Industrials Regulatory News and Trends - March 15, 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.

SEC adopts final rules on climate-related disclosures. The SEC has adopted final rules to enhance and standardize climate-related disclosures. Although the Climate Rules scale back some aspects of the originally proposed rules, they still include a number of new disclosure considerations for all registrants. The Climate Rules will become effective 60 days after publication in the Federal Register, starting the clock on compliance deadlines. Be on the lookout for our series of alerts on the final Climate Rules and their implications. In the meantime, should you have questions about the rules, please contact Era Anagnosti or Kristy Balsanek.

Soo Locks to reopen March 22. At the request of major steel producers, the Soo Locks at Sault Ste. Marie, Michigan, will open to marine traffic on March 22 – a week earlier than last year – ahead of what is expected to be a bustling shipping season on the Great Lakes. The St. Lawrence Seaway shipping lane will open the same day. The early opening is largely a result of the warm winter, which minimized ice conditions on the lakes while allowing essential lock repairs to proceed faster. Some ships that overwintered at the Port of Duluth-Superior will likely begin loading iron ore the week of March 18 and then will line up to pass through the locks as soon as they open, and upbound ships heading for Lake Superior will be doing the same. The 2023 shipping season was very busy, with 21.5 million tons of iron ore coming through Duluth-Superior, the most for a season since 1995; the international shipping season on the Great Lakes was 277 days, the longest in that port’s history, and the Great Lakes season was 305 days. The Soo Locks opening ceremony will be livestreamed.

Texas sues EPA over methane emissions rules. On March 8, the State of Texas sued the Environmental Protection Agency over new rules that aim to crack down on the oil and gas industry's releases of methane, a potent greenhouse gas that contributes to climate change. The lawsuit, filed in the US Court of Appeals for the DC Circuit, challenges EPA rules finalized in December 2023 that seek to reduce methane emissions through measures like bans on routine flaring of natural gas produced at new oil wells. Methane is a greenhouse gas that can leak into the atmosphere undetected from drill sites, gas pipelines, and other oil and gas equipment. It has more warming potential than carbon dioxide and breaks down in the atmosphere faster, so reining in methane emissions can have a more immediate impact on limiting climate change. “The EPA is once again trying to seize regulatory authority that Congress has not granted,” said Texas Attorney General Ken Paxton. “I am challenging this blatant overreach by the Biden Administration and will continue to defend vital sectors of the Texas economy.” See some of our earlier coverage of the rule here.

Alaska House votes to enact advanced recycling legislation. On February 23, the Alaska House of Representatives voted to relax environmental rules in that state on advanced recycling facilities. In advanced recycling, plastic waste that cannot be mechanically recycled is turned into low-grade fossil fuels and petrochemicals by subjecting it to processes that may include high heat, pressure, microwave radiation, and/or chemicals. It is a relatively young technology which, to date, has not been applied beyond a small scale; much of the concern reported about it is that it may use significant amounts of energy, generate pollution, and perpetuate single-use plastics. Representative Tom McKay (R-Anchorage), the bill’s prime sponsor, said, “Advanced recycling is the key to ending plastic waste and keeping plastic out of the environment.” IF this legislation is enacted, Alaska will become the 25th state to enact legislation supporting advanced recycling. The bill now goes to the state Senate.

Rivian announces new mid-size models. On March 7, electric automaker Rivian announced that its newest vehicle, the midsize five-seat SUV R2, will be sold at a lower price point – starting at $45,000, compared to the larger R1’s starting price of $74,900. Among the many customizable features of the R2, customers can select between two different battery sizes, the largest of which, the company says, would provide a range of over 300 miles when combined with the single-motor powertrain. Rivian also announced two additional new vehicle models which will be built on the midsize platform: the R3, a crossover SUV, and the sportier R3X. The company said it will produce R2s at its plant in Normal, Illinois, in order to meet a targeted launch date in the first half of 2026. On March 8, Rivian CEO RJ Scaringe said on social media, “In less than 24 hours, we’ve taken more than 68,000 R2 reservations.” On March 11, Rivian announced it is delaying construction of its $5-billion manufacturing campus in Stanton Springs, Georgia indefinitely. Also on March 11, the Illinois Department of Commerce & Economic Opportunity said “the elements of an economic development package are still being finalized” to provide further incentives to Rivian to expand its Illinois plant.

Ford settles US charges of misclassifying vehicles to avoid customs duties. On March 11, the Ford Motor Company and the US Department of Justice settled a long-running lawsuit in which the department had alleged that Ford violated US tariff laws by systematically misclassifying and understating the value of hundreds of thousands of its Transit Connect vehicles. Ford admitted no liability in this matter, but agreed to pay $365 million to settle the charges, a sum that the department says is one of the largest customs penalty settlements in recent history. The Justice Department said the settlement resolves allegations that Ford devised a scheme to avoid higher duties by misclassifying cargo vans imported from Turkey, from April 2009 to March 2013, as passenger vehicles. Customs and Border Protection ruled in 2013 that Transit Connects imported as passenger wagons and later converted into cargo vans were subject to the 25 percent duty applicable to cargo vehicles, rather than the 2.5 percent passenger vehicle duty.

JetBlue and Spirit terminate merger agreement after court blocks it. On March 4, JetBlue Airways and Spirit Airlines announced that they have cancelled their proposed $3.8 billion merger agreement. The transaction would have created the fifth-largest air carrier in the United States. The merger was called into question when a federal court in Boston ruled that it would harm consumers by reducing competition. “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, JetBlue’s CEO. “We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently.”

IRS increases focus on business aircraft use. The IRS has announced an audit campaign targeting aircraft usage by large corporations, large partnerships, and high-income/high-wealth individuals (including corporate executives). The focus of the campaign is to determine whether taxpayers are properly allocating corporate aircraft usage between business and personal purposes. See our alert.

Senate clears path for sale of fighter jets to Turkey. The US Senate on February 29, by a 13 to 79 vote, defeated a resolution introduced by Senator Rand Paul (R-KY) seeking to block the $23 billion sale of F-16 fighter jets and modernization kits to Turkey. The Biden Administration had approved the sale following Turkey ‘s approval of the admission of Sweden to NATO. Supporters of the sale stressed the importance of Washington keeping its word to a NATO ally. The State Department also approved an $8.6 billion sale of F-35 stealth fighter jets to Greece at the same time it approved Turkey’s F-16 purchase.

Senate panel considers extended producer responsibility issues. On March 6, the US Senate Committee on Environment and Public Works held a hearing on extended producer responsibility (EPR) for packaging. EPR is an environmental policy approach in which a producer’s responsibility for a product is extended to the post-consumer stage of a product’s life cycle. Representatives of the packaging, consumer goods, and plastic waste industries spoke at the hearing as lawmakers sought more information about EPR policy-making going on at the state level and what the role of the federal government could be. Of the 34 nations that are members of the Organization for Economic Co-operation and Development (OECD), only the US does not have an established federal-level policy for EPR in packaging. This year, EPR bills are moving forward in a number of US states, among then New York and Minnesota, and in other states, like California, rulemaking is advancing for state-level EPR programs. The Break Free From Plastic Pollution Act, reintroduced in the Senate in fall 2023, would establish EPR rules for makers of beverage containers and certain plastic products.

Chemistry trade group says expiration of CFATS is hurting the nation. On February 27, the American Chemistry Council announced the results of a new survey that it said indicates that the United States “lost valuable tools to fight terrorism and secure chemical facilities when Congress allowed the Chemical Facility Anti-Terrorism Standards (CFATS) to expire last July.” The manufacturers surveyed by the trade group said they benefited from the security tools that were being provided through CFATS, which have now lapsed. The companies said these tools were especially useful when developing security plans and were irreplaceable in some cases. They pointed to the companies’ ability to vet their personnel against the Federal Bureau of Investigation’s terrorist database and the insight and expertise provided by audits and inspections conducted under CFATS by the Department of Homeland Security. The absence of CFATS left the nation without an active regulatory chemical security program for the first time in 15 years.

NAM urges CPSC to withdraw table saw safety standard. Speaking at a February 28 public meeting of the Consumer Product Safety Commission, Alex Monie, Senior Director of the National Association of Manufacturers, stated that a safety standard proposed by the commission for table saws will harm manufacturing in the United States. He said the agency’s “proposed rule itself outlines that, if implemented, the cost of table saws would more than double, small manufacturers may be forced to exit the market, businesses may be unable to operate, and sales of table saws will decrease.” The rule would require that table saws - which are motor-driven, wood-mounted circular saw blades used daily in multiple industries to cut wood, plastic, and other materials - come equipped with patented active injury mitigation technology. Monie called on the CPSC to withdraw the proposed standard.