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12 April 20248 minute read

Industrials Regulatory News and Trends - April 12, 2024

Welcome to Industrials Regulatory News and Trends. In this regular bulletin, DLA Piper lawyers provide concise updates on key developments in the industrials sector to help you navigate the ever-changing business, legal, and regulatory landscape.

EPA final rule on toxic air pollution from chemical plants. On April 9, the EPA issued a final rule that aims to significantly reduce toxic air pollution from chemical plants. The rule, once implemented, asserts it will reduce both chloroprene and ethylene oxide emissions from covered processes and equipment by nearly 80 percent. The rule also requires reducing emissions of other toxic air pollutants, among them 1,3-butadiene, benzene, ethylene dichloride, and vinyl chloride. About 200 plants that make synthetic organic chemicals and a variety of polymers and resins, including neoprene, are affected by the rule. EPA says the rule will reduce smog-forming volatile organic compounds by 23,700 tons a year, and that it "will advance the Biden Cancer Moonshot, a commitment to ending cancer as we know it, while advancing environmental justice in communities overburdened by toxic chemicals."

SEC stays climate rules. On April 4, the Securities and Exchange Commission voluntarily stayed implementation of its recently adopted Climate Disclosure Rules pending completion of judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit. In its stay order, the SEC noted that it intends to vigorously defend the validity of the Climate Rules. See our alert exploring the latest developments around the rules, including an update on ongoing litigation and next steps for public companies.

Court upholds EPA waiver, says California may set its own emissions rules. On April 9, the US Court of Appeals for the District of Columbia Circuit upheld the EPA’s decision to grant California a waiver to set its own tailpipe emission limits and electric vehicle rules, rejecting a legal challenge brought by 17 states and others, opposing the Agency’s authorization of the California Air Resources Board’s more stringent emissions standards. Be on the lookout for our coming alert on this development.

Massive new DOE funding aims to decarbonize energy-intensive industries. On March 25, the US Department of Energy announced a record-setting amount of funding to assist the decarbonization of various energy-intensive sectors. The nearly $6 billion in funding from the Inflation Reduction Act and the Bipartisan Infrastructure Law will be spread across 33 projects and 20 states, where it will apply to some of the manufacturing sectors with the highest emissions, including iron and steel, aluminum, cement, concrete, chemicals, food and beverages, and pulp and paper. The products, which include groundbreaking recycling initiatives, hydrogen-use projects, decarbonization of thermal processes and more – will aim to remove approximately 14 million metric tons of emissions every year, the DOE estimates.

Inflation Reduction Act provides key edge to US steelmakers. According to a March 19 article in Recycling Product News, the Inflation Reduction Act is already beginning to provide a competitive advantage for United States-based steelmakers. In the article, Philip K. Bell, the president of the Steel Manufacturers Association, said that the act has helped US steelmakers ramp up investments for sustainable steelmaking capacities. According to the article, the impact of the Inflation Reduction Act, which allocates $370 billion in tax incentives to promote clean energy, is being felt within a year of its enactment, as the US infrastructure transitions to higher consumption of green steel. According to Goldman Sachs Asset Management, 280 clean energy projects have been announced across 44 US states in the IRA's first year, with an investment of $282 billion.

Ford will delay production of new electric vehicles, introduce hybrids. On April 4, the Ford Motor Company announced it will delay the production of an all-electric SUV and pickup truck, citing lagging consumer demand. Ford also reported that it intends to shift focus to introducing hybrids across its North American lineup by the end of the decade. This decision will delay the release of its highly anticipated all-electric T3 truck – to be produced at the massive Blue Oval City complex in Tennessee – to 2026. Ford confirmed that it will continue construction of battery plants in Kentucky, Michigan, and Tennessee as planned, indicating that the deferral presents the company with an opportunity to leverage emerging battery and other technologies. Jim Farley, Ford’s President and CEO, clarified that this decision does not change the company’s broader commitment to being a leader in fuel-efficient vehicle sales: "As the No. 2 EV brand in the US for the past two years, we are committed to scaling a profitable EV business, using capital wisely and bringing to market the right gas, hybrid, and fully electric vehicles at the right time.” On April 10, Ford announced it is cutting the price of its F-150 Lightning, the top-selling electric pickup in the US, by $5,500.

Legislators urged action on Federal Supplier Climate Risks and Resilience Rule. Led by Senator Elizabeth Warren (D-MA), a group of Democratic legislators is urging the Biden Administration to finalize rules requiring the largest federal contractors and suppliers to disclose their carbon emissions and climate risks. The proposed Federal Supplier Climate Risks and Resilience Rule was originally announced by President Joe Biden during COP27, the 2022 United Nations Climate Change Conference in Egypt. Because the federal government is the largest purchaser of goods and services in the world, such a rule would position the US as a global leader in the work to combat climate change. But, 16 months later, the rule remains in limbo. The legislators’ April 5 letter to three key Administration officials stated, “Given the immediate and far-reaching effects of climate change, the federal government should use its unparalleled purchasing power to protect taxpayer investments and government operations, including by working with contractors that are taking proactive steps to reduce their carbon footprints and increase their resilience to climate-related disruptions. The Federal Supplier Climate Risks and Resilience Rule would be a major step forward in those efforts.” Six senators and 19 representatives signed the letter. The lawmakers concluded, “We urge you to finalize this rule in the coming months and as rapidly as possible.”

Organization outlines its plan for recycling paper and packaging in Oregon. On April 2, Circular Action Alliance (CAA), the producer responsibility organization that is already approved to implement extended producer responsibility (EPR) laws for paper and packaging in California and Colorado, submitted its initial program plan to the Oregon Department of Environmental Quality. The submission shows how CAA intends to administer Oregon’s EPR program for packaging, paper products and food service ware, the Plastic Pollution Recycling Modernization Act (RMA). In its plan, CAA outlines an approach to implementing the RMA that builds on the existing system by upgrading facilities and improving public participation, understanding and equity throughout the state’s recycling system. With this approach, CAA is seeking to increase the diversion of recyclables from disposal and to reduce the negative environmental, social and health impacts from the end-of-life management of products and packaging.

Two senators call on DOD to reform approach to defense industry consolidations. On March 18, two US senators -- Elizabeth Warren (D-MA) and Mike Rounds (R-SD) – urged the Department of Defense to reform the way it handles mergers and acquisitions in the defense. In a letter to Secretary of Defense Lloyd J. Austin III, the senators pointed to a recent Government Accountability Office report “describing the inadequacies of the Department of Defense to track, monitor, and fully understand risks” arising from consolidations. The report’s findings, they said, “findings have important national security implications.” DOD’s failure to properly assess mergers that may affect the defense industry, the senators stated, clears the way for harmful mergers that may increase supply chain fragility and raise costs. “We urge the Department to adequately resource its merger and acquisition office, conduct holistic analyses on risks to the defense industrial base, and provide information on how the agency intends to do so,” the senators said in their letter.

EPA’s heavy-duty tailpipe emission rule draws criticisms. In late March, EPA finalized new tailpipe emissions standards that seeks to compel significant reductions in greenhouse gas emissions for heavy-duty vehicles. The proposed version of this rule received over 172,000 comments from a range of stakeholder expressing strong and diverse views on various aspects of the proposed rule. The final rule reflects a number of substantive changes intended to make compliance less burdensome for heavy-duty trucks. Stakeholders’ initial reactions to the rule have been mixed. Truck and engine manufacturers and others in the trucking industry argue that the new standards are unachievable, given the current state of zero-emission heavy-duty vehicle technology, limited available charging infrastructure, restrictions on the power grid, and other factors. Conversely, many environmental groups and others argue that the EPA did not go far enough with its new standards, especially for larger categories of heavy-duty vehicles, like semi-trucks.