Emergency Congressional Action Needed to Save CFTC Whistleblower Program

In 2021, Congress passed an emergency measure to save the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Program from financial collapse. This measure is set to expire at the end of September, threatening to shut down a program which plays a critical role in policing corruption and fraud.

The CFTC Whistleblower Program’s financial crisis is due to its own success. In setting up the program, Congress placed a cap on the amount of money which could be in the fund used to finance the program, including both paying the expenses of the Whistleblower Office and paying out whistleblower awards. Only $100 million is allowed to be placed in the fund, which is entirely financed by sanctions collected thanks to the whistleblower program.

Thus, while the CFTC Whistleblower Program has directly led to over $3.2 billion in sanctions, only a fraction of that money has been placed in the CFTC Whistleblower Program’s fund. Under the CFTC Whistleblower Program, qualified whistleblowers are eligible for monetary awards of 10-30% of the sanctions collected in the enforcement action aided by their disclosure. The large sanctions being collected due to the whistleblower program therefore result in large payouts to whistleblowers.

It is these large sanctions and corresponding large awards which are threatening the program. Given the cap on the program’s fund, a large award could completely drain the balance of the fund.

In 2021, CFTC officials and whistleblower advocates raised concerns to Congress that the funding crisis could cause the CFTC Whistleblower Office to shut down. Recognizing the consequences of this, Congress passed an emergency measure which created a separate account to fund the Whistleblower Office. This meant that even if the award fund was depleted by a large award, the program could continue to function.

This measure is set to expire at the end of September, meaning that the CFTC Whistleblower Program is once again facing a funding crisis which could lead to its collapse. Congress must swiftly act again in order to save the program.

“Whistleblowers play a critical role assisting the CFTC be a strong cop on the beat. Much of our Division of Enforcement’s success is tied to the strength of our Whistleblower Office,” said CFTC Chairman Rostin Behnam back in February.

In June, Behnam also told the Senate that “the overwhelming success of the Whistleblower Program has unintentionally led to the potential for disruptions in these two vital offices due to their funding mechanisms.”

When Congress placed the cap on the CFTC Whistleblower Program’s fund back in 2010 it seemed like a fair number. The agency was little known and the great success of whistleblower award programs was not as well established.

Since then, however, the CFTC has greatly expanded as a critical law enforcement agency, thanks in large part to whistleblowers. In recent years the agency has levied massive sanctions against major global entities such as the world’s three largest oil traders, Vitol (a Dutch oil trader; $130 million sanction), Glencore (a Swiss oil trader; $1.2 billion sanction), Trafigura, (a Singapore oil trader; $55 million sanction), and the world’s largest crypto exchange, Binance ($4 billion), to name a few.

According to the CFTC, approximately 30% of the agency’s enforcement actions involve whistleblowers. The collapse of the whistleblower program would be dire for the agency’s enforcement efforts and the United States’ anti-corruption efforts more broadly.

National Whistleblower Center is calling on Congress to immediately pass an emergency measure to save the CFTC Whistleblower Program and has set up an Action Alert allowing the public to urge their elected officials to do so as well.

Geoff Schweller also contributed to this article

Congress Passes ADVANCE Act to Accelerate Deployment of Advanced Nuclear Reactors

On June 18, the Senate passed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act as a section of the Fire Grants and Safety Act (S.B. 870). The Senate approved House amendments to the bill with a vote of 88-2, opposed only by Senators Edward Markey (D-MA) and Bernie Sanders (I-VT). The ADVANCE Act has diverse backing from industry, government, and nonprofit stakeholders, and its passage reflects strong bipartisan support for promoting advanced nuclear reactors, which offer carbon-free dispatchable energy generation for both electricity and industrial applications. The ADVANCE Act now heads to President Biden, who is expected to sign the act into law.
The ADVANCE Act is the latest in a series of recent legislative and regulatory developments aimed at bolstering the development of a technology that may be necessary to meet the nation’s growing energy demand. Advanced reactors promise improvements over conventional, much larger light water reactors. These improvements include additional safety features, lower waste yields, and operational flexibility that can complement integration with intermittent renewable energy or energy storage. One category of advanced reactors, small modular reactors (SMR), is of particular interest; SMRs hold the potential of fitting within the footprint of industrial applications.
In 2019, President Trump signed into law the Nuclear Energy Innovation and Modernization Act (NEIMA), which directed the Nuclear Regulatory Commission (NRC) to streamline its licensing process for advanced reactors and modified the fee structure for traditional and advanced reactors. The passage of the ADVANCE Act builds on NEIMA and provides even more support to deploy advanced nuclear reactors efficiently and successfully.

Key Provisions of the ADVANCE Act

PROMOTING NEW NUCLEAR TECHNOLOGIES

  • Reduced Fees for Advanced Nuclear Reactor Application Reviews. The Act amends NEIMA and sets a specific fee reimbursement rate for NRC’s review of advanced nuclear reactor licensing applications. While applicants are responsible for direct program salaries and benefits for the nuclear reactor safety program, the costs associated with indirect program and agency support expenses will not be passed onto applicants.
  • Prizes for Advanced Nuclear Reactors. To incentivize the successful development and deployment of advanced nuclear reactors, the Act establishes multiple prizes. The first entities to successfully deploy the specified types of advanced nuclear reactors can receive federal funding to cover the licensing and permitting costs associated with deployment.
  • Development, Qualification, and Licensing of Advanced Nuclear Fuel Concepts. The Act directs the NRC to improve its ability to qualify and license advanced nuclear fuel. The NRC must collaborate with the Department of Energy (DOE) to test and demonstrate accident-tolerant fuels and advanced nuclear reactor fuel concepts; operate a knowledge-sharing database for agencies and the private sector; and ensure both NRC and DOE have the technical expertise to support advanced nuclear fuel from the research stage through commercial application. A report detailing these efforts must be submitted to Congress within two years.
  • Licensing and Oversight for Nuclear Facilities on Brownfields and Retired Fossil-Fuel Plant Sites. The Act directs the NRC to identify and report on regulatory, guidance, or policy changes to streamline licensing reviews and oversight for nuclear facilities at brownfields and retired fossil-fuel electric generation sites. Within two years, the NRC must adopt strategies and initiate rulemaking to achieve these efficiency improvements. This provision recognizes the advantage of using existing power grid infrastructure to bring nuclear facilities online and the potential of advanced reactor construction to create more high-paying jobs for former fossil-fuel industry workers.
  • Licensing and Regulation of Microreactors and Nonelectric Applications of Nuclear Technology. The Act directs the NRC to develop strategies and guidance for licensing and regulating microreactors, covering items such as oversight and inspections, emergency preparedness, risk analysis methods, and the transportation of fueled microreactors. Additionally, the Act directs the NRC to submit a report to Congress detailing unique licensing issues or requirements for nonelectric applications of nuclear energy, along with a proposed budget and timeline for implementing regulatory guidance.

STRENGTHENING THE NUCLEAR WORKFORCE, FUEL CYCLE, SUPPLY CHAIN, AND INFRASTRUCTURE

  • Nuclear Energy Traineeship Program. The Act directs the NRC to coordinate with trade schools and institutions of higher education to establish a competitive nuclear energy traineeship program. The program must provide training that meets the critical mission needs of the NRC and nuclear workforce needs.
  • NRC Hiring and Compensation Improvements. The Act includes provisions to ensure the NRC is prepared to review licenses safely and successfully should the demand for NRC licensing and oversight services increase. Specifically, the Act empowers the NRC Chair to appoint up to 120 exceptionally well-qualified individuals into the excepted service and up to 20 exceptionally well-qualified individuals into term-limited positions during each fiscal year. In addition, the Act allows the NRC to determine the compensation for these positions without regard to the General Schedule classification and pay rates, subject to some limitations. The NRC may also award hiring bonuses and performance bonuses.
  • Biennial Reporting on Spent Nuclear Fuel and High-Level Radioactive Waste. The Act requires the Secretary of Energy to submit a report to Congress no later than January 1, 2026, and biennially thereafter, that describes spending related to (1) breaches of contract under the Nuclear Waste Policy Act of 1982 and (2) storage, management, and disposal of spent nuclear fuel and high-level radioactive waste (including the projected lifecycle costs for such activities). The report must also describe mechanisms and recommendations to improve accounting of liabilities and lifecycle costs for spent fuel and radioactive waste. Additionally, the report must describe any activities taken in the previous fiscal year by DOE with respect to interim storage and the development and deployment of technologies that enhance the safe transportation and storage of spent nuclear fuel or high-level radioactive waste.
  • Report on Advanced Manufacturing and Construction Methods. The Act directs the NRC to submit a report to Congress within 180 days on advanced manufacturing and construction techniques for nuclear energy projects. The report must, among other things, assess licensing issues, identify safety standard gaps, and provide recommendations to use the existing regulatory framework or engage in new rulemaking to support advanced manufacturing and construction methods.

IMPROVING NRC EFFICIENCY AND EFFECTIVENESS

  • Updated NRC Mission Statement. The Act provides that the NRC must update its mission within a year to include that licensing and regulation will be conducted “in a manner that is efficient and does not unnecessarily limit” the civilian use of radioactive materials, the benefits of civilian use of radioactive materials, or the benefits of nuclear energy technology to society.
  • Periodic Review of Performance Metrics and Milestones. The Act amends NEIMA and directs the NRC to review its performance metrics and milestones at least once every three years and to revise them as necessary to reflect the most efficient metrics and milestones reasonably achievable.
  • Nuclear Licensing Efficiency. The Act mandates that the NRC establish techniques and guidance for evaluating nuclear reactor license applications that support efficient, timely, and predictable regulatory reviews and the safe use of nuclear reactors.
  • Modernization of Environmental Reviews. To streamline the approval of new nuclear reactor license applications, the Act directs the NRC to improve the efficiency, timeliness, and predictability of NEPA environmental reviews through the expanded use of categorical exclusions, environmental assessments, and generic environmental impact statements. The NRC must submit a report on these efforts to Congress within 180 days.
  • Report on Oversight and Inspection Program Improvements. The Act requires the NRC to provide a report to Congress within a year that identifies potential improvements to NRC’s oversight and inspection programs for nuclear reactors and materials. The report must assess options to maximize program efficiency through the use of risk-informed, performance-based procedures; information technologies; staff training; improved planning; and licensee innovations that may advance nuclear reactor operational efficiency and safety.

ADVANCING INTERNATIONAL NUCLEAR LEADERSHIP

  • Export and Innovation Activities. The Act directs the NRC to support interagency and international coordination related to nuclear reactor import and export licensing. Specifically, the Act directs the NRC to engage in international coordination to promote (1) international technical standards for licensing and regulating nuclear reactor design, construction, and operation; (2) competent nuclear regulatory organizations and frameworks in countries seeking to develop civil nuclear industries; and (3) exchange programs and training for foreign countries to improve their regulation and oversight of nuclear reactors and radioactive materials. The Act empowers the NRC to establish an “International Nuclear Export and Innovation Branch” to support these efforts.
  • DOE Global Nuclear Energy Assessment. The Act directs the Secretary of Energy to conduct a study in consultation with the Secretary of State, Secretary of Commerce, the Administrator of the Environmental Protection Agency, and the NRC that evaluates the global status of the civilian nuclear energy industry and its supply chains. The study must provide recommendations to strengthen the United States’ engagement with nuclear energy in foreign policy and modernize regulatory requirements to improve domestic supply chains of civilian nuclear energy.
  • Prohibitions on Russian and Chinese Enriched Uranium. The Act prohibits possession and ownership of enriched uranium fuel fabricated by an entity in Russia or China. A person may obtain a license to possess or own such fuel, but the Act provides that the NRC may only issue such a license in consultation with the Secretaries of Energy and State.
  • Foreign Ownership of Nuclear Facilities. Under the Atomic Energy Act, nuclear reactor licenses could not be issued to foreign corporations and other entities. The Act modifies this restriction and allows the NRC to issue licenses to governments, corporations, citizens, and foreign nationals of Organization of Economic Cooperation and Development member countries and India if issuance is not contrary to national security or public health and safety.

Other Recent Developments

  • DOE Funding for Small Modular Reactors. On June 17, DOE issued a Notice of Intent to distribute $900 million to support the deployment of small modular reactors (SMRs). Part of the funding comes from President Biden’s Bipartisan infrastructure Law.
  • Reappointment of NRC Chair. On June 18, the current Chairman of the NRC, Christopher Hanson, was sworn in for a second term – running through 2029. In his confirmation hearings, Senators pressed him to work harder on NRC reform.
  • NRC Rulemaking for Advanced Reactors. In response to NEIMA, the NRC has drafted proposed revisions to create a risk-informed, performance-based, and technology-inclusive framework for advanced reactors. An analysis by Van Ness Feldman lawyers found that the NRC has substantial headroom within its Congressional safety mandate to reduce the risk aversion and restrictiveness in its licensing and permitting process.
 

House and Senate Hold Hearings on EPA’s FY 2025 Budget Request

On April 30, 2024, the House Appropriations Subcommittee for Interior, Environment, and Related Agencies held a hearing on the fiscal year (FY) 2025 budget request for the U.S. Environmental Protection Agency (EPA). The Senate Appropriations Subcommittee for the Interior, Environment, and Related Agencies held a separate hearing on EPA’s FY 2025 budget request on May 1, 2024, and the Senate Committee on Environment and Public Works held its own hearing on May 8, 2024. On May 15, 2024, the House Energy and Commerce Subcommittee on Environment, Manufacturing, and Critical Materials held a hearing. EPA Administrator Michael S. Regan testified before both of the House Subcommittees, the Senate Subcommittee, and the Senate Committee (written testimony is hyperlinked).

April 30, 2024, House Subcommittee Hearing

During the April 30, 2024, House Subcommittee hearing, Ranking Member Chellie Pingree (D-ME) asked for an update on EPA’s risk assessment of per- and polyfluoroalkyl substances (PFAS) in biosolids. Regan stated that EPA is working on issuing it in final in 2024, and it will include a focus on certain PFAS to help EPA understand better the specific risks posed to farmers and the uptake in crops and livestock. Regan noted that EPA is working with the U.S. Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA) to research the risk from biosolids application. EPA intends to hold the polluters responsible for the PFAS accountable and does not want farmers, water systems, or taxpayers in affected communities to bear the burden of the contamination.

As reported in our November 3, 2023, blog item, on November 2, 2023, EPA announced that it granted a petition filed under Section 21 of the Toxic Substances Control Act (TSCA) to address the use of the chemical N-(1,3-Dimethylbutyl)-N′-phenyl-p-phenylenediamine (6PPD) in tires. Representative Derek Kilmer (D-WA) asked whether EPA still planned to issue an advance notice of proposed rulemaking (ANPRM) under TSCA Section 6 by the end of 2024 to obtain more information to inform a subsequent regulatory action. Regan stated that EPA expects to issue the ANPRM by fall 2024.

May 1, 2024, Senate Subcommittee Hearing

During the May 1, 2024, Senate Subcommittee hearing, Senator Martin Heinrich (D-NM) asked Regan to explain how EPA will address PFAS contamination under the FY 2025 budget request. Regan noted that EPA recently issued its first-ever National Primary Drinking Water Regulation (NPDWR), which will reduce PFAS exposure to over 100 million people. EPA also announced grants available to help smaller communities comply with the NPDWR. According to Regan, EPA needs the resources and staff to have a comprehensive approach to protect water quality from PFAS. Regan stated that EPA would use the funding to continue to collect scientific evidence and to study how to design technology and health-based standards to protect as many people as possible from different forms of PFAS.

Senator Gary Peters (D-MI) noted that during a 2023 Senate hearing, Regan testified that EPA had an additional 29 PFAS on its radar for a similar drinking water update and asked Regan about the status of the rulemaking. Regan stated that through the Unregulated Contaminant Monitoring Rule, EPA is monitoring drinking water in communities across the United Sates for these 29 PFAS and that EPA intends to pursue regulation for these PFAS.

Senator Patty Murray (D-WA), Chair of the Senate Appropriations Committee, asked Regan about the key funding increases included in the FY 2025 budget request for some of EPA’s core programs. Regan stated that the increases are intended to allow EPA to keep up with recent progress that it has made. While EPA recently issued the NPDWR for six PFAS, there are an additional 29 PFAS being monitored, and thousands more. EPA wants to ensure the safety of chemicals before they hit the market, and that is one of the places where EPA has a deficit in terms of staffing. According to Regan, EPA is getting more requests from agricultural communities about herbicides and pesticides.

Senator Katie Britt (R-AL) stated that EPA’s recent Endangered Species Act (ESA) proposals, such as the Herbicide Strategy, could impose hundreds of millions of dollars in new restrictions on farmers. Britt asked Regan how EPA would implement Congress’s bipartisan instructions in the FY 2024 appropriations report to consider best available data on pesticide usage, conservation practices, and real-world studies on spray drift and water concentrations. Regan testified that previous EPA decisions spanning decades and court rulings have put EPA in a precarious position. According to Regan, EPA is speaking with the farming and agricultural community and has come up with strategies that have received positive feedback. Britt asked whether EPA would consider appointing designated non-federal representatives to help EPA meet its ESA responsibilities. Regan responded that EPA needs more staff and resources to respond to court decisions and that the particular EPA office is down to levels from the early 2000s. Regan stated that he would need to talk through the use of non-federal representatives and agreed to discuss the issue with Britt.

Subcommittee Chair Jeff Merkley (D-OR) asked Regan what Congress can do to accelerate a solution to replace 6PPD with something that works as well without harming salmon. Regan stated that EPA intends to publish an ANPRM by fall 2024 and that EPA is also researching mitigation efforts to fill in the gap until it can take regulatory action.

Ranking Member Lisa Murkowski (R-AK) noted that in its FY 2024 budget request, EPA proposed a significant decrease in discretionary funding because of new revenues coming in from the Superfund tax, while the FY 2025 request includes additional funding for the program. Murkowski asked Regan for his view of the long-term funding outlook for the Superfund program. Regan testified that the tax collections for the first two years were lower than forecasted by the U.S. Department of the Treasury. Because of the gap, for FY 2025, EPA has requested additional funding.

May 8, 2024, Senate Committee Hearing

Senator Cynthia Lummis (R-WY) described EPA’s designation of perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) as flawed, stating that this would place the financial burden on passive receivers such as water utilities. More information on the designation and on EPA’s PFAS Enforcement Discretion and Settlement Policy Under CERCLA is available in our April 23, 2024, memorandum.

Committee Chair Thomas R. Carper (D-DE) asked Regan to describe the impact that the FY 2024 funding levels had on the TSCA program and what EPA could accomplish if it received the full amount requested in the FY 2025 budget request and maximized revenue collection through the recently updated TSCA fees rule. Regan stated that EPA received a small increase for TSCA in the FY 2022 and 2023 budgets, and it more than doubled the number of chemical reviews that it did each month. Without the funding in the FY 2025 budget request, EPA will see slower approval of new chemistries, especially for those companies in the semi-conductor, automotive, and battery sectors.

May 15, 2024, House Subcommittee Hearing

During the hearing held by the House Energy and Commerce Subcommittee on Environment, Manufacturing, and Critical Materials, Subcommittee Ranking Member Paul Tonko (D-NY) asked Regan what EPA is doing to address the backlog of new chemical reviews and what Congress can do to support EPA. Regan stated that with the budget increases that EPA received in 2022 and 2023, it more than doubled the number of new chemicals reviewed each month. According to Regan, EPA has reduced the backlog by half and prioritized new chemistries for the semi-conductor, automotive, and battery manufacturing sectors. According to Regan, without the funding in the FY 2025 budget request, EPA will see slower approval of new chemicals.

Representative Frank Pallone (D-NJ), Ranking Member of the Energy and Commerce Committee, noted that the reinstated Superfund tax has brought in lower receipts than projected by the Treasury and asked how EPA is adapting to the difference between the Treasury’s forecast and the actual funds collected. Regan testified that EPA is working with the Treasury Department to refine its estimates. According to Regan, the $300 million in the FY 2025 budget request will fill in the gap between the projected and actual tax receipts. Without the additional funding, Regan stated that there would be a slowdown in EPA’s ability to clean up Superfund sites. Pallone then asked Regan what the designation of PFOA and PFOS as CERCLA hazardous substances and EPA’s enforcement policy mean for different sectors. Regan responded that EPA is focused on the manufacturers responsible for the PFAS and will not pursue enforcement actions against sectors such as farmers or water systems.

Representative Randy Weber (R-TX) asked about EPA’s final rule amending the TSCA risk evaluation framework and its removal of the definition of “best available science.” Regan stated that he would have to get more context to respond to Weber. More information on EPA’s final rule is available in our May 14, 2024, memorandum.

Representative Dan Crenshaw (R-TX) asked Regan to comment on the almost 400 premanufacture notifications (PMN) awaiting a risk determination and the more than 90 percent that have passed the statutory deadline of 90 days. According to Regan, the issue predates the Biden-Harris Administration. Regan repeated that with the additional resources from Congress in 2022 and 2023, EPA has more than doubled the reviews completed each month.

Representative John Curtis (R-UT) noted that applications in EPA’s New Chemicals Program have dropped from 600 annually to just over 200 and that in the last two calendar years, EPA made 95 and 101 determinations, respectively. According to Curtis, although EPA is required by law to return fees if it misses deadlines, it has never returned the fee to an applicant when EPA has missed the deadline because applicants coincidentally suspend or withdraw their applications before the deadline. Curtis asked Regan to explain the coincidence of PMNs being suspended or withdrawn just in time to allow EPA to keep the money. Regan stated that he was unaware that applications were being withdrawn from EPA and committed to looking into it. Curtis stated that he has been told that EPA has effectively threatened applicants by phone to suspend or withdraw their applications and stated he would like Regan to look into this and report back. Regan committed to doing so. Curtis followed up by asking about EPA’s assumption that it can charge user fees covering 25 percent of the TSCA program’s budget, regardless of the cost. Regan responded that he is not sure that he agrees with the premise and that he needs to look at EPA’s performance with the budget that it did receive. Regan agreed to have a deeper conversation with Curtis on the topic.

Commentary

The hearings for EPA’s FY 2025 budget request were similar to the hearings for EPA’s FY 2024 budget request. Republicans pressed EPA on why it needs additional funding, criticizing the cost and reach of its current rulemakings, while Regan highlighted EPA’s obligations under federal statutes, including the Clean Water Act, the Safe Drinking Water Act, TSCA, the Federal Insecticide, Fungicide, and Rodenticide Act, and the ESA, as well as recent court decisions. On balance, no new information emerged.

Key Developments in Environmental Law and Policy in 2023, and What’s Ahead in 2024 [PODCAST]

On this episode of the Bracewell Environmental Law Monitor, we look back at the significant developments in environmental and natural resources law and policy in 2023, as well as look ahead to what’s to come in 2024. Co-hosts Daniel Pope and Taylor Stuart talk with Ann Navaro and Tim Wilkins, partners in Bracewell’s environment, lands and resources practice, about a range of topics, such as climate and environmental justice, renewable energy advancements, regulatory developments and much more.

 

EPISODE HIGHLIGHTS

[01:44] Big Developments in 2023: The Biden administration’s top priorities have been climate and environmental justice. The big development of 2023 on the climate front has been on the methane side rather than the carbon dioxide side. Regarding environmental justice, the Biden administration and NGOs have been really pushing to apply justice factors in enforcement, in cleanups, new rulemaking, permitting, issuance of grants and loans, and the like.

[06:59] A Significant Year for Jurisdiction Under the Clean Water Act: Almost a year ago, the Biden administration issued its definition of “Waters of the United States.” Subsequently, the Supreme Court issued another decision interpreting Waters of the United States in the Sackett case and essentially eviscerated one of the bases for the Biden administration’s Waters of the US rulemaking. Litigation is ongoing.

[09:33] Congress Amended the National Environmental Policy Act and the Fiscal Responsibility Act: This was enormous, as core provisions had never seen substantive amendments. There are mixed reviews of what that amendment to NEPA accomplished.

[13:41] Renewable Energy: There’s been advancement in renewable energy projects and trying to permit those projects and an emphasis on promoting renewable energy. For example, for offshore wind, in this year and in prior years of the Biden administration, there’s been a lot of advancement on leasing.

[21:57] On the Horizon in Environmental Law in 2024: Ann shares that the US Army Corps of Engineers could revise Nationwide Permit 12. Tim shares that the White House is reviewing EPA’s CERCLA hazardous substance listing for two of the leading PFAS chemicals, and the listing will go final sometime early in 2024. In addition, the SEC’s semi-annual rulemaking agenda for April 2024 promises to include proposed climate disclosure rules for publicly traded companies.

Permitting Reform Package Passes as Part of Debt Ceiling Deal

The past year’s long wrangling between Republicans, Democrats, and the White House on permitting reform finally made progress this month when Congress enacted significant reforms to the National Environmental Policy Act (“NEPA”) as part of the legislation to increase the debt ceiling. Prior to this legislation, the core statutory framework of NEPA had remained relatively unchanged for 50 years. Building from Rep. Garrett Graves’ (R-LA., 6th Dist.) “Building United States Infrastructure through Limited Delays and Efficient Reviews” (“BUILDER”) Act of 2023, the permitting reform title of the Fiscal Responsibility Act of 2023 (“FRA” or “legislation”) tackles four key areas:

(1) reforming NEPA to make the federal environmental review process simpler and quicker;

(2) directing a study of the existing capacity of our transmission grid to reliably transfer electric energy between distinct regions and subsequent recommendations to improve interregional transfer capabilities within the grid;

(3) streamlining permitting for energy storage projects; and

(4) congressional ratification of the Mountain Valley Pipeline.

Several of the reforms to NEPA codify changes to the Council on Environmental Quality (“CEQ”) NEPA implementing regulations made during the Trump Administration.

While these provisions are intended to yield significant benefits for projects requiring federal approvals or funding, the actual impact will depend substantially on how the reforms are implemented, and there remains considerable interest in other aspects of permitting and siting reform making further legislative action likely.

Key NEPA Reforms

The FRA includes numerous changes to NEPA. We have highlighted several key changes here.

Narrowing the Scope of “Major Federal Action”

The term “major Federal action” is the trigger for requiring environmental review under NEPA – federal actions that qualify as a “major Federal action” must be considered under NEPA. The new legislation narrows the definition of what constitutes a “major Federal action” by limiting the term to actions that the lead agency deems are “subject to substantial Federal control and responsibility.” The legislation does not define this phrase, leaving substantial room for agency interpretation. Building on this general concept, the amendments codify the regulatory definition of a “major Federal action,” with modifications. As now defined, certain federal actions will be excluded from the scope of a major federal action, including:

  • non-federal actions (i.e., private or state actions) “with no or minimal Federal funding”;
  • non-federal actions (i.e., private or state actions) “with no or minimal Federal involvement where a Federal agency cannot control the outcome of the project”;
  • funding assistance consisting exclusively of general revenue sharing funds, where the federal agency does not have “compliance or enforcement responsibility” over the use of those funds;
  • “loans, loan guarantees, or other forms of financial assistance where a Federal agency does not exercise sufficient control and responsibility over the subsequent use of such financial assistance or the effect of the action”;
  • Small Business Act business loan guarantees under section 7(a) or (b) of the Small Business Act or title V of the Small Business Investment Act of 1958;
  • federal agency activities or decisions with effects located entirely outside of the jurisdiction of the United States; and
  • non-discretionary activities or decisions that are made in accordance with the agency’s statutory authority.

The meaning and application of these exclusions to specific actions will be subject to interpretation and likely litigation going forward. For example, what constitutes minimal funding—a threshold dollar amount or a percentage of the federal funding contribution in relation to overall project cost—is not clearly identified under the revisions. Resolution of this question will be critical to determining what actions are subject to NEPA review going forward. Given the recent dramatic increase in federal funding opportunities from the Inflation Reduction Act and Infrastructure Investment and Jobs Act, determining what actions are subject to NEPA review based on the level of federal funds involved is likely to become a more frequent and important question.

Scope of Review

When an agency action constitutes a “major Federal action,” the FRA also focuses and limits the scope of the NEPA review in two key ways.

First, the legislation modifies the statute’s existing, broad language requiring that “major Federal actions” significantly affecting the quality of the human environment include a detailed statement on the “environmental impact of the proposed action.” The revised language statutorily limits environmental review of environmental effects to those that are “reasonably foreseeable.” This change follows from a provision of the Trump Administration’s 2020 NEPA rule—later removed by the Biden Administration—which sought to eliminate long-used concepts of direct, indirect, and cumulative effects and instead focus on effects that are reasonably foreseeable and that have “a reasonably close causal relationship to” the proposed action or alternatives. Although the new statutory language does not go as far as the Trump Administration’s rule, which required a “close causal relationship,” it does follow the trend in case law to only require evaluation of reasonably foreseeable impacts. What project-specific impacts are “reasonably foreseeable” is still likely to be the subject of litigation.

Second, the FRA also makes changes regarding the alternatives analysis, often considered the heart of NEPA review. The legislation clarifies that agencies are to consider a “reasonable range” of alternatives to the proposed agency action, and that such alternatives must both be “technically and economically feasible” and “meet the purpose and need of the proposal.” This seems to codify long-standing guidance from CEQ contained in its 40 Most Asked Questions Concerning CEQ’s NEPA Regulations. In addition, it directs that, in assessing the no action alternative, agencies must include an analysis of any negative environmental impacts of not implementing the proposed action. Whether an agency has met its obligations under NEPA to consider “alternatives to the proposed action” is a frequent source of controversy and litigation, particularly for the authorization of large infrastructure and energy projects.

These changes should both help focus environmental reviews and reduce costs and delays associated with challenges to agencies’ alternative analyses and emphasize the importance of properly defining the “purpose and need” of a proposed action.

Data Standards and Requirements

The FRA includes several provisions related to data. First, it clarifies that in making a determination on the appropriate level of review (Environmental Impact Statement (“EIS”), Environmental Assessment (“EA”), or categorical exclusion), the lead agency can make use of any reliable data source—and that “new scientific or technical research [is not required] unless the new scientific or technical research is essential to a reasoned choice among alternatives, and the overall costs and time frame of obtaining it are not unreasonable.” It is unclear whether this will be applied beyond the determination of what level of review is required. This change has the potential to limit delays due to agencies undertaking or requesting additional studies from project proponents. What is deemed “essential” and what costs and timeframe are “not unreasonable,” however, remain undefined.

Second, the legislation requires that the action agency “ensure the professional integrity, including scientific integrity, of the discussion and analysis in an environmental document.” The practical implications and scope of this scientific integrity mandate are unclear—and is likely to be a subject of agency guidance and, potentially, future litigation.

Efficiency Measures

The FRA further codifies several less controversial changes from the Trump Administration 2020 NEPA rule, which the recent Biden rulemaking had left in place. These changes include expressly recognizing and establishing regulations for EAs. Additionally, these changes include setting page limits for EISs—150 pages generally and 300 pages for agency actions “of extraordinary complexity”—and EAs—75 pages—excluding citations and appendices. Additionally, the changes codify the regulatory presumptive deadlines for completion of NEPA reviews—two years for EISs and one year for EAs. The legislation goes beyond existing regulations by creating the right to judicial review when an agency fails to meet a deadline. Under the new legislation, if an agency misses the deadline, the delayed project’s sponsor may seek a court order requiring the agency to act as soon as practicable, which is not to exceed 90 days from the date on which the order was issued unless the court determines that additional time is needed to comply with applicable law.

Further, the legislation clarifies the role of the NEPA lead agency, specifying that the lead agency must develop a schedule, in cooperation with each cooperating agency, the applicant, and other appropriate entities, for the completion of the environmental review and any permit or authorization required to carry out the proposed agency action. This mirrors provisions previously adopted as part of Title 41 of the Fixing America’s Surface Transportation Act (“FAST-41”) in 2015, which has demonstrated success in requiring coordination and improving the permitting and authorization processes for certain large infrastructure projects. Although the FRA expressly contemplates extensions to the schedule, just having a schedule in place can be a helpful tool in the timely completion of NEPA reviews.

In addition, the legislation authorizes project applicants to hire independent consultants to prepare EISs and EAs, subject to the independent review of the lead agency. This provision can provide project applicants with a path to minimize delays caused by a lack of staff and resources at federal agencies.

Programmatic Reviews and Categorical Exclusions

The FRA also codifies the current agency practice of preparing and relying on programmatic environmental documents to streamline the review process for subsequent actions that implement the evaluated program. The legislation provides that programmatic review can be relied on for five years without additional review, and after five years if the agency reevaluates the analysis. Although this change promotes further use of programmatic reviews, the five-year period presumption and reevaluation process could present challenges in certain cases given the extensive resources and time required to undertake a programmatic review and tiered reviews.

The FRA also seeks to facilitate the use of categorical exclusions in the NEPA process by authorizing agencies to adopt a categorical exclusion established by another agency. The legislation lays out a process for consulting with the agency that established the exclusion to determine whether adoption is appropriate, notifying the public of the plan to use the categorical exclusion, and documenting adoption of the categorical exclusion. Though dependent upon agencies taking advantage of this new flexibility, this could have the effect of enabling some types of projects to forgo detailed environmental review.

Other Provisions

In addition to the NEPA reforms, the FRA includes several other important permitting provisions. The legislation seeks to streamline and accelerate permitting for “energy storage” projects by adding energy storage to the list of “covered projects” under FAST-41.

Additionally, the legislation provides a clear path for the completion of the much-delayed Mountain Valley Pipeline project. The legislation finds the timely completion of the project is in the national interest, and congressionally approves and ratifies the various federal authorizations required for the project. Further, the legislation bars judicial review of federal agency actions with respect to the project.

Finally, the legislation requires the North American Electric Reliability Corporation (“NERC,” the entity responsible for setting reliability standards for the nation’s electric grid) to undertake a study within a year and a half on whether more transfer capacity is needed between existing transmission planning regions—including recommendations on measures to increase the amount of energy that can be reliably moved between the studied regions. The Federal Energy Regulatory Commission will thereafter have a year to seek and consider public comments on the study and file a report with Congress detailing any recommendations for statutory changes. This study provision was in lieu of a larger set of transmission-related actions that are of key interest to Democratic lawmakers that will be the subject of future legislative efforts.

Implications

Although the provisions in FRA are not a silver bullet to solve every NEPA woe experienced by project applicants, it is a significant step in the right direction. The codification of key concepts within the NEPA statute itself (rather than regulation, guidance, or case law) will have a durable, long-lasting impact on implementation of environmental reviews because it limits the regulation issuance/withdrawal cycle that we have witnessed with the recent administration changes.

Looking forward, we can expect a rulemaking by CEQ to align the existing regulations with the revised statutory language, as well as additional rulemakings by other agencies to harmonize their NEPA implementing regulations with the revised law. For the last year, we have awaited the Phase 2 NEPA rulemaking from CEQ, as explained in our previous alert. With this new legislation, it seems likely that CEQ will pause and further revise its proposed regulations to capture these new reforms before issuing additional regulations. We can also expect future guidance—and eventual litigation—on several ambiguous provisions in the new legislation as agencies begin to implement them.

While the intention behind the legislation is to speed and ease what has become a very lengthy, expensive, and perilous environmental review process—far exceeding the original intent of NEPA—whether these goals are achieved will depend on whether federal agencies embrace them or look for ways to interpret the reforms to continue “business as usual.”

For example, to meet the new timelines, it is possible that federal agencies will require applicants to provide all documentation needed for the environmental review before starting the clock. This approach would have the effect of undermining the statutory timeframes as well as the efficacy of the public engagement process. Similarly, while the legislation seeks to curtail the extent of the analysis through page limits, it is foreseeable that relatively short EISs and EAs could be weighed down with thousands of pages of analysis contained in the appendices.

It also remains to be seen how courts will interpret these reforms. The “hard look” standard developed by courts to evaluate the adequacy of environmental review documents may have the effect of ballooning the analyses again despite Congress’ intent to streamline the process.

Finally, while these reforms are substantial, Congress continues to discuss and debate additional reforms to address unresolved federal siting and permitting concerns—particularly with respect to energy infrastructure projects. Notably absent from the legislation was transmission permitting reform language of interest to Democratic lawmakers as well as provisions to support oil and gas leasing on federal lands and to facilitate the siting and permitting of mining projects to boost domestic supplies of critical minerals essential for existing and developing clean energy technologies.

© 2023 Van Ness Feldman LLP

For more environmental legal news, click here to visit the National Law Review. 

As White House Loses House Majority, what is Next for H-1B Visa Program?

The H-1B is a popular and highly-sought-after visa category for skilled foreign workers seeking to work in the United States. It has been the subject of much debate and controversy over the years, and recent changes in the political landscape have added new uncertainties and challenges to the H-1B visa process. This blog post explores the impact of the Biden administration on changes to the H-1B visa, as well as the role of the new Republican majority in the House of Representatives in shaping the future of the H-1B visa program.

What is the H-1B Visa?

The H-1B is a temporary, nonimmigrant visa category that allows employers to petition on behalf of highly-educated foreign professionals who work in specialty occupations that require at least a bachelor’s degree. These jobs are generally in the fields of science, technology, engineering, and mathematics (“STEM”), enhancing American competitiveness in the global economy. In fact, in an effort to be even more competitive, the Biden administration recently expanded eligible fields of study that qualify under the program, as described in greater detail on this blog.

The H-1B visa allows U.S. employers to fill critically important jobs in the United States with foreign workers.  While many critics of the H-1B argue that it potentially limits job opportunities for U.S. workers, many others suggest that H-1B workers offer critical support to the U.S. economy. In fact, according to the American Immigration Counsel, H-1B recipients provided critical assistance during the COVID-19 pandemic, with many doctors, scientists, and nurses present in the U.S. on the H-1B visa, including individuals who assisted with the development of vaccines.

Biden Administration and its Relationship with Immigration Reform

One of the key priorities of the Biden administration has been to modernize and improve the U.S. immigration system, including the H-1B visa program. To this end, the Biden administration has taken steps to make the H-1B visa process more accessible and efficient for skilled foreign workers, including increasing the number of visas available, increasing transparency and consistency in the lottery process, and streamlining the application process.

According to a recent article by Forbes, Senator Richard Durbin (D-IL) and Senator Alex Padilla (D-CA) are expected to return as Senate Judiciary Committee chair and immigration subcommittee chair, respectively. It is expected that Sen. Chuck Grassley (R-IA) will no longer be ranking member on the Senate Judiciary; Sen. Lindsey Graham (R-SC) likely will hold that position. Just last year, Senator Grassley blocked an exemption from green card limits for certain foreign nationals with PhDs in STEM fields – a move that frustrated employers and universities alike.

Although Democrats hold the majority in the Senate, the House now features a Republican majority, which may complicate immigration reform efforts on Capitol Hill.

Republicans on Capitol Hill Seek to Counter Democratic Efforts on Immigration

The new Republican majority in the House of Representatives may pose a challenge to the Biden administration’s efforts to reform the H-1B visa program. Republicans have traditionally been more critical program and have pushed for reforms that would restrict the number of visas available and make it more difficult for foreign workers to come to the United States.

Sen. Tom Cotton (R-AR) has been a vocal critic of the H-1B program, stating that it is used to hire cheap foreign labor at the expense of American workers. Similarly, Sen. Grassley has expressed concerns about the impact of the program on American workers, claiming that while the visa was intended to help American businesses recruit the best and brightest talent from around the world, it’s too often been used to import cheaper foreign labor and displace American workers.

Given these differing perspectives, the future of the H-1B visa program will likely continue to be a source of political debate and controversy in the United States. However, it is clear that both sides of the political aisle agree that it needs to be reformed in some way, whether to make it more accessible and efficient for skilled foreign workers, or to better protect the interests of American workers.

Currently, the H-1B process in the United States is in a state of flux, with the Biden administration taking steps to modernize and improve the program, while the new Republican majority in the House of Representatives raises concerns about its impact on American workers. Whether the program will ultimately be reformed to better serve the interests of foreign workers, American workers, or both remains to be seen, but clearly this issue will continue to be a major source of political debate and controversy in the United States for the foreseeable future.

Article By Raymond G. Lahoud of Norris McLaughlin P.A.

For more immigration legal news, click here to visit the National Law Review.

©2023 Norris McLaughlin P.A., All Rights Reserved

SECURE 2.0 Act Brings Slate of Changes to Employer-Sponsored Retirement Plans

In December, the SECURE 2.0 Act of 2022 (“SECURE 2.0”) was passed, a package of retirement provisions providing comprehensive updates and changes to the SECURE Act of 2019. The legislation includes some key changes that affect employer-sponsored defined contribution plans, such as profit-sharing plans, 401(k) plans, 403(b) plans and stock bonus plans. While some of the changes are effective immediately upon the law’s enactment, most required changes are not effective before the plan year beginning on or after January 1, 2024, so employer sponsors have time to prepare for compliance.

Required Changes

Mandatory automatic enrollment in new plans.

Plan sponsors are currently allowed to provide for automatic enrollment and automatic escalation in 401(k) and 403(b) plans. SECURE 2.0 requires new 401(k) and 403(b) plans to automatically enroll participants at a new default rate, and to escalate participants’ deferral rate each year, up to a maximum of 15%, with some exceptions for new and small businesses. This provision applies to new plans with initial plan years beginning after December 31, 2024.

Changes to long-term part-time employee participation requirements.

The Act currently requires 401(k) plans to permit participation in the deferral part of the plan only by an employee who worked at least 500 hours (but less than 1000 hours) per year for three consecutive years. SECURE 2.0 changes this participation requirement by long-term part-time employees working more than 500, but less than 1000, hours per year to two consecutive years instead of three. However, this two-year provision does not take effect until January 1, 2025, which means the original SECURE Act three-year provision still applies for 2024. Employers should start tracking hours for part-time employees to determine whether they will be eligible in 2024 or 2025 under this provision. For vesting purposes, pre-2021 service is disregarded, just as service is disregarded for eligibility purposes. This provision is applicable to 401(k) plans and 403(b) plans that are subject to ERISA and does not apply to collectively bargained plans. This provision applies to plan years beginning after December 31, 2024.

Changes to catch-up contributions limits.

If a defined contribution plan permits participants who have attained age 50 to make catch-up contributions, the catch-up contributions are now required to be made on a Roth basis for participants who earn at least $145,000 (indexed after 2024) or more in the prior year. This provision is effective for taxable years beginning after December 31, 2023.

Changes to the required minimum distribution (RMD) age.

Currently, required minimum distributions must begin at age 72 for participants who have terminated employment. SECURE 2.0 increases the age to age 73 starting on January 1, 2023, and to age 75 starting on January 1, 2033. This means that participants who turn 72 in 2023 are not required to take an RMD for 2023; instead, they will be required to start taking RMDs for calendar year 2024, the year in which they turn 73. This provision is effective for distributions made after December 31, 2022, for individuals who turn 72 after that date.

Early withdrawal tax exemption for emergency withdrawal expenses.

SECURE 2.0 provides for an exception from the 10% early withdrawal tax on emergency expenses, defined as certain unforeseeable or immediate financial needs, on a limited basis (once per year, up to $1000). Plans may allow an optional three-year payback period, and participants are restricted from taking another emergency withdrawal within three years of any unpaid amount on a previous withdrawal. This provision is effective for plan years beginning on or after January 1, 2024.

Changes to automatic enrollment for new plans.

Almost all new defined contribution plans will be required to auto-enroll employees upon hire (existing plans are exempt from this provision). This provision is applicable for plan years beginning on or after January 1, 2025.

Optional Changes

Additional catch-up contribution opportunities.

Currently, the catch-up contribution limits for certain plans are indexed for inflation and apply to employees who have reached the age of 50. SECURE 2.0 increases catch-up contribution limits for individuals aged 60-63 to the greater of: (1) $10,000 (indexed for inflation), or (2) 50% more than the regular catch-up amount in effect for 2024. This provision is effective for plan years beginning on or after January 1, 2025.

Additional employer contributions to SIMPLE IRA plans.

Current law requires employers with SIMPLE IRA plans to make employer contributions to employees of either 2% of compensation or 3% of employee elective deferral contributions. SECURE 2.0 allows employers to make additional contributions to each employee of a SIMPLE plan in a uniform manner, provided the contribution does not exceed the lesser of up to 10 percent of compensation or $5,000 (indexed). This provision is effective for taxable years beginning after December 31, 2023.

Replacing SIMPLE IRA plans with safe harbor 401(k) plans.

The new law also permits an employer to elect to replace a SIMPLE IRA plan with a safe harbor 401(k) plan at any time during the year, provided certain criteria are met. The current law prohibits the replacement of a SIMPLE IRA plan with a 401(k) plan mid-year. This provision also includes a waiver of the two-year rollover limitation in SIMPLE IRAs converting to a 401(k) or 403(b) plan. This change is effective for plan years beginning after December 31, 2023.

Increasing involuntary cash-out threshold.

Currently plans may automatically cash-out a vested participant’s benefit that is between $1,000 and $5,000 and roll this amount over to an IRA. SECURE 2.0 allows plans to increase the $5,000 involuntary cash-out limit amount to $7,000. This provision of the law is effective for distributions made after December 31, 2023.

Relaxation of discretionary amendment deadline.

Under current law, a discretionary plan amendment must be adopted by the end of the plan year in which it is effective. SECURE 2.0 allows plans to make discretionary plan amendments to increase benefits until the employer’s tax filing deadline for the immediately preceding taxable year in which the amendment is effective. This applies to stock bonus, pension, profit-sharing or annuity plans to increase benefits for the preceding plan year. This provision is effective for plan years beginning after December 31, 2023.

Elimination of unnecessary plan notices to unenrolled participants.

SECURE 2.0 eases the administrative burden on plan sponsors by eliminating unnecessary plan notices to unenrolled participants. Under the amended law, plan sponsor notices to unenrolled participants may consist solely of an annual notice of eligibility to participate during the annual enrollment period, as opposed to numerous notices from the plan sponsor. This provision is effective for plan years beginning after December 31, 2022.

Crediting of student loan payments as elective deferrals for purposes of matching contributions.

Under SECURE 2.0, student loan payments may be treated as elective deferrals for the purposes of matching contributions to a retirement plan. This provision is available for plan years beginning on or after January 1, 2024.

Matching contributions designated as Roth contributions.

Previously, employer matching contributions could not be made as Roth contributions. Effective on the date of the enactment of SECURE 2.0, 401(a), 403(b), or governmental 457(b) plans may allow employees the option to designate matching contributions as Roth contributions.

Expansion of the Employee Plans Compliance Resolution System (EPCRS).

Currently, EPCRS contains procedures to self-correct certain limited, operational failures that are insignificant and corrected within a three-year period. SECURE 2.0 expands this, generally permitting any inadvertent failure to be self-corrected under EPCRS within a reasonable period after the failure is identified, without a submission to the IRS, subject to some exceptions. This provision went into effect on the date of enactment.

Recoupment of overpayments.

Currently, fiduciaries for plans that have mistakenly overpaid a participant must take reasonable steps to recoup the overpayment (for example, by collecting it from the participant or employer) to maintain the tax-qualified status of the plan and comply with ERISA. Under SECURE 2.0, 401(a), 403(a), 403(b), and governmental plans (not including 457(b) plans) will not lose tax qualification merely because the plan fails to recover an “inadvertent benefit overpayment” or otherwise amends the plan to permit this increased benefit. In certain cases, the overpayment is also treated as an eligible rollover distribution. This provision became effective upon enactment with certain retroactive relief for prior good faith interpretations of existing guidance.

Simplified plan designs for “starter” 401(k) and 403(b) plans.

Effective for plan years beginning after December 31, 2023, SECURE 2.0 creates two new plan designs for employers who do not sponsor a retirement plan: a “starter 401(k) deferral-only arrangement” and a “safe harbor 403(b) plan.” These plans would generally require that all employees be enrolled in the plan with a deferral rate of three percent to 15 percent of compensation.

Financial incentives for contributions.

SECURE 2.0 allows participants to receive de minimis financial incentives (not paid for with plan assets) for contributing to a 401(k) or 403(b) plan. Previously, plans were prohibited from offering financial incentives (other than matching contributions) to employees for contributing to a plan. This provision became effective for plan years starting after the date of enactment.

When do employers need to amend their plans for the SECURE Act, CARES Act, and SECURE 2.0 (“the Acts”)?

If a retirement plan operates in accordance with the Acts, plan amendments must be made by the end of the 2025 plan year (or 2027 for governmental and collectively bargained plans). (The amendment deadlines for SECURE and CARES were extended late last year.)

© 2023 Varnum LLP

Washington’s Focus on the Electric Vehicle Supply Chain in 2023

If a picture is worth a thousand words, the “photo-op” of the president test driving Ford’s new electric F-150 in May of 2021 was the burning image that foretold the US policy direction for the electric mobility industry.

In 2022, the president and US Congress solidified their support of the industry by passing sweeping legislation aimed at funding and incentivizing US electric mobility manufacturing for the next decade and beyond.

Looking ahead to 2023, the Administration will be writing the rules to implement that support. This will take the form of rulemaking for key statutes such as the Infrastructure Investment and Jobs Act (IIJA), the CHIPS Act, and the more recent Inflation Reduction Act of 2022 (IRA). On the non-tariff front, Congress passed, and the president signed, the 2021 Uyghur Forced Labor Prevention Act.

Background

  • The IIJA authorized $18.6 billion to fund new and existing electric vehicle (EV)-related programs, including a nationwide network of 500,000 EV charging stations and monies for publicly accessible alternative fuel infrastructure. Also, the law injected $10.9 billion in funding for transitioning school buses, transit buses, and passenger ferries to low- and/or zero-emissions alternatives.
  • The CHIPS Act allocated $11 billion in support of advanced semiconductor manufacturing research and set up a $2 billion fund to support technology transfers from laboratory to applications.
  • The IRA, perhaps the most significant development from Washington, DC, injected billions of dollars in tax credits and other incentives to spur US domestic manufacturing of electric vehicles.
  • In December 2022, news came that a United States-Mexico-Canada Agreement (USMCA) Dispute Settlement Panel had completed its findings on a complaint by Mexico and supported by Canada that the United States has been misinterpreting the product origin calculations for “core parts” for USMCA vehicle qualification. In January of 2023, that ruling was made public. See Long Awaited USMCA Panel Decision on Automotive “Core Parts” – What Happened and What’s Next.
  • In June 2022, the Administration published its “Strategy to Prevent the Importation of Goods Mined, Produced, or Manufacture with Forced Labor.” Customs and Border Protection (CBP) has launched a vigorous and highly intrusive enforcement strategy for a number of key sectors, including the automotive industry.

What to Know

Based on the legislative developments from the last year, the EV industry should expect:

  • Import Enforcement. If 2022 was the year of federal infusion of funding and policy development, 2023 will be the year of import enforcement and accountability. Supply chains will be scrutinized, and compliance will have to be demonstrated. In addition, claims of tariff preferences under US trade agreements will be closely monitored to guard against fraudulent product descriptions or county of origin. In terms of US forced labor legislation, a January 2023 article in a well-read trade media reported on a meeting with US Trade Representative Katherine Tai at which the Ambassador “suggested that auto or auto parts imported from China could be in CBP crosshairs.” (International Trade Today, January 6, 2023 Vol 39, No 4).
  • Accountability. With the massive funding from Congress and the White House, federal agencies will be scrutinizing how monies have been spent, particularly whether they have been spent to meet the goals to incentive US domestic production. Global supply chains will come under the microscope. A December 2022 Treasury Department publication can be read here.
  • Corporate Readiness. Companies that engage in the global marketplace dread the unknown. There is no crystal ball. But what corporate executives can do to mitigate the risk of potentially bad news on the trade front is to monitor developments, conduct self-assessments, and, where possible, build in flexibilities.
  • Know Your Customer. Know Your Suppliers. Know Your Suppliers’ Suppliers. A common thread weaving throughout these developments on the trade front is Washington’s not so subtle objective of determining the essential source of imported products. That effort will shift the onus onto the private sector, with companies having to provide far more transparency into their product’s life span.

For product development and marketing executives in the electric mobility sector, 2023 is potentially a very good news story. But for general counsels and corporate compliance and procurement officers, the uncertainties of regulatory change will require extra attention. In the interim, company officials are taking a fresh look at the current legal and regulatory exposures of their supply chains to be best prepared for the trade policy changes ahead. The adage “when in uncertain times, start with what you know” is particularly relevant today.

To that end, the USMCA can play a critical “bridge” for many companies with strategic business interests in the US market.

© 2023 ArentFox Schiff LLP

Complying With New Federal Pregnant Workers Fairness Act, PUMP for Nursing Mothers Act

The new Pregnant Workers Fairness Act (PWFA) and the Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP For Nursing Mothers Act) were adopted when President Joe Biden signed the Consolidated Appropriations Act, 2023 on Dec. 29, 2022.

PWFA: Pregnancy Finally Given Disability-Like Protection

The PWFA applies to employers with at least 15 employees and becomes effective on June 27, 2023.

Like the Americans with Disabilities Act (ADA), the PWFA includes the obligation to provide reasonable accommodations so long as they do not impose an undue hardship. Many courts have determined that pregnancy alone was not a disability entitled to accommodation under the ADA. Under the PWFA, employers will be required to provide reasonable accommodations to employees and applicants with known temporary limitations on their ability to perform the essential functions of their jobs based on a physical or mental condition related to pregnancy, childbirth, and related medical conditions.

The PWFA adopts the same meaning of “reasonable accommodation” and “undue hardship” as used in the ADA, including the interactive process that will typically be used to determine an appropriate reasonable accommodation.

The PWFA provides that an employee or their representative can make the employer aware of the employee’s limitations. It also provides that an employer cannot require an employee to take a paid or unpaid leave of absence if another reasonable accommodation can be provided. Of course, that does not mean the employee gets the accommodation of their choice. The statute provides a defense to damages for employers that, in good faith, work with employees to identify alternative accommodations that are equally effective and do not cause an undue hardship.

Practical Advice for PWFA Compliance

  1. Employers do not have to have a policy for every rule or practice that applies in the workplace. However, if an employer has a reasonable accommodations policy, that policy should be reviewed and updated, as necessary.
  2. Human resources professionals are not the only ones who need training. If managers are not trained as well, they may unwittingly say something in response to an employee’s question that is inconsistent with your policies and practices.
  3. Create a process to follow when employees request an accommodation due to pregnancy-related limitations. The process should be similar to the ADA process, including requesting supporting documentation from the treating healthcare provider. Have employees in states or cities that have adopted versions of the pregnant workers fairness law or other similar laws that are more generous than the federal PWFA? The federal PWFA does not preempt more generous state and local laws. Therefore, any policy, practice, or form may need to be modified depending on where employees are located. As an example, some city and state laws, except in specific circumstances, prohibit employers from requesting medical documentation to confirm an employee’s pregnancy, childbirth, or related medical conditions as part of the accommodation process.
  4. Like under the ADA, when an employee requests an accommodation under the PWFA, Human resources professionals should think about how to make this work, not this will never work. This simple shift in approach makes finding a reasonable accommodation that does not impose an undue hardship on operations more likely.

PUMP for Nursing Mothers Act

The PUMP for Nursing Mothers Act expands existing employer obligations under the Fair Labor Standards Act (FLSA) to provide an employee with reasonable break time to express breast milk for the employee’s nursing child for one year after the child’s birth. The employer obligation to provide a place to express milk shielded from view and intrusion from coworkers and the public (other than a bathroom) continues.

Except for changes to available remedies, the amendment to the FLSA took effect on December 29, 2022. The changes to remedies will take effect on April 28, 2023.

What Changed Under PUMP for Nursing Mothers Act

The PUMP for Nursing Mothers Act covers all employees, not just non-exempt workers. The break time may be unpaid unless otherwise required by federal or state law or municipal ordinance. Employers should ensure that non-exempt nursing employees are paid if they express breast milk during an otherwise paid break period or if they are not completely relieved of duty for the entire break period. Exempt employees should be paid their full weekly salary as required by federal, state, and local law, regardless of whether they take breaks to express breast milk.

With some exceptions, the law requires employees to provide notice of an alleged violation to the employer and give the employer a 10-day cure period before filing a suit.

Employers with fewer than 50 employees can still rely on the small employer exemption, if compliance with the law would cause undue hardship because of significant difficulty or expense. Crewmembers of air carriers are exempted from the law. Rail carriers and motorcoach services operators are covered by the law, but there are exceptions and delayed effective dates for certain employees. No similar exemption is provided for other transportation industry employers.

Practical Advice for PUMP for Nursing Mothers Act Compliance

  1. Educate the HR team and front-line managers on the update to the law and refresh them on the process for providing break time and private spaces to express breast milk.
  2. Like the PWFA, the law does not preempt state law or municipal ordinances that provide greater protection than provided by the PUMP for Nursing Mothers Act. Depending on where employees are located, policies, practices, and the private space provided to express breast milk may need to be modified.
  3. Creativity is the key to being able to come up with staffing solutions and private spaces for nursing mothers to express breast milk. Nothing in the law requires employers to maintain a permanent, dedicated space for nursing mothers. A space temporarily created or converted into a space for expressing breast milk and made available when needed by a nursing mother is sufficient if the space is shielded from view and free from intrusion from coworkers and the public. In other words, allowing an employee to use an office with a door that locks would be convenient, but not practical for many worksites. Depending on the workplace settings, privacy screens, curtains, signage, portable pumping stations, and partnerships with other employers to provide private spaces for nursing mothers are all possibilities.

For more election & legislative news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2023

Newly Enacted Federal “Speak Out Act” Limits Use of Some Sexual Harassment NDAs

President Biden has signed into law the federalSpeak Out Act” limiting the enforceability of pre–dispute non-disclosure and non-disparagement clauses covering sexual assault and sexual harassment disputes.  The Act takes effect immediately.

The Act places restrictions on the enforceability of pre-dispute:

  • “non-disclosure clauses,” meaning “a provision in a contract or agreement that requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.”
  •  “non-disparagement clauses,” defined as “a provision in a contract or agreement that requires 1 or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”

Such clauses entered into before a sexual assault or sexual harassment dispute arises are rendered unenforceable.  The Act defines covered “sexual assault disputes” as disputes “involving a nonconsensual sexual act or sexual contact, as such terms are defined in section 2246 of title 18, United States Code, or similar applicable Tribal or State law, including when the victim lacks capacity to consent.” Covered “sexual harassment disputes” are defined as disputes “relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

A few notes about the Act’s scope and implications:

  • Critically, the Act may have limited implications for many employers for one key reason – the Act only applies to non-disclosure and non-disparagement clauses in pre-dispute agreements, meaning that any non-disclosure/non-disparagement clauses in agreements entered into by employers/employees concerning sexual assault or sexual harassment issues after a dispute has arisen are not impacted by the Act.  Because of this, the Act’s protections would not apply to non-disclosure/non-disparagement clauses in separation or settlement agreements executed after sexual harassment or sexual assault allegations are made, but may be subject, of course, to any applicable state or local laws.
  • The Act explicitly excludes from coverage any efforts by employers to protect trade secrets and proprietary information via non-disclosure or non-disparagement provisions.
  • While the Act does apply to non-disclosure/non-disparagement clauses in agreements entered into before December 7, 2022 (the Effective Date), it would not impact clauses entered into before a dispute arose, but where that dispute was active before the Act’s December 7th effective date.
  • Given the above, employers utilizing non-disclosure/non-disparagement agreements at the outset of employment or during the employment lifecycle should consider creating proper carve-outs for sexual assault and sexual harassment issues given the new Act.

Employers should also be aware of other recent developments in this area.  The Speak Out Act also follows the enactment of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which took effect earlier this year (our post on the law can be found here).  That federal law prohibits employers from compelling arbitration of sexual harassment or sexual assault claims and provides employees the option to pursue those claims in other forums.  Employers should also remain aware that, despite the seemingly narrow implications of this new federal law, several states – including California, Illinois, New Jersey, and New York – have enacted laws in recent years that grant employees broader protections when it comes to certain sexual harassment and discrimination claims, enhancing employees’ abilities to speak out about alleged misconduct.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.