for action and further plans for reviewing FCA retail conduct requirements following the introduction of the Consumer Duty.
FCA Strategy: The FCA published its strategy for 2025 to 2030, which sets out the FCA’s vision and priorities for the next five years and focuses on deepening trust, rebalancing risk, supporting growth and improving lives.
21 MarchESG: The EU Platform on Sustainable Finance (“PSF”) published a report on streamlining sustainable finance for SMEs in the light of the challenges faced by SMEs in accessing external financing for their sustainability projects.
18 March
UK MiFID: HM Treasury published a policy note on the Markets in Financial Instruments Directive (“MiFID”) Organisational Regulation (UK Commission Delegated Regulation (EU) 2017/565), together with a near‑final draft version of the Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025.
17 March
Capital Markets: The European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) published a draft report on facilitating the financing of investments and reforms to boost European competitiveness and creating a Capital Markets Union (“CMU”) that considers recommendations made by the Draghi report on the future of European competitiveness.
Economic Growth: UK Finance published a Plan for Growth, which proposes reforms to help the UK financial services sector make an even stronger contribution to the government’s growth agenda while also delivering real benefits for consumers, businesses and society.
Economic Growth: HM Treasury published a policy paper that contains an action plan setting out the steps the government intends to take to reform the UK regulatory system to ensure regulators and regulation support growth.
14 March
Market Abuse: The FCA published Primary Market Bulletin No 54, which addresses strategic leaks and the unlawful disclosure of inside information.
12 March
Payments: HM Treasury published a press release announcing its decision to abolish the Payment Systems Regulator (“PSR”) as part of an efficiency drive.
Artificial Intelligence: The International Organization of Securities Commissions (“IOSCO”) published a consultation report, produced by its Fintech Task Force, on artificial intelligence (“AI”) use cases, risks and challenges in capital markets.
ESG: The FCA and Prudential Regulation Authority (“PRA”) published respective letters that they have decided not to move forward with proposed diversity and inclusion rules for financial firms. Please refer to our dedicated article on this topic here.
11 March
Motor Finance: The FCA published a statement on the next steps in its review of the motor finance discretionary commission arrangements.
ESG: The FCA published a statement confirming that their sustainability rules do not prevent investment in or finance for defence companies. Please refer to our dedicated article on this topic here.
10 March
Artificial Intelligence: The FCA drafted a letter it sent jointly with the Information Commissioner’s Office (“ICO”), to trade association chairs and CEO of firms on supporting AI, innovation and growth in financial services.
FCA: The FCA published its findings following a multi‑firm review of liquidity risk management at wholesale trading firms.
7 March
Consumer Duty: The FCA published its findings following a multi‑firm review into how firms approach providing consumer support under the Consumer Duty. It also published examples of good practice and areas for improvement.
FCA Quarterly Consultation: The FCA published its 47th quarterly consultation paper (CP25/4).
6 March
ESMA Priorities: The European Securities and Markets Authority (“ESMA”) published a letter from Verena Ross, ESMA Chair, to John Berrigan, Director General of the European Commission’s Directorate Financial Services, Financial Stability and Capital Markets Union, identifying a number of Commission deliverables for 2025 that could be deprioritised or postponed.
5 March
ESG: The European Commission published a notice (C/2025/1373) on the interpretation and implementation of certain legal provisions of the Taxonomy Environmental Delegated Act ((EU) 2023/2486), the Taxonomy Climate Delegated Act ((EU) 2021/2139) and the Taxonomy Disclosures Delegated Act ((EU) 2021/2178) was published in the Official Journal of the European Union.
Private Markets: The FCA published its findings following a multi‑firm review of valuation processes for private market assets. Please refer to our dedicated article on this topic here.
Additional Authors: Sulaiman Malik and Michael Singh

Mexico Bans the Cultivation of Genetically Modified Corn, Opening Door for Other Restrictions in the Future

According to a March 21, 2025 report issued by the U.S. Department of Agriculture (USDA)’s Foreign Agricultural Service, the scope of Mexico’s recent ban on the cultivation of genetically engineered (GE) corn is “ambiguous” and may leave the door open to restrictions on corn grain imported for food or feed use in the future. U.S. growers, distributors, and developers of GE plants should carefully monitor Mexico’s implementation of the cultivation ban and potential responses by the United States, particularly as U.S.-Mexico trade issues continue to receive heightened scrutiny under the Trump administration.
Legal Background
In the United States, GE plants and other organisms are jointly regulated by USDA, the U.S. Environmental Protection Agency (EPA), and the U.S. Food and Drug Administration (FDA) consistent with the Coordinated Framework for the Regulation of Biotechnology. This nearly 40-year-old federal policy describes each agency’s regulatory responsibilities under overlapping statutory frameworks. For example, when agricultural crops, such as corn, are genetically engineered to produce pesticidal substances, EPA regulates the substance (known as a plant-incorporated protectant, or “PIP”) under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), USDA regulates the GE plant under the Plant Protection Act (PPA), and FDA ensures that GE products meet applicable food safety standards under the Federal Food, Drug, and Cosmetic Act (FFDCA).
By contrast, a de facto ban on GE corn planting has been in place in Mexico since 2013, and in effect, prohibitions have existed since 1998. In 2023, the Mexican government officially issued a decree mandating that competent authorities revoke and refrain from issuing permits for the release of GE corn seeds in Mexico, as well as authorizations for the use of such corn grain for human consumption. The decree also ordered the gradual elimination of GE corn used in animal feed and industrial uses intended for human consumption.
In August 2023, the United States formally challenged Mexico’s decree under the United States-Mexico-Canada Agreement (USMCA). In a December 20, 2024 decision, a duly established panel agreed with the United States that Mexico’s restrictions were inconsistent with USMCA principles because, among other reasons, the measures were not based on “relevant international standards, guidelines or recommendations.” In compliance with the panel’s decision, Mexico issued an agreement on February 5, 2025, that revoked the relevant portions of the 2023 decree.
New Constitutional Ban on the Cultivation of GE Corn in Mexico
On March 17, 2025, Mexican President Claudia Sheinbaum issued a new decree amending Articles 4 and 27 of the country’s Constitution, which addresses the conservation and protection of native maize varieties.
In relevant part, the amendment establishes that corn grown in Mexico “must be free from genetic modifications produced through techniques that surpass the natural barriers of reproduction or recombination, such as transgenic methods.” While it does not specifically address GE corn grain imports, the amendment provides that “any other use” of GE corn “must be evaluated in accordance with legal provisions to ensure it poses no threat to biosafety, public health, or Mexico’s biocultural heritage and population.” In addition, the amendment mandates federal promotion of traditional agricultural practices — particularly those using native seeds and agroecological methods — through investment, research, and institutional strengthening.
Continued potential for restrictions on imports under the new constitutional ban
While Mexico formally complied with the USMCA panel’s decision by nullifying the prohibitions against the uses of GE corn under the 2023 decree, the new 2025 amendment entrenches anti-GE corn principles in national law and creates a legal foundation that could support future restrictions on GE corn imports. This poses a potential risk of additional regulatory barriers, legal challenges, and renewed trade disputes, particularly if future measures are framed in terms of biosafety, biocultural protection, or food sovereignty, which are now protected goals under Mexico’s Constitution.
Despite not imposing a formal import ban, the 2025 Amendment enshrines a constitutional preference for the exclusion of GE corn from Mexican agriculture and strict oversight of any other uses. This may open the door to more rigorous approval standards on imported GE corn (such as labeling, traceability, or risk assessments) and provide a stronger legal basis for those who seek to challenge import authorizations on constitutional grounds going forward.

Class Action Litigation Newsletter | 4th Quarter 2024

This GT Newsletter summarizes recent class-action decisions from across the United States.
Highlights from this issue include:

First Circuit addresses four questions of first impression relating to CAFA jurisdiction and “home state” and “local controversy” exceptions.
Second Circuit holds class representative’s susceptibility to unique defenses is not a basis for finding lack of adequacy, though it may go to typicality.
Fourth Circuit reverses certification of FLSA class action, finding conclusory allegations of company policies were insufficient to satisfy commonality requirement.
Sixth Circuit vacates class certification based on individualized questions in automotive defect case.
Seventh Circuit affirms decertification of Rule 23(c)(4) issues class for lack of superiority.
Ninth Circuit holds unexecuted damages model sufficient to demonstrate damages are susceptible to common proof at the class certification stage.

Continue reading the full GT Class Action Litigation Newsletter | 4th Quarter 2024

Additional Authors: Richard Tabura, Aaron Van Nostrand, Gregory A. Nylen, David G. Thomas, Angela C. Bunnell, R. Morgan Carpenter, Gina Faldetta, and Gregory Franklin.

The SEC Under Paul Atkins – What to Expect for Registered and Private Offerings, Climate-Related Disclosure, Consolidated Audit Trail, Digital Assets, and Agency Re-Organization

Paul Atkins, who has been nominated by President Trump to serve as Chairperson of the Securities & Exchange Commission, last week completed a short confirmation hearing before the U.S. Senate Banking Committee. Despite its brevity, the hearing provided meaningful clues to Mr. Atkin’s plans if he is confirmed by the Senate to lead the SEC, which appears reasonably assured to occur. On April 3, 2025, the Senate Banking Committee approved his nomination with a vote of 13 to 11.
Paul Atkins previously served on the staff of SEC Chairman Richard Breeden, as an SEC Commissioner from 2002 to 2008, and as a member of the Congressional Oversight Panel for the Troubled Asset Relief Program, or TARP following the 2008 financial crisis. Most recently, he founded and ran a regulatory and compliance consulting company.
Here are a few takeaways from the hearing:
He Supports Regulation, but “Clear,” More “Tailored,” Less “Political”
Mr. Atkins can be expected to avoid regulation that he perceives as unnecessarily burdensome on business, but indicated that he would back regulation that he believes appropriately balances effectiveness and costs. Pressed on whether he intends to be “deregulatory,” he stated repeatedly that he believes in regulation that is carefully tailored to the actual problem being addressed. When pressed on the causes of the 2008 financial meltdown, noting that he served as an SEC Commissioner in the years prior, he cited “mis-regulation” following the SEC’s “focus on the wrong things” rather than the “actual problems.”
Although Mr. Atkins did not comment extensively on enforcement, the expectation is that he will move away from what some perceive as “regulation by enforcement,” which refers to enforcement cases against grey area activity, in favor of a focus on more traditional fraud actions, such as insider trading and market manipulation. This has been a particular concern of market participants in the crypto and digital assets industries. Mr. Atkins stated that he was in favor of imposing penalties on regulated entities for regulatory violations, citing the compromise reflected in the 2006 Statement of the Securities and Exchange Commission on Financial Penalties.
He Appears to View the SEC’s Climate-Related Disclosure Rules as “Political”
Mr. Atkins stated that he would “get politics out of the financial markets.” When asked about the SEC’s extensive climate change disclosure rules, he clearly backed the agency’s recent retreat from those requirements [link to The SEC Votes to “End its Defense” of Climate Change Rules | Regulatory & Compliance ], but did not comment on the subject of climate-related and other ESG disclosure in principle, and thereby left the door open for new disclosure rules that in his view would provide information material to investors.
Public Registration Is Preferable to Private Offerings, and the SEC Did Not Go Far Enough In Implementing the JOBS Act, And May Suggest Further Legislation
Mr. Atkins indicated that public registration of securities offerings is preferable to private offerings, while citing the unnecessary burdens of public registration that he believes have contributed to a decline in the number of public offerings and public companies. In particular, he cited regulatory changes in 2016 called for by the JOBS Act, which among other things eased the requirements for “emerging growth companies” in registered offerings. Mr. Atkins stated that the SEC “never fully implemented” the JOBS Act, although he also mentioned potential additional statutory relief through Securities Act amendments.
Public commenters at the time of the adoption of the JOBs Act suggested some areas of additional flexibility, which may inform Mr. Atkin’s priorities. For example, the Act raised the threshold for requiring large private companies to become publicly reporting companies from 500 record holders to 2,000 record holders or 500 non-accredited investor holders. Some commenters had suggested ways to ease issuers’ determination of the number of non-accredited investor holders, such as allowing them to rely on the initial determinations made in a private offering, or to allow 3(c)(7) funds to presume the accredited investor status of their “qualified purchasers.” Under current rules, making the determination is difficult at best. The SEC under the leadership of Acting Chairperson has taken steps designed to ease access to capital in recent months, including providing staff guidance designed to increase the use of Rule 506(c) exempt offerings (see below), and opening the confidential review process of SEC registration statements to all companies regardless of how long they have been public.
Views on Retail Participation in Private Funds
Members of the Senate Banking Committee pressed Mr. Atkins on the increasing availability of hedge fund, private equity and similar interests to retail investors. In response, he did not offer any specific SEC action that he believes warranted at this time, pointing to existing guardrails, and indicating that individual retail investors who are “accredited investors” do not require special SEC protection in making these kinds of investments.
The JOBSs Act also required the SEC to adopt Rule 506(c) permitting private placements using general solicitation, and raised the threshold for requiring large private companies to file public reports with the SEC. In expanding the JOBs Act amendments, Mr. Atkins may plan to further facilitate the use of Rule 506(c), perhaps through rule amendments and/or Commission interpretive guidance, following the very recent staff interpretive letter liberalizing the rule, which received widespread attention. [link to SEC Eases Verification Burdens in Rule 506(c) Offerings | Regulatory & Compliance ].
Members of The Committee Reflected Skepticism About Favorable Treatment Afforded to “Foreign Private Issuers”
In the course of their questioning, members of the Senate Banking Committee reflected skepticism about favorable treatment of “foreign private issuers,” such as their exemption from the short-swing profit rules applicable to domestic issuers. Mr. Atkins stated that he would review these issues.
Digital Assets Will Be “Top Priority”
It comes as no surprise that Mr. Atkins believes that crypto and other digital assets have been hindered by regulatory uncertainty, and he intends to provide a “firm regulatory foundation” for the offering and trading of digital assets through “a rational, coherent, and principled approach.” In other words, he believes that these activities should be regulated, but plans to provide clear, practical regulatory processes. The SEC recently established a Crypto Task Force, which has scheduled roundtable discussions. There has been proposed legislation on digital assets, as addressed in our prior blog Digital Assets: What to Expect from the Incoming Administration and Congress | Regulatory & Compliance , and Mr. Atkins likely will weigh with Congress on where legislation may help the SEC’s efforts.
He Will Review the Consolidated Audit Trail Requirements
Members of the Committee pressed Mr. Atkins on his support for the SEC’s controversial Consolidated Audit Trail, or CAT, requirements, and indicated that he looked forward to reviewing the system to ensure that it is accomplishing the purpose it was adopted to serve. The CAT was mandated by the SEC following the 2010 “flash crash” and provides for the collection of trade and personal identifying information on all equity and options transactions in the United States. The CAT permits the SEC to detect and respond to market inefficiencies, but it has been criticized for its cost as well as for its retention of significant volumes of personal trade and other information, and for the lack of public access when the SEC writes new rules based on its analysis of the data.
No Immediate Major Overhaul of the SEC, But the Agency Will Be Reviewed For Effectiveness and Efficiency
Given his substantial experience with the SEC, Mr. Atkins likely believes in the agency and its mission, but also has ideas for reform. As for DOGE and its efforts to substantially reduce the size of government agencies, he stated that “if there are people who can help creating efficiencies I would definitely work with them,” and he will review the Commission’s operations to ensure that the agency is working “effectively and efficiently.”

Safety Perspectives from the Dallas Region: Staying Safe During Texas Wildfire Season [Podcast]

In this episode of our Safety Perspectives From the Dallas Region podcast series, shareholders John Surma (Houston) and Frank Davis (Dallas) discuss the critical topic of workplace safety during wildfire season. With Texas currently facing significant wildfires, Frank and John discuss essential OSHA guidelines, preparedness steps, and emergency action plans to ensure the safety of employees in affected areas.