Context for the Five Pillars of EPA’s ‘Powering the Great American Comeback Initiative’
On February 4, new US Environmental Protection Agency (EPA) Administrator Lee Zeldin announced EPA’s “Powering the Great American Comeback Initiative,” which is intended to achieve EPA’s mission “while emerging the greatness of the American Economy.” The initiative has five “pillars” intended to “guide the EPA’s work over the first 100 days and beyond.” These are:
Pillar 1: Clean Air, Land, and Water for Every American.
Pillar 2: Restore American Energy Dominance.
Pillar 3: Permitting Reform, Cooperative Federalism, and Cross-Agency Partnership.
Pillar 4: Make the United States the Artificial Intelligence Capital of the World.
Pillar 5: Protecting and Bringing Back American Auto Jobs.
Below, we break down each of the five pillars and present context what these pillars may mean to the regulated community.
Pillar 1: “Clean Air, Land, and Water for Every American”
The first pillar is intended to emphasize the Trump Administration’s continued commitment to EPA’s traditional mission of protecting human health and the environment, including emergency response efforts. To emphasize this focus, accompanied by Vice President JD Vance, Zeldin’s first trip as EPA Administrator was to East Palatine, Ohio, on the two-year anniversary of a train derailment. While there, Administrator Zeldin noted that the “administration will fight hard to make sure every American has access to clean air, land, and water. It was an honor to meet with local residents, and I leave this trip more motivated to this cause than ever before. I will make sure EPA continues to clean up East Palestine as quickly as possible.” After surveying the site of the train derailment to survey the cleanup, Zeldin and Vance “participated in a meeting with local residents and community leaders to learn more” about how to expedite the cleanup.
Taken alone or in conjunction with Administrator Zeldin’s trip to an environmentally impacted site in Ohio, Pillar 1 appears consistent with past EPA practice.
Read in the context of the Trump Administration’s first-day executive orders (for more, see here) and related actions such as a memoranda from Attorney General Pam Bondi on “Eliminating Internal Discriminatory Practices” and “Rescinding ‘Environmental Justice’ Memoranda.” Pillar 1 should be construed as meaning that EPA no longer intends to proactively work to redress issues in “environmentally overburdened” communities. Consequently, programs under the Biden Administration that focus on environmental justice (EJ) and related equity issues are ended. (For more, see here.)
Pillar 2: Restoring American Energy Dominance
Pillar 2 focuses on “Restoring American Energy Dominance.” What this means in practice is little surprise given President Trump’s promises during his inauguration to “drill, baby, drill.” Two first-day Executive Orders provide further context to this pillar:
The Executive Order “Declaring a National Energy Emergency” declares a national energy emergency due to inadequate energy infrastructure and supply, exacerbated by previous policies. It emphasizes the need for a reliable, diversified, and affordable energy supply to support national security and economic prosperity. The order calls for immediate action to expand and secure the nation’s energy infrastructure to protect national and economic security.
The Executive Order on “Unleashing American Energy,” seeks to encourage the domestic production of energy and rare earth minerals while reversing various Biden Administration actions that limited the export of liquid natural gas (LNG), promoted electric vehicles and energy efficient appliances and fixtures, and required accounting for the social cost of carbon. (For context on the social context of carbon, see here and here.)
Pillar 3: Permitting Reform, Cooperative Federalism, and Cross-Agency Partnership
Pillar 3 focuses on government efficiency including permitting reform, cooperative federalism, and cross-agency partnerships. As with Pillar 1, two of these goals (cooperative federalism and cross-agency partnership) are generally consistent with typical agency practice across all administrations even if administrations approach them in different ways.
“Permitting reform” generally means streamlining the permitting processes so that the time from permitting submission to conclusion is shorter.
Current events, most notably three court decisions involving the National Environmental Policy Act (NEPA), require a deeper exploration of “permitting reform.” NEPA is a procedural environmental statute that requires federal agencies to evaluate the potential environmental impacts of major decisions before acting and provides the public with information about the environmental impacts of potential agency actions. The Council on Environmental Quality (CEQ), an agency within the Executive Office of the president, was created in 1969 to advise the president and develop policies on environmental issues, including ensuring that agencies comply with NEPA by conducting sufficiently rigorous environmental reviews.
Energy-related infrastructure ranging from transmission lines to ports needed to ship LNG often require NEPA reviews. During his first term, President Trump sought to streamline NEPA reviews. As we previously discussed, in 2020, CEQ regulations were overhauled to exclude requirements to discuss cumulative effects of permitting and, among other things, to set time and page limits on NEPA environmental impact statements. During the Biden Administration, in one phase of revisions, CEQ reversed course to undo the Trump Administration’s changes, and, in a second phase, the Biden Administration required evaluation of EJ concerns, climate-related issues, and increased community engagement. (For more, see here.) Predictably, litigation followed these changes. Additionally, we are waiting on the US Supreme Court’s decision in Seven County Infrastructure Coalition v. Eagle County, Colorado, which addresses whether NEPA requires federal agencies to identify and disclose environmental effects of activities which are outside their regulatory purview.
These two recent decisions add to the ongoing debate about whether CEQ ever had the authority to issue regulations that have been relied upon for decades. These include the DC Circuit’s decision in Marin Audubon Society v. FAA (for more, see here) and a second decision by a North Dakota trial court in in Iowa v. Council on Environmental Quality.
Pillar 4: Make the United States the Artificial Intelligence Capital of the World
EPA’s Pillar 4 seeks to promote artificial intelligence (AI) so that America is the AI “Capital of the World.”
AI issues fall into EPA’s purview because development of AI technologies is highly dependent on electric generation, transmission, and distribution. EPA plays a key role in overseeing permitting and compliance activities related to facilities like these. As we have discussed, AI requires significant energy to power the data centers it needs to function, and a study indicates that the carbon footprint of training a single AI natural language processing model produced similar emissions to 125 round-trip flights between New York and Beijing. Because data center developments tend to be clustered in specific regions, more than 10% of the electricity consumption in at least five states is used by data centers. (Report available here.)
Pillar 5: Protecting and Bringing Back American Auto Jobs
Pillar 5 focuses on supporting the American automobile industry. As was discussed in relation to Pillar 2, EPA seeks to support the American automobile industry. Regarding this sector, EPA intends to “streamline and develop smart regulations that will allow for American workers to lead the great comeback of the auto industry.” Additionally, the US Office of Management and Budget released a memo on January 21, clarifying that provisions of the “Unleashing American Energy” Executive Order were intended to pause disbursement of Inflation Reduction Act funds, including those for electric vehicle charging stations.
While the particulars of this pillar are less clear than some others, we expect that EPA’s efforts in this area will involve some combination of permitting reform and rollback to prior EPA decisions related to vehicle emissions.
Strategic Dialogue With The European Automotive Industry
As announced by President Ursula von der Leyen to the European Parliament on 27 November 2024, and as formally incorporated into the Communication A Competitiveness Compass for the EU (COM(2025) 30 final), published on 29 January 2025, the European Commission launched a Strategic Dialogue with the European automotive industry, social partners, and other key stakeholders on 30 January 2025. This initiative responds to growing concerns from EU Member States and industry stakeholders regarding the declining competitiveness of the European automotive sector. The EU faces mounting competitive pressures from third-country manufacturers and the necessity of meeting increasingly stringent decarbonization objectives.
Pursuant to point 1.2, page 10 of the Communication Competitiveness Compass for the EU, the strategic dialogue will directly contribute to the development of an EU Industrial Action Plan for the automotive sector. This plan is expected to incorporate ambitious supply- and demand-side initiatives, including a proposal on greening corporate fleets. In this context, President von der Leyen has tasked Commissioner Apostolos Tzitzikostas with presenting an Automotive Industry Action Plan on 5 March 2025. It is anticipated that the findings of the Strategic Dialogue will be integrated into this Action Plan, ensuring a coherent and forward-looking strategy for the sector.
The inaugural high-level meeting of the Strategic Dialogue convened on 30 January 2025 and brought together 22 key industry organizations, including leading manufacturers, suppliers, trade unions, and consumer representatives. Participants included ACEA (The European Automobile Manufacturers’ Association), BEUC (The European Consumer Organisation), BMW Group, Robert Bosch GmbH, ChargeUp Europe, CLEPA (The European Association of Automotive Suppliers), Daimler Truck, ETF (European Transport Workers’ Federation), Forvia, IndustriAll European Trade Union, IVECO Group, MAHLE Group, MILENCE, RECHARGE, and Renault Group, among others.
The Strategic Dialogue will continue with a series of regular meetings and workshops that will engage industry representatives, social partners, and policymakers, as well as broader consultations involving additional stakeholders from across the automotive value chain.
The discussion will focus on the following key themes and priorities:
Innovation and future technologies – Address the EU’s lag in key technologies (e.g., batteries, software, autonomous driving) by fostering R&D collaboration, talent acquisition, and risk-sharing models
Clean transition and decarbonization – Focus on regulatory revisions, charging infrastructure expansion, and demand-stimulation measures to accelerate the shift to clean mobility while addressing affordability and equity issues
Competitiveness and resilience – Tackle high input costs, supply chain vulnerabilities, and workforce upskilling to ensure the sector’s long-term resilience
Trade and global competition – Address unfair practices in global markets, strengthen EU trade policies, and monitor foreign investments in the supply chain
Regulatory streamlining – Optimize the EU’s regulatory framework to enhance coherence, reduce industry burdens, and promote common technical standards
Upon completion of these discussions, the European Commission is expected to present a report to the European Parliament and the Council, outlining the challenges identified by stakeholders and proposing corresponding policy actions. In accordance with the Competitiveness Compass, this report is expected to be published in the first quarter of 2025.
For operators in the automotive industry, this is a critical moment that necessitates close monitoring of ongoing developments at the EU level. These developments include, in summary: the adoption of a report that will be submitted to Parliament and the Council, incorporating the challenges identified by stakeholders and the recommended policy actions arising from the Strategic Dialogue; the presentation of an Automotive Industry Action Plan, the precise scope of which remains undetermined, though it is anticipated to serve as a strategic political directive for the sector; and the introduction of a legislative proposal concerning the greening of corporate fleets, which is expected to be part of the Automotive Industry Action Plan.
Once the Automotive Industry Action Plan is published, we will have greater clarity on the specific regulatory measures that the European Commission intends to pursue. While the precise scope of the plan remains to be seen, it is already known that it will include a legislative proposal on greening corporate fleets. This proposal is expected to play a significant role in shaping industry obligations and opportunities in the transition to more sustainable mobility.
We will continue to monitor these developments and provide clients with timely insights and strategic guidance on how these forthcoming regulatory changes may impact their business operations.
Foley Automotive Update 05 February 2025
Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.
Key Developments
Foley & Lardner LLP partner Vanessa Miller commented on the risk of increased costs in the automotive supply chain that could result from new import tariffs in The Wall Street Journal article, “Tariff Threat Prompts Automakers to Find New Suppliers, Consider Higher Prices.”
Foley & Lardner’s Vanessa Miller and Ki Lee Kilgore provided an overview of contractual provisions to cope with increasing tariffs and trade wars.
President Trump’s proposed 25% tariffs on U.S. imports from Mexico and Canada – paused for a “one month period” as of February 3 – could cost automakers up to $110 million daily and $40 billion annually. North American production shutdowns would be a significant risk within a week of the implementation of such tariffs, according to an executive at Canadian Tier One supplier Linamar. In addition, the price of a new vehicle could jump by at least $3,000 on average, to as much as $10,000, depending on the model.
A report in Automotive News remarked on the divergence between automakers’ and suppliers’ public statements on the impact of potential tariffs to the North American auto industry.
Mexico’s automotive exports reached $193.9 billion in 2024 and accounted for roughly 30% of U.S. imports from the nation, according to data from INEGI excerpted in Mexico News Daily.
Vehicles and auto parts accounted for 21% of Canada’s U.S. exports in the first eleven months of 2024. Canadian automotive exports were valued at over $100 billion in 2023.
At least four major automakers produce roughly 40% of their vehicles in Mexico and Canada, and of the major automakers, GM is believed to be the most vulnerable to the proposed 25% tariffs. In 2024, GM sold 2.7 million vehicles, of which over 653,000 were assembled in Mexico for export to the U.S., and at least another 235,000 were produced in Mexico for non-U.S. markets. GM models with significant U.S. import volumes included the Chevrolet Equinox and Blazer SUVs, as well as Chevrolet Silverado and GMC Sierra pickup trucks.
Approximately half of light vehicles exported by Mexico to the U.S. in 2024 were made by Detroit automakers.
TD Economics analysis indicates North American auto parts “cross all three borders up to 7 to 8 times prior to final assembly of a vehicle,” and given the high integration of North American automotive supply chains, the auto sector “would face some of the deepest negative impacts from tariffs.”
In response to President Trump’s launch of new 10% tariffs on all Chinese imports, China announced retaliatory actions including import tariffs that could soon impose a 10% levy on certain U.S.-made large-engine light vehicles and electric trucks.
On January 28 former U.S. congressman and Fox News contributor Sean Duffy was sworn in as the Secretary of the U.S. Department of Transportation. In his first act after being sworn in, Duffy directed the National Highway Traffic Safety Administration (NHTSA) to immediately review and reconsider all existing Corporate Average Fuel Economy (CAFE) standards for vehicles produced from the 2022 model year onward.
The Trump administration on January 24 asked the U.S. Supreme Court to pause three cases while the Environmental Protection Agency reviews previous regulatory decisions in areas that include the Clean Air Act waiver that allows California to implement its own greenhouse gas emissions standards for automobiles.
Preliminary estimates suggest U.S. new light-vehicle sales reached a SAAR of roughly 15.8 million units in January, up 5% year-over-year, but falling short of industry projections.
OEMs/Suppliers
The top five automakers ranked by 2024 global vehicles sales were Toyota, for the fifth consecutive year, followed by Volkswagen, Hyundai Motor Group, BYD and Honda. Last year, Toyota’s global sales declined 3.7% YOY to 10.8 million units, Volkswagen’s sales fell 2.3% to 9.03 million units, and BYD’s global sales increased 41% to 4.27 million units.
GM’s 2024 adjusted pre-tax earnings rose 21% to a record-high $14.9 billion last year, and total revenue rose 9.1% to $187.4 billion. However, net income fell 41% year-over-year to $6 billion, due to restructuring charges for its operations in China.
American Axle will acquire U.K.-based Dowlais Group for $1.4 billion. Dowlais’ businesses include driveline systems manufacturer GKN Automotive.
Following a meeting with President Trump, Stellantis committed to opening its idled plant in Belvidere, Illinois to produce a new mid-size pickup truck in 2027. The automaker had indefinitely postponed plans to reopen the plant following an initial commitment made during the 2023 labor contract negotiations. Stellantis also announced investments to support production at existing plants in Michigan, Ohio and Indiana.
Honda will invest $1 billion, up from a previous target of $700 million, in three plants in Ohio that will have the flexibility to produce ICE, hybrid and battery-electric vehicles on the same production lines.
Nissan will reduce U.S. production by 25%, and the automaker has offered voluntary buyouts to workers at its factories in Tennessee and Mississippi. Last year Nissan announced it would eliminate 20% of its global manufacturing capacity in response to weak sales in China and the U.S.
Chinese automakers are reported to be considering purchasing surplus production lines at Volkswagen’s factories in Germany.
A number of automakers have told dealers they plan to introduce lower-cost models as concerns over vehicle affordability push certain buyers out of the market.
Market Trends and Regulatory
The annual AlixPartners Disruption Index ranked automotive as the “most disrupted” major industry for the first time, reversing two consecutive years of improvement. Key concerns included a lack of real-time visibility into supply chains, the risk of tariffs and protectionism, and high costs for raw materials.
A Fifth Circuit panel invalidated the Combating Auto Retail Scams (CARS) rule issued by the Federal Trade Commission (FTC) in December 2023, after finding the FTC did not provide an advanced notice of proposed rulemaking. The CARS rule included requirements for certain dealership advertising, finance and insurance practices.
NHTSA paused a rule that would require nearly all new light vehicles to be equipped with automatic emergency braking (AEB) systems by 2029. The delay was in response to a January 20 Regulatory Freeze Pending Review Presidential Memorandum directed at executive departments and agencies. The regulation had been finalized in April 2024.
The AM Radio for Every Vehicle Act of 2025 (S.315) was introduced in the U.S. Senate in an effort to begin a rulemaking process to require the inclusion of AM receivers as standard equipment in all passenger vehicles sold in the U.S. Similar legislation failed to reach a full floor vote last year.
Newly elected U.S. Senator Bernie Moreno (R-OH) described plans to introduce an “Automotive Freedom Act” that would restrict battery production subsidies and eliminate the leasing loophole for consumer EV tax credits. Moreno said his bill wouldseek to harmonize NHTSA’s CAFE standards and the EPA’s tailpipe pollution limits to “one national standard” that extends 10 years.
The Alliance for Automotive Innovation filed a lawsuit in federal court in Maine to challenge enforcement of the state’s Right to Repair Law. The Alliance indicated compliance is not yet possible because the state’s Attorney General has not established the “independent entity” described in the law to develop and administer data access to vehicles.
The American Trucking Association projects truck volumes will increase 1.6% in 2025, following two consecutive years of sales declines.
Among the European automakers, Volkswagen is thought to be at high risk to proposed U.S. tariffs on Mexican imports. VW has one U.S. manufacturing plant in Chattanooga, TN. However, its Puebla plant is described as the largest vehicle assembly plant in Mexico.
Volkswagen estimated it could incur up to €1.5 billion ($1.6 billion) in compliance costs and penalties this year due to stricter CO2 emissions standards in the European Union that will apply starting in 2025.
Autonomous Technologies and Vehicle Software
Waymo plans to expand its autonomous vehicle testing to over 10 new cities in 2025, beginning with Las Vegas and San Diego.
NHTSA launched an investigation into Ford’s BlueCruise automated driving system following notice of two fatal collisions involving Mustang Mach-E vehicles.
Autonomous truck developer Kodiak Robotics announced the launch of commercial operations following the sale of two self-driving trucks to oil and gas service company Atlas Energy Solutions to haul fracking sand across a 75,000 square mile area of the Permian Basin.
Toronto-based Waabi Innovation Inc. will provide its generative artificial intelligence driver system to Volvo to support the companies’ joint development of autonomous trucks. Waabi Driver AI software has also been deployed in a small fleet of autonomous trucks for Uber Freight.
Acura and Honda announced a recall of nearly 295,000 vehicles due to a software issue in the fuel injection control unit that may cause vehicles to stall or lose power while driving.
Electric Vehicles and Low Emissions Technology
Automotive News provided a summary and additional context for recent EV-related policies and statements of President Trump.
Recently announced EV model cancelations include:
While Stellantis is planning to offer an electric RAM 1500 REV pickup truck with up to 350 miles of range beginning in 2026, the automaker is reported to have canceled plans for an extended-range version of the REV with up to 500 miles of range.
Stellantis’ Chrysler Airflow EV has been postponed indefinitely. The electric SUV debuted as a concept vehicle in 2022.
Nissan will no longer produce a crossover EV model at its Canton, Mississippi plant.
Volkswagen no longer plans to offer an ID.7 electric sedan in the U.S. market.
ZM Trucks, a subsidiary of ZO Motors, plans to manufacture zero-emission commercial vehicles at a new plant in Fontana, California starting in the first half of 2025.
A number of automakers are suing the European Commission over opposition to the EU’s import tariffs on EVs that are made in China.
Hyundai could finalize an agreement in the first quarter of 2025 to supply its re-badged commercial EVs to GM. The automakers announced a preliminary agreement last year to collaborate on parts procurement and production for certain passenger and commercial vehicles.
Analysis by Julie Dautermann, Competitive Intelligence Analyst
Regulation Round Up: January 2025
Welcome to the Regulation Round Up, a regular bulletin highlighting the latest developments in UK and EU financial services regulation.
Key developments in January 2025:
31 January
UK Listing Rules: The FCA published a consultation paper (CP25/2) on further changes to the public offers and admissions to trading regime and to the UK Listing Rules.
Cryptoassets: The European Securities and Markets Authority (“ESMA”) published a supervisory briefing on best practices relating to the authorisation of cryptoasset service providers under the Regulation on markets in cryptoassets ((EU) 2023/1114) (“MiCA”).
FCA Handbook: The Financial Conduct Authority (“FCA”) published Handbook Notice 126, which sets out changes to the FCA Handbook made by the FCA board on 30 January 2025.
Public Offer Platforms: The FCA published a consultation paper on further proposals for firms operating public offer platforms (CP25/3).
30 January
FCA Regulation Round-Up: The FCA published its regulation round-up for January 2025, which covers, among other things, the launch of “My FCA” in spring 2025 and changes to FCA data collection.
29 January
EU Competitiveness: The European Commission published a communication on a Competitiveness Compass for the EU (COM(2025) 30). Please refer to our dedicated article on this topic here.
EMIR 3: ESMA published a speech given by Klaus Löber, Chair of the ESMA CCP Supervisory Committee, that sets out ESMA’s approach to the mandates assigned to it by Regulation (EU) 2024/2987 (“EMIR 3”).
28 January
EMIR 3: The European Systemic Risk Board published its response to ESMA’s consultation paper on the conditions of the active account requirement under EMIR 3.
ESG: The FCA published its adaptation report, which provides an overview of the climate change adaptation challenges faced by financial services firms.
27 January
Artificial Intelligence: The Global Financial Innovation Network published a report setting out key insights on the use of consumer-facing AI in global financial services and the implications for global financial innovation.
DORA: The Joint Committee of the European Supervisory Authorities (“ESAs”) published the terms of reference for the EU-SCICF Forum established under the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (“DORA”).
24 January
Cryptoassets: ESMA published an opinion on draft regulatory technical standards specifying certain requirements in relation to conflicts of interest for cryptoasset service providers under MiCA.
MiFIR: The European Commission adopted a Delegated Regulation (C(2025) 417 final) (here) supplementing the Markets in Financial Instruments Regulation (600/2014) (“MiFIR”) as regards OTC derivatives identifying reference data to be used for the purposes of the transparency requirements laid down in Articles 8a(2), 10 and 21.
ESG: The EU Platform on Sustainable Finance published a report providing advice to the European Commission on the development and assessment of corporate transition plans.
23 January
Financial Stability Board: The Financial Stability Board published its work programme for 2025.
20 January
Motor Finance: The FCA published its proposed summary grounds of intervention in support of its application under Rule 26 of the Supreme Court Rules 2009 to intervene in the Supreme Court motor finance appeals.
Motor Finance: The FCA published its response to a letter from the House of Lords Financial Services Regulation Committee relating to the Court of Appeal judgment on motor finance commissions.
Cryptoassets: ESMA published a statement on the provision of certain cryptoasset services in relation to asset-referenced tokens and electronic money tokens that are non-compliant under MiCA.
17 January
DORA: The ESAs published a joint report (JC 2024 108) on the feasibility of further centralisation of reporting of major ICT-related incidents by financial entities, as required by Article 21 of DORA.
Basel 3.1: The Prudential Regulation Authority published a press release announcing that, in consultation with HM Treasury, it delayed the UK implementation of the Basel 3.1 reforms to 1 January 2027.
16 January
Cryptoassets: The European Banking Authority and ESMA published a joint report (EBA/Rep/2025/01 / ESMA75-453128700-1391) on recent developments in cryptoassets under MiCA.
14 January
FMSB’s Workplan: The Financial Markets Standards Board (“FMSB”) published its workplan for 2025.
FSMA: The Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2025 (SI 2025/22) were published, together with an explanatory memorandum. The amendments allow the FCA to supervise, investigate and enforce the requirements of the designated activities regime.
Sanctions: HM Treasury and the Office of Financial Sanctions Implementation published a memorandum of understanding with the US Office of Foreign Assets Control.
13 January
BMR: The European Parliament published the provisionally agreed text (PE767.863v01-00) of the proposed Regulation amending the Benchmarks Regulation ((EU) 2016/1011) (“BMR”) as regards the scope of the rules for benchmarks, the use in the Union of benchmarks provided by an administrator located in a third country and certain reporting requirements (2023/0379(COD)).
10 January
Artificial Intelligence: The UK Government published its response to the House of Commons Science, Innovation and Technology Committee report on the governance of AI.
9 January
Collective Investment Schemes: The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025 (SI 2025/17) was published, together with an explanatory memorandum. The amendments clarify that arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme.
8 January
EU Taxonomy: The EU Platform on Sustainable Finance published a draft report and a call for feedback on activities and technical screening criteria to be updated or included in the EU taxonomy. Please refer to our dedicated article on this topic here.
3 January
Consolidate Tape: ESMA published a press release launching the first selection for the consolidated tape provider for bonds.
Sulaiman Malik & Michael Singh contributed to this article.
D.C. Circuit Vacates PHMSA’s LNG-by-Rail Rule
On 17 January 2025, the D.C. Circuit Court of Appeals vacated a 2020 Pipeline and Hazardous Materials Safety Administration (PHMSA) rule—the “Hazardous Materials: Liquefied Natural Gas by Rail Rule” (the LNG-by-Rail Rule)—that allowed for the transportation of liquefied natural gas (LNG) on rail cars.1 The LNG-by-Rail Rule was challenged by a collection of environmental organizations, state governments, and tribal governments for failing to adequately consider the environmental impact of allowing LNG transport by rail. The decision to limit the domestic transportation of LNG conflicts with President Trump’s “American Energy Dominance” agenda and the stated intentions of the nominee for secretary of energy to expand US LNG infrastructure.2 In light of the D.C. Circuit vacating a PHMSA natural gas pipeline safety rule in August 2024 and the published-but-paused 17 January 2025 PHMSA final rule on pipeline methane emission detection requirements, this decision adds yet another element of regulatory uncertainty for domestic natural gas transportation as the second Trump administration prepares to implement its energy agenda.3
History of the LNG-by-Rail Rule
The LNG-by-Rail Rule was first promulgated by PHMSA during the Trump administration in October 2019 and permitted LNG to be transported subject to specific rail car tank requirements and operational controls.4 PHMSA determined that the LNG-by-Rail Rule would not trigger the preparation of an environmental impact statement (EIS) pursuant to the National Environmental Policy Act (NEPA).5 The final rule was published in July 2020 but was promptly suspended in 2021 by President Biden in a series of executive actions that reconsidered various Trump administration rules and actions that were deemed inconsistent with the Biden administration’s climate policies.6 PHMSA implemented the suspension before LNG transport by rail could occur, and directed that the suspension would last until 30 June 2025 or until PHMSA completed rulemaking amending the LNG-by-Rail Rule, whichever occurred first.7
Despite the suspension of the LNG-by-Rail Rule, the Biden administration continued to defend the LNG-by-Rail Rule against challenges from environmental groups, state governments, and tribal governments.8 During oral argument, the federal government claimed that it had no intention of modifying the LNG-by-Rail Rule—meaning that the suspension would lift in 2025 and the LNG-by-Rail Rule would retake effect. Petitioners challenged, among other issues, PHMSA’s decision to forgo the preparation of an EIS as arbitrary and capricious. The D.C. Circuit agreed, vacating the LNG-by-Rail Rule and remanding to PHMSA for further proceedings.9
Summary of the LNG-by-Rail Rule
In October 2019, PHMSA issued the Notice of Proposed Rulemaking in consultation with the Federal Railroad Administration after the Association of American Railroads (AAR) petitioned for a review of existing regulation concerning the transportation of LNG by rail.10 In its petition, the AAR cited the commercial interest in shipping LNG by rail, specifically from Pennsylvania to New England and between the US-Mexico border.11 The AAR noted that shipment by rail was “undeniably safer” that over-the-road transportation of LNG and compared LNG to the other, similar cryogenic liquids that PHMSA permits to be transported by rail.12 The petition specifically suggested that the DOT-113C120W (DOT-113) rail car be used for the shipment of LNG.13
Nine months later, PHMSA published the final rule authorizing the transportation of LNG by rail in DOT-113 tank cars.14 DOT-113 cars are designed to carry cryogenic liquids and have “numerous safety features that reduce the risk of an explosion or the release of cargo.”15 DOT-113 rail cars have typically been used to transport refrigerated ethylene and argon, and PHMSA required a number of safety and operational updates for DOT-113 cars used for transporting LNG.16 First, The LNG-by-Rail Rule required several physical updates to tank cars transporting LNG, including increased tank thickness, improved steel quality, the installation of remote monitoring devices, and advanced braking technology.17 Second, the LNG-by-Rail Rule increased the maximum filling density of each tank to reduce the number of rail cars needed for LNG transport and required railroads to adopt routing safety requirements for analyzing LNG transportation routes.18 Notably, the LNG-by-Rail rule did not include speed limits or tank car-per-train limits for trains transporting LNG.
PHMSA published an Environmental Assessment (EA) that “touted the demonstrated safety record” of the DOT-113 tank car and determined that the LNG-by-Rail Rule did not have a “significant impact on the human environment” and would therefore not require an EIS under Section 102(2) of NEPA.19
Challenges to the LNG-by-Rail Rule
A group of environmental petitioners, a collection of 15 states, and the Puyallup Tribe all petitioned the D.C. Circuit Court of Appeals to review the LNG-by-Rail Rule.20 The D.C. Circuit consolidated the appeals and reviewed petitioners’ arguments against the LNG-by-Rail Rule. Although the petitioners challenged the LNG-by-Rail Rule on multiple grounds, the D.C. Circuit only ruled on the question of whether PHMSA’s decision to forgo an EIS was arbitrary and capricious.21
Petitioners argued that PHMSA “disregarded” the DOT-113 tank car’s history of failure and ignored significant risk by failing to include car limits or speed limits for rail cars transporting LNG.22
The D.C. Circuit Court Ruling
The D.C. Circuit sided with petitioners and vacated the LNG-by-Rail Rule. Judge Florence Pan authored the opinion, joined on the panel by Judges Patricia Millet and A. Raymond Randolph. Even though the LNG-by-Rail Rule was suspended and there was at least the theoretical possibility of pending rulemaking, the court concluded that the case was ripe for review. The court found that transporting LNG by rail poses a “low-probability but high-consequence risk” to the environment in the case of a derailment.23 The spread of a “suffocating vapor cloud” or an “explosion” of the flammable material were “real possibilities” that PHMSA failed to consider in its EA, according to the decision.24 The court held that PHMSA should have considered the history of DOT-113 car derailments—two derailments in the last four years—and concluded that the risk of another derailment was “neither remote nor speculative.”25 Given the small number of DOT-113 cars in use and the history of failure, the court held that PHMSA’s assessment of environmental risk was insufficient.
Additionally, The D.C. Circuit held that by failing to impose a speed limit on rail cars transporting LNG or limit the number of LNG tank cars per train, the LNG-by-Rail Rule increased the risk of environmental impact from derailment.26 Although PHMSA did impose additional safety controls and mandated upgrades to the DOT-113 car, the court was unsatisfied by the safeguards and noted that PHMSA failed to explain how specific procedures were “adequate to address the extreme dangers associated with a derailment.”27
The D.C. Circuit concluded that the risk of an accident while transporting LNG by rail under the LNG-by-Rail Rule was sufficiently significant to require an EIS and remanded the LNG-by-Rail Rule to PHMSA for further proceedings.28 The court noted that the LNG-by-Rail Rule “raise[d] substantial environmental questions” that may require further review once an EIS was prepared, but expressed no opinion on the “wisdom of any particular set of safety protocols” for transporting LNG by rail.29
Revisiting the LNG-by-Rail Rule: The Trump Administration
The D.C. Circuit’s ruling—which came down the Friday before President Trump’s inauguration—will add another layer of complexity to any effort to reinstate the LNG-by-Rail Rule. For now, this hurdle remains procedural. To reinstate the LNG-by-Rail Rule, PHMSA will have to prepare an EIS and take into account the environmental risks before approving the transportation of LNG by rail. And while the D.C. Circuit expressed “no opinion on the wisdom of any particular set of safety protocols,” it left the door wide open to later challenges, explaining that “future legal challenges to the substance of that decision would . . . be brought under some other statute, not NEPA.”30
The Trump administration has not made any comment on the D.C. Circuit ruling or the LNG-by-Rail Rule specifically. However, the new administration has taken several actions indicating a substantial departure from the Biden position on natural gas. President Trump’s day-one executive orders have directed federal agencies to begin reviewing any policies that affected domestic energy production. The “Unleashing American Energy” and the “Declaring a National Energy Emergency” executive orders identify the development, transportation, and export of natural gas as a top priority.31
As the second Trump administration begins to take form and implement its “American Energy Dominance” agenda, regulating the domestic and international transportation of natural gas will remain a prominent focus. Over the coming months, the incoming leadership at the Departments of Energy, Interior, and Transportation are likely to act on a series of pressing natural gas policy questions. PHMSA will likely review major pipeline-related policies like the “Pipeline Safety: Gas Pipeline Leak Detection and Repair” rule finalized in the last days of the Biden administration but paused subject to President Trump’s “Regulatory Freeze Pending Review” executive order.32 Agencies have been granted emergency authority to “facilitate” domestic energy transportation, specifically on the West Coast, in the Northeast, and in Alaska.33 The Firm will continue to monitor this rapidly developing area of policy and provide relevant updates on our page.
Footnotes
1 Sierra Club, et al., v. U.S. Dep’t of Transp., et al., 2025 WL 223869 (D.C. Cir. 2025).
2 Timothy Gardner, Trump’s Energy Department Pick Calls for More LNG and Nuclear Power, Reuters (Jan. 15, 2025), https://www.reuters.com/business/energy/trumps-energy-department-pick-call-more-lng-nuclear-power-2025-01-15/.
3 David Wochner, Tim Furdyna, Stuart Robbins, D.C. Circuit Vacates New PHMSA Rules Related to Natural Gas Pipelines, K&L Gates (Aug. 28, 2024), https://www.klgates.com/DC-Circuit-Vacates-New-PHMSA-Rules-Related-to-Natural-Gas-Pipelines-8-28-2024; Pipeline Safety: Gas Pipeline Leak Detection and Repair, Pipeline and Hazardous Materials Safety Administration, Docket No. PHMSA-2021-0039 (Jan. 17, 2025).
4 Unleashing American Energy, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/.
5 Hazardous Materials: Liquefied Natural Gas by Rail, 85 Fed. Reg. 44994 (Jul. 24, 2020).
6 Exec. Order No. 13,990, 86 Fed. Reg. 7,037 (Jan. 20, 2021); Sierra Club at 10.
7 Sierra Club at 11.
8Id., at 10.
9 Id., at 24.
10 85 Fed. Reg. at 44996.
11 Petition for Rulemaking to Allow Methane, Refrigerated Liquid to be Transported in Rail Tank Cars, Association of American Railroads, PHMSA-2017-0020-0002 (Jan. 17, 2017) at 2.
12 Id., at 2-3.
13 Id., at 4.
14 85 Fed. Reg. at 44994.
15 Sierra Club at 6.
16 Id., at 20-21.
17 Id., at 9.
18 Id., at 9.
19 85 Fed. Reg. at 45027.
20 Sierra Club at 10 (Environmental petitioners included the Sierra Club, Center for Biological Diversity, Clean Air Council, Delaware Riverkeeper Network, Environmental Confederation of Southwest Florida, and Mountain Watershed Association; State petitioners included Maryland, New York, California, Delaware, the District of Columbia, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington).
21 Id., at 17 (Petitioners also brought claims under NEPA’s public participation requirement, the Hazardous Materials Transportation Act safety standards, the Administrative Procedure Act, and PHMSA’s failure to consider greenhouse gas emissions and environmental justice communities).
22 Id., at 17.
23 Id., at 19.
24 Id., at 19.
25 Id., at 20.
26 Id., at 22.
27 Id., at 23.
28 Id., at 24.
29 Id., at 23-24.
30 Id. at 23-24 n. 6.
31 Unleashing American Energy, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/; Declaring a National Energy Emergency, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/declaring-a-national-energy-emergency/.
32 Regulatory Freeze Pending Review, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/regulatory-freeze-pending-review/.
33 Declaring a National Energy Emergency, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/declaring-a-national-energy-emergency/.
Cybersecurity in the Marine Transportation System: What You Need to Know About the Coast Guard’s Final Rule
The U.S. Coast Guard (“USCG”) published a final rule on January 17, 2025, addressing Cybersecurity in the Marine Transportation System (the “Final Rule”), which seeks to minimize cybersecurity related transportation security incidents (“TSIs”) within the maritime transportation system (“MTS”) by establishing requirements to enhance the detection, response, and recovery from cybersecurity risks. Effective July 16, 2025, the Final Rule will apply to U.S.-flagged vessels, as well as Outer Continental Shelf and onshore facilities subject to the Maritime Transportation Security Act of 2002 (“MTSA”). The USCG is also seeking comments on a potential two-to-five-year delay of implementation for U.S.-flagged vessels. Comments are due March 18, 2025.
Background
The need for enhanced cybersecurity protocols within the MTS has long been recognized. MTSA laid the groundwork for addressing various security threats in 2002 and provided the USCG with broad authority to take action and set requirements to prevent TSIs. MTSA was amended in 2018 to make clear that cybersecurity related risks that may cause TSIs fall squarely within MTSA and USCG authority.
Over the years, the USCG, as well as the International Maritime Organization, have dedicated resources and published guidelines related to addressing the growing cybersecurity threats arising as technology is integrated more and more into all aspects of the MTS. The USCG expanded its efforts to address cybersecurity threats throughout the MTS in its latest rulemaking, publishing the original Notice of Proposed Rulemaking (“NPRM”) on February 22, 2024. The NPRM received significant public feedback, leading to the development of the Final Rule.
Final Rule
In its Final Rule, the USCG addresses the many comments received on the NPRM and sets forth minimum cybersecurity requirements for U.S.-flagged vessels and applicable facilities.
Training. Within six months of the Final Rule’s effective date, training must be conducted on recognition and detection of cybersecurity threats and all types of cyber incidents, techniques used to circumvent cyber security measures, and reporting procedures, among others. Key personnel are required to complete more in-depth training.
Assessment and Plans. The Final Rule requires owners and operators of U.S.-flagged vessels and applicable facilities to conduct a Cybersecurity Assessment, develop a Cybersecurity Plan and Cyber Incident Response Plan, and appoint a Cybersecurity Officer that meets specified requirements within 24 months of the effective date. There are a host of requirements for the Cybersecurity Plan, including, among others: provisions for account security, device protection, data safeguarding, training, drills and exercises, risk management practices, strategies for mitigating supply chain risks, penetration testing, resilience planning, network segmentation, reporting protocols, and physical security measures. Additionally, the Cyber Incident Response Plan must provide instructions for responding to cyber incidents and delineate the key roles, responsibilities, and decision-making authorities among staff.
Plan Approval and Audits. The Final Rule requires Cybersecurity Plans be submitted to the USCG for review and approval within 24 months of the effective date of the Final Rule, unless a waiver or equivalence is granted. The Rule also gives the USCG the power to perform inspections and audits to verify the implementation of the Cybersecurity Plan.
Reporting. The Final Rule requires reporting of “reportable cyber incidents”[1] to the National Response Center without delay. The reporting requirement is effective immediately on July 16, 2025. Further, the Final Rule revises the definition of “hazardous condition” to expressly include cyber incidents.
Potential Waivers. The Final Rule allows for limited waivers or equivalence determinations. A waiver may be granted if the owner or operator demonstrates that the cybersecurity requirements are unnecessary given the specific nature or operating conditions. An equivalence determination may be granted if the owner or operator demonstrates that the U.S.-flagged vessel or facility complies with international conventions or standards that provide an equivalent level of security. Each waiver or equivalence request will be evaluated on a case-by-case basis.
Potential Delay in Implementation. Due to a number of comments received related to the ability of U.S.-flagged vessels to meet the implementation schedule, the Final rule seeks comments on whether a delay of an additional two to five years is appropriate.
Conclusion
As automation and digitalization continue to advance within the maritime sector, it is imperative to develop cyber security strategies tailored to specific management and operational needs of each company, facility, and vessel. Owners and operators of U.S.-flagged vessels and MTSA facilities are advised to review the new regulations closely and begin preparations for the new cybersecurity requirements at the earliest opportunity. Stakeholders are also encouraged to provide comments before March 18, 2025, addressing the potential two-to-five-year delay in implementation for U.S.-flagged vessels.
[1] A reportable cyber incident is defined as an incident that leads to, or, if still under investigation, can reasonably lead to any of the following: (1) substantial loss of confidentiality, integrity, or availability of a covered information system, network, or operational technology system; (2) disruption or significant adverse impact on the reporting entity’s ability to engage in business operations or deliver goods or services, including those that have a potential for significant impact on public health or safety or may cause serious injury or death; (3) disclosure or unauthorized access directly or indirectly of non-public personal information of a significant number of individuals; (4) other potential operational disruption to critical infrastructure systems or assets; or (5) incidents that otherwise may lead to a TSI as defined in 33 C.F.R. 101.105.
Fifth Circuit Strikes Down FTC’s ‘Junk Fee’ Rule for Auto Dealers
On January 24, 2025, the Fifth Circuit Court of Appeals struck down an FTC rule aimed at curbing deceptive advertising and sales practices in the auto industry. The rule, which sought to prohibit certain “junk fees” and misleading pricing tactics, was challenged by industry groups who argued that the FTC had exceeded its authority.
The FTC’s Combating Auto Retail Scams (CARS) rule (previously discussed here) required auto dealers to provide consumers with a clear and conspicuous “Offering Price” that included all required charges, with limited exceptions. It also would have prohibited several practices, including:
Bait-and-switch Advertising. Advertising a vehicle at a certain price and then not having that vehicle available when a consumer attempts to purchase it.
Failing to Disclose Key Terms in Advertisements. Key terms for which the rule required a disclosure included the total price of the vehicle, including the enumeration of all additional all fees and charges.
Charging Consumers for Add-on Products without Consent. Such add-on products included items like extended warranties, gap insurance, and paint protection.
The Fifth Circuit sided with the industry groups, vacating the FTC’s rule. The court found that the CARS rule exceeded the FTC’s authority to address “unfair or deceptive acts or practices” by regulating pricing practices that were not inherently deceptive. Additionally, the court determined that the FTC failed to provide adequate notice of the proposed rulemaking, violating procedural rules.
Putting It Into Practice: The decision to strike down the rule marks the latest development in state and federal efforts war on “junk fees” in the financial sector. While the Fifth Circuit Court determined the FTC overstepped its regulatory authority in this instance, federal and state agencies have clearly prioritized combatting “junk fees” (a trend we previously discussed here, here, and here). Companies should closely monitor this development to see if other federal circuit courts follow suit.
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2024 In Review: California Climate Change Legislation, Policy and Regulation
As we enter 2025 amid the devastating Los Angeles fires[1] and with a new presidential administration, we continue our series of yearly reviews of the most significant governmental actions taken by the state of California relevant to climate change in the previous year.[2]
Unless otherwise specified, the legislation discussed herein is effective as of January 1, 2025.
Climate Corporate Data Accountability Act
Senate Bill (SB) 219 amends the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261)[3] and consolidates both under the unified title of the Climate Corporate Data Accountability Act (CCDAA).
Specifically, SB 219 delays the deadline for the California Air Resources Board (CARB) to establish regulations implementing the CCDAA from January 1, 2025, to July 1, 2025. It further amends the previous legislation to authorize, instead of require, CARB to partner with third-party emissions or climate reporting organizations to collect and make relevant data publicly available. SB 219 also provides additional flexibility concerning the reporting of Scope 3 emissions – previously required to be reported within 180 days of Scope 1 and Scope 2 emissions – by allowing CARB to set a separate timeline for the reporting of Scope 3 emissions as part of its rulemaking process. Finally, SB 219 permits reporting entities to consolidate their emissions reports at the parent company level and allows payment of the statutory annual fee at any time, as opposed to at the time of filing.
Geothermal and Gas
Streamlining Geothermal Projects
Assembly Bill (AB) 1359 amends Section 3715.5 of the Public Resources Code to streamline the environmental review process for geothermal exploratory projects under the California Environmental Quality Act (CEQA). AB 1359 is classified as an urgency statute and, as such, took effect upon signature by Governor Gavin Newsom on September 27, 2024, to help accelerate the deployment of geothermal energy projects as part of California’s renewable energy generation goals.
This bill simplifies the process for applicants of “geothermal exploratory projects”[4] by allowing counties to take on lead agency roles, potentially expediting project approvals. The Geologic Energy Management Division (CalGEM) is designated as the lead agency for geothermal exploratory projects. However, upon request, the county where the project is located must assume lead agency responsibilities (as defined by CEQA), regardless of whether it has a geothermal element in its “General Plan.” If a county takes on the lead agency role, it must work with CalGEM to ensure all necessary information for environmental review is included, supporting CalGEM’s role as a responsible agency (as defined by CEQA). The previous requirement for counties to complete lead agency duties within 135 days has been removed, allowing more flexibility in managing project timelines.
Reforming Approach to Idle Oil and Gas Wells
AB 1866 amends sections of the Public Resources Code to address issues related to idle oil and gas wells in California. The bill increases fees for operators of idle wells, including those idle for less than 3 years, with fees escalating based on the duration a well has been inactive. Operators must file a management plan for all idle wells (not just long-term idle wells) by May 1st each year, focusing on prioritizing wells for plugging and abandonment based on specific criteria, such as proximity to sensitive receptors and potential threats. Wells that cannot be accessed or are subject to more stringent court-approved settlement agreements are exempt from these requirements.
Local Control Over Oil and Gas Operations
AB 3233 empowers local governments, such as cities and counties, to impose their own restrictions, including on method or location, or prohibitions on oil and gas operations within their jurisdictions through local ordinances. These local regulations can be more stringent than state laws, particularly in areas related to public health, climate, and environmental protection. If a local entity chooses to limit or prohibit these operations, responsible operators must adhere to existing regulations concerning the plugging and abandoning of wells and the decommissioning of production facilities.
Overall, AB 3233 represents a significant shift in California’s regulatory framework by decentralizing authority and enhancing local control over oil and gas operations.
Transportation
Ban of Gasoline Car Sales by 2035
On December 18, 2024, the United States Environmental Protection Agency (EPA) granted California the authority to move ahead with the state’s “Advanced Clean Cars II” program, which includes the much-publicized ban on the sale of new gasoline-powered cars after 2035.[5] As discussed in our 2023 in Review article, the EPA waiver allowing California to set its own vehicle emission standards at a more stringent level than federal standards had been granted as a matter of course until 2019, when the EPA (under the first Trump administration) revoked the waiver. Such revocation was subject to legal challenges before being reinstated by the Biden administration. The waiver was officially granted in April 2024, after the DC Court of Appeals affirmed the DC Circuit Court’s decision that the waiver did not present any constitutional issues.[6] The United States Supreme Court then denied certiorari on December 16, 2024.
It must be noted that the waiver was only approved for the Advance Clean Cars II program, not the state’s sister programs for medium and heavy-duty vehicles and locomotives. Anticipating rejection of the waivers by the incoming Trump administration, CARB withdrew its requests for these additional waivers on January 13, 2025.[7] It is also anticipated that the Trump administration will again attempt to revoke the waiver granted for the Advance Clean Cars II program, which will likely lead to additional litigation and a period of limbo for California and the 11 states (representing nearly 40% of the nation’s population) that choose to follow California’s emissions standards.[8]
Potential Mandate for Bidirectional Electric Vehicles
SB 59 grants the California Energy Commission (CEC) authority to require that battery electric vehicles of any weight class be bidirectional-capable (capable of both receiving and discharging electricity). This decision is contingent upon the CEC, in collaboration with CARB and the California Public Utilities Commission, identifying a vehicle weight class in which both the vehicle operator and the electrical grid would benefit from the mandate. In making this determination, the relevant agencies are required to assess vehicle readiness and the operational demands of vehicles used by essential service providers.
Interested parties should follow the agencies’ ongoing research and look for opportunities to contribute to any potential rulemaking on this topic.
CARB updates Low Carbon Fuel Standard
In November 2024, after several rounds of public hearings and comments, CARB approved significant updates to the Low Carbon Fuel Standard (LCFS), aiming to drive private investment in clean transportation fuels and zero-emission infrastructure. The amendments set targets of 30% reduction in the carbon intensity of transportation fuels by 2030 and 90% by 2045, while supporting the growth of electric vehicle (EV) charging stations, hydrogen refueling infrastructure, and clean fuels for medium- and heavy-duty vehicles.
These proposed updates were submitted to the California Office of Administrative Law (OAL) on January 3, 2025. OAL has until February 18, 2025, to make a final determination on the proposals.
Proposition 4 – Climate Preparedness Bond
Proposition 4 was passed through the State’s November 5, 2024 general election and authorizes California to sell a $10 billion bond to fund natural resources and climate-related initiatives. The bond will support projects in 8 key areas, including water supply and flood management ($3.8 billion). About half of this funding ($1.9 billion) would be dedicated to improving the availability and quality of water for public use, forest health and wildfire prevention ($1.5 billion), coastal restoration and sea-level rise mitigation ($1.2 billion), land conservation ($1.2 billion), energy infrastructure development ($850 million), park expansion and maintenance ($700 million), extreme heat mitigation ($450 million), and sustainable farming practices ($300 million). At least 40% of the funds must benefit low-income or climate-vulnerable communities, and there will be regular public reporting on the spending.
Statewide Mobile Monitoring Initiative
In November 2024, CARB announced the launch of the Statewide Mobile Monitoring Initiative (SMMI) in connection with the Community Air Protection Program (CAPP) originally established in 2017 by AB 617. The CAPP’s purpose is to identify communities most at risk of air pollution within California and develop strategies to mitigate and reduce such pollution. The SMMI is designed to address the challenges of detecting elusive pollutants that pose serious health risks, particularly to disadvantaged and frontline communities. The SMMI is funded by a $27 million appropriation from the California Climate Investment program.
The SMMI focuses on detecting greenhouse gases, toxic air contaminants, and criteria pollutants, with a strong emphasis on community involvement. The initiative aims to empower local entities by providing data that validates community-reported pollution concerns. Initially, the SMMI will target 64 communities identified under the CAPP.
Looking Forward
Following his inauguration as the 47th President of the United States, Donald Trump again withdrew the United States from the Paris Climate Accord and signaled his intent to follow through on his campaign promises to slash the Biden administration’s climate change policies and combat California’s state-level climate change policies. Governor Newsom, meanwhile, issued a brief statement following the inauguration indicating that California again plans to pursue its ambitious climate targets regardless of the level of support or opposition from the federal government.
The potential for uncertainty, instability, and conflict between federal law and the laws of the state representing the nation’s largest economy bears watching closely for all those who may be impacted.
FOOTNOTES
[1] See articles related to the State’s fire response here and here.
[2] See our previous articles covering 2022 and 2023, respectively.
[3] See prior articles on these bills here and here.
[4] Projects designed to evaluate the “presence and characteristics of geothermal resources” prior to development of a geothermal energy project.
[5] See EPA Grants Waiver for California’s Advanced Clean Cars II Regulations | US EPA.
[6] Ohio et al. v. U.S. Environmental Protection Agency et al., case number 22-1081, in the U.S. Court of Appeals for the District of Columbia Circuit.
[7] See withdrawal letters at this link: Vehicle Emissions California Waivers and Authorizations | US EPA.
[8] See California Vehicle Waivers ‘Legally Solid’ as Trump Eyes Repeal; Trump takes aim at clean energy, climate change and the environment on day one – Los Angeles Times.
Ethical Hacker Uncovers Vulnerability in Subaru Starlink Service
Ethical hackers identified an arbitrary account takeover flaw in the administrator portal for Subaru’s Starlink service, which could allow a threat actor to hijack a vehicle through a Subaru employee account. This vulnerability could allow a threat actor to remotely track, unlock, and start connected vehicles. The ethical hacker reported to Subaru that they could bypass multi-factor authentication (MFA) by removing the client-side overlay from the user interface. Through various endpoints, the ethical hacker could use a vehicle search to query a consumer’s last name, zip code, telephone number, email address, or VIN number and gain access to the vehicle.
This “access” allowed the ethical hacker to:
Remotely start, turn off, lock, unlock, and retrieve the current location of any Subaru vehicle.
Retrieve a Subaru vehicle’s location history from the past 12 months, accurate to within about 15 feet.
Query and retrieve the personal information of any consumer, including emergency contacts, authorized users, physical address, billing information, and vehicle PIN.
Access other user data (e.g., support call history, previous owners, odometer reading, sales history, etc.).
The ethical hacker informed Subaru that this vulnerability could allow any threat actor to track and hijack any Subaru vehicle in the United States, Canada, or Japan. Fortunately, Subaru responded to the ethical hacker’s outreach immediately and patched the offending vulnerability within 24 hours, but this issue raises wider concerns about the motor vehicle industry. With broad access built into vehicle systems as a default, they are very difficult to secure and protect from outside threats. Manufacturers may consider security by design when building these systems and find a balance between ease of service and consumer information security.
How to Successfully Transfer Your Manufacturing Plant From Mexico to the United States
President Trump’s promise to impose a new 25% tariff on goods produced in Mexico has prompted many companies to consider alternatives to their current or planned operations in Mexico. The decades following the 1994 North American Free Trade Agreement (NAFTA) saw enormous industrial investment in Mexico, especially in northern cities like Monterrey, Tijuana, Chihuahua, and Baja California.1 The benefits of producing goods in Mexico were clear – low labor costs, modest transportation costs to the United States, and reduced tariffs under NAFTA. These benefits, however, could be eclipsed by a new 25% tariff on Mexican origin goods. Companies with industrial plants that have tight profit margins are in a precarious position, so it is not surprising that many are now “looking to shift operations to the US to avoid these additional costs and reroute cargo from Mexican ports to US ports.”2
The automotive sector is a prime example of an industry that will be significantly impacted by the proposed tariffs, if implemented. The United States imported more than US$86 billion worth of motor vehicles from Mexico and more than US$63 billion of auto parts from Mexico last year, according to US Department of Commerce data, excluding December.3 This reflects the major investments automotive manufacturers and their suppliers made in Mexico in the years since NAFTA. It also reflects the extent to which Production in Mexico and the US became highly integrated, with producers in both countries (and Canada) relying on a free flow of parts and finished goods across borders. New tariffs, therefore, pose a major challenge to the status quo.
The question of whether to shift operations from Mexico to the United States requires a careful cost-benefit analysis to determine if there is an opportunity to increase profits by relocating to the United States. But, once this analysis is complete, how does one evaluate the opportunity? Proactive planning is essential. For example, when evaluating potential moves, it is important to: (1) select an ideal site that meets the utility and labor needs of the plant; (2) negotiate and maximize economic incentives; (3) conduct real estate due diligence and analyze real estate documents for the facility and its operations; (4) review the tax and corporate considerations with respect to the transaction; and (5) analyze supply chains to ensure products produced or processed in the United States will meet US country of origin standards.
For companies facing these challenges, the firm can assist in finding a successful solution. The firm has an internationally recognized Global Location Strategies practice and an experienced Policy and Regulatory practice with special capabilities in international trade regulation. We have strong relationships with federal, state, and local economic development and government officials all over the United States. This enables our clients to gain government assistance with evaluating when and where to move their operations in the United States. The firm has obtained incentives up to a billion US dollars for our clients and has assisted with finding the perfect site for our clients through our strong relationships with federal, state, and local governments and agencies.
Now is the perfect time to explore relocating to the United States, as doing so will better position your company to navigate future disruptions and obtain the best incentives possible when making use of the firms’ years of experience and success in obtaining those incentives.
Footnotes
1 The Los Angeles Times, p. 6.
2 State of the American Supply Chain, Averitt p. 2 January 9, 2025.
3 WDSU, p. 3, January 21, 2025.
Beach Buggy Battle: Stipulation Insufficient to Establish Trademark Distinctiveness
The US Court of Appeals for the Fourth Circuit found that a district court does not need to accept both parties’ stipulation that a mark is distinctive but instead is permitted to make an evidentiary inquiry in determining whether the mark is distinctive or generic. Moke America LLC v. Moke Int’l Ltd., Case No. 23-1634 (4th Cir. Jan. 15, 2025) (King, Groh, JJ.) (Richardson, J., dissenting).
Starting in the 1960s, British Motor Corporation (BMC) sold vehicles colloquially referred to as “Mokes” in the United Kingdom, Australia, and Portugal. By the time BMC ceased production in 1993, Mokes had garnered a small but devoted following for use as beach buggies in the United States, the Caribbean, and Australia.
In August 2015, Moke International and Moke USA sold their first vehicle using the MOKE mark and subsequently sought trademark registration. One year later, Moke America began US sales of vehicles using the MOKE mark. Both parties described their vehicles as being reengineered and redesigned versions of the BMC Moke.
The present dispute began when Moke America opposed Moke International and Moke USA’s registration based on priority use of the MOKE mark. The Trademark Trial & Appeal Board dismissed the opposition. Moke America then filed a district court complaint seeking a declaration of trademark ownership and asserting trademark infringement. Moke International and Moke USA counterclaimed for a declaration of trademark ownership and trademark infringement, as well as affirmance of the Board’s dismissal.
A party claiming ownership of a mark bears the burden of proving distinctiveness. A generic term is not distinctive. Generic terms in trademark law are those that describe a genus or class of which a particular product is a member, such as “CONVENIENT STORE retail stores, DRY ICE solid carbon dioxide, and LIGHT BEER ale-type beverages.” Generic terms can never be protected. The purpose of denying protection for these terms is to safeguard the public from having commonly used words and phrases removed from the “linguistic commons.” Certain marks that are originally distinctive may become generic through the public’s pervasive use of the term through a process known as “genericide.” Genericide occurs when the trademark ceases to identify the particular source of a product or service to the public and instead identifies a class of product or service. Common examples include ASPIRIN and ESCALATOR.
Since both parties sought ownership of the MOKE mark, the parties stipulated that the mark was distinctive and not generic. The district court found that a stipulation was insufficient and noted that the parties must set forth evidence that the mark was distinctive and not generic. The district court concluded that MOKE was once inherently distinctive but had become generic before either party sold a vehicle bearing the MOKE mark. Both parties appealed.
Seeking to overturn the district court’s finding of genericness, the parties argued that the district court was required to accept their stipulation of the MOKE mark’s distinctiveness. The Fourth Circuit disagreed, finding that blindly accepting a stipulation was incompatible with the court’s role of protecting the public interest by not allowing trademark protection for generic terms.
Turning to the merits, the Fourth Circuit concluded that an inherently distinctive mark does not necessarily convert to a generic term upon abandonment, and abandonment of an inherently distinctive mark does not foreclose the possibility that the mark at some point became generic due to genericide. The Court explained that because neither party took the position that MOKE was a generic term, and because there was no serious endeavor to prove distinctiveness at the district court, there was insufficient record evidence (particularly consumer surveys and conventional purchaser testimony) to affirm or reverse the district court’s decision.
Accordingly, the Fourth Circuit vacated the judgment and remanded to the district court to conduct further proceedings, including consideration of additional evidence, to resolve whether MOKE was generic.
Texas Railroad Commission’s New Environmental Rules: A Step Toward Sustainability or Business as Usual?
In 1984, while Ronald Reagan was securing a landslide reelection and Apple introduced the Macintosh, the Railroad Commission of Texas (RRC) last updated the state’s primary oil and gas waste regulations. Now, four decades later, the RRC is revisiting these rules to better align them with modern industry practices and rising demands for stronger environmental protections.
Oil and gas extraction methods have evolved dramatically since the 1980s. Hydraulic fracturing (fracking) and horizontal drilling have sparked a production boom, significantly increasing both the volume and complexity of waste generated. This waste includes drilling fluids, fracking chemicals, and produced water—all of which, if mishandled, pose serious risks to soil, water, and public health.
While most oil and gas wastes are exempt from federal hazardous waste laws under the Resource Conservation and Recovery Act, states maintain broad authority to regulate their disposal and management. In Texas, the RRC oversees this responsibility. However, increasing environmental concerns and evolving industry practices have driven calls for regulatory updates, resulting in the recent revisions in the RRC’s rules.
Key Changes in the New Rules
The new rules, published in the Texas Administrative Code (“TAC”) on January 3, 2025, reflect a multiyear effort by the RRC to modernize waste management, encourage and expand recycling, and strengthen groundwater protections. These changes aim to balance industry needs with environmental stewardship, though their impact will depend on implementation and enforcement when they take effect on July 1, 2025.
Oil and Gas Waste Pits and Produced Water Recycling Pits (16 TAC §§ 4.113-114). A major change consolidates provisions from Statewide Rule 8 (“Disposal of Oil and Gas Waste”) and Rule 57 (“Produced Water Recycling”) into a new subchapter. Key updates include:
Authorization for certain pits (e.g., reserve and mud circulation pits) to operate without a specific RRC permit, with new registration requirements.
Updated standards for pit liners, groundwater monitoring, and closure procedures.
Stricter location restrictions, construction standards, and closure requirements for produced water recycling pits.
Produced Water Recycling (16 TAC § 4.112). One of the most significant shifts is facilitating produced water recycling. Operators can recycle produced water for reuse in drilling, fracking, and completion operations without requiring an RRC permit. However, they must still meet specific design, groundwater monitoring, and siting requirements. This change reflects growing interest in recycling as a solution to mitigate environmental risks, especially in areas like the Permian Basin, where seismicity concerns are increasing.
Transportation of Oil and Gas Waste (16 Tex. Admin. §§ 4.190-195). The new rules introduce enhanced accountability for waste transportation. Notable provisions include:
Detailed manifests for waste characterization.
Special waste authorizations.
Enhanced recordkeeping for waste haulers, improving tracking and compliance.
Public Participation (16 Tex. Admin. § 4.125). To boost transparency and public involvement, the new rules require that affected individuals and entities be notified about permit applications for waste facility construction. The notice must include details about the application, the protest process, and the location of the proposed facility. Notices must be sent via registered or certified mail, and recipients have 30 days to protest. If a protest is filed, the applicant must respond within 30 days. If no protests are received, the permit may be issued. Protests may lead to a hearing, with notice given to all affected parties.
Recycling Drill Cuttings (16 Tex. Admin. §§ 4.301-302)The rules aim to promote recycling of drill cuttings for beneficial use. Operators must comply with specific treatment and recycling requirements. The Commission may approve permits for using treated drill cuttings in commercial products like lease pads or roads, provided the products meet engineering standards, ensure public safety, and avoid water pollution.
Reactions to the New Rules
The revisions have sparked mixed reactions. For the oil and gas industry, the rules provide much-needed clarity, particularly on produced water recycling and waste transportation. However, many changes merely codify existing practices—like new registration requirements for certain pits—so their day-to-day impact may be minimal. That said, the ability to recycle produced water presents an opportunity for operators to reduce disposal costs and environmental impacts, especially in areas with limited disposal well capacity.
Environmental groups and landowners, however, view the revisions as insufficient. While the new rules offer clearer guidance on waste management and promote recycling, critics argue they fall short in addressing critical environmental issues. Concerns include a lack of more stringent regulations on pit liners, groundwater monitoring, and disposal in sensitive areas. Environmental advocates are also frustrated by the RRC’s decision not to require operators to notify landowners about waste disposal activities on their property. Despite these concerns, the RRC maintains it lacks the statutory authority to require such notifications or consent.
Practical Considerations for Landowners
Landowners whose properties are affected by oil and gas operations may need to take proactive steps to protect their interests. Since mandatory landowner notification is not required, surface owners should negotiate specific lease provisions, such as:
Restrictions on the types of waste disposed of on their land.
Designated disposal locations and management methods.
Operator notification before disposal activities—or even consent for certain types of waste disposal.
Landowners may also seek additional safeguards, such as stricter pit liner requirements, enhanced groundwater monitoring, or more comprehensive closure plans for waste pits.
Looking Ahead
The RRC’s overhaul of its oil and gas waste management regulations marks a significant step toward modernizing Texas’s regulatory framework in response to changing industry practices and environmental concerns. However, the real impact of these revisions will depend on how they are implemented and enforced when they take effect on July 1, 2025. Stakeholders—from industry operators to environmental advocates—should carefully consider the potential implications. For landowners, consulting legal counsel may be wise to ensure their interests are protected under the new rules. These final regulations could shape Texas’s oil and gas industry and environmental stewardship for years to come.